Markets Live: Shares bolstered by China
Australian shares rose capping three sessions of losses, as news China's central bank would inject 180 billion yuan into the money market bolstered investor sentiment shaken by Europe's debt crisis.
- China pumps record funds into financial system
- Woolworths offloads Dick Smith to private equity
- Echo chief Larry Mullins joins exodus
4.57pm: Another edition of Markets Live is coming to an end, thanks for being with us. There are some interesting events overnight in Europe, so be sure to check back in tomorrow from 9.30am to see how it all plays out here in Australia.
4.51pm: Global sharemarkets are pointing to higher opens after Asian shares rallied on the back of China announcing a record cash injection into its money markets.
Futures for the EuroSTOXX50, London’s FTSE100, Paris’ CAC40 and Germany’s DAX were up between 0.3 and 0.7 per cent.
In the US, futures for the Dow Jones and S&P500 indexes were up 0.4 and 0.5 per cent respectively.
4.49pm: BHP expects China's economic growth to strengthen through the rest of the year, says a senior company official.
BHP's long-term view on China also remains positive, Alan Chirgwin, general manager of marketing at BHP's iron ore division, said at an industry conference in the coastal city of Dalian.
4.35pm: Here's a snapshot of how blue chip stocks performed today:
- BHP: +0.6%
- ANZ: +0.7%
- CBA: +0.8%
- NAB: +0.04%
- Westpac: +1.1%
- Fortescue: +0.3%
- Woolworths: -0.9%
- Wesfarmers: +0.3%
- Telstra: +0.5%
4.17pm: The gold miners sub-index led the charge, adding 1.3 per cent. Both materials and health jumped 1.1 per cent, financials finish up 0.5 per cent and energy rose 0.3 per cent. Consumer discretionary and consumer staples bucked the trend, falling 0.3 and 0.2 per cent respectively.
4.13pm: The market has closed higher, snapping a three day losing streak. The benchmark S&P/ASX200 rose 22.6 points, or 0.5 per cent, to 4384.2, while the broader All Ords jumped 20.3 points, or 0.5 per cent, to 4402.8.
3.54pm: Markets around the region have responded positively to China's injection of cash into its money markets, with the Shanghai index leading the region forward:
- Nikkei(Japan): +0.41%
- Shanghai: +2.87%
- Taiwan: +0.18%
- South Korea: +0.41%
- Singapore: +0.62%
- New Zealand: flat
3.45pm: Ever wondered exactly how long it would take you to earn enough money to buy a beer?
The Economist has put together a nice graphic, using data from Swiss bank UBS, to show roughly how long you'd have to work, in a handful of countries, to be able to buy 500ml of beer. Interestingly Australia has the second most expensive beer of all the survey countries:
3.36pm: Boutique corporate advisory outfit Greenhill Caliburn is to change its name on Monday to reflect its ownership by US investment bank Greenhill.
The Australian part of the name, Caliburn, is to be dropped when the company is re-named Greenhill & Co Australia.
Greenhill bought Caliburn in 2010 in a deal that at the time was valued at about $200 million, to be paid over five years.
3.26pm: As we approach the final half hour of trade, here's what IG Markets strategist Stan Shamu had to say about the day's action:
- The local market had poor start to the session but managed to stage a complete turnaround led by the materials. China injected not just liquidity into its money markets, but subsequently put a bid in risk assets ahead of quarter-end and golden week.
- The moves are equivalent to 40 basis points of RRR cuts. As a result, we saw Rio Tinto swing to a 0.4% gain and Newcrest Mining rise 1.2%. Financials have also enjoyed a solid performance.
- The healthcare space has been resilient all day led by CSL Limited which traded at a new all-time high of $45.98 today. The stock has also been supported by news it has started to consider options for progressing development of a drug which can prevent development of type 2 diabetes.
- Looking at an early Bloomberg read on next week’s RBA decision, out of 26 economists, seven (including NAB, WBC and AMP) are calling for a 25 basis point cut; at odds with OIS on 68% probability.
