And that's it for Markets Live today.
Thanks for reading and for your comments.
See you all again tomorrow morning from 9am.
And that's it for Markets Live today.
Thanks for reading and for your comments.
See you all again tomorrow morning from 9am.
The ASX pulled higher on Thursday, with gains in the banking sector helping the benchmark to its first positive session in four days.
The S&P/ASX 200 index rose 31 points, or 0.5 per cent, to 5977. The broader All Ordinaries rose 30 points, or 0.5 per cent, to 6060.
The Australian dollar traded at US75.46¢, taking centre stage on Thursday, with traders selling out of the currency immediately after the release of disappointing October trade data.
The Aussie is approaching the US75¢ level and Morgan Stanley equity strategists suggested that investors should position for the currency to fall even further.
They've pencilled in a level of US65¢ by the first quarter of 2019 and said that they see good alpha opportunity around positioning in stocks that will benefit from the forecast decline in the currency.
"These can be true global growers, US-centric, largely translators or domestic beneficiaries," they said.
Australian dollar-exposed companies advancing on Thursday included Treasury Wines Estates, with the wine maker up 1.7 per cent at $16.12.
Meanwhile, banks were taking back some losses made over the past week in the wake of last week's news that the sector is facing a royal commission.
CBA ended the session up 0.5 per cent at $78.97, NAB climbed 0.8 per cent to $29.68, ANZ rose 0.9 per cent to $28.48 and Westpac advanced 1.3 per cent to $31.38
Metal markets have seen some big moves this week, with copper falling sharply on Tuesday and iron ore sagging on Wednesday amid concern about the outlook for the Chinese economy coupled with a stronger US dollar.
Australian-listed miners dropped again on Thursday, with BHP down 0.2 per cent at $27.14, South32 lower by 0.6 per cent at $3.22 and Fortescue down 0.4 per cent at $4.57.
A handful of companies updated their investors on corporate developments, with Nufarm falling XX after it warned its half-year earnings would suffer from weak November trade and the planned shutdown of its Victorian facility.
A2 Milk shares fell 3 per cent to $7.14 after the milk producer settled out of court with Lion Dairy & Drinks over a long-running dispute about the rights to use the term "A2 protein" on their labels.
Other big decliners included BT Investment, down 4 per cent, and Vocus, down 4.4 per cent.
Brokers weighed in as well on Thursday, with salmon producer Tassal Group falling 6.5 per cent to $3.60 after a downgrade to underweight at JPMorgan.
A big miss on the trade surplus caused the Australian dollar to slump to the lowest level since June, underscoring the economy's vulnerability to lower iron ore prices.
The trade surplus for October came in at $105 million, narrowing month-on-month from a revised $1.6 billion surplus recorded in September, figures released on Thursday showed. Economists were looking for a surplus of about $1.4 billion.
The key weakness in the October trade report was the health of export earnings, which fell by $903 million, or 2.8 per cent, most of which is attributed to the slump in iron ore prices and lower volumes of coal exports upon the tightening of environmental controls in China. It was the largest drop in exports since April.
Iron ore has since recovered, but as Westpac economists noted, the benefit of expanded capacity in the liquefied natural gas sector was undetectable in the latest trade report. Dalian iron ore futures fell 2.6 per cent overnight after spot prices rallied this week above $US70 a tonne, for a gain of 20 per cent since late October.
That puts the Australian currency at US75.44¢, a drop of 0.3 per cent for the session, and with the US75¢ level firmly in reach.
Joanne Masters, economist at ANZ, expects that as more LNG comes on stream, that will provide a solid buffer against deficits.
"I would have thought it's pretty hard to imagine we're going to see a sustained run of trade deficits on just that alone," she said.
Ms Masters emphasised the rise in imports, and given evidence that shelf prices for goods are falling, inferred that healthy volumes were behind the numbers.
"It tells you that retailers are perhaps expecting a reasonable Christmas spending season."
This week, retail sales rebounded 0.5 per cent in October, however, third-quarter economic growth came in at a slightly softer than expected 0.6 per cent as consumption disappointed and business investment firmed.
Here's regular markets live contributor Patrick Commins on the search for "good value" in 2018.
In 2018, the search for yield takes Pictet Asset Management's chief strategist Luca Paolini to Russia seeking bonds earning 7.5 per cent.
Famed contrarian investor Michael Hasenstab of Franklin Templeton is worried investors are way too complacent about higher US bond rates.
The billionaire Michael Hintze of CQS remains positive on the global outlook, but frets about geopolitical risks.
After a barnstorming 2017, all three high-profile offshore investors are talking to their clients about what 2018 might bring. And the powerful gains of this year have left many feeling "queasy", Keith Haydon, chief investment officer at global hedge fund group Man FRM, says.
