And that concludes another week of Markets Live. Thanks for being with us, have a safe and happy weekend.
It's going to be a busy week ahead for economic news in the US and Australia.
In Australia, we'll have retail sales figures for September, the house price index for the third-quarter on Monday. The Reserve Bank's board is set to meet on Tuesday, but financial markets and economists are expecting the central bank to keep rates on hold at 2.5 per cent.
On Wednesday, we'll get the September figures for imports and exports and Thursday brings the October employment figures, a crucial piece of data that could see the RBA still keep the door open to further monetary policy easing if the jobless rate rises.
In the US, there'll be factory orders and ISM non-manufacturing data early in the week. But the key numbers that financial markets will be watching out for later in the week are the third-quarter GDP figures, the October non-farm payrolls (which would have been due today if not for the government shutdown) and the October unemployment rate.
Looking forward a little further, next weekend will see the start of China's Third Plenum meeting, where Communist Party leaders are expected to announce far-reaching economic reforms.
The market has closed lower, with the benchmark S&P/ASX200 slipping 14.4 points, or 0.3 per cent, to 5411.1. The broader All Ords lost 13.8 points, or 0.3 per cent, to 5406.5.
The chances of interest rates getting any lower are very slim, following a recent surge in the housing sector and improved confidence in the Australian economy.
Eight out of 12 economists surveyed say the Reserve Bank of Australia won’t reduce the cash rate in the foreseeable future, and most say it will raise it in late 2014 or early 2015.
A Melbourne Cup day cash rate cut is a non-starter for all of the those surveyed.
But four forecast a reduction in the first half of next year.
The RBA has slashed the cash rate by two per cent to a record low of 2.5 per cent in a series of reductions over the past two years.
HSBC chief economist Paul Bloxham says he thinks improved business and consumer confidence, as well as strong rises in house prices means the RBA has finished its rate cutting cycle.
‘‘The RBA is unlikely to deliver any more rate cuts for fear of over inflating the housing market,’’ he said.
‘‘Housing price growth has risen and timely auction market data suggest these trends have continued in recent weekends, despite a pickup in supply on the market.
‘‘The upswing in the housing construction cycle also appears to be accelerating, with building approvals for new construction rising in September to their highest level since 2010.’’
Huawei has finally broken its silence after the Coalition government decided to uphold the ban on the Chinese telecom giant participating in the National Broadband Network, saying the company is ‘‘extremely disappointed’’.
John Lord, the chairman of Huawei Australia and a former Royal Australian Navy admiral told the company’s staff to hold their heads up high and be ‘‘proud to be Huawei’’.
Mr Lord’s letter to staff came after Prime Minister Tony Abbott categorically shut down the speculation that Canberra was going to relax the previous government’s ban on Huawei.
‘‘While much of this week’s commentary has focused on cyber security,’’ he said in a letter to all staff.
‘‘I want to make it crystal clear that Huawei has never been presented with any evidence that our company or technology poses any kind of security risk.’’
Ban upheld: Huawei is still not allowed to participate in Australia's NBN. Photo: Bloomberg
Shareholders in Gina Rinehart’s Roy Hill project have tipped in a further $624 million over recent months, in a bid to keep the project going until debt funding can be secured.
The extra payments were described in Roy Hill’s annual results, which were published by ASIC over the past 24 hours.
The big iron ore project, which is being developed by Gina Rinehart in partnership with Korean steel giant POSCO, Japan’s Marubeni and China Steel Corporation, had originally hoped to have its $US7 billion debt package secured by March 2013.
But that debt process is still underway, meaning the joint venture partners were asked to pay further instalments on their stakes sooner rather than later.
‘‘The Directors resolved that further calls on partly paid shares be made sufficient to meet existing current commitments in order to progress Project activities. In the quarter ended 30 September 2013 call notices totalling $624,000,000 were made and paid by shareholders,’’ the company said its full year results.
The telegenic Tom Waterhouse vowed in May we would be seeing less of him following the controversy of his spruiking of live odds across our most popular sports.
It now appears he has fresh incentive to do so.
Mr Waterhouse may be forced to curb his marketing arsenal due to a more recent vow - to make a profit.
This follows the sale of his business in August to UK bookie, William Hill, for a modest $30 million up front with a further $70 million dependent on the company turning a significant profit by the end of 2015.
