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Shares advanced after solid gains across mining and energy stocks helped the sharemarket overcome selling in the big banks.
The S&P/ASX 200 index added 20 points, or 0.3 per cent, to 5876 points, after rebounding from early afternoon lows that would have left the benchmark measure in the red.
Bank shareholders appeared spooked by a warning early Wednesday morning from the head of the prudential regulator that the nation's largest lenders will have to hold more capital to ward against growing risks in the housing market.
ANZ lost 0.5 per cent, NAB 0.7 per cent, Westpac 0.6 per cent, while CBA eked out a 0.1 per cent gain. A 1.2 per cent drop in Wesfarmers, owner of Coles, also weighed heavily on the index.
The fact the sharemarket could overcome those bank-led losses was testament to solid buying in miners and oil and gas companies.
Crude oil hit a one-month high on Tuesday night and continued to climb through the Asian session, with Brent crude reaching $US54.46 a barrel in late Wednesday trade. Chinese iron ore futures climbed as traders returned from a two-day holiday, while coking coal futures soared a further 8.6 per cent in late trade as supply disruptions following Cyclone Debbie continue to reverberate through the market.
BHP Billiton jumped 3.5 per cent, while Woodside Petroleum added 1.6 per cent. Rio Tinto rose 2.7 per cent, Fortescue 5.2 per cent and South32 3.5 per cent.
Elswhere, Metcash dropped 4.9 per cent on reports that it will pursue a new program of price reductions across its IGA supermarket chain. Competitor Woolworths advanced 0.2 per cent.
Globally, investors are eyeing the meeting between the Chinese and US presidents in the coming days, and, perhaps more importantly, the start of the American quarterly corporate profit season next week.
More than 105,000 new cars were sold in March, up 0.9 per cent from a year earlier, making it best ever sales result for March.
SUVs made up a record 39 per cent of total sales, with 41,484 sold. The top-selling vehicle in March was the Toyota Hi-Lux with Ford Ranger in second place.
CommSec chief economist Craig James said annual vehicle sales growth over the past five years had averaged 3 per cent, well ahead of population growth of around 1.4 per cent.
"Car affordability is the best on record and buyers continue to take advantage of the favourable conditions," he said. "More vehicles means more demand for a variety of services such as vehicle servicing and parking with potential growth also for car parts, servicing, repairs and toll services."
BHP Billiton has declared 'force majeure' for all coal deliveries from its mines in the Bowen Basin, becoming the fourth miner in the region to invoke the commercial term that implies an inability to fulfil its obligations because of outside forces.
BHP has interests in 11 coal mines in the Bowen Basin, with nine operated as joint ventures with Japan's Mitsubishi under the BMA name and two in partnership with Mitsui, called BMC.
Force majeure is a commercial term that means a buyer or seller cannot fulfill their obligations because of outside forces. It is typically invoked after natural disasters or accidents.
A critical mountain pass on the railway connecting tAustralia's biggest coking coal mines to ports has been hit by landslides and buckled tracks caused by the cyclone, leading to the disruptions.
The line's operator, Aurizon, said it would take around five weeks to complete all repairs and alternative routes were being considered.
Dalian coking coal futures are up 8.6 per cent on their first trading day since Friday.
It was a mixed performance from the ASX-listed insurers over the March quarter, and weather is to blame, Credit Suisse analysts write.
Copping most of the bad conditions were IAG, owner of NRMA among other brands, and the Queensland-based Suncorp, which have resulted in "severe downgrades" to the broker's profit forecasts for this financial year.
In a note to clients on Wednesday, the analysts cut their IAG profits estimate for fiscal 2016-17 by 9.8 per cent, and Suncorp's 5.8 per cent, "primarily driven by increased natural hazard claims".
Suncorp shares are down 5.2 per cent so far this year, and IAG shares are 2.2 per cent lower, against a 3.2 per cent gain in the ASX 200 index.
Also on Wednesday, IAG told the exchange it expects will incur "natural peril" claims costs of $140 million as a result of Cyclone Debbie, which ravaged Queensland and northern New South Wales last week. The insurer said it has received around 4300 claims so far, mainly related to property damage.
As a result, IAG lowered its insurance margin guidance for the financial year, to 10.5-12.5 per cent from 12.5-14.5 per cent.
Vancouver began taxing foreigners who buy into its red-hot property market last year and in March, home sales fell 31 per cent from a year ago.
