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Shares have ended flat, with losses in top retailers Woolies and Wesfarmers offset by strong gains in the real estate sector and SAI Global.
The ASX added 0.1 point to 5431.4 and the All Ords gained 0.5 points to 5519.1.
The flat finish reflected hesitation among investors ahead of Tuesday's US presidential debate, which may result in the market repricing the odds of a Donald Trump versus Hillary Clinton presidency. US futures pointed to another weak session ahead of the televised event.
"People are very cautious and so they should be," Morgans stockbroker Troy Fidler said. "The upcoming US election but also the potential interest rate hike both of those macro things affect our market here."
The real estate sub-index surged 1.5 per cent, profiting from some yield hunting, while consumer staples lost 1 per cent.
Woolies, which shed 2.1 per cent, and Wesfarmers, down 0.7 per cent, were the two biggest drags on the index.
On the other side of the ledger, property group Scentre added 1.3 per cent, Westfield gained 1.4 per cent, while takeover target SAI Global shot up 28.7 per cent.
Bank of Japan governor Haruhiko Kuroda says the central bank stands ready to use every possible policy tool to achieve its 2 per cent inflation target.
While the BoJ would be mindful of the impact ultra-easy policy could have on banks' profits, that would not prevent it from expanding stimulus further if needed to revive Japan's economy.
"There is no better opportunity than now to completely get out of deflation. Talking about the limits of monetary policy does not help at all," Kuroda said in a speech to business leaders in Osaka.
"There is no limit to monetary policy," he said. "In designing monetary policy, the BoJ will relentlessly pursue innovation and never hesitate to challenge."
He added that the pace of the BoJ's government bond buying may fluctuate under its new yield curve control, though there would be no policy implication to such changes.
The BoJ made an abrupt shift last week to targeting interest rates on government bonds to achieve its elusive inflation target, after years of massive money printing failed to jolt the economy out of decades-long stagnation.
Under the new framework, the BoJ's main means for monetary easing would be to deepen negative interest rates from the current minus 0.1 per cent, or lower its 10-year government bond yield target - now set at around zero per cent, Kuroda said.
Are we about to witness a renaissance of value stocks? investment network LiveWire asked four value oriented fund managers.
Clime Asset Management's John Abernethy reckons the shift from growth back to value is yet to occur for the simple reason that bond yields remain exceptionally low, disrupting the efficient allocation of capital.
"To find value we need to look outside of the well-covered larger cap names and their inherent link to macro-economic activity," he says.
Peters MacGregor chief investment officer Wayne Peters is confident that value will again have its day, but finds it hard to say when.
"With monetary policy losing its effectiveness, the business cycle maturing since the recession in 2009, possibly higher interest rates, and a surplus of virtually everything putting pressure on prices, valuation will play a more important part eventually."
But both NAOS Asset Management portfolio manager Ben Rundle Montgomery Fund chief investment officer Roger Montgomery argue that value investing was never really out of favour.
"Generally the upside potential for being right about growth is greater, but the upside potential for being right about value is more consistent," Rundle says.
While Montgomery is confident that deep down most people are value investors at heart. "Offered the opportunity to buy the item they want at a cheaper price, most would jump at it."
He adds that really growth and value are two sides of the same coin: "You cannot define value without estimating the growth.:
The calls for fiscal stimulus will grow this week: Mario Draghi will visit Brussels and Berlin with his increasingly urgent message that governments must act to bolster the economy. In the German capital, he may have a special request: Spend more, now.
The European Central Bank president will testify to the European Parliament today and address a closed-door session of German lawmakers on Wednesday. One of his concerns is that governments are being too slow to implement structural reforms. Another is that even if they accelerate the pace, the benefits could take years to come through.
Step up to the plate, Germany. From Draghi's perspective, Europe's biggest economy is running budget and current-account surpluses that give Chancellor Angela Merkel's government the fiscal space to boost demand immediately.
Not surprisingly, the view in Berlin is rather different - for a start, government spending has been outpacing consumer spending for more than a year.
"If you scrap out consumption and construction, Germany would hardly have grown," said David Milleker, chief economist at Union Investment Privatfonds. "We could still do more, but you can't really blame the government for not doing anything, at least not any more."
