We're calling it a day here at blog central, thank you for reading and commenting, we hope to see you tomorrow.
The market feaded throughout the day, Credit Suisse equity strategist Damien Boey noted.
"There's just generally a lot of nervousness. We had the housing finance data which wasn't that great."
Miners were some of the best perfomers today, with BHP Billiton rising 0.6 per cent and Rio Tinto jumping 1.9 per cent.
Steelmaker Fortescue rallied 6.9 per cent. The company is in talks with BC Iron, the smallest among a tight circle of iron ore miners in Australia's Pilbara region to acquire majority control over its Nullagine joint venture. Rival Bluescope Steel gained 0.3 per cent.
Banks were mostly strong, with Westpac heading gains, rising 0.6 per cent. ANZ bucked the trend, slipping 0.2 per cent.
Defensives were somewhat weak, blood products maker CSL dropped 2.3 per cent while food retailer Woolworths lost 0.8 per cent.
Mining contractor Macmahon is poised for a capital raising as it battles to reverse a drop in earnings and tries to cut costs.
Macmahon's shares were placed in a trading halt today, with the company saying an announcement was pending about a possible equity raising and strategy update.
The stock is expected to remain in a trading halt until Wednesday, or when the company makes its announcement.
Mixed picture among the sectors: while materials rose 0.9 per cent and financials gained 0.2 per cent, the energy sub-index fell 0.3 per cent, industrials slipped 0.2 per cent and health stocks lost 1.5 per cent.
The market has closed slightly higher and well off the day's highs. The benchmark S&P/ASX200 rose 6.1 points, or 0.1 per cent, to 4557.9, while the broader All Ords gained 6.5 points, or 0.1 per cent, to 4562.4.
China's November exports disappoint, taking some shine off weekend data that suggested a revival in the world's second-biggest economy was deepening.
Exports rose 2.9 per cent from a year earlier, well below expectations for a 9.0 per cent increase and October's 11.6 per cent pace, customs figures show. Imports were unchanged on the year, weaker than forecasts for a 2.0 per cent increase.
ANZ economists note:
- November trade data came in much lower than expected, inconsistent with the strong export delivery data released yesterday but in line with throughput data in major Chinese ports.
- Overall trade growth is unlikely to achieve the 10% growth target this year. We expect that the exports and imports will grow 8% and 5% in 2012, respectively, with an annual trade surplus at $220bn, compared with $158bn in 2011.
Resource stocks were particularly responsive to the better looking US and Chinese economic indicators, with Rio among the standout performers on the local bourse to start the week, CMC Markets trader Tim Waterer says:
- The lower print on the Chinese trade balance data did little to upset the momentum today of the materials sector, with investors preferring to focus on the broader uptrend in Chinese economic indicators.
- The evidence is beginning to mount that the Chinese economy has turned the corner, a situation which is supportive of traders entertaining the idea of having higher yielding assets in their portfolios.
New York City Mayor Michael Bloomberg is weighing up whether to make a bid for The Financial Times Group, which includes the namesake paper and a half interest in The Economist magazine, the New York Times is reporting, citing three people close to the mayor.
Pearson Plc, the publisher of FT, is about to lose two of its top executives, raising speculation the paper could be up for sale. Analysts value The Financial Times Group at about $US1.2 billion, well within the reach of Bloomberg LP, which in 2011 had revenue of $US7.6 billion, the paper said.
One media banker with knowledge of the company expects the paper to be sold around early next year, the New York Times said.
Factions within Bloomberg LP have argued that it would be smarter to buy a digital property, pointing to the website LinkedIn as an example.
As we approach the final half hour of trade in Australia, here's a quick snapshot of how the region is doing today:
- Nikkei(Japan): +0.2%
- Shanghai: +0.5%
- Taiwan: -0.5%
- South Korea: flat
- Singapore: +0.7%
- New Zealand: -0.3%
Here's the tweet by CommSec chief economist Craig James referred to in the featured comment:
December is 2nd best month for shares over past 70 years.Strongest is January (up 50 mths); December (up 49 mths). Dec is best last 30yrs.— Craig James (@craigjamesOZ) December 9, 2012
Australand's shares are still well up on the day on speculation GPT may have to go above book value in its bid for parts of the property group.