3.07pm: Mark Pervan, the head of commodities research at ANZ, said by taking today’s spot price of gold –roughly US$1760 an ounce – and adjusting for monthly inflation, the “real” price of gold hit a peak of $2720 in January 1980.
Today, the real price of gold is about $1945. So there’s still a fair way to go before it gets close to that peak, even though it looks like it is creeping back up to its nominal all-time high of US$1900 an ounce.
Sean Callow, a senior currency strategist from Westpac, said it’s sensible to look at the real price of gold rather than the nominal price.
He said even though the price of gold had roughly doubled in nominal terms since 1980, from US$835 an ounce, the average price of goods and services had risen by far more than that, meaning gold had failed to keep up with inflation.
“People who are not gold bugs like to say that if gold is such a great hedge against inflation then why has it been so lousy for so many decades?” he said.
2.57pm: Some 40 per cent of iron ore mines in China have already suspended operations as a slump in prices have forced them into losses, the Metallurgical Mines Association of China said today.
Iron ore prices are expected to hover between $US90-$US110 in the next two years, Liu Xiaoliang, executive deputy secretary general of the association told an industry conference.
2.52pm: It has been a turbulent month for the dollar with lots of economic announcements from around the globe, but it looks like it will end higher than where it started:
2.32pm: Biotech junior Sirtex surged to a record $9.72, up 50 cents, and holding near the day's high of $9.80, in active trading, with sentiment boosted by Macquarie Bank slapping an "outperform" recommendation with a 12-month target of $11.52 on the stock.
Earlier today, the company - which has an innovative liver cancer treatment - hiked its annual dividend to 10 cents a share from 7 cents paid previously.
In raising the dividend, directors pointed to the high level of cash on hand, which totals close to $50 million, combined with its strong cashflow.
Recently BusinessDay highlighted the stock, on the back of investor presentations by senior management which flagged a "step-change'' in its growth profile thanks to new clinical trials which are aimed at improving market penetration of its treatment, which is usually used in conjunction with chemotherapy as a last resort for liver cancer suffers.
In the year to June its net profit rose 49 per cent to $17.1 million despite the strong Australian dollar, and brokers have pencilled in further strong revenue growth of around 20 per cent a year over the next two years.
In research released today, Macquarie noted Sirtex's "scientifically robust treatment", the under-penetrated market it is servicing, rapidly growing revenues and the potential for greater upside if its clinical trials bear results similar to its earlier studies, as justifying its "outperform" recommendation.
2.22pm: Some information on the developing ASIC case against the banks of customers who lost more than $3 billion after the collapse of Storm Financial.
Two banks have told a court the corporate watchdog’s case against them over the collapse of Storm Financial is full of ‘‘irrelevance and inaccuracy’’.
The Australian Securities and Investments Commission is pursuing Macquarie Bank and the Bank of Queensland in the Federal Court in Brisbane.
ASIC barrister Allan Myers says the watchdog wants the court to declare the banks were ‘‘knowingly concerned in the operation of (Storm’s) unregistered scheme’’.
However, lawyers for the banks have told the court ASIC has so far failed to point to any solid evidence that prove these allegations.
2.14pm: Effects of a slowdown in China’s economy, where BMW, Audi and Mercedes account for about three quarters of luxury car sales, have already made themselves felt.
There is much at stake for the European carmakers, which have invested in local factories with Chinese partners to sidestep hefty duties on imported cars.
"The Chinese have overconsumed premium cars in recent years," said Singapore-based Bernstein analyst Max Warburton. "Right now, we see a number of risks to sustained high profits from China."
Sales of high-end cars have surged in China since 2010 because of strong demand from the growing ranks of millionaires, making China a profit driver for luxury automakers, with Europe in the doldrums and the US economy expanding slowly.
But a decline in China's growth rates over the past six quarters is prompting luxury buyers to switch to smaller vehicles, undermining pricing and swelling inventories.
2.07pm: Metcash’s long-time chief executive, Andrew Reitzer, will remain as a consultant to the grocery wholesaler for three years after he steps down from the top job next June.
