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Australian shares have posted double digit returns for the second financial year in a row, up 12.4 per cent over the 12 months to June 30, 2014, fuelled by record low interest rates.
At Monday’s close the benchmark S&P/ASX 200 Index was trading at 5395.7 points, while the broader All Ordinaries Index sat at 5382 points, with the biggest banks and miners higher over the 12 month period.
But it was a lacklustre end to the fiscal period. The market lost 0.9 per cent in quiet trade on Friday, to finish the month of June down 1.8 per cent. New listings included iSentia Group, Gentrack Group, Asaleo Care and Monash IVF.
“While there was a rush of IPOs coming to market in June, most of the buying was funded by institutions selling-down existing holdings so the benefit to the overall value of the index was limited,” Arnhem Investment Management head trader Simon Twiss said.
The Australian dollar had a volatile year but you wouldn't know it judging by the 2 cent rise against the United States dollar recorded over the past 12 months.
Here's a snap of how the Australian dollar fared against Group of 10 currencies - firmly in the middle.
No surprise that the winner was the New Zealand dollar which takes out the top spot on account of its dairy boom and rising interest rates.
Performance of G-10 currencies
The Australian Taxation Office is ramping up its efforts to catch Australians who park undisclosed funds in foreign countries, saying it expects to contact "thousands of people" over the coming months.
Hundreds have already come forward as part of a new amnesty.
The ATO’s Project Do It, launched in March, had already resulted in 166 disclosures raising an extra $13 million in tax liabilities, said ATO deputy commissioner Michael Cranston on Monday.
There had also been 250 "expressions of interest" – where taxpayers identify themselves and pledge a disclosure – and 600 general enquiries, said Mr Cranston.
The S&P/ASX 200 Index finished 49.35 points lower to 5395.7 points. Its 2013-14 gain is 12.35 per cent.
Ten shares were the best performers on Monday, up 3.9 per cent.
The Australian dollar is up slightly, fetching US94.32 cents.
Clime Asset Management has penned some end-of-financial year thoughts, observing a "significant" increase in the level and range of concerning developments for global markets and the Australian economy including Iraq and Ukraine.
"Readers should compare today’s docile volatility to that of 13 months ago when volatility was significant. It was this period of high market volatility that has magically created the impression that equity markets have performed quite well in 2013-14 when in fact they haven’t...
The last eight months is indicative of the importance of income in terms of overall investment returns in the Australian equity market. Today the Australian share price index is at the same level it was in April 2007 and index investors returns over seven years have been totally generated from dividends – more so if they were judiciously reinvested."
Ratings agency Standard & Poor's has upgraded the credit rating outlook for Fairfax Media, saying the publisher had "adopted a credible strategy to stabilise group earnings over the medium term".
S&P had revised the outlook on its 'BB+' long-term rating on Fairfax to stable from negative.
This means Fairfax - publisher of BusinessDay and The Australian Financial Review - is considered less likely to default, although its debt retains a junk rating.
The Abbott government has gone ahead with its controversial roll-back of protection for consumers of financial advice despite a damning Senate report into the Commonwealth Bank financial planning scandal.
Finance Minister Mathias Cormann on Monday registered regulations negating key reforms to financial advice introduced by the previous Labor government under the Future of Financial Advice ('FOFA') banner.
However, Senator Cormann’s regulations may be disallowed by resolution of the Senate, which is not sitting this week but resumes next Monday.
If Labor and the Greens move that the regulations be disallowed, as expected, their fate will lie in the hands of cross-bench senators, including those associated with Clive Palmer’s Palmer United Party.
The regulations strike out parts of the FOFA law, due to come into force on Tuesday, that would have forbidden banks to reward their financial planners and tellers for steering customers into the institution’s own products.
Finance minister Senator Mathias Cormann Photo: Andrew Meares
Shares of Goodman Fielder have been in a trading halt since this morning.
It has emerged that Singapore agribusiness group Wilmar International and Hong Kong investment management company First Pacific are trying to reduce their offer price for Goodman Fielder from 70 cents to around 67 cents or 68 cents a share.
After lifting their proposed offer from 65 cents a share to 70 cents a share in May and securing the support of major shareholders Ellerston Capital and Perpetual Investments and a recommendation from the Goodman Fielder board, Wilmar and First Pacific now want to reduce the offer by 2 or 3 cents a share on the grounds that additional capital investment is required.
