Good morning! Still no government.
1. Europe is looking worrying again. First, a handful of huge UK property trusts have stopped clients from making further withdrawals. It started with Standard Life and now Aviva and The Pru have gated their funds. The whole thing has a very 2007 feel to it. As Greg McKenna notes this morning: “If shuttered funds cause tension elsewhere and people are trying to withdraw cash in other sectors of the financial system, what starts out as natural self-interest to protect capital can morph into a tragedy of the commons and cause capital destruction…”. More details here and here.
2. And then there’s Italy, which has referendum on Senate reforms coming up which, if it fails, threatens to plunge the country into a political crisis and stymie vital reforms. The country’s banks have some problems and it’s all starting to look like a bomb waiting to explode. If prime minister Matteo Renzi’s reforms can’t get through, it could push Italy into recession and lead to massive capital flight. One of its major banks has a massive bad loan book of about $A70 billion, and the government is not positioned to bail it out, which would trigger a request to Brussels – and another crisis for the European Union. Read all about it here.
3. As a result of all of this worry markets sold off overnight. The major stock indices were only down smalls but gold surged and US 10-Year Treasury yields hit a new record low. The Aussie dollar was smashed too, down 1%. Astonishingly, the entire Swiss government bond yield curve is now below zero after the 50-year yield went negative.
4. The RBA left rates on hold as expected but the absence of an explicit easing bias in the July statement means August is now a live meeting, when every economist and their dog was expecting a cut next month. Central to the decision will be the Q2 inflation data at the end of this month. TD Securities, one of the best CPI-forecasting houses out there, expects a horrendously low print of just 1.25% annualised for underlying inflation. Look:
Horrendous. David Scutt has a round-up of the economists’ takes on the RBA statement.
5. The election scorecard is the Coalition has 68 seats and is likely to gain another five, while four are still on a knife-edge. More than a million postal votes are currently being counted and it may be days before we have a clear picture. Malcolm Turnbull has taken full responsibility for the campaign and admitted the Coalition has work to do in order for it to be trusted on Medicare.
6. Former Treasury boss Ken Henry has excoriated politicians for shirking the long-term reforms the country needs in a column for The Australian this morning. The NAB chairman says voters understand the long-term challenges but the politicians don’t view them with any urgency. More here.
7. The next iPhone will start with double the storage. Big, beefy memory banks are simply vital for mobile devices now because of all the photos, videos and apps we’re carrying around on them. So Apple’s starting the new iPhone at 32GB. And here’s the best leak we’ve seen of it:
8. There has been a huge upswing in suicide bombings by ISIS over the past week, and it may only be getting started. Attacks stretched from Istanbul, Turkey, in the West, to Yemen and Iraq, to Dhaka, Bangladesh, and a nightclub bombing in Malaysia. ISIS has been losing ground in the Middle East and the problems there may be forcing it to rethink tactics – fighters can either die on the battleground or martyr themselves in operations further afield, according to one counter-terrorism specialist.
9. No job is safe. IBM says getting rid of redundant jobs is now a “permanent and ongoing” part of its business model.
10. The whole Taylor Swift and Tom Hiddleston thing may be a fake. Theory: they’re shooting a video.
BONUS ITEM: If you haven’t seen it, here are thousands of badass Icelanders welcoming home their football team with a badass Viking chant:
— RÚV Íþróttir (@ruvithrottir) July 4, 2016
Have a great day. I’m on Twitter: @colgo
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