June 08, 2012
Shares snap three days of gains to end flat for the week after comments by the US Fed chief Ben Bernanke chilled hopes for more monetary stimulus in the world's biggest economy.
5.25pm: And here is that evening markets wrap (which will be added to). Have a safe and happy weekend, and remember to rejoin our Markets Live blog on Tuesday at 0930 AEST.
5.11pm: Almost done with the evening wrap, when this lands:
CBA has cut its variable lending rate 21 basis points to 6.80%, effective June 18.
4.45pm: That's just about it from our rolling Markets Live coverage for the week. We won't be back until Tuesday, after toasting the Queen.
Thanks for joining us. We'll point you shortly to the evening markets wrap when it comes in.
In the meantime, here's the rather thin schedule as provided by AAP for the coming week.
And there's also our Board Room Radio feed of events you can listen in on.
4.41pm: It's been a big week - even if we ended up more or less as we began - at least in terms of stocks.
The dollar, though, has notched a big advance, roughly 2% at this point to buy about 98.4 US cents.
That would make it the first weekly gain in six weeks for the Aussie dollar. It's also buying 78 yen, 78.7 euro cents and 63.6 pence.
4.34pm: We're still watching for CBA and NAB - and just how long they can string out their interest rate decisions. My tip: 20/25 for both.
Worth looking, though, at how the banks ended the day:
ANZ down 1.1%
CBA off 1.1%
NAB down 1.8%
Westpac off 1.6%
Macquarie Group down 1.5%
4.28pm: Other gainers today:
Reject Shop 3.7%
James Hardie 2.2%
Seven West 1.9%
Fairfax Media 1.7%
BHP Billiton 1%
Dart Energy 7.5%
Energy World 12%
4.24pm: Echo Entertainment went the other way. It rallied 19 cents, or 4.4% to end the day at $4.49.
That partly out of James Packer's victory in forcing out chairman John Story. The fact Singapore-based Genting has been buying into Echo increases the chance of a bidding battle.
4.21pm: Another horror day for Qantas.
It shed another 8.5%, or 9 cents, to close at 97 cents. It touched a record low of 96 cents during the day, and has lost about $1 billion in value this week.
4.18pm: By sector:
Materials down 0.6%
Energy off 1%
Financials down 1.4%
Industrials (think Qantas) down 2.1%
4.15pm: By my measure, that means the ASX200 is basically flat for the week. The loss is all of 0.2 of a point or less.
4.12pm: Now some closing numbers:
ASX 200 off 44.9 points, or 1.1% to 4063.7 points
All Ords down 45.6 points, or 1.1%, to 4111.1 points.
4.05pm: Nearly done on the local market. A quick look around the region shows:
Japan off about 2%
Hong Kong down 0.7%
Korea's Kospi off 0.7%
Mainland China mixed
Singapore STI off 0.7%
And in futures trade:
Dow off about 0.5%
London's FTSE futures down 0.6%
3.54pm: Just like the banks to go late on a Friday afternoon, I suppose. NAB and CBA can't be far behind Westpac.
Westpac, though, said its key variable small business loans will see their interest rates cut by 25 basis points.
Anyway, always a bit tricky to do calculations on what is a standard rate. Westpac says most customers get a 0.7 percentage point discount on standard variable mortgages, lowering the actual repayment rate to 6.19%.
In any case, today's rate reduction will save homeowners on an average mortgage of $300,000 about $41 a month, Westpac says.
3.40pm: This just in from Westpac:
Westpac has passed on just 20 of the 25 basis-point cut by the RBA. The bank's variable lending rate will fall to 6.89% from 7.09% as of June 18.
3.25pm: Looks like the market is flat-lining to the close. In the meantime, would you emulate the NBN boss?
The man in charge of the national broadband network says he will forgo annual bonuses worth more than $300,000 because of personal objections to short-term incentive schemes, writes Lucy Battersby.
Mike Quigley told BusinessDay he had philosophical problems with the idea that a bonus would make him work harder and he would never accept one as chief executive of NBN Co.
"I came to an agreement with the board that I would not participate in the bonus scheme. That's my personal decision. My motivation for taking this job was to get this network built," he explained.
