BofA with the note: The economy is facing an imbalance: a burst in demand has been met with constrained supply. Economics 101 tells us that when the demand curve shifts more than the supply curve, prices will rise, which continues until the balance is restored from a combination of slowing demand and greater supply. This
Readers will recall that there has been something a mystery in some components of the very steep slowdown in Chinese debt issuance over the last four months. Most pointedly, local government borrowing, which accounts for a lot of infrastructure and property investment, cratered 80% year on year in the four months to April despite having
As Morrison’s Prison Island falls ever further behind in the vaccine race, the northern hemisphere is beginning to open up to tourism. Europe is preparing to launch vaccine passports. Domestic US tourism is exploding higher. Now Canada is leading the reopening of borders to the vaccinated: Wokester Justin Trudeau is considering easier border controls. The
Economically speaking, Australians are very fortunate people. We are also some of the most ignorant. These truisms are played out superbly in the least understood yet most important feature of Australian markets. What’s the best asset hedge in the world? This, via BNP Our analysis has two stages: a historical assessment of the most reliable
Morgan Stabley bearing it up: Over the past few weeks, we’ve been spending a lot of time with investors discussing and debating our mid-year outlook. Here are the highlights: First,investors are definitely more receptive to the mid-cycle transition narrative that we introduced a few months ago. There’s an acknowledgement that something has changed in the
The ferrous complex was universally weak on June 7, 2021. Spot fell. Paper tumbled. Steel was whacked. That this all happened on the day that Brazil plugged another dodgy dam is not a sign of market strength. The proximate cause was mediocre Chinese trade data. Iron ore imports for May were lousy at 89.79mt and
There is no doubt that Australia has the worst vaccine rollout underway in the developed world. Bar none. It is the slowest, most troubled, and worst handled. Via Goldman: I am locked down today for the sixth time directly as a result of this failure and Morrison’s other screw-up, failing to centralise quaratine in the
The Australian dollar was firm again last night as DXY came off hard and EUR rallied: AUD was firm on the crosses: Oil fell, gold lifted: Metals were subdued: EM stocks marked time: Junk is fine! US yields firmed a bit: But the great inflation trade is looking weary as tech shapes up for another
For a long time, S&P was the last of the semi-credible ratings agencies as it kept the pressure on Australia’s AAA rating because of its contingent liabilities in the banking system. It did so by insisting that the budget return to surplus across the cycle so that net debt did not surpass roughly 30% of
I have been warning of this for nearly a decade as I watched various Australian investment legends blow themselves up in China, including Kerr Neilsen and Hamish Douglass. Investing into China is foolish for one simple reason: the sovereign risk is off the chart. This is not an academic measure of risk. Nor is it
Some interesting sector-level trends in US credit card spending. Services spending is normalising swiftly as reopening gathers pace. There are early signs that goods spending is falling away as well: Eating out is now up on pre-pandemic levels. Travel is roaring back to almost unchanged from 2019. I expect a big overshoot ahead. Interestingly, goods
TS Lombard with the note After leading the recovery last year, real estate investment is set to decelerate under macro and sector-specific deleveraging campaigns as well as higher input costs. We expect property investment to reach 5% yoy in H2/21 from13% you in April. The slowdown will hit local government financing and investment. The combined
Watch out for a short squeeze. Via Goldman: Over the week ending June 1, non-commercial traders net sold $0.9bn USD, after net sales of $1.4bn USD in the week prior. Both asset managers and leveraged funds appear to have contributed to the net Dollar sales. Traders net sold Dollars against net purchases of EUR, JPY,
Enjoy the latest twist in this “new asset class” of 100% horseshit.
