That’s it for Markets Live today.
You can read a wrap-up of the action on the markets here.
Thanks for reading and your comments.
Have a great weekend and see you all again Monday morning from 9.
A slew of better than expected local economic news, that came hot on the heels of the best company reporting season in three years, saw local shares move higher over the past week.
The stockmarket shrugged off Monday’s falls as fears abated that Russia’s push in to Ukraine’s Crimean peninsula could escalate into to a military crisis with the potential to disrupt global oil supply and financial markets.
The ASX 200 index lifted 57.5 points, or 1.1 per cent, over the five sessions to 5462.3, while the broader All Ordinaries Index lifted to 5477.
On Friday the benchmark index added 0.3 per cent.
In China on Friday it was confirmed that Chaori Solar Energy has defaulted on its debt. It is the first time China’s government has allowed a national company to default.
“Given a five-year bull run it is impossible to argue stocks look cheap, but the market is not necessarily too high,” MLC Investment Management senior investment consultant Brian Parker said.
“With interest rates still ridiculously low there is an overwhelming incentive for investors to poor more money into stocks and chase equity markets higher.”
Gains in the local sharemarket over the past week were led by the big four banks, while the biggest miners were lower as iron ore and coal prices fell and amid growing fears of a slow down in Chinese demand growth.
The number of Chinese companies with debt double equity has surged since the GFC, suggesting the first onshore bond default won’t be the last. (See posts below from 3:30 onwards.)
Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 per cent have jumped 57 percent to 256 from 163 in 2007, according to data compiled by Bloomberg on 4,111 corporates.
The yield on five-year AA- notes leapt 13 basis points in two days to 7.82 percent on March 6, the most in almost four months, after Shanghai Chaori said it won’t be able to fully pay an 89.8 million yuan ($16.2 million) coupon due today on its March 2017 bonds.
Some “zombie” companies in China that have cash shortages will fail as authorities end an overly loose monetary policy, Xia Bin, an adviser to the State Council and former central bank board member, said on Feb. 10.
“After the first one, there may be more defaults,” said Zhang Yingjie, Beijing-based deputy general manager in the research department of China Chengxin International Credit Rating, Moody’s joint venture in China.
“The domestic economy is slowing, liquidity is tightening globally and more bonds are maturing this year with greater refinancing pressure, so there may be more defaults.”
And here are the best and worst for the day.
Leighton is up 7.7 per cent today. Nobody - not even the company's management - knows why, apparently. Let's call it short covering - why not?
Carsales is feeling the love from its recently announced acquisitions as it expands its presence in Asia. (Investors may have funded their Carsales shares by selling REA Group, which was down 1.9 per cent.)
Good day for the retailers - Harvey Norman, Myer, Kathmandu, and JB Hi-Fi all feature in the top 10.
Best and worst performing stocks in the ASX 200 today.
One of the odder S&P index decisions was to include IT distributor Dicker Data in the All Ordinaries index.
It has a free float of only around 15 per cent as its founder, and the chairman and chief executive, David Dicker, has about half the company and a fellow director (and former partner) around 35 per cent.
But that hasn't stopped Dicker from arguing earlier this morning his company's shares are worth more than $2 a pop, well up from their present level of around $1.10, on the back of the planned $65.5 million purchase of a competitor, Express Data, which is a big buy given Dicker Data itself is only worth around $130 million.
"We believe that the company's performance and historic multiples will support this strategy and price," he told shareholders today.
Shares to be issued later in the year to part fund the acquisition will take the free float to around 25 per cent, he said.
Shares closed 3.5 per cent higher at $1.20.
The market has closed at its high for the day, as investor optimism trumped any lingering fears of further conflagaration in Ukraine - at least for now.
The ASX 200 gained 16 points, or 0.3 per cent, to 5462.3, while the All Ords added 17 points to 5477.
Shares managed to gain despite Westpac declining 1.2 per cent and NAB 0.3 per cent. CBA was up 0.6 per cent, though, and ANZ was flat.
The big miners, BHP and Rio, advanced slightly.
Energy was the best performing corner of the market, led higher by Woodside (+1.1 per cent) and Santos (+2.1 per cent).