Communications Minister Malcolm Turnbull has entered the tax debate, saying the country was far too dependent on personal income taxes and has a system that was "incredibly" favourable to older people who have made their money.
Mr Turnbull indicated that the effective top marginal tax rate of 49 per cent - which takes effect from Tuesday - is "too tough" on people earning income, as well the nation’s entrepreneurs and "people in jobs, making money in their businesses".
"There’s no question we are far too dependent on personal income tax," Mr Turnbull told a conference organised by the ANU’s Crawford School on Monday and sponsored by The Australian Financial Review. Read more
Despite the hyperventilation by some investment banks, the IPO market remains a tough sell, notwithstanding the lengthening line up of planned new listed investment companies as fund managers vie for their part of the pie.
Toilet paper group Asaleo floated at $1.65 at the end of last week, it is ahead just 0.6 per cent at $1.66, with the market barely able to contain its enthusiasm. Then there is Monash IVF. Floated at $1.85, the first day's high of $1.97 touched last week is but a fading dream, with the shares now down another 3 per cent at $1.74.
Even Steadfast, an insurance broker, which was quick out of the blocks following its IPO last August at $1.15, running quickly to $1.85, has run out of puff. You can pick it up today at $1.30, down 0.8 per cent.
CommSec analysis of petrol prices points to higher costs for motorists ahead.
The national average Australian price of unleaded petrol fell by 0.4 cents a litre to $1.553 in the week to June 30.
More significantly, the national average wholesale unleaded petrol price stands at $1.465/l, up around 2.3 cents over the week to the highest levels in almost four months (since March 13). The national average wholesale (terminal gate) unleaded petrol price has risen by almost 5 cents in the past fortnight.
Colombia's giant-killing run in Brazil and the star turn of its number 10, James Rodriguez, have won plenty of new fans.
There are reasons to be excited about its economy too.
AllianceBernstein finds that political volatility will recede and that makes its Colombian assets more attractive. The economy is growing fast and its central bank raised rates this month to 4 per cent. "[President Juan Manuel] Santos’ victory not only has a significant impact on the country’s political landscape but also has important implications for potential economic growth," AB said.
Colombia will benefit from an imminent index re-weighting for the main emerging market bond index, triggering greater foreign investment.
James Rodriguez, Colombia's World Cup star Photo: Getty Images
Household credit rose in May but personal spending went backwards, indicating the drag on consumers has not faded yet.
Reserve Bank of Australia figures show that total credit rose 0.4 per cent in the economy last month, supported by a 0.5 per cent rise from households and a 0.2 per cent rise from businesses. Personal credit declined 0.3 per cent.
ANZ's take is that "subdued credit card use and soft margin lending reflecting a persistent sense of household financial risk aversion". ANZ is more positive on the outlook for businesses, saying "strong momentum in business lending since mid-2013, buoyed by improved business conditions (low interest rates and the lower AUD) and robust corporate balance sheets are likely to eventually kick start non-mining business investment and drive business credit growth higher in the coming year".
Australian Competition and Consumer Commission chairman Rod Sims has described Telstra's push to remove price signalling rules as disappointing.
Price signalling involves companies releasing information on pricing to reduce competition in the market. Australia's big four banks were accused of it when they told the market about plans to pass on interest rates, until fresh laws were passed in 2012 to stop the practice.
Telstra called for a complete removal of all price signalling laws in its submission to the Harper review, which is a "root and branch" inquiry into competition policy. It was a call echoed by other bodies such as the Australian Recording Industry Association.
The BIS report overnight has sparked enormous analysis, including this story about how Australia's banks are among the world's most profitable.
Markets columnist Phil Baker has written on the findings too, seizing on the BIS's observation of euphoria in financial markets.
"Bankers have a habit of comforting themselves with facts and figures and coming up with a thousand reasons why there won’t be a repeat of all the mistakes that led to the financial crisis of 2008.
And they’re probably right; once investors lose money and learn a lesson, they are unlikely to repeat those mistakes.
The problem is, financial markets end up making entirely new mistakes and it’s those mistakes that spark the next crisis.
That theory seems to be the latest message from the bank for central banks, the Bank for International Settlements, which has warned that financial markets are losing touch with reality and another crisis could be just around the corner.
The BIS says financial markets are in a “euphoric’’ state and is calling for central banks around the world to lift interest rates as soon as they can."
