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Markets Live: Gold miners lead plunge

Shares sink to one-month lows, led down by the gold sector, as investors digest the federal budget and fret about a potential default by Greece.

4.50pm: That brings us to the end of our live coverage of the markets today. Thanks for reading this blog and sending us your comments.

Here's our evening wrap of today's session.

4.30pm: Not only shares suffered today, the Australian dollar extended yesterday's losses, as political uncertainty in Greece prompted investors to dump risky assets and scoop up safe-havens like Australian debt.

The dollar slipped 0.5 per cent on the day to $US1.0089, having plumbed $US1.0052, its weakest since late December.


The Aussie has lost more than 3 per cent this month and could be heading back below parity with the greenback.

"Should the situation in Greece unravel, the heightened uncertainty, coupled with the prospect of large-scale easing from the Reserve Bank of Australia in response, will see the Aussie fall well below parity," says David Scutt, a trader at Arab Bank Australia.

The currency has been holding above parity since December 29, its second longest stretch above $US1.00 and is very close to an all-time record of 144 days held in 2011.

4.24pm: Today's close is the lowest for the ASX200 since April 11.

4.21pm: BHP, Newcrest and Woodside were the biggest drags on the ASX200, while Telstra was the top winner.

4.18pm: Here's how some of the blue chips performed today:

  • BHP: - 1%
  • Rio: -1.65%
  • CBA: -0.8%
  • ANZ: flat
  • Westpac: flat
  • NAB: +0.1%
  • Telstra: +0.8%
  • Qantas: -2.3%
  • Woodside: -3.9%
  • Newcrest: -5.25%

4.15pm: Among the sectors, gold plunged 4.9 per cent on the back of a sharp drop in the goldprice, materials lost 2 per cent, energy fell 2.2 per cent and financials slipped 0.3 per cent.

Telcos were the only sector to post a gain, rising 0.8 per cent.

4.12pm: The market has closed sharply lower, but well off the day's lows. The benchmark S&P/ASX200 index fell 39.2 points, or 0.9 per cent, to 4275.1, while the broader All Ords slumped 43.7 points, or 1 per cent, to 4332.2.

4.04pm: Optus added 80,000 customers in the three months to the end of March, taking its total to nearly 9.5 million.

Australia’s second largest telco had 9.49 million customers at March 31, up from 9.41 million at December 31, a rise of just under one per cent.

In the year to March, Optus added 421,000 customers, a rise of 4.6 per cent, according to figures released by Optus’ parent SingTel on Wednesday.

3.55pm: Accordingly, local gold stocks have been hit hardest in today's sell-off, with the gold sub-index sliding 4.8 per cent.

Defensive Telcos are the only sector to post a gain, rising 1.1 per cent as Telstra adds another 0.8 per cent to $3.655.

3.52pm: Gold is down more than 1 per cent, sliding to a four-month low of $US1586.74 an ounce.

Nervous investors sare seeking out safe haven assets such as the US dollar and German Bund, while gold remains lock-stepped with the euro and riskier assets.

"The situation is Europe is difficult, but what's happening is that anything that's slightly tainted with risk is being sold, even though the real risk associated with that product is less than one could justify by its price movements," says Nick Trevethan, senior metals strategist at ANZ in Singapore.

3.46pm: A leftover from yesterday's budget: Australia expects to raise $24.7 billion in four years from the carbon tax coming into effect July 1.

The levy on the biggest polluters starts at $23 per tonne of carbon and rises by 2.5 per cent in real terms in each of the following two fiscal years. Treasury projects they will reach $29 in 2015-16, when the mechanism moves to a price set by the market.

3.41pm: Here's how the region's markets are doing today:

  • Japan (Nikkei): -1.35%
  • Hong Kong: -0.9%
  • Shanghai: -1.15%
  • South Koea: -0.8%
  • Singapore: -0.7%
  • New Zealand: +0.2%

3.23pm: Voters in this morning's poll had it right - shares look like they will finish more than 1 per cent lower. A majority - 31 per cent of the 800 vote - said the ASX200 would close more than 1 per cent lower, and 26 per cent predicted a close between 0.5 per cent and 1 per cent lower.

Here are the full results.

