It's been a big week for Markets Live, but now we must bid you adieu. Have a fantastic weekend, we'll see you bright and early Monday morning.
Iron ore rose to two-week highs, setting course to end the week with its biggest gain in more than a month, as traders snapped up forward cargoes hoping demand from top buyer China will perk up ahead of the Lunar New Year break in February.
Higher domestic steel prices are also spurring interest in iron ore, backed by a decline in inventories and optimism that the Chinese economy is on the road to recovery after a seven-quarter slowdown.
Benchmark iron ore with 62 per cent iron content gained 0.4 per cent to $US118.40 a tonne on Thursday, according to Steel Index, the highest since November 23.
Some positive news for blue chip stock holders today:
- BHP: +1%
- Rio: +0.4%
- ANZ: +0.7%
- CBA: +0.9%
- NAB: +1%
- Westpac: +1.1%
- Fortescue: +1.3%
- Woolworths: +1.1%
- Wesfarmers: +1%
- Telstra: +0.2%
Economists at the International Monetary Fund have compiled figures backing the view that the Australian dollar is becoming a more important reserve asset for central banks.
‘‘The IMF’s new data-set provides fresh insights into central banks’ debt holdings,’’ Commonwealth Bank currency strategist Joseph Capurso said in a report on Friday.
‘‘It also reveals central banks’ preferences for reserve currencies because advanced economy sovereigns issue debt in their local currency.
‘‘Central banks asset allocation decisions are important influences on financial markets because they are amongst the world’s largest investors,’’ Mr Capurso said.
Here's a quick run through of all the important business events next week: Business Calendar.
The market has closed higher, the benchmark S&P/ASX200 jumped 42.45 points, or 0.9 per cent, to 4551.8, while the broader All Ords added 40.17 points, or 0.9 per cent, to 4555.9 points.
Village Roadshow will sell its distribution centre in Sydney which currently handles more than 36 million DVDs.
Village Roadshow said its subsidiary, Roadshow Films, had entered into an agreement to sell its distribution centre to Technicolor Distribution, a subsidiary of the Technicolor Group headquartered in France.
‘‘The sale will lead to a profit on disposal for the Village Roadshow group in the 2013 financial year of $6.5 million before tax,’’ the company said in a statement.
After the sale, Village Roadshow expects to incur a reduction of just under $2 million in its ongoing earnings.
Most markets around the region have enjoyed a nice bump up today:
- Nikkei(Japan): flat
- Shanghai: +1.2%
- Taiwan: +0.1%
- South Korea: +0.3%
- Singapore: +0.9%
- New Zealand: +0.5%
Corporate lawyer Alison Lansley has been appointed to the board of the $37.4 billion national broadband network (NBN).
Communications Minister Stephen Conroy and Finance Minister announced today Ms Lansley’s position on NBN Co’s board will be for three years.
Senator Conroy says Ms Lansley has had more than 30 years of experience as a corporate lawyer and company director.
‘‘Her appointment will deepen NBN Co’s legal expertise and she will make a great contribution to the board,’’ he said in a statement on Friday.
Current board member Terrene Francis has also been reappointed for three years.
Rare earths miner Lynas will face the Malaysian Court of appeal this month to fight another application to stop it operating its new plant in Malaysia.
The group known as Save Malaysia Stop Lynas has obtained a hearing in the Malaysian Court of Appeal on Friday December 19.
The appeal is against the Kuantan High Court’s earlier refusal to grant a stay against Lynas’ temporary operating licence, Lynas said in a statement.
Lynas says there is currently no injunction or stay preventing the company from carrying out its operations at its Malaysian plant.
UBS’s economics team offers some lessons from the last time the cash rate was at 3 per cent (in mid-2009, at the peeak of the GFC):
- the economy today is in much better shape than it was the last time the cash rate was at per cent
- the RBA was willing to ‘stare down’ a further sharp rise in unemployment (& modest drop in inflation) after it had reached this record low of per cent
- the factors that led the RBA to hold (and eventually tighten) were better economy-wide confidence, housing and equity markets (which have already seen some improvement this time), despite ongoing weak GDP growth at the time.This suggests further moves lower in the RBA’s cash rate – if they come – may not necessarily be early next year, as seems consensus, UBS says.
