That’s it for Markets Live today.
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Shares closed flat despite domestic company reporting season delivering some solid results and more companies raising interim dividends after a survey of activity in China’s factories this month was weaker than expected.
The benchmark S&P/ASX 200 Index rose 4.1 points, or less than 0.1 per cent, on Thursday to 5412.3, while the broader All Ordinaries Index added 0.1 per cent to 5421.3.
The market opened higher, defying losses on Wall Street after the US Federal Reserve minutes indicated the central bank will stick to its course of cutting stimulus. But local shares, along with other major equity markets around Asia, fell sharply on the news that China’s manufacturers are reporting the toughest business conditions in seven months.
A flash reading of the HSBC-Markit purchasing managers index for February dropped to 48.3 this month, down from 49.5 in January. A reading below 50 indicates factory activity is deteriorating.
But strategists at BlackRock, the world’s largest fund manager, are cautiously optimistic that China will avoid a hard landing.
“Growth in China will slow down, but the good news is most investors already know this,” BlackRock chief global investment strategist, Russ Koesterich said. “We still predict China will become the world’s largest economy within the decade.”
To the best and worst, and what a pleasure it is to report Fairfax up 23 per cent to reach 88 cents, the highest since November 2011. Breville Group's earnings followed the positive trend of companies exposed to a recovering housing market, both here and abroad, and the stock leapt 13.1 per cent.
Uranium miner Paladin Energy plunged 10.4 per cent on no new information that we could see. NRW Holdings dropped 8.4 per cent; the mining services business announced the appointment of a new CFO.
Best and worst performers in the ASX 200 today.
Facebook's $US19 billion purchase of red-hot messaging service WhatsApp with more than 450 million users around the world has stunned many Silicon Valley observers with its lofty price tag.
But it underscores Facebook's determination to win the market for messaging, an indispensable utility in a mobile era.
Combining text messaging and social networking, messaging apps provide a quick way for smartphone users to trade everything from brief texts to flirtatious pictures to YouTube clips - bypassing the need to pay wireless carriers for messaging services.
And it helps Facebook tap teens who will eschew the mainstream social networks and prefer WhatsApp and rivals such as Line and WeChat, which have exploded in size as mobile messaging takes off.
"People are calling them 'Facebook Nevers'," says Jeremy Liew, a partner at Lightspeed and an early investor in Snapchat.
WhatsApp is adding about a million users per day, Facebook co-founder and Chief Executive Officer Mark Zuckerberg said on his page: "WhatsApp will complement our existing chat and messaging services to provide new tools for our community."
"Since WhatsApp and (Facebook) Messenger serve such different and important users, we will continue investing in both."
Smartphone-based messaging apps are now sweeping across North America, Asia and Europe.
"Communication is the one thing that you have to use daily, and it has a strong network effect," says Jonathan Teo, an early investor in Snapchat, another red-hot messaging company that flirted year ago with a multibillion dollar acquisition offer from Facebook. "Facebook is more about content and has not yet fully figured out communication."
Even so, he balked at the price tag.
Shares have squeezed out the thinnest of gains after trading into the red this afternoon, with the ASX 200 adding 4 points to 5412.3 and the All Ords inching up by 6 points to 5421.3.
Investors were caught in the cross current of some strong earnings results (Fairfax, anybody? Up 23 per cent!), a weak lead from overseas and then, around midday, another poor Chinese manufacturing data point, which precipitated a rapid collapse in the local market and the dollar.
Metals and mining was hit the hardest, down 0.6 per cent, with the smaller gold mining group plunging 3.1 per cent (Newcrest fell 4.2 per cent). Rio fell 0.9 per cent to $69.59 and BHP lost 0.1 per cent to close at $38.70.
The financials sector was flat, pulled lower by the major banks, which all declined, but supported by other financial companies such as AMP, which jumped 9.3 per cent on earnings, Suncorp (up 3.7 per cent) and QBE (up 2.2 per cent).
Consumer discretionary was the best performing corner of the market, thanks to the aforementioned Fairfax and Breville Group, which jumped 12.3 per cent.
The easiest place to find a rental home in Melbourne is in the inner city or inner southeast, reckons RP Data.
Melbourne, St Kilda, South Yarra, Southbank and Docklands have each seen well over 1000 units advertised for rent in the past year. The central suburb of Melbourne recorded just over 4000.
The high prevalence of medium and high-rise units for rent in the inner city is a reflection of the role investors have played in supporting the growth of these markets.
It is quite remarkable to think that only twenty years ago the inner suburbs or Melbourne, Docklands and Southbank either did not exist or had very few houses for rent.
It is also interesting that in those suburbs the median advertised rent is well above the median for Melbourne which was $392 per week. In the suburb of Melbourne the median rent was $450 per week, in Southbank it was $530 and $540 in Docklands.
The suburb with the highest volume of houses advertised for rent was Frankston where the median advertised rent was $310 per week. This is well below the comparable number for the metropolitan area of $438.
ANZ has taken a closer look at the housing market in the region, noting that most countries (with a few exceptions including Thailand and Philippines) managed to avoid the major sustained price falls experienced in the US, Ireland or Spain.
‘‘We attribute this to stronger prudential supervision, more conservative lending practices, relatively solid economic conditions and supportive property market fundamentals,’’ ANZ says in a research note today.
The bank’s economists say that solid home price gains across the Asia-Pacific region in recent years have reignited the housing price bubble debate:
- With global interest rates set to rise over coming years, housing affordability appears likely to deteriorate, potentially exposing vulnerable loans. Deteriorating affordability, coupled with significant housing supply growth may present challenges to rents and prices in some markets.
- Underlying conditions vary markedly across the region and we see some downside risks to rents and prices in the years ahead (Singapore, Hong Kong and Taiwan).
