That's all from us for today - thanks for reading this blog and posting all your comments.
Here are today's biggest winners and losers among the top 200 stocks:
The huge payday Aquila Resources executive Tony Poli and his shareholders are set to receive includes a large chunk of bonus or “free” shares accumulated over a decade.
Aquila was the subject of a $3.40 per share bid by Aurizon and Baosteel today, valuing Poli’s stake in the company he helped float in 2004 at slightly more than $400 million.
Included in that stake – as is the case with every Aquila shareholder that has backed the company since its $600,000 float in 2000 – are a huge amount of bonus shares, which have made Poli and other directors extremely rich.
Starting at the end of 2004, Aquila undertook each year until 2010 the awarding of bonus shares at nil cost to each shareholder.
Just before Christmas in most years, shareholders received one new bonus share for every five or 10 held, though in 2006 investors got one share for every share they owned – effectively and instantly doubling the value of their stake.
Poli, a former accountant himself, has received about 77 million bonus shares since 2004. He has sold down some of his stake since then, including offloading about $20 million worth of shares in 2010, and now holds close to 120 million shares.
The sharemarket has closed slightly higher, following a last-minute push higher.
The benchmark S&P/ASX200 squeezed out a gain of 4.1 points, or 0.1 per cent, to 5462.2, after trading lower for long stretches of the session. The broader All Ords gained 4.6 points, or 0.1 per cent, to 5443.3.
Among the sectors, materials jumped 1 per cent, while financials slipped 0.4 per cent.
The two largest sectors diverged today: mining stocks rose on stronger commodity prices and a takeover bid, but banks fell despite a better than expected earnings report from Westpac.
"Lofty share prices in the banking sector are producing a “sell the fact” reaction to bank reports," CMC's Michael McCarthy notes: "Fears that bank share prices will fall more than the value of upcoming dividends saw the sector lead the market lower."
US wheat futures have soared as much as 3.4 per cent to an 11-month high on fears that recent hot, dry weather will curb production in the United States, the world's largest exporter.
Corn edged lower for a fourth straight session, though the strength of wheat capped losses. Soybeans rose for a second straight session.
Chicago Board of Trade July wheat futures rose 2.2 per cent to $US7.31-3/4 a bushel, just below the session peak of $7.40-1/2 a bushel, the highest since late June 2013.
"It has been very hot in the Southern Plains, with temperatures between 90-100 degree Fahrenheit (32.2-37.8 Celsius)," said Andrew Woodhouse, grains analyst, Advance Trade Australasia. "It puts another nail in the coffin of the US hard-red wheat crop."
Talks are underway to settle a class action over the billion dollar collapse of agribusiness Great Southern.
The agricultural projects manager, which raised $1.8 billion and managed 45 investment schemes, collapsed in 2009. A trial concluded in October 2013 and a judgement is pending.
Bendigo and Adelaide Bank, which had loans to investors in Great Southern managed investment schemes, has confirmed settlement talks are being held by the parties involved. No agreement has been reached, and if there is an agreement struck, it would require court approval, the bank said.
Westpac chief executive Gail Kelly says Australia needs tough spending cuts to deal with a rising deficit.
Unlike ANZ boss Mike Smith, who last week criticised a proposed new tax or deficit reduction levy he said would damage confidence and entrepreneurialism, Kelly would not comment on proposed government policies.
However she rejected the suggestion that any budget upheaval, whether it be taxes on workers earning about $80,000 or cuts to nearly all government agencies, would hurt an already fragile economic recovery.
‘‘We all know it’s going to be a tough budget, it has been well flagged and it needs to be a tough budget,’’ Kelly said today. ‘‘The fiscal deficit issue we have is proving to be quite intractable.’’
In relation to confidence, budget measures tended to have medium-term element to being rolled out, giving people time to absorb them and deal them into the economy, she said.
Kelly said she liked the Business Council of Australia’s Jennifer Westacott’s view that budgets should contain four planks to deliver: economic growth; efficient expenditure and revenue and good social policy including skills training.
