That's all for Monday's edition of Markets Live. Have a good evening and we'll see you tomorrow.
Shares in Warrnambool Cheese and Butter have surged in the wake of China banning imports from its main rival Fonterra.
Beijing has suspended milk products from New Zealand’s biggest milk processor after the company had found bacterial contamination in some its products at the weekend.
Shares in WCB, which duals with Fonterra in Australia for dairy exports in Australia, firmed 4.4 per cent, to $4.49 after the Chinese announcement.
Analysts are expecting the decision to have little effect on Fonterra’s bottom line, with the suspension most likely to be only temporary, and China accounts for about 16 per cent of Fonterra’s dairy exports.
Fonterra said the contaminated whey protein concentrate had been exported to China, Malaysia, Vietnam, Thailand and Saudi Arabia and used in products including infant milk powder and sports drinks.
Chief executive Theo Spierings stressed that the company’s milk products were safe because any bacteria would be killed during processing.
Nevertheless, its shares plunged NZ26 cents, or 3.6 per cent, to $NZ6.86.
It comes five years after China had its own milk contamination. Six babies were killed, and 54,000 put in hospital after Chinese milk and infant formula was found to contain melamine in an effort to make the products appear to have a higher protein content.
Here's a snap shot of how the blue chips went today:
- BHP: flat
- Rio: +0.5%
- ANZ: -0.3%
- CBA: -0.1%
- NAB: -0.3%
- Westpac: -0.3%
- Fortescue: +1.3%
- Woolworths: -0.6%
- Wesfarmers: flat
- Telstra: -0.2%
The market has finished marginally lower, with the benchmark S&P/ASX200 falling 5.5 points, or 0.1 per cent, to 5111.3. The broader All Ords slipped 4.9 points, or 0.1 per cent, to 5093.8.
Investors are betting on oil staying above $US100 a barrel in the months ahead.
Woodside has been the biggest mover on the ASX today, advancing 51 cents, or 1.3 per cent, to $39.26.
In the past week the energy dynamo has gained almost 4 per cent. Equity partner at Baillieu Holst Richard Morrow attributed the move to a spike in the price of oil in past month.
West Texas Intermediate crude hit $US100 a barrel early last month and has continued to rise reaching $106.94 in overnight trade.
“Oil has been above $US100 a barrel for a few weeks no and oil stocks have been doing their best to try and ignore that but it’s only been in the last week or so that it’s really sprung to life,” Mr Morrow said.
“Look at Woodside, Santos, Beach; it’s only been in the last few days that people have said ‘hang on, maybe this oil price is going to stay above $US100 a barrel, and these guys are going to produce pretty good profits’.”
But the high prices will come at a cost. Combined with the a sinking Aussie, which has hit three-year lows, motorists can expect hip pocket pain at the bowser.
The previously strong Aussie, which has slumped about 15 per cent against the Greenback since April, has until now been providing some relief at petrol pump, offsetting gains in the oil price.
Banks are among the large group of Australian companies that tend to win from the weaker Australian dollar, Moody's analysts say.
After the dollar this morning fell to a new three year low below 89 US cents, a new report from the credit ratings agency points out a range of reasons why banks benefit from a lower currency. For one, banks have about 15 per cent of their liabilities in foreign currencies.
"A falling Aussie reduces the offshore funding task of the banks because it requires a lower level of foreign currency-denominated issuance to fund their Aussie-denominated assets," the report says.
Most of the banks also have foreign operations, whose profits are worth more when the dollar falls. Macquarie Group makes about 60 per cent of its profit overseas and 16 per cent of ANZ's earnings are foreign.
Finally, Moody's says every 1 US cent fall in the dollar delivers each of the big four banks up to $500 million in extra collateral. These gains don't flow directly through to profits, however.
Wall Street has fallen out of love with commodities, the FT writes:
The fact that JPMorgan is considering a sale of its physical commodities is the clearest sign yet that Wall Street’s commodities trading boom has fizzled out. Coalition, a consultancy, reports that the combined revenues of the top 10 banks in the commodities sector was $6bn last year, down 22 per cent on 2011. Revenues peaked at $14.1bn in 2008, the same year the oil price peaked.
