Markets Live: Miners pulls shares up
Australian shares end higher after a deluge of economic data offered some support. But investors are likely to stick to the sidelines awaiting the United States presidential election, an interest rate decision from the Reserve Bank of Australia and the Melbourne Cup horse race.
5.10pm: That's all for today, folks. Thanks everyone for reading this blog and posting your comments.
Here's our evening wrap of today's session.
4.35pm: Here's how the bue chips did today:
- BHP: +1.2%
- Rio: +2.6%
- ANZ: +0.04%
- CBA: +0.05%
- NAB: -0.1%
- Westpac: +1.3%
- Fortescue: +1.75%
- Woolies: +0.45%
- Telstra: -0.2%
4.19pm: The market's gains were led by the big banks and miners, with the materials sector up 0.7 per cent and financials adding 0.5 per cent. Gold stocks fell 1.8 per cent and consumer discretiuonary lost 0.9 per cent.
4.13pm: The sharemarket has closed higher, just below the day's peaks. The benchmark S&P/ASX200 index rose 14 points, or 0.3 per cent, to 4474.1, while the broader All Ords added 10.3 points, or 0.2 per cent, to 4493.6.
4.06pm: Australian equities had a case of the ‘blues’ in the early going today with our index initially following the weak lead from Wall Street, says CMC Markets trader Tim Waterer:
- However the release of forecast-beating retail sales data lifted the early gloom and saw the ASX200 move into positive territory.
- With the US election occurring on Wednesday Australian time, and with local employment figures and a raft of Chinese data due on Friday, any moves of conviction on the local bourse will likely be reserved for the second half of the week.
3.59pm: Qantas has accused Virgin Australia of making a ‘‘thinly veiled attempt’’ to convince the competition regulator to reject its proposed alliance with Middle Eastern airline Emirates.
In a strongly worded rebuttal of Virgin’s claims, Qantas said its rival was trying to ‘‘minimise Qantas International’s competitive position’’ so that what it termed the ‘‘formidable Virgin/Singapore Airlines/Etihad/Air New Zealand alliance’’ would not have to respond as vigorously.
Virgin has claimed in submissions to the competition regulator that a Qantas-Emirates alliance will make it harder for competitors to challenge the dominance of Australia’s largest airline on key routes.
But in its latest submission, Qantas has accused Virgin of a ‘‘gross exaggeration’’ in claiming that it already had a significant fare premium over Emirates and its other rivals.
3.45pm: Some reactions coming in on the Federal Court's l;andmark ruling against Standard & Poor's and ABN Amro over the ratings agency assigning a AAA to derivatives that lost almost all their value in the GFC.
S&P says it plans to appeal the ruling. "We are disappointed with the court's decision, we reject any suggestion our opinions were inappropriate," the ratings agency said in an emailed statement.
IMF Australia, a publicly listed company that funds large class-action lawsuits and financed the Australian claim, said it is planning legal action in Amsterdam related to some 2 billion euros in CPDOs sold by ABN Amro and rated by S&P.
"This is a major blow to the ratings agencies, which for years have had the benefit of profiting from the assignment of these ratings without ever being accountable to investors for those opinions," said lawyer Amanda Banton of Piper Alderman, who represented the local councils.
"Today's judgment will ultimately have the effect of ensuring ratings agencies are accountable and promoting transparency in the ratings process," Banton added.
3.14pm: Telstra is planning its first benchmark-sized bond sale in its home market since 2005.
Telstra hired ANZ, CBA, NAB and Westpac to manage the offering.
The Melbourne-based phone company may offer five-year notes yielding about 100 basis points more than swap rates, said a person familiar with the matter, who asked not to be named as the terms aren’t set.
3.06pm: According to the Australian Institute of Petroleum, the national average retail petrol price fell by 4.4 cents to 144.4 cents a litre in the past week.
Over the past three weeks the terminal gate (wholesale) price of fuel has fallen by 9.1 cents a litre to 131.3 cents a litre – a 3-month low. Similarly the Singapore gasoline price has fallen by $15 a barrel in Aussie dollar terms in the past three weeks and is holding at the weakest levels in four months.
