That’s it for Markets Live today and for the week.
You can read a wrap-up of the action on the markets here.
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Falling iron ore prices have winded Australia’s share market, with the big miners dragging the local bourse to finish the week firmly in the red.
The benchmark S&P/ASX 200 Index fell 27.2 points, or 0.5 per cent, to 5598.7 for the week, as investors digested a sea of data and many companies traded ex-dividend.
But the iron ore producers had a particularly tough week, especially Andrew Forrest’s Fortescue Metals Group, which plunged 6 per cent to $3.92 – its lowest since June last year.
Fortescue has lost 32.7 per cent this year, or about $6 billion of its market cap, causing the value of Mr Forrest’s stake in the miner to shrink by $2 billion to $4 billion.
But it was not just Fortescue. BHP lost 2.8 per cent over the week to close at $35.65. It also traded ex-dividend on Tuesday. Rival Rio Tinto shed 2.1 per cent, to $61.30.
Patersons Securities strategists Tony Farnham blamed falling iron ore prices, with the metal measured out of Tianjin port, diving more than 4 per cent on the first four days of the week to a five-year low at $US84.30 a tonne on Thursday night.
“Certainly from a materials perspective the focus this week has been the slide in iron ore prices,” Mr Farnham said.
Two smaller miners of the bulk metal were among the week’s top 10 worst performing stocks on the ASX. BC Iron head headed the list, losing 19.7 per cent to $2.24, while Mount Gibson fell 8 per cent to 63.5 cents.
“The smaller ones are further up the cost curve,” Mr Farnham said. “It’s self evident that the BHPs and Rios of this world can handle lower iron prices more than smaller guys.”
Elsewhere, Mr Farnham said shares in energy companies had also been hit as geopolitical risks in the Ukraine and northern Iraq appeared to ease.
Woodside Petroleum lost 0.2 per cent to $42.96 on Friday, while Santos finished 0.3 per cent to $15.11 and respectively. But for the week both companies finished higher with Woodside up 0.6 per cent and Santos 1.9 per cent.
Standard & Poor's has cautioned against further stimulating the mortgage market, saying this would increase the risk of a housing bust and make Australia more vulnerable in a financial shock.
The global credit ratings agency also backed the big banks' opposition to "bail-in" rules for creditors, warning the major lenders could be stripped of their AA- credit ratings if Australia went down this path.
In a submission to the financial system inquiry led by former Commonwealth Bank chief David Murray, S&P argued against several policies floated by Mr Murray to help smaller lenders compete in home lending.
Regional banks have told the inquiry they face an unfair playing field under current rules that allow the big four banks and Macquarie about half as much capital for every dollar lent out, because of the larger banks' more advanced risk systems.
But in a blow to the regional banks' push, S&P said giving the smaller lenders capital breaks would create new risks in the banking system.
And here are the best and worst among the top 200 names.
It was a particularly tough day for gold miners, despite the ECB ramping up its plans for more monetary easing.
Shares end the week on a sour note as banks and miners drive a 0.6 per cent loss in the benchmark index to its lowest close in almost three weeks.
The ASX 200 and All Ords both finished Friday's session 33 points lower at 5598.7 and 5598.9, respectively.
BHP was the biggest single drag on the market, down 1 per cent, while Rio fell 1.4 per cent as the iron ore price continued to plunge. The Big Four all dropped, and CSL and Telstra added to the market's decline.
Challenger was the day's highlight, surging 4 per cent in a day when only 47 of the top 200 names advanced.
Australia has a growing cash problem, say analysts at Morgan Stanley.
Since the GFC Aussies have added $613 billion to bank deposits, a 57 per cent increase, equivalent to a compound annual growth rate of 8 per cent a year. Bank deposits - as tracked by the ABS's "M3" measure - for the first time are larger than the country's GDP, and are worth more than the total market cap of the ASX to boot.
Higher savings rates and de-leveraging among households explains the big run-up in cash piles, all hallmarks of a more conservative approach to finances among Australians.
