Markets Live: Miners fall off a cliff

That's all from us for the week. The markets are closed tomorrow, but we'll be back on Monday from 9am. Thanks to everyone for reading along and sharing your thoughts.

We'll see you on the other side of Easter.

Have a good evening and a lovely weekend. 

Plunging iron ore prices and a renewed focus on geopolitical tensions sent the ASX lower on Thursday, erasing around half the gains made earlier in the week. 

The benchmark S&P/ASX200 fell 0.7 per cent to 5889.9 in broad-based losses, while the broader All Ordinaries index was 0.7 per cent lower to 5925.9. That drove the ASX to a small weekly gain, with the ASX200 up 0.5 per cent.

Weighing most on the index were the miners, after iron ore tumbled 8.5 per cent overnight. While iron ore futures did point to the metal recovering later in the day, it wasn't enough to save Australia's major resource companies, with the materials index weighing heavily - down 2.9 per cent - on the index.

BHP and Rio Tinto were 4.0 per cent and 4.4 per cent lower respectively. Pure-play iron ore miner Fortescue was savaged, falling 6.8 per cent. 

Meanwhile gold miners, who'd already done well earlier in the week, posted the index's largest gains. Northern Star Resources surged 6.8 per cent, Evolution Mining was up 2.9 per cent while Independence Group added 3.0 per cent. The All Ordinaries Gold Index rose 2.2 per cent over the week's four trading sessions. 

Defensive buying could also be discerned in some of the ASX's best performers on Thursday. Yield stocks like Sydney Airport and REA Group rose strongly, both up 1.9 per cent. 

"There is a lot of risks out there at the moment and a lot of unknowns," said Chris Conway, chief strategist and head of trading at Australian Stock Report. "Geopolitical tensions – Russia, Syria and North Korea – must be on investors' mind at the moment."

Not that investors should panic, he added. "At this stage, the current pullback looks like any other pullback we've seen over the past few months,"

"Such pullbacks have been greeted as a buying opportunity from the market."

Get set for a price war in the Australian mobile phone market as the near-$2 billion entry of the aggressive telco TPG, controlled by reclusive billionaire David Teoh, sets the scene for a major industry shakeup, Elizabeth Knight writes:

TPG, which is already a big player in the broadband market, kicked off its entry with a $1.26 billion investment in spectrum and has earmarked a $600 million spend on rolling out cell sites in order to cover 80 per cent of the Australian market.

Run by rich-lister Teoh, who has an estimated personal wealth of $2.2 billion, TPG has a history of disrupting the telecommunications market, running a low-cost business and cutting prices.

The extent of the damage to incumbent players was evident immediately on Wednesday morning as Telstra's shares fell more than 7.5 per cent, wiping more than $4 billion from its stock market value.

TPG expects to have the new mobile business earnings positive when it reaches a 6 per cent to 7 per cent share of the $8 billion mobile market.

Attracting those customers will require attractive pricing for voice and data – which the other major players – Telstra, Optus and Vodafone will need to adjust for. This, in turn, will have a negative effect on their profit margins.

As the biggest player Telstra will have the most to lose, its pricing levels are already higher than the others, which it justifies by better network coverage.

Even without the entry of TPG, the level of competition in mobiles has been increasing and it's putting a strain on the telco earnings.

Here's more

Construction and contract mining giant CIMIC Group's quarterly profit has jumped 23 per cent.

CIMIC made a net profit of $160.3 million in the three months to March, up from $130.3 million a year earlier. It has reaffirmed its guidance of an annual profit of between $640 million and $700 million in 2017.

Chief executive Adolfo Valderas told shareholders at the company's annual general meeting on Thursday that there was nearly $80 billion worth of tenders relevant to CIMIC to be awarded over the rest of 2017, and around $250 billion for 2018 and beyond.

CIMIC also said it would keep its options open in relation to mining services provider Macmahon Holdings, in which CIMIC holds a 23.6 per cent stake after its recent takeover effort. The recent acquisition of engineering, construction and maintenance firm UGL also provides CIMIC with a further platform for expansion, Mr Valderas said.

Cimic shares are flat at $36.38.

AMP Capital chief economist Shane Oliver has backed fellow economist Chris Richardson advice that young Australians consider renting rather buying a home in the current cycle.

"The one bit of advice I give to young Australians is right now you know...amid our housing markets of the moment is 'don't buy'," the Deloitte Access Economics economist told the National Press Club this week. "...rents today make a lot more sense than housing prices," he added.

