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Markets Live: Miners lead share slump

Before we sign off for today, here are the key market points you need to know this evening:


  • The ASX200 slumped 1.2 per cent to close at the day's low
  • The dollar jumped to $US1.0364, 80 euro cents and 99.4 yen
  • The yield on the three-year government bond jumped to 3.14%
  • The Nikkei rallied 1.1%, while the Shanghai Comp slid 0.1%
  • Gold is slightly lower at $US1587, WTI oil slips to $US92.23
  • Wall Street futures are flat, while FTSE100 futures are slighly higher



  • slow day


More bribery charges have been laid against former executives of a Reserve Bank subsidiary.

Former Note Printing Australia chief executive John Leckenby and three colleagues have been accused of bribing public officials in Nepal’s central bank between October 2001 and April 2003.

Leckenby, 68, Barry Brady, 64, Peter Hutchinson, 62 and Steven Wong, 57, were charged with conspiring to offer a benefit to another person with the intention of influencing a foreign public official in a bid to obtain or retain business with the Nepal Rastra Bank.


Losses in the big miners weighed heavily on the market, with BHP losing 2.3 per cent, Rio down 2.25 per cent and Fortescue plunging 6.1 per cent.

Macquarie Private Wealth's Martin Lakos says the underperformance of the materials sector is related to the slowing down of the mining investment boom but that these stocks should recover:

  • We starting to get a sense of a rotation out of the high-yield defensives and into growth areas. We’re expecting resources to recover in the second half of this year.
  • They actually have the potential to become more profitable because they don’t have the costs associated with the investment programs they had in place.
  • We have (an iron ore price of) $US120 - $US130 in our models, when it recovered from $US85 to $US150, we thought it was overdone, but there had clearly been quite a significant amount of restocking by the Chinese, that seems to be slowing now.
  • But that’s still hugely profitable for the likes of Rio and BHP, when their averages costs are in that $US45-$US55 range, not withstanding a headwind of other costs, but they’re still very profitable at those $US120 levels for iron ore.
  • My guess is that BHP and Rio would want price stability and are happy to increase the volume and their ability to deliver.

The materials sector led the falls, plunging 2.2 per cent, while financials lost 1.1 per cent and energy fell 1.2 per cent. The IT sector was the only one to buck the trend, rising 0.3 per cent.


The share market has closed at the day's lows. The benchmark S&P/ASX200 dropped 60.2 points, or 1.2 per cent, to 5032.2, while the broader All Ords lost 60.6. points, or 1.2 per cent, to 5043.8.

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And another one speaking at a lunch today: Westpac chairman Lindsay Maxsted has slammed Julia Gillard’s minority government as ‘‘unhelpful’’ to business and says it should share some of the blame for the low levels of business confidence and investment.

In a sign of the poor relations between Labor and corporate Australia, Maxsted accused the government of ignoring the needs of business in its approach to developing policy.

‘‘The minority government in Canberra has been unhelpful for business over the last few years,’’ he told a business lunch in Sydney, the same day the ABS reported the biggest number of new jobs created in 12 years. ‘‘It’s not a government which is user-friendly for business it’s not a government which goes out of its way to understand business.

‘‘It certainly doesn’t work on a basis of understanding that to drive the economy, and to do some of the pet projects which are very good pet projects.... you actually need to work with business to get the right policy settings.’’

Journalist and author Debi Marshall is the latest wordsmith to be served a subpoena by the lawyers of billionaire Gina Rinehart.

Ms Rinehart allegedly wants a copy of all recordings and notes of interviews made on or after September 5, 2011, between Ms Marshall and John Hancock and Bianca Rinehart - her estranged children. Ms Marshall used the research for her unauthorised biography of the mining magnate, ‘‘The House of Hancock: The Rise and Rise of Gina Rinehart’’ published last year.

The author said she was served subpoena papers last week but had nothing to offer Ms Rinehart.

Ms Rinehart’s lawyers this week also served a subpoena against one of Fairfax Media’s senior journalists, Adele Ferguson, over sources used in another unauthorised biography of the billionaire.

James Packer says politicians should curb their rhetoric on foreign workers during the federal election campaign, saying the current debate damages the nation’s reputation abroad.

The billionaire casino boss also gave Bob Carr his endorsement, saying whoever won the federal election should put the foreign minister in charge of Sino-Australian relations.