There were 3579 homes sold in the Pacific port last month, down from 5173 sales in the record-breaking month of March 2016, the Real Estate Board of Greater Vancouver said in a statement. Sales did increase from February, though, when 2425 homes were sold.
In August last year, Canada's third-largest city slapped a 15 per cent tax on foreigners - mostly Chinese - who have pushed prices sky high, making Vancouver, much like Sydney, one of the world's hottest property markets.
Vancouver mayor Gregor Robertson has also pledged to start taxing homes that are purchased and then sit empty. He aims to set an empty-home tax of between 0.5 and 2 per cent of the assessed value of the property, which would come to between $C5000 ($5070) and $C20,000 for a million-dollar home.
By contrast, the APRA said it will tighten macroprudential rules on investor home loans, the RBA has kept rates on hold for a seventh straight month even as Sydney's housing prices jumped 19 per cent over the year to March.
And when it comes to taxing foreigners, NSW has announced plans to begin levying a 4 per cent stamp-duty surcharge on foreign buyers.
"While demand in March was below the record high of last year, we saw demand increase month-to-month for condos and townhomes," Vancouver real estate board president Jill Oudil said.
"Sellers still seem reluctant to put their homes on the market, making for stiff competition among home buyers."
The tax measures also appear to have helped property prices plateau.
The board's benchmark price for a freestanding home has fallen 5 per cent in the past five months to $C1.489 million, the board said.
The board's composite benchmark price for all properties is $919,300, a 0.8 per cent decrease in the past six months.
China stocks are leading gains in the region on their first trading day after a holiday break, as investors cheer Beijing's decision to launch a huge new economic zone in Hebei province, with shares of more than 30 related companies surging the daily limit of 10 per cent.
Both the CSI300 index and the Shanghai Composite Index gained 1.1 per cent at the end of the morning session, to 3494.86 points and 3256.67 points, respectively.
Hong Kong stocks gained initially before edging lower, with the appetite for risk attenuated ahead of a potentially tense meeting between US President Donald Trump and Chinese President Xi Jinping starting tomorrow.
China approved a new special economic zone, described as "a thousand year project", on Saturday in the heavily polluted province of Hebei, to focus on building clusters of high-tech and innovative businesses and take over some "non-capital functions" from Beijing.
"The way they put it leaves lots of room for imagination, in terms of future investment," said Tian Weidong, an analyst at Kaiyuan Securities.
Tian identified several sectors aside from property that would benefit from the economic zone including environmental protection and infrastructure stocks. Both CSI sub-indexes were up over 2 per cent at midday.
"This time the momentum is more sustainable because it's boosted not simply by the housing market, which holds lots of uncertainty at the moment," Tian said.
Raw material stocks led the gains in a board-based rise, with the sector index up 2.8 per cent at the lunch break.
The days of Andrew Forrest's bold debt-fuelled strategy for Fortescue Metals might be over, with the company's new chief financial officer, Elizabeth Gaines, signalling she is willing to move the company into a net cash position as it seeks to balance investment and shareholder returns.
In her first interview since stepping into the role in early February, Ms Gaines told The Australian Financial Review she doesn't plan to make any "sudden changes" to the mining company's strategy, which has seen it take advantage of higher than expected iron ore prices to dramatically reduce debt.
The former Helloworld chief executive has been on the Fortescue board as a non-executive director, and a member of its audit and risk management committee and finance committee, since 2013.
"We have certainly always said we want to repay debt so we can get the gearing down and that is certainly part of the strategy but it is broader than that as well," Ms Gaines said.
"It tends to be a number of different limbs to that overall strategy around debt management, investing in our core business for the long term, looking at low-cost growth opportunities and then returns to shareholders."
Ms Gaines joins Fortescue's executive team in the wake of a significant improvement in its financial health over the past four years.
But Ms Gaines' time in the chief financial officer role will not come without its own challenges, with Fortescue the subject of close market scrutiny as it considers how to spend its growing pile of cash.
The $19 billion company had $US1.2 billion cash on hand at the half year, within its target "liquidity balance" of between $US1 billion to $US1.5 billion.
Ms Gaines says Fortescue does not have a new gearing target but debt reduction will remain a priority, to the extent the company could find itself in a net cash position, where it has more cash than borrowings.
Analysts have tipped the company could enter a net cash phase as early as next financial year if the strength in iron ore prices continues.
The damage to infrastructure in Queensland following last week's cyclone was much worse than expected, ANZ says.
