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Markets Live: Shares enter bull territory

That's all for today, folks. Thanks for reading this blog and positng your comments.

Here's our evening wrap of today's session.

What you need to know:


  • ASX closed 1.1% higher at a new 21-month high
  • The AUD has edged up to $US1.0455, 77.74 euro cents and 94.8 yen
  • The Nikkei is 0.3% higher, while Shanghai stocks are down 0.1%
  • Spot gold is trading up 0.4% at $US1661.45,
  • WTI oil is 0.4% higher at $US96.79
  • S&P futures are minimally higher


  • US Case-Shiller 20-city house price index for November; Forecast: 5.2% rise
  • US Consumer Confidence in January; Forecast: 65.1

Local events tomorrow

  • Perth - Wesfarmers releases its second quarter sales results
  • Sydney - First day of the two-day Hastie Group second creditors’ meetings in Melbourne, Sydney, Perth, Adelaide
  • Perth - Australian Property Institute releases its residential property outlook for 2013


Global market are rallying mainly because worst-case scenarios for economies have been avoided, Westpac chief interest rate strategist Damien McColough says:

  • It’s really a removal about the real catastrophe or disaster premium that has been in market rates for some time, As opposed to a confident that the [global economies] are growing strongly, it’s more a confident belief that the worst-case scenario has been averted.
  • It’s not like as if Europe is going to surge ahead in growth or America is going to go well above the 2 per cent per annum growth, but it means the expectation is that the euro is not going to collapse and there is going to be wholesale defaults from Spain or one of the other economies that has been under pressure.
  • So that causes equities to remove some of the negatives and bonds to lose some of their expensive pricing.

The Australian sharemarket, together with global equities, has risen by more than 20 per cent in the past six months - usually the definition of a bull market, Bell Potter Securities research director Peter Quinton notes.

But Quinton says using such a definition at this time was "a little bit aggressive" for the local sharemarket:

  • Having said that, I think there are very solid fundamental underpinnings to those 20 per cent risings.
  • Risks are never zero and a lot of the risks that people are worried about are still there, but they are very much diminished. So it would completely untrue that the risks we’ve been worried about have disappeared but they are a lot less today.
  • The brutal reality is ... there’s still risks out there but anybody who has been bearish about the stock market for the past six months has been proved dramatically wrong.

The market's gains were led by the financials sector, which added 1.3 per cent. Consumer stocks did well too, with consumer staples rising 1.5 per cent and consumer discretionary up 1.4 per cent.

Other defensive sectors such as health and telco posted strong gains, rising 2.5 per cent and 1.9 per cent respectively.

Materials underpeformed adding just 0.2 per cent, while the gold sectors slumped 2.6 per cent.

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The sharemarket has ended sharply higher, chalking up gains for a ninth straight session. The benchmark S&P/ASX200 index jumped 53.8 points, or 1.1 per cent, higher at 4889.0, while the broader All Ords added 52 points, or 1.1 per cent, to 4910.9.


The Australian dollar got a confidence boost today, shooting up near four-year peaks versus the yen and rising against the greenback and the euro as a jump in business confidence underpinned the currency.

The dollar advanced to $US1.0444 in late trade, from $US1.0412 early, having touched one-month lows of $US1.0384 on Monday. It gained momentum on the euro, rising to 77.62 euro cents from 77.17 euro cents earlier today.

It made bigger strides against the yen and was last seen flirting with a fresh four-year peak of 95.08 yen scaled last week.

The catalyst for the broad Aussie move higher was a sharp bounce in business confidence in December, according to a private survey, thanks in part to lower interest rates and better news offshore.

The reading gave investors an excuse to modestly pare the chances of further easing by the Reserve Bank of Australia.

Markets pricing now implies a one-in-four chance of a rate cut to a record low 2.75 per cent when the central bank holds its next policy meeting on February 5, from a near one-in-three chance of a cut.


The poor weather has done little to stop today’s domestic confidence pushing our market along in what is proving to be a strong uptrend globally, says CMC Markets trader Ben Taylor:

  • Locally today we are seeing a lot of defensive buying taking our market higher with large stakes being taken across the finance and healthcare sectors.
  • While it seems like the market is full steam ahead there are a number of non-believers warning that our market is vulnerable to correction as stocks are already pricing in an earnings recovery.
  • Personally I believe the risk on sentiment is too hot at the moment to stop this run, we will need to see a clear change in sentiment before I would sell risk in this current environment.
  • Our business confidence read today has also given investors reason to extend their long positions. It seems that a lower interest rate environment is starting to improve confidence among the Australian business community, mix this in with the China rebound and we have a sharp rise in confidence.

Macquarie Equities Ltd has entered into an enforceable undertaking with ASIC after the corporate regulator found compliance failures in Macquarie Group's retail stock division.

Macquarie Equities agreed to a review of its Macquarie Private Wealth business, including its licence risk and operating model and systems and its legal and regulatory obligations, the corporate regulator said this afternoon.

ASIC was concerned that the responsibility for compliance sat within the Macquarie Perivate Wealth business and Macquarie Wealth has taken steps to integrate compliance within and reporting to the Macquarie Group-wide compliance function.

