That's it for Markets Live for today and for the week.
Thanks for reading and for your comments.
Have a great weekend and see you all again Monday morning from 9.
Not even a strong lift in ANZ shares following its earnings update could help the ASX finish the day in the green, as investors took profits in bluechips like BHP, Rio and CSL following a solid week for the sharemarket.
The ASX 200 index declined 11 points, or 0.2 per cent, on Friday, but at 5806 held above the 5800-point line that it breached during a busy week or profit announcements. Over the five sessions, the benchmark measure climbed 1.5 per cent, adding to last week's 1.8 per cent gain.
A solid week of earnings has helped extend a recovery in the market following an indifferent start to the year. The local action was supported by new records in global sharemarkets, as well as a strong move higher in the iron ore price, which has added close to 10 per cent over the past two weeks.
The Aussie dollar has also been well supported, as it breached the 77 US cent mark for the first time since the US election in November.
So overall a pretty upbeat week. CBA added 2.9 per cent, ANZ 4.3 per cent, Westpac 3.3 per cent and NAB 2.7 per cent. BHP added 2.7 per cent, Rio 2.7 per cent and South32 5.9 per cent. If that wasn't enough, heavy hitters Wesfarmers climbed 2.9 per cent and CSL 5.1 per cent.
Not joining in te blue-chip party was Telstra, which dropped 6.1 per cent after a disappointing earnings number. Similarly, Origin Energy's profit update was punished with a 4.8 per cent share price fall over the week, while Domino's got punished 12.4 per cent.
Shanghai rebar steel futures have climbed more than 1 per cent today to trade near a two-month high, extending recent gains on expectations of tighter supply and a demand pick-up as China boosts infrastructure spending.
The price of the construction steel product is on track for its best weekly gain in five, with the rally also pushing up Chinese iron ore futures this week to the highest since their launch in October 2013.
The most-active rebar on the Shanghai Futures Exchange was up 1.5 per cent at 3471 yuan ($US506) a tonne by midday. The contract has risen 5.4 per cent this week after hitting 3509 yuan on Thursday, its strongest since Dec. 12.
On the Dalian Commodity Exchange, the most-traded iron ore rose 0.4 per cent to 702 yuan per tonne. The steelmaking raw material touched a record high of 721 yuan on Thursday and has gained 5.2 per cent this week.
Traders are building stocks of steel products on expectations of reduced supply after the Chinese government, in efforts to control smog, told mills in the Beijing-Tangshan-Hebei region to limit their utilisation capacity to 50 per cent if air quality deteriorates, said Richard Lu, analyst at CRU consultancy in Beijing.
If half of steel production in the region is capped for 20 days, the decline in production could be 5.8 million tonnes, analysts at Morgan Stanley said in a note on Tuesday.
"People have very strong expectations on infrastructure demand. They think the Chinese government will boost infrastructure investment to support economic growth this year," said Lu.
Inventory of rebar in major Chinese cities stood at 8.2261 million tonnes as of Feb. 10, the most since April 2014, according to data tracked by SteelHome.
"If demand doesn't pick up as expected, there might be a lot of surplus steel in the market and prices might fall," said Lu.
Iron ore for delivery to China's Qingdao port fell 1.1 per cent to $US90.06 a tonne on Thursday, according to Metal Bulletin. The spot benchmark has declined since touching a 30-month peak of $92.23 on Monday, but was still up 4 per cent so far this week.
Takeover target DUET Group has maintained its hunger for acquisitions as it works towards completion of its deal with Hong Kong giant Cheung Kong Infrastructure.
The owner of gas and power networks, subject to a $7.4 billion takeover by CKI, declared its interest in "accretive" acquisition opportunities as it released its half-year results, which included a 6.8 per cent dip in benchmark earnings, to $233.2 million.
DUET has proceeded to organise dates for shareholders to vote on the deal despite uncertainty over whether approval will be forthcoming from the Foreign Investment Review Board.
"While the transaction remains subject to regulatory approvals, we are working towards holding extraordinary general meetings, at which we will seek DUET security holder approval of the proposed acquisition, in mid to late April," chairman Doug Halley said in the interim results statement.
DUET reported a 0.8 per cent slide in consolidated profit excluding one-time items to $98.1 million on revenues that climbed 5.3 per cent to $853 million.