IT was up 1.2 per cent, driven by a 7.8 per cent acceleration in Carsales' share price.
Health care and consumer staples gained 0.9 and 0.8 per cent.
Syrah Resources has ended the week on a nice note, with its shares rising by 15 per cent on the back of a preliminary deal to supply graphite to China.
Melbourne-based Syrah is developing a graphite deposit in Mozambique, and has this afternoon announced an agreement to supply up to 100,000 tonnes of graphite to Chinese company Chalieco. Chalieco is a subsidiary of aluminium giant Chinalco.
The deal is not binding, but requires the two parties to negotiate a binding deal within three months.
Syrah shares rose by 13.8 per cent to $3.30.
"The Chaori default goes to show the government will begin to let the market decide the fate of weak borrowers," said Christopher Lee, managing director of corporate ratings for Greater China at Standard & Poor's in Hong Kong.
“This test case indicates the government is addressing the moral hazard issue.”
"Incidence of defaults will likely be incremental but controlled," he said, nominating metals and mining, shipbuilding and materials as the key sectors with high default risks.
Markets were stoic ahead of the expected default. The benchmark seven-day bond repurchase rate was little changed at 2.45 percent at mid-morning, its lowest since 2012. That weighted-average rate had briefly spiked on Wednesday after Chaori announced it would default, but has since plunged.
The Shanghai Composite Index was down less than 1 per cent since Tuesday's close.
China's insatiable appetite for iron ore has led to billions of dollars of investment in the Pilbarra region of Western Australia's leaving the manufacturing states like Victoria to eat the dust of the big dig.
But now one ambitious Victorian miner is set to become the state's first iron ore producer in more than a century – sharing in some of the spoils of the tapering mining boom.
"It's not a story that's well known," Eastern Iron's managing director Greg De Ross told Fairfax Media. "I think most people we talk to are taken by surprise at how advanced it is, and that's there's iron ore mine situated three hours from Melbourne."
The Five Mile Nowa Nowa iron ore deposit in East Gippsland was drilled by the Victorian government in the 1950s. But it has been left dormant for decades as the enormous ore bodies in the Pilbara have fed the world's demand for iron ore.
Eastern Iron, an ASX-listed company with a sharemarket value of $5 million, has the permit to mine the more than 10 million tonne deposit.
The project is expected to create around 120 jobs in the region with workers living in the towns surrounding the site.
Shares have jumped 17.1 per cent to 4.8 cents (on admittedly minimal volumes) since the article was published. And no, we don't own shares in Eastern Iron.
History captured in a @Bloomberg screenshot... First thing that struck me was the coupon rate! #ChaoriSolar #default pic.twitter.com/KyEPutdBjk — David Scutt (@David_Scutt) March 7, 2014
The man behind the popular Goldman Sachs Elevator Twitter account that annoyed the top brass at the investment bank has lost his book deal after it was discovered that the ex-banker never actually worked at Goldman Sachs.
Touchstone, a division Simon & Schuster, cancelled its contract with John LeFevre, who was planning to pen “Straight to Hell: True Tales of Deviance and Excess in the World of Investment Banking”.
LeFevre landed the book deal in January, but the New York Times reported shortly after that the infamous Twitter author was never actually employed by the bank. The 34-year-old former bond executive previously worked for Citi.
Barely suppressing a giggle, (the real) Goldman tweeted:
Guess elevators go up and down, http://t.co/xkDPZgaCI8— Goldman Sachs (@GoldmanSachs) March 6, 2014
The Wall Street Journal is reporting that Shanghai Chaori Solar has defaulted on its bond interest payments, as has been foreshadowed in recent days.
It will be the first default in mainland China's domestic corporate-bond market, prompting one analyst to dub it China's "Bear Stearns moment", although that is likely to be somewhat exaggerated.
For example, Moody's reckons the bond default by Shanghai Chaori Solar would be a boon.
The ratings agency said allowing a company to default would “introduce greater market discipline and advance the development of a risk-based bond market, in which pricing reflects the underlying credit risk”.
Been a bit of this going around: Leighton Holdings says it can’t explain for a 12 per cent rise in its stock price over the past two days as it responded to an inquiry from the ASX.
