That's it for today folks - thanks everyone for reading and posting your comments.
Here's our evening wrap of today's session.
Here's how some of the blue chips did today:
- BHP: -0.3%
- Rio: +0.8%
- ANZ: -0.9%
- CBA: -0.4%
- NAB: -1%
- Westpac: -1%
- Woolies: -1%
- Wesfarmers: -1.4%
- Telstra: -1%
- Newcrest: +1.75%
Japan’s Nikkei index edged up to a fresh three-week high, helped by futures-led buying, marking its third-straight day of gains.
The benchmark Nikkei ended up 0.5 per cent at 14,053.87, its highest closing since August 14. The index has surged 35 percent this year, but is 12 per cent below its May peak.
The stock market has closed lower. The benchmark S&P/ASX200 fell 35 points, or 0.7 per cent, to 5161.6, while the broader All Ords lost 0.6 per cent, or 32.4 points, ot 5156.5.
Among the major sectors, financials fell 0.7 per cent, materials lost 0.4 per cent and consumer staples dropped 1.2 per cent. Gold bucked the trend, rising 1.6 per cent on the back of a higher gold price.
Chi-X Australia is confident its market share of Australian equity trading will grow to at least 25 per cent within the next 12 months as banks and brokerages increasingly split trade orders between itself and ASX Ltd.
Chi-X’s share of local equity trading reached a record 18.4 per cent on August 27, with an average daily value of $244 million last month, according to data compiled by Bloomberg.
That will grow to at least 25 per cent in 2014 after an increase in so-called passive order flow, or orders to buy shares that wait in a queue to be picked up by a seller, said John Fildes, chief executive officer at Chi-X Australia.
‘‘We will see more split posting of orders,’’ on Chi-X and ASX, Fildes says. ‘‘Now’s it’s about deepening the order book by building the passive side and it’s about brokers developing their capability to split-post orders.’’
It has been a lacklustre session in Asia today, with most markets opening lower and staying that way as investors remain in ‘wait and see’ mode on the Syria issue, says IG's Stan Shamu:
- With the Republicans seemingly willing to play ball with President Obama on a Syria strike, the thought of war is becoming a reality for some investors.
- Positive data from the US also proved to be a bit of a negative for equities, as talk of September tapering ramped up again.
- The only few bright spots in the market today are gold names with Newcrest Mining rising 1.6% and Regis Resources surging 3.1%.
- With the federal election now three days away, the market is looking for any form of a bright light as a report from Goldman Sachs showed that every time the ASX outperforms the DOW by 6% or more in one month it underperforms the index by 4.3% in the following month.
Urbanisation in China is not only expected to help improve the earnings of our big miners, as mentioned in our blog post at 2.42pm.
St George Bank chief economist Besa Deda is tipping that other sectors in our economy will also enjoy the spoils of more and more Chinese upping sticks for the big smoke.
‘‘We might also have higher farm volumes come through because as the Chinese move to cities and become richer they will demand a higher quality of food and we also export those sort of products,’’ Deda says.
This adds more fuel for whoever wins Saturday’s federal election to knuckle down and finalise our free trade agreement negotiations with China, which have been running for the past eight years.
Agriculture companies have been calling for an FTA to be finally signed, with former Australian Agricultural Company boss David Farley lashing out at politicians over the delay.
Our biggest dairy exporter Murray Goulburn has also thrown its weight behind the argument, saying New Zealand, which struck an FTA with China in 2008, had a strong advantage over Australian farmers.
While China’s economy will stabilise around 7.5 per cent in coming years, the rate of Chinese moving the city will continue to increase for decades, economists predict.
Chinese urbanisation is expected to increase farm exports, including beef.
Dart Energy has jumped 12.5 per cent to 11.25 cents after coming out of a trading halt for a capital raising.
The company said it raised $20.7 million from a placement and an underwritten 1-for-9 share offer at 9 cents per share to move forward on it shale gas assets in the United Kingdom.
