Macro Afternoon

Trump is putting his foot into the trade war mouth with more rhetoric overnight that has startled markets again with most Asian equities stumbling today. Luckily, higher than expected Apple earnings are seeing US futures rise instead, but tonight’s July Federal Reserve meeting will be keenly watched by all, especially after the better than expected consumer confidence figures recently.

Chinese stocks are off the worst, with the Shanghai Composite falling 0.7% to be at 2932 points while the Hang Seng Index is buckling under internal pressure with another new daily low, losing 1.3% to finish at 27777 points. This puts it right on ATR daily support and ready to breakdown to a new monthly low:

Japanese share markets are also under pressure with the Nikkei 225 closing 0.8% lower to 21521 points despite a steady Yen. The USDJPY pair remains stuck at the mid 108’s before tonights FOMC meeting and remains well below the weekly resistance level above at the 108.90 level:

The ASX200 has come back from its recent record high, absorbing today’s CPI print with a 0.4% loss, closing at 6812 points. The Australian dollar lifted on the CPI print but it wasn’t much in the scheme of things, hovering just below the 69 handle before going into the City open and still looking set to return to its 68.50 recent low:

S&P and Eurostoxx futures are up 0.2% going into the European session with the S&P500 four hourly chart still displaying a possible bearish rising wedge pattern as price hovers just above the previous high near 3020 points:

The economic calendar is packed tonight, but will focus squarely on the FOMC meeting after absorbing German unemployment, European CPI and the latest DOE oil inventory numbers. Got to stay up late!

Comments

  1. Yet all eyes are on the U.K. for the next round of – My Kingdom for a Flow – and sundry [hung out to dry] with suggestions of 5% – 10% GDP nut buster and how the ideologues will sell it too the unwashed …

    How this trades wrt AUD FX will be instructive to some ….

      • Short term-ism on FX numerology vs sociopolitical ramifications that have strategic implications to businesses concerns wrt location and how that translates to change in the near and long term.

        I would posit the glove will be coming off and the E.U. will deist with pleasantries and allow its member nations to openly vie for U.K. business relocation.

        Sigh …. its like ground hog day with Greece, yet this time its totally self inflicted, not that Greece had huge issues before and its elites went to GS for a fudge …

      • Hay John ….

        I guess it a bit like elites having a picnic overlooking a city pre a sacking in the 17 – 18 hundreds … it sux … question is … did they bring in on …

      • Floating currency will save UK manufacturing… pound will devalue to approx the amount necessary to offset the tariffs … basic stuff. No need to relocate.

        More complex for the financial sector though.

      • SnappedUpSavvyMEMBER

        lol bait, lets see skippy justify HK and the inevitable Chinese invasion and with his hatred for legacy entrant Australians and western culture 🤪

      • At present, employment is stable and wages are rising. The pound is falling as the German industrial machine is delinked, so it will be interesting to watch.

      • It could be bad. But what I don’t buy is the liberal elite (like Carney) claiming they are worried about a collapse in standard of living when they have been perfectly fine with an extended austerity program from 2010 onwards. And demand shocks (austerity) are fare worse for employment than supply shocks (Brexit)

      • You know gang it helps to deal with reality when one has information from those on the ground and not conjecture based on some notion of what is and isn’t. Trade is established by contracts which have long lead times, long tweaking processes, and equally long withdrawal processes.

        It should be noted that one of the U.K. first bargaining ploys [cough threats] was to become a completely unregulated tax haven if it did not get what it wanted …. after triggering A.50 on a political lark forwarded with ideological propaganda. This is compounded by Ireland and Scotland issues.

        FYI you can’t trade if you can’t ship it and replacing flows can’t be conjured with a magic free market wand …

      • Me too Timmeh but I have a feeling the old fox (HrH) is too smart to leave everything on the table and will have stashed plenty around the place in trusts etc that can’t be touched.

        It’s more the dopey everything-on-black sorts who lose the lot. You know, Nathan Birch and his ilk.

      • Trigovermin is apparently “jubilant” over rising house prices according to Gotti.

