That’s it for Markets Live today.
You can read a wrap-up of the action on the markets here.
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See you all again tomorrow morning from 9.
Australian shares have floated higher as the biggest banks and miners lifted ahead of the release of minutes from Reserve Bank of Australia’s July meeting on Tuesday.
The benchmark S&P/ASX 200 Index lifted 0.5 per cent on Monday to 5511.4 points, while the broader All Ordinaries Index added 0.4 per cent to 5495.8. Local shares took a positive lead from the United States where equities closed higher on Friday night.
“After Goldman Sachs came out late last week tipping a possible rate cut in September many investors are idling ahead of the RBA minutes, but we expect them to take a very similar tone to the past few months,” Ord Minnett senior investment advisor Tony Paterno said.
The main focus in the week ahead is likely to be the slew of production reports from resource companies including Rio Tinto, Fortescue Metals Group, Oz Minerals, Iluka Resources, Woodside Petroleum, and Santos, Mr Paterno said.
“The theme of a widening gap between big low cost and small high cost producers is set to continue,” he said.
The two biggest miners lifted with analysts tipping both will beat their guidance for the financial year ended June 30. Resources giant BHP Billiton rose 0.8 per cent to $37.86, while main rival Rio Tinto added 0.3 per cent to $62.34. Deutsche Bank has upgraded its recommendation on Rio Tinto to a “buy” ahead of the miner’s June quarter production report due on Wednesday.
Australia’s third biggest iron ore producer Fortescue Metals Group fell for the sixth day in a row, losing another 2.3 per cent to $4.24 after showing on Friday it had missed full-year export guidance ahead of its quarterly report, also due out on Wednesday. CBA analyst Andrew Hines said FMG represents too much risk relative to its larger peers.
The spot price for iron ore, landed in China, was steady on Friday night at $US96.90 a tonne. On Monday afternoon, Dalian iron ore futures trading was tipping a pick-up in the value of the steel-making commodity after the local market closed.
Either Australians are slowly getting smarter about using expensive credit cards or consumers lack confidence and are therefore wary of debt. One person’s greater intelligence is another’s negative economic indicator.
The latest detailed credit and debit card data from the Reserve Bank shows Australians’ love of credit cards continues to wane while debit card usage continues to rise. Yes, price signals can work.
We’re still married to plastic though and a great many of us remain mugs, failing to manage the easy credit and therefore paying extremely high interest.
After two months of falls, the number of credit and charge card accounts was effectively flat in May. There were still 15.45 million of them, but the growth over the past year has been just 0.77 per cent.
Debit card account growth also was quiet in May, but grew over the year by 5 per cent to 38.49 million.
We’re using the credit cards we have more, but getting better at paying them off.
We made 166.53 million purchases worth $22.9 billion on credit and charge cards in May, compared with 160.92 million purchases worth $22.55 billion a year before.
Over the same period, debit card transactions grew from 279.7 million worth $15.33 billion to 308.7 million worth $16.59 billion.
Total credit and charge card balances grew from $49.62 billion a year ago to $49.99 billion, but, encouragingly, balances accruing interest fell from $35.35 billion to $34.43 billion.
That’s still a powerful mountain of debt frequently being charged interest rates in the high teens or more.
And here they are, the best and worst for the day....
Best and worst performing stocks in the ASX 200 today.
Shares have enjoyed a strong start to the week, as BHP, the big banks and Telstra led the ASX 200 up 25 points, or 0.4 per cent, to 5511.4.
The All Ords also gained 25 points to finish at 5495.8.
BHP was the biggest single contributor to the gains, as the big miner jumped 0.8 per cent as investors looked forward to a bumper production update when it reports on July 23. Rio also gained 0.3 per cent - the company is due to report production on Wednesday.
But Fortescue's shipments disappointed and the shares dropped 2.3 per cent to $4.24. The miner's stock was downgraded by broker CIMB to hold from add, with a price target of $4.35.
All the big lenders gained by between 0.5 and 0.6 per cent. Telstra was up 0.8 per cent.
Gold miners enjoyed early gains, but finished lower after Newcrest Mining dropped 0.9 per cent.
AMP fell 0.9 per cent.
