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Investors the world over spent the week agonising over the potential of a Donald Trump presidency in the United States, and sent the ASX sliding to its third week in the red, and more company news kept investors busy.
The ASX began the week with investors tentatively buying up stocks, but a newspoll suggesting Democratic candidate Hillary Clinton was losing her lead sent investors rushing for the exits, and the local bourse plunged further and further south over the week.
The benchmark S&P/ASX 200 Index finished Friday down 0.9 per cent to 5180 points and was down 1.95 per cent for the week. The benchmark index also fell through its 200 day moving average, a key technical level of support, weighed down by blue-chip banks, miners and supermarket owners.
Gold was well and truly the winner of the week's frenzied speculation, roaring to a four-week high on Wednesday and pulling Australia's biggest gold producers with it. Newcrest Mining finished the week 10.6 per cent higher, Evolution Mining was up 12.9 per cent and Northern Star had lifted 9.1 per cent.
Resources giants BHP Billiton and Rio Tinto were off 1.7 per cent and 0.6 per cent respectively, while Fortescue Metals cruised 0.7 per cent higher mirroring a small lift in the iron ore price.
The big movers in the market on Friday were Mayne Pharma, though it plummeted 15.4 per cent on Friday after a 7 per cent climb on Thursday after news broke the US Department of Justice has launched an investigation into price collusion in the generic drugs market. Shares in explosives maker Orica soared 8.3 per cent on Friday after the company swung back into the black with a $340 million profit.
The British pound surged overnight after a landmark High Court ruling raised the odds of a "soft" Brexit and gave British bank a CYBG a healthy boost. The share price bumped up 7.1 per cent.
The price of crude oil dropped to its lowest since September as a global supply glut appears to be expanding. On Friday afternoon oil was fetching $US46.48 a barrel.
Investors shouldn't be tempted to use June's Brexit vote as a playbook for a Trump victory, writes one of your Eds:
After all, Britain's decision to leave the EU was never going to happen – until it did. And if Brexit represented "the people" blackening the collective eye of the "ruling elites", then the pugilistic metaphor extends handsomely to the Trump campaign.
If Brexit and a Trump presidency are indeed equivalent, then the strategy runs like this: wait for the initial sell-off and then buy sold-down assets with your ears pinned back.
The US Fed will act quickly to reassure the market by announcing, like the Bank of England did, that it stands ready to do what it takes to keep financial markets from a damaging bust.
Then US high frequency data will suggest the feared hit to the economy was overblown. Who knows, just like after Brexit, the S&P 500 could be hitting new highs in a few weeks' time.
If that sounds incredibly optimistic, it's because it is. There are reasons to think that the ramifications of a Trump presidency go way beyond the UK's decision to leave the EU (the impact of which has not even really begun).
At a rally this week, Trump himself boasted of an electoral upset equivalent to "Brexit times 10" (a week earlier it was "Brexit times five"), and he's right that the fall-out would be many orders of magnitude greater than the British referendum.
"We agree that the global economic and financial market response to a Trump win would be greater than for Brexit," Westpac economist Sean Callow says.
"A Trump presidency would bring about the biggest changes in many decades in existing US arrangements on everything from taxation policy to trade policy, social spending, immigration and geopolitics."
But perhaps the greatest question mark for investors in the weeks and months after a Trump victory will be the Fed's ability to step in and steady the boat.
A December hike might be quickly ruled out, but Trump is an outspoken critic of the US central bank, its chair Janet Yellen, and its policies.
If investors begin to factor in a much reduced capacity by the Fed to intervene in the market under sustained attack from the new president, then it's hard to imagine that we are in for an easy ride.
If you're wondering whether professional investors are fretting over the recent horrible sharemarket dynamics, here's the views of a very experienced one in Cadence Capital's Karl Siegling.
We've had eight straight days of VIX increases, that's extremely unusual. Gold has gone through the roof; it's the insurance from uncertainty. All of a sudden, like everyone else, I wish I'd been more than our 40 per cent cash.
Many high P/E stocks that we've had in Australia have experienced a contraction during this period. They're priced for perfection, they're priced for growth and any wobble will cause them to contract.