The central bank is so worried about the slow pace of structural adjustment that it has set up a task force on economic reforms to consider possible ideas.
But in the meantime, policy makers want to see fiscal spending by some governments, and they're not afraid to name names.
"Countries that have fiscal space should use it. Germany has fiscal space," Draghi told reporters earlier this month. Executive Board member Peter Praet said in an interview with L'Opinion last week that the nation's current-account gap of 9 per cent of GDP is an "anomaly" that should be reduced by developing internal demand.
Meanwhile, German Finance Minister Wolfgang Schaeuble has urged lawmakers to take a tough stance with Draghi when he goes before legislators, Bild reported over the weekend. He is irritated at Draghi's criticism of the trade surplus, saying it's the ECB that's at fault, according to the German newspaper.
Draghi's view isn't shared by all of his Governing Council. Jens Weidmann, the president of Germany's Bundesbank, said on Friday he sees no need for government stimulus and the bloc's countries "do not have the necessary fiscal leeway".
We speculated earlier that an article the SMH/Age ran on Lidl getting serious about opening in Australia might be behind some of the slide in Woolies and Wesfarmers (owner of Coles) shares today.
Morgans stockbroker Troy Fidler agrees that it may have influenced the share price, but the effect is unlikely to last long.
"Whenever a foreign player is mentioned in the press, it has a short term effect, but that eventually blows over," he said.
"Coles and Woolworths are very well established here and I'm a big believer those companies will survive any foreign threat.
"Aldi has been here for 15 years now, and it's taken them quite a while to get the 11 or 12 per cent market share."
S&P has affirmed the triple A rating of New South Wales but kept it on negative outlook, reflecting its negative outlook on the federal government.
S&P said the ratings reflected its view of the state's extremely predictable and supportive institutional framework; its very strong financial management and economy and its exceptional liquidity.
"The negative outlook on NSW reflects that on the sovereign, the Commonwealth of Australia," the agency said "A deterioration in NSW's own credit metrics, which we view as unlikely over the next two years, could also lead to a downgrade of the state."
While political uncertainty is expected to increase as we move closer to the US elections on November 8, Macquarie reckons the effect on Australia's economy and markets to be minimal, outside a landslide victory to Trump.
"Not only because we see limited scope for radical change, but also because outside of an economic downturn that drives a legislated largesse fiscal response, the impacts are probably more indirect than direct—FX and trade policy-related," the bank's equity strategists write in a note to clients.
The US accounts for just 10 per cent of Australia's exports, mostly airline parts, meat and wine, while immigration to the US is low. The analysts liken the unpredictability of a Trump win to a "Brexit-like event".
"The unpredictability of Trump raises the risk premium for financial assets but the reality is that both candidates represent a shift from the current political consensus of austerity and globalization - Trump, a little more dramatically and with less qualification," the equity strategists said.
Among the policies expected to affect Australia, both Trump and Clinton have said they intend to boost infrastructure spending, however the impacts will be diluted over a gradual roll out.
"This may potentially give an announcement day push for those exposed to building and construction [Boral, James Hardie, RelianceWorldwine and Transurban] but the earnings impact would be immaterial. It is more likely that the biggest impact will be translation benefits, it if comes with a stronger $US."
Healthcare policies may also weigh on local stocks. A repeal of Obamacare flagged by Trump may present downside for Sirtex Medical and Sonic Healthcare, while the creation of a free market drug pricing policy by Trump could boost CSL.
Are Aussie banks a buy after being bashed around for the last 18 months or should investors still stay away? That's a question a lot of analysts are asking these days and, unsurprisingly the answers range from buy the lot to don't touch with a pole.
Aurora Funds Management senior portfolio manager Hugh Dive says he's in between the extremes.
In a note titled "What to do with the Aussie banks?", Dive says a lot of the most recent plunge in bank shares, which hit CBA and Westpac hardest, has been due to the unravelling of the Aussie dollar carry trade due to expectations of rising US rates.
Many international investors borrowed money cheaply, eg in the US, to then buy Aussie government bonds with a 2 per cent yield but also, say, Westpac shares, which is a bit riskier but delivers something like 6.2 per cent yield.