CommSec expects the national average retail petrol price (pump price) to ease by a further 4 cents a litre over the next fortnight.
2.53pm: Man cannot live on bread alone, but for this German-Turkish immigrant, it seems to be working just fine, writes BusinessDay's Miriam Steffens.
It's been almost seven years since Ahmet Yaltirakli opened the first outlet of his Luneburger German Bakery chain in the basement of Sydney's historic Queen Victoria Building. Since then, six more shops have been added across the city, luring commuters with the smell of soft Bavarian brezen (pretzels), seedy breads, ham and cheese rolls and continental pastries.
Four of the outlets are owned by Mr Yaltirakli; the others by a franchisee and his former wife. And the entrepreneur is eyeing a renewed push to break into the Melbourne market.
For the former goldsmith from Cologne, who came to Australia a decade ago after falling in love with the country on holidays, it was third time lucky
2.42pm: Mazda said on Monday it sold 9,511 vehicles in China in October, down 45 per cent from a year earlier, as consumers shunned Japanese brands following a flare up in anti-Japanese sentiment due to a diplomatic row between the two countries.
The declined was steeper than the 35 per cent fall marked in September.
In the first ten months of the year, sales fell 9 per cent from a year ago to 157,627 cars, it said.
Japanese car makers suffered the backlash from a territorial dispute between Beijing and Tokyo, with Mazda's bigger rivals all posting steep sales decline In China last month.
2.31pm: BusinessDay's Michael Pascoe has filed: Rate cut not a sure bet.
So 20 out of 26 economists polled by Bloomberg are backing an interest rate cut by the Reserve Bank tomorrow – but it’s worth remembering that more often than not the favourite doesn’t win the Melbourne Cup.
While there’s a case for trimming the cash rate to 3 per cent tomorrow, it’s short of the compelling argument that was made for last month’s cut in the board minutes.
In five weeks, the Chinese growth outlook has gone from softer-than-expected to back-on-sustainable-track. Europe is no worse and the fledgling US improvements have held, the economy continuing to expand “at modest pace”.The RBA’s index of commodity prices fell 3.5 per cent in October to be a little above where it was before the global financial crisis, but the panic over falling iron ore prices has abated.
Meanwhile, the sector that Treasury is depending on to deliver 3 per cent GDP growth next year is showing signs of life. Any number of housing indicators remain soft, but there’s a near consensus that the bottom has been reached and building approvals have been steadily improving.
2.14pm: CommSec chief economist Craig James had some interesting tidbits in regards to today's retail data:
- Aussie home-owners were either sprucing up their homes for sale over September or they were just looking to make themselves more comfortable. But whatever the motivation, spending at hardware and outdoor supply outlets posted the largest quarterly gain in 5½ years. In contrast, Aussie shoppers spent less time at book shops, department stores and specialty outlets like antique shops. Interestingly cafes and restaurants are favoured in the current environment while take-away outlets are doing it tough. Consumers are still spending, but selectively.
- Department stores are clearly in trouble. In the September quarter real spending at department stores fell by 3.6 per cent – the biggest decline in seven years. The major department stores will have to work quickly to remain relevant in an increasingly fluid spending environment where store loyalty is a premium.
2.00pm: Westpac is performing well after reporting its third consecutive record cash profit earlier today, up 1.24 per cent. It is the largest contributor to the ASX200 today, adding 3.95 points.
1.44pm: Toyota will hike its operating profit forecast for the year by 5.0 per cent to Y1.05 trillion ($12.69 billion) when it releases it earnings later on Monday, Japan’s public broadcaster NHK reported.
Japan's biggest automaker saw brisk sales in North America and Southeast Asia offsetting a drop in China revenue stemming from a territorial spat between Tokyo and Beijing, which rival Honda blamed for a 20 per cent cut to its net profit forecast for the fiscal year to March, NHK said.
Toyota, whose shares rose 2.22 per cent to 3,210 yen in morning Tokyo trade, was also on track to boost its full-year net profit from an earlier forecast of Y760 billion ($9.19 billion) yen, NHK said without giving a revised figure.