Once these elections are out of the way, people would be saying a Clinton win is a status quo win and volatility should reduce. A Trump is the unknown, and uncertainty and volatility should increase.
This guy appeals to the very rich and the very poor and there's an awful lot of very poor people in America. And it's a 'no confidence' vote in the establishment.
This has been compounded by the fact that nobody picked the Brexit. That's probably causing more angst than anything. Now the logic is, no one's predicting that Trump is going to win and now they're worried that's going to happen. But really, that's false logic.
It's funny how psychological markets are, we're in a holding pattern but we're getting more nervous the closer we get to the time. And that's reflected in the VIX.
These events go to the very essence of how equities are valued and how much confidence is involved. [Even when] the election is out of the way and things settle down, volatility won't go straight back down.
Arrium's Moly-Cop has been sold to US private equity firm American Industrial Partners, The Financial Review's Street Talk column revealed this morning.
The sale price is $US1.23 billion or just over $1.6 billion, with the transaction confirmed by Arrium this morning.
American Industrial Partners, which has raised about $US4 billion and completed more than 65 acquisitions in its 25-year history, had been competing against fellow sponsor firm KPS Capital Partners.
Lead adviser Deutsche Bank and administrator KordaMentha had also considered an initial public offering alternative, which was underwritten by three investment banks and backed by some of the country's biggest institutional investors.
American Industrial Partners' current portfolio includes specialty tyres and wheels manufacturer The Carlstar Group, fire and emergency vehicle manufacturer and exporter REV and printing presses manufacturer Goss.
Arrium's Moly-Cop is the largest supplier of grinding media globally, with about four-times the installed capacity of its nearest competitor. Its key earnings driver is copper and gold volumes, and it is expecting $US146.2 million earnings before interest, tax, depreciation and amortisation in the 2017 financial year, in-line with the $US145.8 million recorded in the year to June 30.
It's the first major step in Arrium's asset sell-off, with the company's lenders seeking to recoup about $2.8 billion owed to them.
Moly-Cop is the steelmaker's prized asset and expected to ensure lenders get more than 50¢ in the dollar for their debt.
The next step will be the rest of Arrium, including Whyalla and the valuable Australian steel distribution business, which is being sold by Morgan Stanley on behalf of the lenders.
The lenders are seeking to have the situation resolved by the end of the year.
The labour market is not as healthy as it seems. That's the conclusion of the RBA's analysis of employment data presented in its semi-annual statement of monetary policy.
It explains that even as the economy adds more jobs, the Reserve Bank may still be more likely to cut rates, rather than raise rates.
While the unemployment rate in Australia has declined to 5.6 per cent, part-time work accounts for all of the increase in jobs in 2016, and about two thirds of the increase since 2013.
This means that the proportion of part-time workers accounts for one third of all jobs compared to 10 per cent in the 1960s.
The rise of the part-time worker could be good or bad for the economy. On the plus side, it may reflect the preference of workers to maintain flexible working hours so they can balance study or caring for family members.
But it's also a sign that employers have sufficient bargaining power to maintain a flexible work-force of their own, so they maintain the luxury of hiring and firing workers, as demand fluctuates.
The rise of part time work has been strongest in the "households services" sector, in which part timers account for 45 per cent of all jobs and, the RBA says, is consistent with the rebalancing of the economy towards non-mining activity.
These are jobs in food, accommodation, healthcare, education and recreation.
In other sectors related to business services (office jobs) and goods ("high viz"), part-time work only accounts for 25 per cent of jobs, and this is where full time employment has been sluggish.
But the rise of part-time work has been significant in all sectors, particularly goods-related sectors where a rise in part time jobs has actually seen a sharp decline in full-time jobs. In office jobs full-time job growth has outpaced part-time jobs, but not by much.
The RBA says its industry liaison reveals the firms aren't hiring future workers because they don't have enough confidence about future demand, so prefer to maintain the flexibility of a part time work-force. While they must pay a premium for part-time workers, it's a trade off they're prepared to make to avoid the expense of scaling up their staff into a potentially weak environment.
What troubles the RBA is the persistently high underemployment rate – which measures people that would work more if they could. At over 8.5 per cent its as high as it has been for a decade, and still trending up.