Morgan Stanley is cutting personnel and Barclays has reduced front-office commodities headcount by 18 per cent in the past year. Goldman Sachs is running its commodities business in the face of intense scrutiny from Washington.
JPMorgan said looming new rules and regulations factored into its retreat.
But rivals question if its foray into the physical trade brought a sufficient return on capital for the bank. “They built a business for a much higher revenue number,” said one executive with knowledge of JPMorgan’s strategy. “It was built for a different era.”
The former chief executive of Phosphagenics has sold her shares in the company to repay some of the millions she and others allegedly stole from the cosmetics maker.
Esra Ogru was allegedly one of six people involved in the writing of false invoices to Phosphagenics, which saw approximately $5.7 million stolen from the company over the past eight years.
Dr Ogru will repay $570,000 to Phosphagenics, after selling her shares in the company.
In a statement today, Phosphagenics said it remained confident of securing a substantial portion of the misappropriated funds and had taken steps to secure the assets of other people allegedly involved in the matter.
Dr Ogru resigned from the company in July, after earlier being stood down by the board when accounting irregularities were discovered.
One other employee allegedly involved in the matter has also been sacked, while the remainder of those believed to be involved in the fraud were not Phosphagenics employees.
The incoming chief executive of retailer Billabong is waiting for a challenge of the company’s recent refinancing deal to be resolved before he officially takes the top job.
Billabong’s former chief executive Launa Inman left the company at the end of last week, in line with arrangements agreed to under a financial deal with private equity firm Altamont.
But the appointment of her successor Scott Olivet, the former boss of Oakley, has not been finalised as the company waits on the outcome of a Takeovers Panel deliberation.
Two US hedge funds seeking to strike their own deal with Billabong want the panel to delay the Altamont agreement, claiming parts of the deal are anti-competitive and coercive.
Billabong expects deliberations by the Takeovers Panel will take a week or more.
Chief financial officer Peter Myers will serve as acting chief executive in the interim.
Looks like the Kouk is giving Rupert Murdoch his views on government funding:
Oz politics! We all like ideal of NBN, especially perfect for Foxtel. But first how can it be financed in present situation?— Rupert Murdoch (@rupertmurdoch) August 5, 2013
@rupertmurdoch Bond interest rates are near record low esp as govt has AAA rating. Very cheap to fund this significant bit of infrastructure— Stephen Koukoulas (@TheKouk) August 5, 2013
Economists say a softening economy - and one that is growing below trend - is pointing towards a rate cut by the Reserve Bank tomorrow.
But another key plank of the Reserve Bank’s decision-making process on rates is inflation. The central bank uses a target band of 2 to 3 per cent annual inflation to determine how it sets monetary policy, which a lower figure keeping the door open to more interest rate cuts.
Last Tuesday, RBA governor Glenn Stevens said the latest second-quarter inflation figures had not changed his board’s view that “the inflation outlook may afford some scope to ease policy further if needed to support demand”.
The second-quarter figures had been seen as mixed and not necessarily clearing the way for a definite rate cut.
Headline inflation increased 0.4 per cent quarter-on-quarter, and 2.4 per cent year-on-year. But the underlying inflation rate - consisting of the trimmed mean and the weighted median measures - lifted by 0.6 per cent quarter-on-quarter, and 2.4 per cent year-on-year.
As such, economists viewed Mr Stevens’ inflation comments as dovish and signalling further monetary policy easing.
“We interpreted Glenn Stevens speech last week as tipping the balance from glass-half full … to glass-half empty,” Bank of America Merrill Lynch chief economist Saul Eslake said.
“Given that at the end of the day, the opinion about the economy that matters is not ours, but the Reserve Bank, the reason we flipped our view was because we thought the Reserve Bank had flipped its view.”
Economists and financial markets are unanimously saying that a second rate cut this year by the RBA board tomorrow is necessary.
