That's all from us here at Markets Live, have a good evening.
The Reserve Bank is overwhelmingly expected to keep the cash rate on hold at a record low of 2.5 per cent, but retain an easing bias as it continues to call for a lower exchange rate.
"We do not think the bank will repeat the governor's threat of large-scale FX intervention in the rate announcement, although it is likely to make noises about how a lower exchange rate can help as the economy copes with the end of the boom in mining investment," said Barclays chief economist Kieran Davies.
Commonwealth Bank economists added that the Reserve Bank had to continue balancing its desire for a weaker Australian dollar with the risk of overstimulating the housing market.
"A soft labour market and low inflation means the RBA has an easing bias," the economists said in a note. A lower Australian dollar is the policy preference and the Australian dollar has recently fallen to near 90 US cents. We expect the cash rate to be held at 2.5 per cent."
Qantas has forged a code-share deal with Asia's largest airline, China Southern, as both carriers seek to funnel more passengers from Australia and China onto their respective networks.
The tie up comes as Prime Minister Tony Abbott sought to downplay expectations the federal government will shore up Qantas' deteriorating financial position by buying a stake in the national airline or guaranteeing its debt.
Mr Abbott said the government’s principle role was to "ensure that we’ve got a strong and competitive aviation sector", and pointed out that Qantas chief executive Alan Joyce had yet to settle on a specific proposal to put to federal politicians.
‘‘We need Qantas to, I guess, settle on what it wants. Maybe it wants to see the restrictions on ownership lifted,’’ he told Brisbane radio station 4BC.
‘‘I’m not sure that they really want to see a new government shareholding. And the trouble with providing a government loan guarantee is that where does it stop?’’
Qantas. Photo: Getty Images
Here's how the sectors fared:
- Property trusts: -2%
- Consumer discretionary: -1.1%
- Financials: -1%
- Industrials: -0.9%
- Materials: -0.8%
- IT: -1.4%
- Utilities: -0.8%
The market has closed lower, with the benchmark S&P/ASX200 falling 40.5 points, or 0.8 per cent, to 5279.5. The broader All Ords lost 40.8 points, or 0.8 per cent, to 5273.5.
ASIC chairman Greg Medcraft has blasted recent criticism of the corporate regulator as a "smear" on its staff and the agency's "good work" ahead of a Senate inquiry into its operations.
In fiery comments made via YouTube, Mr Medcraft said ASIC had "much to be proud of" in its enforcement work. He defended his frequent overseas travel as necessary in his role as the chair of International Organisation of Securities Commissions (IOSCO).
"Recent media reports have tried to cast doubt on ASIC's good work and smear our staff and culture. These reports coincide with a Senate inquiry into our performance," he said.
Mr Medcraft said the agency was co-operating fully with the inquiry, which was called in the wake of a Fairfax Media expose of a major financial scandal inside the Commonwealth Bank.
ASIC had been tipped off about problems inside the CBA's financial planning division but had failed to act as pensioners and investors lost their life savings.
ASIC chair Greg Medcraft has defended the performance of the agency and the amount of international travel has has undertaken in the role. Photo: Jim Rice
December is usually a good month for stocks so what are the chances of another Santa Rally? asks IG’s Chris Weston:
- Despite local data dumop and an RBA rates decision, it’s the Fed that ultimately occupies the world’s attention this week and thus while manufacturing and services ISM, Q3 GDP (revision) and ADP private payrolls will be closely followed as part of the taper puzzle, it will be the Friday non-farms which could really see the markets consensus of a March taper being tested.
- My feeling is that the greater volatility will be seen in the long end of the US curve, while the USD will probably find greater upside against the AUD and NZD on good data, given we have already started to see big cracks appearing in many emerging market assets.
- The interesting aspect is the steeping of the US curve, with the short end largely unaffected by the recent moves in fixed income. The Fed funds rate is still only pricing in 52 basis points of hikes by December 2015, which hasn’t really reacted at all of late, so clearly the market is of a firm belief that the Fed will taper soon, but has offset that with changes to the unemployment threshold for raising the Fed funds rate.