3.15pm: The RBA's Glenn Stevens, meanwhile, says market pricing for further steep cuts in domestic interest rates reflected fears of a disastrous outcome to Europe's debt crisis, which might or might not happen.
Mr Stevens was asked after giving a speech on the economy in Adelaide, whether rates could fall as far as 2% as some experts were predicting. The main cash rate is currently at 3.5% after a cut of a quarter of a point early this week.
Stevens said markets were pricing for "a disaster in Europe. It might happen, or it might not."
Markets, such as overnight indexed swaps, are currently pricing in rates of around 2.75%, or a bit lower, within the next 12 months.
There's also about a three-in-four chance of another 25 basis point cut by the RBA in July - despite the raft of better-than-expected numbers on the Aussie economy this week.
3.07pm: Qantas certainly looking sickly. Its shares recently touched 97 cents - another 8.5% lost on the day.
It's back to about 98 cents, but that's still about 38% lower on the week. Hard landing.
2.54pm: And to be clear:
Crown’s James Packer has aborted his plan to get former Victorian premier Jeff Kennett onto the board of rival casino operator Echo Entertainment.
Mr Packer had forced the convening of an Echo shareholder meeting to consider a proposal to oust chairman John Story and appoint Mr Kennett to the board.
But Mr Story resigned from his position today, and Mr Packer has subsequently withdrawn the request for the meeting.
2.51pm: Bit of an odd one, from marketing and communications company Photon Group:
Photon has decided that changing its name to the Spanish word for January, Enero, reflects its business better than the quantum of light.
Shareholders voted in favour of the name change today at an extraordinary general meeting after Photon Group chairman John Porter explained that it was part of the company’s new strategic direction which it announced on April 30.
‘‘Part of this revitalisation of the company involves marking this fresh start with a new name and company identity,’’ he told shareholders.‘‘Enero, which means January in Spanish, is a good representation of the positive and re-invigorated company we now have.’’
Mmm. Spain, with its ailing banks and economy, may not be the first choice for a marketing company. Still, "Yi yue fen'' or "one month/January'' in mandarin isn't that exciting either.
2.42pm: More on Echo/Crown:
Echo Entertainment's board has not had any discussions with Singapore gaming operator Genting, which revealed today it had built a stake in the company, a source with knowledge of the situation said - Reuters reports.
Analysts have speculated that Genting is preparing for an acquisition, having built up a war chest of $S3.9 billion ($3 billion), and said Echo's casinos were in cities where Genting had attempted to win licences in the past.
Perhaps James Packer will have to pay a premium yet if his Crown seeks to swallow Echo.
2.31pm: And Qantas shares, meanwhile, have dipped below $1, touching 99 cents. That's the lowest since the airline's shares listed in 1995, according to Bloomberg. That S&P ratings watch announcement clearly stung.
2.27pm: This just in from Crown/Echo:
Crown has dropped its plans to seek an Echo Entertainment shareholder meeting.
Billionaire James Packer has also welcomed the appointmentof John O'Neill as Echo's acting chairman.
2.23pm: This just in from BusinessDay's Peter Ker:
An important transport link for Australia’s mining and resources sector has failed again, with yet another train derailment blocking the Adelaide to Darwin railway.
The train – which was carrying 6000 tonnes of manganese to port in Darwin – derailed near Tennant Creek
There has been no official confirmation over the ownership of the manganese, but it is believed to be owned by OM Holdings.
OM has not issued a statement to the ASX and has not returned calls so far, but its share price suddenly lost to 10% around midday, and is currently 3 cents lower at 35 cents.
Reports suggest none of the material has spilled, unlike in December when a train on the same route derailed and spilled large quantities of toxic copper concentrate into the Edith River.
2.12pm: Anyway, more on Qantas.
Its shares have sunk to a new low of $1.02 cents on that downgrade threat. That means the shares are down about 30% this week if my calculations are right...or about $1 billion wiped off its value.
2.07pm: It is a Friday before a long weekend (for all but WA), so it's worth having a diversion:
Pssst ... wanna own the Sydney Opera House? It could be yours with a lucky roll of the dice.
