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Markets Live: Miners spoil jobs party

Date

Patrick Commins, Jens Meyer

Weak China trade data spoiled what was otherwise a strong day for shares after unemployment unexpectedly fell and the dollar jumped through US94 cents.

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That’s it for Markets Live today.

You can read a wrap-up of the action on the markets here.

Thanks for reading and your comments.

See you all again tomorrow morning from 9.

The big banks and supermarkets pushed shares higher despite disappointing Chinese trade data sparking a sell-off in resources stocks.

The benchmark S&P/ASX 200 Index rose 17 points, or 0.3 per cent, on Thursday to 5480.8, while the broader All Ordinaries Index also added 0.3 per cent to 5477.5.  The market is trading at its highest level since June 2008.

Shares eclipsed 5500 points in early trade, while the dollar spiked above US94¢ after equity markets in the United States and around Europe pushed higher following the release of minutes from the US Federal Open Markets Committee reassured investors the central bank is in no rush to raise interest rates.

In an encouraging sign for the domestic economy the latest official jobs report was surprisingly strong. Australian Bureau of Statistics showed 18,100 new payrolls were created in March while the unemployment rate dropped from 6.1 per cent to 5.8 per cent against expectations for a rise to 6.2 per cent.

More economists are tipping the Reserve Bank of Australia's next move will be to raise interest rates than at any time in nearly two years. While the economy is showing signs of modest growth fund managers say share price valuations are tight.

"There is not a lot of scope left in the local market for capital appreciation over the year ahead, making high yielding stocks, such as the big four banks and Telstra, the most attractive play," Bell Asset Management chief investment officer Ned Bell said.

The big four banks led the market on Thursday. ANZ Banking Group rose for the eleventh session in a row, up 1 per cent to a record high of $34.19. Commonwealth Bank of Australia, Westpac Banking Corporation, and National Australia Bank each added 0.5 per cent to $77.89, $34.86, and $35.56 respectively. Telstra Corporation was unchanged at $5.08.

Read more.

So after the unexpected fall in the unemployment rate today, the question everyone is asking: will the RBA now act sooner to raise rates?

The answer is yes, at least according to data collected by Credit Suisse.

Financial markets increased their forecasts of a rate hike, pricing in an 88 per cent of a 25 basis points rise in the cash rate over the next 12 months after the new figures were released, according to the data. It was the highest forecast for a rate hike since early November.

Even so, the RBA is still between a rock and a hard place. Even if there is a sustained sign that the labour market is improving and there is less of a reason for emergency settings for the cash rate, the Australian dollar has grown from strength to strength this year, frustrating the central bank.

The stronger exchange rate means that the RBA will remain cautious about being too aggressive in taking about monetary policy, as it could place further upward pressure on the local currency.

And a rate hike in the near-term was unlikely as that could add further fuel to the Australian dollar’s rise.

“The bank cannot do much about the higher exchange rate as a strong housing market precludes a rate cut, although it might complain a little more about the currency,” Barclays' chief economist for Australia Kieran Davies points out in a note today.

Here they are, winners and losers after an interesting day's trading.

Wotif.com is top of the pops - see post at 4.05 - with Regis Resources not far behind.

Ten had a good day after posting a loss for the first half.

Worries about Chinese economic growth reared its ugly head again, and Mount Gibson Iron was the worst performer, down 6.3 per cent.

Myer gave up all of yesterday's gains plus a bit more as investors pondered the future for the department store competing against a cashed-up South African-owned David Jones.

G8 Education slumped 3 per cent (see post at 3:25 for a less-than-flattering comparison with a notorious former childcare play).

Best and worst performers in the ASX 200.

Best and worst performers in the ASX 200.

Well, everything was going along swimmingly until China came along and spoiled the party, posting weak trade numbers and driving miners lower.

The ASX 200 peaked above 5500 before growing dizzy from the altitude and staggering back down to 5480.8, an unimpressive 17 point gain - 0.3 per cent - from yesterday's close.

The broader All Ords was up a similar amount to 5477.5.

Financials (excluding listed property) were the biggest driver of sharemarket gains, up 0.6 per cent, with ANZ leading the charge, up 1 per cent, and CBA up 0.5 per cent. AMP was up 1.6 per cent.

Woolies jumped 1.2 per cent.

Listed property stocks gained 1.1 per cent - the bet performers in the ASX 200 - with Westfield up 1.6 per cent and Dexus Property 2.3 per cent.

Metals and mining stocks sagged 0.9 per cent. BHP lost 1.3 per cent, Fortescue 2.4 per cent and Iluka 2.4 per cent.

Wotif.com is the best performing stock in the top 200 today up 6.3 per cent to $2.73 ahead of the close.

And this is probably why: its share price having halved over the past year, it is little surprise that Wotif.com has been in the market for a defence adviser, reveals AFR’s Street Talk column.

Following a recent bake-off, the online travel agent founded by Graeme Wood has settled on Goldman Sachs as its investment bank of choice.

But what is unclear at this stage is whether the company plans to put itself up for sale and to actively solicit bids, or if they are simply worried about being bid for.

The company’s market value is down to just $551 million, even though it has $116 million of cash and no debt.

That makes it a very digestible target for potential acquirers interested in its strong, if faltering, position in the Australasian hotel market. Wotif charges lower commissions than most of its rivals, meaning an acquirer could boost returns by raising the rates.

The most likely companies to be interested in Wotif include US groups Expedia and Priceline (owner of Booking.com), which could help cut costs by combining their local head offices with the Australian company.

