That's all for today. Join us tomorrow from 9.30am for the latest on the US default roller-coaster.
Thanks everyone for reading this blog and posting your many comments.
A look at today's winners shows that iron ore plays were in demand, with the iron ore price stabilising above $US130 a tonne, instead of dropping as many analysts have been expecting.
At the other end of the spectre, Iluka was hit after flagging a weaker second half amid sagging Chinese demand.
Today's winners and losers among the top 200 stocks.
Australian bond prices slipped today with less than 24 hours to go until the US reaches a debt default deadline.
But investors expect American lawmakers to reach a last-minute deal to avert a financial crisis, Commonwealth Bank head of debt research Adam Donaldson said.
‘‘There’s an element of brinkmanship about the negotiations ... and certainly a strong element in faith that lawmakers will come to their senses and strike a deal,’’ he said. ‘‘It’s not until that faith is breached that perhaps you’ll see more vicious market reactions in general.’’
It appears Australian government bond investors were more focused on the possibility of an interest rate rise in 2014, despite a lack of local data.
‘‘It’s been an evolving process where clearly most in the market has concluded that the Reserve Bank, even though it has a mild easing bias, is finished cutting rates,’’ Mr Donaldson said.
The December 10-year bond futures contract was trading at 95.790 (implying a yield of 4.210 per cent), down from 95.830 (4.170 per cent) on Tuesday. The December three-year bond futures contract was at 96.800 (3.200 per cent), down from 96.810 (3.190 per cent).
Economics correspondent Peter Martin discusses what might follow a US debt default and whether it is even possible to prepare for the consequences.
Debt default - what next?
Economics correspondent Peter Martin discusses what might follow a US debt default and whether it is even possible to prepare for the consequences.PT4M13S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2vm2y 620 349 October 16, 2013
The stock market has closed slightly higher, led up by the miners and defying early predictions of a slump as the US debt imbroglio continues.
The benchmark S&P/ASX200 inched up 3.8 points, or 0.1 per cent, to 5262.9, while the broader All Ords gained 5.2 points, or 0.1 per cent, to 5264.4.
Among the sectors, materials added 0.8 per cent, with iron ore plays leading the charge. Financials and retails stocks ended flat, while telcos dropped 0.8 per cent.
China should implement more policies to protect retail stock investors to ensure the healthy development of the country's capital market, the head of the securities regulator says.
Retail investors with less than 500,000 yuan of investment account for about 60 per cent of the total market transaction value, but they suffer from inadequate information disclosure by listed companies as well as illegal behavior by some of them, Xiao Gang, the chairman of the China Securities Regulatory Commission (CSRC), wrote in the official People's Daily.
"Protecting the interest of small investors has been a key hurdle of the development of the capital markets," he said.
The CommSec Car Affordability index has improved to the best levels since 1976. CommSec estimates that someone earning the average wage has to work for around 26 weeks to purchase a new Ford Falcon XT auto sedan, down from around 30 weeks just two years ago:
- Interestingly the data has indicated that new car prices have been relatively stable in recent years. Listed new car prices for the Holden Commodore, Ford Falcon and Toyota Corolla haven’t moved in the past 18 months. However over the same period the average weekly wage has lifted by almost 7 per cent, confirming a sharp improvement in car affordability.
- Over the past decade, the average wage has increased by over 55 per cent. But family sedans such as the Ford Falcon and Holden Commodore have increased by just 6-7 per cent while luxury vehicles from BMW, Mercedes Benz and Porsche have actually fallen over the period.
"There is a perception that goods can only go up in price and never fall. And while that holds for a raft of goods, that doesn’t always apply," CommSec says. "The petrol price rises and falls over time as do food prices, in particular, fruit and vegetables. But even some car prices have fallen over the past decade in response to a firmer currency, lower tariffs and competitive forces."
Change in car prices
The local market has actually had a solid day considering we had a dismal start to the session, notes IG's Stan Shamu:
- Iron ore names have really lit up the boards today, with solid performances from heavyweights Rio Tinto and BHP Billiton. Rio has continued its momentum from yesterday’s production report.
