Australian shares rebound, recovering from one-month lows as hopes the European Central Bank will unveil new tactics to curb surging borrowing costs prompted a short-covering rally.
Global shares gained after a string of leaks from eurozone officials raised expectations the ECB will announce a bolder bond intervention plan after Thursday's policy meeting.
- Jobless rate drops as fewer seek work
- Qantas and Emirates in major tie-up
- Billabong shares jump on second bid
- Lynas rockets on Malaysian plant approval
This is a momentous day in international aviation.
5.37pm: That's all for today folks. Thanks everyone for reading this blog and posting your comments.
Here's our evening wrap of today's session.
5.12pm: European equities have edged higher in early trade, with investors reluctant to sell the market in case a European Central Bank meeting later in the day yields a sufficiently strong stimulus signal to revive risk appetite.
The Euro Stoxx 50 is up 0.2 per cent, the German Dax has risen 0.5 per cent, France's CAC40 is up 0.2 per cent, while Britain's FTSE100 has fallen 0.25 per cent.
The onus is on ECB President Mario Draghi to back up his promise "to do whatever it takes" to preserve the euro, with investors focused on any details of the central bank's new bond-buying programme intended to help bring down the borrowing costs of Spain and Italy.
"The hope is out there," says Gerhard Schwarz, head of equity strategy at Baader Bank.
4.56pm: Here's how some of the blue chips performed today:
- BHP: +0.9%
- Rio: +1.7%
- ANZ: +0.2%
- CBA: +0.3%
- NAB: +0.6%
- Westpac: -0.2%
- Fortescue: -4.8%
- Woolies: +1.9%
- Wesfarmers: +0.3%
- Telstra: unchanged
- Qantas: +6.7%
4.44pm: Spot gold has hit a six-month high on hopes the European Central Bank may announce new measures to ease the region's debt crisis at a meeting later in the day.
The gold price jumped above $US1700 and was last trading at $US1703, up 0.6 per cent.
Sources told Reuters the ECB was ready to waive seniority status on government bonds it buys under a new program, which it is set to agree upon at Thursday's Governing Council meeting.
4.34pm: Peabody Energy Corp has deferred the $US500 million sale of a Queenland coal mine after a near year-long process, sources said, joining deals worth almost $US15 billion that have been pulled or delayed as weaker Chinese demand drives prices lower.
Peabody shelved the sale of its Wilkie Creek thermal-coal mine after failing to attract a worthwhile bid, two sources with direct knowledge of the sale said, asking not to be identified because the details were confidential.
"For Peabody, it was not a do-or-die sale. When they didn't see value in the bids, they decided it is worth waiting for a while," one source said.
4.18pm: All sectors except for health (-0.5%) closed higher. Materials jumped 1.6 per cent, industrials gained 1.2 per cent and financials rose 0.4 per cent.
4.14pm: The market has closed higher, rebounding from yesterday's slump. The benchmark S&P/ASX200 index rose 34.1 points, or 0.8 per cent, to 4312.9, while the broader All Ords gained 33.9 points, or 0.8 per cent, to 4331.6.
3.58pm: GRG International says its acquisition of the bigger US-based ATM maker Triton will give it the scale to make greater inroads into big growth markets such as China and India.
GRG, an Australian-listed automatic teller machine (ATM) supplier, said todayit would acquire Triton for about $US25 million.
3.31pm: Our markets remain poised for tonight’s European Central Bank meeting to take its cues, CMC Markets trader Ben Taylor says:
- Talk of the ECB buying unlimited amounts of distressed sovereign bonds has captured the market's attention today pushing a risk on theme.
- The rumour mill has been running wild this week with Mario Draghi expected to announce an outline to help problematic eurozone members.
- Consensus suggest that whilst we will hear more about a framework the detail may be lacking with the ESM’s primary market bond buying still to be decided on in next week’s court ruling.
- Talk of sterilisation also suggests offsetting sales of assets may imply that we don’t get the full guns blazing kick everyone is waiting for.
2.58pm: Another interesting snippet about today's employment figures: were it not for the decline in participation in August, the unemployment rate would have risen to 5.4 per cent this month, the Commonwealth Bank has calculated.
Worse still, had the slump in participation over the past year not occurred, the unemployment rate would be clocking in at 6.0 per cent in August, instead of the spuriously comforting 5.1 per cent outcome.
