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Shares have ended higher, boosted by strong gains in miners after a weaker US dollar supported commodity prices.
The ASX rose 0.6 per cent, led by a 1 per cent rise in the materials sector.
"The support for mining stocks follows a good session for base metals on international markets and broker upgrades for Fortescue Metals," said CMC chief market analyst Ric Spooner. "Iron ore bears remain in capitulation mode as they consider the possibility that the price will continue to be supported by Chinese mine closures as Fortescue is predicting."
Fortescue hit a six-year peak of $6.97 during the session but couldn't quite hang onto the gains, to close 2.25 per cent higher at $6.81.
BHP added 1.7 per cent, Rio rose 0.5 per cent, while energy stocks also gained, with Woodside adding 1.4 per cent and AGL Energy rising 2.7 per cent.
Fairfax, publisher of this website, was the day's biggest winner among the top 200 stocks, rising 5.9 per cent on reports that a US private equity fund is showing interest in the media company's Australian assets.
Shares in OFX Group plunged 23.9 per cent to $1.27 after the money transfer company announced it expects full year statutory net profit of around $19 million, compared with $18 million last year. The trading update outlined how the post-Brexit slide in the British pound only compounded lower-than-expected revenues in Australia.
Senex Energy shareholders enjoyed a 7.1 per cent surge after the company announced a new substantial shareholder on the books following a $55 million placement. EIG Global Energy Partners now hold a 12 per cent stake in the business.
Elsewhere, Virtus Health shares rebounded 5.1 per cent, after the stock fell heavily on Tuesday. The fertility company announced it had suffered a sharp decline in treatment cycles thanks to tough low-priced competition.
New coal-fired power stations, incentives for states to lift coal-seam gas bans, and large-scale facilities to store renewable power, are at the core of an energy security and affordability push outlined by Malcolm Turnbull.
The Prime Minister called for an end to the ideology surrounding the energy debate and for the adoption of technologies that will ensure supply, at low cost and still enable the country to meet its greenhouse gas reduction targets.
"The next incarnation of our national energy policy should be technology agnostic," he told the National Press Club in his year-opeing address. "It's security and cost that matter most, not how you deliver it.
"Policy should be all-of-the-above technologies working together to deliver the trifecta of secure and affordable power while meeting our emissions reduction commitments."
Turnbull said there could be no return to the dirty coal-fired power plants such as the soon-to-be-closed Hazelwood plant in Victoria, but Australia, as the world's largest coal exporter, should be able to build a high efficiency, low emissions plant with carbon capture and storage.
Coal has been considered increasingly obsolete but Turnbull said "coal will have a role to play for many decades in the future".
The US economy is about to go through a productivity boom unseen since the height of the tech boom and the rewards are being under-estimated by the sharemarket.
"The 1990s was a productivity boom driven by technology, this time it's going to be another productivity boom driven by technology," says Atul Lele, the Bahamas-based chief investment officer of private wealth manager Deltec.
He cited advances in battery technology versus gasoline, artificial intelligence and autonomous driving, developments in semiconductor technology and 3D printing as the biggest contributors.
"All of these things are going to lead to productivity growth. The best thing is that it's not yet priced into the market."
Productivity is also necessary to blunt the impact of wage increases which are emerging in the US workforce. "We don't necessarily see jobs growth as a result of this because wages growth in the US is consistent with the fastest wages growth that we've seen in 15 years - in fact we need productivity growth to prevent further wage inflation," Lele said.
Meanwhile US president Donald Trump's entry into the White House has been greeted with higher levels of business confidence. That is just as well, because the economy has relied too much on liquidity or cheap credit for investment. Private investment share of GDP is below trend levels suggesting American companies have to make up for a period of under-investment.
"Whenever I tell people we're going to invest our way out of trouble in the US, they say 'no way', but that is exactly how the US grew in the mid-late 1990s," the strategist says. Business confidence is starting to pick up, but also policy uncertainty is declining and the wave of share buybacks is fading. Deltec found that US companies are on track for 10 per cent capex growth over the next year, which would be the highest level since 1999.
The biggest risk is that the US Federal Reserve raises interest rates too quickly to counter inflation, or companies invest too slowly. "The US basically went from being an investor of capital in productive assets to an allocator of capital and now it's swinging back the other way," Lele said.