Westpac CEO Gail Kelly backs a tough love budget. Photo: Nic Walker
In August 2011 representatives of supermarket giant Coles approached energy drink maker Red Bull for a $200,000 payment in what insiders at the supermarket called, quite plainly, the ‘‘direct ask approach’’.
Indeed, Coles had calculated the value of the benefit to Red Bull of its improved supply chain at $400,000 but thought it would be a sport and only ask for half that amount from the beverages company.
The casual request for the cash was part of a pilot program where Coles sought payments from some of its key suppliers, and the biggest suppliers in the Australian grocery sector, to help pay for what it claimed was improvements to the supermarket’s supply chain.
In nearly 60 pages of stunning documents lodged with the Federal Court this afternoon, the inner workings of the nation’s second biggest supermarket group have been laid bare, forming part of the case launched against it by the competition watchdog this morning.
It started with a briefing to Boston Consulting Group whereby Coles asked the firm to help develop strategies to improve its pre-tax earnings.
According to court documents, a target of $30 million was chosen to squeeze from suppliers and even a script was written to help Coles representatives talk to their supplier accounts and to get them to hand over the cash.
Read more on how the ACCC claims Coles milked suppliers
Shanghai copper has edged up to near its highest in two months, supported by steady local demand as markets returned from a two-day holiday and tracking gains in London copper prices that climbed on hopes of the US economy gaining speed.
Demand for copper in China improved in the past month, boosted by a shortfall of metal in the domestic market and steady second-quarter consumption, typically the peak season for usage. The outlook for copper prices, however, was muddied by the latest economic data that showed slowdown in China's manufacturing sector.
"Every time (copper) has tested the lower end of support it has found buying - but we need a fresh catalyst to make it break its current range. It looks range bound for now," says Rickin analyst Tim Radford.
The most-traded July copper contract on the Shanghai Futures Exchange climbed 0.5 per cent to 47,830 yuan ($US7600) a tonne, after earlier climbing as high as 47,920, bumping up near two-month highs of 48,160 a tonne, hit on April 28. Markets were closed on Thursday and Friday.
LME copper chalked up gains of 1.1 per cent on Friday. The London Metal Exchange will be closed on Monday for a public holiday.
Gas firm WestSide has rejected as undervalued a takeover offer from China's diversified energy company Landbridge Group that valued the company at $177.6 million.
Landbridge, based in Shandong, China, launched the bid for the Queensland-based coal seam gas company to gain entry into northern Australia's fast-growing gas industry. It currently owns a 3.2 per cent stake in WestSide.
WestSide said the proposal, which was already increased to 40 cents per share a week ago from 36 cents, did not represent fair value as it did not take into account recently announced gas sale deal with a consortium including Santos, Total and Korea Gas Corp.
The gas sale agreement could generate over $110 million in annual revenue to WestSide at the maximum production rate, the company added. It recommended shareholders reject the Landbridge offer.
WestSide owns the Meridien CSG field in Queensland state, where three large liquified natural gas (LNG) projects are being built and are due to begin operating over the next two years.
WestSide shares are up 1.3 per cent at 38 cents.
News Corp is believed to have paid more than $200,000 for explosive photos that show billionaire gaming mogul James Packer exchanging punches with former best man and Nine Entertainment chief executive David Gyngell.
Media outlets were being approached to bid for rights to the photos this morning, sparking a bidding war for the images, sources told the AFR.
The images were taken outside Packer’s multimillion-dollar Bondi Beach home on Sunday afternoon and show the pair shaping up to throw punches on a busy street in broad daylight.
They end up wrestling on the ground before being separated by people who appeared to be Packer’s bodyguards. An enraged Packer had to be restrained while a barefoot and bearded Gyngell appeared equally livid.
This morning, the two executives released a joint statement saying: “We have been friends for 35 years and still are. In that time we have had our fair share of ups and downs. We respect each other and neither of us will be commenting further.”
