Markets Live: Investors wait for Greece deal
Australian shares end slightly higher as investors wait for news from eurozone finance ministers's meeting on a Greek aid deal.
- Moody's downgrades Queensland outlook
- Bendigo buys stake in regional lender
- New talks to save Greece from collapse
5.19pm: That's all folks, we've enjoyed your company and hope to see you tomorrow from 9.30.
4.59pm: Financial spreadbetters expect Europe's main stock indexes to dip as investors take a breather following a sharp five-day rally ahead of a meeting of euro zone finance ministers.
Meeting for a third time in as many weeks, the ministers will try to agree on a deal to get international lenders to release a new tranche of aid to debt-stricken Greece.
Spreadbetters expect London's FTSE 100 to open 8 to 12 points lower, or down 0.2 per cent, Frankfurt's DAX to open 15 to 20 points lower, or down 0.3 per cent, and Paris' CAC 40 to open 13 to 15 points lower, or down 0.4 per cent.
4.45pm: This tweet by market analyst Ben Le Brun nicely sums up the day:
4.22pm: Melbourne IT shares fell 11 per cent after the company warned of lower earnings in calendar 2012.
4.19pm: Here's how some of the blue chips performed:
- BHP: +0.8%
- Rio: +0.05%
- ANZ: -0.1%
- CBA: +0.3%
- NAB: +0.3%
- Westpac: -0.7%
- Fortescue: +3.3%
- Woolies: +0.6%
- Wesfarmers: +0.3%
- Telstra: -1.1%
4.16pm: Among the sectors, materials gained 0.7 per cent, energy rose 0.6 per cent, while financials ended flat.
4.12pm: The market has closed higher, with the benchmark S&P/ASX200 index risiing 11.2 points, or 0.3 per cent, to 4424.2, while the broader All Ords gained 12 points, or 0.3 per cent, to 4443.5.
3.57pm: Petrol prices are on the rise and again the differences across capital cities are marked - which does’t make sense, CommSec laments:
- There is a common regional benchmark gasoline price and uniform movements in wholesale (terminal gate) prices across capital cities. But pump prices for petrol across Australian capital cities are far from uniform.
- Just last week the average petrol price rose by around 7 cents a litre in Sydney and Melbourne and fell by around 7 cents a litre in Adelaide.
- Motorists aren’t being well served by the current variable-time discounting system. Regulators need to ensure that the vagaries of the discounting cycle aren’t serving to disguise an upward drift in average gross retail margins.
3.46pm: Australians are expected to spend $16.2 billion over the festive season giving local businesses a reason to feel optimistic as consumer confidence remains subdued.
Much of that will likely be spent on gifts with people on average budgeting $475 for presents, a Commonwealth Bank survey of more than 1000 Australians shows. That means an equivalent of $7.8 billion going inside the wrapping paper.
Contrary to complaints that internet shopping is destroying local retailers, those surveyed said they planned to buy most of their Christmas gifts (70 per cent) from bricks and mortar stores. Those surveyed planned to buy just 30 per cent of their Christmas gifts online.
3.35pm: Despite the enthusiastic rise by Wall Street on Friday, the Australian market was slow to get out of the gates today with traders adopting a fairly measured approach as we await word from the eurozone finance ministers regarding Greek aid, CMC Markets trader Tim Waterer says:
- With the Greek-aid situation in Europe and the budget discussions in the US both still ongoing, the ASX200 was reluctant to move out of first gear today given we still have some crucial as-yet unresolved issues abroad.
- As such, the Australian market moved at its own pace today with traders needing further convincing that the Friday rally on Wall Street was legit and not solely fuelled by Thanksgiving cheer.
3.22pm: Anybody wondered why almost every power company and lobby group in the country is pushing for smart meters? Michael West asks:
First it was a faulty regulatory system which gave rise to ''gold-plating'', or overspending on networks, and spiralling power bills. The increase in ''peak demand'' remains the industry catch cry to rationalise its rampant spending, even though peak demand has actually been falling for three years.
But as the myth of peak demand is now harder to propagate, industry is pushing for smart meters. The smart meter is the next big ruse.
Smart meters and ''flexible pricing'' merely shift the business risk from the company to the consumer. Like mobile phone bills, their sheer complexity will enable the promoter to game the customer.
Who will pay for the devices? Who will pay for the software upgrades? Where should the metering company sit, in an offshore structure? Should the device be company-specific?
