Shares have opened higher, led by a rally in miners after iron ore shot to a 2.5-year high on Friday.
A 1.7 per cent jump in the materials sector is spearheading the ASX's 0.25 per cent rise to 5735.5 points.
BHP is up 1.3 per cent, Rio has added 2.4 pe cent and Fortescue is soaring 3.3 per cent.
Energy shares are also higher thanks to an OPEC report suggesting more than 90 per cent compliance with agreed production cuts. Woodside is up 1.4 per cent.
Domino's is one of the biggest losers this morning, sliding 4.8 per cent after the pizza maker this morning defended its record of franchisee profitability and staff payments, in response to recent media reports that it has squeezed franchisees.
Reporting season is likely to dominate the focus this week, with one-quarter of the top 200 companies releasing annual or semi-annual reports, CMC chief market strategist Michael McCarthy notes.
"However, new highs for US markets on White House promises of tax cuts could see macro factors swamp local news," he says.
Most of this morning's earnings reports have been well received, with the exception of Bendigo Bank and Ansell. Here's the scoreboard:
- Amcor: +4.3%
- Aurizon: +3.7%
- JB Hi-Fi: +6.25%
- Newcrest: +1.5%
- Bendigo Bank: -3.25%
- Ansell: -3.7%
A few more earnings:
- Bendigo and Adelaide Bank has held its interim dividend steady after reporting essentially flat first-half cash earnings of $224.7 million.The bank says cash earnings for the six months to December 31 were just $1 million higher than in the prior corresponding period, while net profit was also flat at $209 million. Bendigo, which will pay a fully franked interim dividend of 34 cents per share, also said its bad and doubtful debts had risen $16.3 million to $39.8 million.
- Global packaging company Amcor's first-half net profit has fallen 6 per cent to $US286.6 million, but it says underlying earnings are up and it remains well placed in the current global environment. Underlying profit, adjusted on a constant currency basis and removing significant items, is up 3.8 per cent at $US308.6 million for the six months to December 30. Amcor says full-year expectation for growth in profit after tax remains unchanged and it will pay an unfranked interim dividend of US19.5 cents, up 0.5 cents.
- Gloves and protective clothing maker Ansell has reported flat first-half net profit as the firms mulls the future of its oldest and smallest division, which makes condoms. Ansell said that the review of its sexual wellness business is progressing in line with its expectations, revealing that it has received "multiple expressions of interest" from several parties. Net profit rose 0.3 per cent to $US69.8 million for the six months to December 31, with revenue down 1.1 per cent to $US775.8 million and an unfranked dividend of 20.25 cents declared.
- New Aurizon chief executive Andrew Harding says he plans more cost cuts after the rail group swung to a first half interim net profit of $54 million compared with an $108 million net loss a year earlier. Underlying earnings before interest and taxation beat some analysts' expectations, rising 21 per cent to $488 million, partially due to $64 million of cost-cutting including 494 redundancies. Aurizon will pay an interim dividend of 13.6¢ compared with 11.3¢ a year earlier.
Get all of today's earnings reports at the AFR's reporting season blog
It's shaping up for another big week for market participants, with corporate earnings likely occupying Australian traders' minds this week, IG's Chris Weston says:
On the docket today we get NCM, ANN, BEN, COH and JBH and these companies have the tailwind of reporting numbers on a day when the broader market is to open higher and positive sentiment seems to be lifting. Certainly, if we look at JBH on Friday we can see someone was pretty happy to hit the bid and there seems little in the price action to suggest concern that they will miss the 23% increase expected in 1H sales (at $2.507b), or $110M in 1H NPAT.
NCM has been a favourite of late, with the price having rallied from $16.35 to $23.95 through December into February, so the earnings numbers will need to justify the move.
The broader ASX 200 is looking upbeat, both from the technical set-up and the recent revisions higher in consensus EPS growth. Our call for the open sits at 5730 and this would be the highest level since 17 January and would see price breach the January and February double bottom neckline at 5720. Therefore probability states higher levels should be on the cards in the short-term and 5800 is the clear target.
The market internals backs up this case for higher levels in the index, where we can see 64% of stocks above their 20-day moving average, 15% at 4-week highs and 10% above the top Bollinger band. These percentages have been moving up of late, as you would expect when the index is going up, but they are at no way at levels which suggest euphoric conditions and contrarian positions.
By way of leads, the S&P 500 made a new high on Friday, pushing up a touch to close at 2316, so again the view that a market at all time highs is bullish holds true. We have seen stability in US fixed income, with the 10-year treasury up 1 basis point at 2.40%, although did close the week down 6bp.
Bulk commodity futures have pushed higher too on the Friday night session, with iron ore futures gaining 4.2%, steel +2% and coking coal +1.9%. Copper has broken out to the upside, thanks to the ongoing strike at BHP's Chile mine, Escondida. Stay long copper here, but watch news flow as this is where first mover advantage plays a pivotal role, as news of a restart will likely cause a wave of profit taking.
Newcrest Mining has made clear its intention to ramp-up dividends this year by announcing a US7.5¢ interim dividend that matches the total payout to shareholders last financial year.
The improved dividend was made possible by a six-month period that saw higher gold prices, higher rates of production and lower unit costs across Newcrest's portfolio of gold and copper mines.
The underlying profit of $US273 million was broadly in line with analyst estimates; Credit Suisse has predicted $US270 million while Deutsche had predicted $US280 million.
The underlying profit was 333 per cent better than for the first half of fiscal 2016, while the statutory profit of $US187 million was a 131 per cent improvement on the prior comparable period, on revenue of $US1.8 billion, up from $1.55 billion.