Here's a good chart from the US's Bureau of Labour Statistics, which looks at changes in costs and prices over the past decade. As the chart shows, essentials have become more expensive while non-essentials have fallen (sometimes sharply) in price.
Big TVs became much cheaper while essentials like food, health care & child care became more expensive pic.twitter.com/R70THUwaI8— Conrad Hackett (@conradhackett) May 5, 2014
Contrarian fund manager Simon Marais is poised to call an extraordinary general meeting this week in to oust the Roc Oil board over anger about the company's $800 million "merger of equals" with Horizon Oil, which is set to proceed without being put to Roc shareholders.
Marais, of Allan Gray, which is Roc's biggest shareholder with a 19.9 per cent stake, has been sounding out replacement directors to offer up should fellow investors back his bid to overhaul the board. He is highly critical of the friendly zero-premium merger not being put to Roc investors.
A loophole in listing rules allows one company to buy another with scrip without getting approval from its own shareholders. Only Horizon shareholders can vote on the deal.
"It is getting pushed through by a merchant bank that gets paid a success fee, they are exploiting this little loophole," Marais says. "It is being done at a massive discount (for Roc investors) and the savings of ordinary Australians are being used for some massive empire building. But they are trying to avoid scrutiny at all costs."
Marais said he wanted to give the board - including Roc chairman Mike Harding, chief executive Alan Linn - and its adviser more time to reconsider and put the merger to investors for a vote. But he was planning to lodge the paperwork this week to call a vote on the board revamp.
It's been three months since Australia's immediate economic outlook took a turn for the better, a turn the federal government has insisted on ignoring at any price, Michael Pascoe notes in his weekly video:
Business Week: no good news
It's been three months since Australia's immediate economic outlook took a turn for the better, a turn the federal government has insisted on ignoring at any price.PT5M0S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-37rg9 620 349 May 5, 2014
Most regional markets are trading lower, with worries over China's economy weighing on investors after a private gauge of Chinese manufacturing came in lower than expected.
- Japan (Nikkei): closed
- Hong Kong: -1.5%
- Shanghai: -0.75%
- Taiwan: -0.1%
- Korea: closed
- ASX200: -0.1%
- Singapore: -0.25%
- New Zealand: -0.7%
‘‘The economy is suffering from relatively weak growth momentum,’’ Societe Generale economist Yao Wei said after the release of the HSBC/Markit manufacturing PMI. ‘‘It’s a structural problem. The economy will remain weak and the deceleration is not over yet.’’
Building approvals fell in March but remain strong over the year, amid expectations of a strong lift in construction activity in coming quarters, economists say.
The number of residential building approvals slipped by 3.5 per cent in March to take the annual rate of growth to 20 per cent.
The fall was driven by the volatile multi-unit segment, which dipped by 7.5 per cent for the month.
The fact that building approvals were still 20 per cent higher than a year ago meant "there is still a significant boost coming to construction and spending which will help offset the winding down of resources investment from its recent peak", Commonwealth Bank senior economist Michael Workman said.
"The trends in building approvals data will help significant parts of the economy through rising revenues, fuller order books, more employment and higher retail spending. Building multipliers are among the strongest in the economy."
Less than six months since Treasurer Joe Hockey blocked Archer Daniels Midland’s $3 billion tilt at GrainCorp, UBS analyst Jordan Rogers thinks the east coast grains handler could become the hunter rather than the hunted.
Competition in the east coast grains market has been heating up – as evidenced by Qube Holding’s new Quattro Grain JV – and Rogers says GrainCorp may look for acquisitions and rationalise its grain-storage network to boost its return on equity amid growing competition.
Rogers thinks GrainCorp could make another run at listed feedstock and rendering company Ridley Corp or take a much bigger bite and merge with WA grains powerhouse CBH.
“We would view Ridley Corporation’s feedmilling and meat rendering assets as being highly complementary to GrainCorp’s assets, with close overlapping of grain silos and feedmills,” says Rogers.
