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Markets Live: China data can't turn the mood

Australian shares drop sharply, led lower by the banks, as Chinese manufacturing data confirms a recovering growth trend, but fails to convince investors the slowdown is bottoming out.

4.56pm: That's all from us here at Markets Live, thank you for being with us, we'll be back tomorrow from 9.30am

Click here for a full wrap of today's session.

4.39pm: Blue chip stocks offered little solace for investors today:

  • BHP: -1.3%
  • Rio: -1.2%
  • ANZ: -0.5%
  • CBA: -0.8%
  • NAB: -3%
  • Westpac: -1.5%
  • Fortescue: -2.2%
  • Woolworths: -1.4%
  • Wesfarmers: -1.8%
  • Telstra: -1.2%

4.31pm: The Australian dollar held steady today, overlooking data showing signs of a recovery in the Chinese economy with markets cautious ahead of an influential US jobs report due out later this week.

The dollar paused near $US1.0371, versus $US1.0373 in early trade, having finished flat for the month of October.

China's official and private sector manufacturing PMIs data confirmed a recovering growth trend, albeit a sluggish one.

4.22pm: All major sectors recorded losses today, financials, energy and materials all weighed heavily on the market, dropping 1.3 per cent each. Consumer staples slipped 1.6 per cent and telecommunications lost 1.2 per cent.

4.13pm: The market has closed lower, the benchmark S&P/ASX200 fell 59.4 points, or 1.3 per cent, to 4457.6 points, while the broader All Ords slipped 55.5 points, or 1.2 per cent, to 4479.9 points.

4.11pm: The Australian is speculating that Ten's mystery share seller is fund manager Perpetual.

3.47pm: Shares in investment manager Perpetual have slumped after the company said it won’t post an improved performance in the first half of the financial year.

But Perpetual has escaped a ‘‘second strike’’ against its executive pay policy, and says a company-wide overhaul is progressing well.

Chief executive Geoff Lloyd told Perpetual’s annual general meeting today that difficult global economic conditions have significantly influenced investor confidence.

He said the company expects to make an underlying profit in the range of $30 million to $35 million in the six months to December 31.

That would be slightly less than or at least in line with a $34.7 million underlying profit in the previous corresponding period.

Perpetual shares were down 4.1 per cent to $26.79.

3.32pm: And in a win for those who are partial to a nice bottle of Merlot from the Barossa Valley:

South Australia’s Barossa Valley and McLaren Vale wine regions will be protected from urban sprawl.

Legislation to limit urban development in the two areas has passed state parliament’s upper house and is expected to be endorsed by the lower house today.

Planning Minister John Rau said that the legislation provided protection for two of SA’s defining regions.A line in the sand has now been drawn on Adelaide’s urban sprawl,’’ Mr Rau said.

3.21pm: China said on today that it would launch anti-dumping and anti-subsidy investigations into imported European Union solar-grade polysilicon, in the latest instance of tit-for-tat trade tensions in the global solar industry.

The move comes as the EU's executive body mulls duties targeting Chinese solar producers, a probe launched in September after companies accused Chinese rivals of "dumping", or deliberately selling products for less abroad than at home.

The Commerce Ministry, in two statements posted to its website, said it would "merge" the EU investigations into ongoing probes of US and South Korean-made solar products "to evaluate the accumulated impact of products from the three regions".

3.11pm: Here's a look at how the dollar has performed today, as you can see, it reacted a little bit after China's PMI announcement, but quickly returned to the level it had been trading at for most of the day.

3.56pm: More on those comments about China made by a BHP executive earlier today:

A BHP spokeswoman said the comments by Group Executive Alberto Calderon were not intended to suggest BHP had changed its outlook on China. The company was sticking to a forecast given two weeks ago for average growth of 7 to 8 percent over the next decade, she said.

"The main message was we're still confident in growth in China and growth around 7 per cent is still expected," the spokeswoman, Eleanor Nichols, said.

2.45pm: A subsidiary of China Investment Corporation (CIC), the country's sovereign wealth fund, is buying a 10 per cent stake in the UK's Heathrow Airport, state news agency Xinhua reported today.

The Xinhua report follows a statement from Spanish infrastructure company, Ferrovial, on Wednesday that it had sold a 5.72 per cent stake in Heathrow holding company FGP Topco to China's Stable Investment Corporation for 319.3 million euros.

