Fortescue has confirmed it is on track to hit the top end of its iron ore export guidance and possibly exceed it, while also continuing to reduce its operating costs.
The miner shipped 42.2 million tonnes of iron ore in the December quarter, which was 4 per cent lower than the September quarter but roughly in line with analyst estimates.
The export number means Fortescue has produced 86 million tonnes in the first half, and if replicated in the six months to June 30, Fortescue will beat the top end of its guidance range of between 165 million and 170 million tonnes.
Cyclone season could yet hamper the miner's stellar performance in fiscal 2017, and shipping from Port Hedland was interrupted by a cyclone in recent days.
The company also took its unit costs below $US13 per tonne for the first time in the December quarter, with an average "C1" cost of $US12.54 per wet metric tonne.
Fortescue shares have opened slightly higher, up 0.15 per cent at $6.50, outperforming a slide in the broader market.
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The interesting theme I have seen from the US trade is divergence in markets, with US equities really being the mover on a risk adjusted basis, says IG's Chris Weston:
Granted the Japanese JPY has found strong buyers, especially against the GBP (GBP/JPY ids down 1.8%), but we cannot say we have seen genuine risk aversion because there has been no move in gold, US treasuries are largely unchanged across the curve and corporate credit spreads have not really widened.
We have seen equity portfolio protection in demand, with the US volatility index (the 'VIX') increasing a sizeable 15.5%. But let's not forget the hedge fund community were running a record 134,224 net short contract position here, so the prospect of a position unwind seems high. As always when trading, extreme positioning plays into the risk-to-reward profile and while some traders have been buying 'put' options to protect US equity portfolios in the event of further falls in S&P 500, we can see that traders who have short sold VIX futures have also closed out, which in turn has pushed up the market. This move in the VIX is normal and doesn't indicate the world is about to collapse!
We can also see that last week traders increased their long positions in S&P 500 futures by 106% to 72,903 contracts. So I question if a number of traders who bought last week and held weak conviction in further upside in the index have closed out today, which in turn has pushed the S&P500 cash market lower.
While we haven't seen it reflected in other asset classes, what we can see in US equities are signs of risk aversion, with 86% of stocks lower on the day and the sectors where the business has a defensive and largely non-cyclical revenue stream (utilities, staples and telco's) have fallen, but by a far lesser extent. In the S&;P 500, tech has taken the largest points out of the market, although energy is having the biggest percentage decline.
The moves in US markets have naturally pulled the SPI futures lower, but the Aussie futures market is only down 5 points at present and our opening call for the ASX 200 sits at 5640. We can factor in the view that the ASX 200 fell far more heavily than the S&P 500 futures did during yesterday's Asia trade, so US markets have played some catch here.
Still, we are coming to a number of important technical levels in the Aussie market and specifically I would be watching 5555 (the 23 January low) on the SPI futures, and while that some 0.6% away, a break here would be taken badly and lead the ASX 200 (cash market) lower. One should question if there is a real catalyst to buy risk today, on the view that investors with cash may sit on the sidelines for now and just see how the political situation evolves.
Goldman Sachs is pushing back against Government Sachs.
In a sharply worded message to staff, Lloyd Blankfein, the bank's long-time head, broke with the Trump administration over its controversial attempt to crack down on immigration. The voicemail, sent Sunday to the bank's 34,400 employees, pits Blankfein against an administration stocked with Goldman Sachs veterans, including his former No. 2, Gary Cohn, and key Trump adviser Steven Bannon.
Blankfein told employees that President Donald Trump's executive order, parts of which were blocked by federal courts, is at odds with the bank's long-held policies on workforce diversity and could disrupt Goldman Sachs's business. "This is not a policy we support," the chief executive said.
Blankfein joined a growing chorus of executives, notably from the technology industry, expressing displeasure about the order halting immigration from seven Middle Eastern countries. Google CEO Sundar Pichai slammed Trump's move in a note to employees Friday, while Microsoft on Sunday described the order as "misguided and a fundamental step backward."
Blankfein's comments put Goldman Sachs, one of Wall Street's most influential banks, in the unusual position of standing against a signature effort of the new administration. Since former chairman Sidney Weinberg served in Washington during both World War II and the Korean War, the bank has sent executives into government service, earning it the Government Sachs moniker. It seldom takes a public stand against a sitting president.
Other Wall Street banks took a softer approach. JPMorgan Chase's operating committee, led by CEO Jamie Dimon, said in a memo to staff on Sunday that it's "grateful for the hard work and sacrifices made to keep our country safe," and that the country was "strengthened by the rich diversity of the world around us." It didn't express an opinion on the policy.