Gold is also clinging to last night’s gains as fears of an escalation in Syria drive shifts from stocks to safe haven assets.
Spot gold is up up 0.05 per cent at $US1412.84 an ounce, after pushing past $US1400 in the previous session as a missile test by Israeli forces training in the Mediterranean with the US Navy set nerves on edge.
"Markets are very quiet today as we are waiting for more developments in Syria," says Peter Fung, head of dealing at Hong Kong's Wing Fung Precious Metals. "Until then we will be in a very tight trading range. It looks like prices can go either side from here but tensions in Syria situation will give some support."
Brent crude oil is holding above $US115 a barrel, close to its highest in almost a week, as US lawmakers' support for military action against Syria rekindled worries over the possible impact on oil supply from the Middle East.
While Syria is not a key oil producer, investors are worried that a strike by Western forces against the country could spread unrest in the Middle East and disrupt supply from the region that pumps a third of the world's crude.
Brent crude for October delivery was at $US115.79, up 11 cents and close to a peak of $US116 hit on Tuesday, when prices ended with a gain of $US1.35. October US crude futures fell 19 cents to $US108.35 a barrel after settling up 89 cents in the previous session.
"The US is likely to take some action in Syria," says Tetsu Emori, a commodity sales manager at Astmax Investments in Tokyo. "Oil prices should ratchet up."
Analysts from Bank of America Merrill Lynch and Societe Generale expect Brent to rise to $US120-$US130 a barrel in a limited strike situation, while a protracted war could boost oil by as much as $US50.
Prospects are brightening for Queensland's struggling coal sector: BHP and Mitsubishi's Daunia coking coal mine was delivered several months early and about $US250 million under budget, giving hope that the nearby Caval Ridge mine construction will also come in on budget within the next 12 to 24 months.
And in some further good news for the sector, Queensland Premier Campbell Newman at the opening of the new mine vowed there won't be another royalty hike.
The Australian coal sector has been struggling under lower commodity prices, high costs, union disputes and even flooding in recent years, and Newman added to those challenges in 2012 when he increased coal royalties for miners working in his state.
The seven mines that make up the alliance in Queensland reduced their cost profile by 30 per cent in the second half of the 2013 financial year, and JP Morgan has estimated the mines' average cost of production is now closer to $US120 per tonne. All seven are believed to be profitable at the moment.
Analysts are expecting resource stocks to fuel a strong bounce in market earnings in the year ahead, while growth among the big banks will slow.
If the prediction is correct, it will be a reversal of roles among ASX 200 companies. Deutsche Bank strategist Tim Baker says the big miners disappointed this earnings season, while the banks surprised on the upside.
Baker is expecting earnings growth among our top companies to be in the mid-teens in the year ahead.
He says resource stocks would lead the charge as key commodity prices, particularly iron ore, have picked up from soft levels of December 2012, while a softer Australian dollar will also help.
Recent data from China, which suggests that the economy of our biggest partner is not slowing, should further underpin commodity prices, while increased production from BHP Billiton, Rio Tinto and Fortescue Metals will also bolster earnings.
But the banks, which generated strong earnings in the past year, will not be as lucky, with Baker predicting a slowing economy to hinder growth.
‘‘Bad debt levels, and the recent rise in unemployment perhaps poses some upside risk. And credit growth continues to grow at only a modest pace (ie 3-4 per cent).’’
Hills Holdings has sold another of its manufacturing businesses, and expanded its technology operations into the healthcare sector.
Hills, the maker of the Hills Hoist, has sold plumbing supplier LW Gemmell to manufacturer Zurn Industries for an undisclosed sum, and says the sale will not impact its sales or earnings. The sale continues the streamlining of Hills’ business to overcome the weakening manufacturing sector.
Hills shares are up 6 per cent at $1.72.
