June 20, 2012
Australian shares end slightly higher on hopes the US Federal Reserve will announce more stimulus measures, while locally News Ltd surprises with a takeover bid for ConsMedia.
5.20pm: That's it today for our live markets coverage. Thanks for reading and posting your comments.
4.55pm: The mood of financial markets swung into more favourable territory today, however the large dependence on the FOMC to '‘come to the party’' with more monetary easing adds a sizeable layer of fragility to the recent rebound, CMC Markets trader Tim Waterer says:
4.45pm: European and Wall Street stock index futures are mixed, not giving a clear signal for the direction of trade today.
Euro Stoxx 50 and CAC-40 futures are slightly higher, while FTSE100 and DAX futures are minimally lower.
On Wall Street, Dow futures and S&P500 futures are slightly lower, while Nasdaq futures are up by about the same margin of less than 0.1 per cent.
4.37pm: The dollar is edging closer to $US1.02, trading at $US1.0196, and is likely to jump that mark in offshore trade if Europe's sharemarkets and Wall Street extend yesterday's gains.
"If the Fed comes to the party and gives us QE3, then that will knock the greenback and bolster ... risk assets," said a trader at a local investment bank.
4.26pm: Most of the blue chips ended higher today:
4.21pm: James Packer's Consolidated Media Holding was one of the biggest winners of the day, jumping 9.7 per cent on the back of News Ltd's $2 billion offer for the company. News shares added 0.6 per cent.
4.16pm: The major sectors ended mainly higher, with financials rising 0.8 per cent, energy up 0.7 per cent and materials inching 0.2 per cent higher. Gold fell 1.5 per cent and consumer staples lost 0.9 per cent.
4.13pm: The market has closed, ekeing out a small gain. The benchmark S&P/ASX200 index rose 9.1 points, or 0.2 per cent, to 4132.4, while the broader All Ords added 9.4 points, or 0.2 per cent, to 4176.8.
3.59pm: Iron ore's upward trend coincides with the Australian dollar's rise, which touched its 2012 low of 96.44 US cents on June 1. Since then it's been mostly rising to currently $US1.0189, the highest since May 7.
3.57pm: The miners may be having a mixed day, but spot iron ore prices have edged higher, putting the benchmark rate on course for a ninth consecutive day of gains - its longest rally in seven months - as traders took cargoes betting Chinese buyers would follow suit.
Iron ore rose 0.4 per cent to $US136.60 a tonne, according to price provider the Steel Index, the highest since May 14.
"The market looks fairly well supported at the moment. There's a fair number of transactions going through," an iron ore trader in Singapore said.
China's daily crude steel output neared record highs in early June, based on the latest industry estimate, suggesting producers may continue to replenish iron ore stockpiles, although some traders say prices may soon peak.
3.51pm: Investors are betting that Europe's worsening debt crisis and faltering global growth will prompt major central banks to launch a new round of monetary stimulus.
The Federal Reserve concludes a two-day policy meeting later, with expectations high that the US central bank will extend its bond-buying program dubbed "Operation Twist".
"We have seen a clear weakening in the US economy," says CMC Markets chief market analyst Ric Spooner.
"The strong employment numbers we'd seen earlier look to have been seasonal, so (the Fed) is going to have to look at doing something to improve jobs growth. The question is: will they act now or hold off and use their firepower if or when the euro crisis gets worse?"
3.39pm: Rio Tinto will spend $3.7 billion to increase iron ore output in Australia by a further 25 per cent to 353 million tonnes a year tonnes by 2015, shrugging off forecasts of waning demand and a looming global supply glut.
Rio Tinto, the world's second-largest miner of iron ore after Brazil's Vale, currently runs its mines at an annual rate of 230 million tonnes and had already put in place work to take output to 283 million tonnes.
Rio Tinto's board approval for the latest expansion, which will cost $5.2 billion all up, with $1.5 billion coming from joint venture partners in the mines, comes despite pressures mounting in the sector to curb capital spending and return more cash to shareholders jittery over slowing global growth.
