That's all for today - thanks for reading this blog and posting your comments.
We'll be back tomorrow from 9am.
Have a good evening.
Shares have closed slightly higher, propped up by massive gains in CSL and Bega Cheese.
The S&P/ASX 200 index managed to salvage a 0.2 per cent gain, ending at 5692.2, but that came courtesy of a 12.5 per cent rally in CSL, which on its own contributed 21 points to the index.
The blood products heavyweight stunned investors with a profit upgrade due to stronger than expected sales, driving the healthcare index 6.5 per cent higher for the day.
Meanwhile, Bega Cheese jumped 15.2 per cent as it fattened its bottom line by buying Vegemite and a host of other products from Kraft for $460 million.
Shares in troubled infant milk formula group Bellamy's Australia tumbled 2.5 per cent to $3.93, finishing below the $4 mark for the first time since mid-2015, as directors ratcheted up their criticism of dissident shareholders led by Kathmandu founder Jan Cameron who are seeking board control, as the company pursues plans aimed at reviving its fortunes.
But aside from sporadic company news, investors failed to get excited about much else. There was a broad selloff in the big banks, except for Commonwealth Bank of Australia, and the strong US dollar weighed on gold stocks.
"There's definitely a feeling that valuations have become overstretched given the lack of fundamental shifts we've witnessed over the last couple of months," said Gary Huxtable, client adviser at Atlantic Pacific Securities.
"Narratives can only carry valuations so far. And with the impending inauguration of Donald Trump a potential catalyst to greatly alter the reflation trade narrative, investors are continuing to lock in recent profits," he said.
UBS and HSBC both warned of moving 1000 jobs out of London due to Brexit, while Goldman Sachs is also reportedly ready to cut staff.
UBS chairman Axel Weber said that about 1000 of the Swiss bank's 5000 employees in London could be affected by Brexit, while HSBC chief executive Stuart Gulliver said his bank will relocate staff responsible for generating around a fifth of its UK-based trading revenue to Paris.
Germany's Handelsblatt newspaper also reported Goldman Sachs was considering halving its London workforce to 3000 and moving key operations to New York and continental Europe, particularly Frankfurt, where it could move up to 1000 staff.
A Goldman Sachs spokeswoman in Frankfurt said the bank does not recognise the numbers in the Handelsblatt report and that it has yet to make a decision on the matter.
Leading financial firms warned for months before Britain's June referendum on European Union membership that they would move jobs out of the country if there was a vote to leave but have set out few details since on how many will go or where to.
"We will move in about two years time when Brexit becomes effective," HSBC's Gulliver told Reuters at the annual meeting of the World Economic Forum.
And in another potentially damaging blow to London's status as Europe's main financial centre, UBS's Weber told the BBC in Davos that 1000 staff working in businesses that would be hit by Britain losing its 'passport' to sell financial services in Europe would be affected.
Goldman staff moving to Frankfurt would include traders and managers responsible for regulation and compliance, financial sources told Handelsblatt. The bank is setting up a new subsidiary in Frankfurt to bring European operations together.
Back-office personnel would move to Warsaw and investment bankers who advise French and Spanish companies would move to those countries, Handelsblatt reported, while trading staff who develop new products would move to New York.
An assumption of ever-lasting favourable conditions when picking stocks would raise alarm bells for fund managers, but for some reason an ever-booming property market doesn't attract quite the same concern.
Using its stock picking techniques, Auscap Asset Management has determined the downside risks involved in property are too great to invest, especially when correlated over time with household income.
Australian residential property prices have experienced annual growth of 7.4 per cent and have not been exposed to a broad decline since 1991, prompting a view by many that buying houses is a relatively low-risk prospect.
"The inference is that past returns tell us something about future returns," Auscap Long Short Australian Equities Fund principals Tim Carleton and Matthew Parker said. "This extrapolation bias carries considerable risk."
Usually, house prices rise in line with household income; when people earn more, they tend to bid up the prices of houses.
But Auscap says while household income has levelled off (now at 3.7 per cent per annum), property prices have continued to rise, increasing the downside risk considerably.