GrainCorp made a hostile bid for Ridley in 2008. Ridley’s past few results have been lacklustre but any bid would be complicated given US private equity firm AGR Partners owns almost 20 per cent of Ridley.
GrainCorp shares are up 0.5 per cent at $8.98.
Nine Entertainment chairman David Haslingden has stood by his chief executive, David Gyngell, following a violent public brawl with his friend, billionaire James Packer.
‘‘David Gyngell has had and continues to have the full support of the boardin his role as CEO of Nine Entertainment Company,’’ Haslingden said in a prepared statement.
Gyngell issued a statement this morning saying: ‘‘We have been friends for 35 years and still are. In that time we have had our fair share of ups and downs. We respect each other and neither of us will be commenting further."
Inflation has jumped by an "alarming" 0.4 per cent to take the annual rate to 2.8 per cent in a sign that the strengthening consumer prices could see the Reserve Bank raise rates by the end of the year, a private survey has found.
The monthly survey, by TD Securities and the Melbourne Institute, was released this morning and showed that inflation rose by 0.4 per cent in April after a 0.2 per cent lift in March.
The increase took the inflation gauge to 2.8 per cent, the highest annual rate since September 2011, the survey showed. Meanwhile, the trimmed mean, which strips out monthly volatility, leaped by 0.5 per cent to take the year-on-year rate to 3.1 per cent.
"This first taste of the June quarter reveals an alarming jump in headline and trimmed mean inflation, of which only a portion can be attributed to seasonality, with annual rates for both measures sitting on top of the RBA's 2 to 3 per cent target band," TD Securities head of Asia-Pacific research Annette Beacher said.
She added that the case for keeping the cash rate at its record low of 2.5 per cent "is no longer there".
"Our base case of lifting the cash rate by 50 basis points by year end may look odd right now, but there is clear evidence that the economy is returning to trend growth, employment momentum is building and inflation pressures are not abating. These factors are expected to more than offset whatever lies within the May 13 budget."
The Australian dollar has weakened slightly after a softer-than-expected reading of Chinese manufacturing activity, but is set to be tested further this week amid a raft of domestic economic data and as the Reserve Bank makes its monthly decision on interest rates.
It rose as high as US93.17¢ early on Monday morning, but weakened slightly to US92.55¢ in the afternoon after new data showed that Chinese manufacturing activity slowed last month, with new export orders contracting.
Local economic data that will be released this week include the Reserve Bank's monthly board statement on Tuesday, the central bank's monetary policy statement on Friday, retail sales data on Wednesday and unemployment rate figures on Thursday.
Traders are closely watching the statement that will follow the Reserve Bank's board meeting on Tuesday afternoon, as the central bank is expected to keep the cash rate on hold at 2.5 per cent for another month.
As such, investors will be looking for forward guidance from the RBA about its outlook for the Australian economy, and if it starts to talk down the local currency again after a softer-than-expected reading of inflation for the first three months of this year.
But Commonwealth Bank of Australia currency strategist Peter Dragicevich said he did not expect the RBA to return to its "jawboning" tactic, which it used extensively late last year in a bid to encourage the dollar to weaken.
Andrew Forrest's investments continue to range far and wide, with the mining billionaire today investing millions into a uranium junior just days after he bought a beef exporting company.
Forrest pumped $12 million into Energy and Minerals Australia as part of a broader $36 million funds injection for the company.
The investment is a reunion of sorts, with EMA run by two men with prior links to Forrest via his main company Fortescue Metals Group; Julian Tapp and Mike Young. Tapp was government relations advisor for Fortescue until 2012, while Young led iron ore exporter BC Iron into a highly successful joint venture with Fortescue in 2009.
EMA is exploring acreage in the goldfields of WA which are prospective for uranium and base metals.
Downward pressure has eased but Chinese manufacturing remains weak, Capital Economics China economist Julian Evans-Pritchard notes on today's final reading of the HSBC/Markit manufacturing PMI for April:
- The breakdown was weaker than the flash release across the board. In particular, the improvement in new orders was smaller, though it remains the primary reason for the increase in the headline number. Output and employment were also weaker than the flash had suggested.
