That brings us to the end of today's blog - thanks everyone for reading and posting your comments.
Here's our evening wrap of today's session.
And here are the best and worst performers in the ASX 200 today.
Topping the table is Mount Gibson Iron, closely followed by that perennial outperformer, JB Hi-Fi.
Investors appear to like the recent strategic moves from Automotive Holdings and G8 Education.
Lynas has lost a tenth of its market cap, while Nufarm has been hit after reporting a 53 per cent drop in interim profits.
The dollar has just hit 92 US cents, up more than half a cent since Glenn Stevens spoke this afternoon and left out the opportunity to talk down the currency in a significant way.
So why is it pushing higher?
Macquarie Bank currency strategist David Forrester said the increase in confidence in the Australian economy is causing international investors to return to Australian dollar assets.
"The Aussie has fallen about 15 per cent over the past year, so investors feel more comfortable that it's probably not overvalued by a significant amount.
"The second factor was demonstrated today - that we no longer have a central bank talking down the currency."
As we highlighted earlier, the Australian dollar has also been attracting bids after China's softer-than-expected preliminary manufacturing activity data pointed to possible stimulus from the Chinese central government.
Strong performances from mining stocks has underpinned a 40 point, or 0.8 per cent, gain in the ASX 200 to 5376.8, while the All Ords was up 36 points, or 0.7 per cent, to 5387.2.
BHP jumped 1.8 per cent, Rio 2.1 per cent, and Fortescue 3.1 per cent after the iron ore price jumped overnight, and on increasing speculation that Chinese authorities would be compelled to act to arrest the slide in the country's economic growth.
The big banks all gained in line with the market, aside from Westpac which was up 1.2 per cent.
Telstra gained 1 per cent, and Woolies 1.9 per cent - seemingly at the expense of Wesfarmers, which dropped 0.4 per cent after the ACCC confirmed it had no issue with IAG buying the conglomerate's insurance arm.
The energy sector was pulled lower by a 2.8 per cent slide in Oil Search, while the listed property and IT sectors also fell.
Gold miners were the worst performers, dropping 1.3 per cent as a group after starting the day in the black.
The Abbott government has confirmed it will sell its first major public asset - Medibank Private.
Australians will soon be able to buy shares in Medibank Private through an initial public offering, with Finance Minister Mathias Cormann confirming the sale of the multibillion-dollar asset.
Cormann would not be drawn on how much money he hoped the government would make from the sale, which has been speculated as netting about $4 billion.
''Subject to market conditions, Medibank Private will be sold through an initial public offering in the 2014-15 financial year,'' Cormann said.
Medibank returned a profit to government of $315 million in 2013.
The Finance Minister would not comment on what other public assets the Abbott government planned to sell to reduce hundreds of billions of dollars of mounting debt.
Medibank Private for sale
Medibank Private will be privatised through a share market offering, but the government says policy holders will not automatically receive shares.
The federal government will sell Medibank Private via an IPO in 2014-15. Finance Minister Mathias Cormann is just announcing details. Stay tuned.
As much as we hate to stray from the RBA's latest pronouncements from on high...
Go long eurozone stocks broadly, and buy the French and Italian markets specifically, reckon Societe Generale strategists.
As an aside - as you can see from the chart below, which shows SG’s forecast returns from some major markets for the rest of the year – avoid Australian, British and US stocks.
In a note looking specifically within European equity markets, the investment bank’s analysts say the 38 per cent surge since June 2012 means equities in the region are no longer undervalued: “the recovery from the European crisis is now almost complete”.
Nevertheless, the evidence from US and Japan suggests that valuations “could very well expand into ‘expensive’ territory, ahead of a tangible earnings recovery”.
And they see “huge potential” for profit recovery among European companies, where earnings remain 32 per cent below their 2007 peak, against the US where corporate earnings are 11 per cent above.
“From 2015, European indices will benefit from stronger economic momentum, a weaker euro and a still accommodative monetary policy.”
They caution against non-eurozone countries like UK, Switzerland, Denmark and Sweden, which have recovered and acted as somewhat of a safehaven. They think Germany looks expensive.
And despite a pick-up in growth in the US, the S&P 500 performance in 2015 and 2016 “will likely be limited by a new cycle of Fed rate hikes” – with the same going for the UK’s sharemarket and rate hikes there by the Bank of England.
This just in from the Stevens Q&A in Hong Kong:
"There are some people who think that Australia is in a (housing) bubble, you can never be 100% sure .. but the price to income ratio has been around four times ... for about 10 years, so a very long running bubble if it is a bubble, most do not last that long.
He also said that the Australian dollar is still too high.
“What we have said, it is worth giving some thought to where the currency was when terms of trade were soaring … biggest since 1850s … we didn’t feel it was appropriate to try to limit that given the size of the event.