JPMorgan analyst Mark Busuttil described the result as "softer than expected", pointing to the 5 per cent decline in adjusted EBITDA to $417 million, some 15 per cent below his estimate.
DUET's board has endorsed the $3 a share offer from CKI, controlled by Hong Kong billionaire Li Ka-shing, but the deal poses a big foreign investment test for Federal Treasurer Scott Morrison, after CKI was among bidders deemed unsuitable last year to buy NSW power distributor Ausgrid.
DUET's portfolio includes power networks similar to Ausgrid as well as the nationally significant Dampier to Bunbury gas pipeline in Western Australia, the state's main gas transmission line.
The deal is also subject to the findings of an independent expert report, as well as other conditions.
Shareholders would in total receive $3.03 per security including a special dividend from DUET.
The uncertainty around the approvals has been reflected in DUET's share price, which has consistently traded below the offer price since it was made. The stock is down 0.9 per cent at $2.77.
Investors should probably be a little more nervous, according to one BlackRock money manager.
Stocks have rallied to records amid signs of stabilisation in China's economy and bets that President Donald Trump will boost US infrastructure spending, roll back regulations and cut taxes.
While the stock surge and below-average volatility show investors are more optimistic, markets are underpricing global political risks, said Russ Koesterich, who helps manage the $41 billion BlackRock Global Allocation Fund. He recommends gold as insurance.
Looming elections in Europe and political uncertainty in the US are among developments that could shift investor sentiment, Koesterich said. Adding to the threat is the potential impact of Britain's exit from the European Union and a debt crisis in Greece.
Such concerns have helped boost haven demand for gold, which has climbed almost 8 per cent this year after posting the worst quarter since 2013.
"That hiding political risk is not reflected in markets," Koesterich said. "People are not that nervous, and there are things that could go wrong, particularly when you think about all of the political risks. That adds to the argument for having gold in a portfolio."
Spot gold is trading flat at $US1238 an ounce, on track for a seventh weekly gain out of the past eight weeks. The All Ords gold index is up nearly 2 per cent today, also extending a stunning rally that has seen it rise eight out of the past nine weeks.
Village Roadshow shares have slumped to their lowest level in more than four years after the company said it could be forced to sell assets in an effort to cut debt.
The stock hit its lowest point since September 2012 after a disappointing first-half performance by Village Roadshow's Gold Coast theme parks contributed to a net debt that now stands at 3.27 times company earnings.
"The board considers this an unacceptable level of gearing and is focused on reducing this significantly," Village Roadshow said. "This includes a range of measures including the active pursuit of potential asset sales and the decision not to pay an interim dividend."
Village Roadshow shares fell as much as 14.6 per cent as the company, which also operates cinema chains and other theme parks, reported a loss for the six months to December 31 of $6.7 million. They are currently down nearly 9 per cent at $3.45.
Earnings before interest, tax, depreciation and amortisation fell 1.8 per cent at the company's Gold Coast theme parks in the wake of the fatal disaster at rival Ardent Leisure's Dreamworld, and 27 per cent at its film distribution unit following the underperformance of independently acquired titles Deepwater Horizon and Red Dog: True Blue.
The Australian dollar remains near a three-month high but is struggling to make ground above crucial chart resistance of US77¢ after breaching that level three times this week.
The Aussie is trading at US77.01¢ after briefly popping up to US77.32¢ on Thursday, a level not seen since November 10. It quickly fizzled to as low as US76.84¢ overnight.
The Aussie is set to end the week slightly higher, having traded in a sideways direction since the beginning of February. Still, the currency is already up nearly 7 per cent this year, led largely by expectations of faster inflation in the United States and globally.
The price of Australia's biggest earning export - iron ore - has also soared in recent weeks, boosting terms of trade and in turn the country's national income.
"The Aussie has been in real demand this week on the back of the reflation trade and perhaps is a little overextended," said Stephen Innes, senior trader at OANDA.
Innes expects further profit-taking and position squaring ahead of the weekend.
A blistering 2016 fourth quarter for M&A has paved the way for significant deal flow for lawyers and bankers this year, perhaps shaking off the dearth of deals following the mining boom slump.
A report by technology and dataroom company Intralinks, that tracks early-stage mergers and acquisitions, has found fourth quarter activity increased by 47 per cent in 2016 compared with the prior year, the highest growth for 19 quarters.
