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Markets Live: Shares snap winning streak

Date

Australian shares close flat, ending a four-day winning streak, with investors lacking ideas after the Fed pledged it would continue pumping money into the US economy.

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That's all from us here at Markets Live, thanks for your company, we'll see you tomorrow.

Click here for a full wrap of today's session.

After a large drop in coal-haulage volumes earlier this year, Australia's second largest listed rail company, Asciano, has experienced a solid pick-up over the last two months in demand in its key state of Queensland.

But it is still warning that extreme volatility makes it nigh on impossible to give even short-term forecasts.

Asciano's chief executive, John Mullen, said today that the company had noticed a strong improvement in demand for coal haulage in Queensland, its biggest market, in the last two months.

A car-parts manufacturer has been accused of running a cartel and faces legal action from the competition watchdog, following a national crackdown on collusion and price-fixing.

The thousands of dollars worth of in-car wiring fitted to Toyota Camrys was impacted by the cartel, according to the Australian Competition and Consumer Commission.

It alleges Japanese company Yazaki and its subsidiary Australian Arrow, formerly known as Yazaki Australia, engaged in cartel behaviour when providing quotes to Toyota for wire harnesses. These harnesses hold all the wiring running within the body of a car.

And further, that between 2003 and 2009 Yazaki and Australian Arrow colluded on ‘‘their responses to requests for quotations issued by Toyota Motor Corporation for the supply of wire harnesses to be used in the manufacture of the Toyota Camry.’’

And that Yazaki and a competitor would agree on prices before providing quotes to car makers. Each car is fitted with about $2000 worth of wire-harnesses.

Fairfax, the publisher of this website, was the top performer in the ASX200 today, soaring 11.3 per cent to its highest since late August.

CBA raised its target for the stock from 43 cents to 59 cents and upgraded it from neutral to overweight.

There was also talk of some short-covering by funds and day traders caught by surprise by the recent rise, but otherwise there was no news out of the company.

APN also did well, jumping 10.5 per cent, followed by Intrepid, up 6.25 per cent.

On the other side of the ledger, Linc Energy gave up a fair share of its recent gains, slumping 20.4 per cent, while Iluka lost 5.6 per cent and Aquila fell 4.4 per cent.

In a bid to catch shonky operators, the Fair Work Ombudsman will target up to 100 contractors in the cleaning industry to ensure they are paying workers properly.

The cleaners' union has welcomed the audits, saying major corporations such as Westfield also need to take some responsibility.

The sectors were mixed, with materials extending their recent rally, rising 0.4 per cent, energy adding 0.2 per cent, but financials slipping 0.1 per cent and consumer staples down 1.1 per cent.

The market's closed for today, ending a very quiet session pretty much flat. The benchmark S&P/ASX200 index slipped 1 point to 4582.2, while the broader All Ords gained 1.1 points to 4592.9.

Steven Bradbury

Steven Bradbury Photo: Reuters

The dollar is the Stephen Bradbury of currency markets - ‘winning’ by default because all its rivals fell in a heap, AAP writes coming up with a befitting image.

Like the Aussie skater’s unlikely Olympic medial win, the dollar remains at sky-high levels because of the sloppy performance of its bigger, and normally stronger, counterparts.

By all rights, the dollar should have fallen back below $US1.00 in the past few months; commodity prices have fallen, economic growth has slowed and interest rates are lower and consumers and businesses are generally pretty depressed. But this week it climbed above $US1.05 to reach fresh three-month highs.

ANZ interest rate strategist Andrew Salter expects it to remain around $US1.05 throughout 2013 and possibly hit $US1.10.

It’s not that the Australian economy is doing particularly well, he says, it’s that most major developed economies - Europe, Britain, Japan and the United States - are weak and likely to stay that way.Furthermore, the US Federal Reserve’s efforts to stimulate growth have pushed the US dollar lower against its Australian counterpart.

‘‘The problem at the moment is that Australia at the moment looks ok but everything else in the world looks pretty poor,’’ he says.