The retailer has also flagged today that Mr Reitzer intends to sell up to half his 1.75 million Metcash shares during ‘‘trading windows’’. At their present value, the shares he plans to sell are worth about $3 million.
2.03pm: Here's a quick snapshot of how markets around the region are performing:
- Nikkei(Japan): -0.24%
- Shanghai: +0.27%
- Taiwan: +0.26%
- South Korea: +0.16%
- Singapore: +0.4%
- New Zealand: flat
1.56pm: China's one-year swap rate dropped the most in five weeks after the central bank added a record amount of funds to the financial system, helping ease demand for cash before a week-long holiday starting October 1.
The People's Bank of China injected a net 365 billion yuan ($57.9 billion) via reverse-repurchase operations and bill redemptions this week, the most since Bloomberg started compiling the data in 2008, compared with 101 billion yuan last week. The monetary authority offered 130 billion yuan of 28-day reverse repo agreements and 50 billion yuan of 14-day contracts today, according to a statement. China's financial markets will be shut next week for the National Day and mid-autumn holidays.
1.40pm: Whitehaven Coal boss Tony Haggarty has quashed media speculation that former billionnaire Nathan Tinkler is preparing to spill the board or remove senior management, himself included.
Mr Haggarty told BusinessDay no Whitehaven director had been approached formally or informally by Mr Tinkler or his agents.
‘‘I’ve not been approached and I’ve been assured by all the directors that nobody has been approached,’’ Mr Haggarty said, and chairman Mark Vaile had confirmed the same thing this morning.
1.29pm: The chief executive of conglomerate Wesfarmers, Richard Goyder, saw his total salary increase by more than $1 million to $8.01 million last financial year, but the payout is still dwarfed by the remuneration paid to Coles boss Ian McLeod whose pay was $14.8 million in 20011-12.
According to the Wesfarmers annual report, released this morning, Mr McLeod’s salary dropped slightly for the year against his payout of $15.62 million in 2010-11.
1.15pm: Looking at the gold price again, here's a chart which shows its fluctuating fortunes in 2012. It reached its high point on 28 February - $US1786.82 - and has been pushing back towards that mark over the last three months:
1.05pm: Here's how the various sub indices on the ASX200 are performing half way through today's session:
- Health: +0.78%
- Telecoms: +0.76%
- Industrials: +0.17%
- Consumer disc.: -0.62%
- Consumer staples: 0.4%
- Energy: -0.38%
1.01pm: While the Aussie dollar is putting in a positive performance for the day, shares are poised to break in positive territory. Both the All Ords and the ASX200 are now flat, regaining the 0.5 per cent loss recorded shortly after the session opened.
12.57pm: The Australian dollar is almost half a US cent higher on liquidity action from China’s central bank, and ahead of crucial economic news from Spain.
At 12pm AEST, the Australian dollar was trading at $US1.0396, up from $US1.0351 late yesterday. The local currency fell as low as $US1.0329 overnight, as the market grew increasingly concerned about the euro zone debt crisis, in the wake of higher bond yields in Spain and rioting in Greece.
12.49pm: Looking again at Spain briefly, here's a chart showing how Spanish bond yields jumped when Spanish Prime Minister Mariano Rajoy said the country would only ask for a bailout if interest rates went to unsustainable levels.
According to Mr Jones: "The market is trying to force the issue at the moment. I think Spain desperately needs some relief; it can’t go on with these interest rates."
12.35pm: Gold is poised to post its best quarterly gain in more than two years, as central banks boosted stimulus measures to bolster growth and strikes halted output.
Spot gold climbed 0.2% to $1756.15 an ounce. The metal is up 10 per cent since June 30, set for the biggest quarterly gain since the three months to June 30, 2010. It was trading at $US1597.40 on 29 June. December-delivery bullion rose 0.3 per cent to $1758 an ounce on the Comex in New York.
