Australian shares end lower after broad-based losses, but hold up better than expected after Friday's slump on Wall Street.
- Swan cuts growth predictions
- Graincorp soars on 'lowball' $2.7b bid
- Treasury shares slide on earnings downgrade
4.59pm: That's all for today. Thanks everyone for reading this blog. We look forward to welcoming you back tomorrow morning at 9.30am.
Here's our evening wrap of today's session.
4.53pm: The biggest winners among the top 200 stocks:
- Graincorp: +39%
- Ten Network: +7.1%
- Emeco: +4.2%
And these are the biggest losers:
- Treasury Wines: -7.3%
- Gryphon Minerals: -3.7%
- Bradken: -3.6%
4.47pm: Union coal miners have voted to accept an employment contract offer by BHP Billiton following two years of industrial action.
A majority of union workers across BHP's five Bowen Basin coal mines in Queensland state supported the offer, the Construction, Forestry, Mining and Energy Union (CFMEU) said.
4.45pm: Superannuation funds have performed at their highest level in five years due to a strong September quarter, with the median return of a balanced fund posting a 4.3 per cent gain, according to SuperRatings.
For the year to September 30, the median balanced fund has surged 8.2 per cent and the best-performing funds almost 10 per cent. About 60 to 70 per cent of Australians are in a balanced fund as it is the default option for most super funds.
4.40pm: China could stage a tepid economic rebound in the fourth quarter as higher public infrastructure spending nudges the world's growth engine out of seven consecutive quarters of cooldown, but growth will remain lethargic through 2013 a Reuters poll shows.
According to the poll of 19 economists, China's economic growth should perk up to 7.7 per cent in the fourth quarter, up a shade from a 7.4 per cent expansion in the previous three months.
The listless recovery leaves the world's second-largest economy on course for its slowest annual expansion in 13 years, though analysts say policymakers will welcome the cooling effect it brings to prices and refrain from fresh measures to stimulate growth in the year ahead for fear of reigniting inflation.
The consensus call is for no interest rate cuts or dramatic pump-priming moves in the coming year, though cuts to the reserve requirement ratio (RRR) for banks are seen in store.
"We think the latest data suggests that the economy has bottomed," says Wang Tao, an economist at UBS in Hong Kong. "This means that there is a diminished need for another round of stimulus."
4.33pm: The biggest pea and thimble trick in the government's mid-year economic outlook is to collect company tax monthly instead of quarterly - a small but significant shift, writes Malcolm Maiden:
It doesn't change how much tax the government collects, but it does pull forward the timing of payments, boosting budgets by $8.3 billion over three years beginning in the year to June 2014, when $5.5 billion is pulled forward.
It's a process-heavy rule change and the companies that are affected will hate it, but the government has an eye to the political cost: a total of 13,350 companies are being forced onto monthly tax payments. More than 2 million others have been spared, for the time being at least.
4.28pm: It seems most market participants are still happy to wait for a deeper pullback before piling into equities, IG Markets strategist Stan Shamu says:
- The fact that Australia currently has contrasting fiscal and monetary policy probably doesn’t inspire much investor confidence in the current market environment.
- We have a government that is fixated on tightening in order to deliver a surplus, while the central bank has been forced into an easing cycle to help the economy keep ticking along.
4.23pm: All sectors closed in the red today, with materials falling 1.2 per cent, energy losing 0.7 per cent and financials off 0.5 per cent.
4.15pm: The sharemarket has closed lower, but well off the day's low hit early in the session. The benchmark S&P/ASX200 index fell 30.1 points, or 0.7 per cent, to 4541, while the broader All Ords lost 28.9 poionts, or 0.6 per cent, to 4564.6.
4.03pm: Dow and S&P futures are up about 0.2 per cent, indicating that Wall Street won't extend Friday's sell-off, which was sparked by disappointing profit results from heavyweights McDonald's and General Electric.
Altogether, it has been been a bad but not terrible US earnings season, desite the negativity on Friday. Of the 116 Standard & Poor's 500 companies that have so far reported, 60 per cent have exceeded analysts' estimates, below the 67 per cent pace of the previous four quarters, according to Thomson Reuters data.
3.55pm: The Reserve Bank is introducing industry-wide reporting standards for mortgage-backed securities to boost investor confidence in the market.
The new standards, which for the first time will allow investors to compare the performance of mortgage-backed securities on a like-for-like basis, comes in the aftermath of the global financial crisis, which crushed the volume of new issuance.