"Australand is attractive because industrial (property) is a high-yielding asset class," says Sholto Machonochile, analyst at CLSA. "They (GPT) probably don't want exposure to residential, which is why they've offered for asset purchase rather than company purchase."
"For GPT, it would increase their passively managed property and slightly decrease the development portfolio, so that is within their strategy," says Bell Potter Securities head of research Peter Quinton.
Ratings agency Standard & Poor's said its ratings on GPT would not be affected by the offer, saying a deal was consistent with GPT's plan to increase the weighting of office and industrial assets in its portfolio, and reduce retail.
Analysts at Credit Suisse said Australand's investment property portfolio contributed 61 per cent of fiscal 2012 earnings. Its residential business accounted for 32 per cent of earnings and its commercial and industrial business 7 per cent.
Australan shares rose as much as 9.6 per cent to $3.34, the biggest one-day rise since June 2009. It last traded up 6 per cent for a market capitalisation of $1.84 billion. GPT shares were slightly higher.
More on Fortescue Metals and Pilbara junior BC Iron;
Both companies currently own 50 per cent of the Nullagine iron ore project under a landmark deal that was struck in 2009, but BC Iron has confirmed today that it is poised to buy a further 25 per cent of Fortescue's stake.
BC Iron shares have been halted all day ahead of the deal being announced.
Fortescue shares were not halted this morning, and duly rose by almost 7 per cent to be testing $4.05 around 2pm.
Fortescue's decision to leave its shares open for trading has already attracted the attention of the ASX regulators, with Fortescue arguing that it is too big a company for the transaction to be considered material.
So it has come to our attention that there are now 201 companies listed on the ASX200. Woolworths property spin-off Shopping Centres Australasia Property Group, which listed on November 26, is the likely culprit.
The index will be rebalanced at some point this month, but until then, enjoy the irregularity.
Iron ore miner Atlas Iron has completed a $US275 million financing package to put it on track to produce 12 million tonnes per annum by December 2013.
The iron ore miner said it had also put in place an undrawn $50 million three-year ‘‘covenant lite’’ revolving facility which contained no earnings-based maintenance covenants.
It's been a rough day for the Ten Network after exiting a trading halt this morning, down 7.2 per cent, factoring in capital raising dissolution.
As the chart shows, this is not a one-off for the broadcaster, as it, along with many other media companies, struggles with dwindling advertising revenue.
Both the United States and United Kingdom have developed viable approaches to seizing and unwinding failing global financial institutions, but more work is needed on the UK side to ensure that losses can be adequately absorbed, said American and UK regulators.
The Bank of England and the US Federal Deposit Insurance Corp said in a joint paper that each country's plans for dealing with the types of cataclysmic financial failures that marked the 2007-2009 financial crisis would reduce risks to financial stability.
"The FDIC and the Bank of England have developed resolution strategies that take control of the failed company at the top of the group, impose losses on shareholders and unsecured creditors - not on taxpayers - and remove top management and hold them accountable for their action," they said in the paper.
The new authorities to seize and resolve so-called global systemically important financial institutions came in the United States from the 2010 Dodd-Frank financial reform law, and in Britain from the anticipated approval by early 2013 of the European Union Recovery and Resolution Directive
China's exports rose in November at a much weaker pace than expected and imports were flat compared with a year earlier, taking some shine off weekend data that suggested a revival in the world's second-biggest economy was deepening.
Exports rose 2.9 per cent from a year earlier, well below expectations for a 9 per cent increase and October's 11.6 per cent pace, customs figures showed on Monday. Imports were unchanged on the year, weaker than forecasts for a 2.0 per cent increase.
The data represented the weakest performance for exports and imports since August.
"The export slowdown shows external demand faces uncertainty due to concerns over the fiscal cliff in the US," said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.
"Nonetheless it does not change our view that growth is on track for a strong recovery in Q4, as (growth) is mostly domestically driven."
The trade data follows government figures on Sunday that showed industrial output rose a higher-than-expected 10.1 per cent in November from a year earlier, the fastest pace since March.
Woodside Petroleum has reached another joint venture agreement to expand its exploration interests in Myanmar.
Myanmar-based MPRL E&P Pte Ltd has accepted Woodside’s offer to buy into a block in the Rakhine Basin. The offer is for a 50 per cent interest in block A-6.
