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Chart of the day: S&P head and shoulders top

The US S&P500 fell over 2.5% last night – a harbinger of further falls. Today’s chart shows that a head and shoulders formation has been completed, with the neckline at 1250 points (the orange line) and below the 200 day moving average. If the S&P500 closes the week below the neck line, the US stock

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37

APRA imposes the new normal

In recent months, the credit ratings agencies – Standard & Poors, Moody’s and Fitch – have warned against the re-emergence of the Australian banks’ pre-GFC business model of borrowing heavily from offshore to pump the Australian housing market. However, with housing credit growth now at 35 -year lows: Other categories of lending even more subdued:

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China’s shadow banking explosion

Fitch recently released an eye opening report on the staggering growth of leverage in the Chinese economy (h/t Bernard Hickey). As many readers will be aware, the Chinese Government has been implementing policies aimed at curbing bank lending in order to slow inflation. However, as is often the case with regulation, these policies have shifted

4

The OECD has had one too many ouzos

As I have stated many times the current plan of pushing austerity onto the indebted periphery of Europe is not a sustainable solution because the current macroeconomic environment of the EMU cannot provide an auto-stabilising mechanism that will compensate them for the lack of credit being issued into their economies. While Europe continues on this

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August 3 links: Stall speed

Rockets:$US, grains, gold Up: ore Down: Aussie, Euro, CRB, energy Smacked: metals Italy, Spain hit record yields, spreads to Germany: 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

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RBA commodity index up again

Below is the RBA July Index of Commodity Prices hitting a new record high in SDR terms. However, in Australian dollar terms, the index is now sliding. Preliminary estimates for July indicate that the index rose by 0.9 per cent (on a monthly average basis) in SDR terms, after rising by 1.7 per cent in June (revised).

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Up, down and sideways

  Here are four bank takes on today’s rate decision, the pick being the first, from Brian Redican at Macquarie Securities. Macquarie The RBA Board’s decision not to raise rates at its August policy meeting will obviously be welcomed by those firms struggling with weak consumer demand, as well as some mortgage holders with stretched

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Building approvals by state

Following are a series of charts drawn from today’s ABS Building Approvals numbers. First up, is the national chart for dwelling approvals, which doesn’t look too bad, though is obviously in a significant declining trend, giving back after last year’s stimulus dragged forward demand: When we break down by state, however, we get a very

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The agony of the bullhawks

As the bullhawks (Joye & Carr) withdraw to their high eyries, dragging the bloodied corpse of Terry McCrann with them, they should take a moment to raise their razor sharp beaks a few points above the strictures of yesterday’s war. Strict adherence to an inflation band is sensibly modified by an appreciation of imminent risks, whether

66

No hike

Statement by Glenn Stevens, Governor: Monetary Policy Decision At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent. The global economy is continuing its expansion, but the pace of growth slowed in the June quarter. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity

9

Trading Day: can’t get no relief

The S&P/ASX 200 slumped on the open and is down over 1% after midday, waiting for the princes at Martin Place to maker their decision. The market is down a total of 58 points or 1.32% at 4439, wiping out most of yesterdays stellar gains. Other Asian markets are experiencing similar losses, with the Nikkei

11

Building approvals fall again

ABS Building Approvals for June are out and the best one can say is that there’s more space for mining to grow into. The ongoing fall is broad based and takes in both residential and commercial construction.  The drop is not as bad as last month thankfully but there is still considerable downward momentum, even if

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ABS house price falls moderate

Here are the ABS results for June Qtr house prices. All capitals fell slightly, except Sydney and Canberra, which eeked out small gains. JUNE KEY POINTS ESTABLISHED HOUSE PRICES Preliminary estimates show the price index for established houses for the weighted average of the eight capital cities decreased 0.1% in the June quarter 2011. The

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Equities Spotlight: Better (not) buy Bega

Bega – that well-known Australian food brand with the cheesy jingle – is launching an IPO, issuing 17.5 million shares at $2.00 a pop to raise $35 million.  They’ll also issue 850,000 shares to Bega employees at no cost as part of the float. One of the first things I read in the prospectus was

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Chart of the Day: iPhone

As much as I hate pie charts, this one, a survey result from Business Insider is interesting for 3 reasons: First, why the rush for non-iPhone owners to get one, secondly, looks like iPhone is Pacman on the second chart, eating up the competition, but third, this explains why Apple (AAPL) sits on a ton

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A modest proposal for manufacturing

If there’s one thing that bugs me about the Australian economy and business it is rent-seeking. It is that practice of big businesses wielding political power for shareholder and personal gain. It is a doubly toxic pursuit because it not only means that Australians often have to pay extortionate prices for goods but it retards

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How many job losses will satisfy the RBA?

