That’s it for Markets Live today.
You can read a wrap-up of the action on the markets here.
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Shares suffered their biggest daily drop in a month as the local market posted a broad based sell-off after following Wall Street lower early, with banks leading the decline.
The benchmark S&P/ASX 200 Index tumbled 69.7 points, or 1.3 per cent, on Monday to 5358.9, while the broader All Ordinaries Index also lost 1.3 per cent to 5353.6 with all major sectors affected by the slide.
Local stocks fell at the open after equity markets in the United States and Europe fell heavily on Friday night. Market weakness around Asia in the afternoon pressure applied further pressure.
The negative sentiment in US markets continued to extend to locally listed internet and biotechnology stocks, which were the worst-performing sub sectors. Carsales.com fell 3.5 per cent to $10.08 while CSL lost 1.9 per cent to $67.28.
A stronger dollar continued to apply extra pressure to shares. At the local close the Australian dollar was buying US93.87¢ up from US93.79¢ at Friday’s local close.
A sell-off in the big banks weighed heavily on the market. Commonwealth Bank of Australia shed 1.1 per cent to $76.51, while National Australia Bank dropped 1.3 per cent to $34.88. Westpac Banking Corporation and ANZ Banking Group each lost 1.5 per cent to $34.15 and $33.34 respectively.
Nickel miner Western Areas was the best-performing stock in the ASX 200, climbing 5.3 per cent to $3.96 with nickel futures trading at their highest price in more than a year due to concerns a ban on Indonesian exports will limit supply.
And here are the best and worst performing stocks in the ASX 200 today.
Coca-Cola Amatil suffered the biggest falls, plunging another 7 per cent. The company's debt was downgraded by Standard & Poor's today.
Magellan and Platinum bore the brunt of the risk-averse investor who seem happy to lock in profits on the fund managers as the environment for global equities takes a bit of a turn for the worse.
Western Areas was the best of the only 16 stocks that finished in the black.
The market started in a hole and then just kept on digging, with banks doing most of the damage in a 70-point drop in the ASX 200 to 5358.9.
The All Ords was also 1.3 per cent lower to 5353.6.
Westpac and ANZ dropped 1.5 per cent, NAB 1.3 per cent and CBA 1.1 per cent. Staying in the financials sector, QBE plunged 3.7 per cent after announcing a strategic review of its US operations, which just screams "writedowns".
BHP joined the 169 names in the top 200 to record losses, trading 0.7 per cent lower, while Rio finished 1.3 per cent down.
Defensive stocks weren't protected, with consumer staples like Wesfarmers 1.3 per cent down and Woolies 1.1 per cent down.
Telcos were the best performing corner of the market, only down 0.1 per cent, after Telstra added 0.4 per cent, while Singtel was flat.
Concerns about China's growth is expected to cap gains in the Australian dollar, which is teetering at five-month highs.
The Aussie is steady today, fetching a touch under 94 US cents. Traders are eagerly awaiting the release of China's first quarter GDP data on Wednesday which is expected to have significant weight on the currency.
CBA currency strategist Peter Dragicevich said the figures were expected to be in line with Chinese manufacturing activity data, which has underwhelmed so far this year.
If that's the case, Mr Dragicevich expected the Aussie to take ''some heat off the Aussie''.
''But we don't expect it to fall too far,'' he said.
''Fundamentals domestically look like they've start to pick up, so that should keep the Aussie pretty well supported.''
The RBA releases its minutes from its March meeting on Tuesday and Mr Dragicevich expected officials would continue to talk up the transition of the economy away from mining-led growth and refrain from jawboning the Aussie.
''We don't think the RBA look to explicitly talk down to strength in the currency.
''We have seen a bit of a bounce back in Australian commodity prices since early March, so that will provide some comfort to the RBA.
''That's one thing they've been stressing over the last year, is the divergence between the Aussie and the terms of trade. So the lift recently that we've seen in the Aussie has been supported by those commodity prices.''
RBS currency strategist Greg Gibbs said the domestic company was performing stronger-than-expected, thanks to a buoyant housing market, which had in turn supported the Aussie.
Mr Gibbs said the potential for significant growth in residential construction this year and strong house prices had boosted confidence, which was helping offset fears on slowing growth in mining investment.