Leighton shares were trading at their highest levels in almost 12 months at $20.33 in early afternoon trading on Friday, up from $18.15 on Thursday morning, sparking a price enquiryfrom the ASX.
Leighton said it was not aware of any information that could explain the trading in its stock and had no explanation for the price change.
The ASX also queried an increase in the volume of trading in Leighton’s shares, with some 2.6 million shares traded on Friday morning.
The surge in Leighton’s share price comes a week after Germany’s Hochtief, Leighton’s controlling investor, said it would continue lifting its holdings in the Australian contractor’s stock.
Hochtief acquired some 3.4 million shares in Leighton between December 27 and February 3, increasing its total stake to 198.2 million shares or 58.77 per cent.
Under Australian law Hochtief, which has been creeping up Leighton’s share register, can buy 3 percent of the company every six months.
Bad news usually comes in threes, so what's next for ailing drill contractor Boart Longyear?
This morning, S&P dropped it from the All Australian ASX 200 index, which its ratings arm followed up by cutting Boart's corporate debt rating to CCC from B.
So as investors await for the third leg of bad news, the shares have been marked down 3.4 per cent to 28.5 cents, holding clear of the 26 cent-low touched in December.
Regional markets are pushing higher, albeit in cautious trade as investors wait for key US jobs numbers out later tonight.
- Japan (Nikkei): +0.6%
- Hong Kong: -0.3%
- Shanghai: +0.2%
- Taiwan: +0.25%
- Korea: +0.1%
- ASX200: +0.1%
- Singapore: +0.1%
- New Zealand: flat
‘‘What’s expected this year is that the US economy will accelerate,’’ says Pimco money manager Tony Crescenzi. ‘‘Equities could fare well. The employment statistics in the US are due out and it might shape perceptions about what’s next.’’
China has given the strongest indication yet that it will push to seal a free trade agreement with Australia by the end of the year, China correspondent Phil Wen reports.
At a press briefing in Beijing today, Commerce Minister Gao Hucheng said the prospects of signing an agreement "as soon as possible" were "optimistic".
While he did not provide a specific timeframe for sealing the deal, Gao noted the Australian government's desire to seal a deal within the year. But Gao said the same sticking points which have dragged negotiations out for nine years largely persist.
Australia wants free access for its agricultural exports, while China is concerned about the restrictions imposed on its state-owned enterprises, as well as the movement of labour into Australia.
"As to how to properly solve these problems so that a China-Australia FTA could be reached as soon as possible, this is the common will of both governments," he said.
In his opening speech at the National People's Congress on Wednesday, Premier Li Keqiang said the Chinese government wished to "accelerate" free-trade talks between the two countries, without providing specifics.
The positive comments from China's leaders will help add momentum to free trade negotiations, with a further round of talks expected around the time of Prime Minister Tony Abbott's visit to China next month.
One of the more interesting 'changing of the guards' moments with the S&P index changes outlined this morning was the decision to dump Qantas from the ASX 50, in favour of James Hardie, which hit an all-time high earlier today at $15.54.
In afternoon trading, James Hardie had still retained most of its gains, trading ahead 2.8 per cent at $15.44.
And with a market cap approaching $7 billion vs Qantas at around $2.5 billion, you have to wonder why it has taken so long.
James Hardie is a clear beneficiary of the US economic recovery and, even with its shares at their present elevated level, it still has five buy/outperform recommendations out.
We always like anniversaries, and here's one for the sharemarket:
Five years ago the ASX200 hit its lowest in the wake of the GFC.
On Friday, March 6, 2009, the ASX200 closed at 3145.5, and on the following Tuesday, March 10, the market hit an intraday low of 3120.8.
Since then the ASX200 has been on an albeit bumpy way up, gaining more than 70 per cent.
On a total return basis, with dividends reinvested, the market’s up 116 per cent since the March 2009 lows.
Happy 5-year bull market
Still on the S&P index rebalance, and one of the odder decisions was to include IT distributor Dicker Data in the All Ordinaries index.
