The Aussie has just hit a new four-month high of 93.20 US cents amid some strong buying coming out of Europe.
Anyway, that's all from us for today - thanks for reading this blog and posting comments.
The Australian dollar has just jumped above 93 US cents again, boosted by some early European buying.
The Aussie is currently fetching 93.03 US cents, slightly below the four-month peak of 93.08 US cents it touched early Saturday morning.
Dollar on a roll
Miners supported the market, with BHP rising 0.4 per cent, Rio gaining 0.9 per cent and Fortescue soaring 2.4 per cent. The big banks were mixed: ANZ and NAB posted small gains while CBA and Westpac slipped slightly.
Here are the biggest winners and losers among the top 200:
Qantas changed the earning rates for its popular frequent flyer program in part because the steep fall in the price paid for discount fares over the last decade raised the relative cost of its points offering, says the airline’s loyalty head Lesley Grant.
She made the comments at a closed-door lunch in Sydney with members of popular online forum The Australian Frequent Flyer from around the country. The function came ahead of a broader national roadshow which will include speeches to state-based chambers of commerce to help promote the new Aquire loyalty program for small and medium enterprises.
“Face-to-face member interaction is a key part of our Qantas Loyalty strategy which is why we are also gearing up to do another national roadshow in July this year,” Grant said after the lunch. “We get critical input and really worthwhile suggestions on how we can continue to improve the program to better suit members. It’s also really important for us to be able to explain program changes and benefits such as the new Aquire program.”
As a result of the changes to the Qantas frequent flyer program announced last month, the minimum number of points earned in discount economy on short routes like Sydney-Melbourne has fallen to 800 from 1000. However, customers buying more expensive flexible fares will receive 1200 points rather than 1000 under the old system.
The sharemarket has closed slightly lower, unable to hang onto the small gains posted in late trade.
The benchmark S&P/ASX200 index slipped 3.1 points, or 0.1 per cent, to 5410.6, while the broader All Ords lost 6.9 points, also 0.1 per cent, to 5409.2.
Among the major sectors, materials rose 0.5 per cent, financial closed flat and industrials shed 0.9 per cent. IT fell 0.7 per cent, while gold jumped 1.7 per cent.
The chance of an El Nino weather event developing in 2014 now exceeds 70 per cent, the Bureau of Meteorology says, raising the prospect of damaging floods and droughts across the globe.
"It is now likely (estimated at a greater than 70 per cent chance) that an El Niño will develop during the southern hemisphere winter", from May-July, the bureau said.
"Although the El Niño-Southern Oscillation (ENSO) is currently neutral, surface and subsurface ocean temperatures have warmed considerably in recent weeks, consistent with a state of rapid transition."
An AMP-linked adviser has warned the financial advice system is rigged against consumers because big companies have a bias towards pushing their own products.
This bias towards in-house products reduces competition and may result in savers paying over the odds for investment products, Rhys Wood, a director of financial planning at Elite Wealth Solutions, has argued. Elite Wealth Solutions is licensed by listed wealth company AMP.
In a damaging submission to the Murray Inquiry into Australia's financial system, Wood says that the high costs of regulatory compliance have prompted many planners to obtain a practising licence through a large institution, which in turn supplies products for advisers to recommend.
"The most pressing issue within the advice industry is the existence of bias within the advice process," says Wood in his submission.
"Given that many of these Australian Financial Services Licence (AFSL) holders are owned and operated by institutions that supply the financial products recommended to retail advice clients, AFSL holders develop approved product lists which virtually exclude all other products from providers who compete with the parent company," says Wood.
Solar projects totalling tens of millions of dollars are at risk after the Abbott government launched a review into its renewable energy targets.
First Solar, the company building the southern hemisphere’s biggest solar plant, said it was reconsidering its future investment plans for Australia, citing increased policy uncertainty.
About $90-$110 million worth of projects have been put on hold, First Solar vice president for business development Jack Curtis said.
‘‘We don’t have a great line of sight as to where the next round of projects are coming from, largely as a function of the uncertainty in the policy backdrop,’’ Curtis said.
The government had planned to source 41,000 gigawatt hours from renewable sources by 2020, or 20 per cent of total supply in that year. But that is being questioned after the government appointed former Reserve Bank board member and global warming sceptic Dick Warburton to head the review.
The ASX has pushed into positive territory, following regional markets' gains and shrugging off the deepening losses on Wall Street.
The benchmark S&P/ASX200 index is up 3.6 points, or 0.1 per cent, at 5417.3, while the All Ords is flat at 5415.7.
