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Shares rose, driven by hopes of further merger activity following the $11.3 billion tie-up between Tatts and Tabcorp, while solid Chinese economic data failed to inspire investors.
Investors digested a slew of equities news, while consumer discretionary stocks led the bourse higher, followed by telecommunications and real estate companies. Solid interest in the banks also saw the market finish in the green.
The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each rose 0.5 per cent to 5435.4 points and 5518.4 points respectively.
"There's been a vacuum of negative news over the last 24 hours, our market is sitting on key levels of support and investors are buying any signs of positivity," said Gary Huxtable, client adviser at Atlantic Pacific Securities.
"Bond yields continue to retrace from recent highs, so sentiment has improved towards bond proxies, the likes of Telstra and Sydney Airport as investors are willing to take on equity risk in return for dividends," he said.
The Tabcorp and Tatts merger was the big deal of the day and the shares came out of trading halts just before lunchtime. Tatts shares rocketed higher and closed the day up 15.8 per cent to $4.16. Tabcorp shares were up 3.5 per cent to $5.06.
In other gambling news, Crown slid again, as more news emerged about the 18 employees currently under arrest in China. The stock ended down 3 per cent, but it wasn't quite the 14 per cent hammering it received on Monday after the news first broke.
Mining contractor CIMIC saw its share price jump 2.6 per cent after deputy chief executive Adolfo Valderas was prompted to chief executive and the company reported an 11 per cent rise in third quarter net profit to $148.5 million.
We've mentioned often enough that coking coal prices have rocketed higher, now it looks like thermal coal is starting to take off too.
Thermal coal shipped from Newcastle yesterday sold for $US100 a tonne for the first time in four years as slumping output in China, which produces half the world's coal, spurred demand for imports.
The price advanced 6.4 per cent to $US100 a tonne, almost doubling this year, according to Globalcoal data. That compares with a 10 per cent gain in 2016 for the Bloomberg Commodities Index of 22 raw materials.
After spending years in the doldrums amid too much supply, the global coal market has been upended by China's decision to restrict the number of working days at mines to support prices for its struggling producers and curb pollution.
The rally in the fuel used by power stations is a boon for the world's top exporters including Glencore, which has a number of operations that export from Newcastle on Australia's east coast. Metallurgical coal, used to make steel, also surged.
Spot prices for hard coking coal from Australia tripled this year and rose 2.8 per cent to $US232.60 a tonne earlier this week, according to The Steel Index.
Australia is the second-biggest exporter of thermal coal and the largest shipper of coking coal.
The federal government facilitated the flow of big spending Chinese gamblers to Australia by introducing an "express visa" seven months ago, after lobbying from Crown Resorts and other casino operators.
The service for "high value visitors" costs 6062 yuan ($1212) and is understood to have been used to organise trips to Australia by at least one of the 18 Crown staff detained in China last week.
The express visa was regarded as a "special lane" for Chinese gamblers by some in the industry and viewed as tacit government support for bringing high-rollers to Australia.
The visa guaranteed applicants a response within 48 hours and was ideal for big gamblers wanting to make a last minute trip to Australia.
The Department of Immigration and Border Protection said it had "fast tracked" 242 visas since the initiative was launched in mid-March.
Here's more at the AFR ($)
As evidence grows that global inflation is finally picking up, Bank of America Merrill Lynch says investors need to "get real" and buy into tangible assets – such as diamonds and farms – while rotating out of expensive stocks and bonds.
The investment bank's US-based chief investment strategist Michael Harnett said the relative price of real assets, which includes real estate and commodities against financial assets, namely stocks and bonds, is at its lowest since 1926.
"Unprecedented monetary easing since the global financial crisis has caused the prices of financial assets to soar, while real assets have lagged the appreciation," Hartnett said in a note to clients.
As a result, US stocks sit near their all-time highs relative to US house prices, while bond prices are at record highs relative to the price of diamonds.
But the tide is turning. With the advice that investors should "sell humiliation and sell hubris", now is the time to prepare for the effects of rising inflation, a pull back in central bank stimulus and infrastructure spending from a wave of fiscal stimulus.
According to BoAML research, diamonds, US farmland and gold have the highest correlation of price rises and inflation since 1950, while stocks and bonds are the most negatively correlated.