"Landslides along the rail network to key ports could curtail exports significantly over the next month," ANZ commodity strategist Daniel Hynes writes in a note to clients.
"The impact will be felt the greatest in the coking coal market, although thermal coal doesn't escape unscathed."
ANZ estimates 13 million tonnes of coking coal and 3 million tonnes of thermal coal will be lost due to this disruption.
"While coal producers have learnt their lesson from the devastating floods in 2011, they will struggle to recover any of the lost production," Hynes says.
With rail infrastructure the bottleneck in the system, the likelihood of exports recovering any lost production will be limited to the stockpiles held at the ports, he says.
ANZ reckons the net impact of this disruption could be similar to the floods of 2011.
While Australian exports fell 25 million tonnes, North American exports jumped over 12mt, leaving the net impact at 13.5mt, Hynes says, adding the only difference this time is that the impact will be contained within a five to six-week window.
The bottom line: ANZ expects prices to surge well above USD200/t in coming weeks as buyers become increasingly desperate.
Inflation across OECD member nations is accelerating, with the average reaching the fastest in five years in February.
The increase was driven by energy prices, where the year-on-year change jumped to 11.1 per cent from 8.5 per cent, and food.
The OECD said energy prices rose 11.1 per cent in the 12 months through February, up from 8.5 per cent in the 12 months through January. Food-price inflation also picked up. Excluding energy and food items, the core rate of inflation was unchanged at 1.9 per cent.
Still, the pickup in headline inflation will be closely watched by central bankers, many of whom added to stimulus measures last year to fend off the threat of deflation.
Among the OECD's biggest economies, the fastest inflation was in the US, where the Federal Reserve is already increasing interest rates.
St Barbara managing director Bob Vassie won't mind if his new exploration partner finds a massive copper deposit near Cobar in New South Wales, but gold is what he is hoping for.
The clarification is timely, after St Barbara took a 9.56 per cent stake in Cobar-focused explorer Peel Mining this week.
The district is best known for Glencore's Cobar copper mine, and Peel has been reporting impressive grades of zinc, lead, copper and silver at its Wagga Tank and Wirlong projects.
When asked why St Barbara was sniffing around what seems to be a polymetallic ore body, Mr Vassie said it was in the hope that one of those metals might be gold.
"We are very targeted on gold, and our strategy is to remain being a gold company," he said.
Growth is high on the agenda at St Barbara now the company is debt free, and the miner is taking a multi-pronged approach to finding new ounces.
St Barbara is unlocking more gold deep below its flagship Gwalia mine in WA, and has made no secret that it would like to acquire a company or asset that is close to production and capable of delivering about 250,000 ounces.
Until recently, the third prong of that growth search - partnering with small explorers on prospective geology - had not been broadly understood, and Mr Vassie said this week he would only partner with "efficient, targeted companies that are doing a good job and getting most of their money in the ground rather than wasting it".
Gwalia produced 64,916 ounces of gold in the three months to March 31, which was almost 10 per cent lower than the previous quarter, but St Barbara's other mine, Simberi, produced a record 30,430 ounces in the quarter, helping the company to maintain full-year guidance of between 255,000 and 265,000 ounces of gold.
St Barbara shares were 8¢ higher at $2.61 on Wednesday, while Peel Mining shares were 18 per cent higher at 26¢.
Fairfax Media, publisher of this blog, has begun a period of editorial staff consultation ahead of job cuts that will contribute to lowering annual costs by $30 million.
Australian Metro Publishing, the division within Fairfax that publishes the Sydney Morning Herald, The Age and The Australian Financial Review, will undergo "major structural editorial changes required to secure the futures of the metropolitan mastheads," the company said.
Chris Janz, the newly installed managing director of the division, said the proposed changes means Fairfax is "now within reach" of its goal to create a sustainable publishing model.
"Including non-staff costs the proposal is expected to deliver approximately $30 million in annualised savings with the majority of these savings expected in the 2018 financial year," Janz said in a statement.
Fairfax shares rose as much as 1.9 per cent to $1.065 following the announcement, but have since lost most of their gains and are currently up 0.2 per cent at $1.0475.
Shares hit a 12-month high of $1.10 last week, boosted by news that private equity giant TPG has been considering a bid for the $2.4 billion media company to get its hands on Domain, the fast-growing online property advertising portal that makes up the bulk of Fairfax's value.
