SHIBOR Spikes Higher

Posted on | by Todd | Leave a Comment on SHIBOR Spikes Higher

SHIBOR refers to the “Shanghai Interbank Offered Rate”. On Friday the one-month rate stood at 4.65%, the highest in over two years.

To put this in perspective, one-month rates in the US are at 0.85% and one-year rates in Australia stand at 1.63%.

And while Chinese central bank officials reject any suggestion that the tighter lending rates were a sign of instability or a source of increased financial risks, global financial markets have been acutely impacted by Chinese banking shocks in the past.

At this point, the one-month SHIBOR rate is now higher than the one-year Chinese Prime lending rate of 4.30%, which is unsustainable.

The knock-on effect is that a sharp contraction of Chinese capital flow will reduce Australian exports and could even distress local real estate markets.

We will watch this development with interest and how it could translate into the Australian share market.

Chinese SHIBOR

Take a Sneak Peak at Leon’s Charts

Posted on | by Craig | Leave a Comment on Take a Sneak Peak at Leon’s Charts

Did you know, that as a subscriber, you can always take a sneak peak at Leon’s personal charts?  It’s pretty easy…

When viewing a chart, press the Investor Signals logo to view Leon’s version of the chart.

If you’re not a subscriber, then register for our Free Trial to try it out today or get in touch with us.

If you are already subscribed, then try it out now.

US Update: Trump Puts Healthcare Reform On Hold

Posted on | by Todd | Leave a Comment on US Update: Trump Puts Healthcare Reform On Hold

US Stock Indexes finished the week mixed as many investors were focused on how the House of Representatives would vote on the administration’s bill to repeal major parts of the current health care program, referred to as Obamacare.

As the day progressed, the DOW and SP 500 swung between positive and negative territory as news reports gave conflicting stories about whether the bill would pass, or even be voted upon.

In the end, after Mr Trump’s ultimatum failed to yield more “yes” votes , the embattled bill seeking to start the healthcare reform process, and free up almost a trillion dollars in tax dollars, was pulled from the floor.

As a result, Mr Trump suffered a second consecutive blow from within his own Republican party. This party dissension will likely cast doubts on the President’s ability to deliver on other policy measures including; tax reform, infrastructure spending and the debt ceiling legislation.

The announcement that the vote was cancelled happened too late in the day to have any material impact on today’s trade.

However, going into next week, investors will have to address the question of how Mr Trump can now unify his own party behind his administration; and whether this legislative defeat will “deflate” the “reflation” trade, which was triggered after he was elected?

US Payroll Preview

Posted on | by Todd | Leave a Comment on US Payroll Preview

The  US Non-Farm Payroll (NFP) report, scheduled for 12:30 am Sydney time tonight, could have a significant impact on global financial markets.

In a speech last Friday, FED Chief Janet Yellen was very clear that steady employment growth and rising inflation were the key indicators guiding US interest rate policy.

Tonight’s report will reflect both the number of new jobs created in the month of February and the pace of wages growth.

Wednesday’s release of the ADP private sector job’s report printed much higher at 298,000 on expectations of 184,000. And while the ADP data is far from a foolproof indicator of the NFP report, it would be a big surprise if the headline jobs number printed much below the 200,000 consensus forecast.

Against this backdrop of an imminent FED rate hike, US 10-yr bond yields have reached a three year high of 2.64%, Gold has dropped below $1200.00, Crude Oil has fallen more than 8.5% this week and Copper has lost more than 6% over the last 10 trading sessions.

It’s likely that a NFP print of  230,000, or more, will be bullish for the US Dollar and negative for Global equity markets.

China Lowers Their GDP Growth Target

Posted on | by Todd | Leave a Comment on China Lowers Their GDP Growth Target

While addressing the 3,000 members of the National People’s Congress (NPC) in Beijing, Premier Li Keqiang announced that China’s economic growth target has been cut to around 6.5% from last year’s estimate of 7%.

China’s GDP grew at the slowest rate in 26 years last year, and Mr Li pledged he would address the state sponsored “zombie enterprises” which produce more coal and steel than the market needed.

Similar pledges have proved hard to fulfill in the past.

However,  it appears that NPC leaders are more committed to slower growth to deal with the painful reforms triggered by the rapid build-up in debt from both the official and shadow banking sectors.

Against the backdrop of last week’s disappointing Australian trade balance numbers, it will be worth watching to see if the RBA makes reference to this development during their monthly statement tomorrow.

A contracting Chinese economy would increase the likelihood of another RBA rate cut and a lower Australian Dollar.

 

 

Aussie Dollar Falls Hard On Trade Data

Posted on | by Todd | Leave a Comment on Aussie Dollar Falls Hard On Trade Data

The Aussie Dollar fell hard last night breaking the key support area of .7600 versus the US Dollar and closing the NY session down almost 1.5% for the day.

After consolidating for several weeks above .7650, the AUD/USD finally broke down. Although recent economic reports have been fairly good, yesterday’s weaker trade balance figures were a sharp reminder of the damage a stronger currency can do to an export dependent economy.

Analysts were looking for the January trade surplus to increase to 3.8 billion, but instead it shrank to 1.3 billion; less than a third of the expected level. The main draw on the trade balance were exports, which fell over 3% for the month.

The RBA has been clear that a stronger AUD will act as an economic headwind as Australia moves away from a mining-based economy.

Over the last 18 months, the AUD/USD has traded in a broad range between .7000 and .7750. Technically, last week’s high of .7740 could stand as a medium-term top as US Dollar strength pushes the AUD toward the bottom end of the range.

Investors looking to benefit from a move lower in the AUD/USD can consider the BetaShares AUD-based Exchange Traded Funds.

BetaShares offers two ASX-listed ETFs which increase in value as the AUD trades lower against the USD.

These two ETFs are called: USD, which is unweighted, and YANK, which has an approximate weighting of 2.5 to 1.

Contact us for more information about these AUD-based ETFs.

Chart – YANK