Shares of ALS have plunged after the testing services provider updated the market this afternoon.
The company reported half-year net profit of $48.7 million, down nearly 15 pre cent from last year, on a 5.6 per cent drop in revenue of $672 million.
Both profit and revenue missed expectations of $54 million and $686 million respectively.
ALS will pay an interim dividend of 5.5 per cent, also lower than expected.
It also said it plans to sell oil and gas operations, excluding lab ops.
The shares are down 7.7 per cent at $6.00, after initially slumping as much as 14 per cent.
Sales of new homes are at a 27-month low after falling 8.5 per cent in October, Housing Industry Association figures show.
HIA senior economist Shane Garrett says the figures are not surprising, with the industry heading into a sharp reduction in building volumes over the next couple of years following the "longest and strongest" surge on record.
The housing construction sector is coming off the boil in response to tighter credit rules and weaker earnings growth. Official figures due on Wednesday are expected to add to picture painted in September, when new building approvals fell a more-than-expected 8.7 per cent.
The slowdown in the market is gaining pace. Since peaking in April last year, new home sales have fallen 12.6 per cent, the HIA says. Detached house sales are down by 15.9 per cent and multi-unit sales are down 19.4 per cent in that time.
Even so, few are predicting a meltdown.
"Activity is projected to fall to a low point of around 172,000 new dwellings starts during 2018-19, about the same as the average of the past decade," Garrett said.
Here's some more background on why the Italian constitutional referendum looms as the next big test for financial markets:
Italians will head to the polls on Sunday to vote on major changes to the country's constitution, which Italian Prime Minister Matteo Renzi claims will simplify decision-making, and make it easier to introduce important economic reforms.
But investors are becoming increasingly concerned that the referendum will trigger a fresh period of political turmoil in the eurozone's third largest economy. The centre-left Renzi has threatened to step down if the proposal is rejected, a result which opinion polls suggest is the most likely.
Investors are fretting that Renzi's departure will extinguish all hopes of a vigorous and orderly clean-up of Italy's precarious €4 trillion ($5.7 trillion) banking sector.
Years of faltering economic activity have left Italian banks nursing €360 billion of problem loans – about 20 per cent of their total loan books – and they've struggled to set aside sufficient funds to cover their likely losses, given their weak profitability.
Analysts estimate that Italian banks need to raise between €80 billion to €100 billion in additional capital. Worries about the frail health of Italian banks – and the likely dilution of existing shareholders as a result of fresh capital raisings – have caused Italian banks to lose more than half their value this year.
After failing to persuade Germany that Italy should be allowed to set up a €40 billion rescue fund using taxpayer funds, Renzi has championed using market-based solution to fix the banks' woes. He's encouraged banks to raise fresh capital from private investors, while using a government-sponsored but privately funded bailout fund, Atlante, to shore up smaller banks.
Renzi has been hoping that Italy can avoid invoking strict European Union bail-in rules which stipulate that bank creditors – including shareholders, bondholders and depositors – must be made to hefty losses before taxpayer funds can be used to rescue banks.
Renzi is concerned that these bail-in rules would lead to heavy financial losses on ordinary retail savers, who own around €70 billion of the riskiest bank bonds, and that this would trigger a huge political backlash which would likely translate into a surge in support for the country's anti-establishment Five Star Movement.
But investors worry that the capital raising plans of Italian banks will be dashed in the event of a "No" vote, because investors, worried about the prospect of renewed political instability, will shy away from committing fresh equity into shaky banks.
In particular, they fear that a rescue deal for troubled lender Monte dei Paschi di Siena, which involves a complicated debt for equity swap, could falter, and that this could lead to a collapse of confidence in the entire Italian banking sector.
Electric scooter maker Vmoto has been questioned by ASX over the timing of a trading update which downgraded its 2016 earnings guidance from an underlying profit to a net loss.
Vmoto, which manufacturers scooters in China, forecast last Wednesday that the company would suffer an underlying net loss of $1 million to $1.2 million in the financial year, instead of a net profit of $1.8 million to $2 million as previously stated.
Replying to an ASX query today, Vmoto said it became aware on Wednesday that orders in the fourth quarter of the year would be less than expected, releasing the revised earning guidance before the market reopened the following morning.