- Nonetheless, in the absence of a severe economic downturn, it is difficult to identify factors that could be expected to drive house prices significantly lower. In general, we expect ongoing (albeit more moderate) gains in home prices in the years ahead.
ANZ has taken a closer look at several of the bigger markets, but we'll stick with what the bank has to say about local housing:
- Australian house prices and home building approvals have risen strongly in the past 18 months buoyed by improved affordability and tightening supply/demand fundamentals.
- While many commentators fear a housing price ‘bubble’ we believe that (despite increasingly difficult first home buyer deposit affordability) Australian house prices are sustainable (supported by improved loan affordability, solid economic fundamentals, a stable mortgage market, strong investor demand and a significant pent-up demand for homes).
- Moreover, prices are likely to continue to rise strongly in 2014 before moderating thereafter and growing broadly in line with average household incomes in the medium term.
Magellan Financial Group more than tripled its interim dividend after the funds management group that specialises in running international portfolios reported a 137 per cent surge in profit after tax to $36 million for the six months to December.
Revenue more than doubled to $67 million from $33 million as management fees earned on the group’s underlying funds soared to $59 million from $19 million.
Investors weren't much impressed, though, with the stock trading lower following the announcement this afternoon after making some early gains.
Much of the sharp rise in funds under management to $21 billion over the past 18 months was attributed to the success in attracting mandates from international clients. Magellan said the rise in assets over the first six months of the financial year was due to $4.7 billion of net inflows and $2 billion on investment gains, the latter having been boosted by the fall in the value of the Australian dollar.
Despite the rise in management fees, performance fees, which are earned if the managers outperform underlying markets, fell 67 per cent to $1.9 million.
“Performance fees may fluctuate materially from period to period,” Magellan said in a statement.
The interim dividend was raised to 16.5¢ a share, from 5¢ last time, payable on March 10.
Prime Minister Tony Abbott's mission to 'stop the boats' has taken a toll on airlines that once racked up big business flying intercepted asylum seekers across the region.
Fly-in fly-out and charter operator Alliance Aviation Services is searching for new clients to offset a downturn in ad hoc charters from the Department of Immigration and Border Protection now that unauthorised boat arrivals are at a standstill.
The Brisbane-based airline reported a 34.2 per cent fall in half-year underlying earnings to $7.1 million in the first half, based on a 9 per cent fall in revenue during the period as flight hours per aircraft fell.
Chief executive Scott McMillan attributed the lower earnings in part to the airline doing "a lot fewer charters" for the government since Prime Minister Tony Abbott was elected in September.
"It is a change in government policy," McMillan told Fairfax Media of the loss of work, which he said had also affected other airline charter groups.
Shares are down 0.8 per cent at $1.29.
A drop in asylum seeker arrivals has seen less flights like this one to Australia's detention centre network. Photo: Kate Geraghty
Stop saying US companies aren't investing - they are; that's the line from online business publication Quartz.
The widely held view is that the "jobless recovery" in the US can be partly blamed on corporate America, which, the story goes, has been unwilling to put money into expanding their business, and instead have been sitting on a rapidly growing pile of cash.
(The last part of that statement is true - US businesses have more than $US1.9 trillion in cash and cash-like assets on their balance sheets, up from about $US1.4 trillion in 2008/09, although cash balances have been rising at a rapid pace since the early 1990s.)
But, says Quartz:
"Companies in the S&P 500 are expected to have spent more than $US163 billion in corporate investment in the fourth quarter of 2013, once the final tally is done. That’s a new record high, and a 4.4% increase over the fourth quarter of 2012."
Stop saying US companies aren't investing - they are!
Shares in Mayne Pharma continue to find favour following its recent placement at 79.5 cents, rallying another 3 per cent to 93.5 cents today, just off a new high of 94.5 cents.
It has raced ahead of analyst estimates of fair value following the recent $18 million placement to fund some more buys, with only one analyst, Moelis and Co with a $1 valuation, yet to be bested.
Earlier this month, the group also raised its profit forecast, as it continues to build out its product portfolio.
Looking at the resources sector, copper miners PanAust and Sandfire are vying for attention today, with both stocks sliding on the ASX after reporting lower profit results.
PanAust reported a 74 per cent fall in full year profits today, but told investors that dividends are likely to hold steady in coming years.
Just like its copper rival OZ Minerals, PanAust has endured a difficult year of working through high waste loads and low copper grades ores, and the impact on the balance sheet was tangible at its full year results.
But the $36.38 million final profit was still in line with analyst expectations, and PanAust continues to predict that 2014 will see improved copper and gold production at its Phu Kham mine in Laos.
The 3 cents final dividend matched the one handed out at the half year, and managing director Gary Stafford said that payout should be sustainable in the near term.
Baillieu Holst analyst Adrian Prendergast said the full year result was a good one: ‘‘PanAust remains our top pick in base metals, for its leverage to both copper and growing free cash flow."
Meanwhile, Sandfire vowed to perform better in the second half than the first, after reporting a $33.5 million net profit for the first half.
The result saw profits fall by more than 60 per cent when compared to the first half of fiscal 2013, but was broadly in line with analyst consensus.
The lower profits reflect Sandfire's recent shift from exporting unprocessed copper ores out of an open pit, to the more expensive underground mining which requires more processing and concentrating.
PanAust shares are 13 cents lower at $1.86, while Sandfire have fallen 11 cents to $6.12.
It’s not only the region’s sharemarkets and the Australian dollar that are down on the weak Chinese manufacturing numbers, China's steel futures fell the most in about a month and Dalian-traded iron ore also dropped.
The most briskly traded rebar for May delivery on the Shanghai Futures Exchange was down 1.1 per cent at 3399 yuan a tonne by midday, just within striking distance from a record low of 3380 yuan reached on January 10. At the Dalian Commodity Exchange, the most-active May iron ore contract fell 0.8 per cent to 856 yuan a tonne.