There is a technical economic concept that you should get to know, if you don’t already know it. It’s called the Phillips Curve. And it may be about to change your life. Basically, it posits an inverse relationship between rates of unemployment and rates of inflation. That is, the lower the former, the higher the

36

Move over banana smoothie

As the Australian housing bubble lurches, the CBA has launched a new marketing tool for would-be investors, an online game. “Investorville” is “fun and friendly” where you can make choices “just like a real investor”. In time, you’ll get so good at it that you’ll be able to “give it a go in the real

41

The long kiss goodnight

The Australian housing bubble debate appears to have hit a stalemate, where the dominant view is that home prices will stagnate for an extended period as incomes catch-up (i.e. declining in real terms). It’s a reasonable view with precedent. For example, after the late-1980s house price boom and the strong run-up in house prices between

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August 2 links: ISM wakeup call

Up: ore, $US, grains, CRB, Flat: Aussie, Euro Down: energy, gold, metals Sovereign easing: 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

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The US debt deal

Find below details of the US debt deal, direct from the White House: Fact sheet: Bipartisan Debt Deal: A Win for the Economy and Budget Discipline Removes the cloud of uncertainty over our economy at this critical time, by ensuring that no one will be able to use the threat of the nation’s first default

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Chinese PMI slows, but how much?

China’s official manufacturing purchasing managers index (PMI) in July continued to show signs of slowdown, albeit at a moderating pace.  The headline PMI fell from 50.9 to 50.7, better than the expected number of 50.1. The new orders index increased from 50.8 to 51.1, which is a bit of a good news, while output fell

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Trading Day: relief rally

The S&P/ASX 200 jumped on the open and is up over 2% after midday, due to the “resolution” of the US debt crisis announced this morning. The market is up a total of 90 points or 2% at 4514. Other Asian markets are experiencing similar gains, with the Nikkei 225 up 1.87% at 10013 points,

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New home sales tank

The mining sector is about to get a whole new batch of construction workers to choose from if the HIA new home sale report for June  is any guide. The index collapsed to GFC levels. The HIA has this to say: New home sales suffered their heaviest monthly decline in five years in June 2011, providing

14

Manufacturing tanks

The adjustment we all had to have is going gangbusters now. Having been in recession for the better part of a year, manufacturing activity fell off a cliff in July. Here’s what the mild-mannered folk at the Australian Industry Group had to say about the ongoing extinction of their members: ■ Manufacturing activity slumped in

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TD-MI Inflation, higher than comfortable

The monthly TD-MI Inflation guage has just been released with a rise of 0.3% in July up from the flat result last month. This has kicked the year on year change up to 3.2% and, for those of us who like to try to interpret charts, the chart below suggests the period of pullback/consolidation in

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Turning a soft landing hard

Sigh. I apologise for the ceaseless battery of bearish outlooks this morning but damn, that’s the way the world is going, and I’m not going to “pull a Yardney” and pretend it isn’t so that yours and my hard earned capital goes up in smoke. This morning we have two excellent pieces on the debt-ceiling

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Melbourne’s Miami connection

A few months back I had dinner with an American hedge fund manager. The fund had made good returns shorting the United States and Irish housing markets, and was undertaking reconnaissance of Australia’s capital city housing markets to determine whether similar shorting opportunities were available. In the days prior to the meeting, the fund manager

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Europe plans its next crisis

With the economic world firmly focussed on the US debt debacle this week it is likely that Europe will slip off the radar a little. I suspect, as many people do, that for the US there will be an eleventh hour resolution followed by a short lived bounce in the world markets. Once that bounce

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Deadlines, debt and downgrades

Find below an excellent note from Westpac covering the fallout from various scenarios emanating from the US debt-ceiling debacle. The note is both useful and entertaining, with Russell Jones of the rates strategies team nicely capturing the absurdity of the situation.