Slides in health-care stocks as well as Wesfarmers are offsetting gains in miners and energy stocks to push the overall market into the red.
"We're seeing some of the morning momentum continuing to wane throughout the afternoon," said Gary Huxtable, client adviser at Atlantic Pacific Securities. "It appears some bears have awoken from their holiday hibernation."
Donald Trump in his much anticipated first pres conference since winning the election was scant on economic policy detail, but he did use the opportunity to slam pharmaceutical companies for high drug prices, sparking a sell-off in the sector on Wall Street which has worked its way through to the local market.
CSL is the biggest drag on the market today, falling 2.3 per cent, while Mayne Pharma is down 4.4 per cent. Wesfarmers has dropped 1.4 per cent.
"Much negativity has already been priced into the sector following the impending price collusion investigation, helping to diminish the negative impact on Mayne Pharma today," Huxtable said.
Regarding the further impact of Trump's press conference, Huxtable said the sharp sell-off in the US dollar had contributed to the outperformance within materials and energy stocks.
The world's largest fixed income manager says there's no sign yet of a so-called "great rotation" from bonds into stocks, even as the prospects of a US growth boom sparked a surge in equity markets and fears of higher inflation and interest rate hikes belted bond prices.
Greg Davis, the global head of fixed income at Vanguard which manages $US1.1 trillion of fixed income assets around the globe, says a further $US139 billion flowed into the low-cost behemoth's fixed income funds from January through to November 2016.
The inflows came as investors continued to withdraw money from higher cost active managers in favour of cheaper index trackers like Vanguard. Paradoxically, balanced funds have been forced to sell equities as they rise in value, to buy bonds in order to maintain their mandated asset mix.
"When you do have a big move in the equity market like we have seen post-election there is a natural rebalancing [into fixed income]," Greg told The Australian Financial Review.
The rise in popularity of "target date" funds, which adjust to more conservative asset allocations as the investor approaches retirement, is also creating constant demand for bonds.
"As you have an ageing society, more people are using these 'target date' funds more and they are accumulating wealth so there is more money going into fixed income. We expect that trend to continue."
Investors in bonds have experienced solid returns for over three decades as global interest rates have declined to near zero levels. But this past year has been more challenging. The widely tracked US 10-year bond rate spiked from 1.4 per cent in July to 2.6 per cent by mid-December one of its sharpest rises ever (bond yields move in opposite direction to prices).
While the local resources-heavy market shrugs off Donald Trump's press conference, Japan's more currency-sensitive Nikkei has dropped to a near two-week low.
The President-elect failed to provide clarity on future fiscal policies in his highly-awaited press briefing, sparking a sell-off in the greenback against major currencies including the yen and the Aussie.
The Nikkei is down 0.9 per cent at 19,192, after hitting as low as 19,095.39 earlier, the lowest level since December 30. Other bourses in the region including the Shanghai Composite and the Hang Seng in Hong Kong are trading flat.
"He failed to deliver what the market has wanted to hear for all these weeks," said Hikaru Sato, a senior technical analyst at Daiwa Securities. "Such disappointment has triggered profit-taking."
Trump's news conference since the November 8 election contained no details on tax cuts and infrastructure spending, two factors that had fuelled the five-week rally in stocks and a selloff in global bond markets.
The Nikkei has gained 18 per cent since Trump's election.
The dollar sank to as low as 114.245 yen overnight, its lowest level since the election and last stood at 114.99, down 0.4 per cent on the day. A strong yen environment hurt sentiment in the overall market.
Oil prices are hanging onto strong overnight gains, cheered by emerging output cuts from OPEC and other producers.
Brent crude, the international benchmark for oil prices, is trading less than 0.1 per cent lower at $US55.06 a barrel, after spiking 2.5 per cent overnight.
A crude oil inventory report published by the US Energy Information Administration late on Wednesday implied ongoing oversupply as inventories unexpectedly rose by 4.1 million barrels to 483.11 million barrel.