Law firm Slater & Gordon has copped a massive protest vote from shareholders against its pay packets as it delivered a quarterly update that showed ongoing issues in its UK business.
Proxy votes delivered ahead of a formal vote at the company's annual general meeting showed a 43 per cent strike against Slater & Gordon's remuneration package.
More than 30 per cent of shareholders who voted ahead of the meeting also voted against a long-term incentive package for company chief Andrew Grech.
Slater & Gordon's decision to award bonuses follows a year in which the company paid no dividend after posting a $1 billion loss.
The loss was driven by a $1 billion-plus writedown on Slater & Gordon's disastrous purchase of UK group Quindell's professional services business.
The company was also forced to re-state its accounts during 2016 after an ASIC investigation.
Fuelling the ire of investors is a $189,000 cash bonus awarded to chief financial officer Bryce Houghton and a $93,750 cash bonus to chief operating officer Felicity Pantelidis and an increase in payments to the board including a nearly 50 per cent increase in fees to chairman John Skippen.
Shareholder Marcel Coleman said he believed the board had "totally failed" in its governance role.
"It has really failed to have any financial oversight in place. Not one board member has put their hand up and accepted accountability for this," Mr Coleman said.
"The reality is this board has no credibility," Mr Coleman said, calling for all members of the board to stand for re-election.
"It's been a disaster. It's untenable to continue in this way."
Another shareholder told the board "you fellas have got to get real".
Mr Skippen reiterated his apology in relation to the UK acquisition.
Mr Skippen said the two executives were the only ones to be awarded bonuses, while the long-term incentive plan for Mr Grech was about retaining him as chief executive.
The ASX 200 has dropped firmly below 5200 points, by 43 points or 0.8 per cent to 5183, with solid selling in blue-chip banks, miners and supermarket owners weighing the most.
Today's losses will consign the sharemarket to its third straight week in the red as first rising bond yields and then a rising Trump in the polls hit equity markets around the world.
NAB is off a hefty 2.1 per cent after being a relative outperformer following last week's earnings, while ANZ is off 1.2 per cent, CBA 0.8 per cent and Westpac 0.5 per cent.
BHP is down 1.8 per cent and Rio 0.8 per cent. Fortescue has serenely cruised 0.3 per cent higher amid another small climb in the iron ore price overnight. Oil has steadied today, but energy names are feeling the pressure of the heavy overnight falls: Origin is off 2.6 per cent, and Woodside 1.5 per cent.
Telstra and CSL are higher, with listed property enjoying a general flight to safety.
Mayne Pharma shareholders would be feeling anything but safe. The stock is off 13.5 per cent after climbing more than 7 per cent yesterday. Looks like investors have dumped the stock following news of a US Department of Justice investigation into price collusion in the generic drugs market.
Orica is the day's best, up 11 per cent, as investors bet that the worst may be over for the company. Meanwhile, the boost in the pound overnight looks to have done wonders for British bank CYBG.
Australia's biggest listed travel agent Flight Centre Travel Grouphas warned first-half underlying profit could fall nearly a third, sending its shares plunging and underscoring the effects of a host of geopolitical events on tourism.
The shares are off 9.8 per cent to $29.71 and fell as much as 13 per cent, their biggest one-day drop since June 2015, and hitting a 14-month intraday low.
The downgrade builds on gloomy trading updates from the country's two top airlines, Qantas Airways and Virgin Australia, which said this week they are experiencing intense competition for international fares due to soft demand. Webjet shares have lost $2 this week to last fetch $9.16.
In an ASX statement, Flight Centre said it expected underlying pre-tax profit between $105 million and $120 million for the six months to end-December, down from $145.9 million the prior year. In August, the company said it hoped to grow underlying profit in fiscal 2017.
"Internal and external factors that are currently impacting top and bottom-line results mean that we will not be tracking at those levels by the end of the first half," managing director Graham Turner said in the statement.
As he did in August, Turner again blamed subdued tourism demand in Britain following its surprise vote to leave the European Union, and in the United States ahead of the presidential election.
Flight Centre added that it expected trading conditions to improve in the second half, and to be able to report underlying pre-tax profit of between $320 million and $355 million for the full year, compared with $352.4 million for the previous year.