- Today's lower than expected reading is a sign that conditions in the manufacturing sector remain challenging. Nonetheless, it is the first improvement in the index since October, which alongside the second successive pick-up in the official manufacturing PMI announced last week, suggests that downward pressure on the economy has eased somewhat.
- Looking ahead, official measures to speed up spending on railways and public housing should boost infrastructure investment, helping to support the manufacturing sector. That said, we still expect economic growth to weaken further over the medium term as private property construction slows.
Not a good day for James Packer: plans to build a casino resort in Sri Lanka were in the balance when Packer flew home over the weekend. That may no longer be the case after his violent brawl with former best mate and Nine chief executive David Gyngell.
According to local reports, Packer was in Sri Lanka last week in a last ditch attempt to salvage the $400 million casino resort.
“As stated by Economic Development Minister Basil Rajapaksa in Parliament on April 24, the government will not allow casinos to operate in the country,” Faizer Mustapha, Deputy Minister of Investment Promotion told a media conference on Friday. No one is taking this as the final decision just yet.
Buddhist leaders opposed the casinos saying it would be detrimental to Sri Lanka's culture, and there were also worries gambling would encourage prostitution and harm Buddhist culture.
Sales of new vehicles fell in April from a year earlier but largely because the month had fewer selling days this year.
The Australian Federal Chamber of Automotive Industries' VFACTS report showed sales of 80,710, were down 5.2 per cent on April last year. April this year had two fewer selling days, so sales per day actually increased from last year.
Sales in original terms were down 17 per cent in April compared to March, but when adjusted for seasonal factors that equated to a rise of 0.3 per cent. The timing of the Easter holidays can greatly impact sales between March and April.
In the year to date, sales were running 3.1 per cent behind the same period in 2013, but still pointed to a solid annual pace of 1.114 million vehicles.
Demand for sports utility vehicles remained resilient with sales up 4 per cent in April, from March. That was a marked contrast to sales of passenger vehicles which fell 8.9 per cent, mostly due to losses in the small car segments.
Shares in Aquila Resources jumped almost 40 per cent after China's Baosteel and rail company Aurizon Holdings said they planned a $1 billion takeover of the iron ore developer.
Aquila shares hit a high of $3.41 and last traded up 37 per cent at $3.35 compared with the $3.40 per share cash offer.
Activity in China's manufacturing sector slowed for a fourth consecutive month in April, adding to questions about whether the world's second-largest economy is still losing momentum.
The final reading of the HSBC/Markit purchasing managers' index (PMI) for April came in at 48.1, lower than a preliminary reading of 48.3 but up slightly from an eight-month low of 48.0 in March.
The HSBC/Markit PMI has been below the 50 level that separates growth from slowdown since the start of 2014. Output and new orders contracted in April, and new export orders slipped back into contraction after a recovery the previous month, the survey found.
"The latest data implied that domestic demand contracted at a slower pace, but remained sluggish. Meanwhile, both the new export orders and employment sub-indices contracted, and were revised down from the earlier flash readings," said Qu Hongbin, chief economist for China at HSBC.
"These indicate that the manufacturing sector, and the broader economy as a whole, continues to lose momentum," he added, saying the government needed to take bold action to make sure the economy regains its momentum.
Last week, China's official PMI rose to 50.4 from March's 50.3, indicating a slight expansion.
The official PMI is weighted more towards bigger and state-owned enterprises and tends to paint a rosier picture than the HSBC/Markit survey, which focuses more on smaller private firms.
Job advertisements in newspapers and on the internet rose for a fourth straight month in April, a further sign that demand for labour is recovering from a long fallow period.
A survey by ANZ showed total job advertisements rose a seasonally adjusted 2.2 per cent in April, from March when they had risen 1.4 per cent.