- This is a net positive for stocks, hence why I feel why the long S&P 500 and short ten-year treasuries will work well from here. It’s probably worth pointing out that the S&P 500 has rallied for the past five consecutive Decembers - and seven of the last nine - so like Australia it’s generally a good time of year to be long on stocks.
- However, whether the market is still upbeat if there is an increased (and wildly out of current consensus) assumption of a tapering announcement in mid-December is certainly debateable.
Treasurer Joe Hockey says the rating agencies have queried about Australia’s debt ceiling. Hockey was speaking in parliament.
In late October, one of the leading rating agencies, Fitch, said it did not expect the debt ceiling hike to $500 billion to threaten Australia's AAA-rating.
The credit rating agency said while the hike was a "significant increase in comparison with recent adjustments", "it does not constitute a loosening of fiscal policy or an imminent jump in the debt burden".
But the agency's analysts had added that "the absence of any deep ideological divide between political parties on core aspects of fiscal management is a key factor underpinning Australia's strong sovereign credit profile".
Australia is one of only a handful countries in the world that still has a triple-A rating from all the rating agencies.
Australia’s economic growth isn’t losing pace and might have even picked up a little as the non-mining sectors of the economy start to recover.
The Australian Bureau of Statistics’ (ABS) national accounts figures, to be released on Wednesday, are expected to show that gross domestic product (GDP) grew 0.7 per cent in the September quarter, according to an AAP survey of 13 economists.
In the June quarter, GDP growth was 0.6 per cent.
HSBC chief economist Paul Bloxham said the nation’s economic growth was showing signs of rebalancing away from one that was heavily driven by mining and resources investment.
‘‘Low interest rates are lifting the established housing market and this month brought more evidence that the upswing in residential construction is picking up pace,’’ he said.
‘‘Helpfully, despite slowing down, mining investment has not yet fallen away sharply and it has levelled out which is allowing more time for growth to rebalance.’’
Some more on today's eco data dump, and specifically on company operating profits, which rose a larger-than-expected 3.9 per cent in the third quarter.
The period of weak income growth that characterised the domestic economic landscape over late 2012‑13 appears to be easing slowly, which is positive for the nominal GDP story, says CBA economist Diana Mousina:
- Profits over QIII look like they have received an upwards boost from a lower Aussie dollar. While the AUD (on a trade‑weighted index basis) was largely flat over QII‑QIII, the prior depreciation (over QII) looks to have had a lagging effect on company profits.
- Despite the doom and gloom reported about the mining and manufacturing sectors, both recorded the strongest increase in profits in QIII, rising by 8.1% and 22.6% respectively.
- It’s interesting to note that while manufacturing profits increased solidly in QIII (17.7%pa), production and inventories actually fell in the quarter. So it looks like manufacturers do have some pricing power on their stock.
- The profits release also contains wages data. Nominal wages and salaries rose by 0.7% in QIII (3.1%pa) which is in line with what the employment and wage figures had been indicating. Wages growth has slowed down on the back of a soft labour market and elevated job security concerns. Soft wages growth is a drag on consumer spending.
- The 0.5% fall in inventories following a rise in the previous quarter translates into a detraction from GDP growth. Inventories look like they will detract 0.4ppts from QIII growth.
- The business indicators data allows us to update our GDP forecast. Our preliminary forecasts for QIII GDP growth remain unchanged at 0.6%‑0.8% (2.4%‑2.6%pa). Following the rest of the partial data tomorrow, we will publish our final GDP forecast.
This one is a bit out of left field, but should it work, it could result in fewer delivery jobs in the future.
Amazon boss Jeff Bezos has revealed his company is looking to the future with plans to use ‘‘octocopter’’ mini-drones to fly small packages to consumers in just 30 minutes.
The US retail giant’s ambitious project still requires additional safety testing and federal approval, but Bezos estimated that Amazon ‘‘Prime Air’’ would be up and running within four to five years.
A demo video posted on the company’s website on Sunday showed the tiny robotic devices picking up packages in small yellow buckets from Amazon’s fulfilment centres and then whizzing through the air to deliver the items to customers just 30 minutes after they made their purchase on Amazon.com.
‘‘I know this looks like science fiction. It’s not,’’ Bezos told CBS television’s 60 Minutes program.