2.30pm: The modest fall in house prices in October can perversely be looked at as a positive development – especially given that prices recorded the largest percentage gain in 30 months in September, says CommSec economist Savanth Sebastian:

  • The last thing that the Reserve Bank wants to see is significant growth in property prices, effectively creating a housing bubble. So the latest fall in prices will give the Reserve Bank a degree of comfort.
  • And while price gains are more subdued the recent trends suggest a modest turnaround in the housing sector.

2.24pm: Looks like we may have missed this one earlier (if so, apologies): import prices fell by 2.4 per cent in the September quarter, with all the major categories falling in price, but are still 1.2 per cent higher than a year ago. Good news for consumers that one.

Prices of exported goods fell by 6.4 per cent in the September quarter and prices are down 13.4 per cent on a year ago. Not so good news for miners and the economy in general, this one.

2.06pm: Some more on China's PMI:

"Overall sentiment is brightening and Chinese orders are suggesting a moderate recovery," says Hirokazu Yuihama, a senior strategist at Daiwa Securities.

"But global monetary easing has strengthened currencies of South Korea and Taiwan, where interest rates are relatively higher, hurting their export-led economies and offsetting the general improvement."

1.57pm: The official PMI figures suggest that a faster implementation of China’s fiscal program on the economy has begun to take effect, said ANZ chief economist for Greater China Li-Gang Li.

  • As the Chinese government has accelerated the approval of large projects since May, with preliminary investment amounting to RMB7.0trn, we believe a stronger economic rebound towards H1 2013 will take place after the leadership transition.
  • As many projects have started and many will start in the following months because of an approval-to-construction lag of 3 to 6 months, we believe the current destocking process in steel and other capital goods will continue in earnest. A solid demand for commodities will resume, albeit at a gradual pace to allow destocking of finished products to complete. 

1.46pm: Here's a look at the best and worst performers amongst the top 50 companies on the ASX:

1.22pm: It looks like most of the region is down today, apart from China.

  • Nikkei: -0.1%
  • Shanghai: +0.7%
  • Taiwan: -1.2%
  • South Korea: -1%
  • Singapore: -0.5%
  • New Zealand: -0.5%

1.10pm: Here are two more responses to the question posed by Borg earlier today (What’s the point of investing?), and these ones are notable for their incisive brevity:

‘snafu, Sitting out fo now’ writes: What the market giveth, the market taketh way. 

And 'Bye Bye Fiat Money' says: Profit mainly ...

12.51pm: BHP Billiton sees China's economy growing between 6 percent and 7.5 percent a year over the next decade, a senior executive said on Thursday.

"They should be able to achieve that GDP," Group Executive Alberto Calderon said at an economics conference.

He reiterated the company expects China's rate of steel demand growth to slow, forecasting annual steel demand at 1 billion tonnes in about a decade, up from 700 million tonnes a year now.

China is BHP's biggest customer for iron ore, the key ingredient in steel.

12.40pm: 111 million shares, or around 8 per cent, of Network Ten changed hands in a single trade at 10.09am.

12.32pm: Ten shares are trading well above daily volumes, with 120 million shares changing hands so far today, their average is 21.8 million per day.

Shares are now down 3.6 per cent.

12.24pm: Administrators appointed to failed discount chain, Retail Adventures, have confirmed that 630 jobs will go by the end of this month as they complete the closure of another 32 stores across NSW Victoria and Tasmania.

The only solace for redundant employees is a redundancy payout by Christmas.

‘‘It is our intention to make those payments before Christmas,’’ said Vaughan Strawbridge who leads the team of administrators from Deloittes who were appointed by the company’s owner, Kathmandu founder, Jan Cameron. 

12:19pm: Some breaking news from the Whitehaven AGM, the board has narrowly avoided its first strike over its remuneration, with 24.98 per cent of shares being used to vote against the report.

12.08pm: China's official manufacturing purchasing managers' index rose to 50.2 in October from 49.8 in September, the National Bureau of Statistics said today.

Economists had expected the October official PMI to rise to 50.3, confirming a trend toward recovering growth in the world's second-largest economy.

A PMI reading below 50 suggests factory activity contracted, while a number above 50 points to expansion.

11.59pm: Ten Network has confirmed that it is selling Eye Corp, its outdoor advertising arm, for $113 million to a private equity-controlled company.

Shares in Ten reacted badly to the news, falling 1.8 per cent, after being up as much as 3.6 per cent in prior the announcement.