"Prices have risen to reflect the favourable macroeconomic factors," the fund managers said. "But like a stock that is pricing in the continuance of favourable conditions, this most likely means that the downside risks associated with investing in property are elevated."
On top of the fact income isn't growing anywhere near the rate of property prices, the amount of debt households are taking on to service bigger and bigger loans makes the prospect of stable market growth riskier.
Infrastructure and equities are tipped to experience strong growth in 2017 after propelling the average balanced super fund to a 7.7 per cent gain in the 12 months to December.
Hostplus and Catholic Super each recorded a 10.1 per cent gain to secure bragging rights as the top ranked balanced super funds in 2016.
Hostplus chief investment officer Sam Sicilia predicted low interest rates and demand for income generating assets from retirees would continue to drive strong growth in equity and infrastructure markets over the next 12 months.
"The only place you are getting dividends is from the equity market," Sicilia said. "The weight of people behind the equity market means it will keep doing what it's doing. I can't see how that is going to change for the foreseeable future, until interest rates get to 5, 6 or 7 per cent."
"I can't see any reason to change the course of the ship," he added.
Last year's average return was considerably higher than the average gain of 5.7 per cent recorded in 2015. The result means the average balanced vehicle has posted an annualised gain of 8.2 per cent since July 1992, easily exceeding funds' internal targets.
Everyone knows Vegemite and cheese go well together, but Bega Cheese's $460 million acquisition of Australia's most iconic brand has surprised investors and caught short-sellers on the hop, the AFR's Michael Smith writes:
The 16 per cent jump in Bega's share price was surprising for a company diversifying out of its safety zone of dairy and may have to raise capital to fund a major acquisition.
It is a bold move by Bega executive chairman Barry Irvin but one playing well with investors as well as the politicians applauding the return of an Australian icon to local ownership; even though the deal is unlikely to change much in terms of job creation.
Vegemite is the first Australian iconic consumer brand to be brought back by a local company in decades, after a wave of acquisitions by global multinationals which gobbled up the likes of Foster's, Arnott's, Uncle Toby's and Aeroplane Jelly.
The deal is good timing for Bega because it needs to diversify away from its core dairy operations, which have limited growth opportunities. Big multinationals are also looking to scale back local manufacturing operations and focus on global brands, which means they are willing sellers at the moment.
Bega's stock has had a bumpy ride since October, after becoming caught up in the negative sentiment surrounding companies exposed to the China market.
It is believed about 5 per cent of Bega's stock was shorted. Bega's shares lost 40 per cent of their value between October 24 and December 20, after its partnership to sell infant formula and nutritional powder with vitamin maker Blackmores failed to meet sales forecasts. Since Christmas, Bega shares have improved, but it was the Vegemite deal which gave them the biggest boost.
Shares are currently up 16.3 per cent at $5.21.
Some economist reactions to today's employment numbers:
Ben Jarman, JPMorgan:
While not showing any dramatic movements through time, the fact that the unemployment rate has moved up from the recent lows and is unchanged over the past six to 12 months does break the improving trend that was in play from late 2014 to late 2015. The participation rate is well down over the same period, so the change in trend looks quite fundamental. It also is a departure from the narrative embedded in the RBA's forecasts, which is that excess capacity will be worked off over time, pushing the jobless rate lower and facilitating a gradual pick-up in inflation. A stalling labour market recovery similarly lends weight to concerns that domestic demand is losing momentum, as flagged in the business surveys and in recent consumption data.
Michael Workman, CBA:
The trend towards more part-time jobs looks be one of the big issues that needs to change if wages and household income growth is to improve from current modest rates. The sectors adding the jobs have a higher proportion of part-time and casual work. The sectors losing jobs over the past year tend to have more full-time positions. While the shift to part-time work may suit some people, the surveys indicate that the majority of the workforce in part-time work would like to have a full-time position.