Synergies in technology and marketing would also be possible.

Notably, Wotif’s share price has fallen in part because it has been forced to spend more on marketing and technology to compete with its larger rivals, at the expense of its margins.

However, some say New Zealand’s Trade Me Group also shouldn’t be ruled out as a potential buyer.

Anything more than a 32¢-a-share dividend at Bank of Queensland’s results would be huge surprise, CLSA’s banks analysts said in their preview note this morning ahead of the regional bank’s interim results tomorrow.

CLSA said BoQ had a strong capital base, but was expected to use it to fund acquisitions and pursue growth rather than return funds to shareholders.

The broker is forecasting a 32¢-a-share first-half dividend when the bank reports on Friday, which is in line with sell-side consensus forecasts.

Further capital management is not out of the realms of possibility and, if this was to occur, it would be a huge surprise to the market,” the analysts told clients.

“Although with BoQ’s $450m capital raising in 2012 in back of management mind, it is likely to err on the side of caution. Potentially by eliminating the DRP discount (currently 1.5 per cent). We see BoQ more likely to use excess capital for growth and acquisitions.”

In terms of results, CLSA expects the bank to marginally beat expectations, given buoyant market conditions and the potential acceleration of past loan write-downs.

UBS has upgraded Arrium to a buy recommendation, citing the stock’s attractive valuation after 25 per cent underperformance in 2014.

The key is steel prices. The broker sees upside risk to Arrium’s steel-related earnings thanks to a strong outlook for domestic construction. Plus the company is trading on 7.5 times financial 2015 enterprise value to earnings before interest and tax. This is in line with other iron ore miners but a significant discount to its steel peers, who are on an average of 10 times.

“We note this implies the market is ascribing little value for an eventual turnaround in the group’s steel earnings, which we see as continuing to trade at near trough levels,” analysts said in a note on Thursday.

Also placing the company in good stead is Arrium’s potential to deliver 12.5 million tonnes a year of iron ore exports at current commodity price levels, allowing significant free cash-flow generation and rapid degearing over the next two years.

UBS has a 12-month price target of $1.70.

The bond market, it seems, has completely erased the European debt crisis from its memory.

On Thursday (northern hemisphere time), Greece, which only two years ago was the pariah of the international capital markets is set to return with a five-year bond issue.

The bond, which is expected to raise €2.5 billion at a modest rate of 5 to 5.25 per cent, is the troubled sovereign’s first public raising since the bail-out of February 2012.

The securities will be sold under UK law rather than domestic law, which should protect investors from default and has already attracted €11 billion of orders. It marks a spectacular two-year rally in the so-called PIIGs (Portugal, Italy, Ireland Anf Greece) that has rewarded the gutsiest of yield hogs.

Earlier this year, we wrote how Spain’s 10-year rate had fallen below that of AAA-rated Australia. Today, Spain’s five-year rate is now pressing against the 5-year US Treasury bond – arguably the safest asset on the planet.

While the bond market is consigning the European debt crisis to history, others aren’t so sure it’s a good idea to buy Greek bonds

“The only way for private investors to justify continuing to throw money at Greece is if you believe that the €222bn the EU has lent to Greece is entirely fictional, and will effectively be converted to 0 per cenrt perpetual debt, or will be written off, or Greece will default on official debt while leaving private creditors untouched,” London based Stratton Street said in a note to investors.

BT Investment Management’s Vimal Gor said in a letter to investors that complacency had crept in when it came to Europe and that bond markets weren’t reflecting an economic recovery but a “truckload of free money” given to the bank to buy Eurozone bonds.

As investors clamour for an upcoming Greek bond issue at around 5.5%, Spanish 5-yr bonds yield as much as the world's safest, US Treasuries.

As investors clamour for an upcoming Greek bond issue at around 5.5%, Spanish 5-yr bonds yield as much as the world's safest, US Treasuries.

The local head of Australia’s third biggest home loan lender says there is nothing concerning about house price rises in Sydney, but says he would like to see a more stable housing market.

ANZ chief executive of Australia Phil Chronican said the spike in the local housing market was a correction after a decade of slow growth, but warned if it was to continue at the same pace he would have concerns:

  • I think it’s reasonable to see that the Sydney market is recovering back into a relative position where it might have been against Brisbane and Melbourne and other cities.
  • The biggest increase in home prices in the last year or so were in Sydney. That was the market that in the decade previously had the slowest growth.
  • The real question is, if it were to continue would we have concerns? And of course the answer is, if it continued at the same pace as last year, then yes we would.
  • The housing market presents two types of concerns. It’s either going up too quickly or it’s showing signs of running out of steam. Frankly, we would like a more stable housing market.

 

There are two types of housing market concerns, ANZ says: it's either going up too quickly or it’s showing signs of running out of steam.

There are two types of housing market concerns, ANZ says: it's either going up too quickly or it’s showing signs of running out of steam. Photo: Rob Homer

Schroders’s senior portfolio manager for small companies, Marcus Burns, has a nice note out today warning against high valuations in sectors reliant on government largesse, and draws an unflattering comparison between a certain market darling and the ill-fated ABC Learning….

In a slowing Australian economy that looks likely to be running budget deficits for the foreseeable future, we would flag the heightened risks around sectors which are heavily reliant on government funding (read largesse).

The two sectors we would point to are the government funded VET (vocational education training) sector (90% of revenues sourced from governments) and the childcare roll-up sector (50-60% of revenues).