3.10pm: Sector by sector on the ASX:
- Gold: +1.1%
- Industrials: +1.1%
- Materials: +0.7%
- Consumer Staples: +0.6%
- Telecommunications: -0.9%
- Health: -0.8%
- Financials: flat
2.54pm: Foreign investors have started rebuilding their China equity portfolios, tempted by low valuations after two years of market underperformance and signs economic growth may be stabilising.
They have pumped nearly $US4 billion into Chinese equity funds in the past two months alone, trying to get in early on what they hope will be a sustained rally.
But sentiment looks to be running ahead of fundamentals. There are clear risk signals for the Chinese market - including sluggish earnings, rising corporate debt and retail investors looking for other opportunities - even if the broader economy gathers strength.
2.40pm: Here's a snapshot of how markets around the region are performing:
- Nikkei(Japan): +0.6%
- Shanghai: -0.2%
- Taiwan: +0.8%
- South Korea: -0.2%
- Singapore: +0.4%
- New Zealand: +0.3%
2.08pm: Australia will find it difficult to grow without boosting productivity through micro-economic reform, National Australia Bank chairman Michael Chaney says.
"I’m concerned that if we don’t manage to lift our productivity we’re going to find it very difficult to achieve any real economic growth," he said.
Mr Chaney, who also chairs Woodside Petroleum, said labour market reform was urgently needed to restore the balance. Speaking at a conference in Perth, Mr Chaney said capital productivity growth had been very poor, partly because it makes time for income to flow from investment in major projects:
So capital productivity is depressed. In addition to that ... capital productivity is lower than it ought to be because of over-regulation and difficulty getting projects up and inefficient project management, rushing projects and having costs blow out and so on. And with labour productivity, growth has simply not been there. One of the reasons for that is that the current industrial relations legislation works against productivity growth.
1.57pm: BusinessDay’s Gareth Hutchens has an interesting take on the changing state of the advertising market.
Next year, for the first time ever, the amount of money spent on online advertising is expected to overtake that spent advertising on either newspapers or free-to-air television.
New data from the Interactive Advertising Bureau of Australia shows online ad spending has generated double-digit growth through every quarter of 2012, even while the general advertising market has been softening.
1.20pm: With the market meandering along in a fairly ho-hum fashion, it’s time to have a look at some of the more serious business being conducted here in the Markets Live blog.
Readers of the comments section will have noticed a game of pick-the-close being played by some of the regulars. It's basically a sharemarket version of that old golfing classic, closest to the pin. Participants must be applauded for playing nicely - some the debates in there can be heated, particular when the traejctory of house prices comes up.
So, in honour of their crystal-ball gazing, here is the result for last week. With thanks to Snidery Mark for his efforts. The ASX200 closed at 4413.2. And the winners were:
- Seriously: Prediction 4405 (Missed close by 8.2)
- The New Black: 4400 (13.22)
- Another Gump: 4390 (23.23)
- Snidery Mark: 4380 (33.24)
- Catch 22: 4470 (56.85)
1.10pm: The view expressed in that last post is an echo of a tongue-in-cheek comment from reader ‘cranberry’, made before the ASX even opened today. At 9.58am, cranberry noted:
How could our market not rise today? Americans going nuts buying discounted goods in a once a year sale is surely an excellent indicator that everything is rosy.
1.05pm: Ric Spooner, chief market analyst at CMC Markets, says Australian traders were not convinced by the strong rally in US markets on Friday. He says many traders prefer a ‘‘cautious stance, waiting to see if the market can hold these gains once trading returns to normal this week.’’
The local market’s subdued response to Friday’s US gains is also consistent with recent volatility. At its lowest point this month the US S&P 500 index was 9% below its peak while the ASX 200 had fallen only 5%. In these circumstances it’s not surprising that we have rallied less in recent days.
After last week’s solid gains, equity markets are getting to a level where investors will need tangible evidence of good outcomes on Greece, the Fiscal Cliff and economic growth to push prices higher.
1.00pm: More from the small business desk: Governments do not fully understand family-owned enterprises whose long-term focus makes them different from other small businesses, a parliamentary committee into family businesses has been told.
12.50pm: And talking of the dollar, BusinessDay writer Matthew Kidman has been looking at what might happen if the $A goes above $US1.20:
What does the RBA do if the Aussie does start to march higher next year? The obvious response would be to cut official interest rates as the strong currency cruels a range of export industries including mining, education, tourism and agriculture. If the Aussie went all the way up to $US1.20 the domestic economy could simply grind to a halt. With official rates sitting at 3.25 per cent, the RBA could easily cut by another 150 basis points before it would have any major impact on the currency.
12.43pm: Hopes that Europe's finance ministers will come to some sort of a deal over a €30 billion aid package for Greece have sent the dollar higher.