However, record US refinery runs of 17.1 million barrels per day (bpd), up 418,000 bpd on the week, indicated strong demand, preventing bigger price falls.
"EIA data showed US refineries increased the amount of crude they processed, pushing the utilisation rate to the highest since September. This saw inventories rise ... much more than the market expected," ANZ said.
Outside the United States, emerging detail of Saudi supply cuts as parts of efforts by the Organisation of the Petroleum Exporting Countries (OPEC) and other producers like Russia to curb the global supply glut have started to emerge.
Despite some February supply reductions to China, India and Malaysia, top crude exporter Saudi Arabia is likely to focus its cuts on Europe and the US, shielding its biggest customers in Asia.
BMI Research said that overall "compliance to the OPEC/non-OPEC oil production cut appears to be positive... (and that) we calculate compliance with production cuts at around 73 per cent."
Analysts noted that one aspect of the co-ordinated production cut which has been overlooked is that under the deal, producers have committed themselves to reducing output, not necessarily exports.
"The GCC countries (and Iraq) that have reportedly enacted the bulk of the production cuts are currently in the lowest domestic demand period of the year and have significant flexibility to reduce production but maintain exports," BMI said.
As China's yuan swings back into the global spotlight, it might seem like an odd time for authorities in Beijing to loosen their grip on the tightly-managed currency.
Yet for a growing number of analysts and investors, the prospect of a freely floating yuan - a Chinese exchange rate wholly determined by market forces - is no longer a distant possibility.
Advocates include a government-backed researcher and a former central bank adviser, while bond-market powerhouse Pimco says the chances of a free float are rising.
The risks of unshackling China's currency are hard to ignore. It would almost certainly lead to a knee-jerk tumble, exacerbating capital outflows and sending shockwaves through global markets.
Investors around the world took notice of the yuan's elevated volatility last week, even as it paled in comparison to everyday swings in many developing-nation peers.
Free-float proponents say the long-term benefits for China outweigh the costs. A quick transition to a market-determined exchange rate would allow the country to preserve its foreign-currency reserves, re-assert control over domestic monetary policy and combat criticism from US President-elect Donald Trump that Communist Party apparatchiks are manipulating the currency.
"At the end of the day, what you have to accept is the value of the currency as it is right now isn't appropriate," said Luke Spajic, the head of emerging Asia portfolio management at Pimco, which is calling for a mid- to high-single digit yuan depreciation over the next year. "Things need to change."
Rising inequality and social polarisation are set to shape world developments for the next decade after contributing to Britain's decision to leave the European Union and the ballot-box success of US president-elect Donald Trump, the World Economic Forum says.
Climate change was underlined as the third major global trend in the WEF's annual assessment of global risks, published on Wednesday at an event at Bloomberg's European headquarters in London. It said world leaders must work together to avoid "further hardship and volatility in the coming decade".
"There's a wide array of potential threats; growing social and political turmoil, potential business interruptions which could stem from inter-state conflict, from social instability, terrorist attacks," John Drzik, president of global risk at Marsh USA, which contributed to the study, said in an interview.
"This whole social and political context creates the potential for disruption."
A weak economic recovery following the global financial crisis has widened the gap between rich and poor, fuelling a sense of "economic malaise" that's led to the rise of populist parties, according to the report.
While Brexit and Trump were the highest-profile signs of an anti-establishment backlash in Western democracies, the evidence extends far wider, with support growing for far-right parties in Germany, France, Italy and the Netherlands among others.
The sell-off in emerging market currencies picked up pace overnight, with the Mexican peso hitting a fresh historic low, after US President-elect Donald Trump warned that the days of companies closing their US plants and shifting operations offshore were over.
Trump repeated his campaign promise to impose a heavy border tax on companies that shift jobs to low-cost countries.
"You think you are going to move your plant...move it to Mexico. It's not going to happen", Trump said. "You are going to pay a very large border tax...There will be a major border tax on these companies that are leaving and getting away with murder."