‘‘We can do half-hour delivery... and we can carry objects, we think, up to five pounds (2.3 kilograms), which covers 86 per cent of the items that we deliver.’’
The mini-drones are powered by electric motors and could cover areas within a 10-mile (16-kilometre) radius of fulfilment centres, thus covering a significant portion of the population in urban areas.
They operate autonomously and drop the items at the target locations thanks to GPS coordinates transmitted to them.
ANZ continued to charge customers fees to raise revenue under a different name to avoid scrutiny from the financial watchdog, a court has heard.
More than 185,000 customers have signed on to a class action against the bank to recover fees they argue are unfair penalties. The case - the first of its kind against a major bank after a High Court decision paved the way last year - began in the Federal Court today before Justice Michelle Gordon.
Michael Lee, SC, for the customers, said in his opening address that the bank had re-named its exception fees service fees.
In 2008, changes to a law governing ASIC's powers were introduced, proposing that banks' exception fees were limited to cost recovery.
Mr Lee read out sections of a range of high-level internal ANZ documents detailing the bank's plans to change the name of its exception fees to a "fee for service".
The Australian dollar has hit the day's high on the news out of China, jumping as high as 91.63 US cents from under 91.20 US cents before the announcement.
China's factory activity maintained steady growth momentum in November, boosted by resilient new orders, though the pace of expansion eased slightly from October, a private survey showed on Monday, keeping intact expectations that the economy is on a stabilising path in the last quarter of the year.
The final HSBC/Markit Purchasing Managers' Index (PMI) came in at 50.8 in November, down from 50.9 in October but improving from a preliminary reading of 50.4.
"China's manufacturing sector kept relatively steady growth momentum in November, as the final manufacturing PMI was revised up from the flash reading on the back of faster new business gains," said Hongbin Qu, chief China economist at HSBC.
"The renewed contraction of employment and the slower pace of restocking activities call for a continuation of accommodative policy," he added.
A sub-index measuring new orders hit an eight-month high of 51.7 in November from 51.5 in October, while new export orders dipped to a three-month low, showing fresh demand in the vast factory sector was mainly created by domestic economy.
The overall figure remained above the 50 line which demarcates expansion from contraction for a fourth consecutive month, suggesting China may have managed to engineer a recovery needed to push through long-awaited structural reforms.
China's official PMI released on Sunday put manufacturing growth at 51.4, unchanged from October and ahead of market expectations for a reading of 51.1.
Here's quick wrap on the data we have out today:
- Australian Industry Group's manufacturing index for November: slipped by 5.4 points to 47.7 last month, a return to pre-election levels.
- RP Data-Rismark October house prices index: dwelling values edged up by 0.1 per cent in November following increases of 1.6 per cent in September and 1.3 per cent in October.
- TD Securities-Melbourne Institute inflation gauge for November: inflation grew by 0.2 per cent last month after a 0.1 per cent rise in October. In the year to November, inflation lifted by 2.4 per cent, above previous 2.1 per cent annual readings.
- New home building approvals for October: fell 1.8 per cent for the month, with the year to October recording a strong 23.1 per cent lift, figures from the Bureau of Statistics show.
- Company gross operating profits: grew 3.9 per cent in the September quarter as the seasonally adjusted estimate for wages and salaries rose 0.7 per cent, new Bureau of Statistics figures show.
So how's the Australian dollar doing after the raft of economic data out this morning?
The local currency ended last week at 91.07 US cents and rose slightly above 91.35 US cents in early morning trade.
It remained steady around 91.30 US cents despite new data showing some weakness in the manufacturing sector in November after two months of expansion.
But it briefly slipped below 91.10 US cents following only slight growth in house prices - 0.1 per cent - across eight capital cities in November.
The currency tend lifted to a day's high of 91.36 US cents, after Bureau of Statistics data showed a smaller-than-expected declined in new home building approvals in October and stronger-than-expected growth in company profits.
Currency strategists say they expect the Reserve Bank to continue to talk down the dollar at its board meeting tomorrow, despite it losing 3.7 per cent of its value last month.
