Oscar Reed
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Good Aussie trader.
Dax in the Evening
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Oscar Reed
Senior member
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Australia’s ASX too bloody expensive mate.
Australia’s ASX 200 index is at a key point in terms of price-to-earnings valuation. History suggests that either earnings estimates need to rise or share prices fall. The key decider will be commodity prices.
The ASX 200 is at an increasingly precarious point in valuation terms. Its forward price-to-earnings ratio is at a level that has often in the past resulted in sharp corrections. Earnings per share (EPS) estimates are incredibly negative, possibly overly so. This means that either earnings estimates begin to improve or prices collapse.
This contradiction largely boils down to commodity price forecasts and their weight in longer-term stock valuations for this commodities-heavy index. The most 'stretched' valuations are in commodity-related sectors, but there is a perfectly valid case to argue that commodity prices will be higher in 12 months or more.
The future price-to-earnings (P/E) ratio can tell traders if the valuation of the ASX 200 is 'expensive' or 'cheap' relative to its long-run average. The current valuation levels in the ASX are at historical warning levels, and historical precedent tells us that these levels are often subject to a reversal.
The forward earnings estimate reflects the market consensus for future earnings growth. On the positive side, forward EPS estimates have rarely dropped below 1 standard deviation, and, should we avoid a recession, EPS forecasts look set to improve throughout the year.
Which sectors are looking strong?
Looking at sector performance, the drop in the Australian dollar has clearly helped Consumer Discretionary and Healthcare’s solid one-month returns.
In forward P/E terms, Financials look the least over-valued according to their historical averages.
But in enterprise value-to-earnings before interest tax, depreciation and amortisation (EV/EBITDA) terms, Consumer Discretionary and Industrials have a noticeably lower valuation premium.
Top ASX value stock picks:
Monadelphous has had a tough time of late. Its a mining services engineering stock and mining capex has dived. But, the worst of the commodities sell-off looks to be over. Forward earnings estimates for the stock are still pretty dismal going out a number of years, but much of this has been factored into the price.
The stock is still offering an over 8% dividend yield on 2016 estimates, and should the dismal capex forecasts out to 2018 show even the slightest improvement, the stock is primed to be a key beneficiary. Currently seven analysts have the stock at 'hold', seven at 'sell', and none at 'buy'.
Western Areas Ltd, the embattled nickel miner, is struggling with spot nickel prices below breakeven price and a poor near-term outlook for its key product. However, the company looks to have enough cash to survive the downturn and should continue as a going concern.
At A$2.00, its valuation is so cheap it is almost a binary bet on whether the stock goes bankrupt or not. If not, the February bottom of A$1.84 looks like the worst of the sell-off and a steady improvement in the nickel price and a lower Aussie dollar are both likely to help the stock edge higher in the future. Currently, five analysts have the stock at 'buy', eight at 'hold' and six at 'sell'.
Downer EDI Ltd, another engineering and construction stock, already seems to be outperforming Monadelphous. The company has a robust balance sheet with low gearing and is increasingly trying to position itself into the oil and gas space now that its LNG-related work is winding down.
The stock also offers a steady 5-6% projected dividend yield based on current earnings forecasts. If sentiment continues to pick up with regards to the E&C space, price growth and dividend payments are likely to lift the stock to healthy double-digit total returns. Currently two analysts have the stock at 'buy', seven at 'hold' and two at 'sell'.
OZ Minerals Ltd has one of the best looking earnings yield (EPS/price) on the index, and against comparable global copper producers it is one of the cheapest looking stocks. It has a much cheaper valuation than local competitor Syrah Resources Ltd. After a massive sell-off in the copper price, the prospects for the metal is improving as demand for electric vehicles is set to steadily pick up.
OZ Minerals is still pretty unloved, but its valuation is very compelling and copper price forecasts are steadily being re-rated, which would explain why its competitors are seeing such an uplift as well. Currently, five analysts have the stock at 'buy', 11 at 'hold' and five at 'sell'.
