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Stocks fall off the fiscal cliff

Investors turn their attention from the presidential election back to Europe's recession and America's looming fiscal cliff of tax increases and spending cuts.

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Australian shares close lower amid worries about the US fiscal cliff, but have trimmed some losses as the economy creates more jobs than expected, lifting the dollar back above $US1.04.

5.09pm: We're calling it a day here at blog central, thanks for all your comments today, we'll be back tomorrow from 9.30am.

Click here for a full wrap of today's session.

4.46pm: Here's a look at best and worst performers on the ASX200 today:

4.32pm: Blue chip stocks offered little safe ground for investors today:

  • BHP: -0.9%
  • Rio: -1.1%
  • ANZ: -1.4%
  • CBA: +0.7%
  • NAB: -0.5%
  • Westpac: +0.3%
  • Fortescue: -2.7%
  • Woolworths: -0.2%
  • Wesfarmers: -0.2%
  • Telstra: -0.7%

4.16pm: All of the major sectors posted losses today, materials and gold stocks both slipped 0.9 per cent, financials lost 0.8 per cent and energy fell 1 per cent.

4.12pm: The market has closed lower as investors continue to worry about the impending US fiscal cliff. The benchmark S&P/ASX200 dropped 32.7 points, or 0.7 per cent, to 4483.8, while the broader All Ords fell 32 points, or 0.7 per cent, to 4502.2.

3.56pm: Small business advocates are calling for more government support, after new research showed almost a third of Australian small business owners feel neglected.

On the wishlist are government-funded loans for small businesses, tax breaks and subsidies for training and support.

Click here for the full story.

3.34pm: The big banks are strong enough to withstand a major global economic downturn, the industry’s regulator says.

Commonwealth Bank, Westpac, National Australia Bank (NAB), ANZ and Macquarie Bank would all post significant losses in the event of a worldwide downturn but have the capital strength to survive, the Australian Prudential Regulation Authority (APRA) revealed. The statement comes after APRA put the banks under a ‘‘stress test’’.

3.25pm: The Australian market has reversed part of its heavy losses on the back of a better than expected unemployment number and a turnaround in US futures, says CMC Markets trader Ben Taylor:

  • Investors bailed out of mining and energy plays today preferring safer plays like healthcare and staples.
  • Today’s better than expected Australian employment result has helped bear the burden in the equity market.
  • The Aussie dollar also shot to 1.0430 on the news before drifting back towards 1.0410 as the Chinese market took the overnight news harder than us.
  • The market doesn't seem convinced that the pace of Australian job creation will continue but does believe the RBA will hold fire for the time being as the jobless rate stays on hold.

3.10pm: Gindalbie Metals expects to complete almost 300,000 tonnes of shipments from its Karara iron ore project in Western Australia.

The company said a shipment loaded with 59,164 tonnes of iron ore departed on Wednesday, taking total shipments to 293,033 tonnes as the $2.57 billion Karara project continues to ramp up in WA’s Mid-West region.

2.54pm: The sharemarket will be in a bit of a risk-off phase as attention turns to the looming US fiscal cliff, says Credit Suisse equity strategist Damien Boey:

  • In the short term, defensives and larger resource companies may be flat to up but banks could retreat, with the overall market unlikely to sustain an advance.
  • I'd be expecting the market to pull back a bit. Our batting order at this stage is defensives, resources, banks.

2.40pm: Gindalbie Metals expects to complete almost 300,000 tonnes of shipments from its Karara iron ore project in Western Australia.

The company said a shipment loaded with 59,164 tonnes of iron ore departed yesterday, taking total shipments to 293,033 tonnes as the $2.57 billion Karara project continues to ramp up in WA’s Mid-West region.

2.28pm: It looks like most markets around the region are in the red:

  • Nikkei: -1.3%
  • Shanghai: -0.9%
  • Taiwan: -1%
  • South Korea: -1.3%
  • Singapore: -1%
  • New Zealand: +0.2%

2.03pm: Noble Mineral Resources has accepted an $85 million financing offer from Resolute Mining.

The agreement means Resolute will acquire almost 20 per cent of the minerals explorer through share sale agreements. The financing will assist Noble in its ramp-up of its Bibiani gold project in Ghana.

Resolute Mining shares are 1.6 per cent higher, while Noble shares have jumped 8 per cent.

