And while we're talking about trade, here's Michael Pascoe's take on Scott Morrison's Monthy Python moment:
It's a dangerous thing to talk a big game before taking the field. Treasurer Scott Morrison did that pre-departure for the weekend G20 finance ministers meeting in Germany. He's been left trying to claim a big loss was actually a win. Monty Python's dismembered Black Knight comes to mind.
Last week Morrison told Fairfax Media he would take no part in any weakening of the G20's pro-trade stance – but that's just what happened. The G20 was right royally Trumped, its public free-trade commitment blown out of the water.
The mealy-mouthed platitudes of the final communique mean nothing. That's why the US was prepared to go along with it. Instead of the previous pledge to resist protectionism, members only say they'll be "working to strengthen the contribution of trade to our economies" – which could mean anything at all – and that they would "strive to reduce excessive global imbalances, promote greater inclusiveness and fairness and reduce inequality in our pursuit of economic growth".
That bit sounds ominous as Trumpland believes it's the victim of excessive trade imbalances and has been treated unfairly by unequal treaties. This G20 communique could be waved as approval for Trump to disregard the World Trade Organisation, tear up agreements and dubiously insist on "America first".
"I don't expect to see any change in the disposition of members of the G20, broadly speaking, from anything they've said before, which has been a pro-trade, pro-growth position," Morrison said last week.
The omission of a line to "resist all forms of protectionism" from the G20 statement this weekend at the apparent behest of the US has sparked a bit of trade war apprehension among observers.
But Citi points out that the move by the US should be understood as part of its negotiating strategy to change trade relations (eg increasing market access for US producers) and does not necessarily imply an intention to impose trade remedies and ramp up protectionism.
"It underlines the new US administration's desire to redress its trade relations, while reserving the right to use leverage to achieve its aims," the bank's economists write in a note to clients.
Citi also notes that the G20 "commitment" to free trade has for nearly a decade been consistent with a large number of protectionist measures by its members.
Overall, the analysts expect a continuation of the gradual rise in protectionism in recent years and for globalisation to stall, adding that a major rise in protectionism (including the risk of trade wars) is one of the main risks to the global outlook.
UBS global chief economist Paul Donovan agrees that saying that the G20 wishes to avoid protectionism does not necessarily make it so. "However, the deliberate change in tone reinforces the idea that on trade, the Trump administration will implement at least some of the campaign rhetoric."
Singapore has retained its ranking as the best place in the world for expats for the second year running, significantly ahead of Australia in areas including career, finance and family opportunities.
A total of 62 per cent of expats in Singapore say living in the country improved their career progression, compared with just 46 per cent of expats in Australia, according to a global report from HSBC.
Altogether Australia ranks in 11th position below countries like New Zealand or Czech Republic - and Singapore.
Earning prospects and employee benefits were seen as significantly more attractive in Singapore, with 63 per cent of expats earning more than in their home countries (just 48 per cent for expats in Australia) and 72 per cent receiving employee benefits packages compared to just 25 per cent of expats in Australia.
Career-minded Australians are among those moving to Singapore, with more than 20,000 now calling it home, compared to just over 2000 in 2001, HSBC says.
People flows between Singapore and Australia aren't all one-sided, with separate research from HSBC recently showing that Australia is the most desirable country for Singaporean parents to send their children to study.
About 135 Flight Centre stores would need to be closed for the company to regain the same level of boom time growth it had in 2012, according to Macquarie.
Flight Centre has a major retail presence in Australia with 678 physical locations, but that level of presence is being questioned by Macquarie.
"Flight Centre Total Transaction Volume per store has not grown since 2012," the analysts said in a report to clients called Flight Centre Travel Group – Shrink to grow: alternative growth paths, "and therefore according to our transport analysts, additional store openings have been dilutive to sales productivity."
The analyst said that meant Flight Centre needed to start rethinking how many stores it maintained.
"To return to same store growth as seen in 2012, Flight Centre would need to close the number of stores it opened in the period from 2012 to 2016.
"This equates to approximately 20 per cent of the current total of 1536 teams. Given Flight Centre has 678 physical locations, this would mean closing 135 stores.
"There are 18 store locations in the Sydney CBD, and with reference to Chadstone, the catchment area extends well beyond the area of both surrounding shopping centres and independent Flight Centre store locations."
Flight Centre shares are down 0.5 per cent at $28.70.
The market is significantly undervaluing Bunnings, Goldman Sachs says, calling owner Wesfarmers a 'buy'.