Qantas Airways Ltd’s stock has suffered a massive correction from a lofty A$4.00, as the oil price has rallied to seven-month highs and the company lowered ambitious revenue forecasts. But now it is beginning to show up on a range of valuation metrics. Its revenue from domestic travel is set to steadily grow as it continues to outmuscle Virgin in their duopoly.
The current price is arguably pricing too much negativity around its international routes and high oil prices. It is trading at a significant discount to global competitors and current earnings are likely to see it provide a 7% or greater dividend yield over the next two years. Currently, seven analysts have the stock at 'buy', two at 'hold', and two at 'sell'.
Sell in June, no longer sell in May
Something to do with outer space weather this year.
Australia’s ASX 200 index is at a key point in terms of price-to-earnings valuation. History suggests that either earnings estimates need to rise or share prices fall. The key decider will be commodity prices.
The ASX 200 is at an increasingly precarious point in valuation terms. Its forward price-to-earnings ratio is at a level that has often in the past resulted in sharp corrections. Earnings per share (EPS) estimates are incredibly negative, possibly overly so. This means that either earnings estimates begin to improve or prices collapse.
This contradiction largely boils down to commodity price forecasts and their weight in longer-term stock valuations for this commodities-heavy index. The most 'stretched' valuations are in commodity-related sectors, but there is a perfectly valid case to argue that commodity prices will be higher in 12 months or more.
The future price-to-earnings (P/E) ratio can tell traders if the valuation of the ASX 200 is 'expensive' or 'cheap' relative to its long-run average. The current valuation levels in the ASX are at historical warning levels, and historical precedent tells us that these levels are often subject to a reversal.
The forward earnings estimate reflects the market consensus for future earnings growth. On the positive side, forward EPS estimates have rarely dropped below 1 standard deviation, and, should we avoid a recession, EPS forecasts look set to improve throughout the year.
Which sectors are looking strong?
Looking at sector performance, the drop in the Australian dollar has clearly helped Consumer Discretionary and Healthcare’s solid one-month returns.
In forward P/E terms, Financials look the least over-valued according to their historical averages.
But in enterprise value-to-earnings before interest tax, depreciation and amortisation (EV/EBITDA) terms, Consumer Discretionary and Industrials have a noticeably lower valuation premium.
Top ASX value stock picks:
Monadelphous has had a tough time of late. Its a mining services engineering stock and mining capex has dived. But, the worst of the commodities sell-off looks to be over. Forward earnings estimates for the stock are still pretty dismal going out a number of years, but much of this has been factored into the price.
The stock is still offering an over 8% dividend yield on 2016 estimates, and should the dismal capex forecasts out to 2018 show even the slightest improvement, the stock is primed to be a key beneficiary. Currently seven analysts have the stock at 'hold', seven at 'sell', and none at 'buy'.
Western Areas Ltd, the embattled nickel miner, is struggling with spot nickel prices below breakeven price and a poor near-term outlook for its key product. However, the company looks to have enough cash to survive the downturn and should continue as a going concern.
At A$2.00, its valuation is so cheap it is almost a binary bet on whether the stock goes bankrupt or not. If not, the February bottom of A$1.84 looks like the worst of the sell-off and a steady improvement in the nickel price and a lower Aussie dollar are both likely to help the stock edge higher in the future. Currently, five analysts have the stock at 'buy', eight at 'hold' and six at 'sell'.
Downer EDI Ltd, another engineering and construction stock, already seems to be outperforming Monadelphous. The company has a robust balance sheet with low gearing and is increasingly trying to position itself into the oil and gas space now that its LNG-related work is winding down.
The stock also offers a steady 5-6% projected dividend yield based on current earnings forecasts. If sentiment continues to pick up with regards to the E&C space, price growth and dividend payments are likely to lift the stock to healthy double-digit total returns. Currently two analysts have the stock at 'buy', seven at 'hold' and two at 'sell'.
