That’s it for Markets Live today.
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A solid profit update from ANZ Bank fuelled a rally among the big banks, leading the Australian sharemarket higher.
The benchmark S&P/ASX 200 Index rose 32.4 points, or 0.6 per cent, to 5254.5 points as investors shifted their gaze to the performance of domestic companies.
The gains came as business conditions soared to a three-year high, led by an improving manufacturing sector. This helped push the Australian dollar above US90¢ for the first time in a month, following the release of National Australia Bank’s business survey.
Not even a technical glitch, which shut down the ASX for about 30 minutes, soured the mood of investors.
The top four banks were among the best performers, after ANZ’s profit update lifted expectations for earnings in the sector.
ANZ’s cash profit rose to $1.73 billion, or 13 per cent, for the three months to December 31. Although the result was broadly in line with expectations, analysts said they were surprised by the low level of bad debts.
That generated the rally among the big banks, Patersons securities economist Tony Farnham said.
‘‘You could say that ‘yes [ANZ’s] profit number was assisted by a further wind back of bad debt expense’. But if it’s happening with them, there’s a fair chance that it’s happening with the others,’’ Mr Farnham said.
Wrapping up the best and worst performers among the top 200 stocks, Energy World Corp popped 7.6 per cent today, with gold miner Northern Star Resources the second best with a return of 4.5 per cent.
Childcare centre operator G8 Education continued its strong run, up 4.3 per cent.
Bank of Queensland jumped 3.8 per cent, while QBE surged 3.6 per cent.
Investors dumped Bradken stock after the company provided a grim earnings update - the shares fell 9.4 per cent.
Cochlear plunged 8.9 per cent and Macquarie 3.8 per cent, once again on poor earnings updates.
Acrux faced another wave of selling - it was down 4.9 per cent.
But the biggest loser today was Forge Group, which entered a trading halt pre-open, from whence it looks unlikely to return.
The best and worst performers in the ASX 200 today.
As mentioned, for the first time ever, Janet Yellen will overnight be making the trip up Capitol Hill to testify on the economy and monetary policy.
"While market participants will be waiting with bated breath to hear what the new Fed chair has to say, one of her primary goals will be to minimise the market's reaction to her comments," says BBK Asset Management's Kathy Lien. "Maintaining low volatility is a top priority for a central banker especially when it is her first time on the podium and this is why we expect Yellen to say as much as possible tomorrow, but reveal very little."
Members of Congress will have a long list of questions for her but investors are only concerned with three, Lien says:
- Is she worried about muted job growth?
- What will she do with forward guidance?
- Is taper on a preset course?
"Given Yellen's support for the tapering in December and January, we don't believe that she will be overly concerned with 2 months worth of weak job growth especially given the recent improvement in the unemployment rate, participation and average hourly earnings."
Waiting for Janet Yellen. Photo: Getty Images
The benchmark ASX 200 index has shrugged off some early disappointing results from the likes of Cochlear and Macquarie to push 32 points higher to 5254.5.
The broader All Ords was also up 0.6 per cent to 5267.3.
Consumer discretionary was the only sector to close down, and then only marginally.
Gold stocks continued to surge, up 3.4 per cent as Newcrest Mining extended its rally. The miner's shares now trade at $11.45.
Metals and mining stocks climbed 0.4 per cent. BHP edged slightly higher to $36.55, while Rio edged the other way to $66.64.
The share prices of the big four banks surged, led by ANZ which added 2.2 per cent to close at $30.56 on an encouraging quarterly update, while CBA, Westpac and NAB were all up around 1.4 per cent as investor optimism on bank earnings grew.
CBA reports interim results tomorrow.
QBE added 3.6 per cent to $11.39 after a UBS analyst upgraded the stock to "buy".
Investors dumped Cochlear after its half-yearly profits came in well below market expectations - the stock plunged 8.9 per cent to $53.68.
Macquarie's update also underwhelmed, and 3.8 per cent was shaved off the investment bank's market cap.
Internationally, the focus tonight (2am, local time) is on the new Fed Chair, Janet Yellen’s inaugural testimony to the House economics committee, write the team at NAB.
Most expect her to be a touch on the dovish side (as most see is her natural bias) but continue the theme of steady tapering.
This event has been remarkably market moving in the past, as the Fed has used this forum in particular to adjust market expectations if it feels that is necessary.
