July 26, 2012
Australian shares post broad gains as investors focus on the chance of another round to stimulus to spur growth in the US and Europe.
4.30pm: As promised - here's the (developing) evening markets wrap. Thanks for joining us again through the day, and look out for the return of Markets Live at 9.30am AEST tomorrow.
And as a taste of what's to come:
European stock index futures inched up, signalling a bounce in indexes from four-week lows hit in the previous day, as hopes of further US stimulus and new measures to fix the eurozone debt crisis halt the market's week-long slide.
The gains, though, are small...roughly 0.1-0.3%, Reuters reports.
4.24pm: Other important movers today:
Wesfarmers up 0.8%
Woolies up 0.4%
Caltex (after the Kurnell closure news) up 1.4%
4.22pm: Notable losers:
Rio off 1% (but BHP up 0.4%)
Fortescue down 2.7%
4.19pm: Notables: Higher:
Qantas up 9.6% - biggest gain in six weeks.
Macquarie Group 2.2%
Telstra up 1% to $3.93 - only a couple of cents below the highest since December 2008.
4.16pm: Among the major sectors, energy shares ended up 0.8%, financials added 0.6% and materials just 0.2% - still every major sub-index was flat or higher for the day.
4.14pm: All Ords ended up 22.4 points, or 0.5%, to 4173.8 points.
4.12pm: ASX200 index ends the day up 23.8 points, or 0.6%, to 4147.7 points.
4.05pm: Most of Asian stock exchanges are higher, although little of the momentum is catching on beyond. Dow and London futures are basically flat.
Europe, no doubt, will have more bond auctions to watch, but not a lot in terms of big economic stats. Italy's retail sales in May probably shrank at a 4.7% clip but that's about it for the region.
In the US, though, durable goods orders for June are out and may provide more evidence of slowing growth. Plus the seemingly endless 'initial jobs claims' may help set the tone.
3.51pm: Almost done on the sharemarket. Just looking at the dollar.
It's up again, buying $US1.033, 80.8 yen and 85.1 euro cents. Perhaps more interesting is that it's hit 66.78 pence or thereabouts.
That's the highest against the pound in about four months and good timing for those heading to Olympics.
3.38pm: Market is paring its gains for the day. Not really tied to that shift, though interesting, is this data out today from South Korea - one of Australia's biggest export market (No.4, or so.)
South Korea’s economy grew at the slowest pace in almost three years as Europe’s debt crisis curbs export growth in Asia and prompts policy makers from Japan to Thailand to consider further easing, Bloomberg reported.
Gross domestic product expanded 2.4 per cent in the three months through June from a year earlier, the Bank of Korea said today. That compares with the median 2.5 per cent estimate of 15 economists surveyed by Bloomberg News. From the previous quarter, growth was 0.4 per cent.
“The big tide from Europe is engulfing Asia and leaving many policy makers helpless,” said Lee Sang Jae, a senior economist at Hyundai Securities Co. in Seoul. “The worst may not be over yet.”
And to give a sense of why Korea matters to Australia, check out these DFAT trade figures. Exports to South Korea are basically triple the size of imports.
3.25pm:There are a few ways of slicing and dicing the outlook for interest rates, but here's Bloomberg's take today:
For the first time this month, investors are seeing a better-than-even chance the Reserve Bank will keep the highest interest rates among major developed nations unchanged after figures yesterday showed inflation accelerated.
Traders estimated a 54 per cent probability officials will hold the overnight cash-rate target for a second meeting on August 7, interest-rate swaps data compiled by Bloomberg indicated.
That comes after three weeks of bets for a rate cut following the central bank’s July 3 meeting, where officials kept borrowing costs at 3.5 per cent.
The Aussie dollar's gained 3.3 per cent in the past month, the best performance among 10 major currencies tracked by Bloomberg Correlation-Weighted indexes.
3.16pm: Interesting to see Woolies has risen for a fourth consecutive day - after turning in some better-than-expected quarterly sales on Monday.
The company's stock earlier today also touched a 20-month high of $28.35 before easing back to trade at $28.24 in recent action. That's a modest gain of about 0.3% for the day.
Rival Wesfarmers, which reported its latest quarterly sales today, is also up about 0.2%.
For the year to date, Woolies shares are up about 13% and Wesfarmers about 8.6%.