The Australian dollar started November at 94.56 US cents but ended the month at 91.07 US cents after a period of intense jawboning by the RBA, and amid increasing Chinese interest rates and rising expectations of a near-term Fed tapering.
So, is GrainCorp worth snapping up after the sharp sell-off in the wake of the federal government blocking the $13.20 a share takeover offer from Archer Daniel Midlands from the US?
Maybe think again, according to Bell Potter analyst Jonathan Snape, who has slapped a ''sell'' recommendation on the shares:
- GNC enters FY14 with below average carry-in tonnage (2.3 million tonne vs 4.3 million tonnes in FY13), lower year-to-date upcountry receivals (down 24 per cent year-on-year) and a fading export profile at the tail end of FY13.
- NPAT looks poised to deteriorate 25 per cent from FY13 levels, which itself was down 24 per cent from record FY12 levels.
- With the ADM bid now effectively on hold, we expect the market to focus on what is a deteriorating operating environment for GNC and cut our rating from "hold" to "sell".
GrainCorp shares are down 2.1 per cent at $8.135, after losing nearly a quarter in value on Friday.
Local councils that lost millions of dollars on investments with Lehman Brothers have finally reached a conditional deal with liquidators of the failed investment bank.
More than five years after the financial crisis, dozens of councils, churches and charities today passed a significant milestone in negotiations over about $170 million in losses.
The councils have been embroiled in a legal stoush with the investment bank’s liquidators since 2008 after they purchased complex financial products from Lehman that plunged in value.
Today the litigation funder Bentham IMF, previously known as IMF (Australia), said it had reached a conditional settlement with the liquidators that will result in the councils getting back about 50 cents in the dollar.
The settlement, if it is approved by the court, will result in the councils entering into a claims resolution process, in which their losses are individually assessed.
The big banks may be weighing heaviest on the market, but Ausenco is the biggest loser of the day, plunging 42 per cent to all-time lows of 69.5 cents after coming out of a trading halt imposed after the mining engineering group said it will likely breach loan conditions and announced a profit downgrade.
The company also sold shares in an entitlement offer at 70 cents a pop, which was a 34 per cent discount before today's plunge.
Ausenco expectt a 2013 net loss of $35.7 million and has cut its sales forecast to $450 million, from an August target of $490-$520 million for the year, while predicting 2014 sales of $440-$460 million.
And to add to the woes, JPMorgan cut the stock to underweight, from neutral, late last week.
Small lunchtime plug for big changes to the business pages: after more than six years it was time for a facelift to BusinessDay online, and we think the new site looks really good.
Check out smh.com.au/business, theage.com.au/business, canberratimes.com.au/business, watoday.com.au/business or brisbanetimes.com.au/business. While you're there maybe take a look at the new Markets page too.
And let us know what you think.
The big banks and miners are leading the market lower, with CBA suffering the biggest damage:
- ANZ: -0.6%
- CBA: -1.25%
- NAB: -0.4%
- Westpac: -0.6%
"Most of the trading we're seeing is centered on the financials," says Kara Ordway, market maker and trader at City Index. "Investors are looking for tops and we have seen some selling over the past couple of days."
But the big miners are also under pressure, with soft copper prices weighing:
- BHP: -1.1%
- Rio: -0.9%
This year has been a bumper one for many equity markets across the world, but stocks will remain the leaders in growth, according to Morgan Stanley’s 2014 global strategy outlook:
- Equities and corporate bonds are not overvalued, either outright or relative to government bonds. However, we believe we’re in the latter half of the current cycle.
The report picks out Europe and Japan as areas that will be going through important regional transitions, which will drive opportunities:
- In Europe, disinflation and richer valuations make differentiation more important. Japan faces a more challenging transition in 2014, but we remain constructive on the equity market and the JPY remains our favoured DM currency short.
Developed markets are heavily favoured over emerging markets, according to the report, with valuations not yet extreme, leading the bank to believe that emerging markets still face an adjustment:
- However, EM differentiation is an important caveat, even within specific markets.
- For example, we are bullish on China equities due to the positive medium-term impact of the reform agenda, but cautious on China credit due to the near-term adjustment process.
The dollar has risen to the day's high of 91.36 US cents on the back of the stronger than expected building approvals and company profits numbers.