The participation rate fell to 65.0 per cent in August – its lowest level since January 2007. Over the past year the participation rate has fallen from 65.6 per cent to 65.0 per cent.
2.53pm: The European Central Bank won’t target a formal cap on bond yields under its new plan to buy distressed eurozone sovereign debt, two people familiar with the matter have told the FT.
The plan is to be revealed in detail later today.
2.45pm: Some more scepticism about the low unemployment rate, this time from ANZ. The bank’s economists say the jobless rate is usually the best indicator of overall labour market conditions, but the August rate of 5.1% is not representative of the underlying labour market softness as shown by:
- the employment-to-population ratio declining to its lowest level since late 2009;
- job ads trending lower since around mid-2011 and weakness in other measures of hiring intentions;
- a trend increase in the number of unemployment benefit recipients;
- falling average hours worked; and
- a rising unemployment rate for those looking for full-time work.
2.34pm: In a bid to drive down surging electricity prices, the national wholesale electricity market is to be opened up to large energy users for the first time.
The move is part of a series of measures aimed at cutting power demand during peak periods of the day, such as late afternoon.
In a report issued this afternoon, the Australian Energy Markets Commission, which oversees the electricity and gas markets, has outlined detailed plans for an overhaul of the market.
The key measures include:
- allowing large power users direct access in the wholesale electricity market for the first time;
- changed electricity tariffs to encourage more energy usage in off-peak times of the day, such as the afternoon and late evening;
- open up the sale of household and small commercial electricity, such as from rooftop solar panels, to buyers other than electricity companies.
2.15pm: One from the small business team: Two enterprising types have proven that you can leave the city and build a business empire in the process.
1.54pm: There's a lot going on in the market today, here's a look at some of the biggest winners and losers so far:
- Lynas: +42%
- Qantas: +6.4%
- Billabong: +7.87%
- Santos: +2.61%
- Fortescue: -5.45%
- Virgin Australia: -2.2%
- Ten Network: -4%
- Pacific Brands: -1.6%
1.43pm: Gold miners are leading the gains today, up 2.5 per cent, the consumer discreationary and materials sub-indexes are both up 1.5 per cent. Health is bucking the trend, down 0.6 per cent.
1.36pm: MasterCard has reached an agreement with a bank in Myanmar to issue its first branded cards in the country, which, emerging from isolation after years of military rule, has an antiquated banking system and a largely cash economy.
MasterCard Worldwide said in a statement on Thursday that it had given the licence to Co-Operative Bank Limited, which it said had the largest ATM network in the country.
The network has 24 machines out of an estimated 82 for all banks -- derisory by comparison with most other Asian countries but a sign of progress in Myanmar, where ATMs were unknown until this year.
1.26pm: Toyota is aiming to sell up to 1.8 million cars annually in China by 2015, up from about 900,000 cars it sold in the world's biggest auto market last year, a senior executive said today.
Executive vice president Atsushi Niimi, speaking at an auto conference in the southwestern city of Chengdu, said the Japanese car maker's target this year is to sell 1 million cars in China.
Niimi's comments come after the Japanese car maker posted a second consecutive monthly fall in China sales in August, which company spokesman Takanori Yokoi said was due to a high base from last year.
That 1 million level this year should account for about 12 per cent of Toyota's anticipated overall global sales this year.
1.18pm: Here's a quick snapshot of how markets around the region are performing:
- Nikkei (Japan): +0.06%
- Shanghai: +0.28%
- Taiwan: -0.08%
- South Korea: +0.6%
- Singapore: -0.37%
- New Zealand: +0.52%
1.10pm: John Singleton and former Qantas boss Geoff Dixon have expanded their pub interests with the purchase this morning of the Marlborough Hotel at King Street, Newtown for $12.2 million.
It was bought through the Riversdale Group, in which the two businessmen have an interest. The deal was completed at the Sydney Morning Herald Auction room in a bidding war, through Mike Wheatley of Knight Frank.
In making the purchase Mr Singelton has teased his friend Gina Rinehart saying he hoped ‘‘plenty of her favoured blue collar workers will frequent the pub’’.
12.55pm: The latest Roy Morgan research on customer satisfaction with the financial performance of super funds has some interesting results:
In the six months to July, the satisfaction level for the whole industry has fallen 1.9 percentage points to 48.4 per cent.
But satisfaction with retail funds, at 43.6 per cent (-3.1 percentage points in six months to July), has fallen by more than that with industry funds, at 50.6 per cent (-1.6 percentage points in same period).
