That's it for Markets Live today.
Thanks for reading and your comments.
See you all again tomorrow morning from 9.
![market close](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/2/g/h/4/2/image.imgtype.columnistThumbnail.60x60.png/1427260967167.jpg)
A fightback from early losses had the ASX looking good for a day in the green, before steady selling from lunch, particularly in iron ore miners Fortescue and Rio, ultimately left the bourse lower for the day.
The ASX 200 dropped 18 points to 5545 in a relatively unruly day of trade, as stocks that have been left behind in the Trumpflation rally - such as listed property (up 1.1 per cent) and healthcare (up 1.3 per cent) - managed a day in the sun. CSL, in particular, had a great day after an extended rough trot as it closed 3.2 per cent up.
Bond yields fell after climbing strongly on Monday, but through all this the Aussie was pretty steady and last fetched 74.9 US cents.
Iron ore futures faded through the afternoon session, perhaps taking the gloss off miners who were already having a tough time. Rio lost 2.5 per cent and Fortescue a hefty 6 per cent, while BHP eased 0.8 per cent as oil prices also relinquished early gains. Bluescope Steel was off 4.4 per cent.
Crude Brent was down 0.2 per cent in late trade at $US55.58, which left the energy sector flat, although Woodside managed a 0.5 per cent gain.
Estia Health returned to trade after completing an unpleasant capital raising and promptly fell 9 per cent.
![Winners and losers in the ASX 200.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/a/8/i/c/image.related.articleLeadwide.620x349.gta9as.png/1481606969609.jpg)
![money printing](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/w/x/b/image.imgtype.columnistThumbnail.60x60.png/1481168573683.jpg)
This year's stunning resurgence in commodity prices is set to blossom into a sweep of dividend payments, at least from the big firms, say experts.
With a meteoric 91 per cent rise in iron ore, a 49 per cent boost in brent crude oil and after gold made a gain of 28 per cent at one point during the year, the moves lit a fire underneath Australian resource companies who are expected to at least double their shareholder payouts.
"The rhetoric at the moment is still that there will be greater financial discipline going forward," says Romano Sala Tenna, portfolio manager at Katana Asset Management. "And as such we expect a greater return to shareholders via dividends, probably around double for the majors."
Earlier in the year, resource giants BHP Billiton and Rio Tinto switched from progressive dividend plans, in which they had promised to not decrease their payments to shareholders at any six-month interval regardless of their earnings results, to a hard and fast payout ratio, where dividends are relative to a company's total net income.
BHP's most recent final dividend was 18.5¢ a share and Rio Tinto's interim was 59.1¢ a share.
"Those big resource players are likely to up their payouts, that's my gut feeling," says Karl Siegling, portfolio manager at Cadence Capital. "I would have thought iron ore producers like Fortescue, who have just had a record period, might be able to put out more dividends as well.
"But I would have thought for the other base metal guys, it's just too early."
South32 paid out only a US1¢ per share unfranked final dividend, which reflected the company's policy of distributing a minimum 40 per cent of underlying earnings to shareholders every six months.
The company could have paid more, given it has an extremely strong net cash position, $US312 million, but the company is eyeing two acquisitions and as such opted to spend roughly $US50 million on dividends.
Fortescue Metals, where Andrew Forrest is the dominant shareholder, last paid out 12¢ a share, but given iron ore's meteoric price rise this year, may have room to pay out more.
"I'd expect Fortescue to at least double their payout as well," says Mr Sala Tenna. "Our modelling shows around 30 and 35 cents.
![This year's stunning resurgence in commodity prices is set to blossom into a sweep of dividend payments, at least from ...](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/9/d/w/r/image.related.articleLeadwide.620x349.gta6n6.png/1481607777494.jpg)
![eye](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/w/x/h/image.imgtype.columnistThumbnail.60x60.png/1481761569151.jpg)
Investors are on high alert for a 2017 'black swan' event, the AFR's Phil Baker writes:
It all sounds very odd but after what's happened to the world since the global financial crisis, investors are not so worried about day-to-day trading.
Instead, it's potential black swan events, or tail risk events, that has them unable to sleep at night. A black swan is something that no one has thought of, but which, if it happened, would rock the markets for the next 12 months.
At the start of 2016, for example, no one saw Trump winning the US election or Britain voting to leave the eurozone.