It has a free float of only around 15 per cent since its founder, and the chairman and chief executive, David Dicker, has about half the company and a fellow director (and former partner) around 35 per cent.
But that hasn't stopped Dicker from arguing earlier this morning his company' shares are worth more than $2 a pop, well up from their present level of around $1.10, on the back of the planned $65.5 million purchase of a competitor, Express Data, which is a big buy given Dicker Data itself is only worth around $130 million.
"We believe that the company's performance and historic multiples will support this strategy and price," he told shareholders today.
Shares to be issued later in the year to part fund the acquisition will take the free float to around 25 per cent, he said.
OzForex’s rise and rise has continued with the foreign exchange company to be admitted to the ASX200 in the coming weeks.
The online currency group listed in October last year after the initial public offering raised $439.4 million.
On its ASX debut, shares opened 30 per cent higher than the $2 IPO price, at $2.59.
The stock now sits at $3.37, 69 per cent higher than its offering price.
The inclusion in the ASX200 reflected the significant level of investors support for the international payments services providers, chief executive Neil Helm said in a statement to the ASX.
‘‘We believe that the improved liquidity and profile that will arise from being included in the index will be beneficial to our shareholders,’’ Mr Helm said.
In the first half of the financial year, OzForex reported a 14 per cent rise in profit to $9.5 million and said it remained on track to meet full-year guidance of $18.6 million.
ASX sent a "please explain" letter to Acrux re its 18c plunge yesterday to $1.91.
No surprise that the company in its response said it had no idea why its shares plummeted 8.6 per cent in one day.
But a change in heart by Morningstar analysts may have something to do with it.
The AFR reported yesterday (paywall content) that the research house had cut its fair value estimate to $2.50 from $4.20.
“Although the testosterone supplementation category has grown significantly in the US during the past 10 years, based on evidence of increases in muscle mass and strength in healthy older men, we continue to view Axiron as largely a lifestyle product and remain cautious given the evolving dynamics of that market and the sensitivity of sales to end-consumer demand,” wrote the analysts, who rate the stock a "hold".
The stock is back up 3.1 per cent to $1.97.
And here are the best and worst performers among the top 200 today.
Carsales continues its great run, while Seven Group and Harvey Norman also jump.
Energy World - the stock we revealed as the least liked by analysts among the top 200 - fell 5.7 per cent.
Best and worst performers in the ASX 200 so far today.
Small caps are looking pricey.
Both the US and Australian sharemarkets look expensive against history, based on 1-year forward estimated P/Es, but "slightly cheap" when comparing earnings yields (the P/E inverted) against bonds yields, say analysts at Credit Suisse.
Resources appear to be slightly expensive, while industrials (excluding financials) are expensive on a P/E basis. A-REITs appear close to fair value, whilst banks are slightly expensive on a P/E basis, the broker reckons.
Small caps have outperformed larger names this year and are looking expensive, as the chart shows.
Miners are out and tech is in. That's the conclusion from our analysis of who is in and out of the All Ords when S&P does its quarterly rebalance of the index from March 21.
The waning of the mining boom is being felt acutely among smaller resource plays, with three quarters of the companies exiting the All Ords index in the upcoming reshuffle either miners or energy firms.
Consumer and financial stocks dominate the incoming names, particularly technology firms. Only 13 per cent of the entrants to the All Ords later this month are resource stocks.
The biggest newcomer to the All Ords is aluminium firm Alcoa, followed by Kiwi tech darling Xero and recently listed Veda.
Eleven of the newcomers could be classified as technology, including communications and computing, and another two are biotech.
Changing of the guard: mining out, tech in
Glenn Stevens has provided further confirmation that the RBA was staying on the sidelines for some time, St George economist Janu Chan sums up this morning's hearing:
- He downplayed the up-tick in inflation, and remained cautious about the impact of slower mining investment.
- However, at the same time, seemed satisfied that interest rates were doing their job to support the economy and that the "hand over" in growth drivers was occurring in the economy from mining investment to other sectors.
- We remain comfortable with our long-held view for the RBA to keep rates on hold for most of this year, before raising them towards the end of this year.
