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Shares have ended the session smartly higher, inspired by a "grand slam" of sharemarket index highs on Wall St overnight, a continued rally in the oil price, and a big bounce in mining names.
The ASX 200 jumped 62 points or 1.2 per cent to 5413, with miners providing the biggest boost after falling as a group in every session last week.
BHP jumped 4 per cent and Rio 2.2 per cent, while South32 surged 5.4 per cent and Fortescue 6.8 per cent. The spark appeared to be a strong move higher in iron ore futures pricing in China, which may have removed some of the "hangover" gloom for what has been a very hot sector this year.
Brent oil climbed a further 1.3 per cent to $US49.54 a barrel as traders continue to speculate on whether there will be production cuts announced at the Nov 30 OPEC meeting. Energy shares had a good day, with Woodside up 2.4 per cent.
Those were the highlights, but it was a broad rally in keeping with the simultaneous highs made by the S&P 500, Nasdaq, Dow Jones and Russell 2000 indices on Monday night in New York - the first time since 1999.
In keeping with that mood, only one in 10 ASX 200 names finished in the red today, among them was gold miner Newcrest and QBE, the latter of which gave up some of yesterday's string gains.
The major banks weren't a great help, but all ended up. CBA was the best, climbing 0.7 per cent, while ANZ and Westpac were only marginally higher.
The day's best was TechnologyOne, up 11 per cent after the software company announced a bumper profit result.
Here's some more on TechnologyOne's bumper profits announcement today (see post at 1:19pm).
The executive chairman of the Australian software company dismissed the efforts of global tech giants like Oracle to make up ground in cloud computing, after its own offering impressed in annual results.
Speaking after his company announced a full year net profit increase of 16 per cent to $41.3 million, and a 14 per cent revenue increase to $249 million, Mr Di Marco was particularly bullish about the long term prospects of its fast growing cloud computing division, which is set to hit profitability ahead of schedule.
Like most software companies TechOne has had to shift its strategy as the world moved towards, cloud-hosted software as a service, rather than traditional on-premise systems paid for on long term licenses.
Its annual results commentary showed that it is doing a good job of encouraging both new and existing customers on to its cloud offering, and Mr Di Marco said it would turn a profit of $1 million in 2016/17, rather than the previously planned break even.
The new Australia and New Zealand managing director at Oracle Rob Willis claimed in Tuesday's Financial Review that his company was making strides into the midmarket through cloud computing, but Mr Di Marco said this was not how he saw the situation on the ground.
"Its the 'same old same old' from the traditional ERP [entrerprise resource planning software] vendors - we have heard it so many times before," Mr Di Marco said.
"They are in most bids we go for - its just that they hardly ever win against us in our markets; and last time I looked they have been pushing cloud hard for the last two years."
He said the large traditional ERP vendors had not been providing strong competition in TechOne's core markets of government and education for many years, and that many of its largest deals in recent years had been at the very top end of the market, which was "their last bastion".
Iron ore and steel are resuming their rally in China as investors return to the market to pick up commodities made cheaper after days of steep losses, but a shaky demand outlook suggests the gains would again be fleeting.
Iron ore futures on the Dalian Commodity Exchange have surged 6 per cent to their upside limit at 580.50 yuan ($US84). Construction steel rebar on the Shanghai Futures Exchange has also jumped 6 per cent to hit its exchange-set ceiling at 2900 yuan a tonne.
Chinese rebar steel and raw materials like coal and iron ore pulled back from this month's multi-year highs after exchanges in Shanghai, Dalian and Zhengzhou cracked down on speculative trading by raising transaction charges.
"I think it's driven by speculative trading again," said Richard Lu, analyst at CRU consultancy in Beijing. "In terms of steel, we haven't seen any real support from the demand side."
"Winter is approaching and most of the construction in the northern part of China is already suspended because it's too cold so steel demand is falling," said Lu.
Slower steel demand in China during winter, which usually lasts through February, may keep iron ore supply high at its ports.