1.29pm: And here are some of the worst-performed companies on the ASX200:
- Aquila: -6.2%
- Emeco Holdings: -6.06%
- David Jones: -4.04%
- Whitehaven: -3.86%
- Seven Group Hodings: -3.63%
1.20pm: As the ASX200 makes a break into positive territory, here's a quick look at the top five on the ASX200 so far today:
- Iluka: +2.15%
- Insurance Australia Group: +1.88%
- Arrium: +1.71%
- BWP Trust: +1.70%
- Carsales.com: +1.67%
1.15pm: Westpac shares are holding onto their early gains following today's profit announcement. They are now 1.4 per cent higher, or 34 cents, to $25.37. The bank's shares have had a good year - they're up more than 25 per cent since January.
1.10pm: Easy Forex currency dealer Tony Darvall said the Australian dollar is trading in a tight range ahead of the week’s key events.
‘‘This week is going to be very volatile, there’s no question,’’ he said.
‘‘Given that we’ve got the RBA and a US election tomorrow you expect the market to be pretty contained. It’s very hard for it to rally ahead of what is about to come out.’’
The local unit was recently buying $US1.036, 64.64 pence, 83.4 yen, 80.75 euro cents and $NZ1.25.
12.59pm: China's services PMI is out and it shows the world's second-biggest economy has rebounded from the slowest expansion in at least 19 months, adding to manufacturing gains that indicate China is recovering from a seven-quarter slowdown.
The purchasing managers’ index rose to 55.5 in October from 53.7 the previous month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing on November 3. The growth follows two reports last week that showed a pickup in manufacturing industries. Full story.
12.51pm: Today, however, the dollar has been on the rising, getting a lift from the slightly better than expected retail sales data for September. The Aussie is currently at $US1.0365, up from $US1.0332 earlier today. The dollar touched a one-month high of $US1.0420 on Friday.
12.46pm: The Australian dollar is unlikely to fall much in the months ahead mainly because of a lack of high yielding alternatives, a Reuters poll of analysts shows, even as financial markets expect the central bank to further cut interest rates.
The median forecast of 52 analysts showed the Aussie at $US1.0300 in a month's time before gradually crawling lower to just above parity at $US1.007 by this time next year. This compares with $US1.0363 where it currently stands.
But the forecasts ranged from a low of $US0.8500 to a high of $US1.0800 for the 12-month view, suggesting great uncertainty in the outlook.
The Aussie's strength is a major reason why a majority of economists expect the Reserve Bank to cut its cash rate by 25 basis points to 3.0 per cent on Tuesday, matching record lows reached during the global financial crisis.
12.40pm: And some more data for the RBA to mull: sales of new vehicles were up a speedy 12.2 per cent in October, compared to the same month last year, once again led by strong demand for sports utility and commercial vehicles.
The Australian Federal Chamber of Automotive Industries VFACTS report showed total vehicle sales in October were 95,584, compared to 85,196 in the same month last year.
Sales were up 1.0 per cent on September, which had also been a solid month. For the 10 months to October, sales were running at 918,258, up 9.7 per cent on the same period last year.
Sales of sport utility vehicles extended their barnstorming run with a rise of 26.2 per cent on a year earlier. The light commercial market was also strong with a rise of 19.7 per cent and the heavy truck market enjoyed a jump of 15.1 per cent, pointing to solid business investment.
12.27pm: Mitt Romney says Barack Obama’s policies will consign the US to an extended period of sluggish economic growth, at best. The president says his Republican challenger’s plans will sow the seeds of another mammoth recession. Both are wrong.
No matter who wins the election, the economy is on course to enjoy faster growth in the next four years as the headwinds that have held it back turn into tailwinds. Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 per cent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009.
“The die is cast for a much stronger recovery,” said Mark Zandi, chief economist for Moody’s Analytics.
He sees growth this year and next at about 2 per cent before doubling to around 4 per cent in both 2014 and 2015 as consumption, construction and hiring all pick up.