Markets are pricing in a 95 per cent chance of a 25-basis-points cut, with a small minority of 5 per cent expecting a 50 basis points cut, overnight swaps data from Bloomberg suggest.
So what makes the cuts an almost done deal?
“We can see that the unemployment rate is still rising and that economic growth is still below trend,” said ANZ's head of Australian economics Ivan Colhoun.
“We know that the mining investment boom is coming to an end and we know the other parts of the economy that need to pick up to offset the mining slowdown are really only showing quite slow growth at this point in time.
“There’s some recovery in housing, but as we’ve seen today, retail sales is quite soft. So I think if you put that whole package together, you can say that yes, it’s true that the economy can do with some further support.”
Evolution Mining is looking to seize on the slump in the metal’s price to make acquisitions as competitors struggle and major producers exit.
‘‘If you look at the industry in two years time you will have had the majors exit and some mines close,’’ Chairman Jake Klein said today in an interview in Kalgoorlie, Western Australia. ‘‘To me this is the period when the leaders into the next cycle are going to be created.’’
Gold-mining companies have announced at least $21 billion of writedowns in the past two months after the metal’s steepest quarterly drop in London in more than nine decades. Evolution, almost a third owned by Newcrest Mining, is likely to look for acquisition opportunities with a focus now on ‘‘distressed juniors,’’ Credit Suisse said last month.
‘‘Firepower is limited in reality, but we are in a market where you don’t need a lot of firepower,’’ Klein said in the interview. ‘‘If you’re just standing and you have a cheque book, I think you are in the game.’’
Evolution Mining rose 4.3 per cent to 85 cents. It’s dropped 50 percent this year.
Here's a look at how the rest of the region is doing today:
- Nikkei (Japan): -1%
- Shanghai: +0.2%
- Taiwan: +0.4%
- South Korea: -0.3%
- Singapore" -0.6%
- New Zealand: flat
A US class action alleging an illegal agreement to inflate aluminium prices may be just the start of aluminium buyers' legal assault against warehouse owners such as Goldman Sachs, lawyers with antitrust expertise said on Sunday.
Goldman, other warehouse owners and the London Metal Exchange were named as defendants in the lawsuit filed last week alleging anticompetitive behaviour.
Goldman and LME owner HKEx said the suit was meritless.
The suit fits a pattern of 'follow-on' class actions typically filed after the US Justice Department or other government authority opens an investigation, lawyers said.
"Antitrust exposure is not limited merely to government enforcement but also to private enforcement," said Daniel Sokol, who writes about competition and antitrust law at the University of Florida.
The exposure is significant, Sokol added, because damages for price-fixing are tripled under US law if a defendant is found liable.
Customers and US lawmakers have accused Goldman and other warehouse owners of artificially inflating waiting times to boost rents for warehouse owners and lift metal prices.
Shares remain down 0.2 per cent in subdued trade, ending 10 consecutive sessions of gains, as investors maintain their positions ahead of the Reserve Bank's monetary policy meeting tomorrow.
"We began July at around 4,700 points so we're 300 points higher, or 4 percent, we've already made a lot of gains," says Michael McCarthy, chief market strategist at CMC Markets.
"There's just no impetus today. The big fund managers who determine where the market goes in a long term basis are very much sitting on the sidelines and (await) any potential change in the interest rate environment before they make any moves."
Interested in tomorrow's RBA decision? Michael Pascoe's take is a little different to most punters.
With the market tipsters almost unanimous in predicting the Reserve Bank will trim the cash rate by 25 points tomorrow, I wouldn't be surprised if they're right – but it seems I might be about the only person also not surprised if the RBA decides to sit pat instead.
The market betting so heavily on an RBA move does itself put some pressure on the board to deliver one, but it doesn't mean they have to and here's why: The two major economic changes since the last board meeting are negative for a rate cut. The Australian dollar has resumed easing, falling under the 90 US cent mark, and fiscal policy has turned stimulatory after a year of acting as a brake on the economy.