Outgoing David Jones boss Paul Zahra says there’s nothing sinister about his departure, as he works on a seamless handover to a successor.
Mr Zahra, who has been chief executive of the department store chain for three years, unexpectedly quit last week, citing personal reasons.
He will step down once a replacement is found.
Mr Zahra said he plans to take a break for at least six months, but is not ending his management career.
‘‘I’m only 47 and I do think there’s a bit more in me and I’m certainly healthy and energetic enough to take on another management role,’’ he said today.
‘‘I’m open for all opportunities.’’
But it was ‘‘unlikely’’ he would go to rival Myer, he said, where chief executive Bernie Brookes’ contract expires on August 31, 2014.
Mr Zahra denied there was anything else behind his departure, describing his relationship with chairman Peter Mason as ‘‘good’’.
‘‘There’s certainly nothing sinister,’’ Mr Zahra said.
Paul Zahra. Photo: Louie Douvis
Here's some good news on the Chinese money market, which has been in the headlines this week amid concerns that the People's Bank of China was once again tightening monetary policy.
The Chinese benchmark money-market rate has dropped to the lowest level in more than a week after the central bank injected cash into the financial system.
The PBOC added a net 29.1 billion yuan ($5.03 billion) via money-market operations in the last four days, after draining 102.5 billion yuan in the two weeks before, Bloomberg data shows.
That's helped the seven-day repo rate to decline 41 basis points to 4.64 per cent in Shanghai - the lowest level since October 23.
"We expect interbank rates to fall back to a normal level," Bank of America economists said in a research note.
"We don't think the PBOC will significantly tighten monetary policies as new leaders still need a stable economic and financial environment to consolidate their power base."
Prices measured at the factory, farm or wharf gate jumped in the September quarter.
But the rise was dominated by surging import prices, figures from the Australian Bureau of Statistics show.
The producer price index for final goods and services rose by 1.3 per cent in the quarter, with the domestic component rising by 0.8 per cent and the imported part leaping by 5.9 per cent.
The PPI is not the same as the higher profile consumer price index.
The CPI is measured at the final point of sale, and includes indirect taxes, profit margins and distribution costs.
But the PPI can give some insight into inflationary pressures.
For the consumer goods and services component of the PPI, the quarterly breakdown was a 1.4 per cent gain overall, with locally sourced products up 1.0 per cent and import prices up by 6.7 per cent.
That annual rise was the biggest since an increase twice as steep was recorded in the final quarter of 2008, after the Australian dollar had slumped in the previous quarter in a knee-jerk reaction to the global financial crisis.
Within the domestic consumer PPI the standout was the supply of utilities - electricity, gas, water and drainage.
This category amounts to only 3.3 per cent of the basket of goods and services measured in the domestic consumer PPI, but posted a rise of five per cent, thereby contributing one sixth of the total rise.
Here's a bit more from the Australian Office of Financial Management (AOFM) on the issuance of government bonds for the 2012-13 financial year.
A total of $54 billion of gross Treasury bonds were issued. Two tenders were held in most weeks, one usually for a longer-dated bond line and one for a shorter-dated bond line. Each tender was in the range of $500 million to $1 billion.
The total volume of Treasury bonds on issue rose by $28 billion to $234 billion, the AOFM says in its annual report. Treasury indexed bonds totalled $2.25 billion for the year. Australian Infrastructure bonds totalled $2 billion.
As of today, the total government securities on issued stands at $289 billion. The newly elected federal government recently flagged a lifting of the debt ceiling from $300 billion to $500 billion.
The AOFM said last week that bond issuance for the current 2013-14 financial year is expected to rise to $70 billion in gross terms. With maturities of $23 billion, it amounts to a net issuance of $47 billion.
Here's an interesting lunch time story from Motley Fool's Scott Phillips:
Brands used to be "trust marks" of quality – a promise from the manufacturer that his product was a high-quality, trustworthy product that he'd stand behind. There were plenty of competing soda fountain flavours in the US south in the late 1800s, but Coca-Cola was a known quantity that tasted the same – and great – no matter where you bought it.
Over the ensuing century, as government regulation, food safety and consumer protection laws increasingly reassured consumers, brands became less about trust and certainty, instead becoming advertising catchphrases designed to appeal to consumers.
