And that's it for Markets Live for the day, the week, and.. wait for it.. the year!
Yes, the blog will be sunning itself on the beach next week. But never fear, we will be back in the New Year - Tuesday January 3, to be exact.
Thanks so much for reading the blog this year. We hope you've enjoyed it as much as we have enjoyed putting it together.
A very merry Christmas to all, enjoy the holidays, and see you all again in the New Year.
Your Eds, Jens and Patrick
After a promising start, investors took profits in the major miners on Friday and the ASX slid into the red on the final, shortened trading day before Christmas.
For most of the week investors have enjoyed snapping up blue-chip stocks, with the likes of Woolworths, Wesfarmers and Telstra all moving higher, however traders pointed to a last-minute sweep of profit taking as the cause for Friday's dip.
The benchmark S&P/ASX 200 Index and the broader All Ordinaries each fell 0.3 per cent to 5628.1 points and 5675.7 points respectively on Friday. Over a fairly subdued week in terms of trading volumes, the ASX 200 finished up a healthy 1.7 per cent and the All Ordinaries jumped 1.5 per cent.
Another slump in the iron ore price on Thursday evening weighed on the resources sector on Friday as investors took the opportunity to cash in on recent gains. Mining giants Rio Tinto and BHP Billiton finished the day down 2.5 per cent and 2 per cent, respectively.
Following the global post-US election Trump elation, investors have bought up financial stocks, which traded higher for most of the week, but lost their lustre on Friday and the big four banks finished in the red.
Oil is still trading solidly above $US50 a barrel, giving energy stocks some lift. Australia's largest oil producer Woodside ended the five sessions up 1 per cent, while Caltex, which announced the acquisition of fuel company Gull New Zealand on Thursday, finished up 0.6 per cent.
Listed property names, such as Goodman Group and Mirvac have suffered selling during the Trump-inspired bond rout, but enjoyed a bit of upward momentum on Friday. Both finished 1.1 per cent and 1.4 per cent higher, respectively.
In the last trading day of the year, there was some equities news around to keep investors occupied. Shares in stem cell biotechnology company Mesoblast bumped up 2.5 per cent after it won significant backing for its technology from major US drug group Mallinckrodt.
Investors sold off Tatts after the company rejected a competing takeover bid from a Macquarie-led consortium, leaning instead towards Tabcorp's approach. Tatts was down 3.1 per cent, Macquarie was off 0.9 per cent and Tabcorp was up 0.8 per cent.
Shaver Shop shares took a dive after the company warned investors that weak pre-Christmas sales will leave earnings short of the forecast included in its prospectus, which was issued mid-year. The stock dropped 14.6 per cent to 70 cents, after listing at $1.05 in June.
The first Chinese developer listed on the ASX, Boyuan Holdings, has acquired a 40.5-hectare development site at Bringelly, 60 kilometres southwest of Sydney for $70 million.
The property is in the Western Sydney corridor 14 kilometres from Sydney's proposed second airport site at Badgerys Creek.
Boyuan is planning to develop a 7-hectare village centre surrounded by 600 housing lots with an average lot size of 400sq m on the property.
The development adds to the growing housing stock in the growing Sydney southwestern and western growth corridors.
Other major precincts close by include the masterplan towns of Leppington and Oran Park where major developers such as Metro Property Development, Villa World and Sekisui House have flocked to.
As apartment developments start to cool, developers are focusing on house and land development where price growth was more stable.
The NSW government is also encouraging more house and land development, especially middle housing types like townhouses for Sydney. It has launched complying development approvals for developers building these homes.
Chief executive Caden Wan, said the acquisition was consistent with the company's strategy to develop in high growth corridors.
"This acquisition is a strong complement to Boyuan's existing Western Sydney development portfolio where we have development sites at Marsden Park and Austral," Mr Wan said.
"We are rapidly building a quality land bank in the highest growth area of Sydney, adjacent to strong housing demand and existing and proposed infrastructure."
"This specific site at Bringelly is particularly compelling given its close proximity to the proposed second Sydney airport and strong, ongoing demand for housing."
Boyuan has paid a $7.5 million deposit for the property with instalments to full settlement by June 2019.
