Markets Live: Caution reigns as QE3 hopes fade
Australian shares finish modestly higher as investors snap up some oversold miners, but doubts linger if China's stimulus can sustain commodities demand while initial relief over Spain's budget announcement faded.
- Alesco and Dulux reach takeover deal
- The dollar jumps on China share stimulus
- Protests can't stop Spain's austerity push
4.54pm: As Bugs Bunny used to say, "That's all Folks". We'll be back Monday, despite public holidays in some states, so be sure to tune in from 9.30am.
4.48pm: Federal Labor’s plan to lower corporate taxes is in turmoil, with big business bluntly rejecting the government’s options for funding a cut in the company tax rate.
After a previous attempt to cut corporate taxes was derailed in the Parliament, the government has been offering a tax cut on the condition that they are funded by the removal of business tax breaks.
To fund the 5 percentage point cut recommended by former Treasury Secretary Ken Henry, businesses would have to give up tax breaks worth up to $9.1 billion a year.
But the Business Council of Australia today said it would not support any of the options for funding lower company taxes, which it said risked doing more harm than good.
4.30pm: Here's a snapshot of how blue chip stocks performed today:
- BHP: +0.06%
- Rio: -0.4%
- ANZ: +0.3%
- CBA: -0.1%
- NAB: +0.2%
- Westpac: +0.2%
- Fortescue: -0.9%
- Wesfarmers: -0.9%
- Telstra: flat
4.20pm: Futures for the Euro STOXX 50 were up 0.8 per cent, London’s FTSE is up 0.4 per cent, while contracts on Germany's DAX and France's CAC were up 0.7 per cent,
While in the US, futures for the Dow Jones and S&P500 indexes are up around 0.1 per cent.
4.16pm: Gold miners led the gains, adding 3.1 per cent. The materials sector rose 0.4 per cent, energy was up 0.3 per cent and health also gained 0.3 per cent. Consumer staples and IT bucked the trend, falling 0.9 and 0.5 per cent respectively.
4.12pm: Shares have finished modestly higher extending yesterday’s small gains. The benchmark S&P/ASX200 index added 2.8 points, or 0.1 per cent, to finish at 4387, while the broader All Ords rose 3.5 points, or 0.1 per cent, to 4406.3.
2.54pm: The end of another yo-yo week for markets, not sure if up is on the up or down is down down, or going up. I’m getting confused just thinking about. Here's Michael Pascoe to shed some light on the week that was.
Please note: To view this video - turn off the auto-refresh.
3.40pm: After more than three years of talks with regulators, Australia’s banks were this afternoon issued with the final version of the tough new rules surrounding capital which are scheduled to be rolled out around the world from next year.
The rules, known as Basel 3, are designed to prevent a repeat of the banking crisis that swept the world during the financial crisis, by boosting the level as well as the quality of regulatory capital sitting on bank balance sheets.
3.33pm: As we near the end of trading for not only the day, but also the quarter, here’s what CMC Markets senior trader Tim Waterer had to say about today’s movements:
- Non-defensive assets have enjoyed a reversal of fortunes late in the week, with traders thankful for ‘small mercies’ such as the Spanish budget result. While the budget result from Spain was undoubtedly a step in the right direction, we are still far from reaching the ‘End Game’ on the entire Eurozone saga. Investor spirits may be buoyed momentarily but the budget result could soon be forgotten if Spanish yields start escalating again.
- With the emergence of some good news stories in recent days, the US Dollar has given way to higher commodity prices. Gold is now appearing primed for a run towards US$1800 and it could get there either through a continuation of the general bounce in commodities or via an inflation-hedge trading approach. Given that gold can be pushed higher via either of two different trading strategies it would almost appear that a move north of $US1800 is more a case of ‘when’ not ‘if’.
- Trading appeared to be largely of the non-committal variety on the Australian sharemarket to end the week, with investors appearing unconvinced by the rally on US equities. With more time having elapsed since news of the Spanish budget was first announced, our market seemed to have a more measured reaction as evidenced by the trading pattern of the ASX200 today which was anything but jubilant. The fact that the Australian market did a u-turn yesterday to end higher also contributed to the indifferent showing of the local market today.