Weaker steel prices may sour appetite again among traders and Chinese steel producers for spot iron ore cargoes, and likely to drag prices back to seven-month lows reached last week.
"This is really quite worrying," said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong. "This means any seasonal recovery in steel demand when construction picks up from March will not be as strong as before because overall economic activity is slowing down."
The Australian dollar is trading at the week's low after it plunged in the wake of HSBC's flash China PMI signalling a bigger than expected slowdown in Chinese manufacturing.
The dollar is currently fetching 89.47 US cents, more than half a cent lower than before the data was released.
‘‘The market wanted an excuse to sell off, and the China PMI has been the perfect excuse,’’ says IG's Stan Shamu. ‘‘I think Aussie is heading to 89 US cents in the short term.’’
The dollar this week.
Gold bulls may have more reason to cheer, if a report in the Asian Wall Street Journal is on the money.
It is reporting India may cut its import tax on gold before the end of February to between 6-8 per cent from the present level of 10 per cent, citing a senior government official.
It had raised the import tax on gold from 2 per cent from 10 per cent since early 2012, to bring down the country's current-account deficit. It tightened restrictions further last year by asking importers to re-export at least 20 per cent of the gold they bring into the country, it reported.
Now that India's current-account deficit is estimated to have halved to around $US45 billion this financial year ending March 31 from $US88 billion last year, this has paved the way for the tax to be reduced, it reported.
Another theme that has cropped up here at the Institute of International Finance conference, which is being held in Sydney before the G20 meetings over the weekend, is the need to move the G20 agenda's beyond its focus on managing the impact of the global financial crisis.
The G20 was ramped up to a leaders' forum after the financial crisis sent shockwaves around the global economy.
But as former federal treasurer Wayne Swan, who is attending the conference, tells Fairfax Media, while the forum of rich and developing nations has achieved a lot, such as the establishment of the Financial Stability Board (FSB), "there's a feeling in recent years that it's wandered a bit":
- We've been dealing with the aftershocks of the global financial crisis. We been dealing with sub-standard global growth for the last three or four years. You have entrenched unemployment in many developed countries around the world.
- You really do need to consider what are the steps you need to take to lift global growth realistically and to get to the debate going about what we need to be doing.
- I don't think there's been enough concentration in that area, so I'm pleased to hear Mr Hockey say they are going to talk about a growth agenda.
Swan added that developed governments have been too reliant on their monetary policies in recent years:
- One problem as it was put to me was it was like a duck trying to fly with one wing. Fiscal policy has not been playing its role.
- And what the government was hopefully talking about this morning was a new emphasis on those policies that would lift the capacity of the global economy to grow.
Perth-based internet service provider iiNet has agreed to sign a vital wholesale broadband agreement (WBA) with NBN Co “imminently”.
iiNet was at loggerheads with NBN Co over the WBA, which is a key document that sets out the price and access terms for companies providing services over the national broadband network.
Rival telecommunications providers Telstra and Optus signed the agreement earlier this year but iiNet, which is Australia’s leading provider of NBN services by market share, refused to do so.
iiNet chief regulatory officer Steve Dalby said the issues were now all but resolved and that the WBA was originally due to be signed this week.
The sale of NBN services has helped boost iiNet’s customer base to 926,000 broadband subscribers. It now has 30,000 customers on the network, which represents 25 per cent of the total NBN user base.
iiNet today announced it had grown its broadband customer base by more than expected and boosted its underlying net profits by 19 per cent to $31 million as part of its half-yearly results.
Time to take a tour of the region's sharemarkets, and it looks pretty ugly after weak China PMI figures and a slightly bigger than expected trade deficit in Japan.
- The Shanghai Composite index has stayed in positive territory, up 0.3 per cent, but was up as high as 1.7 per cent before the data release
- Japan's Nikkei is 1.7 per cent lower
- Hong Kong's Hang Seng is 1 per cent lower
- Taiwan's TAIEX index is down 0.45 per cent
- Korea's KOSPI is 0.6 per cent lower
- Singapore's Straits Times index is flat
- The Jakarta Composite is 0.3 per cent down
- Kiwi NZX 50 index has lost 0.1 per cent.
Fly-in fly-out and charter operator Alliance Aviation Services has reported a 34.2 per cent fall in underlying earnings to $7.1 million in the first half, based on a 9 per cent fall in revenue during the period.
The airline said revenue had fallen because it had transitioned from shorter-term wet lease and ad hoc charter income to longer term fly-in fly-out (FIFO) contracts.
“Because of the nature of these longer-term contracts with more certain revenue streams, the margin is generally not as high as the ad hoc nature of charter and wet lease income,” the company said.
Alliance declared a fully-franked interim dividend of 3.6¢ a share, down from 4.8¢ the prior year, but said the current payout was at the top end of the approved dividend policy.
The company said the directors remained positive about its outlook.
“The current fleet capacity is sufficient to deliver current and forecast revenue.”
Alliance expects to report an underlying profit of $16 million to $17.5 million this year. The company said it expected to return to earnings growth in the 2014-15 financial year, which it said should be better than the 2012-13 financial year.
Failed engineer Forge Group is likely to be hit with a shareholder class action law suit, with litigation funder Bentham IMF alleging the engineer engaged in "misleading and deceptive conduct".
It also alleges there was a breach of continuous disclosure obligations.
Forge collapsed last week, largely due to problems with power station projects in the Pilbara and north western Queensland.
Between late November the end of January, Forge announced three profit write-downs stemming largely from problems with these contracts.
"The shareholder action will allege Forge knew or should have known about, and disclosed, problems with the [construction] contracts from early 2013," the litigation funder said in a statement.
"It will also claim Forge misled the market in its three downgrade announcements by stating that lender ANZ had waived covenants and confirmed ongoing support, without disclosing that this was conditional on Forge securing an injection of fresh equity."