Another factor weighing on the share prices of bank stocks in 2016 has been regulatory uncertainty around future capital requirements, ie do they need to raise further capital in addition to the $20 billion raised in 2015.
But Dive reckons the potential for further capital raisings is not as high as many fear, given the core capital ratios of the big four are among the strongest globally, adding that the burden of additional capital will not fall on shareholders alone.
"Effectively the consumer will bear their share of the cost for this "gold plating" of the banking system," he says.
Dive notes the banks, which are expected to deliver a combined $30 billion of cash profits in 2016, trade at a 30 per cent discount to the ASX 200, the biggest discount since 2007.
He lists five reasons for investing in the banks:
- banks are very cheap in historic terms compared to the wider ASX
- banks appear to be winning back business debt market share with fewer corporates accessing the corporate bond market
- unemployment remains benign which has kept a lid on consumer bad debts
- falling rates improve debt serviceability for borrowers
- strong prices for the asset prices backing loans mitigate against losses
Countering the positives, Dive notes that credit growth is slowing, net interest margins are under pressure, bad debts unlikely to fall further and political pressure remains to pass on RBA rate cuts in full.
Still, Dive expects bank results (due for ANZ, NAB and Westpac at the end of October) to surprise on the strong side, and notes that a 6 per cent fully franked dividend for the likes of CBA remains attractive.
Time for a bit of a recap: shares are struggling for direction after four straight sessions of gains, with consumer and health care stocks weighing most, while investors shift their attention from central banks to American politics.
Shares have gained some momentum over the past half hour, buoyed a bit as US futures lift from the day's lows, but investors are unlikely to resume last week's strong rallly.
Markets are awaiting tomorrow morning's US presidential debate between Donald Trump and Hillary Clinton that could influence stock trading. The first of three debates ahead of the November election looks set to draw a record high US television audience.
"The (Australian) market won't like it if there are signs that Trump might get in," said OptionsXpress market analyst Ben Le Brun.
"We have had a few sectors turn positive, namely the materials and the financials, coupled with property trusts and discretionary. So, if we see this momentum continue, there is a good chance we will close in positive territory," Le Brun added.
Consumer stocks were among the biggest drag on the benchmark. Retail giants Wesfarmers and Woolworths have dropped 1.1 per cent and 2.1 per cent, respectively.
Oil major Woodside Petroleum is down 0.5 per cent after a slump in oil prices on Friday.
SAI Global has soared as much as 33.2 per cent, its biggest intra-day percentage gain since it started trading. The firm is backing a $1 billion takeover from Hong Kong-based Baring Asia Private Equity.
Back to topA major shake-up is looming in the retail sector as giant online retailer Amazon has its sights set on the Australia market with JB Hi-Fi and Harvey Norman the ones with the most to fear.
As one of the largest "disruptors" for retailers, Amazon could generate sales of up to $4 billion in Australia with a focus on electrical items, which will be a direct hit on JB Hi-FI and Gerry Harvey's Harvey Norman business.
Brokers have estimated the most impacted retailer is likely to be JB Hi-Fi where earnings could fall as much as 23 per cent, followed by a 19 per cent fall in Harvey Norman's earnings.
On the sales front, JB Hi-Fi's could fall as much as 6 per cent if Amazon enters this market. There could about a 2 per cent impact on sales for Myer and Premier Investments because they sell their own merchandise and more Australian-centric brands, according to Citi retail analysts.
One of the latest additions to the benchmark is also its most expensive.
Nextdc, among the six inclusions on the ASX 200 index this month, trades at more than 80 times its forward earnings amid a fundraising campaign for a new data centre in Sydney that would be its biggest.
Analysts are bullish - eight of nine tracked by Bloomberg recommend to buy the stock, which rose another 2.2 per cent to an all-time high of $4.425 this morning.
Could rumours of Lidl edging closer to opening shop in Australia be contributing to the pressure on the supermarket giants today, with Woolies now down 2 per cent?
The German discount supermarket chain is applying for trademarks covering hundreds of products, stirring speculation the retail giant is seriously looking into opening in Australia.
As well as holding talks with the Victorian government recently, as reported by Fairfax Media, Lidl is also believed to have reached out to suppliers.