3.21pm: Where has all the volatility gone? the Financial Times asks:
Given all the pitfalls ahead – the US “fiscal cliff”, the risk of a hard landing in China and the unresolved eurozone debt crisis, it would be understandable if financial markets were still topsy-turvy. But, even after Wednesday’s losses, most gauges of expected and actual turbulence are signalling a calmer outlook.
The Vix index is the most closely watched yardstick of expected volatility of global stock markets. It reflects the cost of buying short-term options on the S&P 500, which pay off if stocks move significantly over the next 30 days.
Its reputation for quickly reflecting the mood of markets has earned it the moniker “Wall Street’s fear gauge”. But even after edging up this week, the Vix is still relatively relaxed at 16.8 points, close to levels last seen before the financial crisis.
In stock markets, it partly reflects the fact that investors have continued to pull money from equity funds in favour of bond products. But the primary, overarching explanation for the apparent stability across most markets is the wave of intervention by central banks, investors and strategists say.
3.11pm: NBN Co has lodged a new ‘’special access undertaking’’ with the competition watchdog, a key milestone in setting up the network that sets prices and sale conditions. It now expects to freeze prices until 2017 and keep future price increases below inflation.
This is the second undertaking lodged by NBN Co and comes after dozens of consultation meetings with the telecommunications industry and NBN Co’s future customers – internet service providers.
If accepted by the Australian Competition and Consumer Commission, the undertaking will set out for 30 years the commercial and legal conditions under which telcos access the national broadband network.
3.03pm: Here's something a little lighter from the small business desk:
With Friday afternoon drinks fast approaching, blogger James Adonis has a pertinent question for you: are you a work flirt?
2.50pm: As the third quarter of 2012 comes to an end, we've put together some interesting statistics to show how the Australian sharemarket, major sectors and the Australian dollar have performed. For comparison we've added in the two previous quarters from this year.
Please note: Q3 is subject to change as the quarter finishes at close of trade today.
Q3: +7.28%, or 297.967 points, to 4392.6
Q2: -5.55%, or 240.609 points, to 4094.633
Q1: +6.87, or 278.681 points, to 4335.242
Q3: +2.74%, or 2.79 cents, to $US1.0463
Q2: -2.05%, or 2.13 cents, to $US1.0184
Q1: +2.23%, or 2.27 cents, to $US.10397
Q3: +5.3%, or 501 points, to 9947.7
Q2: -14.02%, or 1540.1 points, to 9446.7
Q1: +4.71%, or 494.2 points, to 10986.8
Q3: +9.45%, or 391 points, to 4529
Q2: -0.99%, or 41.4 points, to 4138
Q1: +7%, or 273.4 points, to 4179.4
Q3: +4.47%, or 531.9, to 12433.8
Q2: -15.82%, or 2237.5 points, to 11901.9
Q1: +10.96, or 1396.2 points, to 14139.4
2.37pm: Virgin Australia’s chief executive, John Borghetti, has scored a 45 per cent rise in his pay package to $4.07 million, easily beating what his counterpart at Qantas, Alan Joyce, received this year.
The airline’s annual report, released today, shows Mr Borghetti’s package included $1.29 million in base pay, $1.16 million in short-term cash bonuses and $1.37 million in long-term share-based payments. His total remuneration of $4.07 million compared with $2.81 million in 2010-11.
Virgin swung to a $22.8 million net profit for the year to June, from a $68 million loss previously, helped by an increase in share of the lucrative business travel market.
In contrast to his opposite, Mr Joyce’s pay package this year totalled $2.28 million, compared with just over $4 million in the prior year, after he turned down his bonus entitlements.
Qantas posted a $244 million net loss this year, from a $249 million profit previously, due to the cost of a long industrial dispute and fleet grounding, and a restructuring of its international operations.
2.26pm: Japan's Sharp confirmed it had won a $4.6 billion bailout led by Mizuho Financial Group and Mitsubishi UFJ Financial Group, a deal that ends Sharp's immediate debt crisis but fails to resolve doubts about its future.
Sharp said it has signed syndicated loan agreements with Mizuho and Mitsubishi UFJ for a 180 billion yen term loan and a loan facility of an equal amount.
The two banks will invite other lenders to join a syndicate to spread the risk, with life insurer Resona Holdings likely to join, a banking source told Reuters on condition of anonymity. Many other financial institutions are cautious because of continued worries about Sharp's future.