3.34pm: Taking a look at media stocks;
3.23pm: ABC presenter Alan Kohler stands to make $8 million from his 28 per cent stake in Australian Independent Business Media, publisher of Business Spectator and Eureka Report, after it was announced that News Limited bought the group for an amount believed to be between $20-$30 million, according to online newsletter Crikey.
3.08pm: When Helmut Kohl went to Maastricht in 1992, he thought he could “Germanise” Europe by imposing fiscal and monetary restraint on the rest, Zeit editor Joseph Joffe writes in the FT.
Now, the crisis countries want to “Europeanise” Germany: spend, inflate and pay. Germany must cheapen credit for all and shoulder the risk alone. It all adds up to a moral hazard that will perpetuate the maladies of the eurozone.
3.04pm: The hedge fund elite is increasingly willing to bet against German debt, reports the FT.
More than half of fund managers polled at an industry conference in Monaco said they expect Bund yields to double within a year as the eurozone crisis hits German credit, despite current record low borrowing rates for Berlin.
2.59pm: The Federal Court has fined telco TPG $2 million for using fine print to mislead customers about the minimum cost of its broadband service.
The court declared the carrier falsely advertised an ‘‘unlimited ADSL2’’ package for $29.99 a month, when it actually cost customers $60 more a month plus an addition ‘‘upfront’’ charge of either $80 or $130 depending on their contract.
2.49pm: One reason for the waning optimism could be that Wall Street futures are now pointing to a slightly lower start of trade later today. Regional markets are mostly higher but off their highs:
2.43pm: The local market is just about flat now, as more big stocks turn into the red.
The main loss makers are Telstra, down 1.1 per cent, Wesfarmers, off 0.9 per cent, and Woolies, down 1.1 per cent. Macquaries has lost 0.4 per cent, while ANZ is down 0.2 per cent, despite all the other major banks still being up strongly.
2.39pm: NBN Co has suspended its application for special regulatory conditions and will resubmit a new proposal in coming months.
The competition watchdog approves of this move and the decision to remove a detailed regulatory document in favour of a high-level regulatory outline.
The regulatory document – which will govern how much NBN Co can charge for services and its wholesale commercial contracts – is still expected to be finished by the end of this year.
2.24pm: The market is being held up mainly by the big banks and also by the big miners. Interestingly, while NAB and Westpac have jumped more than 2 per cent and CBA is up 1 per cent, ANZ is trading flat. Rio is up 1.5 per cent, while BHP has added 0.3 per cent.
2.15pm: Care for an insight into the real impetus behind spiralling in electricity prices, Michael West asks in The real culprits behind surging power bills
Look no further than what the independent regulatory agencies are saying.
The Australian Energy Regulator (AER), the Australian Energy Markets Commission (AEMC) and the Independent Pricing and Regulatory Tribunal (IPART) have all suggested that rising prices are due to overspending on the part of the network providers.
It is also likely that the government will exploit this surging capital expenditure, or “gold-plating” of the networks, as it fattens up its electricity cash-cow Transgrid for privatisation.
2.01pm: In other corporate news not (directly) related to job cuts, Rio Tinto has appointed a new managing director for Australia’s premier diamond mine, adding further intrigue to the company’s review of its diamond operations.
Canadian-based executive Kim Truter was this afternoon announced as the new managing director of the Argyle diamond mine in Western Australia’s Kimberley region, despite that mine being one of three under consideration for divestment.
Rio announced in late March that it was reviewing the future of its diamond business - and while it may retain the assets - most analysts expect divestments.
1.56pm: More job cuts, this time (mainly?) overseas though: struggling Blackberry maker Research In Motion is cutting more jobs as part of a broad cost-saving effort aimed at trimming $US1 billion in operating expenses.
RIM has previously said it aims to save the $US1 billion in operating costs annually by cutting the number of manufacturing sites. The company also is “reviewing its organisational efficiency” across the company.
That may lead to job cuts of 2000 to 3000, assuming the company will try to eliminate 30 per cent of those operating expenses through labour reductions, says Sameet Kanade, an analyst at Northern Securities. The move would add to a round of 2000 cuts announced about a year ago.