Haydon points out that if the $US70 trillion ($93 trillion) global pool of stocks has expanded by 15 per cent this year, then in equities alone we have seen a repricing of asset values of around $US10 trillion, or around three years' worth of real global GDP growth.
"Was this earned or borrowed?" Haydon asks. "Did we really earn it or will we have to give it all back later? When are we assessing our reaction to profits rationally and when are we suffering from hubris? These are increasingly queasy questions."
Nonetheless, for now it appears many investors are prepared to make hay while the sun shines.
London-based Paolini is upbeat about the prospects for the coming year, which place him among the majority of strategists and investors around the world. While not well known locally, Pictet is a massive Swiss-based asset manager with $670 billion under management and a lineage that stretches back to 1805.
Equities should be well supported by the continued synchronised global economic expansion, Paolini says.
"Emerging economies should fare especially well, benefiting from low inflation and a recovery in commodity prices," he says. "Equities may be expensive, particularly US, but as long as corporate earnings are going up they've still got a way to run."
The banks are the best performing sector this afternoon, with the big four lenders shaking off a bit of early weakness to advance in a solidly higher ASX.
The benchmark is up 35 points, or 0.6 per cent, at 5980, as it claws its back to the 6000 mark. The All Ordinaries is up 32 points, or 0.5 per cent, at 6062 and the Australian dollar is trading at US75.53 cents.
Banks have struggled over the past week, after news of royal commission into the sector emerged last Thursday.
But the sector saw a bit of buying today, with Westpac up 1.4 per cent, ANZ up 1 per cent, NAB higher by 0.8 per cent and CBA edging higher by 0.3 per cent.
Treasury Wine Estates climbed 2.2 per cent and Goodman Group advanced 1.6 per cent as the Australian dollar headed towards US75 cents following some disappointing trade data.
Metal markets have seen some big moves this week, with copper falling sharply on Tuesday and iron ore sagging on Wednesday, and miners continued to lag on Thursday, with BHP down 0.3 per cent, South32 lower by 0.6 per cent and Fortescue down 0.4 per cent.
Tassal Group dropped 7.5 per cent after a downgrade to underweight at JPMorgan.
Nufarm warned today its half-year earnings would suffer from weak November trade and the planned shutdown of its Victorian facility.
Chief executive Greg Hunt on Thursday told the company's annual general meeting that Nufarm expected half-year earnings of $70 million to $80 million.
That compares to $85 million in underlying earnings before interest and tax in the prior corresponding period.
Nufarm's November sales had been hit by a delay in the farming season across parts of Latin America and a 10 per cent fall in the Brazilian market, year-on- year, he said.
North America had had a good start to the year year with solid early order sales in the turf and ornamentals segments.
And, despite optimism for local summer cropping thanks to recent rains on the east coast, Nufarm expects its Australian earnings will be lower due to scheduled shutdowns at its Laverton, Victoria, plant.
Chairman Donald McGauchie said industry conditions remained tight and supply constraints on raw materials coming out of China would put pressure on prices but continued earnings growth was expected over the 2018 and 2019 financial years.
That was due to the company capitalising on several opportunities that had emerged out of the industry consolidation in 2017, he said.
Nufarm's acquisition of a new portfolio of European crop protection formulations in October is expected to add mid-to-high single digit earnings per share (pre- amortisation) in the first full year of ownership.
"For the full year, we still anticipate the combination of revenue growth and cost savings benefits to result in earnings growth for the group - prior to any contribution from the European acquisitions," Mr Hunt said.
Mr Hunt said the transactions were currently with the European Commission and that guidance on their contribution would be provided in the first quarter of the 2018 calendar year.
Shares are down 1.3 per cent.
China's banks should increase their capital buffers to protect against any sudden economic downturn following a credit boom, the International Monetary Fund said.
In its first comprehensive assessment of China's financial system since 2011, the IMF recommended "a gradual and targeted increase in bank capital."
In a worst-case scenario, IMF stress tests suggested the country's lenders would face a capital shortfall equivalent to 2.5 percent of China's gross domestic product - about $280 billion in 2016 - together with ballooning soured loans.
Overall, 27 of 33 banks stress-tested by the fund, covering about three quarters of China's banking-system assets, were under-capitalized by at least one measure.
A larger financial cushion would better reflect potentially underestimated risks stemming from the banks' exposure to opaque investments, and absorb losses as implicit government guarantees are removed, the fund said.
China's top four banks, led by the world's largest lender by assets Industrial & Commercial Bank of China, have enough capital, the fund said. But it said the nation's smaller lenders, including those focused on individual cities "appear vulnerable."