3.05pm: Meant to add too that Moody's has weighed in Qantas.
The ratings agency says, not surprisingly, that the airline's debt rating hinges on its international business.
Maintaining a profitable international business is a 'major factor' in Qantas having an investment-grade rating.
While a tie-up with another carrier could 'lessen disadvantages' for Qantas, Moody's also warned that a wind-down of the international arm would have a negative impact on its credit.
2.54pm: Qantas, meanwhile, remains up about 10% on the day - but still about 26% down for 2012.
Interesting that the tie-up prospects with Emirates don't seem to have hurt Virgin Australia shares.
They are up about 3.9% to 40.5 cents - presumably less competition in the skies to come.
2.40pm: Here's a bolter, from BusinessDay's Peter Ker:
Sirius Resources is having the sort of day that investor dreams are made of.
After closing yesterday below 6 cents, the stocks is testing 34 cents this afternoon after announcing a major copper and nickel discovery in Western Australia.
That’s a cool 478% gain for the day. No wonder it's stock tag is SIR.
The last time we saw a share price performance to rival Sirius's serious rally was probably in late May, when the similarly-named Syrah Resources (SYR, in fact) rose 95 per cent in a single day from 93 cents to $1.82 on the results of a single drill hole at its graphite project in Mozambique.
Syrah climbed as high as $2.81 on June 19, but has since slipped back to a still very buoyant $2.34.
Let's see if Sirius can also hold on to these gains for a while.
2.32pm: The market might not be up much, but almost all of it higher. Only health stocks are dragging on the overall index.
Materials, energy and financials are all basically pacing the overall gains.
2.21pm: China's solar firms have warned of a trade war, calling on the Chinese government to respond with all means to an anti-dumping complaint filed by European competitors that they said could be a fatal blow.
Ratcheting up the stakes in ongoing disputes within the industry, companies led by Germany's SolarWorld yesterday asked the European Union to investigate claims that Chinese firms had been selling their products below market value in Europe -- the world's biggest solar market.
SolarWorld spearheaded a similar initiative in the United States, leading the world's largest economy in May to impose duties of about 31 per cent on solar panel imports from China.
"If the EU were to follow the precedent of the US and launch an anti-dumping investigation on Chinese solar products, the Chinese solar industry would suffer a fatal blow," Yingli Solar's chief strategy officer, Wang Yiyu said.
"The investigation would also trigger a whole-scale trade war between China and the EU, which would cause huge losses to both parties," he said at a briefing by four major Chinese solar firms - Yingli, SunTech, Trina and Canadian Solar.
2.10pm: World nuclear capacity is expected to grow by 44 per cent to 99 per cent by 2035, according to a biennial report from the United Nations nuclear body and the Organisation for Economic Cooperation and Development.
This was little changed from the range of growth of 37 per cent to 110 per cent in the edition two years ago of the report on uranium resources, production and demand, known as the "Red Book."
"We see it as a speed bump," said Gary Dyck, head of nuclear fuel cycle and materials at the International Atomic Energy Agency, referring to the long-term impact of the Fukushima accident on the global nuclear industry. "We still expect huge growth in China."
Nuclear capacity is due to expand in East Asia by 125 per cent to 185 per cent by 2035, the report said. The strongest growth is expected in China, India, South Korea and Russia.
2.02pm: Melco Crown Entertainment, a venture between billionaire James Packer and a son of gambling tycoon Stanley Ho, has received government approval to build a five-star hotel on one of the casino company’s land concessions in Macau.
The Chinese city’s Public Works & Transport department on July 19 approved a hotel and film production facilities on a 130,789 square meter (1.4 million square foot) plot earmarked for the company’s Studio City project, according to a government gazette dated July 25.
Construction on Melco’s Studio City project could start within the next six to nine months, said Macquarie Equities Research analyst Gary Pinge.
“We see this as a positive development,” for Melco Crown, said Pinge. “It cements the future growth pipeline.”
The gazette didn’t specify if a casino had also been approved on the site. “We think that a casino will be covered,” Pinge said.
On the ASX, Crown Entertainment is trading 0.24 per cent higher in afternoon trading.
1.54pm: Brent is hovering above $US104 per barrel, with investors anticipating more US stimulus measures to support growth and on fears that tensions in the Middle East could escalate causing supply concerns.