Wesfarmers is trading at its largest discount to Woolworths since the GFC, analyst Adam Alexander says, reiterating his 'buy' recommendation.
"The closure of Masters leaves Bunnings poised to deliver strong sales growth, margin expansion and acceleration of store roll-outs," he explains.
Despite these positive tailwinds, Alexander says Bunnings trades at a price-earnings ratio of only 12.4x financial year 2018 estimates, according to a sum-of-the-parts analysis - which is a 30 per cent discount to the ASX 200 industrials average.
"Further, the recent investor tour of their new UK assets gave us increased confidence in this expansion strategy," he says.
Talking housing market, China's red-hot property market picked up pace in February after price gains had slowed in the previous four months, with average new home prices in 70 major cities edging up in spite of a raft of new government curbs aimed at tempering speculative demand.
Compared with a month earlier, new home prices rose 0.3 per cent, quickening from January's 0.2 per cent increase, according to Reuters calculations from data issued by the National Bureau of Statistics (NBS) on Saturday.
The monthly gain in price growth suggested speculation has yet to be contained even with more local governments rolling out restrictive measures amid fears that a furious rally over the past year end in a crash.
China's property sales unexpectedly surged in the first two months of the year despite government measures to cool the market, though growth in real estate investment eased slightly.
Recent weeks have seen the biggest wave of tightening of home purchase and lending rules since October, a sign that prices remains strong as investors gamble the measures so far won't contain prices.
On Friday, Beijing's municipal government announced new steps to rein in its housing market, increasing the minimum down payment for second home purchases in the city to at least 60 per cent from 50 per cent.
Treasurer Scott Morrison has signalled that a renewed surge in investor property buying - particularly with interest only loans - is likely to trigger a fresh regulatory crackdown on banks as part of the government's efforts to boost affordability for actual home buyers.
With the May budget due to unveil a series of measures that would "reduce the burden" on those looking to buy or rent a house, Morrison indicated that so-called macroprudential restraints on lenders introduced in 2015 were no longer working as effectively as they were in 2016.
"There remain pressures that have built up again over the last few months," Morrison said in Canberra.
Speaking after returning from the Group of 20 finance minister's meetings in Germany on Friday and Saturday, Morrison said it was up to regulators - which are led by the Reserve Bank of Australia and the Australian Prudential Regulation Authority - to be "using the levers that they have".
The remarks are the clearest indication that the federal government supports a renewed focus on bank lending to investors, which has gathered steam since the Reserve Bank last cut the official cash rate in August last year and is nearing APRA's 10 per cent annual speed-limit.
Reserve Bank assistant governor Michele Bullock effectively warned banks last week that regulators are weighing up more restraints to curb demand in cities such as Sydney and Melbourne, where prices continue to surge at double-digit rates.
Local shares have opened lower, with losses across most sectors as investors turn cautious.
The ASX is down 0.3 per cent at 5781.7.
"A week driven by macro events gives way to local factors this week. Asia Pacific markets could turn to regional data and events to drive markets this week," says CMC chief market strategist Michael McCarthy. "Negative leads from US shares and a short term rally in safe haven assets may see trading start on a cautious note today."
Fletcher Building is the biggest loser among the top 200 stocks, plunging nearly 11 per cent after the New Zealand building giant cut its earnings forecast.
Most blue chips are trading lower, with the exception of ANZ and NAB.
With much of the big data out of the way by the close of last week and a quadruple expiry of equity options and futures markets, equities have been left uninspired but continue to look supported, IG analyst Gary Burton says:
This week and following a 25 basis point rate rise, a greater insight into how the Federal Open Markets Committee (FOMC) views the Trump administration policy could be gained, with nine members of the FOMC speaking at events throughout the US. One suspects we are seeing a growing belief that the Trump inspired rally may be coming to an end, with little detail emerging around policy statements and it seems this is a key reason why the S&P 500 is looking so directionless and struggling to move over the key 2400 level.
Bank of America's strategists have taken a more bullish stance suggesting the S&P 500 will reach 2500 points by years end and I would not rule this out either. Considering the benchmark index had already exceeded every analysts estimation for 2017 by the end of February, 2500 points may just be another milestone in this animal spirits driven market. Add in the expectation for earnings per share (EPS) growth between 13 and 19 per cent for 2017 and growing dividend yield the markets may fulfil this very strong projection.