And advertising did its job. The "Mad Men" and their successors turned brands into symbols of affection and desire. They appealed to our aspirations, fears, dreams and insecurities.
We didn't leave home without an American Express card, we were happy little Vegemites, Coke was "it" and we loved football, meat pies, kangaroos and Holden cars. The brands we loved became, in themselves, a shared experience – and we embraced them.
It's also fair to describe a second, parallel track – the rise of consumerism in general, and its unhealthy extreme – conspicuous consumption.
Shares in Sony have plunged more than 10 per cent after the Japanese electronics giant slashed its full-year profit outlook.
The shares were trading at 1,686 yen in Tokyo on Friday, a day after Sony cut its earnings forecast for the year to March by 40 per cent due to tepid demand for its digital cameras, personal computers and televisions.
Whitehaven Coal says it has set a new company record by moving more than 1 million tonnes from its mines to the port of Newcastle in October.
Whitehaven also achieved record monthly export sales of 1.24 million tonnes.
Chief executive Paul Flynn said the achievements were particularly pleasing given they occurred in a period when the coal market was weak.
Whitehaven expects to produce 10.7 million tonnes of coal in the 2013/14 financial year.
Mr Flynn said last week he was seeing signs of recovery in metallurgical and thermal coal markets.
Whitehaven shares were flat at $1.62.
Following David Jones' sales results this morning, BusinessDay's Michael Pascoe says the department store is going nowhere:
It says plenty about the market's low expectations for David Jones when a flat quarterly sales result is greeted with wild enthusiasm. Trouble is, it's hard to stay enthusiastic about a company going nowhere.
DJs' shares were up by as much as 15 cents this morning to a heady $2.87, allegedly on the strength of first quarter sales not falling. And that's all they did.
Total sales for the 13 weeks to October 26 were up 2.1 per cent, but same-store sales if you exclude the Canberra store undergoing refurbishment were up just 0.6 per cent – effectively flat. Include the Canberra shop and sales were down 0.3 per cent – still effectively flat.
So the story for mid-market department stores remains the same. No, the consumer isn't on strike – they're still spending plenty of discretionary dollars but they aren't being enticed to do it in David Jones or Myer.
Warren Buffett calls a company's competitive advantage its "moat", but these days, the multitude of cheaper options in all markets is making it harder for big-name brands to compete, writes Scott Phillips of Motley Fool.
If you ask Australians, we'll tell you that we want to buy quality, Australian-made products from Australian companies… until we open our wallets. Then, money talks, and it says that, in many cases, we just want to buy cheap.
The new phalanx of online retailers – and daily deals sites – has taken it to a new level. There's rarely a week that passes when you can't buy 1000-count Egyptian cotton sheets for previously unheard-of prices. All of a sudden the previously "premium" products seem to be overpriced and under-featured.
The maker of Bonds and Sheridan, Pacific Brands (ASX: PBG) is yet to find a way to adequately respond to the new threats. Indeed, Kmart's success almost proves Warren Buffett's point – that, having brands that Australians know and trust isn't enough, when you have someone else doing what you're doing, but cheaper and as good or better.
A NSW environmentalist charged with allegedly issuing a hoax press release that wiped hundreds of millions of dollars off the value of a mining company has pleaded not guilty.
Jonathan Moylan, 25, appeared in the Supreme Court in Sydney today where he pleaded not guilty to a charge of disseminating false material likely to induce people in Australia to dispose of Whitehaven shares.
Last January, the Newcastle-based activist allegedly sent a press release to media outlets claiming ANZ Bank had withdrawn a $1.2 billion loan from Whitehaven’s Maules Creek open cut coal mine on ethical grounds.
The media release bore the ANZ Bank logo, and $314 million was temporarily wiped from the miner’s market value soon after its distribution.
Moylan was initially expected to face the District Court, but prosecutors successfully applied to have him tried in the Supreme Court.
He will stand trial on June 30.
China's manufacturing sector grew at the fastest pace in 18 months in October, official data showed on Friday, adding to signs of a stabilisation in the world's No.2 economy as the government readies a series of key economic reforms.
The survey's strength offered some relief on the growth outlook after a disappointing run of data last month, including a below-forecast official PMI and a surprise drop in exports.