1.53pm: Is it fair to say: 'News Ltd to sack as many as 1899 jobs', as they've only announced redundancies will be "less than Fairfax"?
1.44pm: And while we mention the eurozone: Royal Bank of Scotland chief executive Stephen Hester says it may take years before Europe finds a solution to the debt crisis as economies in the region struggle to implement reforms.
‘‘At issue is the ability for some countries in Europe, particularly in southern Europe, to make themselves more competitive,’’ Hester said in an interview with Bloomberg Television in Hong Kong. ‘‘In the meantime, we’re talking about pieces of sticking plaster to buy time for economic reform to bite.’’
1.39pm: The dollar is holding steady just under $US1.02 as rising borrowing costs in Spain keep investors focused on Europe’s debt crisis.
The dollar is buying $US1.0179, slightly down from an overnight high of $US1.0201, the strongest level since May 8.
The Federal Open Market Committee will conclude a meeting today, amid speculation policy makers will signal additional measures to support US growth.
‘‘I can’t see that the European developments are turning in a very positive direction,’’ says Thomas Harr, head of Asian foreign-exchange strategy at Standard Chartered.
1.26pm: More on News Ltd. CEO Kim Williams has thus far declined to say how many jobs will go. Because News Ltd is not listed on the ASX it is not obliged to offer the same levels of transparency as Fairfax when it comes to job cuts.
1.24pm: Independent research firm CLSA has upgraded Fairfax Media from a rating of "underperform" to "outperform" and lifted the 12-month target price on its stock to 71 cents, based on an improving outlook for earnings from the company's Australian regional and New Zealand publishing businesses.
"We believe investors should focus attention here rather than the long term restructure of metro, which will continue to dominate news flow but now accounts for only 2 per cent of valuation," says analyst Digby Gilmour.
Fairfax shares are up 1.3 per cent.
1.17pm: Premier Investments today announced the appointment of Colette Garnsey as core brand director. In a press release about, Premier said:
Colette is a world class executive with over 25 years of experience and a proven track record of performance in listed companies. Colette will report to Premier Retail CEO Mark McInnes and will be directly responsible for Just Jeans, Jay Jays, Portmans and Jacquie E. Colette will also have full accountability for international and local sourcing functions.
Insider columnist Ian McIlwraith notes that Ms Garnsey was recently honoured with an OAM for her services to business, including her time as general manager of shoes, clothing and apparel at David Jones. Premier's shares are down 4.42 per cent this year to $4.54.
1.11pm: The Aussie dollar has been trading flat most of the day. It's currently buying $US1.018, roughly where it was early today. National Australia Bank currency strategist Emma Lawson said currency markets were in a holding pattern ahead of the end of the FOMC meeting, due early tomorrow our time.
‘‘Last night, the US dollar was weaker in anticipation of that Fed meeting and in anticipation of further policy measures from Europe and the UK,’’ Ms Lawson said.
‘‘You see the Australian dollar following that trend, being stronger against the US dollar, but there is limited information between now and then, and markets aren’t reacting to the information we are getting, they are just waiting for the end of that FOMC meeting.’’
1.04pm: Insider columnist Ian McIlwraith writes that DuluxGroup revealed this morning that it has "had its first acceptances for its $188 million takeover of roll-up garage door maker Alesco Corporation".
The paints and adhesives company that is trying to expand sideways by absorbing Alesco, said that it had acquired almost 1 million shares under its $2 a share offer.
The acceptances for the bid, which opened on May 25, lifted Dulux holding by slightly more than 1 per cent to 20.98 per cent of its target.
12.56pm: Here’s UBS economists Scott Haslem and George Tharenou on today’s housing numbers. Despite the much bigger-than-expected fall, they are optimistic:
12.50pm: James Packer has told The Australian he was "happy to live with" the $3.50 a share offer. News Ltd's bid was fair, analysts told BusinessDay, adding it was likely to win regulatory approval.