"No surprise, therefore that the relative value of real assets is highly correlated with the US Fed Funds rate," Hartnett said, adding over the next 18 months, BoAML expects the Federal Reserve to hike interest rates three times.
The response to the highly anticipated Chinese economic data has been rather muted, with sharemarkets across the region struggling to hang onto gains.
Japan's Nikkei is up 0.2 per cent, the Hang Seng in Hong Kong has slipped 0.1 per cent, Korea's Kospi is up 0.3 per ecnt and the Shanghai Composite has gained 0.1 per cent.
"China won't do anything new in terms of policy because the economy isn't sliding," said Ben Kwong, a Hong Kong-based director at KGI Asia. "Under these conditions, the market doesn't really have a direction. It needs to wait for news on US rates."
The probability of the Fed raising borrowing costs this year slipped by about three percentage points to 63 per cent overnight as a report showed US consumer prices excluding food and fuel costs rose less than forecast last month.
Which blue chips should you really avoid? Smart Investor has asked a number of experts.
Here's what Koca Capital CIO Brigette Leckie said (quite timely ahead of bank earnings season):
Investors should consider avoiding owning the big four banks. While the fully franked yield is appealing, total return is the key. The days of large price gains and high total returns are over. The headwinds are numerous: cracks in the housing markets loom, global interest rates remain low, political meddling is inevitable, and greater globalisation of banking regulation will continue. And technology is changing the market dynamics. A transaction between buyer and seller that involved both parties' banks can now be completed across a trusted network, without the involvement of any bank. The result: fewer transactions, weaker earnings, reduced return on equity and lower dividends.
Click here for what the other four investors recommend ($)
Here are a few more details on the Chinese economic growth numbers:
The economy grew 1.8 per cent quarter-on-quarter, the National Bureau of Statistics said, in line with market forecasts and compared with revised 1.9 per cent quarterly growth in the second quarter.
#China nominal GDP growth is accelerating thanks to a turnaround in deflation (as discussed here: https://t.co/vnoUSbeblI ) pic.twitter.com/X6yS0m7wUf
— Topdown Charts (@topdowncharts) October 19, 2016
Slumping private investment, surging debt levels and the risk of a property market correction are leaving growth more dependent on government spending and keeping global investors on edge.
Real estate investment growth ticked up to 5.8 per cent in January to September, a slight increase from 5.4 per cent over the first eight months. But many cities are moving to restrict home sales as prices surge over 50 per cent in some places, leading to concerns that growth will take a hit.
"Looking ahead, we think that the cooling measures in property market will weigh on China's economy over the coming quarters," Commerzbank economist Zhou Hao in Hong Kong said in a note.
Official data showed consumption contributed 71 per cent of GDP growth in the first three quarters of the year, compared to the 66.4 per cent contribution for 2015. The increase is partly due to contracting net exports but also indicates some success in rebalancing from investment-led growth.
The government has set a growth target of 6.5-7 per cent for the full year. The economy expanded 6.9 per cent in 2015, the slowest pace in a quarter of a century.
The statistics bureau said in a statement that many uncertain factors in the economy remain and that the foundation for sustained growth is not solid.
CIMIC shares have risen as much as 3.2 per cent after the mining contractor elevated deputy chief executive Adolfo Valderas to CEO and reported an 11 per cent rise in third quarter net profit to $148.5 million.
Valderas, a civil engineer, has been CIMIC's chief operating officer since December 2013 and was named deputy CEO in October. He will replace Marcelino Fernandez Verdes, who will remain CIMIC's executive chairman.
Fernandez Verdes is expected to succeed Florentino Perez as CEO of Madrid-based Grupo ACS, CIMIC's parent company.
CIMIC's shares are up 3.1 per cent at $28.56 after it reported third quarter results, including a 7 per cent rise in cash flow from operating activities before interest, finance costs, taxes and dividends to $532.9 million.
The dollar, which initially held onto its earlier gains following Chinese data that was pretty much bang on target, has now started to slide.
The currency has lost about two-tenths of a cent after hitting a two-week high of 76.91 US cents shortly after midday.
If the Aussie is looking for fresh fuel, it didn't find it in the China data, said Westpac senior strategist Sean Callow. "US77c is likely to remain very hard work for the Aussie."
Capital Economics says the GDP numbers actually mask a growth pick-up in the last quarter.
