That’s it for Markets Live today.
You can read a wrap-up of the action on the markets here.
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Have a great weekend and see you all again Monday morning from 9.
The Australian market finished marginally higher in a mixed week, buoyed by the biggest one-day gain since December after the US Federal Reserve reassured investors that it will not raise interest rates in the near-term.
The benchmark S&P/ASX200 was brought back to earth on Friday, with losses among the miners and big banks. The index finished the week up 0.3 per cent at 5417.5. On Friday, the ASX200 slipped 0.9 per cent.
The broader All Ordinaries also finished the week 0.3 per cent higher at 5401.60. On Friday it fell 0.8 per cent.
Markets were dominated by the US Federal Reserve which Thursday morning soothed investors worried that it would raise interest rates in sooner than expected. The Fed also continued to taper its bond-buying program by $US10 billion to $US35 billion per month.
"The standout driver of equity markets this week has been global central banks. We've had the Fed come out and say growth is improving but rates are on hold," Perpetual head of market research Matt Sherwood said.
"In England, we're had the BoE warning people about rising interest rates, but economic data coming out on the weaker side of expectations – which provides the BoE with more room to hold rates steady – and at the same times we had the minutes from the RBA and they reaffirmed rates were on hold for an extended period."
In commodities markets, iron ore slipped under $US90 per tonne for the first time in nearly two years, hitting a 21-month low of $US89 per tonne. It finished the week marginally higher at $US90.70 per tonne.
Concerns of easing growth in China and an oversupply of iron ore have continued to weigh on the bulk metal, which has slumped more than 30 per cent in 2014.
Australians miners, buoyed by the federal Reserve announcement on Thursday, finished the week higher, despite heavy losses on Friday.
And here are the best and worst for the day, with gold miners enjoying a day in the sun.
Meanwhile, in the cellar, Ten shareholders have another day to forget.
And they say volatility is low... after yesterday recording the best day so far this year, the ASX 200 dropped 0.9 per cent, or 49 points, to 5419.5, while the All Ords shed 45 points to 5401.6.
The big banks were all down heavily, with NAB the hardest hit (-1.4 per cent), while CBA dropped 1.1 per cent and ANZ and Westpac closed 0.9 per cent down.
BHP was the biggest single drag, dropping 1.3 per cent. Rio was down 1.2 per cent.
Gold mining was one of only two sectors to record gains, up 3.8 per cent on a surging metal price overnight. Listed property was the other, inching up 0.1 per cent after Westfield Group gained 0.1 per cent and Westfield Retail Trust finished flat after WRT securityholders voted to go ahead with the split of the Westfield shopping centre empire into Australian and international businesses.
Seven West Media and Nine Entertainment enjoyed strong gains - of 4 per cent and 2.3 per cent, respectively - while Ten had another horror day, down 9.3 per cent.
Bank of America-Merrill Lynch analysts have estimated the implied entry price into Scentre and Westfield Corporation at $3.07 per share and $6.41 per share respectively (after incorporating the capital return, first half 2014 distributions and the conversion ratios of both stocks).
This compares to the market implied valuation (based on peer analysis) of Scentre of $3.32 per share and Westfield Corporation of $7.21 per share.
''We continue to prefer exposure to Westfield Corp over WRT given the greater implied upside from the current share price,'' the brokers said.
''We have also included in our analysis several scenarios around the restructured WRT and Westfield net asset value (NAV) based on information provided to date and assumptions around the development pipeline, capitalisation rates and multiples for the active businesses.
''We have derived a NAV range of $2.93-$3.54 per share for Scentre and an NAV range of$6.55-7.68 per share for Westfield Corporation.”Back to top
The Reserve Bank of Australia has lost its campaign to subdue the stubbornly strong dollar due to ultra-low interest rates in major world economies and Australia's comparatively strong economy according to a senior economist at Perpetual.
The local unit has spent the past two months testing US94¢ after trading below US87¢ a mere five months ago.
"The RBA's war against the Australian dollar — and its desire to get it lower — has been lost," said Matt Sherwood, senior economist at Perpetual.
Beyond cutting rates, no amount of rhetoric from the RBA has halted the Australian dollar's ascent, climbing on the back of loose monetary policies determined in Washington and Brussels, said Mr Sherwood.
"Indeed, over the past 18 months the bank has been telling us that the Australian dollar is historically high and is at levels that are tightening financial conditions."
On the flip side, the high local currency has allowed the Reserve Bank to keep interest rates low by putting a lid on inflation, he said.