Oliver told the AFR that Richardson's advice was "totally right" given that rental yields were at record lows with "rents not kept up with ridiculous home price gains".

"Now is not the time to buy, but rather to rent in places like Sydney and Melbourne. Obviously its more complicated than that for some people. I am talking from a purely financial point of view," he said.

Gross rental yields in Sydney and Melbourne range from 2.7 per cent to 4 per cent, according to CoreLogic, and would be half that on a net basis once borrowing and other real estate costs are deducted.

Oliver likened the disconnect between rents and house prices to company profits not keeping up with share price gains. "It will be alright for a while, but eventually the market will recognise there is an overvaluation," said Oliver.

Here's more at the AFR

While Australians will dig into Easter chocolates over the next few days, it's unlikely to reverse the bad news for the world's cocoa producers, who've seen prices for the commodity tumble 34 per cent in the past 12 months. Meanwhile, those slightly further down the supply chain aren't doing much better, which chocolate consumption falling, albeit slowly, across much of the developed world.

"Our research reveals that changes in per capita consumption points to an important shift in consumers' eating habits, as consumption of chocolate confectionery is declining in the top five markets," said Marcia Mogelonsky from researcher Mintel.

Nielsen data also showed a drop in consumption. Global chocolate sales fell 2.1 per cent in the past six months, falling especially quickly in Europe and the Americas, while growing in Asia. 

Meanwhile, cocoa futures for July delivery fell 1.1 per cent today - on top of the 34 per cent price fall in the past year. The falling futures reflect improving weather conditions which led to a bumper crop, as well as the falling demand.

The cocoa producers of Ivory Coast and Ghana, who together account for over 60 per cent of the world's cocoa supply, said today they would work together to coordinate production in order to tackle price volatility.

"It's become imperative that our countries take decisions on points concerning production and sustainability and on points concerning the prickly question of the volatility of prices," the head of Ivory Coast's Coffee and Cocoa Council, Massandje Toure-Litse, told reporters after a meeting with her counterpart Joseph Boahen Aidoo, CEO of Ghana Cocoa Board (Cocobod).

"Henceforth the world cocoa leaders speak with one voice everywhere and at all times."

Infant formula supplier Bellamy's Australia has confirmed acting chief executive Andrew Cohen as the permanent head of the company.

Cohen has been in the role since January 11, replacing long-term chief execuive Laura McBain, who resigned after a torrid two months for the company.

Bellamy's has also appointed as a non-executive director John Ho, the founder and chief investment officer of Hong Kong-based investor Janchor Partners, which has a stake of 7.01 per cent in Bellamy's.

Shares are flat at $4.45.

Here are some economist reactions to the suspiciously strong jobs report. Look at the trend figures, is the most popular recommendation:

Gareth Aird, CBA:

The integrity of the ABS labour force report will be called into question once again due to today's data. The market was positioned for a decent report (consensus +20k, CBA +25k) and the ABS delivered an incredible set of numbers. Taken at face value, the report is comprehensively strong. The trend unemployment rate, which we consider the best barometer of the jobless pulse, inched higher and has been on a very slight uptrend since September 2016.

Andrew Ticehurst, Nomura:

We have noted the volatility in this data before due to sample size and the effects of sample rotation, so we downplay the indicative value of these numbers. We also note that March has generally produced above-average gains over the past few years, so there may well be some residual seasonality affecting this print as well. Instead we prefer to rely on the ABS trend data, which for March shows a more reasonable 16,500 person job gain. This brings the trend up a little, but to a level now consistent with our interpretation of job ads, skilled vacancies and business surveys.

Paul Dales, Capital Economics:

The huge leap in employment in March looks suspicious to us and we think the stagnation in the unemployment rate at a 14-month high of 5.9% is a better signal of the state of the labour market. That rate is close to the 6% plus mark that we think would really worry the RBA. Uur forecast that the unemployment rate will stay close to 6.0% for most of this year means those concerns will linger for a while yet. 

Scott Haslem, UBS:

There's clearly more work to be done on improving Australia's jobs survey data. All that can be said is the 6mth trend is consistent with a ~2% y/y pace, broadly consistent with the leading indicators, that have for some time now been suggesting a more positive jobs market than the ABS data (until now?). Were this pace to continue, it suggests the unemployment rate should begin to drift lower, regaining its ~5½% level from six months ago by end-17. The apparent better jobs market may eventually underpin a pick-up household income, currently a key area of softness for the economic outlook.