The big proviso, according to Zandi and Yale University professor Ray Fair, is how the president-elect tackles the task of shrinking the $US1.1 trillion federal-budget deficit. The Congressional Budget Office has warned that the US will suffer a recession if more than $US600 billion in scheduled government- spending reductions and tax increases -- the so-called fiscal cliff -- take effect next year.
12.18pm: ANZ head of Australian economics and property research Ivan Colhoun said weaknesses in job advertising, together with a rise in last month’s unemployment rate, could prompt the central bank to cut the cash rate.
‘‘This continuing upward pressure on the unemployment rate will see the RBA cut interest rates further,’’ he said.
‘‘While we pushed back our previous expectation of the next rate cut to December after the higher-than expected third quarter CPI (consumer price index), a move on Melbourne Cup Day would not surprise.’’
He said interest rates were still too high, given persistent weakness in many parts of the economy.
‘‘Further stimulus from monetary policy is likely to be necessary,’’ he said.
‘‘Especially while the Australian dollar remains stubbornly high, in order to ensure that activity in other sectors of the economy picks up to replace the winddown of the mining investment boom from the second half of next year.’’
12.13pm: Australian job advertisements have fallen to their lowest point in more than two years, with weakness in all states, including those supported by the mining sector.
The monthly ANZ Job Ads survey showed the number of job advertisements fell 4.6 per cent in October, after a drop of 3.9 per cent in September.
This means the number of job ads has fallen for seven straight months, and is at its lowest point since January 2010.
12.01pm: JPMorgan chief economist Stephen Walters said the retail data is unlikely to influence the RBA's decision tomorrow.
"All in all reasonably decent numbers. The retail is the most important. That's a bit of a mixed bag...the grocery area like department stores went down. But other area like household goods, which are typically fairly discretionary, they went up.
"No clear message out of that but they are just decent enough numbers.
"The RBA has probably made up its mind. These numbers add a little bit up to that...It makes it slightly less likely that they cut tomorrow. We don't think they are going to cut anyway.
"That may be help set argument a little bit but it's not a big swing factor."
11.52am: CommSec chief economist Craig James said the retail figures provided little direction in terms of what the RBA might do with the cash rate at its meeting tomorrow.
‘‘Retail trade was a bit higher than expectations, but if you look at sales in the September quarter, they fell slightly,’’ he said.
‘‘So it’s not an inspiring set of figures, neither overwhelmingly positive nor negative.‘‘It hasn’t changed our expectations for a rate cut tomorrow - it’s still a 50-50 call.’’
11:45am: Australia’s trade deficit narrowed in September, the balance on goods and services was a deficit of $1.456 billion in September seasonally adjusted, compared with a revised deficit of $1.876 billion in August.
Economists’ forecasts had centred on a deficit of $1.5 billion in September.
11.30am: BREAKING: Retail sales are up 0.5 per cent, they were expected to come in at 0.4 per cent. The figures are up from the previous month, which recorded a 0.2 per cent rise.
The dollar was at $US1.034 before the release of data, immediately after it jumped to $US1.0359, but it is now back down to $US1.0353.
11.28am: Among the sectors, investors look to be moving towards defensive stocks, with IT and telecommunications posting marginal gains, both up 0.1 per cent.
Gold miners are down 2.6 per cent, consumer discretionary have fallen 0.8 per cent and materials have slipped 0.4 per cent.
11.15am: Hanlong Africa Mining has secured a fresh round of finance from a Chinese bank to fund its acquisition of Sundance Resources, the takeover target says.
Sundance said in a statement on Monday Hanlong has secured a financier commitment letter (FCL) from China Everbright Bank Co for $US438 million ($425.39 million).
The new finance, coupled with the previously announced $US1.022 billion in commitments from China Development Bank, was in excess of the amount required by the Scheme Implementation Agreement (SIA), Sundance said.
11.03am: Here’s an interesting read from the Telegraph in London: The forces of reaction and economic folly threaten to prevail in China. The long political arm of Jiang Zemin has reached out from the shadows to thwart reform, with huge implications for Asia and the world.