While Lidl has applied for thousands of trademarks since the year 2000, around the time its German rival Aldi set up in Australia, in 2016 alone it has applied for dozens of trademarks. These include Sir Edward Tea, Oatilicious and Sweet Corner.
But Paul Foley, the former Aldi veteran who helped Aldi set up in Australia, said Lidl was unlikely to set up here any time soon.
"I don't think you can ever say never but it looks unlikely in the next five years," said Foley, who runs an Austrian-based retail consultancy. "Lidl has got its hands full or its pockets empty. It is concentrating on new European markets and the huge investment it's going to make in the US."
Oil has pared its biggest drop in more than two months as Saudi Arabia's offer to cut output opens the door to a future OPEC deal, even as it doesn't expect an agreement this week when members meet in Algiers.
Brent is up 0.9 per cent at $US46.31 in Asian trade after slumping 4 per cent on Friday.
While Saudi Arabia and Iran didn't reach an agreement after two days of preparatory talks in Vienna, the kingdom did offer to pump less crude if Iran caps output at current levels, according to people familiar with the negotiations.
Saudi Arabia proposed to cut its production to January levels, Algerian Energy Minister Noureddine Boutarfa said Sunday.
Oil has fluctuated since rallying in August on speculation OPEC and Russia will agree on ways to stabilise the market. Chances that a deal this week will include Russia have slimmed as its delegation plans to join discussions only after OPEC members reach a consensus among themselves, Bloomberg quotes three people with knowledge of the matter as saying.
"I'm still sceptical there will be a deal, or a deal with any teeth," said Robin Mills, chief executive of consultants Qamar Energy. "If there is any agreement, it would give a boost to the oil market, especially if there is a Saudi cut."
Today's best performer - by a mile - is SAI Global, soaring more than 30 per cent after accepting a $1.1 billion takeover offer from Baring Asia Private Equity.
The information and standards company said its board had unanimously backed Baring's $4.75 a share all-cash bid in the absence of a rival offer after an independent expert recommended the proposal.
The offer price represents a 32.3 per cent premium to SAI Global's $3.59 closing price on Friday.
SAI shares jumped 31 per cent to $4.72 when trading resumed after a halt earlier today - just below the offer price - in a sign shareholders expect the deal to proceed. It was their biggest one-day jump since listing, and their highest intraday level in two years.
The $1.08 billion offer comes more than two years after a separate private equity firm, Pacific Equity Partners, made a $1.1 billion buyout proposal which then led to SAI putting itself up for sale. But no acceptable offers were forthcoming and the PEP proposal fizzled out, along with interest from other players.
The shares fell by a fifth PEP walked away from takeover talks amid media reports that the suitors were concerned about lack of visibility about future SAIcontracts which were still under negotiation
SAI is best known to the public in Australia for overseeing the Five Ticks quality assurance standards program.
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It won't come as much of a surprise if you've been following this blog over the past weeks, but one of this year's best performers on the ASX is Whitehaven Coal, up a whopping 260 per cent since the start of the year (in fact, the only stock among the top 200 to do even better is gold miner Resoulte, up 790 per cent).
The massive capital expenditure to bring in Maules Creek is now behind Whitehaven, and the company stands to reap the financial benefits, the AFR's Trevor Sykes writes.
It's a good story, but the question is whether the share price has run too far. As Whitehaven has just over a billion shares on issue, the $20.5 million profit represents just 2¢ a share. No dividends are proposed yet, because Whitehaven's priority is to pay down debt.
The excitement caught many by surprise. Shaw and Partners put out a recommendation saying they liked the investment thesis and expected the shares to trade higher in the medium to longer term. Nevertheless Shaw recommended selling the stock at $1.45 and reinvest in some of the resource sector laggards. Since then Whitehaven has barged ahead by another dollar.
The punters buying the shares obviously like the story and are looking further ahead.
Whitehaven is also the second best performer on the ASX today, jumping another 5.4 per cent to $2.53.
Turkey's lira has extended losses after Moody's on Friday cut the country's credit rating to junk, citing rising risks related to external financing needs and a weakening in credit fundamentals as economic growth slows.
