Shares close flat, as investors await a key Federal Reserve speech for clues on further US monetary easing. Investors have picked up some beaten-down mining shares after steep losses.
- Strong competition hits Harvey Norman profit
- Australian firms' unlikely profit source: US
- Dollar seen heading back towards parity
5.23pm: That's it for today and this week. Have a good weekend everyone.
Here's our evening wrap of today's session.
4.50pm: European stock futures are pointing to a slightly lower open, with investors remaining uncertain whether Federal Reserve chairman Ben Bernanke will signal imminent stimulus at a speech later in the session to help the economy.
Futures for Euro STOXX 50, for Germany's DAX and for France's CAC are 0.04 to 0.2 per cent lower.
4.28pm: Some winners and losers among the top 200 in August:
- Integra Mining: +49.2%
- BlueScope Steel: +26.4%
- Intrepid Mines: +25%
- APN: -46.7%
- Boart Longyear: -38.4%
- Discovery Metals: -27.4%
4.26pm: The market notched up a loss of 0.8 per cent for the week, its second consecutive week in the red. For the month, however, the ASX200 added 1.1 per cent, its third straight month of gains.
4.21pm: Sectors were mixed today, with losses in industrials (-1.4%) and materials (-0.5%) countering gains in energy (+0.8%) and financicals (+0.2%).
4.14pm: The market has closed pretty much where it opened this morning. The benchmark S&P/ASX200 index edged up 0.4 point to 4316.1, while the broader All Ords slipped 1.2 points to 4339.
3.58pm: Qantas is on the verge of signing an alliance deal with a Middle Eastern airline as early as next week, in an effort to stem large losses on the kangaroo route to Europe, BusinessDay's Matt O'Sullivan reports.
The code-share agreement is believed to include route swaps whereby Emirates would operate the majority of flights on some routes such as those out of Perth to Europe. Qantas has been flying from Perth to Europe via Singapore.
However, the deal will raise serious questions about the future of Qantas’s longstanding revenue-sharing agreement with British Airways on the kangaroo route between Australia and the UK.
Critics also describe a code-share agreement as a short-term measure by Qantas management, which is under pressure to get a deal done. Early this year Qantas shelved much trumpeted plans to set up a premium airline, RedQ, in south-east Asia.
‘‘I don't understand this – it just means less and less Qantas,’’ a source said of a code-share deal with Emirates. ‘‘Unless they are going to be paid for the passengers [who transfer to Emirates flights], and that is unlikely, it is not a huge benefit. It is just a huge downgrading of the Qantas presence and handing it over to Emirates.’’
3.47pm: IG Markets' Chris Weston offers a recommendation whould the Fed disappoint:
If Fed disappoints perhaps look to buy EUR/USD just above the uptrend from July lows around 1.2420 #forex— Chris Weston (@ChrisWeston_IG) August 31, 2012
3.41pm: At times it has been a painstaking journey this week for financial markets in the lead up to Jackson Hole, with traders wondering ‘are we there yet?’ says CMC Markets trader Tim Waterer:
- While the upcoming speech from the Fed chairman still falls into the ‘highly anticipated’ category, it is now looking unlikely to offer the decisive commitment to QE3 which recent market optimism had been premised on.
- Words to the effect of ‘stimulus only if required’ will likely be the order of the day when Bernanke steps to the podium.
- The Australian sharemarket did most of its selling on Thursday which meant that trading activity was muted on Friday.
3.24pm: Asian markets have slipped further as a weak set of Japanese economic figures added to growing pessimism that Federal Reserve chief Ben Bernanke will announce a raft of stimulus measures.
Tokyo has slipped 1.11 per cent, Hong Kong has shed 0.25 per cent, Seoul has lost 0.28 per cent, and Shanghai was flat.
There is fresh evidence that global headwinds are dragging on the Japanese recovery, with data showing factory output unexpectedly fell 1.2 per cent in July, while the strong yen also hurt exporters.
"It was originally assumed that the weakness in April-May would be temporary and followed by a rebound in summer. But such a scenario clearly fell through," says Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities.
3.14pm: Oil is down as hopes that US Federal Reserve chief Ben Bernanke will announce a new economic stimulus package fade, analysts say.