Bit of a stir around Newsweek’s claim that it has found the enigmatic creator of the online currency bitcoin, a reclusive Japanese American physicist and model train fan whose name is actually Satoshi Nakamoto.
A reporter tracked down the 64-year-old, a physicist, living under the name Dorian S Nakamoto in a modest two-story house in suburban Los Angeles.
Nakamoto did not admit to being behind the phenomenon that, since its 2009 launch, has been hailed as a financial revolution despite scandals over its use in the drugs trade and money-laundering. And he called the police when the magazine’s reporter knocked on his door.
But Newsweek said the man, whose quiet career involved classified work as a systems engineer for the US government and government contractors, initially tacitly acknowledged his role in creating the crypto-currency that has rocked the banking world.
‘‘I am no longer involved in that, and I cannot discuss it,’’ he said. ‘‘It’s been turned over to other people.’’
Nakamoto has since told reporters camped outside his house: ‘‘I’m not involved in bitcoin.’’
The Bitcoin Foundation, which supports the development of the currency, would not confirm Newsweek’s story.
‘‘We have seen zero conclusive evidence that the identified person is the designer of Bitcoin. Those closest to the Bitcoin project, the informal team of core developers, have always been unaware of Nakamoto’s true identity, as Nakamoto communicated purely through electronic means,’’ it said.
Newsweek however laid out a strong story, in a scoop meant to relaunch its first print issue after publishing online for two years.
Billionaire casino mogul and former Qantas director James Packer has said long-term shareholders of the airline would have been better off accepting a controversial $11 billion takeover bid by a consortium of private equity firms eight years ago.
Packer was initially reluctant to chat about Qantas, but was persuaded on breakfast radio by his old mate Eddie McGuire to weigh into the conundrum facing the airline.
Qantas, which has had its request for a debt guarantee knocked back by the government, was in a “sad” state, the Crown Resorts chairman, on the phone from Los Angeles, told McGuire on Triple M show The Hot Breakfast.
Packer was a Qantas director when the aviation company fielded a $11 billion bid from a private equity consortium in 2006. At the time Geoff Dixon was Qantas chief executive and Margaret Jackson chaired the company’s board.
Packer said Jackson “got a tough time” because of her outspoken support for the bid.
"History is going to show that from a purely economic perspective, for the shareholders at the time, Margaret was 100 per cent right,” he said. “With the benefit of hindsight, and hindsight is easy, I think the bid would have been good for shareholders to take back then.”
Westpac is reshuffling its top executive ranks, appointing finance chief Phil Coffey to the newly-created role of deputy chief executive and promoting Peter King to chief financial officer.
The bank said Coffey would work directly with CEO Gail Kelly from next month on ‘‘critical strategic issues,’’ including the bank’s contribution to the government’s financial system inquiry.
It is understood the position has has been created in response to the waves of change sweeping through banking, including changes in technology and regulation.
The appointment comes after Kelly has spent six years running Westpac – and some analysts believe it could be an early sign of executive appointments before a future announcement about her future over the next year or so.
However, market observers also said it was unlikely Coffey would be appointed to chief executive after Kelly, as deputy CEO is often seen as a ‘‘sideways move’’ within the bank.
Instead, analysts believe the most likely successors to Kelly are the boss of its flagship Australian divisison Brian Hartzer or institutional boss Rob Whitfield.
Management reshuffle doesn't shine a light on who will succeed Westpac CEO Gail Kelly. Photo: Nic Walker
Back at today's hearing, finally Glenn Stevens is asked about the Australian dollar!
The question by Libs MP Scott Buchholz: "What is jawboning?"
But the RBA governor doesn't take the bait when he is given the chance to talk down the dollar (heavily).
He is instead quite careful about his words, only saying that jawboning is when he opines that the Australian dollar's "long-run equilibrium is somewhat lower than what it was trading at the time".
Some currency strategists have said that Stevens was being more careful about his comments on the exchange rate nowadays given how a lower dollar could push up tradables inflation.
What exactly is jawboning? And how does it affect the dollar? MPs want to know.
