Markets Live: Miners lead shares higher
Australian shares had a strong last day of the month, supported by speculation of more quantitative easing in the US and hopes for local interest rate cut.
The looming RBA rate cut is almost having a cathartic effect on the sharemarket.
5.10pm: That's all from blog central for today. Thanks for reading and sending us your comments.
Here's our evening wrap of today's session.
4.49pm: For the month, the ASX200 managed to eke out a small gain of 1.4 per cent, posting its fourth consecutive month of gains and taking its 2012 performance to 8.4 per cent.
4.39pm: Meanwhile, European stock index futures are pointing to a higher open, courtesy of hopes of more QE in the US.
Futures for both Euro STOXX 50 and Germany's DAX are about 0.7 per cent firmer.
S&P500 futures are also up, but only about 0.25 per cent.
4.33pm: The main reason for today's rise was an increase in global risk appetite after Friday's weak US GDP data increased chances for more quantitative easing by the Fed.
"A flavour of QE (quantitative easing) is back in the air, driving the US dollar lower and risky assets higher," says Sebastien Galy, strategist at Societe Generale.
Locally, investors are betting on a rate cut tomorrow, with some hoping for a larger than expected 50 basis point cut.
4.15pm: All sectors closed higher, but gains were led by a 1.4 per cent rise in the materials sector. Financials added 0.7 per cent, industrials gained 0.8 per cent and energy rose 0.5 per cent.
4.12pm: The market has closed just below the day's high. The benchmark S&P/ASX200 index rose 34.5 points, or 0.8 per cent, to 4396.6, while the broader All Ords gained 33.8 points, or 0.8 per cent, to 4467.2.
3.57pm: Here's an interesting piece worth clipping and reading later: Australia is a nation of loss-making landlords, writes Leith Van Onselen:
The latest taxation statistics show that negatively geared properties are held mainly by lower-to-medium income and older age cohorts, posing a major risk to the housing market.
The risk of widespread selling of investment properties is likely to intensify once Australia’s 1.1 million negatively geared investors come to the realisation that there is little prospect of a resumption of past strong rates of capital growth and they are stuck with a loss-making investment.
3.53pm: A rate cut by the RBA tomorrow is pretty much a done deal, according to economists and interest rate futures. The big question is how much of the cut will the big banks pass on?
Bank of America Merrill Lynch Australia chief economist Saul Eslake says lenders may only pass on 15 points of a 25bp cut, and ANZ, Commonwealth, National Australian Bank and Westpac, have already lifted their standard variable rates by between 10 and 12 points this year.
‘‘So you would end up with a mortgage rate only being five basis points lower than where it was in February even though it is likely the RBA has materially altered its outlook since then.’’
Eslake says this justifies a 50bp cut, but thinks it's highly unlikely the RBA board will deliver more than 25.
3.43pm: The looming RBA rate cut is almost having a cathartic effect on the sharemarket, with the expectation of more conducive growth conditions propping up some of our index heavyweights, says CMC Markets trader Tim Waterer.
"The lethargic performance of the Australian sharemarket in 2012 typifies one of an economy constrained by high interest rates, so a looser monetary policy setting may open the door to the 4500 level on the ASX200 by mid-year should US equities maintain their current upward trajectory."
3.22pm: UGL and CH2M Hill have won a $550 million contract to build the combined cycle power plant for the Ichthys liquefied natural gas project in the Northern Territory.
As part of the agreement GE will engineer and supply gas turbines, steam turbines and heat recovery steam generators for the $32.63 billion project. The CH2M Hill-UGL joint venture will design and supply the rest of the plant, as well as constructing the project.
3.10pm: The RBA will lower its 4.25 per cent cash-rate target at least 25 basis points tomorrow, with a 43 per cent chance of a fall to 3.75 per cent, swaps data compiled by Bloomberg show.
The data shows there is a 67 per cent chance it will be 3.5 per cent or lower by July. The RBA’s cuts of 0.25 percentage points in November and December were its first since reducing the rate by 4.25 percentage points in the eight months to April 2009.
2.53pm: For the remainder of the week, the focus internationally will be on several key events including Chinese manufacturing data, US jobs figures, a policy decision by the European Central Bank and the presidential election run-off in France.