‘‘Bob Carr truly understands China and won’t waiver in putting Australia’s interest first,’’ Mr Packer told a business lunch in Sydney.

He said elections were ‘‘important and necessary’’, but could be destabilising and send the wrong messages overseas.

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The Australian dollar surged today as startlingly strong jobs data led the market to almost abandon any chance of further rate cuts, sending bonds yields flying to the highest since April last year.

The dollar jumped more than half a cent on the jobs numbers, and has managed to hang on to the gains, currently trading at $US1.0367. It's also buying 80.07 euro cents and 99.6 yen.

"We have seen fresh waves of buying and the high so far sits at $US1.0383 and still looks strong," analysts at Westpac say.

"The $US1.0380/$US1.0400 level is something of a pivot point for the AUD," they add. "So a break above this band of resistance will certainly suggest strong demand and strong momentum."

The upbeat jobs report came on top of a run of generally solid data and sent shockwaves through bond markets.

Yields on three-year government debt shot 19 basis points higher to reach 3.14 per cent, the highest since April last year and the biggest daily increase since July. That was also the first time yields rose well above the 3 per cent cash rate since July 2011.

Likewise, three-year bond futures sank 0.185 points to 96.825, while the 10-year contract lost 0.125 points to 96.320 and flattened the yield curve.

In just the past two weeks, swap rates have slashed the amount of easing implied for the year ahead to just 5 basis points, from 45 basis points.

"While the labour force survey is very volatile, the trend is now clearly improving," notes Scott Haslem, chief economist at UBS. "Overall, the stronger data is consistent with our non-consensus view that the RBA cash rate has troughed."


Our market has come under increasing pressure with our miners seemingly under attack today, despite the US markets’ spectacular jump in retail sales while hitting its ninth consecutive day gain in a row, CMC Markets trader Ben Taylor notes:

  • Australia’s main export iron ore is coming under increasing pressure from US dollar strength and Chinese demand fundamentals as the Chinese government acted to curb investment in their property sector. The changing dynamic is set to slow Chinese steel production and constrain demand for iron ore.
  • The market is acting like we are in for a sustained retreat in iron ore after its higher charge since Christmas. Investors favour taking recent profits at these elevated levels in the miners while waiting for stabilisation in our market before jumping back in.
  • Today’s jump in job numbers further compounded the selling pressure as the market reduces its expectations for further local interest rate cuts during the year.
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The bad blood among television broadcasters over the government’s media reforms continues with Ten’s soon-to-be chief executive, Hamish McLennan, demanding answers from its regional partner Southern Cross Media over its merger talks with Nine Entertainment.

“It is now obvious to everyone that Southern Cross Media’s intention is to merge with Nine Entertainment, but Southern Cross Media remains silent,’’ he said in a prepared statement today.

‘‘Its shareholders have a right to know if the company’s directors are meeting their continuous disclosure obligations. Its shareholders have a right to know how detailed and advanced the discussions between Nine and Southern Cross Media are, and what has been discussed with the Government.”


Aurora Oil & Gas says it will offer $US250 million ($244.27 million) in unsecured notes due in 2020.

The company said it intended to use the proceeds from the offering to fund the acquisition of $US117.5 million ($114.81 million) of assets related to its February 28 purchase in the Eagle Ford shale area of Texas.

Aurora is planning to drill between 45 and 50 wells in 2013, and has a planned annual capital expenditure of between $US430 million and $US465 million ($420.15 million and $454.35 million).

The notes will be issued by a wholly owned subsidiary of Aurora, and they will be guaranteed by the parent company and each of the subsidiaries of the issuer.

With an election looming, billionaire James Packer warned both sides of politics against xenophobic messages that affect Australia’s standing in the region that will define our future: Asia.

In a speech to the Asia Society today, Mr Packer warned of the ‘‘destabilising’’ effect elections can have in the way it can ‘‘send the wrong message’’ overseas.

‘‘If I can urge our political leaders across all parties to keep in mind when it comes to the issue of foreign and domestic affairs the rhetoric we casually throw around is keenly followed throughout the region,’’ Mr Packer said.

‘‘Some of the recent public debate does not reflect well on any of us. Even worse it plays on fears and prejudices and is completely unnecessary. We are all better than that. To succeed in China and Asia we must be better than that,’’ he said.

Investors are reacting well to Myer's $87.9 million half-year profit. The department store's shares are up 5.5 per cent to $3.06 and have enjoyed a reasonable good run over the last few months.