[Eds: Kudos to the Griffith University students who won the recent CFA Institute Research challenge with a "sell" rating on the stock! AFR subscribers can read about it here.]
Orica shares have jumped to 16-month highs as investors cheered the prospect that the worst of the downturn on the slump in resource sector spending may be all but behind the company.
"It does seem as if we have reached the inflection point," Albert Calderon, the group's chief executive, told analysts when discussing the group's performance in the key Australia and Indonesian markets. While careful to avoid calling the bottom of the market, he did say there has been "some stabilisation".
Other of the group's markets worldwide are more mixed, but ongoing cost reductions are expected to offset anticipated cost increases in the year ahead, it said, while noting the broad optimism in some quarters about market conditions.
Improved sentiment towards the outlook saw the share price hit $16.94, their highest level since August 2015 when a heavy write-down of assets coupled with a profit warning saw the shares dumped, falling from more than $19 a share to around $15.50. In afternoon trading, they were ahead 7.6 per cent at $16.79.
Orica generates the bulk of its revenues from making explosives for the mining sector, with the net profit in the year to September running at $342.8 million, a turnaround from the $1.3 billion loss a year earlier. The underlying profit slipped to $389.1 million from $424.2 million a year earlier.
Briefing analysts, the group said demand on the east coast of Australia has firmed, although that uptick is yet to be seen on the west coast.
While it is calling for broadly flat volumes, growth is being recorded on the east coast of Australia ass well as in Europe, Africa and Asia, it said.
"That would be two I'd highlight," Mr Calderon told analysts. "But overall, we are forecasting flat volumes.
RBC analyst Andrew Scott said the result held few surprises "and represents a solid (if unexciting) result in challenging markets".
"Cash flow and dividend were a highlight relative to our expectations. The outlook appears to point to a flat year ahead, which is consistent with consensus expectations but may disappoint some given the improved coal pricing environments."
Gold is well and truly the winner when it comes to frenzied speculation surrounding the future president of the United States.
The precious metal is whipsawing as investors flood to safe havens and prices rose as much as 0.8 per cent overnight, nearing a four week high, before sliding again.
"If Donald Trump is elected next week, we think gold can go anywhere shy of $US1,400," Wayne Gordon, executive director for commodities and foreign exchange at UBS Group AG's wealth-management unit, said on Bloomberg TV.
"If Hillary Clinton is elected, we think gold can probably fall by $20, $30. So the clear skew in this trade is to the upside."Gold miners have enjoyed significant gains this week. Australia's largest gold miner Newcrest Mining is up more than 12 per cent for the week so far, Evolution Mining is up nearly 14 per cent and Northern Star is trading up 12 per cent.
Gold's advance has unfolded even as the US central bank prepares the ground for an interest-rate hike next month, saying Wednesday it only needed "some" further evidence that inflation and employment were moving toward its goals.
On Wednesday, prices rallied to a four-week high of $US1,308.02 and was fetching $US1,303.54 an ounce just before lunchtime on Friday.
There's been some deal activity around this morning, with US private equity firm American Industrial Partners set to buy Arrium's Moly-cop, reports AFR's Street Talk.
The sale price is $US1.23 billion or just over $1.6 billion. American Industrial Partners is self-advised.
American Industrial Partners, which has raised about $US4 billion and completed more than 65 acquisitions in its 25-year history, had been competing against fellow sponsor firm KPS Capital Partners.
Lead adviser Deutsche Bank and administrator KordaMentha had also considered an initial public offering alternative, which was underwritten by three investment banks and backed by some of the country's biggest institutional investors.
Arrium shares have been suspended since April. An announcement is expected this morning.
Here's a clue why Mayne Pharma's shares are getting pummeled this morning:
The company has released a statement to the ASX this morning with an update on an investigation by the US Department of Justice.
"Previously on 28 June 2016, Mayne Pharma Group Limited disclosed that it was one of several generic companies to receive a subpoena from hte Antitrust Division of the US Department of Justice (DOJ) seeking information relating to the marketing, pricing and sales of select generic products," the statement reads.
"The investigation relating to Mayne Pharma is focused on doxycycline hyclate delayed-release tablets (generic) and potassium chloride powders."
