Business

Markets Live: Rally runs out of puff

That's all from us here at blog central - enjoy your evenings.

We hope to see you again tomorrow from 9.30am.

Click here for a full markets wrap.

And another tweet on tomorrow's RBA meeting and calls that the board is likely to sit on the fence:

Tomorrow the local earnings season starts. Here's what you need to know about what happened today and what's expected tomorrow:

Markets

  • ASX200 ends down 0.3%, at day's lows
  • AUD slightly higher; buying $US1.0435, 96.7 yen, 76.6 euro cents
  • The Nikkei is up 0.7%; Shanghai flat and Hang Seng up 0.4%
  • Wall St futures are flat; FTSE futures up 0.1%
  • Gold is 0.2% higher, WTI crude oil 0.2% lower

Overnight

  • US factory orders December: 2.4% rise expected
  • Eurozone PPI December: -0.2% m/m and 2.1% y/y

Tomorrow/Economy

  • RBA board meeting - no change expected
  • ABS house prices for December quarter
  • ABS international trade in goods and services

Tomorrow/Earnings

  • Challenger Diversified (HY) -- Expected: $22.2 million net profit/8.7c dividend
  • Cochlear (HY) -- Exp: $80 million / $1.25
  • Navitas (HY) -- Exp: $35.5 million / 9.4c
  • Reckon (FY) -- Exp: $18.4 million / 4.8c
  • Transurban (HY) -- Exp: $213 million / 15.5c

(HY is half year; FY is full year. Earnings estimates are courtesy of Goldman Sachs.)

Global giants including Apple and Google will be forced to reveal how much tax they pay the federal government, under a plan to name and shame firms seen to be dodging their responsibilities by using tax havens.

The proposed crackdown would also clear the way for the government to publish more detail on how much mining tax resources firms are paying. Until now, the government has refused to say exactly how much money the mining tax has raised, citing the need for taxpayer confidentiality.

A fundamental principle of tax law is that the affairs of all taxpayers, from individuals to corporate giants, are kept secret.

But with governments around the world seeking to protect their budgets against use of tax havens, especially by technology firms, large companies operating in Australia may no longer enjoy such privacy.

Sales of locally made family sedans are at their lowest in memory as buyers flock to imported SUVs and utes.

Preliminary sales figures for January obtained by Drive show Holden sold roughly 1600 Commodores for the month, believed to be its worst month on record. It was a record low for its traditional rival too, with Ford selling less than 800 examples of the Falcon.

Toyota’s locally made sedans, the Camry and Aurion, also registered what is believed to be their worst monthly sales on record.

January is typically a bad month for the locally-built sedans because fleet buyers, who account for up to 70 per cent of their sales, don’t buy cars in January.

But the results put further pressure on an industry that has been criticised for relying too heavily on government subsidies for its survival.

Here's the whole yarn

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Most sectors posted losses, with financials down 0.5 per cent, gold falling 1.1 per cent and energy slipping 0.1 per cent. Materials ended flat while telcos inched up 0.2 per cent.

The sharemarket has closed at the day's lows. The benchmark S&P/ASX200 fell 13.6 points, or 0.3 per cent, at 4907.5, while the broader All Ords lost 12.8 points, or 0.3 per cent, to 4929.1.

dollar

The Australian dollar has shot up to fresh four-year peaks on the yen and held ground against its US counterpart, while bond prices fell to their lowest since May as major support levels finally gave way.

The Aussie is trading at 96.63 after earlier flying to 96.78 yen, its strongest levels since August 2008. It's also buying $US1.0425, from $US1.0404 early, and 76.5 euro cents, up from 76.22 earlier.

The Aussie is underpinned by stronger Asian bourses and rising commodity prices after solid manufacturing data from the United States, Europe and China late last week.

"While the AUD is strong and will continue to weigh on domestic demand indicators ... global factors suggest AUD should remain buoyant," summarises Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.

This explained why the Australian dollar has been resilient to a run of surprisingly weak data including a fall of 4.4 per cent in building approvals and a continued drop in job ads.

gold

Gold has ticked up but is unable to breach the upside limit of a recent trading range as mostly upbeat US data takes some shine off the precious metal, which withers when economic recovery gains traction.

"Investors remain fairly optimistic in the US recovery, which makes gold less attractive, even though recent data is rather a mixed bag," says Chen Min, an analyst at Jinrui Futures in Shenzhen. "Unless we see surprisingly good news for gold, it will be trapped in a narrow range of roughly $US1660 and $US1680 an ounce."

Spot gold is up 0.3 per cent to $US1671.60 an ounce.

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After a decent start today, the Australian sharemarket appeared to take the foot off the gas with some key sectors of the market unable to sustain the upward momentum, CMC Markets trader Tim Waterer says:

The bumper lead from Wall Street made for a day of green numbers across most of the Asian region, however the underperformance of the ASX200 today is perhaps due to what can be viewed as a pre-emptive move higher by the Australian bourse last Friday (where the index added 42 points).

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A key indicator that will be released two days after the Reserve Bank's meeting, the unemployment rate, is forecast by economists to drift slightly upwards to 5.5 per cent from 5.4 per cent the month before.

