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1.Market Observations

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18 Aug 2018 (AFR) – Markets in 2018 have been a horror story, with no end in sight

(18 August 2018, AFR, p29, by Patrick Commins) ‘It’s like the set-up for a horror movie [in a husky, deep voice]: “Something is stalking the global financial markets, picking off trades one by one, leaving a trail of losses in its wake.” Turkey is the latest victim. We can only watch in morbid fascination the goring … Continue reading

18 Aug 2018 (AFR) – US, China agree to trade talks, triggering biggest stock surge in four months

(18 August 2018, AFR, p12, by Jacob Greber) ‘The Trump administration and China will next week resume trade talks for the first time in more than two months, elevating hopes a resolution can be found before the worsening tit-for-tat tariff war does lasting damage. In news that coincided with the benchmark US stock market surging by … Continue reading

18 Aug 2018 (AFR) – Earnings push ASX, and ASX shrugs off global sell-off to hit 10-year high

(18 August 2018, AFR, p32, by William McInnes) ‘Despite a volatile week for global markets, the Australian sharemarket has closed the week with a fresh 10-year high, rising on the strength of strong earnings results. The S&P/ASX 200 index rose 60.8 points, or 1 per cent, this week to close at 6339.2, despite base metals prices tumbling … Continue reading

17 Aug 2018 (TheAge) – ASX shakes off commodity plunge to close flat

(17 August 2018, The Age, Business, p29, by William McInnes) ‘The Australian sharemarket shook off a global commodity plunge, closing the day flat despite continued uncertainty in emerging markets.’ <snipped…> ‘On Wednesday night commodity prices collapsed amid threats of a spreading financial contagion in emerging markets and the strengthening US dollar. Base, precious and bulk … Continue reading

17 Aug 2018 (TheAge) – New car sales like canary in a coal mine

(17 August 2018, The Age, Business, p25, Harold Mitchell) ‘Car sales are dropping. July sales were down 8 per cent and followed May and June which recorded reduced volumes on the previous year. My researcher and forecaster Charlie gets very excited about car sales as an economic indicator and he tells me we are experiencing … Continue reading

17 Aug 2018 (TheAge) – ‘In ten years this bridge will collapse’: the man who foresaw a tragedy

[COMMENT: Are there more underyling issues in the European Union?] (17 August 2018, The Age, p10, Nick Miller) ‘London: “In ten years the Morandi Bridge will collapse… and we will remember the name of whoever said ‘no’ [to a bypass].” These were the words of a frustrated industry leader in Genoa, back in 2012.’ <snipoped…> ‘By … Continue reading

17 Aug 2018 (TheAge) – Jobless rate falls to lowest in almost six years

(17 August 2018, The Age, p5, by Eryk Bagshaw) ‘The unemployment rate has fallen to its lowest rate in nearly six years, spurring the Turnbull government to claim credit for the underlying economic performance. The figures show the drop from 5.4 per cent to 5.3 per cent, its lowest level since November 2012, is mostly … Continue reading

17 Aug 2018 (AFR) – Drought delivers bumper profits for West Australian farmers

(17 August 2018, AFR, p36, by Aaron Patrick) ‘West Australian wheat farmers are among those making hay – some literally – from the east coast drought. A near-perfect combination of plentiful rain, high prices and extra demand from a parched NSW and Queensland could generate almost $1 million average income this year for each of … Continue reading

17 Aug 2018 (AFR) – Commodity sell-off hits miners BHP, Rio Tinto as fund managers stay calm

(17 August 2018, AFR, p31, by Sarah Turner) ‘Amid a plunge in commodity prices on emerging markets turmoil and the threat of a trade war, fund managers are preaching calm on the prospects for the ASX-listed mining sector. After a sell-off in London and New York overnight, BHP, Rio Tinto and South32 dropped more than … Continue reading

17 Aug 2018 (AFR) – Emerging markets index falls into bear territory

(17 August 2018, AFR, p29) ‘New York/London | Emerging markets tumbled by the most in six months on Wednesday and remained weak on Thursday, slumping into a bear market as investors were spooked by a commodity price rout, currency turmoil and disappointing results from one of China’s technology giants. In spite of a recovery in … Continue reading