If, after a transition period beginning early next year, issuers have not conformed with the new reporting standard, their securities would become ineligible for the central bank’s repurchase agreements (repos) program.
3.47pm: Super Retail Group has made a solid start to 2012-13, with sales across its automotive, sports and leisure businesses up despite tough trading conditions.
Speaking to shareholders at the company’s annual general meeting in Brisbane, managing director Peter Birtles said like-for-like sales growth at its auto stores through the first 16 weeks of 2012-13 had risen 5.8 per cent.
Like-for-like sales were up four per cent for leisure retailing and had improved 8.9 per cent for Super Retail’s sports unit.
Shares are up 4.1 per cent.
3.35pm: While the winning streak of the market was snapped the damage could have been worse after traders woke up Saturday morning to see a 200 point decline on the Dow Jones, says CMC Markets trader Tim Waterer:
- It seems traders took the view that the sell-off on US equities was perhaps a little overdone and was based too much on emotion and memories of the Wall Street crash.
- The mining stocks looked worse for wear courtesy of commodity prices reacting adversely to the Wall Street sell-off.
- Declines in copper, oil and gold prices dented the appeal of the big miners on the ASX, particularly with a multitude of manufacturing data due mid-week from around the globe which could pose more demand questions.
3.10pm: The rise of the internet has forced newspapers to restructure the way they deliver news, as the age of the NBN nears, are we also seeing the end of free-to-air broadcast TV?
High speed internet that can deliver high quality video on demand is fast becoming the norm in developed countries.
According to a report commissioned by Britain's Office of Communications, “smart” or “connected” television sets—with broadband connections capable of streaming on-demand video—will be in over half the nation's homes within a decade.
In Australia, smart TVs will roll out as quickly as the NBN. That looks unlikely to be at breakneck speed but it should be within a decade, too.
The much talked about “digital convergence” is about to become a reality, making the business models of free-to-air TV much less predictable and perhaps destroying them altogether.
2.53pm: The RBA is proposing new reporting requirements for residential mortgage-backed securities aimed at helping the market recover from the financial crisis, Assistant Governor Guy Debelle said.
“There is an increasing demand for more transparency in securitization from both investors and regulators alike,” Debelle, who heads the Reserve Bank’s financial markets division, during a a speech today in Sydney. “One objective for improving transparency is to ensure that investors, other market participants and regulators all have access to relevant and reliable information in order to monitor risk.”
2.41pm: Now for a change of pace, here's an interesting read from the small business desk:
Justin Dowel's father was initially reluctant to let him join the family business, Natures Organics, before he'd established himself in another career.
But when the natural beauty and cleaning products company was fleeced by an equity partner and fighting for survival, Terry Dowel relented and set his then 21-year-old son a challenge.
“Dad basically said to me 'we're getting the company out of receivership and we need to go from selling $200,000 a month to $300,000 to survive. Go and do it',” says Dowel.
Two decades on, Justin Dowel is the chief executive of the business and has expanded annual sales from $2 million in 1991 to $100 million.
2.24pm: The head of AGL Energy’s retail business has announced his retirement, causing a reshuffle among the company’s senior executives.
General manager of retail energy Ken Hodgson has decided to retire from executive life and will be replaced by AGL’s chief financial offer (CFO) Stephen Mikkelsen from January 2, the company said on Monday.
Mr Hodgson joined AGL in 2008.
Mr Mikkelsen has been the company’s CFO since 2006.Head of strategy and finance Brett Readman will replace Mr Mikkelsen as chief financial officer.
Shares in AGL are down 0.6 per cent to $14.93
2.23pm: CBA economist Michael Workman says today's MYEFO had a message aimed at financial markets:
- The Government has again delivered on its fiscal message about the need for fiscal restraint when the economy is running at trend GDP growth and near full employment. But again, just enough has been done to maintain the wafer thin surpluses expected for some time now. It was also noted that the MYEFO foreshadowed additional savings measures that would have to be made in coming periods to maintain these surpluses.
- The economic message was aimed at the financial markets. Namely, Australia’s Government can deliver budget surpluses, through restraint, in a period where there is significant uncertainty over the finances of some sovereigns. Australia’s AAA rated sovereign debt rating is, therefore, likely to stay intact and public debt will remain low. These are useful protections to have in the current environment.