3.17pm: Shares come back slightly in the last hour. Markets are now about 1.2 per cent lower after sinking as far as 1.5 per cent.

3.02pm: Banking and finance writer Eric Johnston reports that investors have continued to buy Australian government bonds in the wake of last night’s budget, sending Canberra’s borrowing costs to a record low.

Debt market pundits welcomed the Gillard Government sticking to a commitment to keep a large stock of bonds on issue, even as its need to borrow fresh funds falls away as it returns to a budget surplus.

Even as stresses swept through Europe’s credit markets overnight, Australian 10-year bond yields fell to record lows. They were last quoted at $120.43 each, implying a yield of 3.36 per cent, down five basis points overnight.

2.58pm: A really interesting note here from China, and certainly something the iron miners will be watching closely.

An Australian shipment was among three sold via China's first physical iron ore platform yesterday, a promising start for the electronic trading system, although traders say volumes must rise before the platform can create price benchmarks.

Run by state-owned China Beijing International Mining Exchange (CBMX), the platform is the boldest effort so far by the world's top iron ore buyer to determine pricing, an area it believes has long been dominated by global miners Rio Tinto , Vale and BHP Billiton.

The exchange said 165,000 tonnes of Australian 61.5-percent grade Pilbara iron ore was sold via the platform at $145 a tonne, including freight costs, which traders said was on par with current market levels.

2.50pm: But it's not all doom and gloom. There are some companies making healthy gains:

  • Telecom NZ - up 3.5%
  • Singapre Telecom - 2.02%
  • Leighton Holdings - up 1.84%
  • Telstra - up 1.24%
  • Primary Health - up 1.1%
  • Cochlear - up 0.9%

2.43pm: Rio shares haven't had a great day, slipping to a 2012 low. Its shares were recently 2.2 per cent lower to $60.89. It was trading as high as $72.30 on February 6, but overall is only 0.81 per cent down for the year.

The miner's shares are, however, getting close to their 52 week low of $58.52, reached on October 4.

2.27pm: Some more of the shares which have moved in reponse to yesterday's budget:

  • Qantas Airways lost 1.6 per cent to $1.505 as passengers face increased taxes for airfares. The airport passenger movement charge will rise by $8 to $55.
  • AMP, Australia’s second-largest asset manager, slid 2.4 per cent to $4.01 after Swan delayed promised tax breaks on contributions to pension funds.

2.16pm: American aluminum giant Alcoa has been given a five-year extension for an expansion of its Wagerup Alumina Refinery in Western Australia's South West, which the company has apparently been unable to progress within its original approvals timeframe.

The expansion of the existing refinery, which would bring its production capacity up to 4.7 million tonnes per annum, was approved in September 2006 but had in part been stalled by the global financial crisis.

WA Environment Minister Bill Marmion said he asked the Environmental Protection Authority to review Alcoa’s application to extend the time limit, and the watchdog had reported the original environmental factors in the proposal had not changed, in a statement.

2.06pm: Aussie shares are now 1.4 per cent lower. The All Ords is 59.5 points lower to 4316.4, while the ASX200 is 56.4 points lower to 4257.9.

2.01pmA quick look ahead to tomorrow's jobs data, which is forecast to show a small rise in the nation's unemployment rate. A Bloomberg survey of 22 economists predicts the economy will have shed 5000 jobs in April, raising the unemployment rate to 5.3 per cent from 5.2 per cent.

A bad number tomorrow will further bolster the case for another rate cut, which in turn could see the Aussie dollar slide below parity for the first time since just before Christmas last year, if it hasn't hit that mark before the jobs data is released. It was recently buying $US1.006, down from $US1.017 cents late yesterday. It has been creeping lower all day.

1.55pm: Looking at how the various sub indices on the ASX200 are performing:

  • Energy - down 2.32%
  • Materials - down 2.02%
  • Industrials - down 1.46%
  • Info tech - down 1.08%
  • Consumer discretionary - down 0.98%

1.50pm: If you're still a little unsure about where all the budget money is going, check out this data visualisation. You can break down the money flow by a range of categories, including revenue, expenses and the top 20 most expensive budget items.

1.39pm: BusinessDay's Michael West, meanwhile, has been looking closely at this Centro settlement with its litigants.