Shares are down another 2.4 per cent at 8.1 cents, after sliding nearly 14 per cent on Thursday.
Shanghai has raised the minimum required down payment and tightened eligibility for buyers of first homes in its latest move to cool a red-hot property market, state media reports.
Home and residential land prices have soared in many parts of China this year, prompting authorities to introduce a raft of restrictions on buyers and curbs on the ability of developers to raise fresh funds. The northern port city of Tianjin on Monday also rolled out fresh curbs on property purchases.
Starting today, buyers of first homes in Shanghai would have to put a minimum downpayment of 35 per cent, up from 30 per cent, the state news agency Xinhua reported, quoting a notice jointly issued by Shanghai's housing and banking authorities.
The Shanghai Daily said the government also tightened the definition of first-time home buyers to exclude anyone who has owned a home in the city or applied for a mortgage from commercial banks or the government's Housing Provident Fund (HPF), even if they no longer own a home.
Meanwhile, banks have been ordered to raise interest rates by 10 per cent for home buyers borrowing from the HPF for a second time, with the maximum loan amount lowered by 100,000 yuan ($19,300). People who have two mortgages would be banned from accessing HPF loans, it said.
"During 2010 and 2014, similar policies were also implemented in Shanghai, which were proved effective to control the property price gains," Zhou Hao, an emerging market economist for Asia at Commerzbank, wrote in a morning note.
He said the new policy "hints that Chinese authorities are seriously concerned about asset bubbles".
Vocus shares are still being smashed, down nearly 20 per cent, after the company's earnings update disappointed investors.
Arnhem Investment Management partner Theo Maas said the majority of the miss was a poorer than expected number from Nextgen, which the market had forecast would contribute $60 million to EBITDA, but Vocus came out with guidance of $41 million.
"Between due diligence and closing the deal, that business has really deteriorated," Maas said.
However, Maas said he wasn't too worried.
"My view has always been they bought this business as a piece of infrastructure...if they can get that up and running pretty quickly most of that will be used on their own customers...that will be a relief to the market," he said.
Vocus chief executive Geoff Horth told analysts and investors before the company's annual general meeting that the Nextgen situation was "unfortunate" due to high cancellation numbers between due diligence and closing the deal.
"Our view hasn't changed though, this is a very important asset to us and a significant opportunity. We're very confident we can turn that negative revenue trajectory around," Horth said.
The announcement came ahead of its annual meeting, which is expected to be a long one with eight resolutions to put to shareholders including the election and re-election of five different directors.
House prices in Australia are only really high in Sydney and to a lesser extent Melbourne, and a price slide would require a jump in unemployment, most likely triggered by an interest rate tightening cycle, Citi says.
However, households on average have substantial positive equity in their residential properties and mortgage repayment buffers that would take some time to unwind before forced selling occurred, the bank's economists write in a note to clients.
"So the most likely scenario is that Sydney prices plateau and remain expensive unless there are some large external negative shocks to the economy," they write.
As the main area of vulnerability in the housing market the economists identify the outsized rise in inner city apartment construction which already has seen price falls on some projects in Melbourne and Brisbane.
But mortgage lending by banks for these apartments is a relatively small portion of their mortgage books (less than 10%) and direct loan exposure to developers is substantially smaller, they say.
There also are risks in the investor segment of the market, which enjoys favourable tax concessions such as negative gearing, the analysts note. But they expect further macroprudential tightening to deflate the segment.
"Old school macro' is back", says financial markets analyst James Aitken as US president-elect Donald Trump heads to the White House.
"On November 8, we switched from a world where we were debating on different words used by Janet Yellen and Stanley Fischer to describe the outlook to old school 'here comes fiscal policy and supply side reform," where politics and policy making collide Aitken tells the AFR.
The former AIG and UBS analyst who now advises many of the world's largest institutions and policymakers is galvanised by the paradigm shift that will create opportunities for astute and experienced traders.
But he warns against making proclamations on the future based on the short-term moves in the market. The outcome could be very good, or very bad.
"Trump is broadly reflationary but the only thing we can say with confidence is the probability distribution has changed. The 'tails' will be fatter – on both sides of the [probability] distribution," he says via a phone interview from London.