Today’s nearly flat June retail sales (trend growth of 0.1 per cent for the month, 0.9 for the quarter, 2.1 on the previous June) is a factor in favour of a cut and perhaps a touch lower than RBA expectations, given this line in last month’s board minutes:
“Retail sales were flat in April, though the Bank's liaison contacts suggested that sales rose modestly in May and June.”
Very modest indeed. But the minutes went on to note: “Measures of consumer sentiment were close to long-run averages, although consumers' concerns about unemployment had been high and increased in June.”
Argo Investments has reported a full-year profit of $175 million, up 4.6 per cent on this time last year. Its earnings per share rose 3.4 per cent, to 27.7 cents a share, while its final dividend of 13.5 cents a share fully franked rose 0.5 cents.
The best performing stocks in its portfolio – all of which increased in price by more than 60 per cent – were Macquarie Group, Peet, Primary Health Care, Insurance Australia Group, Twenty-First Century Fox, Ramsay Health Care, Aristocrat Leisure and Fletcher Building.
Its investment portfolio outperformed the broader Australian sharemarket, returning 23.6 per cent, compared with the S&P/ASX200 Accumulation Index, which returned 20.7 per cent for the year.
Argo chief executive Jason Beddow said he was “relatively happy” with the result, given there had been “very little” earnings growth in the local economy in the past few years – something which he did not expect to change in the next 12 months. But “overall yield” in the local stockmarket would likely remain attractive compared to global markets.
“We don't expect a whole lot from corporate Australia [for the next 12 months], but if we keep getting rate cuts then the yield story will remain pretty compelling,” Beddow said.
Envestra has rejected a $2 billion takeover offer from fellow natural gas pipeline owner APA Group, saying it undervalues the company.
APA hopes to make itself Australia’s largest energy infrastructure group by combining its 13,000 kilometres of natural gas pipelines around Australia with Envestra’s 22,500 kilometres of gas distribution networks.
But Envestra says APA’s offer significantly undervalues its business and is not in the best interests of shareholders.
Under APA’s bid, Envestra shareholders would receive 0.1678 new APA stapled shares for every Envestra share they own, and would be entitled to any final Envestra dividend of up to three cents a share for fiscal 2013.
When the bid was first tabled on July 16, the price represented a premium of less than one per cent to Envestra’s share price.
But since that time Envestra’s shares have risen and APA’s have fallen, damaging the benefits to Envestra shareholders.
Two of Gina Rinehart’s children are wary of an offer made by their mother to bring a legal battle over the multi-billion dollar family trust to an end.
“If only it were that simple,” Rinehart’s son John Hancock told BusinessDay.
The Supreme Court was told on Monday that Mrs Rinehart wrote an open letter to her son and daughter Bianca Rinehart with a deal that says "the first defendant would be willing to appoint a co-trustee" to the family trust, the Hope Margaret Hancock Trust.
John is understood to have not seen the letter as it was sent straight to the court.
General Motors and its Chinese joint ventures sold 221,580 vehicles in China in July, up 11.1 per cent from a year earlier, the US automaker said today.
That compares with a 10.6 per cent year-on-year gain in June.
GM makes vehicles in China in partnership with FAW Group and SAIC Motor.
The federal government’s financing arm plans to raise an extra $10 billion from investors this financial year, due to to the deteriorating budget position.
The Australian Office of Financial Management said today it expected to issue $60 billion worth of Treasury bonds in 2013-14, up from $50 billion forecast at the time of the budget.
A note from UBS analysts Matthew Johnson and Andrew Lilley predicted the increase after the government’s economic statement last week.
‘‘This will be a record year: exceeding the 2011-12 record of $58.2 billion,’’ the analysts wrote.
Despite the rise, however, the analysts said the Commonwealth government’s AAA credit rating would remain intact.
The biggest risk to the rating is the current account deficit, they say. This is actually contracting as mining investment retreats from its peak, because there is less need to borrow from overseas to finance business spending.
