Markets Live: Shares surge higher
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Markets Live: Shares surge higher

The market shrugged off weak job numbers and a falling dollar to post strong gains, led by miners.

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That’s it for Markets Live today.

You can read a wrap-up of the action on the markets here.

Thanks for reading and your comments.

See you all again tomorrow morning from 9:30.

 

Miners were the big winners today, with Iluka Resources and Newcrest leading the charge.

Village Roadshow had a another tough day, while Treasury Wine also fell.

Best and worst at close

Best and worst at close

Here's a quick wrap-up of what will be moving markets overseas tonight, courtesy of IG Markets:

Later we get unemployment claims out of the US which are expected to come in at 327,000, slightly weaker than the previous week’s reading.

At the same time we have CPI data due out and considering inflation is the other major metric the Fed is closely watching; it will also carry significant weight.

The Philly Fed manufacturing index will also help shape up economic sentiment while comments by Ben Bernanke and Fed member Williams will also be in focus.

A great day on the sharemarket, with the ASX 200 jumping 1.2 per cent, extending yesterday's gains and more than making up for the big losses on Tuesday.

No matter where you were in the market it's likely you made some money (notionally, at least).

By sector, the big winners were energy stocks where Woodside jumped 2.7 per cent, and resources more broadly, which as a group finished 2.6 per cent.

Gold stocks also leaped 3.5 per cent.

The banks lagged the overall upswing, with the ASX 200 banks index advancing 0.6 per cent.

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Roy Morgan Research’s latest Business Confidence survey in December 2013 has fallen sharply from its immediate post-election peak of 136.3 in October to 125.2. This turnaround was expected to some degree after the election but a number of negative events since have contributed to a more severe drop than was considered likely.

The further drop in confidence among business in December was caused by a decline in positive feelings about where the economy is heading in the next 12 months and the next five years. There has also been a small drop in the proportion of businesses considering that the next 12 months are a good time to invest in growing the business.

 

Business confidence has taken a turn

Business confidence has taken a turn

Some advice for Qantas from a former chief economist for the airline:

Every man and his dog have a view about the problems facing Qantas but little has been said about the strategies that can turn the business around.

The first ten things that I would do are as follows.

Fresh Eyes

The business needs fresh sets of eyes on both the Board and Executive Committee. Airline finances are so complex and pivotal to earnings that the top jobs should go to persons with a strong finance background and deep insights into aviation strategy.

I would have Peter Gregg or Colin Storrie as CEOs. I’ve worked for both and they are the smartest aviation financiers and strategists going around. I suspect the horse has bolted for both.

Market Share Target

Qantas should bite the bullet and admit that its 65 per cent market share target is wrong.

Removing the market share target will free-up the airline’s capacity decisions and enable it to better align its capacity with the economic cycle.

Jet Fuel Prices

In the 1980s and '90s the oil and jet fuel prices cycled around a fixed mean of $US20. In this world capacity grew profitably at 5 per cent per annum.

Since early 2000, jet fuel prices have cycled around an upward trend of 14 per cent per annum yet airlines have continued to grow at 5 per cent.

Most airlines worldwide have focused their capacity decisions on expectations about demand but they have "dropped the ball" in relation to how capacity responds to surges in cost. Qantas can lead the way in adopting processes that will enable it to better adjust capacity to both costs and demand.

Read the rest here.

 

Bega Cheese has announced its intention to sell its holding in Warrnambool Cheese and Butter to Canadian dairy giant Saputo, in a move that looks set to seal the milk processor’s fate.

WCB has been the target of a fierce bidding war between Bega, Murray Goulburn and Saputo.

Bega withdrew from the race late last month after it received only a handful of acceptances which increased its holding in WCB to 18.8 per cent.

That stake has now catapulted Saputo’s acceptances to more than 45 per cent.

Bega Cheese executive chairman Barry Irvin said he would have liked to see WCB, Australia’s oldest listed dairy processor, stay in Australian hands.

But he said selling into Saputo’s unconditional offer of $9 cash a share was a ‘‘better financial outcome for Bega Cheese and its shareholders’’.

Read more.

 

NSW dairy producer Bega Cheese ... has made a bid for Warrnambool Cheese and Butter.

NSW dairy producer Bega Cheese ... has made a bid for Warrnambool Cheese and Butter.

Photo: Steve Hynes

PM Capital's chief investment officer Paul Moore explains why "essentially 100 per cent" of their new listed investment company (the PM Capital Global Opportunities Fund) is in cash:

"Not expensive, but not cheap, is probably the best way to describe the current status of equity market valuations. In comparison to rates available on cash and debt securities, one could argue that equities are in fact cheap, but rates are distorted, the Fed has begun a slow taper and with minimal corrections all year, it is a tough dilemma on how to invest new capital in the very short term."

He also outlines why he won't be chasing the banks and other high dividend payers in the local market:

"One issue at the front of our minds is a belief that long term interest rates have ended their 30 year decline giving us conviction on what we do not want to own: the so-called defensive yield plays."

"The consistent long term decline in interest rates has made stocks with high pay-out ratios and thus, high relative dividend yields, a favourite of investors and also driven an extreme in retail investor non-diversification within their investment portfolios."

The long-term decline in bond yields is over, says Paul Moore

The long-term decline in bond yields is over, says Paul Moore

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More on Woodside, which is up 2.2 per cent:

An unexpected tax benefit to be recorded by Woodside Petroleum and a surge in LNG revenues have raised expectations for a healthy final dividend payout, outweighing news of up to $US400 million ($449.3 million) in writedowns.

Woodside said on Thursday that it expected to get a petroleum resource rent tax (PRRT) benefit this year of between $US200 million and $US250 million, higher than analysts had anticipated. It also reported record annual production and a more than doubling in LNG revenues in the December quarter from the September period.

For investors, the writedowns – for early work done for expansions that did not go ahead at the Pluto LNG project, other ventures in Western Australia and on a field in the Gulf of Mexico – were not as important as the tax credit, analysts said.

If you are concerned about the dividend the more important influence is this massive PRRT credit: it goes straight to the bottom line and will be included in the dividend calculation,” said Adrian Wood at Macquarie Equities.

“If you’re a dividend holder you’ve had strong revenue and this PRRT credit that is going to support underlying earnings so your dividend expectations are probably rising because they just pay out 80 per cent of it now.”

Read more ($).

 

While shareholders remain unfussed, the bond market is up after the shocker of a jobs number.

The 3-year bond futures contract has moved quite dramatically after the 11.30 am release, with the sharpest moves in the shorter dated rates.

The 1-year bond rate has moved from predicting a rise in the cash rate in 12 months time to a fall, after it fell from 2.54 per cent to 2.43 per cent. The 10-year rate also fell from 4.26 per cent to 4.18 per cent.  

The move down in Australian bond yields is the market evidence of a “de-synchronisation” of Australia’s economy with the US and for that matter most of the developed world.

Over the past three months US and Australian three-year rates have clearly moved in the opposite direction as traders bet that better conditions in the US will lead to a rise in rates while weakness in Australia will keep rates low or push them lower.

 

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