The waning obsession with Fed-speak signifies a broader change in the collective mindset. The extraordinary rotations in global markets that followed Trump's election win has led investors to reassess the wisdom that we were drifting into a low growth funk and ask just what inflationary forces will be unleashed.
The rout in the bond market that was set in motion well before November 8, Aitken says, has further to go; as does the rotation out of bonds, and bond-like stocks, into stocks.
A big test for the bond market will come as the first month end since the election approaches. Large pension funds around the world that have a targeted asset allocation will be forced to 'rebalance' by selling equities and buying bonds to maintain their mandated weightings.
"There will be funds in the low hundreds of billions of dollars that will rebalance into bonds – it will the first organic contra-flow into Treasuries and should provide a near term boost," he says.
"But it's an opportunity to reset the shorts and if bonds cannot bounce in a decent way, then we are going straight to 3 per cent on the 10-year note by the end of the year."
The OECD believes the next move in Reserve Bank interest rates will be up, sometime before the end of 2017.
In its review of the Australian economy prepared as part of its Global Economic Outlook, it says the hike will be "appropriate, given likely monetary-policy developments elsewhere, the cyclical development of the domestic economy and the need to unwind tensions from the low-interest environment, notably in the housing market".
The Paris-based organisation consults closely with the Australian Treasury and the Reserve Bank in the preparation of its reports and the Treasury has a permanent representative stationed at its headquarters to provide input to its reports.
It says the Australian government should be prepared to go slow on its plans to wind back the budget deficit and spend more in order to support the economy.
"Returns would be high for accelerated infrastructure development and investing in skills, an area where Australia falls short of top-performing countries," it says.
"Active measures to increase transfers to households could help address inequality, thereby making the recovery more inclusive."
The OECD rejects the argument that winding back the deficit should be the government's number one priority, saying government debt has risen, "but from a low level". The debt-to-GDP ratio, currently around 45 per cent, is projected to fall. It says the government already has the "fiscal space" needed to respond to an emergency.
In the meantime, as in the United States where President-elect Donald Trump is planning massive spending on infrastructure, "there is room for spending increases, notably an acceleration in the public investment programmes underway in telecommunications, roads and public transport systems".
The OECD expects economic growth to strengthen to an annual rate of about 3 per cent by 2018 as LNG production ramps up and mining investment stops sliding. It says Australia has experienced 25 years without recession, "but there are risks looking forward".
"Commodity market developments, particularly those linked to the Chinese economy, remain an important source of uncertainty and risk."
"Domestically, non-resource investment may remain lacklustre, damping growth prospects. Also, the housing market remains a risk, as an acceleration in price adjustment would weaken consumption demand and construction activity."
Shares are lower in early trade as investors find little reason to buy, although a positive night across gold, iron ore and oil markets are helping lift ASX-listed drillers and diggers.
The big mover is Vocus, which has plunged around 13 per cent following an earnings guidance update that clearly failed to impress markets.
The ASX 200 index is off 10 points to 5455 after worries around Italy's banking system made for a cautious night in global financial markets, as evidenced by rising gold and bond prices.
Not going to that script was iron ore, which pushed above $US80/tonne for the first time in around two years. That's helped lift Fortescue 1.5 per cent this morning. But it isn't doing much for the two major diversified miners, BHP and Rio, which continue to sell off, both by 1 per cent.
Gold miners are doing well, with Newcrest up 1 per cent, as are energy stocks: Woodside has climbed 0.5 per cent and Santos 1 per cent.
The big four banks are a little lower, by between 0.1 and 0.3 per cent, which is making it hard for the market overall to move higher.
Crown is off 2.4 per cent on reports it will delay its international demerger plans.
Vocus Communications shares have been punished, after the company issued its first guidance for 2016-17 bringing recent acquisitions Nextgen, M2 Group and Amcom under the one umbrella.
Vocus said revenue was expected to be about $1.9 billion, underlying EBITDA was forecast between $430 million and $450 million, while underlying net profit after tax was expected to be between $205 million and $215 million.
Investors are unimpressed, pushing the stock close to 15 per cent lower in early trade to $4.92.
The announcement came ahead of its annual meeting, which is expected to be a long one with eight resolutions to put to shareholders including the election and re-election of five different directors.
Vocus did not issue guidance at its full-year results in August because it was continuing to work through the task of bringing four businesses together as one.
