It's time to say goodbye once again, thank you for being with us today, we hope to see you again tomorrow.
Here's what you need2know this Tuesday evening:
Markets
- ASX dips 0.6%
- AUD climbs to $US1.0390
- Nikkei up 1.9%, Hang Seng up 0.3%, Kospi up 0.6%
- Gold pushes to $US1605.95, WTI oil up to $US93.79
- Wall Street futures up 0.1%, FTSE100 futures down 0.1%
News
A senior market analyst at Ord Minnett, Craig Turton, says he doesn't think Cyprus was a trigger for systemic concerns, so it’s interesting that the market lost ground again today.
“It’s a reminder of how ugly Europe is, and how poor the growth outlook is there,” he said.
“The bit I find interesting is that in Big Caps land there’s not a lot of value left in the Australian marketplace, so there’s not much margin for safety there, and now you’re starting to see volatility pick up.
“I just wonder what this [news from Cyprus] has done to investor psyche.”
The results for blue chip stocks weren't great today:
- BHP: -0.4%
- Rio: -1.5%
- ANZ: -0.9%
- CBA: -0.1%
- NAB: +0.2%
- Westpac: -0.4%
- Fortescue: -0.3%
- Woolworths: -2.6%
- Wesfarmers: -2.4%
- Telstra: flat
Among the sectors, materials fell 0.5 per cent, financials lost 0.4 per cent and consumer staples dropped 2.2 per cent.
The market has closed at the day's low, The benchmark S&P/ASX200 finished down 28 points, or 0.6 per cent, to 4987.4, while the broader All Ords dipped 23 points, or 0.5 per cent, to 5004.4.
US markets are set to open slightly higher with the Dow Jones and S&P500 indexes both up 0.1 per cent.
European indexes are preparing for losses, with FTSE100 futures down 0.1 per cent, Eurostoxx slipping 0.6 per cent and Germany's DAX pointing to a 0.4 per cent fall.
Australian iron ore developer Sundance Resources requested a trading halt after a media report suggested the company's suitor, China's Hanlong Mining, would miss next week's deadline to progress its $1.4 billion takeover.
Expectations are growing that Hanlong will miss a March 26 deadline to provide a credit-approved term sheet and Sundance will be asked to extend the timeline on the long-delayed deal again, the Australian Financial Review reported, without citing sources.
Sundance, which is developing the $4.7 billion Mbalam project on the border of Cameroon and the Republic of Congo, said it would respond to the article by the start of trade on Thursday.
Hanlong officials were not immediately available for comment.
Patients seeking treatment for erectile dysfunction were not told they could only get a refund from the Advanced Medical Institute or end treatment if they agreed to try injections directly into their penis, a court has heard.
A witness, who cannot be named, said AMI’s nasal spray was not "fit for purpose" because it does not work. He said he did not want to keep tying different medications, even though AMI was pressuring him to do so before it would let him out of a contract.
"I am speaking as a layman, but we are not in a Nazi concentration camp - you can't force people to take medication," the witness said in a case between the competition watchdog and AMI in the Federal Court in Victoria.
Counsel for the Australian Competition and Consumer Commission, Lisa Nichols, asked the witness if he was told "at any time that you would have to try injections in the penis" to qualify for a refund.
"No," he replied.
Patients also allege it was difficult to exit contracts or stop payments being taken from their bank accounts if they changed their mind about the treatment within a few days of entering an 18 month contract.
Another witness said he had to cancel his credit card stop AMI taking nearly $200 every month, and had no idea he had agreed to enter an 18 month contract.
Rio Tinto is cutting about 100 jobs from its coal mines as it tries to slash costs in the wake of last month’s $2.8 billion annual loss.
The jobs are understood to come from across its struggling central Queensland and NSW Hunter Valley coal mines.
It follows the miner cutting 140 jobs when it closed its Blair Athol mine in central Queensland late last year.
There have been at least hundreds of other job cuts across Rio in the last 10 months but the company has been unwilling to specify numbers and locations.
As we approach the final hour of trade, here's how markets around the region are looking:
- Nikkei(Japan): +2%
- Shanghai: +0.2%
- Taiwan: +0.5%
- South Korea: +0.9%
- Singapore: +0.7%
- New Zealand: flat
There will be plenty more from the iron ore conference in Perth as the afternoon goes on, with representatives from Fortescue Metals Group, Anglo American and the China Beijing International Mining Exchange (CBMX) all due to take the stage.
