Australian shares end slightly lower, holding up better than Wall Street which posted sharp falls as US investors brace for the start of a poor earnings season.
5.28pm: Join us tomorrow from 9.30am for another edition of Markets Live, thanks for being with us.
5.08pm: European stock index futures are pointing to a lower open, with stocks set to lose ground for the third consecutive session as investors fret about corporate results as the earnings season gets under way.
Futures for the Euro STOXX 50, for Germany's DAX and for France's CAC are down 0.1-0.3 per cent.
4.55pm: Toyota has announced a recall action on almost 300,000 vehicles in Australia – and 7.4 million cars worldwide – over a sticky power window switch.
The recall is for a fix of the power window master switch on the driver’s arm-rest, which may not operate smoothly or become inoperative. Toyota says that in the worst case scenario, the switch assembly may overheat and melt.
The recall affects certain models built between 2006 and 2010, including the Yaris city car, Corolla small car, Camry and Aurion family sedans and RAV4 and Kluger SUVs. Toyota says that no injuries have been reported as a result of the issue, but there have been six reports of the sticky window switch found in Australia.
4.39pm: A Malaysian court has kept on hold a licence granted to Lynas's controversial rare earth plant, delaying until next month a decision on whether it will consider judicial reviews aimed at permanently blocking production, a lawyer says.
Hon Kai Ping, a lawyer for the environmental group involved in the case, said the decision had been delayed by the court until November 8.
Activists linked to the environmental group Save Malaysia Stop Lynas want the Kuantan High Court to suspend the licence until two judicial review cases challenging the government's decision allowing the plant to operate are heard.
The temporary operating licence granted to Lynas has been on hold since September 25
4.15pm: Among the sectors, financials dropped 0.4 per cent, materials lost 0.3 per cent - clawing back some of their earlier losses - while energy stocks gained 0.4 per cent.
4.13pm: The market has closed lower, but well off the day's lows. The benchmark S&P/ASX200 slipped 14.6 points, or 0.2 per cent, to 4490.7, while the broader All Ords lost 14.7 points, or 0.3 per cent, to 4511.9.
4.11pm: Aspiring uranium miner Toro Energy is a step closer to getting its Wiluna project off the ground, after the Western Australian environment minister today gave his blessing for the project to go ahead.
The decision means that approval from Federal Environment Minister Tony Burke is the only regulatory hurdle remaining in front of the project.
Toro would then be able to take a final investment decision at board level, which would depend on whether it can source funding support for the project
If approved, the Wiluna project would be the first uranium mine approved in Australia since the Four Mile mine in 2009.
4.05pm: Gunns' receivers have claimed strong backing for pursuing the failed timber company's centrepiece $2.2 billion pulp mill project.
Receivers Korda Mentha said after their appointment they would undertake a strategic review of the project's economic viability over October before deciding whether it was worth putting up for sale.
In a report today to the first creditors meeting since Gunns went into voluntary administration, Korda Mentha said: "there is significant stakeholder support for pursuing the pulp mill development."
3.56pm: A High Court ruling clearing Fortescue’s Andrew Forrest of misleading investors has given the market important guidance on deceptive statements, the head of Australia’s corporate watchdog says.
The Australian Securities and Investments Commission (ASIC) was unsuccessful in its action against Fortescue and Mr Forrest, with the High Court ruling last week that Mr Forrest did not mislead the market with comments he made about agreements with three Chinese companies in 2004.
‘‘The decision did provide some important guidance to the market on misleading and deceptive statements,’’ ASIC chairman Greg Medcraft told a financial services conference in Sydney. ‘‘Because it found there weren’t any misleading and deceptive statements made by Mr Forrest it did not need to consider continuous disclosure obligations.’’
Mr Medcraft also confirmed BusinessDay reports that Mr Forrest had rung ASIC after the decision to offer to work with the regulator on continuous disclosure issues.
He said he was away when Mr Forrest called, but planned to return the Fortescue chairman’s call.
‘‘It was very kind of him to offer his assistance...’’ Mr Medcraft said. ‘‘We will probably have another discussion with Mr Forrest.’’