Sydneysiders will be able to indulge their passion for property with the launch of a new Monopoly board featuring famous Sydney landmarks and city streets.
The AAP tale is a bit on the dull side, although it does note that a 2007 attend to tap public popularity picked the Barossa Valley as the preferred Monopoly site in Australia.
And there is this quirky comment from Sydney Lord Mayor Clover Moore on how the Sydney version of the (once?) popular board game would boost the city’s profile with tourists.
‘‘People overseas know Sydney for our amazing fireworks ... but we want them to come here all through the year and experience our wonderful city,’’ she said.
1.59pm: Qantas shares, meanwhile, are hovering just above the record low of $1.03 touched yesterday.
They are trading at $1.045, and won't be helped by Standard & Poor's placing the airline's debt rating on 'negative watch' after their big profit downgrade earlier this week.
1.46pm: This just in from BusinessDay's Lucy Battersby:
The competition watchdog is seeking a $2.25 million fine against Apple for selling its new iPad as “wifi + 4G’’ when the device did not work on any existing Australian 4G networks.
The case was adjourned until next Wednesday to allow Justice Mordecai Bromberg of the Federal Court in Victoria to receive some confidential information about Apple’s operations in Australia.
Apple and the Australian Competition and Consumer Commission have asked Justice Bromberg to approve the proposed fine for misleading and deceptive conduct.
(Read the full version here.)
1.32pm: In a speech in Adelaide today, Reserve Bank governor Glenn Stevens acknowledged that the mining sector was crimping other parts of the economy by drawing away labour capital and pushing the exchange rate up.
"It is doing that. But slower growth in sectors that had earlier done well from unusually strong gains in household spending would have been occurring anyway, even if the mining boom had never come along,’’ he said.
Mr Stevens said there had been an extraordinary period prior to 2007 when household wealth rose strongly - mainly due to rising housing prices - and savings out of household income fell to very low levels. But that all changed around 2007, the year the global financial crisis began.
He said household wealth was now about where it was five years ago but at some point would begin to increase again. People were now saving a reasonable amount from their incomes and investing it, he said.
‘‘That is, they are building wealth the old fashioned way,’’ he said.
1.18pm: Michael McCarthy, chief market strategist at CMC Markets, says markets appears to be ignoring positive news.
‘‘There’s a lot of disbelief in the market, (with) a willingness to focus on the negatives despite the terrific (economic) numbers we’ve seen in Australia this week (and) the moves from China and the steady hand on the tiller in the US,’’ he said.
Investors continue to focus on potential problems in Europe and are placing fresh short positions on stocks, he added.
‘‘Today we’re seeing people who are extremely bearish about the European situation taking the opportunity to establish some fresh shorts.’’
1.10pm: Here's Wayne Swan on ANZ's decision to pass the full 25 basis point on to its borrowers:
This morning ANZ really threw down the gauntlet to the other banks to do the right thing or risk seeing their customers walk out the door.
And yesterday we saw the Credit Union of Australia announce that it will permanently keep its standard variable mortgage rate a full one per cent below the major banks.
So the heat is really on the other banks, and if they don’t do the right thing we’ve made it much easier for their customers to walk down the road and get a better deal.
1.05pm: Energy shares are roughly pacing the overall market lower today, losing about 0.8% so far.
New York oil futures are resumed their retreat, dropping about 2.5% to around about $US82.80 a barrel. That looks like the lowest level since early October last year (eight months).
How soon will we see big drops at the local bowser? - Probably not this long weekend (save WA).
Bloomberg, meanwhile, reckons oil prices are heading for their sixth consecutive weekly decline which if realised would be the longest drop for 13 years.
New York oil prices they note are about 16% down for the year.
12.57pm: The dollar's taken a bit of a battering after briefly crossing parity just before midnight (AEST).
It was recently buying about 98.5 US cents - in other words, a full 1.5 US-cent slide in about 13 hours.
The currency was also buying 78.3 yen, 78.7 euro cents and 63.6 pence.
