Markets Live has once again finished for the week, thanks for tuning in, we'll see you next week starting Tuesday at 9.30am. Have a fantastic long weekend.
As mentioned previously, the financial sector was the biggest lifter on the market today, with all the big four banks posting gains.
- BHP: -0.2%
- Rio: -0.3%
- ANZ: +0.3%
- CBA: +0.6%
- NAB: +0.6%
- Westpac: +1.7%
- Fortescue: -1.5%
- Woolworths: +1.4%
- Wesfarmers: -0.2%
- Telstra: +0.4%
Well it looks like Linc Energy's dream run has come to an end, after posting gains or 12.7 per cent and 32.9 per cent in the two previous sessions, the energy company has finished down 13.1 per cent today, despite being up by 12 per cent earlier in the day.
Looking back, here are the best and worst performers from this generally positive week on the ASX:
Apple expanded internal audits of suppliers and identified a Chinese labor agent hiring underage workers as the world’s most-valuable company moves to boost conditions for people making iPhones and iPads.
One manufacturer employed 74 children younger than 16, and 158 facilities lacked procedures or didn’t perform adequate audits of their own suppliers, according to the annual Supplier Responsibility Report released today by Apple.
“Underage labor is a subject no company wants to be associated with, so as a result I don’t believe it gets the attention it deserves, and as a result it doesn’t get fixed like it should,” Jeff Williams, the company’s senior vice president of operations, said in an interview.
Apple, which joined the Fair Labor Association last year after being criticized for working conditions at suppliers such as Foxconn Technology Group, doubled the number of employees trained in worker rights, laws and safety.
Among the sectors, financials pushed up 0.8 per cent, consumer discretionary jumped 0.7 per cent, while consumer staples and telecommunications both added 0.5 per cent.
Materials and gold miners bucked the trend, down 0.4 per cent and 1.6 per cent respectively.
The sharemarket has closed at a 21-month high, buoyed by strong gains in the financial sector. The benchmark S&P/ASX200 jumped 25 points, or 0.5 per cent, to 4835.2, while the broader All Ords added 25.1 points, or 0.5 per cent, to 4858.9.
The Australian sharemarket has operated akin to a well-oiled machine throughout January, says CMC Markets trader Tim Waterer:
- That trend was evidenced again today with the ASX200 pressing higher courtesy of another positive offshore lead.
- International manufacturing data has propped up investor enthusiasm which is serving to drive the local bourse toward the 4850 level.
- The impressive thing about our market performance this week is that despite the solid data from China, we have not been reliant on significant moves by the mining giants (BHP and Rio) to propel our market well north. Instead it has been a more well-rounded performance by the local market.
- US new home sales data will be eyed closely tonight and a result approaching 390k here should satisfy traders enough to continue the buying theme.
The Australian dollar is nursing losses against the US dollar and the euro as investors trim long positions, but has regained enough ground on the yen to put it on track for a 5 per cent gain in January.
The dollar is buying $US1.0446, near a three-week low of $US1.0438 hit earlier and down from above $US1.05 yesterday, and 78.19 euro cents, from just below 79 cents.
Joseph Capurso, a strategist at Commonwealth Bank expected euro strength to continue well into next week, having already gained more than four cents in two weeks.
"There is a lot happening next week in America (FOMC meeting and jobs data) and if there is any downside surprises, you could see the euro rise even more," he said.
The dollar is holding hefty gains versus a broadly-weaker yen with the Aussie steady at 94.52 yen, on track to post nearly 5 per cent in gain this month. It scaled last week its highest since 2008 at 95.02.
Some more on the Penrice chairman's call for the 'two-strikes' rule to be axed, tweeted by shareholder activist Stephen Mayne (@MayneReport):
Don't listen to returned Penrice Soda chair's bleatings about 2 strikes. It forced him to fully engage with investors & take hard decisions.
The Rudd-Gillard "two strikes" corporate voting regime will go down as one of their best reforms. It has unwound exec pay excesses.