Analysis of activity on social media sites such as Twitter and Facebook is the next frontier for the world’s leading stock market surveillance company as it builds new systems to catch insider traders and market manipulators, the AFR writes.
Software developers in the Sydney office of SMARTS Technology are developing products for exchanges, regulators and brokers that will match suspicious trading in securities and derivatives with activities on social media.
In his first interview since becoming global head of SMARTS, Robert Lang, told the AFR that as part of the natural evolution of the company’s core surveillance products its systems needed to go beyond red flag alerts.
“What we are doing is adding information to the information we have already got,” he said. “We are looking to give our clients more ammunition by adding analysis of social media platforms such as Facebook chat.”
Clients of SMARTS, which is a subsidiary of global exchange company NASDAQ OMX, include about 40 exchanges and regulators including the Financial Conduct Authority in the United Kingdom and the Invesment Industry Regulatory Organisation of Canada.
After giving a bit of space in this blog to bears like Harry Dent or Vimal Gor recently, here's a slightly more optimistic take: US stocks have too much momentum to make betting against the Standard & Poor’s 500 Index a winning strategy and the gauge will probably reach 1900 next quarter, according to money manager Laszlo Birinyi.
Birinyi, the founder of Birinyi Associates and one of the first analysts to advise clients to buy when stocks were bottoming after the 2008 financial crisis, told Bloomberg he expects the benchmark gauge for US equities to increase almost 6 per cent by July. It fell 5.8 per cent in the three weeks starting January 15, losses he said signalled healthy skepticism that set the stage for more gains:
- I don’t like when the market just shrugs these things off. It’s OK to just stop and take a deep breath. The market should have some sort of a negative reaction when you have problems in Turkey and Argentina. That didn’t make me uncomfortable.
- Short sellers have probably learned their lesson after a year when 460 of 500 companies in the benchmark index climbed, the most since at least 1990.
- At the same time, there’s nothing that you can say is a bargain or a real value if you’re a bull. You have situations on a day-to-day basis that will give you opportunities, and that’s what we’re trying to take advantage of.
Time for a quick tour of the region's sharemarkets...
- Japan's stockmarkets are closed for National Foundation Day
- Korea's KOSPI is up 0.5 per cent
- The Hang Seng in Hong Kong has gained 1.6 per cent
- Mainland China's Shanghai Composite index is up 0.4 per cent
- Singapore's benchmark Straits Times index is up 0.7 per cent
- Jakarta Composite index is 0.4 per cent higher
- Kiwi shares have gained 0.4 per cent
Virgin Australia founder Richard Branson claims Qantas boss Alan Joyce is in ‘‘deep shit’’ for sticking to his strategy of maintaining a 65 per cent share of the domestic air travel market.
Renewing his attacks on Virgin’s main rival, Sir Richard has told journalists in Dubai that it would be unfair for the federal government to provide financial assistance to Qantas.
‘‘It would be incredulous if the government can hand over money to him [Joyce] and they don’t hand over money to Virgin Australia,’’ he said. ‘‘Every company in Australia will come begging to the government if the government allowed that to happen.’’
Australia’s two largest airlines have been embroiled in a bitter public spat since November when Qantas demanded the federal government step in to stop Virgin’s big-three airline shareholders – Etihad, Air New Zealand and Singapore Airlines – from tightening their grip on the carrier.
Sir Richard has also told journalists in Dubai that he does not have plans to sell his remaining 10 per cent stake in Virgin Australia.
Colourful ... Richard Branson.
Looks like trade on the ASX is back, after halting for about 30 minutes. The stoppage was blamed on problems with market data.
“ASX is aware that some participant and vendor applications are not displaying accurate market data in a limited number of securities,” the ASX said in a notice to traders. “ASX Trade and the matching of orders are functioning normally.
“While this issue does not affect all participants, ASX believes it is in the interest of the whole market to provide all participants the opportunity to refresh their market data view at the same time.”
The ASX has had problems with its technology in the past, including a major meltdown that shut down the market for almost four hours in October 2011.
Has QBE – a perennial disappointment to shareholders in recent years – finally turned the corner?
UBS’s highly regarded healthcare analyst, James Coghill, says it has.
Coghill sparked a mini-rally in the stock today after he upgraded the insurer from “neutral” to “buy”, increasing his 12-month share price target from $12.50 to $13.