New York's main contract, light sweet crude for delivery in October has retreated seven cents to $US94.55 a barrel and Brent North Sea crude for October delivery has fallen 21 cents to $US112.44.
Traders are not holding much hope that Bernanke, due to speak overnight Australian time at Jackson Hole, Wyoming, will announce fresh stimulus measures, IG Markets says in a market commentary.
"On the eve of the long-waited, highly-anticipated and much-hyped Jackson Hole symposium the watchword was defence as traders reduced their risks," it says.
3pm: The market continues to hang around the session's starting position with traders seemingly content to stick around for developments from Jackson Hole.
The ASX200 is up just 0.7 points to 4316.4.
2.49pm: The resignation of APN News & Media's chief financial officer has prompted a sharp drop in the struggling newspaper publisher and radio station owner's share price.
As mentioned earlier, Peter Myers will step down on September 21 after 10 years in the role. The market reacted savagely to the news, with APN shares down 17.95 per cent, or seven cents, at 32 cents.
In percentage terms it is the largest decline among all stocks on the S&P/ASX200.
2.40pm: In breaking news, a Tokyo court has ruled that Samsung Electronics' mobile devices did not violate an Apple patent, awarding the South Korean firm a victory a week after it lost a landmark patent case in the United States.
The Tokyo District Court's ruling on an Apple patent dealing with transferring media content between devices comes after a US federal jury found last week that Apple did not infringe on any of Samsung's patents, while the South Korean firm had copied key features of the popular iPhone, Reuters reports.
The US jury awarded Apple $US1.05 billion in damages and it is now seeking speedy bans on the sale of eight Samsung phones in the US market.
2.28pm: Hong Kong stocks have fallen 0.31 per cent as attention turns to the speech by US Federal Reserve chief Ben Bernanke later tonight.
The benchmark Hang Seng Index has shed 60.70 points to 19,492.21.
2.18pm: Industrial & Commercial Bank of China, the country's biggest state-owned commercial lender, says its first-half profit has risen 12.5 per cent despite a slowing economy.
The Beijing-based bank says it has earned 123.2 billion yuan ($19.12 billion) or 0.35 yuan per share on revenue of 262.8 billion yuan. Interest income has risen 30 per cent to 354.5 billion.
China's banks have prospered from its quick rebound after the 2008 global crisis but face a squeeze on profits as economic growth slows.
2.10pm: The end of a most interesting week - and a month ending with a strange mixture of optimism and pessimism.
Click here to see the week that was with BusinessDay's Michael Pascoe.
2.03pm: The construction company targeted by a union blockade in Melbourne will sue the CFMEU for damages, Grocon chief executive Daniel Grollo says.
After talks with federal Workplace Relations Minister Bill Shorten, Mr Grollo says he still believes the two-week cooling-off period proposed by the industrial umpire is not the answer.
''The problem with the Fair Work Australia proposal last night was it talked about a two-week moratorium at which the CFMEU would be free to commence the blockades again,'' he says.
''We simply can't go into a period where we condone illegal blockading to occur again in two weeks time.
1.53pm: A write-down in value of two major projects and a deluge of wet weather during harvest season has hit almond producers Select Harvests’ bottom line, with the company posting a full-year loss of $4.5 million.
The loss to June 30 compares to a net profit of $17.7 million in the corresponding period last year.
The loss has largely been driven by a $20 million writedown in its Western Australian Greenfields almond project, and a $4.9 million writedown after the decision to close a redundant processing plant.
Its shares are down 2.26 per cent to $1.30.
1.45pm: CommSec’s Craig James says the continued weakness of lending growth means that rate cuts must stay on the agenda.
‘‘However we don’t expect a rate cut for a few more months – to give the Reserve Bank time to be confident of trends in the economy,’’ he says.
‘‘The Reserve Bank warned banks that profit growth would slow in line with weaker lending growth and the latest data clearly shows the difficulties banks face. Given that banks represent a healthy share of sharemarket capitalisation and underpin superannuation holdings, the trends on lending and deposit flows are worth monitoring.’’
1.33pm: A Japanese court will soon issue a ruling in a bitter patent dispute between Apple and its South Korean rival Samsung, the latest case in a global battle between the two technology giants.