OZ Minerals Ltd has one of the best looking earnings yield (EPS/price) on the index, and against comparable global copper producers it is one of the cheapest looking stocks. It has a much cheaper valuation than local competitor Syrah Resources Ltd. After a massive sell-off in the copper price, the prospects for the metal is improving as demand for electric vehicles is set to steadily pick up.
OZ Minerals is still pretty unloved, but its valuation is very compelling and copper price forecasts are steadily being re-rated, which would explain why its competitors are seeing such an uplift as well. Currently, five analysts have the stock at 'buy', 11 at 'hold' and five at 'sell'.
Qantas Airways Ltd’s stock has suffered a massive correction from a lofty A$4.00, as the oil price has rallied to seven-month highs and the company lowered ambitious revenue forecasts. But now it is beginning to show up on a range of valuation metrics. Its revenue from domestic travel is set to steadily grow as it continues to outmuscle Virgin in their duopoly.
The current price is arguably pricing too much negativity around its international routes and high oil prices. It is trading at a significant discount to global competitors and current earnings are likely to see it provide a 7% or greater dividend yield over the next two years. Currently, seven analysts have the stock at 'buy', two at 'hold', and two at 'sell'.
Sell in June, no longer sell in May
Something to do with outer space weather this year.
counter_violent
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Oscar Reed
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June’s shaping up to be a crap month, with Brexit a ‘must-watch’ event
There’s a twelve day window in June when markets face key interest rate decisions in the US and Japan, a Spanish election, and another challenge to the European Central Bank’s bond-buying programme. Perhaps the biggest risk event for the markets during this window is the UK’s referendum on EU membership on 23 June.
Aside from the mid-June meetings of the monetary policy makers at the US Federal Reserve and the Bank of Japan (BoJ), the ‘must-watch’ event this month will be the UK referendum on continued EU membership on 23 June.
Interestingly, Fed chair Janet Yellen is also scheduled to speak two days before the so called ‘Brexit’ referendum in her two day semi-annual monetary policy review on 21 June. This is sooner than the usual July testimony, and seems a function of the Republican (18-21 July) and Democratic (25-28 July) presidential nomination conventions.
Investors now have to navigate portfolios through the meeting of the Fed’s Federal Open Market Committee, the BoJ meeting, a German Court ruling on the legitimacy of the ECB’s bond-buying programme, officially called the Outright Monetary Transaction program, the UK referendum, the Spanish election and Janet Yellen’s testimony, all in the space of 12 days. It promises to be a period where news headlines will throw markets around and while the probability is these events don’t cause a significantly negative impact, how often have markets been wrong in the lead up to key events this year?
There will also be some focus on the take-up by European banks for the ECB’s liquidity operations as part of the TLTRO II (targeted longer-term refinancing operation) on 24 June. A strong take-up of funds would increase the size of the ECB’s balance sheet and would be seen as a positive for European equities on the idea that the banks could use this liquidity to try and extend money into the real economy. Markets generally like excess liquidity.
The event which has the premise to promote the greatest degree of market volatility is the UK referendum, although if the bookies, and not the latest opinion polls, are correct then we don’t have much to be concerned with. The fact that so many key organisations and world leaders have warned about the dangers of ‘Brexit’ has made traders believe this is a genuine global event risk. The threat of such uncertainty should lead to a reduction in confidence, a sharply weaker pound and a fall in Foreign Direct Investment (FDI) and this has all been well documented. Talk of an economic collapse from the likes of the OECD have been portrayed, suggesting we could see a hit of up to 5% to economic growth if a Brexit does occur.
The impact of a ‘Brexit’ will ripple through financial markets globally as traders and investors sell first and ask questions later, and this will not be contained in just UK and European assets. In fact one of the best trades (other than generically selling GBP) will be short USD/JPY, as there is little doubt that the implied probability of a hike from the Fed at the September FOMC meeting will drop from around 80% to less than 30%. The JPY, US treasuries (quoted as 10-Year T-Note Decimalised on the IG platform) and precious metals will be the assets to be long. Of course, pure equity index market volatility measures such as the EU and US volatility index will likely move significantly higher and it won’t be a one-day affair, so this is another tradeable instrument that traders could look at in the event of a ‘leave’ vote.
