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.
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.
Best and worst performers in the ASX 200 today.
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.”
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.
They get ya hooked, then they jack up the price. Source: FT
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.
An 'Australian Made' symbol. Photo: Supplied
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."
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''.
Australian troops are being sent into Iraq to protect the embassy. Photo: Glenn Campbell
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.
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. Photo: Tamara Dean Photo: Tamara Dean
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.
Dividend yield stocks have been the market darlings, but is it time for value stocks to shine? Source: UBS
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.
Cormann Photo: Andrew Meares
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.
Westfield Group’s Australian assets will now merge with those of Westfield Retail Trust, which was spun off from the parent company in 2010. Photo: Bloomberg
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.
UGL shares are up 2 per cent this morning after the company issued a statement to the market where it "clarified" that it as the "board’s intention to return surplus net proceeds from the sale of DTZ to shareholders following completion of the transaction and after the pay down of debt".
"It is expected that post sale, UGL’s capital structure will be in line with its engineering and maintenance services peers, providing the company with a robust balance sheet and the flexibility to fund future growth opportunities," the company said, adding that details would come after the completion of the sale.
Savage price discounting of up to 70 per cent, sales racks in the aisles and ''buy one get one free'' deals will ramp up as retailers try desperately to shift unwanted stock in a climate of withering consumer confidence.
The disastrous stock exchange debut of PAS Group, a grab bag of fashion brands including Metalicus and Yarra Trail, speaks volumes about the impact the federal budget has had on consumer sentiment in the retail sector - as well as the weather.
PAS Group took a hiding on Monday, closing 16 per cent lower as shareholders dumped the stock in reaction to profit downgrades and negative trading updates by a growing list of retailers including Pacific Brands, Super Retail and the Reject Shop.
The latest company to flag weaker-than-expected sales for the year was JB Hi-Fi, which released a trading update on Thursday confirming it would meet its full-year profit guidance but that its full-year sales would be weaker than expected.
The plethora of profit downgrades and trading updates turns the spotlight squarely on department store giants David Jones and Myer, which are yet to release a trading update. Some analysts, including Deutsche Bank, have already started to cut margins to allow for the likely increase in sales discounts.
A report by Deutsche Bank - Reducing Estimates on the Back of Weak Consumer Sentiment - warns that none of the retailers are ''immune'' to the sharp fall in consumer sentiment post the lead-up to the federal budget. The report says this, combined with a very warm start to the winter season, has prompted a number of downgrades from retailers.
''Of the retailers which haven't yet downgraded, we see the most risk to this year's numbers for Myer, Premier Investments and Speciality Fashion.''
Shares are lower early, but gold miners are flying after the precious metal jumped overnight.
The ASX 200 is 11 points, or 0.2 per cent, lower to 5457.2, while the All Ords is down a similar proportion at 5437.1.
Losses are spread across the miners and banks, with the big supermarkets and Telstra also lower.
Ten Network has continued to fall - down 5.6 per cent - after it revealed some pessimistic ad revenue forecasts yesterday.
Of the sectors, consumer stocks - both retail and discretionary - are down the most at 0.4 per cent, while gold miners have surged 5.1 per cent as a group, with the biggest, Newcrest Mining, up 5 per cent.
Activist investor Gabriel Radyzminski is leading a share raid on Coventry Group in a move designed to roll the board. Coventry Group is a $105.9 million Western Australian company that services and supplies parts, such as fasteners and gaskets, to companies operating industrial vehicles and machinery – mostly in the mining services sector.
Mr Radyzminski, the founder and managing director of $35 million ASX-listed investment fund Sandon Capital has buddied up with Dorsett Investments, a private investment company headed by Lorna Dorsett and based in Bunbury Western Australia to build a potentially influential stake.
On Thursday, Coventry Group announced to the ASX that on Tuesday it received a letter from Mr Radyzminski and Ms Dorsett disclosing that, together, their funds now control a combined stake of 7.8 per cent.
In the letter, the raiders propose they use their significant shareholder status to force an extraordinary meeting of shareholders “to seek the appointment of some new directors” and “the removal of some current directors”.
There are currently five directors on the Coventry Group board. Executive chairman Roger Flynn, chief financial officer Keith Smith, and non-executive directors Barry Nazer, John Nickson, and Ken Perry.
On April 29, the company downgraded its full-year net profit guidance to between $1 million to $2 million. Many other companies in the mining services sector have issued downgrades in the past 12 months, although Coventry Group said that part of its business was improving, instead blaming challenging conditions in the construction sector for the downgrade.