Felicity Emmett, ANZ:

We think the RBA would be pleased with the strength in employment in today's numbers, although the stubbornly high unemployment rate will remain a source of concern. With spare capacity in the labour market taking longer than expected to be worked off, and the resulting dampening impact on wages growth, we remain comfortable with our view that the RBA is likely to be on hold for an extended period.

Tom Kennedy, JPMorgan:

While we acknowledge the positive developments, in our view the unemployment rate remains the most important metric to watch, given it tends to abstract from much of the month to month volatility that plagues the employment and supply-side numbers. From a policy perspective, while RBA officials will take heart from the better tone of the March data, the fact that last month's pop in the jobless rate is now 'locked in' is likely to be a concern.

Not only iron ore miners are facing the heat today: Whitehaven Coal shares are down 5.8 per cent at $3.015 after reporting a drop in quarterly sales.

But the miner expects coking coal prices to remain high for months as supply disruptions since Cyclone Debbie damaged train lines and interrupted exports reverberate through markets.

Whitehaven, whose mines about 1300 km south of the cyclone's path have been unaffected by the rail stoppages, also plans to boost its own coking coal sales next quarter as exporters further north grapple with stalled operations.

Five miners in the cyclone-hit region, including BHP Billiton and Glencore have declared force majeure - a clause typically invoked after natural disasters - since multiple landslides and flooding knocked out major coal rail networks.

Railway operator Aurizon is gradually returning some tracks to service. Its Blackwater line resumed operations on Monday and its Newlands line is expected to open today.

However, with the busiest Goonyella line further north closed until May, the disruption caused by the cyclone could lead to the potential loss of 15 million tonnes of coking and thermal coal exports from Australia, Whitehaven said.

"This loss of exports is likely to be positive for coal prices until normal production and shipments resume and any contract delivery shortfall recovered, which could take some months," the company said.

Coking coal prices this month posted the biggest one-day surge on record as the rail outages blocked up to half the world's export shipments.

Whitehaven said customer requests for coking coal "increased substantially" since the storm and that the company expected to boost coking coal sales next quarter.

Whitehaven said it produced 5.7 million tonnes of coal for the quarter, a decrease of 11 per cent frm the previous quarter, and affirmed its full-year production guidance of 21 to 22 million tonnes.

The ASX still hasn't found a bottom for the day, falling further below the 5900-line amid a fierce sell-off in miners.

BHP and Rio have both dropped more than 4 per cent, while Fortescue is down 6.7 per cent.

Possibly heralding temporary relief, Chinese iron ore futures have opened marginally higher, rising 5 yuan to 508.5, after several sessions of vicious selling. The spot price of iron ore plunged 8.5 per cent to $US68.04 a tonne last night.

"The trend is still for steel and iron ore to weaken in the coming weeks," said a trader active on the Shanghai Futures Exchange. "There is a lot of steel and iron ore being produced, too much."

Today's drop in the ASX would be the first loss in five session, but it does make the 6000-point target look a bit less unlikely, at least over the short term.

In our recent poll, 50 per cent of readers said they expected the ASX to reach that mark this month.

Well, this is unlikely to strengthen faith in the ABS: the Australian Bureau of Statistics said some figures concerning under-utilisation rates were incorrect in today's employment data, but that the errors should not affect the headline numbers.

Figures that reported under-employed people were incorrect in tables published on the bureau's website, a spokesperson for the bureau told Reuters by phone.

"It shouldn't affect the headline figures," she said.

That may have caused the short blip in the Aussie, which took the currency nearly back to the level it was at before the jobs data was released.

It wouldn't be the first time ABS employment numbers are raising eyebrows.

The September numbers, for example, surprised economists as full-time employment plunged by the most in over five years, while part-time employment soared, and the jobless rate fell to a three-year low, thanks to male labour market participation plummeting.

"Today's employment report ... was a dog's dinner," said Stephen Walters from the Australian Institute of Company Directors. 

And CBA economist John Peters seconded, "The mixed September labour force report with the huge size of some of the reported moves raises a degree of scepticism about the results."

A second booster shot has taken the Aussie dollar further away from the thtee-month low it hit just yesterday.

The currency initially jumped early this morning after Donald Trump talked down the US dollar in an interview with the WSJ, calling it too strong and saying that he would prefer rates to remain low.