3.51pm: The Australian sharemarket did quite a decent job of absorbing the negative lead provided by Wall Street to escape the day with just a modest move lower by the local index, CMC Markets trader Tim Waterer says:
- The downgraded IMF growth forecasts served to take steam away from investment confidence in recent trading sessions, with traders again leery over what state financial markets will be in come 2013 and beyond.
- Recent sharp rises in the price of iron ore stood the bellwether miners such as Rio and BHP in good stead, and this was able to have an offsetting affect to a degree on the negative sentiment stemming from the IMF downgrades which adversely affected the broader market.
- Given the 100+ point fall on the Dow Jones last night, for the ASX200 to still be within close proximity to the 4500 level is more than an acceptable result today.
3.43pm: Qantas is one of the biggest winners today, with its shares up 4 per cent. There's some talk this could be due to the airline mulling a spin-off of its frequent flyer division, but this is more of an ongoing speculation.
3.32pm: More on jobs and the federal government’s leading employment index.
The federal Department of Education, Employment and Workplace Relations indicator of employment rose by 0.095 in October to minus 0.073 points - its third rise in a row.
‘‘It is still too early to confirm that a renewed quickening in the pace of employment growth above its long-term trend rate of 1.6 per cent per annum is in prospect, because the indicator has risen for fewer than six consecutive months,’’ the department said.
3.23pm: Over the ditch to Wellington, where shares in Steel & Tube Holdings fell the most in almost four years after Arrium sold off its 50.3 per cent stake in the New Zealand steel distributor.
Arrium - formerly OneSteel - sold 44.5 million Steel & Tube shares at NZ$2.05 apiece, a 15 per cent discount to yesterday’s closing price. The stock fell 8.3 per cent, its biggest decline since October 2008.
Arrium said the the share sale was expected to raise $NZ91 million ($A74 million) to reduce debt,
‘‘This is a positive development, providing greater liquidity in the trading of Steel & Tube shares,’’ chief executive officer Dave Taylor said.
3.10pm: More on Fortescue Metals and its annual report. The miner believes iron ore prices will firm in the short term and the company will emerge stronger, despite shedding 1000 jobs and shelving its expansion plans.
While the company’s decision to sack employees and contractors in August had caused ‘‘real pain’’, slowing the expansion plans had been necessary and staff would be welcome back ‘‘whenever the opportunity arises’’, chairman Andrew Forrest said. He went on:
While we endured hardships during the first few months of the 2013 financial year, we remain confident iron ore prices will firm and we will emerge in an even stronger position in the months and years ahead, We continue to see strong demand from our customers, new and old, as we sign up commitments for additional tonnes of iron ore to be met by our expansion.’’
3.08pm: Administrators for Gunns say answers for creditors hit by the timber company’s collapse are still weeks away.
Administrator PPB Advisory has hosted a first meeting in Launceston, telling creditors it is too early to say whether they will receive the money they are owed.
‘‘It’s fair to say that they didn’t get the answers they were looking for today,’’ PPB’s Daniel Bryant told reporters after the meeting.
‘‘Unfortunately we can’t give that answer today, two weeks into administration.
’’Describing the meeting - at a rowing club opposite the former timber giant’s headquarters - as more of an ‘‘information session’’, Mr Bryant said creditors would know more at a follow-up session expected to take place in around three weeks.
2.55pm: Fortescue's annual report shows chief executive Nev Power received $3.01 million in remuneration in fiscal 2012, while chairman and founder Andrew Forrest was paid $165,677.
Executive Peter Meurs received $8.15 million, including $5.83 million in share based options.
2.44pm: Investors should double the amount of gold they hold as the value of paper currency diminishes along with the prospects for global economic growth, says a senior executive at Coutts, the private banking arm of Britain's Royal Bank of Scotland.
Ideally, investors should aim to have 7 to 8 per cent of their assets in gold, above the wealth management industry's average of 3 per cent, Gary Dugan, Coutts' chief investment officer for Asia and Middle East, told Reuters.
"What's happening in precious metals is that they are becoming more mainstream," Dugan said, adding that ten years ago investors rarely held any gold in their portfolios. "Some of the clients ask where gold prices are going, and I say don't even think about prices. It's a store of value."
