Well...to say that was an interesting day would be an understatement.
Thanks for being with us while it happened, we hope to see you again tomorrow.
Despite the sharp plunge in local shares, the Chicago volatility index, which gauges implied market volatility, is at its lowest point in almost six years. But keep in mind the index finished at the close of markets in the US on Friday.
Here's what you need2know this Monday evening:
Markets
- ASX fell 2%
- AUD at $US1.0362
- Nikkei down 2.3%, Hang Seng down 2.1%, Kospi down 0.8%
- Gold up to $US1598.10, WTI oil down to $US92.41
- Dow Jones futures down 1.1%, FTSE100 futures down 2.2%
News
Blue chip stocks weren't safe from the downturn today:
- BHP: -2.4%
- Rio: -2.9%
- ANZ: -2.2%
- CBA: -1.4%
- NAB: -2.6%
- Westpac: -3%
- Fortescue: -3.9%
- Woolworths: -1.9%
- Wesfarmers: -2.4%
- Telstra: -0.2%
Among the sectors, consumer staples dropped 2.9 per cent, financials fell 2.1 per cent, materials slipped 2.2 per cent and energy dipped 1.8 per cent. Gold miners bucked the trend, up 0.6 per cent.
The sharemarket has finished sharply lower, the benchmark S&P/ASX200 fell 104.8 points, or 2 per cent, to 5015.4, while the broader All Ords lost 101.9 points, or 2 per cent, to 5027.
A bid to halve Sunday penalty rates for workers in the retail, fast food and hospitality industries has been rejected by the national workplace relations tribunal.
The Fair Work Commission (FWC) handed down its decision on Monday to keep penalty rates unchanged, following a 15-month review process in which groups such as the National Retail Association, the Queensland Chamber of Commerce and Industry and Ai Group made submissions.
The groups sought to halve the penalty rates paid to employees on Sundays and remove the 25 per cent penalty rate for evening work.
The bid would have affected workers in the fast food, food and beverage, general retail, hair and beauty and general hospitality industries.
But a full bench of the FWC on Monday said ‘‘a case had not been made’’ to change the penalty rates, because the modern award recognised the ‘‘disabilities of working at unsociable times’’.
It also said the industries already had relatively low pay rates.
Standard and Poor's sees a high risk that Spain, Italy, Portugal and France will not be able to carry through necessary reforms as the unemployed become less willing to put up with austerity, said S&P's Germany head Torsten Hinrichs.
"The high unemployment in Spain, Italy and France is socially explosive," Hinrichs was quoted as saying in Monday's Neue Osnabrücker Zeitung.
"There has to be a social consensus for saving measures. High unemployment ... does not help."
Hinrichs said the people of Spain and Portugal had already proven they were willing to bear with austerity measures, but "this cannot continue forever".
In Italy, there was the further danger that "a new government may not be strong enough for the still necessary reforms to strengthen growth," he said.
Hinrichs said S&P still rated Germany as a triple A with stable outlook and did not see any reason for concern: "It is one of the few AAA and stable countries that we still have in Europe".
Investors have shown confidence in the outlook for Australia’s largest listed rail company Aurizon after they snapped up the latest tranche of shares to be offloaded by the Queensland government.
Shares in the company formerly known as QR National rose by as much as 7 cents today to $4.11, on a day when the market slumped by almost 2 per cent. In comparison, other transport stocks including Aurizon’s arch rival, Asciano, fell further than the broader market.
The state government has sold 200 million shares in Aurizon at $4.03 a piece to institutional investors, which was at a discount of just 1 cent a share to its closing price on Friday. Typically, sell-downs of a similar size by major shareholders are priced at a 5 per cent discount.
The $806 million deal represents a profit of about $300 million to the government since the rail company was floated in late 2010. It reduces the state’s stake in Aurizon from 18.2 per cent to 8.9 per cent.
The Bank of Japan today reappointed Masayoshi Amamiya, a mastermind of quantitative easing, to oversee a key division charged with drafting monetary policy, a sign it is gearing up for a radical shift in its policy framework under a new leadership that takes over this week.
The expected new BOJ governor, Haruhiko Kuroda, has pledged to do whatever it takes to achieve the central bank's new 2 per cent inflation target focusing on expanding its balance sheet with purchases of longer-dated government bonds.
The reappointment of Amamiya, a 57-year-old career central banker admired for his skills in coming up with creative banking ideas, may heighten the chance the central bank will shift its policy closer to the quantitative easing campaign of the last decade.
"Amamiya is the architect of many of the BOJ's existing policy frameworks. His return now may be to review them and prepare for an overhaul in time for the BOJ's next rate review in April," said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo.