A number of earnings reports have come in this morning: JB Hi-Fi has upgraded its full year sales and profit guidance after a strong December-half, with net profit jumping 16 per cent to $110.4 million, buoyed by demand for consumer electronics, the demise of Dick Smith and the $870 million acquisition of home appliances chain The Good Guys.
The net profit result was in line with consensus forecasts around $110.3 million, but underlying net profit - before costs associated with The Good Guys deal - rose 31.7 per cent to $125.4 million.
Chief executive Richard Murray now expects total sales for the year to reach $5.58 billion, including $4.33 billion from JB Hi-Fi stores, an improvement on its original guidance of $4.25 billion, the The Good Guys contributing $1.25 billion.
Group underlying net profit for the full year is expected to rise 31.4 per cent to 35.4 per cent to between $200 million and $206 million, well above current forecasts around $196 million.
Group sales rose 23.4 per cent to $2.6 billion in the six months ending December as JB Hi-Fi increased its share of the consumer electronics and appliances markets and new products such as gaming consoles, virtual reality devices, the new Google phone and the iPhone 7 lured customers into stores.
The Good Guys acquisition was completed in late November and analysts estimate the chain contributed about $200 million in sales and $7 million in earnings before interest and tax.
JB Hi-Fi increased its interim dividend from 63¢ to 72¢ a share, payable March 10.
Bankwest is set to rock the $1 trillion mortgage market and more than 1.5 million property investors by axing negative gearing benefits that drive lucrative residential property investment, particularly in Melbourne and Sydney.
The bank – owned by Commonwealth Bank of Australia, the nation's largest mortgage provider – will announce this morning that generous tax breaks will not be allowed for calculating loan eligibility for new – and some existing – borrowers. Without negative gearing, the amount of loan a borrower can get will be lower.
Perth-based Bankwest's decision could lead to a shake-up in the nation's rental sector, trigger a scramble by competitors to poach disaffected customers and cause highly geared investment properties to flood the market.
The bank is expected to introduce the changes by amending serviceability calculators used by mortgage brokers to assess loan eligibility. It will apply to all new loan applications and existing loans that require "reassessment" when banks review and adjust downwards pre-approved or issued loan balances.
CBA, which last week followed Bankwest's decision to pull property investor loans, is widely expected to replicate the decision.
"This potentially has huge implications for property investors and borrowers because of investors' tendency to rely on negative gearing," said Mark Chapman, a director of tax accountants H&R Block.
A confidential Bankwest memo said the changes were targeting borrowers that run investment properties at a loss.
Here's how major markets performed on Friday:
- SPI futures up 10 points or 0.2% to 5677
- AUD up 0.7% to 76.78 US cents
- On Wall St, Dow +0.5%, S&P 500 +0.4%, Nasdaq +0.3%
- In New York, Rio +5.3%, BHP +2.2%
- In Europe, Stoxx 50 -0.2%, FTSE +0.4%, CAC flat, DAX +0.2%
- Spot gold +0.5% to $US1233.97 an ounce
- Brent crude +1.8% to $US56.65 a barrel
- Iron ore +3.3% to $US86.62 a tonne
- Steam coal +0.4% to $US80.05 a tonne; coking coal flat at $US164
- LME aluminium +1.4% to $US1875 a tonne
- LME copper +4.6% to $US6090 a tonne
- 10-year bond yield: US 2.41%, Germany 0.32%, Greek 7.14%, Australia 2.69%
Miners are expected to lead the ASX higher this morning after iron ore jumped to a 2½-year high and investors in London and New York jumped into BHP Billiton and Rio Tinto.
Record closing highs in the Dow, S&P 500 and Nasdaq over the weekend also are helping position local shares for a positive start to a hectic week of company profit reports, including the likes of Commonwealth Bank of Australia, Wesfarmers and Telstra.
Futures were pointing to a 0.2 per cent start for the benchmark S&P/ASX 200 Index on Monday morning. Profit numbers from Amcor, Ansell, Aurizon Holdings, Bendigo & Adelaide Bank, Cover-More Group, JB Hi-Fi and Newcrest Mining will drive trade through the session.
In London, Rio's 5.8 per cent advance helped push the FTSE 100 higher, while BHP added 2.4 per cent. In New York, Rio added 5.3 per cent and BHP was 2.2 per cent higher.
Iron ore futures in China surged more than 8 per cent at one point on Friday, topping the $US100 a tonne mark, in defiance of fears that commodity prices would stumble in the wake of Chinese New Year holidays. The spot price of the steel-making material jumped 3.3 per cent to $US86.62 a tonne, the highest since September 2014.
Friday's much stronger-than-expected Chinese trade data underpinned the renewed appetite for natural resources. Imports rose at the fastest pace in four years amid a continued construction boom, according to preliminary Chinese customs statistics. Meanwhile, indicators suggest global manufacturing activity has begun 2017 on a solid footing. Tuesday's inflation data from the Asian powerhouse is the next key indicator.
Copper also surged over the weekend as BHP told customers to expect disruptions in shipments from its Escondida mine in Chile. Unionised workers began a strike there late last week and indications are the two sides are far apart.
BHP also got a bit of a boost from oil, which lifted on news that OPEC members are complying with new production targets, at a rate of 90 per cent. While Saudi Arabia has been cutting more than it agreed, the initial numbers bode well for efforts to check the global glut.
Good morning and welcome to the Markets Live blog for Monday.
Your editor today is Jens Meyer - please send any feedback on how we can improve this blog to jmeyer@fairfaxmedia.com.au
This blog is not intended as investment advice.
Fairfax Media with wires.
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