Macro Afternoon

See the latest Australian dollar analysis here:

Macro Morning

The start of the trading week is here, and while regional risk analysts are pointing squarely to a probable Evergrande default and then overseas to the underwhelming US unemployment print on Friday night, the risk takers writ large are bidding everything higher, save local stocks. The USD is strengthening against most of the risk currencies, with Yen crosses surging as well, while gold is barely holding on above the $1750USD per ounce level. Meanwhile Bitcoin has surged higher yet again, breaking out above the $56K level, as it barrels in on its previous record high, having gained more than 20% in the last week:

The Shanghai Composite is up 0.4% to be back above the 3600 point level while the Hang Seng Index is following through on its previous surge, up more than 2% to the 25391 point level. Meanwhile Japanese markets continue to find strong bidding support with a near 1.5% gain by the Nikkei 225 to close at 28484 points. The USDJPY pair did the heavy lifting as Yen sells off, pushing right through the mid 112 level after breaking through on Friday night with no Yen buying evident:

Australian stocks are the losers as NSW opens up, with the ASX200 closing 0.3% lower to 7299 points while the Australian dollar is pulling back towards the 73 handle and below the previous weekly high despite some strong moves on Chinese markets:

Eurostoxx and S&P futures are barely moving however going into the London open after their not very impressive Friday night sessions, with the four hourly chart of the S&P500 showing a deflation definitely at hand as price heads back to the previous ATR resistance level at 4360 points as it failed to make a new weekly high but still staving off a wider correction:

The economic calendar is very light on with only a few Treasury auctions to keep an eye on.

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Comments

  1. The Wizz of Ozz

    If America was slug Ray D and his mates would be the nematodes eating her from the inside out skippy probably got potrait of Ray D hanging above his bed head lol

    • Where do you get that wingnut, been pointing out all the fraud/corruption – in everything – from day one and if I was to have a picture of anyone on a wall wrt economics it would be Bill Black et al.

      Most around were still bootlicking oligarchs ….

  2. Coal, natural gas, oil all exploding higher.
    Just when you though everything was already expensive, this is going to really hurt.
    I’m wondering how airlines are going to make it through this.
    Just when everything is opening up, they are going to get crippled with fuel costs.
    Don’t know how you cannot be bearish on airlines

    • Mining BoganMEMBER

      People will put it down to the costs of living with WuFlu and be on their way. They’ll never connect it to be because of out and out inflation.

      Actually, I can see all rising costs being put down as WuFlu related so pollies and central banks can look straight through it.

      • I was in the transitory camp, but once i saw energy cost hit the uk, eu, china at the same time a few months back i thought this run in inflation is going to go harder and longer then most thought. Sure we had some Pump and dumps in individual commodities like lumber, but once you get all enegy commodities rising at once, that effects everything

        • Jumping jack flash

          We desperately need the inflation, we desperately need the extra wages and extra debt it will [eventually] bring to us, but due to Scomo’s bungling of the stimulus Australia is going to get hit hard by it instead of all of us being correctly positioned to ride this inflation wave to prosperity…

          • The Wizz of Ozz

            You will need 30% pay rise by end of next year to match the living standards we had last year thats not going to happen maybe over 5 years so get use to being poorer

          • ErmingtonPlumbingMEMBER

            Poorer people consuming less is good for the environment.
            Are we serious about addressing this climate change or not?

          • Jumping jack flash

            “Are we serious about addressing this climate change or not?”

            Addressing climate change is a doddle, so long as its not us making the pollution everything is good. Debt has a small carbon footprint, and we can dump the decaying shells of our Chinese made consumer items back to China to reprocess, or whatever they want to do with them, nobody cares anyway.

            This strategy is apparent. Read the climate agreement. China gets a free pass while everyone decarbonates, and after that everyone rejoices in 2050, plants a tree for China, and climate change is licked.

            Cake eaten while retained.

          • I would say that Bcnich, has by this time provisioned himself for the needfull.By this I mean, 2 sets of tyres and associated wearables for his vehicles.He would have set aside seeds, canned food, pet food , household provisions inclusive of health, medical , cleaning etc.I find him a planner, and thoughtfull.

          • The Wizz of Ozz

            Yea nah maybe in 5 years when and if they have thorium reactors hope he.went long john silver or his looking for rope

  3. I think this is how it goes. I hate our “leaders”.

    A correctly functioning market:
    100 families, 101 houses, no changes in population. The last house will be valued at construction cost. There would be no construction of additional houses as there is no need. ie. Housing construction is a lagging response to demand. Any additional houses would add a house to the pool of “construction cost” priced houses. A family needs to meet construction cost to buy a house.
    We can all observe how remarkably cheap houses were 20-30 years ago, before the current dynamic.
    A market with shortage:
    101 families, 100 houses. +1% family every year. The last house will be valued at “more than the last family can afford”, as they lose the auction. building a new house takes a year, by which another family has arrived. The detachment from construction cost is noticed by a wealthy family, and they outbid the last 2 families. The minimum cost of a house is now beyond what the last two families can afford.
    Another house is in the pipe-works, another family arrives. the scenario repeats, the minimum cost of a house accelerates inviting further speculation. The minimum cost of a house moves further away from what the poorer families can afford. Land banking, Low interest rates and tax breaks further drive the price surges that contrived shortage has created.
    People start inventing income and faking loan applications. The banks are accused of predatory lending, and a commission is held. The government ignores the findings because they have set this dynamic up. Everyone amazed the government does nothing to follow the recommendations.
    For minimum house prices to revert to the “cost of construction” would require that no further families are added to the demand side of the equation, and forced to outbid each other, until demand has been met with supply. This will never be policy offered by LNP or Labor as they don’t want to have a housing crash on their watch.