Perpetual looked at the disconnect between global sharemarkets and the state of economies and found that central banks are key to influencing market sentiment. Perpetual's Matthew Sherwood thinks only the Bank of England will raise rates next year.
Meanwhile, massive capital management underway in the US suggests that more positive revisions to US earnings per share are ahead, which will continue to support US share prices and global market sentiment.
Buybacks in the US this year are set to topple $US600 billion.
Regional market performance past 12 months
Will the Transformers franchise rescue box office takings in 2014?
The film pulled in $US100 million in its debut weekend in the US and more than $US300 million worldwide.
Only last month Village Roadshow reminded investors how dire conditions are with a profit downgrade citing the lack of interest in the latest Johnny Depp vehicle, Transcendence.
Transformers: The Age of Extinction
Sales of new homes in Australia fell in May for the first time in five months, possibly a sign that the housing market may have peaked in this cycle, an industry survey showed on Monday.
The Housing Industry Association said its survey of large builders showed sales of private sector new homes fell 4.3 percent in May from April.
Still, sales grew by 3.8 percent over the three months to May to be up 21.0 percent compared with the same period a year ago.
Argentina may have survived the group stage of the World Cup but it is likely to miss a bond payment, putting the country on the brink of its second default in 13 years, Bloomberg reports.
A US court has blocked cash from being distributed until the government settles with creditors from the previous debt debacle. Read more
Meanwhile, Argentina faces Switzerland in the round of 16 on Tuesday morning.
Argentina is poised to miss a bond payment. Pictured, Lionel Messi in Brazil. Photo: Reuters
The Healthscope float is edging closer to going live, The Australian Financial Review's Street Talk reports.
Healthscope’s bookrunners contacted fund managers on Monday and the IPO could be priced at up to $2.29 a share. Read more from Street Talk, including valuation analysis, here.
Meanwhile, the float of Healthscope will provide a major windfall for chief executive Robert Cooke, who is set to earn up to $14.7 million in one off payments as a result of a successful listing. Read more about Mr Cooke's remuneration here.
The company lodged its prospectus on Monday morning, it will list on July 31.
Is this it for weak United States consumer prices?
Morgan Stanley expects higher inflation in the world's biggest economy, suggesting we have seen the bottom of the CPI. MS takes a positive view on corporate pricing power, declines in housing vacancy supporting rental inflation and low short-term unemployment supporting wage inflation.
"Despite these trends, the bond market remains relaxed about inflation risks, with 10-year yields declining 50bps so far in 2014. With very low real rates, any change of Fed language should push yields higher," says strategist Malcolm Wood.
What does this mean for Australian equities?
The US housing outlook is positive for James Hardie and Lend Lease.
An uptick in consumer is good for Amcor and Brambles.
And rising rising short rates will ("eventually") be good news for QBE Insurance Group and Computershare.
The flipside is that higher rates in the US are as a rule negative for telecoms, utilities and real estate investment trusts.
US inflation appears to be forming a trough, says Morgan Stanley
Australian credit investors would do well to heed the Bank of England's advice on bank hybrid securities, writes Aquasia credit strategist Mark Bayley in The Australian Financial Review today.
"It was buried in the Bank of England's Financial Stability Report but in Box 3 on pages 33 to 35, it was clear for all to see.
The central bank was warning investors about bank hybrids, which in Europe are generally known as CoCos (contingent convertible capital instruments)...
There is a risk that investors are underestimating the probability of losses on these securities.”
No Netflix in Australia until late 2015?
It appears a long-rumoured move by the online streaming giant to the Australian market has been delayed as Netflix focuses on Europe.
Despite local rivals preparing their own video-on-demand subscription services in anticipation of Netflix’s impending assault, media industry sources have told The Australian Financial Review they don’t expect the company to begin officially operating locally until at least the second half of 2015.
The Australian Financial Review's columnist Christopher Joye writes that foreign investors are likely the key drivers of the Sydney and Melbourne housing booms, potentially buying up to 40 per cent of all newly constructed homes, and accounting for up to one in eight Australian sales overall according to UBS data.
Unprecedented levels of foreign buyer activity, combined with the ability of the $559 billion self-managed super fund sector to leverage its cash five times when making property purchases, could be two reasons why this Australian housing cycle is different to anything we’ve seen before.
Shares in Goodman Fielder are in a trading halt as investors wait to learn whether Wilmar International and First Pacific will proceed with their $1.4 billion takeover offer for the food group.
