Australia's biggest miners led the sharemarket higher after getting a boost from a stronger iron ore price.
Local data showing job creation at a two-year high and a trailblazing move by the Reserve Bank of New Zealand to lift interest rates off a record low spurred confidence a regional economic recovery is under way.
The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each added 0.5 per cent, to 5412.6 and 5429.1 respectively.
Local shares opened higher despite a weak lead form offshore.
Major markets around Asia were mostly higher providing support in the afternoon session ahead of a slew of reports from China's National Bureau of Statistics due after the local market closed, which came in lower than expected.
In domestic economic news employment data for February was better than expected, giving shares a boost. ABS data showed the seasonally adjusted jobless rate held steady at 6 per cent last month. In an encouraging sign for the strength of the economy the participation rate and full -time employment figures improved.
"The jobs data was supportive for the market, particularly for consumer focused stocks such as retailer," Northward Capital portfolio manager Darren Thompson said. "It indicates some of the high profile job losses in the manufacturing and transport industry are being compensated for in other areas."
Iron ore and copper prices are expected to hold up in 2014, despite this week's "flash crash".
But the future for the metals remains murky, say experts.
For this year at least, the majority of analysts expect iron ore to hold above $US100 per tonne. The extent of its depreciation next year is a topic of hot debate.
The slump in iron ore and copper has put the spotlight on China's shadow banking sector and nervousness about the country's financial stability has begun to bubble.
The use of iron ore and copper as collateral for loans in China sparked the sharp sell-off, with the Chinese government clamping down on deals that have kept unprofitable firms from going under.
The squeeze on credit comes as part of the Chinese Communist Party's efforts to implement policy reform which gives a 'decisive role' to markets.
In practice, that means shutting down inefficient, unprofitable and heavily polluting state-owned enterprises.
Earlier in the week the price of iron ore plunged more than 10 per cent in two days, but the metal's capitulation has stopped. The iron ore price added 2.4 per cent on Wednesday night and now sits at $US107.40 per tonne.
"Medium term, the ability for the Chinese [iron ore] consumers to stay out of the market for too long is limited," ANZ head of commodity research Mark Pervan said.
"Steel mills have an extremely high dependency on iron ore imports, with 75 per cent of demand met by seaborne supply," Mr Pervan said.
Of course just as we publish the tweet on the missing Chinese data - it gets posted. It's a bit of a miss, which may explain the delay...:
- Industrial production February (year-on-year): +8.6% (expected: 9.5%)
- Retail sales February (yoy): 11.8% (expected: 13.5%)
- Fixed asset investment February (yoy): 17.9% (expected: 19.4%)
The Australian dollar lost a bit of steam on the data slipping to 90.46 US cents, from 90.6 US cents.
For those wondering what happened to the Chinese data dump (industrial production, retail sales, fixed asset investment) due at 4.30pm, this may be the explanation:
RT @livesquawk: China data delayed due to website problem; no update as to when data will be released— Deirdre Wang Morris (@deeCNBC) March 13, 2014
More green than red on the screen today as we turn to the best and worst in the ASX 200 at the close.
Iron and gold miners were top of the pops as both metals were up overnight.
Leighton fell 1.5 per cent today despite its majority shareholder upping its propoprtional bid price and after the announcement of personnel changes at the top of the construction company.
Domino's was the worst of the lot, 3 per cent lower.Back to top
China will not provide short term fiscal stimulus to the economy this year or ease credit conditions in the near term, Premier Li Keqiang has said.
Speaking at his annual press conference in Beijing, the Premier also indicated he would allow more bond defaults, while he maintained that China’s debt levels were under control.
The Premier killed off suggestions the government would lower the Reserve Requirement Ratio for banks, to allow more credit to flow into the economy. He said maintaining the current RRR levels was a “must”. “We don’t want to let a stepping stone become a stumbling block,” he said.
The Premier also re-iterated that the Chinese economy would grow at “about 7.5 per cent” this year, indicating the new leadership was not wedded to a fixed growth target.
“This shows a level of flexibility,” he said. “We are not obsessed with GDP growth. We care more about the employment of our people behind this GDP growth.”
US investigators suspect that Malaysia Airlines Flight 370 stayed in the air for about four hours past the time it reached its last confirmed location, the WSJ is reporting, citing two people familiar with the details, raising the possibility that the plane could have flown on for hundreds of additional miles under conditions that remain murky:
Aviation investigators and national security officials believe the plane flew for a total of five hours based on data automatically downloaded and sent to the ground from the Boeing 777's engines as part of a routine maintenance and monitoring program.
That raises a host of new questions and possibilities about what happened aboard the widebody jet carrying 239 people, which vanished from civilian air-traffic control radar over the weekend, about one hour into a flight to Beijing from Kuala Lumpur.