As we enter the final hour of trade, here's the best and worst performers on the day.
Singapore Telecommunications said it has hired Credit Suisse and Morgan Stanley to conduct a strategic review of its Optus Satellite, a business that could be worth at least $1.6 billion.
The strategic review, according to bankers and analysts, could mean an outright sale or an initial public offering of a unit that sells TV, telephony and broadband services to more than 2 million subscribers, and had revenue of $319 million for the financial year that ended March 31, 2012.
Sachin Gupta, an analyst at Nomura Securities, said the asset could be worth between $1.5 billion and $2 billion as the margin for the satellite business could be about 80 percent.
Markets across the region seem to have caught Cypriot fever:
- Nikkei(Japan): -2.1%
- Shanghai: -1%
- Taiwan: -1%
- South Korea: -0.6%
- Singapore: -0.7%
- New Zealand: -0.9%
For a bit of a change in pace, here's something from our Money team. Everyone loves the idea of buying stocks that double in price. But how do you spot them? Nathan Bell has 10 quick pointers:
Fairfax Media chief executive Greg Hywood told a parliamentary committee today the government’s proposal to introduce a public interest media advocate would allow ministers to target media coverage they disagreed with.
‘‘The practical application of this legislation is that it sets up a model where a minister of the government can pick up the phone to his own appointee and say ’fix it’,’’ Mr Hywood said.
‘‘Fix it being ’get the media off our backs’.’’
Mr Hywood said regulation of the media should be the last resort of any democratic government and ‘‘be as light a touch as possible to achieve a clear public good’’.
The NBN will hurt regional broadcasters, and TV stations should get free access to the network, Seven West Media chairman Kerry Stokes says.
Seven’s regional Queensland network will not be able to afford the NBN when it replaces existing infrastructure, Mr Stokes told a joint Senate committee hearing on proposed media reforms on Monday.
The regional TV business currently uses its own transmitters and cables to connect its various newsrooms, he said.
‘‘Once we go to NBN that’s a whole different ball game,’’ Mr Stokes told the committee.
‘‘We have to actually pay NBN to use their facilities, and their facilities are much more expensive than our transmitters.’’
Arrangements are yet to be finalised on how television networks will use the NBN, and Mr Stokes said his company wants free access.
Coca-Cola Amatil has announced that its chief executive Terry Davis will step down next year after more than 12 years running the beverage group.
He will retire on August 31 next year, said CCA Chairman, David Gonski.
“Over the last 18 months there has been much speculation concerning the tenure of our long serving Group Managing Director, Terry Davis. I am therefore very pleased to confirm that Terry will remain as Group Managing Director until 31 August 2014.
“In his 11 years so far as Group Managing Director, Terry has made a significant and lasting contribution in transforming CCA into a world-class, premium multi-beverage business. The market capitalisation of CCA has increased from $3.5 billion to $11.4 billion, Group return on capital has increased from just over 7 per cent in 2001 to 24 per cent today, generating total shareholder returns of nearly 400 per cent.”
CCA shares are down 2 per cent to $14.93.
China's new home prices rose in February from a year ago for a second consecutive month, though gains are expected to ease after the government unveiled this month tougher tax plans to curb real estate speculation.
Average new home prices across China climbed 2.1 per cent last month, versus a year-on-year increase of 0.8 per cent in January, according to Reuters' calculations from data released by the National Bureau of Statistics today.
China's cabinet announced on March 1 that it planned to introduce a 20 per cent capital gains tax and higher downpayments and mortgage rates for second-time home buyers in cities where prices are deemed to be rising too fast.
"This is not going to be sustained after the government's new rules. Price rises will ease, but will not head south," said Jianguang Shen, chief China economist with Mizuho Securities Asia.
Here's an interesting post from the Lowy Institute for International Policy: Who is to blame for austerity?
The concerted global fiscal stimulus of 2009 is an example of excellent policy-making, the more outstanding because subsequent policies have been ineffectual in addressing the weak recovery in advanced economies. Why did success morph so quickly into the fiscal policy lethargy of the past three years?
Usually, economies bounce back quickly after a downturn: the greater the downturn, the faster the recovery. Not so this time. Nearly five years after the nadir, the US and the UK still have unemployment close to 8 per cent and the European Union has almost 12 per cent (this doesn't just reflect the shocking unemployment figures in Spain and Greece; even France has unemployment well over 10 per cent).
Given the success of the 2009 fiscal stimulus (a rare example of international economic coordination, associated with the London G20 meeting), the premature shift to austerity in 2010 needs some explanation.