In the past 18 months, Vocus completed a $1.2 billion merger with Amcom, then a $3.8 million merger with M2 and finally acquired Nextgen for $807 million.
The company said the expected synergies from the Amcom merger - $13 million to $15 million annually by the end of this financial year - and the M2 merger - $40 million annually by the end of the 2018 financial year - were on track.
Vocus shares are now down more than 40 per cent since the company's results in August. Former directors James Spenceley and Tony Grist sold large chunks of their holdings in that time.
The pair, founders of Vocus and Amcom respectively, left the company in October after a failed attempt to see chief executive Geoff Horth replaced.
Vocus shares have been caught up in panic about shrinking margins from the switch over to the national broadband network, sparked by David Teoh's TPG Telecom.
However, Vocus' margins on the NBN are little changed because on the consumer side it has mainly been a Telstra reseller.
And with the opening bell looming, here are the market highlights:
- SPI futures down 2 points to 5470
- AUD +0.5% to 74.77 US cents
- On Wall St, Dow -0.2%, S&P 500 -0.5%, Nasdaq -0.6%
- In New York, BHP -1%, Rio +0.3%
- In Europe, Stoxx 50 -1%, FTSE -0.6%, CAC -0.9%, DAX -1.1%
- Spot gold +0.8% to $US1192.47 an ounce
- Brent crude +1.8% to $US48.11 a barrel
- Iron ore +1.5% to $US80.83 a tonne
- Coking coal flat at $US300/tonne
- Thermal coal -0.3% at $US92.30/tonne
- LME aluminium -0.6% to $US1747 a tonne
- LME copper flat at $US5880 a tonne
On the corporate calendar for today:
- Holding annual meetings: Vocus, Mayne Pharma, Brickworks, Wellard, Northern Star, Resolute Mining
- ALS due to release interim earnings
- South32's rating outlook changed to stable from negative at Moody's
- Crown has put its international demerger plans on hold, reports the AFR
- AGL and Graincorp trade ex-dividend
And in analyst news and views:
- Metcash cut to neutral at JP Morgan
- Pact Group raised to neutral at UBS
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The Trumpflation trade is still intact, despite a pullback overnight, writes IG analyst Gary Burton:
In overnight markets we saw some early profit taking in some sectors, and questions are now being asked if the Trump rally is over. The answer: probably not.
The Trump rally will now depend on economic numbers coming through; the Dallas manufacturing Index came in at 10.2 against 2.0 as expected. This week's non-farm payroll number will also have a greater influence in the current market rally.
The most crowed trades in the FX markets are USD/JPY (112.25) and EUR/USD (1.0597) and both saw early profit taking but remain off the session lows. An important level held in the USD Index after trading as high as 102.02 still remains positive over the key 100 level at 101.35.
Both markets saw losses in the early part of the session only to regain some of the lost ground later in the close, this suggests the trade is not over, but the markets certainly have reached an inflection point and now enter the waiting game on political and economic outcomes.
Gold regained some composure looking to retest $US1200/oz, from recent lows of $US1176/oz, and we will see this play out in the Australian gold sector today with the Aussie dollar gold price ticking back over $1600/oz.
Meanwhile. The resource sector in the Australian market continues to see M&A with Yancoal taking some assets from Rio.
Italian lenders declined on rising concerns about risks to their financial stability from the upcoming referendum, bringing an end to a three-week rally in European shares.
Banca Monte dei Paschi di Siena, the lender burdened by bad loans and under pressure to raise fresh money, tumbled 14 per cent. UniCredit and Intesa Sanpaolo fell at least 3.2 per cent, dragging the FTSE MIB Index to one of the worst performances in western-European markets.
The Financial Times reports that Italy has eight banks known to be in various stages of distress. As well as Monte dei Paschi, they include mid-sized lenders Popolare di Vicenza, Veneto Banca and Carige, and four small banks rescued last year: Banca Etruria, CariChieti, Banca delle Marche, and CariFerrara.
Senior bankers have told the FT they fear Mr Renzi's resignation would deter private investors from pumping fresh funds to recapitalise lenders, leading to fears they will need to be put under a new EU "resolution" mechanism that would force losses on creditors.