"Contrary to an inaccurate statement made in the US press overnight, Mayne Pharma has previously stated that it is co-operating with the DOJ in its investigation and continues to do so."
"Mayne Pharma continues to believe these investigations will not have a material impact on its future earnings. However, no assurance can be given as to the timing or outcome of the investigation."
Here's a link to an overnight Bloomberg story on the investigation.
Shares have begun trade underwater, falling 0.6 per cent at the open after a rocky night of trade which included Wall Street posting its eighth straight session of losses, the longest run since the GFC.
The S&P/ASX 200 is down 33 points at 5192.
The selling is broad-based, with the banks and miners falling, led by National Australia Bank which is down a whopping 4.3 per cent as it trades ex-dividend. The other banks are lower, with Westpac down 0.8 per cent, ANZ down 0.7 per cent and CBA down 0.4 per cent.
The big miners are mixed, with BHP down 0.8 per cent but RIO up 0.3 per cent.
Energy stocks are also lower after oil prices fell for their fifth straight session overnight. Woodside Petroleum is off 1.3 per cent.
Mayne Pharma is the biggest drag on the Index, losing almost 15 per cent following yesterday's 8 per cent surge.
NAB's spin-off CYBG is the best performing stock so far, up 5.9 per cent.
The US election however will remain the main driver of market movements for the next few days, CMC Market analyst Ric Spooner says:
"Markets are currently attempting to strike the right balance between the greater probability of a Clinton win and the possibility of a significant sell-off on a Trump victory."
"The more the market falls in advance of the election, the greater the potential for two-way volatility and a significant bounce if Clinton does get up. On that basis, we may soon find some temporary support," he says.
"The September low in the ASX 200 may provide a base for trading today."
Here's the market movers at the open:
Oil's woes continue, dropping to its lowest since September as a global supply glut appears to be expanding.
West Texas Intermediate fell 1.5 per cent for a fifth day of losses. North Sea producers in December will ship the most oil in more than four years, data compiled by Bloomberg show. Prices tumbled yesterday after the US Energy Information Administration said stockpiles rose by a record 14.4 million barrels last week. OPEC members who are claiming exemption from an agreement to limit supplies helped boost the group's output to an all-time high last month.
"If you're a bull you have to be disappointed," said Kyle Cooper, director of research with IAF Advisors in Houston. "The market ignored bullish inventory reports in recent weeks and then collapsed after yesterday's bearish data. Dissension is growing in OPEC and there's a growing suspicion that nothing worthwhile will come from the upcoming meeting."
Oil has retreated from near $US50 a barrel, triggered by the failure of the Organisation of Petroleum Exporting Countries to agree on country quotas last week as part of a deal to limit output. While Goldman Sachs sees little probability of an agreement at OPEC's November 30 meeting, Bank of America is confident of an accord. OPEC's "jawboning" is contributing to instability in the market, according to Barclays.
WTI for December delivery dropped 68 cents to settle at $US44.66 a barrel on the New York Mercantile Exchange. It's the lowest close since September 23. Total volume traded was about 16 per cent below the 100-day average.
Brent for January settlement declined 51 cents, or 1.1 per cent, to $US46.35 a barrel on the London-based ICE Futures Europe exchange. It's the lowest close since September 27. The global benchmark crude ended the session at a $US1.10 premium to January WTI.
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Asian sharemarkets should remain under pressure today, with the ASX needing to push above 5283 points to snap a three-week losing streak, writes IG strategist Chris Weston:
GBP has naturally been the big mover on the British high court ruling, with GBP/USD rallying to test $1.2500. GBP/AUD has traded to a$1.6287, but the easier money is to be made trading the GBP against the USD than the AUD, which is getting a boost from a 20-month low in its trade deficit.
Another strong night for coking coal futures (+5.7%) and iron ore futures (+2.7%) is also helping here, and one wonders if these key terms of trade stay at these levels could we even see the deficit return to surplus in the new year.
Interestingly, AUD/USD is moving back into the top of multi-month trading recent range. Since 10 August moves into $0.7700 have been hit with a wall of supply, so traders will be watching price action to see if that remains the case. It is unlikely that today's September retail sales (consensus is for 0.4% growth) or RBA Statement on Monetary Policy rocks the needle too greatly, but a daily close above the 20 October high of $0.7734 would be very positive for the Aussie.