Part of the answer lies in the very success of the 2009 stimulus. In early 2009 the IMF was forecasting a GDP plunge of 2.5 per cent for the advanced countries over the course of that year, but the fall turned out to be less than 0.5 per cent. The predicted growth of only 1per cent during 2010 turned out to be over 2 per cent. This was hardly tear-away growth, but was enough to shift the focus from the immediate need for fiscal expansion towards the longer term issue of unsustainable government debt.
Click here for the full post from economist Stephen Grenville.
The Australian dollar is lower, as markets get nervous about the implications of planned bank deposit levy in Cyprus.
The local unit was trading at $US1.0353, down from $US1.0369 on Friday.
Since 7am, the Australian dollar traded between $US1.0347 and $US1.0357.
The US is not going to have a gas-led economic recovery. The major potential benefit to the US economy of lower gas prices is cheaper electricity prices, said CBA currency strategist Joseph Capurso. However, electricity prices have not yet fallen.
"US ‘energy independence’ is a long way off. In our view, it will be many years before the US trade and current account balance can improve enough to contribute to a lift in the USD.
"The emergence of hydraulic fracturing technology (‘fracking’) has unlocked unconventional shale gas in the US. The increase in US natural gas production has led to sharply lower US gas prices since 2008. We point out that while gas prices are well below their 2005 and 2008 peaks, they are only modestly below long run average levels. Nevertheless, the lower gas price has raised two questions for the US economy that we consider here."
- Can cheaper US gas lead to a renaissance of US manufacturing, and by extension, the US economy?
- Can the US achieve ‘energy independence’ by transforming itself from an energy importer into an energy exporter?
As we approach the halfway point of the trading day, here's how blue chips are performing:
- BHP: -1.8%
- Rio: -2%
- ANZ: -1.5%
- CBA: -0.9%
- NAB: -1.9%
- Westpac: -1.4%
- Fortescue: -3.9%
- Woolworths: -1.2%
- Wesfarmers: -1.1%
- Telstra: +0.7%
A weekly gauge of sentiment in the Japanese government bond market rose to its highest level in about ten months, helped by hopes of more monetary easing in Japan, the latest Thomson Reuters poll showed today.
The poll's JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those who are bullish, rose to plus 33, from minus 3 in the previous survey.
That was the highest reading since plus 36 marked in mid-May last year.
"There won't be sellers in the market given expectations of large-scale monetary easing, risk-off moves on worried over Europe following Cyprus, and absence of bond auctions until the end of month," said a trader at a brokerage.
Share prices may be down heavily today, but Citi strategist Tony Brennan reckons a longer-term positive trend will be the return of households and investors to the market.
For several years now, households and foreign investors have been reluctant to put new cash into equities.
In a note to clients, Brennan says the better earnings outlook and low deposit rates could soon change this, posing "upside risk" to his end-of-year target for the ASX 200 of 5200 points.
It comes after Westpac's consumer sentiment index last week said the share of people who thought shares were the "wisest" place to put their savings had risen to 8.6 per cent, from 6.3 per cent.
"Provided the equity market holds on to its gains, retail interest should grow further, particularly with term deposit rates likely to stay low, and this should bring new money into the market," Brennan writes.
"Since 2008-09, and the substantial capital raisings that year, there’s been little added to the market by the main investor groups other than super funds – retail investors, foreign investors, and other domestic institutions – and these should return with the market stronger."
Surcharges have long been the bug bear of anyone catching a taxi or booking a flight when paying by credit card, writes BusinessDay's John Collett.
New rules that came into effect on Monday are an attempt to limit the surcharges retailers can add.
It is still early days but, so far, little has changed.
Cabcharge adds a surcharge 10 per cent each time a taxi fare is paid for electronically. The only way to avoid the charge is to pay with cash. Qantas has a surcharge on international flights of $30 per person and $7.70 on domestic flights, which includes flights to New Zealand.
As you might expect, the cloud hanging over Cyprus has a golden lining, if you’ll permit a slight deviation on that cliche.
Gold rose above $US1,600 for the first time in more than two weeks on Monday as an unusual bailout package for Cyprus threatened to trigger fresh turmoil in the euro zone, attracting investors to seek safety in gold.
Spot gold rose to a 2-1/2-week high of $US1,608.30 an ounce earlier in the day, before easing to $US1,600.96 by 0024 GMT, up 0.6 percent from the previous close.
US gold also hit a 2-1/2-week high, at $US1,607.6 an ounce, and pared some gains to $US1,600.10.