That put pressure on the greenback, taking the Aussie back into US75¢-territory after it fell as low as US74.73¢ yesterday, its lowest since mid-January.

The next leg up came from the surprisingly strong local employment data, which showed the economy created 60.9k new jobs, all of them full-time too.

"The greenback is likely to remain under pressure as traders absorb Trump's dovish comments and continue to doubt the Fed," said ThinkMarkets senior analyst Matt Simpson.

"If geopolitical tensions reside then we think AUD is more than capable of clawing its way back above US76¢ and perhaps staying there for more than two minutes."

Also just out, the Reserve Bank has become more concerned about the surge in household debt and a rise in interest only loans that is making the financial system vulnerable to a correction in property prices or rising interest rates.  

In its semi-annual health check of the financial system, the RBA issued its strongest warning yet that rampant debt fuelled property speculation, spurred on by tax policies and surging house prices would amplify financial shocks and inflict pain on the entire economy.

"While it is not possible to know what level of overall household indebtedness is sustainable, a highly indebted household sector is likely to be more sensitive to declines in income and wealth and may respond by reducing consumption sharply," the Reserve said in its 52-page Financial Stability Review.

The report comes as the regulators have responded to surging house prices by doubling down on lending limits and loan underwriting oversight to prevent a further build up of risks posed by an overheated property market.

The bank said a surge in house prices had led to an increase in "the willingness to pay more for a given property and leading to an overall increase in household indebtedness."

The most disturbing line in the RBAs financial stability review pic.twitter.com/OKDailgD4F

— Johnny Shapiro (@johnnyshap) April 13, 2017

In past reports, the Reserve Bank has sought comfort from the fact that, on aggregate households are 17 per cent ahead of their mortgage repayments.

But it has now recognised that these aggregate figures "mask a significant variation across borrowers".

The available data suggests that one third of borrowers - typically borrowers that have recently take out a loan or are on low incomes – has "either no accrued buffer or a buffer of less than one month's repayments."

Investment loans which had concentrated in the hands of already highly indebted households "could induce a more pronounced cycle in housing prices than would otherwise occur, amplifying the size of a subsequent downswing in housing prices," the Reserve Bank said.

A few reactions on Twitter to the surprising strength in jobs; some scepticism around the reliability of the ABS numbers, which have in the past been all over the shop:

ABS says 74,500 full time jobs were created in the month - or more than 2400 a day. Yeah, right.

— Shane Wright (@swrightwestoz) April 13, 2017

Unemployment still an uncomfortable 5.9% - at least 1% from full employment: Rate cut still vital to support growth

— Stephen Koukoulas (@TheKouk) April 13, 2017

Don't downplay the FT jobs jump. Roy Morgan data has been flagging this for a while. #ausecon pic.twitter.com/F5ovTxeRzN

— Justin Fabo (@justinfabo) April 13, 2017

Seen in periods where jobs data smashes expectations AUD traders tend to give it a cyncical view.. AUD spiked here, but selling likely?

— Chris Weston (@ChrisWeston_IG) April 13, 2017

Despite a large rise in employment, total hours worked rose by just 0.2 per cent in March, while hours per person tumbled #ausbiz #auspol pic.twitter.com/7scgqACNkx

— Callam Pickering (@CallamPickering) April 13, 2017

A welcome Easter surprise for the RBA: the economy added 60,900 jobs in March, but a rise in the participation rate kept the unemployment rate steady at 5.9 per cent.

The number of new jobs was triple what economists had expected, and in even better news the new positions were all full-time, and then some.

Altogether 74,500 full-time jobs were created, while 13,600 part-time jobs were lost. The participation rate came in at 64.8 per cent, up from February's 64.6 per cent.

The Aussie dollar bounced on the data, rising about a quarter of a cent to the day's high of US75.70¢.

We mentioned Trump jawboning the US dollar in his WSJ interview overnight, but there was more in the interview.

He also did an about-face on the Fed chair, saying he had not ruled out reappointment of Janet Yellen to a new four-year term as head of the US central bank as he considers his choices.

Trump was asked if Yellen was "toast" when her term expires in February, a question that reflected a widespread assumption that he would put his own stamp on the monetary authority rather than rely on former President Barack Obama's choice to run the Fed.

Trump replied with his most explicit comments about the Fed since taking office, saying that Yellen was "not toast," that he had "respect" for her, and that he would prefer the Fed to keep interests rates low.