An interesting blog on an entrepreneurial duo thinking really big ... a chance meeting in an online chat room may lead to what Eddie Machaalani and Mitchell Harper both hope will one day become a billion dollar company.

Here's the full blog post

European Union finance ministers have brokered a deal to create a single bank supervisor with powers to close down lenders right across the eurozone.

Several officials say the historic agreement came after 14 hours of talks and less than 12 hours from the start of a summit of EU leaders.

The so-called Single Supervisory Mechanism will allow eurozone rescue funds to recapitalise directly struggling banks, like those which failed in Greece and Spain.

Adding insult to injury for Qantas, Virgin Australia and Tourism Australia have announced a doubling of their current marketing partnership, the two parties will increase their current commitments from $6 million to $12 million over the next three years.

In November, Qantas chief executive Alan Joyce ended the airline’s partnership with Tourism Australia.

Mr Joyce said the partnership had to be terminated because of Tourism Australia chairman Geoff Dixon’s clear conflict of interest, given he was part of a group of investors proposing to take the airline in a different direction.

"Virgin Australia has an international footprint which spans a number of Tourism Australia’s key markets, including New Zealand, the United States, Europe and the Middle East. When you add to this the airline's extensive domestic network, the benefits of strengthening our partnership are both logical and compelling." Andrew McEvoy, Managing Director, Tourism Australia

Shares in Virgin are down 2.3 per cent today to 42.5 cents.

Despite the two-year old property slump, buyers continue to struggle to find homes for less than $500,000 in the inner suburbs of many of Australia's largest cities.

That price threshold, which is more than nine times average yearly earnings, puts housing in the inner parts of Sydney, Melbourne, Darwin and Canberra all but out of reach, new research shows.

The country's continuing problem with affordability comes despite capital city house values falling 0.4 per cent this year on the back of a 4 per cent decline in 2011, according to RP Data.

More here.

NAB chief Cameron Clyne dispels suggestions of a housing price bubble at the bank's annual meeting in Perth.

"Regarding housing, here in Australia we remain confident that house prices will be relatively stable. There will always be high-level fluctuations particularly at the top end of the market that we still remain confident that there are underlying factors in the Australian market that support house prices. The first is that demand continues to exceed supply and that is likely to continue to be the case".

So how are the sectors performing so far today? The materials sector has risen 0.3 per cent, energy's down 0.1 per cent, financials are up 0.1 per cent while telcos are down 0.7 per cent.

It's not all doom and gloom in the Australian economy, at least according to the latest data released by the Australian Bureau of Statistics, CommSec chief economist Craig James says.

Annual car sales are at record highs over the past year, while industry employment rose by 58,100 jobs over the three months to November.

''Today the statistics were unambiguously positive,'' Mr James said.

While the mining sector saw a fall in jobs for the second straight quarter, losing just over 8000 jobs, there was a record 47,500 jobs created in the transport, postal and warehousing sector over the past three months.

''We can't conclude with any certainty, but trends in employment over the past three months point to the influences of the internet, online spending and the high Aussie dollar on the economy. ... The growth in online spending is creating jobs for courier drivers, postal workers and warehousing staff.''

Proxy figures just revealed by National Australia Bank at its annual meeting in Perth have a hefty 21 per cent vote against the bank's remuneration report.

This figure is not final as it doesn't take into account figures of shareholders voting at the annual meeting.

Still, the large "no" vote on the bank's remuneration report comes after NAB posted a 22 per cent drop in full-year net profit to $4.08 billion, with the bank weighed by problems in the UK.

The dollar is higher today, thanks to fresh stimulus measures from the US Federal Reserve.

In recent trade it was at $US1.545, up from $1.0532 yesterday.

Easy Forex currency dealer Anthony Botros said the market had rallied over the past few days in anticipation of the announcement.

‘‘It wasn’t a complete surprise to the market,’’ he said.