2.18pm: Australian credit grew at a snail’s pace for the third month in a row in August.
Total credit provided to the private sector by banks and other lenders rose by 0.2 per cent in August after rises of 0.3 per cent in June and 0.2 per cent in July.
Over the year to August, total credit rose by 4.1 per cent, figures from the RBA show.
A year earlier, the annual growth rate was 3.0 per cent, but the acceleration from one year to the next appears to have stalled.
2.12pm: The head of the former Centro Properties Group was paid $3 million in the final five months of the shopping centre owner’s operation.
Centro was one of Australia’s highest-profile casualties of the global financial crisis, succumbing to massive debts due mainly to its exposure to the US market.
It underwent a complicated restructure to eventually become Centro Retail Australia in December 2011, with a sole focus on Australian shopping centres.
The chief executive of Centro Properties Group, Robert Tsenin, went on to serve as interim chief executive of Centro Retail Australia before Steven Sewell was appointed in February 2012.
2pm: Are Australians getting richer, or poorer? Yesterday’s release by the Australian Bureau of Statistics of the nation’s quarterly financial accounts brought two rival interpretations. And both of them are correct.
Yay, we’re richer!
In one of those extraordinary revisions which remind us not to take statistics too literally, the Bureau quietly and without any explanation suddenly multiplied sevenfold its estimate of the wealth that households own in unlisted shares, writes Tim Colebatch.
1.39pm: Asian markets are mostly higher as eurozone debt concerns ease after Spain unveiled budget cuts that are expected to pave the way for a bailout.
Hong Kong has added 0.25 per cent, Shanghai is up 0.10 per cent and Seoul has risen 0.20 per cent. Tokyo is down 0.34 per cent.
1.20pm: And here it is... Shareholders of Singapore's Fraser and Neave (F&N) have voted in favour of selling the conglomerate's beer business, Asia Pacific Breweries (APB), to Heineken in a $6.3 billion deal, Reuters reports.
The vote formally ends a two-month battle between Heineken and companies linked to Thai beer baron Charoen Sirivadhanabhakdi for the control of the Tiger beer maker. The Thai firms, collectively the biggest shareholder of F&N, had previously offered to take over APB.
The approval was a formality after Charoen's firms, including Thai Beverage, said last week they would vote in favour of the sale of F&N's 40 per cent stake in APB to the Dutch brewer.
The Thai group, which owns a combined 30.7 per cent stake in F&N, is now making a $7.2 billion bid to take over the Singapore conglomerate, which also has interests in soft drinks, dairy products, property and publishing.
1.14pm: Heineken's takeover of the maker of Tiger Beer has been approved. We'll have more on this story later.
1.01pm: Easy Forex currency dealer Tony Darvall says the dollar has moved only slightly after rallying last night. It's now at $US1.0465.
‘‘There is a lot of indecision about where we are going and a lot of people taking profits so the market’s range isn’t very long,’’ he says.
The currency moved higher on reports the Chinese government is preparing to announce stimulus measures.
A news report from the Shanghai Securities News has speculation the Chinese government will announce 10 measures to support equities.
12.47pm: About 50 workers will lose their jobs when a Victorian car parts supplier closes its doors in the latest blow to the state’s beleaguered automotive industry.
A prospective buyer for the CMI Industrial factory in Ballarat has pulled out of the deal and it is now set to close around late November.
The factory’s 51 employees will lose their jobs. CMI’s operations in Victoria are being wound down, with a site in Horsham already closed, and two factories in Melbourne due to shut in October, putting a further 148 workers out of a job.
12.35pm: Climate change is occurring and is largely caused by human activities, Rio Tinto’s head of coal in Australia, Bill Champion told a Brisbane conference this morning.
In a speech on sustainable development and mining, Champion said the ‘‘scale of the necessary emissions reductions and the need for adaptation, coupled with the world’s increasing requirements for secure, affordable energy, create large challenges which require worldwide attention’’.
Rio Tinto has factored a carbon price into its investment decision-making for the past 10 years, Champion said.
‘‘We support a co-ordinated global approach to reduce emissions. Until that is in place, as well as after, we recognise that it will be necessary for individual jurisdictions to take actions.
