That's all from us today here at Markets Live, thanks for your company.
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Here's what you need2know this Wednesday evening:
- ASX200 finished down 0.5%
- Hang Seng down 0.7%, Nikkei down 0.5%, Kospi up 0.3%
- Gold at $US1592.18, WTI oil at $US92.71
- Wall Street futures are flat, FTSE100 up 0.2%
- AUD at $US1.0309, 79.1 euro cents, 98.59 yen and 69 pence
- Jobless rate will rise, economists warn
- NAB thinks small to cut costs
- Media dogfight over merger reform
- Metgasco puts development on hold
- Consumer confidence at two-year high
- ABS employment figures
- Myer first half earnings report
Blue chips stocks, dominated by banks, didn't fair too well:
- BHP: +0.7%
- Rio: +0.3%
- ANZ: -2%
- CBA: -1.7%
- NAB: -1.9%
- Westpac: -2.1%
- Fortescue: -0.2%
- Woolworths: -0.2%
- Wesfarmers: flat
- Telstra: +1.1%
While financials were responsible for most of the drag on the market, here's a look at the best and worst performers in terms of movement today:
Among the sectors, financials fell 1.5 per cent, while consumer staples and discretionary slipped 0.2 per cent and 0.1 per cent respectively.
A 0.6 per cent jump in materials stocks was not enough to keep the market in the black.
The sharemarket has finished down, hit by heavy losses in the financial sector. The benchmark S&P/ASX200 lost 26.8 points, or 0.5 per cent, to 5091.1, while the broader All Ords fell 25.5 points, or 0.5 per cent, to 5103.1.
Opposition communications spokesman Malcolm Turnbull has called on Gina Rinehart to ‘‘reconsider’’ her legal attack on Fairfax Media journalist Adele Ferguson.
Mrs Rinehart, Fairfax Media’s biggest shareholder, has obtained a court order forcing Ferguson to hand over details of contact with Mrs Rinehart’s estranged son, John Hancock.
Ferguson, a senior Fairfax Media journalist, risks jail if she does not comply with the subpoena ,issued by the West Australian Supreme Court.
Mr Turnbull this afternoon took to Twitter to offer Ferguson his support.
‘‘Adele Ferguson is doing right thing protecting her sources and Gina Rinehart wd be well advised, given her media interests, to reconsider,’’ he said.
Talking about employment: the federal government’s leading employment index fell for a second consecutive month in March. The declines came after six consecutive months of increases.
The Department of Education, Employment and Workplace Relations indicator of employment declined by 0.029 index points in March, to 0.005 points.
‘‘It is too early to confirm that the pace of employment growth is likely to remain below its long-term trend rate of 1.4 per cent per annum, because the indicator has fallen for fewer than six consecutive months,’’ the department said.
The ASX200 struggled from the onset today and has shed 0.6% to trade back below 5100, IG Markets analyst Stan Shamu says:
- This has come despite a positive day for the resource names. Gold stocks have outperformed with the likes of Newcrest and Regis putting on around 2% in response to strength in the precious metal.
- The banks have finally buckled and are the biggest contributors to today’s losses. NAB has declined 1.8% despite announcing significant cost cutting measures.
- With Asia struggling, we are also expecting a subdued start for European and US markets.
Unemployment will worsen despite a resurgent sharemarket and improving consumer sentiment, economists warn.
The jobless rate has steadily risen from 5 per cent at the start of last year to 5.4 per cent. Economists expect it to reach 5.5 per cent when new data is released tomorrow and most are tipping it to continue its rise towards 6 per cent by the end of the year – potentially heaping further pressure on the federal government if left unchecked.
Much attention has been focused on widely reported job losses in the broader manufacturing sector, which has been undergoing a painful structural shift for some time, often exacerbated by the high Australian dollar.
Still, economists are tipping tomorrow's data to show a further 10,000 jobs were created last month. But the new jobs are not keeping pace with population growth.
Tom Kennedy, an economist at JPMorgan, is tipping 25,000 new jobs to have been created last month, but says that will barely "tread water" with the growth in Australia's population.