The latter in particular makes us want to repeat the chorus line again. Although childcare centres are clearly a very necessary part of a working society, the extent to which the private sector has and is profiting from this space appears unsustainable. Operators in the space proudly report that pricing has risen at 7% p.a. compound for 10 years.

The reason parents haven’t been particularly fazed by these steep day care cost increases is due to the current government subsidies for childcare, in particular the non means tested CCR (child care rebate). The CCR and CCB (means tested child care benefit) now cost the government a staggering $5bn pa.

Critically the CCR costs over $2.5bn and this is the component that is growing the fastest.

Our current Treasurer has stated that the “age of entitlement is over” and is looking to cut the budget deficits. To that end the Productivity Commission is currently reviewing the child care industry and is due to make its submissions to the Government before October this year. Don’t expect an increase!

Equity holders have benefited disproportionately from a service that should arguably be delivered by the State.

G8 Education, the poster child for this space, now trades on 4.5x book value, coincidentally the same peak valuation reached by another child care centre roll up story that ended spectacularly poorly for investors in 2007.

I think I’ve made the case for caution at least.

Miners have pulled the overall market down from its strong early gains after weaker than expected China trade data spooked investors.

The official import and export numbers came out just after midday (see pots at 12:23) and the effect on the benchmark ASX 200 index was immediate.

The metals and mining sector is 0.8 per cent lower, and the energy sector 0.1 per cent down.

Here are the biggest drags on the materials sub-index:

  • BHP -1.4%
  • Fortescue -2%
  • Iluka Resources -2.1%
  • Rio Tinto -0.1%
  • OZ Minerals -2.4%
  • Mount Gibson -4.9%
  • PanAust -3.1%
  • BC Iron -1.2%
  • Atlas Iron -0.7%

The exceptions are gold miners, which are up 0.7 per cent as a group.

Commonwealth Bank's top lawyer, David Cohen, was rebuked before a senate inquiry this morning for downplaying systematic fraud within the bank's financial services arm as ''inappropriate''.

The word ''inappropriate'' was suitable to describe an error of judgment in clothing choice, said Mark Bishop, chairman of the Senate inquiry into the performance of the Australian Securities and Investments Commission, but not the fraud and failure within the bank's wealth management division which culminated in clients losing millions of dollars in savings.

It was a gruelling day for the bank's three top lawyers who fronted the senate panel following the testimony of Commonwealth Financial Planning (CFP) victims.

A group of whistleblowers – known as the ferrets – tipped off the regulator about a scandal inside the bank's wealth division in October 2008.

It then took ASIC 3½ years to act on the information provided by CBA in June 2009 about the serious allegations of forgery and fraud by a planner, who was allowed to continue to work in the industry during the regulator's inaction.

Read more

This morning’s jobs number have put a rocket under the Aussie dollar.

Prior to the release of unemployment number we dropped in to discuss the rates and currency outlook with UBS’s bond strategist Matt Johnson, who is of the view that the high flying Aussie will eventually have to fall

As this chart shows, the AUD is now around 6 per cent overvalued by the RBA’s own models. Johnson says the RBA tends to kick up a fuss when it breaks those grey bands so they might resume voicing their displeasure.

That might mean the RBA will restart “jawboning” – and with the balance sheet recapitalised the threat that they might intervene might be a tad more credible.

The most likely consequence of the rising currency is that it will force a revision of the RBA’s growth forecasts.  

Still Johnson is of the view that the Australian dollar is headed south as US interest rates normalise.

He says interest rates markets appear to be under-estimating the rise of US short term rates relative to the Federal Reserve’s own Taylor Model which ensures monetary policy strikes that balance between containing inflation and supporting growth.

Once US interest rates to begin to rise, the greenback should strengthen against the Aussie dollar.

Expectations the RBA will tighten are making the Australian dollar look a bit rich. Source: UBS

Expectations the RBA will tighten are making the Australian dollar look a bit rich. Source: UBS

Myer will have access to key inside information on Woolworths Holdings’ strategic plans for its transformation of rival department store David Jones after it appointed a former retail boss of the South African retail giant as a special adviser to the Myer board.

At Myer’s annual meeting last year chairman Paul McClintock told shareholders it had secured the advisory services of experienced global retail executive Andrew Jennings, who at the time was the CEO of German department store Karstadt but was previously group managing director of retail at Woolworths South Africa.

Jennings appointment was touted as a huge win for Myer at the time by McClintock who said the Myer board would gain access to his international experience and a ‘‘global perspective on innovation and retail brands’’.

Jennings, who has also worked for Harrods London and Saks Fifth Avenue New York, has spent 40 years in the retail game and helped turn around the 400-store South African retailer Woolworths.

A free-trade agreement worth tens of billions to the Australian economy could be just months away after PM Tony Abbott held one-on-one talks with China's Premier Li Keqiang on arrival in the southern resort island of Hainan on Wednesday.

Mr Abbott used the talks to promote his economic reform message, stressing that Australia welcomes foreign investment, has always needed foreign capital to develop and wants access to the billions of dollars held in China.

The deal would potentially give Chinese companies new access to direct investment in Australian companies and to lucrative development of resources and public infrastructure.

The visit, which was elevated to the highest level of a "state" visit, bringing all the pomp and ceremony afforded to the most powerful, is the third and final leg on Mr Abbott's northern Asia tour.

Officials said the signs were that the mission was welcomed by a Chinese leadership eager to use the extra leverage of a free-trade agenda to expand the country's overly export-oriented economy.