‘‘We recognise the value of action on climate change.
12.27pm: As the market edges higher, gold miner Newcrest is the biggest contributor to the ASX's gains, up 3.4 per cent. Holding the index back are Wesfarmers, down 0.9 per cent, and Iluka Resources, down 5.4 per cent.
12.24pm: Holden will reduce production at its Elizabeth assembly plant in response to sagging market demand, stopping work for a ‘‘small number’’ of days between now and the end of year.
So far this year demand for Holden cars is down 10 per cent in a total market that is running 9.4 per cent ahead compared to the same time in 2011.
Sales of the locally made Holden Commodore are down by almost 27 per cent while demand for the Cruze, also built at Elizabeth, is down by 7.7 per cent.
12.21pm: Third-quarter loan volume has been hit by a lack of deal flow as borrowers were held back by concerns about the overall health of the market and unresolved issues in Europe.
Total volume for the September quarter was $US11 billion, down 65 per cent from $US31 billion a year ago. For the first three quarters combined, volume plunged to $US47 billion compared with $US75 billion for the same period last year - a drop of 37 per cent.
"Underlying activity remains very modest. All the activity around refinancing that took place in the second half of last year has meant that what was earmarked for 2012 has largely been done," said Sean Sykes, head of loan markets for New South Wales and Queensland at Commonwealth Bank.
Refinancing continues to be the market mainstay, while conditions for merger and acquisition activity remain soft on concerns about the continuing debt crisis in Europe, the slowdown in China, and weak recovery in the United States.
12.18pm: The dollar has just scaled the day's high, at $US1.0465, as the market's mood lifts.
12.15pm: Ratings agency Fitch has cut its 2012 growth forecasts for China to 7.8 per cent, from 8 per cent, and India to 6 per cent, from 6.5 per cent.
Both regional giants face a deteriorating global growth outlook with diminished willingness or capacity to respond with domestic policy loosening, compared with 2009.
Slower exports are weighing on China's growth, but Fitch says the slowdown also reflects the authorities' efforts to squeeze consumer and house-price inflation out of the system after the strong credit-led stimulus of 2009-10.
Fitch expects slowing construction activity to knock about 0.8 percentage points (pp) off China's growth in 2012.
12.10pm: Private credit grew 0.2 per cent in August, matching July's rise and chalking up a plus of 4.1 per cent for the year.
Annual growth in housing credit has been running around 5 per cent for months, a marked change from the double-digit pace of the previous decade. Personal credit has been subdued as households chose to save more and borrow less.
Growth in business credit had picked up in the last few months having been negative for much of 2011, though now it seems to be losing steam again.
12pm: Stocks, meanwhile, are trading just below their starting point for the session. The ASX200 is down just 2.9 points, or 0.1 per cent, at 4381.3 and the dollar is steady at $US1.0454.
11.55am: The MySmallBusiness.com.au Ask Our Experts Q&A is sparking some interesting questions. Today expert Guy Ward speaks about the potential risks of buying into a franchise.
11.50am: Oil has climbed for a second day and is heading for the biggest quarterly gain this year.
Oil has rebounded since closing below $US90 a barrel for the first time in almost two months on Wednesday, and surged yesterday as Spain pledged to cut its deficit to ease Europe’s debt crisis.
“We’re seeing a better demand scenario,” says Michael McCarthy, a chief market strategist at CMC Markets. “The market is slowly coming around to the view that Europe, while it still could be a drag on global growth, is unlikely to implode. That dip below $90 hit key support.”
11.40am: Commonwealth Securities market analyst Steven Daghlian says Spain’s budget has been well received in the US, but Australian investors are still wary of how Spain, Europe’s fourth biggest economy, will affect the health of the eurozone.
‘‘In the past it wouldn’t have had a big impact at all,’’ he says.
11.30pm: Just over one third of retailers, or 38 per cent, have a Facebook page while 47 per cent don't have one and don't plan to get one within the next year, according to data compiled by web analytics firm Experian. More than half, 54 per cent, don't use Twitter and don't plan to in the next year, either.
But female-focused social media site Pinterest has induced the biggest yawn, with 72 per cent of retailers saying they have no interest in the site, according to the survey. The data was drawn from research from 300 Australian marketing professionals from business-to-business and business-to-consumer sectors, commissioned by Experian.
