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Markets Live: ASX down despite strong jobs data


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Another day, another blog. It's been a very interesting day, but unfortunately it has come to an end. We'll see you tomorrow at 9.30am.

Click here for a full wrap of today's session.

IG Markets analyst Chris Weston notes the local market was weak before the jobs figures.

‘‘It hasn’t really changed the landscape at all,’’ he says. ‘‘We’ve seen a pretty weak market. Wall Street didn’t provide us with much of a backbone to go on.’’

But he says there are some positive signs in the US with President Barak Obama saying a resolution to the world’s biggest economy’s economic woes could be found within a week.

On the other side of the ledger, BHP and Rio offered the most support, rising 0.35 per cent and 1 per cent respectively.

So much for the Commonwealth Bank breaking the $100 billion barrier today: the stock was one of the biggest drags on the market, falling 1.2 per cent, putting the market cap at $97.3 billion.

The market's losses were led by the energy sector, which fell 1 per cent, while financials slipped 0.4 per cent and materials ended flat. The gold sub-index had another bad day, dropping 1.3 per cent.

The market has closed today, pretty much where it's been most of the session: the benchmark S&P/ASX200 index fell 11.1. points, or 0.2 per cent, to 4509.3, while the broader All Ords lost 12.3 points, or 0.3 per cent, to 4515.7.

Some more on the stubbornly strong dollar, which is currently trading at $US1.0461:

  • The Aussie is expected to remain resilient in the months ahead, mostly due to a lack of high yielding alternatives, a Reuters poll has found.
  • The median forecast of 53 analysts showed the Aussie at $US1.0400 in three months before edging slightly lower to $US1.025 by this time next year. This compared with $US1.0470 where it currently stands.
  • But the forecasts ranged from a low of 86 cents to a high of $US1.1200 for the 12-month view, suggesting great uncertainty in the outlook.
  • The resilience of the currency would not sit well with the Reserve Bank of Australia (RBA), which reiterated this week the local dollar was "uncomfortably high".

From the ABS today comes a long-awaited correction, Peter Martin notes - employment growth didn’t stop during 2011 - it continued at a reasonable pace.

Until today the official figures for 2011 showed fairly flat employment (a loss of 1200 jobs). On paper it was the worst calendar year since 1992 when Australia was emerging from the early 1990s the recession.

In May this year Tim Colebatch took issue with the figures, explaining the Bureau had systematically biased them down during 2011 by plugging in lower than real population growth figures to compensate for earlier mistakenly high population growth estimates.

When the Bureau eventually plugged in the real population growth figures, as did after each census, it would all be revised and the reality would become apparent.

His point was the that the Bureau should have revised as it went rather than biasing future employment estimates to ease away past mistakes.

The head of the Bureau, Brian Pink, stood his ground saying at the time: ''We do not believe that the employment growth that we have shown has been biased in some way by the method - that's our view.”

Not now. Today’s published revision shows employment grew 48,700 throughout last year rather than falling 1200.

The Bureau is changing its method as well. From now on it’ll revise old figures as it goes, at first revising for new information about population every six months, and then from 2014 quarterly.

Following on from that last post on the dollar, here's an interesting chart showing just how strongly the dollar's exchange rate with the greenback and the cash rate have diverged since early 2009. It's a graph the RBA is unlikely to appreciate...

Telstra has won a new contract worth $24 million, providing managed satellite services for Vision Asia, a satellite broadcaster.

Looking back at the general market, CMC Markets trader Ben Taylor says the ASX200 has struggled to hold ground today despite positive overnight leads and an unemployment number which bucked the trend:

  • Today’s unemployment read caught the market by surprise. The daily onslaught of economic doom and gloom, talk of Australian companies doing it tough and stories of workers being laid off had the market ready for a lift in the unemployment rate.
  • The result was a real kick in the teeth to those shorting the Aussie dollar today. Falling job ads, a fall in GDP, our manufacturing industry in heavy contraction mixed with the RBA dropping rates; you’d be forgiven if you believed that today’s result would see a rise in unemployment.
  • The result paints a merry picture for the Australian economy which is showing signs of uncanny employment resilience despite all the news and data to the contrary.
  • If the RBA looks to the unemployment result for guidance it will make it very difficult to see rates cut again in February.


Gina Rinehart has also hit out at Ten, saying the struggling broadcaster could have done more to cut costs in the past.

Mrs Rinehart said the troubled network should have been more prompt in reducing costs during the past two years.

‘‘I think we could have done more there and obviously we are not doing well enough yet with our programming,’’ she told reporters after Ten’s annual meeting for shareholders.