Spot gold was trading above $US1760 an ounce today, down from an 11-month high of $US1795.69 struck last week on support from recent stimulus measures taken up by key central banks.
Dugan expects gold prices to rise towards $US2000 in the next several months, supported by short to medium-term factors including purchases by emerging-market central banks.
2.29pm: European Central Bank Governing Council member Ignazio Visco said speculation about a euro breakup is founded exclusively on investor concern about the credibility of governments’ fiscal-reform efforts.
“The risk we are seeing now of a collapse in the euro is only due to credibility,” Visco said at a panel discussion in Tokyo today. “The euro area has much lower debt than the US and Japan.”
Visco also said that the reasons for the sovereign debt crisis aren’t “only fiscal profligacy but also the failure to grow at a sufficient pace.”
2.21pm: Japan's Nikkei is trading at a two-month low on concerns that upcoming corporate earnings for the latest quarter would be hurt by sluggish global growth.
By the midday break, the Nikkei shed 1.7 per cent to 8621.06 after falling 1.1 per cent on Tuesday.
"We have seen a lot of shorts being put out today," a senior dealer at a foreign bank said.
Car makers came under pressure after they confirmed sharp declines in September sales in China after a territorial row between China and Japan sparked boycotts, raising concerns about their future in the world's biggest auto market.
2.12pm: It looks like Qantas is leading the way forward today, but so far it's not enough to get the ASX in the green.
2.02pm: Australia switched on its first utility-scale solar farm today, bringing the country a small step closer to achieving ambitious renewable energy use targets that traditional coal and gas power producers are now fighting to soften.
The Greenough River Solar project, just outside the small town of Walkaway in Western Australia state, is a joint-venture between Western Australian state-owned Verve Energy and US conglomerate General Electric. It is expected to generate 10 megawatts, enough to power 3,000 homes.
1.51pm: BusinessDay's Michael Pascoe has filed: Grasping the Chinese growth juggernaut.
Did you see the headline about the International Monetary Fund upgrading its forecast of Australia's economic growth? No, I didn't either, because there isn't one.
But that's what the IMF did yesterday. The IMF's previous global outlook guess had Australian growth for 2012 at 3 per cent. It has now boosted that estimate by 10 per cent to 3.3 per cent.
The growth upgrade for 2012 was understandably swamped by the growth downgrade for 2013, the IMF crystal ball retreating from a bullish 3.5 per cent to a more modest 3 per cent. Gee, that's the same number they had down for 2012 until a majority of the year's actual figures had been reported. So it goes.
Given that we're already in the final quarter of this calendar year, it's reasonable to be more interested in the year ahead, but what's less reasonable is for Australian media to continue to concentrate on the North Atlantic world rather than our Asian one and thus provide a less than accurate perspective of what matters for us.
1.41pm: Here's a snapshot of how markets around the region are performing:
- Nikkei(Japan): -1.7%
- Shanghai: -0.4%
- Taiwan: -0.3%
- South Korea: -1%
- Singapore: -0.8%
- New Zealand: -0.6%
1.05pm: CommSec’s Craig James has taken a look at this morning’s consumer sentiment data and says confidence certainly ‘‘isn’t going gangbusters, but it is on a more positive course’’:
Top-line consumer sentiment recorded its second consecutive rise but the gain of just one per cent in October could be categorised as disappointing – particularly in the context that the latest survey was done predominately after the surprise rate cut last Tuesday.
In fact given the extent of the fiscal and monetary stimulus over the past couple of months you could argue that sentiment levels should be far higher, but the average Aussie is still not convinced that the outlook is all that rosy. And the Reserve Bank would have to be questioning the immediate impact of interest rate cuts.
12.56pm: More here on Nine from BusinessDay's Colin Kruger. He writes:
Nine Entertainment’s junior lenders, lead by Goldman Sachs, have agreed to the media group’s proposal to end the deadlock that is threatening to send the company into administration.
Nine’s board were informed this morning that Goldman Sachs has agreed to the deal which would see mezzanine debt holders emerge with 7.5 per cent of Nine’s equity and warrants that would give them upside to any future sale of Nine above the current estimates of its value.