In case you haven't had enough of central bankers, two top Fed officials went on record overnight on US interest rates and QE (quantitative easing or essentially money printing:
Monetary policy is too "crude" of a tool to address possible asset-price bubbles in particular financial markets or corners of the economy, Atlanta Fed President Dennis Lockhart told Reuters:
- I don't think that monetary policy, which is fairly crude, is the best instrument for addressing asset bubbles that appear in a particular financial instrument or a particular sector of the economy.
The debate is growing over whether the Fed should stand ready to raise interest rates to head off any financial instabilities that might grow from all of its accommodative policies, with Fed chair Janet Yellen saying she wouldn't rule it out as a last resort.
But Lockhart said: "It's probably a little bit too much of a blunt instrument for that."
Meanwhile, New York Fed president William Dudley said the US economic outlook would have to change substantially for the Federal Reserve to alter the pace at which it is winding down asset purchases.
While growth is likely to quicken this year, the threshold for changing course on stimulus withdrawal is "pretty high", Dudley said during an event hosted by The Wall Street Journal. "The outlook would have to change in a material way relative to my expectation."
Dudley acknowledged that recent fierce winter weather in parts of the country have depressed activity in early 2014, but said those effects will be both hard to gauge and transitory.
Glenn Stevens, by the way, this morning said he suspects the Fed won't lift rates until late next year.
Shares have firmed slightly in early trading, as investors take a benign view of the currency's overnight spike.
The S&P/ASX 200 is up 7 points, or 0.1 per cent, to 5452.8, while the All Ords is up 8 points to 5468.1.
The big banks are off a little this morning, with CBA the exception.
BHP is also down.
Carsales is one of the early movers, continuing its recent run to jump 5.4 per cent.
Gold miners, health care and energy are the best performing sectors so far.
Stevens the latest: the RBA governor is being quizzed about the level of foreign investment in residential property in Australia, which has received a fair bit of media coverage after a recent Credit Suisse report on Chinese buyers.
Stevens says he is aware of foreign interest in Australian properties, noting that the "role of foreign investors is quite prominent indeed, but less prominent ... than some of the headlines might suggest".
He says that for the most part, foreign investors are confined to buying new structures as it is easier for them to come in through that space.
If there were issues with the supply of new housing, then that would be an issue that had to be addressed by local authorities, he adds.
Stevens says that ultimately, the question boils down to how welcoming Australians want to be about foreign investment, saying it is a vexed question and a matter for parliamentarians.
But anyone waiting for a comment on the dollar will have been disappointed: 45 minutes into the hearing and still no question on the currency's strength. Stevens' jaw must be itching!
So far, questions from the economics committee have ranged from inflation levels, unemployment, housing and foreign investors, credit growth and the global economy.
Foreign investment in local housing a vexed question, Stevens says. Photo: Alex Ellinghausen
Lots of tweets from the Glenn Stevens testimony today, including this one:
Stevens says "we'd surely be asking for trouble" if big step up in household debt from current level— Shane Wright (@swrightwestoz) March 6, 2014
"Once a dog, always a dog", may be one of the market's long standing adages - but not for Bell Potter's residual market bull, Charlie Aitken.
In a rare return to print, he has called the ASX200 to hit break-out and 6000 by mid-year as the bull equity market matures.
And his best pick? AMP, which he picked last year, but which has continued to underperform.
Even so, with an EPS growth outlook this year at +25 per cent at +13 per cent next year, he has told clients to keep the faith.
"Quite simply, if the ASX200 is 6000 the AMP will be $6, i.e. a +20 per cent return vs the index + 10 per cent," he told clients.
And if it doesn't close the gap with the index? "I even think there's a chance a private equity player makes that gap close."
The RBA chief has offered a semi-upbeat economic outlook, saying he's hopeful that unemployment will not rise too much further.
Data last month showed the jobless rate unexpectedly jumped to a decade high of 6 per cent in January.
Stevens says that while non-mining investment has been very low, he believes it will pick up at some stage.
He also says that this week's national accounts for the December quarter showing annual growth at 2.8 per cent is roughly in line with the central bank’s forecast:
- For some time, our view has been that growth has been running below its trend pace.
- The national accounts released a couple of days ago don’t significantly change that assessment.
- Business investment spending outside mining, which has been very low indeed, is bound to pick up at some stage.