President-elect Donald Trump upended years of Pentagon procurement planning with a tweet on Thursday, announcing he had asked Boeing to price an upgrade of its F-18 Super Hornet jet that could replace Lockheed Martin's F-35, the most expensive US weapon system ever.
Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!
— Donald J. Trump (@realDonaldTrump) December 22, 2016
Lockheed's $US379 billion ($525 billion) F-35 Joint Strike Fighter is intended to be the mainstay fighter of the Air Force, Navy and Marine Corps, replacing several older planes including Boeing's F-18. Development of the F-35 is more than a decade in the works, and Lockheed is planning to build more than 2400 of the aircraft for the US and allied air forces, a project that will create tens of thousands of jobs at factories across the country and overseas.
The exact impact of Trump's tweet wasn't immediately clear. The Pentagon has scaled back purchases of the F-18, which lacks stealth and other high-tech capabilities of the F-35, and would require extensive design changes to be comparable to the newer plane.
Lockheed shares fell 2 per cent after Trump's tweet in after hours trading, while Boeing rose 0.5 per cent.
Property giant Stockland is the frontrunner to acquire Marshall Baillieu's Minta Farm, the 286-hectare cropping property, which is soon to be rezoned as a massive $1 billion housing estate.
While the deal, which could be worth between $150 million and $200 million has to be finalised, The Australian Financial Review understands Stockland has trumped a bid by Shanghai's aggressive land buyer Dahua to snap up the property in Berwick in Melbourne's south east growth corridor.
Once rezoned to residential and business use under the draft Minta Farm Precinct Structure Plan, Minta Farm will effectively become a new Melbourne suburb able to accommodate up to 3000 dwellings and an employment precinct that could support about 10,000 jobs.
Stockland declined to comment. A well-placed market insider said Stockland had "gone hard" to acquire Minta Farm.
The sale of Minta Farm caps off a heady year for Melbourne's land market with both local and Asian-based developers highly active following a slowdown in the Melbourne high-rise apartment market.
It's also been a record year for Melbourne land sales with strong population growth and affordable lot prices relative to Sydney driving about 22,000 lots sold in the past year.
If the Minta Farm deal proceeds it will take Stockland's residential pipeline to almost 80,000 lots. Stockland's residential land business, the biggest in the country, currently has an end-of-project value of $18.8 billion.
At Stockland's AGM in October, managing director Mark Steinert said the company had continued to see "high demand" in Melbourne and Sydney for lots within its residential communities. Stockland settled a record 6135 lots in FY16 with operating profits up 38.8 per cent. It expects to settle a similar number in FY17.
Stockland shares are 1.3 per cent higher at $4.66.
And this not long in, the Italian government has approved a bailout of Monte dei Paschi di Siena at a late night cabinet meeting in Rome, led by prime minister Paolo Gentiloni.
The state rescue of the country's third largest bank, saddled by non-performing loans, became necessary after it failed to raise enough capital in the wake of European-wide stress tests published in July, the FT reports..
A last-ditch effort to gather funds in the last few days only yielded about €2.5bn, well short of the €5bn target required.
In the decree approved early on Friday, the Italian government also announced a compensation scheme for retail investors in junior debt who would be hit under EU rules on burden sharing, saying that they would be able to receive senior debt of the equivalent value in exchange for the subordinated bonds.
Seven West Media's lawyers, acting on behalf of two high-profile employees, have launched legal action against a website naming and linking them to the Tim Worner scandal.
Amber Harrison, a former executive assistant at the network who had an affair with Mr Worner, alleged the chief executive had sexual relations with four other staff members, an allegation that Mr Worner has denied.
Law firm Addisons sent letters to Fairfax Media on behalf of the four women named by Ms Harrison and denied they had ever been involved in sexual or inappropriate activities with Mr Worner. The letters also threatened legal action if the women's names were made public.
However, a website has published the names of two high-profile network stars and Seven's lawyers have launched defamation action. The matter will be heard in court on Friday morning.
On Thursday, Seven's board of directors responded to the scandal announcing an independent inquiry into the affair.