The latter of those three could be the most interesting given the recent claims out of China that big mining companies were manipulating iron ore prices.
Speaking for the CBMX this afternoon will be its president Mr Dong Chaobin, whose speech is titled; ''Promote the formation of a more rational and transparent iron ore pricing mechanism''.
BHP Billiton's Tony Ottaviano is next up at the iron ore conference in Perth.
He has said the option to build an outer harbour at Port Hedland is not entirely canned, but it on the back seat at the moment.
He also says BHP's new remote operations centre for its iron ore business is now underway and that the company's metallurgical coal business will be the next to get a remote operations centre.
Mr Ottaviano has also said that autonomous trucks will be working in BHP's Pilbara iron ore mines by the second half of 2013.
Global miner Rio Tinto said its plans to expand Australian iron ore production by more than 40 per cent over the next three years were still in place and on schedule.
Rio was well advanced in its aim to boost iron ore output by about 15 per cent this year to 290 million tonnes, Greg Lilleyman, the company's head of Pilbara iron ore operations, told a conference.
A longer term target of 360 million tonnes by 2015 was also on track, Lilleyman said.
Shares are down 0.7 per cent to $59.145.
There was limited new information in the RBA’s March Board meeting Minutes or in a speech today by Deputy Governor Philip Lowe, said ANZ economist Justin Fabo.
- The Bank appears cautiously optimistic that it might not have to ease monetary policy further, while remaining open to the possibility that it will need to. At the margin, Lowe’s speech today was a little more positive than the Board Minutes, possibly reflecting that the RBA Board is currently a little more dovish about the economic outlook than RBA staff.
- If the cash rate does not fall further this would be positive news overall as it would reflect a strengthening in the economic backdrop. Our view is still that overall growth will disappoint and allow monetary policy to be eased a little more this year.
A former AWB executive has had his punishment increased for his role in the Iraqi kickbacks scandal.
Former AWB chief financial officer Paul Ingleby was last year fined $10,000 and banned from managing a corporation for four-and-a-half months for his role in Iraqi wheat deals.
But the Victorian Court of Appeal allowed an Australian Securities and Investments Commission (ASIC) appeal on his sentence today.
Mr Ingleby must now pay a $40,000 fine and is disqualified from managing a corporation for 15 months.
Appeal judge Justice Mark Weinberg said the new penalty more accurately reflected the nature of Mr Ingleby’s offending.
China’s foreign direct investment rose for the first time in nine months in February, a sign confidence in the world’s second-biggest economy is improving amid optimism growth will keep rebounding.
Inbound investment gained 6.3 percent from a year earlier to $8.21 billion, the Ministry of Commerce said in a statement today in Beijing. Non-financial outbound investment in the first two months of the year surged 147 percent to $18.4 billion.
‘‘Upgrading of the Chinese manufacturing sector, development of the service sectors and their further liberalization will continue to see China being favored by multinational companies,’’ Chang Jian, a China economist at Barclays in Hong Kong who previously worked at the World Bank, said before the release.
No great surprises from #RBA mins, altho the insertion "while further reductions may be required" underscores that it retains an easing bias — Shane Oliver (@ShaneOliverAMP) March 19, 2013
...but given last weeks (albeit exaggerated) jobs figures I can't see the #RBA easing next month
— Shane Oliver (@ShaneOliverAMP) March 19, 2013
And another view, this time on the rates outlook. Robert Mead, head of portfolio management at the Sydney office of Pimco, the manager of the world’s largest bond fund, says he doesn't think the RBA is finished cutting rates.
"We think they have more to do given the backdrop of a moderate slowing in China, the elevated Australian dollar, tight fiscal policy and the return of more global uncertainty,’’ Mead told Bloomberg yesterday.
‘‘Monetary policy is going to be one of the only escape valves in any deterioration in the growth environment.’’
Another view here on the dollar.
‘‘The deputy governor is sounding the victory bell on inflation in the mining boom,’’ said Andrew Salter, a currency strategist at ANZ.