'‘Our surveillance found Macquarie Private Wealth fell significantly short of this mark, so ASIC took action,’’ ASIC chairman Greg Medcraft said. ‘‘This is a major EU (enforceable undertaking) affecting one of the wealth industry’s biggest players, which we believe will rectify some serious compliance deficiencies.’’

It requires Macquarie Equities to develop and implement, with the oversight of an independent expert, a plan to rectify any licence risk management and compliance deficiencies.


No longer can the banks rely on that hoary old chestnut of ''high funding costs'' to pass off their failure to match the successive cuts in the official cash rate, Michael West writes in today's most-read business article:

Covered bonds have brought down bank costs even further. In a confidential note to its institutional clients, Westpac describes the fall in wholesale funding costs over the past year as ''extraordinary''.

Margins are fatter than ever, veritably bulging, and there is scant proof that borrowers are getting their grimy fingers on a single cent of it. It's a good thing for shareholders though, some cautious at the listless growth in credit.

The story that the banks spin to their big clients, as opposed to the rest of us, is about as similar as the Chinese and Japanese perspective on who owns the Senkaku Islands.

Here's the whole article

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Cane crops in parts of central Queensland have been ravaged by torrential rain, leading growers to seek financial support from the government.

Industry body Canegrowers says it’s too early to determine the full extent of the damage but it appears the Bundaberg, Maryborough and Childers areas were worst hit.

The organisation is in talks with the state and federal governments about support for individual growers who have been significantly impacted. The nation’s overall cane production is not expected to be significantly affected.


Citi identifies 10 stocks that may surprise this reporting season.

On the upside, it believes, Myer, Santos and McMillan Shakespeare will do better than consensus. Those that face downside risk including Leighton Holdings, Cochlear, as it faces the roll-off of foreign exchange hedge gains, David Jones, Woodside Petroleum and Origin Energy.

In its report, Citi says: "If we're right and the reporting season is reasonable, it should give further impetus to the market, though it has run hard lately, and partly on some encouraging signs about the results.

But we still expect the market to go higher through the year, with our ASX200 target of 5200 for end 2013, as moderate earnings growth returns in FY14."

Read more in Adele Ferguson's Profit season may spur market rally


There were encouraging signs in the latest business survey but really it is still early days and the improvements are yet to bloom into a fully-fledged recovery for the sector, says CommSec economist Sebastian Savanth:

  • Business confidence did bounce back into positive territory and recorded the most optimistic reading in five months but that’s as far as the good news goes.
  • Not only were business conditions still decidedly weak, but trading conditions actually deteriorated despite the substantial rate cuts late last year.

With the ASX200 on track for its nineth straight day of gains, here's a look at how the rest of the region is performing today:

  • Japan(Nikkei): +0.7%
  • Shanghai: -0.1%
  • Taiwan: +0.7%
  • South Korea: +0.8%
  • Singapore: flat
  • New Zealand: +0.2%
adele ferguson

Some more on insurers, from an earlier article by Adele Ferguson - Flooding puts spotlight on insurance stocks:

The latest Queensland floods, just two years after a similar disaster cost the country $6 billion, is a chilling reminder that investing in insurance companies is risky business.

QBE, IAG and Suncorp will release their profit results between February 20 and 26, with the expectation that they will issue a statement well before then on estimates of likely volumes and claims costs relating to the floods. Suncorp has already arranged a 100-strong team to manage the expected claims influx.

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The main weight on the market today comes, not unexpectedly, from the insurers:

  • QBE: -2.4%
  • IAG: -1.5%
  • Suncorp: -2.7%

BHP statement on the floods:

Significant rainfall across the Bowen Basin has impacted roads and other services. We are still assessing the impacts to our operations across the Bowen Basin. All sites are operating and we are working to return to normal operations.


Some more on banks: Australia’s banking sector has regularly been compared to Canada’s banks, but this comparison is likely to sit uncomfortably following the surprise credit rating downgrade over the bulk of the Canadian sector earlier today.

Ratings agency Moody’s downgraded several big Canadian banks, cutting the ratings on five banks and one credit union by one notch. The downgrade was triggered by Moody’s concerns of the Canadian banks’ exposure to heavily indebted consumers and elevated home prices.

Among the Canadian banks impacted were Toronto-Dominion and Bank of Nova Scotia which are now each rated "Aa2". Bank of Montreal, CIBC and National Bank of Canada were cut to "Aa3". The ratings were all given stable outlooks.

This compares to Australia’s big four banks which each carry a "Aa2" rating, among some of the highest rated banks in the world.

‘‘The Canadian banks’ downgrades will inevitably turn some attention towards Moody’s ratings of the Australian banks,’’ says National Australia Bank credit strategist Michael Bush.

However, Bush points to a report issued by Moody’s just last month noting Australia's major banks are ‘‘well positioned to withstand significant loan losses from any unanticipated economic downturn’’.


The ASX200 is now up 1 per cent on relatively high volumes, with the banks and Telstra leading the charge.

Local investors are catching up with gains made on world markets since last Friday, says IG Markets analyst Stan Shamu:

‘‘It’s quite encouraging to see the market put in such a performance,’’ he says. ‘‘But, the worrying factor is the defensive stocks are outperforming the general market, which generally points toward some sort of caution or lack of confidence.’’

Another defensive stocks extending its rally is Telstra, which is up 1.3 per cent to a multi-year high of $4.65.

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