Goldman’s support for the Nine deal puts pressure on senior debt holders who argue Nine is not worth more than the $2.3 billion they’re owed which means they should be able to swap their debt for 100 epr cent of Nine’s equity.
12.43am: Stocks are now fighting back from a loss of 0.64 per cent reached shortly before 11am. The ASX200 is now down 0.3 per cent and trending up. Health, energy stocks and info tech stocks higher - all other sub indices are in the red. Gold stocks are leading losses with a 1.2 per cent slide, followed by telecomms at a gain of 0.7 per cent.
12.35pm: Oil and gas producer Beach Energy has made another oil discovery which could bring in 440,000 barrels of recoverable oil.
The Adelaide-based company said the new field oil discovery was made in Namur Sandstone in the Cooper Basin in central eastern Australia.
‘‘The pre-drill upside gross estimate for the Namur target of 440,000 barrels of recoverable oil is supported by wireline log data,’’ the company said in a statement.
Beach has a 75 per cent interest in the new discovery, while Cooper Energy holds a 25 per cent interest.
12.29pm: CMC foreign exchange dealer Tim Waterer said the Aussie dollar was struggling to rebound after forecasts for global growth from the IMF had kicked off a rise in the US dollar, weakening the Aussie. A short time ago, the currency was trading at $US1.0201, roughly in line with where it was earlier today.
‘‘The theme for markets in the last 24 hours has been this IMF global growth downgrade,’’ he said.
‘‘That has contributed to some renewed US dollar strength, although the Australian dollar has held its ground quite well, and hasn’t fallen as much as some other currencies.
‘‘I think that’s in part due to a rise in the iron ore price, which has gone up quite a bit - it’s gone up about $13 in about two days.’’
12.15pm: UK lender Barclays has appointed former investment banker Peter Young as chairman of its Australian operations.
The Australian chairman is a new role for the UK bank which has nearly $4 billion under assets here, including a loan book of just under a $1 billion.
Young was previously a member of the advisory board at Royal Bank of Scotland in Australia, a senior adviser at ABN Amro and was the chairman of investment banking in Australia and New Zealand at ABN Amro.
Young currently serves as chairman of the Queensland Investment Corporation and is a non-executive director of Fairfax Media, the publisher of this website.
12.04pm: Today’s rise in the Westpac MI consumer sentiment in October is a small positive change for those businesses facing consumer spending areas of the economy, says CBA economist Michael Workman:
- Lower interest rates are expected to gradually lift sentiment and, most probably, lift consumer spending.
- We expect another RBA rate cut on November 6, Melbourne Cup Day. It will mean that interest rate settings are well into the economic stimulatory territory, based on previous cycles.
- Traditionally, if mortgage rates move lower then there tends to be an uplift in both the purchase of existing dwellings and more construction of new dwellings.
1.56am: BHP Billiton borrowed more cheaply than the higher-rated big four banks as the world’s biggest mining company returned to its home bond market for the first time in more than a decade.
The miner sold $1 billion of five-year bonds yesterday in Australia’s largest-ever single issue of non-financial corporate notes, data compiled by Bloomberg show.
BHP paid 90 basis points more than swap rates, the data show. The premium for Westpac’s $725 million of February 2017 debt, rated a level higher, was quoted at 104 basis points.
‘‘The sale will help to fill a yawning gap for domestic investors starved of non-financial corporate bonds,’’ says Mark Bayley, a credit strategist with advisory company Aquasia. ‘‘The fact that BHP can price inside major banks highlights this demand.’’
11.45am: The Australian dollar is back below $US1.02, reversing a two-day gain, before data tomorrow that may show the unemployment rate climbed to the highest in three months.
‘‘The basic outlook is that employment growth remains weak,’’ says RBS currency strategist Greg Gibbs. ‘‘There are reasons to be more downbeat on the Aussie in the near term.’’
The Aussie fell on speculation the Reserve Bank of Australia will lower interest rates next month to help spur growth in the labour market. But demand for the currency was supported after prices for iron ore, Australia’s biggest export, surged to a two-month high.
The Australian is trading at $US1.0187 and 79.69 yen.
11.38am: Gina Rinehart and her joint venture partner GVK Power and Infrastructure have won government approval for their new coal terminal in Queensland, with 60 conditions to protect the environment.