Data showing the biggest drop in more than a year in US single-family home sales in June, reflecting a sluggish recovery for the housing market, reinforced expectations that the Federal Reserve would act to adopt more quantitative easing to support the economy.
Brent crude had slipped 24 cents to $US104.14 per barrel, while US crude was down 24 cents at $US88.73.
"People are looking towards the possibility of quantitative easing by US as a weaker dollar will be supportive of commodity prices," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "The risk is to the downside and I think we will need some sort of catalyst to change the direction of Brent prices, be it either the current demand or supply outlook."
1.47pm: Here's a look at some of the bigger losers of the day so far:
1.28pm: Qantas shares have soared - up 9.5 cents, or 9.6 per cent, to $1.085 - on confirmation it is in talks with a number of airlines about potential alliances, including Dubai-based Emirates.
Qantas said that making alliance partnerships stronger was one of the four pillars of the group’s five-year strategy announced in August 2011.
‘‘At any one time, Qantas may be in contact with a wide range of companies about potential commercial cooperation,’’ Qantas said in a statement on Thursday.
1.28pm: Stocks on the industrials index that are performing well include:
1.17pm: Looking at how the big banks are faring today:
1.10pm: Bell Direct equities analyst Julia Lee said the market was performing better than expected with gains led by the banks.
‘‘Bank yields are still quite attractive, so we’re seeing a search for (those) yields,’’ Ms Lee said. ‘‘The industrials have been underperforming this week, so it’s good to see them leading the gain.’’
Ms Lee said the local market will continue to be tested in the face of ongoing European debt woes.
‘‘The market is just moving on headlines coming out of Europe. The worse things seem to get in Europe, the greater the expectations of a bailout from the European Central Bank. (The possibility) for a circuit-breaker coming through from the ECB has given hope to overnight markets.’’
12.58pm: Adele Ferguson has taken a look at the Wesfarmers and Coles numbers and says the liquor part of the business continues to provide a drag on overall revenue. She writes:
The booze division is an issue that hasn't been lost on management, which confirmed that the unit - which includes Liquorland and Vintage Cellars - is slicing at least 0.9 per cent off the group's food and liquor revenue.
In sharp contrast, Woolworths is going from strength to strength in its equivalent business, which boasts the successful Dan Murphy's discount outlets. Full story.
12.42pm: And here's one for the gold bugs. Hong Kong’s largest gold-storage facility, which can hold about 22 per cent of the bullion now in Fort Knox, will open in September to meet rising demand from banks and the wealthy.
The facility, located on the ground floor of a building within the international airport compound, has capacity for 1,000 metric tons, said Joshua Rotbart, general manager for the Hong Kong-based company’s Malca-Amit Precious Metals unit. Two of the vaults may hold assets, including gold, for banks and financial institutions, and others will be used for diamonds, jewelry, fine art and precious metals, said Rotbart.
The move in Hong Kong reflects increased demand for gold in Asia even as the commodity struggles to sustain its rally into a 12th year.
12.38pm: Here's one for all the amateur photographers among us. Canon, the world’s largest camera maker, has plunged the most in more than 13 years in Tokyo trading after cutting its full-year profit forecast because of a stronger yen and expectations for weaker global growth.
The shares declined as much as 14 per cent to 2,308 yen, the biggest intraday drop since October 9, 1998.
‘‘Even as the worsening macro economy and a stronger yen were expected to damage Canon’s earnings, an intensifying competition in laser printers was unexpected,’’ Tetsuya Wadaki, an analyst at Nomura Securities, said in a report. A new mirrorless camera model, which Canon unveiled July 23, not improving sales estimates also was a surprise, he said.
12.36pm: Agribusiness Nufarm expects to generate a higher underlying profit in the current financial year as its businesses in Australia and Brazil perform solidly.
The agricultural chemicals and seeds supplier said it expected its underlying profit after tax - that is, profit excluding one-off items - for its 2011/12 fiscal year ending July 31 to be in the range of $110 million to $116 million, up from $98.1 million in the prior year.
Underlying earnings before interest and tax were expected to be between $200 million and $205 million, compared to $171.8 million in the prior year.
12.31pm: The home building industry is still weak as demonstrated by a significant increase in the availability of skilled labour in the June quarter, a survey shows.
