Macro Afternoon

See the latest Australian dollar analysis here:

Macro Afternoon

Asian share markets are quite mixed following continued selloffs from overnight markets as Chinese bourses ignore the downside while Australian stocks lead the way down through bear market territory. The USD remains strong against all the undollars, with the Australian dollar still at or slightly below the 69 cent level as we head into tonight’s crucial FOMC meeting. Oil prices are drifting sideways, with Brent crude above the $120USD per barrel level while gold is trying hard to fightback after another big move lower overnight, currently just below the $1820USD per ounce level:

Mainland Chinese share markets are ignoring all the downside volatility with the Shanghai Composite up more than 1.5% to 3344 points while the Hang Seng Index has equaled that performance, up 1.6% going into close to be at 21404 points. Japanese stock markets however continued their pullback, with the Nikkei 225 index losing 0.9% to 26388 points while the USDJPY pair has pulled back from its gains above the 135 level but remains on trend:

Australian stocks are still selling off, with another 1.5% lost in today’s session, pushing losses to over 10% in the last 12 months for the ASX200 as it closes just above the 6600 point level. The Australian dollar has tried to bounce back up to the 69 cent level this afternoon, but the Pacific Peso is still looking very weak here as weekly support has evaporated:

Eurostoxx and Wall Street futures are slowly moving sideways with the latter showing nascent signs of bottoming as selling exhaustion kicks in. The S&P500 four hourly futures chart shows price action still crushed well below the 3800 point level and the May lows (lower horizontal black line) as a swing play on reverting momentum may give some hope here:

The economic calendar has US retail sales and some other releases to deal with, but everything will hinge on tonight’s FOMC meeting, where the Fed is likely to raise rates by at least 50-75bps.

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Comments

    • The whisper is, investment bankers started the 1% noise knowing it will be 0.75% so they can front run it……investment bankers wouldn’t be unethical, would they😉

      • Hoody it’s not that
        The majority always play the hype game
        This is why majority sell at the bottom & buy at the top
        Macrobusiness does it

        The AUD starts at 76 & heads to 68 & they get more bearish the closer we get to the low
        76 was the time to be bearish & 68 get bullish if market sentiment builds more & more bearish
        Start preparing to turn ahead of everyone

        Don’t listen to the dribble, try to block out everyone’s emotion & be one step ahead

    • TP
      BCN

      Be careful getting caught up in the hype
      You need to be able to pick turning points
      Will they do more than 50…..maybe but JP may even do 50 & hint on the dovish side
      US economy is going off a cliff leading indicators are showing US is heading into deep recession
      They aren’t far away from pause & pivot
      Bond yields & gasoline has done the demand destruction
      We aren’t far away from easing again.
      Look at 2 year US bond yield it’s already done the damage
      There won’t be several more hikes maybe this on & next & it’ll be interest rate cuts
      Everyone missed the rise in interest rates start last year when US 10 year was 1.13%
      US 30 year mortgage was 2.5% a year ago now 6.25%

      The rate hike cycle is nearly over, interest rate cuts starting around September maybe Aug

  1. Hugh PavletichMEMBER

    World’s Central Banks Got It Wrong, and Economies Pay the Price … Enda Curran … Bloomberg

    https://www.bloomberg.com/news/articles/2022-06-15/world-s-central-banks-got-it-wrong-and-economies-pay-the-price?srnd=premium-asia

    Even after central banks recognized they got their inflation calls wrong last year, they’ve continued to flub their policy guidance, threatening greater damage to their credibility, roiling markets and undermining the pandemic recovery.

    The Federal Reserve is now expected to hike interest rates by 75 basis points Wednesday, just weeks after Chair Jerome Powell and his team repeatedly advertised a half percentage point move. It’s the latest in a series of misfires, from deeming high inflation “transitory” last year to speeding up the end of its bond-purchase program to accelerating the runoff of its bond portfolio.

    European Central Bank President Christine Lagarde has lately also turned more hawkish than she previously indicated, and the Reserve Bank of Australia is among those raising rates faster than policy makers had signaled. … behind paywall … read more via hyperlink above …

      • I think it is a anticipated supply mechanism – AEMO says for blocks of time (5mins?) what the demand is likely to be. and generators then can choose to all bid in supply at a price they choose. The marginal / highest needed price is then given to all required bidders.
        I suspect this spot approach has been deemed to be too risky either due to bidding games or not being able to trust that an additional bidder will appear if a near-term shortfall is about to occur.

