Good morning. Here’s what matters most right now.
1. Here comes the rate cut. Veteran business reporter Terry McCrann has crunched the numbers and says the Reserve Bank “will almost certainly cut” rates following its board meeting on Tuesday. Australia’s official interest rate has been at a record low 2.5% since August 2013. Since then, the RBA had been careful to mention “period of stability” in its monthly statements. McCrann says that statement will be dropped in the February statement – along with the cash rate, to 2.25%. “Lots of things” have changed since December, McCrann writes.
2. In Asia yesterday, Singapore joined the currency war with the MAS changing the slope of the NEER band in an attempt to weaken the Singapore dollar. It worked, with USDSGD rallying up to 1.3526 this morning, the highest level since August 2010. Elsewhere in the region, the Nikkei rallied all day before closing up 0.16% but overnight futures indicate a weaker day today, with March Nikkei down 60 points. Likewise, Shanghai and Hong Kong stocks looks set to open lower with indications that futures are down 50 and 153 points respectively.
3. On currency markets, it is, for once, all about the kiwi. The globe’s previous most hawkish central bank – the RBNZ – this morning cut its reference for the need to take rates higher, slamming the NZ dollar to a three-year low. The Aussie was going well until then, rallying to 0.8026 last night, but the kiwi tumble and McCrann combined to knock it under 79 cents this morning, wiping out all the CPI-induced gains.
4. Locally, futures markets are getting hammered as the US dips into the close. March SPI 200 futures were down 44 points with 15 minutes to go but closed down 65 points at 5,447. That’s about a 1.0% loss as an indication of where prices might go today. Datawise, we’ll get the release of Q4 import and export prices in Australia.
5. The China bubble is about burst, writes Societe Generale analyst Wei Yao. And it’s all because of debt covered by government guarantees. For years, massive amounts of it have been hidden state owned enterprises (SOE) and local government financing vehicles (LGFVs). But that goverment-backed debt has been outpacing economic growth for six years now – and there’s only so much SOEs can take. As Linette Lopez puts it, “it’s like charging $US2,000 to your credit card in one week when you make $US1,000”. And when the government takes it credit card back, look out.
6. More surprises. Yesterday, we brought you Morgan Stanley’s note to clients on the 10 surprises they should look out for in 2015. Today, on the heels of UBS slashing its Australian economic growth forecast, Credit Suisse has its own version, except it lists four portfolio-wreckers for 2015. But they are a big four…
7. Suddenly, space is looking like a good place to be in 2015. Elon Musk thinks so, and his private company SpaceX last night showed off how their rockets are going to get there, land back here, and take off again. Just like in the movies, except awesome, because it’s (nearly) real.
8. Sydney’s boom still hasn’t busted. New data shows house prices in Sydney jumped 14 per cent last year, finishing with their strongest quarter of the year. That’s all on the back of a 15% rise the previous year, and one senior economist is predicting growth between 7-10% for 2015. Upper North Shore and North West were the big climbers, up 21.8%. And despite rising prices, Australians are smashing their mortgages.
9. Queenslanders go to the polls on Saturday and while they probably won’t get a new leadership party, they might get a new leader. Premier Campbell Newman is struggling to hold off his Ashgrove challenger Kate Jones. Polls have Newman sitting on 42% for the primary vote and Jones on 46.5% needing a 5.8% swing to reclaim the seat she held for two terms before losing it to Newman in 2012. The ABC reported that the LNP has spent $18m on roads, sports and schools in the electorate, more than they’ve spent in five neighbouring electorates combined.
10. Big Bash finishes with a bang. Which is fitting, really, for a competition that rarely failed to deliver a couple of hours’ excitement every other night on the telly. Last night’s final – played in Manuka, of all places – ended with:
- Brett Lee bowling his final over, ever
- Trying to end his career with a hat-trick
- While the Perth Scorchers needed one run off his final (hat-trick) ball to win
- Which they got, hit by Yasir Arafat.
Sorry, ODI World Cup, it’s been nice knowing you.
BONUS ITEM: Finally, we have frickin’ lasers we can see. Physicists from Heriot-Watt University in the UK caught a laser on camera for the first time.
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