        If I saw Trigo and Gotti drowning in a river, the big question is would be whether I’d be able to refrain from bursting into delighted laughter as they finally slipped under.

    • I wonder if we’ll have half completed building shells dotting the country when this finally collapses. You still see them in Thailand from the asian financial crises.

    • GeordieMEMBER

      For those that don’t read links:

      The slump in Australian construction is starting to hurt the major companies that operate in the industry.

      One of the nation’s largest property developers, Ralan Group, has gone into voluntary administration, leaving billions of dollars worth of apartment projects in doubt and around $500 million owing to creditors.

      In a statement, the administrators said Ralan has a “development pipeline of over 3,000 residential units which are in the construction or pre-sale stage as well as operating accommodation assets comprising over 600 rooms”.

      Nah, we’re L-shaped for sure. No wait, I meant pear-shaped!

      • Currently in a bull trap. Unemployment will drive increase in supply and back to plummeting.

      • I dunno about sadly. I’d be very happy for this economy of building sky kennels to end. I do feel for the subbies that will get screwed though.

      • Rejoice at all the clinker brick art deco homes that won’t be knocked over for sub standard looking TV box like town houses with 0 character.

        The amount of heritage being destroyed so 30 vibrant families can live were 5 families used to, clogging roads, no parking and continuing to push middle class folks out of areas they grew up in. I grew up in Caulfield, St Kilda, Elsternwick and prices are mental there, at least 1.2m for a detached home. Insanity.

  2. … NEW ZEALAND … LATEST ANZ SURVEY …

    … New Zealand’s serious long – term ( and politically can – kicked ) housing multiple stretch problem … where normal markets do not exceed 3.0 times gross annual household income ( median multiple ) … Demographia International Housing Affordability Survey http://www.demographia.com/dhi.pdf .

    … When the Irish bubble burst ’07, the unweighted median multiple across its surveyed metros went from 4.7 to 2.8 a few years later, putting all its Banks to the wall and requiring a bailout from German financial institutions of about 70 billion euro. New Zealand is currently about 6.5 and Australia 5.6 … access ( 15 to date ) Demographia International Housing Affordability Surveys and associated information via http://www.PerformanceUrbanPlanning.org

    ANZ Business Outlook Survey shows the worst sentiment in the construction sector since 2009, while overall business confidence has sagged again and more firms are expecting to cut staff … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/business/100966/anz-business-outlook-survey-shows-worst-sentiment-construction-sector-2009-while

  3. The Beetrooter Advocate

    0.004.

    That’s the yield spread between the Aus 2yr and Aus 5yr bonds. .004.

    Quite incredible really. That would be a really long final 3 years for any actual holders of 5yrs. Still, they’re savers, so they don’t matter. Not even a bit. Well, not even 0.005 of a bit.

    • trying to understand the joke as I am not familiar with how bonds work. So if you park your money over 5 years you only get 0.004% more over the 2 years bond?

      • The Beetrooter Advocate

        Ah… no joke… more just a reflection on what could, and I say could, happen to rates in years 3-5 of a 5yr bond purchase. Focusing on those, as the return for the first two years is effectively the same for the 2 and the 5 yr bond.

        For example, there could be a spate of rampant inflation during that 3 year period, making the 5yr bonds issued now effectively worthless then.

        After all, the budget will be in surplus, pensioners will be spending all their franking sense, and Scomo’s infrastructure spending will be underwriting economic growth in Australia as never before.

        Or all the smart money, that does things like buy bonds years in advance of their maturity for really big investment houses might be thinking that Australia isn’t going to see inflation again until 2024.

        As flwase would say, it is at least a market – one of those scenarios not going to happen.

      • Makes sense. The market is saying the 2 yr bond will probably be rolled at a lower or much the same yield given inflation has been below target for 5 years and doesn’t look like improving for another 10 so any spread is just term premium.
        Locking in the 5 year yield v the 2 year seems like a good strategy tbh.

  4. SnappedUpSavvyMEMBER

    Our ABC being nice and obedient on HK, no mention I can see, but dagoes good, embrace them dagoes you racist Australian mothers who cannot buy formula, embrace them

  5. It was love at first sight and the couple could picture themselves growing old together in the house’s sunny rooms and leafy gardens.