McKinsey is the world's most influential management consulting firm by a mile - but are they worth it?
A thought-provoking new book called "The Firm: The Story of McKinsey and Its Secret Influence on American Business", which comes out next Tuesday in the US, offers a fascinating look behind the company's success.
The book, by Duff McDonald, chronicles McKinsey's rise but also raises an important question about it that is applicable to the entire netherworld of consultants, advisers and other corporate hangers-on: "Are they worth it or not?"
The answer amounts to hundreds of billions of dollars annually. Indeed, the army of advisers whispering into the ear of Verizon and Vodafone (its CEO is a former McKinsey partner) over the weekend for their work on the $US130 billion deal stand to make over $US200 million alone. And, perhaps most important, they don't have to give the money back if the deal turns sour.
McDonald's book explores the remarkable and intriguing disconnect between the advice McKinsey offers and the ultimate results.
Rajat Gupta, former McKinsey head, during his trial for insider trading. Photo: Reuters
ANZ Bank, which is seeking to become an Asian regional power, has been given a A+ credit rating by Standard & Poor’s.
The credit rating, the fifth highest on S&P’s scale, assumed that ANZ’s China arm would continue to play a key role in the parent company's Asian strategy.
‘‘It has been the beneficiary of strong investment and support from ANZ in recent years and we envisage a continuation of this trend, over the medium-to-long term,” S&P said.
ANZ’s China business holds 4.5 billion RMB ($812 million) in required capital, which the lender plans to use to fund expansion in its network and increased customer lending.
The Australian dollar has extended its rally on the back of stronger than expected GDP data, powering up to a two-week high of 91.05 US cents.
It's currently fetching 90.98 US cents, up from a three-year trough of 88.48 touched last month. It also climbed sharply to 90.52 yen, while the euro slid to $1.4466.
Two-year cash bond yields climbed to a two-month peak of 2.77 per cent, a rise of 20 basis points since Monday's low.
"The market reaction was justified," says Alvin Pontoh, a strategist at TD Securities in Singapore. "Some had expected a softer outcome but after this report another easing is unlikely.’’
Interbank futures show a 50 per cent chance of a rate cut by Christmas, down from more than 100 per cent a couple of weeks ago.
The head of the Future Fund, Mark Burgess, will leave the $89 billion fund to return to the private sector.
Burgess' replacement, or future roles, have not been named.
While Burgess' pay is not disclosed, the fund's last released annual report showing the highest paid employee received $1.38 million, including a base salary of $526,499 and a bonus of more than $400,000.
Crown chairman James Packer has bought a 5 per cent stake in Nasdaq-listed online real estate marketplace Zillow, the AFR is reporting on its website.
This takes his stake in the company dedicated to helping homeowners, buyers, sellers and renters to 9.3 per cent.
Packer netted $261 million last month after selling his stakes in SEEK and Magellan Financial Group. He has used about half of this windfall to fund his latest investment in Zillow, which has a market capitalisation of $US3.9 billion and has risen almost 260 per cent this year.
Australian fund management firm Caledonia Investments is ZIllow’s biggest shareholder, with a 16 per cent stake.
Here's a quick glance around the region:
- Nikkei: -0.8%
- Shanghai: -0.3%
- Taiwan: -0.6%
- South Korea: -0.3%
- Singapore: -1.1%
- New Zealand: flat
Engineering firm Monadelphous Group has won a $235 million construction contract for work on an iron ore port being built for Rio Tinto.
Monadelphous said the contract is for work on Rio’s Cape Lambert Port B Project in Western Australia and involved structural mechanical and piping works for the supply and installation of a screenhouse, two car dumpers and associated conveyor and transfer stations.
Work is scheduled for completion in the final three months of 2014.
The company said the contract will support solid sales revenue momentum into the new financial year.
Shares in Monadelphous have climbed 2.8 per cent to $19.75 following the announcement.