He says the raw measure of employed people as a ratio of the country's total population is at its lowest since 2007.
"It's a general indicator that the labour market is a lot softer than the 5.4 per cent unemployment rate indicates," Kennedy says.
First home buyers appear to be deserting the property market, casting doubt on signs of a housing market recovery.
The number of first time buyers entering the market fell to its lowest level in two years in January, according to the latest figures from the Australian Bureau of Statistics.
The 11 per cent drop at the national level marked the fourth consecutive monthly decline for what is considered to be one of the most influential segments underpinning the overall health of the property market.
MacroBusiness economist Leith van Onselen says the first home buyer figures are "atrocious", especially coming on the back of the low interest rate environment and recent price falls.
"It's surprising that it's fallen off this much and so consistently," he says.
"Young first home buyers are leaving the market but baby boomer investors are entering the market. There's a recovery going on but it's built on investor demand," van Onselen says. "It's generally not great for sustainability when young people are not getting in. It's sort of uncharted territory."
Southern Cross shares are down more than 8 per cent as analysts discount the probability of the reach rules governing television broadcasters being abolished.
This would prevent any merger between Southern Cross and Nine.
Boeing won approval from US transport regulators overnight to start testing a redesigned battery for the 787 Dreamliner, putting it one step closer to getting the troubled airplane back into regular service.
Also on Tuesday, sources told Reuters the planemaker was close to signing a $15 billion deal to sell about 170 single-aisle 737 planes to budget Irish carrier Ryanair.
News Ltd boss Kim Williams says the newspaper publishing giant will consider a legal challenge to the government’s planned media reforms.
The government has announced a raft of reforms, including a public interest test on media mergers and a Public Interest Media Advocate.
However the full details of the proposed changes are not expected to be made public until legislation is presented to parliament on Thursday.
The launch of Jetstar's new Hong Kong airlines has been pushed back to the end of the year due to delays in gaining regulatory approval.
It comes as competition over flights through China heats up, with the announcement by Qantas competitor China Southern airlines of standalone flights from Sydney-London at prices up to 34 per cent lower than Qantas.
Jetstar CEO Jayne Hrdlicka told the American Chamber of Commerce that the launch of Jetstar Hong Kong, originally scheduled for the middle of the year, had been delayed because of constraints from government changeovers in China and Hong Kong that were now on a "clear path".
With the broader market down, miners are the few blue chip stocks that aren't down:
- BHP: +0.6%
- Rio: +0.7%
- ANZ: -1.5%
- CBA: -0.8%
- NAB: -2.2%
- Westpac: -1.8%
- Fortescue: +0.2%
- Woolworths: -1.2%
- Wesfarmers: -1.3%
- Telstra: -0.8%
Credit markets are in uncharted territory as the global recovery is threatened by a mismatch between companies hoarding cash and record government debt, Australia’s top-ranked bond manager says.
“It’s pretty clear that the credit cycle is still broken,” Jeff Brunton, head of credit at AMP Capital Investors, told Bloomberg in an interview. “I’ve been doing this for 20-odd years and it just feels very, very different to a normal cycle.”
While AMP expects the rally that’s taken corporate borrowing costs to a five-year low to hold, it’s also buying derivatives to protect against risk aversion as policy makers grapple with a European backlash against austerity, Brunton says.
Oil giant BP has been ordered to prepare a report on what damage was caused when a toxic chemical spilled into a far north Queensland waterway.
The Department of Environment and Heritage Protection (EHP) launched an inquiry after 30,000 litres of water containing fluorinated firefighting foam was discharged into a Cairns inlet in January.
The spill, which came from a nearby depot, was caused by a malfunction of fire suppression equipment, a BP spokesman says.
He says there has been no environmental impacts as a result of the spill but BP will co-operate with authorities to further assess any damage.
BP has until May 31 to prepare the report.
Australian governments are buying fewer locally-made cars and must show more support for the nation’s vehicle manufacturers, the Australian Manufacturing Workers Union (AMWU) says.
South Australian Union delegates meeting on Wednesday have also called on the federal government to ensure all Australia’s naval ships are built locally, to support the wider manufacturing sector.