On inflation he does not believe it is accelerating to the extent a literal reading of the latest data might suggest, adding there could have been an ‘‘element of noise’’ in the December quarter data:
- The general situation - 18 months of below-trend growth, a rise in unemployment, a marked slowdown in wages - is not one that would be obviously associated with a sustained rise in price pressures.
- Our view remains that the outlook for inflation, while a little higher than before, is still consistent with the medium-term target.
Growth in house building and a lift in commercial construction failed to offset a sharp decline in engineering construction and an ongoing lacklustre apartment sector in February, as the construction industry showed signs of a further contraction.
The AiG Performance of Construction Index slid to 4 points to 44.2 last month – its weakest performance in six months – as the sub-index of new orders, a crucial leading indicator, dropped 8.2 points to 39.5. It was the lowest reading for this measure since January last year.
A reading below 50 indicates contraction in the sector, and the lower the figure, the faster the pace of decline.
“Developments in the construction sector reflect the conditions in the broader economy,” said Peter Burn, Ai Group’s director of public policy. “The mining investment boom is fading, as seen in the sharp fall in engineering construction activity and new orders and, even though there is an accumulation of positive signs, other sectors are not filling the void.”
While the figures show the construction industry is still struggling to make the shift from resource-industry work to residential and other types of construction, they do little to dampen the outlook for an upturn. Official figures earlier this week showed house building approvals surged to a decade-high in January, while a separate report predicted new residential building commencements will jump to a 20-year high of 180,000 next year.
More from the Stevens hearing:
Perhaps not surprisingly, the RBA governor repeats his assertion in the central bank's board statement that the Australian dollar "is still high by historical standards".
Two other points to note:
- he repeats that the surprise jump in inflation in the fourth-quarter last year is somewhat of a "puzzle"
- he says while there are signs of a stabilisation in the labour market and a slightly better growth outlook, "the labour market will probably remain soft for a while yet, given that it lags changes in activity".
You can read the full statement here
S&P have announced who will be in and who will be out come their quarterly rebalance of their indices on March 21.
Only one change in the S&P/ASX 50 index, with Qantas out and James Hardie in.
As for the ASX 200, on the way in are:
- Ainsworth Game Technology
- ARB Corp
- Bega Cheese
- Cover-More Group
On the way out are:
- Alacer Gold
- Energy World
- Silver Lake
- SMS Mgt & Tech
- Virgin Australia (on liquidity grounds, says Bloomberg)
Also overnight, the S&P 500 closed at yet another record on better-than-expected jobless claims data. But the overall sentiment on Wall Street was cautious ahead of tonight’s all-important US nonfarm payrolls report and tensions between Ukraine and Russia.
The Dow Jones rose 61.71 points or 0.4 per cent, to end at 16,421.89, the S&P 500 gained 3.22 points or 0.2 per cent, to finish at 1877.03, marking its fourth closing higher over the past six sessions, but the Nasdaq dropped 5.848 points or 0.13 per cent, to close at 4 352.125.
"We had a bit of a selloff in midday session and late afternoon, but the fact the S&P 500 managed to set another record shows how much resistance this market has to geopolitical overhang that is clearly not over, resistance to bad news," said Tim Ghriskey, chief investment officer of Solaris Asset Management.
The CBOE Volatility Index or VIX, Wall Street's so-called fear gauge, ended up 2.3 per cent at 14.21.The VIX generally moves inversely to the performance of the S&P 500 and is often used to hedge against a market decline.
Trading volume was also lower than average, with about 6.4 billion shares traded on U.S. exchanges, according to data from BATS Global Markets, below the daily average of about 7 billion in the past month.
Another central banker was in the spotlight overnight: Mario Draghi. The European Central Bank left interest rates on hold and unveiled no other measures to bolster a fragile eurozone recovery despite forecasting low inflation for years to come.
The ECB left its main interest rate at 0.25 per cent, a move generally expected by markets, and held the deposit rate it pays banks for holding their money overnight at zero.
New forecasts from ECB staff put inflation at 1.0 per cent this year, 1.3 per cent in 2015 and 1.5 per cent in 2016 - below its target of close to 2 per cent all the way through the projection.