Wind farms in four states last month produced record-breaking levels of energy that could power 155,000 Australian homes for a year.
Across the country, enough power was generated from wind farms to make toasted sandwiches for more than 6.1 billion people - almost enough for every person on earth.
The new high levels of wind power were a result of the growing number of wind farms and a very gusty last month of winter, the Clean Energy Council says.
Eight per cent of the power in the National Electricity Market in August came from wind farms.
In South Australia, wind farms in August produced the equivalent of almost 40 per cent of the state’s power, significantly higher than its previous record of 31.2 per cent.
Two-and-a-half years ago, the then recently recruited Nokia chief executive Stephen Elop fired off an email to his staff which became known as the “burning platform” memo.
The email spelt out the uncomfortable truth: Nokia, the one-time mobile phone industry leader, was on the ropes and faced some difficult decisions.
Those choices, he explained using a metaphor, were not unlike those facing a man working on a North Sea oil rig that had just caught fire.
“As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or he could plunge 30 metres into the freezing waters,” Elop wrote.
The man would not ordinarily have chosen to jump, but the approaching fire “caused a radical change in his behaviour”.
Nokia, Elop said, also found itself on a burning platform, and like the man on the oil rig, it had the choice of doing nothing and facing certain death or taking the plunge.
Nokia subsequently shed thousands of jobs and abandoned its legacy operating systems as it opted to partner with Microsoft, the company Elop had left to join Nokia.
On Tuesday, that relationship was fully consummated when Microsoft announced plans to shell out $8 billion to acquire Nokia’s mobile phone division.
Deutsche Bank analyst Paul Young says despite talk of a cooling iron ore market, a site visit for Rio Tinto East Pilbara mines shows its shows its full steam ahead for the Hope Downs 4 and Yandicoona projects.
‘‘One thing was clear, all indications are that the Stage 2 expansion to 360 million tonnes per annum is going ahead on the original time frame; infrastructure completion by the first half of 2015 and a ramp-up to 360 million tonnes per annum by early to mid-2016’’.
Young said little appears to have changed internally over the past 6 months surrounding the multi-billion dollar expansion even with the appointment of new Rio Tinto chief executive Sam Walsh.
He says ‘‘no slowdown’’ has been contemplated by the project teams and senior management. At midday shares in Rio Tinto were 0.3 per cent higher at $61.23.
Growth in China's services sector hit a five-month high in August underpinned by new orders and business optimism, a private survey showed on Wednesday, adding to views that the world's second-largest economy had avoided a sharp slowdown.
The Markit/HSBC Services Purchasing Managers' Index (PMI) climbed to 52.8 in August after seasonal adjustments, up from July's 51.3 and the highest since March. The reading was well above the 50 level that demarcates an acceleration in activity from a slowdown, although a sub-index for employment shrank.
The outcome was roughly in line with China's official non-manufacturing PMI on Tuesday, which showed the services sector grew steadily in August as domestic demand picked up. The official survey is weighted more towards bigger and state-owned companies.
Qu Hongbin, an HSBC economist, cited new business growth as the key driver of the index and expected growth momentum of the services sector to be sustained in future.
"A filter-through impact of VAT reform, combined with a rebound in manufacturing output, is expected to support service industry growth in the coming months," Qu said.
Twitter talk on the better-than-expected GDP figures:
...Aust growth of 2.6% well below the level necessary to stop unemp rising. Price deflators remain weak, eg priv cons inflation just 1.9%yoy— Shane Oliver (@ShaneOliverAMP) September 4, 2013
Small-cap financial services company Trust Co has thrown its weight behind a bid lobbed by IOOF yesterday, leaving rival suitor Perpetual three business days to sweeten its bid.
Trust Co said this morning that its board had "determined that the IOOF proposal is likely to be a superior proposal ... and has accordingly provided Perpetual with the opportunity to match or better tha IOOF proposal".
Perpetual now has until close of business on Monday to decide on whether to up its bid.