At a record low of 3 per cent, the RBA may choose to sit for a time and assess whether the cuts so far, over time, help the non-mining economy recover fast enough to contain unemployment.
While work in the nude day may be restricted to those who work from home, it hasn't stopped the small business team from having a good laugh today. Click here.
Looking forward to 2013, HSBC chief economist Paul Bloxham had some interesting comments on the outlook for Australia's housing sector:
- Australia’s housing sector has been one of the key areas held back as the economy contracted to make way for the mining expansion. The key driver of this, in our view, was the above neutral interest rates the RBA kept in place through 2011, as well as the fairly hawkish rhetoric they espoused through this time.
- The historical relationship between the housing construction cycle and mortgage rates implies that we should expect housing construction to pick up solidly from here. We have in mind that housing construction will continue contribute to GDP growth in Q4 2012 and will make a solid contribution to growth in 2013.
- There are also signs that housing prices are beginning to rise, with prices up by 2.2% in the past seven months, after having fallen by 7% in the previous 18 months. With around 90% of Australian mortgages at variable rates, the below average RBA cash rate has already had a substantial impact on household income flows and this typically supports the housing market.
- Given the declines in housing prices in 2011 and early 2012, some catch-up in housing prices over the next couple of years would not be unreasonable, given continued solid household income growth. Indeed, housing prices would need to rise by around 9% in each of the next two years if we are to maintain the average pace of house price growth that has been apparent since the end of Australia’s 2002-03 house price boom. That is, for housing price growth to average 4% over the five years to end-2014 – which is its recent average pace and broadly in line with household income growth – housing prices would need to rise by 9% a year for the next two years, given the price falls in 2011-12.
The last of Ten’s billionaire investors have backed the struggling broadcasters second capital raising in six months.
It is understood that Ten investor Gina Rinehart has fully participated in the institutional component of the $230 million capital raising.
Underwriters were this afternoon running final tallies on the institutional component of the raising.
Shares that have not been picked up by institutional shareholders will be redistributed. It is understood, however, that buyers are in line and the word from institutions is that no major blocks of shares are being distributed - a signal that Mrs Rinehart has taken up her entitlement.
Banksia debenture holders will get a maximum of 65 cents for every dollar they invested with the regional non-bank lender, receivers confirmed on Friday morning.
An initial payment of 20 cents for every dollar was also made on Friday morning, with the remaining money to be handed out by June 30 next year. The receivers, McGrathNicol, have now completed their investigation into why Banksia Securities Limited collapsed. A full report is available for debenture holders on the McGrathNicol website.
This one's getting plenty of traction today: James Adonis asks, has consumerism gone too far?
Electricity retailer AGL Energy is seeking a stay on a foreshadowed move to reduce power costs in South Australia in the new year, a judge has been told.
AGL wants to challenge a draft price ruling by the Essential Services Commission of South Australia (ESCOSA), contending it wrongly exercised its power to review prices due to special circumstances.
ESCOSA has determined that businesses and households on AGL’s price-regulated standing contract should get an eight per cent cut in 2013, worth about $160 to the average household.
More from the Myer AGM this morning, chairman Paul McClintock chimed in on a current bugbear of many traditional retailers - the $1000 GST free threshold for purchases made on foreign online retail sites.
Addressing shareholders, Mr McClintock said the company was frustrated by the GST loophole that existed and which provided an advantage to foreign retailers against local retailers.
Held in Myers iconic and historic mural hall in its flagship Melbourne store, shareholders were told sales in the first quarter reflected a modest improvement in consumer sentiment However he warned political uncertainty and extra costs such as the carbon tax and flood levy hurt consumer sentiment.
Arab Bank’s David Scutt offers a 140 character poser on today’s ASX action:
Don't want to put the mocker on what has been a good session for the #xjo but +1% out of nothing a tad strange. We'll find out at the close— David Scutt (@David_Scutt) December 7, 2012
There's a feeling that today's rises on the markets have come as investors became more confident now that this week's mountain of economic data is out of the way.