2.10pm: It looks like markets around the region are all a bit off par today:
- Nikkei(Japan): -0.8%
- Shanghai: -0.6%
- Taiwan: -0.9%
- South Korea: -1.1%
- Singapore: -0.3%
- New Zealand: -0.3%
2.02pm: Today's mid-year fiscal update saw a little more belt tightening by the government, says HSBC chief economist Paul Bloxham:
- We estimate that fiscal policy is around 0.1% of GDP tighter than May budget implied.
- This will have few implications for the RBA, beyond what was already expected, as they would have largely anticipated this move.
- We still expect another 25bp cut from the RBA before year-end.
1.53pm: The government will extract an extra $8.3 billion from businesses in the three years from 2014 by collecting company taxes every month, rather than quarterly.
The measure, which will initially apply to the country’s 350 biggest companies before being broadened to smaller firms, comes amid heavy write-downs in the revenue raised by corporate taxes and the mining tax.
Today’s MYEFO update revealed tax collections from corporate Australia were suffering heavily amid a slowing of the mining boom.
Company taxes are forecast to be $4 billion lower this year and almost $22 billion lower over the four-year forward estimates.
1.45pm: Investors are betting Archer Daniels Midland will have to up its $2.7 billion offer for Graincorp or that a rival bid is in the make.
"The market is clearly speculating the offer won't be successful as it is. There is hope for rival offers or a higher price to seal the deal. It is very early days," says Paul Xiradis, chief executive at fund manager Ausbil Dexia.
"Given the strategic value of the GrainCorp assets and this is the last remaining grain company in public ownership, we believe there could be other interested parties such as other grain-related companies or an Asian buyer," Deutsche Bank analyst Mark Wilson writes in a research note.
JPMorgan says in a note to clients that GrainCorp should be valued at between $11.88 to $13.43 a share, based on Canadian grain company Viterra's acquisition of ABB Grain in 2009 and Glencore's bid for Viterra.
Graincorp shares are up 39 per cent at $12.30.
1.29pm: All major sectors are posting losses for the day. Telecommunications and health shares are leading thefall, down 1.2 per cent. Materials and energy stocks are also weighing heavily on the market, down 1.1 per cent each.
1.24pm: Gold and silver fell to their lowest in more than a month on Monday as investors turned to the safety of the dollar after tumbling US equities sparked concerns about the health of the global economy.
Gold hit a low around $US1713 an ounce and was standing at $US1720.21, roughly in line with Friday, but down from an 11-month peak of $US1795.69 marked in early October. Silver tracked gold lower.
1.19pm: Lonsec private client adviser Michael Heffernan said the falls on the Australian market were unsurprising given the drops in European markets on Friday.
‘‘It’s pretty much as expected given the lacklustre situation in Europe and that commodity prices were down,’’ he said. ‘‘It’s not too bad considering the leads we had into today.’’
1.10pm: The Aussie dollar hasn't responded strongly to today's economics news. It's fractionally higher than where it started the day. But investors are mindful of inflation data out on Wednesday and the likely implications for rates.
“The Aussie is soft and likely to remain soft heading into the inflation release,” said Emma Lawson, a Sydney-based foreign-exchange strategist at NAB.
“The currency is looking at the broader global conditions this week and we’re clearly starting off on a more subdued note.”
Australia’s dollar was buying $US1.0313 after losing 0.5 per cent in the previous two days.
12.59pm: The big miners are all having a day to forget:
- BHP is 1.13% lower to $34.60
- Rio is 2.25% lower to $57.82
- Fortescue is 2.72% lower to $4.11
- Newcrest is 1.13% lower to $27.20
12.53pm: As reported earlier, NAB and Westpac have fallen out of favour with Goldman Sachs, who've cut their investment ratings, on concerns that lower loan growth and a weaker margins would limit share price growth. You can read more about that here. The shares of those two banks have had a bad day as a result. Not as bad as the big miners, but they're down more than their rivals:
- NAB is 0.84% lower to $26.00
- Westpac is 1.13% lower to $25.27
- CBA is 0.33% lower to $56.65
- ANZ is 0.04% higher to $25.67
12.50pm: Here's the full story on why today's MYEFO could lead to another rate cut on Melbourne Cup day.