‘‘So these are things that I hope we will see some more improvements on.’’

And here's what Gina Rinehart has to say on her participating in Ten's capital raising:

‘‘[I’ll decide] by tomorrow, if I could also add, I did participate fully in the last one.’’

As an institutional investor, she has until 5pm Friday to decide.

BusinessDay's Malcolm Maiden has chipped in on Channel Ten and Gina Rinehart.

Ten chairman Lachlan Murdoch told today’s AGM that  three of the free-to-air broadcaster’s big four shareholders - Bruce Gordon, James Packer and himself - will take part in the capital raising, but Mrs Rinehart has yet to commit.

She has until 5pm tomorrow to make her mind up.

Malcolm writes:

It will be very interesting to see what she decides.

A decision not to support the issue and allow her stake to be diluted would pose obvious questions about her continued tenure on the board but she may see Ten as a distraction now – and a costly one at that.

Her losses since she bought in in 2010 are estimated at about $140 million, with total losses for the four billionaires close to $600 million.

Read more here

BuinessDay's Matt O'Sullivan has more on Andrew David, the Tiger Australia chief executive who's joining Jetstar. Matt writes:

Jetstar’s chief executive, Jayne Hrdlicka, said a key part of Mr David’s role would be the ‘‘smooth integration’’ of new Boeing 787 Dreamliner planes into the airline’s fleet, the first of which are due in the middle of next year.

‘‘He understands low fares and he understands our key markets,’’ she said. ‘‘We’re putting additional leadership in place now to support this growth into the future.’’ Mr David will be based at Jetstar’s Melbourne headquarters.

Read more here:

Back to the jobs data and Michael Rafferty of the University of Sydney’s Workplace Research Centre who says that the negative mood in the labour market - which comes despite the better employment figures - stemmed from a fear of becoming unemployed.

"I think that what’s happening is that people are pessimistic despite the reasonably buoyant labour market and the reason is that people are finding it hard to get by," her said.

"And I think they are worried that if they were to become unemployed, lots of things could unravel for them.

"There’s a genuine fear because people are struggling to make ends meet. The labour market aggregate figures are missing that story that people are feeling more precarious."

More on Ten and major shareholder Gina Rinehart,  who said after the meeting that she hasn't made a decision on whether to back the capital raising announced today.

Ms Rinehart - who owns 10 per cent of the troubled broadcaster has until until 5pm tomorrow to make up her mind.

Tiger Australia’s chief executive, Andrew David, has resigned from his role at the budget airline after just over a year to become the head of Jetstar’s long-haul operations, writes BusinessDay's Matt O'Sullivan.

His departure comes just five weeks after Virgin Australia moved to take a controlling stake in Tiger’s Australian operations. At the time, Virgin declined to comment on who would lead Tiger in the event that its purchase of a 60 per cent stake in the budget airline is approved by competition regulators.

Mr David, a former senior executive at both Virgin and Air New Zealand, will start at Jetstar next month in the newly created role of chief executive of long-haul operations.

Workers at the collapsed company Gourmet Food Holdings, which produces Rosella tomato sauce, may be able to keep their jobs, writes BusinessDay's Georgia Wilkins.

Ferrier Hodgson, receivers of the company that went into voluntary administration last week, said they had received close to 100 expressions of interest from potential buyers considering purchasing all or part of the business.

“If we continue to receive this valuable support from customers, suppliers and transport operators, the business should be able to continue operating and employees will keep their jobs

“Given the level of interest in the business amongst potential buyers, I have an increasing degree of confidence that the group has a future,” partner Jim Sarantinos said.

Read more here

The stong dollar is driving Asian students to shun Australia in favour of the United States and Britain.

Global banking group HSBC says that while Asian expats appreciated Australia’s lifestyle opportunities, the strong currency was a particular turn-off for students.

HSBC’s Australian head of retail banking Graham Heunis says the problem has worsened since the local currency hit parity with the US dollar in October 2010.

‘‘We’ve seen a 12 per cent drop for students since 2010,’’ he said.

A quick look now at some of the best-performed stocks on the ASX200:

  • Fleetwood Corp: +4.41%
  • Linc Energy: +3.4%
  • QBE: +2.67%
  • Alacer Gold Corp: +2.11%
  • +1.77%


More on jobs. Annette Beacher, the head of Asia-Pacific Research at TD Securities, is wondering why the labour market is again healthier than expected.

She says the biggest shock in today's data is the retreat in the unemployment rate, from 5.4% to 5.2% (the market predicted 5.5%, TD 5.6%).