10.52am: Westpac’s chief executive Gail Kelly is tipping a December interest rate cut by the Reserve Bank if it holds off trimming them on Tuesday.
Economists are divided over whether the Reserve Bank of Australia (RBA) will cut the cash rate tomorrow, with Mrs Kelly describing it as a ‘‘very much a line ball call’’.
Asked by reporters today whether she expected a rate cut, Mrs Kelly replied ‘‘if not tomorrow, then probably December’’.
‘‘I think we are definitely in an environment where declining interest rates is the likely outcome, and certainly would be very beneficial for consumer confidence and consumer sentiment,’’ she said.
10.44am: Both the All Ords and the ASX200 are now down 0.5 per cent. Investors aren't too sure about what to expect this week, by the looks, and are bracing for any uncertainty that may arise from tomorrow's US election or the RBA rates call.
10.41am: BREAKING Municipal councils that lost millions on structured finance products have successfully sued investment bank ABN Amro, credit rating agency Standard & Poor’s and the finance company they bought them from, Local Government Financial Services (LGFS).
The 13 councils lost $16 million on the constant proportion debt obligations, marketed as Rembrandt notes, which were created by ABN Amro and assigned a AAA rating by Standard & Poor’s.
Federal Court Justice Jayne Jagot said that the councils were entitled to succeed in their damages against LGFS, ABN Amro and Standard & Poor’s which included negligence and misleading or deceptive conduct. More soon.
10.39am: The next piece in today's economics new puzzle has arrived. The TD Securities Melbourne-Institute monthly inflation gauge showed that consumer prices rose by 0.1 per cent in October after a lift of 0.2 per cent in September and a 0.6 per cent gain in August. In the 12 months to October, the gauge rose 2.4 per cent.
The rise for October was attributed to increased prices for communications, newspapers books and stationary, and domestic holiday travel and accommodation.These were offset by weaker readings for fruit and vegetables, bread and cereals, and audio visual and computing equipment and services.
TD Securities head of Asia-Pacific Research Annette Beacher said these figures were a ‘‘first peek’’ at inflation in the December quarter. They showed inflationary pressures were ‘‘relatively benign’’, with key underlying and headline measures in the lower half of the RBA’s two to three per cent inflation target band, she said.
10.35am: A quick look at the big miners:
- BHP is 0.12% higher to $34.36
- Rio is 0.02% higher to $57.39
- Fortescue is 1% lower to $3.97
10.32am: It looks like Gail Kelly is determined to hang on to the top job at Westpac for a while. Eric Johnston tweets:
Westpac chief Gail Kelly on tenure: "I've got no plans other than to carry on". Also talks up management bench strength.— Eric Johnston (@ejohnno) November 5, 2012
10.30am: Some more from Westpac:
Westpac's Gail Kelly now says she wants 50% of management women by 2017 bit not official target.... yet #ausbiz— Tony Boyd (@Tony__Boyd) November 5, 2012
10.28am: Stocks are now making a more decisive move into negative territory. The ASX200 is down 0.1 per cent, the All Ords is down 0.2 per cent.
10.25am: A thought from Peter Esho:
Melbourne Cup, RBA, $100m lotto, US Elections <= & that's just Tuesday, going to be a massive week #ausbiz— Peter Esho (@PeterEsho) November 5, 2012
10.18am: Looking at the sub indices on the ASX200 now, no real outliers, defensives moving higher:
- Utilities: +0.75%
- Info tech: +0.72%
- Telecoms: +0.33%
- Health: +0.31%
- Industrials: -0.61%
- Energy: -0.3%
- Materials: -0.23%
10.14am: The Australian share market has opened slightly higher. The benchmark S&P/ASX200 index was up 3.1 points, or 0.07 per cent, at 4463.2 while the broader All Ordinaries index was up two points, or 0.04 per cent, at 4485.3. On the ASX 24, the December share price index futures contract was up eight points at 4453, with 7778 contracts traded.