In most years one or two so-called black swans do come along so it's a fair bet that 2017 won't be any different.
The accompanying graph from State Street Global Advisors shows just how worried investors are about a left-field event actually happening.
At the same time the graph also shows they're not so worried about Wall Street taking a tumble.
But because these one-off events traumatise investors so much they are prepared to spend more money to protect themselves from any extreme event. It's a bit like taking out insurance.
Indeed, the graph shows that there hasn't been such a divergence between investors hedging against a fall in the sharemarket and those hedging against something more sinister since just before the last financial crisis.
For most of 2016, the well-known Chicago Board Options Exchange Volatility Index, or VIX, has been trading around 16.4 points, which is way below its 20-year average of just under 21 points.
As the SSGA report, which is put together by its global chief investment officer Rick Lacaille, shows that sort of reading implies 2016 has been a carefree one and "downside protection strategies were therefore less important".
But a quick look at the CBOE SKEW Index – better known as the Black Swan Index – shows a completely different picture. The SKEW Index tries to work out what the chances are of a tail-risk event actually happening and, unlike the VIX, it is very much on high alert.
According to SSGA, "as the current equity bull market is poised to enter its eighth year, it is apparent that investors are willing to pay in order to hedge tail risk".
![](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/a/6/n/y/image.related.articleLeadwide.620x349.gta6oh.png/1481604293680.jpg)
![I](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/3/a/m/image.imgtype.columnistThumbnail.60x60.png/1455860574632.jpg)
Power giants AGL Energy and Origin Energy will prosper from the growth of wind and solar energy, brokerage CLSA says in a new report that challenges the view that they will be boxed in by new energy technologies such as Tesla's Powerwall 2 battery.
Far from being marginalised by wind and solar energy and batteries in the National Electricity Market, the two big power companies will be sitting pretty as essential buffers against surging prices and system instability, the report by utilities analyst Baden Moore says.
This is because wholesale electricity prices will continue to rise with more intermittent wind and solar energy in the NEM, and the system will be more dependent on AGL and Origin's relatively lower carbon coal and gas generation plant for security and reliability of supply.
"Given the limits to renewable energy penetration, if reliability and security is to be maintained, remaining incumbent generators will be left holding all the cards, and enjoy increased market power," the report says.
It names AGL and Origin as the most likely to benefit, and rates them a "buy" up to $25.75 and $7.50 respectively.
Despite the backing, AGL is down 0.1 per cent at $21.25 and Origin has dropped 1.2 per cent to $6.71.
![Big power companies like AGL Energy and Origin Energy stand to benefit most from increased wind and solar energy in the ...](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/n/7/6/7/r/image.related.articleLeadwide.620x349.gta21i.png/1481607602879.jpg)
![need2know](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/2/g/h/4/5/image.imgtype.columnistThumbnail.60x60.png/1427239371417.jpg)
Listed companies should be forced to report non-standard financial measures in a consistent way with historical figures for comparison, according to a lobby group for retail shareholders.
Creating standards in the way non-standard financial metrics, such as underlying profit, are defined and presented will help improve transparency at listed firms said Diana D'Ambra, chairwoman of the Australian Shareholders' Association.
Non-standard, or non-statutory, measures can be defined by companies promoted in results presentations, media releases and preliminary results reports.
This is in contrast with statutory measures which have a set definition and which companies are legally obliged to produce as part of an audited set of figures for the market and regulators.
"I'd like to see that there was consistency every year in reporting the same non-standard measures," said Ms D'Ambra, a chartered accountant who spent 25 years at KPMG.
"Companies should be doing it consistently every year and not be changing the measures from one year to the next or giving undue prominence to measures that enhance performance.
"At the moment, I have to sit here with three or four annual reports on my desk and work it out – I'm a chartered accountant and [have] extensive corporate finance experience and I can do that, but an average investor can't.
"I want to see more prior-year comparisons. In an ideal world, I'd like to see three years' history so a useful trend can be established."
Ms D'Ambra's call comes in the wake of research showing more than 40 per cent of ASX top-500 companies use non-standard measures to promote their performance to the market, a trend that market veterans say is out of control.
Directors counter that they need to be able to use the metrics that best allow them to explain the performance of their company.
