While from the outside sharemarkets look like they are on a tear, they are looking a little ugly on the inside.
On GaveKal Capital's blog, Eric Bush points out that "more than one out of five developed market stocks and more than two out of five emerging market stocks are in a bear market over the past 200 days.
A bear market is defined as the stock being down over 20 per cent from its recent high.
On Wall Street, four major indices are hitting simultaneous highs for the first time this century. But 54 per cent of the S&P 500's gains since the US election on November 8 have come from financial companies, reports the Wall Street Journal.
Just five stocks - Wells Fargo, Bank of America, JP Morgan, Berkshire Hathaway and Citigroup accounted for more than a quarter of the broad index's rise over that period.
Researchers at LPL Financial, the largest independent broker in the US, noted that something happened last Monday that's never happened before: More than 300 stocks on the NYSE made new 52-week highs, while more than 300 also made new 52-week lows.
This reflects the weakness in the bond market, as debt-like instruments and debt-like stocks have been hit, reported Business Insider Australia.
But back to GaveKal's Bush, as he continues:
- In the developed market, the percentage of stocks in a bear market has doubled from just 11 per cent in late September to 22 per cent as of Friday's close.
- Emerging market (EM) stocks have fared worse as just 18 per cent of EM stocks were in a bear market in late September and now 44 per cent are in bear market.
The aggregate numbers hide a disparity in the regional performance for equities.
- Since Oct 26, the percentage of DM [developed market] Asia equities that are in a bear market has increased from 9% to 22%.
- DM EMEA [Europe, Middle-East and Africa] equities have had the worst performance as 36% of DM EMEA stocks are in a bear market.
- DM Americas equities have fared the best with just 13% of stocks in a bear market.
In the emerging markets, it has been EM Americas that has been blown up recently:
- From 76% on 11/11, 61% of EM Americas stocks are in a bear market.
- 41% of EM Asia and 47% of EM EMEA equities are in a bear market.
The governments of Nigeria, Indonesia and Malaysia - Australia's competitors in the oil and gas export sector - extract twice as much tax revenue from petroleum companies as a proportion of production than the federal and state governments combined.
An analysis, based on International Monetary Fund figures and global resource production numbers, finds Australia is at the bottom of the pile when it comes to charging multinationals for selling its natural wealth.
For example, Malaysia took $20.2 billion in oil and gas-related revenues in 2014 - nearly three times the $7.3 billion that went to state and federal coffers in royalties, corporate taxes and the federally-administered petroleum resource rent tax. That's despite Malaysia's annual production being less than 30 per cent higher than Australia's.
As a percentage of oil and gas production, Australia receives less than 1.5 per cent of the value of product, according to research conducted by Tax Justice Network member Jason Ward on behalf of the International Transport Workers' Federation.
Goldman Sachs is betting on higher commodities prices in the next year as manufacturing picks up around the world, the first time the bank has recommended an overweight position for the asset class in more than four years.
Purchasing managers' indexes strengthened in all major regions in October, helping to spur gains in iron ore, copper and other base metals. Goldman raised its iron ore price forecasts, citing an unexpected resilience in steel usage and a demand boost coming from broad restocking, as well as its oil price estimates into next year.
"The recent re-acceleration in global PMIs suggests commodity markets are entering a cyclically stronger environment," Goldman said in a report. "Supply restrictions from policy actions should benefit oil, coking coal and nickel in the near term while economic reductions should boost natural gas and zinc."
Goldman Sachs is the biggest commodities dealer on Wall Street by sales and for that reason the views of its analysts carry extra weight among natural resources investors.
Industrial metals have rallied 14 per cent in the past month on expectations that the economy in top user China is stabilising and a Donald Trump presidency in the US will bolster demand. Credit-fuelled stimulus in China this year has
been the primary driver of recent gains, rather than speculation surrounding the size of Trump's infrastructure-investment plan, Goldman said.
"It is tempting to blame the sharp post-election rally in industrial metals prices on President-elect Trump's platform of lower taxation and higher public spending on infrastructure," the analysts said. "We would argue this rally was a continuation
of a reflation trend put in place at the start of 2016 by the Chinese through credit stimulus aimed at infrastructure projects and policy driven supply curtailments in coal."