Traders ramp up ‘Brexit’ hedges
One of the more interesting dynamics seen in the last week has been a change in IG’s UK referendum binary, where the implied probability of UK voters siding with the ‘Remain’ camp has fallen modestly from 80% to 75%. However, it’s interesting to see that traders have really started to increase referendum hedges again and this can be seen clearly through the options market. Our own flow has been quite nuanced with 61% of open EUR/GBP positions currently held on the long side.
If we look at one-month implied volatility in EUR/GBP and GBP/USD we can see that both have sky rocketed by over 70% from last week, to stand at the highest levels since 2008 and 2009 respectively. GBP/USD risk reversals (which measure the cost of out-of-the-money call options relative to puts) have collapsed from -0.94 to currently stand -6.2, showing the cost to hedge against downside in the pound has become very expensive.
Another interesting dynamic is that while the referendum polls have been influential in pushing GBP/USD into $1.4400, for the last 12 months or so the strongest correlation has actually been with oil. That correlation is now breaking down. EUR/GBP has rallied from £0.7600 to £0.7770, but I wouldn’t be exposing portfolios too greatly to EUR assets, despite an improvement in European data.
Clearly the worst possible implication of any vote to ‘Brexit’ and one which will impact all markets, developed and emerging, comes from political contagion from with the EU. If the market genuinely believes that a ‘Brexit’ could increase the prospect of a new wave of EU referendums in other EU countries, then this is where volatility really comes alive.
Key times to consider
The results of the referendum will be announced through the 382 voting centres around the UK, and the Electoral Commission has estimated that we should get around three-quarters of the centres announce votes by 4am London time (1pm AEST). At this point, we should have a fairly clear idea of where the land lies, and by 6am London time (3pm AEST) one suspects the market will have this wrapped up. Voting ends at 10pm on 23 June, and there won’t be an official national exit poll. However, it has been speculated that a number of financial institutions will run their own private exit polls (source: FT – Hedge funds and banks commission Brexit exit polls), and this may be reflected in sterling moves.
If the UK public votes to remain in the EU, we may see a modest relief rally given the recent hedging activity. Still, the market just isn’t prepared for a vote to leave the EU and the broader implications this could have, and a ‘leave’ scenario could really impact the actions of many other central banks in the months ahead.
There’s a twelve day window in June when markets face key interest rate decisions in the US and Japan, a Spanish election, and another challenge to the European Central Bank’s bond-buying programme. Perhaps the biggest risk event for the markets during this window is the UK’s referendum on EU membership on 23 June.
Aside from the mid-June meetings of the monetary policy makers at the US Federal Reserve and the Bank of Japan (BoJ), the ‘must-watch’ event this month will be the UK referendum on continued EU membership on 23 June.
Interestingly, Fed chair Janet Yellen is also scheduled to speak two days before the so called ‘Brexit’ referendum in her two day semi-annual monetary policy review on 21 June. This is sooner than the usual July testimony, and seems a function of the Republican (18-21 July) and Democratic (25-28 July) presidential nomination conventions.
Investors now have to navigate portfolios through the meeting of the Fed’s Federal Open Market Committee, the BoJ meeting, a German Court ruling on the legitimacy of the ECB’s bond-buying programme, officially called the Outright Monetary Transaction program, the UK referendum, the Spanish election and Janet Yellen’s testimony, all in the space of 12 days. It promises to be a period where news headlines will throw markets around and while the probability is these events don’t cause a significantly negative impact, how often have markets been wrong in the lead up to key events this year?
There will also be some focus on the take-up by European banks for the ECB’s liquidity operations as part of the TLTRO II (targeted longer-term refinancing operation) on 24 June. A strong take-up of funds would increase the size of the ECB’s balance sheet and would be seen as a positive for European equities on the idea that the banks could use this liquidity to try and extend money into the real economy. Markets generally like excess liquidity.