Economists are concerned the high Aussie dollar is hurting Australia's biggest source of export dollars, commodities.
Manufacturers, tourism operators, education providers and retailers are also grappling with the strong currency.
But beyond the export industries, many households would be cheering the strength of the local currency.
Chocoholics weep. Cocoa prices have jumped to near three-year highs on the back of voracious demand for chocolate across Asia, in a move that will heap pressure on confectioners’ profit margins.
Traders said that a wave of new processing facilities, built to feed rising chocolate consumption in countries including India and China, had added to demand for cocoa beans. Over the past five years, demand in Asia has risen 29 per cent, compared with a fall of 1 per cent in Europe over the same period.
ICE September cocoa rose 3.2 per cent to $3,128 a tonne on Thursday, to the highest level since August 2011.
The jump in price caps spectacular gains over the past 12 months, with cocoa up more than 40 per cent from a year ago. Cocoa butter – the key ingredient for chocolate derived from the beans – has surged more than 70 per cent.
According to Corrina Savage, commodities analyst at research firm Mintec, the cost of ingredients for a bar of milk chocolate is £2.18 a kilogramme. Although these costs are slightly lower than a peak of £2.30 last October, they are up 35 per cent since the start of 2012, and 16 per cent since the start of 2013.
The cost increases are expected to weigh on margins of chocolatiers, which are looking to keep price increases of their products at a minimum.
The gains come against a backdrop of rising agricultural commodity prices. After a relatively benign year in 2013, the prices of coffee, wheat and sugar have fluctuated hugely. Nestlé recently pointed to a single-digit rise in input costs as a result.
Time for a spin around the region's bourses...
- Japan's Nikkei -0.1%
- Hong Kong's Hang Seng +0.2%
- Shanghai Composite -0.5%
- Taiwan's TAIEX -0.4%
- Korea's KOSPI -1.2%
- Jakarta Composite -0.2%
- Kiwi NZX 50 -0.8%
Shares in Mantra Group, Australia’s second biggest accommodation provider, started trading at midday.
After jumping 5 cents above the listing price of $1.80, they were last trading at $1.76, making for a less than stellar debut, at least thus far.
The listing comes more than 20 months after owners, private equity firm CVC Asia-Pacific and UBS, first tried to sell Mantra in a trade-sale and after a float in March this year fell over.
Mantra floated with a market capitalisation of $450 million, underwritten by CVC’s EV Hospitality, which retains a 26 per cent holding and UBS which owns 17.3 per cent.
The bell to begin trading at noon on Friday was rung by long-serving Mantra chief executive and its biggest individual shareholder, Bob East.
Mr East holds $4.2 million of shares. 0.93 per cent of Mantra shares. as part of a 3.5 per cent senior management holding.
The remaining 53.2 per cent of the company is held by new shareholders who have invested a combined $240 million.
Mantra is second in size in Australia to France’s Accor group. It operates 113 properties and more than 11,600 hotel rooms under three brands – Peppers, Mantra and BreakFree – but is not a holder of real estate.
Its primary business is the operation of hotels via long-term leases and management agreements. It also licenses out its brands to third party operators in exchange for fees. Mantra has hotels in all the capital cities. CBD hotels contribute more than half of its revenue with a quarter coming from leisure resorts. The rest comes from booking fees and hotel management fees.
The company trades under the code MTR.
Australian food growers and producers are being hurt by confusing food labelling crowding supermarket shelves, an inquiry has heard.
Representatives from SPC Ardmona, which sources 97 per cent of its produce from Australian growers, say consumers want to buy locally grown and processed foods but unclear or misleading labelling is making it difficult.
SPC's sales jumped after reports that the company's future was under threat put its Victorian cannery workers on the front page of newspapers, an inquiry into food labelling heard on Friday.
But the company says increasingly complicated chains of production were difficult to represent simply on food packaging, to the detriment of genuine local producers.
"'Australian Made', it just doesn't mean anything to people any more," SPC strategy manager Shalini Valecha told the hearing in Melbourne.
SPC sales manager Steve Mickan said those who wanted to make choices based on their food's country of origin faced a sea of labels, including "Product of Australia", "Proudly Australian" and "Manufactured in Australia".
"Most people and consumers want to know where their food is manufactured," Mr Mickan said.
"Consumers are being misled by the use of iconic Australian symbols and images that give consumers a false impression a product is Australian when in fact it's not."Back to top
A small force of Australian troops has been sent to Baghdad to protect the Australian embassy as Iraq teeters on the brink of sectarian war.