        • Yep, that’s how the market “works” – 15 minute blocks back when I had generators as customers – it may have changed in the last 15 years.
          If everything is predictable and no-one is playing cartel games it works well. When things move out of the design range, well…

        • The Travelling PhantomMEMBER

          On the boomers wireless radio station they were blaming renewable energy for the high electricity prices 🤦🤷 and the lack of more coal generated electricity 😳

  2. Pointless exercise in throwing darts at where interest rates may be next week or next year, or the latest quantifying headline house price falls, but if I was placing a wager,whether Australia will collect silver, and looking at the March quarter lending stats for New Zealand , of the 45256 new mortgage originations, 16.8 percent by number were at DTI above 6. And, when compared to Australia interest only lending, including revolving credit, has fallen in New Zealand and is back to levels last seen in the December 2015 quarter by amount, but substantially lower at 18.5 percent of outstanding stock.

  3. alwaysanonMEMBER

    The energy company CEOs & Boards need to be reminded that they only get to have a lucrative gas export market if they keep the lights on at reasonable prices at home. Otherwise we have every right to turn off the taps at Gladstone and otherwise intervene until they are back on…

    I think we’ve seen during the pandemic the emergency powers that the PM and Premiers have to just seize and shut things – let’s do it!

    Imagine how much better a bargaining position Albo would have if he dropped some Federales in and forcibly shut Gladstone and was like “Do I have your attention now? See how seriously I am taking this? You don’t get to reopen it until the East Coast gas and electricity market isn’t gouging and blacking out Australians”…

  4. This might interest some of you (links to 3 YouTube vids)

    that they (central banks) are tying to fight supply side inflation with rates, it don’t even work when Volcker used it in the 70s!

    “For anyone who missed Part 1 of our @EmilKalinowski Volcker Myth trilogy, here it is.

    Monetary experts taking control and slaying the inflation dragon? Not remotely.”

    https://t.co/TzsYImOwpD

    • Yep, very important to understand. The only way to stop this inflation is to open the supply taps and make up with Russia. Core inflation is currently slowing down, only energy and food is on the increase still.

      The Fed and the gov seems insistant on killing off the poor and destablising the world instead of doing the above.

    • It was just to crush labour in the Raygun way by gutting bargaining power and then some are confused how wages and productivity diverged mid 70s. Even when they could have done society better by taxing non socially productive $$$$$, but naw dog taxes are theft of – the mans[tm] – dollar and best of all higher IR helps Banks make free money for themselves. Hence why they are always so fast in passing rate cuts down in the past ….

      • TailorTrashMEMBER

        Think the shoulder flash says straya ……..and if NZ ….would still question .
        ……..but then the military is getting a tad woke so may now be the thing

        • That’s an easy one to answer. This is direct from the US, along with a whole lot of other stuff like; I’m blessed, I wanted to serve my country (never heard this until the 90s), flying the flag at press conferences etc. All these things make me want to reach for the gun I don’t own nor believe in owning, but on some occasions I wish I did and I had!

  5. ps://www.aumanufacturing.com.au/australian-semiconductor-maker-announces-key-commercialisation-milestone-with-export-of-laser-diode-prototypes

    What’s the bet we force them offshore or just kill them off.

  6. Tim Buckley, Director of Climate Energy Finance Studies, clearly reads MB. He used similar / same language (“war profiteering”) as MB to describe the treasonous parasitic gas corporations, while roasting them on ABC “PM” radio program this evening.

    • He did the same thing a couple of weeks ago

      “There’s plenty of gas, we don’t need new fields
      We keep exporting it all

      We’re paying the net back price

      Look at wa

      They’re a cartel

      They pay no tax

      War time super profits tax needed

  7. The Travelling PhantomMEMBER

    Interesting aspect in the US of A housing market, no one wants to sell as they have bought with mortgage rate of about 2% so why to replace it with 6%??

  8. Help!!!
    Someone please explain what rubbish this is: https://www.afr.com/companies/energy/aemo-calls-for-more-supply-to-avoid-blackouts-20220615-p5atrt

    Says there that there isa price cap and somehow aemo has taken over the generators??? How can they do that for assets they do not own (or do they and the energy companies only lease and run them)?
    And then,down the bottom it says that they canapply for compensation for direct and opportunity that will be passed on to consumer anyway. So how does this actually mean price capping work?