On Sunday evening, news broke of the 18-month affair between Mr Worner and Ms Harrison that began prior to the former's promotion to chief executive.The inquiry will seek to make sure there was no misuse of company funds and no breaches of law during work hours or at company functions.
Seven West shares are down 2.5 per cent at 78 cents.
The downturn in the Perth housing and construction market has claimed a high-profile victim with listed developer and builder Diploma Group collapsing owing creditors about $40 million.
The 40-year-old company, which is controlled by the Di Latte family, appointed Matthew Donnelly, David Hodgson and Andrew Hewitt of Grant Thornton as administrators on Thursday.
The appointments cover the ASX-listed Diploma Group and two of its subsidiaries, Diploma Construction (WA) and DGX Construction. Martin Jones and Andrew Smith of Ferrier Hodgson were appointed receivers on December 21.
Mr Donnelly told The Australian Financial Review Diploma Group and its subsidiaries owed about $40 million to creditors, which include sub-contractors, the Australian Tax Office, AssetInsure (owned by insurance giant Swiss Re) and a mezzanine lender.
"It would be easy to say all commercial builders in Perth have come under margin pressure and Diploma is no exception," said Mr Donnelly.
"They also had some troubled projects, which put pressure on the group," he added.
In September, Diploma Group reported that it was in dispute with a developer (TRG Properties) over a $40 million contract to build apartments at the Perry Lakes estate in Perth's Western Suburbs. The company also said at the time iit was in contractual disputes with a number of sub-contractors, which were the subject of legal proceedings.
In November, Diploma Group reported to the market that Diploma Construction (WA) was likely to report a $32.5 million loss including $20 million of write-downs.
In May, Diploma Group said it was reviewing its operations "in light of the current property and commercial construction markets it operates in, in Western Australia".
Shares in Diploma Group have been suspended since August 31 pending the release of its FY16 annual results.They last traded at 1¢ giving Diploma a market cap of $3 million. The company floated in December 2007, on the eve of the global financial crisis at 50¢ a share.
Perth's housing market, construction sector and wider economy has taken a hammering following the slowdown in the resources investment sector which has seen migration into WA slow down dramatically.
BRW richlister Nigel Satterley, who runs WA's biggest developer, Satterley Property Group, told The AFR recently that activity was down 20 per cent across the board in Perth on the back of population growth having fallen from 58,000 at the peak of the mining boom to just 12,000 a year.
Another listed developer, Finbar has also taken a hammering this year with sharp fall in profits due to a write-down in the value of some of its investment properties.
BusinessDay columnist Michael Pascoe highlights the most important bit from the government's recent budget update that people seem to have missed:
As the coalition sowed, it has reaped with this week's mid-year economic and fiscal outlook (MYEFO). The Treasurer is left spinning hard over $30 billion disappearing from May's revenue forecasts, just as his predecessors were when much the same thing happened to them. What goes around…
It's been amusing at times – Scott Morrison stressing that he never predicted a surplus in 2020-21, it was merely "a projection" – but unfortunately the welter of headlines concentrating on the increased deficit over the next few years and what the ratings agencies might or might not think about our AAA rating have missed the most important of the exercise: what's happened to growth.
It's the economy's growth that ends up solving or causing our problems. The fixation with the deficit being a few billion one way or the other is arguing about the fleas on the dog – it's economic growth that decides whether the dog is fed or not.
In May, ScoMo forecast real GDP would grow by an average of 2.5 per cent through this financial year and hit a solid 3 per cent in 2017-18. He then "projected" it would stay at that 3 per cent level. (The projection is that the economy will grow at the Goldilocks rate required to absorb all excess capacity over five years – and therefore should always be taken with a little salt.)
This week, the forecast for 2016-17 dropped to 2 per cent and 2017-18 was downgraded to 2.75 per cent. Beyond that, you're off with Goldilocks again.
So as far as Treasury and the Treasurer are game to forecast, we have an economy this year running below par and then just average next year, meaning the unemployment rate doesn't budge.
MYEFO's key message largely missed
Growth is substandard and the government's only response seems to be the idea that promising tax cuts will magically fix everything. Michael Pascoe comments.