Paul Dales, Capital Economics:
The bigger picture is that the labour market still looks fragile. The level of employment is only 0.8% higher than a year ago. And within that, the number of full-time jobs is 0.4% lower than a year earlier while the number of part-time jobs is 3.4% higher. What's more, due to a 28,200 increase in the labour force, the rise in the unemployment rate from 5.7% in November to 5.8% leaves it at the same level as in February 2016. So on that metric, there was hardly any progress at all last year.
Annette Beacher, TD Securities:
Hours worked are being driven by part-time employment, so it is difficult to construct a case for a rapid pickup in wages and overall inflation. Our call for a higher cash rate by year end is driven by household debt and financial stability risks.
Rahul Bajoria, Barclays:
Forward-looking indicators of the labour market weakened somewhat in December, suggesting some headwinds in H1 17. The average jobs hours remains rangebound, rising slightly to 34.8 hours in December, from 34.7 hours in November. We think these indicators point to the resilience of Australia's job market going into 2017, and lower job advertisements, we believe Australia will continue to see modest jobs gain in H1 17, amid rising labour force participation rate. Unless there is significant AUD appreciation, we think the central bank's bias will be to keep rates unchanged for some time. We expect the RBA to stay on hold throughout 2017.
Jo Masters, ANZ:
Today's labour force data is a mixed bag, with reasonable jobs growth (including in full-time jobs) but another tick higher in the unemployment rate, to 5.8%. There has clearly been a slowdown of momentum in the labour market, although the unemployment rate remains around 53⁄4% and we continue to look for the unemployment rate to slowly trend lower.
Daniel Blake, Morgan Stanley:
Unemployment is a lagging indicator - not just of GDP growth, but we've also noted that it tends to rise after and during periods of full-time employment declines. In contrast to consensus/official forecasts of a gradual decline, we expect headline unemployment to increase further to 6.4% over 2017 on the back of a slowing housing cycle. In particular, we see record construction industry employment of 1.05m (9% of the labour force) falling alongside our forecast for a sharp slowdown in apartment development activity. Today's mixed employment release adds to the case for the RBA to downgrade its 2016/17 growth forecasts at its February 7 meeting, we continue to forecast a final cut from the RBA in 3Q17.
Chinese steel and iron ore futures are down for a second session as demand for the commodities turned tepid ahead of the Lunar New Year holiday late next week.
Iron ore dropped from a three-year high reached on Wednesday and traders say that could pull down bids for physical cargoes in the spot market as restocking appetite wanes.
The most-active iron ore on the Dalian Commodity Exchange was down 1.6 per cent at 632 yuan ($US92) a tonne, after peaking at 666 yuan in the prior session. Rebar on the Shanghai Futures Exchange eased 1.2 per cent to 3249 yuan per tonne, slipping further from Monday's one-month peak of 3418 yuan.
China's renewed campaign to cut excess capacity, targeting producers of substandard steel, has fuelled another rally in steel prices this year after sharp gains in 2016. That has pulled iron ore prices higher, even outpacing steel.
"We didn't feel the excitement of the market when it went up sharply this week," said a Shanghai-based iron ore trader, citing few spot deals with most mills having replenished stockpiles ahead of the week-long Spring Festival break that starts on Jan. 27.
Iron ore inventory at China's ports stood at 118.15 million tonnes on January 13, the most since 2004, according to data tracked by SteelHome.
"I think people were a little bit too optimistic about steel demand. From what I heard in the Tangshan steel market, even though they were quoting higher prices, trading activity was not so great and somebody was talking about how difficult it still was to sell steel products," the trader said.
The rapid spike in steel and iron ore futures this week suggested speculative investors took advantage of upbeat sentiment for the sector to raise bets in these commodities as they did last year. China's exchanges later hiked trading fees to tame the wild price swings.
Iron ore for delivery to China's Qingdao port rose 0.6 per cent to $US82.05 a tonne last night, but down from Monday's two-year high of $83.65.
Rio Tinto's Boyne Island aluminium smelter is slashing production worth more than $100 million and up to 30 jobs as Queensland's soaring power prices make the plant uncompetitive.