The directors of Penrice Soda have called for the ‘‘two-strikes’’ rule to be revoked after avoiding going down in history as the first board dumped under the contentious rule.
Chairman David Trebeck and his deputy Andrew Fletcher were both re-elected after receiving 78 per cent of a historic board re-election vote at an extraordinary general meeting convened in Adelaide today.
Both men had already created a bit of unwanted Australian corporate history, with the small Adelaide-based chemicals manufacturer the first to have faced a board spill after shareholders rejected the company’s remuneration report two years in a row.
‘‘Ideally, the two-strikes policy should be terminated,’’ Mr Trebeck said. ‘‘Shareholders who are sufficiently disgruntled with the performance of the board can always muster the numbers to requisition an EGM and move against some or all directors – as happened with Penrice in 2009.’’
The ‘‘two-strikes’’ rule was designed to deliver shareholders a greater say in the executive remuneration policies of large corporates, particularly as pay packets bulged often at odds with diminishing shareholder returns.
China created 12.7 million new jobs in urban areas in 2012, the Ministry of Human Resources and Social Security, said on Friday.
The increase from 2011's 12.2 million new urban jobs left China's urban jobless rate steady at 4.1 per cent at the end of 2012 - the 10th straight quarter officials say it has been at that level.
The urban jobless rate is China's only official unemployment indicator, but analysts say it grossly underestimates the true level of unemployment because it excludes about 250 million migrant workers from its surveys.
The National Bureau of Statistics said last week that China had created 11.9 million jobs in 2012 in urban areas. The differing numbers highlight the discrepancies in China's employment data which feed analysts' doubts.
The yen is headed for a record stretch of weekly losses against the US dollar as data showing a decline in Japanese consumer prices added to the case for further monetary stimulus from the central bank.
The Japanese currency touched a 2 1/2-year low before Bank of Japan Governor Masaaki Shirakawa speaks today. His policy board announced open-ended easing and a 2 per cent inflation target this week. Deputy Economy Minister Yasutoshi Nishimura said yesterday the currency’s decline isn’t over and a level of 100 versus the US dollar wouldn’t be a concern.
The US dollar is currently trading at 90.5 yen, while the Australian dollar is fetching 94.5 yen.
With just under an hour of trade left on the ASX, here's how the rest of the region is performing:
- Japan(Nikkei): +2.2%
- Shanghai: -0.3%
- Taiwan: -0.6%
- South Korea: -1.3%
- Singapore: +0.2%
- New Zealand: +0.2%
And a bit more on Apple, Motley Fool's Scott Phillips writes only the brave would bet against Apple.
While growth might have underwhelmed investors, Apple still managed to ship 29 per cent more iPhones and 48 per cent more iPads than the same quarter in the previous year. I don't know any CEO who'd turn down the opportunity to deliver that sort of growth.
In addition, Apple chief executive Tim Cook cited shortages of both iPhone 4 and iPhone 5 during the quarter, as well as its iMac laptops, which constrained sales growth.
And while Apple may or may not regain its previously stratospheric growth levels, the company's shares aren't priced for that requirement. Those of us who have been investing for a while can remember when technology companies were trading at 100 times earnings (or even 100 times sales back at the height of the dot.com boom).
Here's an interesting graphic tracking Apple and Samung's stock price performance over the last year. As you can see it's been a rough 12 months for Apple, could their time at the top be over?
More on average hours worked, BusinessDay's Glenda Kwek has pulled together some OECD data on global averages.
Data collected by the Organisation for Economic Co-operation and Development (OECD) for 2011 showed that Germans worked an average of 27.2 hours a week, while Americans worked 34.4 hours per week.
In Greece, where unemployment is soaring, the workforce put in an average of 39.1 workers a week. The OECD average is 34.2 hours worked by employees per week for 2011.
Here's a link to the OECD data.
This week, the spotlight has been firmly on Japan, now BusinessDay's Michael Pascoe is weighing in on the matter.
Filial and grand-filial loyalties run deep in Japan. It's just one of the reasons there are concerns about Japan's jump to the right with Shinzo Abe's election. He has the numbers and perhaps the experience to attempt more in his second term of government.