Investors will closely watch a US Federal Reserve policy meeting on Tuesday and Wednesday to assess the central bank's attitude towards aggressive monetary stimulus. Economists expected the Fed to keep buying bonds for the rest of the year to aid the still frail economic recovery.
Personal finance loans were down 0.1 per cent in January, official figures show.
The Australian Bureau of Statistics (ABS) on Monday said personal finance commitments, seasonally-adjusted, fell to $7.501 billion in January, from $7.511 billion in December.
Total commercial loans in January fell 8.7 per cent to $28.994 billion, from $31.752 billion in December.
Lease finance was up 14.0 per cent to $515 million, compared with $452 million the previous month.
Housing finance for owner occupiers rose 1.3 per cent to $13.764 billion, from $13.586 billion the month before.
Sales of new motor vehicles in Australia were flat in February, from January, but were still the best ever for that month and up strongly on February last year.
Figures from the Australian Bureau of Statistics out on Monday showed new vehicle sales were unchanged in February at a seasonally adjusted 95,708. That followed an upwardly revised 2.2 per cent dip in January.
Sales were still up 9.4 per cent on February last year.
Sales of sports utility vehicles slowed after a couple of very strong months, to rise by 0.3 per cent in February. Yet they remained 19 per cent higher than the same month last year. All the weakness was again concentrated in passenger vehicles where sales dropped 1.0 per cent in February, while sales of other vehicles, including trucks, rose 1.7 per cent.
Tokyo stocks have joined Aussie shares, opening 1.56 per cent lower after the safe-haven yen soared on weekend news that Cyprus would have to tax bank customers’ deposits as part of an EU bailout deal.
The Nikkei 225 index at the Tokyo Stock Exchange was down 195.51 points to 12,365.44 at the start.
Despite today's 1.35% falls for the All Ords, remember that shares rose by 1.7% last Friday. ^SD — CommSec (@CommSec) March 17, 2013
Ansell has announced the resignation of its chief financial officer, Rustom Jilla.
The company said Mr Jilla was leaving to take up another opportunity and would depart in the coming weeks. A global search has been initiated for a successor.
Mr Jilla had been with the company for just over a decade.
‘‘Rustom has been a terrific leader and has guided Ansell through many challenges,’’ chief executive Magnus Nicolin said.
The company's shares are down 4.7 per cent to $15.47.
Some more views on the Cyprus news.
‘‘The concern is that this bailout plan was forced upon deposit-holders, taxing them, and therefore an involuntary support for the bail-out,’’ said Imre Speizer, a strategist at Westpac.
‘‘If this is a template for future bailouts, then that’s worrying for any of the larger countries if they have to go down this route. It isn’t affecting only the euro, it’s affecting risk appetite in general.’’
Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere and threatened to disrupt a market calm that settled over the 17-member bloc since the European Central Bank’s pledge in September to backstop troubled nations’ debt.
With no government in Italy, Spain in the throes of a political scandal and Greece struggling to meet the terms of its own bailout, more turmoil could hamper efforts to end the crisis.
The ASX200 has just bounced off a fresh low for the day - down 1.75%. According to Evan Lucas at IG Markets, the Cyprus news will hit offshore markets when they open for the week tonight.
"This will impact European markets tonight and will therefore make investors here nervous, coupled with losses to major leads in the US on Friday," he said.
"Expect the sell-off to be hard today, barring any positive news coming out of Cyprus."
Now for the retailers:
- Woolies: -3.3%
- Wesfarmers: -1%
- Harvey Norman: -0.71%
- DJs: -1.99%
- Westfield: -1.27%
- Myer: -1.45%
Now for the banks:
- CBA is 0.67% lower to $69.71
- ANZ is 1.08% lower to $28.41
- NAB is 1.63% lower to $30.79
- Westpac is 1.07% lower to $30.56
It's a sea of red among the blue chips. The miners are in a hole, the retailers have copped a bagging and there's been a run on the banks, so to speak. We'll start with the big miners:
- BHP is 1.88% lower to $34.88
- Rio is 1.71% lower to $60.25
- Fortescue is 2.22% lower to $3.97
Michael Turner, strategist at RBC Capital Markets, said the share market falls were ‘‘all on Cyprus’’.
"US futures opened down about a per cent, and we've followed that move and maybe a touch more all on the back of the Cyprus news" he said.
"First thing this morning, FX was pointing to some pretty large falls in the Euro, which is about 170 points lower than it was on Friday night. So even before the Aussie futures had opened, it was looking pretty grim."
He said equity markets were starting what would be a tough week ahead in red.
