While the RBA rate cut is good news for the Aussie share market, the utter collapse in global commodity prices is not. This week the CRB commodities index fell the most in over 50 years—the most ever in such a short period. What is going on and where will commodity prices go from here? Three factors have contributed to the huge reversal in resource prices. First is the global rush to cash. Investors have voluntarily liquidated positions they’ve held for years in order to be in cash.
October 8th, 2008 | Dan Denning | 3 comments | ContinuedAll Posts Tagged With: "australia"
RBA Rate Cut Does Little to Unlock Credit Market
“Rally to me,” said Glenn Stevens. And investors did. The RBA rate cut WAS a full percentage point as we speculated yesterday. And it certainly did make a splash. Economists loved it. The critics praised it. And investors “huzzahed” the ASX 200 up nearly two percent on a day when the rest of the globe quaked in fear. What has changed? The bank has shifted from being worried about inflation to being worried about recession. A credit crunch?
October 8th, 2008 | Dan Denning | 4 comments | Continued
Future Fund ‘Borrowing’ Program Amounts to Theft
All attempts to reflate the system are failing. Leverage is collapsing. Next on the docket is a series of interest rate cuts by Central Banks. They RBA will probably lead off that global parade today at 2:30pm in Sydney. How big will the cut be? It will be 50 basis points for sure. But if the RBA really wants to make a splash-and give the banks room to pass on the reduction to borrowers-it will be a full percentage point.
October 7th, 2008 | Dan Denning | 7 comments | Continued
Australian Recession in the Works? Ask the Sharemarket
All along it’s been assumed the fall in Australian shares is related to the credit crisis. But what if the stock market is actually forecasting an Australian recession? The stock market is a leading indicator. Shares lead the economy. So if shares are heading down, is the market telling us the Australian economy will soon follow into recession? It might seem counter-intuitive. After all, the country just racked up its highest trade surplus in 11 years last month.
October 3rd, 2008 | Dan Denning | 3 comments | Continued
Australia’s Response to the U.S. Bailout Plan
Normally, bank robberies work the other way. An armed and masked gang walks into the bank, fires a few shotgun blasts, tells everyone to get on the floor, and asks the clerks to fill up canvas bags with the fabulous moolah. It’s simple. That is not the way it works in modern central banking, though. Today, it’s as if Hank Paulson is pointing his “big bazooka” bailout plan at Wall Street and demanding it opens up its wallet so he can fill it with other people’s money.
September 26th, 2008 | Dan Denning | 7 comments | Continued
All Ordinaries Reach 52 Week Low
It’s pretty bad out there. Before he left to have his Visa renewed in New Zealand, our technical analyst Gabriel told us to watch 5,050 on the All Ordinaries. We’re watching. The All Ords opened up and promptly fell two percent to 5,105. It’s a new 52-week low. What about that data yesterday on the housing market and retail sales? Retail sales rose by 0.7% in May. Apparently that was stronger than analysts expected. Should it surprise anyone?
July 3rd, 2008 | Dan Denning | 6 comments | Continued
Foreign Investment in Australia, How Much is Too Much?
What is the Australian Federal government’s position on Chinese investment in Australian resources? Yesterday the Foreign Investment and Trade Board told Sinosteel to cool its heels for 90 days while the government figures out how much of Australia it will sell to foreign investors. Sinosteel, which, as you might guess, is a Chinese steel company, already owns 43.6% of iron ore junior Mid West (ASX:MIS) and was given permission to buy all of the company.
June 26th, 2008 | Dan Denning | 3 comments | Continued
The ASX Bubble, Fueled by China
The price action in the Aussie share market is starting to look like a pinball game. BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO), Woodside (ASX: WPL)… some of Australia’s biggest resource stocks made 52-week highs yesterday. Both BHP and Rio gave investment presentations in London yesterday, highlighting their various degrees of exposure to China’s urbanisation. The current cycle-or super cycle if you prefer-is still a cycle. But just how long might it last and how high might it take Aussie stocks?
May 15th, 2008 | Dan Denning | 0 comments | Continued
Wage Pressure in China to Drive Up Cost of Goods in Australia
Wage pressures in China may finally be driving up the price of Chinese exports… and signaling an end to the long period of disinflation in manufactured goods. Your white goods may start to get more expensive. But who knows? That is the one element we neglected to include in our analysis of the Aussie-China relationship last week. Both economies are running at near capacity.
April 21st, 2008 | Dan Denning | 0 comments | Continued
Australia & China: Already Partners in the Commodity Boom
Australia and China are already joint venture partners in the commodity boom. But if China is suggesting a government-to-government relationship over resources and not a market-to-market relationship, well that’s different kettle of fish altogether isn’t it? Is it a proposal? A suggestion? Or an indication of how China would like things to be in the future, in order to remain a reliable customer for Aussie resources? The current system, of course, is the share market.
April 15th, 2008 | Dan Denning | 10 comments | Continued