Trump also said that he plans to ask US taxpayers to initially fund the construction of a wall along the southern US border, but that Mexico would ultimately reimburse the cost.
His comments sent the Mexican peso tumbling to a historic low of just under 22 to the US dollar, and sparked a sell-off in the Mexican share market. The Mexican central bank spent $US2 billion last week to prop up the peso, which fell almost 20 per cent against the US dollar last year, making it the world's worst-performing major currency.
Meanwhile, worries about Turkey's economic outlook flared on Wednesday, sending the Turkish lira down by up to 4 per cent against the US dollar to a new record low, following the release of figures showing Turkey's current account deficit worsened in November. The lira has now fallen by more than 9 per cent against the US dollar since the beginning of the year.
Analysts argue that with confidence in the Turkish economy fast ebbing, the only thing that could brake the lira's fall would be a rise in Turkish interest rates. Turkey's central bank chief, Murat Cetinkaya, raised interest rates for the first time in almost three years last November in response to the currency's weakness.
Time for a midday recap: local shares are trading slightly higher, propped up by gains in industrials and energy stocks and as investors shrug off an underwhelming press conference by US President-elect Donald Trump, which has moved currencies more than stocks.
Miners, which led an early stronger rise in the ASX, have lost some steam, but are still mostly higher, led by a 1.3 per cent rise in BHP.
Qantas is one of the biggest gainers among the top 200, rising more than 3 per cent after the greenback tumbled overnight, reducing the airline's fuel costs. The Aussie is holding onto its gains, trading around $US75.5¢.
Energy shares are being boosted by higher oil prices, with Santos up 1.1 per cent and Woodside 0.9 per cent higher. Oil jumped more than 2.5 per cent overnight after the US dollar dropped and on news that Saudi Arabia trimmed supplies to some Asian buyers.
Gold stocks remain on the ascent, with the All Ords gold index hitting an eight-week high as the precious metal's prices races to $US1200 an ounce, buoyed by softness in the greenback.
Among the weaker performers is Wesfarmers, down 0.7 per cent, while AGL Energy has fallen 0.5 per cent and utilities owner APA Group is down 0.7 per cent.
"For now, the trend remains positive. But we have had such a strong run, it wouldn't be surprising if there was a pullback round the corner," Rivkin Securities' local investment analyst William O'Loughlin said.
Trump initially sent stocks lower during the press conference as he slammed the pharmaceutical industry for high drug prices, but Wall Street quickly recovered to end slightly higher.
Locally, CSL and Mayne Pharma, both exporters into the US, are among the day's losers, falling as much as 1.6 per cent and 3.4 per cent respectively.
But the overall investor reaction was a "perfect example of the current, perhaps over-exuberant momentum in the market", said Chris Conway, Head of Research at Australian Stock Report.
The fact that Trump remained short on detail around mooted key economic policies such as tax reform and infrastructure spending didn't bother share investors too much, said Conway.
"If Trump failing to address some issues most people believe he won't be able to deliver on anyway is the worst of it, then we are absolutely in a vacuum of bad news which markets can continue to rally into."
Given the recent strong moves in the local share market, Conway has also upgraded his already bullish outlook, predicting the ASX will soon hit 6000.
"I think the market can trade to this level in the next few weeks and then the prospect of such a key level, the index being a touch overbought, and the spectre of reporting season will see – at the very least – some sideways consolidation or a pullback," he said.
Central banks have been copping a lot of bad press lately, so here's someone willing to stand up in defence of ultra-low rates:
The critics of negative interest rates are "ignorant" in their analysis of the unprecedented measures forced on central banks across the world over the past years, according to US economist Kenneth Rogoff.
It's impossible to analyse the effects of the "early experiment" with negative rates because central banks were left to themselves amid a global fiscal retrenchment, Rogoff, a professor at Harvard University, said in Oslo.