Six days after the mysterious disappearance prompted a massive international air and water search that so far hasn't produced any results, the investigation appears to be broadening in scope. ...
At one briefing, according to this person, officials were told investigators are actively pursuing the notion that the plane was diverted "with the intention of using it later for another purpose." ...
The sharemarket has closed higher, with miners leading the charge.
The benchmark S&P/ASX200 index rose 28.4 points, or 0.5 per cent, to 5412.6, while the broader All Ords added 28.6 points, also 0.5 per cent, to 5429.1.
Among the sectors, materials jumped 1.7 per cent, financials added 0.4 per cent and energy slipped 0.1 per cent.
Bargain buyers pushed miners higher, ahead of the rudely stronger jobs numbers, enticing investors into industrial and IT stocks, CMC chief market strategist Michael McCarthy recaps:
- Small and mid-cap share strength featured, although an appetite for gold stocks suggests not all investors see smooth sailing ahead.
- Iron ore stocks bounced back by around 2.5%, although BHP was held back by weaker oil prices.
- Market related Iress Technology and Computershare share price gains suggests investors are comfortable that the recent pick up in market activity is sustainable.
- Carsales rounded out the IT sector gains, and Seek rebounded as sellers stepped away after three days of sustained pressure. Building materials stocks were also buoyed by a better employment outlook.
In further encouraging signs for iron ore, Shanghai steel futures are up for a second session after hitting a record low earlier this week and after losing around 6 per cent in a four-day rout fuelled by growing signs of an economic slowdown in top consumer China.
The most-traded rebar for October delivery on the Shanghai Futures Exchange was up 1.2 per cent at 3,263 yuan ($US530) a tonne by midday, distancing itself from a record low of 3,141 yuan reached on Wednesday.
'‘Rebar has fallen so much it's but natural to see a bounce back, but I can't say that overall steel demand has picked up,' said a trader in Shanghai. "Some construction work has restarted but it didn't provide too much additional demand for the market. The steel industry as a whole is still under pressure.’’
Rebar, a construction steel product, makes up about half of trader-held steel inventories in China which stood at 20.66 million tonnes at the end of last week, down less than 1 per cent from the previous week, data from industry consultancy Mysteel showed.
"A likely support (for iron ore) will be a fall in Chinese steel stocks, which have been building for the past two months. Seasonally, steel inventories start to fall around March-April," ANZ said in a note. "If this trend is followed this year, we we should see steel prices recover, supporting iron ore."
Iron ore for immediate delivery to China climbed 2.4 per cent to $US107.40 a tonne on Wednesday, regaining more ground after falling to $US104.70 on Monday, its lowest since October 2012.Back to top
Money laundering, market rigging, tax dodging, selling faulty financial products, trampling homeowner rights and rampant risk-taking — these are some of the sins that big banks have committed in recent years.
Now, some government authorities are publicly questioning whether such misdeeds are not just the work of a few bad actors, but rather a flaw that runs through the fabric of the banking industry.
After years of saying little about the behaviour of bankers, even as one scandal followed another, regulators are starting to ask: Is there something rotten in bank culture?
It is a concern recently voiced by William Dudley, president of the US Federal Reserve Bank of New York, the institution that has more day-to-day contact with Wall Street than any other arm of the government.
"There is evidence of deep-seated cultural and ethical failures at many large financial institutions," Mr Dudley said in a speech that sent a chill through the financial industry last year.
In a recent interview, Mr Dudley explained why he decided to make such a loaded point about bank culture: "To make it clear that 'too big to fail' isn't the only problem," he said in his office three blocks from the actual Wall Street in Lower Manhattan. "I don't want senior bank management to feel, 'Oh gee, if we solve "too big to fail," we're done.' "
New Zealand's stock market is trading at all-time highs, but will today's rate rise and the expectation of up to three further hikes this year spell an end to the Auckland bourse's rally? Not necessarily, Credit Suisse says:
- Past tightening cycles in New Zealand suggest that the initial phase of higher rates should not be interpreted as a strong signal for declining sharemarket performance.
- Indeed it is likely that the broadly observed positive performance of the NZ equity market – at least in the early stages of a domestic tightening cycle – reflects the positive economic backdrop which is prompting the RBNZ to raise rates.
- Nevertheless, the longer the tightening cycle proceeds, the more of headwind higher rates become to growth in the domestic equity market, as interest rate settings increasingly begin to dampen economic activity.
Wheat futures, off to the best start to a year since 2008, have entered a bull market as shipping delays in Canada and Argentina and turmoil in Ukraine boost prospects for US exports.
Wheat has gained 13 percent in 2014, surprising banks including Goldman Sachs Group that forecast prices would extend last year’s 22 percent decline. Instead, futures climbed as Russia’s incursion into Ukraine threatened the flow of supplies from the region.
Russia was on track to be the fifth-biggest wheat exporter, and Ukraine was set to be the sixth-largest, according to the USDA.