Oil prices are extending their strong overnight gains, as the market prices in a potential output cut led by producer cartel OPEC, although analysts warn that a failure to agree a cut could lead to a ballooning supply overhang by early 2017.
Brent crude oil has risen as high as $US49.43 per barrel, up more than 13 per cent over the past week.
The Organisation of the Petroleum Exporting Countries (OPEC) is trying by November 30 to bring its 14 member states and non-OPEC producer Russia to agree on a co-ordinated production cut to prop up the market by bringing production into line with consumption.
"With investors becoming more optimistic about OPEC reaching an agreement on production cuts, oil prices should continue to edge higher in trading today," ANZ said.
Investors wanting to express their concern over the world's rising populist mood are preparing to attack currencies, rather than government bonds, on the latest political battleground: the Italian constitutional referendum.
Both the euro and Italian bonds have fallen in the lead-up to the December 4 vote as analysts predict the European Central Bank may step in to prop up the bond market should Prime Minister Matteo Renzi fail to secure his Senate reforms.
Where "bond vigilantes" once prowled markets, punishing fiscally irresponsible governments for their indulgent spending, currency traders appear to have picked up the mantle as unconventional quantitative easing programs flattened the bond market and warped stock markets.
"Whether the ECB will then continue its buying program will affect the euro," said James Woods, global investment analyst at Rivkin Securities. "It might provide a backstop for Italian bonds, but if the Italians vote no, the euro will probably fall further."
The "currency vigilantes" roared to life following Britain's shock decision to leave the European Union in June. The pound was decimated after the decision and bore the brunt of investor anger, whereas bonds leapt higher on the expectations of more quantitative easing and further rate cuts.
The euro has dropped nearly 4 per cent against the US dollar since Donald Trump's election victory on November 8.
"For FX markets, politics is the new economics," said David Bloom, global head of FX research at HSBC. "Quantitative easing has stifled the bond market, distorted equity markets and narrowed yield differentials. This means FX is uniquely placed to reflect political developments."
With major central banks continuing to buy up bonds, regardless of the fundamental drivers, there is less scope for bond traders to express their displeasure at a wayward government.
"There is no room for this traditional bond reaction," Mr Bloom said. "This puts the onus on FX to punish the weak and reward the strong."
TechnologyOne's revenue jumped 14 per cent to $249 million over the past financial year, while net profit climbed 16 per cent to $41.3 million, both of which results were ahead of analyst expectations.
It was also ahead of the company's own guidance, which was for 10-15 per cent profit growth.
Investors are understandably chuffed, pushing the stock 7.6 per cent higher to $5.70, partially reversing a slide in the share price in recent weeks.
TechOne touts itself as Australia's largest enterprise software company. Incredibly, its annual revenues have climbed for an unbroken stretch of 17 years.
With that kind of coin, the company declared a second half dividend of 5.09 cents, plus a special final dividend, as per the previous year, of 2 cents. The total annual ordinary dividend at 7.45 cents per share was up 10 per cent from FY15.
The company said its strong result was underpinned by the "substantial growth" of its "software as a service", or SAAS, business, which more than doubled for the second consecutive year. License fees also jumped by 14 per cent to $56 million.
The company said it expects its cloud business to be profitable by 2017, and that the company's profit margin will move to 25 per cent from 21 per cent now.
Traders ditching the greenback for the yen following the Japanese earthquake along with stronger commodity prices have lifted the Aussie dollar.
The local unit is fetching US73.90¢, up nearly half a cent from levels it was trading at this morning.
Royal Bank of Canada chief economist Su-Lin Ong said the earthquake off Japan's coast pushed investors to buy up the safe-haven yen against the greenback, which had helped the Aussie move higher against its US counterpart.
"It's largely a bit of a softer US dollar story and the Aussie has moved up accordingly," she said. "It hasn't really broken out of any range, but there's been a move this morning."
OANDA Australia and Asia Pacific senior currency trader Stephen Innes said that the greenback was due for some profit taking following its strong rally over the past days.
"The Australian dollar also caught the wind in the sails overnight from the surging oil prices," said Innes. "Profit-taking was also on the cards after the recent sell-off in US treasuries abated and the 10-year yields of the US stabilise."
"Keep in mind that given just how far the US dollar has surged from last week's position and squaring ahead of the long weekend in the US, it was expected."