The politics of chopstick rattling over a few isolated rocks in the East China Sea are another complication in considering the Abe government's big stimulus gamble, highlighted this week by the Bank of Japan's announcement of open-ended money printing and moving from an inflation goal of 1 per cent to an inflation target of 2 per cent.
Along with Abe's pledge of increased fiscal stimulus – yet more infrastructure spending that inevitably comes with suspicions about more bridges to nowhere – a massive amount of money is being thrown at trying to blow Japan out of a couple of decades in the doldrums.
Clients of financial advisers will find it easier to determine if they are getting value for money under new guidelines issued by the corporate watchdog.
Advisers will be required to issue a fee disclosure statement to clients from From July 1, 2013, as part of new reforms being introduced across the financial services industry.
The disclosure statements will include information about the fees being paid by a client, the services that client has received, and the services that client was entitled to receive, the Australian Securities and Investments Commission (ASIC) said today.
All Nippon Airways, which has the biggest fleet of Boeing 787 Dreamliner jets, today cancelled another 78 flights scheduled for January 29-31 - bringing total cancellations at the Japanese carrier since one of the planes made an emergency landing on January 16 to 459.
All Dreamliners have been grounded since January 17 due to unexplained battery problems.
ANA, which has 17 of the 50 Dreamliners that Boeing has delivered to airlines to date, said the cancellations have affected more than 58,000 passengers, adding it would announce on Saturday which flights it will not run from February 1.
Kia Motors has set aside provisions of about 200 billion Korean won to compensate drivers in North America for its overstated fuel-economy claims, said Joo Woo-jeong, a director at the automaker said today.
Hyundai Motor and its affiliate Kia Motors conceded early November that they overstated the fuel economy on more than 1 million recently sold vehicles in the United States and Canada, and agreed to compensate owners for the additional fuel costs.
Hyundai said yesterday it has earmarked 240 billion won to cover the compensation costs.
The directors of chemicals maker Penrice Soda have survived a two strikes board spill vote with strong support for them to remain.
At an extraordinary general meeting (EGM) in Adelaide on Friday, Penrice chairman David Trebeck received 77.8 per cent support and deputy chairman Andrew Fletcher had 78.44 per cent of shares voted in his favour.
Three challengers proposed by dissident shareholder London City Equities (LCE) were comprehensively defeated, with each receiving about 25 per cent support.
Penrice Soda is the first company to fall foul of Australia’s new ‘‘two strikes’’ rule under which a board must be spilled and face re-election if more than 25 per cent of shareholders reject the company’s remuneration report two years in a row.
The shine is starting to come off Linc shares. After two days of rampant gains and a +10% gain early today, the selling has begun. It's shares are now off almost 5 per cent for the day, down to $2.54 after hitting $2.99.
OptionsXpress market analyst Ben Le Brun said general market confidence was being driven by encouraging Chinese manufacturing data, continued signs of economic recovery in the US, and some positive European manufacturing figures.
‘‘It’s just a lack of any bad news,’’ Mr Le Brun said.
‘‘Throw in there the potential for some further (interest) rate cuts this year and the fact that our market has underperformed global indices for the last two or three years, maybe we’re on the cusp of a new dawn for the ASX 200.
‘‘But I still suspect we’re going to need to see further rate cuts and a softening of the Aussie dollar before that really materialises.’’
Here's a look at how the sectors are doing on the ASX today:
- Health: +1.5%
- Financials: +0.6%
- Telecommunications: +0.7%
- Consumer discretionary: +0.5%
- Materials: -0.2%
- Gold: -1.3%
Samsung Electronics turned cautious on spending for the first time since the global financial crisis, keeping its annual investment plan unchanged at 2012 levels, as demand for computer chips wanes and the smartphone market slows.
Samsung, one of the industry's most aggressive spenders, has ramped up capital expenditure every year since 2004 except 2009 to meet soaring demand for its array of consumer electronics and mobile devices. It sold a record 700,000 smartphones a day in the last quarter.