![Even a professional accountant has trouble getting to grips with company accounts.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/0/f/f/j/image.related.articleLeadwide.620x349.gta5f5.png/1481603288103.jpg)
![The yield on the Australian 10-year](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/w/x/g/image.imgtype.columnistThumbnail.60x60.png/1475200777471.jpg)
Deutsche has put out some nice charts to cap off the year, some of which we'll be posting on the blog.
Here's a good one on the correlation between the 10-year bond yield and the premium investors have to pay for bond proxies (such as telcos, utilities or property trusts).
Highly-priced yield stocks have corrected over the past months as bond yields rose, but Deutsche reckons they're still priced for a 10-year bond yield of 3 per cent, which they say seems excessive.
![](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/a/3/u/4/image.related.articleLeadwide.620x349.gta3vh.png/1481601503502.jpg)
![Tenants market: residential rents are barely budging.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/x/b/6/image.imgtype.columnistThumbnail.60x60.png/1440644111173.jpg)
Housing price growth slowed in the September quarter as unit values in Melbourne and Brisbane hit the brakes, the latest ABS figures show.
Quarter-on-quarter growth in dwelling values slowed to 1.5 per cent nationally from 2 per cent in the June quarter, the figures showed.
The annual growth rate of 3.5 per cent was the weakest level in over three years.
While price growth in Sydney was little changed at 2.6 per cent from the previous quarter's 2.8 per cent, the rate of increase slowed in Melbourne from 2.7 per cent to 1.7 per cent and in Brisbane from 1.1 per cent to just 0.2 per cent.
Price growth of established houses slowed in both the Victorian and Queensland capitals, but the bigger change came in so-called attached dwellings - apartments, townhouses and semi-detached dwellings.
In Melbourne, prices rose just 0.3 per cent after a 1.3 per cent quarterly gain in June. In Brisbane, prices turned negative for the first time in two years, falling 0.6 per cent after June's 1 per cent increase. The last time attached dwelling prices fell in the Queensland capital was the December quarter of 2014, when they shed 0.8 per cent.
While annual growth has slowed in line with RBA thinking there are some quirks in the data, CBA analyst John Peters said, pointing to a divergence in ABS data from CoreLogic numbers in recent quarters.
"The reason for the divergence lies in the measurement of house prices in Sydney," he said.
The ABS measure showed that in third-quarter prices are 4.1 per cent higher than last year, while CoreLogic data, which are showed Sydney prices were 10.6 per cent higher.
![](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/a/1/p/r/image.related.articleLeadwide.620x349.gta1qf.png/1481599278565.jpg)
![dollar](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/2/a/q/s/h/image.imgtype.columnistThumbnail.60x60.png/1427237767290.jpg)
The Aussie dollar has nudged back above US75¢, buoyed by rising commodity prices and as the US dollar loses its mojo ahead of the Federal Reserve's two-day policy meeting starting later to.
The Australian dollar briefly spiked to a one-month high of US75.15¢ just before midday but has since been trading in a tight range around the US75¢ mark, which has proved a strong chart barrier.
The Aussie drew support from rising commodity prices, particularly iron ore, Australia's largest export earner.
It is hard to ignore the surging iron ore prices, which had become the hottest commodity on the block, said Stephen Innes, senior currency trader at OANDA Australia and Asia Pacific.
"The Aussie dollar remains underpinned by surging iron ore prices as the currency tug of war plays out between higher US yields and rising industrial metal prices," Innes said.
Boosting the currency was another surge in the iron ore price overnight to a two-year high of $US83.58 a tonne as well as news this morning that iron ore shipments out of Port Hedland, WA's most important harbour for exports of the bull commodity, held close to record highs in November.
Finally, another set of broadly positive economy data out of China suggested that Australia's top trading partner is on track to end this year on a strong note.
Also underpinning the Aussie are low short-term yields in the euro which reinforce the appeal of carry trades, where investors borrow euros and yen at cheap rates to invest in higher yielding currencies such as the Aussie.
Yields on the 10-year New Zealand government bond reached 3.3 per cent, the highest since January. The Australian equivalent fetched 2.8 per cent, not far from a one-year peak of 2.9 per cent touched on Monday.
Overall, traders said the market remains cautious ahead of the Fed meeting.
"AUD's spike above US75¢ today is a good example of something to be wary of. It lacked any enthusiasm and merely extends, very slightly, a bullish move overnight which was due to broader USD weakness," said ThinkMarkets senior analyst Matt Simpson.