Guess which chairman of a media company has offered to take a 50 per cent pay cut to help company coffers in the face of declining advertising revenue?
It is a company that had an 18 per cent decline in core post-tax profit and is screaming for the government to pass the media reforms. Give up?
John Hartigan, former chairman and chief executive of News Limited (now known as News Corp), who is now chairman of Prime Media Group. He told the annual general meeting that he will take a 50 per cent cut to his chairman's fees, effective from July 1, 2016. His annual feel in 2015-16 was $181,981, which means he will take home about $91,000, which is on par with the company's other non-executive directors.
Meanwhile chief executive Ian Audsley (on a total package of $1.4 million with no hint of a pay cut), gave a fiery speech about the need for the government to pass the media reform bill.
"The reality is that we are operating with a set of regulations for a market that no longer exists. There is no such thing as a 'regional television market'. This effectively disappeared with the advent of streaming. Metropolitan Australia and regional Australia are now one television market – augmented by the internet," Audsely told shareholders.
"Ultimately, the 'market' created by the Hawke government in the late 1980s and perpetuated by subsequent governments, which used to sustain three local commercial TV stations, two local radio stations and a local newspaper, is failing us. We have reached a tipping point. It is now on the cusp of being public policy failure."
The A2 Milk Company has generated a big jump in revenue for the first four months of the current 2016/17 financial year as sales of infant formula and milk products continue to grow.
New Zealand-based A2 Milk told shareholders at the company's annual general meeting in Sydney that revenue for the four months to October, 2016 was up 96 per cent to $NZ155.2 million, compared to a year earlier.
The growth over the four-month period reflected the major seasonal build-up for China's Singles Day, the November 11 holiday that is a major online shopping event.
The company also said it had strong positive operating cash flow.
A2 Milk's biggest market is Australia and New Zealand but it is building markets in China, the UK and the US.
The company also said it hopes to adopt a dividend policy after the end of the current financial year, provided the positive trends in its business continue and there is no need for substantial additional capital expenditure.
A2 Milk chairman David Hearn said A2 Milk's priorities for the current year and beyond would be to consolidate the gains made in fiscal 2016.
The company would continue to build its market positions and brands in its chosen development markets.
Investors like it: shares in A2 Milk are 7.6 per cent higher at $2.12, making them the best performing in the ASX 200 today.
Speaking of the devil: Malcolm Turnbull's hope that Donald Trump might be persuaded to do a U-turn and support the Trans-Pacific Partnership appears doomed, after the President-elect officially announced he will pull out from the trade pact.
Trump also says he'll issue a rule cutting government regulations, direct the Labor Department to investigate abuses of visa programs, and cancel some restrictions on energy production, including shale oil and gas and coal.
In the Youtube video Trump says his agenda "will be based on a simple core principle: putting America first."
He reiterates a number of his promises for the first 100 days of his administration, including vows to remove regulations on businesses and establish a five-year ban on executive officials becoming lobbyists.
Notably missing from his promises is his pledge to repeal the Affordable Care Act and his vow to build a southern border wall with Mexico.
The pending withdrawal of the US opens up a big opportunity for China to fill the void in the Asia Pacific region, economically and strategically.
This morning Mr Trump said on the first day of his presidency he planned to issue a notification of intent to withdraw from the "potential disaster" TPP. The 12-country deal signed last year was intended to cover 40 per cent of the global economy.
Instead, the President-elect said he would sign "fair" bilateral trade agreements that "bring jobs and industry back on to American shores".
A bilateral trade deal between the US and Japan is a possibility, according to James Clad, a senior adviser for Asia at CNA and former US government official.
Australian businesses counting on the trade and investment pact to open up new markets in 11 other Pacific Rim countries will lose out on the failure of the TPP, which Prime Minister Turnbull once hailed as a "gigantic foundation stone" for the economy.
Back to top
In case you're wondering about our headline, the four most famous US stock indices all closed at record highs overnight - the first time that's happened simultaneously since 1999, at the peak of the dot-com boom.
The benchmark S&P 500, the 120-year old Dow Jones, the tech heavy NASDAQ and the small-cap focused Russell 2000 all closed at all-time highs after oil jumped on speculation OPEC will cut output.