In a note titled “Don’t wait for the last train” the analyst explains that the company is two-thirds of the way through a three-year turnaround, and while there may be “many bumps to navigate around in 2014” (cue groans) there is now a “sufficient buffer” in the heavily de-rated share price to “absorb possible further disappointments”.
“We would argue that the upheaval phase of QBE's transformation has largely run its course,” Coghill writes, pointing out that over $1.5 billion has been added to QBE’s reserves.
“Our greatest aversion to QBE over the past two years has been significant management disruption,” the analyst writes. “As night follows day, downgrades have followed the arrival of each new business head. The new CFO starts in June and we still see the ensuing period as a key risk, albeit less so after multiple earnings hits already.”
Some reactions to the ASX outage as trade slowly restarts:
Markets closed due to technical issues at the #ASX. First world problems.— Assad Tannous (@AsennaWealth) February 11, 2014
@AsennaWealth Why does the market go into auction? Why does it need to stagger?— Chris Weston (@ChrisWeston_IG) February 11, 2014
#ASX statement says some participant and vendor applications are not showing accurate market data in a limited number of securities.— Chris Thomas (@Mr_Chris_Thomas) February 11, 2014
Insolvency firm Ferrier Hodgson has been appointed as voluntary administrator by the board of bankrupt contractor Forge, sources close to the situation have told AFR StreetTalk.
The next step is that lender ANZ will take control by appointing KordaMentha as receiver.
ANZ extended Forge an additional $11 million line of credit in the past fortnight, which was being used to pay Forge employees and for other working capital expenses.
The support was conditional on Forge finding an equity backer, and the company had adviser Euroz on the search for a white-knight investor. Potential buyers had been told ANZ have been “working with Forge management”.
StreetTalk adds it’s understood Forge came to the conclusion over the weekend it would not be able to find the equity piece. So ANZ withdrew its support.
Looks like trading has stopped on the ASX. The bourse just sent out a notice saying "ASX trade markets have been placed into enquire mode".
Could be a glitch of sorts after a technical upgrade over the weekend.
But trade is supposed to fully continue at 2.57pm.
Graincorp is investing $125 million into its edible oils and spreads manufacturing operations to create a strategic hub in Victoria, the company said in a statement.
Graincorp Foods' operations in Queensland will be relocated to the new, larger locations from early 2016, which will affect 130 jobs, the company said.
The project forms part of a program of strategic initiatives aimed at delivering an additional A$110m per annum of underlying EBITDA by the end of FY16.
Capital commitment will be funded with existing cash and debt facilities. The associated restructuring cost of $20 million will be reported as a significant item in GrainCorp’s earnings, principally in FY14.
The stock is up 1 cent to $7.72.
Residential property prices, quarterly change
Another look at today's ABS housing data shows that the total value of residential dwellings in Australia has broken through the $5 trillion level for the first time:
- The total value of residential dwellings in Australia was $5,017,041.4 m at the end of December quarter 2013, rising $184,304.7 m over the quarter.
- The mean price of residential dwellings rose $17,700 and the number of residential dwellings rose by 37,300 in the December quarter 2013.
- The capital city residential property price indexes rose in Sydney (+4.7%), Melbourne (+2.6%), Perth (+3.3%), Brisbane (+2.8%), Adelaide (+2.5%), Hobart (+2.0%), Darwin (+1.7%) and Canberra (+0.3%).
- Annually, residential property prices rose in Sydney (+13.8%), Perth (+8.7%), Melbourne (+7.9%), Brisbane (+5.7%), Darwin (+5.0%), Hobart (+4.9%), Adelaide (+3.4%) and fell in Canberra (-0.3
Gold is on a bit of a run, on track for a fifth straight session of gains, taking the price to its highest level in three months.
The spot price has just broken through $US1280 an ounce, after a small surge.
Fed chair Janet Yellen gives her first testimony before the House Financial Services Committee overnight, and will likely face questions on the state of the labour market and the future pace of tapering.
Recent weak economic data, including Friday's US non-farm payrolls report, has many in the market hoping that the wind down of the bond-buying stimulus would be slowed, which is regarded as a positive for gold.
Also buoying the price, workers at AngloGold Ashanti's Sadiola and Yatela gold mines in Mali started a five-day strike on Monday, demanding better redundancy payouts.