- We’ve seen even stronger performances from pure plays, with big gains from Fortescue, Atlas Iron and Mount Gibson. MGX has jumped over 5% on the back of a quarterly activities report in which it reiterated FY14 sales guidance with Q1 iron ore sales of 2.6Mt, up 47% on year. Ideally I would want to see the stock close above 84 cents. This would open it up for a move to 90 cents in the near term.
- Lagging the miners is Iluka which has declined after its production report disappointed.
- In the defensive space, CSL is having a stellar day after announcing a $950 million buyback. This is a bit more than what the market was expecting and has been well received. I feel this could be a catalyst for the stock to make its way back up towards its all-time high at $68.
A federal judge questioned whether pension rights for Detroit’s municipal workers can be guaranteed by Michigan’s constitution, as claimed by current and retired employees seeking to have the city’s $US18 billion bankruptcy case thrown out.
US Bankruptcy Judge Steven Rhodes pressed lawyers yesterday in a Detroit court to explain why Michigan municipal pension commitments can never be revised and to say whether that position means the state must guarantee payments.
Rhodes challenged unions and a city pension system on their claims that the state constitution bars any cuts to municipal retiree payments, in or out of bankruptcy. Even proposing the cuts makes a city ineligible for bankruptcy protection, they have said.
‘‘Is there any other constitutional right, state or federal that is that absolute?’’ Rhodes asked an attorney for a pension system that opposes the bankruptcy. ‘‘Even freedom of the press isn’t that absolute, is it?’’
Union lawyers and a committee representing retired workers made legal arguments yesterday in Detroit to have the city’s filing under Chapter 9 of the US Bankruptcy Code rejected. The hearing will continue today. Next week, Rhodes is set to hear from witnesses about whether the city is eligible to remain in bankruptcy.
It wouldn’t be the first time, but maybe sharemarket valuations are moving too far ahead of the real world.
As interest rates are being cut, at some point there is always a big swing of cash into cyclical stocks such as building materials, retailers and the like, in advance of an uptick in earnings that usually flows from easier monetary policy.
Hence the handy lift in prices of many construction sector-related stocks and retailers over the past quarter.
But tuning in to what is happening back in the real world gives a sobering assessment since the annual meeting season gives investors a quick update on trading conditions in the new financial year.
And it’s not too flash.
China, the US’s largest creditor abroad, urged American lawmakers opposed to raising the debt limit by tomorrow to get out of the way. Tea Party Republicans’ response: mind your own business.
The US must “shoulder its responsibility” as the world’s biggest economy and holder of the main reserve currency and “take concrete measures before October 17 to avoid a default,” Deputy Finance Minister Zhu Guangyao said at a briefing with reporters yesterday in Beijing in which he referred to “the attitude of the Tea Party.”
Lawmakers tied to the Tea Party didn’t appreciate the advice, even from a nation that holds almost a quarter of foreign-owned Treasuries -- $US1.28 trillion as of July.
“They need to stay out of our politics,” Representative Blake Farenthold, a Tea Party-backed Texas Republican, said in an interview. China’s criticism “almost sounds like a threat,” said Representative Ted Yoho, a Florida Republican. “For them to say something derogatory about the Tea Party, I take offense to that.”
Australia’s aviation sector will be comprehensively examined by federal government to ensure it can meet predicted domestic and international growth.
Nationals leader Warren Truss, who has ministerial responsibility for transport, told a meeting of air safety delegates the coalition government plans a series of reviews on safety and competitiveness.
‘‘A review of skills and workforce requirements ... will provide an evidence-based and coordinated approach to training and workforce development to meet industry needs,’’ he told the Safeskies Australia conference in Canberra today.
The skills review will look at a wide range of aviation occupations including pilots, cabin crew, air traffic controllers, maintenance and engineering staff, aviation security and airport employees.
‘‘The future is likely to be challenging, and we need to ensure that we plan effectively,’’ Mr Truss said.
Tourists to Western Australia spent more than $7 billion there last year, despite the continuing economic struggle in Europe reducing the number of visitors from the UK.
WA Tourism’s annual report has revealed seven million visitors to Australia spent at least one night in WA in 2012-13, an increase of nearly eight per cent on the previous year.
More than 14 million day trip visitors added to the spend.
But Tourism Research Australia said, while international visitors to WA grew, the increase was below the national average due to the UK, Europe and the US still being ‘‘economically weak’’ as tourism markets.