‘‘The proposal provides the opportunity for Woodside and MRPL E&P to undertake a 3D seismic survey program in the block and also provides an option for future drilling,’’ Woodside said in a statement today.
The offer is subject to conditions including execution of fully termed agreements, completion of due diligence, and government and other approvals.
BusinessDay's Adele Ferguson says the 2Day FM controversy is a shining example of people power. In a lunchtime column, she writes that the community backlash "from the so-called royal prank-gone-wrong by two shock jocks on 2Day FM says a lot about the power of the people rather than the power of a company’s board or the regulators":
The board sets values for a company and if management takes decisions that are in contravention of the company’s values then something has to be done. Investors and directors of Southern Cross Media need to look at those values to see where they are falling short.
BC Iron shares have been placed in a trading halt ahead of an announcement by the company to the ASX.
The Iron ore developer expects to make an announcement of a ‘‘potential material transaction’’ around 2pm today AEDT.
In a statement, BC Iron said unless the ASX decides otherwise, the securities will remain in a trading halt until the start of normal trade on Wednesday, December 12.
BC Iron operates an iron ore joint venture in Western Australia’s Pilbara region with Fortescue Metals Group.
The price of China iron ore climbed back past $US120 a metric tonne on Friday. And Bloomberg today reports that iron ore shipments from Australia advanced to a record in October as a strengthening Chinese economy boosted demand.
Exports gained 7.6 per cent from September to 44.2 million metric tons, according to government data compiled by Bloomberg.
Shipments to China climbed 11 per cent to 34 million tons, the data show. China’s industrial output surged 10.1 per cent in November from a year earlier, the National Bureau of Statistics said yesterday, after advancing 9.6 per cent in October.
Iron ore with 62 per cent content delivered to the Chinese port of Tianjin climbed 2.2 per cent to $121 a dry ton on December 7, the highest since November 19, according to data compiled by The Steel Index. Prices gained 14 per cent in October after advancing 17 per cent in September.
Australia’s bond market is showing confidence the economy can weather a faltering mining boom. Yields on 10-year government debt are within a basis point of their level at the end of last month even after the Reserve Bank of Australia cut its key rate by a quarter percentage point to 3 per cent on December 4.
Australia ‘‘remains a standout macro story for what is still a stable AAA country,’’ said Tony Morriss, head of interest-rate research at ANZ.
‘‘If you compare them with bond yields in equivalent countries, ours are still really, really high.’’
The yield on 10-year Aussie debt climbed three basis points today to 3.15 percent as of 12 p.m. in Sydney, having ended November at 3.16 percent.
Today, or this week, could mark a milestone on the ASX200 for the year. The benchmark index is nearing its calendar 2012 closing high of 4571.1 points, reached on October 19.
The market is currently trading at 4566.39, 5 points from that closing high and just 15 points from its 2012 intraday peak of 4581.1, hit on October 18. The low point for 2012 was reached on 4 June at 3985.
Although the home loan figures were underwhelming, there were some upsides, said JPMorgan economist Tom Kennedy.
‘‘The positive takeaway is that this is the third consecutive month we’ve seen growth in total number of new loans. The negative is that each month that growth has been decelerating.”
Mr Kennedy said that the increase was a result of investor loans, rather than first home-buyer and owner occupied loans.
‘‘It looks like housing prices have bottomed and are starting to move gradually higher, that’s probably a large reason for that increase in investor participation,’’ he said.
Mr Kennedy said today’s figures could give the RBA further reason to cut the cash rate when it meets again in February.
‘‘You haven’t really seen any rapid increase in credit. Housing prices, although they have stabilised, are not going anywhere, so there is no real concern of asset inflation,’’ he said.
The big miners have enjoyed a strong start to the week, particularly Fortescue, which could be benefiting from the strong Chinese industrial production numbers out yesterday and the iron ore price rising back above $US120 a metric tonne:
- BHP is 0.6% higher to $34.95
- Rio is 2.1% higher to $61.44
- Fortescue is 5.54% higher to $4.00
Fund manager Perpetual has named a leader of its restructuring program as its new chief financial officer. Gillian Larkins will replace outgoing CFO Roger Burrows on January 7.