 

BusinessDay’s Michael Pascoe has been having a look at yesterday’s Westpac-Melbourne Institute consumer sentiment survey and has found a surprising fact - Coalition voters are the most pessimistic:

The political chasm has widened again and, again, it is Coalition voters calling the confidence tune. Consumer sentiment increased among people who said they would vote Labor at the next federal election - up 6.4 points to a strong 123.7 – but among Coalition voters it dived 12.1 points to 84.9, taking the overall seasonally adjusted index down 4.1 to 100, the break-even point between pessimism and optimism.

Read more here

Gail Kelly is betting on a rate cut after Christmas. Speaking at the Westpac annual meeting in Sydney, the bank's chief executive said something needed to be done to improve confidence in the economy:

I think I would be in the same camp as most of the market and say there is likely to be further rate reduction in the new year, whether it’s February or March. The key driver of that is what you see in regard to business and consumer confidence. I think we need a little bit more in the way of confidence building in our overall market.

 

With shares in Fairfax Media - owner of this website - up 4½ cents at 53 cents, a couple of tweets from Peter Esho of City Index Asia Pacific have caught our eye:

More from the NAB AGM in Perth, where chairman Michael Chaney has acknowledged the bank’s earnings drop this year was made worse by its troubled UK business.

Mr Chaney issued a cautious outlook  for the banking environment and said it would take another year to finalise the restructuring of the UK business.

While NAB explored a sale of the business until late 2011, Mr Chaney said a ‘‘disposal ultimately proved not to be possible’’.

'‘Following declines in commercial real estate values and the economy late last year, we decided that the only sensible course was a radical restructuring of our UK banks."

Australia should consider a raft of reforms, including to the tax and industrial systems, to help boost productivity and economic growth, National Australia Bank chairman Michael Chaney says.

Addressing shareholders at NAB’s annual general meeting on Thursday, Mr Chaney said that as the resources investment boom peaks and Australia’s terms of trade declines, the nation will need to increase productivity to achieve acceptable economic growth.

‘‘This will only come about through a renewed focus on microeconomic reform in industrial relations, regulation, infrastructure and taxation, to name a few,’’ he said.

He also suggested a review of the domestic funding model used by local banks, which raise a significant amount of their funding on international, short-term, and wholesale funding markets.

Here's a quick snapshot of how markets around the region are performing:

  • Nikkei(Japan): +1.6%
  • Shanghai: -0.4%
  • Taiwan: +0.4%
  • South Korea: +0.5%
  • Singapore: +0.1%
  • New Zealand: -0.3%

Lower interest rates have yet to give a noticeable boost to the manufacturing sector, which remains plagued by a high Australian dollar, a new survey suggests.

The latest Australian Chamber of Commerce and Industry (ACCI)-Westpac industrial trends survey for the December quarter showed that while overall activity was reasonably stable, profit expectations, investment, selling prices and employment were all under pressure.

''It is disappointing to us that there hasn't been a greater impact of lower interest feeding through to the economy,'' ACCI chief economist Greg Evans told reporters in Canberra on Thursday. ''It is further evidence ... of the entrenched lack of business confidence.''

The survey's composite index declined to 50.7 points in the December quarter from 51.9 points in the September quarter, only just holding above the 50 point mark that separates expansion from contraction in the manufacturing sector. The expected composite index also moderated to 52.5 points in the December quarter from 53.3 points in the previous three months, indicating modest growth in the March quarter 2013.

A lunch-time read via @TheKouk, from The New York Times.

The investment prospects of Mongolia, a darling of the emerging markets, are similarly shifting.

In May, the Parliament passed a law that restricted foreign investment in the country's most attractive asset, its mineral deposits. The government is also taking aim at a crucial deal with the multinational mining giant Rio Tinto, a pact that many see as the foundation of the country's recent economic growth.

Now, the underlying fundamentals of the country look increasingly shaky. Mongolia faces a financing crunch, as investment dollars flowing from abroad have fallen. And revenue from coal, the country's main export, has dropped along with Chinese demand.

More here.

Over in the US, prominent consumer advocate and senator-elect Elizabeth Warren has been nominated to be a member of the Senate Banking Committee, where she will have influence over laws affecting the finance industry.