The official Purchasing Managers' Index (PMI) stood at 51.4 last month, up from September's 51.1 and above a forecast of 51.2 in a Reuters poll of economists.
"This is in line with our relatively benign growth outlook," said Louis Kuijs, an economist at RBS, in a note.
"With global demand momentum likely to pick up gradually and domestic demand growth remaining solid, we expect GDP growth to comfortably exceed the government's bottom line in the coming quarters."
With the battle for Warrnambool Cheese and Butter heating up, analyst Chris Gibson takes a look at the the players involved in the saga:
ASX-listed Bega Cheese owns 17.9 per cent of Warrnambool. In mid-September Bega offered 1.2 of its shares and $2.00 cash per Warrnambool share. Based on Bega’s opening price on Friday $4.49 this values Warrnambool at $7.74 a share (a material increase from the implied $5.89 when its bid was launched as Bega’s shares have been caught up in the frenzy).
Murray Goulburn, a farmer co-op and Australia’s largest dairy processor owns 16.8 per cent. Murray Goulburn offered $7.50 a share in mid-October.
Saputo, a Canadian-based dairy major that currently enjoys the support of Warrnambool’s board, bid $7.00 a share in early October and raised this to $8.00 a share on October 25 following Murray Goulburn’s offer. Saputo had no direct interest in Warrnambool as of that date.
Lion Dairy & Drinks - owned by Kirin Holdings of Japan - has this week reportedly paid $9.25 a share for a 9.99 per cent stake. Lion has stated that it does not currently intend to make an offer for Warrnambool. Lion does have a manufacturing arrangement with Warrnambool to produce Coon and Cracker Barrel brands that is up for renewal in 2015.
These key players collectively hold 44.7 per cent of Warrnambool’s scrip.
The release of the annual report of the Australian Office for Financial Management (AOFM), which manages the Australian government's debt is a good opportunity to take a look at foreign investment in government securities over the past year.
The AOFM says that offshore interest remains strong, as investors continue to be drawn to the government's AAA-credit rating and stable outlook, coupled with the high yields on offer relative to other sovereign debt.
Non-resident holdings for Commonwealth Government Securities (CGS) were about 70 per cent of the total outstanding during the 2012-13 financial year, keeping the proportion of offshore investors in government bonds relatively steady in recent years.
However, the strength of the Australian dollar compared to the yen earlier this year, as a result of the country's quantitative easing policy, led to a pull-out by some Japanese investors from CGS, the AOFM says.
But it adds that the divestment activity has since "slowed significantly" by the end of the financial year.
Non-resident holdings of Commonwealth Government Securities.
Australia’s housing market is experiencing its strongest run in three years, with Sydney emerging as the engine of growth for the nation.
But rising prices are raising fresh concerns about worsening housing affordability after the limited breathing room delivered by the recent slump is being wiped away.
Affordability constraints are increasingly being flagged as a new danger area, particularly in the country’s east.
The number of finance commitment for first home buyers has plunged nearly 22 per cent in the last year despite the record low interest rate, according to the Bureau of Statistics.
First timers now comprise only 13.7 per cent of loans, which is their lowest market share since early 2004.
Capital city dwelling values rose 1.3 per cent in October, the latest in a series of solid months that has pushed the annual growth rate up to 7.9 per cent – the highest it has been since the last boom fizzled in 2010.
Wondering how someone can go from being a billionaire to being bankrupt? Meet Brazilian Eike Batista.
Just a few years ago, flamboyant Brazilian billionaire Eike Batista was boasting that he'd soon be the world's richest man. But his fall was deep and fast.
He loved to show visitors his Mercedes-Benz McLaren - parked right in the living room of his mansion.
Mr Batista's OGX oil company filed for bankruptcy protection on Wednesday in a stunning reverse for the champion speedboat racer who came to symbolise the country's economic boom with Brazilian flair.
Mr Batista was born to privilege. His father was the mines and energy minister and also led what was then the state-run Vale mining company, which has since been privatised. The younger Batista made his first fortune in his 20s, scouring the Amazon to buy up gold, which he resold in Brazil's big cities and Europe.
Eike Batista: his company filed for bankruptcy this week. Photo: AP
What can we take away from the solid gains in today's home price figures?