12.43pm: Here’s where the government is cutting to ensure it can fulfil its promise for a budget surplus. You'll find a snapshot of all the numbers here:
- $8.3 billion over three years - company tax to be collected monthly from large businesses, rather than quarterly
- $700 million over three years - government contribution to private health insurance to increase more slowly
- $390 million over three years - removing private health insurance rebate on lifetime cover loading component of premiums
- $461 million over three years - baby bonus down from $5000 to $3000 from July 1, 2013 for second and subsequent children
- $305 million over four years - change of funding for trade training centres
- $270 million over three years - cuts to facilitation funding to universities
- $499 million over four years - slower funding increases for Sustainable Research Excellence
- $277 million over four years - cuts to payments to employers of part-time and casual apprentices
- $89 million over four years - reductions in various grants
12.37pm: You can watch Wayne Swan live here as he talks about the mid-year budget update. Remember to turn off autoplay is you don't want videos to start automatically.
12.35pm: Only five of the top 50 companies on the ASX today are posting gains, none over 0.5 per cent:
12.29pm: As the government continues to cut its way to a surplus, borrowers are likely to be the short-term winners.
Westpac head of Australian interest rate strategy Damien McColough said the weakening outlook for the budget and the commodities boom would trigger another rate cut in November, following the Reserve Bank's 25 basis point cut in October.
"It’s all about iron ore prices and coal prices, so as always with Australia being a small, open economy, we’re very vulnerable to global growth prospects," he said. The budget update showed that falling commodities prices would lower government mining tax receipts to $9.1 billion from an earlier projection of $13.4 billion over the next four years.
"The market has been saying for a long time that, because the government is so focused on surpluses it means that the RBA has to do more heavy lifting."
12.17pm: More on MYEFO. JP Morgan's chief economist Stephen Walters said the government was counting on strong economic growth and stable commodity prices to hit its promised budget surplus. In other words, there is a bit of hit-and-hope at play here.
‘‘They are sticking with their brave assumption of a surplus this year but the fact they are having to release what is effectively a mini-budget four months into the fiscal year shows they weren’t on track,’’ he said.
‘‘They are basically just crossing their fingers and hoping the growth materialises.’’
Mr Walters said that, based on JP Morgan’s own forecasts, the government would fail to achieve the surplus.
‘‘If we’re right, then they are still not going to make it on this sort of strategy because there just isn’t going to be enough growth and the risk is that commodity prices will fall,’’ he said.
12.09pm: Some tweets on the MYEFO:
Our economy walks tall in the world as a result of the hard work of Aussies & Labor’s strong economic management & fiscal discipline. @SwannyDPM (Wayne Swan)
Govt saves $1.2b over the forwards because of lower global interest rates on Aussie bonds. Cheap debt. @swrightwestoz (Shane Wright)
Swan to Stevens: caaaaaarn @MattCowgill
Cutting the baby bonus to $3000 per child ($5k still for 1st one) will save Aust. Govt. $505.9m/4 years @latikambourke
Well: that’s it on fiscal policy till 7 May 2013. Back to RBA watching @TheKouk (Stephen Koukoulas)
12.06pm: One of the big measures in today's MYEFO will see big business pay their tax in monthly instalments, just as they do their GST, Katharine Murphy notes in her Pulse blog from Canberra.
This brings $8.3 billion to the budget on an underlying cash basis over four years.
11.51am: More on Graincorp, and RBS Morgans analyst Belinda Moore, who has recommended investors hold on to their Graincorp stock in anticipation of an increased offer, possibly north of $13 a share, either from ADM or from a rival bidder.
‘‘In our view, the offer price isn't high enough,’’ she wrote. ‘‘Based on an average season and including Graincorp’s target to grow earnings before interest tax depreciation and amortisation (EBITDA) by $40 million by the end of 2013-14, we value the company at $9.77 per share. Including the usual takeover premium of 30 per cent, this implies a takeover price of $12.70 per share for
Graincorp shares have soared since they came out of a trading halt this mornin,. They're at $12.42, up 40.3%.
Read more here
11.38am: The dollar is back up above $US1.03 after briefly slipping below that level in anticipation of the government’s MYEFO release. It’s currently buying $US1.0317.
Markets are still overwhelmingly expecting a rate cut at the RBA’s next board meeting, with Credit Suisse interest rate futures indicating an 84 per cent chance of another 25 basis point move.
RBC Capital Markets senior economist Su-Lin Ong said the budget surpluses were ‘‘well within forecasting error’’ and added pressure for another rate cut in November.