Warren, a Harvard professor who made her reputation defending Americans from Wall Street abuse, defeated Republican incumbent Senator Scott Brown in November after a bitter, expensive race.

She takes her seat in early January. Warren has earned strong liberal backing for being a fierce critic of big banks, and she played a major role in creating the Consumer Financial Protection Bureau as a part of sweeping financial regulatory reform passed by Congress in 2010.

More from Westpac's annual meeting in Sydney. Shareholders have voted overwhelmingly in favour of chief executive Gail Kelly's $9.6 million pay packet.

Chairman Lindsay Maxsted said her remuneration was fair and in line with the bank's competitors. 

"The fact is they are big numbers but Westpac is a very big and complex business," he told the annual meeting.

Australian stocks are flat at noon, with the market dipping slightly into the red after a positive start in morning trade.

At 1220 AEDT, the benchmark S&P/ASX200 index was down 0.3 points, or 0.01 per cent, at 4583.5 points, while the broader All Ordinaries index fell 0.2 point to 4591.6 points.

Governments in France, Britain, Italy and Australia have been probing Google's tax avoidance as they seek to boost revenue.

What is Google's response?

It's called capitalism," Google chairman Eric Schmidt said. "We are proudly capitalistic. I'm not confused about this."

Mr Schmidt said the company's efforts to reduce its tax bill were legal.

"We pay lots of taxes; we pay them in the legally prescribed ways," he said. "I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate."

More here.

 

Australian sales of new motor vehicles, seasonally adjusted, in November were virtually unchanged on the previous month’s figures, official data shows.

In the month, 95,748 new vehicles were sold, seasonally adjusted, compared to a downwardly revised 95,717 in October, according to Australian Bureau of Statistics (ABS) data released on Thursday.

In the year to November, new motor vehicle sales rose 9.7 per cent, seasonally adjusted, from 87,271.

Virgin Australia has threatened to speed up its growth in other parts of Australia except Brisbane, after expressing frustration that a decision to open up routes to regional airports in Queensland was being delayed until 2014.

The airline had wanted to tender for several regulated and subsidised routes in regional Queensland, such as Roma and Bundaberg, when QantasLink’s contracts expired next year, but said they were informed the Department of Transport was rolling over the agreements until 2014.

But the airline said it had no intention of pulling its 1200 staff out of Brisbane.

“Competition brought about by deregulating markets will bring not doubt bring lower fares and deliver betting access to regional communities, reduce costs to business and boost tourism,” Virgin’s head of corporate affairs, Danielle Keighery, told Fairfax Media this morning.

Shares in Virgin are down 0.6 per cent to 43.25 cents

Westpac’s chairman, Lindsay Maxsted, has defended the bank’s position on mortgage rates, saying that passing on official rate cuts in full would force other customers or shareholders to ‘‘subsidise’’ people with home loans.

In response to a question at the bank’s annual general meeting in Sydney today, Mr Maxsted said changes in the cash rate were only one influence on its cost of funds.

When the bank decided whether to pass on Reserve Bank official changes to shareholders, it had to weigh up the competing interests of borrowers, savers and investors, he said.

Bank of Queensland is optimistic about a recovery in its home state’s housing market and increasing earnings.

Chairman Neil Summerson told shareholders at the bank’s annual general meeting today that the Queensland economy had stabilised but remained subdued.

However he said the bank was seeing some early indications that property values were on the rise.

‘‘With borrowers better able to meet their mortgage commitments as a result of successive interest rate reductions, including that of last week, we have reason to be optimistic about recovery in the important housing market,’’ he said.

Bank of Queensland in October became the first Australian bank in two decades to post a loss.

The bank suffered a $17 million loss for its 2011-12 fiscal year due to $401 million in costs from unrecoverable loans linked to BOQ’s exposure to the struggling property market in Queensland, where 60 per cent of its loans are written.

The Tax Office has moved to wind up the Newcastle Knights and the Newcastle Jets, along with their parent company the Hunter Sports Group, over unpaid debts of some $2.7 million, as owner Nathan Tinkler's debt problems continue to mount.