The approval by the Environment Minister allows Rinehart and India-based GVK to expand the existing Port of Abbot Point to accommodate its $10 billion Alpha coal project, which was approved in August.
11.27am: A meeting of failed timber company Gunns’ creditors has begun in Launceston.
More than 100 people have turned up for the meeting organised by administrators PPB Advisory at a boat club opposite the company’s headquarters.
Recently sacked chief executive Greg L’Estrange and company secretary Wayne Chapman are among those inside.
The meeting is likely to decide whether a committee will be formed to represent creditors in dealings with the administrator.
A lone protester, Michael Hirst from the pro-forestry group Give It Back, said he was likely to lose a significant sum of money as a lease-hold timber grower for Gunns.
‘‘There’s going to be some angry people in there and rightly so,’’ he said.
Media have been excluded from the meeting.
11.23am: Japan’s Nikkei share average has lost 1.3 per cent in early trade on concerns that upcoming corporate earnings results for the latest quarter have been hit by slowing global growth.
The Nikkei was down 113.09 points to 8656.50 - a one-month low - while the broader Topix index dropped 1.2 per cent to 718.81.
11.18am: The joint venture between Gina Rinehart’s Hancock Prospecting and Indian giant GVK is a step closer to getting its massive Alpha Coal project off the ground, after securing environmental approvals today, Peter Ker writes
Federal Environment Minister Tony Burke has ruled that the second stage of the project had been approved, subject to a host of conditions, including seagrass health and measures to protect the Great Barrier Reef.
The project is located in Queensland’s Galilee Basin, and would transport coal to a new port terminal at Abbot Point.
Attention will now turn to seeking a funding solution for the project, which is estimated to cost more than $US7 billion and is hoped to produce first coal by 2016.
11.13am: The dollar is down this morning, trading at $US1.0189, down from $US1.0231 yesterday. Downgrades to global growth forecasts and fears of a poor quarterly earnings season in the US hurt global markets have been dragging on it today.
11.05am: BREAKING In a bid to stave off receivership, Nine Entertainment has thrown the hedge funds a bone, writes Adele Ferguson:
Private equity group and owner of Nine, CVC Asia Pacific, has decided to take Adrian MacKenzie off the board of Nine. It follows a decision last month that MacKenzie would retire from the post of CVC’s CEO at the end of the year.
It is understood that the hedge funds who are owed $2.3 billion in debt have been complaining about the potential conflict of interest with MacKenzie, who is CEO of CVC and who is also on the board of Nine, at such a crucial time in negotiations.
To remove any stench of independence, CVC has agreed that MacKenzie will step down immediately to allow discussions to continue.
Here's the full story
11.00am: Today's major chink of economic data is out. The Westpac Melbourne Institute Index of Consumer Sentiment for October has shown a slight improvement -up one per cent to 99.2 per cent - but Australians remain pessimistic about the national economy.
A reading below 100 indicates more consumers are pessimistic about the economy than optimistic.
Westpac chief economist Bill Evans said the result was disappointing, especially in light of the Reserve Bank of Australia’s (RBA) interest rate cut last Tuesday.
‘‘There were a number of reasons to have expected the Sentiment Index to have increased by more than only one per cent,’’ he said. He said the index had now been below 100 for eight months.
10.58am: IG Markets analyst Stan Shamu said that with iron ore and crude oil prices rising, "we could see some buying kick in’’.
‘‘Yesterday, we charged through 4500 on the back of strength in China lifting the big resource names.
‘‘A big liquidity injection into the country’s money markets was perhaps the main reason for the gains.
‘‘It will be interesting to see if speculation of China stimulus will rescue equities in the region yet again today.’’
10.56am: AWE is another energy company performing well in early trade. The oil and gas explorer has added 1.4 per cent, or 2 cents, to $1.40.
In a research note this morning, Greg Fraser at Fat Prophets wrote that the stock had come under some pressure this year but he maintained its hold rating:
The company faced a couple of disappointments in the past financial year with a delay in the BassGas project and some cost creep attached to the development, and finally a minor exploration miss at its new Indonesian field.