The region's sharemarkets have joined the local one in posting some solid gains today:
- Japan's Nikkei is 0.9% higher
- Hong Kong's Hang Seng is up 0.5%
- Shanghai Composite is 0.6% higher
- Taiwan's TAIEX is up 0.3%
- Korea's KOSPI has gained 0.3%
- The Thai stock exchange is 0.6% up
- Kiwi NZX 50 is 0.5% higher
- The Jakarta Composite is 0.1% lower
The conventional wisdom that has underpinned the Australian dream of home-ownership could be flawed, according to a research paper published by the Reserve Bank of Australia which seeks to answer the age old question: is it cheaper to own or to rent?
The RBA’s conclusion is that house prices would have to continue to rise at the same rate as they have for the past six decades for owners to be as well off as renters.
“If house price growth were to be slower than the historical average, as some forecasters predict, then the average home buyer would be financially better off renting,” the paper says.
The RBA says this finding allays concerns about a housing bubble, because investors are assuming house price growth will maintain the pace of the last sixty years.
But if the pace drops, the renters would be the real winners.
The RBA analysed a range of costs involved in owning a house but not applicable to renters, such as council rates, interest rates and the purchase price.
It said that while there had been countless comparisons, its study was unique because it focused on Australia and used a larger and improved data set.
There were limitations in the paper, the RBA said, noting the it focused on owner-occupied purchases. Investors in housing may be better off because of tax reasons.
The RBA also noted non-financial benefits such as security of tenure, pride of ownership and freedom to renovate.
Renters could find themselves better off than home owners.
Macquarie analyst Jennifer Kruk has upgraded Village Roadshow to “outperform” from “neutral” following a “deep-dive” analysis of the outlook for Australian cinema exhibitors and content distributors.
Kruk notes that of the 25 films currently forecast to gross more than $US100 million ($106.6 million) in the US, 19 are from known/proven franchises such as The Avengers and Star Wars.
“Seven of the top eight films for current year 2015 realised more than $30 million in a previous iteration, giving us comfort around the outlook for Australian box office,” Kruk writes in a research note to clients. She has set her CY15 box office revenue growth at +6.1 per cent, slightly below Macquarie’s US analyst’s forecast of +6.8 per cent for the US box office.
Village Roadshow’s distribution business has been under pressure for some time from declining DVD sales, “however, the outlook is improving, with video on demand expected to offset the majority of lost sales from physical retail/rental.”
Kruk also expects the Gold Coast theme parks to benefit from a recovery in domestic and international inbound tourism.
She has increased her price target on Village Roadshow to $8.50 from $7.60.
The stock is up 2.1 per cent today at $7.67.
Never a good sign…
Transurban chief financial officer Samantha Hogg is unexpectedly leaving the tollroad group after just two years in her current role.
Ms Hogg, who was appointed CFO in May 2012 following the departure of Tom Honan, joined Transurban in 2008 as treasurer.
Transurban chief executive Scott Charlton said Ms Hogg’s last day was Monday and that a process to find a replacement was underway. Leigh Petschel, Transurban’s general manager of finance, will be acting CFO.
Ms Hogg’s departure comes after a busy year for Transurban, which has expanded its east coast tollroads following April’s $7 billion acquisition of Queensland Motorways and struck a deal with the NSW government to build a brand new tollroad, NorthConnex, in western Sydney.
Transurban’s shares, which were flat on Monday at $7.71, are up 14 per cent in the year to date, outperforming the S&P/ASX200.
Transurban has also made other executive changes, putting former group general manager of strategy, Wes Ballantine, in charge of the group’s Queensland operations.
Tim Steinhilber, who manages Transurban’s project delivery, will transfer to the US and oversee the group’s development of express lanes on Virginia’s Interstate 95 motorway.
Mr Steinhilber’s role in Australia will be filled by Tony Adams, who is currently based in the US as vice president of infrastructure and major projects.
Perth-based internet service provider iiNet has confirmed its interim chief executive David Buckingham will take the top job permanently.
Mr Buckingham was previously iiNet’s chief financial officer and he replaces iiNet founder Michael Malone, who stepped down from the company in March and ceased to be a substantial shareholder earlier this month.
Mr Buckingham was widely expected to take the role despite the company running a global search for a new CEO. He is considered by analysts to be a safe pair of hands.
iiNet chairman Michael Smith said in a statement there was strong competition for the role from around the world.
The company has just finished the review of its long-term business plan.
“David has made the role his own over the past nine months, delivering the company’s strongest ever results, market - leading customer service, and organic growth,” Mr Smith said. “The iiNet leadership team has charted an exciting course for the business over the next five years, and David is the best person to deliver on this plan.