Some more eco data:
- Building approvals in October slipped 1.8 per cent, but that was much better than the 5 per cent slide economists were predicting, coming after a 16.9 per cent jump last month. Over the year, approvals are up 23.1 per cent. The better-than-expected data came from a small decline of 0.3 per cent in approvals for private sector houses, which offset a 2.7 per cent decrease in other dwelling such as flats and townhouses.
- Company profits also came in at a stronger than expected 3.9 per cent in the third quarter, after nudging up 0.4 per cent in the previous quarter.
- Business inventories fell 0.5 per cent to $156.64 billion in the third quarter.
Another month of benign inflation and a contraction in the manufacturing sector aren't likely to increase the low odds of an interest rate cut by the Reserve Bank tomorrow.
Economists are expecting the RBA to keep rates on hold at a record low of 2.5 per cent at its last board meeting of the year, after a strong rise in house prices this year and despite the strength of the Australian dollar.
Inflation grew by 0.2 per cent last month after a 0.1 per cent rise in October, the TD Securities-Melbourne Institute monthly gauged released this morning found, as the price of fruit and vegetables rose but fuel costs slipped.
"The clear signal is that inflation remains benign, well within the lower half of the RBA’s 2 to 3 per cent target range," TD Securities head of Asia-Pacific research Annette Beacher says.
Beacher says despite the soft inflation figures, she does not expect the RBA to ease rates at its December board meeting tomorrow, given the central bank's need to keep the recent rises in house prices in check.
- We expect all forthcoming RBA communiques and speeches to continue talking down the Australian dollar rather than hint at rate cuts. We are of the view that rising house price inflation and the recent spark in credit growth prevents entertaining another cash rate cut.
- While inflation is expected to remain within the bottom half of the RBA band until mid-2014, this is unlikely to be a trigger for introducing a fresh explicit easing bias next year.
Financial markets are pricing in a 6 per cent chance of a cut to the cash rate at the central bank's meeting tomorrow.
Had enough bubble talk? Didn't think so..... the American who won this year's Nobel Prize for economics believes sharp rises in equity and property prices could lead to a dangerous financial bubble and may end badly, he told a German magazine.
Robert Shiller, who won the esteemed award with two other Americans for research into market prices and asset bubbles, pinpointed the US stock market and Brazilian property market as areas of concern.
"I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets," Shiller told Sunday's Der Spiegel magazine. "That could end badly," he said.
"I am most worried about the boom in the US stock market. Also because our economy is still weak and vulnerable," he said, describing the financial and technology sectors as overvalued.
The collapse of the US housing market helped trigger the 2008-2009 global financial crisis.
"Bubbles look like this. And the world is still very vulnerable to a bubble," he said.
Bubbles are created when investors do not recognise when rising asset prices get detached from underlying fundamentals.
Saputo is risking its reputation as a ''disciplined acquirer'' as the battle for Warrnambool Cheese and Butter enters the ''silly zone'', according to Canadian analysts.
The North American dairy dynamo is locked in a three way battle for WCB with Murray Goulburn, Australia's biggest dairy company, and NSW-based Bega Cheese.
On Friday the Australian Takeovers Panel banned Saputo from acquiring WCB shares for at least two months after Murray Goulburn protested that the Montreal-based company had ''misinformed'' shareholders about the true value of its bid.
But despite the latest hurdle, Canadian analysts say the bidding war has become irrational, political and dangerous.
Fund manager John Stephenson, of First Asset Investment in Toronto, told The Canadian Press, said Saputo investors were starting to become jittery.
''I think it's starting to get to the silly zone where the deal dynamics are driving this,'' Mr Stephenson said, adding anything above a 10 cent rise would be ''a bit of a worry''.
''They can probably make this work at $9.50 or maybe $9.60, but if they are going to chase this up $10, I think that's crazy.''
House prices growth could be moderating, after dwelling values edged up by 0.1 per cent in November following increases of 1.6 per cent in September and 1.3 per cent in October, RP Data-Rismark's monthly index reports.
Perth recorded the strongest growth in November at 2.9 per cent, followed by 2.8 per cent in Darwin. Adelaide house prices lifted by 1.2 per cent while Sydney prices grew 0.9 per cent.