12.20pm: Stocks have mounted a recovery. Things, it seems, were not as bad as investors thought. Both the All Ords and the ASX20 slipped to a loss of more than 0.5 per cent, but are back to only 0.1 per cent down now.
12.13pm: Baoshan Iron & Steel Co (Baosteel), China's biggest listed steelmaker, says it has suspended production at a loss-making plant in Shanghai, in a sign of the intense pressure on the sector as steel prices trade near three-year lows.
The steelmaker is one of the first major Chinese mills to publicly announce it is suspending production, but with the world's second-biggest economy cooling and banks restricting lending to an industry that built up $400 billion of debt during years of double-digit growth more suspensions are likely.
The plant, located in Shanghai's Luojing district, has been making losses due to weak demand and high costs, the firm said in a statement to the Shanghai Stock Exchange, responding to a media report.
12.09pm: As protestors march the streets in Madrid, the Spanish government is set to announce its budget overnight.
Russell Jones, global head of interest rates strategy at Westpac, says more austerity is expected.
‘‘I think the country is suffering from austerity fatigue,’’ he says. ‘‘It’s a very messy situation in Europe and Spain is just one example of that. You’ve got an improved momentary policy framework, the ECB has come up with some fairly innovative initiatives recently, but it’s not being put into operation.’’
Last night the Spanish Prime Minister Mariano Rajoy said the country would only ask for a bailout if interest rates went to unsustainable levels.
Within minutes, the market responded, as interest rates jumped up, yields on Spanish 10-year bonds surged 31.7 basis points from 5.75 to above 6.05.
‘‘The market is trying to force the issue at the moment. I think Spain desperately needs some relief; it can’t go on with these interest rates.’’
The situation could have a trickle down affect on Australia says Mr Jones.
‘‘Europe as a whole is in recession and is showing absolutely no signs of pulling out of it, that affects global growth, it affects China, China affects Australia,’’ he said.
12.02pm: Almost a quarter of young Australians are working insecure, black-market jobs and missing out on their entitlements, trade unions say.
ACTU president Ged Kearney says employers are paying workers cash to avoid legal obligations and taxes.
‘‘The illegal use of cash-in-hand payments to workers is one of the dirty secrets of the Australian economy,’’ she says.
A survey of more than 1,000 workers by the Victorian Trades Hall Council and the ACTU found almost a quarter of people aged between 18 and 30 were being paid cash-in-hand and off the books.
The national survey, conducted earlier in September, found a tenth of Australian workers were working black market jobs.
11.52am: The number of job vacancies in Australia has risen by 4.2 per cent.
The total number of vacancies in August 2012 was 179,300, in seasonally-adjusted terms, compared with 172,100 in May, according to the latest ABS quarterly survey.
There were 165,900 private sector job vacancies in August, up 5.9 per cent on May’s 156,700. But the number of public sector vacancies in August, at 13,500, was down 12.9 per cent on August.
11.45am: Grocery wholesaler Metcash expects to name a new chief executive in February after current boss Andrew Reitzer confirmed he will resign at the end of the financial year.
Mr Reitzer announced in February 2010 he would retire in three years time, and today the company set the date as June 30, 2013.
Metcash says its board has begun succession planning and expects to make an announcement about a new CEO in February.
After stepping down, Mr Reitzer will work as a consultant to the Metcash board for three years, providing strategic advice and assistance.
11.38am: Gold has edged higher after three days of losses, but anxiety over the eurozone debt crisis continues to weigh on the market, as it has lifted the US dollar and weakened oil prices.
Spot gold edged up 0.1 per cent to $US1753.34 an ounce, after dipping to a two-week low of $US1737.50 in the previous session.
US gold inched up 0.1 per cent to $US1756.10.
11.23am: Toy distributor Funtastic has returned to profitability and expects further growth in the year ahead. Funtastic made a net profit of $10.4 million in the year to July 31, up from a loss of $38.2 million in the previous year.
The turnaround was due to a 19 per cent reduction in costs and improved profit margins on a narrower and more successful product range, Funtastic said.