It's not cheap, but strong June quarter results last Friday, coupled with a hike in the dividend, have prompted a range of bullish analyst notes to clients today on medical devices group Resmed.
The most upbeat is Citi, with a $7 target price, which is well north of its price of $5.35, down 1 per cent after a surge Friday, while Deutsche Bank has upgraded to "buy" its view of the shares.
JP Morgan has a target price of $6.13 and Credit Suisse $5.90.
Fuelling much of the optimism was a June quarter hike in the dividend on the back of buoyant earnings.
Sales of new vehicles were up 4.1 per cent in July, compared to the same month last year, though down from a record peak in June when demand is typically boosted by end of financial year discounts.
The Australian Federal Chamber of Automotive Industries VFACTS report showed total vehicle sales in July were 90,235, compared to 86,641 last year and 118,758 in June. Sales for the first seven months of 2013 were running 4.6 per cent ahead of the same period last year, while annualised sales were up at 1.135 million.
Demand for sports utility vehicles remained brisk with sales 6.5 per cent higher than in July last year, while sales of passenger cars increased by 7.2 per cent. The light commercial market pulled back by 7.2 per cent after a very strong June, while sales of heavy trucks rose 5 per cent.
For July alone, Toyota retained first place on the sales ladder with 19.3 per cent. The local Holden unit of General Motors took second spot with an improved take of 11.2 per cent, Mazda was third at 9.4 per cent.
NAB's head of Australian economics, Rob Brooker, says the latest retail sales figures are a further indication that the Australian economy is going through a soft patch:
- There's no indication in the monthly data that there's any sign of immediate improvement for retail trade as a whole.
- It looks like total consumption for [the second-quarter] is pretty much on the weak side. ... Retailing is broadly weak - both of value and of volume, and it suggests that margins are continuing to be under pressure.
And here are some Twitter reactions to the retail data:
Very, very weak retail spending data. Looks like households front-ended spending in Q1 to the detriment of Q2 #ausbiz— David Scutt (@David_Scutt) August 5, 2013
Will add to pressure on RBA for its meeting tomorrow. Would be first rate cut during formal campaign since true independence— Shane Wright (@swrightwestoz) August 5, 2013
Despite Australia Fed election Sept 7th the mkt is pricing a 31% probability of a 2nd rate cut 4 days b4 voting (assm RBA cut Aug) #ausbiz— Glen Ford (@GlenFord71) August 5, 2013
Shares in gold miner Northern Star Resources are soaring today, after the company announced an improved dividend and a positive outlook for the 2014 financial year.
Northern Star revealed a second half dividend of 2.5 cents per share to complement the 1 cent interim dividend from earlier this year. That builds upon the maiden 2.5 cent dividend that was paid this time last year.
Despite the turbulence in the gold sector, the company has hinted the dividend flows could continue into the 2014 financial year, after forecasting surplus cash of between $50 million and $70 million.
NST shares are 7.8 per cent higher at 85.2 cents.
The flat retail sales data for August has cemented the chances of a cut to the cash rate tomorrow, Moody's Analytics associate economist Katrina Ell says:
- An August rate cut looks even more in the bag after this data.
- Households aren’t responding to rate cuts the way they traditionally have. Retailers are struggling as households continue to pay down debt rather than markedly increase discretionary spending."
Markets are fully pricing in a rate cut tomorrow and there's even a minimal chance of a 50 basis-point cut. Just about all economists agree that the RBA will cut.
Some more on the weak retail sales data: food retailing was the strongest contributor, rising 0.2 per cent in trend terms over the longer term.
Retail sales in NSW were flat at 0.0 per cent for the month, but rose in Victoria by 0.1 per cent and 0.3 per cent in South Australia. Retail sales also lifted in the ACT by 1.3 per cent and Queensland by 0.1 per cent.
Turnover fell in Western Australia by 0.4 per cent, and also eased in the NT by 0.4 per cent and Tasmania by 0.1 per cent.
Total retail turnover grew a seasonally adjusted 1.1 per cent over the year to June 2013.