AMWU national secretary Paul Bastian said manufacturing had a strong future in Australia provided governments recognised the need to support local producers.
Mr Bastian said 10 years ago 66 per cent of the cars in government fleets were Australian made but that had now fallen to 33 per cent.
The federal government is likely to produce a budget deficit of about $20 billion this financial year on the back of declining company tax revenues, Barclays chief economist Kieran Davies says
The projection is double most expectations, but would be better than the $43.7 billion deficit in 2011-12.
‘‘The government has been successful in containing spending, although the problem is that revenue has also been weak,’’ Davies says.
While personal income tax and other forms of revenue have grown solidly - by 8 and 14 per cent respectively - during 2012-13, company tax has declined by 22 per cent. This is due to lower mining sector revenues, following a sharp decline in commodity export prices and subdued growth in finance sector income.
Davies says the government’s dumped $1.1 billion budget surplus forecast for 2012-13 was always too ambitious.
If it happens, it would be the largest turnaround in the budget bottom line in a single year since what he describes as the ‘‘horror’’ budget of 1951-52.
Some more on NAB: the bank will aim to cut the average size of its branches by a quarter as part of a push to reduce costs, without lowering the number of branches across the network.
As consumers embrace online banking and banks look to reduce expenses, the industry is eyeing the savings from reducing the floor space used by branches.
NAB chief executive Cameron Clyne said the bank would revamp its technological systems to allow more ‘‘self service’’ by customers through online banking and smart phones.
It will also place a greater emphasis on using its branches to sell financial services, rather than a ‘‘full service’’ offering.
BusinessDay's Malcolm Maiden takes a look at NAB's announcement of a managment shuffle and a new plan to save money.
David Lipton, the International Monetary Fund's first deputy managing director, said further improvements in the economic outlook will require repairing bank balance sheets and in some cases banks may need to be closed.
"Banks will need to remove the dead wood and address asset quality problems, with some having to increase provisioning for bad loans and add fresh capital," Lipton said in prepared remarks to the Chartered Financial Analyst Society.
"Some banks will prove to be non-viable and will need to be wound down in an orderly manner," he added.
Lipton said one of the lessons from the global financial crisis was that banks needed to improve the way they manage risks so they do not wreck the economy. This means that banks and other financial institutions will need to reassess their involvement in complex and opaque activities, he added.
The consumer banking website of JPMorgan Chase was temporarily unavailable for a time yesterday as the company tried to deal with a denial-of-service cyber attack that slowed access for some customers, a company spokesman said.
The company continued to work late Tuesday to restore normal service, said spokesman Michael Fusco, who declined to say how long the Chase.com site had been down during the day.
Major US banks, including JPMorgan, have recently warned their investors that they are grappling with an increasing number of attacks on their sites that make it hard for customers to conduct transactions.
More on housing finance, JP Morgan economist Tom Kennedy says it was the fourth consecutive month that approvals fell and was a sign the Reserve Bank of Australia needed to cut the cash rate further.
‘‘That could suggest that consumers are still pretty apprehensive in acquiring new debt even though the RBA has delivered significant easing over the past 18 months,’’ he said.
‘‘I definitely think it supports the bias for the RBA to maintain a dovish tone and for rates to go lower.’’
The RBA cut the cash rate 1.75 percentage points between November 2011 and December 2012, bringing it to its current level of three per cent.
Looks like Stephen Koukoulas thinks today's consumer confidence numbers are good news:
Wow! Consumer sentiment up again. Bodes very well for consumer spending and bottom line GDP. 2013 could be a strong year for the economy— Stephen Koukoulas (@TheKouk) March 13, 2013
EBay, operator of one of the largest online marketplaces, questioned the value of Google's main advertising service in a recent study.
EBay, one of the biggest Internet advertisers, released a study on Friday examining whether the paid search ads it bought on Google and that show up to the right of search results were worth the investment.
"The conclusion: Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels," eBay spokeswoman Johnna Hoff wrote in an email.
The study highlights a potential problem for Google, which generated $46 billion in ad revenue last year, up from $38 billion in 2011.
