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Markets Live: Bad day for banks

Date

Patrick Commins, Jens Meyer

Shares fell as investors sold down banks ahead of a European Central Bank press conference tonight, while a plunging iron ore price hurt miners.

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That's all for today - thanks for following this blog.

Here's our evening wrap of today's session.

And here are the best and worst for the day.

 

 

Best and worst performers in the ASX 200 today.

Best and worst performers in the ASX 200 today.

It was a bad day for the banks as investors nervously await word on whether the European Central Bank has any new tricks up its sleeve to help resuscitate the regions economy. The ECB holds a press conference at 10:30pm AEST.

The ASX 200 was dragged down 25 points, or 0.4 per cent, to close at 5631.3, while the All Ords slumped 23 points to 5632.1.

Westpac fell 0.8 per cent, NAB 0.7 per cent, ANZ 0.5 per cent and CBA a more modest 0.2 per cent.

BHP dropped 0.5 per cent as the iron ore price reached its lowest since late 2009, although Fortescue managed to gain 1.3 per cent as it revealed record monthly iron ore export volumes in August.

Telstra started the day well but slumped to as 0.9 per cent fall.

The supermarket owners - Woolies and Wesfarmers - provided some support on a day when most stocks fell. The stocks were up 1 per cent and 0.3 per cent, respectively.

Forget about the $25 billion net debt rule for BHP Billiton’s capital management plans; focus has now shifted to the miner’s credit rating as the trigger for any large scale buyback or special dividends.

That’s the message from the miner’s post-results analyst roundtable, as told by Citi’s mining team.

“Firstly, the target of net debt falling below US$25b before capital management is initiated, has been effectively dropped, with the focus now on maintaining the strong Single A credit rating, which is a bit of a moving feast as credit agencies assess the impact of the NewCo demerger,” the analysts reported back to clients.

“Secondly, BHP will not pre-emptively distribute cash flow on capital [management] before it is generated. In our view, this makes cap [management] unlikely until mid-15, with the potential for ~US$5b to be distributed in FY16.” 

Citi said BHP would keep its dual-listed structure and progressive dividend policy, and ruled out any major M&A activity in the near term.

The analysts also said BHP confirmed its spin-off would carry about $US2 billion in liabilities, which would largely be leases and environmental liabilities rather than bank loans.

China’s state-run media are trying to do something the securities industry has failed to accomplish for much of the past three years: get the world’s biggest population to buy more stocks.

The official Xinhua News Agency published at least eight articles this week advocating equity investing after similar stories appeared in the People’s Daily newspaper and on state-run television last month, part of what Everbright Securities says is an increased government push to bolster the market. Authorities have also cut trading fees, made it cheaper to open new accounts and organized investor presentations by the biggest listed banks in the past two weeks.

Huang Shi got the message.

The media campaign “did influence my purchase,” Huang, a 26-year-old who works in the finance industry in the northeastern city of Harbin, said after shifting more than 20,000 yuan ($US3,257) into shares last week. “Also, our stock market had slumped for so long.”

Chinese policy makers are trying to rekindle interest in stocks after the Shanghai Composite Index lost $US460 billion of market value in the three years through May, the most worldwide, and investors liquidated almost 5 million trading accounts. A shift toward equities may help the government reduce speculative investing in the property market and curb risks tied to lightly regulated wealth-management products, whose assets rose to a record $US2.1 trillion in the first half.

“The government is indeed encouraging stock investment,” Zeng Xianzhao, an analyst at Everbright Securities, said by phone from Chongqing yesterday. “They need the market to be vibrant to encourage foreign funds into the country.”

Xinhua’s commentaries and news stories on equities included headlines such as “China needs a bull market with quality” and “How could the stock market be invigorated?”

Read more at Bloomberg.

The Chinese state-run media is trying to inspire more locals to invest in shares.

The Chinese state-run media is trying to inspire more locals to invest in shares. Photo: AP

Airlines are finding hidden value in air miles.

Frequent flyer programmes can provide a stable income stream for carriers in what is otherwise a cyclical and turbulent industry. Carriers can also sell stakes to outside investors in times of financial strain to raise cash. But the opportunity isn't equal for all.

Though earn-and-burn schemes started as a way for airlines to reward loyal customers, some have morphed into fully-fledged marketing businesses. Airlines are selling miles in bulk to hotels, credit card companies, and retailers, which use the credits to lure customers and mine valuable data on their spending habits. Members then use the miles to buy anything from business class upgrades to vouchers for iTunes.

Successful programmes make airlines more profitable by filling seats. Yet loyalty schemes can also generate good returns in their own right. Their main source of income comes from selling miles to commercial partners at a premium to their redemption value. Buyers pay for them upfront, while the airline only has to bear the cost when the miles are redeemed - if ever. That's good for working capital.

Most airlines still reveal little about the finances of their loyalty schemes. The extent to which carriers can expand into more lucrative areas appears to depend on the size of their domestic market. That makes loyalty schemes one of the few areas in which long-haul carriers in Europe and Asia may have an advantage over their deep-pocketed rivals from the tiny Gulf countries.

As investors wake up to the value of frequent-flyer programmes, airlines are responding. Germany's Lufthansa is giving its scheme a more independent profile. Virgin Australia last week sold a minority stake in its loyalty business to a private equity firm at a valuation which implies it is worth more than a third the airline's total enterprise value.

But giving up control is something that most airlines only consider when they are in deep distress. The programme operated by Qantas has twice as many members as Virgin Australia and is the airline's only profitable and growing business. No wonder that the Flying Kangaroo has decided to keep full ownership of the money-spinner for itself.

The UK could fall into a eurozone-style crisis if Scotland votes for independence later this month, Goldman Sachs warns.

In some of the most bleak predictions economists have made about independence, the Wall Street bank said a "Yes" vote on September 18, while looking unlikely, "could have severe consequences" for both the Scottish economy and the UK overall.

Goldman warned that public services would have to be cut if Scotland goes it alone, and that the country would face much higher borrowing costs. But the most worrying consequence, the bank predicted, would be that uncertainty over a currency union would cause a run on sterling and a capital flight with echoes of the eurozone crisis.

"One of the main lessons from the euro area crisis is that a reasonably high degree of fiscal and/or financial integration is necessary, as a means of effective risk sharing, for a monetary union to work," wrote Kevin Daly, senior economist at Goldman.

He predicted that, even if a currency union were agreed, the uncertainty in the months up to a resolution could mean a run on assets based in Scotland.

Goldman was backed up by an analysis of Scottish independence by economists at Berenberg Bank, who warned that the uncertainty would hamper corporate investment significantly.

"The biggest initial issue would be a spike in uncertainty. Firms could delay investment and consumers could shun big-ticket spending until the post-independence arrangements became clear. That could cause a serious setback for the Scottish economy and a material hit to the 'rump UK'," Berenberg's Rob Wood wrote.

Sterling fell by almost a cent against the US dollar to $US1.6470 on Tuesday after a YouGov poll showed support for a Scottish exit jumped by eight points in the last month to 47 per cent, compared with 53 per cent who said they planned to vote no. It’s currently trading flat at $US16461.

Uncertainty over a currency union between an independent Scotland and England could spark a run on sterling, Goldman says.

Uncertainty over a currency union between an independent Scotland and England could spark a run on sterling, Goldman says.

The data is two years old, but a new release by the ATO reveals that over the June 2012 financial year there were 1.9 million individual property investors, of whom around 1.3 million were negatively geared.

That implies around one in 10 Australians who lodged a tax return for that year reported to the tax office a rental loss from investment property.

Numbers crunched by the AFR ($) show that one in five taxpayers aged 50 and above report owning an investment property, and more than half of this group claimed a net loss.

But despite an explicit warning by Reserve Bank chief Glenn Stevens to baby boomers about the risks of investment property, it is actually taxpayers aged between 25 and 34 who claim the highest average net rental losses.

The average rental loss of the taxpayers aged between 25 and 34 is about $7200 in 2011-12, compared to the average loss for those aged 50-54 of about $5,800, according to the latest Tax Office statistics (see chart).

The level of average rental losses drops dramatically as taxpayers head towards and beyond retirement with 55- to 59-year-olds claiming an average rental loss of about $4200 and 60- to 64-year olds claiming an average loss of $217.

Those aged 65 and older report net rental gains from their properties, as the need to have losses to offset income disappears, with the average rising to more than $15,300 for those aged 75 and older.

The 25 to 34-year old cohort reported the largest rental losses over the 2012 financial year. Source: AFR.

The 25 to 34-year old cohort reported the largest rental losses over the 2012 financial year. Source: AFR.

Nickel stocks are stronger today after a senator in the Philippines introduced a bill to ban exports of unprocessed mineral ores.

The ban if passed into law would be similar to the one introduced earlier this year by Indonesia, which sparked a rally in nickel prices, and stocks of miners.

The Philippines last year accounted for 10 per cent of global mined nickel production, according to Citi.

"It is unclear if or when a ban would be imposed, and government approval is necessary before any legislation is implemented. No timeframe for its potential implementation has been given," Metal Bulletin's Fleur Ritzema writes in an analysis.

She adds it's worth noting that the Indonesian ban on unprocessed oar exports was widely dismissed before its implementation.

Nickel futures are flat at $US19,055 a metric tonne today but jumped nearly 3 per cent yesterday on fears of an export ban. Prices have surged nearly 40 per cent this year following the Indonesian export ban.