One area of focus has been the G20 meeting over the weekend of which the Australian treasurer Scott Morrison attended. It really seems the broader economic community is also becoming comfortable about the synchronised future of global growth with the expectation that inflation and GDP growth will remain at or above the key 2% level for 2017 and 2018. Some of the commentary from the G20 statement centred around growing greater ties with the African nations and to provide funding to build infrastructure, this would be of great interest to the Euro region in the aftermath of the United Kingdom decision to leave the Euro.
Financial leaders from the world's biggest economies found common ground on foreign exchange at a G20 meeting on Saturday but failed to agree on trade, highlighting a global shift towards protectionism and setting a cautious tone for financial markets.
The Group of 20 powers meeting in the German spa town of Baden-Baden reiterated their long-standing warnings against competitive devaluations and disorderly FX markets, allaying fears that the new US administration might have opened up a chink in the G20's united front on global currency policy.
For markets, no change to G20's stance on FX is welcome news. Having the world's financial and economic powers on the same page should help keep FX volatility low, a cornerstone for stable markets and rising asset prices more broadly.
Most major currencies have opened little changed this morning.
But failure to agree on a commitment to keep global trade free and open will have negative consequences for financial markets, even if not dramatically so immediately.
"We may open on Monday with modest dollar weakness thanks to the failure to agree on trade, but it would have been a lot worse if there were major changes to the FX language on top of that," Tim Graf, managing director and head of macro strategy EMEA at State Street in London, said yesterday.
The US dollar has slipped recently even though the Federal Reserve has raised US interest rates, because longer-term bond US yields have eased back. The greenback had its biggest weekly fall for two months last week.
Washington may have signed up to the language on FX, but it is widely believed that it wants a weaker exchange rate. It blames the persistent US trade deficit, manufacturing decline and lack of competitiveness on the dollar's strength.
More importantly on the weekend, one sentence from last year's G20 communique - the shortest and one of the most important - was omitted: "We will resist all forms of protectionism."
This points to a fundamental disagreement between the US administration and the other 19 participants, particularly the Europeans, who flatly rejected any form of protectionism.
US Treasury secretary Steven Mnuchin said that the previous communique was not necessarily relevant to the current global economic climate from his point of view. He said he favoured "free" trade but some agreements might need to be renegotiated.
Yet despite the isolationist and anti-globalisation rhetoric from the US administration, the implementation of protectionist policies and reality of trade wars are not immediate concerns, analysts say.
"This G20 is not really a big deal for the market, partly because the language on FX was maintained," Kenneth Broux, head of corporate research, FX and rates at Societe Generale, said.
"The disagreement on trade and protectionism is new, but the meeting at a later date between US President Donald Trump and Chinese premier Li could be more pertinent to where trade negotiations are headed," Broux said.
Fletcher Building shares are expected to test a 12-month low today, after cutting about 15 per cent off earnings guidance issued only four weeks ago.
Trading desks reckon Fletcher shares will open below the $8 mark and could even test the $7 mark.
They said the stock was matching at $7.84 with more than half an hour left before the open, and was likely to be lower come the opening bell. Fletcher shares last closed at $8.34.
It comes after the $5.8 billion company re-issued full-year earnings guidance to $610 million to $650 million, down from the previous range of $720 million to $760 million.
The building materials company blamed contracts in the building and interiors unit of its construction division.
Analysts and fund managers were awaiting more details in a pre-market call.
In the meantime, Citi analysts told clients: "Although details of the actual contracts doing the damage to earnings are not provided we expect it will likely be further losses booked on the major Justice Centre project together with losses expected to be incurred on the Convention Centre project and provisions for a number of smaller contracts.
"Expectations for the possibility of further losses are understandable given problematic contracts run through to early FY19; and management has noted that there was an expectation for a $10m contribution for construction EBIT in FY18, which we expect is likely the Convention Centre project."
That also means 2018 earnings expectations will come under review.
Here's the overview how major markets and asset classes performed on Friday night:
- SPI futures down 13 points or 0.2% to 5770
- AUD at 76.99 US cents
- On Wall St, Dow -0.1%, S&P 500 -0.1%, Nasdaq flat
- In New York, BHP +0.7%, Rio +0.2%
- In Europe, Stoxx 50 +0.3%, FTSE +0.1%, CAC +0.3%, DAX +0.1%
- Spot gold +0.3% to $US1230.20 an ounce
- Brent crude -0.1% to $US51.70 a barrel
- Spot iron ore -0.3% to $US92.34 a tonne
- Dalian iron ore +0.3% to 717 yuan
- LME aluminium +0.7% to $US1914 a tonne
- LME copper +0.4% to $US5934 a tonne
- 10-year bond yield: US 2.50%; Germany 0.43%; Australia 2.86%
US stocks dipped on Friday as bank shares fell alongside Treasury yields while Adobe helped buoy the S&P tech sector and the Nasdaq Composite.