"Our view is the price is pretty fair. News Ltd is the most logical buyer and the least likely to have problems with the ACCC," one analysts said.
Steve Allen, media expert at Fusion Strategy said the offer from News Ltd followed owner News Corporation's long established strategy of lifting its stakes in partly held pay TV companies around the world.
"It was a once in a lifetime opporturtinity" for News Ltd, he said.
12.45pm: On aspect of this afternoon's announcement by News Limited on its future has leaked. The Australian reported a short time ago:
News Limited will collapse its eastern seaboard operations from 19 to just five divisions under a major restructuring that is likely to result in significant redundancies, although below the 1900 announced by rival Fairfax Media on Monday.
12.38pm: City Index chief market analyst Peter Esho says the market is in a band of caution ahead of the US Fed meeting tonight’’.
‘‘It’s really going to dictate whether there’s hope or disappointment. I think the Fed acknowledges inaction won’t be well received.’’
12.29pm: BusinessDay’s Malcolm Maiden writes that News Corp's $2 billion takeover proposal for James Packer's Consolidated Media Holdings is all about speeding up the move away from print. For James Packer, meanwhile, it is all about casinos.
[The deal] frees up close to $1 billion if [Packer] sells out of ConsMedia, and his main investment thrust is casinos in general, and, quite probably, the operator of Sydney's The Star casino, Echo, in particular.
Asian casino group Genting is sitting close to 10 per cent after share raids this week, and its intentions are unclear.
Genting could be a Packer ally. Packer is certainly searching for ways to bring Star into his orbit without launching a full bid, and an alliance with Genting might do it.
12.21pm: Job advertisements on the internet rose by 3.4 per cent in May, new federal government figures show.
The Department of Education, Employment and Workplace Relations’ internet vacancy index, seasonally adjusted, was 84.2 points in May, up from April but 11.1 per cent lower than a year ago. Vacancies increased in all eight occupational groups monitored by the department, the figures released today show.
The strongest increase was in community and personal service workers, which rose by 7.4 per cent, followed by labourers, up 4.7 per cent.
12.16pm: Imports of goods rose $808 million, or four per cent, between April and May. The seasonally adjusted figures from the Australian Bureau of Statistics (ABS) showed the value of imports in May was $21.868 billion.
The main contributor to the seasonally adjusted change was a 16 per cent rise in imports of fuels and lubricants, lifting that category by $492 million.
12.09pm: Aurora Oil & Gas shares are up four cents, or 1.28 per cent, at $3.17 and Eureka Energy last traded at 45 cents. Suitor Aurora Oil & Gas has appointed three representatives to takeover target Eureka Energy’s board after increasing its stake to 68.4 per cent.
11.57am: Moody's Economy.com analyst Katrina Ell says the dwelling starts result is disappointing.
"It shows consumers are still very cautious and the housing market is still very weak and we haven't really seen the stimulatory impact of the rate cut coming through."
"Usually with a rate cut we would expect to see some sort of increase in consumer sentiment which would encourage buyers back into he market... but we haven't seen that at all."
Total dwelling units fell to 30,623 in the March quarter, the ABS said. New private sector houses sank 7.8 per cent to 20,306 in the March quarter, while other residential buildings tumbled 21.6 per cent in the quarter to 9492, on seasonally adjusted terms.
11.49am: "We know dwelling activity is pretty subdued," says RBC Capital Markets economist Su-Lin Ong. "[Construction] is going to detract from overall growth for the year."
Dwelling starts collapsed by 37.4 per cent in New South Wales, and 8.3 per cent in Victoria, on a seasonally adjusted basis. In Queensland they rose 2.5 per cent, while in Western Australia they sank 4.8 per cent, the ABS says.
11.45am: Australia’s economic growth is expected to come to a virtual halt in the second half of 2012, a private sector survey shows.
The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was as 0.2 per cent in April, well below its long-term average of 2.6 per cent.
‘‘The Leading Index is pointing to a sharp slowdown over the second half of this year,’’ Westpac Senior Economist Matthew Hassan says.