Inbound visitors to the state rose by 2.3 per cent, which was attributable to higher-than-expected growth from interstate tourists.
China should implement more policies to protect retail stock investors to ensure the healthy development of the country's capital market, the head of the securities regulator said today.
Retail investors with less than 500,000 yuan ($860,565) of investment account for about 60 per cent of the total market transaction value, but they suffer from inadequate information disclosure by listed companies as well as illegal behaviour by some of them, Xiao Gang, the chairman of the China Securities Regulatory Commission (CSRC), wrote in the official People's Daily.
"Protecting the interest of small investors has been a key hurdle of the development of the capital markets," he said.
The government needs to protect investor rights to access information, improve the decision-making mechanism and shareholders' voting at listed companies, open various channels to solve disputes and improve the compensation mechanism for small investors, Xiao added.
The CSRC has been stepping up efforts to restore investor confidence in the market. It has been clamping down on insider trading and has frozen initial public offerings for over a year to ensure the quality of companies listing on the Shanghai and Shenzhen stock exchanges.
And some more on the looming debt deadline, this time in the fairly colourful words of US economist Kenneth Rogoff:
America faces ‘‘financial Armageddon,’’ the professor and former chief economist of the International Monetary Fund warns.
In an interview with London's Telegraph, he compares President Barack Obama’s position to the 1962 Cuban missile crisis, when the Kennedy administration refused to negotiate with Cuba and the Soviet Union despite the threat of potential nuclear destruction.
‘‘It’s very hard to see a silver lining to this. It’s a constitutional breakdown [but] threatening financial Armageddon is blackmail,’’ says Rogoff, who is now a professor of economics and public policy at Harvard.
‘‘President Obama should push them [the Republicans] to the brink. This has implications beyond the moment. There is a danger of weakening the presidency on a long-term basis.’’
Rogoff says that a bond default would be ‘‘catastrophic’’ to the global economy and that investors’ faith would be permanently shaken. ‘‘Their virginity will be lost."
Kenneth Rogoff. Photo: Bloomberg
As the clock heads towards midnight, Washington time, it's increasingly clear that if there is to be a last-minute deal ahead of Thursday's default deadline it will be just that: last minute, 11th hour.
Reports out of Washington are saying Senate leaders, who are currently leading the talks after Republican disarray in the House, will not announce a deal to raise the debt ceiling on Tuesday (US time).
That leaves politicians little more than 24 hours to finally extend the Treasury's borrowing authority.
Meanwhile, the market has lost some of its initial optimism and is now running flat as investors lose faith in a compromise during today's local session.
Most investors are still assuming that Washington will reach a debt ceiling compromise before the Treasury misses any payments on its debt.
The US Treasury's borrowing authority expires tomorrow, but there's still an estimated $US30 billion in its hands to pay the most immediate bills.
In a note to clients, Goldman Sachs economists said that, based on their projections, the Treasury department should have enough money to make it through next week.
“That said, given the volatility in the Treasury’s daily cash flows, as the Treasury’s cash balance dwindles the risk of a failure to make scheduled payments increases,” the Goldman note said.
Even if Congress does strike an agreement, investors have been preparing for the possibility that the debt ceiling will be lifted only until later this year or early next year, merely postponing a default.
“Whichever plan is adopted, the riot point will likely be only temporarily avoided,” Gennadiy Goldberg, a strategist at TD Securities, wrote on Tuesday afternoon.
Police have arrested Australian businessmen Vanda Gould and John Leaver and Belgian national Peter Borgas as part of an Operation Wickenby investigation into $30 million of tax evasion and money laundering.
Mr Gould, who is chairman of listed investment company CVC, and Mr Leaver, who is a director of the company, were arrested in raids on their Sydney homes on Tuesday night.
Mr Borgas was arrested at Sydney International Airport as he was preparing to return to Switzerland, where he is based.
They face possible jail terms of up to 25 years.
Properties in the Sydney and Melbourne central business districts were also raided.
The owners of more than 20 US Treasury securities are most at risk as the US Congress struggles to resolve an impasse that threatens a default on the US debt, with the Federal Reserve almost certainly the largest holder in the crosshairs.
