Hard coking coal prices have lifted by almost 150% in five months driven mainly by Chinese policy of limiting domestic production to lift prices and curb pollution. Glencore announced that it is restarting a coal mine which is obviously driven by this surge in prices but also points to some concern about the longevity of this surge in prices. Australia is well poised to take advantage of this surge in coal prices.
The Australian Dollar found some support following reports coming out of China that the domestic GDP is set to beat the target 6.5%. The growth in some of the weaker states within the Chinese economy reporting double digit growth supports this analysis. Off course the Dollar will come under pressure if the US Fed tightens policy at its December meeting. It is widely expected that the Fed Chief Yellen will deliver the long awaited rate rise in December and analysts have factored in another rate hike by middle of 2017.
The Australian Dollar found some support following reports coming out of China that the domestic GDP is set to beat the target 6.5%. The growth in some of the weaker states within the Chinese economy reporting double digit growth supports this analysis. Off course the Dollar will come under pressure if the US Fed tightens policy at its December meeting. It is widely expected that the Fed Chief Yellen will deliver the long awaited rate rise in December and analysts have factored in another rate hike by middle of 2017.
LENDING TO HOUSING ASSETS BIGGEST RISK FOR BANKS
Domestic banks biggest risk is their exposure to a surging and overvalued housing market which might limit their ability to be supported by off shore funds. Banks have started tightening loans to off the plan apartments due to a possible glut in new inner city apartments in Melbourne and Brisbane. Sydney continues to lead the growth in house prices although the rate of growth has definitely plateaued over the last few months. Sydney and Melbourne auction clearance rates were 80% and 79% respectively for the weekend of 15 October which represent good market activity in the sector in the two principal cities.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Industrial Average Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) Iron Ore | As at 14-Oct 1.50 1.75 2.26 1.80 0.7582 0.6875 78.92 5.0989 5,434 2,132 18,138 3,063 51.95 1,251 57.28 | As at 7-Oct 1.50 1.73 2.18 1.72 0.7573 0.6811 78.61 5.0526 5,467 2,153 18,240 3,004 51.93 1,258 55.86 |
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