"The non-farm payroll number in the US will be in focus on Friday, after which the market will turn its attention to French and Greek elections on Sunday. Cautiousness will be the watchword for the week and risk aversion is unlikely to go lower meaningfully," Credit Agricole says in a note to clients.
2.43pm: Staying in Asia, Singapore's economic recovery is likely to be muted with continued weakness in electronics a drag on growth, the central bank says, painting a less rosy picture of the economy compared with forecasters in the private sector.
"Despite the rebound in Q1, the pace of recovery for the rest of the year is expected to be relatively subdued," the Monetary Authority of Singapore says in its half-yearly macroeconomic review.
2.24pm: Hong Kong shares are up 1.12 per cent following a strong lead from Wall Street and amid optimism for the Chinese economy.
The benchmark Hang Seng Index added 233.01 points to 20,974.46.
2.14pm: A leading business group believes economic conditions justify a hefty cut in the central bank’s official interest rate.
The Australian Chamber of Commerce and Industry has released its latest business expectations survey, just 24 hours ahead of an RBA monthly board meeting.
The March quarter survey shows a slight pick-up in conditions compared to the previous three months, but many components remained below five-year averages while others were still at contractional levels.
‘‘Uncertainty still prevails across the Australian business landscape, particularly in the small business sector,’’ says ACCI director of economics and industry policy Greg Evans.
2pm: CommSec's Craig James says it appears the sluggish consumer spending environment will dominate the economic landscape over the next six months.
"Overall the latest round of data is further confirmation of the slowdown that has taken place across the economy. The ongoing low inflation results should provide the Reserve Bank with a degree of comfort when deciding on interest rates," he says
"CommSec expects the Reserve Bank to provide a modest degree of stimulus by easing rates at the board meeting tomorrow."
1.55pm: Oil prices, meanwhile, are lower in Asian trade, with investors fretting over stuttering growth in the US as political and economic uncertainty in the eurozone weighed, analysts say.
New York's main contract, West Texas Intermediate crude for delivery in June was down 21 cents to $US104.72 per barrel while Brent North Sea crude for June shed 25 cents to $US119.58.
1.42pm: Gold is holding near 2-week highs on prospects of more safe haven buying, with the greenback under pressure from weaker-than-expected US economic data and speculation the Federal Reserve could ease policy further to boost growth.
Gold has added $1.12 to $US1663.44 an ounce.
1.31pm: Freedom Foods’ business unit Pactum Australia will build a UHT processing plant in southeast Australia to meet increased domestic and export demand.
The company says its main focus will be supplying UHT milk to proprietary and private label customers in South East Asia, including China.
Pactum Australia says rising incomes and improving diets in South East Asia had led to strong and long-term demand for high-quality dairy products from low cost production bases such as Australia. The company says it expects to have selected the site by June and commissioning to begin by mid 2013.
1.20pm: Energy Watch duped consumers into thinking they could save hundred of dollars on electricity bills during a nine-month advertising blitz, a court has found.
But Energy Watch was not offering a comparison service and its claims consumers could save $386 on their electricity bill were based on a small as misleading sample, Justice Shane Marshall of the Federal Court in Melbourne has ruled.
He found that Energy Watch breached three sections of Australian Consumer Law on multiple occasions in television, radio, and newspaper ads, on websites and billboards and on three ads screened during football matches at the MCG.
1.05pm: The big banks are showing a mixed performance today:
- CBA is 0.66% higher to $51.93
- ANZ is 1% higher to $23.90
- NAB is 0.12% higher to $25.18
- Westpac is 0.4% higher to $22.68
12.57pm: Back to Clive Palmer for a moment, and Tony Abbott said he had no idea the mining magnate was mulling a move to Canberra. Or that he was building the Titanic II.
‘‘Good luck to him,’’ Mr Abbott said. ‘‘If there’s anyone in Australia who can successfully run for parliament and at the same time build a replica of the Titanic it’s Clive.’’
12.54pm: Looking at how the big miners are performing today:
- BHP is 1.66% higher to $35.47
- Rio is 1.21% higher to $66.22
- Fortescue is 1.24% higher to $5.70
12.47pm: Origin Energy’s production rose by 8 per cent in the March quarter and sales revenue increased slightly due to higher commodity prices. The energy producer and retailer said it produced 30.9 petajoules (PJe) of gas in the three months to March 31, up from 29.1 PJe in the same period in the previous year.