But the analyst at Morgan Stanley think this is likely to "gradually" change, for three reasons:
First, the official cash rate is likely to languish at a record low 2.5%, or move lower, for an extended period. That should reduce the appeal of deposits.
Second, banks are now in a much stronger funding position allowing them to whittle away the premium offered to depositors.
Third, with lower global risks the logic for a high exposure to low-returning cash reserves is much weaker.
So where will that cash go? Shares? Bonds? Property?
Asian markets are mostly lower, in a case of 'sell the fact' after the ECB's rate cut:
‘‘We’re seeing a bit of profit-taking today following the recent rally,’’ says IG market strategist Ryan Huang. ‘‘Investors are looking out for the US jobs data due tonight and the Chinese exports data next week.’’
We asked a number of investors for their take on the ECB's decision to ease monetary policy even further and what it means for global liquidity and our market.
Here are their responses:
1. How important is the move for global liquidity?
Platinum Asset Management managing director Kerr Neilson
Significant, as it enhances the existing easing mode taking place in China and Japan - versus a move towards tightening in the United States and United Kingdom. There are interesting implications for currencies and national competitiveness.
BlackRock Australia head of fixed income Stephen Miller
It is an important step and, by European standards a timely response to the region’s predicament. It could stimulate lending, improve confidence and potentially encourage exports via a lower euro. Along with the Bank of Japan, the ECB could potentially become an alternative source of global liquidity as the US Fed’s balance sheet expansion comes to an end. However, as Draghi said at Jackson Hole, the ECB needs to be supported by structural reform and “smart” fiscal easing.
Magellan Asset Management portfolio manager Domenico Giuliano
It is difficult at this stage to gauge by how much, but it is clear the initiatives announced at the ECB’s September meeting will mean an increase global liquidity. Lower interest rates should encourage the private sector to increase borrowing, as well as encouraging banks to deploy their excess funds away from deposits with the ECB. The central bank’s plans to purchase asset-backed securities and covered bonds is actually quantitative easing, as it will be financed by money creation.
PM Capital global equities portfolio manager Ashley Pittard
It is a continuation of the trend we have seen from other central banks over the past five years. The US Federal Reserve was the first and most aggressive, then the BoJ, and now the ECB. As a result of all this “cheap” money, investors are encouraged to increase their risk. Without this unprecedented global liquidity injection the equity markets would not be making new highs globally, as the risk of owning safer assets would be higher.
And 2. What do you expect it will mean for Australian investors?
Despite this news I think the outlook is probably neutral for the local currency. While extra stimulus in Europe will be supportive of the Australian dollar a slower China is hurting it.
At the margins it will be supportive for global equity markets, any by extension Australian shares. A weaker euro is means the impact on global currency market is likely to be much bigger. I do expect some depreciation of the Aussie dollar, but only when the Fed communicates a definite intention to raise rates in the US.
Markets now project lower interest rates in Europe, along with more liquidity, which could encourage global investors to seek out higher yielding investments including Australia assets. That might have consequences for an appreciating Aussie dollar against the euro, along with possible further compression in Australian bond yields and higher valuation multiples on Australian stocks.
Short term the upward trend in markets will continue as people are encouraged to take on more risk, but ultimately longer term interest rates will go higher, and people that are highly levered at the wrong time will be in trouble.
And while we're looking at the iron ore miners, Fortescue shares have just plumbed a one-year low at $3.86.
Shares are down 4 per cent for the day, 7 per cent for the week and more than 33 per cent since the beginning of the year.
The plunge has shaved about $6 billion off the iron ore miner's market capitalisation, taking it to just above $12 billion.
Spare a thought for Fortescue founder and chairman Andrew 'Twiggy' Forrest, whose net worth has shrunk by a tidy $2 billion, with his stake in the company now valued at $4 billion.
Apols: an earlier version of this post said Fortescue shares hit a two-year low. We got a bit ahead of ourselves.