The 545,000 tonne capacity smelter on Queensland's central north coast is the third smelter to fall victim to Australia's dysfunctional energy market in 12 months after Rio's Bell Bay Aluminium and Alcoa's Portland Aluminium were hit by last year's Tasmanian power crisis and western Victorian blackout.
Rio said it had been forced to shed 80 megawatts of power because spot electricity prices had surged as high as $12,000-$14,000MWh during Queensland's heatwave last weekend. It estimated the exercise would cost 45,000 tonnes of production.
That amounts to lost revenue of about $108 million at the current $US1805 a tonne London Metal Exchange price, a loss Rio is being forced to partly recoup through job cuts. The number of jobs to go is yet to be determined but could be as many as 30 of Boyne Smelters 1000-strong workforce.
The company fears the situation could deteriorate further this weekend as temperatures in Queensland are again expected to soar and the Australian Energy Markets Operator forecasts more record electricity demand.
It has long been suspected but never proven. Now Liaoning Province, in the rust belt of northern China, has admitted to faking its economic growth data. The fabrication occurred between 2011 and 2014, the provincial Governor Chen Qiufa told a meeting of the local legislature.
But as is often the case in China, the Communist Party did not say by how much the data had been over-stated, although it said fiscal revenue was inflated by as much as 20 per cent in some years.
More tellingly there has been no pledge to restate the numbers for that four-year period in either provincial or national accounts.
The revelation will give further voice to the China bears, even though Liaoning was considered something of a renegade province which has been hit by major corruption and vote buying scandals in recent months.
But the timing could not be worse given China's full year GDP numbers will be released on Friday.
These are set to be equally questionable, as in each of the first three quarters China's economy grew at exactly 6.7 per cent.
Here's more by AFR China correspondent Angus Grigg
Carsales chief executive Greg Roebuck is retiring from the online car classifieds company he co-founded two decades ago after transforming it from a loss-making start-up into an ASX 100 company.
The company's chief operating officer Cameron McIntyre, a nine-year Carsales veteran, will take over as chief executive on March 17.
Chairman Jeffrey Browne said Roebuck transformed the company into a business with a market capitalisation of $2.7 billion. He said Roebuck, who co-founded carsales.com in 1997, is leaving the company in a strong position.
Shares have dropped 2.2 per cent to $10.98, falling as much as 4.5 per cent in early trade.
When China introduced its game-changing 276-day coal policy which lit a fire under prices in 2016, Tribeca fund managers Ben Cleary and Craig Evans were on a plane 48 hours later heading to Beijing, Shanxi, Hebei and Shandong to figure out the implications for the moribund coal market.
Coal had been in oversupply for five years but within days they formulated an investment strategy that would help fuel a 145 per cent return for their $200 million Tribeca Global Natural Resources Fund, after fees, for 2016. It took eight weeks for most banks to update their coal supply forecasts.
The fund managers say being nimble is a big advantage in resources where it doesn't pay "to buy and hold".
But this Tribeca fund is not a participant in Mercer's benchmark fund manager's survey.
"We feel like there's lots of great resources investors but most of them have got the wrong strategy, most are constrained whether they're long-only, Aussie-only or equities-only. It really doesn't make any sense," says Cleary, "it's so volatile. You go on these site visits, for example to the Pilbara, and the majority of investors can't invest in the shipping company because it's listed in Japan, the engineering company because it's Korean, they can't short because they are long-only or they don't invest in the credit."
Their best contributors last year were long positions in Canadian zinc and copper producers – Trevali Mining, Nevsun Resources, Lundin Mining and Teck Resources – which helped deliver more than 10 per cent of alpha, and longs in oilfield services stocks such as ASX-listed WorleyParsons, Canada's Gibson Energy, and Texas-based Halliburton and Baker Hughes which together contributed more than 15 per cent.
In 2017, they are staying long oil services and are bullish on their salmon interests, as well as base metals, where many commodities face supply deficits.