Out of favour stem cell biotech company Mesoblast has won significant backing for its technology from major US drug group Mallinckrodt Pharmaceutical which has taken an option over two key products under development as well as snapping up a 5 per cent stake in the Australian company.
The US company has up to nine months to finalise development and commercialisation agreements covering two key products, for low back pain and for acute graft versus host disease which can occur following transplants.
Mesoblast has additional research trials for both products underway with the results expected to assist in potential commercialisation opportunities.
Along with the $29.6 million raised by placing shares with the US company at $1.47.61c a share if a deal is finalised this will free Mesoblast from the need for ongoing development and marketing spending on these companies, in return for an ongoing royalty from potential sales.
The shares are to be placed at a premium to its closing share price Thursday of $1.40.5c. Mesoblast shares rallied Friday on the news, trading late morning up 4.6 per cent at $1.47.
"The market sucks, biotech is getting creamed so for Mesoblast to do this deal now, giving up nothing just an optional right is a good deal," said Jason Kolbert, a US-based analyst with Maxim Group who is a long term follower of Mesoblast.
"It signifies third party validation for its technology platform, which is very, very important. Mallinckrodt has taken an option, a right of first refusal over these product. Plus [Mesoblast] has raised funds without a discount."
A heavy cash burn as the group has pursued an aggressive research and development program has pressured Mesoblast's share price over the past few years especially as earlier deals with other US drug companies such as Teva and Celgene have failed to live up to expectations.
Shaver Shop has emerged as the latest dud sharemarket float of 2016, warning investors that weak pre-Christmas sales will leave earnings short of the forecast included in its prospectus which was issued mid-year.
Friday morning, its shares slumped 12 per cent to 72¢. Its shares were issued at $1.05.
Its shares have fallen heavily over the past few weeks which the company told the ASX could have been due to an institutional investor in the company losing an investment mandate, forcing the sale of its holding in the company.
Shaver Shop operates the eponymous chain of around 100 stores across Australia and New Zealand selling "male and female grooming products", including electric shavers through to female hair removers.
It blamed weak trading recently in key gift-giving lines such as hair styling products for its woes.
The company raised $98 million through its sharemarket float with $18 million of that pocketed by the company's backers with the chief executive, Cameron Fox, taking $1.8 million.
Retailers are being hit hard as consumers are choosing not to splurge this Christmas.
While almost half of consumers reported "very low" levels of stress, spending across essential and nonessential items has fallen to its lowest seasonally adjusted levels since early 2015, a NAB consumer behaviour survey found.
"What seems to be happening is they're more relaxed, but that doesn't mean that they're going to spend more," NAB chief economist Alan Oster said.
"Reading into the Christmas period, we're softer than we thought it was going to be."
Overall, Australian consumers are the least stressed they have been since mid-2012, but lingering issues have prevented them from spending more than before.
"Consumers are still concerned about the fact their wage growth is not strong, and they're still basically saying 'I'm not going to spend a lot'," Mr Oster said.
Additionally, high consumer confidence typically does not reflect retail spending.
"Most measures of consumer sentiment are not well correlated with actual spend, that's a general story and this survey is showing exactly the same thing, except it's showing it much more explicitly."
The most anxious spenders are middle-aged single mothers, while this quarter's most confident spenders are self-employed single men over 50, particularly from rural areas.
Regardless of how much they are willing to spend, consumers aren't expected to put fewer presents under the tree, IBISWorld senior industry analyst Nick Tarrant said.
"We're seeing not necessarily that consumers buy less gifts this Christmas, but that they'll be more discerning over where they spend it and how much they spend," he said.
Mr Tarrant also anticipates decreased spending over the Christmas holiday as part of a wider trend, and he expects department stores to be hit hardest.
The ASX is wallowing in early trade on this final, shortened trading day before Christmas, with some last minute shopping going on in bank shares, while mining stocks are under pressure from a steep drop in the iron ore price overnight.
The benchmark top 200 index is up a handful of points despite a poor Wall St lead, and last fetched 5647. The big four lenders are all up by around 0.2 per cent, but BHP is off 1.2 per cent, Rio 0.3 per cent and Fortescue 2 per cent.