"Why were we (and the market) wrong? Job vacancy data plus anecdotes of job shedding by the public sector et al have foreshadowed a weakening labour market for months now, yet the ‘hard data’ are yet to reflect this reality," she said.

"Is employment growth actually improving to catch up with the job vacancy series?"

Michael Pascoe takes a look at today's jobs numbers and makes the observation that "unemployment keeps refusing to skyrocket the way the doomsday brigade, tabloid headlines and the federal opposition promise."

He also makes these interesting points:

The latest release contains statistical revisions based on better population numbers. The main impact is to smooth out some of the lumpiness in employment and participation rates over the past couple of years. Turns out employment growth hasn’t slowed as much as previously thought, because it was already fairly slow. The relative surge in employment in late 2010 has been revised away.

The welter of other statistics released over the past week points to the labour market weakening further as population growth picks up and Australia’s mini-fiscal cliff (OK, let’s call it “Australia’s steep creek bank”) takes its toll.

Stephen Koukoulas questions the accuracy of data produced in the ANZ jobs ads series, which showed on Monday that unemployment was expected to worsen, with the amount of jobs advertised online and in newspapers falling for the eighth consecutive month in November.

The ASX200 is off its lows for the day. It touched a loss of 0.34 per cent at about midday but has since found reasons to be more cheerful, clawing back about 0.2 per cent to be 0.14 per cent down for the day. 

Network Ten related, sort of. Some more lifestyle advice from Gina Rinehart, courtesy of CBD columnist Ben Butler:

Live within your budget and stop taking overseas holidays, urges Her Roy Hill Highness, Gina Rinehart, in her latest column for Australian Resources and Investment magazine.

Rinehart also warns of the dangers of excessive household and government debt.Her plea to earn before spending came as the Ten Network, where she's a director and major shareholder, went to the market to ask its long-suffering shareholders for an extra $230 million, much of which will be used to pay off a $210 million debt that falls due in March.

Read the full article here.

Here's a chart showing the unemployment rate, both trend and seasonally adjusted, since around this time last year:

Back to Ten for a moment, and here’s a fresh Liz Knight analysis. A link to the full text will follow shortly.

A very astute professional fund management quipped this week that investing in a company whose shareholders include a bunch of billionaires is a recipe for disaster because all of them can afford to lose money.

Yesterday the directors - who no longer include Packer who retains his holding but has resigned from the board -had to stand before the other shareholders and explain what went wrong ...

The Ten board was damning with faint praise for its new chief executive, James Warburton, in what was a fairly frank assessment of the network’s performance over the past year.

Execution was a problem, ratings are abysmal, the advertising market is soft for all the networks but worse for Ten and promised cost cutting program has been limp.

But it left lingering questions about where the finger should be pointing the blame for the dismal and worsening ratings and revenue performance - particularly since August.

The doomsters got it wrong on jobs. So says CBA's Savanth Sebastian:

More jobs created, more hours worked and fewer people unemployed. Overall the Australian economy is holding up well despite a very uncertain global environment. While there are a number of high profile company failures and job losses, beneath the surface small and medium-sized business are still keen to put on more staff. The anecdotal evidence is that it is hard to attract and retain staff and today’s jobs figures back up these observations.

Matthew Johnon, interest rate strategist at UBS, said the jobs numbers were ‘‘surprising’’. He said:

Headlines are much better than expected. The details in the data are probably not as big a change as headlines suggest but it makes it more difficult to see the RBA moving rates in February. The RBA will need to see higher unemployment rate and very low inflation to cut again in February. This labour market report puts the higher unemployment rate a little further away.

I still think global markets are pretty soft and inflation low and see a rate cut in February though it is a little less likely than yesterday.

Click here for the full story on today's unemployment numbers.

Some context on the jobs data:

Unemployment rate (per cent)

  • October 5.4 
  • September 5.3
  • August 5.3
  • July 5.2 

New jobs added

  • October +10,700
  • September +14,500
  • August -8800 

Reader 'willow, syd' asks:

interesting job numbers ... is that the end of the rate cut cycle?

Anyone care to offer their thoughts on that one? 

RBC strategist Michael Turner on the jobs result:

"Unemployment at 5.2 per cent is a big shift from the rise that we've been seeing over the past few months. But we see the data as still broadly pretty soft across the economy so we still see a case for lower rates."

This brings to mind that Paul Keating quote about a beautiful set of numbers, albeit in a different context:

The dollar certainly welcomed the jobs news - it shot from $US1.0442 prior to the annoucement to $US1.0479, close to a two-month peak of $1.0491 hit last week. Currency traders obviously think this lessens the likelihood of another rate cut. 