Investors should brace for a final blow-off surge in stock markets akin to the last phase of the dotcom boom or the "Gatsby" years of the Roaring Twenties, followed by a cathartic crash and day of moral judgment, according to a Nobel prize-winning economist.
Professor Robert Shiller said the psychological "narrative" behind Donald Trump is powerful and likely to carry Wall Street to giddy heights before the ageing business cycle finally rolls over.
"I think there will be a Trump boom for a while. Stocks look high, but they are not yet super-high. In 2000 the (Cape Shiller) price-earnings ratio was over 45 and we may see a repeat of that," he said.
The Cape Shiller P/E index measures the average earnings of S&P 500 equities over 10 years in real terms, and is closely watched by investors as a gauge of underlying value. It is trading at roughly 25. This is the highest level in over 130 years, excluding the two anomalies of the late 1990s and 1920s.
Shiller believes the prospect of a Trump White House is a "horrible nightmare", calling the incoming president a dangerous adventurer bent on a nuclear arms race that will draw the world into a spiral of conflict. But nobody, he said, should underestimate the Trump effect on the "animal spirits" of Americans.
"Trump is a phenomenal motivational speaker. He may not be my taste, but he is telling people that it is alright to flaunt your wealth, that it is OK to do whatever you want," he said.
Globalisation not to blame: China
Chinese President Xi Jinping offers a vigorous defense of globalisation and free trade in a speech at the World Economic Forum in Davos.
A few reactions to the jobs numbers on Twitter:
Cheeky increase in the unemployment rate to 5.8pc #ausbiz pic.twitter.com/6lV7lRYjSO
— Pete Wargent (@PeteWargent) January 19, 2017
If the ABS jobs data is accurate, Victoria seemingly becoming the breadwinner for the Oz economy
— Lindsay David (@linzcom) January 19, 2017
Unemployment rate stayed at 5.7 per cent on a trend basis; participation rate remains near decade low #auspol #ausbiz pic.twitter.com/fpAxSSnEmm
— Callam Pickering (@CallamPickering) January 19, 2017
Australian employment rose by 85.6k during 2016, which was the worst calendar year result since 2013 #ausbiz #auspol
— Callam Pickering (@CallamPickering) January 19, 2017
Has been a nice improvement in full-time work in the past two months, but still a ways to go pic.twitter.com/GkGflgTt53
— Greg Jericho (@GrogsGamut) January 19, 2017
The economy added 13,500 new jobs in December, but the unemployment rate still ticked up to 5.8 per cent, mainly due to a rise in the participation rate.
The amount of new jobs came in a little ahead of economist predictions who had also tipped the jobless rate would remain at 5.7 per cent, but was well below November's 39,100 new positions, which many consider a one-off.
Of the new jobs, 9300 were full-time and 4200 part-time, while the participation rate edged up to 64.7 per cent, from 64.6 per cent in the previous month.
The dollar has barely moved, trading at US75.06¢.
Get ready for the December employment numbers, due in a bit over five minutes.
Economists are expecting an additional 10,000 new jobs created, following November's 37,100 stunner, with the unemployment rate holding steady at 5.7 per cent. \
The numbers are notoriously volatile, and some may even say unreliable, but the main focus is likely to be on the number of full-time jobs created.
November's bumper figure was exclusively due to full-time jobs, but economists reckon that may have been an aberration, as the trend over 2016 was a) a slowdown in jobs growth and b) most new jobs were part-time.
The Aussie dollar is sitting pat at US75.10¢.
And another output update: Woodside has flagged production will fall by as much as 11 per cent in 2017, in line with analysts' forecasts, even with the start-up of the Wheatstone gas field in Western Australia.
Australia's largest independent oil and gas producer is counting on the $US34 billion Wheatstone liquefied natural gas (LNG) project, in which it bought a 13 per cent stake two years ago, to help offset declines at its older assets when it starts producing.
"We look forward to adding production from Wheatstone in the middle of this year. Wheatstone is a key component of our near-term growth strategy," Woodside chief executive Peter Coleman said.