17 Aug 2018 (AFR) – Regulator’s measures won’t help Turkey’s financial system forever – Real test for banks still to come

(17 August 2018, AFR, p29, by The Lex Column) ‘Everyone likes to use historical markers now and again. Maybe that photo on your internet bio is a few years old. Maybe you still reach for trousers with a 32-inch waist, which your belly no longer accommodates. The decision by Turkey’s financial regulator to allow its … Continue reading

17 Aug 2018 (AFR) – Escondida strike delayed, possibly averted – Could extend copper price slide

(17 August 2018, AFR, p19, by Peter Ker) ‘BHP Billiton and Rio Tinto have delayed the threat of a strike at their Escondida mine, in a development that could put further short-term pressure on the sliding copper price. Copper prices have slipped by more than 20 per cent in the past two months, and some believed … Continue reading

17 Aug 2018 (AFR) – Jobless rate hits lowest in nearly six years

(17 August 2018, AFR, p7, by Patrick Commins) ‘Australia’s unemployment rate hit its lowest level in close to six years, as a surprise loss of 3900 jobs in July was more than offset by a fall in the participation rate. The key jobless gauge fell to 5.3 per cent in July, data from the Australian … Continue reading

16 Aug 2018 (AFR) – This is no time to bet against Hong Kong property

(16 August 2018, AFR, p44, by Nisha Gopalan) ‘Hong Kong’s banks are finally raising mortgage rates. This won’t stem price gains in the world’s most expensive city for real estate. Already up 14 per cent this year, Hong Kong’s home prices now overshadow those of New York and London relative to incomes. A key reason … Continue reading

16 Aug 2018 (AFR) – Retail property deals nudge a record $10b for FY2018

(16 August 2018, AFR, p43, by Nick Lenaghan) ‘Deals in retail property over the 2018 financial year hit $9.87 billion, a record total after increasing almost 50 per cent on the previous year. The hefty transaction flow came despite ongoing concerns at the broader impacts of increasing e-commerce on bricks and mortar retail real estate … Continue reading

16 Aug 2018 (AFR) – Western Sydney showing early signs of loan stress

(16 August 2018, AFR, p41, by Su-Lin Tan) ‘Households in western Sydney changing from interest-only to principal-and-interest loans are selling out as they struggle to meet higher repayments, but they may struggle to find the right price unless they are prepared to meet the market. Selling agents are starting to reveal the truth behind recent … Continue reading

16 Aug 2018 (AFR) – Detached house growth to offset apartment construction fall this year, HIA says

(16 August 2018, AFR, p40, by Michael Bleby) ‘Detached housing construction likely rose to its highest level in 18 years over the four quarters to June, as demand triggered by the growing  population more than offset a small decline in apartment starts. In its latest forecasts published on Wednesday, the Housing Industry Association said commencements … Continue reading

16 Aug 2018 (AFR) – Melbourne land speculators ‘panicking’ as settlements loom

(16 August 2018, AFR, p35, by Larry Schlesinger) ‘Speculators who hoped to get rich on a boom in Melbourne land prices are “panicking” as settlements loom and they can’t find developers to on-sell their sites to, according to Resi Ventures’s Khurram Saeed, who has been developing for 15 years. Mr Saeed said he was getting … Continue reading

16 Aug 2018 (AFR) – Citi: ‘severe’ drought could wipe 0.6pc from 2018-19 GDP

(16 August 2018, AFR, p33, by Vesna Poljak) ‘A worsening of drought conditions in Australia could put market forecasts for economic growth at risk warns Citigroup, wiping more than half a percentage point from GDP growth in 2018-19 assuming the economy experiences a 20 per cent fall in farm production. The last time farm GDP … Continue reading

16 Aug 2018 (AFR) – Don’t rush back into emerging markets – Emerging markets need Turkey to deliver a circuit breaker

(16 August 2018, AFR, p31, by Mohamed El-Erian) ‘The temptation for experienced emerging market investors is to respond to the Turkey-induced sell-off by using a game plan that has worked for many years. But before buying baskets of EM bonds and currencies, an important fact needs absorbing: Turkey’s policy response has so far had little … Continue reading