Sales volume in the March quarter of 33.2 PJe was flat on the previous corresponding period, but revenue was up two per cent to $203 million due to higher prices, Origin said.
Its shares are 0.2 per cent lower, or 3 cents, to $13.20.
12.35pm: The Australian dollar has risen steeply on weak US growth data. Official data released on Friday showed the US economy has expanded by an annual rate of 2.2 per cent - less than the forecast 2.5 per cent.
The dollar was recently buying $US1.0454 US, up from $US1.0364. Commonwealth Bank currency strategist Joseph Capurso said this allowed the Australian currency to spike up.
‘‘The main move upwards for the Aussie dollar was based on US dollar weakness because of that GDP result,’’ he said.
However, the Aussie dollar had moderated down since then, with little other data to support it.
‘‘Today regional share markets except for the ASX have been falling, and that’s helped the Aussie to fall back as well,’’ Mr Capurso said.
12.26pm: On the private sector credit numbers:
Housing credit - up 5.3% y/y in March: Equals the slowest growth since 1977!!— Stephen Koukoulas (@TheKouk) April 30, 2012
12.17pm: Loans provided by banks and finance companies rose 0.4 per cent in March from the previous month, outpacing a predicted 0.3 per cent advance.
Total lending increased 3.4 per cent from a year earlier, the Reserve Bank said today, also more than the forecast for a 3.2 per cent annual increase.
Loans to consumers to buy houses rose 0.4 per cent from February and 5.3 per cent from a year earlier, according to today’s statement. Credit provided to consumers for purchases other than housing increased 0.1 per cent last month for an annual decline of 1.5 per cent.
12.08pm: Troubled miner Kagara has appointed voluntary administrators in a bid to save the company.
The base metals miner suspended mining at its Balcooma and Mt Garnet operations in Queensland last week while its shares have been suspended from trading since April 20.
The company has blamed falling zinc and copper prices, increased production costs and a strong Australian dollar for its poor outlook and $49 million first half loss.
It also cut 130 jobs from its Perth office and North Queensland operations, leaving it with 350 remaining staff.
12pm: BHP Billiton has paid Archer Exploration $8 million to buy out its five tenements near its massive Olympic Dam mine in South Australia, adding to recent acquisitions in the region.
BHP took an 80 per cent interest in the tenements at West Roxby, 90km southwest of Olympic Dam, last December but has now bought the rest. The tenements cover 3699 square kilometres of the Stuart Shelf region.
11.52am: It's a $700 million-plus retreat to Scotland and the north of England for National Australia Bank as chief executive Cameron Clyne turns his back on his predecessors' grand UK expansion, Eric Johnston reports.
That's the outcome of a two-month review of NAB's British adventure, which has been hurting the Australian bank with a decade of poor returns.
The move will lead to the closure of dozens of branches in the south of England, shut down commercial lending and cut as many as 1400 staff there.
11.40am: Weaker equity markets and the cost of a recent acquisition have caused a 24 per cent drop in BT Investment Management's first-half profit.
BT, which is owned by Westpac, has posted a net profit of $11.2 million in the six months to March 31, down from $14.7 million.
The company says costs are higher due to BT’s recent purchase of London-based investment manager JO Hambro Capital Management.
11.33am: As the graph above shows, the market is climbing higher. The ASX200 is now up 25.2 points, or 0.6 per cent, at 4387.3.
11.24am: In more grist for the RBA mill, new home sales have plunged to their lowest since May 1994 in the latest sign of Australia's struggling real estate sector.
Sales of new homes sank 9.4 per cent in March to 5443 homes nationwide, following a 3 per cent rise in February, according to the Housing Industry Association. Monthly sales were in excess of 11,000 homes as recently as May.
“Leading housing indicators such as new home sales are pointing to on-going deterioration in already very weak new home building conditions," said HIA chief economist Dr Harley Dale. "That situation is in turn having a major negative impact on manufacturing and services sectors."
House sales fell 9.7 per cent in March, while unit sales slumped 6.9 per cent nationwide, HIA said.
11.20am: Here’s a positive note to start the week. Australian stocks, which have lagged US shares by the most in three years, are set to catch up as lower interest rates and a rebound in China’s economic growth propels a 7.7 per cent rally through December, according to UBS.