IMF (the lawyers, not the Washington-based fund) say their clients are expected to share $150 million of the 'global' settlement of $200 million.

West, though, is not so sure:

The irking thing about this Centro settlement is that it raises more questions than it answers.

The price to shut this case down is $200 million, a monumental sum. It harpoons the previous record, Aristocrat's $144 million settlement in 2008 and, in market terms, will be seen as a big win for the plaintiff law firms and litigation funders.

The deal also proves the big end of town has more to fear from shareholder actions than the corporate regulators. In this, the market is working, putting a price on failure, and on legal services for that matter.

(Read the full version of the story here.)

1.31pm: Hard to escape the budget. Here's a view, reported by BusinessDay's Rania Spooner, that comes from former finance minister Lindsay Tanner:

Mr Tanner said the decision made by himself, Julia Gillard, Wayne Swan and Kevin Rudd, in January 2009 to return the budget to surplus within three years - a move that may have saved Australia from mirroring current economic uncertainty in Europe.

"Australia of course is a lot better off than most, some good luck, some good judgment by governments who may remain nameless," he said.

"Some good luck is that we were actually selling stuff to the Chinese, the American's borrowed from them," he said.

Mr Tanner says the Chinese "have demonstrated they are pretty good at economic management."

Let's hope so, since the promised budget surplus and much else besides hinges on China's economy growing at least as fast as it is.

1.25pm: One of the more diverting stories from budget night may in fact have been a porky:

Pork and bacon prices will not be affected by a rise in the pig slaughter levy, the pork industry says.

The levy - which goes towards promoting the pork industry - will be increased from July 1 to $2.25 a head from $1.35 now.

But Australian Pork Limited CEO Andrew Spencer says the levy is not a bacon tax, despite comments to the contrary on Twitter following the budget announcement.

‘‘The increase to the pig slaughter levy has been completely misreported and is not a bacon tax,’’ he said.‘‘This levy will not change the retail price of pork and pork products.’

1.18pm: Most of the chatter about the market's slide is not budget related. Instead, the blame is pointed mostly in one direction:

"This Greece political uncertainty has the potential to derail the risk rally we have seen this year," said Stan Shamu, strategist at IG Markets.

1.05pm: Stocks hitting fresh lows for the day, and are now at about four-week lows.

BusinessDay's Michael Pascoe, meanwhile, has this view on the federal budget: Welcome to the Temple of Surplus Adoration.

Here's a taste:

So here we all are, newly recruited members of the Church of Fiscal Rectitude, called to worship at the Temple of Surplus Adoration - and then whinge about the implications of following such simplistic dogma.

And like all religions, there’s the inevitable schism with the high priests of the two key branches each claiming they have the one, true surplus and that the other side is heresy.

Too bad that this religion, like many others, has taken a good idea and gone a little too far with it.

12.50pm: Not much help for those trying to access this blog online but in case you're wondering why friends or colleagues in Ballarat or Geelong aren't responding to your emails:

Regional Victorian customers of Canberra-based TransACT are without broadband services this afternoon following an unexplained outage of the company’s network.

“We are currently experiencing a broadband outage in Geelong and Ballarat,” said a message on the company’s technical assistance line.

“We do not have a time of restoration at this time and we thank you for your patience,” the recording said

12.46pm: Our friends at MacroBusiness are even gloomier:

12.41pm: Here's one tweet on the dollar from someone with a downward arrow.

12.37pm: The main pluses for the market currently are Telstra and Woolworths - which are two of just 31 stocks higher among the top 200. Telstra's up 0.8 per cent and Woolies 0.3 per cent...fairly modest.

Among the major sectors, gold stocks as noted below are tanking, losing 3.9 per cent for the day.

Energy and materials stocks are off 1.6 per cent, industrials 1 per cent and financials 0.6 per cent. 

12.33pm: ASX200 is trading in a narrow range - about 0.8 per cent lower for the day.

Main drags on the index so far include the heavyweights BHP and CBA - together they are accounting for about a quarter of the overall market's drop.

Not a good day for gold stocks, with Newcrest is the third-biggest drag on the overall market. Its shares are off 95 cents to $24.17 in recent trading.