‘‘Chinese buyers have been quite active but the longer-term picture for gold remains bearish against the backdrop of continued stimulus reduction in the US,’’ says Yang Xi, a Hangzhou-based analyst at Yongan Futures. ‘‘Gold’s support may come in the form of haven demand if further tapering results in more capital outflows from emerging markets.’’
Gold over the past week.
A tiny Australian-based watch design company with a Swiss heart is about to step into the big time with a new product line and a swag of high-profile sporting endorsements.
And big is the right word for it, with Bausele announcing its latest release will be worn on the wrists of giant Australian basketballer Andrew Bogut – Australia's highest-profile player in the US-based NBA – and Jenna O'Hea, a star of the WNBA.
“It's a pretty big thing that [Bogut] decided to support my little brand,” Christophe Hoppe, a Swiss-raised Frenchman who now calls Sydney home, says.
The company puts a small piece of Australia – sand, red dust or coal – into the transparent crown of each of its watches, creating a strong selling point to both tourists and Aussie expats.
The company has also formed a licensee arrangement with the ICC World Cup of cricket to be played in Australia next year, and will produce a special commemorative model for the tournament.
The high-profile moves come as Bausele prepares to launch its second model line, a sporty design offered with the company's first automatic movements.
Bausele's new Sport Automatic model puts the brand on par with other luxury watchmakers.
The bushfire threat to Victoria's power supplies has eased, with the resumption of power generation at the Hazelwood power station.
"The fires are not currently affecting the operational areas of large power plants in the Latrobe Valley," the Australian Energy Markets Operator said.
"Even with the loss of some power plant, reserves are adequate to meet supply in the coming days."
Even with no threat to power generation, the distribution network may see some localised disruptions due to the fires, it warned.
Gor's comments (see post below) come amid concerns about the stability of China’s smallest lenders and a possible default within China’s bond market.
Bloomberg reports that China’s banking regulator has also ordered some of the nation’s smallest lenders to set aside more funds to avoid a cash shortfall, three people with knowledge of the matter said in a news report.
At the same time, borrowing costs for China’s riskiest companies are at their highest level in 20 months. The yield gap on five-year AA- notes - equivalent to non-investment grade globally - over AAA debt jumped 27 basis points last month to 224, the most since June 2012, Chinabond indexes show.
Following a swift correction in bank stocks, investors will be closely examining CBA’s interim results tomorrow for signs that the country’s big four banks have been oversold.
But if recent buying activity by fund manager John Sevior of Airlie Funds Management is any guide, they may be looking in the wrong place.
Smart Investor has learned that the respected stock picker has been quietly building a position in Queensland based lender Suncorp Group.
Airlie’s Concentrated Equity Fund began buying its stake in December, as Australia’s sixth largest bank eased from a November high of $13.75 to current levels of around $12.
The fund, which was closed to new money in 2013, holds a maximum of 15 stocks at any time with a maximum allocation to cash of 50 per cent and a minimum of 5 per cent.
With such a small number of holdings, the fund can’t afford to put a foot wrong - which begs the question, why Suncorp?
Volatility in markets is set to return with a vengeance as the Fed unwinds its massive stimulus program, BT Investment Management’s head of fixed income Vimal Gor predicts.
Gor in a note is also warning investors about a 1997-type Asian crisis unfolding amid rising concerns offshorwe about the impact of rising global interest rates and risks within China’s banking and bond market.
- There has to be a [Asian] crisis; the question is how big it gets and how long it lasts.
- With slow world growth and a shifting focus from [Asia] exports to domestic consumption, the markets are applying pressure on countries to reduce imports by weakening currencies and forcing central banks to rate hikes.
- These hikes will weigh on the domestic economies which are already fragile.
- The impact of this on world growth and the current rapidly falling global inflation rate cannot be overstated. Hopefully the liquidity injections from central banks will stop the EM situation moving from idiosyncratic to a systemic crisis but that remains to be seen.
As we've mentioned, one of the big movers today has been QBE.
The catalyst for this morning's rally looks to be an upgrade to "buy" from UBS's influential analyst James Coghill, who has put a 12-month price target of $13 on the stock - the shares last traded at $11.36 and are now up 3.2 per cent for the day.
The consensus among the analyst community remains cautious, with a aggregate rating of around a "hold", according to Bloomberg.