David Cassidy, a Sydney-based strategist at UBS, says ‘‘the RBA cutting rates combines with our view that the China growth slowdown has probably bottomed in the first quarter.’’
‘‘This can all lead to a better relative performance for Australia in the next few months,” he said.
11.12am: IG Markets’ Chris Weston said the market had responded well to National Australia Bank announcing it would restructure its loss making business in the United Kingdom after it contributed to a 15.6 per cent fall in the group’s first half profit.
‘‘There’s a bit of buying coming through the banks,’’ he said. ‘‘People have been looking pretty closely at the NAB restructure. It seems the market is warming to it.’’
11.08am: Spotless shares are 4.5 per cent higher after coming out of a trading halt. They've added as much as 11 cents to $2.57 since resuming trade at 11am.
10.59am: Shares in Spotless Group, which have been on a trading halt, are set to resume trade at 11am after the company agreed to a $720 million takeover offer from Pacific Equity Partners.
In case you missed it earlier, here's the full story.
10.51am: The first of this week's economics releases is out. BusinessDay's Chris Zappone reports that the TD Securities - Melbourne Institute monthly inflation gauge increased by 0.3 per cent in April, following a 0.5 per cent rise in March, as prices on travel, clothing and footwear fell in the month. Full story.
“The first taste of inflation for the June quarter is sending mixed messages, with relatively healthy monthly growth rates for prices, but annual inflation remains comfortably benign,” said head of Asia-Pacific research at TD Securities said Annette Beacher.
Analysts tip a rate cut from the RBA tomorrow after official Australian Bureau of Statistics first quarter inflation came in at 0.1 per cent last week, well below the 0.6 per cent rate expected by the market. The faltering inflation suggests the domestic economy has slowed more dramatically than anticipated by the RBA.
10.43am: It looks like markets are catching up with Barthurst Resources - now down 4.5 per cent - and drilling products suppliers Imdex - down 0.8 per cent - both of which released activity reports on Friday.
Imdex flagged that unseasonally wet weather in Australia, political unrest in Mali and PNG and the transition from the winter drilling season to the summer drilling season in Canada, which dinted third quarter performance, would likely flow into the early part of the fourth quarter.
10.39am: Back to Clive Palmer for a moment. Your blogger wonders if Mr Palmer himself is having a flutter at these odds:
Good old Centrebet on seat of Lilley: Swan $1.30; Palmer $3.20.— Stephen Koukoulas (@TheKouk) April 30, 2012
10.34am: Markets are holding steady at 0.5 per cent higher. And now for some of the early sliders:
- Bathurst Resouces - down 6.02%
- Henderson CDI - down 2.93%
- Dart Energy - down 1.67%
- Myer Holdings - down 1.29%
- Cudeco - down 1.15%
10.33am: NAB shares are now 0.7% lower to $24.97 following today's announcement on first half profit.
10.30am: Looking at the early gainers on the ASX200:
- Intrepid Mines: up 5.52%
- Saracen Mining Holdings: up 5.50%
- Aquarius Platinum: up 4.72%
- Emeco Holdings: up 4%
- Virgin Australia: up 2.63%
- IOOF: up 2.47%
10.22am: Looking at how the sub indices on the ASX200 are going today:
- Materials: up 1.13%
- Industrials: up 0.73%
- Telecoms: up 0.71%
- Consumer staples: up 0.49%
- Financials: up 0.41%
- Health: down 0.43%
10.16am: In early trade, the All Ordinaries index is 21.3 points higher, or 0.5 per cent, to 4454.7, while the benchmark S&P/ASX200 is 22.4 points higher, or 0.5 per cent, to 4384.5.
10.10am: NAB shares are up as much as 12 cents, or 0.5 per cent, to $25.27 following the announcement today of an unaudited first half profit of $2.82 billion, a rise of 5.7 per cent.
10.07am: Early take - shares 0.4 per cent higher as the markets opens.
10.02am: Industrial services company Spotless has agreed to a full takeover by private equity firm Pacific Equity Partners (PEP) for a total cash consideration of $2.71 per share. More to come.
9.56am: It's been a busy morning for Clive Palmer. He has announced he will seek preselection from the Liberal-National Party to stand against Treasurer Wayne Swan for the seat of Lilley, in Brisbane’s north.