Leading the rebound are miners, with the materials sector up 0.7 per cent after earlier posting losses. Financials are up 0.1 per cent.
Seeds are being sown for the next financial crisis, Intelligent Investor's John Addis writes:
The best way to avoid another GFC is to ensure banks can fail without infecting the entire system. That means making them smaller. Trouble is, 'too big to fail' banks are now even bigger.
According to APRA, in March 2008 the four biggest banks controlled 67 per cent of total bank assets. By December 2013 that figure had increased to 78.4 per cent. In the United States in 1990, the five largest banks accounted for less than 10 per cent of total industry assets. Now they control 44 per cent.
According to US Attorney General Eric Holder, bankers are also too big too jail because bringing "a criminal charge ... will have a negative impact on the national economy, perhaps even the world economy".
Only in the strange reality field of financial politics do we save the system by keeping the people that destroyed it in their jobs because if we didn't people might lose confidence.
Instead of time behind bars, bankers got free taxpayer money to recapitalise. They made so much that the enormous fines levied on them barely registered.
Before the crisis bankers hoped governments would rescue them; now they know they will.
Gold has been helped by a dovish Fed and strong Chinese demand, both of which should allow a seasonal rally, Macquarie writes in a note on the precious metal:
- We continue to view that short covering plus M&A activity might lead to the green shoots of a revitalisation of the gold equities in the coming quarter.
- Focus remains on low-AISC producers and developers with advanced projects attractive to producers.
- With the exploration spigot generally turned off, the market will rely on only a handful of well-capitalised juniors to drive the discovery process in the precious metals space. Although there are a number of existing undeveloped assets with resources and exploration upside there have been relatively few new “raw” discoveries in the past few years
Among Macquarie's global top buy candidates are: Goldcorp and Silver Wheaton (senior); Osisko, OceanaGold, Tahoe and B2Gold (intermediate), while sell candidates include Zijin Mining (senior) and the juniors Medusa, St Barbara and Silver Lake.
Gold is trading slightly higher at $US1300 an ounce.
Gold price predictions.
The real reason why ECB chief Mario Draghi is flirting with QE, according to London's Tele:
The official line is that the European Central Bank is considering joining the mass money-printing club because of fears about deflation. In March, eurozone inflation was indeed just 0.5 per cent, on official measures. The underlying motivation for euro-QE, though, is rather different. Financial markets denizens know this, but few are prepared to say it.
Massive losses continue to smoulder on European bank balance sheets. It was the acute danger of clapped-out banks dragging their host governments into bankruptcy that caused systemic panic across eurozone sovereign bonds markets, threatening the entire single currency project, during the summer of both 2011 and, particularly, 2012.
Such alarm bells led to Draghi’s “whatever it takes” speech – a promise the ECB was ready to buy up eurozone government bonds under a scheme called Outright Monetary Transactions. That’s yet to happen and may even be illegal. Various European courts are still thinking about it, having issued a series of technical verdicts kicking the issue into the long grass. But just the breaking of the taboo, the notion the ECB could come to the rescue and hose down a bad situation with printed money, has been enough, for now, to spread calm.
Despite the OMT bluster, the underlying problem remains. Numerous eurozone banks are busted, not only in profligate “Club Med” nations such as France and Italy, but Germany, too. Such banks, though, are too politically-connected to be allowed to fail.
That’s one reason the eurozone elite wants QE; so out-of-thin-air wonga can by used to buy dodgy bank loans, allowing smooth bankers to avoid the realities of their mistakes.
Another reason the ECB wants QE is that both the US and UK have printed money like crazy and, as a result, the dollar and pound have fallen against the euro, making eurozone exports less competitive.
Regional markets have trimmed their early losses as investors shake off worries the recent losses on Wall Street could turn into a fully-fledged market correction.
- Japan (Nikkei): -0.7%
- Hong Kong: +0.9%
- Shanghai: +1.3%
- Taiwan: +0.1%
- Koea: +0.2%
- ASX200: -0.2%
- Singapore: +0.4%
- New Zealand: -1%
‘‘Equity valuations have peaked and markets will trade nervously going forward,’’ says Nikko Asset Management chief global strategist John Vail. There is ‘‘accelerating deterioration of China’s economy and financial system and subpar US and Japanese economic growth.’’
Australia isn't the only country in which foreign ownership of airlines is a sensitive issue.
The European Commission has launched a formal investigation into Etihad Airways - one of the major shareholders in Virgin Australia - over its strategy of buying stakes in carriers across Europe. Delta Air Lines, which bought a 49 per cent stake in Virgin Atlantic, is also under investigation.