The ferrous complex was mixed Friday with spot down, paper up overnight and steel firm as well. But that all misses the point. This market is showing signs of early trouble: Why am I getting nervous? CISA late May steel output fell heavily: It is not unusual for May production to pull back a little
When your choice is between a deeply corrupt rape protection racket versus the plaything of an evil foreign power what are you to do? Make it zero all: The rape protection racket must now be a slight favourite to win despite violently alienating the female half of the electorate. To wit: Frank Zumbo, the long-serving
Australian triumphalism is on the march. We’ve come through another global shock with the housing bubble intact. We’re cock-a-whoop! Like the GFC, the performance is being put down not to hard work or sacrifice but dirt. Iron ore is apparently responsible: Australia can thank the booming price of its biggest export iron ore, which currently
Forex did a full-blown reversal Friday night. After readying for tearaway US jobs and a rising DXY, instead we got Goldilocks numbers and violent jack-knifing as yields were clubbed and risk bets roared back. DXY and EUR changed places: Australian dollar hit a trampoline: Gold firmed. Oil is off and running: Base metals were subdued:
Nordea with the note. I see US inflation tumbling next year: We see clear risks of a big positive surprise to the May inflation report as well with core inflation around or just above 4%. The market is still buying the transitory inflation narrative but for how long? Lately, increasing (US) inflation has been the
Not according to Bill Bishop at Sinocism: Comment: David Bandurski of the China Media Project has written an excellent article on the Politburo’s collective study session on global discourse power and the wishful thinking in some quick takes about a change in tone/halt of “wolf-warriorism”. He provides good background on the discussant, Fudan University professor
Bill Evans at Westpac with the note: The RBA Board is likely to decide that there will be no extension of the YCT to the November 2024 bond at the July Board meeting because such action would imply no tightening till 2025. Westpac disagrees with that interpretation but cannot dispute the resulting decision. Not extending
Bernard Keane at Crikey: The “Commonwealth remit” for the vaccination rollout, to use the term employed by the Department of Health, consists of four groups: aged care residents, aged care workers, disability care residents and disability care workers. Those groups formed the bulk of what the government in its vaccination rollout strategy called “Phase 1a”. The remainder
The ferrous complex rolled over yesterday and last night as the US dollar rallied. Spot was up a little but paper fell overnight. Steel has not updated: If the US dollar advances from here on strong US jobs then expect iron ore to have peaked and fall away earlier. It is a factor after the
Back in 2018 when MB readers understood clearly where the Australia/China relationship was heading even as the rest of the nation did not, Donald Trump confidante Steve Bannon summarised the US view succinctly: Donald Trump’s former chief strategist Steve Bannon has criticised Australia’s approach to an aggressive China, labelling it weak and saving his most
After a week of going nowhere, forex lit it up last night as we approach tonight’s US jobs report. The big, smart, hot money piled into DXY and everything else got caned. EUR sank: Australian dollar was crushed: Gold was put to the sword. Oil survived it: Base metals were smacked: And big miners: EM
Goldman has a note today that will scare the willies out of Australians: Central banks and especially financial markets believe that the neutral real short-term interest rate (r*) is extremely low. The major G10 central banks estimate r* at ¼-½%, while markets appear to be pricing about 0% in the US and -1½% in Europe.
The China trade war on Australia is not going at all well. Iron ore is trading on a vast geopolitical premium. Damaged commodity trade flows have been redirected to other nations with a minimum of fuss. Australia’s current account surplus has skyrocketed to records. Based on outcomes so far, it’s the best thing to ever
Deutsche with the note: Since the last CoTD, Bloomberg’s US financial conditions index has eased to fresh14-plus year highs. This index looks at money markets, various credit spreads and equity markets. However Bloomberg also compiles a financial conditions “plus” index where they include indicators of asset-price bubbles incorporating tech shares, housing markets and additional yield
The ferrous complex was much calmer on May 2, 2021 than in recent times. Spot hardly moved. Paper warmed a bit. Steel fell: In other news, Westpac reports on the rebound in Aussie volume after Q1: May Australian iron ore exports fell short of our expectations at just 75.7mt. That’s -1%yy and -4%3myy. Given recent
What is Australia’s secret weapon against China, I ask? Iron ore! I hear you scream. Wrong. Sure, iron ore’s good to have. It makes steel. That’s pretty important if you want to build apartments, bridges…and guns. But iron ore is not forever. Even if it seems so. Why, you say? For one thing, those really