Stocks of Australian nickel miners are rallying today, with Western Areas up 2.6 per cent at $5.06, Panoramic Resources surging 6.2 per cent to 86 cents and Sirius Resources up 1.8 per cent at $3.99,

Nickel (red line) has been rallying this year, pulling up the shares of Australian miners Panoramic Resources (white), Sirius (green0 and Western Areas (purple).

Nickel (red line) has been rallying this year, pulling up the shares of Australian miners Panoramic Resources (white), Sirius (green0 and Western Areas (purple).

Westfield could be a takeover target, Intelligent Investor’s Graham Witcomb writes in the AFR:

Women’s fashion retailer Noni B was valued at more than $150 million seven years ago. Yet on Wednesday the founding Kindl family accepted an offer from investment manager Alceon for just $16 million.

When a family that’s been involved in an industry for decades sells out at that kind of price it’s not just because the company is going through a rough patch. It tells you the game has changed.

Retail has always been extremely competitive, but the internet, high Aussie dollar and increased competition mean bricks and mortar retailers that don’t adapt will fall like flies. Internet retailers offer a wider range, easy access to different brands at every price point that are more affordable when the Aussie dollar is strong and increasingly favourable return policies if the shoe doesn’t fit.

As Australia is one of the world’s richest countries, premium brands have also sprung up in landmark Australian shopping centres, all but crushing previously popular premium shopping districts like Oxford Street in Sydney, which has been sandwiched between Westfield City and Westfield Bondi Junction.

But Australia’s most prominent retail family may also be preparing to abandon ship. The Lowy family orchestrated a controversial restructure in June that spun off Westfield Group’s Australian shopping centres into a new company called Scentre so it could concentrate on the higher growth shopping centres abroad.

Freed from the slower growth Australasian assets and with foreign investors desperate to buy long-dated assets yielding anything above zero, Westfield Corp is being touted as a takeover candidate. Its smaller size would also make it easier to bite off for the usual suspects, including large foreign property groups Simon Property Group and Unibail-Rodamco.

Read more ($)

Almost $70 billion has flowed to ­investors in dividends throughout 2013-14, keeping equities in favour and underscoring Australia's love affair with companies which give back cash.

Dividends declared in the earnings season just ruled off take the haul in the year to June 30 to a record $67.8 billion, up ­from ­$61.3 billion in 2012-13 for ­members of the S&P/ASX 200, analysis by Credit Suisse shows.

Improved payouts from Telstra, Wesfarmers and Commonwealth Bank led the way, ensuring the S&P/ASX 200 Index held its gains through August in spite of only single-digit ­average earnings growth by Australian companies. Indeed, dividends rose more than earnings.

The RBA revealed on Wednesday the economy grew at 0.5 per cent in the second quarter, slowing from 1.1 per cent in the first quarter, making the strength of ­dividends all the more remarkable. Annual gross domestic product growth was a more comfortable 3.1 per cent.

"It is obvious that some of these ­massive dividend payments are coming at the expense of capex," Credit Suisse equity strategist Hasan Tevfik said.

"This is what investors want now, ­especially "selfies" [self-managed super funds] who are ­collecting more than $10 billion of ­dividends themselves. It is important to ­remember Australian companies are contributing a significant amount to our pension scheme."

Goldman Sachs equity strategist Matthew Ross highlighted investors' strong preference for dividends. "It's still a market that really likes defensive, high yield income streams," he said.

Read more.

Company payouts increased more than 10 per cent over the past financial year.

Company payouts increased more than 10 per cent over the past financial year. Photo: Glenn Hunt

The slump in iron ore prices has already forced some third-grade producers out of the market, Goldman says in a note, adding the low hanging fruit is already gone:

  • The displacement of marginal supply began in Indonesia with the strict enforcement of an export ban saw volumes plunge from 18Mt in 2013 to 0.2Mt in Q2 2014. We had previously flagged Indonesian iron ore as particularly vulnerable because of its low value per tonne and its sensitivity to low prices, even if regulation rather than competition was the main catalyst.
  • More recently, an aggregate 12Mtpa of Tier 3 seaborne capacity has been flagged for closure. The attrition at the top end of the seaborne cost curve has already started, and future surpluses will reach ever deeper into the cost curve and maintain the downward pressure on iron ore prices.


Goldman also notes that in the past two years, buyers flexed their muscle by destocking aggressively. Is a similar correction likely now?

  • The short term demand outlook is challenging, but we believe iron ore inventories held by mills are not high enough to support another major destocking cycle.
  • Instead, we expect the price discount of seaborne ore relative to domestic concentrate (currently US$20/t versus a 2013 average of US$4/t) to continue and port stockyards to remain as the destination for surplus ore.
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And here's how the rest of the region is doing today, ahead of a key ECB meeting later today:

  • Japan (Nikkei): -0.2%
  • Hong Kong: -0.3%
  • Shanghai: +0.1%
  • Taiwan: -0.5%
  • Korea: +0.2%
  • ASX200: -0.55%
  • Singapore: -0.3%
  • New Zealand: flat

‘‘We’re likely to have volatility in September,’’ Stuart Freeman, chief equity strategist at Wells Fargo Advisors said. ‘‘We’ve got a fundamental situation, an acceleration of growth that’s going to allow the market to move higher by the end of the year.’’

In Japan, the central bank has kept monetary policy steady and maintained its upbeat view of the economy, signalling confidence that it can meet its 2 per cent inflation target without additional monetary stimulus.

As widely expected, the BoJ voted unanimously to continue increasing base money, or cash and deposits at the central bank, at an annual pace of 60-70 trillion yen through purchases of government bonds and risky assets.

"Japan's economy continues to recover moderately as a trend," although the effects of the April sales tax hike can be observed, the BoJ said in a statement issued after the meeting, keeping its assessment unchanged from last month.

The BoJ has stood pat since launching an intense burst of stimulus in April last year, when it pledged to double base money via aggressive asset purchases to achieve its 2 per cent inflation target in roughly two years.

The Nikkei is trading slightly lower.

Meanwhile, China’s benchmark money-market rate fell the most in two months on signs the central bank will keep monetary policy loose enough to support an economic recovery.

The People’s Bank of China pumped 7 billion yuan into the financial system in the five days through yesterday, a fourth weekly injection.

China will allow listed property developers to sell bonds on the interbank market, Reuters reported yesterday, citing three unidentified people.

‘‘This new policy initiative suggests that Chinese authorities are keen to shift some financing demand to the capital market, with an intention to lower the overall cost of funds,’’ says Zhou Hao, a Shanghai-based economist at ANZ. ‘‘The market liquidity conditions are improving.’’

The seven-day repo rate, a gauge of funding availability between banks, dropped 16 basis points to 3.23 per cent this morning in Shanghai, according to a weighted average from the National Interbank Funding Centre. That was the biggest decline since July 3.

Relaxing the listed developer issuance rules will help boost property market sentiment and support risker assets, according to a report yesterday by Guotai Junan Securities. This is a further step in helping cash-strapped developers cope with a market downturn, Guotai Junan said in the report.

China's yuan has hit a nearly six-month high on the back of a long-running rally.

The People's Bank of China set the midpoint rate at 6.1666 per US dollar before the market opened, up 31 pips from the previous fix.

The spot market hit 6.1340 per US dollar, the highest level since early March, during morning trade. It closed at 6.1411 on Wednesday.

‘‘Risk appetite has improved on signs China’s economy is still holding up, while political risks in Ukraine are receding,’’ said Daniel Chan, a Hong Kong-based analyst at Brilliant & Bright Investment Consultancy. ‘‘The yuan is still on trajectory for a gradual, mild appreciation.’’

Australian houses are expensive, sure, but the local property market prices doesn't come near London.

That's the view of Charles Dallara, who is the chairman of the Americas region for Partners Group, which has more than €30 billion invested in private equity, debt and infrastructure funds all over the world including in Australia.

Dallara reckons rising housing prices in Australia require monitoring by regulators but the risks posed to the financial system are nowhere near as great as in the United Kingdom, which is approaching bubble territory.

Australian capital city housing markets had their strongest winter since before the lead up to the global financial crisis, with Sydney and Melbourne house prices lifting 5 per cent and 6.4 per cent respectively over the three months to the end of August, according to RP Data.

“The housing market is something that needs monitoring but it really doesn’t pose a major risk to the Australian economy from my perspective,” Mr Dallara told Fairfax Media from the Australian Private Equity and Venture Capital Association Alpha conference in Melbourne.

“In terms of the fundamental valuations relative to income, relative to payment capacity, in the UK I think the risks are much higher.”

Dr Dallara, who is a former managing director of J.P. Morgan & Co and a senior Treasury official in the George H.W. Bush and Ronald Reagan administrations, said Australian housing had not become a trophy market in the way London had.

“The housing market in Australia is relatively self-contained,” he said.

“In London, Middle Eastern, Russian and now Chinese money has driven up housing prices extraordinary.

“I think London has become a very unique market with unique vulnerabilities and I don’t see those same factors here in Australia at all.”

Foxtel is stepping up its battle for subscribers by slashing the cost of a basic cable package to $25 and launching a new on-demand BoxSets channel for pay TV and digital users.

The announcement came as part of a revamp of Foxtel's cable and satellite subscription pricing in what could be seen as a preemptive move before US giant Netflix, which is rumoured to be eyeing Australia, enters the local market.

"We recognise that many Australians feel that Foxtel is too expensive to fit comfortably into their budget," Foxtel chief executive Richard Freudenstein said.