That's not what Trump said on the campaign trail last year: "I have nothing against Janet Yellen whatsoever, she's very capable person. But she's not a Republican," Trump said. "When her time is up I would most likely replace her because of the fact it would be appropriate."

On rates, he talked from both extremes - criticising Yellen as a political hack who kept interest rates low to help the Obama administration, but also saying that as a businessman he liked to borrow cheap.

Though rates are now rising under Yellen they remain low by historic standards. Yellen and other policymakers have emphasised that rates will rise only gradually in the months ahead, and that monetary policy would remain loose for perhaps years to come.

Yellen is "the safest dovish choice" for Trump, said Vincent Reinhart, chief economist for Standish Mellon Asset Management in Boston and a former top Fed economist.

The Fed said it would not comment on Trump's remarks. Yellen, who like Trump turned 70 last summer, has said little about the subject other than that she intended to serve out her current four year term.

Trump will have a chance to appoint five of the seven members of the Fed's Washington-based Board of Governors, including a currently open job of vice-chair in charge of financial supervision.

For President Trump, lower or slower-growing interest rates could make it easier to pay for any infrastructure program he proposes, and slow what has been a steady rise in the US dollar that makes exports more expensive and hurts manufacturers.

The largest acquisition by a Chinese government entity of Australian assets has been given the green light, with the Foreign Investment Review Board recommending the $US2.5 billion purchase of Rio Tinto's suite of NSW coal assets.

The buyer is Yancoal Australia, which is 78 per cent owned by Yanzhou Coal Mining Co of Hong Kong, which is in turn controlled by an arm of the Chinese government.

Chinese bids to acquire Australian assets have been controversial, with a string of planned acquisitions - from Ausgrid to the Kidman rural empire -  blocked.

"FIRB approval is a positive step forward for Yancoal, its shareholders and the Hunter Valley, demonstrating the Australian Government's support for continued investment into the local resources sector," said Reinhold Schmidt, the chief executive of the miner said in a statement.

"Yancoal ...[looks] forward to continuing to grow our operations." 

Yancoal sells around 25 million tonnes of coal annually produced at its Australian mines, which will more than double to an estimated 51 million tonnes once the deal is concluded.

Myer has come to the rescue of two of Australia's most popular fashion labels, Marcs and David Lawrence, buying the brands and stock from administrators two months after they collapsed.

The acquisition includes Marcs' and David Lawrence's existing inventory, brand names and intellectual property but does not include lease liabilities and staff obligations.

Marcs' and David Lawrence's parent company, M Webster Holdings, collapsed on February 2 owing about $30 million to creditors including owner Malcolm Webster, a secured creditor.

Myer's chief merchandise and customer officer Daniel Bracken told the AFR that Myer stepped in about a week ago after it became clear that no buyer could be found and the brands would be wound up.

Shares have opened sharply lower, led down by steep falls in miners after the iron ore price collapsed overnight.

The ASX is down 0.6 per cent at 5899.8, on track for its first day in the red in five sessions.

Overnight trading displayed elements of a risk-off stance from investors, said CMC chief market strategist Michael McCarthy.

"Gold and bonds rallied, shares and industrial commodities were marked down and volatility indicators rose. The trimming of risk positions comes against a background of rising geo-political tensions and the start of the US company reporting season."

Fortescue is the biggest loser in the to 200, slumping 7.3 per cent, while heavyweight BHP is the biggest single drag on the index, falling 3.75 per cent.

Telstra remains under pressure, losing another 1.5 per cent after TPG announced it will spend close to $2 billion to build a competing 4G mobile network.

But there are plenty of winners too, as investors rotate into defensive stocks such as consumer staples Wesfarmers and Woolies, up 0.6 per cent and 0.3 per cent respectively, or healthcare such as CSL.

Fortescue shares are being hammered in early trade, following an overnight plunge in the iron ore price.

Adding to pressure, the miner reported lower iron ore shipments for the fiscal third- quarter, with its cash costs also rising for the first time in 13 quarters, due to the impact of wet weather.

The Pilbara miner shipped 39.6 million tonnes of iron ore in the three months to March 31, down 6 per cent from the 42 million tonnes a year earlier, and also down 6 per cent decline on the second-quarter.

Cash costs, at $US13.06 per wet metric tonne, were down 12 per cent from a year earlier but rose 4 per cent from the second quarter.

The miner also said it expects the iron ore price to fall further, to between $US60 and $US65 a tonne, as imports to China continue to rise.

Fortescue shares are down 7 per cent at $5.49.