‘‘I wonder with a number of national data hurdles cleared, if those investors who’ve been buying dividend returns are back in the market today,’’ said Michael McCarthy, chief market strategist at CMC Markets.
‘‘It looks like investors are showing more confidence."
Corporate regulators in the US are pursuing Netflix chief executive Reed Hastings over a Facebook post the watchdog claims violated rules on full and fair public disclosure.
"Netflix monthly viewing exceeded 1 billion hours for the first time ever in June,’’ Mr Hastings wrote in the post on the company’s Facebook page on July 3 which was accessible to the more than 244,000 subscribers.
Netflix’s stock jumped from $67.85 a share on July 2, to $81.72 on July 5. On July 25 its stock fell 22 per cent to $60.28 when the company reported second quarter earnings fell from $68.2 million a year earlier to $6.2 million this year.
The SEC has sent Netflix a "Wells Notice" warning it the agency may bring a civil action against the company and Chief Executive Reed Hastings because it said he violated public disclosure rules, something Netflix disputes.
"We think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers," Mr Hastings said.
Banksia debenture holders will get a maximum of 65 cents for every dollar they invested with the failed regional lender, receivers confirmed this morning.
An initial payment of 20 cents for every dollar was also made today, with the remaining money to be handed out by June 30 next year.
The receivers, McGrathNicol, have now completed their investigation into why Banksia Securities Limited collapsed.
A full report is available for debenture holders on the McGrathNicol website.
A bit more on the dollar...
A long-run comparison of the AUD and commodity prices shows a striking resemblance. What is most interesting is that both the AUD and global commodity prices were at very low levels in the 1980s and 1990s.
Indeed, the last two decades of the 20th century appear to be the unusual periods in both the history of the AUD and real commodity prices, when both were at historically very low levels.
Despite having risen for most of the past decade, commodity prices have only now returned to the sorts of levels they were at on average over most of the past 150 years.
Likewise Australia's currency is back to the sorts of levels it maintained for most of the postwar period.
Its almost lunchtime and the markets are buoyant.
In recent trade the All Ordinaries index is 40.6 points higher, or 0.9 per cent, to 4556.3, while the benchmark S&P/ASX200 is 43.3 points higher, or 1.0 per cent, to 4552.6.
All the sectors on the ASX200 are in positive territory.
City Index chief market analyst Peter Esho said there were few local factors influencing the local market.
‘‘The market is anticipating a good jobs number to come out of the US tonight,’’ Mr Esho said.
‘‘Traders don’t want to get on the back foot and miss any rally early next week, so that’s a nice catalyst for our market today.’’
He said there were no specific corporate or economic issues affecting the local market.
A video wrap of what's been a hectic but illuminating week on the economics front. Over to you, Michael.
ForexCT head of research Steven Dooley reackons the Aussie dollar has remained popular among investors in part because of concerns about ongoing US debt talks.
US Republicans and Democrats are attempting to negotiate a way to avoid a so called ‘fiscal cliff’ of tax hikes and spending cuts due to apply from early 2013.
‘‘Overall, the Aussie has just been very well bid currency. As we approach the US fiscal cliff there is just more and more demand for Aussie government bonds,’’ he said.
Mr Dooley said the next key event for the Australian dollar would be the release of US non-farm payrolls data on Friday night. He said the Australian dollar is likely to trade in a range of between 104.35 US cents and 105.20 US cents heading into the weekend.
ANZ is the first Australian bank to be granted approval to open an office in Myanmar (Burma).
ANZ expects to open an office in Yangon in early 2013, expanding its presence in what it terms the greater Mekong region.
The bank also has offices in nearby Vietnam, Cambodia, Laos and Thailand. ANZ received approval for the Myanmar office from the country’s central bank, after talks with the Government of the Union of Myanmar, in consultation with the Australian and United States governments, it said.