Retail sales number for June are in and they're disappointing: over the month sales were flat, after a 0.1 per cent increase in May. Economists had been expecting a 0.4 per cent rise.
The dollar immediartely dropped to a new three-year low of 88.56 US cents.
Japanese stocks are trading lower after the US dollar fell against the yen on a weaker-than-expected reading on US jobs growth last week.
The benchmark Nikkei 225 index is down 0.7 per cent at 14,366. A strong yen is bad for Japanese exporters as it makes their products less competitive abroad while reducing their income when repatriated.
Hiroichi Nishi, general manager of equities at SMBC Nikko Securities said ‘‘there also is some caution over stocks’ having risen too sharply’’ in previous sessions. Still, ‘‘falls are likely to be limited as uncertainty has broadly receded over the global economic outlook in recent weeks,’’ he added.
Mining magnate Gina Rinehart has written to two of her children, making an offer which she hopes will bring their litigation to an end, a court has heard.
Ms Rinehart’s barrister, David Russell QC, told the Supreme Court that the ‘‘open letter’’ was to John Hancock and Bianca Rinehart, two of her four children. The letter, which was handed over this morning, states that ‘‘the first defendant would be willing to appoint a co-trustee’’ to the multibillion dollar family trust, he said.
It was done in the hope that the siblings’ litigation against their mother would come to an end, the court heard.
Hancock and his sister, Bianca Rinehart, are seeking to oust their mother as trustee, claiming she acted ‘‘deceitfully’’ and with ‘‘gross dishonesty’’ in her dealings with the trust, which was set up in 1988 by her father, Lang Hancock, with her children as beneficiaries.
They were previously supported by their sister Hope Welker, but she withdrew from the case earlier this year. Gina Rinehart is supported by her youngest daughter, Ginia.
An offer they cannot refuse? ... Gina Rinehart.
The Australian dollar has eased again this morning, falling to a day's low of 88.76 US cents just ahead of the retail sales figures for June.
The currency fell as low at 88.71 US cents on Friday ahead of the US' non-farm payrolls employment data, but bounced back slightly after the numbers were softer-than-expected. It's currently trading at 88.89 US cents.
"The lack of flow-through on Friday reiterates the current market sentiment towards the Aussie recently," Commonwealth Bank currency strategist Peter Dragicevich said.
"People are looking towards tomorrow's RBA meeting. The market's fully priced in for a 25 basis points cut. The market's started to price in a little bit more, and I think that's probably a little bit excessive but we do expect a 25 basis points cut tomorrow."
Ahead of the release of June retail sales data at 11.30am, we take a look at some of the previous figures, which have pointed to a cautious spending environment.
Retail sales rose a seasonally adjusted 0.1 per cent in May, after a 0.1 per cent decrease in April and a 0.6 per cent drop in March. The soft numbers came after healthy rises of 1.2 per cent in January and 1.3 per cent in February.
Economists are expecting a slight improvement from the June figures, tipping a rise of 0.4 per cent.
The Australian Retailers Association and the National Retail Association are both calling for a rate cut by the Reserve Bank tomorrow to boost the weakness in the retail sector. Financial markets have fully priced in further easing tomorrow.
Shares in uranium miner Paladin Energy are testing some of their lowest levels in eight years after the company completed a surprise share placement over the weekend.
The $88 million raising sold the shares at about 70 cents each, well below the $1 the stock was fetching when it last traded.
Paladin shares have returned to trading this morning, slumping 27.5 per cent to 72.5 cents.
Salary packaging company McMillan Shakespeare (MMS), which is being treated as a bit of an election indicator after the federal government flagged changes to the fringe benefit tax on vehicle leases and the Coalition said it would scrap those plans, is on the rise, gaining another 3.6 per cent to $9.01.
But shares have trimmed nearly half of their early gains of 6.9 per cent.
Pleads guilty ... John Gay. Photo: Peter Mathew
Former Gunns chairman John Gay has changed his plea to guilty on a charge of insider trading.