The Treasury notes, worth an aggregate of $US773.3 billion, either mature or are due an interest payment of about $US6 billion on October 31. Another $US300 billion of short-term T-bills maturing through that date are expected to be rolled over using proceeds from bill auctions occurring before then.
As a result of the large interest payment due that date, and $US58 billion in other obligations coming due the following day, many analysts have circled October 31 as a possible date for default if Congress has still failed to reach an agreement to raise the US government's $US16.7 trillion debt ceiling.
Uncertainty about how the Treasury expects to manage that potential problem has put pressure on many of the individual Treasury notes and bills that have a payment due on October 31.
For instance, the yield on the 2-year Treasury note that matures October 31 - which was auctioned on October 25, 2011, with a coupon of 0.25 percent - shot to an all-time high of about 0.73 per cent on Tuesday following news that negotiations to resolve the impasse had broken down.
The Australian government has sold $800 million of April 15, 2020 Treasury bonds.
The Australian Office of Financial Management (AOFM), which conducts bond auctions on behalf of the government, said the bonds were sold for a weighted average yield of 3.7951 per cent.
The sale attracted bids totalling $2.410 billion, giving a coverage ratio of 3.01.
A court has thrown out claims by the wife of former ABC Learning childcare tycoon Eddy Groves that he forged her signature to obtain bank loans.
The Queensland Supreme Court on Wednesday dismissed the case bought by Le Neve Groves against her ex-husband and three banks - Citibank Singapore, CitiGroup and BT Securities.
Dr Groves was seeking compensation after alleging her husband forged her signature to allow him to use $33 million of ABC Learning shares as a guarantee to obtain margin loans with the banks.
Dr Groves was a director of ABC Learning until it went into liquidation in 2008.
During the trial, Dr Groves also alleged her former husband was physical abusive and controlled most of her financial affairs even after they separated in 1998.
In dismissing the claim, Judge Glenn Martin said that Dr Grove’s evidence during the trial could not be believed.
Here's some more US optimism: After its AGM, CSL's new CEO Paul Perreault described the government shutdown as "US politics, ad nauseam" but tipped a result before the Thursday deadline.
"I grew up in the US, obviously, so you see this sort of outcome more and more as the political divide between the two [political] parties," he told reporters. "I think they'll work it out and we'll move ahead. They always seem to meet the deadline at some point."
The advertising market is continuing to dry up for the media industry, but there are glimmers of hope.
Agency advertising in metro newspapers dropped by 32 per cent in September, according to the Standard Media Index (SMI).
Credit Suisse analysts said this was the 15th consecutive double-digit contraction and the worst monthly result on record.
However, digital advertising grew 19 per cent, year-on-year, in September.
“We forecast total market growth of ~3% for 2013, with growth to pick up in the last quarter. Agency advertising is +1.3% YTD. Note that the SMI data is for agency ad spend only and thus excludes the majority of Digital Search and Classifieds revenues, which are booked directly.”
"“Digital ad spend continues to substantially outperform traditional media, with +18.9% reported growth in September (+17.9% ex-political). August’s originally reported +19.1% growth was revised upwards to +26.7%, suggesting September’s true growth rate could be closer to +25%. Traditional online display growth was +10% in September (vs August’s revised result of +15%), with emerging platforms continuing to drive additional growth.”
Here’s an interesting lunchtime read by Marcus Padley on why money alone doesn’t make us happy:
Money is an amazing motivator; it causes us to do astonishing things. Like grind it out in boring jobs, take unusual risks, sacrifice our values, and ignore our families, as well as inspiring us to greatness, to invention, innovation and charity. But does it make us happy?
I met a rich bloke once who answered the question like this: ''No.'' And he gave his reasons. He envied people like me with four kids, a mortgage and school fees. I had purpose. I had passion. I had a father's drive to deliver, financially, for his family. What a task. What a reason to get up every day. What greater purpose?
I was lucky, he said. I had something to live for, a direction, a focus, a knowledge that every day I would set out to succeed. I had the excuse to exercise my brain every day, to constantly develop my intellectual assets.
That's what set me on course, what put me in contact with the interesting, the exciting and the possible. It is what drove me to be innovative, competitive and enterprising. The pursuit of that feeling that you have delivered, handsomely, for your family.