In a statement, IOOF said it agreed to the Trust board's request to make drafting changes to the scheme implementation agreement, and the deadline for acceptance of the revised IOOF proposal would be 9 September 2013.
There is now a three-way battle for Trust Co, starting by a scrip-only bid by the Melbourne-based Equity Trustees in February.
Trust Co shares are up 3.2per cent at $6.75.
IOOF shares are up 1 per cent to $8.50.
Perpetual shares are up 1.4 per cent to $40.01.
The Australian dollar has lifted on the better-than-expected GDP numbers, adding around a third of cent to 90.85 US cents.
GDP figures have come slightly higher than expected, for the quarter GDP rose 0.6 per cent and year-on-year up 2.6 per cent.
The important GDP figures will be released at 11.30.
They will contain the figure for economic growth for the three months to June, and the annual economic growth rate for the past 12 months.
The market consensus is for 0.5 per cent growth for the June quarter, and 2.4 per cent annual growth.
Saul Eslake, Bank of America Merrill Lynch chief economist, says he expects the GDP figure for the three months to June of 0.4 per cent, and an annual figure of 2.3 per cent.
The rising cost of doing business in Australia has seen it slip further behind in a survey of global competitiveness.
The World Economic Forum’s global competitiveness report for 2013-14 sends Australia down one place to a ranking of 21, compared to the previous year.
Australian Industry Group chief economist Innes Willox said while Australia stacked up well in terms of infrastructure and education, there was further slippage in cost competitiveness.
Out of 148 countries, Australia’s labour market efficiency ranking fell to 54, from 13.
On flexibility on wage determinations Australia now ranks 135th, down from 123 last year, while on burden of government regulation it stands at 128, down from 96.
Similarly, pay and productivity has fallen to 113 from 80, and the total tax rate ranking dropped to 109 from 106.
Gold extended gains to a second session on Wednesday as US President Barack Obama gained support from key Congressmen for a limited strike against Syria.
Spot gold, traditionally considered a haven, has edged up 0.1 per cent to $US1413.40 an ounce this morning, after gaining 1.3 per cent during overseas trade on Tuesday night.
Obama won the backing of Republicans John Boehner and Eric Cantor in his call for limited US strikes on Syria to punish President Bashar al-Assad for his suspected use of chemical weapons against civilians.
Earlier on Tuesday, a missile test by Israeli forces training in the Mediterranean with the US Navy set nerves on edge.
Gold's movements in the US session
The Nikkei 225 index, which soared 3 per cent yesterday on a weaker yen, fell 103.27 points to 13,875.17 at the start.
‘‘While a brighter outlook for global economies and a weak yen support the market, concern over US military action in Syria and a series of events scheduled this week such as the release of US jobs data may hold back investors,’’ said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
‘‘Although the floor will likely be firm, profit-taking may add downside pressure,’’ he added.
Here's how the sectors have opened:
- Consumer staples: -1%
- Consumer discretionary: -0.6%
- Energy: -0.5%
- Financials: -0.6%
- Health: -1.1%
- Materials: -0.6%
As the US National Football League struck a settlement totalling hundreds of millions to compensate players who have suffered concussion a small Australian company is working on a cure for the severe brain injuries.
Using research from the Univesity of Adelaide, PresSura Neuro is developing a drug aimed at preventing the degenerative disease, chronic traumatic encephalopathy (CTE), which normally forms in people with a history of multiple concussions.
It’s a condition that has symptoms similar to dementia and can only diagnosed during an autopsy.
PresSura Neuro chairman Peter Pursey AM, says the company is ready to start phase 1 trials with humans, after succesful results with sheep – the brains and skulls of which, he says, had an 80 per cent similarity with humans.
Pursey says the company is using a compound that pharmaceutical behemoth Roche spent $US20 million ($22.22 million) developing.
