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Markets Live: Shares up but eyes on fiscal cliff

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Well, that's all from us here at Markets Live for 2012. A big thank you to all you readers, we hope you've enjoyed the blog as much as we have.

Best wishes and stay safe this holiday season.

We'll be back Monday January 21, 2013....We hope to see you then.

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


Wayne Swan’s decision to jettison Labor’s commitment to get the budget into surplus next year is only a big deal for the economy and perceptions of its management if Labor does what Swan says it won’t, and attempts to buy itself another term in office.

Swan’s central proposition is correct, and for that reason there is a limit to the political mileage the opposition can extract.

As the September quarter national accounts confirmed, the economy is now running well below its long term growth trend. The annualised growth rate during the quarter was only 2 per cent, and the government’s tax receipts in the first four months of the year to June were $3.9 billion lower than estimated.

The hole has mainly been caused by lower commodity prices and competitive pressures on the economy that are partly related to the refusal of our dollar to follow commodity prices down, but Swan has taken the advice of experts including the OECD and decided against finding spending cuts or new revenue to try and fill it.

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Here's a snapshot of how blue chip stocks performed today:

  • BHP: -0.1%
  • Rio: -0.6%
  • ANZ: +0.6%
  • CBA: +0.3%
  • NAB: +0.3%
  • Westpac: +0.7%
  • Fortescue: -3.4%
  • Woolworths: +0.3%
  • Wesfarmers: +1.3%
  • Telstra: +0.2%

The dollar changed hands at $US1.0475, from $US1.0484 early, pulling away from a three-month peak of $1.0585 hit last week. The Aussie has fallen nearly 1 percent this week.

Charts show some vulnerability with support at $US1.0440, a double bottom from earlier in the month. A break would suggest a move under $US1.0400. Resistance was initially seen at $US1.0535, the previous session high.

Foreign investors have been cooling their interest in bonds sold by Australia’s state governments just as some have been feeling pressure on credit ratings.

However the nation’s big banks have been stepping in to pick up the shortfall, as they prepare for the introduction of new rules forcing them to pump up their holdings of assets.

Overseas ownership of of state government bonds - also known as semi-government bonds - fell by $1.1 billion in the September quarter, according to figures released by the Australian Bureau of Statistics.

This has seen the overseas percentage ownership of semi-government’s fall to 33.8 per cent from 36.2 per cent in the June quarter.State bonds on issue rose by $10.2 billion to $203.8 billion in the September quarter, according to the ABS data.

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Among the sectors, financials and consumer staples both pushed up 0.7 per cent, while gold and energy shares lost 0.6 per cent and materials was relatively flat, down 0.1 per cent.

shares up

The market has finished stronger, with a fresh 17-month high close. The benchmark S&P/ASX200 added 16.3 points, or 0.4 per cent, to 4634.1, while the broader All Ords rose 13.4 points, or 0.3 per cent, to 4646.6


Hong Kong’s de facto central bank says it will probe Swiss banking giant UBS over claims of possible rigging of Hong Kong’s interbank offered rate (Hibor).

The Hong Kong Monetary Authority (HKMA) today said it had received information from overseas regulators about ‘‘possible misconduct’’ by UBS involving submissions for Hibor and other reference rates in Asia.

The Bank of Japan eased monetary policy today by expanding its asset-buying and lending programme, a widely expected move in response to intensifying pressure from incoming premier Shinzo Abe to deliver bolder steps to beat deflation.

The central bank topped up its asset-buying and lending programme by 10 trillion yen to 101 trillion yen by a unanimous vote, expanding stimulus for the third time in the past four months.

It also said the board would review at its next policy-setting meeting in January its guidelines for medium- and long-term price stability, which is now set in a range of zero to 2 percent consumer inflation.

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JPMorgan economist Tom Kennedy said Swan's comments meant that there would be less pressure on the Reserve Bank in its easing of monetary policy.

"I think the fiscal drag will obviously be less over the current financial year and I’m assuming so into the 2014 financial year as well," he said. 

"For that reason we think at the margin it takes a bit of pressure off the RBA, because now we have the two arms of policy - the monetary arm and the fiscal arm - moving in a more congruent manner, rather than going in the opposite directions."

Mr Kennedy said while Mr Swan was emphasising a "temporary hole" in the budget, a deficit should be expected as growth fades next year.

"When you look at the outlook for 2013, you’ve basically got growth fading. ... In addition, you’ve got commodity prices that we think have certainly seen their peak in terms of pricing. You had very high prices for coal and iron ore in the back end of 2011 and I think the economy is still adjusting to the lower prices," he said.

"I think considering the current outlook, a deficit will certainly be what occurs with the budget."

Here's some good news for retailers from our small business team, businesses may get that sales boost they've been begging Santa for after all, with a new survey showing a rise in consumer spending ahead of Christmas.

Click here for the full story.

More from the Swan presser, When asked about what Labor would say heading into the next election, Mr Swan said Labor had delivered ‘‘responsible economic management’’. 

‘‘Unlike the rest of the world, our budget is still in relatively good shape,’’ he said.

‘‘We are going to continue to apply our fiscal rules in a commonsense view. If we were to engage in cuts immediately ... that would be counterproductive for growth and jobs in the economy.

Only a handful of suburbs in Melbourne and fewer than 50 in Sydney are cheaper for aspiring owners to buy a home in than to rent.

Of Melbourne’s 668 suburbs, only six were more affordable to buy than rent and among Sydney’s 967 suburbs, only 48 fit the bill.

But in other parts of the country the recent fall in interest rates and stable house prices has boosted the number of suburbs and country towns where it is cheaper to buy than rent.

In October there were 388 localities, this month there were 494, according to RP Data's latest Buy vs. Rent report.And if prospective home owners were willing to chip in another $50 per week, that number rose to 1726 localities, the report said.

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The Australian Bureau of Statistics says super fund assets have risen by $56.1 billion to almost $1.4 trillion in the September quarter, as cash holdings reached a record high of 15.9 per cent of financial assets.

CommSec chief economist Savanth Sebastian said Australian super funds were holding almost double the ‘‘normal’’ amount in cash and bank assets, a reflection that equity investments were less than the cash inflows recorded by fund managers.

‘‘The risk for fund managers is being caught with too much money on the sidelines while equity markets track higher,’’ he said in a research note. 

‘‘As term deposit rates fall and the global economy strengthens, pension funds will need to allocate a larger proportion of inflows to growth assets.’’


The Finance Department’s latest monthly statement released today shows cash receipts for 2012-13 so far totalled $111.6 billion at the end of October, down $3.9 billion on expectations.

‘‘Now that’s a really big hit to revenue, it’s a huge whack to revenue,’’ Mr Swan told reporters in Canberra.

‘‘Now, obviously dramatically lower tax revenue now makes it unlikely that there will be a surplus in 2012-13.’’

Treasurer Wayne Swan looks to be backing away from the planned budget surplus.

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