Over the last 12 months, industry funds have increased their lead over retail funds from 2.5 to 7 percentage points.
However, bucking the trend are self-managed super funds. Customer satisfaction with the financial performance of SMSFs has actually grown in the last six months, by 0.8 percentage points, to 67.3 per cent.
12.52pm: Interbank futures have widened the odds of an October rate cut after the jobs numbers, factoring around 50-50 chance of a move next month, from 66 per cent before the data.
They are still fully priced for a 3.0 per cent cash rate by Christmas. The Reserve Bank of Australia left rates unchanged at 3.5 per cent on Tuesday.
The dollar, meanwhile, is trading at $US1.0222.
12.44pm: Investors have been snapping up sold-off shares, but they are also awaiting a crucial meeting of the European Central Bank overnight when ECB chief Mario Draghi is expected to announce a framework for bond buying to help contain the eurozone's debt crisis.
12.39pm: The market is hanging onto its gains, up nearly 1 per cent. All the big players are posting gains - except for Fortescue, which is extending yesterday's losses by slumping another 7.4 per cent.
12.35pm: The High Court has handed a victory to 38,000 ANZ customers who were seeking compensation for fees paid to the bank for overdrafts and late payments.
The High Court overruled a December 2011 decision by the Federal Court on the issue of bank fees, strengthening the hand of the plaintiffs seeking more than $220 million in fees from eight banks.
The court said the fees charged by ANZ potentially qualified as "penalties" although they didn't breach a contract between the bank and its customers.
ANZ shares are up 0.3 per cent.
12.18pm: While the iron ore miners are trying hard to talk up the iron ore price, former Morgan Stanley star analyst Andy Xie predicts more losses.
Xie says the price will drop to $US50 a tonne, probably before mid-2013, and stay down permanently.
Any rebound will be small, temporary because of high short-term steel inventory, lack of long-term growth prospects, the independent Shanghai-based analyst says.
The iron ore price extended its decline overnight, hitting a three-year low of $US86.70/tonne on concerns about slowing growth in China.
12.09pm: The low unemployment rate will leave the RBA in a "little bit of a bind," making it difficult for the central bank to lower rates, JPMorgan economist Ben Jarmanhe says:
Yet the reduced consumer spending and activity arising from a shrinking workforce will mean the RBA will eventually have to consider more rate cuts to spur growth.
12.03pm: Telstra has scheduled its annual meeting for October 16 in Melbourne, but shareholders can also watch from the comfort of their own home if they own a T-Box device.
Shareholders will be asked to approve a $500,000 increase in the director’s fee pool to a total of $3.5 million. Non-executive directors fees increased by $9,000 on July 1, 2012, to $235,000, and chairman Catherine Livingstone’s fee increased by $26,000 to $705,000.
These fees are below the median for the top 15 companies in Australia.
11.55am: Economists are puzzling about the fall in the participation rate: Adam Carr suggests it might be because of more people retiring or because of population changes.
Stephen Koukoulas has an interesting theory: lower interest rates lead to lower cost of living, so more people drop out ('Bottini' effect, he says).
11.43am: RBC Capital Market economist Su-Lin Ong says it was a weak overall report despite the fall in the unemployment rate:
- The unemployment rate has dipped but that's largely a function of a lower participation rate.
- A falling participation rate is a poor sign in terms of the labour market.
- We expect the non-resource parts of the economy are continuing to shed labour, particularly in areas like construction and retail.
11.40am: One interesting detail is the state-by-state jobless rate numbers: all got worse, except for NSW, which fell to 4.8 per cent. In fact, the drop in the national jobless rate is entirely due to NSW.
11.38am: Some tweets coming in on the jobless rate; most pointing out the fall in job seekers:
Aust jobs -8.8K (we expected -10K). Unemp fell to 5.1% but only due to fall in job seekers. Labour mkt is soft. Supports case for #RBA cuts
Employment growth over 2h12 so far does look to have moderated relative to 1st half
but again this is on the back of paft time jobs - full time job creation has actually accelerated.
A great unemployment result, but participation rate has dropped 1% in past year or so
- @TheKouk (Stephen Koukoulas)
11.34am: The solution to the riddle is the participation rate, which dropped to 65.0 per cent (instead of the expected 65.2 per cent), its lowest since January 2007, as more people give up on the labour market.