Italy's banks have €360bn of problem loans versus €225bn of equity on their books after successive regulators and governments failed to tackle a bloated financial system where profitability was weakened by a stagnant economy and exacerbated by fraudulent lending at several institutions, the FT reported.
A gauge of Italian lenders on Monday closed at its lowest level in more than three months, taking its 2016 slump to 52 per cent. The spread between Italian and German 10-year government bond yields widened two basis points to 186 basis points. Italy's securities have been the worst performers globally in the past month, according to Bloomberg World Bond Indexes.
The "Italian referendum is the next big political event," Azzurra Guelfi, an analyst at Citigroup wrote. "Higher sovereign spread and higher market volatility could negatively impact bank balance sheets given the large sovereign exposure."
OPEC officials failed overnight to bridge their differences on an agreement to cut production and revive oil prices, following comments from Saudi Arabia that output curbs aren't essential.
With just two days left before ministers from the Organisation of Petroleum Exporting Countries meet to finalise the first decline in production in eight years, the foundations for a deal are looking increasingly shaky.
After a 10-hour meeting, Iraq and Iran continued to express objections, according to an OPEC delegate who asked not to be named due to the sensitivity of the negotiations. The result: OPEC officials agreed to refer the matter to ministers for further consideration. A proposed deal would trim production by 1.2 million barrels a day from October levels, though it remains unclear whether the idea has the support needed for approval, the delegate said.
The final round of diplomacy Monday focused on how best to divide up the cuts and on Russian resistance to reducing supply, a factor that forced the cancellation of crucial discussions with non-OPEC suppliers. Last week, Saudi Arabia pulled out of a meeting with non-members including Russia, arguing that OPEC needs to sort out its internal divisions before engaging with other producers.
On Sunday, Khalid Al-Falih, the Saudi oil minister, for the first time floated the possibility of leaving Vienna without an agreement.
"Saudi Arabia and Iran are all playing very strong negotiation tactics," said Abhishek Deshpande, chief energy analyst at Natixis in London. "The problem for Saudi Arabia is that this isn't the 1980s and 1990s, when it could use its clout and expect others to follow. Today members like Iran and Iraq are equally strong and their agenda is to ensure they get a large market share."
Both Iraq and Iran have resisted cutting their own production, but need an OPEC deal to increase prices. Iraqi Oil Minister Jabbar Al-Luaibi told reporters as he arrived in Vienna that he was optimistic OPEC can reach an agreement acceptable to all members.
Without an OPEC cut, the International Energy Agency predicts that the oil market will remain in surplus for a fourth year in 2017, which could cause prices to fall. Brent crude rose 1.7 percent to $48.02 a barrel overnight.
The Donald Trump effect lost its sway over global financial markets as investors shifted to new threats including the future of Italy's government and fled to the safety of bonds and gold.
US stocks slipped from all-time highs on speculation that gains sparked by expectations for brisker growth under a new government went too far. Treasuries rose and gold pared its monthly drop.
The pullback overnight snapped an incredible 20-day winning streak for the US smaller companies index, the Russell 2000. The Dow, S&P 500 and Nasdaq all edged lower.
In commodities, iron ore climbed above $US80/tonne and Brent oil jumped 1.7 per cent to $US48.02 a barrel amid the to-and-fro ahead of Wednesday night's OPEC meeting. Helping was a decline in the US dollar, all of which pushed the Aussie as high as 74.9 US cents overnight, a level it trades slightly below now.
After the UK's vote to leave the European Union and Donald Trump's unexpected US election win, investors are on edge about the prospects of political and economic instability should Prime Minister Matteo Renzi lose the Dec. 4 referendum on constitutional reform. As many as eight Italian banks are at risk of failing if the Renzi loses a constitutional referendum this weekend.
American financial firms tumbled after their value was inflated by more than $300 billion since the vote.
"The Trump trades were a distraction for a while but now people are starting to look elsewhere for market drivers," said Kevin Lilley, a manager of euro-area equities at Old Mutual Global Investors in London. "People are getting worried about the impact that a power vacuum in Italy could have on the refinancing needs of its banks. It's a nervous market at a time when liquidity isn't great."
Good morning and welcome to the Markets Live blog for Tuesday.
Your editors today are Jens Meyer and Patrick Commins.
This blog is not intended as investment advice.
Fairfax Media with wires.
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