![Price rise meets volumes: as iron ore prices hit two-year highs, shipments out of Port Hedland remain close to record levels.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/0/6/h/c/image.related.articleLeadwide.620x349.gt9zrw.png/1481601735051.jpg)
![Tenants market: residential rents are barely budging.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/x/b/6/image.imgtype.columnistThumbnail.60x60.png/1440644111173.jpg)
And some more data out of China: property sales growth slowed sharply to 7.9 per cent in November from a year ago, its lowest since December 2015, and and well short of 26.4 per cent increase in October.
Meanwhile, real estate investment rose 6.5 per cent over January to November from the same period a year earlier, and property sales area increased 24.3 per cent, official data showed.
Investment growth, reported by the National Bureau of Statistics (NBS), also slowed slightly from an increase of 6.6 per cent in January to October, as house prices and sales have shown signs of cooling in recent months.
That is in stark contrast to a robust recovery in home prices and sales that supported the economy in the first three quarters of the year, thanks to a flurry of government stimulus measures.
Nonetheless, in recent months policymakers have begun to worry about an overheating property market and the risk of a sudden and sharp price fall damaging the economy.
Regulators have told banks to strengthen risk management around property loans. More restrictions on home purchases have been implemented to curb soaring prices, helping to slow down property investment.
Real estate investment, which directly affects about 40 other business sectors in China, is considered to be a crucial driver for the economy, which last year saw its slowest growth in a quarter of a century.
![China's housing market is slowing.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/p/v/e/1/4/image.related.articleLeadwide.620x349.gt9z82.png/1481596207412.jpg)
![china](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/2/b/d/k/e/image.imgtype.columnistThumbnail.60x60.png/1429585740303.jpg)
China's economic stabilisation held in November, offering policy makers more room to switch focus away from stimulus and toward curbing financial risks.
Industrial production climbed 6.2 per cent from a year earlier, compared with a median estimate of 6.1 per cent in a Bloomberg economist survey.
Retail sales advanced 10.8 per cent last month, while fixed-asset investment increased 8.3 per cent in the first 11 months of the year.
The world's second-largest economy has remained resilient in the final quarter of the year as exports were cushioned by a weaker yuan and factory prices snapped out of their deflationary funk.
With the expansion on pace to land smack in the middle of the government's 6.5-7 per cent full-year objective, attention is shifting to curbing excess corporate borrowing and industrial capacity and reining in surging property prices.
"Stabilising economic growth and mild inflation create favourable conditions for structural reform," analysts led by LiuLiu at China International Capital in Beijing wrote in a recent note. "We expect the government to continue to implement expansionary fiscal policy and prudent monetary policy in 2017."
The Aussie dollar was unmoved by the data release, and is steady at just shy of 75 US cents. Meanwhile, Chinese stocks have dropped, extending their biggest loss in six months.
The Shanghai Composite Index is down 0.4 per cent after plunging 2.5 per cent on Monday. The Shenzhen Composite Index is 0.3 per cent lower following the previous day's 4.9 per cent tumble.
Analysts had a long list of reasons for yesterday's synchronised sell-off in Chinese stocks, bonds and currency, from President-elect Donald Trump's questioning of the decades-old One China policy, to a regulatory crackdown to insurers' stock investments, higher money market rates and concern that property prices are poised to fall.
Markets have also came under pressure before this week's expected US interest-rate hike.
![<p>](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/x/a/9/image.imgtype.columnistThumbnail.60x60.png/1435106788034.gif)
Here are some economists' early reactions to this morning's data releases on business conditions and house prices.
ANZ:
Today's data tell a mixed story of Australia's business sector. Business conditions softened further in November and show a real slowing in momentum over the second half of 2016. However, business confidence remains solid and this sentiment will remain a vital ingredient for the economy going forward.
Conditions have seen a marked weakening over the second half of 2016, driven by a noticeable reduction in firms' profitability. The profitability index has averaged 6.9 in the second half of the year compared to a very strong 11.9 over the first half. This slowdown in profitability is consistent with other data, including the softer employment outcomes experienced over the last few months (see Figure 2 in PDF). We also saw a very weak company profits result in last week's Q3 GDP data, and the ongoing softness in today's survey suggests some caution about a turnaround in profits in Q4.