Dwelling values fell by 2.1 per cent in Melbourne, 1.3 per cent in Canberra, 0.5 per cent in Hobart and remained flat in Brisbane.
Despite the slowdown, the combined values of house prices over the eight capital cities were still 8 per cent higher over the past 12 months. Prices have been up 8.3 per cent for this year.
"While further growth is likely for this cycle, it may be the case that the peak rate of value growth in both cities has now passed," RP Data's senior research analyst Cameron Kusher said.
The manufacturing sector weakened slightly in November, after expanding for two consecutive months, following a slowdown in production, new orders and supplier deliveries, a private monthly measure has found.
The Australian Industry Group's Australian Performance of Manufacturing Index for November slipped by 5.4 points to 47.7 last month, a return to pre-election levels.
But the employment sub-index recorded its highest reading in more than two year, edging up 1.5 points to 50.1.
"Comments from survey participants indicate that the mild lift in local new orders that was apparent immediately after the September federal election is already drying up, as mining, government, maintenance and R&D spending slows," AiG said in its report published this morning.
"The relatively high Australian dollar and fierce import competition continue to take their toll, as many businesses struggle to maintain market share in an environment of generally weak demand for goods."
Car industry workers will rally outside the Productivity Commission hearings in Adelaide with the future of Australia's car manufacturing sector at stake.
The commission has already taken 60 submissions from industry groups, governments and private individuals as it looks into the future of commonwealth support for the auto industry.
AWMU members will gather outside the hearings amid concerns the commission's recommendations could result in local car maker Holden deciding to follow Ford and close its assembly operations. Holden workers recently agreed to a pay freeze and other changes to their enterprise agreement to help the company cut costs.
The union has backed continued government assistance declaring the alternative not in the long-term interests of the nation.
''In order to ensure that a positive future for the automotive industry and the broader manufacturing industry can be achieved, a constructive partnership needs to be built between firms, workers and government,'' the AMWU said in its submission.
Inflation has remained benign in November, as the price of fruit and vegetables rose but fuel costs slipped, a private gauge has found.
Inflation grew by 0.2 per cent last month after a 0.1 per cent rise in October, the TD Securities-Melbourne Institute monthly gauge found. In the year to November, inflation lifted by 2.4 per cent, above previous 2.1 per cent annual readings.
"The clear signal is that inflation remains benign, well within the lower half of the RBA's 2 to 3 per cent target range," TD Securities head of Asia-Pacific research Annette Beacher said.
The prices of fruit and vegetables, furniture, furnishings, newspapers, books and stationery lifted for the month but were offset by a fall in the prices of holiday travel and accommodation, automotive fuel, and alcohol and tobacco.
Ms Beacher said despite the soft inflation figures, she did not expect the RBA to ease rates at its December board meeting tomorrow, given the central bank's need to keep the recent rises in house prices in check.
"We expect all forthcoming RBA communiques and speeches to continue talking down the Australian dollar rather than hint at rate cuts. We are of the view that rising house price inflation and the recent spark in credit growth prevents entertaining another cash rate cut," Ms Beacher said.
"While inflation is expected to remain within the bottom half of the RBA band until mid-2014, this is unlikely to be a trigger for introducing a fresh explicit easing bias next year."
The benchmark S&P/ASX200 index has opened down 0.6 points, or 0.01 per cent, at 5,319.4, while the broader All Ordinaries index was down one point, or 0.02 per cent, at 5,313.3.
GrainCorp chief Alison Watkins has announced she will take over as chief executive at Coca Cola Amatil.
Earlier this morning, Ms Watkins announced she was standing down from GrainCorp in the wake of the federal government's decision to block a takeover from US company.
Ms Watkins will take over from Terry Davis in March.
"My career and experience to date puts me in an excellent position to lead Coca-Cola Amatil in its next chapter of growth," Ms Watkins said in a statement.
The United States has expressed concerns about the federal government decision to block the takeover of GrainCorp by a US company.
As part of the Free Trade Agreement between Australia and the US, a "side letter" commitment gave the two governments the right to be involved in negotiations over any sizeable agricultural investment in either country.