12.45pm: It's actually been a yo-yo week. As it stands, the ASX200 is basically sitting at where it closed last Friday - despite a torrent of news, particular on the domestic front.
Among the top 50 stocks today's movers are:
Lend Lease 0.8%
Rio Tinto 0.6%
12.35pm: Quite a drop for the overall market. Goldminer Newcrest is the biggest single drag on the market.
Gold prices have continued their retreat on signs that the US Federal Reserve may not hit the stimulus button again soon.
Gold bulls had been betting on a flood of extra money pushing investors to perceived havens such as the precious yellow metal.
Spot gold prices are off about 1% to $US1561 an ounce in recent trading, according to Reuters.
12.22pm: Bit of a reality check from BusinessDay's Gareth Hutchens to add to the ANZ rate cut mix:
It is the first time since the ANZ began its monthly rate announcement policy at the start of 2012 that the bank has passed on cuts in full. (Mind you, the RBA has only cut in May and June so far this year.)
Twice this year, in February and April, it lifted its rate by 6 basis points even though the RBA kept the official rate steady in those months.
12.16pm: Echo shares, meanwhile, have rallied today, rising as much as 20 cents, or 4.7% to $4.50, before easing back to $4.44 in recent trade.
James Packer's Crown owns 10% of Echo, and the latter's shares are up 24% or so in 2012 mostly because of speculation that the billionaire wants a lot more.
Echo, which owns The Star casino among others is worth about $3 billion, roughly half the size of Crown.
Crown shares, 48 per cent owned by Packer, were recently down 15 cents, or 1.8% for the day, at $8.21. Crown is up 1.7% for the year...about the same as the overall market.
12.04pm: End of Story:
Echo Entertainment chairman John Story has resigned from the board of the casino operator due to James Packer’s efforts to remove him.
‘‘The board of Echo has formed the view that the ongoing disruptive campaign ... for the removal of Mr Story was damaging to the company, and that it was in the best interests of shareholders that Mr Story not contest the resolution,’’ Echo said in a statement.
12.01pm: Housing finance is also in the news in another form. Data out today from the ABS shows the number of home loans edged 0.2% higher in April to 46,632.
That gain also came after March's tally of loans was revised higher to 46,519.
Economists had been tipping a flat result - so today's figures adds to the lengthening list of analysts under-estimating the strength of demand out there.
11.52am: All the major banks are lower - although there were drifting down before the ANZ's surprise full quarter-point cut.
ANZ was recently down 1.4%
CBA off 1.1%
NAB down 1.5%
Westpca down 1.5%
11.45am: Full story of ANZ's move to lower interest rates here. How long before other banks moves? Surely there will be others which go today.
11.42am: More on rates shortly. Meantime, Australia’s trade deficit narrowed in April, the Australian Bureau of Statistics (ABS) said today.
The balance on goods and services was a deficit of $203 million in April, seasonally adjusted, compared with an downwardly revised deficit of $1.282 billion in March. Economists’ forecasts had centred on a deficit of $900 million in April.
During April, exports were up 3.0 per cent in adjusted terms while imports were down 1.0 per cent, the ABS said.
11.35am: More from ANZ. ANZ CEO Australia Philip Chronican said:
"Funding costs remain elevated as a result of the deteriorating economic situation in Europe and strong competition for deposits. We are however pleased to be in a position to reduce rates by 0.25% this month.
"Although there was strong economic growth data this week, we know that several major states and many of our customers are not directly benefiting from the strength of the resources sector."
11.34am: From the ANZ press release:
Effective 15 June 2012, ANZ’s new standard variable mortgage rate will be 6.80%pa (6.90% pa comparison rate). New small business rates are also effective from 15 June.
11.32am: BREAKING ANZ has cut rates by the full 25 basis points. More soon.
11.31am: Expanding on a tweet from Stephen Koukuolas about China, the world’s second- largest economy is scheduled to release data on inflation, industrial production and trade over the weekend and Bloomberg economist Michael McDonough said the timing of the rate cut suggests the figures are going to be ‘‘very disappointing.’’
11.27am: The Queensland government has given final approval for the $1.7 billion Grosvenor coal mine in the state’s central highlands. The mine will be operated by Anglo American near Moranbah where the government recently approved a controversial mine workers camp.