This sums up the week pretty well:
Interest rates, employment numbers, GDP, retail trade, AGMs, inflation all out this week. No wonder we're all exhausted! #ausbiz— Juliette Saly (@julesaly) December 7, 2012
As Myer explains itself to shareholders, the retail sector is enjoying the buoyant mood on the ASX. Most of the big retailers are well ahead of the general market:
- Woolies: +0.67%
- Wesfarmers: +1.09%
- Harvey Norman: +0.14%
- DJs: +1.42%
- Myer: +1.15%
We've already mentioned that the dollar hit $US1.05 overnight, before comments by ECB presdinet Mario Draghi dragged it back down to around the $1.048 mark, where it's been hanging around for most of today.
We've already mentioned that Chinese data may push it along next week, but some analysts think it may not only breach $US1.05, but go higher still.
In a research note yesterday, Todd Elmer, who revels in the title of head of Group-of-10 foreign-exchange strategy for Asia excluding Japan at Citigroup in Singapore, wrote in a research note yesterday that the Australian dollar may rise above $1.11.
According to Mr Elmer: “Stabilisation in expectations for Asia is likely to prove supportive for China-linked FX and asset markets.”
More on October's trade deficit, which at $2.088 billion, is Australia's biggest deficit since 2008.
Commsec economist Savanth Sebastian said the figure was the tenth consecutive monthly trade deficit and showed the impact of lower commodity prices and the high dollar:
‘‘Lower commodity prices are the key driver and also you are continuing to see imports out-pace exports, so the strength of the Aussie dollar is also a big driver. It justifies the rate cut we had on Tuesday and if anything means the RBA can afford to allow the household sector a little more room to swing their arms over the coming year."
National Australia Bank senior economist Spiros Papadopoulos said the trade figures were slightly better than the market expected but still showed a significant deterioration:
‘‘The trade figures once again just show that our export sectors continue to struggle with the high Australian dollar. Our trade position is continuing to deteriorate on the back of weaker commodity prices and the high Australian dollar impacting on our export sector.’’
The dollar seems to be holding up well. It's not hit the heights of $US1.0515 it scaled overnight but it is at $US1.0484, and heading up.
The trade data helped a bit and markets are looking forward to Chinese data due next week that may show the world’s second-largest economy is picking up.
“Chinese economic data are improving after concern about a slowdown,” said Teppei Ino, a Tokyo-based analyst at Bank of Tokyo-Mitsubishi UFJ.
“That’s providing some support for the Australian and New Zealand dollars.”
There's a few AGMs on today, including Myer - from whom we've heard already - and Washington H Soul Pattinson, who are holding their bash in Sydney with more noise about its cross-shareholding with Brickworks.
Fund manager Perpetual, the second largest shareholder in WHSP and Brickworks, has been agitating to end the shareholding structure where WHSP owns 44.4 per cent of Brickworks and Brickworks owned 42.7 per cent of WHSP. Perpetual has said ending the cross shareholding structure would unlock about $1.5 billion in value for shareholders.
But the Soul Patts board says the structure is performing well for its shareholders.
‘‘The board is of the view that as an investment company, WHSP’s ownership of an interest in Brickworks is an entirely appropriate and consistent strategy,’’ chairman Robert Millner said.
Australia’s trade deficit widened in October, official figures show.
The balance on goods and services was a deficit of $2.088 billion in October seasonally adjusted, compared with a downwardly revised deficit of $1.420 billion in September, the Australian Bureau of Statistics said.
Economists’ forecasts had centred on a deficit of $2.2 billion in October.
During the month, exports were flat, while imports rose 3.0 per cent, the ABS said
Now for a tweet from Arab Bank's David Scutt, who seems quite happy with how things are progressing this morning:
More from the Myer AGM and chairman Paul McClintock who has joined the likes of fellow retail businessmen Gerry Harvey and Solomon Lew in calling on the federal government to cut the GST-free threshold on goods bought from overseas.
‘‘If the federal government truly values the retail sector, the impact of increasing labour costs and uncompetitive nature of online retailing must be balanced by measures to improve productivity or flexibility,’’ Mr McClintock said.
‘‘We look forward to the outcomes of the GST review, as well as the low import threshold taskforce delivering reforms to ensure the retail industry can continue providing economic benefits to all Australians by remaining globally competitive.’’
More from BusinessDay’s Matt O’ Sullivan on the $23 million in fines Singapore Airlines and Cathay Pacific have been hit with for their prt in a global air freight cartel.
