Links for 23 August 2012

Global Macro: The Hottest Trade on Wall Street: European Stocks – The Reformed Broker Citi Expects Only Two Countries Will Have AAA Ratings In The Long Run – Business Insider Iron Ore-Contract defaults as price slides, Shanghai rebar record low – Reuters Iron ore floor becomes iron ore trapdoor – FT Alphaville United States: FRB:

Latest posts


ASX Shares Daily – 22nd August

  By Chris Becker First up – apologies for lack of updates, I was fighting the dreaded lurgy the past few days – and secondly, today’s Olympic Dam decision by BHP confirms my view of the shallowness of debate in this country about the mining boom, the economy, and of course the politics and ideology that


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


China links

Courtesy of Sinocism. Rural reforms are desperately needed. Beijing knows this, and Minister of Finance Xie Xuren recently said that China “desperately needs to deepen comprehensive rural reforms”-谢旭人:新形势下亟待深化农村综合改革. Land reform, Hukou/urbanization reform, and rural health care reform are just some of the reforms that could be key to unlocking China’s next wave of more sustainable


Leading index improves

From Westpac this morning: The annualised growth rate of the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 2.4% in June 2012, below its long term trend of 2.7%. The annualised growth rate of the Coincident Index, which gives a pulse of current activity, was 3.7%, above its


Japan’s trade data adds to global slowdown fears

From Bloomie: Japan reported a wider-than-expected trade deficit in July as Europe’s sovereign debt crisis and austerity measures dragged down exports and higher oil prices boosted imports. The shortfall was 517.4 billion yen ($6.5 billion), after a revised surplus of 60.3 billion yen in June, the Finance Ministry said in Tokyo today. The median forecast in a


Residex: House prices rise in July

By Leith van Onselen Late last week, Residex released its house price results for the month of July, which registered a rise in house and unit values over the month, but significant divergence between capitals: In his commentary surrounding the results, Residex CEO, John Edwards, is cautiously optimistic about a housing recovery, but notes risks


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


End of an era for iron ore?

The world steel association released its July production report overnight and the news is not especially good: World crude steel production for the 62 countries reporting to the World Steel Association (worldsteel) was 130 million tonnes (Mt) in July 2012, an increase of 2.0% compared to July 2011. China’s crude steel production for July 2012


Macro Morning – Europe hopes but S&P 500 pulls back

Ambrose Evans Pritchard wrote an article in the UK Telegraph that I tweeted early yesterday morning, after this note was published, saying that the Telegraph could confirm that the discussions that were scotched by the ECB the previous night on caps on bond spreads had indeed taken place. Regardless of the fact that it’s a


Chinese eat at home

The economic slowdown in China is hitting more sectors.  The latest is food and beverages, restaurant operators, etc. Food & beverage businesses in China have been, like other parts of the economy, facing the problems of increasing wage and other costs.  And now, with the economic slowdown, revenues are down across different parts of the country.  First Financial Daily reports that 15%


Zombie China

It is now quite well-known now that non-performing loans in China are surging, and loans at risk of turning non-performing are also on the rise. But we are always suspicious on these figures as they look artificially low.  And here is why. The Chinese banking sector is dominated by state-owned banks, and as I said in my guide


China chart pack

Find below ANZ’s excellent monthly China chart pack. The only observation I’d make is that the bank continues to apply a Western paradigm to the PBOC response to economic weakness, forecasting large cuts in reserve ratio requirements and interest rates. The evidence to date is that a more modest easing is coming, if China wishes


August 22 links

United States: Lockhardt kills QE3. Zero Hedge, Tim Duy Risk off. Zero Hedge Structured by cows. Dealbreaker Europe: Concessions for Greece. Bloomberg Asia: China’s unprecedented liquidity operation. Alphaville More China links in the daily post from Sinocism Local: RBA exposes low doc loans. The Oz Port Hedland strife. The Oz Coalition’s radical Federalism. AFR RBA


Smith canes Abbott

It’s not very often that I agree with Mike Smith but today he is right in caning Abbott’s Great Gaff of China. From the AFR: Australia and New Zealand Banking Group chief executive Mike Smith has called on political leaders to foster a more welcoming attitude towards foreign investment in the resources and agricultural sectors


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


More resources gloom

The RBA today brought forward its estimate for the mining boom peak. From The Oz today comes more confirmation that the ground is shifting under the resources boom: Analysts think that not all of the projects in the government’s $500 billion pipeline will happen without a major recovery in commodity prices or an increased willingness


Rate markets ignore RBA (again)

It’s becoming a tradition for interest rate markets to ignore the RBA’s pronouncements of economic strength. Today’s upbeat Minutes failed to shift interest rate markets, which are still pricing 50bps of cuts in the next twelve months: The next meeting is still rightly discounted:


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


China links

Courtesy of Sinocism. Gu Kailai got death with a two-year reprieve and some experts say she could be free in as little as nine years. Her accomplice Zhang Xiaojun was sentenced to 9 years and 4 Chongqing policeman convicted of helping Gu cover up the crime received 11, 7, 5, and 5 years respectively. Gu will likely serve her sentence


Earnings neither hot nor cold

The reporting season so far has neither excited nor disappointed. Which means the market is likely to be buffeted by overseas currents, not that there is anything new about that. One would have to think that the strength of the $A would be making foriegn investors, about two fifths of the market, feeling nervous about


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


Ore swaps bust the ton

Iron ore weakness continued yesterday: 12m swaps busted the ton. Here’s a long term chart: Sorry to harp on this, but swaps are rapidly approaching the 2010 low of $98.50 that marks the neckline on the giant post-GFC head and shoulders pattern. The news from China was also poor. From Reuters: An unexpected rebound in