Myer boss Bernie Brookes has told BusinessDay he still has “fire in his belly” to lead the nation's biggest department store and has hinted at a possible expansion overseas if the Myer board's audacious $3 billion bid to merge with upmarket rival David Jones is successful.
Mr Brookes said the proposed merger with David Jones was not just about cutting costs but also about having a greater weight on the global stage.
''The scenario would be, and it's quite hypothetical because at the moment we haven't even started discussions [with David Jones], but if you think about a merged entity it becomes a lot easier to expand the business whether it be overseas , whether it be online, to gain the best of both worlds and that's where it provides a much better platform to build and get growth,'' Mr Brookes said.
Myer shares are up 3.5 per cent, and David Jones stock is trading 1.1 per cent higher.
Risks of prolonged market turmoil in emerging markets and of deflation in the euro area are threatening the world’s improved economic prospects, according to the International Monetary Fund.
The IMF, in a staff report prepared for central bankers and finance ministers from the Group of 20, said the recovery is still weak and “significant downside risks remain”.
A January global growth forecast of 3.7 percent for this year, from 3 percent in 2013, hinges on recent market volatility from Turkey to Brazil being short-lived, according to the report.
“Capital outflows, higher interest rates, and sharp currency depreciation in emerging economies remain a key concern,” according to the report prepared ahead of the G-20 Feb. 22-23 meeting in Sydney.
“A new risk stems from very low inflation in the euro area, where long-term inflation expectations might drift down, raising deflation risks in the event of a serious adverse shock to activity.”
Less than two months into 2014, global investors pulled more money out of emerging-market stock and bond funds than the total amount they retracted last year.
A Chinese manufacturing index fell to the lowest level in seven months, adding to signs of a factory slowdown that will limit growth in the world’s second-largest economy.
The Australian dollar fell half a US cent on the news, to be 89.52 US cents. Local shares also took a bashing, reversing all of their early gains.
The preliminary February reading of 48.3 for a Purchasing Managers’ Index (PMI) released today by HSBC and Markit Economics compares with January’s final figure of 49.5 and the 49.5 median estimate in a Bloomberg News survey of 17 economists. A number below 50 indicates contraction.
Softening factory output may encourage policy makers to take steps to support economic expansion that’s projected by analysts to slide to a 24-year low in 2014. The government this week set a 9.5 percent target for industrial-production growth this year, down from 10 percent in 2013.
“Beijing policy makers should and can fine-tune policy to keep growth at a steady pace in the coming year,” Qu Hongbin, HSBC’s chief China economist in Hong Kong, said in a statement.
China data in January and February are distorted by the shifting timing of the weeklong Lunar New Year holiday, which began this year on Jan. 31 and last year on Feb. 9.
Eds: Sorry all, we were placed in an involuntary posting halt due to technical issues for a while there. Back now.
Diversified property group Mirvac has narrowed its full year operating earnings guidance to 11.8¢-12¢ per security after a first half that delivered solid returns in the investment portfolio and boosted the residential contracts on hand to a record $1.5 billion.
Operating profit after tax rose 3.1 per cent to $200.2 million, and the statutory profit jumped over 345 per cent to $246.1 million, although last year’s figure was collapsed by $273 million worth of provisions.
The full year earnings guidance points to a rise of 8.3-10.1 per cent over 2013.
As previously announced, the group will pay a first half distribution of 4.4¢ a security up for 4.2¢ last year.
For the full year, the distribution is expected to be 8.8 to 9.0¢ per security, up from 8.7¢ per security in 2013.
Mirvac chief executive Susan Lloyd-Hurwitz said the result demonstrated a disciplined focus on executing the Mirvac strategy across all areas of the group.
“The stability of the Mirvac Property Trust earnings, together with a high percentage of development EBIT (Earnings before Interest and Tax) has given an increased confidence around our full year performance,” she said.
Drug delivery company Acrux has joined the cash splash this reporting season, announcing a special dividend of 12¢ a share, unfranked, after it received a $US25 million ($27.77 million) milestone payment from distributor Eli Lilly for meeting its 2013 sales target.
The company reported a whopping 751 per cent rise in revenue to $43.7 million in the six months ended December 31, as the overall market for testosterone replacement therapies continued to grow.
“Based on current knowledge, it is a reasonable expectation that the second Axiron sales milestone payment of US$50 million will be earned on 2014 calendar year net sales,” the company said in a statement on Thursday.
The special dividend is payable to shareholders on March 20.
Net profit rose to $24.6 million, up from $2.1 million in the previous corresponding period.
In the half, Axiron was launched in Australia, Canada and Brazil. The company expects to receive regulatory approval in Germany by the end of this month.
Sales of Axiron last month were 6 per cent higher than the previous corresponding period, Acrux said.
Gambling company Tatts Group has reported a 12.2 per cent rise in net profit from continuing operations to $122 million, despite falling revenue as lotto customers turned their back on smaller jackpots and wagering customers were spoilt for choice from online-only operators.
The Brisbane-based company reported a 3.5 per cent fall in revenue to $1.5 billion in the six months ended December 31.
On a statutory basis interim net profit fell 5 per cent; however, the same half last year benefited from 46 days of profit contribution ($19.6 million) from the now discontinued Victorian poker machine business, which distorts like-for-like comparisons.
The interim net profit result just missed analysts consensus of $123.4 million. Revenue also missed the consensus estimate by $100 million.
The company declared an interim dividend of 8¢, which was in line with the previous corresponding period. The dividend will be paid on April 4.
Housing starts in the US slumped in January by the most in almost three years as unusually harsh winter weather added to the industry’s burdens.
Builders began work on 880,000 homes at an annualized rate last month, matching the lowest projection in a Bloomberg survey of economists and down 16 per cent from December, according to data from the Commerce Department issued today in Washington. The decrease was the biggest since February 2011. Another report showed wholesale prices remained constrained.