The newly created $25 entry point entertainment pack includes 40 channels, such as MTV, National Geographic TCM and Universal.

The BoxSets channel will be available for an additional $10 on top of the newly announced $25 entertainment pack.

"Bingeing on television is hugely popular and we know that this service will be a smash hit," Mr Fredenstein said at a subscription TV industry conference on Thursday.

Subscribers will be able to view complete series of television shows on demand, including popular series Game of Thrones, The Newsroom, Entourage and The Sopranos.

Foxtel will launch its BoxSets channel on November 3. It will be available through its mobile service Foxtel Go and through its internet-connected iQ personal video recorder boxes. At this point in time, it is not available on online only package Foxtel Play.

Read more.

"Many Australians feel that Foxtel is too expensive to fit comfortably into their budget," says the pay TV company's boss Richard Freudenstein.

"Many Australians feel that Foxtel is too expensive to fit comfortably into their budget," says the pay TV company's boss Richard Freudenstein. Photo: Christopher Pearce

After issuing a "dire warning" about the national postal service's future viability (see post at 10:07), the world's best paid postmaster is now detailing his action plan.

Australians will be forced to pay more for "regular" mail delivery as part of a shake-up of Australia Post's dwindling letters service.

Managing director Ahmed Fahour announced the changes on the back of the business announcing today its mail division lost a record $328.4 million in 2013-14.

He said without the "urgent reform", Australia Post would have to ask the federal government for taxpayer support.

There will be three options - regular, priority and express - that customers will be able to choose from. Priority delivery will occur five days a week, for a fee, while regular delivery will occur one to two days after priority.

Customers can choose their preference by the type and cost of a stamp.

The cost of a stamp - 70 cents - is amongst the cheapest in the world but does not cover the cost of the service, he said.

He said the reforms would deliver choice and flexibility for customers, 97 per cent of whom were businesses and governments.

Australia Post's parcel delivery service continues to grow thanks to the explosion in online shopping, helping to post an overall profit of $116 million. It is a 35 percent drop in profit compared to the previous 12 months.

"More people are shifting from delivered mail to online. We need to respond," Mr Fahour said.

Read more.

Australia Post managing director Ahmed Fahour said the changes meant the business represents a shift from "a letters business to a parcel business".

Australia Post managing director Ahmed Fahour said the changes meant the business represents a shift from "a letters business to a parcel business". Photo: Phil Carrick

The only way to make a firm break with the pre-GFC era is to make banks hold waaaaay more capital, reckons FT columnist Martin Wolf:

The business model of contemporary banking has been this: employ as much implicitly or explicitly guaranteed debt as possible; employ as little equity as one can; promise a high return on equity; link bonuses to the achievement of this return target in the short term; ensure that as few as possible of those rewards are clawed back in the event of catastrophe; and become rich. This was a wonderful model for banks. For everybody else, it was a disaster.

The new regulatory regime is an astonishingly complex response to the failures of this model. But “keep it simple, stupid” is as good a rule in regulation as it is in life. The sensible solution seems clear: force banks to fund themselves with equity to a far greater extent than they do today.

So how much capital would do? A great deal more than the 3 per cent ratio being discussed in Basel is the answer. As Anat Admati and Martin Hellwig argue in their important book, The Bankers’ New Clothes, significantly higher capital – with true leverage certainly no greater than 10 to one and, ideally, lower still – would bring important advantages: it would limit the implicit subsidy to banks, particularly “too big to fail” ones; it would reduce the need for such intrusive and complex regulation; and it would lower the likelihood of panics.

Read more at the FT.

One for the bubble discussion (the index is the S&P500):

Today's eco data is out, with retail sales hitting expectations while the trade deficit shrunk, instead of an expected rise, boosting the dollar a bit.

Retail sales for July rose 0.4 per cent, down from a 0.6 per cent gain in June.

The trade deficit fell to $1.36 billion in July, down from $1.56 billion in June and well below expectations of a $1.75 billion shortfall.

The dollar added about one-tenth of a cent to hit the week's high of 93.65 US cents minutes before the release, and is currently fetching 93.54 US cents.

Wotif shares have plunged by as much as 7.4 per cent after the competition regulator raised possible concerns that Expedia’s $703 million proposed acquisition could lead to higher hotel commission rates in the Australian market.

Rather than giving a green light to the deal as many investors had expected, the ACCC released a “statement of issues” outlining competition issues that have arisen to date.

“This raises some risks,” Bell Potter analyst John O’Shea said. “If [Expedia] did walk away the stock is going materially lower.”

In a development that is understood to have surprised Expedia, the ACCC said its view was that bricks and mortar travel agents such as Flight Centre, Helloworld and STA Travel were unlikely to be a strong constraint on the operations of online travel agencies like Wotif, Expedia and Priceline’s Booking.com.

Therefore, they did not form part of the relevant market even though Euromonitor estimates off-line distribution still accounts for over 64 per cent of hotel rooms booked in Australia.

Wotif shares are down 3.4 per cent at $3.15, after posting their biggest one-day drop in 5-1/2 months.

A cooling love affair with shares of the big four banks could free up $44 billion in investor capital, cash that will be looking for a new home over the coming months.

After an underwhelming August for bank share prices, questions are being raised about Australian investors' commitment to the Big Four, and analysts are beginning to place bets on where shareholders will look to put their money next.

The underperformance over the month was marginal – the ASX 200 bank sub-index fell 1 per cent over the month, against a 0.1 per cent drop in its parent index, on Bloomberg data.

But it was significant that a perennial favourite destination for yield-hungry shareholders lagged through an earnings season in which dividends held centre stage.

The absence of any big payout boost from the three banks providing earnings updates – Commonwealth Bank of Australia, Australia and New Zealand Banking Group and National Australia Bank – hurt share prices. It also intimated that dividend growth is likely to remain subdued.

Indeed, the best thing the big banks could have done was stay quiet. Shares in Westpac Banking Corporation, which has a September financial year end and doesn't provide quarterly updates, bucked the trend among its peers and added 1.2 per cent over August.

It didn't help that the earnings numbers from CBA, ANZ and NAB were underwhelming, highlighting to the market that while bank earnings remain strong, the outlook is less bright than it was a year ago.

Read more.

Analysts at UBS expect growth in bank earnings per share to slump to 4.6 per cent this financial year, after growing by an estimated 8.3 per cent over the 12 months to June 30.

Analysts at UBS expect growth in bank earnings per share to slump to 4.6 per cent this financial year, after growing by an estimated 8.3 per cent over the 12 months to June 30. Photo: Chris Pearce

Michael Bloomberg will reassume the leadership of his business empire only eight months after ending his final term as mayor of New York.

The company, in which Bloomberg is the majority shareholder, said chief executive Daniel Doctoroff, a longtime friend and lieutenant of Michael Bloomberg, would step aside as president and chief executive at year-end.

For years, Bloomberg had insisted that he had no intention of returning full time to the company he founded.

When he left politics, Bloomberg was expected to devote most of his time to giving away his $US32.8 billion fortune. But in recent months, Bloomberg — who still owns 88 per cent of the company — has become an increasing presence at Bloomberg’s Lexington Avenue headquarters, the NYT writes:

Those “few hours” soon turned into six and seven hours a day with Bloomberg taking a hands-on role in meetings and strategy decisions. Doctoroff, a former deputy mayor of New York and private equity executive, told Bloomberg about two weeks ago that he planned to resign, frustrated with how the leadership dynamic had shifted. Bloomberg urged him to stay and remain chief executive, but Doctoroff demurred.

Doctoroff, who remains a friend of Bloomberg and will join the board of Bloomberg’s foundation, explained his decision to step down: “When Mike decided he wanted to spend some time at the company, and then spent more time, obviously things changed.” He added, “It isn’t the job I had for the past six years. It’s his — he wants to be involved. He doesn’t want to consult with me on everything. I get that.”

With a wry smile and a laugh, Doctoroff said: "Mike is kind of like God at the company. He created the universe. He issued the Ten Commandments and then he disappeared. And then he came back. You have to understand that when God comes back, things are going to be different. When God reappeared, people defer."

"When God reappeared, people defer": Months after ending his tenure as mayor of New York, the billionaire is taking back the reins.

"When God reappeared, people defer": Months after ending his tenure as mayor of New York, the billionaire is taking back the reins.

Numbers published by Fortescue over the past 24 hours illustrate how quickly iron ore supply is rushing into the market.

The miner exported 15.16 million tonnes during August; a rate that would smash the company’s full year export guidance if repeated in every month.

Fortescue has promised to export between 155 million tonnes and 160 million tonnes in the 2014 financial year, yet the August performance would imply exports of about 178 million tonnes.

The extraordinary rise in exports could explain why Fortescue shares are trading higher, despite yet another fall in the commodity price to a five year low. Fortescue shares are 1.3 per cent higher at $4.05.

The August export statistics have set a new monthly record for Fortescue, with the result 14 per cent higher than the previous monthly export record.

There is plenty more new supply coming soon too, with BHP Billiton and Rio Tinto both ramping up exports aggressively, and Gina Rinehart’s Roy Hill just a year away from beginning exports too.

Rinehart hinted this week that Roy Hill may seek to start exporting earlier than the September 2015 target date.

 

On track for more: FMG looks set to easily achieve its target of 160 million tonnes of iron ore this year.

On track for more: FMG looks set to easily achieve its target of 160 million tonnes of iron ore this year. Photo: Bloomberg

Ahead of July retail sales data out later today, Citi has put out a note taking a look at some of the stocks in the sector.