The concerns relate to whether the non-European carriers are effectively controlling their European investments despite the minority stakes. It is a similar argument to the one that Cathay Pacific is using as an attempt to block Qantas from setting up Jetstar Hong Kong, although in that case it relates to whether control will reside in Hong Kong or Australia rather than foreign ownership issues.
In order to operate as a European carrier, an airline must be more than 50 per cent owned and "effectively controlled" by a European Union member state or EU citizens.
Etihad owns stakes in Germany's airberlin, Air Serbia, Ireland's Aer Lingus and Etihad Regional (formerly Switzerland's Darwin Airline) in Europe. It is reportedly examining an increase of its stake in airberlin to 49.9 per cent from 29 per cent and is also conducting due diligence on the possible purchase of a stake in ailing Italian carrier Alitalia.
Apple is sitting on more cash than numerous countries, including Australia, the following chart by US Trust and courtesy of Business Insider shows.
“Amid a world of uncertainty, one thing is without question: Most US corporations have plenty of capital at their disposal,” BI quotes US Trust’s Joseph Quinlan:
- Indeed, capital is in abundance among America’s largest nonfinancial companies, with Moody’s noting that US firms were sitting on some $US1.6 trillion in cash at the end of 2013, a 12 per cent increase from a year ago.
- The latest figure is nearly double the level of 2008, signalling the extent by which US firms have built out their cash positions over the post-crisis period.
- Putting that number into perspective, the cash hoard of corporate America (eg, financials) is greater than the total international reserves of Japan, the second-wealthiest nation in the world, with foreign exchange reserves of $US1.2 trillion. Only China has more cash in the safe — almost $US4 trillion.”
Dragons don't come cheap, says Foxtel. The pay-TV operator has defended its exclusive deal to broadcast the highly anticipated new season of fantasy blockbuster Game of Thrones, saying it was showing the program quickly and affordably, and it hoped most people would "do the right thing" by not downloading it.
The exclusive deal has angered many local fans who were able to watch previous series through iTunes, Quickflix and Google Play but must now wait until Foxtel stops airing the series and buy it in full.
Foxtel's broadcast of the first episode of season four was watched by 315,000 viewers, a good result for its Showcase channel but leading to suggestions that many Australian fans were downloading the program.
In the US, the average audience was 8.2 million viewers with repeats, with Torrent Freak reporting more than one million downloads. Game of Thrones has been the world's most pirated show for two years running, according to file-sharing network TorrentFreak. Per capita, Australians are among the biggest pirates.
In February, Foxtel extended an olive branch to the show's fans by adding the HBO show to its online streaming service, Foxtel Play. The $35 monthly price for Foxtel Play rises to $50 a month after three months.
"People attack our business model [of bundling] ... while there will always be people who say, 'We'd like to get this bespoke', $35 a month is not a huge amount of money," Foxtel spokesman Bruce Meagher said. "Yes, there is a price-tag ... but HBO has to be remunerated. At about $7 million an episode, dragons don't come cheap."
Game of Thrones: what's all the fuss?
Don't know the difference between a Lannister and Stark? Don't worry you're not the only one, but it's never too late to dive into the show.PT5M16S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-368ng 620 349 April 7, 2014
The Bank of Japan has refrained from adding extra stimulus as officials assess the blow from an April 1 sales-tax increase projected to trigger a one-quarter economic contraction.
Governor Haruhiko Kuroda and his board kept a pledge to expand the monetary base at a pace of 60 trillion yen to 70 trillion yen per year, the central bank said in a statement today, as forecast by economists.
The central bank is expected to add more stimulus by July to help drive inflation closer to a 2 per cent target and to strengthen the economy ahead of another possible tax increase next year.
The challenge for Kuroda will be to avoid any perception of incremental policy steps, an approach he has vowed to avoid.
‘‘I expect the BoJ to add expansive policy between May and July,’’ Yasuhide Yajima, chief economist in Tokyo at NLI Research Institute, said before today’s decision. ‘‘The economy will slow down and price increases will be sluggish from April to June because of the sales-tax hike.’’
Japanese stock futures extended losses after the central bank issued its statement. The Nikkei was down 1.1 per cent at the midday break, but futures point to further losses.
Yes, Japan will benefit more than Australia in the trade agreement - but that is a good thing, writes Michael Pascoe.
Make no mistake, Japan is the big winner from the slight reduction in agricultural trade barriers announced with so much fanfare from the Prime Minister's captive travelling trade troupe. And that's a perfectly good and very desirable thing.