She joined Perpetual in October from Westpac to be Perpetual’s group executive of its transformation office, overseeing the fund manager’s restructure aimed at cutting costs and simplifying the business.
Lots of interest in Ross Gittins's yarn The hidden truth about interest rates, in which he focuses on deposit rates. Gittins writes:
I suppose it's a good thing for the media to discover at long last that interest rates are a two-way street; that though borrowers gain from lower rates, savers lose. And that there are actually a lot more savers than borrowers.
There's just one problem with the newly fashionable bleeding for retired depositors: it doesn't necessarily follow that a cut in the banks' interest rates for people with home loans leads to similar cuts in rates paid to depositors - a point the grey-power lobby didn't bother making clear to a newly sympathetic media.
There are probably few more underreported topics than what's happening to deposit rates. The banks don't mention them in their press releases announcing cuts for borrowers, and the media rarely press the banks to be more forthcoming.
But even if some of the big four banks shave their deposit rates, I doubt they all will. And those that do are not likely to cut them by as much as the 20 basis points they're lopping off mortgage rates.
Some reactions on GPT's offer for Australand Property Group’s industrial and commercial property assets and development business.
‘‘It wouldn’t make sense for Australand to sell its crown jewels, which are helping support its residential business,’’ says Stuart Cartledge, managing director of Phoenix Portfolios.
‘‘I can understand why GPT don’t want to buy the whole thing because the last thing they want is to get into residential development, but I don’t think they can extract the best bits of Australand without paying a premium.’’
Australand shares jumped as much as 10.6 per cent and are now up 5.3 per cent at $3.18. GPT are 0.1 per cent higher.
The proposal involves Australand, controlled by Singapore’s Capitaland, keeping its residential business and remaining a listed entity. The bid, whose pricing was not disclosed, is incomplete, conditional and subject to due diligence.
Australand’s industrial and office investment properties, valued at $2.3 billion at June 30, will provide about 70 per cent of earnings this year, the company forecast on November 2. The residential business, experiencing weakness in Melbourne and southeast Queensland, will see lower volumes, it said.
There's more data out of Japan this morning: the country's current account showed a better-than-expected surplus of Y376.9 billion ($4.4 billion) in October, although the figure is still down about 30 per cent on the previous year.
Economists had been expecting a 218 billion yen surplus. Japan’s current account surpluses have been hit by a slowing global economy and a spike in fuel imports due to the shutdown of most of the country’s nuclear reactors following last year’s atomic crisis.
Earlier, Japan said the economy shrank by 0.9 per cent in the three months to September, amid fears the country is slipping into recession. On an annualised basis, the economy contracted 3.5 per cent in the quarter, according to Cabinet Office numbers.
Some more on Austereo: media analyst Mark McDonnell says there are also concerns about the impact of any findings of a possible breach of standards:
- In this case, a number of lawyers have come out and suggested they have broken the law, so people will be concerned about regulatory action and I daresay there will be an inquiry and there may well be some sanctions applied.
- This time it’s not about Kyle Sandilands which is some ways might look like a good thing, but in other ways, it makes the problem more difficult because when it’s one person, that one person is seen to be the problem.
- But when it becomes other people then it starts to take on a wider significance for the management and the board, and it becomes more an issue around the culture of the station.
The number of home loans approved in October rose just 0.1 per cent to 46,477, well below expectations for a 3 per cent rise.
That was from an upwardly revised 46,425 in September.
Total housing finance by value rose 1.8 per cent in October, seasonally adjusted, to $21.564 billion.
‘‘The result is a continuation of the cautiousness in the household sector as consumers pay down debt, preventing a strong rebound in housing finance,’’ Moody's economist Matthew Circosta said before the numbers were published.
Macmahon Holdings has been placed in a trading halt before a possible equity raising and strategy update. Its shares will remain in a halt until the earlier of the opening of trade on December 12 or when it makes the announcement.
Japan said its economy shrank by 0.9 per cent in the three months to September, leaving unchanged the preliminary figure that stoked fears the country would slip into recession.
On an annualised basis, the economy contracted 3.5 per cent in the quarter, also unchanged from the preliminary figure, according to data from the Cabinet Office.