He also addressed why the sharemarket has become more jumpy in reacting to policy news out of the White House. "They have potentially a broad impact from an economic perspective, for example, the [immigration ban] has huge implications from an economic perspective because the US is reliant on migrants to provide the labour force."
Hunter Hall International has floated the possibility of buying out founder Peter Hall's remaining 24 per cent stake in the business as it deflects below-market takeover offers from Washington H. Soul Pattinson and Pinnacle.
The strategy emerged in Hunter Hall's target's statement where the fund manager says its stock is worth up to $3.20 a share, and a minimum of $2.75 a share, versus Soul Patts' $1-a-share bid and Pinnacle's $1.50-a-share offer. Pinnacle's offer rises to $2 with conditions attached.
One of the strategies being explored by the board is "the potential buy-back of some or all of Peter Hall's residual 24.05 per cent holding as an alternative to accepting the offer," chairman Kevin Eley says in the document filed to the ASX. A "selective" buyback would require the support of 75 per cent of shareholders excluding Mr Hall.
The founder and maverick stockpicker sold 19.9 per cent of the company to Soul Patts in a deal struck just after his shock resignation in December. That put the $900 million-plus ethical investment business in play.
Fortescue shares have jumped to their highest in six years, as several brokers upped their price targets for the stock following yesterday's strong quarterly update.
The stock hit an intraday high of $6.97, its highest since February 2011, and is currently up 3.1 per cent at $6.86.
The miner said yesterday it's on track for to meet the top end of its iron ore production forecast for the year, as demand and prices for the bulk commodity exceed market expectations.
Macquarie is one of the more bullish brokers, rating Fortescue an 'outperform' and lifting the price target to $7.60.
"Fortescue's second-quarter production result was impressive, with stronger realised pricing boosted by positive provisional pricing the key highlight," the analyst said. "The company continues to report sector leading cash costs ... despite the absence of favourable currency movements."
Argonaut also raised its target price to $5.18 from $3.81, but kept a "sell" rating on the stock, citing recent share price appreciation - the stock rose more than 220 per cent in 2016.
Meanwhile, Jefferies also upped its target, to $6.50 from $5.50, maintaining its rating at "hold".
Overall, brokers remain bearish on Fortescue, with 10 of the 23 covering the stock rating it a 'sell', eight a 'hold' and only five a 'buy'. The average price target is $6.43.
There were a record number of 'backdoor listings' on the ASX in 2016 but reverse takeover activity will drop sharply in 2017, a study has predicted.
There were 69 reverse takeovers (RTOs) raising a total $368 million in 2016, up from 2015's 58 RTOs raising $330 million, according to analysis by mid-tier professional services firm HLB Mann Judd. The previous record had been 32 RTOs in 2000.
However HLB Mann Judd expected the number of RTOs to plummet due to a combination of new ASX listing rules, a lack of suitable targets, and poor performance of RTO stocks upon their re-listings in 2016.
The boom in backdoor listings was driven by a 'use it or lose it' rule introduced by the ASX in 2014, giving dormant company shells a three year time limit to find a new activity or be de-listed. Failed mining exploration shells rushed to reinvent themselves as technology plays, with the number of software companies on the ASX increasing by 23 in 2016 thank to RTOs, and the number of materials companies reducing by 25.
However the number of suitable shells is almost exhausted, said HLB Mann Judd partner Simon James, and revised ASX listing rules have also made it harder to pull off a reverse takeover.
NAB is turning up the heat on rivals by making it easier for property borrowers to qualify for home loans amid concerns that red-hot property markets are beginning to boil.
The bank, which last month increased fixed interest rates on two, three and four-year mortgages, has cut the key measurement used to assess borrowers' ability to repay by 15 basis points to 7.25 per cent.
The move comes as investment bankers warn that investor housing credit "has reaccelerated" close to APRA's 10 per cent annual growth limit, which could trigger a new round of regulatory action to toughen lending conditions.
NAB's new rate brings it into line with its major rivals, such as ANZ and CBA, but the move is expected to increase pressure on smaller rivals.
The floor rate is the measurement at which repayments are calculated by a lender for affordability purposes.