The Housing Industry Association (HIA) trades report, released on Thursday, showed an oversupply of skilled labour for a fifth consecutive quarter. The HIA trade availability index was at +0.20 in the June quarter, following a reading of +0.04 in the March quarter.
HIA chief economist Harley Dale said the decline in home and renovations activity was reflected in the highest availability of skilled labour since the survey began in 2002.
‘‘Tens of thousands of tradespeople are feeling the pressure of persistently weak residential building activity,’’ Dr Dale said.
12.27pm: Local shares are slowly giving up today's gains, but the retailers are having a positive day:
12.17pm: Optus has gobbled up Eatability, an Australian-made and owned restaurant review app. Optus will pay $6 million for 100 per cent of Eatability, pending approval from the Foreign Investment Review Board. Optus is owned by Singapore Telecommunications (SingTel).
The acquisition fits with SingTel's strategy to become an applications and services company as well as a mobile phone and Internet provider.
12.10pm: Here's how a few of the companies in the news today are going shortly after midday:
11.56am: Here's a look at how some of the markets around the region are performing:
11.47am: Drillsearch Energy has announced a $40 million capital raising to drive development of its oil and gas projects.
The equity raising involves a fully underwritten placement by UBS to sophisticated and institutional investors of 39.2 million fully paid ordinary shares at an offer price of $1.02 per new share.
The placement price is an 11.3 per cent discount to the company’s share price close of $1.15 yesterday.
The company went into a trading halt today.
11.40am: Here's something interesting from the small business desk: It happens with Olympians, and it also happens in business. Like it or loathe it, perception is everything, writes blogger Valerie Khoo.
11.32am: BusinessDay's Brian Robins has filed an analysis on how Caltex's job cuts expose Australia to global oil markets.
Caltex is profitable, but management has decided it can become more profitable by axing jobs, and importing refined oil products, which have already been processed at a Singapore refinery owned by Chevron, one of its main shareholders. In the process, Sydney is now totally exposed to global markets, with no buffer.
The decision to close Kurnell comes hard on the heels of the closure of the smaller Clyde refinery, also in Sydney, which is owned by Shell, again with heavy job losses. As a result, Sydney - and NSW - are totally beholden to foreign suppliers.
Any supply disruption, from technical problems at offshore refineries, to piracy and war that may affect shipping lanes, will be felt in the local market within a matter of days.
Other countries which are heavily exposed to foreign oil imports have moved to establish oil stockpiles, to give them a buffer in case of major supply disruptions.
11.24am:And there's more scuttlebutt about Qantas, this time via Reuters and KL:
Malaysian Airline System may revisit a joint venture plan with Qantas as part of its strategy to boost interlining revenue by over 40 per cent, as it becomes an official member of OneWorld Alliance in 2013.
MAS senior vice-president of international affairs Germal Singh told a briefing on Wednesday that the national carrier is particularly interested in teaming up with Qantas and its JV partner British Airways to tap the "Kangaroo route" which refers the routes Qantas flies between Australia and the UK, via Asia.
More than 20 airlines operate the route.
11.08am: Local shares are now 0.5 per cent higher for the day after a sluggish start.
11.04am: Australian company Oil Search has suspended loading operations in Papua New Guinea after an oil spill that the company described as minor. Oil droplets were seen on the sea surface next to the Kumul Marine Terminal during loading of a tanker. As a precautionary measure, loading was suspended and the loading line depressurised, the company said on Thursday. The company's shares are higher half a per cent higher to $6.72 today.
10.55am: Troubled miner Energy Resources of Australia (ERA) says the uranium market remains challenging after it recorded a net first half loss of $59.86 million. But the company says the longer-term outlook remains encouraging for established producers as demand continues to grow in China with the construction of 26 nuclear reactors.
ERA’s net losses shrank by more than 50 per cent in the first half, while its revenues fell 37 per cent to $147.999 million. The company's shares are flat today at $1.47. Full story.
10.46am: A bit more here on Caltex. The company’s shares have been well supported over the past year, rallying from below $11 on an improvement in its refining margin.
Today's gain reflects the prospect of a further reduction in costs, with more than 300 in-house jobs axed, although the timing is uncertain, since the closure will take two years to implement.