A spokesman for Defence Minister David Johnston said that a ''small Australian Defence Force liaison element has been deployed to the Australian embassy in Baghdad to support security arrangements''.
Fairfax Media reported earlier this week that elite SAS soldiers could be sent to Baghdad to evacuate diplomats if the security situation in the Iraqi capital deteriorated sharply.
Senator Johnston's spokesman refused on security grounds to say how many troops were now going, nor what kind of force they represent.
It means Australian troops are returning to the chaotic and dangerous country barely six months after the last of them were withdrawn from the eight-year Iraq war.
Australia withdrew most of its forces in mid-2008, when then prime minister Kevin Rudd declared "mission over".
But 11 Australian military officers continued to serve with the United Nations Assistance Mission in Iraq (UNAMI) in a deployment known as Operation Riverbank until November last year.
Prime Minister Tony Abbott said on Friday that the government's first priority was ''ensuring that our people in Baghdad are safe and that we have the capacity to remove them if necessary, to move them safely if necessary''.
Westfield Group and Westfield Trust have returned to trading after the historic "yes" vote this morning.
The trust is up 1.3 per cent to $3.21, while Westfield Group is 1.5 per cent higher at $10.98.
BusinessDay columnist Michael Pascoe imagines the budget we should have had...
Ask not what the Treasurer can do for you, but what you can do for the Treasurer – as he obviously needs all the help he can get.
The whole nation suffers when consumers lose heart. Thus Joe Hockey's spectacularly unpopular first budget is proving economically damaging as well. While the Reserve Bank's verdict is out on the implications of the sharp consumer confidence dive, the budget itself features a sharper fiscal contraction than the central bank expected.
So, for the sake of the nation, here are a few steps that could restore a little confidence by removing some of the budget's more contentious aspects and improving the communication.
A few of the fixes are relatively easy, but the bigger issues will require an injection of political courage to deal honestly with the electorate. First the easy stuff:
Hose down the Medicare brawl
You want to introduce a co-payment for those currently bulk-billing? Here's a reasonable olive branch: exempt all pensioners and children under 18. That wipes out the main complaint about the announced policy – the idea that a financially-stretched parent would hesitate about taking a sick child to the doctor.
Once you have slipped "co-payments" into the system, you can always fiddle it a bit more later on.
The ruse of claiming this pricing initiative is for a medical research fund - "the budget that cures cancer!" – hasn't scored thanks to the government's broader credibility problem. Better at least reinstate the funding for the commercialisation of our existing quite strong medical research. That might at least improve credibility in the research community.
Large conferences and events helped to drive international traffic growth at all three of Australia's largest airports in May.
Melbourne Airport grew international traffic at a faster rate than Sydney Airport and Brisbane Airport in May, with the southern city citing benefits from new direct Jetstar flights to Japan and two large medical conferences during the period.
Melbourne Airport's international traffic rose by 11 per cent in May versus the same month last year, ahead of Brisbane Airport with 7 per cent growth and Sydney Airport with 5.6 per cent growth from a larger base than its rivals.
"The strong growth of the Japanese market in May shows that people are taking advantage of Jetstar's Melbourne-Japan service which commenced in late April," Melbourne Airport chief executive Chris Woodruff said. "International passenger growth in May was also boosted by two global conferences, the World Congress of Cardiology and the International Congress of World Federation of Haemophilia, both held at the Melbourne Convention Bureau."
The airport is also likely to benefit from increased traffic in July from the 20th International AIDS Conference being held in Melbourne, which will have 14,000 participants.
Sydney Airport chief executive Kerrie Mather said international traffic in May at her airport had been assisted by strong Chinese passenger growth of 11.4 per cent. The 2014 International Rotary Convention also helped boost traffic from the US, Japan and Canada during the month.
In Brisbane, the Australian Tourism Exchange in Cairns helped boost international traffic as did the World Congress of Audiology.
Cashed-up private equity firms and a sluggish economy have put the spotlight back on value investing. And broker UBS reckons Challenger, Lend Lease, Henderson, Asciano, Origin Energy and QBE Insurance are the best value stocks to own.
UBS’s equity strategists ran a screen for value stocks, using both price-to-book value and price-to-earnings ratios.
“Value stocks have struggled over recent years, though enough individual value stocks have managed to outperform to enable a value manager to still conceivably beat the market,” the strategists told clients on Thursday morning.
“The likelihood of an ongoing sluggish macro environment suggests ongoing headwinds for value from the perspective of earnings delivery. On the other side of the coin, the likelihood of ongoing corporate M&A and private equity activity is likely to provide something of a tailwind for value stocks.”
