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Interest rate markets rallying again

While the equity markets sail blithely on, there are signs that the crunch under way in Australia’s terms of trade is beginning to strain interest rate markets. The Credit Suisse rate futures market for the next twelve months has added more than one cut in the past week or so: And rate path probabilities from


New home sales head back down

HIA New Home Sales for July are out and, contrary to recent RBA hopium, the new year started with a whimper: New home sales posted a very disappointing result in July 2012, losing nearly all the modest ground made in late 2011/12, said the Housing Industry Association, the voice of Australia’s residential building industry. The HIA New


Macro Investor: Shorting the battler

As the Australian stock market approaches former highs on a very fast rebound, complacency from this optimism is clouding the medium and long-term economic reality. This is reflected in falling sovereign credit default swap (CDS) prices, now at very cheap levels and the higher Australian dollar against most major currency pairs: Add in concerns about


Dud earnings drive China’s bear market

The on-going weakness in Chinese equities has been a recurring theme for me. Here is the latest bear market low: There is nothing particularly out of the ordinary regarding the poor performances of equities if one compared Chinese equities with other stock market bubbles. More to the point, corporate profits have been quite weak.  Profit warnings filed with the Hong


Bears under the beds!

It’s all very entertaining. Last week it was Chris Joye at the AFR condemning some bearish menace looming over housing. Sadly too, the Governor of the Reserve Bank of Australia has recently taken to bear bashing, reckoning that Australians are more worried about the economy than the Greeks. Yesterday in his weekly drivel, Wayne Swan


Coking coal still sliding

From the ANZ: Newcastle FOB physical thermal coal prices were steady last week at USD89.05/t. Although market activity remained subdued, the end of the Muslim holiday of Eid al-Fitr in Indonesia should see more movement this week. Having hit a low of a low of USD81-82/t in late July, thermal coal prices have held up well. The same cannot be


Macro Investor Volume 1, number 9

Macro Investor Vol 1, No 9. is now available at the website and in PDF. War is peace, ignorance is strength, there was no mining boom… The mining boom has transformed Australia’s political economy in ways that will be felt for years to come as what has been forecast as a structural revolution will, in


Credit crunch seizes iron ore price

Friday’s ore price movements showed some stabilisation: With 12 month swaps catching a break, there is some hope that last’s week’s heavy dump was the capitulation phase for the ore price. There is not much hope in the fundamentals, however, with rebar falling to a new low and little discussion so far of Chinese steel-makers


Dallas Fed: China understating slow down

From the Dallas Federal Reserve comes this today: China’s Slowdown May Be Worse Than Official Data Suggest by Janet Koech and Jian Wang Vol. 7, No. 8, August 2012 | Issue in PDF In the months following the 2008–09 economic crisis, emerging-market economies robustly rebounded. Output in China and India expanded more than 10 percent in 2010,


“Keep taking the pills, Nev”

Fresh and cross-posted  from FT Alphaville, comes this unusually frank assessment of Fortescue and iron ore. Remember the joke about the $120 iron ore price floor? How we laughed. And for continued amusement here’s Nev Power, chief executive of Fortescue Metals,the highly-leveraged poster child of the Australian resources boom, discussing iron ore at Wednesday’s annual results announcement. From


My endless boom

By David Llewellyn-Smith It’s playing out as expected with the Pascometer leading off a chorus of nay-saying insiders yesterday afternoon and today. The boom isn’t over. Oh no! This is the endless boom, don’t you know. It’s entering a new phase, a third, fourth,fifth…twelfth stage. The AFR is wall-to-wall miner drivel this morning. The consensus now


More on China’s dud Flash

The HSBC/Markit China manufacturing PMI flash estimate for August drops to a 9-month low. The internals look weak as well.  New export orders slide to 44.7 from 46.7, while new orders slide from 48.7 to 46.6.  Both input and output prices components continue to point to further lack of inflationary pressure (or indeed, further deflationary pressure).  While


And now for coking coal…

I have been a bit confused by some of the spot versus contract pricing going in the market for coking coal. It appears I got my quarters mixed up. From ANZ today, there’s clarity, sadly: Newcastle Sept coal futures fell mildly to USD91.5/t. China’s total coal imports fell 10.3% m/m to 20.2mt in July, but is still


Coke no longer a defence play?