There's also a strong chance that much of the immediate advantage Australia should enjoy won't last long.
Other beef exporters will be hot on the heels of our most favoured nation status – stand by for American trade negotiators to target the Australian beef tariff level as they seek their own deal. They've never stopped working on a better deal for themselves.
The immediate reaction to the announcement of a handshake deal seems to be close to that which greeted Chamberlain's waved piece of paper on return from Munich.
But a little perspective can be healthy.
Prime Ministers Tony Abbott and Shinzo Abe at dinner on Sunday night, with interpreters.
Write-downs at the nation’s top 50 share market-listed companies fell 33 per cent, to $28 billion, in the latest reporting season, as mining giants found their feet in the post boom environment, and the big banks posted record profits.
But the patchy results of the 41 companies outside these two sectors reflects the latent challenges in the domestic economy. KPMG analysis for the AFR shows profit before tax at the 41 companies that are not big banks and miners fell 15 per cent, to $36 billion, for the six months ended December 31 2013, the worst result since December 2009.
Revenue and operating cash flow for this group also fell.
“The mining sector has reported a recovery of revenues against the peak in the mining boom but this is being achieved through large production increases at much lower prices and at lower margins,” KPMG analysis shows.
Over three-quarters of S&P ASX50 companies are using alternative measures of financial performance, or “underlying profit” figures, to explain and smooth out volatility in their books.
In the vast majority of cases the non-statutory results are higher than the audited numbers, resulting in a 23 per cent accounting discrepancy.
It seems Rupert Murdoch isn’t the only media magnate that Clive Palmer is jousting with at the moment. The controversial Queenslander is also testing the patience of Perth billionaire Kerry Stokes over relations between their neighbouring iron ore interests in the Pilbara.
Stokes’ ASX-listed mining company Iron Ore Holdings is being frustrated by Palmer’s Mineralogy on two fronts, with the latter preventing the former from using both road and port infrastructure in two different scenarios.
The road issue is forcing the two parties to negotiate directly, with IOH wanting to build 70km of private road on a section of Mineralogy’s land to allow it to improve efficiencies by running the sort of large trucks that cannot be used on civilian roads.
Mineralogy is refusing to allow the road to be built, and the two parties have taken the dispute to the Warden’s Court in Western Australia, which handles mining disputes.
A verdict from the warden is expected later this month. But the disputes don’t end there.
IOH has been planning to export its iron ore through a small port that will be built several hundred metres east of where Citic Pacific exports magnetite concentrate from Mineralogy’s land.
''We don't think we're supposed to give up the road.": Clive Palmer is sticking to his guns. Photo: Andrew Meares
Economist Steve Keen and newly converted housing market sceptic Christopher Joye are engaging in a colourful blog exchange over the real estate market.
Both agree house prices are overvalued now ('buyer beware'), but are at odds over past predictions and what has changed to shift Joye's outlook.
First up here's Steve Keen, writing in Business Spectator:
One of the most prominent commentators asserting that there is a dangerous house price bubble in Australia is… Chris Joye. There are also many others who were once on the “no bubble” side of the argument who are now warning that there is one.
I’m delighted by this shift of course, but it does beg the question “what has changed -- the facts, or the commentators?” The answer, as in most things, is a bit of both -- but I think more the commentators than the facts.
Firstly, the issues that I highlighted as causes for alarm -- the level of household debt and the ratio of house prices to incomes -- are the same ones that Joye and others are now using to saying that we’re in a dangerous bubble. Secondly, the levels of those indicators are much the same as they were in 2010. So back in 2010 these indicators weren’t a problem, and now they are?
... Back then, a price to income ratio of 4.7 was not a problem. But last month, a lower ratio of 4.4 times was a problem, Joye argued.
... For my part, my change of expectations about house price rises -- which I now expect to see continue for some time, thanks to the combination of the speculative buying frenzy by “investors”, self-managed super fund levered purchases of property, and non-resident purchases -- reflects another of Keynes’s famous aphorisms, that “the market can remain irrational for much longer than you can remain solvent.”
And here's Christopher Joye's reply, up at afr.com:
I welcome perma-bear Steve Keen’s commentary on my recent analysis of the asset class, and his apparent comfort with my conclusions. It is, however, worthwhile clearing-up some misunderstandings as to how I arrived at them.
It is doubtless frustrating for folks like Dr Keen, who claimed that Australian house prices would slump 40 per cent in nominal terms in 2008, to see that they are actually 22 per cent above their pre-global financial crisis peak today.