11.15pm: Unity Mining boss Andrew McIlwain has kept his pledge to launch a merger or acquisition before Christmas, with the Melbourne-based company today merging with fellow gold player Cortona Resources.
The two Australian gold miners announced plans to merge this morning with Cortona shareholders to get 0.734 Unity shares for each Cortona share they hold.
Shares in Unity were a cent higher to 14 cents, while Cortona shares were also about one cent higher at just over 9 cents per share.
11.06pm: US regulators punished two more firms for excessive speculation in cotton markets during one of the most tumultuous periods in the contract's history, tagging ANZ and JP Morgan with fines totalling nearly $US1 million.
In the latest sign that the US Commodity Futures Trading Commission is cracking down on trading limits in futures markets, JP Morgan agreed to pay $US600,000 for exceeding position limits in the cotton market in September and October 2010, one of the agency's largest civil penalties ever for position limits violations.
Earlier in the day it said Australia and New Zealand Banking Group would pay $US350,000 for exceeding limits in the CME Group's Chicago Board of Trade wheat futures contract on multiple occasions in August 2010, and in IntercontentalExchange cotton futures in February 2011.
"These breaches of CFTC regulations were inadvertent, technical in nature and confined to a small number of transactions. However, ensuring we are compliant with regulations is a key priority in every part of ANZ," ANZ Chief Risk Officer Nigel Williams said in a statement.
10.53am: Also on Japan, the nation's jobless rate decreased to 4.2 per cent last month from 4.3 per cent in July, according to a separate report.
Entrenched deflation may increase pressure on the central bank to ease further after unexpectedly expanding its asset-purchase fund last week.
The decline reported today compares with a Bank of Japan forecast for a 0.2 per cent increase in prices in the fiscal year that started in April and a 0.7 per cent gain in the following 12 months.
10.49am: There's some fresh data out of Japan today. Japan’s consumer prices fell 0.3 per cent in August from a year earlier, matching the steepest decline in 16 months as the central bank remains distant from a 1 per cent inflation target.
The decline in prices excluding fresh food, reported by the statistics bureau in Tokyo today, was the same as the median estimate in a Bloomberg News survey of 26 economists.
10.44am: Now for the early gainers on the ASX200:
- Intrepid Mines: +6.45%
- Oceanagold: +4.32%
- Kingsgate: +3.93%
- Saracen Mining: +3.33%
- Beadell Resources: +3.24%
- Mineral Deposits: +3.2%
10.40am: Here's how the big miners are faring in early trade:
- BHP is 0.21% lower to $32.95
- Rio is 0.58% lower to $53.28
- Fortescue is 0.57% lower to $3.50
10.35am: The slide on local markets has now touched 0.4 per cent now. One contributing factor could be a major Chinese steelmaker halting production at a loss-making plant, and expressing doubt that government attempts to stimulate the slowing economy would revive demand for metal. The miners are down but not sharply.
10.33am: BREAKING Building products group Alesco has recommended a takeover offer from paint maker DuluxGroup after reaching agreement with its suitor.
Alesco said today the two companies had agreed that Alesco may pay its shareholders a special dividend of 27 cents per share on top of DuluxGroup’s offer if DuluxGroup takes a 90 per cent stake in Alesco.
10.28am: China is scheduled to release its closely followed manufacturing purchasing managers index on Sunday, with economists predicting a reading of 50, the level that divides contraction from expansion.
A similar private index from HSBC and Markit Economics is due for release tomorrow. The data may increase pressure on Chinese Premier Wen Jiabao to try to boost growth ahead of the transfer of power to a new Communist Party leadership that begins later this year.
10.24am: Here are the early sliders on the ASX200:
- Iluka Resources: -4.90%
- SMS Management & Technology: -4.21%
- Sandfire Resources: -2.36%
- Fairfax: -2.3%
- Reject Shop: -2.13%
- Seven Group Holdings: -2.11%
- Transfield: -1.99%
10.17am: All but one sector trading trading lower on the ASX200. Health is flat::
- Health: -0.77%
- Info tech: -0.64%
- Consumer staples: -0.58%
- Utilities: -0.39%
- Financials: -0.29%
10.12am: In early trade, the All Ordinaries index is 10.8 points lower, or 0.2 per cent, to 4392.0, while the benchmark S&P/ASX200 is 12.8 points lower, or 0.3 per cent, to 4371.4.
