Markets Live: Telstra leads shares down

That's all for today - thanks everyone for reading the blog and please do come back tomorrow from 9.30am.

Here's our evening wrap of today's session.

Some things to look out for overnight are US retail sales numbers and the US producer price index.

Locally, there's still not much happening on the corporate front tomorrow, but some more economic data is expected:

11.00am - Westpac/Melbourne Institute Survey of Consumer Sentiment
11.30am - ABS Lending finance for November
11.30am - ABS New motor vehicle sales for December


Billabong was one of the day's biggest winners, surging 16 per cent to 98 cents after the struggling surfwear company received a second takeover proposal.

Billabong received an offer from a consortium led by San Francisco-based private equity firm Altamont Capital Partners and clothing group VF Corp worth $1.10 per share. That matches a $556 million bid led by Billabong's US boss, Paul Naude, and New York-based private equity firm Sycamore Partners.


Some more on Rio: the miner stands to benefit the most from a healthy market for ore, given its sub-$US30 per tonne average production costs and heavy weighting to the sector versus its other business units.

A $US10 per tonne rise in the iron ore price can increase Rio's full-year earnings by more than 10 per cent.

UBS is forecasting a drop in Rio Tinto's earnings before interest and tax to $US13 billion in 2012 from $US15.3 billion in 2011 after iron ore prices came under pressure for most of last year.

In the last month, iron ore has rebounded by about a third, although a further rally will hinge on whether Chinese demand outpaces the rise in global supply this year.

Rio Tinto is targeting an annual production rate of 290 million tonnes by the end of 2013 (from 253 million tonnes in 2012) before lifting output to 360 million tonnes in 2015 pending board approval. The tonnage also includes output from the company's iron ore mines in Canada.

It said it had most board approvals in place for the next phase of its expansion work to take output to 360 million tonnes.

Here's how some of the blue chips performed:

  • BHP: -0.1%
  • Rio: -0.1%
  • ANZ: +0.2%
  • CBA: +0.2%
  • NAB: -0.1%
  • Westpac: -0.5%
  • Fortescue: -1.9%
  • Telstra: -1.3%
  • Woolies: +0.1%
  • Wesfarmers: +0.1%
  • Newcrest: +2.05%
  • QBE -1.9%
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Among the sectors, materials lost 0.2 per cent, industrials fell 0.5 per cent, telcos dropped 1.3 per cent, while financials ended flat, gold gained 0.8 per cent and energy stocks added 0.6 per cent.


The market has closed slightly lower. The benchmark S&P/ASX200 index slipped 3.1 points, or 0.1 per cent, to 4716.6, while the broader All Ords lost 2.7 points, or 0.1 per cent, to 4743.


The Australian dollar has been caught in choppy trade against the yen today as a warning against excessive yen weakness by Japanese Economics Minister Akira Amari gave markets an excuse to trim large short yen positions.

The dollar has dropped 0.7 per cent on the day to 93.77 yen, from a four-year peak of 94.63 yen.

"The Aussie went from 79 to 95 yen (in three months), so around 20 per cent... That is quite a dramatic move. Having the currency gone so far already, left it vulnerable to a pullback," said Matthew Johnson, a rate strategist at UBS.

He said the Japanese government would probably still favour more yen weakness and does not expect a major correction.

"(But) It's certainly a reminder to people that it's not a one-way bet," Johnson added.

The yen leapt across the board after Amari said an excessively soft yen could have a negative impact on people's livelihoods through higher import prices.

The comments prompted some participants to book profits on massive long positions for the dollar. The yen rebound weighed on the dollar against its US counterpart.

The Aussie was contained at $US1.0555, from $US1.0568 early, though still within easy reach of a four-month peak just shy of $US1.0600 set last week.

Rio Tinto has achieved its goal of producing more than 250 million tonnes of iron ore in 2012, after a strong three months for the company at its Pilbara operations.

Rio's final iron ore production tally of 253 million tonnes was achieved by producing 66 million tonnes in the three months to December 31.

That figure includes some volumes that are owned by joint venture partners, such as Gina Rinehart's Hancock Prospecting.

Rio's share of annual iron ore production was 199 million tonnes. The record iron ore result was contained in Rio's December quarter results which were published to market shortly after 3pm.

Rio shares were down 49 cents to $65.50

Origin Energy, Australia’s biggest electricity and gas retailer, said it will hold onto the proposed Stockyard Hill wind farm in Victoria state after considering a sale of the project.

“Stockyard Hill is one of Australia’s premier wind farm sites and Origin has elected to retain the right to commercialize it at the best time,” the Sydney-based company said today.

Origin last year started a process to identify development options for Stockyard Hill, which has approval for 157 wind turbines at a site west of Melbourne.

The company, also ConocoPhillips’s partner in a $23 billion liquefied natural gas project in Queensland state, has said it sought proposals from companies interested in supplying wind turbines, building Stockyard Hill or buying the development.

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Fortescue has terminated a proposed deal that would have seen the company diversify into Western Australian shale gas.

Less than two months after shale minnow Oil Basin Limited claimed to have secured Fortescue as a cornerstone investor and new biggest shareholder, Oil Basins conceded that Fortescue had walked away from the proposal.

Cancellation of the proposed deal does not come as a massive surprise, given it was behind schedule and had attracted the attention of Australia's corporate regulator in relation to movements in the Oil Basins share price prior to it being announced.

When announced on November 15 the deal lifted Oil Basins share price by about 35 per cent, as it appeared to represent a major coup for the tiny company to pair with a big company like Fortescue.

Worth just $4.2 million, the deal was financially trivial to Fortescue, but loomed as a symbolically significant diversification beyond iron ore.