It's worth remembering that the tech-fuelled party lasted a few more months on Wall Street (and elsewhere), but then ended with a nasty hangover.
An explosion of investment in the newish internet sector had caused stocks to soar up until around March 2000, when most indices plateaued.
Increasing stock prices, over-confidence in the profitability of the internet and widely available venture capital caused many investors to overlook traditional metrics for the risky startups.
Investors were overcome by an internet mania in which companies could increase their stock prices simply by adding the suffix ".com" or the prefix "e-" to their name. Companies barely a few years old splurged on lavish launch parties, celebrity endorsements and prime real estate. Following the recommendations of publications such as The Wall Street Journal and Forbes, investors continued to flock to them.
Less attention was paid to revenue, with excessive spending going unchecked under the mantra of "growth over profits".
But eventually it all came crashing back to earth. When it became clear many of these startups were less profitable than they seemed, and after a number of executives were convicted of fraud for misusing shareholders' money, capital began to dry up. The September 11, 2001 attacks sped up the crash.
By September 2002, the NASDAQ had gone down by almost 77 per cent, while the S&P 500 dropped by 49 per cent. The losses on Wall Street wiped out about $US5 trillion in market value, and around half of listed internet startups were liquidated or acquired by brick-and-mortar competitors.
But some managed to survive and flourish, such as online retailers eBay and Amazon. Current behemoths such as Google and Facebook have learned from the mistakes of their predecessors, focusing much earlier on profitability.
It's not just Donald Trump, Japanese Prime Minister Shinzo Abe's government is also pushing for a greater role for fiscal policy next year, according to draft guidelines for the 2017 budget seen by Bloomberg.
The government handed over the document for Japan's initial budget for the fiscal year starting in April to the ruling Liberal Democratic Party, and it advocates more use of fiscal policy to help the economy in coordination with loose monetary policy.
Japan is among countries around the world that are turning to fiscal spending to stoke sputtering economies, some after years of extraordinary monetary easing failed to achieve strong, sustainable growth. In the US, President-elect Donald Trump has promised to spend $550 billion on infrastructure and to cut taxes.
There is particular interest in fiscal policy in supporting growth in Japan. Some doubt the Bank of Japan will be able to maintain its aggressive monetary easing program. The BOJ recently shifted its policy regime to one better-suited for long-term sustainability, but some economists say the new framework provides cover for a "stealth tapering" of its asset purchases.
The budget document does not mention spending levels or targets, but it lists principles that should guide next year's budget. It points out the importance of investing in elder care, child care and research and development. It also notes improvements in income and employment conditions, saying policies are needed to ensure that progress in those areas is not undone.
The cabinet is set to approve the document by the end of next week, according to a person familiar with the plan.
Fiscal spending was the "second arrow" of Abe's growth program, Abenomics, but its implementation has been sporadic. In August, Abe proposed a 28 trillion yen ($343 billion) supplementary stimulus package that was approved by parliament last month, but only about a quarter of that amount was new spending.
Japan's fiscal stimulus is often packaged in supplementary budgets.
Billabong shares have plunged as much as 8.3 per cent to 99.5 cents, their lowest since July 2013, on a weak outlook.
The sports apparel retailer said trading conditions remain challenging in financial year 2017, flagging first-half EBITDA to be down substantially on the same period last year.
It also said it expected FY17 EBITDA to be ahead of FY16 and in a range of $60 million to $65 million but it is subject to reasonable trading conditions.
CIMIC's stake in UGL has jumped to 32.5 per cent after the construction group bought shares in the open market ahead of its $524 million hostile takeover closing on Friday.
The construction group has acquired substantially more UGL shares on market on Friday and Monday than it has received as acceptances into its $3.15 per share cash offer.
CIMIC bought 22.4 million shares on market on Friday and Monday, but only received 2.7 million shares tendered into its offer. The on market buying has boosted its stake in UGL to more than 30 per cent from 17.4 per cent on Thursday.
UGL shareholders who sell their shares on market will receive their money faster than if they formally accept the CIMIC offer, getting their cash in three days instead of seven days. But they would have to pay brokerage fees by selling on market - unless the fees are being covered byCIMIC.
Acquiring shares on market allows CIMIC to increase its stake as fast as possible and puts pressure on UGL shareholders to accept the bid.