Let me put that stark contrast another way. In March 2008 the national median dwelling price across all regions was $367,500. Dr Keen evidently believed it would fall to $220,500. The median dwelling price of $450,000 today is thus more than double his predicted outcome. On any benchmark, that is a massive miss.
As is well known, I vocally maintained during the GFC that any house price falls would likely be modest, which proved to be the case, and anticipated the 2009-10 rebound, just as I did the present recovery. The latter commenced in June 2012 and gathered real pace in second half of 2013.
The fact is that the cyclical shifts in Australian housing conditions since 2008 should not have been surprising to anyone with an open mind.
...In 2010 I argued that house price growth that year would track disposable incomes, which was what happened. In August 2013 I called double-digit house price growth, running at three times household incomes, which is again what we got.
In 2010 I said if we were hit with multiple rate hikes, we could see house prices lose altitude over 2011. The hikes materialised, with an especially painful “double-tap” in November 2010, and prices duly fell in 2011.
...I’ve simply stated that the market looks expensive, and if the RBA normalises its cash rate, prices will, on the balance of probabilities, fall. How much they deflate by is an open question, and depends on how high the cash rate goes, which nobody, including the RBA, knows right now.
Household debt is only marginally different to its level in 2010, Steve Keen notes.
The RBA’s foreign currency reserves jumped $US10 billion last month – the biggest such increase in 45 years – but analysts think it’s unlikely that the central bank intervened in the forex markets.
Data on Australia Official Reserve Assets, showed the central bank’s foreign reserves jumped $US10.4 billion to $62.2 billion in March from the month-earlier $US51 billion.
Trader talk overnight was that the increase could be a sign that the RBA is intervening in currency markets to put downward pressure on the Australian dollar, which has climbed 6¢ from a four-year low earlier this year. But local analysts say this is highly unlikely.
“I think it would be highly unlikely that the RBA has done anything untowards in FX markets during March,” said National Australia Bank head of global FX strategy Ray Attrill.
He added that the jump in recorded value of the RBA’s reserves “is most unlikely to relate to intervention” but that it could reflect profits from offshore currencies, such as if the RBA held a lot of US dollars, and also transactions that were carried out some time ago.
UBS Singapore-based currency strategist Gareth Berry said it might be too early to say whether the RBA is trying to affect the Australian dollar:
- These are just gross reserves and things like FX swap activity can have a huge bearing on this so it doesn’t mean at all necessarily that there’s been intervention.
- I’d be very surprised if there were. It’s so vague that we can’t really attach any explanation to it until we see more detail which usually comes later in the month.
The dollar is currently fetching 92.77 US cents, still stuck below the 93c level as it has been for the better part of the past two weeks.
The Japan-Australia free trade agreement has split the farming sector, with beef producers welcoming the pact while dairy, pork and rice farmers expressed disappointment with the deal.
The National Farmers’ Federation said the historic agreement, struck last night after seven years of negotiation, fell short of expectations.
“We recognise the historical significance of the agreement. However, we are disappointed with the overall outcomes for agriculture with a number of sectors facing marginal improvements or limited commercial gains,” federation president Brent Finlay said.
Trade experts have praised the agreement, with Alan Oxley, chairman of Monash University's Australian APEC Study Centre, hailing it as a potential "game changer".
But deputy chair of the Australian Dairy Industry Council Robert Poole said dairy farmers were “extremely disappointed with the deal”.
"We were hopeful government had heeded the industry’s message in regards to freeing up market access in Japan, however it now appears our words fell upon deaf ears. There has been no movement in this agreement on fresh cheese – the number one objective for Australian dairy, with tariffs to remain at 29.8 per cent."
Sam Lawrence, a senior policy adviser at Australian Pork Limited, said the agreement was "substandard" and represented a "missed opportunity" for the pork sector.
"Exports will remain largely as cost-prohibitive as they are today because of high levies and surcharges," Lawrence said.
The chairman of the Australian beef industry's free trade taskforce, Lachie Hart, said the deal would be worth $5.5 billion to the Australian industry over 20 years.
"This will create opportunities for increased Australian beef sales into Japan and improve the affordability of beef to Japanese consumers," he said.
Ricegrowers’ Association of Australia president Les Gordon slammed the FTA as a deal that punishes and ignores ricegrowers.
Gordon said the RGA is “extremely disappointed” that the government concluded a deal that excludes rice.
Gordon said the government has ignored rice in its talks with Japan and South Korea, and he called on the Coalition to ensure access to China in its upcoming free trade negotiations with the world’s second-biggest economy.