The big corporate news is Tatts rejecting a competing takeover bid from Macquarie & friends, preferring Tabcorp's approach. Tatts is down 3.3 per cent, Macquarie is off 0.4 per cent and Tabcorp is up 0.6 per cent.
Bluechips are a popular choice this festive season, and Telstra, Woolies and Wesfarmers are all higher by around 0.2 per cent. Global industrial names Amcor and Brambles are up around 0.8 per cent, and Ansell 1.2 per cent, perhaps as investors reckon a US dollar-earning business might be a good bet in 2017.
Listed property continues to regain some ground lost in its "Trump slump", with the sector 0.5 per cent higher today, led by 1.4 per cent gains in Goodman Group and Mirvac.
This is news from yesterday evening, but in case you missed it, the corporate watchdog has started legal action against Westpac and its subsidiary BT Funds Management for breaching the "best interests" obligation and providing financial advice when they were not permitted to do so.
BT rejected the interpretation, saying consumers would have known they were only getting general advice.
BT Financial Group chief executive, Brad Cooper, said this will be an important test case for the industry.
"More and more we are finding people want to have a natural and practical conversation without having to pay for comprehensive personal advice," he said through a statement.
"Super fund consolidation is in the best interests of many Australians and along with regulators and industry, we have built programs to inform and support customers to consolidate or roll over their superannuation."
ASIC has started legal action in the Federal Court's New South Wales registry alleging Westpac Securities Administration Limited [WSAL] and BT breached their duty during a telephone sales campaign targeting superannuation fund members.
Some pre-Christmas excitement!
Lotteries and wagering giant Tatts Group will reject a takeover offer from a Macquarie-led consortium and will retain its backing for Tabcorp's bid.
The Macquarie-led Pacific Consortium - which includes private equity firm KKR, Morgan Stanley's infrastructure wing North Haven Infrastructure Partners and local superannuation investor First State Super – pitched an offer for Tatts Group on December 14 worth $4.40 to $5 a share for Tatts.
This compares with Tabcorp's November offer that valued Tatts at $4.34 a share.
But the Pacific Consortium's plan was specifically aimed at getting Tatts' valuable lotteries business. The Consortium planned to float Tatts wagering business in a separate sharemarket vehicle, or sell it to a "strategic buyer".
The Consortium offered $3.40 cash for the lotteries business, including $3.105 in cash, plus a 20¢ special dividend and a 9.5¢ interim dividend.
It valued the wagering business at between $1 a share to $1.60 a share. But the upper end of that valuation was based on the synergies available if it was snapped up by a "strategic buyer" such as Tabcorp, whose multiple Macquarie used in its wagering business valuation.
Analysts had previously argued that the Tatts Group board would find it hard to recommend the Pacific Consortium's bid because of the uncertainty over the valuation of the wagering business.
Credit Suisse analyst Larry Gandler, who puts a valuation of just 55¢ a share on the wagering business, questioned the consortium's outlook for wagering earnings in an ultra competitive market.
"We cannot envision this business trading at 11.7x EBITDA and a 23 per cent premium to Tabcorp when we expect earnings will decline for the next two years," he said.
"It would also seem premature for the Tatts board to consider 60¢ per share in value from a 'strategic party' paying a premium for a spun-out wagering and gaming company," Mr Gandler said.
Ahead of the open, here are the overnight market highlights:
- SPI futures down 10 points or 0.2% to 5603
- AUD -0.3% to 72.19 US cents (overnight low 71.98)
- On Wall St, Dow -0.1%, S&P 500 -0.2%, Nasdaq -0.4%
- In New York, BHP -1.5%, Rio -1.8%
- In Europe, Stoxx 50 flat, FTSE +0.3%, CAC flat, DAX -0.1%
- Spot gold -0.2% to $US1129.86 an ounce
- Brent crude +1.2% to $US55.09 a barrel
- Iron ore -3.8% at $US76.15 a tonne
- Steaming coal -0.2% to $US86.75, metallurgical coal untraded at $US270.00
- LME aluminium -0.2% at $US1722 a tonne
- LME copper +0.1% to $US5519 a tonne
- 10-year bond yields: US 2.55%, Germany 0.25%, Australia 2.87%
There's nothing on the economic release agenda for today, but in corporate and broker news:
- Inghams Group is rated a new buy at UBS
- Alumina is downgraded to underperform at Credit Suisse
- Santos's share purchase plan offer is set to raise around $500m
The Australian dollar overnight dipped below US72¢ for the first time since May as the currency continues to come under pressure from a resurgent greenback and further weakness in the iron ore price.