Documents filed yesterday in the Federal Court in Sydney show the Deputy Commissioner of Taxation is applying for the wind-up of Hunter Sports Group (owing $184,258), Newcastle Jets Pty Ltd (owing  $1.063 million) and Newcastle Knights Pty Ltd (owing $1.424 million).

The applications have been set down for hearing on February 20.

 

Insurance Australia Group has replaced outgoing board member Anna Hynes with a politician from Singapore.

Ms Hynes will end her five years as a non-executive director with the insurer in February, IAG said on Thursday.

Before joining IAG, which owns the NRMA Insurance and CGU brands, she held senior roles at American Express.

Ms Hynes will be replaced on the IAG board by Raymond Lim, who has worked with the Singaporean government over the last 10 years.

He has held the positions of second minister of foreign affairs, second minister of finance and minister of transport, and has previously worked as an economist.

Shares in IAG are flat at $4.87.

The consumer discretionary sub index is leading the ASX200 higher - up 0.52 per cent - as  the general markets sits on a 0.1 per cent gain. Here are the best performed companies:

  • Fairfax: +5.15%
  • Billabong: +3.76%
  • Aristocrat: +2.26%
  • Super Retail Group: +1.84%
  • APN: +1.75%

RBS Morgans private client adviser Bill Bishop said the Australian market was flat after receiving a weak lead from Wall Street which faltered after comments from Dr Bernanke.

Dr Bernanke said if the US economy did fall off the ‘‘fiscal cliff’’ because US politicians could not reach a compromise to avert a range of tax hikes and spending cuts coming into force on January 1, then there was nothing the Fed could do.

‘‘Wall Street didn’t like Ben Bernanke’s comments in America and it turned up its nose a little bit,’’ he said. ‘‘There’s a little bit of hesitancy in the local market now because of that.’’

Looking at that slide in Iluka's price today, IG Markets analyst Stan Shamu notes that "a decline was likely after the company released a mineral sands update. The miner is struggling on the back of falling mineral sands prices". 

"ILU has also been hit by a number of broker downgrades recently with Deutsche Bank downgrading them to sell," said Mr Shamu.

Now for the early sliders on the ASX200:

  • Iluka: -5.21%
  • Linc: -3.31%
  • Gryphon: -2.61%
  • Paladin: -2.22%
  • Aquila: -2.18%
  • Arrium: -1.69%

The best-performed companies on the ASX200 in early trade include:

  • Oceanagold: +4.74%
  • Fairfax: +4.12%
  • Transpacific: +3.52%
  • APN: +3.51%
  • Boral: +3.21%
  • DuluxGroup: +2.46%

One from the small biz desk, and perhaps some encouragement for anyone out there mulling a business idea. 

The average age of a first-time entrepreneur is 25, according to research from Ernst & Young. But there are many advantages of starting an enterprise later in life, writes Alexandra Cain.

A quick whiparound of the blue chip stocks shows mixed performances - miners down, banks up, retailers all over the shop:

  • BHP: -0.36%
  • FMG: -1.29%
  • ANZ: +0.49%
  • Westpac: +0.19%
  • Woolies: +0.17%
  • Wesfarmers: -0.8%
  • DJs: -0.2%
  • Myer: +0.46%

Sector by sector on the ASX200, most are higher but gains are modest:

  • Financials: +0.21%
  • Consumer disc.: +0.18%
  • Health: +0.15%
  • Industrials: +0.13%
  • Info tech: -0.66%
  • Materials: -0.15%

In early trade, the All Ordinaries index is 3.6 points higher, or 0.1 per cent, to 4595.4, while the benchmark S&P/ASX200 is 3.2 points higher, or 0.1 per cent, to 4587.

 

First news from ther Westpac meeting has arrived. 

Westpac does not expect conditions in the banking sector to improve any time soon, but says it is in good shape to deliver sound returns for shareholders.

Chairman Lindsay Maxsted told shareholders at Westpac’s annual meeting on Thursday that operating conditions remained challenging.