“When the terms of trade started to fall. We thought that was odd … happily enough the currency is now well done off its peak. From here it really depends what you think the fundamentals will do.
"Our assumption is that the terms of trade will fall further. We think commodity prices will be softer than where they have been in recent past.
"It will be quiet a surprise if that comes to pass if the Australian dollar doesn’t depreciate along with that.
“The long running equilibrium of the exchange rate is probably lower and we have been quiet consistent in saying that.
China stimulus talk is reaching a crescendo. IG's Evan Lucas says reports are emerging that the National Development and Reform Committee has approved five new railway projects, and there are rumours the NDRC is looking to add to these, particularly in urban areas:
- Credit Suisse suggests the fact it is the NDRC announcing these development having not been given approval for any in the previous three months means China is pushing the button on stimulus.
- Credit Suisse believes that cost for these projects is likely to be around 142 billion renminbi , which may explain the changes seen over the commodities space. Copper saw a bullish break, jumping 2 per cent in London and New York as the prospect of the world’s largest consumer of the industrial metal drove traders back.
- Iron ore has also reached a 10-day trading high after an extraordinary day on the futures yesterday. The more we hear about ‘increasing domestic demand’ and the acceleration of infrastructure projects like the rail projects, we will see copper and iron ore moving higher still.
- The other likely action from China as it tries to quell slowdown fears is the PBoC may relax its crackdown on lending. Today for the first time in a week the PBoC has lowered the fixing rate to CNY6.1440 from CNY6.1426 yesterday.
- The talk from the floors in China is that the PBoC is canvasing the appetite for seven- and 14-day repo raising. Considering the volatility in the rates in June last year, particularly in the seven-day repo if it is well bid it will show that corporate demand is still supportive and that funding will continue. This again is short term positive.
Stevens was less sanguine about asset prices, cautioning investors against a debt-fuelled binge of house-buying, repeating what the RBA said today in its semi-annual financial stability report.
"We are watching this closely, and we remind people that house prices can go down as well as up," Stevens said.
Still, rising house prices were working to drive a much-needed revival in home building, which has been running at a rate below population growth in recent years.
That pick-up would help offset a slowdown in mining investment which is starting to cool after several years of booming growth.Back to top
Turning to the Australian economy, Stevens says he finds a "fascinating divergence between the views of foreign observers, especially in Asia, many of whom say to me ‘Australia is doing very well’ and the tone of the commentary at home, which is typically a lot more pessimistic." He continues:
My reading of the actual data is that they suggest that the economy has been doing a bit better than much of our domestic commentary over the past couple of years would have you believe, but not quite as well as many foreign investors seem to have thought.
Australia certainly weathered the financial crisis well, and with a real GDP some 13 per cent larger than it was at the beginning of 2009, compares well with many other advanced countries. It is the case, though, that growth while positive, has been running at a pace a bit below its trend pace for about 18 months now. The rate of unemployment has increased by something like a percentage point over the same period.
Looking ahead, as the resources sector's capital spending continues to fall, it will be desirable to see some other sources of growth strengthen. One is export volumes for resources, which are already growing strongly, as the additional capacity put in place over recent years becomes utilised.
For example, iron ore shipments have risen by about 85 per cent from their levels of five years ago, to around 1.5 million tonnes per day. Exports will rise further over the coming year or two, as additional resource projects are completed and, at the margin, some other areas face slightly less of a headwind from the exchange rate.
Reserve Bank chief Glenn Stevens says it is still a little too early to tell if the slowdown in China is a "large one".
"People are still too inclined to fret about what are monthly movements in PMIs and sometimes they fret even before movements in American data.
"The greater concern is the risks involved in the build up of credit in shadow banking in recent years.
"Recent credit events have focused on the possibilities of failure", he said in reference to the corporate sector.
He noted that recent indicators, including industrial production and retail sales, have shown possible signs of slower growth in the early part of 2014.
"Given that the growth target was more than met last year, and given that the Chinese New Year holiday period makes it more difficult to assess trends in the data, it may be a little too early to draw strong conclusions," he said.
"Spot prices for steel and iron ore have fallen lately though, on movements to date, seem within the range seen in recent years."
RBA chief Glenn Stevens' speech he's holding in Hong Kong is out and it looks like he's passed on the opportunity to talk down the dollar, which has driven the currency higher.
The currency has jumped about three-tenths of a cent to the day's high of 91.84 US cents, a new four-month high.
Will RBA governor Glenn Stevens use the high-profile platform of the Credit Suisse Asian investment conference in Hong Kong, where he's due to speak now, to jawbone again on the need for a weaker exchange rate?
He could certainly do so, says Westpac's chief currency strategist Robert Rennie.
While the Reserve Bank's senior officials, such as deputy governor Phil Lowe, have sidestepped opportunities to talk down the Australian dollar this year, the currency has continued to edge up. It pushed to a new year's high of US91.76¢ overnight.