The strategists said mining and mining services stocks looked cheap on a price-to-earnings and price-to-book basis, although their earnings outlook is also weak.
They said Rio Tinto had a better risk-return profile than Arrium or Fortescue Metals Group, and warned clients of getting too exposed to seemingly cheap iron ore miners.
“The rest of the composite basket is a mix of financials and industrials (often but not exclusively domestic cyclicals),” the analysts said.
“Some of these value plays actually have good or relatively benign EPS revision trends – e.g. Echo Entertainment Group (a fairly recent trend), Challenger Limited, Bendigo Bank, Bank Of Queensland, Harvey Norman and Primary Health Care (some concerns about government policy impacting future earnings).”
UBS said Challenger, Lend Lease, Henderson, Asciano, Origin Energy and QBE Insurance Group performed best across both of their price-for-growth and composite value screens.Back to top
This from BusinessDay's CBD column:
You can't accuse Andrew ''Twiggy'' Forrest of ever meeting a Fortescue share he didn't like.
The irrepressible Fortescue founder waded into the market this week, picking up another 1.75 million shares at less than $4 a pop.
And to think the share price pipped the $6 barrier in February before a falling iron ore price made its presence felt.
[Twiggy also picked up 1.5 million shares between 10th of March, at an average price of roughly $4.90.]
Ore prices have now fallen 34 per cent this year to trade below the $US90 mark for the first time since 2012. Good thing Twiggy is showing the way, otherwise some punters might be thinking it's time to part ways with higher-cost, lower-quality ore producers such as Fortescue.
Consumer groups and industry super funds have hit out at the federal government's decision to push ahead with controversial changes to financial advice reforms.
Under changes to be introduced from July 1, the government will abolish a 'catch-all' provision for advisors to act in the best interests of their clients.
It will also exclude general advice from conflicted remuneration rules and remove the requirement for investors to "opt-in" to authorise ongoing fees every two years.
The changes follow months of debate and speculation over the amendments to the future of financial advice (FOFA) reforms, introduced under Labor in response to a series of corporate collapses.
Consumer group Choice said the changes would wind back essential protection for consumers seeking financial advice.
''Conflicted and poor financial advice has cost consumers billions and in too many cases led to people losing their homes and life savings,'' chief executive Alan Kirkland said.
''This is why consumer protections were originally needed and exactly why they should not be removed.''
Industry Super Australia said the changes would see the re-introduction of kickbacks paid to financial advisors.
It said the removal of the 'opt-in' clause would allow commission-like fees to erode consumer investments, including super.
"The government's proposals, lobbied for by banks and financial planners, will create caveats and loopholes,'' chief executive David Whiteley said.
''Consumer protections should be ironclad, not subject to fine print.''
Minister for finance, Senator Mathias Cormann said the changes would not see a return of commissions.
Westfield’s $70 billion restructure will go ahead after the shopping centre giant obtained enough shareholder support to get it across the line.
Just over 76 per cent of shareholders in Westfield Retail Trust have voted in favour of the move, above the 75 per cent threshold needed for it to go ahead.
The result means Westfield Group’s Australian assets will now be merged with those of Westfield Retail Trust to create a new company called Scentre.
Westfield Group will now be solely focused on managing and developing its international businesses, which includes major shopping centres in the UK and US.
The shopping centre giant appears to have been able to convince some institutional investors to switch their vote after postponing the poll late in May.
Only 74.1 per cent of proxy votes cast before the abandoned poll were in favour of the restructure, meaning it was likely to have been defeated. Westfield Group shareholders have already approved the restructure, with 98 per cent voting in favour of the move last month.
Shares in Austin Engineering were up 9.5 per cent yesterday (and up 7.5 per cent this morning) and now we know why: the company has announced this morning to the ASX that it has won two "major contracts" to service and maintain equipment, including a fleet of over 110 dump trucks, at the second largest copper mine in Chile.
Both contracts have been awarded by Compania Minera Dona De Collahausi SCM (Collahausi), said the company.
"It is the intention of the mine to significantly increase production over the next 5 years. Both contracts are expected to commence in August 2014. The minimum revenue of the combined base contracts, for their initial periods only, is $15 – 18 million."
Commenting on the award managing director Michael Buckland said: “The two contracts have been under negotiation for 6 months and it is very pleasing to finally see the award of these contracts to the company".
Looks like the Westfield restructure will get up after they get the Westfield Retail Trust proxy votes required to split the empire into Australian and international businesses.Back to top