The event which has the premise to promote the greatest degree of market volatility is the UK referendum, although if the bookies, and not the latest opinion polls, are correct then we don’t have much to be concerned with. The fact that so many key organisations and world leaders have warned about the dangers of ‘Brexit’ has made traders believe this is a genuine global event risk. The threat of such uncertainty should lead to a reduction in confidence, a sharply weaker pound and a fall in Foreign Direct Investment (FDI) and this has all been well documented. Talk of an economic collapse from the likes of the OECD have been portrayed, suggesting we could see a hit of up to 5% to economic growth if a Brexit does occur.
The impact of a ‘Brexit’ will ripple through financial markets globally as traders and investors sell first and ask questions later, and this will not be contained in just UK and European assets. In fact one of the best trades (other than generically selling GBP) will be short USD/JPY, as there is little doubt that the implied probability of a hike from the Fed at the September FOMC meeting will drop from around 80% to less than 30%. The JPY, US treasuries (quoted as 10-Year T-Note Decimalised on the IG platform) and precious metals will be the assets to be long. Of course, pure equity index market volatility measures such as the EU and US volatility index will likely move significantly higher and it won’t be a one-day affair, so this is another tradeable instrument that traders could look at in the event of a ‘leave’ vote.
Traders ramp up ‘Brexit’ hedges
One of the more interesting dynamics seen in the last week has been a change in IG’s UK referendum binary, where the implied probability of UK voters siding with the ‘Remain’ camp has fallen modestly from 80% to 75%. However, it’s interesting to see that traders have really started to increase referendum hedges again and this can be seen clearly through the options market. Our own flow has been quite nuanced with 61% of open EUR/GBP positions currently held on the long side.
If we look at one-month implied volatility in EUR/GBP and GBP/USD we can see that both have sky rocketed by over 70% from last week, to stand at the highest levels since 2008 and 2009 respectively. GBP/USD risk reversals (which measure the cost of out-of-the-money call options relative to puts) have collapsed from -0.94 to currently stand -6.2, showing the cost to hedge against downside in the pound has become very expensive.
Another interesting dynamic is that while the referendum polls have been influential in pushing GBP/USD into $1.4400, for the last 12 months or so the strongest correlation has actually been with oil. That correlation is now breaking down. EUR/GBP has rallied from £0.7600 to £0.7770, but I wouldn’t be exposing portfolios too greatly to EUR assets, despite an improvement in European data.
Clearly the worst possible implication of any vote to ‘Brexit’ and one which will impact all markets, developed and emerging, comes from political contagion from with the EU. If the market genuinely believes that a ‘Brexit’ could increase the prospect of a new wave of EU referendums in other EU countries, then this is where volatility really comes alive.
Key times to consider
The results of the referendum will be announced through the 382 voting centres around the UK, and the Electoral Commission has estimated that we should get around three-quarters of the centres announce votes by 4am London time (1pm AEST). At this point, we should have a fairly clear idea of where the land lies, and by 6am London time (3pm AEST) one suspects the market will have this wrapped up. Voting ends at 10pm on 23 June, and there won’t be an official national exit poll. However, it has been speculated that a number of financial institutions will run their own private exit polls (source: FT – Hedge funds and banks commission Brexit exit polls), and this may be reflected in sterling moves.
If the UK public votes to remain in the EU, we may see a modest relief rally given the recent hedging activity. Still, the market just isn’t prepared for a vote to leave the EU and the broader implications this could have, and a ‘leave’ scenario could really impact the actions of many other central banks in the months ahead.
tar
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Karen super trader = Fraud
https://www.sec.gov/litigation/complaints/2016/comp-pr2016-98.pdf
http://www.elitetrader.com/et/index.php?threads/schadenfreude-warning-karen-the-supertrader.300275/
http://www.forbes.com/sites/fredolt...ertrader-seems-like-mini-madoff/#614a66da3141
"For example, in October of 2014, Hope experienced massive trading losses as a result of volatility in the market. The HI Fund and the HDB Fund collectively ended the month with unrealized losses of approximately $100 million, most of which resulted from the October trading losses. Nevertheless, Hope reported to investors that the Funds had millions of dollars’ worth of “realized” gains in October and collected incentive fees of more than $600,000."