What price the safety of your children? Photo: Sharon Dominick
Warrnambool Cheese and Butter has urged its shareholders to reject a takeover proposal from rival Bega Cheese, saying the offer is inferior to one put forward by Canadian dairy giant Saputo.
Bega last week said it intended to put its takeover offer to WCB shareholders, despite saying it would not lift its offer to match that put forward by Saputo. It said it believed some WCB shareholders would prefer the company remain in Australian hands.
But the WCB board today urged its shareholders to reject the deal and ignore all documentation sent to them by Bega. They pointed out that a recent independent audit found Bega’s offer was neither ‘‘fair nor reasonable’’ to WCB shareholders.
Saputo has put forward a $7 a share takeover offer that values WCB at around $390 million.
WCB shares are down 0.1 per cent at $7.21.
Sealink Travel Group, which owns Captain Cook Cruises, has joined a long list of IPOs to hit the market this year, in a successful debut for the stock.
Sealink shares (SLK) opened at $1.51, significantly higher than the $1.10 price tag offered during the IPO. They are currently trading at $1.48, taking its market capitalisation to $103.3 million.
Around 54 per cent of the company’s revenue comes from its Kangaroo Island operations, while 34 per cent comes from Captain Cook Cruises.
According to Motley Fool, Sealink has a stronghold over Kangaroo Island, many companies have tried to break into the market, with six failing since 1989.
In a blunt assessment of the overnight chaos emerging from Washington, President Barack Obama says the frantic stop-and-go effort in Congress to avoid a debt default and end a government shutdown is "a mess".
In recent days Obama has tamped down some of his more harsher partisan rhetoric, dropping the "gun to the head" metaphors, in an apparent effort to encourage some semblance of goodwill.
He is still making a point of blaming the partial government shutdown and threat of a debt default on his opponents, saying conservative Tea Party Republicans made "a very extreme decision to use very extreme tactics" that moderate Republicans are struggling to overcome.
"And what we've seen as a result is the kind of mess that we're seeing today," Obama told WABC.
Of trying to work out a compromise with House of Representative Speaker John Boehner, the top US Republican, Obama stated the obvious: That the more conservatives see Boehner working with him, the worse it is for the speaker among his Republican caucus.
"It weakens him," Obama said. "So there have been repeated situations where we have agreements, then he goes back and it turns out that he can't control his caucus. So the challenge here is can you deliver on agreements that are made."
Japanese shares are swinging between gains and losses as investors watch developments in the US impasse over raising the debt limit to avoid a default.
The Topix has lost 0.1 per cent, while the Nikkei is little changed.
Futures on Wall Street's Standard & Poor’s 500 index gained 0.6 per cent after Senate leaders resumed talks aimed at ending the gridlock.
‘‘It’s all very confusing and extremely frustrating,’’ says IG strategist Chris Weston. ‘‘There’s not a lot of clarity now, so people are probably going to stay on the sidelines until we get something more meaty on the bone. The leaders in the Senate are optimistic and that’s keeping the markets supported.’’
Investors holding $US120 billion of Treasury bills coming due tomorrow are increasingly worried they won’t get paid.
Fitch Ratings placed the nation’s AAA credit rating on a negative watch overnight, citing the government’s failure to raise the borrowing limit as the deadline approaches.
Australia's economy has suffered a significant loss of momentum since the start of the year as its transition away from being a mining investment gets bumpy.
The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 3.2 per cent in August, down from four per cent in July but marginally above its long term trend of 2.9 per cent.
‘‘Although the growth rate in the leading index remains slightly above trend, it has slowed abruptly over the last six months,’’ Westpac chief economist Bill Evans said.
‘‘Some months ago the index was pointing to significantly above trend growth in 2013 but this current slowdown is more consistent with Westpac’s growth forecasts,’’ he said.
Here's what Reuters says on the last-minute deal speculation:
Democratic and Republican leaders in the US Senate could announce a deal later tonight (Washington time) to extend the government's borrowing authority until February 7 and quickly re-open federal agencies that have been closed since October 1, a Senate aide said.
The aide described a deal in line with provisions that were being negotiated in the Senate before a failed House of Representatives proposal suspended those talks. The provisions include a temporary government spending bill running through January 15.