Turning to the best and worst performers in the top 200 in what has already been an eventful day, QBE is leading the charge, up 3.4 per cent, followed by a couple of winners from yesterday, gold miner Evolution Mining and childcare centre owner G8 Education.
Resmed is up 2.9 per cent, perhaps as investors look to find a new home for the cash that was until very recently in fellow healthcare name Cochlear.
Bank of Queensland is up 2.6 per cent, enjoying a strong run in bank shares todays that has pushed the Big Four up strongly as well.
Bradken and Cochlear have suffered the sharpest sell-offs after disappointing with earnings updates. Macquarie is down heavily and for similar reasons.
McMillan Shakespeare and Acrux have also had a tough morning.
Today's best and worst performers in the ASX 200 at midday.
The Australian dollar has finally broken through 90 US cents, after several failed attempts over the past days.
The dollar rose as high as 90.13 US cents on the back of today's robust data.
It's the first time since mid-January that the dollar has traded above 90 US cents.
The dollar over the past three days.
So what can we make of the surprise fall in home loans?
Moody's Analytics associate economist Katrina Ell says the disappointing data looks like a monthly anomaly, rather than a sign the housing market is running out of steam:
"Nationwide prices are still rising and auction clearance rates indicate ongoing buoyancy in demand," she says.
Some more reactions to the data:
Investors account for 39.8% of all housing finance commitments in Dec-13, highest since Oct-03 which was record high proportion (41.2%)— Cameron Kusher (@cmkusher) February 11, 2014
ABS Dec qtr national av house prices +3.4%QOQ, +9.3%YOY led by Sydney. Old news as basically same as long reported by RP Data and APM— Shane Oliver (@ShaneOliverAMP) February 11, 2014
Rex’s hyperbole aside, Australia's airlines are genuinely hurting, writes BusinessDay columnist Matt O’Sullivan:
Regional Express has a history of resorting to hyperbole. Issuing a profit warning late on Friday, the country's largest independent regional airline declared ''the entire aviation industry is financially haemorrhaging right now and approaching collapse''.
Rex demanded the Abbott government step in and live up to its promise to reinstate a form of subsidy on some regional routes. The Gillard government removed the en route rebate scheme in 2012 when it established the carbon tax.
Highlighting the challenges the aviation industry faces is not unique. Qantas has left some punters thinking the sky is about to fall in as it pressured the government for help.
Hyperbole to one side, it is an inescapable truth that airlines of all sizes are hurting in Australia. Between them, Qantas and Virgin Australia are staring at combined losses just shy of $400 million in the first half, a period when they make the bulk of their earnings.
The simple reason for their financial woes is that airlines have been growing at a rate far outpacing demand. A boon for travellers in the form of cheaper fares equals pain for airlines and their shareholders.
The collapse late last year of Brindabella Airlines, which had monopoly rights to fly a number of routes in NSW, gives weight to Rex's claims about the challenges.
But the final verdict on Brindabella's demise has yet to be handed down. It was placed in receivership just before Christmas after the air-safety regulator grounded eight of its 10 planes.
Will Rex Airlines go the way of the dinosaur of the same name? Photo: James Morgan
The Australian dollar has jumped more than a third of a cent to the day's high of 89.71 US cents on the back of the robust business confidence survey.
In other economic data also out at 11.30am:
- Home loans surprisingly fell 1.9 per cent in December, instead of the predicted 0.7 per cent rise; coming after 1.4 per cent growth in November.
- And the ABS house price index posted a year-on-year rise of 9.3 per cent, and quarterly gain of 3.4 per cent in the fourth quarter. Both figures came in slightly ahead of expectations.
Business conditions have soared to their highest levels in almost three years as confidence lifted above its long-run averages, as a weakening Australian dollar and record-low interest rates support the non-mining sectors of the economy.
Business confidence, which dipped after a post-election boost last year, rebounded into positive territory, although two sectors that are key to the economy - wholesale and mining - remained negative, the National Australia Bank's business survey finds.
"The improvements over recent months have established a clear upward trend in business activity, suggesting some upside potential to our current growth outlook, although indicators of employment continue to point to a soft labour market," NAB said.
The survey, which was conducted before Toyota's announcement that it would pull out of car making in Australia, found that conditions in the manufacturing sector recorded a "surprisingly strong turnaround". The construction and retail sectors almost reported improvements in conditions, NAB said.