Retail stocks are pricing in further acceleration in consumer spending,  but to become more bullish on retail, income growth and credit growth need to pick up, the analysts say.

There are three ingredients for above-trend retail spending, Citi analyst Craig Woolford writes in a note to investors: 1) Above-average income growth (missing). 2) Solid credit growth (missing). 3) Higher house prices (materialising).

The savings rates fell to 8.7 per cent in June, and is tipped by Citi to fall another 1 percentage point. The average household is saving $614 less a year, which may have boosted retail growth by 1.9 per cent last year, Woolford says.

He expects retail spending to grow 5.0 per cent in the next financial year, slightly ahead of the current one.

‘‘Investors should consider bottom-up factors influencing categories,’’ Woolford says. ‘‘We see cafés and restaurants outperforming, apparel potentially slowing beyond October 2014 and consumer electronics looking vulnerable, with a poor product pipeline.’’

Citi has a ‘buy’ rating on Super Retail Group, tipping a turnaround in its leisure segment and lower supply chain costs. Woolford also rates Specialty Group a ‘buy’, seeing it as a candidate to lift gross margins via direct sourcing. JB Hi-Fi, on the other hand is a ‘sell’, given the risk of declining comparable store sales, Woolford says.

Retail sales are expected to have grown 0.4 per cent in July, down from 0.6 per cent in June. The data will be out at 11.30am.

<p>

Shares in Wotif.com have come under pressure this morning, dropping 5.2 per cent to $3.09, after the competition regulator raised possible concerns that Expedia's $703 million proposed acquisition of the online travel site operator could lead the US travel giant to increase commission rates charged to hotels listed on the Australian accommodation site.

Rather than giving a green light to the deal, the ACCC this morning released a "statement of issues" outlining competition issues that have arisen to date.

The ACCC said its view, after making enquiries, was that bricks and mortar travel agents such as Flight Centre, Helloworld and STA Travel were unlikely to be a strong constraint on the operations of online travel agencies like Wotif, Expedia and Priceline's Booking.com and therefore do not form part of the relevant market.

"Commission rates charged by Expedia and Booking.com in Australia are lower than the rates charged by those companies in other parts of the world," ACCC chairman Rod Sims said. "The presence of Wotif may be a contributing factor to this difference. Market participants have expressed concern that the removal of Wotif as an independent competitor will allow Expedia to increase its commission rate."

Read more.

The takeover could lead to higher commission rates charged to hotels listed on Wotif, the ACCC has warned.

The takeover could lead to higher commission rates charged to hotels listed on Wotif, the ACCC has warned. Photo: Adrian Brown/Bloomberg

The big banks and miners are weighing on the market early, while Telstra and energy stocks are providing support.

The ASX 200 is 4 points down and the All Ords 3 points lower.

The Big Four and BHP have dropped by between 0.2 and 0.3 per cent, while the national telco is 0.4 per cent higher.

Energy is outperforming, as Origin jumps 0.9 per cent, Woodside 0.4 per cent and Oil Search 0.5 per cent after the oil price rallied overnight.

Woolies and Wesfarmers are also higher, by 0.2 and 0.1 per cent, respectively.

 

Australia Post announced a sharp slump in profit this morning, and added a dire warning about the future of the business.

The government-owned entity said it was likely to overwhelmed by losses in the coming years, mostly caused by its traditional letter delivery services.

The cost of running the sprawling, low margin delivery network dragged this year's total profit down to $116.2 million, a fall of 34.5 per cent from the previous year. In total, letter delivery cost $328.4 million.

The company reported a net loss of $105.9 million for the second half of the year, its first since it was corporatised.

The pre-tax earnings of Australia Post were reported as $518.6 million, up just over 10 per cent from last year. Revenue was also up by 8.3 per cent at 6.383 billion.

Chief executive Ahmed Fahour said Australia Post urgently needed reform to survive after a government-commissioned report predicted the company would incur a $12.1 billion cumulative loss from letter delivery.

"Profit growth in parcels has covered the growing losses in letters again in this full year but possibly for the last time," chief executive Ahmed Fahour said.

"These results are a stark illustration of the urgent need for changes to the regulations governing our Letters service.

"Unfortunately without significant and urgent reform of our community service obligations, the loss in the regulated mail business will overwhelm the entire company and result in the enterprise making a loss in the near future."

Read more.

Losses from the letter-delivery business blew out to $328.4 million for the full year.

Losses from the letter-delivery business blew out to $328.4 million for the full year. Photo: Luis Enrique Ascui

Investors are likely to stick to the sidelines today, as markets wait for the outcome of the European Central Bank's meeting today.

The ECB is facing intense market pressure to take some kind of action and risks losing credibility if it fails to back up a dovish message delivered by President Mario Draghi late last month.

Draghi ramped up expectations for today's meeting when, departing from his speech text, he told the Jackson Hole central bankers' conference on August 22 that markets had indicated inflation expectations showed "significant declines" in August.

He added that the ECB's Governing Council would acknowledge these developments and, within its mandate, "use all the available instruments" to deliver price stability over the medium term.

Draghi's problem is the ECB is running out of weapons with which to fight the low inflation - running at just 0.3 per cent - and stagnation gripping the 18-country euro zone. The ECB targets inflation of just under 2 per cent over the medium term.

The one big weapon the ECB retains is quantitative easing (QE) - essentially printing money to buy assets. Though other central banks have used this tool, hawkish members of the ECB's 24-member policymaking council are resistant.

"The barrier to QE is still very high," one ECB source told Reuters last week.

Nomura economist Nick Matthews thinks that Draghi's use in Jackson Hole of the term "all instruments", rather than the "unconventional instruments" he referenced in the original text of the speech, put an interest rate cut on the table.

However, a Reuters poll pointed to no change in rates, which are already at record lows.

Another policy option the ECB has flagged without yet launching is a program to purchase asset-backed securities (ABS), with a view to stimulating this market and offering smaller businesses an alternative source of funding.

"It's difficult to imagine the ECB turning up on Thursday and doing very little," said ABN Amro analyst Nick Kounis. "I think the ABS purchase program is the absolute minimum."

Draghi said in Jackson Hole the ECB's preparations for an ABS purchase program were "fast moving forward and we expect that it should contribute to further credit easing."

The ECB has already committed to new bank funding plan, with the first so-called TLTRO operation set for September 18, which it believes will help stimulate the economy. It may want to see how that plays out before taking any further action.

"The likely uptake from periphery banks in particular will be fairly aggressive we think," said Owen Murfin, fund manager with BlackRock's global bonds team.

The ECB's rates decision is expected at 9.45pm (Sydney time), followed by Mario Draghi's press conference, where more of the action is likely to be (10.45pm).

Will he or won't he? All eyes will be on Mario Draghi later today.

Will he or won't he? All eyes will be on Mario Draghi later today. Photo: Reuters

Nickel was the outstanding performer overnight amid a generally weaker session for the base metals, and there could be further gains ahead. Take it away, ANZ commodity analysts:

Nickel prices edged toward $US19,000/tonne following news that the Philippines may look to replicate Indonesia’s ore export ban. A key Philippine senator has filed a bill to urgently halt exports in an effort to generate more domestic income and attract more investments. The country is a top three nickel ore producer. If the ban does eventuate, it has the potential to boost prices well above $US20,000/tonne.

Keep an eye on nickel miner Western Areas today.

Aussie Home Loans founder John Symond, who helped ignite a wave of mortgage competition against the banks in the 1990s, has rejected claims that competition in home loans is inadequate such is the rivalry among the big four banks eager to lend money for housing.

With big bank dominance under scrutiny from the financial system inquiry, smaller lenders and consumer groups are concerned that the big four banks benefit from an "unlevel" playing field in the $1.3 trillion mortgage market. 

But Mr Symond rejected claims that competition in home loans was inadequate.

"You don't need any more competition in housing loans. Australian borrowers have got the best deal in the world," Mr Symond said.

Helped by record low interest rates fuelling a housing boom, banks' main priority was clearly lending for housing, he said.  

"The only area where they want to compete vigorously is mum and dad housing. Not credit cards, not business lending, not development finance – mum and dad housing," he said.

"Consumers have got lenders tripping over each other to get their business, some of them are even offering $1000 cash and no expenses and all that, loans with all the features and flexibilities that you can't get anywhere in the world. We take things for granted."

Rather than focus on housing, he said more competition was needed in lending to small businesses or property developers.

Read more.

Massaging the message: John Symond in front of a Gerard Rancinan photo artwork.

Massaging the message: John Symond in front of a Gerard Rancinan photo artwork. Photo: Peter Braig

The RBA is on track to break its record for the longest spell of cash rate inertia, with most major economists forecasting the central bank will sit on its hands well into 2015.

RBA governor Glenn Stevens said in the statement accompanying Tuesday's rate decision that "the most prudent course is likely to be a period of stability in interest rates," despite the Australian dollar being stuck in the tight trading range between US92¢ and US93¢. The statement had sparked market speculation about when the "period of stability" will end.

Economists agree that the next move by the central bank will be a tightening of monetary policy. But they have produced wildly varying forecasts for the timing of that move from as early as February 2015 (Commonwealth Bank of Australia) to as late as the first quarter of 2016 (Bank of America Merrill Lynch).

At its recent monthly board meeting, the central bank kept the cash rate on hold at 2.5 per cent for the 12th consecutive meeting, marking the longest period of steady rates since 2006.