Amgen was the largest drag on both the S&P 500 and Nasdaq, down 6.4 per cent at $US168.61, after the extent of a cholesterol drug's benefits in a highly anticipated study disappointed investors, even if it cut the risk of heart attacks and strokes by over 20 per cent in patients with heart disease.
The S&P tech index was supported by Adobe's surge to a record high of $US130.30 after the Photoshop software maker reported strong earnings. The stock ended up 3.8 per cent at $US127.01.
Indexes were little changed for a second day even if the Nasdaq Composite touched a record intraday high. Analysts say investors are expecting a catalyst to thrust stocks higher after bets on President Trump's promises of tax cuts and a fiscal stimulus drove Wall Street to all-time highs on a weeks-long rally.
"Investors are moving from sector to sector dependent on where the US dollar is, comments from the White House on the health care act, and earnings," said Quincy Krosby, market strategist at Prudential Financial.
"The 10-year (benchmark US Treasury note yield) dipped below 2.5 per cent and financials pull back while utilities get bid. This churn is a way for the market to consolidate."
Analysts increasingly worry that the Trump administration is spending too much of its political capital in an effort to pass a Republican-proposed healthcare bill, which may leave it wanting for support when it tries to reform the tax code.
Bets on the passing of a tax reform are one of the pillars of the equities rally since the November presidential election.
"This is a market waiting for its next catalyst and I think it wants to hear it from the White House," Krosby said. "That's very important for a market that embraced the pro growth agenda of the Trump administration.
The Dow Jones Industrial Average fell 19.93 points, or 0.1 per cent, to end at 20,914.62, the S&P 500 lost 3.13 points, or 0.13 per cent, to 2,378.25 and the Nasdaq Composite added 0.24 point, or 0 per cent, to 5,901.00.
For the week the S&P rose 0.2 per cent, the Dow gained less than 0.1 per cent and the Nasdaq added 0.7 per cent.
Local shares are poised to start the week lower, with thoughts of rising trade protectionism potentially at the forefront of investors' minds and ahead of a raft of speeches from central bankers.
ASX futures closed down 13 points over the weekend as financials, including Goldman Sachs and JP Morgan, slumped in New York. The Standard & Poor's 500 index slipped 0.1 per cent to 2378, limiting its weekly gain to 0.2 per cent.
But, while momentum faded on Friday, global stocks recorded the best week since January after the US Federal Reserve raised its benchmark lending rate without accelerating the timetable for future hikes.
As the week progresses, a litany of speeches by central bankers – specifically in the United States – may add to the market's comfort with a global trend towards tighter monetary policy, or threaten to puncture it.
The Reserve Bank's Luci Ellis is first off the mark speaking in Canberra today. The RBA's latest meeting minutes are to be released Tuesday with Guy Debelle speaking at a conference in Singapore on Wednesday. On Thursday there is a policy meeting across the Tasman at the RBNZ.
There are also nine Fed speeches on the schedule this week, which will "provide an opportunity for the Fed to re-calibrate market expectations after what the market interpreted to be a somewhat dovish hike," NAB economist David de Garis said. All bar three of the nine are voting members of the Fed's monetary policy setting committee, de Garis noted.
RBC Capital Markets chief US economist Tom Porcelli said it was "puzzling" that the market took last week's US Fed meeting so calmly.
"There are now only three [board members'] forecasts calling for less than three hikes this year, compared to six in the last go-around," Porcelli said. "In other words, you now have 82 per cent of the [Federal Open Market Committee members] in the three-hike camp or higher."
"Yet the market closed that day at a 50-50 chance of two or three hikes this year. Why the market views what is a higher probability that we get three hikes as something that should equate to lower odds of three hikes this year is puzzling to say the least."
Good morning and welcome to the Markets Live blog for Monday.
Your editor today is Jens Meyer.
We welcome any suggestions on how to improve this blog - please send your feedback to jmeyer@fairfaxmedia.com.au
This blog is not intended as investment advice.
Fairfax Media with wires.
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