Wheatstone is operated by Chevron which has run into difficulties with the ramp-up of its bigger Gorgon LNG project off Western Australia. When complete, Wheatstone will contribute more than 13 mmboe to Woodside's annual output.
The company expects annual production in 2017 to fall to 84-90 million barrels of oil equivalent (mmboe) from 94.9 mmboe last year, in line with two analysts' forecasts for a drop in output to around 87 mmboe.
Woodside reported fourth-quarter revenue rose 2 per cent to $US1 billion from the previous quarter, topping analysts forecasts, thanks to higher oil prices.
Its oil-linked LNG contract prices will benefit from the oil market gains in the first quarter of 2017, it said.
Woodside's production guidance for 2017 is in line with UBS's estimate of output of 87.6 million boe, while RBC Capital Markets was assuming 85 million boe.
Shares are flat at $32.36.
Diversified miner South32 has posted lower first-half production in several of its commodities but says it remains on track to achieve full-year guidance for the majority of its operations.
The company said manganese ore production rose 6 per cent to 1.25 million tonnes, zinc output jumped 38 per cent to 24,400 tonnes, and alumina production lifted 2 per cent to 1.32 million tonnes.
However, production for thermal and coking coal, silver and lead fell during what it described "a generally challenging quarter".
South32 shares are up 0.9 per cent at $2.85, on a generally good day for miners.
The stoush continues: Bellamy's Australia says a proposal by the Black Prince Private Foundation to knock off four independent directors risks handing control of the troubled baby food and infant formula maker to inexperienced directors with no strategy.
Bellamy's this morning responded officially to the requisition of an extraordinary general meeting and proposal to remove directors by 14.48 per cent shareholder Black Prince, which first came to light on January 4.
The board, led by chairman Rob Woolley, unanimously recommended that shareholders vote against all resolutions proposed by Black Prince at the EGM to be held in Melbourne on February 28.
The shareholder, which it has been revealed holds shares that distribute profits to the Elsie Cameron Foundation, a charity set up by Kathmandu founder and retail entrepreneur Jan Cameron, proposes to remove directors Patria Mann, Launa Inman, Michael Wadley and Charles Sitch.
Cameron, alongside Chan Wai-Chan, Vaughan Webber and Rodd Peters, who is an authorised representative of Black Prince, are the proposed replacement directors.
"These proposed directors do not have the equivalent listed company directorship experience of the existing directors and ... three of them (being Jan Cameron, Rodd Peters and Chan Wai-Chan), do not appear to have any listed company directorship experience," Bellamy's said in its statement.
Bellamy's also revealed it had knocked back a proposal from Cameron, through lawyer Peters, for a $5 million convertible note to be issued by the company to her. It was proposed to have a 10 per cent per annum interest rate and be convertible at any time, but was dependent on the four under-fire directors resigning immediately.
Finally the company reiterated it had concerns about regarding Cameron's relationship with Black Prince and said it has written to her requesting she urgently outline her total Bellamy's holdings. Cameron has previously said she owns about 2 per cent of the $390 million company.
Bellamy's shares are down 1.2 per cent at $3.98 as investors remain unimpressed by the power struggle.
Shares post healthy gains at the start, led by two rocketing stocks: CSL and Bega Cheese.
The former is up courtesy of a surprisingly big profit upgrade following strong sales, while investors are giving the thumbs up to Bega's purchase of a number of Kraft products in Australia, including Vegemite.
The ASX has added 0.4 per cent to 5699.7, bursting above 5700 in the first few minutes of trade.
"A data driven day is on the cards for Asia Pacific investors as markets react to better than expected US numbers ahead of investment flow data from Japan and an employment report in Australia," says CMC chief market strategist Michael McCarthy. "Currency reversals and a mixed night for commodities, along with muted sharemarket moves in Europe and the US, could mean most local indices remain close to their previous closing level."
The US dollar surge saw gold, copper and oil move off recent highs. However iron ore added to recent gains, an indication of underlying strength.
BHP and Rio are both trading higher, up 1 per cent and 1.4 per cent respectively.
Search pagination
1 new post(s) available. View post(s) Dismiss