Capital Economics:
The rebound in business confidence in November supports our view that Australia is unlikely to fall into its first recession in 25 years in the fourth quarter. But the ABS house price data for the third quarter imply that the housing market is not as hot as some indicators suggest and that it can't be relied on to carry the economy next year.
UBS:
The NAB business survey suggests further loss of economic momentum in recent months, with business conditions trending down towards a 2-year low, but the level is around average, and hence is still inconsistent with Q3's negative GDP. Meanwhile, Q3 ABS home prices strangely slowed, to be even weaker than Core-Logic, leaving lingering uncertainty.
JP Morgan:
As it has for a few months now, the NAB survey suggests that the fading in the consumer data evident in the national accounts since 2Q should be taken seriously. With business conditions now only at average levels, some further easing in monetary conditions is likely to be required to deliver the RBA's forecast 3% GDP growth profile.
![](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/9/x/x/0/image.related.articleLeadwide.620x349.gt9xvg.png/1481594554978.jpg)
![euro](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/2/b/d/k/i/image.imgtype.columnistThumbnail.60x60.png/1427252515147.jpg)
Italy is ready to pump capital into Monte dei Paschi di Siena if the ailing bank fails to get the 5 billion euros ($7.1 billion) it needs to remain in business from private investors, a Treasury source said on Monday.
Italy's third-biggest bank is pressing ahead with a last-ditch attempt to raise the cash on the market this year despite a government crisis triggered by Prime Minister Matteo Renzi's resignation following his defeat in a Dec. 4 constitutional referendum.
However, its chances of success are slim and the state is likely to have to step in to make up for the shortfall, bankers say.
A failure of the world's oldest bank would threaten the savings of thousands of Italians and could have repercussions on Italy's wider banking sector, which is saddled with 360 billion euros of bad loans - a third of the euro zone's total.
"If the operation failed, the state would carry out a precautionary recapitalisation," the Treasury source said. "The bank's existence and its clients' savings will be preserved under any circumstances."
However, the source said that any injection of public money would involve the mandatory conversion of subordinated bonds into shares, including for 40,000 retail investors, in line with European rules for dealing with bank crises.
The government, well aware of the unpopularity of such a move, is looking at ways to compensate ordinary Italians who invested their savings in the bank's junior debt.
Monte dei Paschi shares closed up 3.7 per cent, with traders saying the prospect that the state might act as an investor of last resort was helping the stock.
Rome is fearful of triggering a so-called precautionary recapitalisation after retail investors at four small banks had their money wiped out in a government-led rescue scheme last year, leading to protests and at least one suicide.
New Italian Prime Minister, Renzi loyalist Paolo Gentiloni, unveiled his government on Monday, keeping almost all former ministers in place in a move aimed at reassuring financial markets.
The new government may then be asked to sign off on the emergency decree needed to authorise a bailout of the bank.
![An emergency recapitalisation of Italian bank Monte dei Paschi di Siena looks increasingly on the cards.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/9/x/7/2/image.related.articleLeadwide.620x349.gt9x9a.png/1481593616821.jpg)
![eye](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/w/x/h/image.imgtype.columnistThumbnail.60x60.png/1481761569151.jpg)
Are bonds the safe havens they're cracked up to be?
That's the big question troubling investors after heavy selling in global bond markets overnight sent the yield on benchmark US 10-year bonds spiralling above 2.5 per cent for the first time since 2014. (Yields rise as bond prices fall.)
The latest selling was triggered by the surge in oil prices after OPEC reached a deal with Russia and other big oil crude producers to cut output. Traders fear that higher oil prices will stoke inflation, eroding bonds' real return over time.
But most economists agree that the downward pressure on global bond prices - and the corresponding rise in global bond yields - reflects expectations of a shift in global policy-making.
They argue that financial markets are on the cusp of a major turning-point, as fiscal policy supplants monetary policy as the main driver of economic growth.
Since 2010, politicians have been extremely nervous about using fiscal policy, such as increased government spending or tax cuts, to boost economic growth, because of fears that government debt levels were already too high.
This meant that the job of boosting economic activity fell exclusively to central bankers, who felt compelled to push monetary policy to extreme levels - including pushing interest rates into negative territory and launching massive bond-buying programs - in a vain effort to spur growth.
As a result, the bond market is being forced to adjust from a world where the expectation was for continued slow growth, low inflation and massive central bank stimulus towards one where the outlook is for stronger growth, higher inflation and reduced support from central banks.