Japanese stocks rose, with the Nikkei 225 Stock Average headed for its highest close since April. The Nikkei 225 Stock Average added 0.4 per cent to 9,565.11, headed for the highest close since April 19. The broader Topix Index advanced 0.4 per cent to 793.16, with more than three stocks rising for each that fell.
It’s getting ugly for 2Day FM. Online vigilante group Anonymous is believed to have threatened the broadcaster in light of Mrs Saldanha’s death.
Using a new account on YouTube with the group’s branding, a person wearing a mask similar to that used by Anonymous members said 2Day FM was "directly responsible" for Mrs Saldanha’s death. The message said in part:
We are Anonymous and hereby demand you terminate the contracts of Mel Greig and Michael Christian. We will not listen to any more excuses. We will not let you escape your responsibility. You have a funeral to pay for. We are Anonymous. We are legion. We are amongst you. Expect us. This is not a prank call; this is no laughing matter. This is your one and only chance to make amends. You have one week to do so.
More on Austereo. Media analyst Mark McDonnell said the fall in shares is a reaction by the market that this type of bad news could reflect very poorly on the future performance of Southern Cross Austereo.
‘‘We did see that in the Alan Jones case. That proved to be quite a temporary reversal and we may see the same again here.
‘‘I think often you see excess volatility in share prices around bad news and that’s largely what we’re seeing here I think.’’
Aussie stocks are now sitting on a gain of about 0.4 per cent, rising streadily though the first hour of trade, and adding to Friday's gains. RBS Morgans Ipswich manager Tony Russell said the Australian market closed on a high last week as it had already anticipated a positive night on Wall Street after the jobs report.
‘‘We might be looking for stronger leads when the Asian markets open to boost our markets later today,’’ he said.
‘‘As we head into the festive season a lot of the major institutionals will close their books for the rest of the calendar year, so turnover volumes lighten up a bit.
‘‘You do get a bit more volatility in the market but it can also get a bit quiet as well.’’
One from the small business desk ... Christmas bonuses will be few and far between this year, say HR experts. But perhaps it doesn't matter, with many staff preferring a knees-up over a cash injection.
Shopping centre owner Centro Retail Australia is changing its name just 12 months after a massive company overhaul that kept the once debt-laden company afloat.
The company has chosen Federation Centres as its new name, and will ask shareholders to vote on the change at a meeting on January 22.
Centro was one of Australia’s highest-profile casualties of the global financial crisis, succumbing to massive debts due mainly to its exposure to the US market.
The bump in the Australand share price has been driven by a takeover bid from GPT Group for Australand’s commercial and industrial and investment property portfolio.
Australand said the unsolicited approach from GPT was made late on Friday, and remains highly conditional and subject to a due diligence process.
GPT has offered to buy Australand’s investment property portfolio, and its commercial and industrial property business for an undisclosed sum. GPT said the offer was incomplete, and the company intends to enter discussions with Australand to develop a complete proposal.
Australand’s board has not yet formed a view on the offer, Australand said.
Some of the early gainers on the ASX200:
- Australand Property: -6.62%
- Linc Energy: +4.94%
- Alacer Gold: +2.49%
- Fortescue: +1.89%
- Mirvac: +1.8%
Along with Southern Cross Austereo and Ten, here are the other big losers in early trade:
- Intrepid Mines: -3.85%
- Metcash: -3.18%
- Aquila: -2.5%
- Oceanagold: -2.55%
Ten Network shares are trading again and investors have expressed their dismay at last week's announcement of another capital raising. Its shares plunged as much as 12.77 per cent in opening trade and are currently sitting on a loss of 10.9 per cent. They've slipped today to 24 cents, down about 3 cents.
Shares in Southern Cross Austereo, the owner of scandal-plagued 2DAYFM, has taken a big hit in early trade. Its shares are down slipped as much as 8.14 per cent to $1.01 after starting the day at $1.05.
Obviously investors don't like the outlook for the broadcaster, which moved swiftly to ditch all advertising after the death of a British nurse which has been linked to a prank call made by 2DAYFM presenters.
Ric Spooner from CMC Markets notes some of the recent developments in Europe and their likely effect:
News that Greece is likely to be successful in buying back around €30 bn of its bonds will also assist market confidence by removing Greece as a short term source of risk. The political situation in Italy may temper this confidence though. The prospect of an election next year being fought on the issue of fiscal policy will be unsettling for bond and equity markets.