‘‘They’re pretty wafer-thin these surpluses,’’ she said. ‘‘The underlying message, very clearly, is that the fiscal stance remains extremely tight.’’
Ms Ong said the fiscal policy would drag on activity, at a time when the economy was softening. ‘‘With the labor market is weakening, that’s going to keep pressure on the RBA to cut further.’’
11.31am: Billabong founder Gordon Merchant has forced the Australian Shareholders Association to retract some of the statements made in a recommendation to dump him from the struggling surfwear retailers board, BusinessDay's Colin Kruger writes.
The ASA said it received correspondence last Monday from Minter Ellison, acting for Mr Merchant - and former Billabong colleague Colette Paull - as well as Allens lawyers, representing the company itself, after recommending investors vote against their re-election as directors at this month’s AGM.
While the ASA has stuck with this recommendation, it was forced to retract statements and clarify points supporting their recommendation which includes allegations that Mr Merchant ‘‘effectively prevented’’ Billabongs board from accepting a $3.30 a share offer from former suitor TPG in February.
Billabong shares have fallen this morning - they're down 2.4% at 83 cents.
11.23am: Japan’s Nikkei average has lost 1.5 per cent in early trade, retreating from a three-week closing high thanks to a disappointing earnings seasons and the same bad news from Wall Street that has been depressing the Australian market.
The Nikkei dropped 131.60 points to 8871.08, ending a five-day winning streak, while the broader Topix index lost 1.3 per cent to 744.99.
The Nikkei’s decline came as Japan announced a $US7 billion ($A6.82 billion) trade deficit in September.
The global slowdown and the fallout from a bitter territorial spat with China have contributed to the shortfall.
It came to ¥558.6 billion, reversing a year-earlier surplus of ¥288.8 billion. Exports fell 10.3 per cent, with shipments to China down 14.1 per cent.
11.16am: Before the release of the mid-year economic and fiscal outlook, nervous investors had sent the dollar to $US1.03 from $US1.032 earlier.
Rochford Capital director Derek Mumford said the dollar weakened in part because the budget update may foreshadow further rate cuts to come.
‘‘It does open the door for further interest rates cuts by the Reserve Bank, possibly as soon as Melbourne Cup day,’’ he said. ‘‘And that obviously will undermine the attractiveness of the Aussie dollar, with the interest rates differential being squeezed all the time.’’
11.14am: Graincorp shares have soared more than 40 per cent after receiving a $2.7 billion takeover bid from Archer Daniels Midland as the US agriculture giant seeks to push ahead in the global race for grains trading power.
Graincorp shares had added as much as $3.64 to $12.49 in recent trade.
11.12am: We've got more detail on Treasurer Wayne Swan's mid-year economic and fiscal outlook, which includes $16.4 billion in new savings over four years in a push to return the budget to surplus.
"The weaker global outlook and lower than expected commodity prices, along with the general easing of price pressures in the economy, are again slowing the recovery in tax revenue,’’ Mr Swan said.
Real gross domestic product is now forecast to grow at around trend, at 3 per cent in 2012/13 and 2013/14. This is a downgrade of one quarter of a percentage point since the May budget.
Australia’s terms of trade is also forecast to worsen, declining by eight per cent this financial year compared to a previous forecast fall of 5.75 per cent.
But unemployment rate is expected to remain low at 5 per cent in 2012/13 and 2013/14, while inflation is likely to remain well-contained.
‘‘The government has responded to the more challenging global outlook by delivering $16.4 billion in new savings over the forward estimates,’’ the Treasurer added.
11.04am: More from the Ansell AGM, and BusinessDay's on-the-spot reporter, Madeleine Heffernan.
Chief executive Magnus Nicolin says that although year-on-year sales to September have been weaker, a recovery in North America is coming.
Despite persistent weakness in Europe, Mr Nicolin says Ansell is "staying the course" on its guidance, announced in August.
11.02am: The federal government has slashed spending by $4 billion to reach a forecast surplus of $1 billion this financial year, which is $500 million less than forecast at the May budget.
The Treasurer, Wayne Swan, has also tweeted that the forecast surplus for 2015-16, the final year of the four-year forward estimates, will be $6 billion, which is $1.5 billion less than forecast in May.
10.59am: APOLOGY A minor, but annoying, technical issue may have prevented you from reading the blog earlier. It should be fixed now and should be updating OK.