However the bank did not expect conditions to be any more difficult than in recent years. ‘‘Indeed, given the material strengthening of the balance sheet we are in excellent shape to positively respond to whatever emerges in the external environment,’’ Mr Maxsted said.

‘‘With all of our businesses showing good momentum, Westpac is well placed to continue delivering sound returns for shareholders.’’

Some analyst rating changes for today:

  • Iluka Resources cut to sell at Deutsche Bank
  • SAI Global cut to neutral at Bank of America-Merrill Lynch
  • WorleyParsons upgraded to hold from sell at Deutsche Bank
  • Lend Lease downgraded to neutral from buy at UBS

 

The readers of this blog are a civic-minded lot. This comment from 'cranberry' certainly won't harm that impression:

With such a high dollar, I did all my christmas shopping online with a US retailer. However, my bank did charge approximately $6 in foreign currency conversion fees, so I've done my bit for the local economy.

US stocks ended nearly flat, giving up most of the day's gains after Federal Reserve chairman Ben Bernanke reiterated that monetary policy won't be enough to offset damage from the fiscal cliff.

His comments followed the Federal Reserve's announcement of a new stimulus plan, which briefly pushed the S&P 500 to a seven-week high.

Interestingly though, Wall Street closed flat after he said he hoped that markets wouldn’t have to tank to get a fiscal cliff deal.

"Initially the addition of QE was certainly favorable. I think, though, in the press conference, what came out is that there still seems to be a level of uncertainty with regard to the exit strategy (and) the efficacy of the current policy," said Bucky Hellwig, senior vice-president at BB&T Wealth Management.

Mr Bernanke "reiterated the fact that monetary policy has its hands tied as far as addressing the seriousness of going over the fiscal cliff," Mr Hellwig added.

Our futures markets heard those comments clearly too. At 6.30am, the SPI futures contract was up 16 points but closed only three points higher.

The major local news today will surround Westpac and NAB, which hold their AGMS. Westpac's is in Sydney and kicks off at 10am, while NAB fronts shareholders in Perth a bit later in the day (east coast time). Bank of Queensland holds its AGM in Brisbane. 

The Aussie dollar was one of the beneficiaries of the Fed's decisive statements overnight, and in partiuclar the continuation of its bond buying program.

The Aussie moved to a fresh three-month high after the US Federal Reserve announced new measures to stimulate the world's largest economy.

In recent trade it was at $1.0549 up from $1.0532 on Wednesday, but it rose as high as $1.0587 overnight after the Fed announced it would continue buying long term bonds following the expiration of its "Operation Twist" debt purchasing program.

The major news from overnight arrives courtesy of the US Fed, which said it would hold interest rates near zero until it hit the specific target of a 6.5 per cent US jobless rate, and it pledged to keep pumping more money into the economy.

The central bank said its commitment to hold rates steady until its new threshold was reached would hold as long as inflation was projected to be no more than 2.5 per cent one or two years ahead and inflation expectations were contained.

The decision, accompanied by an announcement to replace a more-modest and expiring stimulus program with a fresh round of Treasury debt purchases, came as a surprise. Most economists had not expected the central bank to adopt thresholds to guide policy until sometime next year.

Full story here.

For a comprehensive look at this morning’s business news, check today’s need2know:

  • SPI futures are 3 points higher at 4599
  • The $A is higher at $US1.0549
  • In the US, the S&P500 added 0.04% 1428.48
  • In Europe, the FTSE100 rose 0.35% to 5945.85
  • China iron ore added $US0.10 to $US125 a metric tonne
  • Gold fell $US7.75 to $US1713.85 an ounce
  • WTI crude oil fell $US1.00 to $US86.79 a barrel
  • Reuters/Jefferies CRB index was flat at 293.84

Good morning all. Welcome to the Markets Live blog for Thursday.

This blog is not intended as investment advice

Contributors: Thomas Hunter, Richard Hughes, Jens Meyer, Max Mason  

BusinessDay with agencies