10.07am: Early take - shares edge lower as markets open. Down 0.1 per cent in early trade.
9.57am: Shares in Sundance Resources have been placed in a trading halt ahead of an expected announcement from its Chinese suitor Hanlong Mining.
Sundance requested the trading halt today ‘‘pending an announcement on Hanlong’s financial commitment obligations’’ under its revised takeover offer.
Sundance said it expects an announcement will be made before the open of trade on the Australian Securities Exchange on or before Tuesday.
9.55am: Leading businessman and long-serving Woolworths chairman James Strong will retire from his role at the supermarket chain’s helm in November.
Mr Strong has been on the Woolworths board for 12-and-a-half years, and has served as its chairman for more than 11 years.
He will step down at the Woolworths annual general meeting to be held on November 22.Mr Strong will be replaced by Woolworths director Ralph Waters, who has been on the company’s board since January 2011.
9.54am: Australian bond futures prices are lower on positive sentiment surrounding Spain’s 2013 budget and rumours of Chinese stimulus.
CMC Markets chief market strategist Michael McCarthy said speculation the Chinese government would take steps to support the country’s weak stock market saw investors move away from safe-haven assets like bonds overnight.
At 8.30am on Friday, the December 10-year bond futures contract was trading at 97.035 (implying a yield of 2.965 per cent), down from 97.085 (implying a yield of 2.915 per cent) on Thursday. The December three-year bond futures contract was at 97.600 (2.400 per cent), down from 97.650 (2.350 per cent).
9.50am: Caltex Australia has confirmed it will close its Kurnell refinery in Sydney in the second half of 2014 after discussing the proposal with staff and unions.
The company announced on July 26 it planned to convert the Kurnell refinery into a fuel import terminal, in response to financial pressures caused by cheap labour costs and newer, larger and more efficient refineries in Asia.
9.47am: Local miners may see some support today from copper prices, which rose on hopes that demand from the metal's top consumer China could recover by the end of the year.
Benchmark copper on the London Metal Exchange (LME)rose from two-week lows hit in the previous session to close at $US8175 a tonne from a close of $US8120.
China iron ore was flat at $US104.20 per metric tonne in overnight trade, but the big miners rose on Wall Street following the China cash boost. BHP added 2.18 per cent and Rio gained 1.32 per cent.
9.43am: Spain has pushed through 20 billion euros of fresh austerity measures in the teeth of recession, despite violent protests across the country and separatist crises in Catalonia and the Basque region that threaten to break the country apart.
The government announced a detailed timetable for economic reforms and a tough 2013 budget based mostly on spending cuts overnight in what many see as an effort to pre-empt the likely conditions of an international bailout.
The move saw Spanish 10-year bonds advance, snapping their biggest decline in almost two months, and Italian yields ease:
- Spanish 10-year yields dropped 12 basis points to 5.95%
- Italian 10-year bond yields fell nine basis points to 5.12%
9.38am: Stocks looks set for flat start despite gains on offshore markets overnight. Australian shares advanced yesterday after China's central bank announced a $55 billion cash injection into money markets, and that flowed through to the European and US sessions.
Offshore investors also welcomed news that Spain would push through a detailed timetable for economic reforms and a tough 2013 budget based mostly on spending cuts on Thursday in what many see as an effort to pre-empt the likely conditions of an international bailout.
For a comprehensive look at this morning’s business news, check today’s need2know. Here is this morning’s key market data:
- The SPI was 2 points higher to 4388
- The $A was trading at $US1.042
- In the US, the S&P500 added 0.96% to1447.15
- In Europe, the FTSE100 added 0.2% to 5779.2
- Gold added 1.4% to $US1776.50 an ounce
- WTI crude oil added $US1.87 to $US91.85 a barrel
- RJ/CRB commodities index 1.18% to 307.33
9.35am: Good morning folks. Welcome to the Markets Live blog for Friday.
Contributors: Thomas Hunter, Jens Meyer, Peter Litras
This blog is not intended as investment advice
BusinessDay with agencies