Against concerns about the potential backlash against Chinese outbound mergers and acquisitions (M&A), which saw the collapse of the NSW Ausgrid deal and the Kidman cattle station deal last year, the Asia-Pacific was the best performing region, with 44 per cent year-over-year growth for the last quarter of 2016.
Elsewhere in the region, India has enjoyed a 100 per cent uptick in early-stage M&A activity, Southeast Asia which is up 49 per cent and Japan recorded a 33 per cent jump.
Intralinks vice-president of strategy Philip Whitchelo said the Australian results were most promising for M&A activity in the financials, consumer & retail and healthcare sectors.
We've just about survived the first big week of reporting season - so what are the main takeaways?
As is often the case after an initial flurry of good results we have seen a few more misses over the last week, says AMP Capital's Shane Oliver.
But he says so far the overall results remain good: 53 per cent of companies to report have exceeded earnings expectations compared to a norm of 44 per cent, 70 per cent of companies have seen profits up from a year ago and 69 per cent have increased their dividends from a year ago.
So why has the market's response to companies reporting been lukewarm, with just 44 per cent seeing their share price outperform?
Oliver says this is due to the strong rally in the market in anticipation of the results, meaning a lot of good news was already priced in.
The big driver of profit growth remains the resources sector, where profits are on track to more than double this financial year and this is driving a return to overall profit growth for the market, Oliver says.
Shares in Baby Bunting have dived after Australia's biggest baby goods chain reported flat profit margins in the first half and tipped growth at its older stores to slow.
Baby Bunting, which sells products such as prams, cots, nappies and car seats, said same-store sales (excluding new stores) were up 8 per cent in the seven months to early February, thanks in part to strong growth in car seats and prams, but this would moderate for the year to June.
The Melbourne-based chain forecast earnings before interest, tax, depreciation and amortisation (EBITDA) to rise between 15 and 31 per cent to between $21.5 million and $24.5 million, due to growth at its older, new and online stores. Online accounts for about 6 per cent of its sales and is its biggest single store.
Baby Bunting has 40 stores and plans to open between four and eight outlets a year to reach more than 80 stores. It opened four stores in the first half (in Sydney's Belrose and Camperdown, the Melbourne suburb of Preston and Baldivis south of Perth) and plans to open a further three by the end of June.
After listing on the sharemarket in October 2015 at $1.40 a share, Baby Bunting shares reached as high as $3.21 in August last year on the back of strong same-store growth, its store rollout plans and the willingness of parents and carers to fork out big money on items such as prams.
But the company's shares have slid 7.3 per cent to $2.30.
Dean Fergie, director and portfolio manager at Cyan Investment Management, said the result "looked good across all metrics on the prior corresponding period, [with] sales up 18 per cent, same-store sales up 8 per cent and net profit up 22 per cent."
"However this has to be put in context of an evaluated valuation more than $300 million market capitalisation, and the price reaction today suggests that investors expected more than the company has delivered."
The RBA has released images for the new $10 note, which is due to start turning up in wallets late this year.
The note is a fusion of new and old. Writer AB 'Banjo' Paterson and poet and journalist Dame Mary Gilmore still have pride of place on the front and back, but Dame Mary's image has been substantially updated using a photograph of her when she was in her early 20s.
The note comes complete with symbols of rural life – sulphur-crested cockatoos, a farm-house and windmill, bramble wattle. Another cockatoo is hidden in the note's bottom left corner, and only appears under UV light.
It's clear that interest rates are too low in Australia and the US, and thank heavens some smart bankers are unilaterally lifting mortgage rates to cool housing market exuberance inflated by the RBA's rate cuts, the AFR's Christopher Joye says:
On Thursday investors who had bought bonds with fixed rather than floating rates of interest were hammered by news that core US inflation in January was much stronger than markets predicted.
US interest rate markets are the primary determinant of changes in the long-term price of money around the world and the inflation surprise pushed fixed-rate yields on AAA rated Australian government bonds up by 0.10 per cent.
Deutsche Bank's Torsten Slok criticised acolytes of the "low-rates-for-long" meme for clinging to weak US wages data in the January employment report, which some suggested could delay the Fed.