11.32am: That seeming contradiction between jobless rate falling and job cuts seems to have confused the punters a bit, who at first knocked the dollar down to as low as $US1.0167 before lifting it back up to $US1.0206.
11.31am: However, 8800 jobs were lost in August, instead of the expected 5000 new jobs.
11.30am: The jobs number are out and it's a bit of a surprise: the jobless rate has fallen to 5.1 per cent, from 5.2 per cent in July. Expectations were for a small rise to 5.3 per cent.
11.25am: A report by Citigroup has warned that Saudi Arabia could run out of oil to export by 2030, raising fears that oil prices may rise significantly in coming years.
The kingdom is the world’s largest oil producer, accounting for about 13 per cent of global supply, but it may need to use a growing share of its production for power generation to meet rising electricity demand, Citi said.
Its export capacity could steadily reduce and, ‘‘if nothing changes, Saudi may have no available oil for export by 2030’’, Citi analyst Heidy Rehman wrote.
WTI crude oil is up 0.5 per cent at $US95.81 today.
11.22am: Getting close to today's main economic data: the August jobs numbers. Expectations are for 5000 new jobs and a small rise in the jobless rate from 5.2 per cent to 5.3 per cent.
The dollar is hovering just below $US1.02, at $US1.0190.
11.15am: Most readers responding to our poll seem to think Qantas's tie-up with Emirates is a good idea, even though some are muttering about the inconvenience of a stop-over in Dubai, instead of Singapore.
What do you think? Here's the poll.
11.06am: Investors are snapping up beaten down stocks, IG Markets analyst Chris Weston says:
‘‘The lead from overseas was lacklustre, but we’re seeing a lot of short covering."
Meanwhile, the number of shorts in Fortescue has edged up to 17 per cent.
10.59am: Here's a chart showing Fortescue's dramatic fall from favour this year - shares are roughly half of what they were worth end of March. The fall correlates pretty closely to the drop in the iron ore price, which slipped to $US86.70 overnight.
10.49am: Fortescue’s turmoil continues: the resignation of joint company secretary Roderick Campbell has become the latest twist in a tumultuous week for Australia's third largest iron ore producer as the full breadth of its job cuts begins to be felt across Western Australia.
In a short announcement to the market this morning, Andrew Forrest's Fortescue said Campbell, who also served as the company's investor relations head, resigned effective yesterday.
The announcement comes days after Fortescue announced up to 1000 jobs would be cut immediately to help right the company's books in the face of depressed iron ore prices, limited cash and $9b worth of debt.
Campbell has been with Fortescue for more than eight years joining the company in 2004 after working as the WA State Manager for Rabobank, according to the company's website. He was still managing the fallout of Monday's dramatic announcements as recently as Tuesday.
That might be why shares are down this morning, despite other iron ore miners rebounding.
Fortescue shares fell as much as 4.8 per cent to drop below $3.00 for the first time since June 2009. Shares have since recovered a bit but are still down 2.6 per cent.
10.40am: Some more details coming out on the Qantas/Emirates tie-up:
- Under the 10-year partnership, Qantas will replace Singapore with Dubai as its hub for European flights and coordinate pricing and sales with Emirates.
- Qantas will end its existing relationship with British Airways in March 2013 as a result of the new alliance.
- The arrangement helps Emirates meet competition from its main state-backed Abu Dhabi rivals Etihad Airways and Qatar Airways.
- The alliance is deeper than a straightforward code-share arrangement - where airlines share some flights - but stops short of a global revenue-sharing deal or equity injection.
10.33am: Not too many big losers around at the moment - Challenger 1.7% drop is the highest among top 100 stocks.
But one somewhat surprising loser is Fortescue, whose shares have slipped another 1.6 per cent, adding to yesterday's near 9 per cent hammering. Could be that market talk of a capital raising is weighing on the stock.
The mining majors BHP and Rio are up 1.1 per cent and 1.8 per cent respectively.
10.31am: Here are some of the biggest winner among the top 200:
- Lynas: +54%
- Borat Longyear: 13.5%
- Gindalbie Metals: 12.7%
- Karoon Gas: +10.5%
Unsurprisingly, most of these stocks had been sold off big time in the past weeks.
10.22am: Qantas's tie-up with Emirates is being heralded as a significant breakthrough for Qantas, which has been struggling to revive the fortunes of its international flying operations.