ECB President Mario Draghi told a news conference that the latest economic information suggested recovery was on track and needed no extra push for now:
- We saw our (economic) baseline by and large confirmed.
- The news that has come out since the last monetary policy meeting is also, I would say, by and large on the positive side.
Inflation has been in what Draghi calls the "danger zone" below 1 per cent for five months now and was running at 0.8 per cent at the last count.
Draghi rejected comparisons with Japan's experience of deflation which became so entrenched that companies and households held off on spending on expectations of lower prices ahead, leading to two decades of economic stagnation.
ECB policymakers have insisted that so far there is no sign of eurozone citizens deferring spending plans.
The lack of action was significant since last month Draghi had signalled that by the March policy meeting the ECB would have enough information to judge the need for fresh stimulus.
But the International Monetary Fund believes more needs to be done.
Reza Moghadam, head of the IMF's European Department, said in a blog on Wednesday that the ECB should cut interest rates and pump out more money, perhaps through QE.
And the Glenn Stevens hearing has started, with our reporter Glenda Kwek covering:
We are here in Sydney at the Masonic Centre as RBA governor Glenn Stevens fronts the House Economics Committee.
It comes as the Australian dollar rises above US91c earlier today amid spate of positive economic data, the highest level since mid-December.
Stevens, not surprisingly, starts off with a joke again - this time avoiding any quips about long RBA board meetings (Bloomberg is present). He instead remarks on the closeness of the facing tables between the committee and the RBA's senior officials
All eyes on the man in the middle...
The Australian dollar has jumped to a three-month high after a series of stronger-than-expected economic data, including yesterday's retail sales and trade surplus figures, boosts confidence in the local economy.
This morning, the local unit was trading at 90.96 US cents, up from 90.12 cents on Thursday. It traded as high as 91.13 US cents earlier in the session, its highest level since December 11.
Westpac economist Imre Speizer said over the short term he expected a further rise in the dollar above 92 US cents as momentum was strong. Over the mid term the RBA’s neutral policy bias and net short speculative positioning supported the currency.
‘‘However, there remains a question mark around Australia’s economy, with tension between strong business sentiment and weak consumer sentiment not expected to be resolved until the second half of this year,’’ Mr Speizer said.
Today, RBA governor Glenn Stevens will testify to the House of Representatives Economics Committee and any comments made about the recent rally in the dollar will be closely watched and then the US payrolls report tonight will be the key focus.
OM Financial senior client FX adviser Stuart Ive said if the American data was weaker or stronger than expected the Australian dollar could climb higher.
"It could rise if the data weakens the greenback or if the data beats expectations, it still could rise because it's a sign the global economic situation is improving," he said.
"I think the Aussie dollar is edging towards 92 US cents."
Among the stocks to watch this morning will be embattled contractor Boart Longyear, which has had its corporate credit rating cut to CCC+ from B by S&P, with a negative outlook.
These ASX 200 companies are trading ex-dividend today:
- Air New Zealand
- Seven West Media
- Slater & Gordon
- Trade Me
Local stocks are poised to open slightly higher on positive US jobs data, while in overnight trading, at about midday in New York, the Australian dollar rose as high as 91.13 US cents.
Here’s what you need2know this Friday morning:
- SPI futures up 9 points at 5450 at 9am AEST
- AUD at 90.97 US cents, 83.68 Japanese Yen, 65.64 Euro and 54.27 British pence at 5.55am AEST
- On Wall St, S&P500 +0.2%, Dow Jones +0.4%, Nasdaq -0.1%
- In Europe, Euro Stoxx 50 +0.3%, FTSE100 +0.2%, CAC +0.6%, DAX flat
- Spot gold up $US13.73 to $US1350.58 an ounce
- Brent oil down 7 US cents to $US107.69 per barrel
- Iron ore up 20 US cents to $US116.90 per barrel
And here's what's on today in economics:
- Australia: Ai Group performance of construction, RBA governor appears before parliament (9.30am).
- In China trade balance figures, CPI, PPI data is on tap.
- In the US, around midnight tonight, local time, the crucial February payrolls report will be released.