Jobs. Full-time employment fell by 4200 to 8.132 million in November and part-time employment was up 18,100 to 3.414 million, taking the net gain for the month to 13,900 jobs, the Australian Bureau of Statistics says.

Jobs. Expectations were for unemployment to rise to 5.5 per cent in November from 5.4 per cent in October. This result is a surprise. The participation rate was steady at 65.1 per cent.

BREAKING Unemployment down to 5.2 per cent in November, bucking expectations. Dollar jumps.

Ten board member Gina Rinehart was meant to have been at the AGM - there was a nameplate put out for her on the podium - but she has yet to show up.

She's caught up in traffic.

And talking of Ten and its billionaire investors, here's a tweet from Stephen Mayne:

A little more than an hour into the day and the market, after opening up a bit, has fallen back.

In recent trade, the All Ordinaries index is 6.2 points lower, or 0.1 per cent, to 4521.8, while the benchmark S&P/ASX200 is 5.9 points higher, or 0.1 per cent, to 4514.5. 

RBS Morgans Brisbane private client adviser Bruce Smith said that at first the market had followed the lead of Wall Street which closed higher.

‘‘We opened slightly higher on the back of a good night on Wall Street,’’ Mr Smith said.

‘‘It’s also been driven by the miners who have opened strongly.’’

American giant Chevron has revealed a $9 billion cost blow-out on its massive Gorgon gas project in Western Australia, BusinessDay’s Peter Ker writes, ending years of silence in regard to constant speculation about cost and schedule over-runs.

The size of the blowout, which many feared would be even larger, means the project now has a total cost of $52 billion, making it almost certainly the most expensive resources project ever attempted in Australia.

Continuing the themes that have dogged Australia’s resources sector in recent times, Chevron named the cost of Australian labour, and local productivity rates as some of the main factors in the blow-out.

Chevron vice-chairman George Kirkland said the project remained financially attractive despite the blowout.
‘‘While investment requirements have grown, oil prices, which directly impact the overall revenue stream, have increased by approximately 80 per cent over the same time period,’’ he said.

Read more here

More still on Ten and the capital raising:

RBS Morgans Brisbane private client adviser Bruce Smith said that while the big billionaires might be happy to dig deep once again, other investors would not welcome another share issue.

‘‘I think the market will react quite negatively to that given that they raised money not that long ago, and the general fundamentals of Network Ten appear to be not all that solid with their viewer content diminishing at a rapid rate,’’ he said.

‘‘I would think that the market will take a dim view of it and they will have difficulty getting much support from your average retail punter.’’

CBD's Ben Butler has written on Gina Rinehart and Network 10:

Live within your budget and stop taking overseas holidays, urges Her Roy Hill Highness, Gina Rinehart, in her latest column for Australian Resources and Investment magazine.

Rinehart also warns of the dangers of excessive household and government debt.

Her plea to earn before spending came as the Ten Network, where she’s a director and major shareholder, went to the market to ask its long-suffering shareholders for an extra $230 million, much of which will be used to pay off a $210 million debt that falls due in March.

Rinehart is concerned that advertising is down, ‘‘and professional jobs are being terminated Australia-wide’’.
Perhaps a reference to the 100-odd jobs, including those of newsreader Helen Kapalos, lost from Ten?

Lachlan Murdoch is at the Ten AGM in Sydney this morning. It wasn't clear if he would attend following the death yesterday of Dame Elisabeth Murdoch, his grandmother. 

All in all, a big week for the Murdoch clan. Restructure and the abandonment of The Daily announced on Monday. Matriarch dies on Wednesday. Lachlan faces Network Ten shareholders on Thursday. Fair to say he's probably looking forward to the weekend.

Something for BHP watchers. In a note this morning the big miner said:

The miner today announced plans to transfer responsibility for its Olympic Dam operation to the Base Metals Customer Sector Group.

The announcement follows decisions in August this year to investigate an alternative, less capital-intensive design of the Olympic Dam open-pit expansion and to sell the Yeelirrie uranium asset in Western Australia to Cameco Corporation.

The incorporation into Base Metals will consolidate the management of the next phase of studies for the open pit expansion, align with the Company’s cost control strategy in the current economic environment and position Olympic Dam to support BHP Billiton’s long term copper strategy.

Boral is to cut 90 jobs with the decision to switch to importing cement clinker at its Waurn Ponds plant near Geelong, west of Melbourne. 

The building products group said the switch follows a review of operations, aimed at cutting unprofitable operations.

The strong Australian dollar and low shipping costs, along with high energy costs, had made it cheaper to switch to imports, rather than produce cement clinker locally, it said.