The aide said discussions were also underway in which the Republican-controlled House, if it co-operated, could help speed up passage of any deal before a Thursday deadline when the Treasury Department says it will bump up against its borrowing limit.
The dollar has just bounced from the session low of 94.99 US cents around 10am to a high of 95.41 US cents on the back of the speculation that there might be a US debt deal today.
Looks like there might be some movement in the US debt talks:
“It’s all over. We’ll take Senate deal" ... “People are thinking about primaries, they really are" http://t.co/CFJ282D06k— Jonathan Strong (@j_strong) October 15, 2013
if the rumours floating around about a deal in the US are right that might have been the dip to buy down to 95 cents in the #AUD— Greg McKenna (@gregorymckenna) October 15, 2013
Headline lines are coming thick & fast 'Looks like the GOP will take the Senate deal'. sees USDJPY +0.33% AUDUSD +0.1% NKY mtching + #ausbiz— Evan Lucas (@EvanLucas_IG) October 15, 2013
The annual FIX Conference is in Sydney today, at the Westin Hotel, with buy-and-sell-side traders, technology firms, regulators and representatives from exchange operators on hand.
The organisers have just held an electronic vote, asking the audience what kind of impact recent regulatory changes have had on the local market. Here are the results:
Positive impact: 31%
Negative impact: 49%
No change: 20%
The room laughed when the results were flashed on the screen.
Funny, because a commissioner from ASIC, Cathie Armour, had just completed a 35 minute speech about the efforts ASIC has made to keep pace with changes in trading technology in the last 12 months, including establishing taskforces on high frequency trading and dark pools.
Intel, the world's biggest computer chipmaker, says its quarterly profit dipped 0.7 per cent from a year ago to $US2.95 billion ($A3.12 billion), but it managed to beat Wall Street estimates.
Intel, which is struggling to make inroads in the surging market for processors for smartphones and tablets in a rapidly shifting tech landscape, said that revenues for the third quarter were up a scant 0.2 per cent at $US13.48 billion.
The profit translated to 58 cents a share, or five cents better than the Wall Street consensus.
"The third quarter came in as expected, with modest growth in a tough environment," said Intel chief executive Brian Krzanich.
The Silicon Valley giant claims its new, low-power, high-performance Silvermont chip design unveiled in May could be used in segments ranging from smartphones to the data center.
Here's how the sectors have opened:
- Materials: +0.4%
- Consumer staples: -0.6%
- Consumer discretionary: -0.2%
- Energy: -0.6%
- Financials: -0.5%
- Gold : +0.5%
- Health: +0.3%
- Industrials: -0.6%
Time is running out fast for a solution to the US debt stalemate, and the Republicans seem intent on taking this issue to the wire.
The Republican-led US House of Representatives failed again to produce a plan to lift the threat of a government default and has abandoned plans to vote on any measure today, meaning that any resolution will be an 11th hour one as the default deadline approaches on Thursday.
Representative Pete Sessions, a senior House Republican, emerged from a meeting in House Speaker John Boehner's office telling reporters Republicans would try to come up with a new plan on Wednesday.
Boehner tried twice on Tuesday to move a debt limit and government funding bill to the House floor for passage but failed to get enough support.
Meanwhile, US Senate leaders are quoted as saying they're optimistic a debt limit and government funding deal is within reach. Says a spokesman of Senate majority leader Harry Reid.
Blood plasma company CSL says first quarter trading was in line with expectations but a settlement in the US will cut growth in net profit to 7 per cent from 10 per cent.
The settlement, announced recently but yet to be approved by the US courts, will result in a one-off charge of $US39 million, CSL said at its annual general meeting.
CSL also announced another buyback, this one $950 million over 12 months.
In early trade, CSL shares are up 1.1 per cent to $66.14.
Apple has poached Burberry CEO Angela Ahrendts to head up its retail division.
Ahrendts, who will be Apple's first female executive in nearly a decade, comes with a sparkling reputation, having helped Burberyy turn its fortunes around.
Apple didn't disclose what she is being paid, but in 2011-12, Ahrendts was the highest-earning CEO in Britain, earning $26.2 million.