Some leading e-commerce companies, such as eBay and Amazon.com, that have traditionally been big buyers of Google paid search ads may not need the service as much anymore.
The number of home loans approved in January fell 1.5 per cent to 44,383, official figures show, a fourth consecutive monthly fall.
That compared to 45,075 approvals in December.
Economists had expected the number of housing finance commitments to fall by 3.1 per cent in January.
The Australian Bureau of Statistics said today that total housing finance by value rose 2.4 per cent in January, seasonally adjusted, to $21.485 billion.
Mining giant BHP Billiton insists it has done nothing wrong in relation to its sponsorship of the Beijing Olympics, amid claims it was involved in possible bribery.
Australian and US authorities are investigating alleged suspicious transactions carried out by BHP relating to sponsorship of the 2008 Games.
Fairfax media says the criminal division of the US Department of Justice is conducting ‘‘law enforcement proceedings’’ involving BHP, and the Australian Federal Police is working closely with the US agency.
BHP says it is cooperating with the authorities and that it has policies in place that ban any sort of bribes.
Some context for that last tweet. The Japanese government's nominee to become central bank deputy governor, Kikuo Iwata, said today that monetary easing must accompany fiscal spending to help Japan escape deflation because increased spending could cause bond yields and the yen to rise.
A widespread belief that the BOJ's monetary policy regime has changed would cause money to flow from savings accounts into equities and other investments, which would stimulate consumption and corporate investment, Iwata said at a confirmation hearing in the lower house of parliament.
Prime Minister Shinzo Abe last week nominated Iwata, a professor at Tokyo's Gakushuin University, to be the new deputy governor of Japan's central bank in a push for more aggressive monetary easing to meet a 2 percent inflation target and end nearly two decades of deflation.
As only Asia can do, #JPY strength on the #Iwata news is seeing the #USD offered against the AUD, hence at session highs 1.0328 #forex — David Scutt (@David_Scutt) March 12, 2013
Heading offshore for a moment, Boeing got approval from US transport regulators overnight to start testing a redesigned battery for the 787 Dreamliner, putting it one step closer to getting the troubled airplane back into regular service.
Also overnight, sources told Reuters the planemaker was close to signing a $US15 billion deal to sell about 170 single-aisle 737 planes to budget Irish carrier Ryanair.
Boeing's shares closed up 1.5 per cent, hitting an almost five-year high, and extended gains in after-hours trade.
Just looking at that Myer result, the retailer is in the news at the moment.
It's currently locked in a court battle with rival David Jones. As BusinessDay's Lucy Battersby reports, Myer and David Jones will not be forced to release commercially sensitive information to each other before a trial begins between Myer and one of its designers, Kimberley Ellery.
Justice Michael Sifiris of the Victorian Supreme Court ruled this morning that neither side was entitled to subpoena highly sensitive commercial information from the other. You can read more on this story here.
The other thing possibly weighing on investors' minds is tomorrow's half-year result. That's due out tomorrow at 10am.
Despite the strong consumer confidence numbers, the retailers have started the day in less-than-impressive form:
- Woolies: +0.81%
- Wesfarmers: -0.19%
- Harvey Norman: -0.72%
- DJs: -0.67%
- Westfield: -0.36%
- Myer: -2.41%
We'll get the retailers in a moment, but like the banks they having a soft start to the day. Fresh data out today shows Australian consumer sentiment has hit its highest level in more than two years amid low interest rates and rising stock markets.
The Westpac/Melbourne Institute index of consumer sentiment rose two per cent in to 110.5 points in March, its highest level since the end of 2010.
Westpac chief economist Bill Evans said consumer sentiment had risen 15.1 per cent over the past year and was at its highest point since December 2010.
He said consumers were finally reacting to the 1.75 percentage points of interest rate cuts delivered between November 2011 and December 2012.
‘‘The rate cuts had been having limited impact on consumer confidence,’’ he said. ‘‘However, in recent months we have seen the accumulation of the cuts appearing to be genuinely boosting confidence.’’