“The focus is to strengthen our market share, increase profitability and extend our customer service excellence into new business areas.”
Shares in the ISP are up 1.4 per cent today at $7.45.
David Jones shares are back trading, up 1.3 per cent to $3.98 after shareholders voted in favour of the bid by South Africa's Woolworths.
Still some work to do before the scheme of arrangement is implemented, as laid out in the retailer's ASX announcement (see below).
With shareholders voting in favour of the takeover, David Jones has laid out the remaining key dates for the completion of the bid.
US economists have consistently overestimated the strength of their country's economy over the past 10 years, while their Aussie counterparts have consistently underestimated theirs.
The chart below, from Colonial First State's James White, shows the cumulative difference between the actual GDP growth figure for the quarter and what economists forecast the number would be, using Bloomberg data.
Adding up all the misses on the locals' GDP forecasts comes to a grand total of 4.7 percentage points of underestimation. The US forecasters have been off by a similar number, but on the flipside - they have been way too bullish.
What to make of all this?
Well, one obvious takeaway is that forecasting is a tough gig (some would say impossible).
That said, there has been some flattening of the line over the past year, suggesting that economists have got a better line on where their respective economies are going.
Or perhaps it's a case of good ol' American patriotism set against that well-documented Aussie quirk: tall-poppy syndrome.
The Aussie economy has done far better than economists have predicted over the past decade, while their US counterparts have proved overly bullish on US growth. Source: Colonial First State Global Asset Management
For years, wealthy Chinese have been transferring billions worth of their money overseas, snapping up pricey real estate in markets including New York, Sydney and Vancouver despite their country’s currency restrictions.
Now, one way they could be doing it is clearer. Last week, when China Central Television levelled money-laundering allegations against Bank of China, the state-run broadcaster’s report prompted the revelation of a previously unannounced government program that enables individuals to transfer their yuan and convert it into dollars or other currencies overseas.
Offered by some banks in the southern province of Guangdong, across the border from Hong Kong, the trial program was introduced in 2011 for overseas property purchases and emigration and doesn’t constitute money laundering, Bank of China said in a July 9 statement. The transfers were allowed by regulators and reported to them, the bank said.
“What it shows is the government has been trying to internationalize the renminbi for a lot longer than we thought,” Jim Antos, a Hong Kong-based analyst at Mizuho. “I’m rather encouraged by this news because this is the way they need to go.”
China’s foreign-exchange rules cap the maximum amount of yuan that individuals are allowed to convert at $US50,000 each year and ban them from transferring the currency abroad directly. Policy makers have taken steps in recent years, including allowing freer movements of capital in and out of China, as they seek to boost the global stature of the not-yet-fully convertible yuan.
Affluent Chinese have been moving money overseas in search of greater investment returns. China’s benchmark stock index has tumbled 66 per cent from its 2007 record, while the government has clamped down on property lending to rein in rising prices.
Chinese have become the biggest investors in Australia’s commercial and residential property, with purchases surging 42 per cent to A$5.9 billion ($5.6 billion) in the year to June 2013, according to the country’s Foreign Investment Review Board.
Former Commonwealth Bank CEO Ralph Norris’s attempt to dismiss the bank’s financial planning scandal as nothing more than a few “rogue people” is public relations trick 101.
The scandal occurred when Norris was running CBA between 2005 and 2011.
It all makes Norris’s attempt to pin the scandal on a few rogue planners breathtaking, albeit a predictable line of defence.
For instance it doesn’t explain why those so-called rogue planners, including Don Nguyen, were rewarded and promoted. Nor does it explain the contents of a letter from ASIC in February 2008 to the head of financial planning Tim Gunning, which alludes to something far worse than a few bad apples.
Rather than blame it on a few rogue planners, it should be blamed on an aggressive sales culture, where targets and bonuses were king and compliance got in the way of writing business. Indeed, one former compliance manager said the CBA compliance unit was nicknamed the business prevention unit.
As one insider at the bank says: “Good people are incentivised into bad conduct by the environment they find themselves in.”
Some of those 38 critical risk planners identified in the 2008 letter still work at the bank.
Norris says the compensation was “adequate” and says regulation didn't always ''necessarily overcome dishonest people''.
If that is the case how can he explain what happened to victims, including Joe Hockey’s mother-in-law, who were given low ball offers and only after they fought the bank were given more money.