China is pushing for greater access to investment in Australia, prompting speculation that the threshold of $244 million which triggers automatic assessment by the powerful Foreign Investment Review Board will be lifted in line with deals given to Japan and Korea.

A free-trade agreement with China has long been regarded as a boon for Australia assuming it includes rights of Australian businesses to invest in China and greater access to agricultural markets.

Australia is also pursuing greater rights to provide services in China in areas such as finance, health and ageing services, management, environmental water management and architecture.

Read more.

Prime Minister Tony Abbott and Chinese Premier Li Keqiang meet during Mr Abbott's visit to the country.

Prime Minister Tony Abbott and Chinese Premier Li Keqiang meet during Mr Abbott's visit to the country. Photo: Alex Ellinghausen

Credit Suisse recommends shorting one of the most favoured stocks in the ASX200, Ramsay Health Care, saying that shares of the “market darling” will fall because it is expensive and generates poor free cash-flow.

Equity strategist Hasan Tevfik identified improving cash-flow among Australian listed companies as a key theme underpinning his forecast for the S&P/ASX 200 to rise to 5600 points by the end of 2014. The other elements working in the index’s favour are dividend growth and a claim to having the highest dividend yield in the world.

Tevfik’s analysis suggests removing casino group Crown as a short idea and replacing it with Ramsay, the hospitals operator that was among investors’ favourites coming out of the February earnings season. Credit Suisse also added Flight Centre to its long ideas, dropping David Jones.

In spite of Credit Suisse’s forecast for the Australian sharemarket to finish the year with formidable gains, comparing global stocks on a price-earnings ratio measure suggests Australian equities are indeed expensive.

The United States is the world’s priciest market trading at 14.8 times June 2015 earnings. But after adjusting for Australia’s unique sector mix, domestic stocks unseat the US with a P/E of 15.6 times (or 14.5 times on an un-adjusted basis).

It is the ASX 200’s dominance on yield that will keep supporting further price gains in spite of this.

“While Australia looks to be the most expensive market in the world on P/E ratios, it is the cheapest on dividend yields,” Tevfik says in his report:

  • As long as bond yields remain low, Australian equities are well positioned to further benefit from the global-search-for-yield.
  • Australia is expected to record amongst the fastest free cash-flow growth in the world. This will be a major achievement given the inherent capital intensive industries Australian companies are exposed to.
  • Free cash generation is an obvious early indicator of a company’s ability to return capital to shareholders.
Yields are in line with the long-term average - but high in a global comparison.

Yields are in line with the long-term average - but high in a global comparison.

More on the jobs data, and in particular what economists think it might mean for the RBA’s monetary policy decisions (which aren’t getting any easier).

This from TD Securities’s Annette Beacher:

The RBA tends to watch the unemployment rate rather than noisy monthly employment movements.  However, the February Statement of Monetary Policy claimed “it is likely that employment growth will be only moderate over the coming year and the unemployment rate will continue to edge higher”.  So while this report is at odds with (i.e. stronger than) current RBA thinking, the Bank tends to need three months to be convinced that a new trend is established.

We expect GDP growth to reach 3 per cent this year, and higher employment growth lies ahead.

However, even with our expected return to 2 per cent/yr employment growth by year end, this doesn’t guarantee that the unemployment rate remains below 6 per cent.  We target 6 per cent by year end.

And from RBC’s Su-Lin Ong:

The positive tone in the breadth of the labour market data and ongoing signs of strength in the broad activity indicators may well prompt a discussion over whether we have see the peak for the unemployment rate for this cycle.

A key factor in the monetary policy debate, we have often argued that the unemployment rate has a good (inverse) relationship to the cash rate.

Labour market developments could start to see the market bring forward its timing of the first hike from current expectations of May 2015.

We expect a tightening cycle to begin in Q2 2015, with 75bp of hikes pencilled in for 2015.

James Packer's Crown Sydney development will generate the lowest returns for investors among six Australasian casino developments that are currently in the pipeline.

That's the view of Citi gaming analyst Michael Goltsman who has analysed projects underway for the three listed casino players: Mr Packer's Crown Resorts, Echo Entertainment Group and SkyCity Entertainment. Combined, the projects are worth $4.3 billion.

Investors concerned that Mr Packer's $1.3 billion, 275-metre hotel and high-roller palace being built at Barangaroo is a vanity project will not find any solace in the comprehensive research report.

In July Crown won approval from the NSW government to build its new casino and hotel on the Barangaroo waterfront development precinct on the Western edge of the city centre.

Crown Sydney, which is slated to open in 2019, will compete with Echo's flagship casino The Star that, located just across the water in Pyrmont.

Mr Goltsman forecast that Crown's high roller casino would deliver a pre-tax return on invested capital of 7 per cent.

"Crown Sydney holds the largest revenue opportunity in both mass and VIP," he told clients. "However, returns are dampened by high capital commitments and its low margins."

Read more.

 

Citi casinos estimated returns on investment

Citi casinos estimated returns on investment

High profile Bell Potter trader Charlie Aitken has labelled high-frequency trading "legalised scalping" and warns that the national stock exchange is headed for trouble because it profits from allowing investors to gain faster access to the equity market to the disadvantage of other participants.

Aitken said most investors he spoke to believed that the growth of HFT had made the equity market a "rigged casino" and trading volumes were lower as a result.

"This is all a question of market integrity," he said in a morning note to clients. "If private investors believe the market is rigged against them, and in one aspect they are right because they are executing at slower speeds than others, then you can't blame them for not wanting to participate."