1.54pm: There is something for everyone in the latest jobs data, says CommSec economist Savanth Sebastian:

  • The optimists could focus on the ongoing rise in full time employment over the past four months and conclude all is fine. The pessimists would look at the fall in the participation rate and hours worked and conclude something more concerning.
  • What is clear is that the labour market is treading water. Yes, it was encouraging that employment grew but more forward looking indicators like job advertisements have suggested that further labour market gains may be more circumspect.
  • In fact internet and newspaper job advertisements have fallen for seven consecutive months, suggesting job growth is likely to flat line in coming months.
  • Employers aren’t keen to hire unless they have to, given the global uncertainties. But while jobs are being lost in some industries, clearly they are being created in other industries.
  • Overall it does seem like a fare proportion of Aussie businesses are holding onto existing staff, rather than significantly adding to the workforce.

1.41pm: NAB has bought back $4.44 billion in debt guaranteed by the Australian government in a global public tender.

NAB said it repurchased approximately $2.84 billion over three Australian dollar lines of notes and approximately US$1.66 billion over two US dollar lines. The public offer received a 65 per cent participation rate.

1.35pm: Strong words in Beijing where outgoing President Hu Jintao said China should become a "maritime power" as he opened the Communist Party congress

"We should enhance our capacity for exploiting marine resources, resolutely safeguard China's maritime rights and interests, and build China into a maritime power," Hu said in his speech in Beijing

That was probably aimed at the Japanese and the dispute over some islands and will probably have litttle direct impact on Australia. But he’s also called for a ‘‘new economic growth model’’ - and that might.

1.23pm: Noble Mineral Resources has accepted an $85 million financing offer from Resolute Mining.

The agreement means Resolute will acquire almost 20 per cent of the minerals explorer through share sale agreements.

The financing will assist Noble in its ramp-up of its Bibiani gold project in Ghana.

Resolute Mining shares are 2½ cents higher to $1.935, while Noble shares increased a cent to 13.5 cents.

1.03pm: BREAKING NEWS Qantas is cutting another 500 engineering jobs in Sydney and at Avalon Airport in Victoria as the airline steps up the consolidation of its heavy maintenance bases from two to one, writes BusinessDay's Matt O'Sullivan.

About 200 of the latest job cuts will be to line-maintenance roles at Qantas’s jet base at Sydney Airport and the remainder mostly from heavy maintenance at Avalon Airport near Geelong.

Qantas will also reduce its workforce at Qantas Defence Services which conducts maintenance on the Defence Forces’s C130 Hercules aircraft.

Read the full story here

12.59pm: Mining contractor Macmahon Holdings says it has reached a termination agreement with its former chief executive Nick Bowen valued at more than $380,000.

Mr Bowen would receive his unused annual leave and long service leave entitlements, as well as payment in lieu of 3½ months notice, totalling $384,773, Macmahon said.

Mr Bowen will be replaced by chief operating officer Ross Carroll.

12.50pm: If you've ever wanted a peek into the lives, loves and entrepreneurial dreams of a bunch of Silicon Valley start-ups, new reality TV show Startups: Silicon Valley could be for you, writes small business blogger Valerie Khoo.

Produced by Randi Zuckerberg, sister of Facebook founder Mark Zuckerberg, the "cast" all hope to turn their start-ups into billion-dollar businesses one day.

Our blogger admits she was mesmerised by the show, even if it was a bit like watching a train wreck.

12.45pm:   Australian stocks lacklustre opening had followed the US market’s negative lead.

Wall Street tumbled more than two per cent and posted its largest daily fall in almost a year after Fitch Ratings warned that the US would lose its AAA credit rating if the government failed to address looming tax increases, spending cuts and the fast approaching debt ceiling.

‘‘It was a little bit of a shock that the ratings agencies threatened to downgrade the US debt rating again and it seems that our market has reacted negatively again, which is expected,’’ said Sam Fimis, a private client adviser with Paterson’s Securities.

"But it is improving as we’re going along.’’

12.40pm: The markets have been steadily making up the ground they lost at the start of the day. Just befor lunch the All Ordinaries is down 33.5 points - 0.7% - at 4500.7, while the ASX200 is down 33.2 points - 0.7 per cent - at 4483.3.

12.30pm: And more agan on the jobs data, and the dollar's subsequent jump. Today’s data  ‘‘was stronger than expected,’’ said Sue Trinh, a Hong Kong-based senior currency strategist at Royal Bank of Canada.

‘‘It’s no surprise to see the Aussie outperforming across the board. Expectations of a December rate cut from the RBA have been pared back further.’’

12.25pm: More on the jobs data and National Australia Bank senior economist Spiros Papadopoulos who thinks the this morning's figures won't change the RBA’s outlook for the economy.

Whatever they were thinking earlier this week, I don’t think this would have changed their outlook. I don’t think the figures today really increase or decrease the chances of them going in December.

12.15pm: Linc Energy shares have powered along today - they're the best performing stock on the ASX200 by far - on the news that Russian tycoon and Chelsea FC owner Roman Abramovich is considering an investment.