But with the personal computer market shrinking for the first time in 11 years, the global smartphone market growing more slowly, and Apple Inc moving to buy fewer of Samsung's microprocessors used in the iPhone and iPad, the South Korean IT giant is now forced to keep a lid on spending.
Data from the company shows Samsung had started to slow down planned investment in the last quarter.
Samsung said it spent 4.4 trillion won in October-December, pushing its 2012 investment to a record 23 trillion won. But the company said in October that it was on course to spend 25 trillion won in 2012.
Analysts had expected a 4-20 percent cut in Samsung's 2013 capital spending.
Australians are working at an average of 32 hours a week, the lowest in over 30 years, detailed labour force data released by the Bureau of Statistics yesterday show.
But what looks like a reinforcement of a stereotype that Australians are living the good life rather than working is instead a reflection of a longer trend away from full-time towards part-time work, more flexible working hours, and the increasing casualisation of the work force, economists say.
“We know that over the last 12 to 18 months, conditions have been very tough on the economy and activity has been sluggish, especially for the retail sector,” Commonwealth Securities economist Savanth Sebastian, who pulled the figures together, said.
“As a result, while businesses are planning for a future turnaround and holding on to key staff, they are trying to maintain a lower cost base and that means cutting hours back, even for some of those full-time workers.”
Here at Markets Live, we like to think we have a sense of humour.
We came along this in our travels, it appears we're not the only ones watching Linc Energy.
Morgan Stanley chief executive James Gorman received lower compensation for 2012 after a difficult year for the bank in which profits declined.
Gorman received $US6 million in total compensation for 2012, including $US800,000 in salary, $US2.6 million in deferred cash and $US2.6 million in stock options, a person familiar with the matter said on Thursday. He did not receive a cash bonus.
Gorman made $US8.56 million for 2011, when counting salary, deferred cash and restricted stock grants.
Leighton Holdings subsidiary Thiess has won a $175 million maintenance contract with Sydney Water.
Thiess will provide mechanical and electrical services for water and wastewater treatment plants and management services for more than 2,000 sites and buildings across the greater Sydney region under the five-year contract.
Thiess works in the construction, mining and services sectors, and is wholly owned by Leighton.
It’s two years to the day since Coles declared war on Woolworths slashing its price of milk to just $1, writes BusinessDay's Colin Kruger.
But with shares in both supermarket giants at more than five-year highs, how do these archrivals maintain growth in a stagnant market?
The banks are having a good day - up about 0.4 per cent - which continues a solid start to the year for NAB. As Arab Bank's David Scutt notes:
With Linc Energy sitting on an oil reserve the size of the Atlantic Ocean (or something like that), the price of oil is looking at a week of gains on speculation that stronger economic growth will boost demand, says Bloomberg.
Eighteen of 36 analysts, or 50 per cent, forecast crude will increase through February 1. Eleven respondents, or 31 per cent, predicted a drop. Seven said there would be little change. Last week, 39 per cent of analysts projected a gain.
"The economy is looking better in the US and in Asia," said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. "All the economic data is pointing higher oil prices. Stronger growth is positive for crude oil prices next week."
A little snippet on what's driving the Resmed gains. The sleep disorder specialist has posted a 24 per cent increase in its second quarter net income, ahead of market expectations. Its shares are up 4.44 per cent now to $4.47, but gained as much as 7.48 per cent in early trade.
Here's a chart showing Specialty Fashion Group's share performance back to June last year, which puts this morning's gains into perspective:
The Financial Times has pulled together a neat primer on the Linc Energy story from this week. It's a good read. Here's a taste:
Linc, or course, hasn’t found anything like $20 trillion oil. What it has found, according to one estimate from Colorado-based consultants Gustavson, is up to 223bn of unrisked prospective resources. (Another firm puts the figure at a more (cough) conservative 103bn barrels).
And as anyone who knows anything about oil exploration will tell you that’s a long, long, long way from a $20 trillion find.
Some more detail on the Specialty Fashion Group announcement, which has seen shares skyrocket. Today's guidance represents a significant increase from the company’s $6.2 million profit posted in the corresponding period last year.