The uncertainty in the market has created something of an excessive focus on defensive investments, and Coca Cola Amatil has been one of the candidates for that play. Analysts are looking pretty non-committal. Merrill notes that the company “pretty much pre-announced its result”  so it was very much in line with expectations. It has a


Olympic damn!

BHP has canned Olympic Dam. I have no idea why. The company has $4.7 billion in cash (albeit from $10 billion last year), almost no debt and can borrow at 3% for twelve year bonds. Copper and uranium are supposed to be a part of the next wave of Chinese growth, with copper a central


Draghi does his best

Two weeks ago I wrote a post about Mario Draghi and what appeared to be ECB’s step across the Rubicon into the arena of politics and fiscal policy in order to force Europe’s politicians to break the ‘chicken and egg’ stand-off that has plagued Europe for over a year. In that post I described his


Very expensive banks

There is a growing degree of scepticism about the banking sector amongst analysts and it is not surprising. As UBS points out Australian banks’ market capitalisation has now reached US$305bn, for which you could get: US Bancorp; Goldman Sachs; Standard Chartered; Deutsche Bank; and the entire UK domestic banking system. The scepticism can be seen


Macro Investor: CBA is not worth the risk

Commonwealth Bank of Australia Ltd (ASX:CBA) is the nation’s largest bank, providing banking, life insurance and related services for individuals, small businesses and medium sized commercial enterprises. It also provides corporate and general banking, international financing, institutional banking, stock broking via Commsec and funds management. On the surface, CBA looks great – record profit, improving


RBA housingfest

The RBA is co-hosting a conference on property markets and financial stability with the BIS. The following are the papers presented. Land and House Price Measurement in China [PDF 1.2M] Yongheng Deng, National University of Singapore, Joseph Gyourko, University of Pennsylvania, Wharton, and Jing Wu, Tsinghua University Comparing Housing Finance Systems [PDF 527K] Frank Warnock and Veronica


RBA Minutes see mining boom peak

Find the RBA Minutes below. Not much to go on here. Probably more on the hawkish side but nothing on the dollar, bugger all on China or the bulk commodities. More on Europe, actually. A few rumblings on inflation. There was this one intriguing line: Resource investment was forecast to peak during 2013/14 and gradually


Grexit looms again

It’s been 7 months and taken a private sector default but there is mounting evidence that European leaders are again reaching the limits of their own failure on Greece. So are we being soften up for a Greek exit yet again? Possibly, but even if that isn’t the case there is growing evidence that Greece is


After holes, is it back to houses?

Last week while I was in bed with flu, Commonwealth Bank CEO, Ian Narev, declared that the bank is in favour of a new Wallis Inquiry into the financial system. So long, that is, as it’s focussed on the following, from the AFR: Commonwealth Bank of Australia chief executive Ian Narev has warned that the


McKinsey: Australia vulnerable beyond the boom

By Leith van Onselen Following on from Houses & Holes’ excellent post yesterday on the looming terms-of-trade correction facing Australia, McKinsey Global last week published a fascinating report entitled Beyond the Boom, which supports MacroBusiness’ view that the Australian economy is dangerously undiversified and highly exposed to a sharp fall in commodity prices. According to


Interest rate confusion seizes the nation

According to Westpac, consumers are confused about the prospect for interest rates: The Feb, Jun and Aug Westpac-Melbourne Institute Consumer surveys include an extra question about expectations for mortgage rates over the next 12 months. The Aug survey showed a significant shift with consumers now evenly split on the direction of rates compared with 52% expecting higher rates in the