"I think the private sector is still indicating by its activity in the labour market that there’s still not moves to significant reduce the work force, otherwise we would see a lot more negatives on the monthly employment figures," Commonwealth Bank senior economist Michael Workman said.

"On balance, the case is [the RBA] can sit, wait and watch. And maybe they can progress this argument that in December the rate cut was provided on a reading of the economy both here and offshore that was a little bit more negative than it’s actually turned out to be."

In Japan, Panasonic shares jumped 16.89 per cent to 692 yen in Tokyo morning trade, following the company’s announcement after the close of Friday’s session that it posted an operating profit of 121.95 billion yen ($1.27 billion) in the nine months to December, and a 61.4 billion yen net profit in the last three months of 2012.

That marked a huge reversal from a net loss of 197.6 billion yen a year earlier, with Panasonic citing aggressive cost-cutting as part of a massive corporate overhaul aimed at stemming record losses.

Rio Tinto’s $3 billion expansion of a Pilbara mine has been approved by the West Australian government.

More than 1,500 construction jobs would be created, nearly tripling iron ore operations at the Nammuldi mine and building a new 130 megawatt power station at nearby Cape Lambert, from where the ore will be shipped.

There would be ongoing employment for more than 700 people, WA Premier Colin Barnett said in a statement.

The expansion would see iron ore mined below the water table and production increased from eight to 23 million tonnes a year.

Rio shares are up 1 per cent to $67.86.

Puma Energy has agreed to buy independent fuel distributor and retailer Ausfuel from private equity firm Archer Capital, in a deal reported to be worth up to $650 million.

In a statement, Puma Energy, which is a subsidiary of Dutch independent commodity trader Trafigura Beheer, said the deal would make it Australia's largest independent fuel retailer.

Terms were not disclosed. Morgan Stanley advised Archer, one of Australia's largest buyout firms.

The Australian Financial Review reports that the deal is worth between $625 million and $650 million.

The new head of Australia's solar thermal research effort says the cost of generating electricity can be halved by 2020, placing it on course to match the renewable energy contribution from solar photovoltaic technologies.

Manuel Blanco, an international specialist in solar energy, started today as director of the CSIRO-led Australian Solar Thermal Research Initiative (ASTRI). The initiative has $87 million in funding over eight years to advance so-called concentrating solar power technologies, which typically tap solar energy using mirrors or lenses to drive steam turbines.

Dr Blanco said a "technological leap" would be needed to cut generation costs from 25 cents a kilowatt-hour to 12 cents by 2020 but collaborative efforts between Australian and overseas scientists could achieve the goal. Costs had fallen by about 25 per cent over the past five years.

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Have you noticed that international flights have become more crowded lately? Former Qantas chief economist Tony Webber has.

The airline metric that describes the extent of this crowding is the seat factor, defined as the percentage of seats on the plane that are occupied. For all international flights operated into and out of Australia, the seat factor has grown from just 66 per cent in 1991 to 77 per cent in 2012.

Click here for the full story.

Here's a snapshot of how markets around the region are performing:

  • Nikkei(Japan): +0.5%
  • Shanghai: +0.6%
  • Taiwan: +0.7%
  • South Korea: flat
  • Singapore: +0.6%
  • New Zealand: flat

Buyout firm Quadrant Private Equity is actively considering an initial public offering of its Virtus Health in vitro fertilisation business, the largest IVF group in the Asia-Pacific region.

A share sale, which could be worth around $500 million according to press reports, is possible around mid-year, Quadrant director Marcus Darville says.

"Virtus is the largest player in its sector and it is a natural IPO candidate," Darville says. "There is a lot of investor interest in healthcare stocks, and the market background is becoming more positive again."

Whilst the market is up, interest rates are down. That's the simple explanation for why stocks might yet rise further, Steven Johnson says in Don't sell your stocks just yet:

The longer explanation is that the earnings yield of the market, which is the earnings before tax for the ASX 300 divided by the combined market capitalisation of the ASX 300 companies, hasn't fallen any more than the 10-year Australian Government bond yield.

Whilst a rising market has caused the earnings yield to fall from around 11% at its peak to just over 8% now, the yield on 10-year government bonds has fallen from 6% to 3.5% over a similar period.

The gap between the two is known as the equity risk premium—the extra return you receive for investing in stocks rather than bonds. And as the chart show, the equity risk premium is still at historical highs.

Despite the fact that stocks prices went up last year, with current interest rates you can expect to earn a return of about 5% over that of bonds.

Lawyers for the former head of surfwear company Billabong have until the end of the month to review the prosecution case against him.

Matthew Perrin, 40, has pleaded not guilty to a charge of defrauding the Commonwealth Bank of $13.5 million.

It’s alleged Perrin forged his former wife Nicole Bricknell’s signature on documents, enabling him to use the value of a jointly-owned house on the Gold Coast to obtain a loan of $13.5 million from the bank in 2008.

Perrin, once regularly listed as one of Australia’s richest men, filed for bankruptcy in March 2009. He had debts of $28.2 million.

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