11.40am: Ausbil Dexia managing director Paul Xiradis says selling ConsMedia "frees up more cash and gives him (James Packer) a bit more flexibility".
"He's shown his hand in Echo... but his intentions are not well and truly understood," he says.
11.35am: New homes starts plunged in the first three months of the year despite two rate cuts from the Reserve Bank in November and December.
Dwelling starts tumbled 12.6 per cent in the first three months of the year, following a downwardly revised 4.5 per cent drop in the final quarter of 2011, according to the Australian Bureau of Statistics. Analysts polled by Bloomberg tipped a 2.3 per cent fall.
11.27am: Among the major miners, BHP is up 0.8 per cent and Rio has gained 1.9 per cent. Fortescue is up 2.1 per cent.
Among the banks, ANZ is up 0.9 per cent, CBA is up 1.1 per cent, NAB has gained 1.9 per cent and Westpac has risen 2 per cent.
11.14am: RBS Morgan’s Brisbane equities director Bill Chatterton said the domestic market had followed Wall Street’s positive lead.
‘‘We had a good market in the US overnight with them being up about 0.8 per cent and we’re right in line with what’s happened there,’’ he said.
11.07am: Among the bigger gainers on the ASX100, BlueScope is up 3.9 per cent, Incitec is up 2.5 per cent, Lynas is up 2.5 per cent, Challenger has added 2.3 per cent and Aurora Oil & Gas is up 2.2 per cent.
Among the sliders, Perseus Mining is down 2.5 per cent, Toll is down 2.1 per cent and Graincorp is down 2 per cent.
11.02am: Shares in Consolidated Media have jumped after coming out of a trading halt at 11am. They have risen 35 cents, or 11.4 per cent, to $3.43, a bit less than the $3.50 quoted in the takeover bid.
Shares in News Ltd were flat at $20.06. There's more here on the News Ltd takeover bid for Consolidated Media.
10.57am: After rising more than 4 per cent earlier, Fairfax shares have given up most of their gains. The stock is now up half a cent, or 0.8 per cent, to 60 cents after falling more than 8 per cent yesterday.
10.54am: Japan logged a bigger-than-expected trade deficit of 907.3 billion yen ($US11.5 billion) in May as fuel imports kept rising despite a recovery in shipments abroad, official data showed Wednesday. The shortfall was 5.4 per cent higher than 860.7 billion yen in May 2011, and well above the deficit of 520 billion yen expected by economists.
10.51am: Markets are now gradually easing from the strong open. Both the All Ords and the ASX200 are back to a gain of 0.6 per cent, down from a peak of 0.8 per cent.
10.47am: The timing for the News Ltd announcement has been confirmed: 1.45pm. This is what News staff were told:
A video message from Kim (Williams) will be made available outlining what this vision is and how we, as a company, will transform to embrace opportunities the dynamic media landscape
Today, our CEO Kim Williams will be sharing with you his vision for News as the company embarks on its next phase of growth.
10.44am: We are hearing the News Ltd announcement about staff reductions and restructuring is now set down for 1.45pm today. More on this as it comes to hand.
10.38am: An interesting view here of the effect of the carbon tax, slated for a July 1 start, on certain Australian companies.
AGL, the Australian power supplier, is the only company covered by JPMorgan expected to benefit from carbon pricing because of financial assistance it will get from the government and any rise in electricity prices, Carolyn Holmes, a Sydney-based analyst at JPMorgan, wrote yesterday.
Qantas and Virgin, the nation’s biggest airlines, face an increase in the fuel excise tax and may struggle to pass on the cost to customers through higher ticket prices, the report found.
10.32am: Market gains have topped out for the moment at 0.8 per cent and appear to be sliding back slightly. Now for the companies dragging on the ASX200:
10.28am: Looking now at the companies which are leading the ASX200 higher:
10.25am: Looking at how the various sub-indices on the ASX200 are performing:
10.20am: Wise Owl equities research firm director Imran Valibhoy said the potential acquisition of Consolidated Media by News Ltd would help free Mr Packer's hand for more involvement in his casinos business.