The decision comes a week after the iPhone maker won more than $1.0 billion in a massive US court victory over Samsung with jurors finding that the South Korean firm had "willfully" infringed on Apple's patents.
The Tokyo District Court is due to rule on Apple's claim that Samsung illegally copied technology from its iPhone and iPad computer for some of its Galaxy smartphones and tablet.
1.15pm: The market is treading water in anticipation of Fed chairman Ben Bernanke's speech at the central bankers' meeting at Jackson Hole overnight, CommSec market analyst Steven Daghlian says:
- Some people in the market are hoping for (US Federal Reserve chairman) Ben Bernanke to shock everyone and announce some sort of stimulus measure. I wouldn’t be holding your breath for that.
- The Aussie market has had a pretty good run recently, partly in anticipation of QE3 being announced in the US. It has improved for three straight months.
1.02pm: Meanwhile, shares in Fairfax, publisher of this website, have plumbed new lows today, falling as far as 41.5 cents. They're currently at 42 cents, down 4.5 per cent.
12.42pm: China’s most influential investment bank weighs in on the mining boom debate, saying the commodity super cycle is coming to an end as China moves towards a new ‘‘consumption era’’ that would require less Australian iron ore and coal.
China International Capital Corp has predicted the demand for energy and precious metals would continue to grow strongly but country’s appetite for iron ore and coal - two of Australia’s most important exporter earners - is likely to wane.
The bank says the fundamental shift in the Chinese economic growth model from one driven by investment to a consumption-led model will change the structure and intensity of future Chinese demand for commodities. It predicts China is likely to become the second-largest consumer market in the world by 2020.
12.35pm: Iron-ore miners are holding up better than expected today, despite the iron ore price slipping another 2 per cent overnight.
Mt Gibson is the biggest gainer among the top 200 stocks, rising 3.9 per cent, while Rio has added 1.4 per cent and Fortescue is flat. BHP, on the other hand, is down 0.9 per cent. The world's biggest miner isn't as dependent on iron ore as its rival Rio, so shares didn't slide as much in the past days.
Meanwhile, the biggest loser among the top 200 is APN, which has dived 19.2 per cent after the CFO announced his exit.
12.29pm: Japan’s consumer prices slid at a faster pace in July and industrial production unexpectedly slumped, raising the danger that the world’s third-largest economy has slipped back into a contraction.
The benchmark price gauge, which excludes fresh food, fell 0.3 per cent in July from a year before, putting the central bank’s 1 per cent inflation goal further from reach, a government report showed in Tokyo. Industrial output fell 1.2 per cent.
A private measure of manufacturing for August was the lowest since the aftermath of the record March 2011 earthquake.
‘‘The risk of a contraction in the second half of the year is increasing,’’ says Junko Nishioka, chief economist at RBS Securities Japan in Tokyo. ‘‘The downside risks on the economy are increasing, and could push the BOJ to further expand its asset- purchase program next month.’’
12.10pm: "We've just had a solid reporting season and companies still have reasonable prospects and solid balance sheets," says CMC Markets chief market strategist Michael McCarthy.
"Expectations were quite frothy but have become a bit more realistic," he says.
12.02pm: The big event looming ahead is the central bankers' meeting that starts overnight in Jackson Hole, Wyoming. The meeting will kick off with a much-anticipated speech by Fed chairman Ben Bernanke.
Markets are hoping he'll hint at some more monetary stimulus for the struggling US economy. However, better not get your hopes too high, AMP's Shane Oliver warns in a tweet:
#Bernanke did not announce QE2 at 2010 Jackson Hole meeting.Very unlikely he will announce QE3 at this one. He doesn't pre-empt Fed meetings
11.55am: Bell Direct equities analyst Julia Lee says the Harvey Norman figures were expected given that the business had flagged the result earlier this month.
"Nonetheless, it has been a very difficult environment for Harvey Norman because we've seen a lot of electrical retailers trying to get rid of stock," she says.
"(Also) the weakness in the housing market has an impact in terms of white good sales and household products," she says.
"The two key challenges are the migration of sales to the internet and the weakness in the housing numbers," said Ms Lee.