In demand: Angela Ahrendts is on her way to Apple. Photo: Bloomberg
After all the gloom surrounding the US debt standoff, here's some optimism by Goldman Sachs’ Richard Coppleson:
"I still stand by my 5600 end of year target," he writes in a note:
- As far as I can see our GS strategy team seem to be the second most bullish with their 5300 target they put on around March (well done) while the rest seem to be cluttered around 4800 to 5100.
- So we remain the most bullish in the market – and have been all year long – and seeing what I’m seeing now – this market is going to be a lot higher by the end of the year and thus after seeing the ASX 200 up +14.6 per cent in 2012 we are right now quite interestingly almost exactly the same with index +13.10% with over 2 ½ months to go.
Deal or no deal? Well markets don’t seem to care, notes Rivkin analyst Tim Radford:
- Many analysts continue to underestimate the incompetence of the US political system and its ability to find a deal on raising the debt ceiling that’s not irresponsibly last minute.
- Equity markets are largely ignoring the stalemate in Washington as most people think a deal will be reached by Thursday. But who knows, especially when there are idealistic Tea Party members ready to put the global economy at risk of another financial crisis, likely dwarfing the 2008 GFC.
- Worst case scenario aside, regardless of how idealistic certain politicians are we must expect Washington will come to its senses and find some formal agreement by Thursday.
- Aside from shorter dated government debt, most asset classes have barely reacted to the shenanigans in Washington over the past week. If we use that as a gauge, either everyone is blind and naive or it is representative that a deal will still likely be reached, or even that quantitative easing in its current form will be here to stay in 2013.
- The escalation in shoutings over the debt ceiling and government shutdown more than anything is likely a reflection of rising anti-government sentiment from Main Street in the US, stemming from ongoing political games in Washington.
- The longer a deal is delayed, the more likely we’ll see another 2011 event in which we see some extreme risk off moves. For the bulls’ sake, let’s hope we see a deal soon.
The market has opened lower, with the benchmark S&P/ASX200 sliding 28.6 points, or 0.5 per cent, to 5230. The broader All Ords has dropped 27.4 points, or 0.5 per cent, to 5231.8.
Social networking website Twitter said it would list its stock on the New York Stock Exchange, dealing a blow to the tech-heavy Nasdaq which bungled rival Facebook's initial public offering.
In an amended IPO filing, Twitter updated its financials and user figures along with expanded details of investors.
Twitter sustained its pace of revenue growth in the third quarter, more than doubling its third quarter revenue to $US168.6 million ($177 million).
But the company widened its net loss to $US64.6 million in the September quarter compared with $US21.6 million a year earlier.
Twitter also said it has 230 million monthly active users, up from about 218 million when the company first disclosed its S-1 filing on October 3.
Citigroup posted weaker-than-expected third-quarter earnings overnight as bond market trading volume dropped, hurting revenue at the No. 3 US bank and across Wall Street.
The bank's bond trading revenue dropped 26 per cent, or $US956 million, excluding an accounting adjustment, and revenue at most of its major businesses dropped.
The fall in fixed-income revenue could spell trouble for investment banks Goldman Sachs and Morgan Stanley, which post results later this week. Volumes dropped after the Federal Reserve said it plans to continue its bond buying stimulus program, giving assurance to investors that they can hold onto their bonds for a little longer.
Late in the quarter, investors also grew increasingly concerned about the government's fiscal impasse, which made many reluctant to trade.
"I don't think anybody wanted to get in front of that," said TCW fund manager Diane Jaffee, who counts Citigroup among her top 10 holdings. The budget and debt ceiling crises continue to weigh on trading volumes in the fourth quarter, analysts said.
Citigroup posted net income of $US3.2 billion ($3.3 billion) in the July-September quarter, up from $US468 million in the same quarter in 2012. Earnings per share came in at $US1.00, up from 15 cents a year earlier.
Excluding a tax benefit and CVA/DVA adjustment - the risk-based adjustment of derivative asset valuation - earnings were $US1.02 per share, below the $US1.04 analysts estimated.
CMC analyst Ric Spooner is expecting a subdued day on the markets, with caution ruling as local investors keep an eye on developments in the US.