The Aussie dropped as low as US71.98¢, extending the currency's losses for the year to around 1 per cent. It last fetched US72.15¢.
Iron ore fell 3.8 per cent to $US76.15/tonne on Thursday evening, as it continues its retreat from its December 12 high of $US83.58.
But much of the weakness in the Aussie can be slated to continuing support for the greenback, as traders bet on higher interest rates and stronger growth in the US thanks to stimulatory policies under president-elect Donald Trump.
Since the US election on November 8, the Australian currency has lost 7 per cent of its value against its American counterpart. The losses have been exacerbated by signals from the US Federal Reserve that it may hike rates faster than expected in 2017.
"The market still wants to own [US] dollars as it winds down into Christmas and the New Year period," NAB economist David de Garis said.
The Aussie has failed to find support in recent days despite RBA minutes from its policymakers' last meeting, which struck a relatively upbeat tone and revealed an unwillingness, in the eyes of veteran RBA watchers such as Westpac chief economist Bill Evans, to cut rates any further due to risks around an overextended housing market.
Traders are now pricing in more than even odds of a rate rise in Australia in 2017, although economists are wary of forecasting a tightening of monetary policy next year given the recent underperformance of the economy. Indeed, fixed income markets reflect a close to 10 per cent chance of a cut when the RBA's monetary policy setting committee next meets on February 2, suggesting conditions are expected to only improve markedly later next year.
Stock markets around the globe dipped and US equities posted their first back-to-back daily declines of the month overnight as the rally that has sent Wall Street shares to record highs since Donald Trump's election victory paused ahead of the Christmas holiday weekend.
US indexes have surged since the Nov. 8 election but were lower Thursday in light trading as investors took profits. The Dow, Nasdaq and S&P 500 have all risen more than 5 per cent in the six weeks since Trump's victory, with the Nasdaq and Dow both touching record highs this week.
Some investors believe recent gains may have made stocks too expensive, and that Congress may water down or prevent major infrastructure spending or tax cuts proposed by Trump.
"There are issues hanging over the market," said Donald Selkin, chief market strategist at Newbridge Securities in New York. "You need to digest these gains, and once he becomes president, we'll see what is actually going to get passed."
Billionaire investor Carl Icahn, tapped by Trump on Wednesday as a special adviser for regulatory issues, said in an interview on CNBC that he was concerned about the stock market in the short term following its recent surge.
The Dow Jones Industrial Average fell 0.1 per cent, to close at 19,919, the S&P 500 lost 0.2 per cent, to 2261 and the Nasdaq Composite dropped 24 points, or 0.4 per cent, to 5447.
The Dow recorded its first two-day decline since Nov. 4.
The US dollar was little changed against a basket of six major currencies, hovering below a 14-year high reached this week as modest buying emerged following a round of profit-taking. It was marginally higher at 103.08 but still below 103.65 it set on Tuesday, its highest since December 2002.
Traders brushed off mostly upbeat US economic data and held off further bullish dollar bets ahead of Christmas, analysts said.
"We have had a big rally and we are due for a breather," said Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments in Minneapolis.
European markets were also broadly lower, with the pan-European STOXX 600 index falling 0.2 per cent, closing lower for the second straight session after marking its highest level since Jan. 4.
Good morning and welcome to the Markets Live blog for Friday.
Your editor today is Patrick Commins.
Last trading day before Christmas! Remember that the ASX closes at 2:10 AEDT to give you some time to do that last bit of shopping.
This blog is not intended as investment advice.
Fairfax Media with wires.
1 new post(s) available. View post(s) Dismiss