CIMIC's offer closes on Friday unless its stake in UGL rises to more than 50 per cent, which will allow it to extend the offer.
Local shares are joining the global party, buoyed by record closes on Wall Street and a surge in the oil price.
The ASX is up 0.75 per cent at 5391.2, hitting a four-week high.
Energy stocks are leading the gains, with the sub-index jumping 1.8 per cent after oil prices soared more than 4 per cent overnight, but all other sectors are higher too.
The catalyst of positive talk around a potential OPEC supply agreement may eventually disappoint, but the improvement in demand is sustainable, says CMC chief market strategist Michael McCarthy.
"The focus on commodities could see the Australian sharemarket lead the region today."
BHP is the biggest tailwind for the benchmark index, rising 1.9 per cent in early trade, while South 32 and Woodside are close behind, up 4.3 per cent and 2 per cent respectively.
Among the losers, Newcrest has shed 0.7 per cent following softer gold prices.
It's not clear yet when Boral will resume trading following its capital raising to fund a $3.5 billion takeover in the US, but McCarthy notes that there's been healthy appetite for the institutional placement at $4.85 versus a previous traded price of $6.15.
"It would be both surprising and disappointing if the deal is not already bedded down."
Fund managers are already joking that Boral is paying $3.5b for "Heartbreaker" rather than "Headwaters". Transaction costs are $175m!!!
— Stephen Mayne (@MayneReport) November 21, 2016
SPONSORED POST
It's like Trump in a lolly shop for markets, says IG strategist Gary Burton:
Another night of approval for the coming Trumponomics, with all of US indices that count again pushing into or very close to record territory overnight. The Russell 2000 the real representative end of any planned Trump tax cuts now looks very comfortable over the important 1300 at 1321 points. Dow transports again higher, and solid 43 point gains in the Nasdaq Composite.
This comes on the back of a surprising 24 per cent drop in the CBOE VIX over the past week. With upcoming elections in France and the still unknown Trump full transition team, the markets are starting to consolidate the recent gains. Lack of profit taking would suggest a further bullish outcome.
In the theme of getting the band back together, Trump moves to build his cabinet and meets with Rick Perry the ex Governor of Texas and ex presidential Republican candidate, also on board is Newt Gringrich taking on an advisory role looking at government reform.
On the broader markets theme the emerging markets MSCI move to rally 0.3% higher. This is surprising considering the USD Index ( DXY) looks very comfortable over the 100 level at 101.12. Mexico the pawn in the whole Trump campaign lowers its GDP forecast into 2017. Russia makes supportive statements for a cap on oil with crude up 3.8% and having a strong push back to the important $US50.00bl.
This three-week high price recovery comes into to the already recovering energy space and is expected to continue. This price recovery is showing up in Santos and Woodside both stocks entering a primary bullish price pattern. Woodside testing $US30 resistance looking the most bullish after trading in a basing pattern for most of the year.
Oil prices surged 4 per cent to a three-week high overnight, bolstered by growing conviction that major oil producing countries would agree next week to limit output.
Brent crude briefly touched $US49 a barrel. The London benchmark has risen 11 per cent in a week since Saudi Arabia, de facto leader of the Organisation of the Petroleum Exporting Countries, started a diplomatic charm offensive to persuade more reluctant members to join its proposed output plan.
OPEC members are due to agree to a world oil freeze pact on November 30 at a meeting in Vienna, Austria. In recent days, several OPEC members including Iran, along with non-member Russia, have suggested they were leaning toward a deal to limit output.
Brent crude futures settled at $US48.90 a barrel, up $US2.04, or 4.4 per cent. US West Texas Intermediate (WTI) gained 4 per cent to settle at $US47.49 a barrel, up $US1.80, after climbing as high as $US47.80.
"As we get closer to the meeting the threat that they will achieve some agreement has triggered a lot of short covering," said Gene McGillian, manager of market research at Tradition Energy. He added that funds were less enthused about holding positions ahead of the meeting.
Goldman Sachs analysts said in a note that chances of an OPEC cut succeeding have increased, and they believe the global oil surplus will shift into a deficit by the middle of next year, which would support prices.
"Our base case now is that an OPEC production cut will be announced and implemented," they wrote.