The longest the Reserve Bank has kept interest rates on hold was more than 18 years ago, when the central bank kept the rates at 7.5 per cent for 17 consecutive meetings between February 1995 and July 1996. If the central bank were to match that record, that would imply no change to current settings until April next year, matching most analyst forecasts.

Read more.

The central bank cash rate since 1990.

The central bank cash rate since 1990. Photo: Graphics: Les Hewitt

After teetering on the edge, iron ore overnight broke through a five-year low as worries about China's property sector and a flood of global supply weigh heavily on the metal.

Last night the benchmark price for iron ore for immediate delivery to the port of Tianjin in China crashed through a five-year low after threatening for more than a week, hitting $US85.70 per tonne.

Analysts believe the iron ore price could fall even further, with Goldman Sachs forecasting an average price of $US80 per tonne next year, while CLSA have warned it will hit $US75 per tonne.

Australia's most valuable commodity has fallen more than 35 per cent this year.

Concerns about China's property market are bubbling with the Chinese government's plans to transition the economy away from fixed-asset investment to consumption proving tricky.

The price of new homes across nearly all cities measured by the government fell in July, marking the third straight month of declines.

Steel prices in China have slumped to 10-year lows amid a faltering property sector, one of the biggest drivers of growth, accounting for 15 per cent of gross domestic product last year.

Read more.

Iron ore has plunged to a five-year low.

Iron ore has plunged to a five-year low.

The Nasdaq Composite Index fell the most in almost a month, dragged down by losses in Apple after a competitor introduced new smartphones and the company faced criticism for the theft of celebrity photos.

Apple, the world’s most valuable company, sank 4.2 per cent for its biggest decline since January.

The Nasdaq Composite lost 0.6 per cent, the most since Aug. 5. Apple has the biggest weighting in the gauge at 8.7 per cent. The Standard & Poor’s 500 Index slid 0.1 per cent to 2,000.7, while the Dow Jones Industrial Average climbed 10.7 points, or 0.1 per cent, to 17,078.3.

“Apple stock’s had a pretty strong move in the last several months,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities, said. “A lot of positives from the iPhone launch are built into the stock price at these levels. People are merely taking profits.”

Apple had rallied in 15 of the previous 17 sessions, adding 9.3 per cent since Aug. 7 to reach a record close of $US103.30 yesterday.

Samsung Electronics unveiled a pair of Galaxy Note smartphones today, as the No. 1 seller tries to fend off Apple’s push into large-screen devices. The US company yesterday said that a spate of nude photos from actresses including Jennifer Lawrence that were recently posted online were individually stolen from Apple accounts.

The theft, which prompted scrutiny from the FBI, threatened to mar an Apple event on Sept. 9, where the company is set to unveil new iPhones, a wearable device and a mobile-payments system, people with knowledge of the matter have said.

Pacific Crest Securities said it would likely cut Apple’s outperform rating unless the event shows “massive incremental profit opportunities.”

Iron ore has slumped to a fresh five-year low, falling 1.2% to be fetching $US85.70 per metric tonne. On the local market, shares are poised to open little changed ahead of retail sales and trade data after a weak lead from Wall Street.

Here’s what you need2know:

• SPI futures is flat at 5649

AUD at 93.45 US cents, 97.88 Japanese yen, 71.08 Euro cents and 56.77 British pence

• On Wall St, S&P 500 -0.1%, Dow +0.1%, Nasdaq -0.6%

• In Europe, Euro Stoxx 50 +1.2%, FTSE +0.7%, CAC +1%, DAX +1.3%

Iron ore slips 1.2% to $US85.70 per metric tonne

• Spot gold up 0.4% to $US1270.03 an ounce

• Brent oil up 2.1% at $US102.40 per barrel

What’s on today:

• Australia: July retail sales and the trade balance, both from ABS at 11:30 AEST.

• Europe: European Central Bank press conference at 10:30pm.

• US: trade balance, ADP non-farm employment, ISM non-manufacturing PMI

• UK Bank of England rates, asset purchase target, inflation target

• Japan: Bank of Japan monetary policy statement; Germany factory orders, Markit PMI.

Stocks to watch:

Fortescue Metals says it shipped a record 15.16 million tonnes of iron ore on 82 ships in August

Origin Energy has dropped out of the auction for Infratil’s Australian energy assets and is not expected to table a final bid on September 8, sources said told the AFR's Street Talk column.

Western Areas: nickel supply may be critical if Philippines bans exports, says BMO

• Companies trading ex-dividend today: Acrux, Greencross, Prime Media

• Noni B, BHP Billiton, Rio Tinto, Atlas Iron, BC Iron, Wesfarmers, Woolworths.

BHP Billiton and Rio Tinto could earn as much $US800 million between them for at least three years when they unlock a “secret” supply of 200,000 tonnes of copper at their Escondida copper mine in Chile, Deutsche Bank says.

• Canaccord Genuity has reiterated a “buy” recommendation on TFS Corp and raised its target price to $3.44 a share, while Argonaut Equity Research also reiterated its “buy” on the stock with a target price of $2.65 a share.

• RBC Capital Markets retained a “sector perform” on ports and rail operator Asciano with a $6.25 a share price target and said upside from here would be “dependent mostly on success of a port sale”.

Read more.

Good morning and welcome to the Markets Live blog for Thursday.

Your editors today are Jens Meyer and Patrick Commins.

This blog is not intended as investment advice.

BusinessDay with wires.

Quotes Search

Sort comments by:
  • What is it with end-of-trade. Time & time & time again I notice very small trades knock down the price of a share that has withstood a whole day's fall on the ASX. The cumulative effect across a portfolio can reduce a good green result to a nasty shade of red. And the value of trades that do it can be less than $1000.

    Commenter
    mitch of ACT
    Location
    Date and time
    September 04, 2014, 4:03PM
  • If average negative gearing is $4125 per tax payer, that means with a healthy majority of properties in joint names (including my property), the average claim per property is more like $8000. That's a big loss to the government and not much social benefit.

    Commenter
    Allen
    Location
    Date and time
    September 04, 2014, 3:44PM
    • Negative gearing is bad policy Pure and simple. Another point of how government intervention in markets rarely ends well. Not only does it cost the government a heap of money, it inflates property prices all over the country. Same with first home buyer schemes. If you can't afford to buy a house in the first place, don't buy one. The problem is now with nearly 2million property investors that is a very large sector of the population. Get rid of it and the government of the day is not going to be very popular. Which is why welfare hasn't been touched, tax cuts can happen, but tax raises never do and changes to superanuation make everyone irate.

      Commenter
      Savyinvestor
      Location
      Date and time
      September 04, 2014, 3:54PM
    • oh, and Zero social benefit.

      Commenter
      Savyinvestor
      Location
      Date and time
      September 04, 2014, 3:55PM
    • one partner on a high income and the other on nothing and the rebate ( not the claim ) is closer to $30K - in the hand.
      its pure gold. I suspect EVERY politician is doing the same.

      Commenter
      smilingjack
      Location
      Date and time
      September 04, 2014, 3:56PM
    • its fantastic for the wealthy - its one of their key pillars of wealth

      Commenter
      plutonomy
      Location
      peasant street
      Date and time
      September 04, 2014, 4:29PM
    • Isn't negative gearing just the equivalent of running companies? The government wants to encourage investment (that provide it tax revenue). To do this it taxes profits and allows losses to be deducted. Why is it any different when applied to the 'business' of renting a house?

      Commenter
      Peter
      Location
      Oz
      Date and time
      September 04, 2014, 4:37PM
  • Dear Foxtel,
    It was never that we could not afford your service, it was the fact your service offering is not compelling.
    40 channels in the basic offer, of which most people dislike or just dont watch 38 of them.
    What people would like to see is a $25 offer where they can pick, lets say, any 8 channels of their liking.
    A basic pack full of rubbish and then charging like a wounded bull for "add ons" is just not a business model I will ever subscribe to.
    Roar,
    Wwwish Lion

    Commenter
    Wwwish Lion
    Location
    Melbourne
    Date and time
    September 04, 2014, 3:32PM
    • Dear Wwwish Lion,

      Netflix is coming to a theater near you soon.

      Commenter
      Viking
      Location
      Sydney
      Date and time
      September 04, 2014, 4:03PM
  • The table @2:49pm Generally the younger you are, the less your taxable income and the lower your marginal tax rate. Why then, would the younger cohort of taxpayers have the highest negative gearing losses. They are not getting anywhere near the tax benefit that they would get if they were older, on higher incomes and in the higher tax brackets. They should be concentrating on acquiring and paying off their own home, not providing homes for other people while paying rent themselves.

    Commenter
    mitch of ACT
    Location
    Date and time
    September 04, 2014, 3:23PM
    • Clearly they also have a smaller equity base due to their younger years, and are leveraging the investment more and providing more out of pocket gap to keep it funded.

      Commenter
      Wwwish Lion
      Location
      Melbourne
      Date and time
      September 04, 2014, 3:34PM
    • Yeah some people just don't think. Why you would pay off your own mortgage and then find extra money to pay off another mortgage is beyong me.

      The trend stacks up though. You would think that by the time people are 60-70 they shouldn't have much of a loan to pay back and therefore there rental properties are cash flow positive.

      Commenter
      Savyinvestor
      Location
      Date and time
      September 04, 2014, 3:41PM
    • You have hit the nail on the head Mitch and these people will be the most vulnerable in the forthcoming downturn.