"It is probably still too soon to call the end of sub-trend economic growth in Australia based on these outcomes, but a rise in forward orders and capacity utilisation certainly provides some comfort," NAB added.
If you are just joining us, there are serious concerns about the future of contractor Forge Group, after lender ANZ pulled its support for the company, reports the AFR's Street Talk column.
It’s understood ANZ extended Forge an additional $11 million line of credit in the past fortnight, which was being used to pay Forge employees and for other working capital expenses.
The support was conditional on Forge finding an equity backer, and the company had adviser Euroz on the search for a white-knight investor. Potential buyers had been told ANZ have been “working with Forge management”.
It’s understood Forge came to the conclusion over the weekend it would not be able to find the equity piece. So ANZ withdrew its support.
Forge on Tuesday went into a trading halt after it was advised by financiers they would no longer support the company.
Some more detail on Cochlear, whose share price has taken one of its biggest intraday price falls since a profit warning last year, after the medical device maker announced a 73 per cent fall in interim net profit and implied it will miss its full year profit guidance as well.
Interim net profit slumped to $21.0 million due to cash put aside for a patent dispute, customers delaying purchases until new products are launched and foreign exchange contract losses.
Excluding the provision for the patent dispute, net profit fell 53 per cent to $36.8 million, the company said today.
The company reported a 5 per cent fall in revenue to $371.1 million and a 54 per cent fall in earnings before interest and tax to $49.4 million, in the six months ended December 31.
The result fell far below expectations with consensus estimates of net profit of $59.3 million, EBIT of $81 million and sales of $387.9 million, according to FactSet Consensus reported in a Citi note.
Shares in the hearing implant manufacturer opened at $52.54, 10.8 per cent down on Monday’s closing price. They're currently down 9.8 per cent at $53.10.
Rang the Bell ... Charlie Aitken
Go Charlie, gone. Investors have lost another colourful read. First it was Coppo’s afternoon report, which abruptly ended when Goldman Sachs’s trader and author Richard Coppleson pulled the pin in January.
And now Bell Potter’s Charlie Aitken has decided to stop writing the widely read Ringing the Bell morning not, the AFR's StreetTalk notes:
It’s understood Aitken grew sick of his note being widely spread around the market.
The note was widely known for its bullish views on the market and particularly bellwether stocks including Fortescue, Qantas and QBE.
Another result judged a shocker by the market this morning has been Bradken's half-year results, despite interim net profit beating expectations.
The stock has plunged 10.2 per cent to $4.68, reversing strong gains in the two previous trading days, suggesting investors were caught by surprise.
Interim net profits were down 18.5 per cent on the previous corresponding period to $38.1 million, against the consensus estimate of $32.1 million.
But the mining products business forecast full-year EBITDA of around $180 million, where the market had been looking for a figure more like $206 million, on Bloomberg data.
The company said it was continuing discussions with Austin Engineering about a potential tie-up.
Here's a quick graph we've put together on the top five employing industries in Australia, amid strong focus on job losses in the manufacturing sector after Toyota decided to exit local production.
As economists have pointed out, the manufacturing sector in this country has declined over the past few decades as Australia loses out to low-cost competitors in Asia and other countries. Meanwhile, employment in other industries has grown strongly.
"The larger part of the story is not to do with the currency, but rather to do with globalisation, and Australia not competing in terms of low-cost manufacturing," said HSBC’s chief economist for Australia Paul Bloxham on Toyota's decision to exit manufacturing in Australia by 2017.
"Had the Aussie dollar been lower, it would have taken the pressure off some of the manufacturers, but they still have to face a range of different challenges to do with the lack of productivity and competitiveness in many parts of the Australian economy."
While the resources sector was central to Australia, the viability of the auto sector has remained questionable, RBS senior currency strategist Greg Gibbs said.
"The economies of scale are very apparent in the auto sector, and it’s a very competitive marketplace for manufacturing globally," he said.
Tigerair Australia has averted the possibility of damaging industrial action by its pilots after reaching an in-principle agreement with them on a new labour agreement.
The two sides reached a deal over the new terms and conditions, including changes to the rostering of pilots, at a meeting which concluded late on Monday.
Tigerair said it was confident the proposed agreement would provide a ‘‘reasonable outcome that ensures fair pay and conditions for pilots and addresses their concerns in regard to roster stability’’. The airline emphasised that the new agreement allowed the airline to ‘‘maintain its competitiveness in the domestic market’’.