Australian financial markets are considered safer and more tightly regulated than Wall St when it comes to HFT, which accounts for about a third of all trading activity, compared with more than double that in the US.

It is widely agreed that HFT is an issue only when the technology is used by traders who deliberately program their super-fast computer systems to take advantage of client orders and force them to usually pay more or suffer a loss.

Mr Aitken, who has been an outspoken critic of HFT for some time, moved to promote Bell Potter as a broker that will hopefully be "rewarded" for its long-term stance against HFT.

He reaffirmed his "sell" recommendation on shares in the Australian Securities Exchange, which he said was playing a role in facilitating and profiting from allowing HFT to operate in the public market and in its dark pools away from the exchange and at cheaper cost.

Some of the HFT numbers Aitken quotes:

  • 27 per cent of turnover based on value is attributed to HFT
  • 32 per cent of all trades on the lit market are HFT
  • 44 per cent of all orders entered are HFT
  • 47 per cent of all amended orders are HFT
  • The top 10 high-frequency traders account for 60 per cent of HFT turnover
  • Top 20 account for 80 per cent of HFT turnover
  • 10 per cent of HFT orders exist for between 10 and 100 milliseconds
  • 40 per cent of HFT orders exist for 1 second or less
  • 65 per cent of HFT is intraday turnover that is flat at day's end

Read more

Bell Potter's Charlie Aitken has been a longstanding critic of high-frequency trading.

Bell Potter's Charlie Aitken has been a longstanding critic of high-frequency trading.

China’s exports and imports unexpectedly fell in March as Premier Li Keqiang tries to stabilize an economy headed for its slowest growth since the global financial crisis.

Shipments declined 6.6 per cent from a year earlier, the customs administration said in Beijing today, compared with the median estimate for a 4.8 percent increase in a Bloomberg News survey of 47 economists. Imports fell 11.3 percent, leaving a trade surplus of $US7.71 billion.

Investors are monitoring prospects for additional stimulus as the government grapples with protecting growth while reining in credit risks and rolling out changes to the structure of the economy.

Li is speaking today at the Boao Forum in Hainan province after central bank Governor Zhou Xiaochuan yesterday reaffirmed the government’s commitment to market-driven changes during a visit to Shanghai’s free-trade zone.

China’s export data have been distorted by inflated numbers in early 2013, when some companies filed fake invoices to disguise capital inflows. According to the official figures, exports fell 18.1 percent in February from a year earlier, the biggest drop since the global financial crisis.

Today’s numbers compared with analysts’ median estimates for a 3.9 percent gain in imports and a $1.8 billion trade surplus.

Li last week outlined measures including railway spending and tax relief to support growth as economists estimate that GDP rose 7.3 percent in the first quarter from a year earlier, which would be the slowest pace since 2009. Zhou yesterday reiterated that markets should play a “decisive” role in the economy.

The government’s target this year is for expansion of about 7.5 percent, matching the IMF’s latest estimate for the nation’s growth.

Early economist reactions to the much better than expected unemployment rate figure out this morning are coming through.

This from Barclays's Kieran Davies:

"I think the turnaround in hiring is consistent with the improvement we've seen in the business surveys and the jobs ads [data]," Barclays' chief economist for Australia Kieran Davies said.

"Companies were reluctant to take on people last year but they are feeling more positive about hiring this year."

Mr Davies said the jobless rate could rise further, but peak in the middle of the year instead of in early 2015, as the Reserve Bank of Australia had been expecting. 

The earlier turnaround could also mean that the central bank might raise interest rates faster than the expected first-quarter of next year, he added.

Wealth management group Equity Trustees has announced it has agreed to acquire ANZ Trustees from ANZ Bank for $150 million.

The purchase will be funded by a fully underwritten equity raising, Equity Trustees said in an announcement to the ASX.

EQT’s Chairman, Tony Killen, said in the statement: “The acquisition of ANZ Trustees cements EQT as Australia’s largest independent ASX listed company with a dedicated trustee service”.

In addition (and this is from the press release):

“EQT and ANZ have entered into a strategic relationship for an initial period of five years, with the potential for renewal for a further five years.

“It is anticipated that this will provide benefits for each party: ANZ will refer clients to EQT for the provision of specialised trustee services and will work with EQT to develop a suite of banking solutions that can be offered to their traditional trustee clients.

“In addition, ANZ and EQT have agreed to explore other areas of mutual interest such as the development of solutions to meet the needs of ANZ clients who need access to aged care services.”

You can read the full ASX announcement here.

EQT shares remain in a halt and last traded at $22.58.

Copper overcapacity will last the next two or possibly three years, and prices will “remain volatile,” said Jean-Sebastien Jacques, copper chief executive officer at Rio Tinto.

“The overcapacity that we are seeing for this year is on the back of investment decisions made five or 10 years ago,” Jacques said in an interview with Bloomberg in Santiago yesterday. “The entire industry is of the view that there will be overcapacity in the next two or possibly three years.”

Long term fundamentals are “strong,” he said. Rio Tinto will focus on projects that “can create value throughout the cycle.”

Copper has dropped 10 per cent this year, the worst performance of the main six metals on the London Metal Exchange. Supply will exceed demand this year by the most since 2001, according to the International Copper Study Group in Lisbon.

The dollar has shot through 94 US cents, jumping half a cent to a new five-month high of 94.36 US cents on the back of the surprise drop in the unemployment rate.

The Aussie dollar has jumped half a US cent to US94.40 following a surprise drop in the unemployment rate.

The Aussie dollar has jumped half a US cent to US94.40 following a surprise drop in the unemployment rate.