      Commenter
      Viking
      Location
      Sydney
      Date and time
      September 04, 2014, 3:47PM
    • I would prefer to have as many properties negatively geared in my later years as possible. I could have $millions in gross value in property but the net value and net income after interest might even let me pass both the assets & income tests for the age pension. Now there's a thought, a property multi-millionaire on the pension. Non-cash depreciation reducing income for the age-pension would give me plenty of cash to live-on from both rents & the pension.

      Commenter
      mitch of ACT
      Location
      Date and time
      September 04, 2014, 3:58PM
  • Here's a theory re house prices - a boom or are we entering a new model for our housing market? Consider these inputs over the past decade or so:
    1. high population growth
    2. record levels of immigration (contributing to 1. above but not the only cause). Can't find any recent figures quickly, but I'm sure it's around 400k per annum, compared to 100k pa. in past decades?
    3. how many millions of cash is there now in SMSF's looking to be invested. Lots of SMSF owners 'know' property, and feel comfortable with bricks and mortar...so they buy a house for their fund. Ageing population means more retirees, setting up SMSF's, looking to buy property...
    So, leaving aside our record low interest rates, all these increase demand for houses. Is it likely to end? Can anyone see an end to migration levels/population increases anytime soon? When was the last time you saw any debate on the topic? No pollie will touch the subject, Australia's final population is anyone's guess. Look at what happened when Rudd let it slip that Australia would reach 30 million population. Migration levels are hardly ever mentioned, employers probably love current levels because it puts downwards pressure on wages.
    So, result is that house prices rise, FHB are priced out the market, become renters instead because they have to live somewhere. Our traditionally high levels of home ownership will probably revert to levels in Europe.
    I'm sure there's lots of holes in the above, and I'm not an economist! Just seeing recent trends that are very different to the past. A new 'paradigm' perhaps or tosh? I'm remembering the 'new paradigm' of the tech boom, that turned into the tech wreck...

    Commenter
    jacey
    Location
    Date and time
    September 04, 2014, 1:58PM
    • Generaly correct as to cause of this bubble, SMFS , neg gearing rort , large migration , emergency low rates. The quoestion is how long will it last. Few questions should be asked.

      Can record migration continue post mining boom and if unemployment goeast above 7% can government justify 400K per year? History suggest not.

      Once all boomers have loaded up on property with SMFS what next? Also as the oldest of Boomer start to retire and look to liquidate those assets will it result in glut of stock russhing to market?

      Housing is not like other assets, it takes lag measured in years for industry to respond to demmand especialy in appartments, but it also means there is a lag for industry to slow down when demand is ment and usually it results in oversupply.

      If interest rates rise as expected and rental yeald keep falling as they are, how much margin do so called "investors " have factored in?

      Commenter
      DJ77
      Location
      Sydney
      Date and time
      September 04, 2014, 2:23PM
    • the real estate market is a market like all markets and behaves the same way.
      once there are no more buyers at a certain price level the market moves down to the next level where buyers start to enter.
      who are the buyers now?
      SMSF and chinese if whaqt i read is correct. how long will they be able to buy for?
      Not saying i know the answers but the questions are interesting.

      Commenter
      j
      Location
      syd
      Date and time
      September 04, 2014, 3:09PM
    • I tend to agree , i believe its a fundamental shift and those who don't recognise this are calling it a bubble

      Commenter
      just the way it is
      Location
      melbourne
      Date and time
      September 04, 2014, 3:38PM
  • Foxtel

    On new packages:

    "we know that this service will be a smash hit"

    This is spin talk for :

    "We can't rip off the user any more although we would like to continue as a monopoly but now there is competition from faster speeds and the internet"

    Foxtel fading slowly........next monopoly Chromecast

    Commenter
    Harry Rogers
    Location
    Date and time
    September 04, 2014, 1:41PM
    • Subscribe to Foxtel, that would mean putting money into Rupert Murdoch's pocket. Why on earth would I want to do that. Look at the type of gov't here he supports. I was really angry with myself the other day when I bought a pack of blu-ray movies and discovered that they were distributed by a Murdoch company.

      Commenter
      mitch of ACT
      Location
      Date and time
      September 04, 2014, 2:49PM
    • @Mitch, yawn. 'Always Political'.

      Commenter
      Kane
      Location
      Date and time
      September 04, 2014, 2:56PM
    • Yes Mitch but only half goes to Rupert - Telstra get the other half.
      Sometimes its hard to avoid purchasing something that hasnt had Ruperts grubby hands all over it.

      Commenter
      Red Rooster
      Location
      Sunny Back Yard
      Date and time
      September 04, 2014, 3:02PM
  • Dr Dallara.. sorry mate but you can still live in London in a respectable suburb and buy a house for less than 700 000 dollars ..Unfortunately the same cannot be said for Sydney. 2 problems with this analysis .. firstly it is obviously based on a skewed average which no doubt includes data from untouchable zones like Belgravia and Sloane square and the like. and 2./ No doubt it's based on his own experience of London when this guy lived there on his 2 year sabbatical in Mayfair! so called Us analysts doing assessments on overseas property markets always makes me laugh!

    Commenter
    RougeTrader
    Location
    Sydney
    Date and time
    September 04, 2014, 1:37PM
    • You sure about that? A$700K is only GBP 400K you know.
      Lets see - http://www.londonpropertywatch.co.uk/avg_prices.html
      Ratios of London house prices to income by area -
      http://www.lbc.co.uk/london-house-prices-ten-times-average-income-96332

      Commenter
      TP
      Location
      Date and time
      September 04, 2014, 2:32PM
    • Agreed, just came back from London, I was staying in south Kensigton and prices for 2 bed appartments were well over million AUD... but move two tube stations west on Piccadily line and litteraly 5 min away in Hammersmith you can buy very nice Town House or appartment for much much less.

      So while Inner Sydney and Inner London are comperable..( it is Manhaten syndrom, small area large demand) where there is a difference is in outter subburbs where Sydney has gone completly bonkers. 500m2 house and block packages in Liverpool and Penrith selling over million dollars is utter maddness and considering these are all blue collar subburbs, the end of minning boom and continued record skilled migration will see those 6 figure tradie wages quickly drop a zero and then servicing those record house boat and car loans becomes a problem.

      Commenter
      DJ77
      Location
      Sydney
      Date and time
      September 04, 2014, 2:33PM
  • @12.47 Charles Dallara says" Australian property is nowhere near as expensive as London's" No Sh*t Sherlock, not many Russian oligarchs stashing money in Aussie property market, y would u.U can't run a football team in EPL from Bondi!

    Commenter
    Ox
    Location
    Kensi Pk
    Date and time
    September 04, 2014, 1:36PM
  • Netflix secures an exclusive Gotham deal and Foxtel suddenly announces big slashing to the cost of a basic cable package to $25 and other deals. Foxtel not afraid of a little competition are we? Netflix soon to launch in Straya.

    Commenter
    Viking
    Location
    Sydney
    Date and time
    September 04, 2014, 1:28PM
  • The market is facing a near perfect storm in the ST. The banks 'as-good-as-it-gets' argument could well become a self-fulfilling prophecy. With the iron ore price breaking down below significant technical levels and the ASX hovering around six year highs it doesn't take a genius to realize that most of the risks are to the downside. Just for good measure, throw in a healthy dose of 'black swans' circling such as Ebola, ISIS and the Ukraine.

    Commenter
    50BahtLeo
    Location
    Date and time
    September 04, 2014, 12:56PM
  • yest morning could hold the asx200 back, all aboard for the free euro easing express.
    this morning no one wants it?

    Commenter
    j
    Location
    syd
    Date and time
    September 04, 2014, 12:39PM
  • Amused about the story of cooling investor enthusiasm for bank shares due to a slowing rate in the growth of earnings of the banks. That slowing rate of bank earnings is coming from a slowing economy. As bank investors abandon the banks in search of better yield elsewhere they will push up the prices of the stocks of their new investments thus depressing the yield that will also be falling from a slowing economy. That falling yield of alternative stocks will make the yield of the banks look attractive as bank stock prices will have fallen a little. So back into the banks they will plunge and the cycle continues. Don't forget that every $ of every transaction flows through the banking system. The banks have worked out a way to cream off a tiny, or sometimes a large margin from each and every transaction. I will be keeping most of my bank shares. The only people who will gain from all of this swapping and changing between stocks are the brokers, most of whom are owned by the banks. But just watch out when interest rates rise. Then the banks will be in strife from their part in blowing out house prices as overextended families can no longer service their mortgages.

    Commenter
    mitch of ACT
    Location
    Date and time
    September 04, 2014, 11:53AM
    • Banks just keep inventing new products/services and improving their margins on existing products/services.
      I'm not selling either.

      Commenter
      TP
      Location
      Date and time
      September 04, 2014, 12:23PM
  • FMG brilliant production result Keep up the good works.

    As a famous figure once said "let your tall poppies grow!".

    Commenter
    Harry Rogers
    Location
    Date and time
    September 04, 2014, 11:23AM
    • My tall poppies are buried under a mountain of surplus iron ore.

      Commenter
      mitch of ACT
      Location
      Date and time
      September 04, 2014, 12:10PM
    • The production was "shipped" not "stored". So poppies getting lots of sunlight.

      Commenter
      Harry Rogers
      Location
      Date and time
      September 04, 2014, 1:08PM
    • BDR still plumbing the depths of its share price, where is the floor?