We warned against her a couple of years back ...
https://www.sec.gov/litigation/complaints/2016/comp-pr2016-98.pdf
http://www.elitetrader.com/et/index.php?threads/schadenfreude-warning-karen-the-supertrader.300275/
http://www.forbes.com/sites/fredolt...ertrader-seems-like-mini-madoff/#614a66da3141
"For example, in October of 2014, Hope experienced massive trading losses as a result of volatility in the market. The HI Fund and the HDB Fund collectively ended the month with unrealized losses of approximately $100 million, most of which resulted from the October trading losses. Nevertheless, Hope reported to investors that the Funds had millions of dollars’ worth of “realized” gains in October and collected incentive fees of more than $600,000."
We warned against her a couple of years back ...
dunitatlsatrodney
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Oscar Reed
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Bad US job number, will Dave from Dagenham be okay.
Will Dave from Bhs......
Oscar Reed
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British Home Stores gone.:-0
http://www.skynews.com.au/business/...03/bhs-administrators-let-11-000-jobs-go.html
http://www.skynews.com.au/business/...03/bhs-administrators-let-11-000-jobs-go.html
Oscar Reed
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Watched this last, good fun and bit of a soap opera.
Anton is a bit a girly boy and scared to kick but.
No problem with Lex kicking but when needed.
Glad I never worked in a trading office, there is no freedom.
Mind you I can't spel that would hold me back from getting in the door.
Anton is a bit a girly boy and scared to kick but.
No problem with Lex kicking but when needed.
Glad I never worked in a trading office, there is no freedom.
Mind you I can't spel that would hold me back from getting in the door.
dunitatlsatrodney
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Emile came on here and spilled a few beans shortly after that aired.
Oscar Reed
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Can you source T2W link.
Hope Counter dinner or double 3 don't remove the link.
Have you me met once in Luton.
dunitatlsatrodney
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Not unless your name is Sapphire, you like insulting men by mocking their manhood and you charge £60 an hour.....
Here's a thread to have a squint at think Emile came on with his real name and I believe it was actually him. BT guy came on too, Simon Brew features at the end of that thread. Sure it's all on here somewhere.
http://www.trade2win.com/boards/educational-resources/49570-tv-show-about-trading.html
Here's a thread to have a squint at think Emile came on with his real name and I believe it was actually him. BT guy came on too, Simon Brew features at the end of that thread. Sure it's all on here somewhere.
http://www.trade2win.com/boards/educational-resources/49570-tv-show-about-trading.html
darktone
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lmaaaaao! what I meant to say is that ive no idea what youre talking aboutNot unless your name is Sapphire, you like insulting men by mocking their manhood and you charge £60 an hour.....
Oscar Reed
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Media Release Statement by Glenn Stevens, Governor:
Monetary Policy Decision
Number 2016-16
Date 7 June 2016
Taking account of the available information
At its meeting today, the Board decided to leave the cash rate unchanged at 1.75 per cent.
The global economy is continuing to grow, at a lower than average pace. Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies. China's growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.
Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.
In financial markets, conditions have generally been calmer for the past several months following the period of volatility early in the year. Attention is now turning to some particular event risks. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.
In Australia, recent data suggest overall growth is continuing, despite a very large decline in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend. Labour market indicators have been more mixed of late, but are consistent with continued expansion of employment in the near term.
Inflation has been quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.
Low interest rates have been supporting domestic demand and the lower exchange rate overall is helping the traded sector. Over the past year, growth in credit to businesses has picked up, even as that to households has moderated a little. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
Indications are that the effects of supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. Dwelling prices have begun to rise again recently. But considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities.