"I find a lot of what is written by representatives of the financial sector, they're very hostile to negative rates, to be kind of ignorant," he said ahead of a tour of Scandinavia, where sub-zero rates first saw the light of day. "They're talking about their short-term profits, and their short-term interest, but it's a long-run policy if you do the homework, if you lay the groundwork, it would certainly work very well."
Policy makers from Stockholm to Zurich and Tokyo have come under fire for cutting rates below zero as they grappled with near non-existant inflation and anemic growth in the wake of the global financial crisis. Critics at mainly commercial banks have argued they are endangering financial stability by stoking asset bubbles and consumer borrowing, reducing the ability of lenders to make money and putting future pensions at risk.
According to Rogoff, it's impossible to draw any conclusions because the efforts to restore growth and inflation have been one-sided. But done "correctly" it can restore "complete control over inflation expectations," he said. "To do it correctly, you have to make legal, tax, institutional changes," he said. "And second, you need to be able to do whatever it takes."
Unlike current efforts, a successful implementation of negative rate policies would "involve the whole government."
Shares in troubled Bellamy's continue to lose ground on broker downgrades after the baby formula supplier replaced chief executive Laura McBain and warned of lower annual earnings.
Bellamy's shares have slid another 14 per cent to $4.60, following yesterday's 20 per cent drop after the shares resumed trading following a four-week suspension.
Bellamy's yesterday revealed that lower-than-expected sales in China will have a significant impact on its earnings, with annual earnings before tax and interest expected to be in the range of $22 million to $26 million, down sharply from $54.3 million a year earlier.
OrdMinnett is among the brokers downgrading the stock after its announcement, saying Bellamy's has changed from structural growth to significant turnaround.
"With significant finished goods inventory on hand, flat sales for three halves expected, lower long-term gross margins than originally forecast, a weaker balance sheet and a channel strategy in need of overhaul, we see the risk profile with BAL as too great to justify investment and as such downgrade to 'sell'," said OrdMinnett head of research Nicholas McGarrigle.
"We see the current financial year 2017 PE multiple of 25x as unreasonably high."
​The broker also axed its price target from $7.26 to $3.72.
Goldman Sachs, meanwhile, put its rating (neutral) and price target ($5.35) under review, saying it needs more detail from the company on its ability to raise debt in the event of a further slowdown in revenues.
"While we do not believe that the brand is permanently impaired, we do hold concerns on whether BAL will be able to regain its lost market share, and hence whether it will be able to return to an appropriate level of growth to meet its guidance for shortfall payments and/or avoid further inventory build as well as allay concerns of an equity raising in the near future."
Overly positive or realistic? Confidence in the residential and commercial property markets particularly around rising prices has hit a two-year high despite a complete reversal in expectations for the future of interest rates.
The latest property industry survey compiled by ANZ and the Property Council of Australia shows confidence is stronger across all states except Western Australia, which is still reeling from a wind-down in the resources sector.
"If you were looking for signs that property was peaking you won't find that here," ANZ chief economist Richard Yetsenga said. "Much of the improved outlook for the property market came from the residential segment."
More than 1500 property professionals across the sector had positive expectations on everything from forward work schedules, staffing levels and price growth on housing, retirement property, office towers, shopping malls and hotels. The index rose 2 points to 130 for the quarter, where a score of 100 is considered neutral.
While dwelling values were already up 15.5 per cent in Sydney and 13.7 per cent in Melbourne in 2016, the industry survey shows those expectations on growth have risen further, especially in NSW where the capital growth expectations index jumped by a third in just one quarter.
While the confidence is up, expectations about rising interest rates have changed dramatically. The 12-month forward interest rate expectations index for NSW and Australia were both sitting at less than zero last quarter but the latest survey reveals they have shot up into positive territory to over 10 index points.
The greenback may be faltering, but on the sharemarket the bulls remain firmly in charge, pushing the benchmark index close to 5800 points in early trade.