      Commenter
      DR
      Location
      Clovelly
      Date and time
      September 04, 2014, 1:31PM
    • @Harry, not if your poppies are on a dock in China. Until that lot is shifted who would want to import more of the stuff.

      Commenter
      mitch of ACT
      Location
      Date and time
      September 04, 2014, 2:19PM
    • "import more stuff"

      Apparently the whole world needs iron ore and we are certainly the lucky country because we have "few" entrepeneurs who actually contribute to the economy instead of the usual naysayers who sit on the sidelines.

      Perhaps you havent noticed that FMG paid 1.2bln in income tax last year maybe just a bit more than Google,News Corp,IKEA,Microsift etc etc.

      Strange idea in Australia of who they like to kick.

      Commenter
      Harry Rogers
      Location
      Date and time
      September 04, 2014, 4:02PM
  • How am I going, SBM is my best performer?

    Commenter
    barbara
    Location
    Date and time
    September 04, 2014, 11:20AM
    • Spare a thought for the guy who has been short CBA since it was $60

      Commenter
      which bank?
      Location
      Date and time
      September 04, 2014, 12:15PM
  • any ideas on UGL surge

    Commenter
    stu
    Location
    Date and time
    September 04, 2014, 11:10AM
  • The "poor" old Australian exporters can not win. Yesterday the Aussie battler started to show it's weakness and today it has bounced back to Monday's price.How can you run a business when the currency jumps about like the kangaroos on the back of the $1 ?

    Commenter
    Pest from the West
    Location
    Lowood S E QLD
    Date and time
    September 04, 2014, 10:57AM
    • easy , make something the world wants , something better
      Stop relying on a weak currency
      Do the Swiss, Germans, Brits bitch abt theircurrency? No, yet the Brits build quality and the world wants that product
      Wake up for goodness sake
      You cant have a strong economy with a weak dollar

      Commenter
      stu
      Location
      Date and time
      September 04, 2014, 11:05AM
    • @stu. Yes you can. The weaker the $A, the more expensive our imports so we have to make more of what we need locally. That boosts manufacturing, employment and the economy. We have surplus manufactured goods to export that are in demand from o/seas because it is cheaper to buy here than elsewhere or even make in their own countries. So our economy gets another lift. Before you know it we have a booming economy and a high currency that we wish we could get lower.

      Commenter
      mitch of ACT
      Location
      Date and time
      September 04, 2014, 12:16PM
    • @Stu the swiss capped their exchange rate 3 or 4 years ago to keep it low. They have an aggressive and active intervention polict when the EURCHF approaches the 1.20 rate. Every manufacturing country complains about the strength of their ccy. Do you think the Germans wouldn't be happy to see a weaker Eur? They are the ones who have sanctioned QE Eur over the last 3 yrs.

      Commenter
      Bunyip
      Location
      fairy land
      Date and time
      September 04, 2014, 1:02PM
  • Just wondering what platform you guys use to trade options on the asx.

    Commenter
    max power
    Location
    Date and time
    September 04, 2014, 10:50AM
    • webIress

      Commenter
      50BahtLeo
      Location
      Date and time
      September 04, 2014, 11:01AM
  • Does anyone have any tips for fixing teary eyes caused by IPL's fall this morning?

    Commenter
    Teary Eyed
    Location
    Curled up in a ball
    Date and time
    September 04, 2014, 10:50AM
    • It's only down 3.9%. Hardly worth crying over.

      Commenter
      doglover
      Location
      Date and time
      September 04, 2014, 11:00AM
    • What tears? I'm up 20% plus dividends. :) :)

      Commenter
      Dave
      Location
      Brisvegas
      Date and time
      September 04, 2014, 11:07AM
  • @DJ77 - when you say "...printing money..." what, exactly, do you mean?

    Commenter
    Oh_Mighty_Zeus
    Location
    Mount Olympus
    Date and time
    September 04, 2014, 10:44AM
    • Quantitative easing policies of FED and some other central banks. Only difference between these and litteral printing of cash, is that with QE there is a middle man in form of retail banks who in the end proffit the most.

      Litteraly printing money and giving it to public would for all intense and purpose been better option for US in stimmulating economy. According to Bank of England report In UK the 40% of nearly 1 Trillion in boost caused by QE ended up in hands of richest 4% households.

      Commenter
      DJ77
      Location
      Sydney
      Date and time
      September 04, 2014, 11:07AM
    • Ok...but given that the QE in the U.S. was essentially swapping non-cash reserve assets out of bank reserve accounts and replacing it with cash in the forms of non-loanable reserves, and that the non-cash assets are taken out of the system and held on the FED's account - i.e., these assets now sit outside the banking and financial assets markets, how has that created a weak dollar? I'm no fan of the continued QE - but it might be the best choice of a lot of bad choices - but I really can't see how it impacts the U.S.$ adversely or drives inflation. There simply are not more dollars in forex markets as a result of those actions.

      I think it (QE) has led to real asset prices being driven higher than they otherwise would be, but I don't think it is driving either a weaker $U.S. or broad-based inflation.

      But hey, I guess both of us are short of some info on this stuff.

      Commenter
      Oh_Mighty_Zeus
      Location
      Mount Olympus
      Date and time
      September 04, 2014, 3:36PM
  • Once again this morning it is obvious that the world would be better managed if the Need to Know blog correspondents were in charge, but sadly they are not. Meanwhile perhaps one or two observers have noted that the column on the left this morning reported analyst fair value prices of up to mid$3 for TFC. It closed yesterday at low $2. This is what Roger Montgomery followers would call a very attractive margin of safety. It is carrying a 3c div until early October. Take a moment out from second guessing the world’s powerbrokers and consider the world demand and supply for Sandalwood oil, it may help calm your iron ore anxiety.

    Commenter
    billyw
    Location
    avalon beach
    Date and time
    September 04, 2014, 10:38AM
    • Thanks billy, oil on troubled waters perhaps? It's looking a tad bit overbought at mo, though....

      Commenter
      jacey
      Location
      Date and time
      September 04, 2014, 1:25PM
  • I wish countries that produce Copper would instate an export ban! Might get this metal out of its moribund state and ignite the mining side of the market.

    Commenter
    Ox
    Location
    Kensi Pk
    Date and time
    September 04, 2014, 10:38AM
  • "Australia's most valuable commodity has fallen more than 35 per cent this year."

    To be followed by house prices.

    Housing boom!

    Commenter
    Allan
    Location
    Prahran
    Date and time
    September 04, 2014, 10:35AM
    • Yeah your right about commodity prices.

      But not sure why you keep harping on about housing boom. If Australia isn't in a housing boom at the moment, then I'm a monkeys uncle.

      Yes it will eventually fall, and it needs to happen. Housing has become too expensive in this country. But that fall aint going to be today.

      Commenter
      Savyinvestor
      Location
      Date and time
      September 04, 2014, 12:02PM
  • "Mr Stevens on Wednesday said it would be "unwise" to try to strengthen the economy by allowing house prices to rise further from "already elevated" levels."

    Housing boom!

    Commenter
    Allan
    Location
    Prahran
    Date and time
    September 04, 2014, 10:30AM
  • Australia Post needs reform: sack the CEO and the management, because they got very high pay compare with the other countries. and also very very poor performance, only know to raise the delivery fees, everyone can do the job!!

    Commenter
    aaa
    Location
    Date and time
    September 04, 2014, 10:29AM
    • CEO paid himself $2 million bonus which went to Islamic art council to save tax as it is run by his family members. Why JH cannot see this rorting and he wants disadvantaged to pay medical copayment.
      Why this most expensive postal services management in the world has not been sacked ?
      Even CEO of US postal services gets $500000 as compared to $4.8 million of Auspost CEO while he is sacking people.

      Commenter
      xyz
      Location
      Date and time
      September 04, 2014, 11:14AM
  • FMG sub $4. Oh dear.

    Buy the dips!

    Housing boom!

    Commenter
    Allan
    Location
    Prahran
    Date and time
    September 04, 2014, 10:27AM
  • Australia exists in aworld where it has to compete fiscally with the most one of the most corrupt economic regimes seen in history. The US dumps trillions of its currency on the world markets due to complete
    ineptitude in running its own economy and corrupts every world currency by doing so.

    The EU subsidises and bails out its banking sector and continues with enormous subsidies across all industries. China contiues to dump produce unilaterally.

    Australia with a GDP of 9% of both US and EU and 17 % of China is supposed to sit back and run an austere and responsible economic policy against such corruption and then be asked to support free trade agreements.

    What an incredible resilience our country has to weather all these storms and still....survive and yet we pay the price daily.
    Level playing field....rubbish.

    Commenter
    Harry Rogers
    Location
    Date and time
    September 04, 2014, 10:11AM
    • Excellent post, Harry, you sum it up perfectly. There is no such thing as a level playing field at present.

      This is one reason why Australia unilaterally abolishing the whole spectrum of industry support, from tariff protection to co-investment, over the last couple of decades has been suicidal for Australian industry.

      'Free trade' cannot exist when there is no level playing field.

      Commenter
      Fred
      Location
      Date and time
      September 04, 2014, 10:22AM
    • Absolutely true, Harry ..... All of the present day evils including over inflated housing prices here in Australia can be traced back to low / zero interest rate regime followed by the Federal Reserve, ECB, BoJ. Unfortunately Australia will have to pay a severe price for reckless economic policies pursued by the Americans and the Europeans and will severely haunt future generations of Australians. The Can has been kicked beyond the point of 'No Return'.