Mohamed El-Erian, Allianz's chief economic advisor, argues that the sell-off in bonds reflects the same market "romance" with Trump's proposed corporate tax reform, infrastructure spending and reduced regulation that has boosted the US share market.
"What you're basically seeing is a romance of reflation. It comes from the President-elect's emphasis on pro-growth policies", El-Erican said in a television interview overnight. "That has a massive impact on what had been artificial pricing of the bond market."
![Mohamed El-Erian, Allianz's chief economic advisor, says markets are in the grip of a "romance of reflation"](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/s/c/l/j/h/image.related.articleLeadwide.620x349.gt9w4t.png/1481592160206.jpg)
![money printing](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/w/x/b/image.imgtype.columnistThumbnail.60x60.png/1481168573683.jpg)
Troubled aged care operator Estia Health saw its share price briefly plunge and analysts reduce their price targets for the company a day after announcing a highly-dilutive capital raising.
Trading was volatile but at one point the stock dropped as much as 7.3 per cent this morning. It was recently trading at around $2.52 a share, down only 1 per cent.
The company announced on Monday that it would raise $137 million in a deeply discounted share offer and would drop its interim dividend.
The aged care industry has been under pressure due to government funding cuts but Estia has also twice downgraded its earnings outlook. The company's founder Peter Arvanitis and other key staff including a previous chief executive left the company.
Estia has also come under close scrutiny because its debt has approached its bank borrowing facility.
Morgan Stanley issued a note to clients on Monday night saying it had reduced its price target on Estia to $2.10 from $2.50, while Bank of America Merrill Lynch said it was reducing its price target to $2.00 from $2.50.
CLSA went further reducing its price target on Estia to $1.90, down from $2.56. The analysts said they were concerned about management's ability to forecast the company's financial performance.
"While there may be potential upside on a longer-term view, we worry about Estia's historical lack of ability to forecast earnings," the analyst said.
Occupancy of Estia's 5700 aged care places was also under scrutiny.
"We believe "underlying Ebitda guidance of $86-90 million" is predicated on average occupancy of 93.7 per cent versus its actual occupancy of 92.8 per cent. This implies 2nd half fiscal 2017 occupancy will need to be above 94.6 per cent, which may be a stretch as Estia has not delivered this in the past."
Estia has hired Macquarie Capital to conduct a strategic review of its business. The review resulted in the company's chairman Pat Grier also being replaced by Dr Gary Weiss.
![](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/9/u/w/k/image.related.articleLeadwide.620x349.gt9urj.png/1481590294311.png)
![eco news](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/2/b/d/k/f/image.imgtype.columnistThumbnail.60x60.png/1426030549910.jpg)
Business conditions have fallen to their lowest in 19 months, in a further sign the economy has hit a soft patch.
NAB's monthly business conditions index dropped to +5 in November (from +7), its lowest level since April 2015, dragged down by a deterioration in the retail sector, where conditions fell to the gloomy levels of mining.
"While this is not a bad result, the trend is raising concerns about the direction of the non-mining recovery in the near term," said NAB chief economist Alan Oster.
The risks to growth were further compounded by expectations that both the housing construction cycle and commodity exports would peak in the coming months, said Mr Oster, who is predicting the Reserve Bank will react to the more subdued growth outlook and stubbornly low inflation by cutting rates twice next year.
"We are becoming increasingly concerned about the underlying momentum in the economy as evidence mounts that the non-mining economy is losing steam," he said.
The downward trend in business conditions and signs of weakness in last week's national accounts, which showed the economy shrunk 0.5 per cent in the third quarter, supported this view, he said.
In spite of the decline in business conditions, business confidence has remained relatively upbeat, tracking broadly sideways in recent months, with the monthly index edging up to +5 (from +0.4) in November.
![Business conditions fall to their lowest since April last year.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/9/u/a/4/image.related.articleLeadwide.620x349.gt9uaf.png/1481637378683.jpg)
![](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/3/o/z/image.imgtype.columnistThumbnail.60x60.png/1427331849695.jpg)
Trading in Corporate Travel Management has been halted pending a statement on a material transaction and proposed capital raising.
The AFR's Street Talk column is reporting that the company is expected to raise $70 million in new equity.
The company has requested a halt until start of trading tomorrow at the latest. Corporate Travel shares last traded at $16.08, having been as high as $19 last month. They fell 3.5 per cent yesterday.