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QBE Insurance Group has confirmed that it is undertaking a strategic review of its US-based middle market business, leaving all options open including a possible sale of the unit.
Investors are worried: the stock is down 3.8 per cent to $11.97 today.
That’s because the announcement has raised analysts’ suspicions that the $1.2 billion paid for the US insurer Winterthur will lead to write downs, according to CMC Markets chief strategist Michael McCarthy.
The review was foreshadowed in February, during the company's full-year profit results, and comes after news reports surfaced that QBE might be considering selling the business.
"We are well advanced in implementing remediation work which will allow QBE's North American business to return to profit," QBE chief executive John Neal said in a statement.
"As part of this process, we continue to assess options for various components of the US business, including the US middle market business," he said.
The review will include "a continuing focus on improving the profitability of the middle market business, consideration of opportunities to increase scale and support for our business partners, refining the business strategy and operating model and exploring options for a potential sale of all or part of the middle market business."
Coca Cola Amatil’s credit rating has been cut from A- to BBB+ by Standard & Poor’s in a fall from grace for a credit that has always been one of the local market’s strongest names.
"The downgrade reflects our opinion that mounting competition and margin weakness in Coca Cola Amatil's Australian business have weakened [its] operating performance to levels below our expectations for the previous 'A-' rating," Standard & Poor's credit analyst May Zhong said.
In previous years CCL’s cost of funds was so low that it would raise debt at below the rate the banks would offer on term deposits.
CCL's shares are 7 per cent lower today to $9.07.
The Federal Court has ruled that supermarket giant Woolworths breached undertakings made to the regulator this year that limited it to a standard discount of 4 cents per litre off petrol.
Last year the ACCC reached a deal with Woolworths and Coles that limited discounts on shopper dockets earned at supermarkets to 4 cents per litre.
However, both chains quickly introduced new schemes that allowed shoppers to up their discounts by spending money at the petrol station convenience store with a Woolworths scheme allowing shoppers to boost the fuel discount to 8 cents per litre.
The ACCC immediately reacted to enforce its undertakings, with the court, in its judgment on Monday, ruling it as a breach of its deal with the regulator.
The ACCC had alleged that Woolworths’ initial 4 + 4 cents fuel discount offer was conditional on Woolworths supermarket purchases and breached its undertaking from last year because the discount was only available to a customer who has made a qualifying supermarket purchase.
From 10 March 2014, after the proceedings had commenced, Woolworths introduced a new offer so that the 4 cent discount for purchases of $5 or more in the petrol station was available without a supermarket purchase, although it could also be used in conjunction with the 4 cent discount offer on qualifying fuel purchases.
It took action to defend its offer, asking the court to declare at the time that its ‘‘stacked’’ 8 cent per litre discount offer met with the undertakings it made to the ACCC in December.
Santos chief executive David Knox has voiced confidence in the future of Australia’s nascent shale gas sector, despite others cautioning that the US boom in the fuel is unlikely to be replicated elsewhere.
Addressing a CEDA function in Adelaide, Mr Knox said that from Santos’s work so far in unconventional gas in the Cooper Basin, he was optimistic about the future for commercial production, although acknowledged it may take some time to come up with the optimal combination of technology.
“I’m confident we will be able to do it when we apply the right technology, and it will probably take a few years to unlock that,” Mr Knox said.
He said Santos had brought two vertical shale wells into production, and had two other horizontal wells it would test for production this year.
But speaking at the same event, international energy expert Professor Paul Stevens said various factors such as property rights that differed between the US and elsewhere meant the success the sector has seen in the US made it unique.
“When you apply these characteristics in other parts of the world it doesn’t look so promising for the moment,” Professor Stevens said.
Mr Knox also defended the move toward gas exports from Australia’s east coast, despite the resulting increase in domestic gas prices.
Gold stocks are back in vogue, with miners of the precious metal rising 25 per cent more than the ASX’s biggest companies this year.
But doubts linger about how much further the rally can go.
Gold prices hit a three-week high, rising 0.6 per cent to $US1328.30 an ounce, on Monday amid increased fears about tensions between Russia and Ukraine.