    • It’s in the federal legislation that was set up with the national energy market, for use in dire times! If they refuse they face massive fines; it’s critical infrastructure.

  9. Ronin8317MEMBER

    Been reading up on the NSW proposal to replace the stamp duty with a land tax. While I support removing stamp duty, what replaces it is worse. The proposal is to levy $400 + 0.4% of unimproved land value on PPOR, and $1500 + 1.1% for investors. There is no land tax threshold.

    For owner occupier, borrowing the money to pay stamp duty will result in a much better outcome. For a 1.2 million dollar home, stamp duty is 51k. Suppose the land cost 800K, then the total tax payable for the first year will be 3.6k. However, since land tax goes up with land value, a 10% increase in land value per year will see it increase to 5.5k in 5 years, and $8600 in 10 years time. Any owner with a choice will be better off borrowing the money to pay the stamp duty.

    Due to the fixed charge, it is a regressive tax regime : the more your land cost, the less you pay as a percentage. Currently the land tax is at 1.6% for investors over 880k, so for the big land-bankers will pay less in land tax. Furthermore, NSW passed a 50% land tax rebate for ‘build to rent’ (only accessible for big players), so they’ll only be paying 0.55% in land tax. The tax creates a skewed market where some investors are taxed less due to political connections.. At the low end of the market: land tax alone will take up 3 months of rent in a year!! @[email protected] (Dubbo, land price @400k, rent at $400 a week). Investment properties in regional areas will all become holiday homes that is only lent out for AirBnB for tax purposes, because the yield simply doesn’t work.

    The commercial land tax at 2.3% is also ridiculously high. The tenant pays the tax, not the landlord.

    Land tax shouldn’t be regressive (get rid of the fixed charge), should be less for commercial properties, introduce a threshold for owner occupiers, and should be a lower rate for area outside capital cities. If that is the proposal, the cure will be worse than the disease.

    • Yep, I’ll never move if they grandfather us in if we paid stamp duty. I paid about $56k on my home in 2020. Wasn’t happy about it, but would rather live here the rest of my days than move to an annual rate of tax like that.

    • Arthur Schopenhauer

      For owner occupiers of a median priced house in Sydney (or Melbourne), the current stamp duty will be paid as tax over ~9 years. And additional to stamp duty every year after.

      What a fk’n scam.

      If revenue is an issue, raising the GST instead? An immigration “infrastructure surcharge”? Or maybe, just maybe, a “resources rent tax”?

      • TailorTrashMEMBER

        Perrottet knows stamp duty is going to fall significantly
        ….( the Chinese might not be buying dog boxes too much in the future )
        …so let’s go and put a forever tax on peoples homes
        …imagine how much will be available to bail out builders and developers
        This country is fcuked…….,

    • Fishing72MEMBER

      “…..the virus is positioning us where it wants us.”

      Your talents are wasted shilling for the sniffles. You should be writing for Hollywood. That penchant for Xtreme hyperbole is astounding. The anthropomorphism was a nice touch.

      • Arthur Schopenhauer

        No one would have believed in the last early years of the nineteenth twenty-first century that this world was being watched keenly and closely by intelligences greater than man’s and yet as mortal as his own; that as men busied themselves about their various concerns they were scrutinised and studied, perhaps almost as narrowly as a man with a microscope might scrutinise the transient creatures that swarm and multiply in a drop of water. With infinite complacency men went to and fro over this globe about their little affairs, serene in their assurance of their empire over matter. It is possible that the infusoria under the microscope do the same…

    • I dunno. I didn’t read it, but this guy responded to that and seems to have a different interpretation of what’s in the paper :
      https://twitter.com/LarsSanderGreen/status/1536927160757125120?s=20&t=RxsUCq5NzohtXazJxjREpA
      Someone needs to read it to qualify what it says. If it means what this guys saying, then this is primarily a China problem. And I guess then I can see why ccp is locking down so hard when the rest of world is fine with opening up with omicron.

      • Lars is correct.

        Rajeev is off his head.

        If you want to take a narrow view of the Australian situation, it makes it all the more worthwhile to have rolled out vaccination given that the incidence of the Wuhan and Alpha waves here was so small.
        The paper (and Lars) also make the pertinent point that those who were vaccinated after Wuhan or Alpha infection don’t gain any immunity, but everyone else does.

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