For the six months ended December 31, the company reported an interim net profit of just $200,000, after revenue fell12.8 per cent form the previous corresponding period amid tough trading conditions. The December downgrade followed a profit warning in September.
However the company is sitting on a stash of cash, with about $53 million in cash and term deposits. The strong balance sheet position is a legacy of selling off its retail automotive parts businesses in 2010 and 2011.
The largest shareholder in the Coventry Group is Investors Mutual, controlling about 16.4 per cent, according to Bloomberg. AntonTagliaferro, the investment director of Investors Mutual confirmed the fund is a large shareholder.
Other fund managers that control large shareholdings in Coventry Group are Wilson Asset Management, and US-based fund Schroder Investment Management.
Westfield Group and Westfield Retail Trust entered into trading halts on this morning ahead of the 10am AEST WRT securityholder meeting where there will be a re-vote on the proposed restructure the Lowy family shopping empire.
The outcome remains close even after nearly three weeks of talks between Westfield management and investors and widespread public debate.
Westfield Retail chairman Richard Warburton deferred the vote on May 29 minutes before the proposal was set to be voted down.
Street Talk reported on Tuesday that three major investors in Westfield Retail had changed their vote to ‘yes’ - enough to swing the pendulum in Westfield’s favour.
Others still believe the proposal on the split of Westfield’s $70 billion plus empire will be unsuccessful.
Australian Shareholders’ Association spokesman Stephen Mayne however expects it to be “narrowly defeated.”
At least 75 per cent of Westfield Retail securityholders must support the proposal in order for it to pass.
The Abbott government is pressing ahead with secret trade negotiations aimed at bringing about radical deregulation of Australia's banking and finance sector, WikiLeaks documents reveal.
Highly sensitive details of the Trade in Services Agreement (TiSA) negotiations, obtained by Fairfax Media, show Australian trade negotiators are working on a financial services agenda that could end the Australian government's ''four pillars'' banking policy and allow foreign banks much greater freedom to operate in Australia. The changes could also see Australians' bank accounts and financial data freely transferred overseas and allow an influx of foreign financial and information technology workers.
Financial Services Union national secretary Leon Carter said there was ''a real danger'' that the negotiations ''could undo the effective regulation that sheltered Australia from the global financial crisis'' and result in ''a tidal wave of finance job losses in Australia''.
But Trade Minister Andrew Robb said the negotiations were a "key focus" in his policy to "open as many doors as possible" for Australian financial services. "Financial services are a key part of the negotiations for us given the strength of our sector in areas including banking and wealth management, particularly in the major, growing markets of Asia," he said.
A confidential negotiating text provided to Fairfax Media by WikiLeaks reveals that the TiSA talks have big implications for Australia's financial system, potentially pre-empting the Abbott government's Financial System Inquiry which, chaired by former Commonwealth Bank chief executive David Murray, will present an interim report on July 15.
WikiLeaks publishes draft trade agreement
Details of the draft trade agreement revealed by WikiLeaks have big implications for Australia's sovereignty, says Economics editor Peter Martin.PT3M19S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-3agu0 620 349 June 19, 2014
Santos and French major GDF Suez have dropped plans to proceed with a circa-$US10 billion ($10.6 billion) floating LNG project far off the north coast in further evidence of the prohibitive cost of new large-scale gas projects.
The partners will instead look at piping gas from their offshore fields to Darwin, where it could be used in more economical brownfield expansions.
“The rate of return was assessed on this project to be insufficient given the fact it was still a mega-project with a level of risk in capital exposure and complexity,” said John Anderson, Santos’s vice-president for Asia and north-west Australia.
He said progress made in alternative ways to develop gas from the venture over the last 12 to 18 months had also highlighted other options that should be “looked at very hard”.
At the forefront of the alternative options is expected to be piping gas from the Petrel, Tern and Frigate fields that make up the Bonaparte project to Darwin for use in the ConocoPhillips-operated Darwin LNG project.
Gas from the fields could be used either to replace declining supplies from Conoco’s Bayu-Undan venture in the Timor Sea or to help underpin an expansion at the Darwin project.
Several other owners of undeveloped gas off north-western Australia have also pointed to the potential for taking gas to Darwin for LNG, including Origin Energy, which recently bought out Karoon Gas in Conoco’s Poseidon gas venture in the Browse Basin.
Gold surged the most in nine months and silver jumped to a 13-week high as the Federal Reserve said US interest rates will remain low, driving the dollar down and boosting demand for the metals as alternative investments.
Escalating violence in Iraq is also reviving investor interest for the yellow metal.