‘‘We managed to come through the boom without an excessively high level of inflation. It’s hard to see a long-term short position in the Australian dollar bearing any fruit.’’
The RBA’s deputy governor today said a stronger currency and higher savings rate have helped contain inflation and allowed lower interest rates even as the mining industry boomed.
‘‘These factors have helped Australia to digest a huge investment boom without generating substantial imbalances in the economy,’’ said Mr Lowe.
CMC Markets chief market analyst Ric Spooner said with the benefit of hindsight the market over-reacted yesterday.
‘‘It’s not really a robust bounce I don’t think, we’re certainly still well below where we were Friday,’’ Mr Spooner said.
‘‘That reflects the fact that there is ongoing risk, particularly the next hurdle which will be the vote by Cypriot parliament on whether to approve these measures.’’
The gains today are broad-based with all sectors up apart from defensive healthcare stocks.
The Australian dollar is higher, climbing above 104 US cents after the release of the central bank’s March board meeting minutes.
At midday the Australian dollar was at 104 US cents, up from Monday’s local close of 103.60 US cents. The currency climbed to its intraday high of 104.07 US cents shortly after the minutes of the RBA’s March board meeting was published at 1130 AEDT, from 103.9 US cents shortly beforehand.
OzForex corporate dealer Michael Judge said the minutes offered little by way of direction for the Australian dollar.
Rather, traders were continuing to unwind the local unit’s decline after news Cyprus planned to slap a levy on all deposits as part of a bailout package with the European Union.‘‘We saw a massive selloff in risk on the weekend,’’ Mr Judge said.
‘‘I think the move away from risk was a bit overdone.’’
Mr Judge said he expected the Australian dollar to grind its way higher towards 104.3 US cents during afternoon trade.
‘‘The key in the short term will be European happenings to drive direction,’’ he said.
The chances of a rate cut in April, or even at some point over the next year, are vanishing fast. Here's the latest interest rate pricing from Credit Suisse:
- Pricing at the April rates meeting
Today: 10% chance of a 25bp rate cut
Previous Day: 15% chance of a 25bp rate cut
- Pricing over the next 12 months
Today: 12 basis points of rate cuts
Previous Day: 20 basis points of rate cuts
Some of the companies which have been in the news so far today:
- Breville - up 2.5 cents, or 0.47 per cent, at $5.34
Kitchen appliance maker Breville has lost a key distribution contract in Canada worth up to five per cent of its revenue.
- Clean Seas Tuna in a trading halt, last traded at 2.8 cents
Clean Seas Tuna has gone into a trading halt pending an announcement by the troubled aquaculture company.
- Pharmaxis in a trading halt, last traded at 49.5 cents
Shares in biotechnology firm Pharmaxis have been placed in a trading halt while the company assesses a letter from regulators in the United States in relation to its drug to treat cystic fibrosis, Bronchitol.
- TPG - up 14 cents, or 5.2 per cent at $2.82
Internet provider TPG has upgraded earnings guidance after adding 36,000 new broadband customers in the first half on the way to a hefty lift in first half net profit.
Local shares now showing a 0.7 per cent gain for the day, but the ASX200 is off the day's high of +0.84 per cent.
Coal miner New Hope Corporation, which unveiled a 32 per cent drop in its first half net profit to $69 million on Tuesday, is targeting $45 million in annualised cost savings without shedding jobs.
''We're well on the way,'' managing director Robert Neale told BusinessDay, citing productivity improvements including running its wash plants for more than 8000 hours a year, diggers working at world's best practice rates with reconfigured buckets, mine trucks at 90 per cent availability and extending tyre life from 4-5000 hours up to 13,000 hours.
Mr Neale said the continuing high dollar, as quantitative easing continued in the US, Japan and Europe, was having a bigger impact on profitability than weak coal prices.
New Hope shares rose 3 cents or 0.8 per cent on Tuesday morning, to $3.85.
The RBA said GDP growth was likely to remain a little below its long-term trend in 2013 but would pick up after that, with signs investment away from the mining sector would continue to improve.
It also said a further moderation in wages growth would help keep inflation around the middle of the RBA’s two to three per cent target range.
Meanwhile, the RBA said Australia’s commercial banks were continuing to record strong profitability and, due to improvements in the global economy, were benefiting from more favourable wholesale funding conditions.