But while viewed with relief, since it will slice a signifiant amount off the company's $400 million annual wage bill in NSW, Caltex has flagged a cut in its dividend policy, as well as a hybrid security issue which may give investors cause to pause.
For the next two years at least, the dividend payout ratio will be cut to between 20 and 40 per cent of earnings, from the present ratio of 40-60 per cent.
Once the closure is fully implemented, the dividend payout will be raised to the former level, Caltex said.
Both UBS and Citi have been retained to advise with "capital management initiatives, including the potential issuance of hybrid securities," Caltex said.
10.42am: Today’s report that Qantas and Emirates are ‘edging closer to a transformational alliance’ – as the AFR worded it, has helped Qantas shares bounce. They are up 6 cents, or about 6.1 per cent, to $1.05 in recent trading. That still leaves them down about 29 per cent in 2012.
Caltex shares, meanwhile, are up as much as 2.3 per cent, or 32 cents, to $14.38, in the wake of today’s announcement of plans to close the company’s Kurnell refinery in Sydney. Caltex shares are up about 22 per cent for 2012.
10.38am: Stocks in the consumer discretionary sector are helping push the ASX higher. Here's some of the top performers on that sub index:
10.35am: After an indecisive start, stocks are about 0.3 per cent higher.
10.32am: There seems to be some investor relief that Newcrest met its revised full-year gold production targets. Newcrest shares jumped more than 5 per cent in early trading, rising as high as $23.41, on today’s report by the gold miner that it had met its revised production goals for the year to June 30.
Newcrest originally predicted the 2012 financial year would deliver as much as 2.92 million ounces of gold, but ongoing problems at several mines - particularly those acquired from Lihir - saw those hopes dashed.
The company will be hoping today's guidance puts a floor beneath the company's share price, which has tested multi-year lows recently, even though gold traditionally performs well in times of economic uncertainty.
10.29am: And the early sliders on the ASX200:
10.25am: Here are the best performed companies on the ASX200:
10.21am: Here are how the various sub indices on the ASX200 are performing so far today:
10.15am: The benchmark S&P/ASX200 index is up one point, or 0.02 per cent, at 4,124.9, while the broader All Ordinaries index was up 1.4 points, or 0.03 per cent, at 4,152.8.
On the ASX 24, the September share price index futures contract was down one point at 4,4081, with 7,560 contracts traded.
10.11am: Shares in Woolies have fallen 11 cents, or 0.4 per cent, to $28.06, while competitor Wesfarmers fell 17 cents, or 0.5 per cent, to $31.81. Wesfarmers this morning reported that sales rose at its Coles supermarkets in the fiscal fourth quarter as higher sales volumes and government handouts offset record price deflation. Full story.
10.06am: Early take - shares up marginally. Markets showing a gain on just 0.1 per cent without all companies trading.
10.01am: Newcrest Mining met its revised full-year gold production targets, a disclosure that will ease concerns among investors worried about another downgrade.
Australia's biggest listed gold miner had issued a series of series of production downgrades over the past year, with the most recent change coming on April 24.
Newcrest said today its full-year output was 2.28 million ounces of gold, towards the lower end of its April guidance for between 2.25 and 2.35 million ounces. Full story.
9.58am: Some analyst rating changes for today:
9.54am: Petroleum company Caltex will close its Kurnell refinery in Sydney in a move that will cost up to 630 jobs, with unions claiming the announcement is a "kick in the guts" to Australian motorists.
Caltex said the refinery would be closed in the second half of 2014 and would be converted to a "major import terminal" to supply imported fuel for Australian customers. The closure would eliminate about 330 direct positions, and as many as 300 contracting jobs. Full story.
9.50am: Wesfarmers said sales rose at its Coles supermarkets in its fiscal fourth quarter as higher sales volumes and government handouts offset record price deflation.
The retail-to-coal company said same-store food and liquor sales at Coles, which makes up about half of group revenue, rose 3.0 per cent in the fourth quarter from a year earlier.
That was a touch below market forecasts for 3.2 per cent growth, according to a Reuters survey of five analysts, and compared with growth of 1.3 per cent at top rival Woolworths. Full story.
9.45am: For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:
9.41am: Good morning folks. Welcome to the Markets Live blog for Thursday.
This blog is not intended as investment advice
BusinessDay with agencies