The sale is to Outdoor Media Operations (OMO), owner of oOh!media, an Australian outdoor advertising specialist that is controlled by Champ Private Equity.

The new sale price compares with a reported higher sale price offer of about $145 million only few months ago.

11.47am: Some more local economics data has arrived, and it shows commodities exports plunged in the September quarter, offering the latest evidence yet the mining boom was cooling.

Exports of crude materials dropped 11.7 per cent in the September quarter, while mineral fuels sank 5.8 per cent in the quarter, Australian Bureau of Statistics data show. In the June quarter, both types of exports rose, 2.5 per cent and 1.1 per cent respectively.

Overall, exports fell 6.4 per cent in the September quarter, following a 1 per cent rise in the June quarter, according to ABS, in line with market expectations. The latest official data comes after iron ore prices - crucial to Australia's export prices and tax revenues - unexpectedly fell in August and September, hitting a 2009 low of $US86.70 a tonne.

The price they reached was well below the $US110 a tonne floor needed to keep mining projects viable. Prices have since recovered to about $US119 a tonne. The suddenness of the fall, however, has put a question mark over the outlook for the strength of the commodities boom.

In recent weeks, the RBA has suggested the mining investment boom will end next year, as growth in the major Asian economies stabilises at a slower rate. Australia was spared the worst effects of the global financial crisis because largely because the volume of commodoties exported to Asia through that period. 

11.43am: Here's another response to reader Borg's question from earlier today, What's the point of investing?

'Super Ted, Perth' offers this:

Risk versus reward Borg. There are far more lucrative ways to make money than property and cash, but they come with inherently higher levels of risk.

11.41am: A quick look now at how the big retailers are performing. In a word, mixed:

  • Woolies: -0.75%
  • Wesfarmers: -1.02%
  • Harvey Norman: +0.26%
  • DJs: -1.50%
  • Myer: +0.26%

11.35am: NAB reports today that online retail sales were up 23 per cent year-on-year in September, "but the level is still modest compared to traditional sales". For the year to September 2012, Australia’s online retail sales totalled $12.1 billion. The report said:

This figure is equivalent to 5.5% of the traditional bricks & mortar retail sales (excluding cafés, restaurants and takeaway food) for the year ended August 2012.

Compared with the previous month, the NAB Online Retail Sales Index edged a little lower in September – down to 200 points (from 210 points in August). There may be a seasonal component to this trend – with month-on-month declines observed in both September 2010 and September 2011.

Year-on-year growth in online retail sales strengthened in September – up by +23% yoy – a level that was stronger than August (+22%) but was marginally lower than September 2011 (+25%). 

11.32am: While we're on the subject of manufacturing, in about half an hour we'll get the first of two reading on China's manufacturing sector. Chinese manufacturing PMI is due at midday, with exepectations of a return to expansion in the factory sectory. At 12.45pm, the HSBC manufacturing PMI is expected to show an easing in the contraction of factory sector in October.

11.28am: Australia's manufacturing sector has contracted for an eighth consecutive month amid weakness in selling prices and new orders.

The latest Australian Industry Group performance of manufacturing index (PMI), released on Thursday, showed it rose marginally to 45.2 in October from 44.1 the previous month. However readings below 50 indicate the index is in contractionary territory, a place it has been stuck since March.

The October sub-index for new orders dropped to 43.9 in October from 44.3, while only two sectors expanded in the month - paper, printing and publishing (at 51.1), and transport equipment (at 52.5).

11.17am: Whitehaven shares, meanwhile, are down 1.6 per cent, well ahead of the general market, to $3.00.

11.14am: Following on from that last post, Nathan Tinkler isn't expected to appear at today's Whitehaven AGM, but he gave an interview to the AFR in which he played down the scale of his financial troubles. Mr Tinkler said he was not on the brink of financial collapse.

"All I will say is that tough people last, tough times don't," he said.

"There's been a massive media campaign to try and ruin me ... They wanted to treat me like Christopher Skase, like I was sitting in a wheelchair puffing in a bag and owed $250 million. It is just not the case."

11.12am: Here’s some more from the Whitehaven meeting. BusinessDay's Padding Manning spoke to two small shareholders who did not wish to be identified – a husband and wife who own 20,000 shares – but said they would vote for the board. 

“We’ve been with Whitehaven since its inception,” said the husband. “We think Mr Haggarty’s done a great job. He’s proposed what’s going to happen, and it has happened.