Gold futures, meanwhile, are back below the $US1600 an ounce mark, trading lately at $US1597. 

12.24pm: More on the markets in a minute. In the meantime:

The success of a $200 million class action case against the property group Centro Retail Australia is a win for all Australian investors, lawyers for the shareholders say.

Law firm Maurice Blackburn, which represents thousands of investors who have been battling the debt-ridden company, confirmed today  that an in-principle agreement for the company to pay out $200 million had been reached.

‘‘This is a very good day for Centro shareholders and a very good day for the Australian investor community generally,’’ the firm’s class action principal Martin Hyde told reporters.

Let's see what comes next.

12.15pm: The nature of budgets, this blogger suspects, is that it's better to be safe and complain about what you get lest satisfaction sets you up for a cut when next year's budget comes along.

Then again, Jessica Irvine might have it right in this piece: Swan shows Astaire's flair. In recent years, recipients of government largesse might not want to take it for granted.

Anyway,  the test is to compare rhethoric with reality. Here's one industry not happy:

Despite Prime Minister Julia Gillard’s pronouncements last week that Australia could play a role in global food security, there was little in the budget to help the sector become a global “leader in food production”, according to its industry body.

 “Overall, this budget was more business-as-usual rather than a bold new plan for industry to become more competitive domestically and globally and continue to invest, innovate and create jobs,” said Australian Food and Grocery Council acting chief executive Dr Geoffrey Annison.

Still, Dr Annison did welcom the announcement of the  $30 million Manufacturing Technology Innovation Centre, which ‘‘provided a boost for manufacturing’’.

12.01pm: Meanwhile, the lure of Australian debt remains strong, with the yield on Australia’s 10-year note sliding to a record 3.368 per cent today, according to Bloomberg.

The rate on the 15-year security also dropped to 3.693 per cent, the lowest for Australia’s longest-maturity issue since 1991.

Mind you, the shrinking yield probably has more to do with investors seeking a haven for their funds rather than investors worried about a short of Australian debt in the wake of last night's budget.

11.53am: BusinessDay's Ian McIlwraith - aka Insider - has this view about the changes at Billabong:

Billabong International's elevation of the talented Launa Inman from consultant to chief executive shows that her audition for the top job is over - but the hard work is just beginning.

As the former boss of discount department store group Target she brings a whole range of retailing skills - sourcing, supply chains, brand marketing - to the job.

But Billabong's customer base is vastly different. She is more used to the fluoro-lit, polished lino and chrome-racked worlds of Target.

(Read the full article here)

11.38am: Worth noting this about the dollar:

The dollar's slide is not contained to the greenback. It's even dropped against the euro - a currency that is being sold down across the world because of renewed worries about the state of Europe's finances and renewed political uncertainty.

The dollar fell to as low as 77.57 euro cents this mornng, its weakest point in five weeks.

The Aussie also lost ground against the yen, sinking to as low as 80.4 yen, the lowest point since January 23.

The drop against the pound was even more pronounced, however. It fell as low as 62.38 pence this morning, a level it's not touched since November 24.

11.26am:  All three major agencies - Standard & Poor's, Moody's and Fitch - say the budget surplus plan is positive, but caution it could be derailed by external risks from global growth and commodity market developments.

"Restoring the government's strong fiscal settings through a forecast return to surpluses over the cycle and maintaining low debt will provide flexibility to respond to large economic and financial shocks," S&P says in a note.

This, it added, was consistent with maintaining its AAA rating.

However, it warned that the strategy relied on an economic outlook that remained highly uncertain.

11.21am: Here's another update on the sectors: Gold stocks are down 3.5 per cent, materials are down 1.6 per cent, industrials are down 1.1 per cent, energy stocks are down 1.7 per cent and financials are 0.7 per cent lower.  Bucking the trend are the telcos - the sector is up 0.8 per cent.

11.17am: BlueScope Steel says it has completed a tender for the repurchase of $US300 million ($297.69 million) private placement notes, which were then re-valued at $US305.4 million ($303.05 million).

The company plans to fund the repurchase through its own bank facility.

BlueScope chief financial officer Charlie Elias said the method of funding would benefit the company’s finances in the long run.