While NAB has received a wag of the finger from investors following its announcement of costs savings, the other banks have not been warmly embraced by investors in opening trade:
- CBA is 0.16% lower to $70.47
- ANZ is 0.79% lower to $28.82
- NAB is 2.28% lower to $30.82
- Westpac is 1.54% lower to $30.68
Interestingly, NAB stocks have fallen out of favour with investors this morning despite the bank saying it is stripping $800m dollars in costs out of the business per year over the next five years.
As we report here, after a disappointing year for the bank in 2012, chief executive Cameron Clyne today said it would focus on simplifying its product range and technology, giving customers more flexibility in how they banked.
He also revealed sweeping management changes, including the retirement of its executive director of finance, Mark Joiner.
The changes come after investors were increasingly frustrated at NAB’s poor performance in 2012, with profits hit by its troubled UK banking business.
Mr Clyne said the strategic changes would save the bank $800 million a year in five years time, and would allow more self-service by customers.
The list of worst-performed companies on the ASX50 in early trade includes:
- NAB: -2.19%
- Westpac: -1.48%
- Computershare: -1.11%
- Lend Lease: -1.02%
- Iluka: -0.8%
- ANZ: -0.76%
- Macquarie: -0.72%
Just looking at the 2.7 per cent gain in Newcrest shares, gold has continued its recent strong run as signs of slowing growth in Europe increased speculation that central banks will expand stimulus, boosting demand for precious metals as a store of value.
“Speculation about new announcements on easing in Europe is supporting gold,” Phil Streible, a senior commodity broker at R.J. O'Brien & Associates, said in a telephone interview. “Physical demand out of Asia is also bullish.”
Gold futures for April delivery climbed 0.8 per cent to $US1,590.30 an ounce at 11:38 a.m. on the Comex in New York. Prices are heading for a fourth consecutive session of gains, the longest stretch since Aug. 21.
After 12 straight annual increases, gold was down 5.8 per cent this year through yesterday.
Here are the best performed companies on the ASX50:
- Newcrest: +2.72%
- Stockland: +1.58%
- Leighton: +1.28%
- Fortescue: +1.18%
- Rio: +1.1%
Here's how the main sectors are doing, in a flat broader market:
- Consumer discretionary: -0.5%
- Consumer staples: flat
- Energy: +0.2%
- Financials: -0.5%
- Gold: +1.6%
- Industrials: flat
- Materials: +0.6%
- Telcos: -0.2%
The share market has opened slightly higher, with the ASX200 edging up 2.7 points, or 0.1 per cent, to 5120.6, while the All Ords has gained 3.2 points, or 0.1 per cent, to 5131.8.
We are calling the ASX 200 flat up four points to 5121 (+0.07%) on stronger commodity prices and the global miners strengthening in London, says IG Markets analyst Evan Lucas:
- Gold, copper and aluminium all rose in London and should bode well for the materials space after several poor performances.
- BHP’s ADR [traded in New York] is suggesting it will follow the leads with the stock set to add 8 cents to $35.75 (0.22%).
- Gold plays should also see a slight bounce today on the back of an $US11 rise in the precious metal overnight.
- Once more it will be the defensive stocks that will draw attention after most lost ground yesterday; watch for buying in consumer staples and telecommunications.
Some analyst rating changes:
- Atlas Iron raised to outperform at Credit Suisse
- Westpac cut to equalweight by Morgan Stanley
- OZ Minerals raised to outperform from neutral at CIMB
- Oil Search rated new outperform at CIMB
- Santos rated new neutral at CIMB
- Woodside rated new underperform at CIMB
For a comprehensive look at how markets performed overnight and what you need to know before the start of trade, click here. These are the key numbers:
- SPI futures are 9 points higher at 5123
- The $A is higher at $US1.032
- In New York, the S&P500 lost 0.24% 11552.48
- In Europe, the FTSE100 rose 0.11% to 6510.62
- China iron ore lost 70 US cents to $US143.40 a metric tonne
- Gold added 0.05% to $US1593.5 an ounce
- WTI crude oil added 48 US cents to $US92.54 a barrel
- Reuters/Jefferies CRB index added 0.33% to 295.70