The continuing strength in Sydney and Melbourne house prices coming on the back of an acceleration in lending to investors will add to RBA concerns about financial stability, AMP Capital head of investment strategy Shane Oliver says.
"While a surge in housing supply to record levels will act to slow the property market this is still yet to become clearly apparent (except perhaps in Melbourne unit prices)," Oliver says in a note.
"In the meantime the focus around APRA tightening its macroprudential measures in order to slow investor activity in the Sydney and Melbourne markets, in order to provide the RBA with ongoing necessary flexibility on interest rates, is likely to intensify.
Oliver says this take the form of APRA lowering its threshold for the stock of lending to investors from the currently level of 10 per cent year on year.
"We remain of the view that the RBA will cut interest rates again but not until May, but this likely to require either some slowing in property price momentum or a further tightening in APRA's macroprudential policies."
Warren Buffett has added to his stock portfolio at Berkshire Hathaway in a big way after November 8.
"We've, net, bought $US12 billion of common stocks since the election," he said in an interview with Charlie Rose. Buffett didn't identify the securities that he picked.
Purchases of that magnitude represent a major pickup in activity for Berkshire. During the first nine months of last year, the company bought $US5.2 billion and sold or redeemed roughly $US20 billion worth of stocks, according to a regulatory filing. In 2015, Berkshire bought about $US10 billion of equity securities.
Buffett told Rose he was sceptical that the US could increase output at a 4 per cent annual clip, as the president has said he's aiming to achieve. "That's pretty high," Buffett said. "Two per cent will produce miracles."
Rose asked if Buffett's most-recent purchases included airlines. Buffett ducked the question, saying only that Berkshire held stakes in airlines as of September 30.
The new-world Silicon Valley technology titans rule the top 10 global most valuable brands list, while Australia's traditional companies, such as telcos, banks, miners and the grocery duopoly, dominate the Australian scene.
Telstra maintained clear air between it and its rivals in Brand Finance's Top 100 most valuable Australian brands, but CBA, ANZ and National Australia Bank take the next three slots on the poll.
While Telstra's brand value slipped 2 per cent to $14.3 billion in the latest rankings, CBA, ANZ and NAB all recorded growth – up 9 per cent, 4 per cent and 12 per cent respectively. They came in with brand values of $10.7 billion, $10.6 billion and $8.4 billion respectively.
One of the big stories for the 2017 ranks was the continued decline of Woolworths, which fell to second last year, after being topped by Telstra, and dropped again to fifth this year. The supermarket giant's brand value fell 21 per cent to $8.4 billion.
Telstra is ranked 125th in Brand Finance Global 500 most valuable brands list.
Globally, Google pipped Apple to claim the crown as the world's most valuable brand, worth an estimated $US109.5 billion. Coming third was Amazon, followed by AT&T and Microsoft. The first non-US brand in the list is Samsung at seventh, with and estimated brand value of $US66.2 billion.
China's official factory gauge started the new year on a robust note, giving policy makers a buffer to transition to neutral policy settings as they prepare for potential trade tensions with a Donald Trump-led White House.
The manufacturing purchasing managers index was 51.3 in January, compared with estimates of 51.2 and following 51.4 in December. The non-manufacturing PMI was at 54.6 versus 54.5 in December. Numbers higher than 50 indicate improving conditions.
The services sector accounted for over half of China's economy last year and for the majority of its 6.7 per cent growth as rising wages give Chinese consumers the opportunity to shop, travel and eat out more.
Policymakers are counting on growth in services to offset persistent weakness in exports that is dragging on the world's second-largest economy.
The Aussie dollar hardly budged on the data and is currently fetching 75.7 US cents.
Fairfax shares have jumped as much as 7 per cent on reports a US private equity fund is showing interest in buying the media company's Australian assets.
The Australian is reporting today that a mystery US-based fund is said to have contacted media executives in the region about buying the assets, according to unnamed sources who said the fund was based in Los Angeles.
"The plan was understood to involve the group buying the assets once Fairfax's New Zealand business was divested," the paper writes.
It's not the first time these kind of rumours hit the market, with a number of institutional investors said to have run the rulers over Fairfax, publisher of this website, possibly with the intention of spinning off the lucrative Domain real-estate website.