‘‘We are very pleased with the response to our tender offer to repurchase US$305.4 million of our USPP Notes,’’ he says.

BlueScope share are down half a cent, or 1.3 per cent, to 38 cents.

11.13am: The best performer is Primary Healthcare, up 1.85 per cent.

11.11am: Here's a snapshot of the worst perfomers among the ASX200:

  • Ramelius Resources is down 7.45%
  • Gryphon Minerals is down 6.47%
  • Aquila Resources is down 6.19%
  • Aquarius Platinum is down 6.17%
  • Dart Energy is down 5.77%

11.08am: The story is much the same for the dollar - it's holding above parity with the greenback - but only just. The currency is at $US1.0090.

11.05am: The slide gets longer... the ASX is now down 37.7 points, or 0.9 per cent, to 4276.6.

11.02am: RBS Morgans Ipswich manager Tony Russell says the local market has been affected by falls on Wall Street and uncertainty in Europe as well as the absence of an expected cut in company tax in the federal budget.

''Certainly no doubt the weakness in Wall Street overnight following further concerns on what's happening in the political landscape in Greece and France and whether those actions in those countries will further affect decisions on the funding of sovereign debt,'' he says.

‘‘Locally I think the market was expecting a reduction in the company tax rate in the federal budget, so there’s probably a little but of disappointment there.’’

10.56am: A Leighton Holdings subsidiary says it has been named preferred contractor for the Fortescue Metals Group-owned Solomon iron ore project in WA's Pilbera region.

Leighton Contractors and Fortescue had reached agreement ''within a limited notice to proceed (LNP)'' to continue negotiations over a five-year mining and operations contract, the company says. It has not given details on the contract's value.

Leighton shares are up 22 cents, or 1.2 per cent, to $19.24.

10.51am: Another company feeling the pinch is gold producer Newcrest Mining - its shares have fallen 3.3 per cent $24.29, its lowest since November 2008, after bullion prices dropped 2 per cent toward 2012 lows.

10.48am: Markets in Japan have opened and the picture is similar to other bourses. 

Japan's Nikkei share average has opened 0.7 per cent lower as worries mount that Greece could reject the bailout that saved it from bankruptcy and even leave the euro altogether.

The Nikkei has fallen to 9112.72, while the broader Topix index also slipped 0.7 per cent to 707.77.

10.44am: As the graph above is showing, the market is continuing to slide. The ASX200 is now down 27.5 points, or 0.6 per cent, to 4286.8.

10.42am: Among the major miners, BHP is down 0.3 per cent to $34.57, Rio Tinto is down 1.2 per cent, to $61.52 and Fortescue is up 0.3 per cent, to $5.38.

10.39am: A reminder - you can get our full budget coverage here.

10.37am: Here's an update on the dollar. Click here to track it and other currencies.

10.33am: Prime Minister Julia Gillard, meanwhile, says she remains determined to give business a tax cut even though the government scrapped a promise to do so in the budget.

The government had promised to use revenue from its new mining tax to drop the corporate tax rate from 30 per cent to 29 per cent from July 1.

Instead the money will be used to provide upfront payments to lower income families and create new tax breaks for small business. The decision has angered business groups.

Ms Gillard says the government will now work in good faith with business to re-gear the tax system so company tax can be reduced.

10.29am: Australian industry has hit back at Treasurer Wayne Swan's Budget, saying it undermined business ability to make longer-term investments.

"The Government has made a strategic decision to favour a short-term boost to consumption at the expense of the longer-term drivers of economic growth,'' Australian Industry Group chief executive, Innes Willox says.

"While the budgeted surplus for 2012-13 is welcome and will have important national benefits, there are considerable risks in the way it has been achieved. In particular, the additional taxes and costs imposed on industry will undermine the ability of business to make the critical longer-term investments needed to boost productivity, improve our global competitiveness and lift employment," the AIG says in a statement.

"The scrapping of the company tax cut that was to be financed from the Minerals Resource Rent Tax is a major blow to business. It will reduce incentives to invest and innovate and is a particular set-back for businesses in non-mining, trade exposed industries such as manufacturing that need to invest to lift productivity to overcome the impacts of the strong Australian dollar, weaker global demand and the impending carbon tax."