11.49am: "Discrimination is wrong, right? Wrong. It's right. In the right circumstances, that is. At other times it's just plain wrong. It really depends. Confused? Yeah, me too."
11.43am: The Harvey Norman chief says , however, that the failure of some competitors means the retailer can increase its market share in the technology sector over the next 12 months.
‘‘Within the Australian franchising operations segment, we anticipate that the home entertainment and technology category will continue to remain volatile and uncertain,’’ he says.
‘‘However with further retailer and supplier rationalisation occurring, there is the opportunity for improvement. Whilst the predictions for market values remain flat at best, we are cautiously optimistic of consolidating and increasing our market shares in the technology categories and geographies in which we compete.’’
11.31am: More from Gerry Harvey: ‘‘The liquidation of WOW Sight and Sound, the closure of numerous Retravision stores and the restructure of the Dick Smith brand created a glut of product being sold at never before seen prices.’’
11.25am: Electronics retailer Harvey Norman has announced a nearly 40 per cent drop in pre-tax profit, as it struggles with the glut of stock from failed rivals flooding the market.
Pre-tax profits at the company sank 39.2 per cent to $227.4 million from $373.9 million the year before. After tax profits plunged 31.6 per cent to $172.4 million from $252.2 million over the year. Shares in the company lost half a per cent, or 1 cent, to $2.09 on the news.
Calling the year "very disappointing,’’ Harvey Norman chairman Gerry Harvey says retail categories, "specifically the television and some technology categories, have been under enormous pressure with price and margin deflation’’.
11.18am: Gold is heading for its biggest monthly gain in seven months, before a speech by Federal Reserve chairman Ben Bernanke that may hint at a new round of stimulus measures to boost the economy.
Gold for immediate delivery rose as much as 0.2 per cent to $US1659.55 an ounce and is little changed at $US1655.90. The price is up 2.6 per cent this month.
11.12am: Fortescue Metals Group, the biggest seller of junk-rated mining bonds, is being reviewed by Moody’s Investors Service for a possible cut to its credit score because of a slump in iron ore prices, Bloomberg reports.
Moody’s may lower the company’s Ba3 rating, the third-highest junk grade, the ratings firm said in a statement dated yesterday, after iron ore prices fell 24 per cent this month. A downgrade would affect about $US7.6 billion of debt securities, it says.
Fortescue is investing heavily in its significant capacity expansion project, and the depressed operating cash flow, arising from the drop in iron ore prices combined with the potential for ongoing short-term weakness, is raising material challenges for Fortescue,” Matthew Moore, an analyst with Moody’s, says in the statement.
Fortescue is spending about $9 billion to expand operations in Western Australia’s Pilbara region, including building mines, a port expansion and a rail line. The company is considering selling some assets such as power stations to raise cash, Chief Executive Officer Neville Power said yesterday.
11.06am: NAB’s global co-head of FX strategy Ray Attrill says the dollar could be "having a look" at parity with the greenback in the next couple of weeks on falling iron prices and news of a slowing commodities market.
"We should be down to at least parity between now and the end of the year," he says. "Foreign exchange markets being the way they are, we might come in on Monday morning and find it there, if everybody heads for the exit at the same time."
Without a ‘‘reversal of the negative news flow, we will come lower," says Mr Attrill.
The Aussie is trading at $US1.0289 and 82.2 euro cents.
11.01am: RBS Morgans private client adviser Bill Bishop says some investors may have been prompted to return to the market after recent declines.
‘‘It’s nice to see that the market is confident enough to actually buy,’’ Mr Bishop says.
‘‘It is a terrific vote of confidence considering the Dow Jones dropped 107 points last night. It’s a nice broad-based gain.’’
10.53am: A measure of online sales in Australia jumped in July to reach a new high, a contrast to anecdotes from brick and mortar retailers that suggested activity had slowed in July.
National Australia Bank's index of online sales rose 5.8 per cent in July, from June, to hit 200.1. Annual growth in the index accelerated to 25.4 per cent, from 18.8 per cent in June.
The index valued online sales in Australia at $11.7 billion for the year to July. That is equal to around 5.3 per cent of overall retail spending and is growing far faster than sales in traditional stores.