![I](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/3/a/m/image.imgtype.columnistThumbnail.60x60.png/1455860574632.jpg)
Domino's Pizza Enterprises stands to more than double its share of the $23 billion takeaway food market in nine years, but short-term expansion plans could come under pressure as higher wages dent franchisee margins.
UBS's retail team expects Domino's to increase its share of takeaway food sales in Australia and New Zealand from 4 per cent in 2016 to 10 per cent by 2025 by lifting stores from 714 to at least 1200, growing same-store sales by 8 per cent a year and taking sales from rivals such as McDonalds and KFC.
However, UBS fears higher labour costs could crimp franchisee earnings by as much as 14 per cent this year, denting franchisees' appetite and capacity to invest in new stores, new technology and marketing.
Domino's last enterprise agreement expired in 2009 and franchisees are bracing for a significant increase in labour costs as they start paying weekend and late night penalty rates for the first time.
Domino's chief executive Don Meij has repeatedly downplayed the threat, saying that technology introduced over the last few years, including GPS pizza tracking and 10-minute deliveries, will boost productivity and help franchisees maintain profitability.
Last month Mr Meij reaffirmed its forecast for 30 per cent net profit growth this year even with the forecast rise in wages.
Despite strong group profit growth, the profitability of franchisees remains under scrutiny as Domino's needs healthy operators to maintain its ambitious store expansion plans.
According to a recent report by Morgan Stanley, Domino's Australian and New Zealand franchisees generate the highest sales per store globally but are less profitable than franchisees in Britain, Europe and Japan, generating margins between 10 per cent and 12.5 per cent compared with 15.4 per cent in Britain and 13.5 per cent in the US.
UBS estimates that franchisee wage costs could rise around 15.6 per cent this year, squeezing margins by 250 basis points to about 8 per cent and reducing earnings before interest, tax, depreciation and amortisation by 14 per cent.
![UBS believes Domino's could more than double its share of the takeaway food market in nine years, but short term ...](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/0/9/t/m/image.related.articleLeadwide.620x349.gt9sux.png/1481587075079.jpg)
![The yield on the Australian 10-year](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/1/m/8/w/x/g/image.imgtype.columnistThumbnail.60x60.png/1475200777471.jpg)
CBA is raising its standard variable rates for investor mortgages by 0.07 percentage points following earlier increases to its fixed-rate products.
Australia's largest bank said its standard variable investor loan rates would be 5.56 per cent from Friday, while its owner-occupier rates would remain unchanged.
The lender already increased interest rates on two-, three- and five-year fixed- rate owner-occupier and investor loans on December 2.
It comes after rivals ANZ and NAB increased variable rates on investor home loans, while Westpac lifted variable rates for all interest-only mortgages.
![The banks are lifting variable mortgage rates.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/r/b/2/m/q/image.related.articleLeadwide.620x349.gt9s8z.png/1481586065822.jpg)
![market open](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/2/g/h/4/3/image.imgtype.columnistThumbnail.60x60.png/1427152702357.jpg)
Shares are lower in a messy start to early trade, with the ASX 200 off 14 points of 0.3 per cent at 5549.
The big banks are exerting the bulk of the downward pressure on the market, with the four majors down by between 0.4 per cent and 0.9 per cent.
Miners are mixed. Despite a another gain in iron ore, Fortescue and Rio are off 1.3 per cent and 0.8 per cent, respectively. South32 is up 0.5 per cent, though, while BHP has climbed 0.8 per cent.
Interestingly, a bad night for bonds has not translated into losses in bond proxies and gold. Utilities and listed property are two of only three sectors in the green. The other is healthcare - another segment that has tended to suffer during reflation trading periods - as CSL bounces 1.3 per cent following yesterday's fall.
The worst performer early is Qantas, down 2.7 per cent, as oil prices continue to climb, up another 2.5 per cent in Asian trade to $US55.69 a barrel in the case of Brent crude.
But that hasn't helped energy shares, which are retreating from yesterday's gains. Woodside is off 0.5 per cent.
![Winners and losers in the ASX 200 this morning.](/web/20161215222456im_/http://www.theage.com.au/content/dam/images/g/t/9/r/t/7/image.related.articleLeadwide.620x349.gt9rx0.png/1481585370546.jpg)
Search pagination
1 new post(s) available. View post(s) Dismiss