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European democracy dies in its cradle

Yet another night in the European soap opera. If I had to name the episode I would have called it “the death of European democracy”, but I’m not particularly imaginative so maybe someone else can think of a better one. The news is moving very fast at the moment with lots of conflicting stories, so

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Global easing underway

While the equity market dances around the latest European bailout developments like a pre-teen girl following a pop idol, the real action is in the economy and central bankers, it seems, are starting to see it. As I wrote yesterday and is confirmed today by the guest post from 4cast, the European economy is in

1

The Italian economy is crashing

From the folk at 4cast comes this rather unsettling look at the trends within the Italian economy.   We’ve been exceptionally negative on Italy for some time now – see for instance ‘Italy GDP heading negative?’ from the 15th of July where we forecast a sharp downshift pulling the economy into recession over the end

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Chart of the Day: S&P versus ASX

Today’s chart is from one of our regular readers The Avid Chartist, who has updated his study of the ASX200 and the S&P500, both denominated in USD. The chart plots the first day of the month from August 2007 through to October 2011. As Avid says very well: We Aussies are financially joined at the hip

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How Phoenix housing boomed and busted

When analysing the US housing bubble, four states stand-out for the way in which home values rose into the stratosphere before crashing and burning: California, Nevada, Florida and Arizona (see below chart). Given the first three markets were covered in previous posts (see above links), I now want to analyse the Arizona housing market –

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November 4 links: Greek convulsions

Up: ore, metals, gold, CCI, grains, euro, Aussie, energy Down: $US, Treasuries Contagion: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year Germany 2 Year

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Trading Day

The S&P/ASX 200 Index closed down 12 points or 0.3% lower to 4171 points after positive leads from overnight markets. In after hours trading, the index is up 15 points, although Euro and US markets are pointing to slightly lower opens. Volatility continues to rule. Asian markets experienced broader losses, with Japan’s Nikkei 225 down

15

Australian dollar at the edge

We never want to get too bearish just for the sake of it but the Australian Dollars break down through my target from earlier in the week of 1.0322  yesterday and then this morning’s take out of 1.0230 suggests to me we are on the verge of a cascade that may see us all the way

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Which bank to buy?

Analysts are looking at banks at the moment, with the tone being, for the most part, sceptical. Westpac is getting the most attention; the consensus seems to be that it is accurately prices. Royal Bank of Scotland has a hold and has slightly raised its price target to $23.69. RBS is not all that impressed:

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Retail sales match wages

So, after a big bounce in July of 0.8% and solid follow through in August of 0.6%, ABS September Retail Trade slowed again to 0.4%. To the charts. The result was in line with expectations: It looks like retail sales growth is now running at roughly the same rate as wages growth, in the 3.5%

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Services in recession, again

If you’ve been running a services sector business and wondering why your turnover is down despite all the talk of a boom, then today’s Services PMI might help clear things up for you. The Australian services sector has been dipping in and out of recession all year, including in October: In case you’re wondering whether

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Chart of the Day: May 2008 redux?

Australian equity investors must always look abroad to the US to indicate the probabilities of future gains or losses on the ASX as binary risk markets continue to correlate (positively: equities, non-USD currencies, commodities; negatively: USD, USD bonds)to each other. For those who don’t understand or don’t want to believe the impact of world finance

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China’s leading indicators head south

While market sentiment hangs on the ebb and flow of the noise that is European politics, there are longer term structural economic considerations that are bubbling on the back burner and will have material impacts on the global but more particularly Australian economy in the months ahead. The main point of interest for me is

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Will Europe drag us all down?

While markets remain focused on the debt travails and bailouts of Europe, the underlying economy is in deep trouble. In fact, the Eurozone is plunging into recession – fast. Last night’s PMI was another shocker: Conditions in the Eurozone manufacturing sector continued to weaken in October. At 47.1, down from 48.5 in September, the final

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Fed slashes projections

For those living under a rock, last night was the Fed meeting for October and the results are below. First, the Statement: Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed

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China set to ease?

Exclusively from Michael Pettis newsletter: Credit growth in China has been tight in the past month or two.  This hasn’t yet shown up in the GDP growth numbers, but if low credit growth continues, it will almost certainly result in much slower GDP growth.  The main thing generating growth in China is investment, and investment is largely

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November 3 links: Fed gloom

Up: ore, metals, gold, CCI Down: grains,  $US, Treasuries, euro, Aussie, energy Contagion: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year Germany 2 Year

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Will rate cuts stimulate housing?

Predictably, the usual suspects are on the hustings promoting property in the wake of the RBA rate cut today. And why not? It’s always worked before. Hasn’t it? Well, actually it’s not that easy to tell. Here’s a chart of ABS YOY house price growth graphed against the RBA cash rate since the eighties: The

4

Trading Day

The S&P/ASX 200 Index closed down 48 points or 1.15% lower to 4184 points after the continuing turmoil in Europe. In after hours trading, the index is steady, with Euro and US markets pointing to positive gains from the heroic losses of last night. Asian markets experienced similar if mixed losses, with Japan’s Nikkei 225

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Are earnings projections low enough?

OK, the market is in a terrible hole. But the question is what has the market priced in and how accurate is it? No earnings growth at all in the case of Rio and BHP, and precious little growth across the market more generally. Such bearishness has proven close to the mark, but it is worth

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RBA Chart Pack

The Reserve Bank of Australia (RBA) has released its monthly chart pack today. The Pack (downloadable as a PDF or in separate GIF images as below) has 16 categories covering the state of the Australian and world economies, via diverse metrics and observations. I’ve reorganised the charts as follows: Economic growth The major measure of

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Building approvals backflip

Well, so much for the good news. The August pump in Building Approvals has more than reversed, returning the series to its declining trend in September:   The state by state table shows universal (-SA) falls: NSW more than reversed its jump. The Victoria boom continues its unwind as well. Here’s the chart: Once again

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Chart of the Day: US earnings revision

A great chart from Dr Ed Yardeni’s blog on the US S&P500 earnings bonanza (note that the US reports quarterly, Australian corporates half yearly). The chart is a weekly update of analyst’s average forecast of quarterly earnings. Note the substantial upward revisions to Q1 thru Q3, with an estimated looking through growth rate of some

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Greece explodes, Italy ticks

I started watching the live BBC feed last night after it became obvious that European markets had reacted very poorly to the call by the Greek PM to allow for a democratic process to occur in his country by asking its citizens to make a decision as to which poison they will imbibe over the next decade. The

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MRRT fail

One has to be a skeptical of polling, and I’d like to see more results, but given the state of the economy I am unsurprised by the findings of a poll today on the MRRT via the SMH: THE Labor Party will introduce legislation for its mining tax today buoyed by internal polling that shows

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The iron ore crash in context

Yesterday saw the little bounce in the ore price continue with spot up 0.76% to $119.30, 12 month swaps reversed course and were down 2.1% to $125.55, whilst Shanghai rebar was again little moved. This looks like a weak bounce. I’m not confident that the correction is over. But today I want to discuss what

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China hard landing a 1 in 3 bet

Nomura has published a monster report, attaching 1-in-3 chance of a China economic hard landing by the end of 2014, defined as an “abrupt slowdown in real GDP growth to an average of 5% y-o-y or less over four consecutive quarters”.  They believe that the growth potential for China is 8% in real term, thus 5%

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China’s PMI decoded

China’s official manufacturing purchasing managers index (PMI) declined in October after improving for two months.  The headline PMI declined from 51.2 in September to 50.4 in October. Once again, new exports order dipped below 50 after improving for a month, indicating weaknesses in the global demand continues as the global economy slows.  The new orders index