UBS economist George Tharenou says the clear positive trend in the housing market shows that the Reserve Bank's rate cuts are gaining more traction in the domestic economy.
"Looking ahead, amid a prolonged period of record low interest rates, we also expect spill-over of these wealth effects to deliver better consumption growth over the year ahead," he says.
ANZ analysts Paul Braddick and David Cannington say the improvement in home affordability and a rebound in buyer sentiment are helping to release the "pent-up" demand for homes that's been building over the year.
But they note that while Sydney and Melbourne are leading the way, the conditions in Tasmania aren't as rosy.
"While property market conditions have improved in most capital cities, Sydney and Melbourne are clearly the front runners, buoyed by solid property market fundamentals and improved home buyer confidence," the analysts say.
"In contrast, weak state economic conditions continue to weigh on Tasmania's housing market, with Hobart home prices 2.3 per cent lower month-on-month in October."
Here is an outline of the ins and outs of the cheese war taking over the nation, with Warrnambool Cheese and Butter the target of many admirers.
The latest twist has seen Fonterra, New Zealand’s giant dairy co-op, snap up a 6 per cent stake in Bega. It is reportedly trying to take a 10 per cent holding in Bega Cheese – the largest position a single shareholder can currently own in Bega under its constitution. Fonterra holds the rights to market Bega Cheese in Australia.
Shares in Warrnambool have enjoyed a 127 per cent share price gain in the twelve months to 31 October as suitors circle. Why is there such a frenzy for Warrnambool?
German media giant Bauer has expanded its presence in New Zealand, striking a deal to buy a number of high-profile magazine titles from APN.
In a statement to the ASX, APN News and Media said it was seeking clearance from the Commerce Commission to sell its New Zealand magazine business to Bauer Media Group.
If approved, the sale would see titles including the New Zealand Woman's Weekly, The Listener, Simply You Living and Crème change hands.
Titles acquired by APN from Pacific Magazines in 2010 and published under licence, including New Idea, That's Life and Girlfriend will remain with the Australasian publisher.
APN's statement said the sales reflects a "strategy of an emphasis on growth assets, particularly digital."
The housing market is surging but housing and commercial construction still appears unlikely to offset the fall in mining capital expenditure, says Barclays' chief economist for Australia Kieran Davies.
The Reserve Bank has been looking for growth in the non-mining sectors to help rebalance the economy as mining investment peaks this year.
"This points to a period of sub-par GDP growth as the recovery in housing to date has been modest and commercial construction is still subdued even though the fundamentals, including the recent improvement in business confidence, are positive," Davies says in a note.
Here's some numbers from the note that illustrate the trend:
- Engineering commencements peaked at 6.9 per cent of GDP in late 2011 and have fallen to 3.4 per cent now, which is the lowest level since 2007.
-Commercial commencements remain relatively subdued at about 1.5 per cent of GDP, which compares with the most recent peak of 2.5 per cent in 2008.
- Residential commencements remain weak at about 4.9 per cent of GDP, which is on a par with historic lows, although the smoothing of the data obscures a recent modest improvement.
We've touched on the move by mortgage lenders, including the big four banks, to start to raise the rates on some of their three-to-five-year fixed home loan products as expectations of another rate cut by the Reserve Bank fall.
But the rates on the one-year fixed products are still easing slightly. HSBC Australia has joined the lower-end of the rates market, announcing today that it is cutting its one-year fixed rate home loan to 4.49 per cent for new and existing customers who borrow $100,000 or more.
According to comparison website RateCity, the Greater Building Society currently has the lowest one-year fixed rate home loan on the market at 4.29 per cent.
The average one-year fixed rate has been decreasing slowly, from 4.97 per cent in August to 4.89 per cent in October.
The group that owns thousands of former Nortel patents filed a barrage of patent lawsuits on Thursday against cell phone manufacturers including Google, the company it outbid in the Nortel bankruptcy auction.
Rockstar, the consortium that bought the Nortel patents for $US4.5 billion, sued Samsung Electronics, HTC, Huawei and four other companies for patent infringement in US District Court in Texas. Rockstar is jointly owned by Apple, Microsoft, Blackberry , Ericsson and Sony.
Google is accused of infringing seven patents. The patents cover technology that helps match Internet search terms with relevant advertising, the lawsuit said, which is the core of Google's search business.