Linc is up 4.5 per cent at 62.2 cents.

12.11pm: The dollar, as we touched on earlier, has responded positively to the employment data. At 11.33 it was at 104.27 US cents, up from 103.94 cents at 11.29, just before the data was released. And it seesm to have held on to the gains - for now at least - its at $US1.0427.

11.58am: It’s not a terrible number, but it’s not a great number, says JP Morgan Australia chief economist Stephen Walters:

  • The rise in employment was not enough to keep up with population growth. So, we were a bit lucky that the participation rate went down. If it hadn’t, you would have got a slightly higher unemployment rate.
  • We think you’re going to get softer numbers than that over the next few months, so unemployment will be a little higher over the next few months.

11.54am: But there's not only good news in the report, as the following sceptics note:

11.45am: The full-time component has been up for four consecutive months now - we're a bit surprised by that in particular, says RBC Capital Markets economist Su-Lin Ong:

  • To us, the employment numbers seem a little at odds with some of the weak leading indicators of the labour market.
  • We're not convinced this pace of job creation will continue given what the leads are telling us - and the softer pace of growth in the economy - but for now you've got to take the numbers at face value and they suggest a moderate-type economy.
  • It probably falls in the side of the ledger of the RBA staying on the sidelines for a bit longer. It's going to sit with their view that the labour market is softer but still in reasonable shape.
  • We have them moving again in Q1 of next year. You're looking at February, March at the earliest.

11.38am: The jobless rate has actually gone down slightly, as Peter Martin notes:

11.34am: Some more jobs data: full-time employment rose by 18,700 to 8.13 million in October and part-time employment was down 8,000 to 3.393 million.

The October participation rate was 65.1 per cent, compared with 65.2 per cent in September. The October participation rate was forecast to be 65.2 per cent.

11.31am: That gives the dollar a boost, taking the currency back above $US1.04 to $US1.0418.

11.30am: BREAKING: Jobless rate stays at 5.4 per cent in October, with 10,700 new jobs created. Strong figures.

11.28am: Jobs numbers are out in two minutes - expectations are for a rise in the unemployment rate to 5.5 per cent (from 5.4%) as the economy adds just 500 jobs. Dollar has slipped below $US1.04 to $US1.0398.

11.25am: Cabcharge, on the other hand, is one of the biggest losers, falling more than 7 per cent after Goldman Sachs cut the share to 'sell'.

11.12am: Another stock bucking the trend is Yellow Brick Road, which has soared 37 per cent to 41 cents, the highest since September 2011, but still well off 2008 highs of around $1.10.

Buying is being fuelled by Yellow Brick Road's tie-up with Macquarie to offer ''aggressively priced" mortgage prodcuts.

11.04am: Russian billionaire Roman Abramovich is considering investing in Linc Energy, a company that has produced diesel and jet fuel from gas released from underground coal, a person familiar with the talks told Reuters.

"He is particularly interested in the Clean Energy UCG business," the source said, declining to be named as the talks were confidential.

The source confirmed a report in the Australian Financial Review that said Chelsea soccer club owner Abramovich was seen dining with Linc Energy chief executive Peter Bond at a restaurant in Brisbane and had visited Linc's gas-to-liquids plant in Chinchilla, Queensland.

Linc Energy shares are up 3.4 per cent.

10.49am: Miguel Audencial, sales trader at CMC Markets, says ‘‘the Australian employment figure due later today would need to post a very strong result in order for the market to lessen the concerns it has from overseas headlines.’’

10.44am: This could be the first sign that the initial rush of concern over the Obama/fiscal cliff problem is beginning to subside.

Dow futures are up 0.35 per cent after Greek PM Antonis Samaras mustered enough support to secure approval of austerity measures that will unlock bailout funds, after more than 50,000 protesters ringed Parliament. Full story here.

10.37am: The big miners are following up a bad night on Wall Street with losses here too. They're a bit behind  the general market:

  • BHP is 1.29% lower to $34.53
  • Rio is 1.83% lower to $58.90
  • Fortescue is 1.73% lower to $3.98

10.31am: Local shares have stumbled to a loss now of 1.2 per cent. The jobs numbers at 11.30am could provide some cheer.

That +5000 to 10,000 would be a long way ahead of the Bloomberg survey, which predicts job creation of +500

 10.27am: Most blue chips are down, including the banks. ANZ has lost 4.27 per cent after going ex-dividend today. Here's how its competitors are faring:

  • CBA is 0.14% lower to $57.72
  • NAB is 1.04% lower to $24.73
  • Westpac is 0.68% lower to $25.68

10.23am: Here are the biggest sliders in early trade on the ASX200:

  • Cabcharge: -7.24%
  • Coalspur: -5.75%
  • APN News & Media: -4.35%
  • Iluka: -4.08%
  • Fairfax: -3.85%
  • Alumina: -3.43%

10.19am: All sub indices on the ASX200 are lower:

  • Materials: -1.47%
  • Financials: -1.23%
  • Energy: -1.21%
  • Consumer discretionary: -1%
  • Industrials: -0.77%

10.15am: In early trade, the All Ordinaries index is 50.3 points lower, or 1.1 per cent, to 4483.9, while the benchmark S&P/ASX200 is 51.2 points higher, or 1.1 per cent, to 4465.3.

10.07am: Shares down sharply early - ASX200 and All Ords down 0.9 per cent.

10.03am: Here’s an offbeat story Wall Street from overnight:

The re-election of Barack Obama sparked a heavy sell-off on global sharemarkets, but there was one beacon of hope for investors - guns.

As investors headed for the exits on concerns that the US could be plunged back into recession if politicians can't find a way to repair the national budget, the stock prices of gunmakers soared on Wall Street. Full story.

9.58am: ANZ trades ex-dividend today. Final dividend of 79c paid on 19 December for total 2012 dividend of $1.45 per share.

9.55am: Shares in rare earths miner Lynas Corporation have been halted from trade ahead of an outcome in a court case relating to its licence to operate a plant in Malaysia.

Lynas was granted a temporary operating licence for its controversial advanced materials plant on Malaysia’s east coast in September, but local activists have sought a judicial review of that approval. Environmental activists and local residents argue the plant will produce radioactive pollution.

9.52am: The big miners had a rough night on Wall Street. BHP lost 1.75 per cent and Rio gave up 2.48 per cent, which suggests they might be on the negative side of the ledger locally today.

But they were down as much as the US banks. Shares of Goldman Sachs Group, JPMorgan Chase & Co and Citigroup dropped 5 per cent, Bank of America lost 6 per cent and Morgan Stanley fell 7 per cent in midday trading on Wednesday, in large part over fears that a second-term Obama administration could enact tougher legislation on banks.

Obama lost the support of many bankers in the aftermath of the 2008 financial crisis and the passage of the 2010 Dodd-Frank financial reform law, which sought to shore up the financial system but also cost banks billions of dollars in annual profit.

9.48am: Today's jobs numbers for October are expected to show the unemployment rate is expected to rise to 5.5 per cent from 5.4 per cent, the highest level since April 2010. The number has been on the rise since December 2010, when it bottomed out at 4.9 per cent. 

That data arrives at 11.30am.

9.45am: As well as the US election, jobs data is likely to set the pace for local markets today, says Westpac’s global head of interest rates strategy Russell Jones.

“We are all waiting for the employment report, which is always an area of huge uncertainty. That will probably dictate how markets perform today,” he said.

Mr Jones said tension over the US fiscal cliff was already having an effect on local markets.

“We have started to see noise level rise almost immediately on that. It’s going to be the main policy debate over next six weeks,” he said.

“But frankly speaking I wouldn’t expect much until the 11th hour and the 59th minute on that one.”

9.40am: After an initial burst of optimism world markets decided the re-election of Barack Obama was a cause for concern. Australian shares spiked yesterday on news of the Obama re-election, rising strongly into the close. US markets, on the other hand, opened higher and spent the first 90 minutes of trade falling. The S&P500 and the Dow both closed more than 2 per cent lower. European investors noted the Obama win and swiftly turned their attention to state of the US budget.

Driving the losses were fears about the US 'fiscal cliff'. President Obama has until 31 December to negotiate his way through the mess with his Republican counterparts. By mess, we mean a combination of tax increases and spending cuts which have the potential to damage the nascent US recovery and plunge the world's biggest economy back into recession.

Given that Obama hasn't been returned to office with anything like a landslide, at least on the popular vote, claims of a clear mandate to deal with the budget on his own terms will be hotly contested by Republicans. Which is what investors are worried about.

9.36am: For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:

  • SPI futures are 33 points lower at 4463
  • The $A is lower at $US1.0417
  • In late trade, the S&P500 fell 2.15% to 1397.71
  • In Europe, the FTSE100 fell 1.58% to 5791.63
  • China iron ore added 50 US cents to $US121.60 a metric tonne
  • Gold rose $8.10 to $US1719.02 an ounce
  • WTI crude oil fell $3.79 to $US84.92 a barrel
  • Reuters/Jefferies CRB index added 1.66% at 297.17

9.34am: Good morning folks. Welcome to the Markets Live blog for Thursday.

Contributors: Thomas Hunter, Jens Meyer, Richard Hughes

This blog is not intended as investment advice

BusinessDay with agencies