Record beef prices predicted
New trade deals with Japan and Korea could significantly increase the price of beef, according to National Party Senator John 'Wacka' Williams.PT8M54S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-36a6t 620 349 April 8, 2014
Business confidence has weakened to its lowest levels since the federal election as sluggish activity weighed on positive sentiment, a monthly private survey has found.
Business sentiment was also weakened by the recent elevated levels of the Australian dollar, uncertainty over the global economy and fears of a "belt tightening" federal government budget in May, the National Australia Bank's business survey shows.
Business conditions edged up in March, but remained subdued, as sales fell in the month and employment improved slightly but still pointed to a soft labour market.
Business confidence slipped from seven points in February to four points last month, while conditions improved from zero to one point in March, the survey found.
A separate survey by Roy Morgan Research, which was released on Monday, found that business confidence strengthened slightly last month after a sharp decline in February. The increased optimism was driven by firms' reporting a better financial position this year than 12 months ago, and by the improved outlook for the domestic economy, Roy Morgan said.
Despite the soft readings, most industries recorded a lift in conditions, particularly in the mining sector. But the transport industry, as well as the "bellwether" wholesale sector, weakened significantly, NAB said.
The corporate watchdog is calling for a number of reforms to improve the financial system, including tighter standards for financial advisers and new mechanisms to manage risk.
In a submission to the Murray inquiry into the financial system, ASIC is also renewing calls for tougher penalties and the introduction of a user-pays system to fund its activities.
In contrast to other regulators who have used the financial system inquiry to call for minimal change, ASIC has warned that failure to keep pace with international regulatory standards could exclude big players from participating in Australia’s markets
It said new powers such as those held by regulators in the US and UK would improve its ability to govern corporate behaviour – particularly around areas of high risk including high frequency trading, dark liquidity and speculative trading.
US financial services giant Genworth Financial has launched the initial public offering of its Australian mortgage insurance business, which if successful would become the largest float of the year to-date.
Genworth’s brokers distributed detailed pre-marketing research reports to fund managers this morning, which valued Genworth Mortgage Insurance Australia Limited at up to $2.4 billion.
Lead broker Goldman Sachs said the Australian business was worth $1.9 billion to $2.4 billion, or 0.8-to-1-times the company’s book value. It forecast Genworth to record $235 million net profit after tax in the 2014 financial year, and said the valuation implied an eight-to-10-times on a price-to-earnings basis.
Genworth’s business is insuring banks and mortgage-backed securities investors against the risk of losses on mortgages.
It is the largest Australian mortgage insurance provider, with more than 60 per cent of its business coming from loans written by Commonwealth Bank of Australia, Westpac Banking Corp and National Australia Bank.
Goldman Sachs said Genworth had been able to increase prices in four of the past six years, which had driven a significant increase in the return generated by policies written since 2010.
Tech stocks are leading the way down again, following the Nasdaq's lead and as investors reassess their valuations.
Most blue chips are also lower, with the big banks falling between 0.1 per cent (ANZ) and 0.4 per cent (NAB). The major miners have also slipped, despite rises in commodity prices overnight.
Here are the biggest gains and losses among top 200 stocks:
The sharemarket has opened slightly lower, holding up fairly well after Wall Street extended its sell-off overnight with major indices dropping another 1 per cent.
The benchmark S&P/ASX200 index is down 12.2 points, or 0.2 per cent, at 5401.5, while the broader All Ords has lost 14 points, or 0.3 per cent, to 5402.1.
Among the major sectors, consumer discretionary have lost 0.8 per cent, while materials and financials are both down 0.2 per cent.
Going nowhere ... the ASX has managed to shrug off Wall Street's tech sell-off, but is up just 1% since the start of the year.
Cabcharge investors don't look to be happy following the NSW government's announcement that it will follow Victoria and legislate a reduction in the maximum card surcharge for taxis from 10 per cent to 5 per cent.
Cabcharge shares have started the day down 3.4 per cent at $3.95.
"I've heard the concerns of customers that they've been taken for a ride by this excessive surcharge and that's why we've listened and acted," NSW Premier Barry O'Farrell said.
Local stocks will again be spared from the tech-driven sell-off on Wall Street, Rivkin global investment manager Tim Radford predicts:
- While technology shares will likely get whacked today, the rest of the market should hold up relatively well with materials stocks to benefit from stronger commodity prices (iron ore, crude oil, and copper).
- When the tech sector in the States goes pear-shaped the Australian market is pretty immune given its heavy weighting toward financial services and materials stocks.