Shares in takeover target PanAust have fallen to a two-month low, as investors fear takeover talks with its biggest shareholder could be turning sour.
The copper miner is due to update the market on Tuesday when it publishes its second quarter results, with the stock falling 11¢ to $2.14 apiece on Monday.
The shares were as low as $2.05 in the first hour of trading - its lowest price in more than eight weeks - before recovering slightly.
The takeover approach from Guangdong Rising Asset Management is not expected to be called off tomorrow, but any progress on the situation is clearly in the court of the Chinese group, which has not advanced its offer for PanAust since lobbing it in May.
Guangdong Rising has been welcomed inside PanAust to perform its due diligence on the offer, and those close to the deal were surprised by today’s negativity on the market.
Guangdong Rising has offered $2.30 per share for PanAust, in a ‘‘non-binding, indicative’’ offer that values the copper miner at $1.46 billion. PanAust shares have never reached $2.30 over the past two months despite the offer, instead hovering in a range between $2.15 and $2.28.
The offer has combined with rising copper prices to boost enthusiasm for the copper sector in recent times, with other miners like OZ Minerals and Sandfire Resources enjoying strong stock prices in recent times.
Here's how Air New Zealand became Australia's most profitable airline:
Recalling the dark days of 2001 at Air New Zealand, when the Kiwi carrier was bailed out by its government after the collapse of Ansett, CEO Ralph Norris likes to paraphrase Winston Churchill.
“Never waste a crisis,” Norris says.
“You have the opportunity to make changes and do things in a much quicker time frame than you would in a normal-state situation.
“Qantas was a fearsome competitor and putting a lot of pressure on Air New Zealand. We had to change very, very quickly.”
Norris, who was parachuted into the chief executive role after serving on its board, initially focused on the thousands of staff.
He ran a series of two-day sessions with 800 employees at a time, explaining the tough external environment meant change was needed and laying out a strategy for the future.
But first, he gave employees the opportunity to vent their frustration about its near collapse.
“We started those sessions off with what we called the ‘mad, sad and glad session’.
“The first few hours . . . were about people saying what made them mad about what had happened, what made them sad about what had happened and thinking about things about the airline that made them glad – what they would like to see carried into the future, the good things about the company.”
Norris says the sessions explained the challenges from new low-cost entrants such as Virgin Blue. As a result, Air NZ did away with domestic business class, standardised its narrow-body fleet to Airbus A320s, its wide-body fleet to Boeings and updated its tired long-haul service. That included dropping first class and introducing premium economy seats.
The airline decided to shut down its low-cost subsidiary Freedom Air and absorb it into the mainline division.
“We came to the view that there were issues in our mainline carrier so we had to overhaul it,” Norris says.
The interior of the stretch version of Air New Zealand's new Boeing 787-9 Dreamliner, which made its delivery flight to Auckland on Friday. Photo: Air New Zealand
David Jones is a step closer to being a foreign-owned company, with shareholders voting overwhelmingly approving South African retailer Woolworths’ $2.2 billion takeover.
But Australia’s oldest department store will not know until a court hearing on Thursday whether the acquisition will proceed.
Of the votes cast, 96.81 per cent were in favour, 3.19 per cent were against. Of the shareholders, 89.64 per cent voted in favour, 10.36 per cent against. 53.86 million shares abstained.
Retail magnate Solomon Lew is believed not to have voted his shares.
Of proxy votes, 96.48 per cent were in favour of Woolworths’s bid or open, with 3.07 per cent against. This represents 88.36 per cent of shareholders in favour, 10.13 per cent against.
Proxies voted accounted for 51.4 per cent of issued shares.
DJs' stock remain in a trading halt.
David Jones shareholders have voted to accept the takeover off from South Africa's Woolworths Holdings. Photo: Wayne Taylor
Shares in Australia's biggest blind and curtain maker Kresta have been halted from trade ahead of an expected announcement about a takeover offer from China.
Kresta in June received notice from a subsidiary of Chinese sunshade maker Ningbo Xianfeng New Material Co that it intended to make a 23 cents-a-share offer for the Australian company.
Kresta requested a trading halt today, saying it expected an announcement from the Chinese company about its intended takeover offer.
The announcement is expected either later today or Tuesday.
Kresta shares last traded at 21¢.
Fund managers are tipping a run of capital raisings in the Australian resources sector in the next two weeks, and say graphite juniors are likely to try to capitalise on the share price success of Melbourne-based Syrah Resources.