Rennie says expectations of stimulus from the Chinese government is working in a "bad news is good news" sense to lift the Australian dollar.
US-focused oil and gas play Austin Exploration's share price has jumped 18.2 per cent, after earlier surging as much as 36.4 per cent, with trading volumes of over 138 million on the back of significant oil flows from its latest Eagle Ford shale well in Texas.
Austin’s first farm-out well with Halcón Resources recorded an initial production rate of 1066 barrels with an 87 per cent oil cut. The company has highlighted the potential for another 100 drilling locations on the Birch property.
Halcón is the latest venture from Floyd Wilson, founder of Petrohawk Energy Corp which was sold to BHP Billiton for around $US12.1 billion back in 2011.Back to top
US fund manager Jeremy Grantham's gloomy predictions for stocks sparked lots of interest and some controversy when they ran on our website yesterday.
We took that as a prompt to check what other well-known investors are predicting. Turns out that while a bit of caution seems to be a common theme as the Fed slowly winds down the easy money, many successful fund managers and investors aren't quite as bearish as Mr Grantham.
Warren Buffett, although concerned about the effects of the Fed tapering its $US85 billion ($92.8 billion) a month asset buying program, believed the economy is going to be ''just fine'' and equities were still the most attractive investment.
''People react too much to short-term things in the stock market whereas they behave quite rationally when they get into other investments,'' he said this month.
Billionaire Ray Dalio, whose Bridgewater Associates is the world's largest hedge fund with $US130 billion under management, wasn't as upbeat but said that the US was in its ''boring years'', hence 2014 would be forgettable.
Howard Marks, the chairman of US investment firm Oaktree Capital, said while equities were no longer cheap, there was no cause for panic. But he said investors should be cautious.
''The price of most assets as being on the high side of fair. We're not in the low of the crisis like five years ago. But similarly, I don't think we're in a bubble,'' Marks told Swiss newspaper Finanz und Wirtschaft.
''The economy, investor psychology and the price of credit investments had recovered, and pro risk behaviour had started to return to the markets. Because of that, our mantra at Oaktree Capital for the last few years has been: 'move forward, but with caution'.''
An M&A boom may be coming to mining, driven by private equity funds, Bloomberg Briefs writes in a note:
- Private equity looks at mining far differently than a traditional publicly traded mining company. Public companies seek to give their shareholders the upside of the metal price while private equity seeks to lock in cash flows. Public miners are loathe to hedge, while PE firms see it as an opportunity to ensure cash flows.
- While raising billions for the mining industry, now PE funds need to deploy their capital. Public mining companies need the cash, and with their own multiples for the value of their reserves having dropped so significantly, board arguments against selling to PE funds have diminished.
- The union of willing sellers who need the cash and buyers who have lots of it to spend may culminate in a buying frenzy in the mining sector.
The famous Millionaires' Factory, Macquarie Group, has its mojo back – and chief executive Nicholas Moore is one of the biggest beneficiaries.
After announcing a surprise profit upgrade on Monday, analysis of the stock holdings of key executives, directors and shareholders shows that the value of Moore’s stake in Macquarie has climbed $36.4 million in the past 12 months to sit at about $81.2 million, based on yesterday’s close of $56.53.
The 81.1 per cent rise in Macquarie Group’s share price in the past year has also helped lift the value of the shareholdings of several other key executives.
Shemara Wikramanayake, the group head of Macquarie Funds Group who is seen as a possible successor to Mr Moore, has seen the value of her shareholding climb by $9 million to $20.1 million in the past 12 months.
Garry Farrell, group head of Macquarie’s corporate and asset finance division, has seen the value of his stock rise by $1.3 million to just under $3 million.
Shopping mall giant Westfield Group has entered into $22 billion of financing facilities required for its restructure plan.
Westfield said the $22 billion of funding commitments include $14 billion worth of 2-year bridge facilities and $8 billion of 2-6 year bank facilities, with further details of the facilities to be released in late April.
The financing was meant to fund Westfield's plan to separate its global retail assets from its Australia and New Zealand businesses, which will be merged with Westfield Retail Trust (WRT) to form a new company Scentre Group.
Regional markets are higher today, after US consumer confidence climbed to a six-year high overnight, with the ASX200 leading the gains (after underperforming over the past sessions):
- Japan (Nikkei): +0.4%
- Hong Kong: +1%
- Shanghai: flat
- Taiwan: +0.6%
- Korea: +1%
- ASX2--: +1.05%
- Singapore: +0.8%
- New Zealand: +0.4%
‘‘Early signs are that US growth is back on track with consumer confidence holding up and the market growing more confident that some of the data through the winter was weather- related,’’ says Sean Fenton, a fund manager at Tribeca Investment Partners. ‘‘We have seen a stabilisation in China recently and there is a good chance we are through the worst.’’Back to top