“This year the only problem he has had, has been waiting for the OK from the government for Maules creek, together with a flood in the first part of the year. You can’t expect miracles.”

Asked for his view on Mr Tinkler, the husband said: “I don’t like him. He’s an imposter. He only ever seems to be worried about himself.” 

11.06am: Investment manager Perpetual expects its first half underlying profit to be roughly in line with the previous year’s, as it continues to overhaul its business to improve returns.

Chief executive Geoff Lloyd said on Thursday the company expects to make an underlying profit in the range of $30 million to $35 million in the six months to December 31. That would compare to an underlying profit of $34.7 million in the previous first half.

‘‘This outlook is subject to there being no material deterioration in financial markets and business conditions over the remainder of the 2012 calendar year,’’ Mr Lloyd told Perpetual’s annual general meeting.

10.59am: Here’s a couple of responses to the question posed by reader ‘Borg, Melbourne’:  What’s the point of investing?

'Seriously' writes:

There is always a good reason to invest ... everyone gets burnt once in a while (I have lost almost everything a few times myself on extremely high risk punts in the past so I sympathise if you're having a hard time) ... When it comes down to it you can throw your cash in a bank stock or TLS and earn better dividends (which are also much much more tax effective) than you can earn in taxable interest in a bank account.

'Pest from the west' doesn't really answer the question but offers a different strategy:

Next Tuesday invest in a lot of trifectas using numbers between 1 & 24.

10.54am: BusinessDay's Paddy Manning reports that 11 protesters from Quit Coal Sydney attempted to block access to the Whitehaven Coal annual meeting inside Sydney’s Wentworth Hotel this morning.

Informed they were trespassing, the protesters were quickly asked to leave by police.

Spokesperson Alex McGuinness said the group were concerned about the expansion of Whitehaven’s operations into the Gunnedah Basin and the Leard State Forest – particularly, the expansion of the Tarrawonga mine and the Maules Creek project which was recently approved by the NSW Government and is now awaiting approval from the federal environment minster Tony Burke.

“We’re planning to speak to shareholders before the meeting to make sure they’re aware of how damaging the expansion is going to be,” Ms McGuinness said.

Protesters are also assembled outside the hotel.

10.51am: The big banks are also lower:

  • CBA is 0.17% lower to $57.65
  • ANZ is 0.1% lower to $25.42
  • NAB is 1.12% lower to $25.50
  • Westpac is 0.71% lower to $25.33

10.47am: The big miners are down, roughly in line with the general market, which is now down a bit more than 0.7 per cent:

  • BHP is 0.88% lower to $33.95
  • Rio is 0.88% lower to $56.44
  • Fortescue is 1.47% lower to $4.02

10.34am: Here's a bit more on Arrium, which rejected a $1.2 billion takeover bid yesterday. The stocks is headed for its biggest decline in six weeks after the bidders decided to drop their takeover attempt.

The stock fell as much as 15 per cent to 67 cents, set for its biggest decline since September 13, and traded at 68 cents as of 10:11am local time, well below the 75 cents a share initial bid.

The benchmark stock index was down 0.8 per cent. The group, having raised its offer by 17 percent to 88 cents a share, decided to walk away because Arrium’s board rejected the second bid and refused to engage, Martin Debelle of Citadel PR, an external spokesman for the consortium, said yesterday.

10.31am: Profound question from commenter 'Borg, Melbourne': "What's the point of investing?"

Anyone interested in taking a swing at an answer?

10.28am: Now for some of the good news stories on the ASX200:

  • AWE: +2.26%
  • FKP Property: +2.25%
  • Gindalbie: +1.45%
  • Saracen Mining: +1%
  • Newcrest: +0.64%
  • WorleyParsons: +0.57%

10.22am: Arrium remains way out ahead of any other contenders for the title of the worst performed company on the ASX200 so far today. It's shares are now down 12.1 per cent. Other major sliders on the ASX200 are:

  • Transpacific: -4.97%
  • Linc Energy: -4.55%
  • Mineral Deposits: -4.08%
  • APN News & Media: -4.05%
  • Seven West Media: -3.7%
  • Aquila Resources: -3.35%

10.20am: The first piece of local economics news is out for the day. Home prices fell in October, after four months of gains, dashing hopes of an earlier recovery aided by lower interest rates.

Capital city homes prices fell 1 per cent in October, following a 1.4 per cent increase in September, according to the RP Data Rismark, after the Reserve Bank cut interest rate through 2012. Home prices fell 0.9 per cent in Sydney and 1.1 per cent in Brisbane, RP Data said.

“Whether the October decline is a blip on the path to a recovering market, or a sign of further weakness is yet to be seen,’’ said RP Data’s research director Tim Lawless. 

10.16am: Here's how the sub indices on the ASX200 are performing. All are down:

  • Industrials: -1.15%
  • Consumer disc.: -0.91%
  • Consumer staples: -0.82%
  • Materials: -0.8%
  • Energy: -0.68%
  • Health: -0.67%

10.12am: In early trade, the All Ordinaries index is 33.5 points higher, or 0.7 per cent, to 4501.9, while the benchmark S&P/ASX200 is 35.2 points lower, or 0.8 per cent, to 4481.8.

10.09am: Arrium shares are down heavily after the company knocked back another takeover offer yesterday. Its shares have lost 12.7 per cent in opening trade to 68.5 cents.  Deutsche Bank has cut the steelmaker to a 'sell' rating.

10.06am: Early take - stocks down about 0.2 per cent as markets open.

10am: Miguel Audencial, sales trader at CMC Markets, reckons we're in for a flat start:

A flat start to the Australian equities market is expected today as the US session ended in a stalemate when it returned to trading last night. The release of the Chinese Manufacturing PMI figure at midday today and the HSBC Final Manufacturing PMI data 45 minutes later is likely provide direction for traders.

9.55am: In local company news today, Whitehaven holds its AGM. We'll be monitoring it closely. BusinessDay's Paddy Manning is there and will file as the action unfold. 

Also this morning, women’s fashion retailer Noni B has told shareholders that tough retail conditions have continued into the current financial year.

‘‘Last year’s challenging business conditions are continuing in the current year,’’ Noni B chairman Lynn Wood told the company’s annual general meeting on Thursday.

‘‘There is still substantial discounting in our market and we are having to fight for every dollar. While we wait for consumer sentiment to improve, we remain focused on efficient management of everything we can control"

Ms Wood said while Noni B’s summer fashion range had been received, the retailer’s first half earnings would depend on the critical pre-Christmas period.

9.51am: Here are some analyst rating changes for today:

  • Arrium cut to 'sell' at Deutsche Bank
  • Westfield Retail Trust raised to 'buy' at Deutsche Bank
  • Charter Hall Group cut to 'sell' at Deutsche Bank
  • CFS Retail  Property Trust raised to 'buy' at Deutsche Bank
  • Dexus Property Group raised to 'buy' at Deutsche Bank
  • Stockland raised to 'buy' at Deutsche Bank
  • Transpacific Industries cut to 'hold' at Moelis & Company
  • Tiger Airways raised to 'buy' at OSK Securities

9.49am: Locally, here's a snapshot of today's economics news. Although there aren't any blockbuster releases, there's certainly a bit around:

  • RBA index of commodity prices for October
  • ABS trade price indexes, September quarter
  • The Australian Industry Group/Pricewaterhouse performance of manufacturing (PMI) index for October
  • RP Data-Rismark home prices for October
  • Federal Treasurer Wayne Swan to deliver dinner speech at the Melbourne Institute 2012 Economic and Social Outlook Conference

9.46am: Looking first at what's coming from offshore today, we get two important readings of Chinese economic activity at about lunchtime. Chinese manufacturing PMI is due at midday, with exepectations of a return to expansion in the factory sectory. At 12.45pm, the HSBC manufacturing PMI is expected to show an easing in the contraction of factory sector in October.

9.43am: For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:

  • The SPI was 5 points lower at 4499
  • The $A was trading at $US1.0378
  • In the US, the S&P500 lost 0.02% to 1412.16
  • In Europe, the FTSE100 lost 1.15% to 5782.70
  • China iron ore lost 50 cents to $US119.30 a metric tonne
  • Gold added 0.4% to $US1719.10 an ounce
  • WTI crude oil added 90 US cents to $US86.58 a barrel
  • RJ/CRB commodities index lost 0.18% to 295.23

9.40am: Good morning folks. Welcome to the Markets Live blog for Thursday.

Contributors: Thomas Hunter, Jens Meyer, Max mason

This blog is not intended as investment advice

BusinessDay with agencies


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