Investors appear content to take a wait-and-see attitude to this situation. Equity markets are heading into the “pointy end” of the US debt ceiling negotiations with arguably very little risk premium built into current valuations for a bad outcome. While this significantly increases the risk of a large sell-off if the wheels were to fall off world credit markets, investors seem reluctant to incur the opposite risk of being out of the market if the situation blows over. The general belief is that in the final analysis markets are unlikely to be seriously disrupted by this situation.
This “she’ll be right” attitude has a number of strands. Firstly, history suggests that politicians will pull back from the abyss. Secondly, there may be scope to prioritise spending to avoid a debt default for another week or to. Thirdly, a temporary technical default may not necessarily be cataclysmic for markets.
Brambles' sales revenue from its pooling-solutions operations rose 7 per cent to $US1.312 billion in the first quarter due in part to its acquisition of container company Pallecon in late 2012.
The Sydney company's pooling business provides wooden pallets and containers to businesses. Brambles, the world's largest supplier of wooden pallets, said the increase in revenue reflected new business and the contribution of Pallecon, which it bought for $170 million in December.
It also said it was on track to deliver an underlying profit of between $US930 million and $US985 million for the year.
''Our trading performance in pooling solutions during the first quarter of 2014 was broadly in line with our expectations,'' Brambles chief executive Tom Gorman said.
''Despite continued muted levels of underlying sales growth in the consumer staples sector, we are benefiting from the execution of our growth strategy.''
Brambles' pooling solutions does not include its Recall information management business, which will be spun off into a separately listed company by December.
The impasse in Washington could cost the US its AAA rating with ratings agency Fitch placing it on 'negative watch'.
‘‘The political brinkmanship and reduced financing flexibility could increase the risk of a US default,’’ Fitch said in a statement.
Fitch reiterated that it expects the debt ceiling to be raised
Standard & Poor’s stripped the US of its top credit ranking in 2011 on Washington gridlock and the lack of an agreement to contain its growing ratio of debt to gross domestic product.
Some analyst ratings changes:
- Cochlear cut to 'underweight' at JPMorgan.
- OZ Minerals cut to 'hold' at GMP.
- Transpacific Industries cut to 'neutral' at JPMorgan.
- Western Areas raised to 'hold' at Deutsche Bank.
- QBE Insurance rated 'new buy' at Bell Potter.
- Iluka Resources downgraded to 'neutral' at UBS.
- Crown raised to 'outperform' at Macquarie.
BlackBerry shareholders have launched a class-action lawsuit against the company, alleging its optimistic sales forecasts for its new smartphones cost them hundreds of millions of dollars.
The lawsuit on behalf of Canadian shareholders who purchased BlackBerry stock between September 27, 2012, and September 20 of this year, alleges that senior management "knowingly or negligently" misrepresented that its BlackBerry 10 line of smartphones were being well-received by consumers and that the company was in a strong financial position.
‘‘For almost a full year, BlackBerry management made market statements based on prophecy rather than fact,’’ class-action lawyer Tony Merchant said in a statement.
Talks in Washington on a new US debt deal have stalled again, as we get closer to Thursday's deadline.
Senate leaders had been close to a deal that would reopen the government and raise the debt limit until early 2014, while the initial alternative plan proposed by House Republican leaders failed to gain enough support in a closed-door meeting for the House to proceed.
"There are a lot of opinions about what direction to go. There have been no decisions about exactly what we will do," House Speaker John Boehner told reporters after the meeting.
The Australian market poised to open lower following falls on Wall Street as optimism of a deal being reached on the US debt ceiling ebbed.
What you need2know:
- SPI futures down 15 points to 5,234.
- AUD fetching 95.11 US cents, 93.51 yen, 70.34 euro cents, 59.46 pence
- On Wall St, Nasdaq -0.6%, Dow Jones -0.9%, S&P500 -0.7%
- In Europe, Eurostoxx +0.9%, FTSE100 +0.6%, CAC +0.8%, DAX +0.9%
- Spot gold up 0.7% to $US1281.67 an ounce
- Brent oil falls 1.3% to $US109.58 per barrel
- Iron ore is at $US133.60 per tonne
Making news today
- The Westpac-Melbourne Institute Leading Indexes of Economic Activity report is due out.
- Iluka Resources is expected to release its quarterly report
- CSL and The Reject Shop have annual general meetings scheduled.