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Appetite for Commonwealth Bank shares following solid annual earnings helped drive the ASX higher, as local investors largely ignored geopolitical concerns around North Korea which dampened spirits throughout the region.
Technology and healthcare were the best performing sectors, while a dip in the oil price weighed on energy stocks.
The benchmark S&P/ASX 200 index and the broader All Ordinaries Index each lifted 0.4 per cent to 5765.7 points and 5816.4 points respectively.
US and Asian shares were sold off after North Korea said it was mulling an attack on the US Pacific island of Guam after President Donald Trump warned that any threat to the United States would be met with "fire and fury", rattling investors.
"In an environment where both the US Fed and ECB might remove stimulus, people are going to be a lot more nervous about liquidity," said Ken Peng, investment strategist at Citi. "As such these geopolitical headlines will have more impact, more punch. The talk is more intense than what it used to be."
A bumper profit from CBA saw investors pour into the stock which has suffered in recent days following an investigation by Austrac into the bank's security practices.
The share price closed up 0.6 per cent to $81.11 after earlier in the session rising as much as 1.4 per cent. Investors also moved into the other three big banks: ANZ closed up 0.7 per cent, Westpac was also 0.7 per cent higher and National Australia Bank enjoyed a 0.9 per cent lift.
Recent positive economic data out of China gave investors cause to support the resources giants, despite a slight dip in the iron ore price: BHP Billiton and Rio Tinto closed up 0.4 per cent and 0.5 per cent respectively.
The global risk-off sentiment was reflected in the gold price on Wednesday, which bumped up 0.4 per cent to $US1266.04 an ounce.
#Gold priced in euros receiving some attention as 'Fire and Fury' comment attracts demand for both gold and dollars pic.twitter.com/gKbyU13ZAO
— Ole S Hansen (@Ole_S_Hansen) August 9, 2017
As such, gold miners received considerable investor interest: Newcrest Mining, Australia's largest gold producer lifted 1.4 per cent while Evolution Mining was up 4.6 per cent at market close.
Shares in Janus Henderson Group's leapt 5.6 per cent to $45.49, their highest in more than a year. The dual-listed asset manager has reported that assets in the second quarter grew 4 per cent to $US345 billion
The Australian dollar's recent appreciation mainly reflects the fall of the US dollar in response to an unwinding of the so-called Trump Trade, Reserve Bank assistant governor Christopher Kent has said.
In a Q&A session following a speech, Kent said investors had initially anticipated that if President Donald Trump pursued his policies of fiscal stimulus, this would tend to be inflationary in the US and that helped push the US dollar and long-term bond rates higher.
"Gradually that's just been unwinding," said Kent, who oversees financial markets at the RBA. "In addition to that, there's been a bit weaker inflation of late in the US, so I think that's a large part of the Australian dollar appreciation story of late."
The Aussie dollar has risen almost 7 per cent since the start of June, eroding the economy's competitiveness at a time when it's relying on services exports to drive growth. But over the past days, the currency has been on the back foot, falling back below US79¢ as the greenback rebounds.
Kent also noted that the eurozone and Canada are experiencing similarly unwanted strength in their exchange rates.
Kent reiterated the central bank's comment from last week: that further appreciation in the Aussie dollar would slow the pick up in economic growth and slightly weaken inflation.
In response to a question about a shrinking yield differential between US and Australia, Kent said: "One might imagine that if the rest of the world is experiencing increasingly better conditions, better inflation, that underpins a pickup in yields, then that yield differential will come back and our estimates suggest that will potentially have some impact on the Australian dollar."
Chinese iron ore and rebar steel futures have steadied after recent rapid gains, with investors anticipating steep production cuts during winter.
China in February ordered steel and aluminium producers in 28 cities to slash output in winter as it fights smog. Last week, the key steel-producing area of Tangshan and other parts of Hebei province said they would implement the order, cutting production by up to 50 percent.
Steelmakers in Hebei must comply with state and province-level emission restrictions by September 1 or they will be shut down, the Hebei Province Environmental Protection Bureau said late on Tuesday.
The most-active rebar on the Shanghai Futures Exchange was little changed at 3919 yuan ($US585) a tonne. The construction steel product touched 4013 yuan on Monday, its strongest since March 2013.