Queensland Mines Minister Andrew Cripps said both the state and federal governments had signed off on the project after environmental requirements were satisfied. The Grosvenor mine, near Moranbah, won’t be affected by an ongoing dispute over environmental approvals between the two governments.
11.21am: Village Cinemas Australia Pty, owned by Village Roadshow Ltd, has signed A$100 million of loans due 2015, according to data compiled by Bloomberg.
The debt is split into a term facility of A$60 million and a revolving credit facility of A$40 million, the data show. Australia & New Zealand Banking Group Ltd. arranged the loans.
11.15am: Looking at the Chinese rate, economists at HSBC have offered some thoughts on how 2012 is likely to play out:
Going forward, the market should get ready for more decisive easing measures on three fronts: monetary easing via both quantitative and price tools (still expect additional 200bp RRR cuts); fiscal easing via additional tax cuts, VAT reforms and spending on public works, and the opening-up of more sectors to private investment.
We expect the economy will likely bottom out towards the end of 2Q. A modest rate cut, plus the larger discount banks can now offer on lending, is still helpful for reducing companies' lending cost and stimulating credit demand. This, plus the liquidity boost from RRR cuts and open market operation and fiscal easing, will be critical for reversing China's slowdown.
11.05am: James Packer’s bid to install Jeff Kennett on the board of casino operator Echo Entertainment has met with resistance from another major shareholder.
Echo shareholders are due to meet in July to consider Mr Packer’s request that chairman John Story be removed from the Echo board, and that Mr Kennett, the former Victorian premier be appointed.
Mr Packer is the largest stakeholder in rival casino operator Crown, which holds a 10 per cent stake in Echo. The next largest shareholder, Perpetual Investments, has said it will not support Mr Kennett’s appointment.
10.58am: Japan's current account surplus unexpectedly fell from a year earlier in April in a sign that a slowdown in China is weighing on demand for the nation's exports and casting doubt on the strength of its economic recovery.
First quarter economic growth was revised up to 1.2 per cent from initially reported 1.0 per cent, reflecting upward revisions in capital spending and private consumption, separate data also showed.
However, Japan's current account surplus fell 21.2 per cent compared with the median estimate for a 2.8 per cent annual increase and followed an 8.6 per cent decline in the year to March.
10.56am: Benny Sada, senior equities analyst at Australian Stock Report, says the lack of any clear direction from the US Federal Reserve is behind today's slide.
"That really took the wind out of the market’s sails last night and that has translated into some (sharp) losses for our gold miners who are leading the declines this morning,’’ he said.
Mr Bernanke kept all policy options open when he testified in front of the US Congress’ Joint Economic Committee.
‘‘If we decide that further action is required, then, of course, we have to decide what action is appropriate or what communications are appropriate. We do have options that we can consider."
10.52am: What started as a tentative move into negative territory has turned in a full-blown slump - markets are now nudging a 1 per cent loss for the day. What could turn them around? There isn't much news around locally today that could provide that sort of spark. We're expecting:
10.49am: But investors like the big miners after China moved overnight to cut rates in an effort to stimulate economic activity:
10.45am: While they remain tight-lipped about how much of Tuesday's rate cut they will pass on, the big banks are trading in line with general market:
10.41am: Homewares and haircare products distributor McPherson’s has downgraded its guidance for the full year to June 30 by more than 10 per cent due to low consumer confidence.
In February, the company provided guidance for profit before tax from continuing operations for the year to June 30 as $29.4 million.
McPherson’s managing director Paul Maguire on Friday said the company’s guidance had been downgraded to $26 million, or 11.56 per cent, due to widely reported deterioration in the retail environment.
10.37am: Shares in Fairfax - publisher of this website - have moved off their historic lows, perhaps in part because of a Bloomberg article which raised the possibility of a takeover. It said:
For potential buyers still willing to bet on the newspaper business, few publishers offer a cheaper entry than Fairfax Media.
As newspaper readers defected to the internet, and falling consumer spending curbed advertising, the company trades at a 59 per cent discount to the $3.3 billion value of its six units, according to Royal Bank of Scotland Group. Full story.