Big surprise! The unemployment rate has fallen to 5.8 per cent, as 18,100 jobs were added to the economy last month, according to the ABS.

A total of 22,100 full-time positions were lost in March, and 40,200 part-time jobs were gained as the participation rate was steady at 64.8 per cent.

Economists had expected the jobless rate to rise to 6.1 per cent, the highest since July 2003, and for only 2500 jobs to be added to the economy.

The latest figures came after February's surprise 80,500 jump in full-time positions, which boosted hope that a turnaround in the labour market could be in progress.

These latest figures may confirm that.

Recent forward job indicators have pointed to improving conditions in the labour market. On Monday, March job advertisement figures from ANZ showed an increase for the third-straight month, amid signs the demand for labour is strengthening.

Read more.

Japan's core machinery orders fell sharply in February, casting doubt on the strength of capital spending as early signs suggest the world's third-biggest economy may struggle to cope with a sales tax hike that kicked in this month.

Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, declined 8.8 per cent, Cabinet Office showed on Thursday.

The fall followed a 13.4 per cent jump in January, which was the quickest gain since March 2013, but was much worse than the 3.0 per cent drop forecast by analysts in a Reuters poll.

The data joins a recent run of weak economic reports that showed a loss of economic momentum after a solid performance in the first half of last year, which was fuelled by Tokyo's aggressive monetary and fiscal stimulus policies.

However, capital spending, private consumption and exports have lagged recently as the effects of Prime Minister Shinzo Abe's policies began to fade, raising pressure on the Bank of Japan to provide additional stimulus.

The Nikkei is up 0.9 per cent in early Tokyo trading.

There is also growing concern among analysts that a chill in demand from an increase in the sales tax to 8 per cent from 5 per cent on April 1 will severely crimp growth.

"Companies remain wary of business conditions after the sales tax hike, so growth in capital spending is unlikely to pick up pace at least until this summer when the situation may become clearer," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo.

"Capital spending may underpin the economy but I doubt it could be strong enough to serve as a key drive," he said.

Governor Haruhiko Kuroda dismissed market expectations on Tuesday that the BOJ could ease again soon.

BusinessDay columnist Michael Pascoe, not impressed with its latest forecasts, asks: has Canberra nobbled the IMF?

I give up – what’s with the International Monetary Fund publishing an out-of-date forecast for the Australian economy? Has the long shadow of official Joe Hockey gloom fallen over its Washington headquarters?

As it was summarised by the AFR, the IMF officially reckons the Australian “economy is likely to remain in the doldrums this year and next” with GDP growth of 2.6 per cent in 2014 and 2.7 per cent in 2015, according to the forecasts released on Tuesday night.

Excuse me – the Australian economy is in the doldrums? That’s not what the ABS is saying. Yet the IMF report was dutifully and widely reported as if it was credible news.

The IMF view is pretty much in line with the doom-laden forecasts of Treasury’s mid-year economic and fiscal outlook (MYEFO) way back in early December. Four months can be a long time in the crystal ball business.

Since the MYEFO show, our economic indicators have been overwhelmingly on the positive side with a very good chance that the 2013-14 financial year will show trend growth or better – an extraordinary achievement.

Retail sales have been almost ridiculously strong for the past six months, building approvals are as good as they ever are, the trade surplus is rocketing along, there are even signs of life in that lagging indicator, the labour market, and the Reserve Bank has reported there’s optimism returning to tourism.

The relative unknown is just how badly the slowdown in resources construction will impact the overall figure. The mining part of that is going to be sharp as the year rolls on, but there’s enough happening in the rest of the economy to think it’s certainly not a one-way bet.

Read more.

Here are some numbers on the market's performance:

  • The ASX200 today topped 5500 for the first time since June 2008
  • The index has risen 75 per cent since its lows in March 2009
  • That's an annualised gain of nearly 10 per cent
  • The ASX200 is still 18.5 per cent below its all-time high of 6478.9 in October 2007
  • In 2014 the index has risen 2.7 per cent, adding about $40 billion in market capitalisation
  • The ASX200 Accumulation index, which includes dividends, is at a new all-time high
  • It's currently 7 per cent above 2007 highs, and 117 per cent above 2009 lows
The market is at its highest since June 2008, but still well off its all-time peaks.

The market is at its highest since June 2008, but still well off its all-time peaks.

As we mentioned, the Aussie dollar was a hair short of US94 cents overnight, but there are a couple of data releases today - jobs data and Chinese trade numbers - that could either push it past that point or send it lower.

Here's a nice take on those releases from NAB's economics team:

The domestic merry-go-round that is the monthly labour market day has come around again. The wild swings in the month-to-month data should be looked through, but tend not to be by markets. Last month’s very strong increase in employment is not expected to be fully reversed this month, but the monthly increase is only expected to be very modest by consensus. The more stable unemployment rate is expected to tick up to 6.1% from 6.0%, with a steady participation rate.

Markets will react, no matter the caveats. Market estimates range from -20,000 to +25,000, with NAB at -10,000. We believe that through the year, the unemployment rate will continue to rise.

The Chinese trade data has also been exceptionally volatile of late. A surplus is expected to be restored.

As the data distortions drop out of these numbers they will become more readable.

More interesting is the possible release of China's FX reserves data for Q1. Remember, this is the quarter the PBoC has engineered a substantial (for CNY) depreciation. How much they had to oppose capital inflows will show up in the accumulation of FX reserves.