Plenty of market commentators continue to spruik the next market crash, saying we’ll see the S&P 500 fall 20-30% this year, with some basing the analysis on comparative charts of the 1990’s dot-come bubble, 1987 and 1929 market crashes for instance, Radford continues and laments:
- It gets a bit tiresome seeing these misleading cross comparisons spread all over the internet, with the intention of trying to inflict fear into investors and entice a higher hit rate on the article/analysis.
- The market undoubtedly has had a massive run higher since the GFC, and is arguably overdone. From a risk reward perspective it doesn’t make much sense to be skewed aggressively long equities at the moment, as it’s hard to see the S&P 500 having another +10% year.Tech stocks have simply run too hard too fast, and are now undergoing a healthy, albeit fast, correction. We may see the correction deepen in the near-term but there is no real evidence of a big crash around the corner.
- Tech stocks have simply run too hard too fast, and are now undergoing a healthy, albeit fast, correction. We may see the correction deepen in the near-term but there is no real evidence of a big crash around the corner.
The bears may have taken over on Wall Street, but that's only temporarily says one big bull:
Fidelity global chief investment officer Dominic Rossi thinks the US sharemarket is only halfway through a multi-year bull run that will see stocks rise for several more years on the back of fatter corporate profit margins and a return to a US government surplus.
In an interview with the AFR, Rossi says there are three key reasons why the S&P 500 will rise to about 2000 this year and keep rising in 2015:
- The deficit is improving strongly and I have not seen that for two decades. It is not implausible that President Obama will have a fiscal surplus by the time he leaves office in two years.
- My second point is that while we had a slow start to the year because of a cold snap, over the last four weeks we have seen a real acceleration in economic growth. I think the economic news we are going to see over the next two months is going to be positive and there is no risk to the market from interest rates rising.
- The third point I would make is that price-earnings multiples look OK. The bears have been arguing that profits are at record highs and that you have to adjust price earnings down because they will revert to the 30-year earnings average. If you do that, the market looks expensive. My argument to counter that would be that profit margins are going to go even higher.
The world’s biggest listed wine company, Treasury Wine Estates, could be set to shed jobs and slash its costs in the face of a protracted downturn in its key markets, with the newly appointed chief executive of the winemaker that owns brands such as Penfolds, Wolf Blass and Rosemount to address analysts and investors this morning.
Treasury Wines boss Michael Clarke said in a statement this morning to the ASX that since officially commencing in the role on March 31 he has spent extensive time kicking the tires of the business, including inspecting its underperforming vineyards and assets in America, and believed immediate action including reducing costs was needed to improve the business.
‘’While there are a number of actions to be taken to improve Treasury Wine’s performance, my immediate focus is on running the business. It is however, already clear to me that Treasury Wine must take action to reduce overhead expenditure, reinvesting these savings back into consumer and brand marketing.’’
Clarke, who has a background in fast moving consumer goods working for companies such as Kraft and Reebok, also said he was committed to the strategy laid down by his predecessors to shift Treasury Wine’s production focus up the price curve to more expensive wines, also known as a ‘’premiumisation’’ in the industry.
It's fairly quiet so far on the local corporate front. Here's an early one on short sellers targeting Ten: the struggling commercial broadcaster has increasingly come under attack from short sellers over the past year, with 9 per cent of its free float shorted at the end of March.
According to analysis of Australian Securites and Investments Commission figures by Wilson HTM, Ten's short position as a percentage of free float rose from 5.6 per cent to 9 per cent over the year to 31 March.
At 9 per cent, this represents just over 5 per cent of Ten's market capitalisation, or $40 million worth of shares, the broker said. Not all stock is available for shorting.
John Lockton, senior research analyst at Wilson HTM, said shorters started hammering Ten shares because they saw "limited believability on its revenue outlook and there were deep concerns regarding its balance sheet."
While those concerns have been solved by Ten's equity raisings, Mr Lockton said, expectations for Ten's first-half results were "biased towards bad news."
Fairfax Media, publisher of this website, was the second most shorted media stock over the 12 months.
It’s a big day in Japan today, with the central bank deciding on monetary policy - but not much is expected to come of it.
The Bank of Japan is predicted to hold off on expanding stimulus today, holding fast to existing plans to beat chronic deflation even as a sales tax hike clouds the outlook for the world's third-largest economy.
Unfazed by recent signs of weakness in the economy, the central bank is set to maintain its current monetary policy settings when it announces its decision today around 1pm AEST, and affirm its conviction that the economy is on track to meet the target of 2 per cent inflation within a year or so.