Fortescue shares are down 1.9 per cent, while Oil Basins is in a trading halt.

asian markets

Meanwhile, Shanghai stocks are extending yesterday's 3.1 per cent rally, adding another 0.4 per cent.

The Shanghai Composite Index has risen 18.5 per cent since December 3 to just above 2300 points at midday today.

The rally could be in part due to the suggestions by the Chinese government that it could allow foreign investoers greater access to Chinese equity markets, Arab Bank’s David Scutt says.

Guo Shuqing, chairman of the China Securities Regulatory Commission, said on Monday that the money invested by foreigners in China’s stock and bond market accounts “at the moment” for 1.5 to 1.6 per cent of the total.

“So I think at least we can increase it 10 times, nine times,” he said at the Asia Financial Forum in Hong Kong.

Scutt says the recent spike could also be due to China’s preparations ahead of the official changeover of political leadership. Xi Jinping is set to take over as China’s president in March.

Here's a chart form Bloomberg showing the steep climb of the Shanghai Composite since early December:


The ASX200 has just plunged into the red and is currently down 0.1 per cent, led lower by Telstra and some of the miners.

The materials sector is down 0.2%, financials are also down (-0.1%) as are industrials (-0.5%), while energy stocks are up 0.6 per cent.

Here's how some of the blue chips are doing:

  • BHP: flat
  • Rio: -0.8%
  • ANZ: +0.1%
  • CBA: +0.1%
  • NAB: flat
  • Westpac: -0.4%
  • Fortescue: -1.9%
  • Telstra: -1%

Billabong faces a break-up if the latest suitor successfully acquires the struggling surfwear maker.

VF Corp, the retailer behind other well-known brands such as Timberland, The North Face and Vans, says it's only interested in the Billabong brand itself.

Its private equity partner, Altamont Capital Partners, is interested in the rest of the business which includes the vast retail network that proved to be the company’s undoing.

‘‘This interest is consistent with VF’s stated intent to pursue acquisitions, particularly in the Action Sports category, to continue to build shareholder value,’’ VF said in a statement. ‘‘Altamont’s interest lies in acquiring Billabong’s other brands and related assets, and is predicated on the firm’s mandate to invest in situations where it can provide strategic and operational support to build business success stories.’’

VF said the $1.10 per share proposal did not constitute a binding offer for Billabong nor did it impose any obligation on VF or Altamont to make an offer for Billabong.

Shares are up 12.4 per cent at 95 cents.

While America frets over the debt ceiling, the amount Australia owes its creditors is insignificant, economist Stephen Koukoulas suggests:

The size of Australia's GDP is roughly $1.3 trillion.

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As the world waits for Oprah's interview with Lance Armstrong, here's an interesting read in the New York Times: The banker who put his faith in Armstrong

When Lance Armstrong’s interview with Oprah Winfrey about his suspected use of illegal performance-enhancing drugs is broadcast on Thursday (US time), an investment banker will most likely be watching it very carefully (and nervously): Thomas Weisel.

Mr. Weisel is a legend in finance and Silicon Valley. He was the banker behind Yahoo’s public offering and some of the biggest deals during the dot-com bubble. He famously sold the firm he ran, Montgomery Securities, for $1.2 billion in 1997. And he sold his next firm, Thomas Weisel Partners, for $300 million to Stifel Financial in 2010.

But it is Mr. Weisel’s extracurricular activity that connects him to the news of the moment: he was Mr. Armstrong’s biggest financial backer and the single individual most responsible for the money machine that propelled Mr. Armstrong’s career.

Depending on what Mr. Armstrong says in the interview about his purported doping, Mr. Weisel, who was a co-owner of the United States Postal Service Pro Cycling Team through a cycling management firm that he helped found called Tailwind Sports, could be subject along with his partners to lawsuits from corporate sponsors seeking millions of dollars. Already, there is a False Claims Act case contending that Mr. Armstrong and the team defrauded the Postal Service.

Billabong looks in an unassailable position at the head of the field on the ASX200 today. It's currently sitting on a gain of 12.43 per cent. The general market is up 0.2 per cent. Here are the other major gainers on the benchmark index:

  • Beadell Resources: +6.49%
  • Mount Gibson Iron: +5.59%
  • Bathurst Resources: +4.82%
  • FKP Property: +4.2%
  • Metcash: +3.22%
  • Seven West: +3.1%
  • Ten: +3.03%

A post-script to yesterday's 3.2 per cent gain on the Shanghai composite from Arab Bank's David Scutt:


One for readers with frustrated ambitions of joining the pro golf tour. Here's Bloomberg on why Rory McIlroy is not the new Tiger Woods, but why it was wise for Nike to sign him on a reported $US250 million sponsorship deal.

Given McIlroy’s effortless talent, beaming smile, aw-shucks disposition, and celebrity girlfriend (tennis star Caroline Wozniacki), the transition would seem to make sense. It’s undeniable that he represents the future of golf. But it’s doubtful Nike’s investment in McIlroy will produce the Tiger-size returns the company’s executives and shareholders are hoping for.


A bit more on the dollar. Easy Forex senior currency dealer Francisco Solar said the currency traded in a tight range both before and after the public question and answer session with Dr Bernanke earlier today.

‘‘There has been nothing really to warrant a move higher or lower, so it’s been holding in the high 105 (US cent) area,’’ he said.

‘‘Dr Bernanke’s speech didn’t really move the markets. It was pretty much the same rhetoric.’’ Since 7am AEDT, the Australian dollar has traded between 105.56 US cents and 105.70 US cents.

But Mr Solar said Dr Bernanke’s assertion the Fed wouldn’t want to ‘‘raise interest rates prematurely’’ had weakened the US dollar slightly.

Mr Solar said the Australian dollar was likely to remain in a narrow range today but would be driven by events in the US over the next few days, ahead of the release of key domestic employment figures for December on Thursday.

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