Australian dollar crushed with iron ore

See the latest Australian dollar analysis here:

Macro Morning

DXY is up and away on the growing energy crisis with US oil and LNG set to benefit. EUR was squashed:

The Australian dollar was flushed with commodities:

Oil was up and gold down:

Base metals are a raging bubble fit to burst. 10% of global copper goes into Chinese property. Almost all nickel into stainless steel:

Big miners are crashing:

EM stocks are catching on:

And junk:

US yields have no time for China, only oil:

Stocks were stalled:

Westpac has the wrap:

Event Wrap

US retail sales in August were stronger than expected, with past downward revisions only partly offsetting the surprise. Headline sales rose 0.7%m/m (est. -0.7%, prior revised to -1.8%m/m from -1.1%m/m), while the ex-auto and energy measure rose 2.0%m/m (est. flat, prior -1.4%m/m from -0.7%m/m) and the core control group rose 2.5%m/m (est. flat, prior revised to -1.9%m/m from -1.0%m/m).

The Philadelphia Fed business survey rose to 30.7 (est. 19.0, prior 19.4), but the details were mixed. New orders and employment components softened and future activity measures moderated (but still optimistic), while prices remained elevated.

Weekly jobless claims data was close to expectations, with initial claims of 332k (est. 323k) and continuing claims of 2.665m (est. 2.740m)

Event Outlook

New Zealand: The return of COVID-19 restrictions is likely to result in a weaker manufacturing PMI in August.

Euro Area: The final release of the CPI for August is forecast by the market to be at or near the initial estimate (market f/c: 3.0%yr).

UK: TheAugust retail sales reportis expected to show a rotation from goods to recently-reopened services (market f/c: 0.5%).

US: Following consumer sentiment’s Delta-driven drop in August, September’s University of Michigan sentiment report is expected to show a modest partial reversal (market f/c: 72).

The Wall Street obsession with ESG and energy, inflation and stagflation is blinding it to what’s really going on. Chinese property has entered historic crisis. It appears too late and too big to save.

This is going to converge with the dying inventory cycle and slowing US growth in the months ahead and any energy crisis (which is real short term) is going to resolve fast.

If we get a cold northern winter and energy runs it will force the Fed to taper into the great China accident. That has global bust written all over it. The AUD will get slaughtered.

If we get a warm northern winter then energy will crash anyway and all commodities be engulfed in a China rout that will likely take down EMs and the AUD with it. Its odds on that triggers a major correction in global equities.

China has already killed the global reflation. A necrophiliac Wall Street won’t let go of the corpse. If the Fed joins it then run for the hills.

The Australian dollar is in trouble.

Houses and Holes
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Comments

  1. meanreversionMEMBER

    Why would the Fed taper into an energy price surge? Any energy price increases are guaranteed to be short lived given the low marginal costs of production across the world for fossil fuels and the move to renewables. It’s just as likely they look through it.

  2. FMG was crushed today but AUD sure wasn’t, just had a look AUD was 7311 at 4pm yesterday and now 7286, that’s 25 pips. That’s a days range on a very quiet day. So the AUD isn’t getting the memo.

    Just had a look, the Australian 10 year is actually up today, 0.03 to 1.30%

    ASX is down half a percent only