Wheat futures for May delivery rose 3.8 percent to close at $US6.84 a bushel on the Chicago Board of Trade, leaving prices up 24 percent from a January closing low of $US5.52.
A 20 per cent gain based on the settlement price marks the common definition of a bull market.
World food prices posted the biggest gain in 19 months in February on concern that cold weather and drought in the US and hot, dry weather in Brazil will harm crops, according to the United Nations’ Food & Agriculture Organization.
Locally, that’s been reflected in the relative outperformance of the BetaShares Agriculture Currency Hedged ETF. It has recorded gains of 9.3 per cent in 2014, against the local sharemarket which has added 1.3 per cent and the S&P 500 which has managed 1.1 per cent.
That reverses a pretty powerful trend – since the beginning of 2012 the BetaShares ETF has fallen 4 per cent against 32 and 46 per cent returns for local and US equities, respectively.
But the rally in food prices will be short-lived according to Goldman analysts, who said in a report this week that they expect planting to increase in the spring. The price will fall to $US5.75 in six months, the bank said.
Purchases from China, Brazil, North Africa and the Middle East increased after prices fell in January to the lowest since July 2010.
Global exports will climb to a record 162.1 million metric tons in the year that ends May 31, the USDA said this week.
If Australian miners are worried about the dramatic decline in iron ore prices earlier this week, they don't show it.
At the annual gathering of many of the world's biggest and smallest iron ore producers over in Perth on Tuesday and Wednesday the mood was upbeat - as if the heftiest one-day fall in ore prices since the global financial crisis never happened.
"Iron ore mining isn't tennis, it's a contact sport," said Atlas Iron chairman David Flanagan. "Sometimes it hurts a bit, like you copped it in the stomach. We just get on with it."
Wayne Richards, executive chairman of Tawana Resources, which is digging an iron ore mine in Liberia, wasn't too fussed about Monday's 8 per cent slump either.
"The way I see it, the price was driven down on sentiment, not fundamentals, and sentiment will again push the price up," he said.
Most at the Global Iron Ore and Steel Forecasting Conference say the price fall was the result of Beijing's efforts last year to tighten credit, which they believe could threaten 2014 economic growth targets.
"We can't control factors like that," said Morgan Ball, managing director of BC Iron, which is operating on an assumption iron ore will average $US110-$US130 a tonne in 2014.
"If it comes in within that range, we will have a very pleasing year," Ball said.
Still, the miners can't have been too upset when iron ore prices rebounded more than 2 per cent overnight.
Time for a quick tour around the region, and sentiment has clearly improved:
- Japan's Nikkei is up 0.5%
- Hong Kong's Hang Seng is 0.4% up
- China's Shanghai Composite is 1.2 per cent higher
- Taiwan's TAIEX has advanced 0.9%
- Korea's KOSPI is up 0.6 per cent
- Singapore's Straits Times index has eased 0.1%
- Indonesia's Jakarta Comp index is 0.5% higher
- The Kiwi NZX 50 is 0.4% up
The question some of the world’s biggest hedge funds are starting to ask is whether overly placid investors will also wake up to discover they are living in a “Truman Show market” – where central bankers’ ultra loose monetary policy has manufactured a fake reality that is bound to end, the FT writes:
For Seth Klarman, the manager of the $US27 billion hedge fund the Baupost Group who recently coined the analogy in a letter to clients, investors have been lulled into a false sense of security that is creating an ever greater risk of a sharp correction.
“All the Trumans – the economists, fund managers, traders, market pundits – know at some level that the environment in which they operate is not what it seems on the surface,” Mr Klarman wrote in his letter, later adding: “But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end.”
But no matter how sceptical hedge fund managers may be, they find themselves in a bind. While the assumption that central bank bond-buying will continue for the foreseeable future has been a boon to broader markets, indiscriminately surging equities have made life frustrating for most specialised stock pickers.
At the same time other hedge fund strategies, such as making bets on interest rates and currencies according to views on the direction of the global economy, have faltered as markets have refused to obey previously presumed iron rules, such as money printing leading to devaluation. Of late these so-called global macro funds have retreated from such trades as their performance has suffered.
“Many hedge funds continue to predict this ongoing drift upwards in asset prices due to an implicit backstop from central banks, who want to believe they are omnipotent, and that when data is bad they can just turn on the taps again and make it go away,” says Anthony Lawler, portfolio manager at GAM, one of the world’s biggest investors in hedge funds.
As a result, while many managers feel deeply uneasy with the lofty valuations attached to certain parts of the US stock market, and low returns offered by risky assets such as junk bonds, few are willing to step out just yet.
BusinessDay columnist Michael West writes about the fisherman caught out by a low-doc loan:
Graham Filmer used to earn a living 30 kilometres off the coast of Corny Point in South Australia long-line fishing for sharks – mostly bronze whalers, gummies and schoolies – and catching snapper.