A Google spokesman declined to comment. Representatives for Samsung, Huawei, HTC and Rockstar could not immediately be reached.
Samsung, Huawei and HTC all manufacture phones that operate on Google's Android operating system, which competes fiercely with Apple and Microsoft mobile products.
In 2011 Google placed an initial $US900 million bid for Nortel's patents. Google increased its bid several times, ultimately offering as much as $US4.4 billion.
After losing out to Rockstar on the Nortel patents, Google went on to acquire Motorola Mobility for $US12.5 billion, a deal driven partly by Motorola's library of patents.
Shares in Bega Cheese have rallied on opening after New Zealand dairy major Fonterra early Friday confirmed it had bought a 6 per cent stake in the Australian dairy interest.
Bega shares jumped 8.6 per cent on opening to trade at $4.79. The move by Fonterra adds to the intrigue in the three-way fight for control of Warrnambool Cheese and Butter, given Bega remains one of the hopeful parties with a live bid on the table for the Victorian producer.
Fonterra chief executive Theo Spierings said Australia was an important market for New Zealand's biggest company and the world's leading dairy exporter. It was committed to growing an already strong presence across the Tasman, he said.
"There has recently been a lot of consolidation activity in the Australian dairy industry," Spierings said.
Here's an analyst's take on the Macquarie's results, which were released today.
Morningstar analyst David Ellis says the results are "strong and impressive".
"The strong operating performance and the Sydney Airport distribution confirms our positive view and suggests Macquarie is on the way back to doing what it does best - taking full advantage of the recovery in equity and investment markets," Ellis says in a note this morning.
"A very telling sign of Macquarie's change in confidence is the 238 increase in staff numbers during the past six months. We interpret this as evidence the firm is positioning itself for an extended market recovery."
Shares in Macquarie are up 2.75 per cent to $52.35.
Paladin Energy shareholders have been urged to reject a controversial share placement that has drastically diluted the value of shares in the uranium miner over the past 11 weeks.
Despite the $88 million placement taking place in early August, shareholders will be asked to approve it retrospectively at Paladin's annual meeting of shareholders on November 21.
Shareholder approval would allow Paladin to make further share placements later this year, but rejection would prohibit any more raisings, and duly close-off one of the company's swiftest methods of raising cash.
Proxy advisor ISS has recommended that shareholders vote against the placement on the grounds that most of them were denied the opportunity to participate, with the placement sold mostly to large institutions.
Paladin shares were fetching $1 prior to the placement being announced in early August, and the stock immediately slipped to 72 cents upon it being publicised.
This morning they are trading at 41 cents, a fall 2.4 per cent from yesterday's close.
Read more: http://www.smh.com.au/business/mining-and-resources/paladin-shareholders-told-to-reject-88m-placement-20131101-2wmks.html#ixzz2jLRrSRdr
How some companies in the news are performing in early trade:
Macquarie: $51.66, up 1.6 per cent.
Bega Cheese: $4.90, up 11.1 per cent
Warrnambool Cheese and Butter: $8.25, down 0.6 per cent
Paladin: 41 cents, down 2.4 per cent
David Jones: $2.76, up 1.5 per cent
The market has opened slightly lower, with the benchmark S&P/ASX200 sliding 9.40 points, or 0.2 per cent, to 5416.1. The broader All Ords has dropped 8.98 points, or 0.2 per cent, to 5411.3.
Manufacturing activity has expanded, boosted by gains in the food, beverages and tobacco sub sector.The Australian Industry Group's (Ai Group) Performance of Manufacturing Index (PMI) rose 1.5 points to 53.2 in October.
It was the second month in a row the index was above 50, indicating activity in the sector is in expansion.
However, Ai Group chief executive Innes Willox says there are a series of factors that are not helping manufacturers.
''While there are, certainly, encouraging signs, it is too early to call a recovery with a good share of the gains representing a catch-up following a very slow mid-year period,'' he said.
''The fundamentals facing the sector remain very tough with the domestic currency still a major barrier to export growth and an impediment to businesses seeking to win back market share from imports.''In addition, manufacturers' margins remain under pressure as wage and non-wage costs continue to rise ahead of selling prices.''
With the calendar ticking over to November, IG analyst Evan Lucas looks at the month ahead for the market.