‘‘Our continued focus on our strategies to improve sales, margins and costs of doing business has meant we have delivered a significant turnaround in trading performance,’’ chief executive Gary Perlstein said in a statement.
‘‘The economic uncertainties and structural changes affecting retail have not gone away, but we have pulled all the levers within our control to achieve sustainable improvements and our results reflect this.’’
Sales in the group’s 892 stores in the six months to December rose two per cent on the prior corresponding period, and revenue lifted 1.3 per cent to $311.2 million.
The company said a major contributor to the profit growth was changes made in the company’s supply chain, which delivered reduced product cost prices and freight costs, Mr Perlstein said. Falling cotton prices had also reduced the cost of fabrics, he said.
In case you were wondering:
Specialty Fashion Group +43% - yep, its a bull market #ausbiz— Peter Esho (@PeterEsho) January 24, 2013
To the early sliders on the ASX200. They're mostly in the energy and resources space:
- Resolute Mining: -4.35%
- Sandfire Resources: -3.49%
- Kingsgate Consolidated: -3.42%
- Mirabela Nickel: -3.16%
- Silver Lake Resources: -3.07%
After jumping to a gain of 12 per cent in early, gravity has finally caught up with Linc shares. Perhaps investors finally read this story. It's stocks has moderated that early rise to just 2 per cent, with the stock now trading at $2.79, down from $2.99 in early trade.
Shares in Australia's Karoon Gas Australia have jumped 16 per cent after it said it had found oil at its Kangaroo-1 well off the coast of Brazil. Karoon shares touched a high of $6.24 and last traded up 15 percent at A$6.21.
To the early gainers on the ASX200:
- Karoon Gas: +15.03%
- Resmed: +6.54%
- Pacific Brands: +4.32%
- Southern Cross Media: +3.51%
- Downer EDI: +3.24%
- Goodman Fielder: +2.66%
The health sub index of the ASX200 has leapt out of the blocks in early trade - up 1.23 per cent. Resmed leads the gains among health stocks - up 6.07 per cent. Here's how the other sectors of the benchmark index are performing in early trade:
- Telecoms: +0.87%
- Industrials: +0.57%
- Financials: +0.51%
- Consumer disc.: +0.43%
- Energy: +0.35%
- Materials: -0.15
The ASX has opened a third of a per cent higher. The benchmark S&P/ASX200 index is up 18.1 points, or 0.38 per cent, at 4,828.3, while the broader All Ordinaries index is up 17.3 points, or 0.36 per cent, at 4,851.1.
On the ASX 24, the March share price index futures contract was up 14 points at 4,795, with 9,697 contracts traded.
Atlas Iron is 1.6 per cent higher after maintaining its production forecasts after a record second quarter. The emerging Pilbara miner shipped 1.75 million tonnes of iron ore in the three months to December 31, up 10 per cent from the preceding three months.
Shares in Specialty Fashion have soard 30 per cent in early trade after the fashion retailer announced its first-half profit would nearly triple due to cost savings and improved sales.
The owner of the Katies and Millers fashion stores expects its net profit for the six months to December 31 to be in the range of $17 million to $18 million, it said on Friday.
Linc Energy shares are up another 9.4 per cent early on, following gains of 9 per cent and 24 per cent over the last two days. Read more here on what's driving the gains.
Early take - shares up without all companies trading. ASX200 showing an early gain of 0.2 per cent.
And a note on the ASX as it opens up with a positive day in prospect:
A final note on Apple before the local market opens:
The mk is a hard beast to please. Apple shares -12.3% due to lower than expected revenue. Still made US$145m profit/day over quarter! ^SD— CommSec (@CommSec) January 24, 2013
A couple of local corporate stories that could see some share price moves:
- Womenswear retailer Specialty Fashion Group expects its first-half profit to nearly triple due to cost savings and improved sales.
- Iron ore miner Atlas Iron has maintained its production forecasts after a record second quarter.