Asian equities should remain under pressure on open, with the ASX 200 needing to close above 5283 to snap a three week losing run. With our opening call at 5187 (-0.2%) one can safely say there is a little probability we can close the week higher and despite higher iron ore and coking coal BHP looks set to open lower (based on its American Depository Receipt). US crude has fallen a 2.3% from the ASX 200 cash close so that is a headwind for energy names, while banks also look set for lower levels on open.
Gold stocks have been the place to hide this week with names like Newcrest Mining, Evolution Mining and Resolute finding solid support in the market and this is an area where pullbacks should be nicely supported, with gold holding the $1300 level.
Earlier in Europe, stocks halted their longest losing streak in two years amid some better-than-expected earnings from the region's banks, and as a UK ruling sparked optimism the nation's split from the European Union won't be as harsh as feared.
The Stoxx Europe 600 Index rose 0.1 per cent at 4.30pm in London, after judges decided the UK has to hold a vote in Parliament before starting the two-year countdown to Brexit, a decision that the government said it will appeal.
Separately, the Bank of England signalled it no longer expects to cut interest rates again this year, intensifying a rise in the pound that pushed the FTSE 100 Index down 0.7 per cent. The Stoxx 600 pared gains of as much as 0.8 per cent after data showed orders for US business equipment fell in September by the most in seven months, and service industries expanded less than projected.
In a decision that contributed to a sharp rally in the pound, three senior judges ruled on Thursday that the British prime minister did not have power to unilaterally trigger Article 50 of the Lisbon Treaty by the end of March to start the two-year process of negotiating Brexit.
"The most fundamental rule of the UK's constitution is that parliament is sovereign and can make and unmake any law it chooses," said Lord Chief Justice John Thomas, England's most senior judge.
The government responded to the setback by saying it would appeal against the decision. A spokeswoman for Mrs May said that the prime minister would press ahead with the planned timetable of launching talks on the terms of Brexit by the end of March.
The S&P 500 fell for an eighth straight session, its longest losing streak since the 2008 financial crisis, as Facebook shares weighed and investors grappled with uncertainty over next week's US presidential election.
Facebook shares tumbled 5.7 per cent as the world's largest online social media network warned that revenue growth would slow this quarter.
The stock was the biggest drag on the S&P 500 as well as on the tech-heavy Nasdaq, which also posted its eighth straight day of losses.
Investors have been unnerved by signs the US presidential race between Democrat Hillary Clinton and Republican Donald Trump is tightening, after Clinton had until recently been thought to have a clear lead.
Two polls showed Clinton maintaining a narrow lead nationally ahead of the November 8 election, echoing other polls that have shown Clinton with a slimmer lead since the re-emergence last week of a controversy over her use of a private email server while secretary of state.
"The polls have tightened and now the concern is more about what might a Trump presidency look like and the market hasn't quite priced that in," said Ernie Cecilia, chief investment officer of Bryn Mawr Trust in Bryn Mawr, Pennsylvania. "Given the fact that the election is five days away, that's what's driving near-term behaviour right now."
The S&P 500 lost 9.28 points, or 0.44 per cent, to 2088.66 and the Nasdaq Composite dropped 47.16 points, or 0.92 per cent, to 5058.41.
The Dow Jones industrial average, which does not include Facebook among its components, fell 28.97 points, or 0.16 per cent, to 17,930.67.
The CBOE Volatility Index, a gauge of near-term investor anxiety, climbed 14 per cent to its highest level in more than four months.
The spike in volatility "tells you people are buying protection, there is a little bit more concern," said Matt Jones, US head of equity strategy at JP Morgan Private Bank in New York. "You just have a buyers' strike right now and people waiting for the results next week to reposition themselves going forward."
With its recent slide, the S&P 500's 2016 gain has been trimmed to 2.2 per cent.
Good morning and welcome to Markets Live for Friday.
Your editors today are Patrick Commins and Vanessa Desloires.
This blog is not intended as investment advice.
BusinessDay with wires.
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