Tim Schroeders, a fund manager at Pengana Capital, says July will see a suite of small cap resources stocks raise between $5 million and $20 million in cash, and handful of mid-cap players will tap the market for over $20 million.
They were set to rattle the tin after “significant encouragement” from institutional players, and in an attempt to get in ahead of reporting season in August.
He noted a recent shift in attitude to investing in resources over the last few weeks, particularly among institutions based in Hong Kong and London, as well as domestically.
“Valuations in the loved sectors of healthcare, telecommunications and banking have become stretched,” he says.
“And as a risk mitigation strategy, investors are being forced to come back to resources, where most are underweight.
“It (resources) has not done as badly in the past 12 months as most expected. Despite significant headwinds, resources have done at least as well as industrials.”
Wilson Asset Management senior equity analyst Martin Hickson says there has been a shift in fellow fund managers’ attitude to resources exposure in the past three months.
“A lot of investors have been underweight in resources and we are seeing a move to neutralise that, or even move to overweight,” Mr Hickson says.
“As for industrials, they are delivering low earnings growth and you’ve seen a run of downgrades, so fund managers are reducing their exposure.”
Graphite companies were likely to try to ride the wave of interest on the back of graphite and vanadium hopeful Syrah Resources but he warned that investors could be taken for a bit of a ride.
Hickson also tips gold companies will try to raise money to shore up their balance sheets.
Optimism springs eternal for some when it comes to middling biotech Sirtex. Strong quarterly sales data saw its share price pushed to new records last week, nudging its market cap clear of the $1 billion level for the first time.
And this morning, Bell Potter has hiked its price target to $21.19 from $18.70.
The driver is its view that Sirtex's microspheres treatment for colorectal cancer is being used in the key US market for a greater number of so-called “off-label” uses than previously thought.
Bell Potter reckons as much as 65 per cent the use of the Sirtex treatment could be off-label, pointing in particular to prospects in the promising liver cancer market segment where demand for treatments is growing due to the ravages of hepatitis-C.
Sirtex is down 6c at $18.68.
Bell Potter is not alone with a $21-plus valuation on Sirtex, joining Baillieu Holst, which has a $21 figure on the stock, which it has had for several months now.
No official announcement out yet, but early reports that DJs' shareholders have approved the takeover. Apparently Solomon Lew abstained.
DJS shareholders vote in favour of Woolys deal #ausbiz
— Evan Lucas (@EvanLucas_IG) July 14, 2014
Northern Star MD Bill Beament.
The most acquisitive mining boss of 2014 has revealed his recent buying spree was partly inspired by a dislike for single-mine companies among the world’s biggest mining investors.
Speaking after his company hit its highest share price on Friday, Northern Star managing director Bill Beament said balance-sheet caution, last year’s gold price slump and his own knowledge of West Australian goldmines had enabled the company to acquire five new mines in three transactions over the past six months.
Just two years ago Northern Star was an upstart junior making money out of a single mine that was picked up for a song in 2010. But the simple story belied bigger ambitions.
‘‘We saw two years ago where we thought the Australian gold landscape was going, and we also talked to our major shareholders, like the BlackRocks of the world and the Van Ecks and the other large ones, about what interested them in the gold space,’’ Mr Beament said.
‘‘They told us they were going to stop investing in single-mine companies, and that they didn’t think there should be a board and a management team on every single mine in Australia.’’
Determined to get the world’s major mining investors on board, Northern Star directors began reducing their holdings to bring in large institutions such as Mitsubishi and BlackRock.
The strategy moved into top gear in December 2013, when despite a market capitalisation of just $370million, Northern Star launched a string of transactions with the world’s two biggest goldminers: Newmont and Barrick.
Northern Star's shares are up another 9.1 per cent this morning to $1.77, less than a week ago they traded at $1.32.
CEO Peter Coleman’s determination to internationalise Woodside Petroleum has taken another step forward, with the petroleum giant gaining entry to a prospective oil zone near the borders of Tanzania and the Democratic Republic of Congo.
Through a farm-in with ASX listed Beach Energy, Woodside will gain a controlling stake in the prospective Lake Tanganyika South Block in Tanzania.
Woodside will take 70 per cent ownership of the block, which Mr Coleman said was in an under-explored “frontier” region.