Stockpiles of imported iron ore at 46 Chinese ports reached 110.58 million tonnes on Friday, up 2.83 million tonnes from the previous week, according to data tracked by industry consultancy SteelHome. That was the most since September 2014. Inventory has risen 19 per cent this year.
Among small- and medium-sized Chinese mills, iron ore stockpiles rose 8 per cent on November 9 from October 26, according to Morgan Stanley.
But today's rebound in iron ore futures may spur a recovery in spot prices. Iron ore for delivery to China's Qingdao port slid 3.4 per cent to $US70.34 a tonne overnight. The spot benchmark lost 8.8 per cent last week, ending a five-week rally.
Here's an interesting chart from Citi's global equities team, showing which sectors they favour in different markets.
"Donald Trump's election victory has driven significant rotation across global markets and our macro colleagues expect the US dollar, government bond yields and oil prices to rise over the next 12 months," says chief equity strategist Robert Buckland.
"We remain positive on global equities, forecasting a 10 per cent gain to 2017. Political risks in Europe remain a concern," he said.
Buckland says Citi's favourite sector is financials but it's noticeable that the one place the bank's analysts are lukewarm on financials is Australia.
The local sharemarket is on track to close at its highest in four weeks, thanks to a continuation of the upbeat post-US election sentiment combined with a surge in oil and commodity prices that drove Wall Street indices to new records overnight.
"We were looking for the market to retest the Brexit lows [after the US election] and the fact we've bounced so strongly off that is a positive," said Fairmont Equities managing director Michael Gable. "It reflects the relief that the last six months, with Brexit and the election, is over."
That the ASXt has eased from its intraday high of 5424 was a sign that it has hit a trendline resistance level, suggesting a few days of softness into the end of the week that includes the Thanksgiving holiday in the US, Gable said.
"If there's any weakness it might not extend for more than a couple of days. The market might want to push to a new [year to date high] of 5600 by the year's end," he said. "I expect the rest of the week to be soft but we should use that an opportunity to buy stocks we like."
Meanwhile, markets around the region are also trading higher, with the Hang Seng in Hong Kong up 1.3 per cent, the Shanghai Composite up 0.7 per cent and Korea's Kospi rising 0.8 per cent.
Japan's Nikkei is underperforming with a 0.2 per cent gain, after the yen ticked up against the greenback following this morning's earthquake.
"Investors will react if more manufacturers are halting operations in their factories in the region, but right now the impact from the earthquake is limited," said Hiroaki Mino, director of investment information department at Mizuho Securities.
Infrastructure opportunity knocked and Canberra wasn't home. Still isn't, writes BusinessDay columnist Michael Pascoe:
The commonwealth government started this financial year able to borrow money for 10 years at about 1.8 per cent.
The 10-year bond on Tuesday morning was trading with a yield of about 2.66 per cent. It finished last week at 2.72. Split the difference, round it up and it's costing the government 50 per cent more to borrow money today.
You could say a wonderful opportunity was missed to borrow very cheaply to invest in infrastructure that would pay for itself several times over.
That sort of borrowing is what financial advisors explain to retail-level customers as "good debt". It's the sort of debt our central bankers have tried to explain to the government as sound economic policy to help Australia realise its potential by improving productivity and our quality of life, paying fat economic dividends for years to come.
There is a caveat though – the investment decisions have to be kept away from politicians who prefer to roll out pork barrels in marginal electorates and choose projects that appeal to their own fancy. ("Had a great holiday in Portugal. Those Lisbon trams were cute. Hey, let's buy trams!")
When opportunity knocked in July to borrow so very cheaply, to launch Commonwealth Infrastructure Bonds, the government was not at home. The Prime Minister and Treasurer were claiming, and continue to claim, that a corporate tax cut, phased in over a decade, is all the nation needs to reach its potential.
As we're seeing in the US, there is an ideological belief on the right wing of politics that tax cuts solve everything, that government should get the hell out of the way and let capitalism rip. It's as silly as the far-left belief in government ownership delivering Utopia.
Australia not home when opportunity knocked
Last week Australian government bonds finished 51 per cent dearer than when opportunity was knocking loudest for infrastructure. Michael Pascoe comments.
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.
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.
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