The average number of job ads per week was 136,091, from an upwardly revised 131,111 in March. That was up 1.5 per cent on April last year, the first positive growth reading in at least two years.
"Labour demand has strengthened this year, with each of the main job ads/vacancies measures improving gradually, or at least stabilising over this period," said ANZ chief economist for Australia Ivan Colhoun. "The pick-up in hiring intentions suggests employment growth will continue to improve modestly in the near term and the unemployment rate should be close to a peak around 6 per cent or slightly lower."
Official employment figures for April are due on Thursday and analysts generally look for a rise of 6750 after a couple of solid months. The jobless rate is seen ticking up to 5.9 per cent after an unexpected fall to 5.8 per cent in March.
Here's a bit more on the ACCC's legal action against Coles, from its chairman, Rod Sims:
Sims said the alleged conduct of Coles was capable of causing significant detriment to small suppliers' businesses.
''This could have resulted in these businesses becoming less able to plan and less able to innovate in the market, with resulting reduced economic efficiency and consumer detriment," Sims said in a statement this morning.
"The ACCC alleges that Coles used undue pressure and unfair tactics in negotiating with suppliers, provided misleading information and took advantage of its superior bargaining position, so that its overall conduct was in all the circumstances unconscionable.
If this conduct is established in court, the ACCC expects that the community will share the ACCC's view that business should not be conducted in this way in Australia," Mr Sims said.
You can read the full story here.
The Australian Competition and Consumer Commission is taking action against Coles for "alleged unconscionable conduct towards its suppliers".
The allegations relate to the supermarket giant's Active Retail Collaboration (ARC) program, with the ACCC claiming that Coles' action were in contravention of Australian consumer law.
The ACCC alleged that Coles sought to improve its earnings by obtaining better trading terms from its suppliers - through the introduction of ongoing rebates connected to the ARC program.
The consumer watchdog alleged that or 200 of Coles' smaller supplies, the company required an agreement to the rebate in "a matter of days". Suppliers that declined to agree to pay the rebate were "threaten[ed] commercial consequences if the supplier did not agree".
"The ACCC alleges that, in a number of cases, threats were made when suppliers declined to agree to pay the rebate," the watchdog said in a statement this morning.
"The ACCC alleges that Coles has engaged in unconscionable conduct towards 200 of its smaller suppliers."
Read the ACCC statement here.
Expectations are growing the Abbott government will move shortly to clamp down on online piracy and internet service providers that enable the national pastime.
Fairfax Media has been told that federal cabinet will consider two proposals to crack down on illegal downloads as early as this week.
One is internet service providers being required to issue warnings to people who repeatedly download illegally. The other is forcing ISPs to block file-sharing websites such as Pirate Bay.
The government has promised to make ‘‘significant’’ changes to Australia’s copyright laws as a first-term commitment, although a spokesman for Arts Minister and Attorney General George Brandis said there was no firm timetable for this. The topic is also battling for attention ahead of the federal budget.
Australians are among the biggest illegal downloaders per capita. Debate continues about whether this is driven by opportunism, the delays for overseas content to reach here, or an aversion to the country's higher prices.
Iron ore exports to China from Port Hedland, which accounts for about a fifth of the globally traded market, rose by almost 7 per cent in April, from March when they jumped 27 per cent.
Shipments to China amounted to 28.89 million tonnes in April, up from 27.04 million in March, data from the Port Hedland Port Authority showed.
That was almost 50 per cent higher than in April last year, a sign of still resilient demand from the Asian giant and of Australia's success in grabbing market share from other producers.
Overall shipments of iron ore from Port Hedland edged up to a fresh record of 34.82 million tonnes, from 34.43 million in March. That compares to 26 million tonnes in April last year.
Local stocks are off to a surprisingly strong start, with most blue chips trading higher, after Westpac became the latest bank to post a bumper first-half result.
The big miners are both up 1.2 per cent, while the four banks have added between 0.1 per cent (ANZ) and 0.5 per cent (Westpac).