The State Department, which is responsible for conducting international relations including on strategic and commerce matters, took the rare step of publicly stating its disappointment about the Australian government's decision to The Australian Financial Review.
"We are disappointed by the government of Australia's decision to reject Archer Daniels Midland's proposed acquisition of GrainCorp," a State Department spokeswoman said.
On Wall Street on Friday, the Dow and the S&P 500 dipped in thin holiday trading, but technology stocks helped lift the Nasdaq to a 13-year high.
The Nasdaq got a boost from the technology sector, with Apple up 1.9 per cent at $US556.07, Microsoft up 1.4 per cent at $US38.13 and Amazon up 1.8 per cent at $US393.62.
"It's almost as if people are rotating into the bigger blue-chip names, especially the technology big caps. We wouldn't be shocked at all to see the small and mid-cap names lag a little bit," said Ryan Detrick, senior technical strategist with Schaeffer's Investment Research, in Cincinnati.
But with the both the S&P and Dow on an eight-week winning streak, investors may be cautious in adding new positions.
"We expect, and we recommend to our clients, that if they have exceeded their strategic allocation to equities, to take profit at these levels," said Paul Mangus, head of equity research and strategy for Wells Fargo Private Bank.
China's factory growth held at an 18-month high in November on firm domestic and foreign demand, defying expectations the economy faces a modest slowdown as 2013 draws to a close.
The official Purchasing Managers' Index (PMI) stood at 51.4 in November, the National Bureau of Statistics said yesterday, unchanged from October and ahead of market expectations for a reading of 51.1.
There are several interesting inferences that can be drawn from the China PMI data, says IG's Evan Lucas:
- Manufacturing in the country continues to stabilise even as demand from key markets such as the US and Europe slow and government intervention is ramping up.
- The fact that manufacturing is also holding up in the face of central government headwinds suggests the recent 60 point plan can be rolled out a little harder, without the concern of impacting the 'bottom end' of the GDP range that Premier Li Keqiang set out in October.
- I suspect the recent crackdown on shadow banking and the increase in regulation on state-owned banks will continue over the coming months as the country continues to monitor overcapacity in all areas of manufacturing.
- The manufacturing figures from the weekend I believe give the central government further room to intervene.
Wholesaler Metcash reported a 1.9 per cent fall in underlying first half net profit to $119 million after aggressive grocery and petrol discounting by Coles and Woolworths led to a decline in grocery sales and market share, reports The Australian Financial Review.
Metcash's earnings before interest tax and amortisation from its core IGA grocery and food distribution business slumped 13.9 per cent to $150.7 million after a 1.5 per cent decline in sales – offsetting higher earnings from its liquor, hardware and automotive wholesaling operations.
Underlying earnings per share for the six months ended October 31 fell 6.9 per cent, with the decline in earnings magnified by the 5 per cent dilutionary effect of a capital raising last year.
Hard on the heels of the federal government's decision to block a $3.4 billion takeover bid for GrainCorp, the chief executive, Alison Watkins, is to quit the company.
On Friday, the Federal Treasurer, Joe Hockey, rejected a takeover offer for the company from US grains group Archer Daniel Midlands, in the national interest, sparking domestic and overseas criticism.
"I have carefully weighed my options over the past two days," Ms Watkins said in a statement.
"I had planned to leave the company at the time control passed over to ADM. Given last week's unexpected developments, I feel it is in the best interests of GrainCorp, our people and customers that I move on now and allow the board to find new leadership to take the business forward into its new phase," she said.
Walking away: Alison Watkins. Photo: Rob Homer
Here's what you need2know this Monday.
- SPI futures fell 9 points to 5320, indicating small losses at the start of local trade
- The Australian dollar is at 91.32 US cents, 93.58 yen, 67.20 euro and 55.79 British pence.
- On Wall Street, the Dow and the S&P500 shed 0.1%, but the Nasdaq rose 0.4%
- In Europe, the FTSE slipped 0.1%, the CAC lost 0.2%, while the Dax added 0.2%
- Brent fell 1.1% to $US109.69
- Spot gold rose 0.7% to $US1253.35 an ounce
- Iron ore is at $136.40 a tonne.