However, with the stock trading around current levels we view the stock price as well underpinned by the company’s reserves and resources (2P+2C), which grew 31% in the last year to approximately 189 million barrels of oil equivalent.
The Perth Basin [also] offers considerable potential, growth at Casino, Cliff Head and more blue-sky potential could come from the recently acquired blocks in Indonesia.
10.53am: There have been a few analyst updates out this morning:
- RBS rates Breville as a "new buy" with a price target of $6.48
- Goldman Sachs has raised GWA to "neutral"
- BWP Trust is cut to a "sell" by Goldman Sachs on valuation and inflation issues
10.47am: Shares are still falling. The All Ordinaries index is 22.3 points /lower, or 0.5 per cent, to 4504.3, while the benchmark S&P/ASX200 is 22.6 points lower, or 0.5 per cent, to 4482.7.
10.45am: Drillsearch was rated a new ‘neutral’ at Macquarie, with a price target of $1.70. As noted in the last post, it has gained about 0.6 per cent today, or 1 cent, to $1.58.
Macquarie said the near-term investment case rests on the company’s ability top grow high-margin reserves and the production base in the Western Flank oil exploration and development program.
10.40am: There’s a lot of red across markets this morning, but the energy sector is bravely pushing higher. It’s showing a gain of less than 0.1 per cent and is the only sector to have advanced on yesterday’s close. Here are some of the early winners:
- Awe: +1.09%
- Woodside Petroleum: +0.95%
- Aurora Oil & Gas: +0.81%
- Senex Energy: +0.78%
- Drillsearch Energy: +0.64%
- Whitehaven Coal: +0.16%
- Caltex: +0.12%
10.34am: Banking stocks are mixed so far this morning:
- CBA is 0.9% higher to $56.78
- ANZ is 0.31% lower to $25.54
- NAB is 0.11% lower to $26.27
- Westpac is 0.7% lower to $25.71
10.30am: Overall, losses on the ASX200 and All Ords have been contained to about 0.4 per cent in early trade, but gold stocks are down sharply, off 1.7 per cent.
Two of the three big miners, however, are enjoying the strong performance of the iron ore price since the end of China’s Golden Week holiday:
- BHP is flat at $33.49
- Rio is 0.23% higher to $55.83
- Fortescue is 1.5% lower to $3.89
10.28am: Debt-laden Nine Entertainment is reported to have offered Goldman Sachs between 5 and 7 per cent equity in the company’s restructure, in an effort to avoid calling in receivers.
Nine chairman Peter Bush and chief executive David Gyngell outlined a proposal to offer Goldman Sachs a small share of equity in the company over which the investment bank controls about $1 billion in debt, according to media reports. Under the terms of the deal, the executives proposed offering as much as 90 per cent of equity to hedge funds Oaktree Capital and Apollo Global Management, which together control around $2.8 billion in debt.
The meeting between the executives and the creditors late yesterday is said to have lasted less than an hour. Covenants over the company's debt are due in February, leaving the prospect of receivership on the cards.
10.24am: Here are some of the early sliders on the ASX200:
- Intrepid Mines: -5.00%
- Alacer Gold: -4.28%
- St Barbara: -3.60%
- Fletcher Building: -3.06%
- Aquila Resources: -2.61%
10.20am: Here are some of the early risers on the ASX200:
- Awe: +1.81%
- Sigma Pharmaceuticals: +1.54%
- Mermaid Marine: +0.96%
- Goodman Fielder: +0.95
- Pacific Brands: +0.83%
10.15am: All sectors are trading lower on the ASX200:
- Consumer discretionaries: -0.61%
- Health: -0.61%
- Utilities: -0.53%
- Industrials: -0.47%
- Materials: -0.44%
- Telecoms: -0.42%
- Consumer staples: -0.39%
- Finance: -0.34%
- Energy: -0.18%
- Info tech: -0.15%
10.10am: In early trade, the All Ordinaries index is 14.7 points lower, or 0.3 per cent, to 4511.9, while the benchmark S&P/ASX200 is 15.2 points lower, or 0.3 per cent, to 4490.1.
10.06am: Early take - shares are heading down. Off 0.2 per cent in early trade.
9.55am: Australian bond futures prices are lower following a volatile overnight session.