Ric Spooner, chief market analyst at CMC Markets, says the ASX is likely to maintain its recent firm tone. In a note this morning, he writes:
The Australian market is likely to maintain a firm tone today. Apple’s disappointing sales results were the main negative factor for US indices overnight but this is unlikely to worry local investors too much. Broader economic statistics released over the last 24 hours, including China’s PMI and US jobless claims did nothing to disturb the consensus view of an improving, although moderate economic growth outlook.
While investors are likely to continue chasing yield, we may see some book squaring from short term traders later in the day. Traders are often more inclined to square positions prior to a long weekend rather than stay in the market for two US and European trading sessions before the local market re-opens.
Some analyst rating changes for today. The retailers could be in focus after Nomura reviewed some of the big players in the sector:
- Aurora Oil & Gas rated new buy at GMP
- Newcrest raised to outperform at RBC Capital
- BC Iron cut to sector perform at RBC Capital
- Woolworths raised to buy at Nomura
- Wesfarmers cut to neutral at Nomura
- Premier Investments raised to neutral at Nomura
- Myer raised to buy at Nomura
- JB Hi-Fi raised to neutral at Nomura
Australian bond prices have followed other markets down at the end of the week. Nomura rates strategist Martin Whetton said it was global market movements which weakened bond prices in Australia overnight.‘‘Our bond prices fell in-line with other markets,’’ he said.
‘‘US Treasuries are off, so we’re off. There was no local activity or data which explains the move.’’ Mr Whetton said he expected Friday to be a quiet day, with little to influence the market.
At 8.30am the March 10-year bond futures contract was trading at 96.715 (implying a yield of 3.285 per cent),down from Thursday’s close of 96.750 (3.250 per cent). The March three-year bond futures contract was at 97.290 (implying a yield of 2.710 per cent), down from 97.330 (2.670 per cent).
BK Asset Management’s Kathy Lien helps to explain why US investors did not get carried away by the strong jobs report overnight:
Given the current state of the global economy, stocks don't deserve their lofty valuations. The US economy is improving but not there is still a tremendous amount of underlying weakness that will keep the Federal Reserve dovish next week. So skepticism is warranted even when it comes to today's blockbuster jobless claims report.
US jobless claims dropped to the lowest level in 5 years but the impact on the dollar was limited. While the data shows that the economy and labor market are improving, the correlation between jobless claims and non-farm payrolls have weakened over the past few years. Therefore investors are not convinced that fewer firings will translate into more hiring.
US stocks were generally positive, except for Apple, which lost 12.4 per cent to $US450.50 a day after it posted revenue that missed Wall Street's forecast as iPhone sales were poorer than expected. The sharp drop wiped out nearly $US60 billion in Apple's market capitalisation to less than $US423 billion, leaving the company vulnerable to losing its status as the most valuable US company to second-place ExxonMobil, at $US416.5 billion.
It also helped to push the Nasdaq to a 0.75 per cent loss for the session, while the S&P was flat and the Dow was up.
In offshore news overnight, European stocks hit their 2013 peak as signs of growth in economic powerhouse Germany strengthened expectations that the region's sovereign debt crisis may be easing.
Mirabaud Securities' European equity sales executive Rupert Baker said investors were prepared to overlook lingering signs of economic weakness, such as a downturn in France, and were favouring German equities over other regional European markets.
Baker added that investors were increasingly moving away from bonds and cash - where returns have been hit since interest rates have been held at near record lows - to equities, which offer better returns via dividend payouts.
"People want to see the glass half-full," said Baker. "There's a lot of cash around not earning very much money, and some of that has to go into equities," he added.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key markets numbers:
- SPI futures are 16 points higher at 4797
- The $A is lower at $US1.0471
- In New York, the S&P500 was flat higher at 1494.82
- In Europe, the FTSE100 rose 1.09% to 6264.91
- China iron ore added 80 cents to $US148.60 a metric tonne
- Gold fell 1% to settle at $1,669.90 an ounce
- WTI crude oil fell 72 cents to settle at $95.95 a barrel
- Reuters/Jefferies CRB index lost 0.9% at 300.6