"The decline in average hourly earnings in January is a statistical fluke driven entirely by issues with wages in the financial sector," Slok explained. "The uptrend in wages seen since late 2014 continues, and this is what matters for discussions about when the Fed will raise rates."
Sanguine equity investors are nevertheless ignoring the higher cost of capital that is hurting anyone carrying duration risk with US sharemarkets rallying on the back of further data surprises, including better than expected retail sales in January (prior months were also revised up) and evidence US manufacturing activity is accelerating.
Locally bankers have prudently taken matters into their own hands, with CBA, BankWest and AMP all (again) lifting mortgage rates to cauterise surging demand from speculative investors following the RBA's silly rate cuts.
While house price growth and auction clearance rates remain too high in Sydney particularly, out-of-cycle rate rises and regulatory constraints on credit creation should suck the wind out of market's sails.
It's also possible the RBA will pull its head out of the sand and address the core problem that has propelled Australia's housing bubble since 2013 — artificially cheap money — by jacking up rates before the year ends. (Don't hold your breath.)
Read the whole article at the AFR
Uber drivers will have to pay 10 per cent GST from the first dollar they earn after ridesharing app Uber lost a 18 month battle with the Australian Tax Office.
In a decision handed down today, the Federal Court rejected Uber's argument that its drivers should not have to pay GST because it is not providing "taxi travel" and ordered the ridesharing app to pay the Tax Office's legal costs.
The decision confirms Uber drivers will have to pay 10 per cent GST on top of the 25 per cent commission to Uber regardless of how much they earn.
Uber sued the Australian Tax Office in July 2015 after the Tax Office declared from August 1, 2015, Uber drivers must pay GST regardless of how much they earn because they are providing a modern equivalent of taxi service.
The court case hinged on whether Uber was providing "taxi travel" for the purposes of the GST legislation. Generally businesses with less than $75,000 turnover do not need to collect GST. However, this rule does not apply to taxis, which means taxis have to pay GST from the first dollar they earn. If Uber was classified as a provider of "taxi travel" its drivers would also have to pay GST even if they earn less than $75,000 a year.
In case you missed this one: declining rates of home ownership aren't necessarily a bad thing, according to the Reserve Bank.
Addressing a conference of housing researchers in Melbourne, the Bank's head of economics, Luci Ellis, said participation in the housing market "need not be about owning your own home".
"Many people rent, someone else has to own those dwellings as well," she said. "In Australia, most private rental properties are owned by other households."
While the proportion of 25 to 34 year olds owning the home they lived in had fallen from around 60 per cent to around 50 per cent since the 1970s, this wasn't necessarily a cause for concern.
"Most of the decline happened by the early 1990s, before the big increase in housing prices relative to incomes," she said. "What changed during that earlier period was that people started partnering and settling down later in life."
Ownership rates for young people declined partly because "many people wait to settle down before they buy a home".
Ellis, until recently the Bank's housing specialist as head of its financial stability division, said a neglected concern was security of tenure. While a lot of renting was voluntary, renters appeared to be forced to move far more often than they would like.
Another big day for earnings, but unlike yesterday when there was a sea of red among companies reporting it's more of a mixed picture.
But it's probably fair to say that the losers are being punished harder than the winners rewarded. Even though the losses aren't always because earnings disappointed, but rather there is a bit of 'sell the fact' going around.
Here's the overview:
- ANZ: +1.7%
- Medibank: -4.1%
- Santos: +0.25%
- Whitehaven Coal: -2.4%
- Duet Group: -0.5%
- ASX Ltd: +0.2%
- Link: +3.75%
- Virgin: +2.6%
- Village Roadshow: -13%
- Pharmaxis: +1.7%
- Baby Bunting: -6.1%
- Fleetwood: -3.1%
- Abacus: +1%
- Pacific Smiles: +0.5%
- MyState: -0.85%
- Mantra: -4%
For all the numbers of today's reporters, here's the AFR's earnings season blog
Back to top
ANZ's first quarter trading update was an overall good result with a continued focus on reducing costs and also aided by a marginally better credit environment, Regal senior analyst Omkar Joshi says.
Here are the main points Joshi identifies:
- Cash earnings for the quarter were $2bn which was c20% above consensus expectations. This large beat was driven by stronger trading income, significantly lower provision charges and the sale of 100 Queen Street. Excluding these benefits, the result was only slightly ahead of expectations.