10.25am: Among the indices, gold stocks are down 3.2 per cent, materials are 0.9 per cent lower and the financials are down 0.4 per cent.

10.22am: Among the big banks:

CBA is 0.5% lower to $51.84
ANZ is 0.7% lower to $22.95
NAB is 0.2% lower to $24.57
Westpac is 0.1% lower to $22.80

10.18am: Credit Suisse equities strategist Damien Boey says the dollar is dropping because world growth is slowing, commodity prices are falling and the RBA is cutting rates.

''But interestingly, the currency hasn't fallen anywhere near as much as we would have expected considering the de-leveraging risks at work in the global economy,'' he says.

''We think this is because Australian dollar is being viewed as a quasi-safehaven currency, with the euro now under scrutiny.''

10.14am: Shares in Billabong have fallen as much as 4 cents, or 1.7 per cent, to $2.36 after the surfwear maker announced changes at the top. Here's the full story.

10.11am: As more stocks come online, the ASX200 is now down 20.5 points, or 0.5 per cent, to 4293.8.

10.09am: Retailers, meanwhile, have slammed the budget, saying it has fallen short for them and the government is financing a return to surplus by penalising business.

Australia Retailers Association president Roger Gillespie says he is disappointed retailers would suffer from the scrapping of a promised one percentage tax cut.

The government had promised to use revenue from its new mining tax to drop the corporate tax rate from 30 per cent to 29 per cent from July 1.

Instead the money will be used to provide upfront payments to low-income families and create new tax breaks for small business.

''The government has given with one hand through initiatives for business and consumers but taken with the other with no compensation for the carbon tax or superannuation increases,'' Mr Gillespie says.

10.05am: British ratings agency Fitch Ratings says the federal government's budget is a strong and resilient one, but reaching a surplus could be a challenge.

Fitch says Australia's AAA rating has factored in the federal government's plan for fiscal consolidation, but warns slower growth could pose a problem for reaching surplus in 2012/13.

But it says if the government doesn't balance the budget, it won't automatically have ratings implications.

10.02am: Early take on the market: stocks are down 4.2 points, or 0.1 per cent, to 4310.1.

9.56am: Australian bond futures prices have opened higher on concerns around the Greek austerity measures and bailout.

The June 10-year bond futures contract is trading at 96.650 (implying a yield of 3.350 per cent), up from 96.635 (implying a yield of 3.365 per cent). The June three-year bond futures contract was at 97.310 (2.690 per cent), up from 97.270 (2.730 per cent).

Nomura rates strategist Martin Whetton says negative sentiment in the euro zone i the key factor behind market movementst.

''There was more bad news out of Greece last night, with commentary around a possible default,'' he says.

9.50am: Surfwear business Billabong has appointed former Target head Launa Inman as its new managing director, replacing Derek O'Neill and capping a tumultuous six months at the company.

In a statement to the market this morning, Billabong says the board had decided that the company "required new leadership and skill sets for the next stage of its development".

"Derek O'Neill has been with Billabong for more than 20 years and we thank him for his service and wish him best for the future," chairman Ted Kunkel says.

9.46am: "With a sharp rise in risk aversion, commodities and risk currencies have the hardest hit," says IG Markets analyst Stan Shamu.

"The Aussie dollar continued its slide [to] its lowest print since December last year."

Mr Shamu says shares dropped "as Greece's political situation came back to haunt markets".

"Parity is certainly not far away at all with pressure still firmly to the downside," he says.

9.43am: SPI200 futures are now down 20 points at 4279.

9.40am: Also in the spotlight this morning is reaction to last night's federal budget. As the Government begins its sales pitch, click here for our full coverage.

9.37am: While stocks are poised to follow European and US markets lower - the dollar is also under pressure and is nearing parity with the greenback.

The local unit is at $US1.009, down from $US1.0117 earlier this morning.

9.32am: For a comprehensive look at this morning's business news, check today's need2know and the business press digest.

Here are the key markets links for today:

What you need to know

9.30am: Hi everyone. Welcome to the Markets Live blog for Wednesday.

This blog is not intended as investment advice

Contributors: Thomas Hunter, Peter Litras, Peter Hannam, Jens Meyer

BusinessDay with agencies


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