    But two decades later, the loan has ballooned to over $600,000 and the couple are struggling to pay it back, along with several other debts, which total more than $1 million.

    The Ladkis are just one example of the growing number of Australians in mortgage arrears, falling months behind in repayments.

    https://www.abc.net.au/news/2019-07-30/more-australian-borrowers-falling-into-mortgage-arrears/11365288

    The frogs are boiling.

    • When his business ran into trouble he should have sold the house. Not increase the mortgage from 250k to 600k. Not sure how this was permitted if his business was struggling

      • Because his home had rocketed up in value so the bank had plenty of security – they don’t care about whether his business is profitable, they only care if the collateral is there for the loan. So they can sell his house if the need to recover the money. Which they will.

        It will take a crisis and then this nation will relearn what our grandparents knew.
        – debt can be a killer
        – your only true financial security comes from owning your own home outright
        – you should pay off your house as quick as you can
        – and if you borrow against your house for anything – anything at all – you can lose your house.

      • That’s right Arrow, all sensible advice. Which would get you howled down in the MSM. 😀

    • The Beetrooter Advocate

      Someone should have purchased income protection insurance, or some professional business advice, or some counseling.

      Or maybe, just maybe, sold the property they knew they could no longer afford years ago, years ago, when the market was at peak. Guarantee they wouldn’t have featured in an abc sob story then. There weren’t any then about this.

      muppet journalist. Story should be titled: “We lost everything ’cause we didn’t want to be renter scum with lots of cash in the bank”.

    • With all those small businesses secured against the family home, it will be depressing but academically interesting to observe which happens more:

      – lose your house because your business goes bust
      Or
      – lose your business because house devalues and bank calls in the business loan (and you lose your house).

    • Ronin8317MEMBER

      The house is in Forestville. The debt may be one million, but the house is at least 1.5 million.

    • haroldusMEMBER

      250k loan over 2 decades = 12.5k per annum

      or a grand total of $240 bucks a week for 1.5 million asset.

      Not paying rent in that time.

      Fvck off.

      • The Beetrooter Advocate

        It’s thinking like that which makes people povos.

        Reusa’s the expert, I’ll leave the maths to him on, with those figures, how much more he could have borrowed on top of the mortgage for the guaranteed income from an investment property. Would’ve been sweet then. If he’d tried having a go.

    • that’s quite a story. Is there anyone here from the LSWCHP community who can tell us if $4 is a credible price for a bullet?

      • It’s been a long time, but i’d say only for something like a big game rifle. Standard rounds much much cheaper.

      • Legal ammo can be made at home from about $0.18c per round for a 9mm up to about $0.70 for rifle ammo in .223 or similar.

        Factory made commercial ammo might cost around a dollar for rifle calibres. But these idiots don’t own legal firearms and can’t buy ammo legally so I presume they’re talking blackmarket prices in which case I’d say $4 for a pistol round would be cheap given the consequences for the vendor if caught.

        Either that or they plan on shooting him with a big Rigby elephant gun or something similar, in which case $4 sounds about right. Be a helluva mess though.

  6. Mystic MedusaMEMBER

    I have a question (actually two) for the informed folk on here and yes, it is probably a really foolish query but still here goes:

    Everyone is saying we are now in an era of low-interest rates forever – that they will never go up: Is this for real or in part propaganda by the people who want them forever repressed? Is there a mechanism by which they would rise, regardless of what central banks did?

    And, what is to stop a bank breaking rank and saying that will offer – say – 7% interest on deposits? And that would be all that they did – kept the money safe and paid a great return?

    • The Beetrooter Advocate

      1. a. Interest rates are not forever low.
      1. b. Yes. The market (various). E.g. rampant price growth due to an energy shock. Or trade war. Or actual war. Or market crash with no bail in.
      2. a. Mandate from government it is legislated by (e.g. effect of change on employment rate).
      2. b. That’s all they do no matter rate it is. (other than QE, TARP and money printing, but they are all different subjects).