"The official GDP figures remain too stable to tell us much about the performance of China's economy," China economist Julian Evans-Pritchard says. "Our own measure of economic activity suggests that growth actually picked up last quarter, though the improvement clearly won't last."
Looking ahead, Evans-Pritchard says it makes more sense to focus on the monthly data for September in order to gauge the economy's current momentum.
Industrial production growth missed expectations, dropping back somewhat. But retail sales and fixed asset investment both improved. The rebound in private sector investment is particularly welcome, he says.
"The upshot from today's data is that economic activity seems to be holding up reasonably well, with few signs that a renewed slowdown is just around the corner. "
On the day of Australia's biggest merger of the year, Mergermarket has put out its quarterly M&A report, saying mergers and acquisitions more than doubled in the September quarter from a year ago.
M&A value rose 118.5 per cent to $18.3 billion across 124 deals, the report said, adding that, in line with the downward global trend, Australia's year-to-date value dropped 36.7 per cent to $45.2 billion compared to the same period last year.
Transport proved the top sector with the largest growth in deal value so far this year thanks to mega deals such as the Qube-led $12.6 billion takeover of Asciano or the $9.7 billion privatisation of Port of Melbourne. Altogether, there were 12 deals worth $23.5 billion during the first three quarters, which represented a 174.3 per cent value increase.
Private equity activity across Australia saw a marginal year-on-year increase in both buyouts and exits, Mergermarket said. A total 37 buyouts took place totaling $12.3 billion compared to 36 deals worth $10.1 billion during the same period last year.
Meanwhile, on the exit-front, the 20 deals worth of $3.1 billion announced during the first three quarters of 2016 represents an 8.1 per cent value increase with four more deals.
China data is out and it's pretty much bang-on expectations, which has stalled but not dented today's mild upward move in the Aussie dollar.
Annual GDP growth is running at 6.7 per cent, which was the consensus forecast and unchanged from the previous quarter's figure. Retail sales growth has, as expected, over the year to September ticked up to 10.7 per cent from 10.6 per cent a month before.
CHINA ANNOUNCES IT MEETS ESTIMATES FOR ALL MACROECONOMIC DATA THROUGH 2020
— Quoth the Raven (@QTRResearch) October 19, 2016
The only slight disappointment is industrial production, which expanded by 6.1 per cent over the year to September, shy of the 6.4 per cent expected and 6.3 per cent to August.
The Aussie is pretty steady on the data at 76.8 US cents. The ASX 200 index was largely unmoved.
Even the head of the Treasury is becoming a "Mum and Dad bank", writes The Age's economics editor, Peter Martin:
So concerned is the head of the Treasury about the cost of housing, he says he is having to help out his own son, and that parents like him are endangering their superannuation.
"It's a worry, the Bank of Mum and Dad," Treasury secretary John Fraser told a Senate estimates hearing.
"I talk with people my age, and the Bank of Mum and Dad is becoming more and more prevalent. It has impacts on superannuation, where superannuation is going to, it has impacts on why people are saving in their older years, to fund their children's housing needs. And not just purchase, but often rents.
"I am not talking not just about young people entering the housing market as young professionals, I am talking in particular about the lower income people. It's an area that I do worry about."
Asked why it was happening and what could be done, Mr Fraser said he had four Treasury officers working on it full time.
Part of the reason for high prices was planning regulations that constrained the supply of land. Another part was the role of increasingly wealthy buyers in bidding up prices for everyone else.
"A big factor is that the wealth is in houses," he said. "And this is the cycle that we've got: high house prices, high wealth, and people feel more comfortable about taking on more debt."
"If Trump wins the election, the casino will be well and truly open," crowed financial blogger Zero Hedge recently, though there's been little consensus on how investors might prepare for the possibility. Until now.
A Bank of America Merrill Lynch survey of 171 global fund managers with $US443 billion assets under management has found 53 per cent of fund managers would bet on rising market volatility, 22 per cent would short the Mexican peso, betting on its decline, and 12 per cent would short bonds should the Republican firebrand manage to take the White House.
The outcome of the US election, fears of a eurozone breakup and a crash in bond yields are the largest causes for concern for global fund managers who have upped their cash holdings from 5.5 per cent ot 5.8 per cent, the highest since Brexit and the September terrorist attacks.
However, there has been a perceptible change in sentiment. As central banks and governments have confronted a deflationary global economy this year, the survey has found inflation expectations are at a 16-month high and perceptions of developed market equity and bond valuations are also at record highs.