A leaked US monetary policy tip off to an Australian interest rate analyst, from inside the Federal Reserve, has forced a veteran Fed board member to quit for tacitly confirming to her "information that should have remained confidential".
Jeffrey Lacker resigned abruptly after admitting he spoke to professional central bank watcher Regina Schleiger a day before she published a newsletter for hedge fund clients that contained remarkably accurate predictions about the Fed's stimulus plans nearly five years ago.
New York-based Schleiger, a former Sydney Morning Herald journalist turned central bank analyst for macro policy intelligence firm Medley Global Advisors, is one of several people embroiled in US law enforcement investigations into the leak of the Fed's non-public information.
The scandal has damaged the reputation of the world's premier central bank and triggered a political backlash in Washington.
In October 2012 in the aftermath of the financial crisis, Schleiger's Medley "special report" sent to high-paying Wall Street subscribers foretold that the Fed would expand its asset purchase program to include $US45 billion of Treasury securities a month and refrain from lifting rates from near zero until the high unemployment rate had fallen to 6.5 per cent.
She also identified the preferred policy positions of individual Federal Open Market Committee members and revealed that Fed economists in Washington were working past midnight on the stimulus plan.
Lacker, a 13-year president of the Federal Reserve Bank of Richmond and interest rate committee member of the US central bank, disclosed on Tuesday in the US that he spoke by telephone to Schleiger a day before her October 3 2012 report was issued.
According to Lacker, she introduced into the conversation "an important non-public detail about one of the policy options considered by participants prior to the meeting".
Lacker in his resignation statement signalled that he wasn't the original source of the information, but that his failure to decline to comment and decision to carry on the discussion "could have been taken by the analyst, in the context of the conversation, as an acknowledgment or confirmation of the information".
"I crossed the line," Lacker said. "Due to the highly confidential and sensitive nature of this information, I should have declined to comment and perhaps have ended the phone call."
Lacker's lawyer said he would not be facing charges. The Fed's inspector general, Mark Bialek, said in a separate statement that he was closing an investigation into the leak.
Nice chart here: no US recession in sight despite the third-longest stretch of growth:
US expansion proving durable (3rd longest post WWII). No recession in sight, #ANZ index suggests prob of #recession in next year at <5% pic.twitter.com/do27FzyvxM
— ANZ_Research (@ANZ_Research) April 5, 2017
Banks are dealing with an "implosion of trust and an explosion of scrutiny", former Queensland premier Anna Bligh has warned.
In her first speech since her controversial appointment as head of the Australian Bankers Association lobby group, Bligh said it was her mission to reverse a "profound and fundamental shift in trust" against institutions like banks that is happening all over the world.
"Banks here in Australia are under an unprecedented level of pressure and scrutiny. I think there is a direct correlation between the implosion of trust and explosion of scrutiny," she told the AFR's wealth and banking summit.
While being the "envy of the world" for their strength and stability, even during the global financial crisis, Bligh said the respect of customers did not match that level of peer respect.
"Australian banks have lost trust in their ability to balance the interests of customers and shareholders. Politicians and regulators are responding to this with unprecedented levels of scrutiny."
For more on the summit, here's the AFR's live blog
The ASX is struggling to hold onto its early gains but one sector doing quite well today is energy.
The sub-index is up 1 per cent after earlier rising as much as much as 1.5 per cent to its highest in more than two months.
Among the biggest winners are Beach Energy, which is rallying 4.5 per cent, WorleyParsons, up 2.1 per cent, and Santos, up 1.6 per cent.
The gains come courtesy of a 2 per cent rise in the Brent crude oil price to a near one-month high of $US54.17 a barrel, supported by an unplanned production outage in the North Sea and expectations of a drawdown in US crude and product inventories.
In the North Sea, production of crude oil from Britain's 180,000 barrel per day Buzzard field was temporarily halted while repair work is carried out at an onshore processing terminal, trading sources said, noting normal output should be restored in the coming day or two.
Meanwhile, US crude stocks fell by more than expected last week, dropping by 1.8 million barrels compared with analysts' expectations of a 435,000 barrel decline.
Yet global inventories remain high. UBS analyst Giovanni Staunovo said OPEC was taking longer than expected to tighten the oil market but recent data suggested the process was now well under way.
"We believe the implemented production cuts will trigger a material drawdown in OECD oil inventories and thus higher crude oil prices," Staunovo said. "We expect Brent oil prices to rise above $US60 a barrel in three months."