And, he is going to build the Titanic II, according to reports. (This blogger just double-checked - it's definitely not April Fools' Day.) Mr Palmer announced he has signed a memorandum of understanding with state-owned Chinese company CSC Jinling Shipyard to build Titanic II.
Asked if the ship could sink, Mr Palmer told reporters: ‘‘Of course it will sink if you put a hole in it’’.
He added: "It is going to be designed so it won’t sink. It will be designed as a modern ship with all the technology to ensure that doesn’t happen."
Keeping his tilt at federal politics from sinking might not be so easy.
9.54am: Australian bond futures prices have opened slightly lower ahead of a key rates decision by the Australian Reserve Bank (RBA).
At 8.30am the June 10-year bond futures contract was trading at 96.390 (implying a yield of 3.610 per cent), down from 96.400 (3.600 per cent) on Friday. The June three-year bond futures contract was at 97.000 (3.000 per cent), down from 97.030 (2.970 per cent).
ANZ senior economist Shane Lee on Monday said the bond market in Australia remained relatively subdued, given little news on international markets over the weekend.
‘‘The US GDP (gross domestic product) data over the weekend was pretty much in line with expectations, although a touch on the weak side,’’ he said.
‘‘So, there wasn’t a real lead from the US going into today. Stocks were a bit stronger, particularly in Europe.’’
9.52am: Here's the economics data we're expecting today:
- RBA private sector credit data - forecasts are for a 0.3 per cent rise for March, 3.2 per cent for the year
- TD Securities - Melbourne Institute inflation gauge for April
- Housing Industry Association new home sales for March
9.49am: Also out locally this week:
- Tuesday: RBA board meeting and interest rate decision, Australian Industry Group/Pricewaterhouse performance of manufacturing (PMI) index for April, Dun and Bradstreet business expectations survey
- Wednesday: ANZ Banking Group first half results
- Thursday: Westpac Banking Corporation first half results, Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI) for April
- Friday: RBA Statement on Monetary Policy
9.45am: All eyes move to the RBA tomorrow when it meets to decide on the official cash rate. A Bloomberg survey forecasts the central bank will cut rates from 4.25 per cent to 4 per cent, with 26 out of 27 economists predicting a 25 basis point cut. One economist forecast a 50 basis point cut.
The decision follows the release today of a private sector inflation survey, private sector lending data and new home sales data from the HIA, but after softer-than-expected official inflation figures last week most believe a rate cut tomorrow is a foregone conclusion.
9.42am: Australian business services company Spotless Group is set to announce it has agreed to a $720 million takeover offer from Pacific Equity Partners, a source close to the process said.
9.39am: Here are a couple of items related to the NAB profit outlook:
- The big four banks will have reported a combined first-half profit of about $12.5 billion by the end of the next fortnight
- Westpac is making an aggressive move to drum up market share by undercutting rivals on some variable mortgage rates ahead of the Reserve Bank's anticipated interest rate cut tomorrow.
9.36am: National Australia Bank says first-half unaudited cash profit rose 5.7 per cent even as it posted higher bad debt provisions and revealed a charge of almost $300 million to overhaul its struggling operations in the United Kingdom.
The bank said cash profit for the six months to the end of March came in at $2.82 billion. Net profit for the first half will be about $2.05 billion, down almost 16 per cent on a year earlier in part because of the restructuring costs related to the UK, the bank said.
9.32am: It's been a busy start to what's going to be a busy week. We've got a steady flow of economics data to look forward to, a rates decision and trading updates from some of the big banks, not to mention the will-they-won't-they speculation about whether lenders will pass on a rate cut should the RBA deliver one.
- The SPI futures was 28 points higher to 4397
- The $A was trading higher at $US1.0459
- US stocks rose on strong earnings
- Euro stocks defy bad news
- Oil little changed in thin trade
- Gold rises amid Spanish debt fears
- Wall St week ahead: Bulls ready to take over
- Australian financial calendar: April 30 to May 4
9.30am: Good morning everyone. Welcome to the Markets Live blog for Monday.
This blog is not intended as investment advice
Contributors: Thomas Hunter, Peter Litras, Peter Hannam, Jens Myer
BusinessDay with agencies