And as we mention it, the Tinkler hearing has resumed after the lunch break, with Paddy Manning tweeting the latest:

For more, read here

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For those of you who haven't been following BusinessDay's Paddy Manning while he was in the NSW Supreme Court covering the questioning of Nathan Tinkler on the liquidation of his private company Mulsanne, here's a cracker story he's filed on the matter.

And make sure you follow Paddy for all things Tinkler as well as energy, food and agriculture business.


Former coal billionaire Nathan Tinkler says he expected Singapore-based commodities trader Noble Group would pay $25 million to $30 million for his three-quarter share of a royalty stream from the Middlemount coal mine in Queensland, allowing his private company Mulsanne to complete the purchase of shares in Blackwood.

But Mr Tinkler in the NSW Supreme Court today told lawyers for the liquidator of Mulsanne the verbal arrangement, between himself and Noble’s Will Randall, was never documented - although in hindsight “I certainly I wish I had done that”.

On May 6, 2012, Mulsanne signed a share purchase agreement to pay $28.4 million for 94.7 million shares in Blackwood at 30 cents a share by July but Mr Tinkler said after the due date had passed Noble Group came back and offered half the previously discussed valuation for the Middlemount royalty.

Click here for the full story.

shares down

Equity prices are falling amid signs that the RBA has finished its easing cycle, following better-than-expected jobs data, says BBY institutional dealer Anson Rosewall.

"Although the market initially ticked up on the jobs data, the Australian dollar and Australian bond yields rallied quite sharply and that’s the market telling you that the RBA is unlikely to ease any further, and that the next rate move might be to the upside either late this year or early next year," Mr Rosewall said.

"The most significant thing about the bond market today is that all Australian bond yields are now above the cash rate for the first time since 2011. So it’s a very strong signal that the RBA is unlikely to ease any further."

Mr Rosewall added that major gold miners were down sharply as the spot gold price moved lower, pulling down gold mining equities in the US overnight.

At the same time, iron ore prices also fell sharply overnight, causing shares in miners such as Fortescue to drop by 6 per cent on the ASX this afternoon.

Concerns were also growing that Australian banks' equities, which have led much of the rise on the ASX200, would be subject to a pullback, Mr Rosewall said.

The ASX200 is down 43.3 points, or 0.9 per cent, to 5049.1.


The Australian Office of Financial Management (AOFM) has sold $1 billion of Treasury notes that mature on June 7 2013.

The AOFM, which conducts bond auctions on the behalf of the government, said the notes were sold for a weighted average yield of 2.97 per cent.

The sale attracted bids that totalled $4.13 billion, giving a coverage ratio of 4.13.

Virgin Australia has urged the competition regulator to stop Qantas and Emirates from forming an alliance on the trans-Tasman route unless there are benefits to the flying public.

Australia’s second-largest airline has told the regulator that the ‘‘claimed public benefits’’ of the Qantas-Emirates alliance did not extend to routes between Australia and New Zealand.

‘‘Whilst their may be public benefits that arise in relation to flights to Europe, it is not clear that there are material public benefits from the Qantas-Emirates alliance on the Tasman,’’ it said in a submission to the regulator.

‘‘If there is a competition issue on the Tasman, the commission should consider excluding it from the authorisation of the Qantas-Emirates alliance rather than imposing conditions.’’

Myer chief executive Bernie Brookes looks to have entered a purple patch for the nation's biggest department store just as his board begin to seriously consider succession planning to replace the long serving and popular CEO, writes BusinessDay's Eli Greenblat.

Speaking to analysts and the press this morning, Mr Brookes was cautious and conservative in describing the more upbeat and bullish trading environment that has emerged over the last six months, but certainly seemed to suggest the worst was over.

He reeled off a list of positive signs that were bolstering the department store's sales trajectory - property prices not declining, sharemarket up, superannuation accounts stronger, low interest rates and good employment figures - that were feeding into a positive consumer psyche.

That was underlined today when new Australian Bureau of Statistics data showed Australia recorded the strongest jobs growth in more than a decade in February, as the unemployment rate remained at 5.4 per cent.

To be sure, Myer's first half and second quarter sales were only up 1.7 per cent and 2.1 per cent respectively, but that needs to be put into context of the last two years when sales dropped through the floor as shoppers turned away from the stores and decided to shove their discretionary cash in the bank.

Click here for the full story.

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