It also cited the downturn in building sector activity for the decision.Clinker production at Waurn Ponds will be suspended from April, 2013, it said, with the prospect of a write-off against the $100 million book value of the asset.

And if you’re wondering what cement clinker is, here’s the Wikipedia definition

In the manufacture of Portland cement, clinker is lumps or nodules, usually 3–25 mm in diameter, produced by sintering limestone and alumino-silicate (clay) during the cement kiln stage. Clinker is ground (usually with the addition of a little gypsum, that is, calcium sulfate dihydrate) to become Portland cement.

The ASX200 just took a dive south, losing almost 15 points in a big hurry. That's pushed the benchmark index into negative territory for the first time today - now down 0.2 per cent.  

We've got official jobs data for November in an hour and expectations among many analysts are weighted to the downside:

The miners are catching people's attention this morning:

Here's how the other sub indices on the ASX200 are performing early on:

  • Industrials: +0.16%
  • Financials: +0.06%
  • Energy: +0.06%
  • Health: -0.51%
  • Consumer disc.: -0.4%
  • Info tech: -0.36%
  • Utilities: -0.23% 

Materials stocks are leading the market higher - up 0.45 per cent - with the big miners among the best performed stocks on the ASX200 in opening trade:

  • BHP is 1.17% higher to $34.69
  • Rio is 1.58% higher to $60.29
  • Fortescue is 0.27% higher to $3.76

Local stocks are higher, but only just

In early trade, the All Ordinaries index is 5.6 points higher, or 0.1 per cent, to 4533.6, while the benchmark S&P/ASX200 is 6.5 points higher, or 0.1 per cent, to 4526.9.

Turning our minds to markets, Ten remains in a trading halt and could stay there until Monday. 

And here's some happy news for CBA shareholders. Its equities are up 24 per cent since the beginning of the year, pushing the stock to record highs - the bank's market capitalisation is now less than 2 per cent away from $100 billion.

That's an impressive rebound. CBA shares hit $61.33 on Tuesday after trading at $47.50 in early March. 

Overnight, Citigroup's new CEO announced the bank would shed 11,000 jobs

Michael Corbat, who took the lead of the mega-bank on October 16, said it would slice more than 11,000 jobs, mostly in its global consumer banking division, and take a $US1 billion charge in the 2012 fourth quarter and another $US100 million in the first half of next year.

What does that mean for the Australian outpost? BusinessDay's Glenda Kwek checked with a Citi spokesman who said local operations and staffing would undergo minor changes, but he refused to put a number on job losses.

"We will continue to offer the full range of products and services and our commitment to the market in all products and areas remains the same," Citi spokesman Steven Blaney said.

Mr Blaney would not detail local job losses but said that Citi "constantly review [its] business model to ensure it meets with market conditions".

"If that requires some minor changes in particularly areas, that will be done. But the business has been consistently reviewing its operations to make sure that it is running a very efficient operation in this market."

Are you a Citigroup employee in Australia who just lost your job? If so, drop us a line.

Ten is in the news again this morning, and not just because of today's AGM. The ailing broadcaster has implemented more cost cutting and launched a $230 million offer of new shares in response to its recent poor performance.

Chairman Lachlan Murdoch, whose grandmother died late yesterday, said the new initiatives were being taken to "secure and build the business".

"Poor execution of our spring programming schedule, compounded by a weak advertising market, has negatively impacted our results," he said. Previous cost cutting in Ten's newsroom has resulted in 100 job losses.

Here’s a snapshot of the company’s woes and how they affect its billionaire owners, and here’s the news from this morning. Fair to say its going to be a difficult AGM for management. 

The major piece of economics data for today is the November jobs numbers from the ABS. The data is expected to show unemployment rose to 5.5 per cent during the month, up from 5.4 per cent in October. A Bloomberg survey expects the economy added no new jobs over the month, but some forecasters are predicting the economy shed jobs last month.

We’ll have full coverage here as soon as the arrives.

For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key markets numbers:

  • The SPI was 6 points higher at 4531
  • The $A was trading at $US1.0466
  • In late trade, the S&P500 added 0.16% to 1409.28
  • In Europe, the FTSE100 added 0.39% to 5892.08
  • China iron ore added 80 US cents to $US117.90 a metric tonne
  • Gold lost 0.1% to $US1693.80 an ounce
  • WTI crude oil added 30 US cents at $US88.20 a barrel
  • RJ/CRB commodities index lost 1% to 297.23

Good morning everyone.

Welcome to the Markets Live blog for Thursday.

Contributors: Thomas Hunter, Jens Meyer, Richard Hughes, Max Mason

This blog is not intended as investment advice

BusinessDay with agencies

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