But the unconfirmed report was enough to spark the biggest rise in Fairfax shares since May. They are currently up 6 per cent at 90 cents.
Are we heading to a trade war? The rhetoric is pointing in that direction.
Markets were rattled overnight after Trump's to trade adviser, Peter Navarro, accused Germany of using a "grossly undervalued" euro to gain a competitive advantage, while his boss ramped up his aggression against China and Japan arguing they use monetary policy to drive their currencies lower.
"Every other country lives on devaluation," Trump said. "You look at what China's doing, you look at what Japan has done over the years. They - they play the money market, they play the devaluation market and we sit there like a bunch of dummies."
Japan's yen gained more than 1.0 per cent against the US dollar following Trump's off-the-cuff comments.
Not surprisingly, growing signs that Trump intends to get tough on trade is alarming major US trading partners.
Bank of Japan chief Haruhiko Kuroda told a Tokyo news conference yesterday that "there are concerns that protectionist measures could cause international trade to shrink or global economic growth to decelerate.
And Japan's top currency official said today that foreign-exchange rates were decided by markets and were not being manipulated.
"As Bank of Japan Governor (Haruhiko) Kuroda has said repeatedly, Japan's monetary policy aims to achieve the domestic purpose of ending deflation. It's not aimed at (affecting) currency rates," Masatsugu Asakawa, vice finance minister for international affairs, told reporters.
Chancellor Angela Merkel also sought to defend Germany from the accusation that it uses an artificially low currency to boost exports, by pointing out that the country could not influence the euro, and that Berlin "supported an independent European Central Bank."
"We won't exercise any influence over the European Central Bank, so I can't and I don't want to change the situation as it is now," Merkel told reporters. "We strive to trade on the global market with competitive products in fair trade with all others."
He hasn't understood euro or this is a serious conspiracy accusation. We take independence seriously over here. @ecb https://t.co/P6Sjmmq37c
— Henrik Enderlein (@henrikenderlein) January 31, 2017
Critics argue that the creation of the euro has been a huge benefit for the extremely competitive German economy, which has doubled its exports to around half of GDP since the common currency was introduced.
But others note that Germany has been very critical of European Central Bank chief Mario Draghi's ultra-easy monetary policies - which include negative interest rates and a massive bond buying program - which have helped push the euro lower.
Meanwhile, new German Economy Minister added to the war of words by saying Trump's policy decisions are going in "a totally wrong direction".
Zypries told Bild newspaper: "What we are witnessing over the past 10 days is alarming and irritating."
Zypries pointed out that only 10 per cent of German exports were going to the US while 60 per cent went to other European countries, but admitted that a protectionist US trade policy would cost German jobs.
"We sense the strong dollar policy is over, a thing of the past," said Neil Jones, head of hedge fund FX sales at Mizuho. "Recent US concern over the strong dollar versus China is now feeding into the eurozone with these comments on an undervalued euro."
Take away the rhetoric, the euro is actually trading well below its fair value, according to at least four different measures.
The euro is undervalued by anywhere between 9 per cent and 25 per cent the measures indicate, with the OECD's purchasing-power parity showing the shared currency as the lowest relative to its fair value among its Group-of-10 peers.
Will the Aussie dollar finally break through the US76¢ barrier today?
It had another sniff at those levels overnight due to broad greenback weakness, rising as high as US76.06¢, but just like over the past weeks it failed to hang on to the US76¢ handle and is currently fetching US75.78¢.
"But all indications show that a weaker US dollar is clearly favoured by President Trump and his team," said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader. "That means the Australian dollar is coiled for a break higher."
The US dollar is nursing hefty overnight losses after the Trump administration accused Germany and Japan of devaluing their currencies to gain a trade advantage, fuelling a risk-off mood that subdued stocks while benefiting bonds.
The US currency suffered its worst January in three decades after President Donald Trump complained that every "other country lives on devaluation."
ThinkMarkets senior market analyst Matt Simpson reckons that if we get strong Chinese manufacturing data later today the currency might well make another attempt at hitting a three-month high.
"Only a break back below US75¢ removes the bullish bias, and a close above US76.09¢ confirms the bullish resumption from the December low," he says.