Virgin Australia has a majority stake in Tigerair, which continues to rack up large losses.
Macquarie Group chief executive Nicholas Moore has been questioned about the bank’s underbidding for acquisitions.
Late last year, Macquarie was in the mix for Llyods Banking Group’s Australian assets, but was ultimately beaten out by Westpac, who secured the assets for $1.45 billion.
At the third quarter operational briefing, Mr Moore tells investors and analysts Macquarie is open to mergers and acquisitions, but won’t make a move just for the sake of it.
“Most of the growth historically, from a group point, comes organically.”
Shares have lost ground early after shareholders sold Macquarie and Cochlear in response to underwhelming earnings updates.
The ASX 200 is down 17 points, or 0.33 per cent, to 5204.8.
The market has punished Cochlear for reporting a 73 per cent drop in net profit for the first half of the financial year, to $21 million - the stock is 9.2 per cent down after opening even lower.
Macquarie is the biggest individual drag on the market, dropping 3 per cent after it reaffirmed guidance for the full year, but continued to report falling profits in its key capital markets business.
No surprise that health care was the worst performing sector, down 0.9 per cent.
Gold stocks have continued their recent rally - perhaps ahead of more dovish statements from new US Fed Chair Janet Yellen tonight - with the sector up 2.4 per cent.
IT and telcos have also gained ground this morning.
Financiers to troubled engineer Forge Group have withdrawn their support, signalling a deepening of the financial difficulties confronting the group.
As a result, it has sought a suspension of trading in its shares on the sharemarket.
The company has run into financial difficulties completing two power station projects - one in western Queensland and the other in Western Australia - which has forced successive earnings downgrades.
It has also forced the group to seek support from its lenders, in particular ANZ Banking Group.
The AFR's StreetTalk earlier this week wrote three listed contractors are among a group of about 10 parties taking a look at Forge’s books, as part of a sale process being run by Perth-broker Euroz.
Forge shares last traded at 91.5 cents, after rallying over the past sessions.
"Cochlear reported this morning with a below market result - expect share price weakness this morning," says Morgans senior analyst Scott Power.
UPDATE: The stock is down by more than 10 per cent at open.
Amid the bloodbath in the David Jones boardroom, the retailer’s search for a new chief executive has uncovered a surprising frontrunner, Adele Ferguson writes:
Speculation is rife that the board will abandon its search for a new chief executive and Paul Zahra will be reappointed boss of David Jones as part of a plan to restore stability amid a share trading scandal that has seen director Steve Vamos fall on his sword and chairman Peter Mason and Leigh Clapham agree to go in three months.
Come three months, David Jones will have a new board and a chief executive with a new lease of life who just might want to think about merging with Myer and running a much bigger department store empire.
It follows a week of meetings and teleconference calls with the company's key shareholders, Zahra and Mason, and meetings with advisers, in an attempt to strike a deal to restore the company's battered credibility.
Despite attempts by advisers to preserve Mason, the drums were beating too loud for his resignation after he gave the two directors permission to buy shares a few days before the company released better than expected quarterly sales results and the day after Myer lobbed a $3 billion merger proposal.
Illustration: John Spooner.
Automotive Holdings Group in a statement this morning said Toyota's decision to exit Australia in 2017 is "not expected to have any material impact" on the automotive logistics and dealership owner.
Managing director Bronte Howson said in the release top the ASX that he was confident the Toyota range would remain an important part of the Australian market.
"Toyota, Ford and General Motors remain leading global manufacturers... and we are confident they will continue to be an important part of AHG's broad product range," Mr Howson said.
Another stock to watch this morning is dealership owner AP Eagers.
A highlight of ANZ's trading update today has been the very low provision charge for bad and doubtful debts - which dropped to $191 million from $322 million in the previous quarter.
Falling bad and doubtful debts were a key factor behind the Australian banks' profit growth throughout 2013, and it seems the trend has continued during the latest December quarter.
With the Commonwealth Bank set to hand down its half-year results tomorrow, analysts say the further improvement in credit quality bodes well for the sector.
ANZ also reported tighter margins - but Shaw Stockbroking analyst David Spotswood points out this had been a weak spot for the bank because of its focus on institutional lending:
- Bad and doubtful debts are low, margins are in slightly for ANZ, which has had the most pressure.