“Securing this highly prospective acreage represents another step forward in building Woodside’s global exploration portfolio,” he told the ASX this morning.
Woodside will reimburse Beach for some of its initial costs in the block and fund another round of seismic exploration.
During his three years in charge of Woodside, Mr Coleman has broadened Woodside’s horizons beyond the North West of Australia and into foreign territories like Myanmar, Ireland, Canada and New Zealand.
There was also an ill-fated attempt to spend $US2.5 billion buying into the Leviathan gas field in Israel, which was abandoned in May.
Beach Energy managing director Reg Nelson said the transaction vindicated his company’s plan to be an early entrant into prospective areas, and will use the position to strike deals with big oil companies.
Woodside’s shares are trading 0.3 per cent higher at $41.59, while Beach Energy’s stock is 0.5 per cent up to $1.6475.
This from ex-PIMCO head honcho Mohamed El-Erian in his column for Bloomberg View on how the troubles at a Portuguese bank illuminate some of the continuing worries about Europe's economy (it's a couple of days old but in case you missed it):
The market convulsions surrounding the difficulties of Portugal's Espirito Santo financial group may be waning, but the episode illustrates a deeper and longer-lasting issue: The way Europe's persistently low economic growth exposes all kinds of underlying financial vulnerabilities.
The Espirito Santo case won’t be easy to untangle. As analysts dig in, they are uncovering the complex interconnections that inevitably occur in such large conglomerates. This “spaghetti bowl” element is bad news, and it points to challenges in restoring clarity and confidence.
On the brighter side, the financial and economic fallout appear to be containable. The bank is not large by global standards, and the European Central Bank and the European Commission have enough resources to prevent a re-eruption of the European debt crisis if Portugal can’t cope on its own. Moreover, the ECB is spearheading more credible stress tests for banks, along with asset quality reviews.
There is, however, a bigger issue at play, highlighted yesterday by the disappointing European data on economic activity. Europe is having a hard time restoring growth - a situation that is unlikely to change given the unbalanced nature of demand in the region, the strength of the euro, sluggish investment, high unemployment and heavy debt burdens. The longer Europe is stuck in this low-level equilibrium, the greater the likelihood of periodic eruptions of the Espirito variety.
RBA governor Glenn Stevens gave a big interview to The Oz over the weekend, here’s a summary, courtesy of HSBC’s Paul Bloxham:
On the Aussie dollar, the RBA governor repeated that he believed “some investors may be underestimating the probability of a material decline at some point”. The high level of the AUD appears to remain his biggest concern although, unlike last December's interview with the AFR, there was no mention of currency intervention.
To some degree, the RBA seems largely resigned to the fact that they are beholden to the Federal Reserve and its withdrawal of stimulus before the AUD will decline noticeably, although the Governor remains optimistic that the US economy is recovering.
On the cash rate, the governor noted that he still expects a “period of stability” for the policy rate. He noted that they will probably soon shift the language to “something not quite so specific” - they have already been on hold for 11 months, which means there has already been a period of stability.
On the economy’s rebalancing act, the Governor remains positive about developments in the housing market, which are playing a key role.
He noted that the recent easing in the pace of housing price growth was welcome and that despite the fall in building approvals, he still expects “pretty high levels of construction for a while yet”.
Nonetheless, he noted that there was a “wider margin of uncertainty” about the outlook as the resources sector shifts from investment to export volumes.
On macro-prudential tools, the Governor was more open to the possibility of their use than any previous RBA commentary has suggested. He noted that “I personally think that it is useful for have so-called macro-prudential tools”, which he then clarified as “regulatory tools”.
Shares have started the week on a good note, with the ASX 200 edging 24 points, or 0.4 per cent, higher to 5510.3.
The All Ords is up by a similar amount to 5496.1.
The big banks and BHP, boosted by reports that the mining giant would report solid production numbers next week, are driving the gains.
But metals and mining stocks are having a mixed morning, with iron ore miners Fortescue and Atlas Iron 1.4 per cent and 2.5 per cent lower, respectively.
Rio is down marginally.
Utilities are the only corner of the market to trade lower as a group.
Clive Palmer may be busy shaping the laws of the nation, but when it comes to obeying them, his flagship company is sadly lacking. An analysis of the accounts for Mineralogy Pty Ltd has identified a slew of irregularities. Some are technical, and are laid out in detail below.
Questions were put to Palmer and Mineralogy's auditors, Ernst & Young. Both declined to provide a meaningful response.