So far gold prices have bounced about 10 per cent this year compared with the S&P/ASX 200 Index rising 1.4 per cent.
ANZ head of commodity research Mark Pervan attributed much of the gains to a steep sell-off among gold exchange-traded funds (ETFs), which sold about 30 per cent of their holdings late last year as US bond yields hit 2 1/2 year highs.
''So gold prices came off about 25 per cent last year,'' Mr Pervan said. ''But that's completely unwound now. We have seen a fair bit of momentum taken out of the US bond markets.''
Bond markets rallied amid increased speculation US would soon raise interest rates as the Federal Reserve hit full throttle on tapering its asset buying program. But all has not gone to plan this year, with a wave of poor US economic data and the Fed suggesting it might not be as eager to trim its stimulus.
However, while the gold price has bounced thanks to ''opportunistic buying'' from India and China, Mr Pervan said ETF holdings ''haven't really taken off''.
Instead, he said there has been a swing back into equities, after ETFs knocked the momentum out of the gold equity markets for much of the past decade.Back to top
It's often said we pay a lot for superannuation. But how much? Well, research firm Rainmaker estimates Australians paid $18.6 billion in fees for their retirement savings to be managed last financial year.
That is equivalent to $1075 for every adult in the country, including those who don't even have super.
It's the same amount that was paid out last year by Medicare, which provides free or subsidised healthcare services to the entire population. And just like Medicare costs, super fees are likely to swell, with the total super pool tipped to triple over the next two decades.
Funnily enough, business groups don't complain about this cost burden as they warn about growth in government spending on social services. That's hardly surprising - super is a significant source of corporate profits.
But thankfully, the issue should come under serious scrutiny in the financial system inquiry being led by former Commonwealth Bank boss David Murray.
As submissions from the Reserve Bank and Treasury highlight, ours is one of the most expensive private pension schemes in the world.
The RBA cites Organisation for Economic Co-operation and Development figures on pension funds' operating expenses as a share of total assets.
In the RBA's graph, Australia's cost ratio was third-highest among OECD countries, behind Spain and Mexico.
QBE has confirmed a strategic review of its struggling US based middle market business.
Chief executive John Neal said the company was well on the way to constructing a plan to return the US business to profit.
‘‘The review will include a continuing focus on improving the profitability of the middle market business, consideration of opportunities to increase scale and support for our business partners, refining the business strategy and operating model and exploring options for a potential sale of all or part of the middle market business," Mr Neal said.
The middle market represents around $US900 million in gross written premium.
QBE shares are down 3.4 per cent at $12.15.
Sheesh, what a day. The bears are gathering some steam and losses on the benchmark ASX 200 index have accelerated into the afternoon.
As the chart shows, the index is through the 30-day moving average and approaching the 50-day MA.
US jobless claims may have dropped to their lowest level since 2007, at 300,000, but Morgan Stanley economists reckon that Easter gift won’t last for long.
‘‘Over the past several years, jobless benefits have jumped by an average 20,000 during the week that includes Good Friday, and have fallen by an average 23,000 three weeks later. Assuming a repeat, this year the jump in jobless claims will come in the week ending 19 April.’’
Not a great day for Coke and cheese - CCA and Bega Cheese are the worst performers today. Coke has received a mixed but mostly negative review by analysts after their Friday earnings update shocker (see post at 11:10).
Asset managers Henderson and Magellan are among the worst performers in the ASX 200 so far.
Sirius Resources and Western Areas are the best performers, with Ten Network enjoying some rare time in the sun.
Pacific Brands is also among the better performers, perhaps off the back of conjecture around more merger activity in the retail space.Back to top
Sticking with David Jones, the South Africa’s Woolworths bid has put some much needed fizz into the local retail sector, notes the AFR's Street Talk column.
It is interesting that electronics retailer JB Hi-Fi also had a good week with shares in the Sydney company finish almost 6 per cent higher. (The shares have eased 0.8 per cent lower today to $20.47.)
There are observers who believe a local or foreign predator could be running the ruler over the $2 billion company, which has shrugged off malaise affecting the sector.