But Emirates is also raving about the deal: "This is a momentous day in international aviation," says Emirates chief executive Tim Clarke.
Meanwhile, British Airways might not be so happy, as Qantas is saying it will terminate its agreement with BA next March.
Qantas shares have jumped 7 per cent, while Virgin is trading flat.
10.16am: One of the big winners this morning is Lynas, which has jumped 60 per cent after getting approval for its rare-earths factory in Malaysia.
10.12am: Here's our update on the Qantas/Emirates hook-up. Alan Joyce is outlining the terms of the deal now.
10.05am: Early take - shares up by about 0.3 per cent as markets open.
9.55am: Australian bond futures prices are mixed ahead of the release of monthly domestic jobs data and a highly-anticipated meeting of the European Central Bank (ECB).
Commonwealth Bank interest rate strategist Phillip Brown said bond markets had been quiet on Wednesday night (Australian time) as traders waited for the ECB meeting.
‘‘Everyone is pretty much waiting for the ECB meeting, so there hasn’t been too much of a move in direction overnight,’’ he said.The ECB, due to meet on Thursday night (Australian time), is expected to announce new measures to combat the region’s sovereign debt crisis.
At 8.30am, the September 10-year bond futures contract was trading at 97.045 (implying a yield of 2.965 per cent), down slightly from 97.050 (2.950 per cent) on Wednesday.
The September three-year bond futures contract was at 97.650 (2.350 per cent), up from 97.640 (2.360 per cent).
9.52am: Here's an interesting note on the contrasting fortunes of two nations, our's and one in southern Europe. Australia, driven by the biggest resource-investment expansion since the 19th century, is poised to overtake debt-laden Spain as the world's 12th largest economy, measured by gross domestic product.
Australia's $US1.379 trillion economy will probably supplant Spain's $US1.386 trillion GDP this quarter, data compiled by Bloomberg from the national statistics agencies of both countries show. The International Monetary Fund projected in January that Australia's economy would be $US3 billion smaller than Spain's by the end of this year.
9.48am: On Lynas, its US depository receipts jumped 44 per cent overnight, a record gain, to 85 US cents. The company yesterday won a temporary operating licence for its controversial rare-earths plant in Malaysia from the country's Atomic Energy Licensing Board. Its shares are likely to react strongly when trade opens today.
9.44am: Some analyst rating changes for today
- Australian Pharmaceuticals raised to buy at RBS
- Lynas upgraded to hold from sell at Deutsche Bank
- Western Areas NL rated new overweight at JPMorgan
9.41am: Qantas will also be in the news today, and it shares could respond, when it announces the terms of an alliance with Emirates on routes to Europe via Dubai. Qantas's chief executive, Alan Joyce, will front a media conference at a Sydney hotel at 10am AEST today.
9.38am: In breaking news, Billabong has received a second takeover offer, this time from an unnamed suitor, at $1.45 a share. Its shares closed yesterday at $1.27.
The company said in a filing to the ASX that it received "an indicative, non-binding and conditional proposal from another party interested in acquiring all of the shares in the company." While not revealing the source of the offer, the bid equals the TPG offer which Billabong said undervalued the company. Full story.
9.34am: 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 13 points higher at 4295
- The $A is steady at $US1.0189
- In the US, the S&P500 fell 0.11% to 1403.44
- In Europe, the FTSE100 fell 0.25% to 5657.86
- China iron ore fell 0.2% to $US86.70 a metric tonne
- Gold fell 50 cents to $US1695.50 an ounce
- WTI crude oil rose 60 cents to $US95.90 a barrel
- Reuters/Jefferies CRB index fell 0.17% to 308.28
9.32am: This week's meeting of the European Central Bank is top of mind, certainly for European investors. We'll know early tomorrow morning our time if the leaks about a process of unlimited bond-buying will be undertaken, as has been reported today. That could give markets some real impetus to close the week.
Spanish and Italian bonds rallied sharply before today's ECB policy meeting, fuelled by renewed expectations the central bank would unveil a plan for large-scale bond-buying.
Markets hungry for details of how European Central Bank President Mario Draghi would back up his promise to do whatever it takes to preserve the euro seized on a report by Bloomberg, which cited two central bank sources briefed on the matter, saying the buying would be unlimited.
9.30am: Good morning folks. Welcome to the Markets Live blog for Thursday.
This blog is not intended as investment advice
BusinessDay with agencies