This will also tell us the rebalancing (EUR, AUD etc) needs that have arisen from the accumulation of USDs over the period.

China’s loan data may also be released; again, closely watched as a guide to assess the slowing, or lack thereof, of the Chinese economy.

David Jones shares are pretty steady this morning, up marginally to $3.92, after surging 23 per cent yesterday on the $4 per share cash bid. Myer, which enjoyed some uplift yesterday, has eased 0.8 per cent to $2.37.

The AFR is reporting analysts are divided on whether DJs may attract more bids ($), although the market pricing at this stage suggests investors think $4 is as good as it is likely to get.

“This bid knocks Myer out of the process, but there may remain other international department stores that see the potential in owning David Jones at a transaction price that is relatively modest compared to the peer group, before synergies,” a CBA analyst said.

CIMB analyst Daniel Broeren sees only a small probability of a higher offer emerging, “(but) given board approval has already been provided, any superior bids ... will soon be flushed out.’”

David Jones chairman Gordon Cairns says Woolworths offer is compelling and provides shareholders with certainty.

However, he said the board was aware that overseas department store chains such as John Lewis and Marks & Spencer were looking at the Australian market and the board would consider superior offers if they emerged.

Investors have responded well to Ten's results this morning, with the shares up 1.9 per cent after climbing 4 per cent yesterday. Here's a more fulsome account of the interim profit numbers:

Australia's fourth-rated network Ten Network has posted an improved first-half loss of $8 million and reported "difficult trading conditions in the advertising market".

Ten, backed by billionaires James Packer, Bruce Gordon and Lachlan Murdoch, said the television advertising market remains "short, with limited visibility."

Revenue from ordinary activities rose by 7.8 per cent to $331.6 million over the six months to 28 February, the ASX filing shows.

The loss attributable to members was $7.99 million, an improvement on the prior period's loss of $243 million.

The loss after tax was $4.75 million, compared with $239.8 million in the previous corresponding period, which included $244.8 million in impairment charges and restructure costs.

No dividend was declared.

"The financial performance ... reflects the continued difficult trading conditions in the advertising market with only modest growth in ratings and revenue during the period," Ten said.

Analysts are almost universally bearish on Ten, with 11 sells, 3 holds and 1 buy, according to Bloomberg.

Concerns include the network's continued poor ratings in 2014, its lack of premium sport, and the time and money that will be required to turn the company around.

Read more.

Hamish McLennan CEO Channel Ten in their studios at Pyrmont. Thursday 17th October 2013 AFR photo

Hamish McLennan CEO Channel Ten in their studios at Pyrmont. Thursday 17th October 2013 AFR photo Photo: Louie Douvis

Global steel demand is forecast to decline this year as the Chinese economy slows from its breakneck speed, raising concerns about the impact it will have on Australia as one of the world's top iron ore producers.

The World Steel Association, the industry's main international body, expects global demand to rise 3.1 per cent in 2014 to 1.52 billion tonnes, compared to growth of 3.6 per cent last year, the Financial Timesreported. Demand growth is then expected to increase slightly in 2015, rising 3.3 per cent.

The expected drop off in demand is expected to affect the profit margins of Australia's biggest and richest iron ore miners BHP Billiton and Rio Tinto, and smaller players, as the raw material is used in steel making.

The price of iron ore is down 11 per cent this year and is trading at $US119 a tonne on this morning.

Australia's iron ore miners have been a significant contributor to national income as a result of a 20-year mining boom, but the economy is now in transition to one which is trying to encourage growth in non-mining sectors because of the expected drop in demand for the steel commodity, namely from China.

Helping to offset some of the drop in demand from China and emerging countries – which ran at more than 6 per cent a year for six years in a row from the early 2000s – is an expected pick up in the growth of developed economies, such as the US and Europe. The hope is that as these powerful economies improve that demand for steel to build infrastructure and housing will increase.

Read more.

Shares have surged higher in early trading, with the ASX200 touching 5500 before easing back to 5490.5, for an early gain of 27 points, or 0.5 per cent.

The All Ords was up a similar amount to 5487.4.

The big four banks are pushing the market higher, with gains of between 0.5 and 0.7 per cent. Woolies is up 1 per cent and Wesfarmers 0.8 per cent.

Transurban is up 2 per cent on quarterly traffic and revenue figures released this morning.

REA Group is the biggest drag, down 2 per cent, but was one of only 17 stocks to decline.

Metals and miners were the laggards, with the sector flat early. Gold miners were the exception there, up 0.9 per cent.

Shares in Horizon Oil are in a trading halt with the company saying in a statement that it expects to make an announcement “in relation to a material government approval in respect of its operations in Papua New Guinea”.

The shares will return to trading once the announcement is made, or by Monday morning at the latest.

Underperforming Australian broadcaster Ten Network has reported a smaller half-year loss and said it would target "non-traditional" advertisers as it tries to turn itself around in an uncertain market.

Ten, which had the lowest ratings of the three major commercial networks last year, posted a net loss of $8 million for the six months to February 28.

That compared with a net loss of $243.3 million for the same period a year ago, which was affected by large one-off charges.

The Australian dollar has jumped to a four-and-a-half-month high as the US dollar weakened on the back of signs from the US Federal Reserve of a slower start to a rise in interest rates.

The local currency rose as high as US93.99¢ early on Thursday morning as minutes from the US central bank's meeting last month revealed Fed members were concerned a shift in the median projection of interest rates could overstate the move towards an earlier start for rate hikes.