And he takes a look at the week ahead on the ASX:
The coming week is shaping as a defining one for the technical outlook on S&P/ASX 200 index. A clear breach of the mid October high at 4582 would be a bullish development for the medium term signifying that the correction of the June/October rally is complete. The 50 day moving average at around 4470 represents near term support for the market this week.
Lots of green among blue chips in early trade:
- BHP: +0.12%
- Rio: +0.71%
- NAB: +0.49%
- QBE: +0.33%
- Wesfarmers: +0.41%
- DJs: -1.2%
- Telstra: +0.46%
- Origin: +0.36%
A fairly even split of sub indices on the ASX200 in positive or negative territory:
- Telecoms: +0.46%
- Utilities: +0.4%
- Financials: +0.31%
- Materials: +0.1%
- Health: -0.44%
- Consumer disc.: -0.25%
- Info tech: -0.22%
- Energy: -0.14%
Local stocks are higher in early trade. The All Ordinaries index is 8.8 points higher, or 0.2 per cent, to 4564.7, while the benchmark S&P/ASX200 is 8.6 points higher, or 0.2 per cent, to 4560.4.
Cameron Peacock at IG Markets points to more China data out today which could give support to the miners during the second half of today’s session. In a note this morning, he said:
Continuing on the Chinese economic data theme, we have trade balance numbers due out around midday (ADET), which are expected to reveal another healthy surplus of US$26 billion with monthly export/import growth of 9% and 2% respectively. This figure will no doubt set the tone for resource names heading into the afternoon.
To begin the day though, it’s likely to be a relatively muted start with a slight upside bias.
One company to keep a close watch on early this week is Ten. It was placed in a trading halt last week ahead of a $230 million capital raising. Mining billionaire Gina Rinehart is believed to have given her last-minute support to the troubled Ten’s offer.
Two weeks before Christmas, CommSec has taken a look at the Santa Claus effect. Craig James has asked, does it exist or is it a myth? He concludes that yes, there may be evidence to support it. In a note this morning, he writes:
Clearly there is always a lot going on in the domestic and global economies to affect sharemarkets. And corporate news is always evolving. But the data over the past 70 years does indeed show that the Australian sharemarket generally performs better in December than other months of the year.
Actually the stand-out month over the past 70 years has been January, with the All Ordinaries rising in 50 of the 70 years and gaining on average in the month by 1.9 per cent. But not far behind is December, rising 49 times in the past seventy years and lifting on average by 1.8 per cent in the month.
The interesting point is that December has indeed been a consistent out-performing month over time and certainly the best month to buy shares over the past 20 years. And if you track back at decade intervals starting at the last 20 years to the past 70 years, December has been the number one month.
CommSec market analyst Juliana Roadley said the Australian stock market was expected to have a good day today, following better-than-expected job numbers from the US and positive Chinese economic data.
"The SPI Index Futures does have our markets set to open six points higher, but you have to remember that closes on Saturday, so all these data dropped after that. But so did the news about Mario Monti and they have to take that into consideration as well," she said.
"You’ve got base metals higher, iron ore higher, the gold price up around $4, the oil price holding around $US86-a-barrel mark, so we’re expecting a pretty good day on the markets.
Ms Roadley said the Chinese data was very positive, with retail sales and industrial production exceeding expectations and inflation data matching forecasts at 2 per cent. But she warned that business deflation, with producer prices falling by 2.2 per cent year-on-year, was something to keep an eye on.
"Apart from that, the numbers were great, showing that all of the engineered slowdown by the Chinese government over the last few years has worked and now they are at a turnaround phase. They can put more money into their economy and they’re doing that. So that’s going to help boost our markets today."
Looking at that offshore data now, a good US jobs report and strong data from China could help to support local stocks today.
On Friday, US nonfarm employment increased by 146,000 jobs last month, data showed, defying expectations of a sharp pull-back related to superstorm Sandy.
Meanwhile in China, industrial output and retail sales exceeded forecasts last month while inflation rebounded from a 33-month low in signs the economic recovery is accelerating.
Aussie stocks are expected to open higher following the release of better-than-expected jobs figures in the US and further evidence of a rebound in China. More on those two things in a minute.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key markets numbers: