That's all for today. Thanks all for reading and posting your comments.
Among the companies reporting today, Flight Centre was the biggest winner, soaring 8.5 per cent to a new record closing high of $48.41.
At the other end of the ledger, Seven Group slumped 7.5 per cent and Billabong lost 5.3 per cent (clawing back earlier double-digit losses).
Boart, which reported yesterday, lost another 10.2 per cent, the worst performer among the top 200.
For more on this season's earnings reports, click here for our special.
The local stock market has closed slightly higher, with the benchmark S&P/ASX200 index inching up 5.8 points, or 0.1 per cent, to 5141.2, while the broader All Ords gained 3.7 points, or 0.1 per cent, to 5130.8.
Among the sectors, consumer staples added 0.7 per cent, financials rose 0.3 per cent, while materials slipped 0.1 per cent and energy lost 0.6 per cent.
Emerging-market stocks are under pressure, with Philippine shares retreating to the lowest level in two months and Thai equities headed for a bear market.
Thai shares are sliding for a ninth day, sending the benchmark gauge down 20 per cent from this year’s high. The Jakarta Composite Index has slumped 3.1 per cent while India’s stock measure declined 1.8 per cent.
The rupee weakened 1.7 per cent and the baht dropped 0.7 per cent.
Overseas investors pulled $US2.2 billion from equity markets in India, Indonesia, Thailand and the Philippines this month amid prospects the Federal Reserve will reduce stimulus.
Stocks also declined after US Secretary of State John Kerry said Syria will be held accountable for using chemical weapons.
Turn the tables back a couple of years and we suspect we would be seeing global markets in free-fall at present, says IG's Chris Weston:
- However, the fact the S&P 500 fell 0.4% yesterday, while Asian and European markets are showing zero panic highlights the huge change in investor psyche. Is it complacency or is it that the market has done its homework and genuinely thinks that the foreseeable risks will sort themselves out with limited impact on future earnings streams?
- Interestingly, the US volatility index (VIX) pushed up a mere 7.1% to 14.99% yesterday, despite emerging markets continuing to find solid redemptions; the US being likely to run out of money by mid-October; a mass FOMC rotation exercise taking place in Q1 2014 (which will surely create uncertainty); political issues in Italy and potentially Germany; Greece needing a third bailout and now geo-political tension flaring up.
- All eyes now fall on commentary from Iran, Saudi Arabia and Iraq, who of course are key players and are gradually getting pushed into fray. Iraq, we suspect, is the market’s key concern as it is OPEC’s second largest producer, and domestically internal tensions are becoming more vivid by the day. Reports that the US is ready to take action in the near term (CNN) are of interest and the fact that President Obama has had detailed liaisons with Australian Prime Minster Kevin Rudd suggests the US is drumming up support from its allies.
Losses across the region are picking up now and that seems to be weighing on the dollar, which has just plumbed the day's low at 89.56 US cents, down more than half a cent from this morning.
‘‘Increased volatility historically has placed some downward pressure on the Aussie,’’ says CBA currency analyst Peter Dragicevich. ‘‘In terms of what’s contributed to it, you’ve got concerns in the emerging-market space. And the other factor is that historically, volatility does pick up in and around large turning points in US monetary policy, and we are on the cusp of one at the moment.’’
And following up from that last post: new home loans approved by banks and other lenders jumped by 28 per cent to $79 billion in the June quarter, amid growing signs of a recovery in the residential property market.
Official data released by APRA today puts Australian lenders’ total exposure to residential property at $1.13 trillion, an amount that has increased by 7.3 per cent in the year to June.
New lending, however, is expanding much more quickly than the banking sector’s total exposure to property, because many borrowers are using low interest rates to pay off their debts more quickly, taking older loans off banks’ books.
The fastest growing category of property lending was to investors, with the value of investment loan approvals surging by 35 per cent to $27.8 billion in the quarter.
Veteran stock tipper Charlie Aitken is banking on NSW, and in particular Westpac, as steering a national recovery in the housing market.
Aitken says Sydney is a barometer of Australian confidence, and given the auction clearance rates in the harbour city have been above 80 per cent for a record six weeks, he is predicting a new national property boom.:
- When Sydney is going well, Australia is going well. It’s that simple. I think the fact Sydney auction clearance rates are at record levels ahead of the federal election is extremely bullish.
- That suggests the betting agencies are right in the result they are predicting and households are utilising historically low interest rates to upgrade their property ahead of the broader confidence lift of a decisive federal election result.
- To take advantage of this upswing, investors will want to be exposed to those who provide finance to the property markets.
- I continue to think the oligopoly mortgage banks are the cheapest way of gaining leverage to rising residential real-estate prices and the demand for finance/refinance.
- Westpac is the Bank of New South Wales plus St George. It is a double leveraged play on NSW after buying SGB during the GFC.
Citi has whetted the prospective appetite of CBA investors for receiving extra cash, highlighting prospects for a special dividend in the year ahead, flagging a "$1 per share capital surplus", it told clients today.
"We see scope for CBA to generate ~55 cents per share surplus capital by end FY14, even after fully neutralising the DRP (dividend reinvestment program)," it said in a client note.
"In addition, we estimate a further ~50-60 cents per share of capital could be released via sale of the bank's property management business.
A ‘‘large’’ special dividend payment could also be triggered by Tony Abbott’s plan to reduce the company tax rate, the analysts says.
CBA's extra capital is forecast to come partly from profits in its banking business and also from the sale of its property management business.
When it is building up capital so quickly, there is an argument for giving some of it back to shareholders before the Coalition's corporate tax changes take effect, if they win the election.
Why? Because the Coalition plans to reduce the corporate tax rate from 30 cents in the dollar to 28.5 cents in the dollar, which would reduce the value of CBA's "franking credits" - tax breaks on dividends.
CBA disappointed some investors when it did not pay a special dividend earlier this month, but Citi argues this change in the tax system might be enough to convince the bank’s board to return the surplus capital to shareholders.
Some of the smaller markets in the region have been hit hard today, but overall it's a fairly mixed picture:
- Japan (Nikkei): +0.2%
- Hong Kong: -0.3%
- Shanghai: -0.2%
- Taiwan: -0.5%
- Korea: +0.05%
- ASX200: +0.15%
- Singapore: -0.6%
- Malaysia: -1%
- Indonesia: -2.7%
- Philippines: -4.4%
Brent crude oil has risen above $US111 a barrel again to trade near its highest in five months as rising tensions over a suspected chemical weapons attack in Syria raised the prospect of more military action in the Middle East.
The United States and its allies have met in Jordan for what could be a council of war, should they decide to punish Syrian President Bashar al-Assad, who has denied using chemical weapons and blamed rebels for staging such attacks.
Brent crude for October is trading at $US111.18. It hit $US111.68 on Monday, its highest since April 2.
"Any dips in oil prices will be well supported by tensions bubbling in Syria as that has the potential to spread into other parts of the region," says Ben Le Brun, a market analyst at OptionsXpress.
Unrest in the Middle East, which pumps a third of the world's oil, has supported Brent crude as investors feared that the crises in Syria and Egypt could spill over to the rest of the region and disrupt oil supply.
The Australian dollar remains stuck under 90 US cent, last trading at 89.88 US cents, as heightened tensions in Syria and uncertainty over the Federal Reserve's stimulus policy weigh on market sentiment.
The move lower this morning was triggered after the Indonesian rupiah and the Malaysian ringgit came under early pressure. That followed steep falls in Turkey, Brazil and Mexico's currencies yesterday.
"It's the emerging markets story that has pushed the Aussie lower," says Michael Turner, a strategist at RBC Capital Markets. "There was broad US dollar buying and nothing specific to the Aussie," he says, seeing a test of 88.48 on the cards.
Emerging markets were hit hard last week on unrelenting expectations the US Federal Reserve will start tapering its massive stimulus next month. The Aussie is often used as a liquid proxy to hedge against weakness in emerging markets.
Despite the optimistic noise from investment bankers about the IPO market, the planned float of Centuria Property Trust holding the Northpoint Tower building in Sydney’s North Sydney has been pulled by its backer, Centuria.
The $215 million float was struggling to win investor support late yesterday, which prompted the backers to withdraw the offering a few minutes ago.
The failure of the float threatens to undermine the push by Centuria to spin off a range of listed property vehicles to complement its unlisted trusts.
Toll Holdings faces strike action by more than half its workforce after staff voted overwhelmingly in favour of taking industrial action due to a lack of progress over a new enterprise agreement.
Talks between the Transport Workers Union and Toll became bogged down in July over issues including job security, outsourcing, and wages. It led to the union applying to the industrial umpire to carry out a ballot of members who worked at Australia’s largest listed transport company.
The results of that ballot, released on Tuesday, show about 85 per cent of the votes received were cast in favour of staff taking protected industrial action.
The possibility of workers exercising their right to take industrial action threatens to disrupt the supply chains of retailers across the country. Toll transport goods for retailers including Coles and Woolworths.
Drilling contractor Boart Longyear is a long way from its highs of better than $20 a share five years ago, but at 45.5 cents, down a heavy 7.1 per cent so far today, brokers are warning that it may have much further to fall.
June half loss of $US329 million, largely on write-downs, has set the scene for a thumping full year loss, even with ongoing cost cutting.
The push back from miners over contract prices is only now being felt, which will be another leg down to earnings over the next year or so.
Citi didn't mince words, maintaining its ''Sell" call as it cut to 40 cents from 55 cents its targeted price for the shares.
"With demand still deteriorating, balance sheet risk remaining elevated, and limited near-term catalysts, we retain our Sell recommendation," it told clients earlier today.
Here's the Myer executive shake-up story we promised you earlier.
Department store giant Myer is shaking up its management team, ahead of next year’s hunt to find an eventual replacement for chief executive Bernie Brookes.
The changes, announced in an internal email viewed by BusinessDay, have been sparked by an ‘‘internal review of processes’’ at Myer, as the retail giant seeks to find further cost savings without having to axe staff.
As part of the changes, Myer’s general manager of marketing and brand development, Megan Foster, will become managing director of the department store’s part-owned fashion label sass & bide.
Foster’s vacant marketing role will be merged with control of digital sales, the successful 'Myer one' loyalty program, major events and the ‘‘omni-channel’’ sales strategy – selling merchandise across bricks-and-mortar stores, online websites and mobile devices – as part of a new executive role.
Myer is already interviewing candidates for the new position. Whoever is appointed to the new role will be considered a prime contender to succeed Bernie Brookes as Myer chief executive when he and the board agree to a date for his eventual departure.
Megan Foster will take the helm at sass & bide.
For the year to June 30, Seven Group Holdings reported a 193 per cent rise in full-year profit to $486.4 million.
Revenue grew by 6 per cent to $4.75 billion, and underlying net profit was $399 million - within the forecast range provided at its half-year results.
The company declared a 20 cent fully-franked dividend.
The result was boosted by a $50 million gain on the sale of its investment in Consolidated Media Holdings last year for $491 million. But the company recorded $54.3 million in restructuring and redundancy costs in the second half.
Here's a glimpse at how reporting companies are doing today:
- Billabong: -9.7%
- Whitehaven: -1.7%
- Flight Centre: +5.4%
- Seven Group: -7.5%
- McMillian Shakespere: +0.5% (will reporting after market closes)
Shares in medical devices outfits Resmed and Fisher & Paykel Healthcare are well supported, with bullish forecasts by F&PH maintaining interest.
Kiwi sleep apnoea group Fisher & Paykel Healthcare reckons the year ahead will be a big one, flagging a net profit of $NZ90-95 million up from $NZ77.1 million earned in the year to March.
Ditto for revenue, which it reckons will run at $NZ625-645 million.
This follows a buoyant second half performance in its most recent year, when net profit surged 54 per cent, thanks to improved margins and efficiencies.
It is a key competitor of Resmed in the US market, which has also reported strong earnings growth recently, pushing the share price to record levels.
In early afternoon trading, Resmed was ahead 1.5 per cent to $5.515 in local trading, holding around all-time highs, with Fisher & Paykel Healthcare was up 0.8 per cent to $3.60 before being put in a trading halt, holding above $3 and back at multi-year highs.
We've got a cracker of a story coming up for you very soon from Fairfax Media's Metro Business Editor Mark Hawthorne. Stay tuned.
Weak coal prices and high operating costs pushed NSW coal producer Whitehaven Coal into the red in the year to June, with little prospect of a quick turnaround.
In the year it posted a net loss of $60.7 million, a reversal from the $57.8 million profit of a year earlier.
Revenue rose slightly to $622.1 million from $618.1 million a year earlier.
The loss saw the group pass paying a dividend in the latest year, following a total payout of 53c in the previous year.
Whitehaven said it expects little improvement in coal prices ‘‘in the short term’’ although the weaker Australian dollar will give revenues a lift.
‘‘In addition recent cost cutting across all of the mines will leave Whitehaven well placed to cope with the current market environment,’’ it said.
Output and sales are expected to total 11 million tonnes, up from 6 million tonnes in the year to June.
Shares have fought back, with the benchmark S&P/ASX200 down just 4.2 points, or 0.1 per cent, at 5131.2.
Rather than any sectors pushing strongly into black, it seems sectors have trimmed losses.
- Consumer staples: flat
- Financials: +0.2%
- Energy: -0.7%
- Materials: -0.5%
- Telecommunications: -0.5%
International tourist numbers have surged by 5.2 per cent to nearly half a billion people worldwide in the first half of 2013, beating earlier expectations.
The UN’s World Tourism Organisation says some 494 million international tourists spent at least one night abroad in the first six months of the year.
As a result of the ‘‘robust’’ performance, the WTO said it was boosting its 2013 forecast. After originally tipping growth of three to four per cent for the whole year, it now expects the increase to be at the higher end of that range ‘‘or to slightly exceed it’’.
Europe enjoyed growth of 5.1 per cent in international tourist numbers in the six months, the Madrid-based agency said in a report of preliminary results for the period.
The Asia-Pacific region reported growth of 6.2 per cent including an 11.6 per cent surge in tourists going to Southeast Asia.
But results were weaker than anticipated in the Americas, which posted growth of just 2.2 per cent.
International tourist numbers grew 3.1 per cent in North America, but South America reported growth of just 0.3 per cent and the Caribbean had growth of a meagre 0.1 per cent.
In Africa, international tourist arrivals rose by 3.8 per cent.
In the Middle East, tourist numbers soared by 12.9 per cent, but these figures should be viewed ‘‘with caution’’ because of uneven results and limited data, it said.
Wage growth under recent enterprise bargaining agreements has been restrained, posing little threat to the inflation outlook, new federal government figures suggest.
The Department of Education, Employment and Workplace Relations data released on Tuesday shows the average annualised wage increase through collective agreements during the June quarter was 3.4 per cent, down from 3.8 per cent in the previous three months.
The annualised rate for the private sector fell 0.2 percentage points to 3.5 per cent in the September quarter, while public sector agreements dropped by 0.7 percentage points to 3.2 per cent.
The overall result brought it more into line with the Reserve Bank of Australia’s preferred wage growth measure for the same quarter.
The June quarter wage price index, released earlier in August by the Australian Bureau of Statistics, showed an annual rate of 2.9 per cent - well below the 4.5 per cent level normally considered a threat to the inflation outlook.
Goldman Sachs lost tens of millions of dollars after a computer glitch led to a flood of erroneous options trades last week, a source close to the matter said overnight.
Last Tuesday, an upgrade of Goldman's internal system affected options on stocks and some exchange-traded funds with symbols beginning with the letters H through L, leading to trades vastly out of line with market prices.
Roughly 80 per cent of the erroneous option-market contracts traded on NYSE Euronext's two option platforms NYSE Arca Options and NYSE Amex options were cancelled, according to a second source close to the situation.
The two platforms have collectively handled about 23 per cent of equity and index options trading in August, according to data from OCC, formerly known as the Options Clearing Corp, which clears all U.S.-listed options.
NYSE Euronext said it completed a review and appeals process last week but declined to give further details.
Dutch banker ING today said it was selling its South Korean insurance arm ING Life Korea to the Asian country’s largest private equity firm MBK Partners in a deal worth 1.24 billion euros.