In recent trade the dollar was fetching $US1.0453, a little down on the day's high of $1.0470, but more than half a cent above Friday's $US1.0398.
Easy Forex senior currency dealer Francisco Solar said the currency was being supported by positive sentiment surrounding negotiations between euro zone finance ministers, which will continue on Monday night, especially. Sspeculation that writedowns would not be necessary had lifted market confidence, he said.
‘‘It is holding onto its gains from late last week,’’ he said. ‘‘The rhetoric we have heard is that a deal is definitely possible without any writedowns, so that has kept sentiment elevated,’’ he said.
12.32pm: SCA Property Group, the $1.4 billion shopping centre trust spun off by Woolworths, has jumped as much as 1.4 per cent on its first day of trading.
Shares of the company, which raised $472 million through a placement to institutional investors at $1.40 a share last week, opened at $1.405 and traded at $1.42 just after noon. Woolworths shareholders will receive one stapled unit in the property group for every five shares they hold in Australia’s largest retailer as of Friday.
The listing of SCA, which holds 69 shopping centers in Australia and New Zealand, is the largest initial public offering in Australia since Westfield Group hived off ownership of some of its Australian and New Zealand malls into the Westfield Retail Trust in December 2010.
Woolworths shares have fallen 13 cents - 0.5 per cent - to $28.53.
12.20pm: Cabcharge is among the best performing stocks on the ASX200 today.
Shares fell off a cliff last week, falling from about $4.30 to a low of $3.57 on Friday after the RBA announced that the 10 per cent surcharge whacked onto taxi fares for the privilege of paying by a card won't survive the new year.
But Cabcharge - which holds its AGM on Wednesday - has come back a bit today. Shares are up 15 cents at $3.86.
12.09pm: ‘Insider buying’’ by directors is a common yardstick for many investors when considering buying into a company: if directors are buying, then it may pay to follow suit, since they usually have a fairly good idea of what’s going on.
But for those looking at buying into Melbourne IT, it would have cost them dearly.
Thanks to the company’s dividend reinvestment plan, some of the company’s directors topped up their holdings at $1.75 late last month.
But the trading update this morning, signalling a 10 per cent slide in earnings before interest and tax this financial year has prompted a quick bout of selling, which has pushed the shares so far to $1.48, down 26 cents - or almost 15 per cent.
11.57am: For the first year since the futures were created, Brent crude is poised to overtake West Texas Intermediate oil as the world’s most-traded commodity.
“The market is looking at Brent as the international leading index for traded crude. It will be a trend that will continue for a very long time,” said Angelos Damaskos, manager of the Junior Oils Trust in London.
Daily trading in Brent jumped 14 per cent to average 567,000 contracts in the year to November 20 compared with all of 2011, while WTI fell 17 per cent to 575,000.
“When we talk about asset allocation, when we talk about the overall impact of oil on inflation, and all these sort of things, we’ve been talking about Brent as the price of oil,” said Greg Sharenow, who co-manages $30 billion of commodity investments at Pimco.
11.45am: So the market's up, even if only a little and much of it's due to a better situation in the US, especially the big spend on 'Black Friday' - the day after Thanksgiving - as consumer confidence seemed to show signs of returning.
"Conditions have improved,” says George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth management unit.
“The US consumer is in better shape. Equity valuations remain compelling on so many different measures.”
11.33am: The market is focusing on Greek debt negotiations this week, Societe Generale analyst Michala Marcusen says:
Monday’s Eurogroup will see a third attempt at reaching agreement on what will de facto amount to the third financial assistance programme for Greece.
While a German press report this weekend suggested that some form of “conditional” forgiveness could be on the cards as of 2015, the official position out of Berlin is that official sector debt forgiveness is not on the menu.
To reach debt sustainability, a cocktail of measures is on the table, including lower interest rates on Greek debt, debt buybacks and a compromise with the IMF to extend the target date for debt at 120% of GDP to 2022 from 2022.
While there is a good chance that an agreement is reached on Monday, we consider it unlikely that this will make Greek public finances sustainable on anything but paper. The hope is no doubt that the Greek issue will not need to be revisited until after the German election due in autumn 2013.
11.27am: Well, the positive leads failed to push Aussie stocks higher, but Japanese investors are in a more buoyant mood. Tokyo stocks opened 1.06 per cent higher, boosted by the sharp gains on Wall Street and the yen’s continued slide.
The benchmark Nikkei 225 index at the Tokyo Stock Exchange was up 99.26 points to 9,466.06 at the start.
