Where’s Wally, sorry, our Joe? China’s sharemarket routed, Greece’s crisis/backflip/impending bankruptcy, commodity prices slumping, topped by the historic plunge in iron ore prices overnight — there’s a lot battering the economy, so where is Joe Hockey when we want the comforting sight of our weary Treasurer at a media conference, telling us what a wonderful job he and Tone are doing for the economy and how we are outperforming everyone else? Oh, sorry, that was a month ago, after the March GDP data was released. Since then, our Joe has gone missing in action; on holidays since the laughingly described winter session of Parliament ended and our lads and lasses bolted for the sun.
So while Joe’s been away, China’s sharemarket has collapsed, iron ore has plunged to a new record low, copper, oil and other commodity prices have slumped to new multi-year lows in some cases, and our sharemarket has finally caught up with all of this — and the Sydney property bubble goes on unabated, and all Joe’s mob can do is rabbit on about the “perfidious” ABC. China is getting laughable, overnight the government banned big shareholders (those with 5% or more of a company’s shares) from selling for six months, as well as directors and managers. Up until Wednesday night, trading has been halted (self-suspended) in 1476 stocks — or more than 50% of all the companies on China’s two main exchanges. The suspensions have frozen shares worth an estimated US$2.6 trillion. And Hong Kong lost nearly 6% yesterday, one of its largest ever one-day falls. But the Chinese government’s most dramatic action was making it clear the central bank was now financing the direct purchases of shares to try and stabilise the market. Previously, it had said it would lend to the China Securities Finance Corporation to help smooth out margin call liquidity. Now it is lending to the corporation to “hold the line against the outbreak of systemic or regional financial risk”. That means it is financing the direct purchase of shares — probably a final resort before shutting the market if that doesn’t work. — Glenn Dyer
Joe, it’s the ore, it’s the ore. But the really important development for Australia today (that’s not excluding China, because the two are linked) was that 10%-plus plunge in iron ore prices overnight to just above US$44 a tonne. That’s a fall of more than 30% in the past three weeks alone. The spot price has slid from US$58.90 to last night’s close in just five trading days. It is now under budget estimates and at a level where it could fall, under US$40 a tonne simply because of the extra tonnage about to come on stream from Gina Rinehart’s Roy Hill mine from September onwards. The fall last night was one of the largest on record and a direct result of the sharemarket collapse in China and the inept handling of that rout by the government. — Glenn Dyer
Cyber attack? Greece flailing with only days to live, the Chinese sharemarket in full rout and commodity prices tanking, it wasn’t the best of times for the New York Stock Exchange to go black for three hours overnight, or United Airlines to suffer what it called a “problem” that grounded all its planes for over an hour, or the website of the Wall Street Journal to shut down, without explanation, at the same time as the NYSE trading was halted. In fact, the trifecta of tech problems had some wondering there was some sort of cyber attack — from whom, no one was speculating. But United, which suffered the first round of problems, called its troubles a “Network connectivity issue”, whatever that means. And the Journal’s website blamed its problems on “technical difficulties”.
Of course, the NYSE problem was the most serious, and it forced a three-hour stop to trading just as shares were selling off on the bad news from China (although European shares had rallied on claims Greece would present a new three-year rescue plan ASAP). The NYSE tweeted “The issue we are experiencing is an internal technical issue and is not the result of a cyber breach. We chose to suspend trading on NYSE to avoid problems arising from our technical issue.” When trading resumed at 3.05pm (5.05am Sydney time), the market kept falling as worried investors continued selling — it closed down a sharp 1.7% for the S&P 500. The White House said it could find no evidence of any cyber war or hacking in the three incidents, but seeing it didn’t notice Chinese hackers in one of its key computer systems (the Office of Personnel Management, with a reported 32 million records hacked) for more than a year, what would it know? — Glenn Dyer
There’s an excellent piece by Zeynep Tufekci over on “The Message” on the great NYSE stuff up here.
http://is.gd/Ei12Lq
Hint: It’s not terrorists, but the nature of legacy software. 🙂
What is the matter with Crikey’s maths today? It has 11.768 million in work and now Glenn thinks we have a new record low for iron ore. Did Twiggy write that? Record low for iron ore would be 20 something US, not 44.