The lira fell to its lowest level in six weeks against the greenback, taking losses to about 40 per cent since 2013.
"The risk of a sudden, disruptive reversal in foreign capital flows, a more rapid fall in reserves and, in a worst-case scenario, a balance of payments crisis has increased," Moody's said.
"This slow deterioration in Turkey's credit profile will continue over the next two to three years and the balance of risks are better captured at a Ba1 rating level."
Senior Turkish officials criticised the cut, claiming that the move is "biased" and does not reflect the realities of Turkey's macro indicators.
Prime Minister Binali Yıldırım said the action showed Moody's was "not impartial" and not basing its ratings solely on economic factors.
The Moody's cut came a day after Turkish President Recep Tayyip Erdoğan criticised ratings agencies in an interview with Bloomberg in New York.
"I don't care at all [if they downgrade]," Erdoğan said, accusing them of making decisions based on politics rather than economic fundamentals.
Shares have opened slightly lower, led down by the energy sector after the oil price slumped on Friday and as investors take a breather following last week's rally.
The ASX has slipped 0.3 per cent to 5412.4 and the All ords is down 0.3 per cent at 5501.
Perceptions of a continuation of the central bank induced rising tide lifted the boats last week, but a more nuanced final session saw shares and oil fall as bonds and gold rose, said CMC chief market strategist Michael McCarthy.
"This thematic could see further support for dividend paying banks, property trusts and telcos, and pressure on growth exposed resource stocks today."
Most blue chips are in the red in early trade, with Wesfarmers and Woolies weighing heaviest on the index, down 1 per cent and 1.5 per cent respectively.
The other event this week causing a bit of a buzz are the "informal" OPEC talks on the sidelines of the International Energy Forum in Algiers from today until Wednesday.
While the differences between Saudi Arabia and Iran still look too big for any kind of agreement to limit output levels at this week's meeting, analysts say the sides are at least moving in the right direction.
CBA commodities analyst Vivek Dhar predicted any kind of actual deal targeting production levels was most likely early next year, when Iran hit its proclaimed target of about 4mbd, its pre-sanction production level.
Dhar, who expects Brent prices to average at $US46 a barrel in the fourth quarter, listed five possible outcomes to the Algiers meeting, ranked according to likelihood and including their anticipated effect on oil prices:
- Statement that members are on the same page: likely. Price moves up (~$US0-$US2/barrel)
- Agree to freeze production later: somewhat unlikely. Price moves up (~$US3-$US4/barrel)
- Meeting ends in disunity. Somewhat unlikely. Price moves down (~$US1-$US3/barrel)
- Production freeze: unlikely. Upwards price movement (~$US4-$US5/barrel)
- Production cut: highly unlikely. Big upwards price movement (~$US5-US10/barrel)
RBC Capital Markets global head of commodity strategy Helima Croft said she expected an Algiers statement to "strongly suggest a willingness to act" at OPEC's next official meeting in November.
"Many of the biggest and most influential producers are close to maxing out and hence may judge that there is little downside to agreeing to cap output at current levels or sign up again for a collective ceiling," she said in a note to clients, warning that investors should think twice before shorting the oil market.
Who becomes the next US president will be more of a focus for global investors this week and beyond, as the first debate between candidates Hillary Clinton and Donald Trump approaches.
Over 100 million Americans any many more globally are expected to watch the blockbuster event, due to start at 11am, Tuesday morning, Australian time.
While Republican presidential candidate Donald Trump has sharply narrowed Democratic rival Hillary Clinton's lead in the polls, she is still expected to edge ahead at the election, but as the race gets tighter, their respective performance in the debates will be closely watched.
"Sharemarkets have largely ignored the possibility of a Trump victory, but he's closing the gap," said AMP Capital Investors head of investment strategy Shane Oliver. "The volatility we have seen lately could continue in the weeks ahead if Trump continues to rise in the polls as investors fret about his trade and foreign policies in particular."
Oliver noted that a Trump victory could be more negative for Australia than the US, as one of his key platforms was trade protectionism and the local economy was much more vulnerable to a trade war.
According to the RealClear Politics website, ahead of the weekend, Clinton was leading Trump by just 2.6 points.
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