China's coking coal futures have jumped as much as 7 per cent in early trade on news of Cyclone Debbie hitting supplies at key mines last week.
Coking coal futures are up 6.5 per cent at 1352 yuan ($US196.42) per tonne. The most-active thermal coal futures were up 1.6 per cent at 643 yuan per tonne.
Coking coal prices up $50 in last week on impact of Cyclone Debbie - keep an eye on quarterly contract negotiations which are going no now. pic.twitter.com/l4yRAwuGsw
— Robert Rennie (@R0bertRennie) April 4, 2017
Chinese markets reopened today after closing on Monday and Tuesday for a public holiday.
The spot price rose another $US1.10, or 0.6 per cent, to $US176.80 overnight, after having soared 15 per cent on Monday.
Whitehaven Coal has been one of main beneficiaries of the coal price spike, as it's mines weren't affected by the cyclone,, It's up another 1.4 per cent at $3.32, its seventh day in the black.
Dalian iron ore futures, meanwhile, are also being pulled higher, opening up 2 per cent at 567 yuan.
Short positions in the major Aussie bank stocks have steadily decreased since the middle of last year.
In a research note, Deutsche Bank analysts said that short positions reduced by around 24 basis points in March to an average of 0.9 per cent of total bank shares outstanding. Average short positions for the big four banks have shrunk by 1 per centage point year-on-year.
After a sustained build-up, bank short selling reached a peak in May 2016. The majors were under fire amid calls for a royal commission into poor conduct, increased regulation and uncertainty about the medium-term interest rate outlook.
Those fears appear to have eased, as this chart tracks the reduction in short positions over the last 12 months.
After experiencing the most rapid reduction in shorts over the last 12 months, ANZ was the only major in which short selling ticked upwards in March. March shorts in ANZ stock rose by a fractional 4 basis points.
Calculating the reduced volume of short shares on issue with reference to the market cap of the big four banks before markets opened this morning, the reduced short volume equates to $4.89 billion worth of value.
The ASX 200 banking index is up 5.5 per cent this year.
IAG shares have taken a small hit after the insurer trimmed margin guidance and estimated the costs from Cyclone Debbie would reach $140 million.
The insurer lowered its insurance margin guidance to 10.5 to 12.5 per cent from 12.5 to 14.5 per cent as a result of the higher-than-expected claims costs.
The company said it had received about 4300 claims for mainly property damage caused by Debbie's rains and strong winds.
"This is a highly unusual and complex event with the devastating effects still being felt across north and south east Queensland, northern NSW and New Zealand," the insurer's chief executive Peter Harmer said.
Following the event, it increased its natural peril claim target to $850 million, from $680 million, which allows the insurer around $100 million for further peril events in April, May and June.
Shares are down 1 per cent at $5.91.
This may help explain Metcash's 3.5 per cent drop this morning:
Metcash is working with IGA retailers and suppliers on a new price matching program aimed at stemming market share loss, which has accelerated since Woolworths turned the corner last year.
Industry sources said Metcash was preparing to invest another $40-50 million into reducing grocery prices under Price Match II, the second iteration of a successful program that cut prices on key grocery lines by about 3 per cent to match those at Coles and Woolworths.
The first program, launched by Metcash chief executive Iain Morrice in 2014, helped stem the decline in Metcash's wholesale revenues and boosted same-store sales at participating IGA retailers, who part-funded the price reductions.
Comparable store sales in IGA supermarkets rose 1.4 per cent in 2016, twice the rate of growth in 2015, and sales at about 960 stores that matched prices rose by an average 3 per cent.
However, analysts said the impact of Price Match was wearing off as the major chains stepped up price investment, improved their fresh food offers and opened more small-format and metro stores, chipping away at Metcash's reputation for convenience.
Ritchies Supermarkets chief executive Fred Harrison, who runs about 82 IGA stores, said IGA retailers' same-store sales growth had slowed but remained positive in the past 12 months (moving annual total to the end of February).
"IGA is still holding up, it's not all doom and gloom," Mr Harrison told The Australian Financial Review.
Mr Harrison said Price Match had "stopped the rot" when it was launched almost three years ago but needed to be revamped.
Metcash is also seeking supplier support to fund at least part of the investment in price to reduce the impact on its food and grocery distribution margins, which have halved in the past five years from 4.8 per cent to 1.9 per cent.
"If it's funded by suppliers and retailers, Metcash might get out without too much damage [to margins)]," one analyst said.
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