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Guide to the Markets Australia

Thanks to a subscriber for this chartbook from JPMorgan which may be of interest.



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White House to Tap Oil Reserve Again Amid High Fuel Prices

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The Biden administration is moving toward a release of at least another 10 million to 15 million barrels of oil from the nation’s emergency stockpile in a bid to balance markets and keep gasoline prices from climbing further, according to people familiar with the matter.  

The move would effectively represent the tail end of a program announced in the spring to release a total of 180 million barrels of crude from the Strategic Petroleum Reserve. About 165 million barrels has been delivered or put under contract since the program was put into effect.

The Biden administration also is set this week to provide details on plans to replenish the emergency stockpile. The Energy Department announced in May it was planning a new method of buybacks to allow for a “competitive, fixed-price bid process,” with prices potentially locked in well before crude is delivered.



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Email of the day on name changes and courier services

It seems Royal Mail changed its name to International Distributions Services plc (IDS.L). I would be grateful if you would kindly share your views on the implications of this change to the price of the share and the health of the company. As always thanks for your great service.



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Social Security COLA update coming this week - and it could be huge

This article from Fox Business may be of interest to subscribers. Here is a section:

Should Social Security beneficiaries see an 8.7% increase in their monthly checks next year, it would mark the steepest annual adjustment since 1981, when recipients saw an 11.2% bump. An increase of that magnitude would raise the average retiree benefit of $1,656 by about $144 per month or roughly $1,729 annually, the group said.

"A COLA of 8.7% is extremely rare and would be the highest ever received by most Social Security beneficiaries alive today," Mary Johnson, a policy analyst at the Senior Citizens League who conducted the research, said. "There were only three other times since the start of automatic adjustments that it was higher."

However, the decades-high benefit increase is not always good news for recipients, according to Johnson.

Higher Social Security payments are a bit of a Catch-22. They can reduce eligibility for low-income safety net programs, like food stamps, and can push people into higher tax brackets, meaning retirees will pay more taxes on a bigger share of their monthly payments.



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JPMorgan Is Worried About Who's Going to Buy All the Bonds

This article from Bloomberg may be of interest to subscribers. Here is a section:

Even if new buyers step into purchase these bonds, they’re likely to demand a higher yield for doing so — potentially adding to government deficits and mortgage rates at a time when they’re already soaring.

“All this points to a somewhat higher resting level for the mortgage/Treasury basis—and potentially for other related assets like IG corporates, which finally caught up with some of the mortgage widening over the past few days,” the analysts conclude.



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China Offers Rare Tax Rebate to Spur Home Purchase in Crisis

This article from Bloomberg may be of interest to subscribers. Here is a section:

China’s central government offered a rare tax incentive for residential purchases, ramping up support for the country’s embattled real estate sector. 

Residents who buy new homes within one year after selling old homes will enjoy refunds for personal-income tax on the sale, according to a statement on the finance ministry website. The tax refunds will take effect from October till the end of 2023. 

The novel tax policy comes after a yearlong slump in the housing market. To spark a turnaround, the central government is allowing nearly two dozen cities to lower mortgage rates for purchases of primary residences, while the central bank vowed to speed up delayed homes with more special loans. 

“The measure may help restore some confidence,” said Xu Xiaole, a property analyst at Beike Research Institute. “It’s another demand-side policy targeting homebuyers after mortgage rate cuts.” 

The tax break suggests the central government is ramping up support for people seeking to upgrade their homes. Previously, most incentives focused on first-time buyers, echoing President Xi Jinping’s mantra that “houses are for living in, not for speculation.”

Unless the person has held on to the home for at least five years, most big cities charge personal tax income on property sales when there’s a gain in value, usually 1% of the full amount or 20% of the gain. 
Under the new policy, people who buy more expensive apartments will enjoy a full refund in this area. The tax break only applies to home upgrades in the same city.  



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Fertilizer Maker Mosaic Says Some Florida Sites Evacuated

This article for Bloomberg may be of interest to subscribers. Here is a section:

Fertilizer maker Mosaic Co. has evacuated some of its Florida operations as Hurricane Ian prepares to make landfall.

All of our Florida locations have been secured with some “fully evacuated,” Mosaic spokesman Bill Barksdale said Wednesday in an email. The state is home to Mosaic’s phosphate rock assets, where they mine product, and to facilities where they turn that rock into crop fertilizers.

Ian’s current trajectory has it passing near Tampa, through the bulk of Mosaic’s facilities. The facilities are expected to remain closed for at least a week due to the hurricane, a hit that could see third quarter revenue fall by $240 million to $300 million, Bloomberg Intelligence said Wednesday in a note. Ammonia imports from Yara International and CF Industries at Tampa may also slow. 

The storm is on a path similar to Hurricane Irma in 2017, when Mosaic lost about 400,000 metric tons of finished phosphate products, according to Bloomberg Intelligence.



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Top Banks Pull Back From China Metal Financing After Crises

This article from Bloomberg may be of interest to subscribers. Here is a section:

JPMorgan Chase & Co. and ICBC Standard Bank Plc are cutting back on financing to China’s troubled metals trade, adding pressure to a sector already hit hard by a struggling economy. 

At least three Chinese metal trading companies have had credit lines frozen or reduced by either of the banks in recent weeks, according to people familiar with the matter. The lenders have pulled back after a liquidity crisis emerged at top copper trader Maike Metals International Ltd., said the people, who asked not to be identified discussing private information. 

Both JPMorgan and ICBC Standard Bank have financing relationships with Maike. It’s not clear whether the banks’ pullback from the Chinese metals market is a temporary freeze while they assess their situation, or a more permanent retreat. 

Maike’s admission last month that it asked for government help with liquidity issues is further shaking confidence in the industry, coming after the nickel short squeeze that almost bankrupted Tsingshan Holding Group Co. in March, and two recent cases of missing metal used as collateral for financing deals.



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Email of the day on graphene

Excellent reflexions in this long term view.

Have you ever talked about investing in the Graphene potential?

I have a friend convinced that the cost of producing it will come down with some innovation. And it could substitute or complement copper supply.



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Tycoon Running a Quarter of China's Copper Trade Is on the Ropes

This article from Bloomberg may be of interest to subscribers. Here is a section:

 

Much as He’s rise was a microcosm of China’s economic boom, his current woes may mark a turning point for commodity markets: the end of an era in which Chinese demand could only go up.

“In some ways Maike’s story is the story of modern China,” said David Lilley, who started dealing with Maike in the 1990s, first as a trader at MG Plc and later as co-founder of trading house and hedge fund Red Kite. “He has skillfully ridden the dynamics of the Chinese economy, but no one was prepared for the Covid lockdowns.”

This account of He’s rise to the pinnacle of China’s commodities industry is based on interviews with business associates, rivals and bankers, many of whom asked not to be named because of the sensitivity of the situation. 



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