In the latest chapter in the unravelling of the cartel, the Federal Court in Sydney has ordered Singapore Airlines and Cathay to pay fines of $11.75 million and $11.25 million respectively.
After Qantas’s fine of $20 million in 2008, the penalties imposed on the two Asian airlines are the second and third highest in Australia for illegally ramping up freight charges in concert with other airlines.
Myer has blamed economic conditions, the introduction of the carbon tax and a GST loophole on goods bought overseas for its weak performance.
In a speech released before this morning's AGM in Melbourne, chairman Paul McClintock said the retail sector continues to be impacted by ‘‘a range of macroeconomic factors’’.
‘‘While our sales in the first quarter [of the 2012/13 year] reflected a modest improvement in consumer sentiment, the challenging retail and economic environment continues, both in Australia and internationally.’’
‘‘Uncertainty at a political level is also impacting business across Australia, at a time when business and consumers alike want and need certainty.’’
Heading towards an hour into the day and the markets are moving nicely upwards.
In recent trade the All Ordinaries index is 31.9 points higher, or 0.7 per cent, to 4547.6, while the benchmark S&P/ASX200 is 33.8 points higher, or 0.7 per cent, to 4543.1.
RBS Morgans private client adviser Bill Bishop said overseas investors were drawn to the Australian market given relatively high interest rates and a robust economy.
‘‘Australian assets and financial assets are quite a desirable commodity for offshore investors in a world where zero interest rates is the norm rather than the exception,’’ Mr Bishop said.
Despite the central bank’s cut to the cash rate on Tuesday, Australia interest rates were still high compared with other major economies such as the US and UK and in the euro zone.
Singapore Airlines and Cathay Pacific have copped fines of $23 million between them for their part in a global air freight cartel, which included attempts by the Singaporean carrier to fix prices for transporting meat to troops in the Middle East.
The latest fines take to $91 million the total amount airlines including Qantas have been fined in Australia for the illegal activity.
All the sectors on the ASC have advanced in early trade this morning, with the sole exception of Utilities, which is almost dead flat. Health is the biggest winner so far.
- Health: +1.08%
- Materials: +0.85%
- Finance: +0.85
- Industrials: +0.75%
- Consumer staples: +0.54%
- Consumer discretionaries: +0.54%
- Energy: +0.50
And now for the early tumblers on the ASX200:
- Gindalbie Metals: -4.17%
- Linc Energy: -1.61%
- Arrium: -1.25%
- Macmahon Holdings: 1.13%
Now for the early risers on the ASX20:
- Intrepid Mines +3.77%
- Imdex: +3.39%
- Goodman: +3.37%
- St Barbara: +3.35%
- Mesoblast: +2.45%
How low is low, asks energy reporter Brian Robins? He writes:
For shareholders in mineral sands group Iluka, there may yet be plenty of downside if research by well respected RBC Capital Markets analyst Geoff Breen is close to the mark. He reckons the shares could fall as low as $6.50 amid ongoing caution over the outlook for Iluka's product prices with ongoing de-stocking by large users.
In research sent to clients this week, Breen pointed to a recent unsuccessful auction of zircon by Riio Tinto which has seen prices slashed by $US600 a tonne to around $US1500 a tonne, while the investment bank reckons the price will test $US1300 in the coming months.
As a result, RBC has sliced its fiscal 2013 earnings outlook for the company by 29 per cent to 45c a share, as well as cutting its forecast for fiscal 2014 earnings. In response, it has cut its Iluka price target to $6.50 which well south of its recent trading at around $8.50. You have been warned.
In early trade, the All Ordinaries index is 30.3 points higher, or 0.7 per cent, to 4546, while the benchmark S&P/ASX200 is 31.6 points higher, or 0.7 per cent, to 4540.9.
Local stocks are putting on a show to end the week - up 0.6 per cent in opening trade.
The cracks in the federal government's promise to deliver a budget surplus next year are becoming public. In an intervew this morning, Prime Minister Julia Gillard signaled a budget surplus goal relies on the economy expanding at trend, as weaker growth threatens to curb revenue and derail her election-year commitment.