11.21am: A couple of analyst rating changes from this morning:
- AGL raised to overweight on emerging value propositions by JPMorgan
- Challenger raised to overweight from neutral at JPMorgan
11.16am: A bit more here on the Queensland downgrade. Ratings agency Moody’s has lowered its outlook for Queensland’s AA1 credit rating, from stable to negative.
‘‘The change in the outlook reflects the deterioration in the state’s financial performance which has persisted since fiscal 2007/08 and the resultant high levels of indebtedness,’’ the agency said on Monday.
‘‘Scheduled improvements will only take hold in a few years, and progress could be slowed by the potential emergence of less supportive conditions.’’
11.11am: The big banks are mixed:
- CBA is 0.36% higher to $59.16
- ANZ is 0.17% lower to $23.56
- NAB is 0.04% higher to $23.64
- Westpac is 0.6% lower to $24.79
11.07am: Looking now at how the big miners are faring:
- BHP is 0.33% higher to $33.86
- Rio is 0.38% higher to $57.40
- Fortescue is 2.17% higher to $3.76
11am: Stocks are back to a gain of 0.1 per cent in early trade, more or less where they opened. Bell Potter senior adviser Stuart Smith said talk of an early election had kept the local market subdued in early trade.
‘‘The screen is full of perhaps an early election in March,’’ Mr Smith said.
Fairfax Media over the weekend reported that federal public servants were told to bring work forward and clear backlogs in readiness for a possible poll in early 2013.
Gold stocks were the market’s best-performing sector at the open, rising 1.54 per cent, according to IRESS data.
10.56am: Moody's changes Queensland's rating outlook to negative. More on this one as it comes to hand.
10.48am: Looking at that Challenger gain of 3.45 per cent in early trade, it comes after the company announced a share buyback equivalent to 3 per cent of shares on issue. More as it comes to hand.
10.41am: And now for the companies on the ASX200 which are starting the week on a down note:
- Intrepid: -5%
- Ten Network: -3.28%
- FlexiGroup: -2.97%
- DuluxGroup: -2.16%
- Billabong: -2.13%
- Pacific Brands: -1.67%
10.36am: Looking now at the early winners on the ASX200:
- Boart Longyear: +5.56%
- Ausdrill: +5.24%
- Mineral Deposits: +3.83%
- Sims Metal: +3.64%
- Challenger: +3.45%
10.28am: Early gains among blue chips are fairly broad-based. Miners are doing well, the banks aren't tanking and the retailers are generally positive:
- BHP: +0.5%
- Fortescue: +2.45%
- ANZ: +0.13%
- QBE: +0.84%
- AGL: +0.49%
- Harvey Norman: +1.64%
- DJs: +0.62%
10.24am: Sector by sector on the ASX200:
- Energy: +0.76
- Materials: +0.72%
- Industrials: +0.63%
- Utilities: +0.58%
- Consumer disc.: +0.23
- Info tech: -0.6%
- Health: -0.39%
10.16am: Aussie stocks have been circumspect in early trade. The All Ordinaries index is 8.5 points higher, or 0.2 per cent, to 4440, while the benchmark S&P/ASX200 is 8.4 points higher, or 0.2 per cent, to 4421.4.
10.14am: Bendigo and Adelaide Bank is buying the majority of assets of regional financial company Southern Finance Group for $290 million.
Bendigo has entered into a non-binding heads of agreement to acquire the loan book, equipment finance assets, the financial planning business and certain investments of Southern Finance, it said in a statement.
Southern Finance offers financial services in western Victoria and southeast South Australia, and Bendigo said it looked forward to continuing to assist the company’s customers.
10.11am: Fascinating tweet from Arab Bank's David Scutt on the subject of a Santa rally:
10.07am: Aussie stocks have edged higher in opening trade - up 0.1 per cent.
10.04am: One from the small business desk: Australian entrepreneurs are less ambitious than their US counterparts, less likely to develop global businesses and are not keen on getting rich or changing the world, according to new research. Read more here.
9.57am: The dollar was expected to be well supported today after reaching a high of $1.0471 on Friday night, ANZ FX strategist Andrew Salter said.
"I think it’s going to be well supported today. There are really no data releases in Asia that could have any material effect on the currency today but later tonight there are a couple of releases overseas that might dictate direction," he said.
"So for Asia, I expect a quiet session and for the currency to be well support and offshore it will be data dependent."
Two important releases offshore tonight that could impact on the Australian dollar include the Chicago Fed National Activity Index, a good lead indicator for manufacturing component of the ISM, and the regional Fed survey, Mr Salter said.
