Spring is almost sprung. It’s September tomorrow; the northern hemisphere starts returning to work, markets change their nature, volumes rise and the young trader’s fancy turns to, well, the new Apple iPhone or iPad on September 9 — perhaps he or she still has hopes of a rate rise at the end of the two-day Fed meeting on September 16 and 17. Before that, our Reserve Bank meets on the first day of spring, and no rate rise looms. The European Central Bank meets later in the week on Thursday night (no change either), the Bank of England a week later (will it grasp the nettle and lift rates before the Fed?), and central banks in Canada, South Korea, NZ and China as well as India and Japan also hold key meetings this month, which could all herald the emergence of monetary policy changes to meet the rising volatility and weakening pace of economic growth. That is not a problem in the US where the final estimate of the already strong second-quarter data is out at the end of the month. Before that (this Friday night, actually) we get the August jobs report that will have an impact on market expectations of the first US rate rise in nearly nine years.
The Australian jobs report is out next week for August, but before then there’s the final flood of data resulting in the June-quarter growth figures for Australia in Wednesday’s national accounts. Economists are saying growth of 0.4% to 0.6%, down on the 0.9% rate in the March quarter. The trade and current account could be a major negative with a negative 0.05% forecast. Key indicators to watch for include business inventories, the terms of trade, productivity and the savings rate. And there’s the Canning byelection on the 19th of this month … — Glenn Dyer
Sydney’s property cool-down. Here’s some worrying news for News Corp and Fairfax Media . The booming Sydney property market is slowing, with clearance rates at auctions last Saturday hitting their lowest level (according to Domain). For News (which controls REA Group, the dominant online real estate business) and Fairfax Media (which controls Domain, the second-ranked online business) the slowing clearance rate is a red alert. The share prices for both struggling media giants have been boosted by their growing real estate operations. The key banking regulator is engineering the slowdown by forcing up the cost of all home lending, especially to investors. The rate of growth in investor lending has slowed, but not yet fallen. According to Domain figures, that is now happening, judging by the clearance rates.
Sydney had a rate of 73.7%: still very high, but lower than the week before and this time last year when the clearance rate was more than 83%. But it was the lowest so far this year and the lowest rate since the slide started six weeks ago. In fact, it could be lower with some real estate agents claiming competitors are slowing the submission properties that fail to sell and are passed in or withdrawn from the market. Part of the reason for the slowing clearance rate (besides the toughening of lending standards) is the flood of properties onto the Sydney market. Domain estimates that 70% more properties were on the market and up for auction in the past couple of weeks compared to 2014. Eventually, the overhang of unsold properties will crush the market. They will have to be taken off the market to allow a balance to be achieved at much lower levels. Will prices follow? — Glenn Dyer
Only in America. Last week’s terrible murders of a TV journalist and cameraman in the US have had no impact whatsoever on the US sharemarket, where the shares of the leading gun-makers, Smith & Wesson and Sturm, Ruger & Co. are up 88% and 77% so far this year. Murdering innocents seems to be good for the bottom line of these grubby companies. In fact, it would be true to say that not one of the atrocities this year (which is turning out to be one of the worst for mass shootings) has had an impact on these companies, their business models or on the greedy US investors buying and selling their shares. Nor have they had any impact whatsoever on the managements of the companies: S&W CEO James Debney told a briefing after the company released its latest strong quarterly results that there is a “healthy market for firearms”. S&W shares jumped 11% on Friday after the good results. The company’s gross profit margin in the last quarter was fat 39.8 cents in the dollar. And to maintain growth, management say they are willing to cut margins — in other words, cut the price of pistols, rifles, shotguns and other products, just to make themselves and shareholders richer and more obscene. — Glenn Dyer
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