11.18am: CSL shares are down about 0.7 per cent to $44.86 despite announcing the discovery of a drug which could prevent and reverse the progression of type 2 diabetes.
As The Age reported this morning, an antibody developed by CSL Limited has been found to prevent the condition in mice bred to develop it. It also reversed the progression of the disease in mice that had developed obesity and type 2 diabetes as a consequence of a fat-rich diet.
11.12am: Medical devices firm Sirtex says it will pay a fully franked dividend of 10 cents a shares, a 43 per cent rise on last year.
Shares of the company, which provides a radioactive treatment for inoperable liver cancer, have had a pretty good run in 2012, more than doubling to $9.35. They're up 1.4 per cent today.
11.06am: City Index analyst Peter Esho said the sale of Dick Smith showed Woolworth’s giving up on their search for a better sale price.
“This is a fire sale. It’s an admission Woolworths can’t do any better and they just want to put it behind them,” said Mr Esho.
“Woolworths is really digging into the home improvement space and that really is the main priority now in terms of growth,” said Mr Esho.
Turning Dick Smith around will be very, very difficult, said Mr Esho, but it’s not impossible. A successful turnaround would require a lot of trial and error and the company would want to be in a vehicle that doesn’t have to report continuously to shareholders who are focused on short-term profits, he said.
10.59am: CMC Markets senior dealer Tim Waterer said concerns about European and US growth were weighing down resources stocks.
‘‘Will they or won’t they ask for a bailout?’’ he said.
‘‘Once again, there seems to be a real lack of positive drivers on the global stage at the moment.’’ Mr Waterer said global growth concerns led to worries about the possible effect on demand for commodities, which then hit the major resource companies.
10.53am: The big miners are all lower again. Fortescue down for the fourth straight day, BHP for the fifth and Rio for the sixth:
- BHP is 0.82% lower to $32.54
- Rio is 0.37% lower to $52.70
- Fortescue is 1.71% lower to $3.45
10.48am: Consumer discretionary stocks are leading the market lower. The sub index is 0.86 per cent lower. Here are some of the bigger sliders:
- Super Retail Group: -2.51%
- Crown: -1.54%
- Souther Cross: -1.5%
- Ten Network: -1.37%
- JB Hi Fi: -1.33%
- Wotif: -1.25%
- Billabong: -1.12%
10.43am: Woolworths shares were down 30 cents, or 1 per cent, at $28.98 on a day the broader market is off by about 0.4 per cent.
Morningstar head of research Peter Warnes said Woolworths should have sold Dick Smith many years ago, given its return on funds employed ‘‘almost never exceeded the cost of capital’’.
‘‘The painful exit from consumer electronics has finally happened,’’ Mr Warnes said in a research note. ‘‘Management can now get on with the real business - supermarkets, Big W and hotels.’’
10.35am: Markets look to have bottomed out - for now - at a loss of 0.5 per cent. That's roughly in line with the futures market and Wall Street, but a long way ahead of Europe.
10.23am: Here are some other biggish movers among the top 200:
- Canbcharge: +2.6%
- Linc Energy: +2.3%
- Charter Hall: +1.8%
- FKP Property: -5.9%
- Kingsgate: -4.6%
- Evoluition Mining: -4.2%
10.20am: Blue chips are mixed in early trade:
- BHP: -0.5%
- Rio: +0.1%
- ANZ: -0.2%
- CBA: +0.2%
- NAB: -0.3%
- Westpac: -0.3%
- Fortescue: -1.7%
- Woolies: -0.7%
- Wesfarmers: -0.1%
- Telstra: +0.3%
- Newcrest: -0.3%
10.15am: Some more on Echo chief Larry Mullin announcing his exit early next year: the announcement comes the same week that Echo director Brett Paton resigned effective immediately.
The departures thin the ranks of Echo’s board at a time when the company is attempting to fend of two potential suitors including James Packer’s Crown Ltd which is building a shareholding in Echo and proposing a joint venture to share the VIP market in Sydney with its own luxury hotel and exclusive casino just across the water from Echo’s The Star.