But it said it would take a while for the improved conditions to push average funding costs lower, with banks still facing strong competition for deposit holders.
The Reserve Bank of Australia says low interest rates are providing a boost to under-performing parts of the economy but concedes further rate cuts may still be needed.
In the minutes of its March 5 board meeting the RBA said there were signs six interest rate cuts delivered between November 2011 and December 2012 were starting to affect weaker parts of the economy.
‘‘Interest rate sensitive parts of the economy continued to show signs of responding to these low rates and it was likely that this still had further to run,’’ the RBA said in the minutes, released today.
It's come to our attention that the ASX now has a new most valuable stock.
Commonwealth Bank has overtaken BHP as the top stock in terms of market cap.
BHP's market cap has slipped to 112.2 billion, while CBA has risen to 112.5 billion.
Clean Seas Tuna has gone into a trading halt ahead of an announcement about a proposed capital raising.
Last month, Clean Seas Tuna reported a net loss of $34.1 million for the six months to December, a 383 per cent drop from the previous corresponding period, as it took into account $29.7 million in impairment charges.
The South Australian aquaculture company has been undergoing a rough patch after failing to find a partner for its yellowtail kingfish business in December.
Clean Seas Tunas said in a statement to the ASX this morning that it would make an announcement to the market by Thursday.
Japanese investors have bounced back with more gusto than their Aussie counterparts. After falling 2.7 per cent yesterday, the Nikkei has climbed 1.5 percent in early deals today. Yesterday’s slide was the biggest one-day percentage drop in 10 months for the Japanese bourse.
Just a reminder that the RBA will be releasing the notes to its latest rates meeting at 11.30 today. Stay tuned for full coverage.
Retailers are mixed, with Woolies falling slightly:
- Woolworths is 0.49 % lower to $34.58
- Wesfarmers is 0.26% higher to $42.21
- DJS is 0.68% higher to $4.96
More from the RBA:
Dr Lowe said it was crucial that non-mining investment strengthen enough to fill any gap left when the mining boom finally peaks.
"We cannot know the answer to this question yet," said Dr Lowe. "At the moment though, the available evidence does suggest that lower interest rates are doing their work broadly as expected."
There had been promising signs in the government's latest survey of investment intentions, he said, which showed firms expected to raise spending on non-mining construction and equipment for the year to June 2014.
"Whether the increases will be sufficient to offset the expected lower levels of mining investment is something that we will be watching very carefully over the months ahead."
Dr Lowe said data and liaison with retailers suggested household spending had firmed in recent months. There had also been a better tone to leading indicators of the labour market.
Official figures out last week showed a huge increase of 71,500 in employment for February, though analysts suspected the strength was somewhat overstated.
Eight of the most familiar words to the Australian Securities Exchange - Sundance Resources have gone into a trading halt - have been uttered again this morning, as the Perth based iron ore play continues efforts to lock down a takeover partner.
Sundance is the company that has tried for almost 18 months to finalise a takeover deal that will see it folded into Chinese group Hanlong. Completion of the deal remains elusive, as Hanlong has struggled to come up with the necessary funding.
There have been unconfirmed reports that Glencore might be lured to join the deal. More will be known on Thursday when Sundance emerges from the trading halt.
More from the RBA speech this morning. Dr Philip Lowe said he had been very surprised by plans to tax depositors in Cyprus as part of a bailout package and saw it as a step back for the region.
Answering questions after a speech, Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe said the plans for a tax threatened integrity of deposits generally and could lead to runs on banks in other euro zone countries where bailouts might be needed.
On the domestic outlook, Lowe said the RBA expected a very substantial increase in resource exports from Australia in coming years as past mining investment boosted production.