A run of recent data has cast doubt on Premier Shinzo Abe's reflationary policies, including the central bank's own "tankan" survey. It showed companies expect inflation to remain subdued in coming years, and see a worse consumer chilling effect from last week's tax hike than from the previous increase in 1997. But Governor Haruhiko Kuroda and other central bank officials appear unshaken, pointing to positive signs such as shrinking slack in the economy that should help them meet their pledge of accelerating inflation to 2 per cent by around April next year.
The BoJ is widely expected to maintain its commitment to increasing base money, its key policy gauge, at an annual pace of 60-70 trillion yen. It is also seen sticking to its assessment the economy will recover moderately.
"The BoJ's message will remain the same, which is that things are on track and there's no need now for more stimulus," said Izuru Kato, chief economist at Totan Research in Tokyo. "I think Kuroda is no mood to act any time soon. But if doubts emerge over its rosy projections, the BoJ may ease again in June or July."
The country is also set to release balance of payments data for February, with economists forecasting a trade deficit of 593 billion yen, down from 2.3 trillion yen in the previous month.
"Some improvement in the balance of payments is anticipated, but absent a huge unexpected improvement, markets may shrug off the positives as a short-term cyclical boost. Any deterioration would be very negative," NAB writes in a note this morning.
Wall Street had another bad session overnight, once again without any specific news driving the sell-off which has hit technology stocks particularly hard.
The S&P500 lost 1.1 per cent, falling to a three-week low that erased the gauge gain for the year, while the Dow Jones dropped 1 per cent. The Nasdaq 100 slid 1.2 per cent for a three-day slide of 4.3 per cent.
Technology shares have been hit as traders dump the biggest winners of the bull market amid concern valuations have advanced too far.
"It's a carry-over from Friday's selloff," said Wes Mills, chief investment officer with Scotia Private Client Group in Toronto. Markets had risen to the point where people are a little skittish and locking in profits ahead of the earnings season.
"If you take a closer look under the hood, things have been deteriorating for a while now," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "Small caps and tech have been breaking down all over the place the past month, with the big blue chips holding tough. Well, now it looks like the last place bulls were hiding is finally starting to crack."
The Nasdaq, which slid the most in two months on Friday, trades at 31.5 times reported earnings of the companies in the index. That's almost twice the ratio for the S&P 500, which trades at 17 times earnings. The technology gauge has dropped 6.4 per cent since a March 5 high.
The selling in the Nasdaq has sent anxiety among options traders to the highest levels since the flash crash four years ago. More than 1 million bearish options on an exchange- traded fund tracking the index of technology stocks changed hands that day for the most trading in puts since May 7, 2010, the day after $US862 billion was erased from the value of US equities in a matter of minutes.
"Will investors see this as opportunity to buy the dip, or do they stay on the sidelines and wait to see earnings strength in the first quarter?" said Kate Warne, an investment strategist at Edward Jones & Co. "The fundamentals remain pretty good, but sentiment can change quickly, as we saw on Friday."
ASX outperforming ... Wall Street's Nasdaq index (white line) is down 6.4% from its March highs, while the local market has slipped just 1%.
Local stocks are poised to open slightly lower after Wall Street extended its sell-off over night, pushing all the major indices into the red for 2014.
What you need2know:
- SPI futures are down 18 points to 5390
- AUD at 92.65 US cents, 95.51 Japanese yen, 67.42 Euro cents and 55.78 British pence
- On Wall St, S&P500 -1.1%, Dow Jones -1%, Nasdaq -1.2%
- In Europe, Euro Stoxx 50 -1.4%, FTSE100 -1.1%, CAC -1.1%, DAX -1.9%
- Spot gold down 0.5% to $US1296.57 an ounce
- Iron ore up 1.3% to $US117.20 poer metric tonne.
- Brent oil down 0.8% to $US105.86 per barrel
What’s on today
Australia: NAB business survey
Japan: The central bank decides on monetary policy
Stocks to watch
Private equity firm Pacific Equity Partners has started assembling a board for Peters Ice Cream, in an effort to apply some pressure to trader buyers, the Australian Financial Review's Street Talk column reported.
CIMB has an “add” rating on Downer EDI and has lifted its 12-month price target to $5.99, expecting a further re-rating.
JPMorgan has retained an “underweight” rating on Sydney Airport after a report showed its quality of service for airside services and facilities as rated by airlines remained “poor”. It left its December 2014 price target unchanged at $3.80 a share.
Deutsche Bank has “buy” ratings on Aristocrat, Crown Resorts, Echo Entertainment and Tabcorp.