Echo shares are down 1.1 per cent, while Crown have lost 1.2 per cent.
10.12am: Nearly all sectors are in the red, with losses once again led by the miners. The materials sub-index is down 0.5 per cent, energy has lost 0.3 per cent and financial have slipped 0.1 per cent.
Health stocks are up 0.1 per cent.
10.09am: The sharemarket has opened lower as expected - the S&P/ASX200 index is down 0.2 per cent, as is the All Ords index.
10.04am: BREAKING: Echo chief executive Larry Mullin is stepping down.
9.55am: More here on the Dick Smith sale. The new owners have appointed ex-Myer executive Nick Abboud to lead the electronic retailing firm.
As revealed by BusinessDay this month, Mr Abboud, once considered a successor to Myer chief Bernie Brookes, stepped down from the board of the department store ahead of his announcement as CEO of a retail chain.
Most recently the long-time retail veteran Mr Abboud had been executive general manager of Myer. He joins ex-Myer chairman executive Bill Wavish on the board of Dick Smith.
9.51am: So, where are markets headed today? Down, but not heavily, according to one analyst.
Leyland Asset Management managing director Charles Leyland said the local market would likely open lower today amid news of violent anti-austerity protests in Spain and Greece, but a market plunge was unlikely.
"I'd expect the market to drift on fairly low volumes given recent trends and lack of 'new' news from overseas," said Mr Leyland.
While it was possible the European debt crisis would step back up a notch with the end of the northern summer, markets generally have grown accustomed to the uncertainty, he said.
"I think the market is becoming pretty used to what's happening over there. It seems to me the market reaction to what we're seeing overseas is no where as great as what we've seen a year or two ago,” he said.
9.48am: The chance of a rate cut when the RBA meets next week has been steadily rising as the troubles in Europe have intensified. Credit Suisse data now gives a 25 basis point cut a 74 per cent chance, up from 60 per cent at the start of this week and 45 per cent at the start of last week.
Interestingly, the interest rate futures market is now expecting four 25 basis point cuts over the next 12 months.
9.43am: Highlighting the current instability in Europe, Spain's 10-year benchmark yield rose above 6 per cent, approaching the levels seen before European Central Bank President Mario Draghi offered to buy struggling nations' debt.
Prime Minister Mariano Rajoy told the Wall Street Journal in comments confirmed by his office that he would “100 per cent” seek a rescue if borrowing costs stayed “too high”.
9.40am: In commodities, gold and oil were both down but iron ore rose. China iron ore added 50 US cents to $US104.20, snapping a four day losing streak, but the big miners booked losses on Wall Street. BHP lost 1.32 per cent and Rio slipped 2 per cent.
9.36am: In corporate news this morning, Woolworths is selling electronics chain Dick Smith to a private equity group for $20 million.
The buyer is Australian private equity firm Anchorage Capital Partners, which specialises in turning around underperforming businesses. Woolworth's CEO Grant O'Brien said that selling the eletronics business was part of a broader review of the company's assets. Full story here.
9.32am: European markets were shaken again by opposition to the austerity measures being imposed in Spain and Greece, with clashes between protesters and police. The clashes could intensify in Spain when the government releases its 2013 budget, and news of further cuts to government spending, over overnight our time.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:
- SPI futures are 20 points lower at 4347
- The $A is higher at $US1.037
- In the US, the S&P500 fell 0.57% to 1433.36
- In Europe, the FTSE100 fell 1.56% to 5768.09
- China iron ore added 50 US cents to $US104.20 a metric tonne
- Gold fell 0.7% to $US1753.60 an ounce
- WTI crude oil fell $US1.39 cents to $US89.98 a barrel
- Reuters/Jefferies CRB index fell 1% to 303.74
9.30am: Hi everyone. Welcome to the Markets Live blog for Thursday.
Contributors: Thomas Hunter, Peter Litras, Jens Meyer, Max Mason
This blog is not intended as investment advice
BusinessDay with agencies