Gay dropped the bombshell as his trial was set to begin in the Tasmanian Supreme Court in Launceston today.
He’d been facing two charges of insider trading, after allegedly selling 3.4 million Gunns shares shortly before the share price dived in 2009.
The charges were rolled into one amended indictment, still comprising the 3.4 million shares, to which Gay pleaded guilty. The disposal of the shares earned about $3 million.
Takeover target Envestra has rejected a highly conditional takeover offer received from gas pipeline owner and operator APA as not being in the best interests of shareholders.
The refusal comes as the competition watchdog, the Austrralian Consumer and Competition Commission, has decided to review the $2 billion bid. If it proceeds, the acquisition of Envestra would give APA dominance in gas supplies into a number of key urban markets.
APA is offering 0.1678 APA share for each Envestra share held. Including Envestra's anticipated 3c a share final dividend, the offer was equal to $1.102 for each Envestra share, APA said.
Analysts were wary of the APA offer from the outset, due to competition concerns along with the low price, which does not include a control premium.
Independent directors of APA rejected the conditional APA offer as being too low, and not in the best interests of shareholders.
APA shares are up 1 per cent at $6.11 with APA shares steady at $1.12.
Inflation rose by 0.5 per cent last month, pushing the yearly measure to 2.7 per cent and towards the top of the Reserve Bank's 2-3 per cent target band, a private monthly gauge has found.
The rise in inflation came on the back of a rise in the prices of fuel, seasonal utilities, holiday travel and accommodation. In contrast, the prices of fruits, vegetables, footwear and garments fell, the TD Securities-Melbourne Institute report found.
The trimmed mean rose by 0.6 per cent in July for a yearly measure of 3.1 per cent.
"After slightly stickier than expected underlying inflation in the June quarter, we are seeing upside inflation pressures in the September quarter with this July report," TD Securities head of Asia-Pacific Research Annette Beacher says. "However, there may be base effects at play due to the soft July reading last year, hence the jump in the annual rate to 3.1 per cent."
Beacher expects the Reserve Bank to slash rates by 25 basis points tomorrow. "The evidence so far is that the non-mining sector remains too weak to support the economy while the impetus from the investment boom drops out of the growth calculations."
When the mining industry gathers for the annual Diggers & Dealers conference in Kalgoorlie later today, the state of the local gold industry will be stark from the opening speeches.
The first company to speak will be Alacer Gold, the mostly Canadian company that recently decided to exit gold mining in Australia to concentrate on lower-cost operations overseas.
Second will be Ramelius Resources, the high-cost gold junior that recently sold assets for scrip and is worth 70 per cent less than it was at last year's conference.
Third up will be Norton Gold Fields, the once marginal producer that was taken over by Chinese investors with plans to gobble up several more marginal Australian gold mines.
It's enough to drive a miner to drink - not that anyone at Diggers needs a reason to drink, mind you. The colourful conference has become famous over its 21-year history as a party that is unrivalled at other industry conferences.
Diggers and Dealers
With commodity prices down, mining jobs being shed and projects shelved, the mood at this year's Diggers and Dealers mining forum will be more subdued than in recent years.PT4M18S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2r734 620 349 August 4, 2013
Virgin Australia has warned it will post a loss of as much as $110 million this financial year due to tough trading conditions, the carbon tax and the takeover of West Australian airline Skywest and Tigerair Australia.
Issuing its second downgrade in three months, Australia’s second largest airline said it expects to post a loss after tax of between $95 million and $110 million for the year to June, compared with a $23 million profit previously.
The airline has included in the latest guidance a pre-tax loss of between $5 million and $10 million for Skywest, which it acquired earlier this year.
Shares in Virgin have slumped 5.5 per cent.
The stock market has slipped at the open, with the benchmark S&P/ASX200 index dropping 5.5 points, or 0.1 per cent, to 5111.3, while the broader All Ords is down 4.2 poitns, or 0.1 per cent, to 5094.5.