"For James Packer to come out and say he's happy with the proceedings thus far, [means] he may be looking more towards his casinos business area," he said. "For this business to be taken off his hands, may not be such a bad thing."
News Ltd sees "potential" in Consolidated Media in a time when the sector is not only gripped by change but by consolidation, said Mr Valibhoy.
10.16am: In early trade, the All Ordinaries index is 32.8 points higher, or 0.8 per cent, to 4200.2, while the benchmark S&P/ASX200 is 33.5 points higher, or 0.8 per cent, to 4256.8.
10.14am: News Limited and ConsMedia are in a trading halt until 11am.
10.10am: Fairfax shares have risen 4.2 per cent in early trade with media stocks firmly in the spotlight today. Shares in Fairfax, publisher of this website, have risen 2.5 cents to 62 cents.
10.06am: Early take - shares up 0.5 per cent as the market opens.
9.57am: And just before the marekt opens, the Australian dollar is now trading close to $US1.02. It was recently buying $US1.018 after touching $US1.02 at about 5.15am. Here are the recent cross rates:
9.54am: Australian bond futures prices are lower ahead of statements by the G20 and the US Federal Reserve. UBS interest rate strategist Matthew Johnson on Wednesday said a return of market optimism had encouraged traders to leave safe-haven assets and move into equities.
At 8.30am the September 10-year bond futures contract was trading at 96.940 (implying a yield of 3.060 per cent), down from 97.030 (2.970 per cent) on Tuesday. The September three-year bond futures contract was at 97.630 (2.370 per cent), down from 97.710 (2.290 per cent).
9.49am: Here are some analyst rating changes for today:
9.46am: The Australian, meanwhile, reports News Ltd is expected to announce as early as today that it has bought the Business Spectator and Eureka Report businesses, splashing out about $22 million even as the company chops back on jobs.
9.44am: Turning again to local matters and News Ltd, the owner of The Australian and other newspapers, is expected to unveil plans to cut hundreds of jobs. Reports suggest the announcement could come at 10.30am.
9.40am: In Europe, fears of a full-scale bailout for Spain have mounted as its borrowing costs remained at danger levels on concern over the nation's stricken banks and fast-rising debt.
After Greek elections averted the immediate threat of Athens exiting the eurozone, concern turned to Spain where the banks have been thrown a eurozone lifeline of up to 100 billion euros ($A125 billion).
As Greece's pro-bailout parties negotiated the terms of a coalition government, Spain's troubles mounted.
9.36am: As well as the Consolidated Media takeover bid, News Ltd is expected to announce redundancies, but more on that in a moment. Here's a quick look at what took place offshore overnight, which has local shares pointed higher. And most of it hinges on US Fed meeting which will announce its policy stance early tomorrow morning our time.
With economic storm clouds gathering abroad and signs the US recovery is flagging, the FOMC may feel compelled on Wednesday to launch a new round of monetary stimulus.
Confronted with rising financial strains in Europe, a year-end fiscal showdown in Washington and a sharp slowdown in hiring by US employers, many economists expect the Fed to extend a program aimed at pushing down longer-term interest rates to shield the still-fragile economy.
Of course, the downside is that markets could slump if the Fed decides to holds steady.
9.33am: In breaking local news, News Ltd has made a $1.97 billion takeover bid for James Packer’s Consolidated Media Holdings.
ConsMedia owns 25 per cent of Foxtel and has a 50 per cent stake in Fox Sports. Foxtel is half owned by Telstra Corporation, with Rupert Murdoch’s News Corporation and ConsMedia each holding a 25 per cent stake.
Meanwhile, Fox Sports is a 50:50 partnership between ConsMedia and News Corp.
9.32am: Local shares are set for a strong start after offshore market rose on hopes the US Federal Reserve will launch another round of stimulus measures.
9.30am: Good morning folks. Welcome to the Markets Live blog for Wednesday.
This blog is not intended as investment advice
Contributors: Thomas Hunter, Peter Litras, Jens Meyer, Peter Hannam
BusinessDay with agencies