Miners are happy too, lifting in early trade:
- BHP is 0.52% higher to $34.87
- Rio is 0.64% higher to $59.93
- Fortescue is 2.31% higher to $3.39
All the banks are looking up in early trade:
- CBA is 0.72% higher to $69.72
- ANZ is 0.55% higher to $28.23
- NAB is 0.89% higher to $30.76
- Westpac is 0.77% higher to $30.20
- Macquarie Bank is 0.43% higher to $37.41
ANZ is % higher/lower to $
NAB is % higher/lower to $
Westpac is % higher/lower to $
Macquarie Bank is % higher/lower to $
Among the big miners
BHP is % higher/lower to $
Rio is % higher/lower to $
Fortescue is % higher/lower to $
After the last 3 big selloffs on the #xjo we've ground higher constantly the following day. Let's see if this remains the case today #ausbiz — David Scutt (@David_Scutt) March 18, 2013
Here's a Maths test. You have 10 bucks. I take a dollar. What have the got left? A Cypriot bank account — henry jennings (@henryj007) March 18, 2013
Looking now at the best performed companies on the ASX50:
- Fortescue: +2.56%
- Leighton: +2.55%
- Computershare: +1.62%
- Newcrest: +1.53%
- Asciano: +1.4%
Sector by sector on the ASX200 now:
- Info tech: +1.41%
- Materials: +0.84%
- Financials: +0.81%
- Industrials: +0.68%
- Telecoms: +0.56%
- Consumer disc: +0.5%
The Australian share market has opened two-thirds of a per cent higher.
The benchmark S&P/ASX200 index is up 34.5 points, or 0.69 per cent, at 5,049.9, while the broader All Ordinaries index is up 34.8 points, or also 0.69 per cent, at 5,062.5.
On the ASX 24, the March share price index futures contract was up 46 points at 5,065, with 43,954 contracts traded.
Early take - shares up 0.4 per cent in opening trade.
Some notes here on a speech by RBA deputy governor Dr Philip Lowe, who said this morning that the twin villains of Australian businesses in recent years - the high dollar and increased household savings - have saved the economy from overheating and spared consumers from outsized price hikes.
Dr Lowe says that though the increase in savings since the middle of last decade and the rise in the Australian dollar had hurt many businesses, they had been good for the overall economy.
The increase in the value of the dollar had helped keep inflation under control and economic growth at a sustainable level during a once-in-in-a-century boom in mining investment.
‘‘Had we not experienced the sizeable appreciation (in the value of the Australian dollar) over recent years, it is highly likely that the economy would have overheated and that we would have had substantially higher inflation and substantially higher interest rates,’’ he told an economics forum in Sydney on Tuesday.
Australian bond futures prices have fallen after the Cyprus parliament postponed its vote on a bank deposit tax.
On Tuesday morning (AEDT), a statement from the eurogroup said that small depositors should be treated differently from large depositors.
It also reaffirmed the importance of fully guaranteeing smaller deposits.RBC Capital Markets senior economist Su-Lin Ong said the statement had eased tensions, with a tax on small deposits looking less likely.
‘‘They look like they are getting some type of proposal that will more likely get this bill to pass,’’ Ms Ong said.‘‘There’s been some modest steps in the right direction for a resolution. That will be a small positive for risk and we expect bonds to be a little heavier on the open.’’
At 8.30 AEDT the June 10-year bond futures contract was trading at 96.455 (implying a yield of 3.555 per cent), down from 96.510 (3.490 per cent) on Monday.The June three-year bond futures contract was at 96.990 (3.010 per cent), down from 97.060 (2.940 per cent).
#SPI +56, had closed NY session at +37. The ridiculous pessimism of yesterday to be replaced by ridiculous euphoria today #ausbiz #xjo — David Scutt (@David_Scutt) March 18, 2013
Australian biotechnology firm Pharmaxis has been placed in a trading halt ahead of an announcement on whether the US Food and Drug Administration has approved the use of its cystic fibrosis drug Bronchitol.
Pharmaxis said in a statement to the ASX this morning that it had received a letter from the FDA on its decision and was analysing it.
Analysts have said the FDA was unlikely to approve the drug for marketing in the US when it met yesterday, following a negative review by advisers to the regulator in January.
The negative review saw shares in the pharmaceutical firm plunged more than 45 per cent in one day.
Last week, Pharmaxis said it was replacing its chief executive Alan Robertson and reviewing its business model.
Kitchen appliance maker Breville has lost a key distribution contract in Canada worth up to five per cent of its revenue.
Breville would not distribute Keurig coffee machine products in Canada beyond June 30, the company said on Tuesday.
It had been in talks with GMCR Canada - the owner of the Keurig brand - seeking to renew the agreement beyond June 30.