The ASX has added 0.45 per cent to 5797.3, on track for a seventh session of gains out of the eight it's traded so far this year.
Gains are once again led by resources stocks, with the materials sector rallying 1.1 per cent and energy up 0.75 per cent after major commodity prices rose overnight.
BHP is providing the biggest tailwind for the benchmark index, up 1.5 per cent, followed by Telstra's 0.8 per cent rise.
The big banks are mixed, with CBA and Westpac up 0.3 per cent, NAB gaining 0.25 per cent, while ANZ has slipped 0.1 per cent and Macquarie is down 0.5 per cent.
Bellamy's continues to slide since coming out of a trading halt yesterday, plunging another 10.3 per cent.
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2017 was never going to be boring, IG's Gary Burton says:
Obama having given his farewell speech, the rhetoric of Donald Trump via Twitter and news outlets now becomes very real. Trump in his first press conference spent some of his time defending himself against "nonsense" intelligence reports and stated he would not divest himself of his business holdings.
He also reaffirmed a border tax on US companies that shift production overseas, sending his message to car companies saw the stocks of auto makers mixed in US trading, Ford fell 2% while General Motors rallied 1.1% in overnight trade.
Trump openly criticised the pharmaceutical and biotech sector sending the healthcare index down 2.6% in early trade putting a lid on recent gains in the Nasdaq. Traders were expecting the President elect would be good for the industry with many stocks making strong gains since November.
The coming reporting season only days away will provide many companies an opportunity to state not only there trading results but also commentary around future business. At risk is the Pacific trade pact involving Australia and further risk of a trade war around protectionism.
Healthcare in Australia has been one of the better performing sectors up 2.6% in new year trade. Companies like Mayne Pharma with a portfolio of generic drugs recently purchased from Teva/Allergran is one Australian company with a strong US exposure that will be closely watched in the coming months.
Closely monitored today will be Bellamy's after surprising the market yesterday coming out of suspension two days early and falling a further $2.00 to open at $3.84 a dramatic fall from grace as the stock had traded over $12 mid 2016.
We are expecting a strong open in resources with across the board gains in metals and mainly flat overnight. Gold shines again in Australian resources after making good gains overnight.
The Australian dollar spiked higher overnight as the greenback swooned following Donald Trump's first press conference following the US election, prompting ANZ to predict the local currency may have enough upward momentum to carry it to US78¢.
It didn't hurt the currency that iron ore continued to edge higher too, retaking the $US80 a tonne level.
Still the focus was on Trump who disappointed investors by not specifically highlighting his pro-growth agenda during his first news conference since winning the November 8 election.
With no fresh rationale for buying the US dollar, investors sold.
"The AUD looks set to continue to test the topside after surging ahead overnight," ANZ economists wrote. "We expect that the AUD could re-test 0.78 given it has lagged fundamentals." The Aussie last traded above US78¢ in April.
Westpac said it sees US75.25¢ as the next target for the Aussie.
The Australian dollar shot as high as US74.72¢ overnight, during Mr Trump's news conference, reaching its highest since mid December. It's currently trading at US74.45¢.
It was a rougher session for emerging market currencies in particular Turkey's lira and Mexico's peso, both fell to fresh record lows against the greenback.
US stocks ended higher after a choppy day as energy and technology gains countered a drop in healthcare stocks after President-elect Donald Trump said pharmaceutical companies were "getting away with murder" by charging high prices.
The Nasdaq ended the day with another record closing high after falling as much as 0.5 per cent following Trump's first formal news conference since the November 8 election.
"We're the largest buyer of drugs in the world and yet we don't bid properly and we're going to save billions of dollars," Trump said.
The S&P 500 healthcare index ended the session down 1 per cent after falling as much as 1.9 percent earlier in the day and the Nasdaq biotechnology index sank 3 per cent, ending a six-day winning streak for both indexes.