10.12am: After a brief dip at the open, Westpac shares are now charging ahead of its rivals - up 1.16%. CBA now down 0.07%, ANZ down 0.6% but NAB is up 0.4%.
10.08am: Westpac shares are down 0.4 per cent in early trade following this morning's profit announcement. Not out of step with the other big banks, which are also down marginally, except CBA, which is 0.2 per cent higher.
10.06am: Early take - Shares flat, much as expected.
10.01am: At some point this morning, we will learn about the judgment in the action by local councils against Standard & Poor's, ABN Amro and others.
S&P had slung its once-cherished Triple A credit rating on some toxic credit instruments called "Rembrandt" CPDOs. They blew up six months later.
Apparently some $200 billion of these masterpieces were sold worldwide, not Rembrandts but CPDOs that is, and there was a defect in S&P's modelling of the volatility in the products.
If the court finds against the ratings agency in Australia, it will not only be the first adverse judgment against S&P worldwide, but it may also open up S&P to a further $200 billion in claims. In 48 hours, the eyes of the credit world will be fixed.
9.57am: More on the Westpac result. City Index chief market analyst Peter Esho noted that Westpac's earnings continued to grow even as activity in the housing market cooled.
"For cash earnings to grow by 5 per cent when housing growth trends towards 3 per cent is testament to a very well managed bank," he said.
"Growth in this order while maintaining asset quality over the next few years looks achievable and the market will start to reward this consistency by closing the multiple gap between Westpac and Commonwealth Bank," he said.
9.53am: And here’s the local week ahead:
- Tuesday: RBA decision on official interest rates - 2.30pm, ABS house price indexes for September quarter, AiG/HIA performance of construction index for October
- Wednesday: House price index, News Corporation first quarter earnings results, Commonwealth Bank September quarter trading update
- Thursday: ABS labour force data for October, AiG performance of construction index
- Friday: RBA statement on monetary policy
9.50am: Here's the full list of what's on the economics agenda today:
- TD Securities - Melbourne Institute inflation gauge for October
- ANZ job advertisements series for October
- ABS retail trade for September
- Australian Industry Group/Commonwealth Bank Australian Performance of Services Index for October
- Dun and Bradstreet business expectations survey
- Australian Bureau of Statistics (ABS) international trade in goods and services for September
9.47am: The first of many economics releases has landed. Activity in the Australian services sector has fallen fell for the ninth consecutive month, weighed down by weak consumer confidence.
The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI) for October rose 0.9 points to 42.8 points. A reading below 50 indicates a contraction in activity.
Eight of the nine sub-sectors covered by the activity survey recorded falls in the month, with transport and storage, retail trade and wholesale trade among the weakest.
Commonwealth Bank senior economist John Peters said the services sector continued to suffer from the impact of the high Australian dollar.
‘‘Sectors exposed to household spending, particularly retail trade and wholesale trade segments, have experienced particularly sharp falls in activity,’’ he said.
9.44am: The first piece of major local news today arrived from Westpac, which posted its third consecutive record cash profit but said full-year net profits fell 15 per cent due to the tax implications of its takeover of smaller rival St George.
The result for the year to September 30 was down from $6.99 billion in 2010/11, when Westpac received $1.1 billion in tax benefits. The 2011/2012 result includes $165 million in retrospective tax charges. Westpac announced a final dividend of 84 cents, up from 82 cents a year earlier. Full story.
Here's the result in a nutshell:
- Cash profits rise 5% to $6.598 billion
- Net profit down 15% to $5.97 billion
- $165 million retrospective tax charge on St George takeover
- Impairment charges up 22% to $1.2 billion
9.39am: For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:
- The SPI was 3 points lower at 4442
- The $A was trading at $US1.034
- US stocks slide despite strong jobs data
- European shares buoyed by US jobs report
- Oil price falls $US2 after refinery shutdowns
- US jobs report triggers gold sell-off
- Australian business news: November 5-9
9.37am: Good morning folks. Welcome to the Markets Live blog for Monday.
Contributors: Thomas Hunter, Jens Meyer, Max Mason
This blog is not intended as investment advice
BusinessDay with agencies