He says the compound, which would be taken after each concussion, stops a protein in the brain forming which leads to neurobibrillary tangles and CTE.
The company also has found a separate Roche compound can be used to treat swelling on the brain, with its sheep studies revealing intracranial pressure returned to normal levels about three hours after taking the drug.
The company resisting a public float to raise the $3 million it needs to begin human trials, instead choosing to pursue other funding avenues.
Etihad has been confirmed as the buyer of a large block of Virgin Australia shares earlier this week.
It has resulted in the Middle Eastern airline boosting its stake from 10.5 per cent to 12.3 per cent, according to a shareholder notice to the ASX, putting it well on the way to reaching its target of 19.9 per cent.
Etihad received approval in late June from the Foreign Investment Review Board to build on its cornerstone stake in Virgin.
The market has opened lower, with the benchmark S&P/ASX200 sliding 30.2 points, or 0.6 per cent, to 5166.4. The broader All Ords has dropped 28.4 points, or 0.5 per cent, to 5160.5.
Microsoft investors signalled unhappiness with the deal yesterday, pushing the firm’s stock down 4.6 per cent to $US31.88, eliminating about $US13 billion in market value. Nokia shares soared 34 per cent to 3.97 euros, valuing the firm at about 15 billion euros.
BlackBerry shares rose 1.1 per cent $10.75 CAD on speculation the struggling mobile phone company could be part of a deal similar to the Nokia-Microsoft agreement.
Activity in the services sector is at its lowest level since the global financial crisis despite lower interest rates and a falling Australian dollar.
The Australian Industry Group Australian Performance of Services Index (PSI) fell 0.4 points to 39.0 in August.
A reading below 50 indicates the sector is contracting. The lower the number the faster the contraction.
Ai Group chief executive Innes Willox said many key services industries were still under stress.
‘‘Cautious consumers are keeping their hands in their pockets and are reluctant to take on debt,’’ he said.
‘‘This is keeping a lid on discretionary spending on retail goods, entertainment services and hospitality, which has consequences in turn for wholesale traders and freight transport.’’
Mr Willox said the business orientated services sectors such as finance, communications and transport were still subdued because of weak activity in the manufacturing and construction sectors.
Yesterday's announcement of a deal between Microsoft and Nokia is sure to shake-up the mobile world with the big loser to come out of the deal being BlackBerry.
If misery loves company, BlackBerry had a friend in Nokia while both companies were struggling to adapt to a changed mobile phone world.
But Microsoft’s purchase of Nokia’s handset and services business, some analysts said on Monday, may now make it harder for BlackBerry to find its own saviour and will only underscore the Canadian company’s fundamental problems.
“BlackBerry always looked small fry,” said Nick Spencer, the senior practice director for ABI Research in London. “Now they look even more small fry. They’re up against three of the biggest companies in the world.”
Once the dominant maker of smartphones, BlackBerry has spent the last couple of years vying with Microsoft’s Windows Phone operating system for third place in a market overwhelmingly dominated by Apple’s iPhones and phones using Google’s Android operating system. The general indifference that greeted a new line of BlackBerrys introduced earlier this year, along with a new, more sophisticated BlackBerry operating system, led the company to say last month that it is “exploring strategic options” including a sale.
What you need2know this Wednesday morning:
- SPI futures down 39 points
- AUD fetching 90.56 US cents, 90.21 yen, 68.75 euro cents, 58.19 pence
- On Wall Street, Dow Jones +0.2%, S&P500 +0.4%
- In Europe, Eurostoxx -0.8%, FTSE100 -0.6%, CAC -0.8%, DAX -0.8%
- Spot gold up to $US1412.70 an ounce
- Brent oil up to $US115.70 per barrel
- Iron ore flat at $US138.70 per tonne
In economic news today, the Australian Bureau of Statistics releases national accounts figures, including gross domestic product, for the June quarter, along with overseas arrivals and departures numbers for July.