    • You are doing extremely well at understanding the situation.

      LaborOrLiberal are a big part of the problem, and they are gifted power by people who vote LaborOrLiberal.

      The solution is to vote out LaborOrLiberal and vote in decent people who care, and will represent the voters interest. Once in power these decent people can employ a range of policies. Some of them could be:

      * land tax for all land.

      * When a person dies and leaves housing vacant (eg no one else was living there) the land moves back to community ownership. Heirs are compensated for construction value. Govt then has a waiting list of (young) people who need housing and the housing is issued to the family at a nominal cost or rent for as long as they wish to use it. No resale allowed at higher price.

      * Govt to take over development. Large land owners offer their land to govt. Govt pays reasonable market value BEFORE REZONING IT, and then sells the housing to families who MUST build and live on it immediately. Such land is then subject to an ongoing land tax.

      * Govt does not take over development but allows large land owners to buy the rights for rezoning at an auction.

      * Govt builds many new hospitals. Attached to the hospitals are hundreds of small apartments to suit single nurses.

      * Govt builds many new schools. Attached to the hospitals are several houses to suit teachers.

      * Govt builds caravan parks on the outskirts of every city and town and provides a powered site AT COST to any taker. Govt ensures there are ALWAYS vacant spots available.

      • * When a person dies and leaves housing vacant (eg no one else was living there) the land moves back to community ownership. Heirs are compensated for construction value. Govt then has a waiting list of (young) people who need housing and the housing is issued to the family at a nominal cost or rent for as long as they wish to use it. No resale allowed at higher price.

        There’s an implication here that land is leased, not owned. Nothing wrong with that, but it should be called out explicitly.

      • OK. The conclusion to the story is:

        The Covid vaccines have been proven to reduce the risk of catching the virus and severely reduce the symptoms of those who get it.

        According to America’s Centers for Disease Control and Prevention, unvaccinated people are 10 times more likely to be hospitalised and 11 times more likely to die from the virus.

        This is the conclusion to a story about two doubly vaccinated people who died of Covid. Saying that being vaccinated will prevent you from catching the bug, getting sick and dying in a story about two vaccinated people who caught it and died doesn’t seem to follow. At least to me. Had they been unvaccinated, it would make more sense.

        • Saying that being vaccinated will prevent you from catching the bug, getting sick and dying […]

          It doesn’t say that.

          It says that the risk and consequence are reduced, not eliminated.

        • It says ‘reduce’ – The Covid vaccines have been proven to REDUCE the risk of catching the virus and severely REDUCE the symptoms of those who get it. This is unequivocally correct.
          It doesn’t say ‘prevent’, no authority says that. There will always be some vaccinated people who still succumb, that risk increasing for those with underlying health issues, immuno-compromised and the like, but there would be far more deaths from unvaxed of this same cohort.
          Assume 100% vaxed population – there will still be deaths but then consider a counterfactual of 0% vaxed and the death rate would be far greater.

          edit – just saw drsmithy’s post. correct.

  4. Went through the sydney CBD today to check out to opening up. It was still very sad. Most stores still close. Foot traffic still very low. Overall a real fizzer. Its going to take months to get it back to pre-covid and they are going to need more vouchers and free shows etc

    • It took months to train the lock-in behaviour, it will take months to reverse it. Business will follow consumers, those that are not already bankrupt that is.

    • Reckon it will stay that way for a long time. Pre-COVID, Sydney CBD was only ever busy during the work week. It was always dead on weekends – there was fk all to do and the lockout laws (now rescinded) killed the night economy.

      Now that the workers who occupied the gleaming office towers no longer have to battle public transport and traffic chaos to work and execs are seeing $$$ from divesting exorbitant office leases, the CBD will become a wasteland. Sure, there’ll be some return to normal but not as much as there was before.

      As Gareth says, businesses will follow consumers – whether it’s to the suburbs or the regional hubs. Lots of retail , services and consumable businesses won’t survive. I expect a lot of pubs and clubs will go under too.

      The government need to do a big rethink about the future of Sydney CBD.

  5. Hugh PavletichMEMBER

    Update … China: The property Ponzi party is over …

    “It’s A Disastrous Day” – All Hell Breaks Loose In China’s Bond Markets … Zerohedge

    https://www.zerohedge.com/markets/its-disastrous-day-all-hell-breaks-loose-chinas-bond-markets

    China’s bond markets slump again as new Evergrande deadline passes … Andrew Galbraith and Marc Jones … Reuters

    https://www.reuters.com/world/china/china-evergrande-bondholders-brace-mondays-coupon-deadline-2021-10-11/

    China’s Biggest Real Estate Developers Look Unlikely to Meet Annual Sales Targets … Caixin

    https://www.caixinglobal.com/2021-10-11/chinas-biggest-real-estate-developers-look-unlikely-to-meet-annual-sales-targets-101785156.html

    … better understanding China’s internal political tensions … Dr Paul Monk explains to Catherine McGregor of SkyNews Australia …

    Xi Jinping’s regime ‘floundering’ amid ‘missteps’ being made … The McGregor Anfle … SkyNews

    https://www.youtube.com/watch?v=BjZjuOscyFU

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