10.57am: As was, predicted the weakness on Wall Street at the end of last week has set the tone for the trading day here. Burrell Stockbroking director Richard Herring says he expects little recovery from current levels throughout today's session.
‘‘I’d expect some consolidation, but nothing too dramatic,’’ he said.
Mr Herring said the release of the federal government’s mid-year economic and fiscal outlook due in a couple of minutes was expected to have little impact on the equities market.
10.53am: The big banks are all lower, led by Westpac and NAB which, as we mentioned earlier, have both been downgraded by Goldman Sachs.
- CBA is 0.32% lower to $56.66
- ANZ is 0,16% lower to $25.62
- NAB is 0.57% lower to $26.07
- Westpac is 1.06% lower to $25.29
10.50am: The big miners are down quite heavily this morning:
- BHP is 1.11% lower at $34.61
- Rio Tinto is 2.35% lower at $57.82
- Fortescue is 2.60% lower at $4.12
10.43am: The Ansell AGM is underway in Melbourne, in which chairman Peter Barnes is to stand down to be replaced by his deputy Glenn Barnes.
Chief executive Magnus Nicolin says Ansell’s sexual wellness arm was the star performer in the 2012 fiscal year and its new women’s ‘‘intimate freshness line’’ in Australia ‘‘seems to be working nicely’’.
The CEO said despite the ‘‘rather tough environment'', Ansell’s full-year guidance is ‘‘sustainable"; that is the company expects mid to double-digit growth in earnings before interest.
10.30am: Treasury Wine Estates has downgraded its financial forecasts because of a slow first quarter performance.
The wine maker behind brands including Penfolds, Beringer, Lindemans, Wolf Blass and Rosemount said its earnings in the first half of the 2012/13 financial year would be lower than originally forecast.
Its shares were down as much as 4.2 per cent, or 23 cents, to $5.27.
Treasury Wine said it expected its first-half earnings would be 20 per cent lower than the same period the previous year. First half earnings previously had been forecast to grow below the average of the past two years, which corresponded to 15.8 per cent. More soon.
10.28am: Sundance is leading the market with a gain now of 8.8 per cent. Here are the other major gainers on the ASX200 in early trade:
- Ten Network: +3.57%
- Pacific brands: +2.68%
- Lynas: +1.46%
- Envestra: 1.17%
- Seven Group Holdings: +1.12%
10.26am: With all sectors in the red in early trade, here are the major sliders on the ASX200:
- Coalspur: -5.34%
- Mount Gibson Iron: -3.85%
- Iluka: -3.79%
- Silver Lake Resources: -3.41%
- St Barbara: -3.38%
10.24am: All the sectors on the ASX200 are down in early trade today:
- Materials: -1.62%
- Energy: -1.43%
- Telecoms: -1.20%
- Health: -1.10%
- Information technology: - 1.03%
- Consumer discretionaries: -0.99%
- Industrials: -0.80%
- Finance: -0.65%
10.21am: Sundance Resources shares have leapt 9 per cent on Monday after its Chinese suitor Hanlong Group secured a long awaited financing commitment from China Development Bank for its year-old $1.4 billion bid for the aspiring iron ore miner.
Sundance shares opened at A$0.37, up 3 cents, compared with Hanlong's offer of A$0.45 a share.
10.15am: It’ll be interesting to track the fortunes of the local banking sector today after Westpac and NAB were downgraded by investment bank Goldman Sachs on concerns lower loan growth and a weaker margins would limit share price growth.
In the latest bearish signal for the banking sector, Goldman Sachs lowered its rating on Westpac from "neutral" to "sell" as the outlook for returns softens.
"We expect Westpac's second half result to highlight a relatively weaker trend in pre-provision operating profit growth than peers at 1.2 per cent half-on-half," wrote Goldman Sachs' banking analyst Benjamin Koo in a note to clients.
10.13am: In early trade, the All Ordinaries index is 46.0 points lower, or 1 per cent, to 4547.5, while the benchmark S&P/ASX200 is 47.2 points lower, or 1 per cent, to 4523.9.
10.09am: As expected, the markets are heading south in very early trade.
9.57am: At least one analyst reckons local stocks won't escape the selling which hit Wall Street on Friday night. Leyland Asset Management senior portfolio manager Rohan Schmidt expected said stocks could fall as much as 1.5 per cent today on worries for US earnings and concerns about the EU debt crisis resolution.