"I think there’s a growing sense in markets at the moment that the global economy is starting to find a base and I think that’s one of the reasons the Australian dollar is finding a bid," he said, adding that it was possible the dollar might breach the $1.05 mark this week.
"As long as the global data keeps underpinning the recovery and as long as there’s no obvious turbulence from political risk events like the US fiscal cliff or the situation in Europe as regards Greece, the dollar should definitely press on," he said.
9.54am: On markets today, CommSec stock market analyst Juliette Saly said she expected a "really solid start" to the trading week.
"It was basically thanks to the huge turnouts at retailers for the Black Friday sales. Today in the US we’ve the Cyber Monday online sales coming through too, but essentially when we see consumers part with their cash and are willing to spend up in the shops, then that’s a sign that people feel more relaxed about the economy and that’s what spurred the buying," Ms Saly said.
Ms Saly said the influential German Ifo business index came through with a better-than-expected reading, so that was a "strong sign that the German economy is showing some resilience and that’s what helped European markets have a good session too."
"Locally we have nowhere to go but up," she said.
Ms Saly said the big players - mining and energy stocks, and financial stocks - were expected to take on most of the heavy lifting on the ASX today.
"We had some good movement coming through on the commodities front. That should be a great boost for mining stocks today," she said. "We did see the BHP stock in New York do quite well - it was up by around 2 per cent. That’s a good signal that we should see some good optimism coming through for mining players today.
9.49am: Looking ahead locally this week, there's no economics news of note out today. On the company front in Australia, Harvey Norman Holdings and Brickworks hold their annual general meetings on Tuesday. Australian Vintage, Cabcharge and Oroton have AGMs on Wednesday; BHP Billiton, Lend Lease Corporation and Macquarie Radio Network and Ramsay Health Care hold their AGMs on Thursday and Primary Health Care has its AGM on Friday.
In economics news this week:
- Tuesday: CBA/HIA housing affordability for September quarter, ABS balance of payments (goods and services) - September quarter estimate
- Wednesday: ABS construction work done for September quarter
- Thursday: HIA new homes sales for October
- Friday: RBA private sector lending data for October
9.45am: Looking at the week ahead in offshore news, data from the US's durable goods orders and new home sales are expected to impact on the Australian share market this week, Westpac economist Elliot Clarke said.
"One of the stories that has been going around a lot at the moment has been that the last six to 12 months has seen a fairly decent recovery in housing. However, it’s not of the scale at the moment that’s going to give the overall economy a boost," he said.
"The durables data has been weak of late, which has been suggesting that businesses have been basically cutting back on their investment. So that’s a negative and something that we would like to see turn around.
There’s been a lot of talk of that being affected by what’s happening with the fiscal cliff, so that will be a key release for the market."
In Europe, finance ministers are expected to reconvene later today for discussions on the Greek bailout.
9.42am: While Friday was positive on Wall Street, with the S&P 500 above 1,400 after five days of gains, traders will be hard pressed not to cash in on the advance at the first sign of trouble during negotiations over tax hikes and spending cuts that resume next week in Washington.
President Barack Obama and US congressional leaders are expected to discuss ways to reduce the budget deficit and avoid the "fiscal cliff" of automatic tax increases and spending cuts in 2013 that could tip the economy into recession.
As politicians make their case, markets could react with wild swings. Here’s a look ahead for the week on Wall Street.
9.38am: In a holiday-shortened session on Wall Street, traders were encouraged by signs of progress in talks about releasing aid to debt-saddled Greece and piled into US retail shares as Black Friday got the holiday shopping season under way.
Although volume was the lightest of the year, shares of big-cap technology companies climbed as investors took advantage of the day's upward momentum to add to positions, helping the S&P 500 rack up its second best week of 2012.
9.36am: After a burst of optimism to finish the week on Wall Street and in Europe, Aussie shares look set to start the week in a positive mood. The Aussie dollar has certainly benefitted from the rise in sentiment, climbing to a two-month high in after hours trade on Friday night.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:
- SPI futures contact was 30 points higher to 4450
- The $A was higher at $US1.046
- US shares higher amid bargain hunting
- European stocks post best week in 2012
- China iron ore added 20 US cents to $US118.90 a metric tonne
- RJ/CRB commodities index added 0.5% to 299.07
- Australian business calendar: Nov 26 - Dec 1
- Wall Street week ahead: Political wrangling to pinch markets
9.34am: Good morning folks. Welcome to the Markets Live blog for Monday.
This blog is not intended as investment advice
BusinessDay with agencies