E&Y was appointed auditor of Mineralogy on June 30, 2009. There is no auditor previously mentioned in the filings with the Australian Securities and Investments Commission.
Nevertheless, the Mineralogy accounts for 2008 mysteriously claim that E&Y earned $49,500 a year before it was appointed to audit the company's accounts.
Accounting and disclosure expert at University of NSW, Jeff Knapp, who reviewed the filings for Fairfax Media, said: ''The claim that audit fees were earned during the 2007 and 2008 years is plainly wrong given Ernst & Young was appointed on 30 June, 2009.''
Knapp also points to the 2007 tax disclosures. According to the income statement there is an income tax expense of $79 million for 2007, mainly relating to a large capital gain. Yet there is no evidence in the 2007 balance sheet for a significant tax liability.
The accounts show the company paid income tax of $68 million for 2007. As anybody who has filed a tax return will know, however, you pay your tax in the year after you make a capital gain, not in the same year.
''The income tax information relating to 2007 does not add up and suggests that transactions and events from previous accounting periods may have been lumped into 2007,'' says Knapp. The rub is that there is no record in the ASIC database of any Mineralogy accounts for 2006 or earlier years.
Knapp also questioned the E&Y audit report for 2008. ''It is unusual for an auditor to give a clean opinion when they have only been appointed 12 months after the relevant year end.''
"There is no evidence that Clive Palmer's companies have been penalised". Photo: Alex Ellinghausen
David Jones shares are in a trading halt as shareholders vote on whether to approve Woolworths takeover bid.
Former CBA chief executive Ralph Norris has broken his silence over the bank's financial planning scandal, labelling the advisers involved as ''rogue people'' and denying any conspiracy to defraud customers.
Mr Norris, who ran CBA between 2005 and 2011, during which time the misconduct identified by a series of reports by Fairfax Media and a Senate committee report occurred, admitted to being aware of ''some of the problems'' while he was CEO and considered the compensation procedure as adequate.
''I thought that we had put in place the appropriate resolution for those problems,'' he said.
''Certainly I don't know the specifics of everything that has happened since I have been there.''
Earlier this month, CBA chief executive Ian Narev announced a new compensation process to determine whether the bad advice was more widespread.
CBA is not revealing how many aggrieved customers of Commonwealth Financial Planning or Financial Wisdom have registered with the scheme.
Mr Norris said regulation didn't always ''necessarily overcome dishonest people''. ''If laws and regulation solved everything, well, we wouldn't have the need for courts to handle anything like that,'' he said.
''It comes down to the fact that it is a case where, when you find these issues, you have got to look at your processes and systems and say, 'What can we do to prevent this from happening again?' That is going to be more effective than a piece of legislation.''
World financial markets became reacquainted with fear last week, and even if it was short-lived, the ructions in some riskier assets looked to some like a precursor to a much rougher ride down the road.
Concerns that Portugal’s largest listed bank, Banco Espirito Santo was badly exposed to its owners’ accounting problems raised eyebrows in Europe and the US, getting investors to ask whether there were more shoes to drop in European banking.
Also some excess speculation that has been building up in various corners has bubbled over. Examples included the halt in trading in the stock of a company, Cynk Technology, with no assets or revenue, that had soared to a $US6.4 billion market value, and the sudden collapse of Spanish wireless provider Gowex after a massive accounting fraud.
Add in the big reversal in fortunes for some companies who recently did US IPOs, plus Puerto Rico's increasingly troubled debt picture, and it was tempting to remember Warren Buffett’s old saying: “Only when the tide goes out do you discover who’s been swimming naked.”
Billionaire investor Carl Icahn said he has become very wary. "In my mind, it is time to be cautious about the US stock markets," he said in a telephone interview on Thursday. "While we are having a great year, I am being very selective about the companies I purchase."
It all comes against a backdrop of anxiety about whether global markets and economies are resilient enough to cope when the US Federal Reserve takes the punch bowl away by ending its bond buying program and then starts to raise interest rates – probably next year - for the first time since 2006.
The sense of complacency that had set in among many investors has begun to disappear.
BHP Billiton looks set to easily beat its iron ore export target for the 2014 financial year, after data published by its Port Hedland neighbours indirectly shed light on BHP's performance.
Australia's biggest company needed to export about 54 million tonnes of iron ore during the June quarter - including tonnes owned by joint venture partners - to meet its full-year target of exporting 217 million tonnes.