It was a hard life. Things had been better years before when he still had a licence to catch rock lobsters.
The deep sea fishing took its toll on Filmer, physically. Five years ago, he developed rheumatoid arthritis in both wrists. Now he can't even reel in a hand-line.
Around the same time he was inveigled into taking out a loan he could not afford by a mortgage broker. His debts have risen since and he has fielded four letters from the Commonwealth Bank which is trying to repossess his home.
"I am in a desperate situation now. I am facing eviction and my health is failing," Filmer told Fairfax Media.
Graham Filmer's is a story of hard luck, and one which strongly evokes the principle of “buyer beware”.
The 73 year-old fisherman should never have taken out the loan, let alone the $30,000 line of credit from the bank and the Commonwealth gold credit card which went with the package.
But the story is not quite that simple. Equally, the bank should never have given Filmer a loan in the first place.
And now that he has found irregularities in his loan documents – that is, they have been tampered with to exaggerate his income and the value of his assets – he says he ought to have a case against his lenders for maladministration.
Like a host of other low-doc loan victims however, Graham Filmer's appeals for an investigation are falling on deaf ears.
This is old material (from January) but a reader comment has prompted a re-run:
They’re the highly paid workhorses of the professional investment world, sweating over spreadsheets, harassing company executives, and churning out reports to a voracious community of clients.
Their research and forecasts set the benchmark for investors large and small and form the earnings expectations which listed business “miss” or “beat” come reporting season.
All that work boils down to a target share price and a “buy”, “hold” or “sell” recommendation.
But at the end of the day, how good are broker analyst calls?
Overall, not bad, according to exclusive research conducted by Fairfax Media.
The data, provided by Bloomberg, suggests that over the past year adopting a trading strategy that follows the analysts’ calls would have yielded you an extra 1.1 per cent on top of the 14.2 per cent median total return (that is, including reinvested dividends) delivered by the top 200 stocks over the period.
Foster Stockbroking has placed 10 million Liquefied Natural Gas Limited shares with three local institutions, raising $4.2 million for the US gas play.
The placement, announced this morning, took place after market on Wednesday night and was done at 42¢, or a 4.5¢ discount to the last close.
Funds will be put towards its Magnolia LNG project, helping pay its credit obligation under an agreement to transport gas from Magnolia.
It’s the second time in three months LNG has had Foster Stockbroking passing the cap around to fund managers.
LNG set out for $15 million through an on-market bookbuild in December but scaled the offer back to $10.85 million. That deal was done at 31¢.
Here are some first takes by economists on the strong jobs numbers:
UBS rates strategist Matthew Johnson
- It's a good jobs report but it's probably not as good as it looks. An increase in unemployment rate, a big move in participation rate and a big move in jobs, when you have these three big moves together it suggests that the jobs increase may not be as big as it looks like, and it could be related to a sampling issue.
- I still see the RBA on hold. The most important variable is unemployment and that's continued to go up. It's just below 6.05 per cent, so it has increased by 5 basis points on the month and that's an important part of the story. When you have this much in a survey going up at once, you want more information before reacting. At the moment, the trend in the unemployment rate is up.
NAB senior economist Spiros Papadopoulos
- There seems to have been a sampling issue with the data. Nevertheless the positive numbers is just a further signal for the RBA to remain on hold for the short term. The unemployment rate remaining around 6 percent is a good sign as they expected a higher number in the short term.
- Our forecast has another cut towards the end of the year, given the negative investment growth that we are looking at in 2014. We see more job losses later in the year that will push unemployment higher and we'll see the RBA cut again. We think (unemployment) somewhere around 6.5 percent would push the RBA to cut."
JPMorgan economist Tom Kennedy
- The good news is 80,000 jobs were actually created in full-time employment. That's the composition that you want, with more full-time jobs than part-time, so it's clearly a good sign.
- The jobless rate did hold steady at 6 per cent, and the only reason for that is we saw a big uptick in labour force participation, which bounced pretty sharply today. It's now tracking levels that we now saw around mid-2013. So again, quite a good sign, and I guess in a sense it's realigning itself a little bit more with the data flow we've had over the past two weeks, which have been pretty good.
- [For the RBA to ease] I'd say the jobless rate would have to be around 6.5 per cent, somewhere north of 6.5 per cent."
CBA senior economist Michael Workman
- A lot stronger than most people were expecting, so hopefully people will take that as a positive sign that you can have job losses that are extremely well publicised in manufacturing, and they are offset by job gains mainly in the services sector, we presume.
- We have an RBA rise pencilled in for November and ... by then we'll see much more consistent increases in employment in the 20,000-30,000 a month bracket. And that will change market perceptions about what the RBA is likely to do, given what they did in 2009.