"The expectation of a bailout for Spain, whilst continuing, is going at a real snail's pace," said Mr Schmidt. "At least it's still there on the table. I expect it will happen, but if it doesn't, we could see more ructions."
After the stellar run by US stocks in recent months, Mr Schmidt said investors may be reevaluating their outlook for earnings given the ongoing weakness in the US economy.
If people become worried that the US stocks have had a reasonably good run part because of the US Fed's monetary stimulus, then they may begin to sell down those stocks there, he said.
"I think today's focus is probably more on what happened in the US on the weekend," said Mr Schmidt.
Banks would also likely be sold down locally, said Mr Schmidt, following the bad debt provisioning by NAB on Friday.
9.53am: The Sundance Resources takeover play could be a step closer after the iron ore miner Sundance Resources said that China's Hanlong Group has secured a financing commitment from China Development Bank, marking an important step towards finalising a $1.4 billion takeover deal that has dragged on for a year.
Sundance said the bank has agreed to provide a debt facility of up to $1.022 billion, subject to credit approval processes.
Sundance added Hanlong had received a second commitment from Bank of Deyang Co Ltd to finance loans for the balance payable.
9.50am: Now for some fresh local news. Graincorp says it is reviewing a $2.7 billion takeover offer from United States-based agribusinesses Archer Daniel Midlands (ADM).
Graincorp confirmed it had received an indicative, non-binding acquisition proposal from ADM, after the US company last week increased its stake in the Australian business to 14.9 per cent. ADM is prepared to pay $11.75 in cash for each Graincorp share, valuing Graincorp at $2.68 billion.
‘‘The GrainCorp board is reviewing the proposal and has not yet formed a view on its merits and will keep the market informed of any material developments,’’ Graincorp said in a statement.
9.47am: And here's a snapshot of the major offshore news events this week:
- Monday: China Entrepreneur Confidence Index for Q3
- Tuesday: US Federal Reserve’s federal open markets committee monetary policy meeting (day 1 of 2); Richmond Fed manufacturing index
- Wednesday: Day 2 of US Fed meeting, announcement of rates stance. US house price index, US new home sales, Markit PMI manufacturing index. China - Bloomberg economic survey for October, HSBC flash manufacturing PMI
- Thursday: US Conference Board leading economic Index for September, US durable goods orders, jobless claims, pending home sales index
- Friday: US GDP -economists consensus of 1.9%, up from 1.3%, US consumer sentiment. China - MNI business sentiment index for October
9.44am: One of the major themes this week will be AGM season, with Ansell and Treasury Wine Estates due kick things by fronting shareholders today. Other major companies holding a general meeting this week include Pacific Brands, BHP, Fairfax, Toll and Macquarie.
For a full list of the AGMs check the Australian business calendar. Here's a quick snapshot of this week's major business news:
- Tuesday: Conference board leading index. AGMs - PacBrands, OzMinerals, WorleyParsons
- Wednesday: ABS Consumer price index for September quarter. Internet skilled vacancies. AGMs - Fairfax, Austereo, Tatts
- Thursday: HIA Trades report, June quarter. AGMs - BHP, Suncorp. ANZ full-year results
- Friday: AGMs - Toll Holdings. Macquarie first-half results.
9.40am: The main game in economics news today is the federal government's MYEFO release, or mini budget. There'll be cuts, and Wayne Swan is expected to maintain his promise of a suplus for the year. It's expected at 11am.
In a preview piece this morning, Michael Pascoe writes that "the bi-partisan rush to fiscal rectitude is doing more to weaken demand here than softer growth in Asia". He writes:
The RBA currently has its toe on the accelerator while Treasury has its foot on the brake. The MYEFO means the brake will be pushed harder. Full story.
9.36am: Local stocks could have a rough start to the week following a bumpy end to last week on Wall Street. With major companies like General Electric and McDonalds issuing disappointing earnings guidance, US shares headed south and gave strong negative leads to Aussie stocks in the process. The Aussie dollar also weakened through Friday evening.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:
- SPI futures were down 45 points to 4522
- The dollar is down to $US1.031
- Wall Street tumbles on weak earnings
- European shares fall on EU bank discord
- Spot gold suffers biggest drop in months
- Oil price dragged down by economic concerns
- Australian finance news: October 22-26
9.33am: Hi folks. Welcome to the Markets Live blog for Monday.
Contributors: Thomas Hunter, Jens Meyer, Richard Hughes
This blog is not intended as investment advice
BusinessDay with agencies