The latest profit warning: Ozforex shares have slumped after the foreign exchange trader said that its financial year 2017 fee and commission income would be $3 million lower than expected.
The foreign exchange group said in the three months ended December 31, it saw a "further decline in average transaction values", largely stemming from the UK after the June Brexit vote resulted in "fewer large value discretionary transactions and a corresponding 35 per cent decline in revenues per transaction".
EBTDA for the year ending June 30 is "now expected to be between $27.5 million and $28.5 million with statutory net profit of at least $19 million", the company said.
It also announced it has appointed John Alexander Malcolm as the company's new CEO. Malcolm, who earlier worked with HSBC Skander and Westpac's card products group, succeeds Richard Kimber, who has stepped down from leading the foreign exchange company.
Ozforex's shares are down 19.5 per cent at $1.34.
House prices continued to climb fast in January with Sydney and Melbourne recording the strongest growth, Corelogic's January Hedonic Home Value Index shows.
Sydney posted a 1 per cent rise in dwelling values while Melbourne rose 0.8 per cent. Every other capital city, except for Darwin, showed rises in houses prices resulting in an overall combined capital states 0.7 per cent growth.
Year on year, Sydney values have risen 16 per cent while Melbourne has shot up 11.8 per cent. Since the growth cycle commenced in June 2012, Sydney dwelling values have increased by a cumulative 70.5 per cent.
"While the pace of capital gains remained strong in January, our view is that growth rates will trend lower over 2017, with several factors likely to dampen the strong capital gains trend," head of research Tim Lawless said.
"Affordability constraints are likely to become more pressing, particularly in Sydney, where the dwelling price to income ratio was approaching 8.5 times in September 2016. The deposit hurdle is becoming a larger barrier to entry with additional costs such as stamp duty adding to the high entry costs for housing.
"While mortgage serviceability remains reasonably healthy, mortgage rates are already edging higher on the back of higher funding costs, which could progressively take some heat out of investment demand. In addition, with house prices continuing to increase, the supervisory focus from APRA and risk committees can only be expected to increase in 2017."
Shares have opened marginally higher as gains in the miners are offset by losses in banks, amid general unease over the Trump administration's policies.
The ASX is trading 0.1 per cent higher at 5627.4, propped up by a 1.6 per cent rise in mining giant BHP.
"While we may see some price consolidation near-term, I think both companies (BHP and Rio) offer strong value, and leverage to sustained strength in commodity prices which we expect to play out over the course of this year," says Fat Prophets CEO Angus Geddes.
Weighing on the index are falls of around 0.4 per cent in three of the big four banks, with Westpac trading flat.
GUD Holding has risen 6.5 per cent after posting first-half results, while Fairfax - publisher of this website - is up more than 4 per cent on reports a US private equity fund is mulling an offer for the Australian assets.
Quite a few analyst ratings changes this morning:
- Ansell (ANN): Cut to neutral at JPMorgan
- Beach Energy (BPT): Cut to hold vs buy at APP Securities
- Brambles (BXB) Cut to neutral at Goldman, PT $10.66
- BT Investment Mgmt (BTT): Raised to neutral at Credit Suisse
- Carsales (CAR): Cut to hold vs add at Morgans Financial
- Charter Hall Retail (CQR): Cut to neutral at Goldman, PT $4.45
- GPT Group (GPT): Cut to sell at Goldman, PT $4.85
- Iluka Resources (ILU): Cut to underweight at JPMorgan
- Navitas (NVT): Raised to buy vs neutral at UBS
- Scentre Group (SCG): Cut to sell at Goldman, PT $4.49
- Sydney Airport (SYD): Raised to add vs hold at Morgans Financial
- Wisetech Global (WTC): Raised to buy at Bell Potter
- Woolworths (WOW): Raised to buy vs sell at UBS
Digital real estate advertising company REA Group has sold its European businesses to private equity investor Oakley Capital.
REA Group, which owns the realestate.com.au website, has announced the completion of its sale of businesses atHome Group and REA Italia, which operate in Luxemburg, France, Germany and Italy.
It said the sale, announced to the market in December, was effective from December 31, 2016, with the final profit yielding $161.6 million including completion adjustments.
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