There has been speculation that Wilmar and First Pacific could reduce or withdraw their offer if due diligence uncovers weaker than expected sales and earnings or higher than expected asset writedowns.
JPMorgan has upgraded Wesfarmers to a neutral recommendation.
Its call is supported by poor share price performance, greater confidence in Bunnings and Coles, and a "slight increase in the possibility of capital management" this year. The broker is still worried about the outlook for Target and Wesfarmers' industrial division.
JPMorgan has a price target of $42.85 on Wesfarmers shares.
Comparative share price performance against ASX 100
Media mogul Kerry Stokes has emerged as the largest shareholder in Capilano Honey, mopping up a large part of the Icon Brands stake sold off last week.
In early June one of Capilano's largest beekeeper shareholders sold a big line of stock and last week broker Cannacord Genuity handled a block trade on behalf of Icon Brands that saw Mr Stokes join the register.
Icon Brands held a 20.7 per cent stake and Mr Stokes has emerged with a 12.5 per cent shareholding. The billionaire executive chairman of Seven Group, Mr Stokes is well known for his ability to use creep provisions to wield influence over listed companies without paying shareholders a premium to gain control.
Kerry Stokes has emerged as a key investor in Capilano Honey Photo: Rob Homer
Dick Smith Holdings has confirmed that it will beat its prospectus guidance forecasts for sales in 2013-14.
Its other key forecasts are pro-forma earnings before interest, tax, depreciation and amortisation of $71.8 million and net profit after tax of $40 million.
Today, the retailer revealed sales came in at $1.228 billion.
Local stocks are poised to open flat ahead of key data locally and from both the US and China on the final day of the fiscal year.
• SPI futures up 8 points to 5424
• AUD at 94.23 US cents, 95.57 Japanese yen, 69.05 Euro cents and 55.32 British pence at 6am AEST
• On Wall St, S&P 500 +0.2%, Dow flat, Nasdaq +0.4%
• In Europe, Euro Stoxx 50 -0.2%, FTSE +0.3%, CAC -0.1%, DAX +0.1%
• Spot gold down flat at $US1316.18 an ounce
• Iron ore loses 0.4% to $US94.90 per metric tonne
• LME three-month copper at $US6945 per tonne
• Brent oil up 0.1% to $US113.30 per barrel
What’s on today
Australia: May private sector credit; TD Securities June monthly inflation gauge; HIA May new home sales;
Japan: May housing stats
German: May retail sales
EU: June inflation
US: May pending home sales; June ISM manufacturing index;
China: Manufacturing PMI.
Good morning and welcome to the Markets Live blog for Monday.
Your editor today is Vesna Poljak.
This blog is not intended as investment advice.
BusinessDay with wires
South Africa's Woolworths has declared its offer for Country Road best and final.
The offer price remains $17 a share.
Earlier, BusinessDay reported that SA's Woolworths could miss ambitious synergy targets from the planned takeover of David Jones after shelling out an extra $213 million to dislodge rag-trade billionaire Solomon Lew from his Country Road foxhole.
For Woolworths, the addition of Country Road implies that the "real" premium it is paying for the David Jones acquisition goes up to 38 per cent - or 25 per cent excluding the acquisition of Mr Lew's stake in Country Road.
Investors said this could place further pressure on Woolworths management to hit their targets of squeezing $130 million a year of earnings from David Jones within five years.
Chanticleer columnist Tony Boyd reports that the country's top banking regulator has called on the government to strengthen its independence against ministerial interference that could water down its strict supervisory powers.
John Laker, the executive chairman of the Australian Prudential Regulation Authority, said the regulator should have the same protection from government interference as the Reserve Bank of Australia.
He wants to restore a system designed by the Wallis inquiry in 1998 but scrapped in 2003 under which differences between APRA and the Treasurer can be sent to mediation.
Australia's major banks are the most profitable in the developed world, the Bank for International Settlements says, in figures that highlight the big four's consistently high returns as an inquiry investigates competition in the sector.
The major banks' pre-tax earnings as a share of their total assets rose to 1.28 per cent in 2013, higher than 10 other developed countries, the influential BIS said in its annual report on Sunday night.
It is the fourth consecutive year in which the sector's profitability has been the highest among developed countries assessed by the BIS, including Britain, the United States, Japan and various European nations.