"When somebody that high profile says something that negative, people do not want to invest in it. They view the sector as uninvestible, and withdraw their money," Brad Loncar, manager of the Loncar Cancer Immunotherapy ETF.
However, the sector's pain eased as the session wore on as money managers noted that Trump gave no new specific details on his healthcare proposals, according to Michael Scanlon, portfolio manager at Manulife Asset Management in Boston.
He cited the beginning of fourth-quarter earnings season on Friday and Trump's inauguration as President on January 20 as reasons for investor caution.
"Portfolio managers have every reason in the world to sit on their hands," said Scanlon. "You put those two factors together and I don't think you're going to see much movement in the market until maybe we get some fireworks on Friday with earnings."
The Dow Jones Industrial Average closed up 98.75 points, or 0.5 per cent, to 19,954.28, the S&P 500 gained 6.42 points, or 0.28 percent, to 2,275.32 and the Nasdaq Composite added 11.83 points, or 0.21 percent, to 5,563.65.
Here's the overview of how major global markets performed overnight:
- SPI futures up 17 points or 0.3% to 5746
- AUD +1% to 74.44 US cents (overnight high 74.72)
- On Wall St, Dow +0.5%, S&P 500 +0.3%, Nasdaq +0.2%
- In New York, BHP +2.1%, Rio +1.7%
- In Europe, Stoxx 50 flat, FTSE +0.2%, CAC flat, DAX +0.5%
- Spot gold flat at $US1188.88 an ounce
- Brent crude +3.2% to $US55.37 a barrel
- Iron ore +1.2% to $US80.41 a tonne
- Coking coal -3.3% to $US206/tonne; thermal coal -2.6% to $US83.5
- LME aluminium +0.5% to $US1758 a tonne
- LME copper -0.8% to $US5714 a tonne
- 10-year bond yield: US 2.37%; Germany 0.32%; Australia 2.73%
US Treasuries rallied across the board overnight, while the greenback fell to one-month lows after President-elect Donald Trump, in a widely-awaited press briefing, failed to provide clarity on future fiscal policies.
"The market was disappointed by Trump's lack of specificity and details on his fiscal spending plans," said Kathy Lien, managing director at BK Asset Management.
US stocks also weakened initially after Trump took aim at the pharmaceutical industry for charging high prices, but eventually ended the session higher. He said pharmaceutical companies are "getting away with murder", vowing to bring prices for drugs down.
Treasuries have since held gains despite US stocks recovering from Trump-inspired losses.
In his first press briefing as US president-elect, Trump presided over a wide-ranging session that touched on topics such as allegations of Russia spying, Mexico, his business interests, and drug pricing.
But the briefing, which lasted longer than expected, did not break new ground, analysts said. It contained no details on tax cuts and infrastructure spending, which were two factors that ignited a five-week global bond market selloff after his surprise presidential win.
"We were looking for specific details on tax reforms and other pro-growth ideas that people have been pricing in since the election," said Priya Misra, head of global rate strategy at TD Securities. "The big Trump trade is on pause, stuck at this 'show-me-the proof' type of level."
US Treasuries rallied after a $US20 billion 10-year US note auction drew the strongest demand since June, giving renewed impetus to traders who've been abandoning trades amassed in the wake of Trump's election victory.
"There was so much demand, either from overseas who are attracted by the weaker dollar today, or short-covering from domestic accounts," said Jim Vogel, head of interest-rate strategy at FTN Financial. "There is some near-term exposure given the breadth of the Trump trade."
Trump blasts CNN in fiery press conference
At his first press conference, Trump rebuffed the latest report that Russia has compromising information on him, and engaged in a tense stand-off with CNN.
Good morning and welcome to the Markets Live blog for Thursday.
Your editor today is Jens Meyer - please send any tips, suggestions, feedback, jokes, criticism, praise to jmeyer@fairfaxmedia.com.au
This blog is not intended as investment advice.
Fairfax Media with wires.
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