Here are the biggest winners and losers in the top 200:
The services sector has contracted for another month, according to the Australia Industry Group's monthly indicator, which was released this morning.
The Performance of Services Index contracted by 0.3 points to 48.6. A reading below 50 points to a contraction.
"The services sector retreated again in April after building towards recovery late last year and in the early months of 2014," AiG chief executive Innes Willox said.
"The contraction in sales, new orders and employment in the large services sector suggests the overall economy is clearly struggling to find sufficient alternative sources of expansion to offset the impacts of the slowdown in mining-related investment."
Mr Willox said the respondents to the survey were concerned about "potential spending cuts and tax increases" in next week's budget.
"There is clearly apprehension in the business community that next week's budget will stifle economic activity," Mr Willox said.
The local sharemarket looks set for a tentative start to the week as investors weigh up mounting tensions in the Ukraine and solid earnings from Westpac, CMC sales trader Niall King says:
- Having wilted last week as the banks and miners were hit by profit taking and an iron ore slump respectively, the market reaction to Westpac’s result this morning could prove telling to broader sentiment. Elsewhere, gold miners will be on the radar following the precious metals spike on geopolitical tensions.
- Across the Pacific, US market advances struggled once more to pierce resistance at these levels. Despite a rosier outlook on both the corporate and macro-economic front, escalating problems in the Ukraine sparked a reduction of exposures going into the weekend, keeping bullish activity in check.
- Friday’s headline figures gave a glossy finish to the pivotal monthly employment checkpoint. However, a look under the bonnet of the data revealed crucial weakness in the participation rate and wage growth. Overall though, the takeaway is positive for equity markets with US economic growth apparently strong enough to withstand tapering but still sufficiently reliant on monetary intervention to require a low interest rate environment to remain prevalent.
- A week bumper to bumper with key economic data points is kicked off this morning by local building approvals with Chinese manufacturing data hot on its’ heels. Given the reluctance of the greenback to appreciate on Friday’s payrolls, positive vibes from this morning’s releases could edge the Aussie over US 93 ahead of tomorrow’s monthly RBA rate decision.
Expectations for Westpac's east coast exposure see it as a stand out of the big four over the past 12 months, as the housing recovery has taken off, IG's Evan Lucas says, identifying three key themes for WBC:
- East coast lending growth – particularly retail housing, which grow by about 5% in the first half and was ahead of estimates.
- Possible positive margins growth – which was expected to buck the trend in the big four as competition has driven this down on most. However, this has not eventuated; WBC has seen net interest margins falling eight basis points to 2.11% versus a consensus of around 2.14%.
- A strong capital position and positive asset integration – this is certainly one area of improvement; cost growth was been benign, the balance sheet continues to show good signs of improvement and operation income was a beat.
In years past, the build-up of franking credits on WBC’s balance sheet has seen special dividends which have been stripped out this time, which saw a consensus read for WBC’s interim dividend of 90 cents - which has been delivered, Lucas continues:
- The real positive for WBC is the financial services space like CBA; wealth management has seen major double-digit growth as retail and business banking continues to be strong.
- The results on the headlines looks very solid, however the detail is likely to see WBC coming in under stellar, which may see it losing ground.
James Packer. Photo: Reuters
Quite a bit of news out this morning, but the most explosive item that's sure to get everyone talking about at the water cooler today is a report of a punch-up between James Packer and Nine boss David Gyngell:
A set of explosive photos showing billionaire gaming mogul James Packer embroiled in a vicious fist fight with his former best man and the head of Nine Entertainment Group David Gyngell have hit the market this morning.
The images were taken outside Packer's multimillion-dollar Bondi Beach home on Sunday afternoon, and show the pair in the midst of throwing and receiving punches.
The pair eventually fell to the ground and continued wrestling, before being forcibly separated by people who appeared to be Packer's bodyguards.
According to alleged witness claims, people were spotted looking for teeth outside Packer's home shortly following the exchange.
Sources close to both men told PS this morning that their life-long friendship soured soon after Packer and his second wife, Erica, announced their shock separation six months ago.