16 Aug 2018 (AFR) – Turks scramble as Lira falls and prices soar

(16 August 2018, AFR, p15, by Carlotta Gall) ‘Prices have soared on imported goods, scaring buyers and sellers. Sales are off as Turks delay purchases or cut back. Everyone is quoting the exchange rate, feverishly calculating what to do with his or her savings, large and small, and watching the price of goods daily.’ Read … Continue reading

16 Aug 2018 (AFR) – Indonesia fights Turkey contagion with surprise rate hike

(16 August 2018, AFR, p15, by Viriya Singgih and Tassia Sipahutar) ‘Jakarta | Indonesia’s central bank surprised most economists by raising its benchmark interest rate a fourth time since May, moving swiftly to contain the volatility sweeping across emerging markets and curb a slide in its currency. The seven-day reverse repurchase rate was raised to … Continue reading

16 Aug 2018 (AFR) – China vows to control debt despite fresh stimulus for cooling economy

(16 August 2018, AFR, p14, by Kevin Yao) ‘Beijing | China’s state planner pledged on Wednesday to keep debt levels under control even as Beijing rolls out fresh stimulus to support the stumbling economy as a trade war with the US deepens. The comments by the National Development and Reform Commission (NDRC) came a day … Continue reading

16 Aug 2018 (AFR) – Matteo Salvini questions EU austerity after bridge collapse

[COMMENTS: Reading between the lines in this article, one might start to think that there are serious financial problems in the EU.] (16 August 2018, AFR, p13, by Gregory Viscusi) ‘Paris | Deputy Premier Matteo Salvini and his allies seized on the collapse of a bridge in northern Italy to question whether their country should … Continue reading

15 Aug 2018 (AFR) – Why gold tells us this emerging markets crisis is all about the greenback

(15 August 2018, AFR, p25, by John Authers) ‘When attempting to cure contagion, it is necessary to tell the difference between symptoms and causes. And it looks as though Turkey’s financial crisis is only a very severe symptom of the contagion that is moving through emerging market currencies. The underlying cause appears to be the … Continue reading

15 Aug 2018 (AFR) – Investors fear Turkey is harbinger of crisis as easy money ends

(15 August 2018, AFR, p25, by Roger Blitz and Jonathan Wheatley) ‘As European stock markets bounced from their lows late on Monday, it was tempting to write off the global ramifications of Turkey’s currency crisis. While the relatively small size of the Turkish economy — it accounts for 1 per cent of global gross domestic … Continue reading

15 Aug 2018 (AFR) – China’s economy cools further as investment growth slows

(15 August 2018, AFR, p12, by Cheng Fang and Kevin Yao) ‘Beijing |China’s economy is showing further signs of cooling as the US prepares to impose even tougher trade tariffs, with investment in the first seven months of the year slowing to a record low and retail sales softening, data showed on Tuesday. Fixed-asset investment … Continue reading

15 Aug 2018 (AFR) – Currency sell-off threatens commodity prices

(15 August 2018, AFR, p11, by Javier Blas) ‘London | When Thailand devalued its currency two decades ago, few in global commodity markets took note. Within a year, the crisis morphed into an emerging-market rout that eviscerated the price of everything from crude oil to copper. Fast forward to today and Turkey is presenting a … Continue reading

15 Aug 2018 (AFR) – Downward spiral: Turkey’s toxic situation has markets spooked

(15 August 2018, The Age, Business, p35, by Ambrose Evans-Pritchard) ‘The famous Dornbusch’s Law of financial crises is that they take longer to hit than you think, but then unfold much faster than you ever thought possible. Every hedge fund in London knew that Turkey was an accident waiting to happen. It was odds-on favourite … Continue reading

14 Aug 2018 (AFR) – UK house prices are on the longest losing streak since crisis

(14 August 2018, AFR, p34, by Jill Ward) ‘House prices in Britain fell for a fifth month in a row in July, the longest stretch of declines since the global financial crisis. Values fell 0.2 per cent from June, bringing the average price for a home to £302,251 ($529,000), Acadata said in a report. London … Continue reading

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