"The FOMC appeared to backtrack on the hawkish tones the market assumed from the March meeting," Nomura interest rate strategist Martin Whetton said in a note.

"The tone of the statement will likely give some pause for thought on the likelihood of higher market rates in the near term, though as always, the FOMC's actions and market reactions, should remain data-dependent."

The US dollar jumped in mid-March when Fed chair Janet Yellen said interest rates could rise six months after the tapering of its stimulus program ended, which markets had read as a stance towards a more hawkish stance.

The Australian dollar, which had been lifting to fresh four-month highs over the past month, could have US94.50¢ as its next target level, Westpac senior market strategist Imre Speizer said.

Read more.

'A bit of a game changer': The Australian dollar fell dramatically after the release of the RBA minutes.

'A bit of a game changer': The Australian dollar fell dramatically after the release of the RBA minutes. Photo: Bloomberg

Toll road owner Transurban has reported quarterly revenue grew by 12.9 per cent against the same period last year to $221.7 million.

Average daily traffic across its Australian assets grew by between 0.2 per cent and 0.5 per cent.

They company’s Sydney roads were particularly strong. Average traffic growth across Westlink M7, Hills M2 and Lane Cove Tunnel was 10.9 per cent for the quarter.

The company said the construction of the M5 West Widening project remains on schedule and budget and is 70 per cent complete with a completion date of late 2014.

US Federal Reserve officials fretted last month that investors would overreact to fresh forecasts that appeared to map out a more aggressive cycle of interest rate increases than policymakers actually anticipated.

The published forecasts, known as the "dots" charts, suggested the federal funds rate would end 2016 at 2.25 per cent, a half percentage point above Fed officials' projections in December. Bonds fell when the charts were initially released, at the close of the US central bank's March 18-19 meeting, as investors priced in slightly sharper rate rises.

But in minutes of the meeting published overnight, several of the meeting's participants noted the charts "overstated the shift in the projections," suggesting the Fed is not as eager to tighten policy as the dots had seemed to suggest.

Major US stock indexes rallied after the minutes were released, with the S&P 500 posting its largest daily gain in three weeks, while the US dollar weakened. Traders pushed out their expectations of a first Fed rate hike by about six weeks, to July 2015, trading in interest-rate futures showed.

"People are taking solace in the idea that the Fed may be more accommodative than previously thought, for longer than previously thought," said Steve Sosnick, an equity-risk manager at Timber Hill/Interactive Brokers in Greenwich, Connecticut.

 

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Ten Network has appointed Paul Anderson as chief operating officer, a move triggered by Lachlan Murdoch's exit from the television broadcaster.

An 11-year veteran at Ten, Mr Anderson takes on the new role in addition to his responsibilities as chief financial officer.

Mr Murdoch's departure from the Ten to take on the role of non-executive co-chairman at his father's company News Corporation forced Ten's chief executive Hamish McLennan to take on the role of executive chairman.

Mr Anderson's shift into the COO role, which has remained unfilled since the resignation of Jon Marquard last July, is seen as a move to help Mr McLennan with the day-to-day running of the network.

The broadcaster is due to report its first half earnings this morning, with Citi expected an underlying loss of $5.9 million, excluding one-offs.

"We appreciate Ten's commitment to content reinvestment, to boost audience ratings and ultimately revenue share, though we are yet to see signs of any major turnaround," Citi analyst Justin Diddams said.

"The shares have pulled back significantly from the recent highs, with the audience ratings disappointing post Big Bash League and the Sochi Olympics. While the operational leverage is significant, the execution risk remains high and we remain sceptical of any major recovery in the near term," Mr Diddams said.

Ten shares are hovering around two-year lows, having last traded at 26¢.

Read more.

Listed wealth management firm Equity Trustees is in a trading halt.

No details other than the shares won't be trading until an announcement by the company or by Monday.

Local stocks are poised to open sharply higher after the US Federal Reserve minutes suggest rates will stay lower for longer, sparking strong gains on Wall St and the Australian dollar.

Here’s what you need2know:

  • SPI futures up 40 points to 5504 at 8.45am AEST
  • AUD at 93.88 US cents, 95.71 Japanese yen, 67.75 Euro cents and 55.89 British pence
  • On Wall St, S&P500 +1.1%, Dow Jones +1.1%, Nasdaq +1.7%
  • In Europe, Euro Stoxx 50 +0.2%, FTSE100 +0.7%, CAC +0.4%, DAX +0.2%
  • Spot gold up 0.1% to $US1310.66 an ounce
  • Brent oil up 0.2% to $US107.85 per barrel
  • Iron ore up 1% to $US119.40 per metric tonne

What's on today:

  • ABS labour force figures at 11:30am AEST. Unemployment rate is expected to rise to 6.1% from 6.0% on a steady participation rate, on Bloomberg consensus forecasts.
  • China official trade balance data is due out today at an undetermined time. Economists are expecting a rebound to surplus after last month revealed a deficit in this volatile figure.

Stocks to watch:

  • Ten Network releases first-half results, conference call at 10:30am
  • Transurban releases release March quarter traffic and revenue
  • Artistocrat Leisure cut to neutral vs buy at UBS
  • Atlas Iron raised to buy vs neutral at UBS
  • CSL cut to hold from buy at Deutsche Bank; price target $73.20
  • Expect more talk and share price action in takeover target David Jones, as well as peer Myer

Read more.

 

 

Good morning and welcome to the Markets Live blog for Thursday.

Your editors today are Jens Meyer and Patrick Commins.

This blog is not intended as investment advice.

BusinessDay with wires.

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