Meanwhile, Dalian iron ore futures are up 0.1 per cent at 595 yuan, after earlier in the week rising as high as 619 yuan. Spot iron ore slipped 0.9 per cent to $US75.46 a tonne overnight.
Unless rebar drops to Monday's intraday low of 3,755 yuan, it could rise further on the prospect of the production cuts, said Ric Spooner, chief market analyst at CMC Markets.
"We're getting into an era where we may see a pullback, but whether this is it or not (is not yet certain)," said Spooner. "Now the market is trading inside Monday's range."
In its February order, China called on steel producers to halve output in four northern provinces - Hebei, Shanxi, Shandong, Henan - as well as Beijing and Tianjin, during the peak winter heating months from November through late February. The size of the output cuts will depend on how much each region has reduced its emissions.
Spooner said iron ore "probably will struggle to get above $US80" amid a well-supplied market in the medium term.
Magellan Financial Group has overlooked the popular listed investment company model in favour of a simpler ASX-traded investment trust in what will be surely the largest float of its kind.
Co-founder and chief executive Hamish Douglass emphasised the simplicity of Magellan Global Trust, in a market where he thinks complexity has become a problem for retail investors. He declined to entertain how big the float would be, but is interested to see if the number of concessions Magellan is offering will entice curious and potentially jaded investors.
"A number of these other vehicles that have been launched recently are frankly far too small and they immediately start trading at discounts to net asset value because they haven't got the right scale and liquidity and the offer costs have been put onto the unitholders and all these other issues," Douglass said. "Some of them almost get orphaned on day one, there's no support for them, no-one's ever really heard of them."
Douglass will personally invest $20 million; he is worth $531 million according to this year's Financial Review Rich List, ranked 133.
The trust is similar to a property trust, except with global equities instead of offices or shops as the underlying investment. It's a model that is entrenched in the UK market but has not taken off in Australia where roughly $33 billion has been raised by listed investment companies.
Magellan will cover the costs of listing, intending that the trust trades without a discount on debut. Although more correctly, the underlying net asset value will be intact at $1.50 on debut because the float expenses are not borne by the unitholders.
Also, the trust will target a 4 per cent cash yield every year (3¢ every six months for the first two years) and include a permanent dividend reinvestment plan at a fixed 5 per cent discount.
Meanwhile, shares in Bellamy's have soared after Chinese authorities lifted a licence suspension on the infant formula maker's recently acquired Camperdown canning facility.
The registration of the Camperdown Powder canning site in Victoria has been reinstated by the Certification and Accreditation Administration of the People's Republic of China (CNCA), Bellamy's said.
The company's shares are up nearly 5 per cent at $8.25, their highest so far in 2017.
Foreign suppliers of Chinese-labelled infant formula products in China must register the canning facility used to blend and pack the products with the CNCA.
Chinese authorities suspended registration of Bellamy's Camperdown canning facility in Victoria on July 7 after a third-party's allegations relating to historical filing and records, and to certain previous quality issues, the company said.
Specialty pharmaceutical company Mayne Pharma is the biggest loser among the top 200 stocks, falling more than 8 per cent to 74 cents, its lowest since February 2015.
The stock is being sold off again today following the group's earnings downgrade on Tuesday for fiscal 2017 amid fierce competition in the US's generic drug sector.
Mayne has been battling against cheaper generic pricing and a US price-fixing lawsuit filed by 20 states accusing six companies, including Teva and Mayne, of conspiring to artificially inflate prices of an antibiotic and a diabetes drug.
The company said it would write down $25 million in the 2017 accounts the value of generic drugs it acquired from global pharma group Teva, but that these changes "do not affect the cash flow or underlying profitability of the company".
Today's housing finance numbers, which came in slightly below expectations, show a pick-up by first-home buyers as well as investors.
A 1.6 per cent monthly rise in investor home loans helped push total investment lending in the year to June to the highest level in 18 months.
The last month before stamp duty concessions and exemptions to first home buyers in NSW and Victoria kicked in also showed an increase in home loan commitments to people seeking to get a foothold on the property ladder.
The number of loans to first home buyers - before adjustment to strip out seasonal changes - totalled 8573, the highest monthly total in nearly three years and first home buyers also accounted for 15 per cent of all dwellings financed for the month.