      Commenter
      Ash
      Location
      Sydney
      Date and time
      September 04, 2014, 10:28AM
    • Great comment Harry.

      I've said it before and I'll say it again: The biggest geopolitical and economic threat to our way of life is not ISIS or Russia, or Iran, or China, or "Global Warming", or whatever. It's the US private bank the Federal Reserve.

      Commenter
      Dr No
      Location
      Sydney
      Date and time
      September 04, 2014, 10:35AM
    • I believe if a country is competitive, there is less need to have free-trade-agreement with other countries. You are right that if for example Australia has a free-trade-agreement with China and then China has another one with Russia, this could be counter productive as China might buy gas cheaper from Russia vs Australia.

      One need to remember there is no guarantee a free-trade agreement will bolster trade between countries. There are plenty of examples where it does not e.g. Australia free-trade agreement with USA has provided little benefit to Australia. Look at country like Switzerland which trade exclusively on competitive merits e.g. product and service excellence.

      Australia has the added problem of trading commodities which are only competitive based on price and cost. As we can see many low cost countries will now be able to out perform Australia on coal, iron ore etc.

      Commenter
      Viking
      Location
      Sydney
      Date and time
      September 04, 2014, 10:54AM
    • And yet the Oz dollar is the one every other country wants to buy? And yet (apparently) its Oz houses that every one else wants to buy? And yet we were one of the only countries to survive the GFC (and prosper)? Have you stopped to consider that OZ is doing pretty darn well for itself and has been for decades?

      Tarrifs are just a subsidy to an unprofitable industry and that money has to come from somewhere.

      Commenter
      Peter
      Location
      Oz
      Date and time
      September 04, 2014, 1:34PM
  • RE 9:41am "John Symond, who helped ignite a wave of mortgage competition against the banks in the 1990s, has rejected claims that competition in home loans is inadequate"

    Says the man that sold his business to CBA and currently holding around 3 million CBA shares! Ok man we believe you!

    Commenter
    GS
    Location
    Date and time
    September 04, 2014, 9:50AM
    • it wasn't even worth publishing.

      man used to fight big bank, say big bank bad.
      man sell to big bank, now say big bank ok.

      Commenter
      brian
      Location
      Date and time
      September 04, 2014, 10:24AM
  • Joe Hockey used the words "a pleasing set of numbers" regarding the June qtr growth.

    However, just a year ago when the numbers were better and growth forecast was higher, Hockey was talking about disasters, spending out of control and economic failure.

    Joe, Joe, why did it go so wrong for you?

    Commenter
    Viking
    Location
    Sydney
    Date and time
    September 04, 2014, 9:41AM
  • news from the coal world. several oz mines in the hunter and qld have announced lay offs each in the hundreds this morning.
    coal is dieing a fast death dropping faster than iron ore.

    Commenter
    smilingjack
    Location
    Date and time
    September 04, 2014, 9:39AM
    • Coal is screwed.

      The sad thing is that it is coal that our government wants to tie Australia's future to.

      Every day there is evidence of the irrepressible growth of renewable energy around the world, and that is what has Australia's coal barons so terrified.

      In the last couple of days:

      A single solar project, funded by US investors, is by itself going to provide 12% of Burma's electricity.

      Austin, Texas, has passed a law that will require solar to be the city's 'default energy'.

      A single Indian company announces it will invest US$2.5 billion on wind and solar in India.

      The International Energy Agency announced that renewable energy capacity is growing at its fastest ever pace, and currently produces 22% of the world's energy.

      Commenter
      Fred
      Location
      Date and time
      September 04, 2014, 10:19AM
    • wouldnt surprise me re austin.

      I spoke to someone from there awhile back. they told me its probably the only place in the USA where you can openly admit to being an atheist without recriminations

      Commenter
      smilingjack
      Location
      Date and time
      September 04, 2014, 10:34AM
    • Joe Hockey talking in the Reps now about making sure foreign companies making profits here pay tax on those profits. Good luck Joe. That will be fought against harder than you fought against the carbon & mining taxes.

      Commenter
      mitch of ACT
      Location
      Date and time
      September 04, 2014, 11:02AM
    • @Fred - All that Solar's gonna need a stack of Silver. With the price at or below the cost of production and Silver generally being mined as a by product of other metals, wouldn't Silver miners look like a bargain today? Thoughts anyone?

      Commenter
      MrSteve
      Location
      Date and time
      September 04, 2014, 12:53PM
    • Too bad about the people who've lost their jobs, but it's a no-brainer that coal has no future and only dinosaur pollies are propping it up here. Look at how quickly the world turned on eliminating CFC's. The response to renewables will be even better, as the $$$$$'s savings are there.

      Commenter
      jacey
      Location
      Date and time
      September 04, 2014, 1:34PM
    • Im not sure about silver but I have several ingots and would love for it to go up. however I think new technology solar panels wont be using silver. dont quote me though.

      Commenter
      smilingjack
      Location
      Date and time
      September 04, 2014, 2:21PM
  • The dollar is not presently following the iron ore price's trajectory, but appears to strengthen, at least for the moment. Well, the reason for this is because of Australia's high interest rates vs the OECD.

    The RBA will not take action to lower the interest rates or to print $. Stevens is too scared of taking any action, more jaw boning?

    Commenter
    Viking
    Location
    Sydney
    Date and time
    September 04, 2014, 9:31AM
    • The main reason is Chinese Government buying our dollar, they have trillions dollars foreign reserve, so no matter what happened, they will keep buying our dollar, unless we printing more money for them, the dollar will stay high.

      Commenter
      aaa
      Location
      Date and time
      September 04, 2014, 10:45AM
  • Based on the latest June qtr GDP growth number of .5%. It appears that annual growth which is forecast to be around 3.1% by the experts is actually more like 2%.

    My estimates forecast the growth trajectory to be around 0.2% by Xmas and that Australia will be in recession by mid 2015. Watch this space.

    Commenter
    Viking
    Location
    Sydney
    Date and time
    September 04, 2014, 9:26AM
  • "You don't need any more competition in housing loans. Australian borrowers have got the best deal in the world," says John Symond.

    Funny he would say that. John maybe you should leave that decision to the people looking for a housing loans. The reality is that Australia has got one of the highest interest rates for housing loans in the world.

    You can today get a loan in USA, UK, Europe or Japan for less than 2%. To pay 5% might look good comparing with history in Australia but not the world. John you need to do your research, most Aussies have the internet these days.

    Commenter
    Viking
    Location
    Sydney
    Date and time
    September 04, 2014, 9:18AM
    • Problem with Symonds and the nation in general is that everyone is only focused on residential sector. While big 4 are willing to lend $700,000 with no deposit to a part time self employed tradie (personaly know the case) they are completly ignoring buissines needs and lending in that sector is very tight. This is why we need more competition.

      Commenter
      DJ77
      Location
      Sydney
      Date and time
      September 04, 2014, 9:43AM
    • I always laugh when I hear" We'll save u"

      Yeah sure!

      Commenter
      Ox
      Location
      Kensi Pk
      Date and time
      September 04, 2014, 10:39AM
    • I always laugh when I hear stories like the one from DJ77. I can guarantee you that none of the Big 4 banks would lend 700k to anyone without a deposit for a home loan. Let alone a part time tradie that is probably doctoring his application to look very impressive. Not unless the guy has another house that he outright owns, or can provide substantial equity in another form. What you are saying here simply does not happen in today’s environment and your tradie mate is probably lying to you, or is lying to the bank.

      Commenter
      DR
      Location
      Clovelly
      Date and time
      September 04, 2014, 1:29PM
    • "What you are saying here simply does not happen in today’s environment and your tradie mate is probably lying to you, or is lying to the bank."

      Yes the last one, he is lying to the bank. In this case he is using services of Mortgage broker who is handling all the details for him and collecting the "bonuses" for signing new customers. I also know he is not the only one using the same broker to secure otherwise unsecurable loan.

      That was the point I was trying to make, thanks to unregulated broker industry , and unhealthy sales driven culture in banks where staff who fail to meet targets have their names written on board of shame (not making it up) , the amount of "sub prime" mortgages in this country is frighteningly underestimated.

      You just keep on laughing as many did in US in 2007.

      Commenter
      DJ77
      Location
      Sydney
      Date and time
      September 04, 2014, 2:44PM
  • Teflon Aussie? Not realy , as we are one of few nations not printing cash. Also most traders know yesterdays statement by Glen Stevens about need for gov. to pull housing ouf off bubble territory will go unheeded hence the need for RBA to deploy sanity injection in form of Rate rise is real possibility. Hence "Teflon Aussie".

    Commenter
    DJ77
    Location
    Sydney
    Date and time
    September 04, 2014, 9:17AM
    • if rates go up - the economy will be wiped out. fore closures will sky rocket.
      the RBA knows this so are trying to bluff investors shoving the smsf funds into property to buy shares instead. of course it wont work. what glen stevens says is absolutely irrelevant.

      Commenter
      smilingjack
      Location
      Date and time
      September 04, 2014, 9:43AM
    • Wiped Out? Hasn't history taught you that bubbles popping are always preceded by dire hyperbole. Then the reality is some short term pain (eventually) for a few and the deck chairs are reshuffled and it begins again.
      The RBA has no wish to raise interest rates and if when it finally does people will stop buying and selling houses quite so much. Most will just sit and wait and pay off the mortgage.

      Commenter
      Peter
      Location
      Oz
      Date and time
      September 04, 2014, 1:38PM
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