10.34am: Now for the gainers on the ASX200, who are swimming against a strong current so far today:
10.29am: Markets now more than half a per cent lower. Here are worst performed companies in the ASX200 so far:
10.22am: Here are how the sub indices on the ASX200 are performing - most are in the red.
10.18am: Markets now down decisively. Both All Ords and ASX200 are now 0.3 per cent lower.
10.13am: The All Ordinaries index was 4 points lower, or 0.1 per cent, at 4152.7, while the benchmark ASX200 was up 3.7 points lower, or 0.1 per cent, at 4104.9. On the ASX 24, the June share price index futures contract was down three points at 4115, with 11,564 contracts traded.
10.05am: Early take - shares 0.2 per cent higher without all companies trading.
9.58am: Still no word from the big banks about how much - if any - of Tuesday's rate cut they will pass on. ANZ is expected to announce their decision today, which could trigger a flood of announcements.
9.55am: Australian bond futures prices have fallen slightly after a night of mixed sentiment on global markets. At 8.30am the June 10-year bond futures contract was trading at 96.955 (implying a yield of 3.045 per cent), down from 96.975 (3.025 per cent) on Thursday. The June three-year bond futures contract was at 97.580 (2.420 per cent), down from 97.590 (2.410 per cent).
RBC fixed income strategist Michael Turner said Australian bond prices had moved down then up on activity from global central banks and sentiment in Europe.
Mr Turner said the market would look to a speech by Reserve Bank of Australia governor Glenn Stevens on Friday to give an indication of where the cash rate might be headed.
9.49am: In China, meanwhile, interest rates were cut for the first time since 2008, stepping up efforts to combat a deepening economic slowdown as Europe's worsening debt crisis threatens global growth.
In a tweet this morning, economist Stephen Koukoulas notes: There is a flood of data in China over next few days - the rate cut likely anticipating soft results.
9.46am: Spain had a mixed time of it overnight. It's credit rating was slashed by three notches by Fitch, which signalled it could make further cuts as the cost of restructuring the country's troubled banking system spiralled and Greece's crisis deepened.
But the nation's bonds surged, driving 10-year yields down by the most in more than two weeks, after the government beat its maximum target at a debt sale, easing concern the nation may be forced to seek international aid.
9.43am: Looking more closely at offshore events, expectations of further central bank support for the US economy were not met, which led to Wall Street reversing early gains of around 1 per cent.
"Bernanke threw traders a curveball," said Phil Flynn, senior market analyst with PFG Best in Chicago.
"After his vice chair made it seem like QE was a foregone conclusion, he really messed people up. We tried to shake that off, but there was a lack of follow-through and we lost momentum."
9.39am: Here are the recent cross rates for the Aussie:
9.35am: To the dollar, which touched parity with the greenback after China announced its first rate cut since 2008. The local unit was recently trading around 99 US cents, down from 99.39 cents late yesterday, and down from $US1.0003 at 11.34pm AEST after the China announcement.
The dramatic turnaround in the Aussie dollar came after Federal Reserve Chairman Ben Bernanke struck a decidedly different tone from his deputy, who just hours before his congressional testimony, argued in favor of monetary support.
Bernanke told Congress the Fed was closely monitoring "significant risks" to the US recovery from Europe's debt crisis, disappointing those looking for him to lay out the groundwork for a third round of large-scale Fed bond buying.
His comments overshadowed the surprise move by China, which cut borrowing costs by 25 basis points and gave banks additional flexibility to set competitive lending and deposit rates to combat faltering growth.
9.32am: Local stocks look set for a modest in early trade. US markets closed lower after only weak signals from Ben Bernanke that the US Federal Reserve would act if the debt crisis in Europe worsened. More on that shortly.
Meantime, for a comprehensive look at this morning’s business news, check today’s need2know.Here are this morning’s key market links:
9.30am: Hi everyone. Welcome to the Markets Live blog for Friday.
This blog is not intended as investment advice
Contributors: Thomas Hunter, Peter Hannam, Jens Meyer
BusinessDay with agencies