Greenback, euro parity looms. Who would have thought it? The euro is now down 12.8% against the US dollar and edging closer to parity. The euro fell as low as US$1.05 overnight, down from US$1.07 at the close on Tuesday night in New York. The eurozone currency lost 1.4% on Tuesday and another 1.4% yesterday as the soaring US dollar meets a rapidly sliding euro, with the common factor the European Central Bank’s quantitative easing program that has boosted sharemarkets in the region and driven bond yields to record lows. US analysts say that if the euro dips below a rate of US$1.50, it will be the lowest since January 2003. Gold fell overnight, Wall Street eased (but European shares have a bad case of “pass the sugar bowl” as they continue to soar on the spending program by the European Central Bank). German bond yields fell to new lows — 0.16% for the 10-year bond, which is absurd. Overnight, the Aussie dollar fell to a low of US75.86 cents. It is down from around US$1.10 at its peak, a drop of around 30%. It is down 20% on a trade-weighted index, which is not as much because of the plunging euro and yen, which have partially offset the weakening Aussie. — Glenn Dyer
Strains grow in China as growth slows. Economic growth is getting a bit white-knuckled in China. Output, prices and demand are all weak, and nowhere is that more apparent than in the country’s property sector, which is in the midst of a gathering a housing slump. Data out yesterday showed a 16.7% drop in housing sales in China throughout January and February, more than double the 7.8% fall across all of 2014. Growth in property investment slowed to a 10.4% in the first two months this year, compared with a 19.3% growth rate recorded in the same period of 2014, and 10.5% for all of last year. New construction starts across residential and commercial property in the first two months fell 17.7% to 137.4 million square meters. Construction starts measured by area fell 10.7% to 1.80 billion square meters in 2014. Industrial production grew. Other economic data confirmed the slow down in activity in China is accelerating. Industrial output slowed to an annual rate of just 6.8% in January and February, well under market forecasts for growth of 7.8% and the 8.3% (all annual rates) reported for December. Power generation, a key indicator, rose 1.9% in January and February from a year earlier, well below the 3.2% rate of last year, which was the slowest growth rate in 16 years. — Glenn Dyer
What’s Yankee for Dud Bank? Try Deutsche from Germany and Santander from Spain. The US Federal Reserve has nixed the US capital plans of the two European banking giants despite both passing the first part of the latest round of stress testing last week. The capital plans were the second part of the annual test and, for the first time, all American banks passed it after Citibank was humiliated in 2014 with a failure. The Fed found US operations of Deutsche, Germany’s largest bank, and Santander, Spain’s biggest bank, were found to have serious deficiencies in capital planning and risk management. Santander has now failed this test, called the Comprehensive Capital Analysis and Review, two years in a row, while Deutsche was tested for the first time this year.
Failure means neither bank can distribute capital to their European parents and could, if there is no improvement, be issued with a cease-and-desist order, which would effectively shut them out of the world’s biggest capital market. But the pass by the US banks (a total of 31 US and foreign banks were tested in the two-part stress tests by the Fed) was not totally clean. Bank of America received a conditional tick, which means it has to clean up the found faults by the third quarter this year or face Fed action. And Goldman Sachs, JPMorgan and Morgan Stanley all had to cut the size of their planned share buybacks to preserve capital. The two Fed tests are now considered to be the most important globally in banking — the first part assesses the banks ability to withstand severe economic shock on a quantitative basis (how much capital, liquidity etc and plans does a bank have to withstand the shock. The second part involves a review of the quality of that capital and the banks plans to survive a shock. That includes the ability and skills of management and other parts of the bank. It has been the test that has tripped up banks in recent years. — Glenn Dyer
Down, down. I see the Down Down Status Quo ads have returned to our TV screens as Coles tries to convince us that it has consumers’ best interests at heart (and not those of shareholders). After the past five trading days, you could ask Status Quo to back up for a reprise on current global iron ore pricing. Down another 0.9% overnight (according to the Metal Bulletin) to a new all-time low (for the current pricing method of $57.61 a tonne). That’s a fall of close to 9% in those five days and nearly 19% for the year so far. — Glenn Dyer
Down, down, down. Like the global iron ore price, shares in Ardent Leisure fell like a stone yesterday and despite a semi-recovery, new Ardent Leisure CEO Deborah Thomas sounded shell-shocked with yesterday’s vicious sell-off of the shares, which cost the company more than $200 million in lost market value. Longtime CEO Greg Shaw left late in the evening on Tuesday without explanation. And chairman Neil Balnaves will want a plan to regain shareholder trust a bit more defined than just spending half a million on the company’s shares yesterday and then telling the market about the purchase. Analysts used a common word in their comments — “shock”. Companies get punished for shocking announcements — as Myer was last week after the departure of longtime CEO Bernie Brookes. Ardent shares turned tail and rose sharply at the opening this morning, up nearly 9% in the first minutes. All forgiven? Wait and see. — Glenn Dyer