"It’s very difficult to know what they’re going to do with this news in Europe tonight. Sometimes Asia misinterprets the news from events on the weekend, but you’d have to say that Europe will probably open fairly week this afternoon, and it’s not really going to be something people want to buy into," he said.
"It’s pretty easy to see us staying heavy today, in terms of equity markets."
The slide on the ASX was a deep as 1.7 per cent, but it has stabilised at about 1.4 per cent - that's a loss in cash terms of about $21 billion.
It's a diverse group of companies which have fallen hardest among the 50 top companies on the ASX:
- Woolies: -3.41%
- Orica: -3.16%
- Asciano: -3%
- Amcor: -2.7%
- Incitec Pivot: -2.69%
- Sonic Healthcare: -2.49%
- Macquarie: -2.1%
Every sector on the ASX200 is in the red, with telecoms the best performed with a loss of 0.34 per cent. Here's how the others are faring:
- Health: -2.35%
- Consumer staples: -2.04%
- Info tech: -1.73%
- Energy: -1.64%
- materials: -1.59%
- Financials: -1.5%
With that huge slide at the open, the ASX has lost about $25 billion in only 20 minutes. It's early days of course, but the comments from Derek Mumford at Rochford Capital we published earlier could have been prescient. If markets were looking for a trigger for a correction, they might have found it in Cyprus.
In early trade, the All Ordinaries index is 69.7 points lower, or 1.4 per cent, to 5059.6, while the benchmark S&P/ASX200 is 73.1 points lower or 1.4 per cent, to 5047.1.
Markets have fallen hard in early trade - down 1.5 per cent. Ouch!
Just as markets open, ASIC has delivered it reports on dark pools and high frequency trading, and the message is a clear one: 'Relax everyone.'
The corporate regulator says fears about high-frequency traders in Australia appear to be largely exaggerated, but it said some trading practices are forms of market manipulation.
"Many issues can be dealt with by existing regulations and there has been a marked change in the professional traders' behaviour during the course of the ASIC study," said ASIC Deputy Chairman Belinda Gibson.
"Some of the commonly held negative perceptions about high-frequency trading are not supported by our analysis of Australian markets."
Looking at economics data today, we get ABS data on lending finance for January at 11.30am. And looking ahead this week:
- Tuesday: RBA minutes from March 5 board meeting, RBA assistant governor Dr Guy Debelle speech on trends in Australian debt markets
- Wednesday: ABS international merchandise imports for February, Westpac-Melbourne Institute Leading indexes of economic activity
- Thursday: RBA March Quarter Bulletin, Washington H Soul first half results, Brickworks first, Premier Investments first half results, March 2013 share price index futures contract expires
Rochford Capital Derek Mumford said what was happening in Cyprus had the potential to trigger a correction to the share market, both in Australia and the US.
‘‘The equities markets were already vulnerable to a correction, so this may just be the catalyst that sends the markets to a much needed period of consolidation, if not a sharp downward move,’’ he said.
Mr Mumford said it was likely to send the share market down today, and down by up to five to eight per cent over the coming weeks.
‘‘Equities were running very strong, particularly in the States, and I do think they are vulnerable to a correction or sell off,’’ he said.
‘‘A lot of professional traders will be wary that a correction was due, even though the markets were making new highs. It seemed to be running ahead of what future corporate earnings could justify,’’ he said.
‘‘It will be negative, but to what extent it’s hard to say.’’
As well as Wall Street snapping its winning run on Friday, local investors are looking to Europe and some uncomfortable news from Cyprus, as jitters in the eurozone are in focus on global markets at the start of the week.
After all-night Friday talks, euro finance ministers agreed a 10 billion euro ($US12.6 billion) bailout for Cyprus. But overnight, MPs postponed an emergency debate in parliament on a controversial bailout as MPs baulked at an unprecedented tax on savings, threatening a prolonged closure of the island's banks.
BusinessDay's Eric Johnston reports that Australia's exposure to the drama is limited:
Australians had nearly $1.6 billion in deposits tied up with Australian-based subsidiaries of Cypriot banks.
At the same time, Cypriot banks had just shy of $2 billion in loans spread through the economy here. Most of these were small business and housing loans, with banks such as Laiki Bank or Bank of Cyprus targeting the Cypriot community.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key markets numbers:
- SPI futures market was 23 points lower to 5099
- The $A was lower to $US1.0345
- Dow snaps 10 day rally as JPMorgan weighs
- European stocks fall before Cyprus talks
- Australian business and economics news: March 18-22
Good morning folks. Welcome to the Markets Live blog for Monday.
Contributors: Thomas Hunter, Jens Meyer, Max Mason
This blog is not intended as investment advice
BusinessDay with agencies
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