Materials and financials sectors are both down a marginal 0.1 per cent, while gold is up 1.6 per cent.
It's likely to be a fairly quiet session today as it's a bank holiday in NSW. The calling of the federal election for September 7 is unlikely to light up the market, ANZ analysts say:
- Markets are unlikely to be affected by Prime Minister Rudd calling the election for 7 September even though the campaign will coincide with the Reserve Bank’s 6 August board meeting at which the board is expected to deliver a 25 basis point cash rate.
- We do not yet know what the Opposition’s full plans are for fiscal policy although party representatives have stated that details will be released before the election.
- We expect the election campaign will have little impact on the economy at this point in time, although anecdotes suggest that business confidence may be boosted by a more certain political outlook.
Now that the election date has been confirmed, expect a flurry of policy announcements. Today's will affect the car industry: Treasurer Chris Bowen says the federal government will put up a new support package for car makers because the industry is important for Australian manufacturing.
‘‘It goes to co-investments with state governments to ensure that the industry survives, diversifying manufacturing production,’’ Bowen told ABC radio this morning.
The measures will also make sure Australian car manufacturers are able to compete in the world market and that local demand is strong, he said.
The package is expected to be worth $200 million over the next two years, although Bowen did not confirm the figure.
The plan is also expected to include making the commonwealth car fleet be 100 per cent Australian, and forcing government agencies to buy Australian cars - resulting in extra 18,000 Australian cars sold a year.
Fonterra’s botulism scare is rattling New Zealand. The dairy giant is at the centre of an international safety scare after it revealed some of its whey contained the bacteria that can cause potentially fatal botulism.
China is blocking milk powder products imports while Russia has banned all New Zealand dairy product imports.
Units of Fonterra Shareholders’ Fund have tumbled to the lowest level this year this morning, leading a decline in dairy-related companies on the NZX amid investor concern earnings will suffer from the discovery of a bacterial contamination in batches of whey protein.
Units of the fund, which give investors access to the dividends from Fonterra’s shares, fell 8.6 per cent to $NZ6.51, erasing more than $NZ60 million from its market value. The units were sold in an initial public offering in November at $NZ5.50 apiece.
Activity in the services sector has reached its lowest level since the global financial crisis, weighed down by sharp falls in sales and new orders.
The Australian Industry Group Australian Performance of Services Index (PSI) fell 2.1 points to 39.4 in July. A reading below 50 indicates the sector is contracting.
Ai Group chief executive Innes Willox said it didn’t look like the sector would recover soon, despite getting some help from the Reserve Bank’s interest rate cuts and the falling exchange rate.
‘‘Recent interest rate cuts have brought some cost relief to Australian businesses and the fall in the Australian dollar is very welcome. (But) their effects are yet to show up in stronger sales,’’ he said. ‘‘Of particular concern for the immediate outlook: employment in the services sector remained in contraction for a fourth consecutive month.
‘‘Further, business margins remain under intense pressure, with the Australian PSI indicating strong rises in input prices and particular weakness in selling prices.’’
Australian shares are set to edge up after Wall Street ended at record highs, with firmer metal prices likely to boost miners as investors eye the start of the domestic earnings season and this week's RBA rates decision.
The September share price index futures contract was up nine points at 5077.
The Australian dollar is slightly higher after US stocks made small gains on Friday. Early this morning, the local unit was trading at 89.21 US cents, up from 89.07 cents on Friday.
For more on how offshore markets performed on Friday, read this morning's need2know.
- SPI futures were up 9 points to 5077
- The dollar hovers near three-year lows at 89.15 US cents
- The Dow and the S&P500 hit all-time highs at 15,658.36 and 1709.67 respectively
- London’s FTSE 100 index dropped 0.5%, Frankfurt’s DAX and Paris's CAC closed flat
- WTI crude oil was at $US106.94, while Brent oil slipped to $US108.95
- Spot gold inched 0.15 per cent higher to $US1312.03 an ounce
- Iron ore edged up 0.3 per cent to $US130.10 a tonne