RBC Capital Markets fixed income strategist Michael Turner said local bond futures had risen early in the session amid weakness in the euro currency and stock markets, but had since fallen back.
‘‘Australian bonds managed to drift off a litle bit later in the session,’’ he said. ‘‘So, it wasn’t your classic risk-off/bonds up move.’’
At 8.30 AEDT on Wednesday, the December 10-year bond futures contract was trading at 97.015 (implying a yield of 2.985 per cent), down from 97.030 (2.970 per cent) on Tuesday. The December three-year bond futures contract was at 97.630 (2.370 per cent), down from 97.650 (2.350 per cent).
9.48am: At least on local analyst thinks early losses could exceed the mark set by the futures market. Leyland Asset Management senior portfolio manager Rohan Schmidt said local stocks could drop as much as 1 per cent in sympathy with the weaker session in the US.
"There will be a negative sentiment in the market today," he said, following the expectation of weaker corporate earnings in the US and the after-effects of the IMF downgrade to the world growth outlook.
An upturn in the iron ore price yesterday, though, may help iron ore mining stocks, he said. Mr Schmidt predicted bank stocks would fall with the overall market as concerns about a housing bubble being stoked by lower rates swirled in the background.
"Our major concern with the banking sector is its exposure to residential real estate here. Even though housing has gone down, we still think it's a bubble. Cutting rates is only going to to exacerbate that bubble at some stage," he said.
The Reserve Bank cut rates this month to 3.25 per cent, with markets tipping another rate cut to come in November.
9.43am: China iron ore had another strong day. Second day back from a week-long holiday and it has added more than 10 per cent. The bulk commodity added $US6.80 to $US117.20 a metric tonne, taking the two day gain to $US13. But the big miners posted mixed returns in US trade. BHP fell 0.26 per cent on Wall Street but Rio added 1.46 per cent.
9.39am: Some analyst rating changes for today:
- Westpac cut to 'underweight' at JPMorgan
- Arrium rated new 'hold' at VTB Capital
- James Hardie cut to 'sell' at RBS
- Boral cut to 'sell' at RBS
- Drillsearch Energy rated new 'neutral' at Macquarie
- Nufarm cut to 'neutral' from 'buy' at RBS
- Coca-Cola Amatil downgraded to 'sell' from 'neutral' at UBS
- AMP cut to 'neutral' at Goldman Sachs
9.36am: Transurban’s revenue from its toll roads in Melbourne and Sydney rose to $195 million in the three months to September.
Transurban owns Melbourne’s CityLink toll road, and the M2, Lane Cove Tunnel and Eastern Distributor in Sydney. It also has a 50 per cent stake in Sydney’s M7 and M5 motorways.
The company said toll revenue was $195.1 million in the three months to September 30, up 1.3 per cent from the same period in the previous year.
9.32am: With US investors braced for a disappointing earnings season, Alcoa bucked expectations by reporting improved productivity at its primary metals and engineered-products units during the third quarter.
Still, Alcoa's net loss was $US143 million, or 13 cents a share, compared with net income of $US172 million, or 15 cents, a year earlier, the New York-based company said today in a statement.
"Alcoa's done a better job than I would have thought given the fairly negative backdrop over the last year," said Toronto-based John Stephenson at First Asset Investment Managemen.
9.29am: Worries about US earnings and the fallout from the IMF's gloomier outlook for the global growth pushed markets lower last night, and Aussie stocks look set to follow. The futures markets points to an early loss of close enough to 1 per cent.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:
- The SPI was 34 points lower at 4475
- The $A was trading at $US1.0202
- In the US, the S&P500 lost 1% to 1441.48
- In Europe, the FTSE100 lost 0.54% to 5810.25
- China iron ore added $US6.80 to $US117.20 a metric tonne
- Gold lost 0.6% to $US1765 an ounce
- WTI crude oil added $US3.06 to $US92.39 a barrel
- RJ/CRB commodities index lost 0.47% to 306.17
9.28am: Good morning folks. Welcome to the Markets Live blog for Wednesday.
Contributors: Thomas Hunter, Richard Hughes, Jens Meyer
This blog is not intended as investment advice
BusinessDay with agencies