Bullion climbed 70 per cent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent, boosting inflation concerns. The metal plunged 28 per cent last year as consumer costs stayed muted and equities rallied.
“People perceived what Yellen said yesterday as less hawkish, and that’s bringing in money to the gold market,” Scott Gardner, who helps manage $450 million at Verdmont Capital SA in Panama City, said. “The dollar is moving lower, and gold is gaining because of that.”
The metal reached $US1,322/ounce, the highest since April 15.
Gold traded above the 100-day moving average, a bullish signal to some analysts who study historical price patterns, said Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago.
“A lot of technical buying is helping gold,” Streible said in a telephone interview. “We saw a lot of buying come in once the market moved above $US1,300.”
The metal has climbed 9.3 percent this year, partly on concern that economic growth in the US was stalling and as violence erupted in Iraq and tension between Ukraine and Russia escalated.
President Barack Obama said he’s sending as many as 300 US military advisers to assist the Iraqi army battle an insurgency and is prepared to take additional “targeted” action if necessary.
“Some people definitely are buying gold because of political uncertainties,” Streible said.
Gold jumped the most in nine months overnight and is up 9.3 per cent this year.
The S&P 500 extended a record and global equities rallied as the Federal Reserve’s policy statement fuelled optimism that the economic recovery will accelerate.
The S&P 500 rose 0.1 percent to a record 1,959.48. The MSCI All-Country World Index added 0.6 percent today to a record.
“Yellen is a super dove,” Lex Van Dam, a fund manager at Hampstead Capital LLP in London, said. “There remain very few alternatives for your cash other than putting it in stocks. The trend remains up in markets. I believe in the Fed. The economy has recovered on financial engineering.”
The stimulus has helped the S&P 500 rally 190 per cent from its bear-market low in March 2009.
The index of US leading indicators rose in May for the fourth straight month, according to data released today, showing the economy will gain momentum following the slowdown at the start of 2014. Fewer Americans filed applications for unemployment benefits last week, a sign of steady progress in the labor market.
The Fed Bank of Philadelphia’s factory index increased to 17.8 in June, topping economists’ forecasts. Readings greater than zero signal growth in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
The Chicago Board Options Exchange Volatility Index, known as the VIX, added 0.1 percent to 10.62 today, after closing at the lowest level since 2007 yesterday. The measure of volatility has dropped 23 per cent this year, and is within two points of its record low reached in 1993.
Local stocks are poised to for a soft start despite late buying on Wall St helping to lift the S&P 500 to a fresh closing high, while gold jumped overnight and oil also gained.
Here's what you need2know:
- SPI futures down 4 points to 5417
- AUD at 94 US cents, 95.83 Japanese yen, 69.10 Euro cents and 55.17 British pence
- On Wall St, S&P 500 +0.1%, Dow +0.1%, Nasdaq -0.1%
- In Europe, Euro Stoxx 50 +1.1%, FTSE +0.4%, CAC +0.7%, DAX +0.7%
- LME copper 3-month is at $US6710 a tonne
- Spot gold surges 3.1% to $US1317.85 an ounce
- Brent oil up 0.7% to $US115.02 per barrel
- Iron ore adds 0.4% to $US90.70 per metric tonne
What's on today:
- Japan: BoJ Governor Kuroda speaks at 4.45pm AEST
- Europe: June consumer confidence, April current account
- Germany: May PPI
- UK May public sector net cash requirement
- Canada: retail sales, CPI
Stocks to watch:
- Westfield Retail Trust shareholder vote due.
- DJs has postponed its shareholder meeting that was due to take place today to approve the takeover bid from South Africa's Woolworths
- Santos has announced it has dropped plans to go ahead with a $10b floating LNG joint venture project off Darwin
- Dulux Group: $149.5m notes issue was over-subscribed
- Leighton gets $300m pipelines project in Doha
- Linc Energy: hires PAC Partners for Australian coal sale
- Macquarie sees more renewable deals after funding 8minuteenergy
- Macquarie Telecom lowers FY EBITDA guidance to $25m-$27m
- McMillan Shakespeare raised to buy v hold at Credit Suisse
- Seven Group: Caterpillar Asian sales drop accelerates amid mining cutbacks
- Sydney Airport: May sales and revenue expected
- Macquarie Research has maintained an “underperform” recommendation on Woodside Petroleum and a 12-month price target of $39 a share
- Deutsche Bank has retained its “sell” recommendation on Metcash with a target price of $2.60 a share
- Mantra Group begins trading at midday, with an IPO price of $1.80.