      #learntocount?

    • “ Is there a mechanism by which they would rise, regardless of what central banks did?”

      A financial crisis would do it, ie a bank goes bust, suddenly people start thinking the other banks might also go bust, so the cost of funds for those shaky banks goes through the roof, so interest rates go up. This is why I was getting 7% interest on my cash after the GFC…!

      Expect the RBA to bail out every bank in sight and lend them unlimited money at like 0.25% to prevent such a scenario though. What I can’t tell you is whether it could happen anyway (despite the RBA’s best efforts) if things get bad enough.

    • Arthur Schopenhauer

      1. War. It stokes inflation and would increase rates. The average rate across all 20th century wars was roughly 4%.

      2. Banks make money by lending. This simple fact ensures interest paid on savings accounts is less than interest charged.

      • Mystic MedusaMEMBER

        Thank you! I feel as if social media (Twitter especially) is suddenly alive with ‘this is a new reality and it cannot be altered” messaging about low-interest rates.

      • If u want war u got it adelade is protected by woomera don’t listen to the North water. Must be utilised and diverted to South threw murry daring the only thing stop is mistrust between. The west and the east we must make peace before November or all is lost this maybe the End

    • “And, what is to stop a bank breaking rank and saying that will offer – say – 7% interest on deposits? And that would be all that they did – kept the money safe and paid a great return?”

      you go for it and tell me… 7% in a 0% world = ponzi ..ie v short lived model

    • Mystic Medusa – the simplest fact is that the loan is probably 30 years. And do they really think interest rates will stay this low for 30 years?

      The last time home loan rates were over 7% was only in 2012.

      Or put it another way, from 1973 until 2013 (that’s 40 years) interest rates were over 6% for the entire time, except for nine months during 2009.

      Do they really think the current low rates situation is normal?

      (Source: https://www.orangefinance.net.au/historical-interest-rates/ )

      • Mystic MedusaMEMBER

        Hey, I get it, I’m crap at maths and it’s been a long week + it’s only Weds and I did my head in following Twitter down a thread of low-interest rate articles. So yes logically, nobody could make money only offering $ for deposits. I think what I am really hankering for is the old-style banks I dimly remember when I was a kid, august and boring.
        But the ‘it’s here to stay’ meme is everywhere. I hate it. And it’s spooked me from spending.

  7. TailorTrashMEMBER

    Can’t understand all the false shock horror about crown ….as many others have pointed out …it’s just business
    ……and that kids name was James Packer ……life imitates art ……
    https://youtu.be/VsbyvuO_AqM

    • I don’t think anyone is surprised about crown at all. The government being complicit in it is the juicy part.

      • I was surprised about privately operated Australian native shooting ranges. That is a cruel new low.
        The idea of getting border force to manage your travel management plans shows just how open for business we are though.

  8. We’re Andrew I like to chastise that thirty something girly boy iam confident Catholic shool has a lot 2 do with his miserable scab of a minf

  9. The Beetrooter Advocate

    Fckn.

    I’ve seen at least three posts above responding to serious economics questions – with actual researched answers. Now fckrs are starting to post ‘sources’ with their responses.

    Jeeeeez. WTF is this? An economics blog or something? Could we all go back to making siht up and arguing about actual impt. things please? fckn reddit if you want stuff think hard.

    I’ll start. So, the ABC, Cricket Australia and the English media are already out to stop the booing of banned cheats returning to their sport at the same time as Australia is cheering a sportsstar for protesting someone’s legal right to compete (until their appeal is heard and they are done over, sent back to China and billed 7c).

    Question, would the ABC et al be doing such stellar prep work if the cheats’ last name was Goodes? Or it’s ok if you cheat while white, or while playing cricket, or after shopping at bunnings? Confused.

    2 years it took for some of the esteemed organisations to get of their butts and say something about what happened to Goodes. 2 years. And what did he do again? Draw about fewer penalties that year than most other players in the AFL.

    But yeah. Warner and Mr Cries a lot and feels entitled now need support before English fans have even done anything. Because? And ‘fair’ why?