The miner appears to have easily achieved that, after Fortescue Metals Group and Atlas Iron illuminated Port Hedland data by both publishing their export numbers earlier than expected last week.
Just less than 105 million tonnes of iron ore were shipped through Port Hedland in the June quarter and, after subtracting the contributions of Fortescue and Atlas, BHP appears to have shipped just over 62 million tonnes.
Such a performance would put BHP on track to export well over 220 million tonnes in the 2014 financial year, smashing its guidance and proving that expansions to its Pilbara export system towards 220 million tonnes per year has arrived.
The vow to export 217 million tonnes in the financial year was itself an improvement, after BHP began the year promising to export 207 million tonnes.
Beating the full-year export target would be a boost for the miner, given iron ore remains its biggest money spinner.
But it would not be a surprise to analysts, many of whom have been tipping a guidance beat for months.
BHP is on track to export well over 220 milliom tonnes of iron ore in the 2014 financial year. Photo: Reuters
David Jones is expecting overwhelming support from minority shareholders when they meet on Monday to consider South African Woolworths' $2.2 billion offer, but Australia's oldest department store will not know until a court hearing later this week whether the takeover will proceed.
David Jones has also yet to hear from ragtrader Solomon Lew, who emerged with a 9.9 per cent stake last month and has refused to disclose whether he intends to support or oppose the offer.
ASIC has also threatened to intervene and, depending on the outcome of the vote, may withhold a letter of consent, raise matters of concern or oppose the scheme at a court hearing on Thursday.
ASIC believes Woolworths' $213 million mop-up offer for 88 per cent-owned Country Road represents a multimillion-dollar ''inducement'' or collateral benefit to Mr Lew, breaching ''equality of opportunity'' principles enshrined in Corporations Law.
Woolworths offered to buy Mr Lew's 11.8 per cent stake in Country Road for a generous $17 a share, conditional on the David Jones scheme proceeding.
Analysis of voting intentions over the past few weeks suggests that about 95 per cent of investors are in favour of Woolworths' $4-a-share offer and plan to vote in favour of the scheme of arrangement.
The scheme requires support from 50 per cent of shareholders and 75 per cent of shares voted. Given David Jones' low shareholder turn-out in the past, Mr Lew would be in a position to block the vote with as little as 12 per cent of the shares or with the support of other investors.
However, David Jones shareholders are confident the scheme will proceed, whether or not Mr Lew votes his shares and regardless of ASIC concerns.
David Jones shareholders expect the takeover to go ahead, despite the shenanigans of Solomon Lew.
Shares are expected to start the week little changed ahead of more US corporate results, the latest RBA minutes tomorrow and Rio's production report on Wednesday.
Here's what you need2know:
- SPI futures up 12 points to 5466
- AUD at 93.8 US cents
- On Wall St, S&P500 +0.2%, Dow +0.2%, Nasdaq +0.4% on Friday
- In Europe, Euro Stoxx 50 +0.2%, FTSE +0.3%, CAC +0.4%, DAX +0.1% on Friday
- Spot gold up is at $US1,338.47 an ounce on Monday morning
- Brent oil down $US2.01 to $US106.66 per barrel on Friday in New York
- Iron ore steady at $US96.90/tonne
What's on today:
- ABS lending finance figures at 11:30am AEST
Stocks to watch:
- David Jones's shareholders hold vote on Woolworths' takeover bid at 10am.
- Daiwa House and Sekisui House are investigating potential bids for Devine: The Australian
- Healthscope to make retail IPO allocations this week: AFR
- Karoon Gas plans a buyback after $600m Poseidon sale: AFR
- Santos: Oil output started from Dua oil project
- Sirtex raised to buy from hold at Bell Potter; price target of $21.19
- Telstra: media and marketing MD resigns
- Morningstar has initiated coverage on Westfield Corporation, placing an "accumulate" recommendation on the group with a fair value estimate of $8.00
- Barclays has upgraded Rio Tinto from "equal weight" to "overweight" and said it was looking for a bounce in iron ore equities
- Deutsche Bank has downgraded education services provider Navitas to a "hold" recommendation with a target price of $5.10, after a reduced contract with Macquarie University was announced
Good morning and welcome to the Markets Live blog for Monday.
Your editor today is Patrick Commins.
This blog is not intended as investment advice.
BusinessDay with wires.