As commodity prices are widely believed to have bottomed out, investors are no longer underweight the sector for the first time since December 2012, though there are grave concerns economic growth will stay below trend, resulting in the highest stagflation fears since April 2013.
The bizarre behaviour of bond yields in recent times has had investors worried there might be a savage bond crash, however Bank of America has found most global fund managers are expecting "a good slow rise in bond yields" and a clear upswing in earnings per share from the stock market.
In October, fund managers rotated out of healthcare, pharmaceuticals REITs and bonds and into banks, insurance, equities, commodities and emerging markets. While there has been strong consensus in recent times, Bank of America points out contrarians could go long pound sterling, UK equities and resources and short cash, technology stocks, banks, REITS and discretionary assets.
Fourty-four per cent of those surveyed said the biggest driver of equities over the next six months is likely to be treasury yields.
Twenty per cent of those surveyed say the eurozone disintegration is the biggest tail risk, with 18 per cent saying a crash in the bond market and rising credit spreads while 17 per cent are terrified of a Trump assent to the White House.
With the world's second-largest economy stable for now, you'll need to look under the hood to see where the real action is when China releases its third-quarter economic report card, due in an hour.
GDP probably expanded 6.7 percent from a year earlier in the three months through September, the same pace as the previous two quarters. Annual retail sales growth to September is expected to tick up to 10.7 per cent, and industrial production to 6.4 per cent from 6.3 per cent,
But Matthew Sherwood, head of investment strategy said he expects the GDP number to come in stronger than forecast.
"I'd suggest the Chinese GDP figure out later today will have a high six figure in it," Mr Sherwood said. "Premier Li said the economy had performed above expectations in the September quarter so there is the chance that growth might even have a seven handle in front of it."
For a gauge of whether China can keep the good times rolling, here are some themes to keep an eye on in the reports:
Real Estate Investment
While prices have surged in cities like Shenzhen, Shanghai and Beijing, developers have remained largely cautious on a national level by their historical standards.
The latest data on completed property investment will show whether developers are buying into the price frenzy or remaining level headed. While an increased turnover of apartments fuels realtors pay checks and the services sector, it's construction that really stokes the economy by firing up demand for concrete, glass, steel and other raw materials.
Animal Spirits
The economy's stabilisation in 2016 has been underpinned by government spending on everything from shanty town upgrades to new pipe networks. Private investment, meantime, seemed to be in chronic decline. Until August that is, when private investment in fixed assets stabilized. Any pick up would be an upbeat sign for the economy's momentum.
Inflation
A read of economy-wide inflation should show the return of some kind of pricing power for Chinese companies and a resulting decline in real borrowing costs. The GDP deflator - the difference between the headline growth rate (adjusted for inflation) and the nominal growth rate (unadjusted for inflation) - usually falls somewhere between the consumer price index and the producer price index, which just turned positive after more than four years of deflation.
With economists dialling back expectations for additional monetary stimulus - and some already mulling a switch toward tightening in the not-too-distant future - a significant move higher in the deflator could be a policy altering event.
Charter Hall has pulled the pin on the float of its new $1.12 billion Long WALE REIT after failing to get sufficient investor interest.
Institutional investors again voted with their feet against an externally managed funds model failing to back Charter Hall's offering.
Charter Hall said this morning the fund did not "attract the sufficient quality of support that the Group deemed appropriate to create an orderly market."
"The Group will consider alternative options for the assets within the proposed Long WALE REIT portfolio," it said in a statement.
The Long WALE REIT was to be priced at $4 a security when it hit the bourse today with a forecast 2017 financial year annualised earnings and distribution yields of 5.3 per cent per security.
Was Charter Hall Long WALE REIT debacle a one-off, or has sentiment turned and IPO contenders and their bankers should prepare for a punch in the face? the AFR's Street Talk asks in response to the failed float.
The IPO window is a fickle thing based on investor confidence, market trading multiples and vendor price expectations. The window has been wide open for most of the past 3½-years, with only a handful of deals rejected by fund managers.
However, the market has changed. Bond yields are spiking higher, drawing money out of perceived safe havens and high-yielding equity sectors like real estate and infrastructure.
And all of a sudden the Long WALE REIT - and VIVA for that matter - are not so attractive, particularly to institutional investors.