‘‘This transaction is a major step in the divestment of our Asian insurance and investment management activities,’’ the Amsterdam-based ING said in a statement.
The Australian dollar has slipped against all of its 16 major counterparts.
The Aussie weakened against its US and Japanese peers as investors continued to sell Asian emerging-market holdings and before a report that may show home-price gains in the world’s biggest economy remained near a seven-year high, boosting the case for a reduction in US Federal Reserve stimulus.
“Increased volatility historically has placed some downward pressure on the Aussie,” said Commonwealth Bank currency economist Peter Dragicevich.
“In terms of what’s contributed to it, you’ve got concerns in the emerging-market space. And the other factor is that historically, volatility does pick up in and around large turning points in US monetary policy, and we are on the cusp of one at the moment.”
The Aussie lost 0.4 per cent to 89.92 US cents in early trade. It fell 0.6 per cent to 88.38 yen.
Below is a graphic showing major currency performance over the 24 hours. Based currency is USD.
Billabong says it will seal a refinancing deal within weeks as its annual net loss more than tripled and sales of its surf and streetware continued to decline in key markets including the US.
The company is considering two refinancing offers, one led by US private equity firm Altamont Capital Partners and another from US hedge funds Oaktree Capital Management and Centerbridge Partners.
"We are within weeks of finalising our long-term funding arrangements," chairman Ian Pollard said, without mentioning which party's offer was the preferred option.
Billabong posted a net loss after tax of $859.5 million for the year ended June 30, including significant items such as impairment charges on brands and goodwill. That compared with a net loss of $275.6 million a year ago.
Adjusted net profit, excluding one-off items, fell to $7.7 million, from $33.5 million a year ago. That was below average analysts' forecasts of $10.8 million.
Sales continued to slide in the Americas, Billabong's biggest market, following the closure of a number of underperforming stores, the company said. Store closures and weak consumer sentiment hit sales in Australia, while heavy discounting impacted revenue in Europe.
Struggling to pay off debts left over from an ill-timed expansion as its brands fell out of favour, Billabong has issued a series of profit warnings since rejecting a $850 million bid from private equity firm TPG Capital Management in February 2012.
It shares hit a record low of 12 cents in June after trading above $14 in 2007.
It's a tale of two reporting companies today: Billabong has shed 11.5 per cent after its huge loss, while Flight Centre is up 5.1 per cent after reporting a nice bump up in profit.
The market has opened lower, with the benchmark S&P/ASX200 falling 2.5.5 points, or 0.5 per cent, to 5109.9. The broader All Ords is down 24.3 points, or 0.5 per cent, to 5102.8.
Italian borrowing costs relative to Germany are shrinking as bund yields climb, in turn masking investor concern about the potential for political turmoil, credit-default swaps suggest.
The cost of insuring Italian government securities against default has risen 8.5 per cent since reaching a low for the year in May. The yield premium investors demand to own its 10-year bonds rather than German bunds dropped to a two-year low last week.
Evidence of an economic rebound in the euro region has pushed German yields higher while underpinning demand for Italian debt, even as former Prime Minister Silvio Berlusconi’s party threatens to withdraw from the coalition government. The increase in German rates was exacerbated by speculation that the US Federal Reserve will soon scale back its bond purchases.
‘‘Italian yields are out of whack with its political situation,’’ says Robin Marshall, director of fixed income at Smith & Williamson Investment Management in London. ‘‘Some investors may have expressed their bearish view through the CDS instead of selling the underlying bonds. It’s more the case of German yields being pushed higher by concern about the Fed’s tapering than a reflection of progress in structural reforms in Italy.’’
- The comments saw the markets free-falling into the close, having traded in the green for over three quarters of the day. The Washington Post is now reporting that it’s not a question of if the US goes to war with Syria, it’s a question of when, with the al-Assad regime now ‘crossing the red line’.
- This caused gold to shoot up and cross the $1400 an ounce mark, and it will see the gold plays continuing their recent surge. Yesterday we saw Silver Lake (SLR) entering a trading halt to raise $47.5 million in a capital rising. The surge in the gold price may actually trigger several more of these gold plays to take advantage of their recent share price surge and rise capital themselves.