‘‘Our last economic update had us at trend growth and that is why the last economic update had us with a surplus,’’ Gillard said in an interview with ABC radio today.
‘‘We are still determined to deliver the surplus.’’
Very much a case of watch this space, but you can imagine the opposition is sharpening its lines.
Here’s an insight from Chris Weston at IG Markets into possible ASX action later today. In a note this morning, he said "the last hour of trade could be interesting as traders potentially position themselves for tonight’s US payrolls report".
Given the impact of ‘Sandy’, the market will give the print an element of leeway, although many feel the incident subtracted around 50,000 jobs from being created.
Consensus is currently calling for 86,000 jobs to be created, around half the twelve-month average of 160,000, so even if you add the 50,000 that was potentially lost from ‘Sandy’, it is still below trend.
The low-ball call this time around comes from Morgan Stanley (15,000) so if its call comes to fruition expect risk asset to come under pressure despite the metric not having as much significance as previous reads.
Just a small list of analyst rating change for this morning:
- Suncorp removed from ANZ conviction buy list
- Ten raised to outperform at Credit Suisse
- NIB Holdings cut to underperform at Bank of America-Merrill Lynch
- iiNet rated new buy at Nomura
The Australian dollar has had a strong night, pushing above $US1.05 before easing. The appetite among offshore investors appears to have been driven by yesterday's strong jobs number, perhaps seen as evidence that the RBA would not cut rates again in February while the local jobs market remains in robust health.
“(The jobs numbers were) a surprise,” said Roy Teo, a foreign-exchange strategist in Singapore at ABN Amro Bank NV. “This will give a short-term boost to the Aussie. If you look at the overall financial market, it looks to be a bit more risk-seeking.”
BK Asset Management managing director Kathy Lien said the Australian dollar rallied before losing ground following a downgrade of economic growth forecasts for Europe by European Central Bank (ECB) president Mario Draghi.
‘‘We had a real nice rally during the European session but as the day progressed and a lot of currencies came under pressure following President Draghi’s comments the Aussie dollar also gave up its gains,’’ she said from New York.
The first bit of economics news is in for the day and it shows that lower interest rates have slowed the decline of Australia’s construction sector, but the industry is expected to remain in a slump into 2013.
The Australian Industry Group (Ai Group) and Housing Industry Association (HIA) Australian Performance of Construction Index rose 1.2 points to 37.0 in November.
A reading below 50 indicates the sector is declining.The ongoing slump in commercial and housing construction continued to weigh on the sector, Ai Group’s director of public policy Peter Burn said.
‘‘Lower interest rates may have helped stem the pace of decline but have not lifted the sector out of the doldrums to date,’’ he said.
HIA chief economist Harley Dale said the figures suggested the slump in the residential construction sector may be bottoming out, but there was no clear evidence of a sustainable recovery emerging in 2013.
‘‘The residential sector and the wider construction industry has a vital role to play in filling the void that will be left by a decline in mining related investment activity,’’ he said.
There were some good returns on European markets overnight. Germany's DAX 30 rallied 1.07 per cent to its highest level since January 2008 while in Paris the CAC 40 finished at a year high, up 0.31 per cent.
This came as ECB boss Mario Draghi offered a sobering reassessment of eurozone growth in 2013. He warned of another gloomy year for the 17 European Union countries that use the euro, cutting its forecast for economic growth next year from plus 0.5 per cent to minus 0.3 per cent.
Even so, the bank left rates unchanged at its meeting, and Draghi gave little sign he was leaning toward any more cuts to stimulate growth. Full story here.
Local markets are looking to end the trading with a gain, or at least an early one. For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key markets numbers:
- SPI futures are 13 points higher at 4528
- The $A is lower at $US1.0474
- In the US, the S&P500 was 0.33% higher to 1413.94
- In Europe, the FTSE100 rose 0.16% to 5901.42
- China iron ore added $US0.50 to $US118.40 a metric tonne
- Gold rose US$0.90 to $US1699.15 an ounce
- WTI crude oil fell $US1.73 to $US86.15 a barrel
- Reuters/Jefferies CRB index was flat at 297.94