The coldest January in two decades probably limited groundbreaking as construction in the Midwest dropped to a record low, indicating homebuilding will contribute less to economic growth at the start of 2014.
The outlook for the rest of the year will hinge on whether hiring picks up enough to overcome declining affordability as mortgage rates and property values climb.
“We won’t know until probably April at the earliest whether there is some change in the fundamentals” of the market because of the weather impact, said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama.
If there is growth in job creation and incomes, “that will offset higher mortgage rates,” he said.
Australian business leaders have called on international governments to boost their infrastructure spending and unlock $57 trillion of funding over the next two decades, as finance ministers and central bankers descend in Sydney for the annual G20 meetings.
Telstra's chief executive David Thodey, who is co-chair of the infrastructure and investment taskforce of the B20 business advisory arm of the global economic body, said today there was "no lack of money" for global infrastructure investment if projects were well-planned and have regulatory certainty.
"If we want to take the opportunity, we've got to give [investors] the right environment to invest," Mr Thodey said at a media briefing.
The projects could boost the global GDP growth by 3 to 4 per cent and improve people's standards of living, Mr Thodey added.
Casino-related shares in Hong Kong fell on a local media report that renewal terms for Macau gaming licenses may be shortened to just five years, reports The Standard, which would have implications for locally listed Crown.
Macau's gaming industry has entered a stable development phase and it is thus not necessary to give out 20- or 10-year licenses, and a five-year license may be more appropriate, the Hong Kong Economic Journal quoted a source as saying.
Also, the shorter renewal period is said to act as a political restraining move against US-based operators including Hang Seng-listed Wynn Macau and Sands China, which are among the six Macau casino operators up for license renewal in 2020 and 2022.
The central government will take the Sino-US relationship into consideration when renewing licenses, the source said.
Both Wynn Macau and Sands China are subsidiaries of US firms.
License holders may also be required to invest more in the non-gaming business to help diversify Macau's economy during the interim review, which falls next year and in 2016, the source said.
Crown shares are trading slightly lower.
Japan’s trade deficit widened to a record in January as surging import costs weigh on Prime Minister Shinzo Abe’s campaign to drive a sustained recovery.
The shortfall of 2.79 trillion yen ($30.3 billion) reported today by the Ministry of Finance in Tokyo was more than the 2.49 trillion yen median estimate in a Bloomberg News survey of 28 economists.
Imports rose 25 per cent from a year earlier and outbound shipments gained 9.5 percent.
Declines in the yen are driving up import costs, while the nation’s exports have seen only limited gains from the currency’s slide of more than 20 percent against the dollar in the past two years.
The trade deficit contributed to Japan’s economy growing a less-than-forecast 1 percent in the fourth quarter, underscoring the risk that Abenomics may falter after a sales-tax increase in April damps consumption.
“The effect of the yen’s depreciation on exports has been so slow,” former Bank of Japan Deputy Governor Kazumasa Iwata told reporters in Tokyo yesterday. Iwata also highlighted declines in the competitiveness of Japanese industries and production shifting overseas.
The Japanese currency eased only slightly in response and now sits at 102.28 yen per US dollar.
Time for the best and worst in the ASX 200, and we keep pinching ourselves, but, yes, Fairfax is the best performing stock in the ASX so far today.
The stock is up 23.8 per cent, reaching 88.2 cents - its highest level since November 2011. That may have shaken some shorters out of the tree.
Breville Group is the other big gainer this morning, up 10.4 per cent on earnings (see post at 10:16).
Best and worst performing stocks in the ASX 200 - go Fairfax!
Copper miner Sandfire Resources has vowed to perform better in the second half than the first, after reporting a $33.5 million net profit for the first half today.
The result saw profits fall by more than 60 per cent when compared to the first half of fiscal 2013, but was broadly in line with analyst consensus.
The lower profits reflect Sandfire's recent shift from exporting unprocessed copper ores out of an open pit, to the more expensive underground mining which requires more processing and concentrating.
The past six months were spent fine-tuning the underground mine at Sandfire's DeGrussa site, as well as ramping up the processing equipment and concentrator.
Lower copper and gold prices didn't help either.
Managing director Karl Simich said the company was now poised to accelerate.
The miner did not pay a dividend, but is considered a chance of paying its maiden dividend in six months time.
If you think there have been a lot of dividend increases this earnings season, you'd be right.
As of yesterday, more than 80 per cent of companies that had reported so far had increased dividends. And judging by the action so far today, that number is set to stay high.
Higher payouts have come from companies including Telstra, CBA, Rio Tinto, Wesfarmers, Suncorp, Fortescue and Woodside. There have been $6 billion in dividends declared this week - and that's excluding this morning's results.
Federation Centres has lifted its full-year earnings forecast as it reaps the benefit of lower debt costs, reduced overheads and an expanded portfolio.
The shopping centre landlord now expects to achieve 16.7¢ to 17¢ earnings per security. Its previous guidance was 16.5¢ to 16.8¢.
Federation will pay a first-half distribution of 7.5 cents a security, up 13.6 per cent from 6.6 cents a security.
The property trust’s statutory profit for the 2014 first half has almost doubled to $226.7 million from $115.9 million.
Federation’s book profit was boosted by gains from property revaluations, a reversal of its stamp duty obligations flowing from the restructure in late 2011 and a decrease in borrowing costs.
Underlying earnings rose 11.9 per cent to $118.8 million, after chief executive Steven Sewell reduced the landlord’s overall debt and cut its cost by winning an investment-grade credit rating.
Department store Myer has junked its succesion planning for its chief executive role and decided to keep current boss Bernie Brookes at the helm despite saying last year the board had begun looking for a replacement.
In a shock announcement this morning Myer announced Bernie Brookes has been re-appointed and will continue beyond August 2014 when he was set to depart after leading the department store for more than five years.