Breville in February said it expected income from the Keurig distribution agreement in the 2012/13 financial year to be similar to the $19.5 million earnt in 2011/2012.Breville’s total revenue in 2011/12 was $393.6 million.
Chief executive Jack Lord said the company would now focus on expanding its own products in the north American market.
Just a small list of analyst rating changes from late yesterday:
- Mount Gibson Iron cut to sector perform at RBC Capital
- Roc Oil cut to buy at BBY Limited
- Metcash downgraded to underweight at Morgan Stanley
- Woolworths downgraded to sell at CLSA
Here are a few local stocks to keep an eye on in early trade today:
- Cooper Energy: Says production of 12,000 bbls of oil to be deferred after oil flow line interruption; some oil output anticipated in current FY will be pushed to next FY
- Leighton: Secured A$656m contract from MTR Corp to build part of Shatin to Central Link development in Hong Kong
- Lynas: Says Malaysia Federal Court dismisses challenge to temporary operating license
- New Hope Corp: 1H result
- SingTel: Its Optus satellite unit may be worth A$2b if sold, Nomura analyst Sachin Gupta says. SingTel to conduct “strategic review” of Optus satellite business
In corporate news this morning, TPG has recorded a net profit of $78.3 million for the six months to January 31, a 41 per cent increase from the previous corresponding period.
The internet services provider declared a fully franked interim dividend of 3.5 cents.
TPG also reported revenue of $357 million for the first half of the 2013 financial year, a rise of 10 per cent from the same period the year before.
The company said it had almost doubled the growth in its broadband subscriber base to 36,000 in six months, and saw its mobile subscribers expand by 48,000 people in the same period.
Evan Lucas at IG Markets has a nice line on the Cyprus scare. In a note this morning he wrote:
Cyprus, a country with a population smaller then Adelaide (the fifth largest city in Australia) has caused one major upheaval on global markets. For a country that contributes about 0.2% of European GDP, why is a badly worded, ill thought out policy so damming to world markets? The answer is contagion.
The fear is that Spain or Italy might implement the same type of policy. Can you imagine what would happen if the next Italian Prime Minster came out and said it was going to take say five per cent off every Italian’s personal bank deposits?
This is a country that is the third largest borrower (bond offerings) and has some of the worst tax evasion issues in the world; they would all withdraw their money at once. The effects would be dire to say the least, and in this strategist’s eyes - it isn’t going to happen.
Looking offshore now, world markets fell but with far less drama than Aussie stocks yesterday. In fact, Asian markets might have over-reacted to the news from Cyprus. Wall Street lost about 0.5 per cent or a bit less while European markets fell a but more. Australia booked a 2 per cent loss and Japan fell 2.7 per cent.
But the concerns remain, even if they are under control at the moment. And the concern focus on whether the instability in Cyprus could be harmful elsewhere.
"There are worries about whether there will be any spillover from the Cyprus situation," said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati. which oversees more than $45 billion.
"Will authorities be able to convince markets that this proposal is only for this unique situation, for such a small country where the banking system is more of a tax shelter? If they can't, that might cause new concerns about Europe's banking system."
A quick look ahead to what's on the agenda for today. In economics news, we’re expecting the minutes from the RBA's March interest rates meeting at 11.30am. Interestingly, the dollar is firmer this morning, perhaps as investors bet that the minutes will paint a stronger picture of the economy, lowering bets on the chance of a rate cut in April or the months ahead.
Also today, RBA assistant governor (financial markets) Dr Guy Debelle delivers a speech on on Australian debt markets, and Austock Group holds its annual general meeting.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key markets numbers:
- SPI futures are 37 points higher at 5043
- The $A is higher at $US1.0395
- In recent trade in New York, the S&P500 was 0.64% lower at 1550.65
- In Europe, the FTSE100 lost 0.49% to 6457.92
- China iron ore was flat at to $US134.60 a metric tonne
- Gold rose 0.8% to settle at $US1,604.60 an ounce
- WTI crude oil rose 3 cents to $93.48 a barrel
- Reuters/Jefferies CRB index fell 2% at 294.45
Good morning folks. Welcome to the Markets Live blog for Tuesday.
Contributors: Thomas Hunter, Max Mason
This blog is not intended as investment advice
BusinessDay with agencies