The findings reflect the burden on a financial system that's doubled in size in 10 years while China evolves from an export-oriented economy to one based on services and consumption. The call for capital highlights the risks during that transition caused by government policies aimed at protecting jobs or propping up failing state entities.
"Stress test results reveal widespread under-capitalizationof banks other than the Big Four banks under a severely adverse scenario," the fund said in its report. "Increasing capital would enhance the resilience and credibility of the financial system, as well as reassure markets." The fund didn't name the specific banks that need more capital.
A2 Milk shares are down 3.3 per cent at $7.12 today.
The firm settled out of court with Lion Dairy & Drinks over a long-running dispute about the rights to use the term "A2 protein" on their labels.
A2 Milk and Lion Dairy & Drinks did not provide details about whether Lion, which is owned by Japanese brewing giant Kirin Corporation, will continue to use A2 on its PURA and Dairy Farmers milk labels.
A2 Milk had argued that Lion was engaging in misleading and deceptive conduct by including the statement "contains A2 proteins" as their milk also contains A1 proteins.
"The parties have mutually agreed not to proceed with their cases against each other. The terms of the settlement are confidential. The parties are very satisfied with the outcome and will remain focused on building and maintaining the strength of their individual brands," the companies said in a statement.
In late August, Lion lodged cross-claims with the court arguing that A2's representations that A2 milk makes many customers feel better than after drinking normal milk are false.
A2 chief executive Geoffrey Babidge, who declined to comment further when contacted, said last month the company would consider paying dividends after reporting its net profit had increased by 138 per cent in the first four months to October to $NZ52.3 million.
Earnings before interest, tax, depreciation and amortisation rose 120 per cent to $NZ78.4 million while revenue climbed 69 per cent to $NZ262.2 million.
Morgan Stanley's equity strategy team have taken a look at the weaker dollar and possible impact on the equity market. Here's what they had to say:
Our global FX team is calling for a correction in the AUD to 0.67 over the course of 2018 as subdued commodity prices, weaker relative rate expectations and ultimately inverse carry combine with negative housing correlations.
The ASX 200 has a meaningful basket of stocks that offer leverage to a weaker AUD.
We estimate in Industrials the market weight of these names is circa 20 per cent and recommend an overweight exposure to this theme. The trade has worked since 2013 and we see an extension of this performance into 2018.
Indeed Australian dollar spot now appears to be below what we assume is embedded in consensus forecasts for earnings and as such a tailwind is building for the direction of earnings revisions from the first half of 2018.
Notwithstanding muted expected ASX 200 Index returns over the next 12 months, we see good alpha opportunity around positioning in stocks that will benefit from a forecast decline in the AUD. These can be true global growers, US centric, largely translators or domestic beneficiaries.
We also see merit in holding resource and energy exposures given the sustained momentum forecast in global growth as well as improved quantum and quality of earnings for key names.
There will be a continuing build in both fiscal response and infrastructure offset to the housing and consumer headwinds – finding exposure here is key, as will be a preference for non-bank financial stocks.
An adjustment downward in the AUD is required to balance the economy. For the market it adds a tailwind to many stocks that already have stronger growth outlooks in offshore markets. Closer to home domestic beneficiaries around education and tourism are in focus as well as the prospect of an increase in inbound M&A activity.
The one sector where it looms as a negative is retail where COGS would ultimately increase at a time where consumers' willingness to accept higher prices is limited.
The Australian dollar dropped 0.3 per cent to US75.44 cents after the release of trade data for October and is now trading back at mid-June levels, after hitting a peak of more than US80 cents back in September.
The country's trade surplus narrowed to $105 million in October, from a revised $1.6 billion surplus in September.
Exports fell 3.0 per cent in the month while imports were up 2.0 per cent, the Australian Bureau of Statistics said.
"The slump in the international trade surplus, to $0.1bn in October from $1.6bn in September (consensus $1.4bn) is due to the reduction in demand for iron ore and coal exports linked to the pollution crackdown in China and a rise in the cost of imported oil.," said Paul Dales at Capital Economics.
"Australia has still managed to notch up 12 consecutive months of a trade surplus for the first time since 2011, but only just.
"The 2.8% m/m fall in export values was mainly due to a 10% m/m decline in iron ore exports and partly due to a 3% m/m drop in coal exports. Both were driven by lower prices and lower quantities, the latter as China's demand for polluting commodities has been reduced by the authorities.
"Overall, it's possible that the total trade surplus will turn into a deficit in the coming months, at least for a short while. And while it is early days yet, after making a neutral contribution to GDP growth in the third quarter, net exports may be a small drag on GDP growth in the fourth quarter."