Wells Fargo, Morgan Stanley and Bank of America said they were monitoring the ban's impact on employees. Citi CEO Mike Corbat said the lender was "concerned" about the message the order sends.
"If the order were to become or remain effective, I recognise that there is potential for disruption to the bank, and especially to some of our people and their families," Blankfein said in the voicemail. "I want to assure all of you that we will work to minimise such disruption to the extent we can within the law and are focused on supporting our colleagues and their families who may be affected."
Here's the AFR's Karen Maley on why Blankfein decided to speak out
Meanwhile, higher prices and production fuelled a more than doubling in oil and gas revenues for Origin Energy in the December quarter, setting the scene for its planned spin-off of the conventional petroleum business, potentially this half.
Sales in the December quarter of $544.3 million were up 157 per cent on the same quarter a year earlier and 27 per cent higher than in the September quarter. Sales for the first half of fiscal 2017 surged 123 per cent to $973.9 million on production that rose 51 per cent to 154.3 petajoules.
While much of the increase was due to the ramp-up of the $25 billion Australia Pacific LNG project in Queensland, which isn't included in the spin-off, production and revenues also climbed in the rest of the oil and gas business.
With local earnings season looming, rail freight company Aurizon has warned it will take about $321 million of one-off charges, including impairments and significant items, when it reports half-yearly earnings.
Aurizon said in a statement that it expects to report underlying pre-tax earnings between $900 million and $950 million for the six months to December 31, 2016, but that it was taking the one-off costs as a result of an ongoing review of operations.
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Here's how other key markets performed overnight:
- SPI futures down 5 points or 0.1% to 5598
- AUD flat at 75.51 US cents
- On Wall St, Dow -0.6%, S&P 500 -0.6%, Nasdaq -0.8%
- In New York, BHP -1.5%; Rio -2.1%
- In Europe, Stoxx 50 -1.2%, FTSE -0.9%, CAC -1.1%, DAX -1.1%
- Spot gold +0.4% to $US1196.26 an ounce
- Brent crude -0.4% to $US55.30 a barrel
- Iron ore +0.0% to $US83.34 (closed due to Chinese New Year)
- Steam coal +0.1% to $US83.55, Met coal +0.0% to $US185.25
- LME aluminium -0.8% to $US1802 a tonne
- LME copper -1.4% to $US5820 a tonne
- 10-year bond yield: US 2.49%; Germany 0.45%; Australia 2.72%
Major US stock indexes posted their largest drop so far in 2017 as investors worried that a curb on immigration ordered by Donald Trump was a reminder that some of the US President's policies are not market-friendly.
An executive order issued by Trump on Friday banned immigration from seven Muslim-majority countries, including legal residents and visa holders, and temporarily halted the entry of refugees. Over the weekend, thousands of people rallied in major US cities and at airports in protest.
US equities had hit a series of record highs following Trump's election in November, encouraged by his promise of tax cuts and simpler regulations.
"Investors focused on the pro-growth of (Trump's) proposals and not those detrimental to economic activity, like protectionism," said Peter Cardillo, chief market economist at First Standard Financial.
He said investors wore blinders to only see the market-friendly policies Trump spoke about during the campaign and the immigration ban was a reminder of actions he could take that could undermine the economy.
Technology, a sector which has openly opposed bans on immigration and hurdles to hiring foreign talent, weighed the most on the S&P 500.
The Dow Jones Industrial Average fell 122.65 points, or 0.61 per cent, to close at 19,971.13, the S&P 500 lost 13.79 points, or 0.60 per cent, to 2,280.9 and the Nasdaq Composite dropped 47.07 points, or 0.83 per cent, to 5,613.71.
It was the largest daily percentage drop for the Dow since October, while the S&P and Nasdaq dropped the most since late December.
Earlier, Trump signed an executive order that would seek to pare back federal regulations by requiring agencies to cut two existing regulations for every new rule introduced.
In an event with small business leaders, Trump took credit for the market rally since November 8.
"The stock market has gone up massively since the election. Everyone's saying 'Oh, the market will go down.' I said 'The market's not going down'."
Good morning and welcome to the Markets Live blog for Tuesday.
Your editor today is Jens Meyer - please send any tips, suggestions, feedback, jokes, criticism, praise etc to jmeyer@fairfaxmedia.com.au
This blog is not intended as investment advice.
Fairfax Media with wires.
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