Tatts and Tabcorp shares have come out of trading halts following their announced mega merger and as you'd expect Tatts shares are flying thanks to the premium offered by Tabcorp.
The former's shares are up 14 per cent at $4.09, but that's still a bit below the 20 per cent premium offering - perhaps due to some lingering worries the ACCC could shoot down the deal. Tabcorp shares are up 1.7 per cent to $4.975.
"It is a massive win for all shareholders," says APP private wealth adviser Matt Felsman.
"The company will be big enough to fend off international competition and they are completing a $500 million share buyback further tightening what would be a strong balance sheet."
Apartment prices are headed for a major shakeout that will almost certainly create contagion into the broader property market, says Stephen Walters, one of Australia's most experienced economists.
Prices of apartments will fall 10 per cent to 15 per cent over the next one to two years, he predicts, squeezing buy-to-let investors who have borrowed to negative gear and are heavily relying on capital gains.
"I think it's going to get ugly, particularly in some parts of the market and for some lower-income cohorts who have borrowed," Walters said.
The warning echoes a sharp escalation in concern from the Reserve Bank over a potential oversupply of apartments. For the third time in four days the central bank noted on Tuesday that a "considerable supply" of units would arrive over the next few years, adding to the need to closely watch the property market.
Officials at the bank on Friday warned that risks were coming to the "fore", while Philip Lowe cautioned in his first speech as governor on Tuesday that growth in rents was "very low and there is a big increase in housing supply still to come".
Walters, a former chief economist for JPMorgan and now working for the Australian Institute of Company Directors, said falling rents are a "pretty strong price signal" the market is starting to adjust downwards.
"Rents are already off and given that a large part of the market is investor focused, that's got to affect your price expectations and purchasing prices," he said.
Origin Energy has suffered a backlash from shareholders who disagree with a planned bonus payment for the outgoing chief executive, with as much as 16.5 per cent of proxy votes opposed.
Grant King, the company's longstanding chief executive, is to leave the company today, with shareholder support sought to pay him $1.35 million in so-called "equity performance share rights". The move has been opposed by some proxy advisory firms.
In his address to shareholders at today's annual general meeting, Origin's chairman Gordon Cairns pointed out that when Origin was spun-out of Boral in 2000, it was worth $700 million, which has now reached $10 billion as the company has expanded its reach in the energy markets.
In the year to June, Origin posted a net loss of $576 million, little changed from the $590 million loss a year earlier on steady revenue of $11.9 billion as the weak oil price swamped earnings from elsewhere in the group.
Origin has invested heavily in a gas export project in Queensland which is now being brought into full production, with a turnaround in the group's performance hingeing on a rise in the price of oil, which will also flow through to higher gas prices.
The group re-affirmed earlier guidance that the underlying EBITDA in 2016/17 will rise by 45-60 per cent although the likely movement in the net profit will not be clarified until it releases its December half earnings in February.
The head of the group's energy markets division, Frank Calabria, is to replace Mr King as the chief executive from Thursday.
Mr King has run the company since it was spun-out from Boral in 2000. Origin shares are off 0.4 per cent at $5.65 despite a bump higher in oil prices overnight.
Shares have followed their offshore lead to climb in early trade, with the ASX 200 adding 14 points, or 0.3 per cent, to 5425. The Aussie dollar is holding most of the night's gains at 76.7 US cents.
Shares in Tatts and Tabcorp are yet to hit the boards, although you can imagine the former will jump given the premium of the latter's bid.
Gambling is big in the news - and Crown's shares have moved a little higher in early trade but are still well off their pre-China raid levels. Fellow casino operator Star Entertainment is down 1.3 per cent.
In terms of the market movers, its the big banks that are helping lift the market, even if their performance is mixed. ANZ is up 0.7 per cent and NAB 0.4 per cent, but CBA is flat and Westpac is down 0.2 per cent.
The slight reversal in US dollar strength overnight has failed to lift BHP, which released quarterly production data this morning and is off 1.1 per cent, weighing on the index. But the rest are getting a boost: Rio is up 0.4 per cent, South32 1.4 per cent and Fortescue 0.7 per cent.
Gold miners are going great guns, with Newcrest up 2.1 per cent.
Woolies is 1.1 per cent up, but Wesfarmers has dropped 0.6 per cent.
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