- So I would think that tomorrow CBA will have a cracker of a result.
Macquarie Group, Australia's biggest investment bank, retained its forecast for an increase in full-year earnings from the previous year as market conditions improve.
Net profit from its fixed-income, currencies and commodities unit for the 12 months to March 31 has potential to be in line with the year earlier, which compares with Macquarie's previous forecast for a fall, the bank said in a statement today without providing amounts.
Macquarie is estimated to report a rise in net profit to $1.19 billion for the full year, from $851 million a year earlier, according to the mean survey of 11 analysts by Bloomberg. The bank's profit last year was the first gain in three years.
Macquarie Chief Executive Officer Nicholas Moore is reaping the benefits of a cost-cutting program undertaken in the past three years. The bank is also gaining from a revival in investor appetite for riskier assets and its shift to less volatile businesses such as lending and fund management.
''Market activity levels are up and that is always positive for Macquarie and its earnings,'' said Angus Gluskie, chief investment officer at White Funds Management, which manages $550 million including Macquarie shares.
''While all factors point to a buoyant revenue generation, Macquarie is usually cautious in its outlook.''
Digital currency Bitcoin experienced more than usual volatility overnight, tumbling as much as 21 per cent to $US535.55 before recovering to around $US660, according to the CoinDesk Bitcoin Price Index, which averages prices from exchanges.
The Bitcoin Foundation blamed the Mt Gox Bitcoin exchange, one of the most popular exchanges for Bitcoin, for technical faults that prevented customer withdrawals of the virtual currency.
‘‘The issues that Mt Gox has been experiencing are due to an unfortunate interaction between Mt Gox’s implementation of their highly customised wallet software, their customer support procedures and their unpreparedness,’’ said Gavin Andresen, chief scientist for the foundation, which promotes and sets technical standards for the currency.
Earlier, Mt Gox cited ‘‘a bug in the Bitcoin software’’ that is ‘‘not limited to Mt Gox.’’ The quirk enables a user to cover up a transfer to another wallet - a software protocol for storing the virtual currency - and re-send the same money.
The exchange said it was working with the core team of software developers associated with the Bitcoin Foundation to resolve the problem.
Flash crash ... Bitcoin plunged more than 20% before recovering.
ANZ's cash profits rose to $1.73 billion in the first quarter, as bad debts continued to fall and the bank said economic conditions were becoming more predictable.
In a trading update for the three months to December, the bank today said unaudited earnings were up 13 per cent on a year earlier, a result it described as a "good start to 2014".
The lender said business conditions were in line with previous guidance it had provided in late 2013. It reaffirmed expectations for revenue growth of 4 to 5 per cent for this year.
After falling bad debts last year helped drive profit growth across the Australian banking industry, the bank said its total provision charge for impaired loans this year would be 10 per cent lower than 2013.
Chief executive Mike Smith said the bank's strategy of pursuing expansion in Asia was delivering ''consistent improvement in business growth and financial performance.''
''There remain a number of challenging issues in the global economic environment however these are now largely more predictable. Our performance in the first quarter means we are on track to deliver a solid 2014," Mr Smith said.
In a sign that credit quality has continued to improve in recent months, the total value of its impaired assets continued to fall, to $4.01 billion.
The unaudited result comes before the Commonwealth Bank hands down its first half earnings on Wednesday, with analysts expecting a record interim profit of about $4.1 billion.
Stocks in focus this morning:
- ANZ first quarter earnings update
- Bradken first-half earnings
- Cochlear first-half earnings
- David Jones: chairman and two board members to resign
- Macquarie: Operational briefing
- Tabcorp goes ex-dividend
- Westfield: AFR's Street Talk says may sell two Sydney malls after split
- Reckon full-year results
What you need2know:
• SPI futures up 1 point at 5170 at 9am AEST
• AUD at 89.48 US cents at 9am AEST
• On Wall St, S&P500 +0.16%, Dow Jones +0.05%, Nasdaq +0.54%
• In Europe, FTSE100 +0.3%, CAC +0.21%, DAX -0.13%
• Spot gold $US 1275.19 an ounce, up 0.625 per cent
• Brent oil $US 108.82 per barrel, down 0.68 per cent
• Iron ore $US 120.800 per tonne, down 0.083 per cent