- Energy is also being watched very closely as a declaration of war by the US will see a spike in world oil prices. This is the worst possible outcome at the current point in time – and from a humanitarian point of view.
- If war does eventuate, higher fuel prices are going to add a third impact point to emerging markets as their currencies were again smashed overnight. The Indian rupee fell to 65.53 to be back within 0.8 rupee of its all-time low, the Brazilian real and South African rand also shift lower on the news.
Women's clothing retailer Noni B has reported an underlying profit of $1.5 million, excluding an impairment of goodwill, compared with $2.7 million in the previous year.
Including impairement, Noni B ran a loss of $3.5 million.
"This is a disappointing result. Revenue increased despite one less week’s trading, however; earnings were affected by lower margins and higher expenses in a year when spending on women’s fashion was impacted by low consumer confidence," said joint managing director David Kindl.
Mr Kindl said the outlook for women's fashion remained challenging and sales so far this financial year have been hit by pre-election jitters.
Noni B will not pay a final dividend.
Saudi Arabia has secretly offered Russia a sweeping deal to control the global oil market and safeguard Russia’s gas contracts, if the Kremlin backs away from the Assad regime in Syria.
The revelations come amid high tension in the Middle East, with US, British, and French warships poised for missile strikes against Syria, and Iran threatening to retaliate. The strategic jitters pushed Brent crude prices to a five-month high of $US112 a barrel.
‘‘We are only one incident away from a serious oil spike. The market is a lot tighter than people think,’’ said Chris Skrebowski, editor of Petroleum Review.
Leaked transcripts of a behind closed doors meeting between Russia’s Vladimir Putin and Saudi Prince Bandar bin
Prince Bandar, head of Saudi intelligence, allegedly confronted the Kremlin with a mix of inducements and threats in a bid to break the deadlock over Syria.
‘‘Let us examine how to put together a unified Russian-Saudi strategy on the subject of oil. The aim is to agree on the price of oil and production quantities that keep the price stable in global oil markets,’’ he is claimed to have said at the four-hour meeting with Mr Putin.
Stronger sales and improved margins have helped Flight Centre lift its net profit 23 per cent.
The travel agency group’s 2012-13 profit was $246 million, up from $200 million the previous year.
Revenue was up nine per cent to $1.99 billion.
Managing director Graham Turner said the company recorded profits in all 10 countries it operates in for the third consecutive year.
Sales of both leisure and corporate travel increased 20 per cent.
The company expects to grow its sales network by between eight and 10 per cent this year.
‘‘FLT (Flight Centre) is a growth-focused company and has set its sights on delivering improved top and bottom-line results and enhanced shareholder returns during 2013-14,’’ Mr Turner said.
The company declared a fully-franked final dividend of 91 cents. That’s up 28 per cent on the 2012 final dividend of 71 cents and takes the full year distribution to $1.37 a share.
Troubled surfwear group Billabong has reported a net loss of $859.5 million for the year to June, down 211.8 per cent from a year earlier.
The company said the net loss included significant items such as write downs of real estate and retail and impairment charges.
It said it was still considering a proposal by private equity funds Oaktree/Centerbridge and had secured liquidity for refinancing.
The company did not post a final dividend.
The Australian market looks set to open lower after Wall Street fell following a disappointing durable goods report which raised fresh concerns about the strength of the US economy.
The fall was sharply exacerbated when Secretary of State John Kerry warned the US would demand ‘‘accountability’’ after an ‘‘obscene’’ chemical weapons attack on Syrian civilians.
Here's what you need2know this Tuesday morning:
- SPI futures down 29 points
- AUD fetching 90.28 US cents, 88.84 yen, 67.51 yen, 57.94 pence
- On Wall St, Dow Jones -0.4%, S&P500 -0.4%
- In Europe, Eurostoxx -0.2%, FTSE100 closed, CAC -0.1%, DAX +0.2%
- Gold at $US1403.40 an ounce
- Oil at $US106.23 per barrel
- Iron ore at $US138.70 per tonne