Taking account of the available information, and having eased monetary policy at its May meeting, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time.
Monetary Policy Decision
Number 2016-16
Date 7 June 2016
Taking account of the available information
At its meeting today, the Board decided to leave the cash rate unchanged at 1.75 per cent.
The global economy is continuing to grow, at a lower than average pace. Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies. China's growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.
Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years.
In financial markets, conditions have generally been calmer for the past several months following the period of volatility early in the year. Attention is now turning to some particular event risks. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.
In Australia, recent data suggest overall growth is continuing, despite a very large decline in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend. Labour market indicators have been more mixed of late, but are consistent with continued expansion of employment in the near term.
Inflation has been quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.
Low interest rates have been supporting domestic demand and the lower exchange rate overall is helping the traded sector. Over the past year, growth in credit to businesses has picked up, even as that to households has moderated a little. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
Indications are that the effects of supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. Dwelling prices have begun to rise again recently. But considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities.
Taking account of the available information, and having eased monetary policy at its May meeting, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time.
Watched this last, good fun and bit of a soap opera.
Anton is a bit a girly boy and scared to kick but.
No problem with Lex kicking but when needed.
Glad I never worked in a trading office, there is no freedom.
Mind you I can't spel that would hold me back from getting in the door.
Nice show! I'd really like to see more of those instead of all the fantasy/detective stories. By the way, loved the idea to invite an environmentalist guy, looking forward to see how he's doing.
counter_violent
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Lets just say....he didn't rape the markets
What the heck??
An interesting philosophical idea though, I wonder why don't environmentalists care about plants' feelings as much as they do about their life
Oscar Reed
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Forced to Buy Crap
Poltics about to dominate
Another day where key note equity indices have provided Asia with little in the way of inspiration, with Europe lower and the S&P 500 grinding towards the 2015 all-time high.
The trade of being long fixed income and credit and higher quality yield in the equity market continues to work well globally. One just has to look at the daily chart of Johnson and Johnson in the US, which pays a meagre 2.63% yield, yet investors are compelled to hold because it’s rated AAA (the highest investment grade rating).
The observation central to the current investment landscape is subdued implied market volatility (watch the ‘VIX’). When you consider that over $10 trillion of government debt globally now commands a negative yield, investors want to be paid to be in a position and despite elevated valuations, equity looks relatively attractive. Too many valuations mean very little and momentum trading rules.
It seems that as long as implied volatility stays low then this macro trade will not change. The question is what will alter sentiment and cause volatility to spike? It doesn’t look like it will come from oil, which continues to push higher, with the overnight move into $51.62 largely a result of a 3.23 million drawdown in US inventories. The UK referendum is clearly the red flag and judging by GBP/USD one-month implied volatility, which remains close to the highest since 2009, traders are expecting a huge move in the pound. I still stand by the view that the UK will remain part of the EU, but David Cameron has hardly brought his A-game and the ‘Leave’ camp have polled better of late. The day of the 24th June promises to be a very interesting day in Asia when the polls are announced. So while GBP will be thrown around, it’s interesting to recall FTSE futures re-open at 10 am (AEST), so this will get plenty of attention.
The US election is a clear event risk yet causes absolutely no angst, perhaps because it is a number of months away. However, from an outsider’s perceptive, the unfolding story is incredible. Bernie Sanders refuses to concede, thus allowing the Democrats to galvanise and show cohesion, and his supporters bitterly suggest they will vote for Trump or spoil their ballot. Hilary Clinton is under FBI investigation and Donald Trump is aggressively defending himself against his comments around the ethnicity of Judge Gonalo Curiel. It’s a truly bizarre situation, yet traders don’t know how to trade, despite the betting market still giving Trump a higher chance of becoming president than the UK leaving the EU. Are we reaching a point again where investors have to become political commentators as well? I feel this is certainly coming and the impact of a Trump victory (although not my base case) should send shivers down any USD bulls’ spines. Janet Yellen is watching her every step.
