European pressures
With the UBS/Credit Suisse takeover dominating news flows over recent days, jittery financial markets turned their attention towards fellow struggler Deutsche Bank.
Deutsche's share price is down -26 per cent to EUR 8.50over the past month as fears of a default rise (and is of course way down from pre-financial crisis highs of around EUR 92).
There are the usual charts showing an alarming spike in credit default swaps over recent days.
Zooming out the graph to a decade timeframe is still pretty alarming, but at least shows the situation in some broader context.
Source: Bloomberg Terminal
Germany Chancellor Olaf Scholz moved quickly to announce that the banking system in Europe is stable, which naturally brought to mind the old Thatcher adage that if you need to state that you're powerful then you probably aren't (or something like that).
Whatever, global markets have been further shaken to the extent that futures have priced interest rate cuts in the US beginning as soon as June.
Not sure about that but in any event the trend will inevitably be down over the next few years.
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Domestic news: tent cities
There are two keys news items this week in Australia.
Firstly, retail turnover, which is expected to be flat in nominal terms for the month of February, with domestic demand now fading.
And then there's the monthly inflation release, which is volatile and incomplete, but nevertheless watched by the Reserve Bank for an indication of whether a pause in interest rates is now appropriate.
Housing markets have continued to firm over the past 8 weeks in the face of a looming chronic shortage of rentals in the capital cities, with steady selling price increases also set to be reported.
Most weeks now there are reports of tent cities popping up in Australia.
Last year they were mainly being pitched in regional areas, but now they're popping up in the capitals.
Properties coming up for rent in Sydney and consistently seeing rents being repriced 30 to 50 per cent higher due to the ongoing dearth of new landlords in the market and skyrocketing demand.
Labor won the NSW election at a canter yesterday, having campaigned hard for tenant rights, including ending unfair evictions by landlords.
We'll have to see how that plays out, though it's unlikely to encourage more rental stock (well, actually the opposite).
The settings are all wrong for the city rentals market at the moment: record high immigration, workers moving back into town from regional Australia, higher interest rates being quoted for investor borrowers, and a nanny state lending assessment buffer accounting for a hypothetical 12 interest rate hikes scenario (when futures markets are expecting rate cuts ahead).
A 50 per cent step-up in Sydney rents is pretty much locked in while those settings remain in place.