- ANZ continued to exhibit good cost control, with costs declining 1% on an adjusted proforma basis. A decline in the absolute level of costs is quite a significant change on previous years and is positive to see.
- Bad debts were 40% better than consensus expectations, however the bad debt charge in the first quarter is usually a bit lower than other quarters (c19% of the full year charge). ANZ has mentioned that the credit environment is "marginally better" than expected at the time of its 2016 full year result.
- Pleasingly, the run-down of risk weighted assets in the institutional business has continued with risk weighted assets in institutional declining by $0.9bn for the quarter.
- The net interest margin declined by several basis points in the quarter which was slightly weaker than consensus expectations.
ANZ shares are up 1.8 per cent at $30.76, providing the biggest boost to the benchmark index. Despite the rally, the stock is still down about $1 from recent highs early this year.
Shares have opened flat despite a strong rise in ANZ, as investors digest a busy week of earnings reports and strong gains over the past days.
The ASX is down less than 0.1 per cent at 5811.6, following a lacklustre session on Wall Street overnight.
A soft lead from US markets and slightly weaker base metals prices suggest that the local market will take a wait and see attitude in early trade this morning, said CMCchief market analyst Ric Spooner. "While bank results have been solid, Telstra's declining margins have concerned investors and selling may have further to run, weighing on the ASX 200 today."
Investors are giving ANZ's result the thumbs up, adding 1.5 per cent to the stock, which is buoying other banks too. CBA has added 0.5 per cent, Westpac is up 0.15 per cent, while NAB is bucking the trend, down 0.2 per cent.
Leading the loss-making among the market's heavyweights is BHP, down 1.15 per cent, followed by a 1.1 per cent drop in CSL.
Telstra is down another 0.5 per cent, following yesterday's 6 per cent slide in the wake of its earnings shocker.
SPONSORED POST
Traders are asking whether the recent push higher in global sharemarkets is close to exhaustion, but few want to stand in front of this bull, writes IG analyst Gary Burton:
The S&P 500 is already hitting most analysts full year predictions, but the index finished flat overnight. There would be a build up of those willing to stand in front of this freight train bull market, with short positions trying to pick the top, without any evidence of real market weakness. They are brave souls in this new world order of reinflation.
With legendary investors Warren Buffett and Charlie Monger increasing their positions in American Airlines and Apple, a position that has reportedly already made a billion dollar profit, this bullish stage of the markets may be just be getting underway.
Our market is now higher 7 out of 8 trading days and testing resistance at 5830 this may the point of inflection for traders as the resistance of 6000 points is tantalisingly close. Continued upbeat reporting may just allow the market to retest level in the near future.
And here's how major markets performed overnight:
- SPI futures down 1 point to 5763
- AUD -0.2% to 76.95 US cents (overnight range 0.7685 - 0.7732)
- On Wall St, Dow flat, S&P 500 -0.1%, Nasdaq -0.1%
- In New York, BHP +0.6%; Rio +0.4%
- In Europe, Stoxx 50 -0.4%, FTSE -0.3%, CAC -0.5%, DAX -0.3%
- Spot gold +0.4% to $US1238.60 an ounce
- Brent crude -0.6% to $US55.44 a barrel
- Iron ore down -1.1% to $US90.06 a tonne
- Steam coal +0.0% to $US80.00, Met coal -1.2% to $US160.00
- LME aluminium -0.8% to $US1897 a tonne
- LME copper -1.1% to $US6000 a tonne
- 10-year bond yield: US 2.44%; Germany 0.34%, Australia 2.79%
Whitehaven Coal has kept its dividend powder dry on the day it revealed half year profits were 20 times higher at $157.5 million.
A dramatic rebound in coal prices and the ramp-up of the new Maules Creek ensured the result was always going to be a big improvement on the $7.8 million net profit for the same period of last year.
The result was slightly below some analyst projections, but roughly in line with others.
Analysts expect Whitehaven to make more money in its second half thanks to the lagged effect of coal prices. Very few expected Whitehaven to pay an interim dividend, and those cautious expectations proved accurate.
The company reduced its debt from $835 million to $655 million since the comparable period of last year, and many believe the company will resume dividend payments in August.
Search pagination
1 new post(s) available. View post(s) Dismiss