It is understood Gyngell confronted Packer about his decision to walk away from his seven-year marriage that had produced three children, an approach to which Packer did not react kindly.
Bendigo and Adelaide Bank has agreed to purchase the business and assets of Victoria’s Rural Finance for $1.78 billion as its shares enter a trading halt ahead of a capital raising.
The halt was requested to be in force until the start of trading on May 6 as the bank prepares to issue new ordinary shares.
In a statement, Bendigo and Adelaide Bank said it expected to complete the purchase of the business and assets of Rural Finance by July and that it was “committed to maintaining Rural Finance’s distinct brand and its presence in 11 locations across Victoria”.
The purchase was formalised with the Victorian state government earlier today and will include all the assets, including Rural Finance’s loan book, which has an estimated value of about $1.695 billion, the company statement said. The acquisition is subject to APRA approval.
Chinese steel giant Baosteel and Aurizon, Australia’s largest freight operator, have made a joint $1.4 billion takeover offer for iron ore miner Aquila Resources.
A letter was sent to the mining company’s board on Saturday outlining the joint conditional off-market $3.40 bid.
If the offer was accepted by all share holders, Aurizon would acquire a 15 per cent slice while Baosteel would achieve majority ownership of 85 per cent.
The Chinese company already controls 19.9 per cent of Aquila and its intentions have long been a subject of speculation.
According to a letter released to the stock exchange, the iron ore miner has had numerous confidential discussions with Baosteel about its potential direct participation in the West Pilbara Iron Ore project, Aquila’s main asset in which it owns a 50 per cent stake.
Westpac’s profits have swelled, as the country’s second biggest bank benefits from strong growth in its vast mortgage business and low default rates from borrowers.
The bank today delivered an 8 per cent increase in cash earnings to $3.77 billion and announced an interim dividend of 90c a share, up from 86c last year.
The earnings result is ahead of market forecasts for a result of about $6.65 billion, while analysts had been expecting the dividend increase. Contrary to some predictions, the bank did not pay a special dividend as it has in previous halves.
Profits were up strongly across most of its divisions, with double digit growth in every division except for its institutional bank, where earnings fell.
Although households remained cautious, the bank cited signs of stronger spending growth and confidence, and also said there were better signs ahead for the business sector.
The bank has the strongest capital position of the big four banks, with a tier one capital ratio of 8.82 per cent, and some analysts had expected it would return some of these funds to shareholders via a special dividend.
The bank said one reason it had opted instead for the increase in regular dividends was upcoming regulations that will require banks to hold billions more in capital from the start of 2016.
Westpac lifts its dividend - but isn't quite as generous as ANZ ... Westpac CEO Gail Kelly. Photo: Nic Walker
Local stocks are poised to open little changed, with investors focusing on Westpac's first-half profit result but likely to remain on the sidelines as tensions rise in Ukraine.
What you need2know:
- SPI futures up 7 points to 5454
- AUD at 92.85 US cents, 94.87 yen and 66.89 euro cents
- On Wall St on Friday, S&P500 -0.13%, Dow Jones -0.28%, Nasdaq -0.09%
- In Europe, Euro Stoxx 50 -0.65%, FTSE100 +0.2%, CAC -0.65%, DAX -0.49%
- Spot gold up $US15.39 to $US1299.70 an ounce on Friday in New York
- Brent oil up 83 US cents to $US108.59 per barrel
- Iron ore edged up 0.6 per cent to $US106.00 a tonne
What’s on today
Australia: building approvals for March, performance of services for April, TD inflation gauge for April
US: ISM services for April
Stocks to watch
RBC Capital Markets has reiterated its “outperform” recommendation on Sirius Resources. It has a $3.50 a share target price.
Deutsche Bank has cut Woolworths to “hold” after the release of its latest sales data. It has a $38 price target on the stock.
Morningstar has a “hold” rating on Mirvac Group with an unchanged fair value estimate of $1.70.