10.44am: Australia's digital economy is worth as much as the nation's iron ore exports and is forecast to grow by up to $70 billion over the next four years, according to Deloitte Access Economics.
Google says it's Perth's online activity which is leaving the rest of the nation in the dust.
10.38am: Among the big banks:
- ANZ is up 0.4% to $24.95
- CBA is up 0.6% to $54.31
- NAB is up 0.2% to $25.26
- Westpac is up 0.1 per cent to $24.79
10.33am: Tokyo shares have opened sharply lower, down 0.98 per cent following falls in European and US stocks.
The Nikkei 225 index at the Tokyo Stock Exchange is down 88.28 points to 8895.50.
10.29am: Insurance Australia Group has begun a search for a new board member after Phillip Colebatch announced his retirement.
Mr Colebatch, who has a background in insurance and investment banking, will step down after six years on the insurance company’s board.
IAG says an international search is underway to fill the vacancy with a replacement that complemented its geographical growth.
10.24am: Financials and energy stocks are boosting the broader market - up 0.2 per cent and 0.3 per cent respectively. The materials index, meanwhile, is flat.
10.18am: The market, meanwhile, has popped into positive ground. The ASX200 is now up just 3 points, or 0.1 per cent, to 4318.7.
10.15am: Here are some of the early movers on the ASX:
- BHP down 0.5%
- Fortescue Metals down 1.4%
- Rio Tinto up 1.1%
- Atlas Iron down 1.1%
- Gindalbie Metals down 4.4%
- Arrium up 0.7%
The biggest gainer on the ASX200 is Macquarie Atlas which is up 7.8%.
10.11am: In company news today, we'll be looking at Harvey Norman's release of full-year earnings, while Australian Power & Gas will also report its full-year results, and Hastings Diversified Utilities Fund will release first-half results.
10.05am: Early take: the ASX200 is down 7.9 points, or 0.2 per cent, to 4307.7.
9.58am: Some economic data from Japan this morning: Consumer prices fell 0.3 per cent year-on-year in July, a decrease for the third consecutive month.
Also, Japan factory output fell 1.2% in July and the jobless rate remained at 4.3% for the month.
9.51am: Joseph Palmer & Sons director Alex Moffatt says the market, already down about 0.75 per cent for the week, could shed another 30 points today, led lower by miners.
It's going to be a negative day," says Mr Moffatt. "The iron ore price getting down to the $US80s (a tonne) is obviously being noticed."
"We started the week on a positive note with hope of further stimulus from the US,'' he said, referring to hopes of further quantitative easing from the US Federal Reserve. ''We end the week on concerns that the global economy continues to slow, led by Europe."
Mr Moffatt says that if the iron ore price drops to $US85 a tonne, it's the break-even point for profitability for Rio Tinto and BHP. "When it gets to that point, they'll just leave it in the ground."
9.45am: In news this morning, APN News & Media CFO Peter Myers is stepping down, as the debt-laden company struggles with the transition of readers online and a slumping share price, Chris Zappone reports.
"Mr Myers has been the CFO for 10 years and has resigned to pursue other interests" the company says.
APN says it has begun a search for a permanent replacement.
9.40am: Locally traded miners may take another hammering today, particularly iron ore producers, after a key Chinese gauge of iron ore prices sank for an 11th consecutive day yesterday, losing another 1.8 per cent to $US88.70 per tonne. That's the lowest price for the index since October 2009.
BHP Billiton's US-traded shares shed 3.6 per cent overnight while those of RioTinto slumped 2 per cent.
9.35am: Here's a wrap of what's happened on overseas markets - it doesn't look too promising for local shares today:
What you need to know
- SPI futures are 18 points lower at 4287
- The $A is lower at $US1.028
- In the US, the S&P500 lost 0.8% to 1399.5
- In Europe, the FTSE fell 0.4%
- Gold fell 0.4% to $US1657 an ounce
- NY oil futures eased $US94.62 a barrel
- Reuters/Jefferies CRB index fell 0.6 to 306.5
9.30am: Hi folks. Welcome to the Markets Live blog for Friday.
This blog is not intended as investment advice
BusinessDay with agencies