He has been awarded an ‘‘open ended’’ contract, meaning Mr Brookes will stay at the helm of the nation’s biggest department store indefinitely.
A weak lead from Wall St has been more than offset by some enthusiastic responses from investors to earnings results from AMP, Fairfax Media, and Leighton, among others.
The benchmark ASX 200 index is up 19 points, or 0.3 per cent, to 5427, while the broader All Ords has gained 0.4 per cent to 5434.9.
Here are the early gainers following earnings updates:
- AMP up 8.2 per cent
- Fairfax Media up 22.4 per cent
- Leighton up 7.5 per cent
As ever, there were some earnings misses as well:
- Origin down 3 per cent
- Alumina down 2.5 per cent
- Fletcher Building down 3.2 per cent
Most sectors have lifted in line with the market, with the exceptions being drops in energy, IT, consumer staples (Wesfarmers is another 0.7 per cent lower), utilities and gold miners, which have fallen 1.9 per cent.
Insurers have gained this morning, including QBE (up 2 per cent), Suncorp (up 1.6 per cent) and IAG (up 1.5 per cent).
Accounting software maker Xero added 39,000 customers to its online platform in the past four months, surpassing the 250,000 customer mark for the first time as the New Zealand company prepares to ramp up activity in the United States.
The new customer numbers, revealed before a customer roadshow in New Zealand this week, are spread over New Zealand, Australia, the US and the United Kingdom.
The company said the number of customers in Australia alone was approaching 100,000, up from 79,100 in September.
By comparison, rival MYOB claims to serve 1.2 million customers across Australia and New Zealand and Reckon says it has 600,000 registered businesses on its accounting platform.
“It took five years to get our first 50,000 customers, but in the last 12 months we’ve added 115,000 more,” chief executive Rod Drury said in a statement.
The company replaced its chairman Sam Knowles with former General Motors chief financial officer Chris Liddell last week. It also added two other US technology executives as it prepares to increase activity in the US and potentially make a third public listing in New York.
The company's shares are down 1.5 per cent to $36.12 in early trading, but are up almost 19 per cent for the year.
This from our reporter Glenda Kwek, who is inside the tent at the G20 today, the annual jamboree of major economies' finance ministers, central bank governors and their assorted entourages, which begins in earnest tomorrow (today is a pre-meeting bankers talk fest):
Good morning from the G20 and the International Finance Conference in Sydney.
We've collected our G20 media kit, and lo and behold, there's ... sunscreen!
It's busy here at Four Seasons where federal Treasurer Joe Hockey is set to open the conference in a few minutes. So far, we've spotted two former treasurers attending the conference - Wayne Swan and Peter Costello.
We'll also be covering the B20 (business side to the G20) events in Sydney, which is looking at infrastructure and investment this year.
Finance ministers and central bank governors need to be sun smart.
The loss of Breville Group’s distribution licence with coffee machine maker Keurig has offset strong sales of Breville and Kambrook appliances, leading to a 1.6 per cent fall in net profit to $31.2 million in the six months ending December.
Sales from Breville’s core businesses in Australasia, North America and Europe rose 23.2 per cent to $310 million, more than offsetting the $11.4 million decline in commission income after the loss of the Keurig licence in Canada last June.
However, the Keurig commission income generated significantly higher margins than Breville’s core business.
As a result, EBIT slipped 1.1 per cent to $45.6 million. The EBIT result beat market consensus forecasts around $41 million.
Breville maintained its interim dividend at 14¢, payable April 9.
Brevile chief Jack Lord expects business conditions globally to remain challenging in the second half and has forecast flat earnings for the full year.
US stocks may have dropped after the Fed minutes disappointed investors hoping for a slowdown in the central bank's asset purchase taper, but the S&P500 came within a whisker of its record high.
The S&P 500 set an all-time closing high of 1848.38 on January 15, and came within a point of that level at its session high.
"I think the rally that we've seen off the 1750 low (on the S&P 500) was largely driven by the sense the Fed is going to slow down their retracement if it's necessary," said Uri Landesman, president of Platinum Partners in New York.
"Anything that puts a crimp in that belief is going to scare this market," he said. "This market is trading at nosebleed levels, and so it will not have a huge tolerance even for news that can be shaded in a bad direction."
Treasury Wine Estates, the world’s largest pure-play wine company and owner of iconic brands such as Penfolds, Wolf Blass and Beringer, has reached outside the wine sector for its next chief executive, picking a former Kraft Foods and Coca-Cola manager to run its global wine business.
The company announced this morning that Michael Clarke would join Treasury Wine Estates as its new chief, following last year’s shock ejection of its former boss David Dearie, with the new CEO a former president of Kraft Foods European business and a 12-year veteran of the Coca-Cola Company. Clarke’s CV does not include any direct leadership roles in the wine sector.
It is unclear if the market and investors will welcome Mr Clarke’s appointment given his lack of wine experience and whether he has the necessary skills to reverse the global winemaker’s collapsing earnings in the midst of a tough trading environment across much of the world for the wine sector.
It comes as Treasury Wine Estates recently issued its second profit downgrade following a poor performance by its US wine arm and continued headwinds across Australia and Europe which has crunched wine sales and group earnings.
This morning Treasury Wine Estates also reported that its pre-tax earnings had dived 37.6 per cent to $45.8 million, while revenue remained flat, up only 1.6 per cent to $864.2 million.
Net profit was $106.2 million, up against a profit of $52.3 million in the first half last year, but included a $80.5 million tax benefit.
Rising costs, heavy investment in new stores and supply chain and weaker earnings from leisure retailing have crimped profit growth at Super Retail Group, with net profit for the six months ending December rising only 1.7 per cent to $61.6 million.
Earnings at Rebel Sport and Amart rose 5.5 per cent to $38.4 million after like-for-like sales grew 5.5 per cent.
In the Super Cheap Auto division, EBIT grew 9.5 per cent to $44.9 million and like for like sales grew 2.3 per cent, building on strong like-for-like growth of 5.2 per cent previously.
But EBIT in the leisure business, which includes Rays Outdoor, BCF and FCO stores, fell 8.3 per cent to $24.4 million on like for like sales growth of 1.6 per cent. New stores cannibalised sales at older stores and the downturn in resources activity dampened demand in regional and mining areas.
Total sales for the group rose 5.8 per cent to $1.09 billion.
Chief executive Peter Birtles said the first half result was below expectations due to short term internal issues but the underlying business remained solid.
Super Retail lifted its interim dividend 9 per cent to 18.5¢ a share, payable April 3.
The Fed may have signalled its determination to stick to its taper course for now - but it did leave the back door open, hinting that if US economic conditions deteriorated significantly it might reconsider.
One piece in the central bank's puzzle is housing and the latest figures didn't look good: data overnight showed US housing starts recorded their biggest drop in almost three years in January.
The data was among a slew of recent economic reports affected by a severe US winter, including a US homebuilder confidence index on Tuesday, which suffered its largest ever one-month drop in February. The weather was also largely blamed for the sharp slowdown in hiring in December.
Some economists, however, lowered their first-quarter growth estimates on the back of the weak housing starts data. Goldman Sachs cut its first-quarter growth estimate by a tenth of a percentage point to a 1.8 per cent annual rate. Barclays reduced its forecast by 0.3 percentage point to a 1.9 per cent rate.
Leighton Holdings has delivered full year profits for 2013 at the top end of its guidance range as healthy income from the contractor’s Thiess subsidiary countered weakness elsewhere in its business.
Leighton also upped its payout, declaring a final dividend of 60¢ per share, 50 per cent franked, compared to a 50¢ dividend a year earlier.
The company reported underlying net profits after tax of $584 million for the 12 months to December, having previously guided investors to expect profits of between $520 million and $600 million.
Gearing dropped to 29 per cent, down from 39 per cent in November, and within Leighton’s guidance range of 25 to 35 per cent.
There have been quite a few recommendation upgrades from analysts following recent results:
- Ausenco raised to "hold" from "sell" at Bell Potter
- Brambles raised to "buy" from "hold" at Deutsche Bank, while Credit Suisse has upped its view to "outperform" from "neutral".
- Suncorp raised to "neutral" from "underperform", again by CS.
- Toll raised all the way to "buy" from "underperform" at BBY.
- But Wesfarmers has been cut to "underperform" at BBY.
Also, today Nine Entertainment officially joins the ASX 200.
Fletcher Building said its first-half net profit rose 5 per cent to $NZ154 million ($141.3 million) from $NZ146 million as revenue fell 2 per cent.
Revenue in the six months ended December 31 slipped to $NZ4.273 billion ($3.92 billion) from $NZ4.38 billion in the year-earlier period, the company said in a statement to the ASX.
Chief executive Mark Adamson said the improved result stemmed from increased activity levels in most sectors in New Zealand and an improved environment in the US.
“Across most of our Australian businesses, sales volumes were mixed with declines in the steel and concrete pipe business,” he said.
Auckland International Airport said its first-half underlying profit rose 13.9 per cent rise to $NZ86.7 million ($79.5 million) based on a 4.8 per cent increase in passenger movements that led to strong aeronautical income.
Chairman Henry van der Hayden said the company was pleased to report an interim result that had exceeded expectations.
The company has lifted its full-year underlying earnings guidance to the range of $NZ166 million to $NZ172 million, up from a previous range of $NZ160 million and $NZ170 million, subject to any material adverse events or deterioriation because of global market conditions.
AIA will not pay an interim dividend as it has already announced a proposed $NZ34.3¢-a-share, or $NZ454 million, return of capital to investors that it expects will be distributed in April.
Gold fell almost 1 per cent overnight, but held well above $US1300, after the Fed minutes reaffirmed the central bank’s commitment to gradually cutting stimulus, weighing down on bullion's inflation-hedge appeal.
Spot gold is currently down 0.8 per cent at $US1311 an ounce.
The precious metal accelerated losses after the Fed minutes, which also pressured US equities. The strong inverse correlation between gold and equities earlier this year has shown signs of weakening lately, traders said.
"What the Fed is saying is the economy is strong enough for it to continue pulling back its bond purchases, and the equities may continue to rally, so there is not as much a need for precious metals as a safe haven," said Tom Power, senior commodity broker at Chicago-based RJO Futures.
Adelaide Brighton has rewarded shareholders with a 3¢ special dividend as the construction materials group reported a 1.2 per cent drop in full-year net profit to $151.1 million on record revenue of $1.23 billion.
The 4 per cent rise in revenue for the year ended December 31 was fueled by solid demand from projects in South Australia and the resources sector in Western Australia.
Stripping out a $7.6 million fair value accounting gain on an acquisition from the 2012 result, the $151.1 million profit result is a 4 per cent gain in net profit after tax.
Managing director Mark Chellew, who is resigning as chief executive in May after 13 years at the helm, said the modest growth in underlying profit was encouraging, because the full benefits of recent major capital expenditures were yet to flow through and the residential housing recovery was in its infancy.
“Adelaide Brighton’s cement and lime exposure to resources and infrastructure again supported shareholder returns despite commercial and residential building activity being weak for much of the year,” Mr Chellew said.
iiNet has grown its broadband customer base by more than expected and boosted its underlying net profits by 19 per cent to $31 million.
Where some analysts expected broadband subscriptions to increase by around 12,000 customers, iiNet acting chief executive David Buckingham said they rose by 16,000.
While net profits officially fell by 9 per cent to $29 million, much of this was due to a one-off settlement rebate the company received in the first half of financial year 2013.
The company also reported it has 30,000 customers on the national broadband network, which makes it one of Australia’s leading providers of NBN-related services.
“We are leading the pack in our proactive approach to NBN and currently have a 25 per cent share of the NBN market,” Mr Buckingham said. “iiNet continues to generate strong cash-flows which has enabled us to continue investing growth capital in our network and systems during the period”
The company will pay shareholders an interim dividend of 9¢ per share.
Origin Energy has posted a 39 per cent drop in first-half profit to $322 million, while underlying profit edged up 5 per cent to $381 million, just short of some forecasts.
Origin declared an interim dividend of 25¢ per share, on a par with the same time a year ago.
Tough conditions in Origin’s core energy markets business weighed on the underlying number, but was more than offset by better performance in the other divisions, Origin said on Thursday.
Managing director Grant King said the company was starting to see “tangible improvements” across the energy markets business, which saw a net gain in customers, despite intense competition.
Construction of Origin’s large Australia Pacific LNG project in Queensland remains “on track,” with the first cargoes due to be shipped in mid-2015, Mr King said.
So much for the proclaimed end of the tech bubble... Plenty of people scratching their head over the price Facebook is paying for mobile messaging company WhatsApp, and investors seem to be less than enthused:
FB paid about $35 per active user for Whatsapp. Its own valuation is about $180/MAU— Benedict Evans (@BenedictEvans) February 19, 2014
RT @dkberman: Facebook's total purchase price for 55-person WhatsApp: $345 MILLION per employee.— felix salmon (@felixsalmon) February 19, 2014
Wait, 16 BILLION? WTF?— Josh Barro (@jbarro) February 19, 2014
Sixteen. Billion. Dollars. The world has gone bonkers. http://t.co/7NjPghHfVz— felix salmon (@felixsalmon) February 19, 2014
Fairfax Media has reported 48.5 per cent growth in underlying net profit to $86.4 million for the half year ended December 31, compared with the previous corresponding period.
Revenue was down by 1.2 per cent to $1.083 billion, while earnings before interest, tax, depreciation and amortisation grew by 2.3 per cent $178 million.
Fairfax’s statutory net profit was $193.8 million, boosted by business sales.
The company sold InvestSMART, Stayz Group and FRG Asia during the reporting period with net proceeds of $221 million.
“It is a credit to the skill and resilience of everyone at Fairfax that the company has recorded its first year-on-year increase in underlying EBITDA for continuing businesses since June 2010,” Fairfax chief executive Greg Hywood said.
Australia’s biggest life insurer AMP has reported a 2 per cent fall in net profit to $672 million for the year to December, as earnings were hurt by worsening claims and customers cancelling their cover.
AMP reported an underlying profit of $849 million for the year, down from the $950 million posted in 2012.
The company netted good growth from its wealth management, AMP Bank and New Zealand businesses. But the gains were offset by a “challenging life insurance environment” and a drop in investment income from shareholder funds.
AMP will dish out a 11.5¢ per share full year dividend to shareholders – the same as the 2013 interim dividend. The latest dividend represented a full year payout ratio of 80 per cent of underlying profit and sat at the top of AMP’s target range of 70 to 80 per cent of underlying profit.
The results come after the wealth giant issued two profit warnings last year. In October, AMP disappointed shareholders when it warned the company would take a $90 million profit hit in 2013.
That’s $17.8 billion Australian – equivalent to the market capitalisation of Macquarie Group.
"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO.
US stocks fell after the Federal Reserve made it clear in its minutes that it will stick to its taper path, dashing hopes many in the market had harboured of a slower pace of unwinding stimulus after recent US economic data came in weaker than expected.
When US Federal Reserve officials met at the end of January, they were surprised by the strength of the economy, cheered by the optimism of consumers, and convinced they should continue to dismantle the central bank’s economic stimulus campaign, according to the minutes of that meeting.
Consumer spending is the dominant engine of American economic growth, and Fed officials cited its resurgence as the primary reason for their optimism.
“While noting that households remained cautious, participants cited a number of factors that were likely to continue to underpin gains in household spending, including rising house prices, growing confidence in the sustainability of the economic expansion, increasing payrolls” according to the account of the Fed’s policy-making meeting, released after a standard three-week delay.
The tone of the account left little doubt that officials are committed to steadily reducing the Fed’s purchases of Treasury and mortgage-backed securities, a point that a range of Fed officials have made consistently in public remarks.
Indeed, there was little sign of concern about a string of underwhelming economic reports during the early weeks of 2014. Officials, the account said, “generally did not expect the recent pace of economic growth to be sustained, but they nonetheless anticipated that the economy would expand at a moderate pace in coming quarters.”
The Fed has dashed hopes it will slow the pace of unwinding stimulus. Photo: Bloomberg
Here's a list of stocks reporting today, it's going to be a busy one:
- Adelaide Brighton
- Auckland Airport
- Cromwell Property
- Decmil Group
- Fairfax Media
- Federation Centres
- Fletcher Building
- Investa Office Fund
- Leighton Holdings
- Magellan Financial
- Origin Energy
- Platinum Asset Management
- Treasury Wine
Local stocks are poised to open down after the US Federal Reserve minutes indicated increasing optimism about the state of the American economy, sparking concern among investors of more volatility ahead as the QE taper continues.
Here’s what you need2know:
- SPI futures down 16 points at 5361 at 8.10am AEST
- AUD at 90.00 US cents at 8.10am AEST
- On Wall St, S&P 500 -0.65%, Dow -0.56%, Nasdaq -0.82%
- In Europe, Euro Stoxx 50 +0.11%, FTSE100 +0.00%, CAC +0.24%, DAX +0.00%
- Spot gold down $US2.61 to $US1319.41 an ounce
- Brent oil slips US3¢ to $US110.43 per barrel
- Iron ore down US50¢ to $US123.90
What's on today
Australia: detailed jobs data, average weekly earnings.