A cashed-up Wesfarmers is the most logical Australian predator given there would not be competition issues. The Perth conglomerate could spend $7 billion, according to UBS analysis, and has enjoyed success with retail by turning around the Coles supermarket chain. JB Hi-Fi, of course, is in better condition than Coles before Wesfarmers came along.
JB Hi-Fi shares are up 49 per cent over the past year, easily outperforming rival Harvey Norman (33.6 per cent) and the wider consumer discretionary index (15.5 per cent).
Despite these gains it trades at a P/E of 16 times – about the same as Harvey Norman (which has been the subject of private equity approaches in the past).
Woolworths (the Australian version) tried – and failed – to do a deal with JB Hi-Fi back in 2008. Both sides could not agree on price while Woolies CEO at the time, Michael Luscombe, did not get on with then JB Hi-Fi boss Richard Uechtritz.
Woolies had a less than pleasant experience in electronics retailing with Dick Smith, which it sold for a big loss to private equity firm Anchorage in 2012. It seems unlikely it would want to test the waters again.
Woolworths Holdings chief executive Ian Moir has already identified three sites for new, smaller David Jones stores in Australia, and says his investors are now getting over their initial shock at the size of the deal.
Mr Moir has returned to South Africa to meet shareholders to detail his transformative $2.15 billion takeover bid for David Jones and admitted investors were initially surprised.
But he claimed investors have quickly appreciated its strategic and financial sense.
Shares in Woolworths listed on the Johannesburg Stock Exchange fell by 7.5 per cent when investors heard the news of its plans to swallow up Australia's second-biggest department store, but bounced back 2 per cent the following day.
Mr Moir is already examining ways to expand David Jones.
He said David Jones' ''village-style'' store in Melbourne's Malvern - which is one-third the size of a normal David Jones store - was a model that Woolworths would roll out further.
''I think we see three obvious [sites] within the next couple of years,'' he said. ''I believe we can get to double digits in time - but it's going to take time.
David Jones's shares are steady at $3.93.
The devastation of US biotech stocks last week - The NASDAQ Biotech Index fell more than 20 per cent – burst a contemporary stock market bubble.
In the grand scheme of bubbles however, biotech stocks was fairly modest.
This chart from the always excellent chief investment strategist at Bank of America/Merrill Lynch, Michael Hartett, shows a history of recent asset price bubbles measuring the length of time that the bubbles run for and the gains in price.
The most notable bubble, by a long way, when measured by the duration and the scale of gains, was the run-up in Japanese stocks through to 1987.
Cochlear, UGL and Monadelphous are the top three most shorted stocks on the ASX, according to CBA analysis of ASIC data.
“A stock being among the top 20 shorted stocks sends a strong signal that the market is concerned about the stock, especially when the short position exceeds double digits,” write the CBA analysts. “Entering the top 20 or exiting the top 20 is also a strong signal to the market.”
The biggest weekly increases in shorting positions over the week to April 4 were Singtel (Optus), up 122 per cent, BC Iron, up 101 per cent, and iiNet, up 52 per cent, report the CBA analysts.
Biggest falls were in shorting interests were in Kingsgate Consolidated (down 54 per cent), Independence Group (38 per cent lower) and GUD (down 28 per cent).
Telstra could be paid over $98 billion by NBN Co over the next 55 years for infrastructure leases and other fees, according to a report in industry publication CommsDay.
The article said a May 2013 Goldman Sachs analysis for NBN Co showed the government-owned company building the national broadband network would be forced to pay $98.2 billion in nominal pre-tax profits to Telstra between financial years 2011 and 2067.
According to the draft document cited by Commsday, $88 billion of this would be from infrastructure leases for Telstra assets like underground ducts, which are needed for the construction of the NBN.
NBN Co's payments would grow to $1 billion per year in financial 2019 from $400 million per year in the year ending June 30. The company would be paying Telstra $2.9 billion per year by 2067.
Though Telstra has characterised its existing deal with NBN Co as offering $11.2 billion in net present value through infrastructure lease and other payments, the exact fees owed to the telecommunications company have never been released.
The then-Coalition's broadband plan was forecast to add an extra 20 per cent, or $2.4 billion, onto the value of Telstra's plan because the company would be able to keep using its hybrid fibre coaxial network, Commsday reported.Back to top