After four very strong very bullish months I see a pullback on the cards as institutions and fund manager start to eye total returns and profits as their investment metrics start to scream ‘overbought’ and ‘overpriced’.
I called a crest on the market at the start of the week, I believed the banks would be the driver for a rally up to 5426 and that has been the case the ANZ results were bumper and Tuesday saw WBC, ANZ and CBA reaching record highs.
However, what made me hesitate was the turnover in October; only $75 billion changed hands last months compared to the month average of $88 billion which is the second lowest volume turnover of the year behind January (which is always the slowest month of the year due to seasonality).
The fact that NAB and WBC fell and are falling into their results suggests the institutions don’t see price backing the record earnings the banks are reporting. They have been the best total return on the market over the past 24 months and have be bid up on the income they provide along with the relativity safe earnings they produce.
However, the price to earnings expansion of the last four months gives me reason to believe profit-taking is coming in November. The rally is running out of support in the short term and the fact the technical level of 5426 hasn’t been clearly broken gives me even more reason to believe a pause is coming. I think it will be a short three to four week pull back as the banks turn ex-dividend and money managers assess where their next total return is coming from. Don’t be surprised to see the ASX back into mid-5300 come mid-November.
Don’t get me wrong, come December – when approximately $13.7 billion in dividends are returned to the shareholders from ANZ, NAB and WBC – support will return pretty quickly before Christmas as people set-and-forget for a month or so
Department store David Jones has reported a 2.1 per cent rise in sales in the first quarter of FY14.
Total revenue increased to $424.2 million, up from $415.6 million in the same period last year.
Like-for-like sales were down 0.3 per cent, however David Jones said excluding disruption impact of its Canberra store refurbishment, like-for-like sales were up 0.6 per cent in the quarter.
Australia's ongoing dairy takeover battle took a fresh twist late last night with New Zealand heavyweight Fonterra seeking to acquire a 10 per cent stake in Bega Cheese.
The defensive move, valued at more than $75 million, adds to the intrigue in the three-way fight for control of Warranmbool Cheese and Butter, given Bega remains one of the hopeful parties with a live bid on the table for the Victorian producer.
Brokerage Goldman Sachs late Thursday was seeking a 10 per cent stake in Bega on behalf of client Fonterra.
The broker was understood to be offering $4.95 for each Bega share. This was a premium on Thursday's close of $4.41.
Macquarie Group has booked a 39 percent rise in first-half net profit, after its market-facing and annuity style businesses both performed well.
Macquarie Group posted profits of $501 million, beating an average projection of $475 million from two analysts, and up from $361 million in the same period last year.
The bank has been diversifying away from investment banking into less riskier areas and is pushing rapidly into home mortgages.
That is threatening to disrupt a highly profitable segment of the banking industry long dominated by the country's top four lenders.
With the earnings a share lifting 42 per cent to $1.50, it has raised the interim dividend to $1 a share from 75c paid previously.
Additionally, the bank intends distributing its shares in Sydney Airport to shareholders on a one-for-one basis, it said.
Here's what you need2know this Friday:
The Australian market looks set to open flat following falls on Wall Street and most European bourses after eurozone employment figures failed to impress. Macquarie Group has announced its first half figures - recording a $501m profit, which was a 39 per cent jump and beat expectations. Also worth looking out for will be the release of PMI figures from China for October.
What you need2know:
- SPI futures up 10 points to 5,426.
- AUD fetching 94.61 US cents, 93.01 yen, 69.61 euro cents, 58.96 pence
- On Wall St, Nasdaq -0.3%, Dow Jones -0.4%, S&P500 -0.4%
- In Europe, Eurostoxx +0.9%, FTSE100 -0.7%, CAC +0.6%, DAX +0.3%
- Spot gold falls 1.4% to $US1325.77 an ounce
- Brent oil drops 0.9% to $US108.93 per barrel
- Iron ore gains 0.5% to $US131.90 per tonne
Making news today
- In economic news on Friday, Reserve Bank of Australia (RBA) will release the index of commodity prices for month just ended, the Australian Industry Group posts the performance of manufacturing (PMI) index for the month just ended, while the RP Data-Rismark Home Value Index for September is due out, as is the producer price index for September quarter.
- In equities news, David Jones will post its first quarter sales.