Japan remains my key point of contention. While the market scream out for clarity on a further fiscal stimulus, the market remains sceptical on the Bank of Japan’s current inflation outlook and recent surveys in Japan see a 79% chance of easing by July. I remain sceptical on further JGB purchases, although I wouldn’t rule out buying of ETFs (as soon as next Thursday), as its really unclear what further monetary policy stimulus will do in Japan other than accelerate the inevitable. That being markets truly gives up on the notion that monetary policy in Japan drives inflation expectations.
All this being said, these factors and thematics are not to concern the open of the Asian markets and we expect a modestly stronger open on the ASX 200 at 5380. The top of the recent range of 5400 beckons, although my preference is a fade any rallies over the next few days into 5420. BHP should open around 1.5% higher, with a flat open for financials. Expect the energy and material space to perform nicely.
Poltics about to dominate
Another day where key note equity indices have provided Asia with little in the way of inspiration, with Europe lower and the S&P 500 grinding towards the 2015 all-time high.
The trade of being long fixed income and credit and higher quality yield in the equity market continues to work well globally. One just has to look at the daily chart of Johnson and Johnson in the US, which pays a meagre 2.63% yield, yet investors are compelled to hold because it’s rated AAA (the highest investment grade rating).
The observation central to the current investment landscape is subdued implied market volatility (watch the ‘VIX’). When you consider that over $10 trillion of government debt globally now commands a negative yield, investors want to be paid to be in a position and despite elevated valuations, equity looks relatively attractive. Too many valuations mean very little and momentum trading rules.
It seems that as long as implied volatility stays low then this macro trade will not change. The question is what will alter sentiment and cause volatility to spike? It doesn’t look like it will come from oil, which continues to push higher, with the overnight move into $51.62 largely a result of a 3.23 million drawdown in US inventories. The UK referendum is clearly the red flag and judging by GBP/USD one-month implied volatility, which remains close to the highest since 2009, traders are expecting a huge move in the pound. I still stand by the view that the UK will remain part of the EU, but David Cameron has hardly brought his A-game and the ‘Leave’ camp have polled better of late. The day of the 24th June promises to be a very interesting day in Asia when the polls are announced. So while GBP will be thrown around, it’s interesting to recall FTSE futures re-open at 10 am (AEST), so this will get plenty of attention.
The US election is a clear event risk yet causes absolutely no angst, perhaps because it is a number of months away. However, from an outsider’s perceptive, the unfolding story is incredible. Bernie Sanders refuses to concede, thus allowing the Democrats to galvanise and show cohesion, and his supporters bitterly suggest they will vote for Trump or spoil their ballot. Hilary Clinton is under FBI investigation and Donald Trump is aggressively defending himself against his comments around the ethnicity of Judge Gonalo Curiel. It’s a truly bizarre situation, yet traders don’t know how to trade, despite the betting market still giving Trump a higher chance of becoming president than the UK leaving the EU. Are we reaching a point again where investors have to become political commentators as well? I feel this is certainly coming and the impact of a Trump victory (although not my base case) should send shivers down any USD bulls’ spines. Janet Yellen is watching her every step.
Japan remains my key point of contention. While the market scream out for clarity on a further fiscal stimulus, the market remains sceptical on the Bank of Japan’s current inflation outlook and recent surveys in Japan see a 79% chance of easing by July. I remain sceptical on further JGB purchases, although I wouldn’t rule out buying of ETFs (as soon as next Thursday), as its really unclear what further monetary policy stimulus will do in Japan other than accelerate the inevitable. That being markets truly gives up on the notion that monetary policy in Japan drives inflation expectations.
All this being said, these factors and thematics are not to concern the open of the Asian markets and we expect a modestly stronger open on the ASX 200 at 5380. The top of the recent range of 5400 beckons, although my preference is a fade any rallies over the next few days into 5420. BHP should open around 1.5% higher, with a flat open for financials. Expect the energy and material space to perform nicely.
- Status