Russian President Vladimir Putin said he saw no obstacle to freezing oil output from its post-Soviet high of more than 11 million barrels per day.
Here's an overview of how major markets performed overnight:
- SPI futures up 40 points or 0.7% to 5393
- AUD +0.5% to 73.69 US cents
- On Wall St, Dow +0.5%, S&P 500 +0.8%, Nasdaq +0.9%
- In New York, BHP +2.7%, Rio +2.6%
- In Europe, Stoxx 50 +0.4%, FTSE flat, CAC +0.6%, DAX +0.2%
- Spot gold +0.4% to $US1212.51 an ounce
- Brent crude +4.5% to $US48.98 a barrel
- Iron ore -3.4% to $US70.34 a tonne; but Dalian iron ore futures +3.4%
- Coking coal +4.1%
- LME copper +2.5% to $US5559 a tonne
- LME aluminium +1.6% to $US1722 a tonne
An earthquake with a preliminary magnitude of 7.3 has hit northern Japan, the Japan Meteorological Agency said, issuing tsunami advisories for much of the nation's northern Pacific coast.
The epicentre of the earthquake, which was felt in Tokyo, was off the coast of Fukushima prefecture at a depth of about 10 km, the agency said. There were no immediate reports of damage or injury, which struck at about 8am AEDT.
On NHK live stream you can see water flowing left-to-right, back toward land (after it previously was flowing right-to-left) pic.twitter.com/huuDPTrkBA
— SevereStudios (@severestudios) November 21, 2016
Tokyo Electric Power was checking its nuclear plants in Fukushima for damage, public broadcaster NHK said. Tohoku Electric Power Co said there was no damage to its Onagawa nuclear plant.
Television footage showed ships moving out to sea from Fukushima harbours, as the meteorological agency warned of a tsunami of 3 metres for Fukushima, where Tepco's Daiichi nuclear plant was devastated in a March 2011 quake and tsunami.
The 2011 quake was magnitude 9, the strongest quake in Japan on record. The massive tsunami it triggered caused world's worst nuclear crisis since Chernobyl a quarter of a century earlier.
For updates on the Japan earthquake and tsunami, click here
All four major US equity benchmarks climbed to record highs as oil jumped on optimism OPEC will agree to cut output. The US dollar halted its longest advance ever against the euro.
The S&P 500 Index, the Dow Jones, the Nasdaq and the Russell 2000 smaller-cap index rallied together to their all-time peaks for the first time since 1999.
Grand slam. Russell 2000, S&P 500, Dow Industrials and Nasdaq Composite all hit highs on same day, for first time since 1999. Golly. pic.twitter.com/0WpBN6YUtB
— John Authers (@johnauthers) November 21, 2016
Oil surged as Iran signalled optimism that OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster unity before next week's meeting in Vienna.
The greenback's decline versus the European shared currency was its first in 11 days even as yields on two-year Treasury notes climbed to the highest level this year.
American stocks achieved the new milestone as companies ended a five-quarter profit slump and Donald Trump's election fuelled optimism that his plans to cut taxes and boost fiscal spending will benefit industries more geared toward economic growth.
"There's optimism that it's more likely that Trump is going to put us on an economic fast track versus Clinton," said Terry Morris, manager director of equities at BB&T Institutional Investment Advisors inPennsylvania. "The election had something to do with this, and I also think there's some short covering going on."
S&P500- up she goes... markets at all time highs are bullish and should be traded as such
— Chris Weston (@ChrisWeston_IG) November 21, 2016
Traders are now pricing in a 100 per cent chance of a US rate rise next month, compared with a 68 per cent probability in the beginning of November. If the Fed doesn't act as expected, it may bring on more market turmoil, says Seven Investment Management's Ben Kumar.
The S&P 500 rose 0.8 per cent to 2,198. The Dow Average and the Nasdaq advanced more than 0.4 per cent. The Russell 2000 index of smaller companies rose for a 12th day in its longest rally since 2003.
"It's a push on the upper end of the equity markets due to this renewed belief that there's tax cuts and stimulus spending coming in 2017 and 2018," said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. "The overall equity markets are taking a cue from that and they are trading on the belief that earnings will move higher as well as revenues in 2017."
Back to topSearch pagination
1 new post(s) available. View post(s) Dismiss