It suggests that first home buyers, anticipating not having to pay stamp duty on some property purchases in the two biggest states from July 1, were getting their finances in order.
"Perhaps what first home buyers did in June was gearing up for a start in July," said Louis Christopher, the managing director of consultancy SQM Research. "They go off, get approval for X and then go off to the races in July."
Energy retailers will be required to tell households when they are coming to the end of a discount period to ensure they are on the best power deal, according to an agreement between retailers and the Turnbull government.
They will also be required to tell the federal government and regulators how many customers are on their highest tariffs after they come off discounted plans.
After an hour and a half meeting with Prime Minister Malcolm Turnbull, Treasurer Scott Morrison and Energy Minister Josh Frydenberg, seven retailers - including the big three of AGL Energy, Origin Energy and EnergyAustralia - agreed to boost transparency with customers over their power plans.
Turnbull said retailers benefited from "customer inertia" by not switching to another retailer, with the Australian Energy Market Commission figures showing 20 per cent of households had been with the same company for the past five years.
"What we are seeking to do is cut a better deal for Australian families," Turnbull told reporters in Canberra on Wednesday.
"The complexity of the various offers makes it very difficult for many families and businesses to understand what is the right deal for them. We are determined to protect those Australian families and ensure that they pay no more than they need to for their electricity. They will always have the best plan for them."
The retailers at the meeting - who have more than 8 million customers across the country - will be required to write to their customers in "plain English" as well as send them "clear, user friendly fact sheets", probably in their next household bill, about alternative offers available when their discount period finishes, Turnbull said.
Janus Henderson Group's Australian shares have jumped nearly 6 per cent to $45.58, their highest in more than a year.
The dual-listed asset manager said overnight that assets in the second quarter grew 4 per cent to $US345 billion.
The firm's US-listed shares hit an all-time high at $US35.8 in the session after the release of its quarterly results.
Janus is the biggest winner among the top 200 stocks today.
Back to top
Inflation in China remains sluggish, with both consumer prices and producer prices rising slightly less than expected in July.
CPI rose 1.4 per cent over the 12 months, following a 1.5 per cent rise in June, while PPI gained 5.5 per cent, the same as the previous month.
Economists had expected both to rise by one-tenth of a percentage point more.
The Aussie dollar fell nearly half a cent to a three-week low of US78.65¢ following the data.
Also weighing on the currency werer disappointing local home loan approvals, which rose just 0.5 per cent in June, missing market expectations for an increase of 1.5 per cent.
The value of loans approved for owner-occupied housing rose 0.3 per cent in June, while the value of loans for investment housing rose 1.6 per cent.
As the Senate for the second time votes down legislation for a plebiscite on same-sex marriage, paving the way for a postal ballot on the issue, here's an interesting thought:
Has any one asked is the government pushing a big postal vote so it can boost the profitability of Australia Post and then flog it ?
— Peter Morgan (@psimpsonmorgan) August 9, 2017
CBA's $10 billion bumper profit will be welcomed by investors and demonised by the wider community, even though many of its critics own shares in the company, teh AFR's Michael Smith comments:
That is the contradiction of the country's most hated company at the moment.
Chief executive Ian Narev has delivered a better-than-expected annual profit, which is evidence he has been able to manage the multi-pronged challenge of increased capital requirements, investor loan crackdown and increased competition in between the endless trips to Canberra to explain himself to politicians.
The latest scandal engulfing the bank in relation to money laundering allegations will overshadow today's 4.6 per cent lift in annual cash profit.
But if you look at the bank as the market looks at most other companies, from a financial perspective, then CBA is doing well even if growth is not what it used to be after a decade of double-digit profit increases.
Three things stood out in the bank's full-year profit announcement, which comes a day after chairman Catherine Livingstone cut Narev and his management team's short term bonuses.
The $9.88 billion profit itself, which beat the market's expectations, as the bank cemented its position as the nation's biggest home lender despite the regulatory crackdown on investor lending.
CBA also confirmed it was in talks to sell its life insurance business in Australia and New Zealand, which could fetch as much as $5 billion.
While the lawyers will prevent Narev from commenting on the money laundering claims at today's results presentation, CBA did confirm it will argue it should only be liable for a single $18 million fine in relation to the 53,000 suspicious transactions outlined in the AUSTRAC statement of claim.
The bank's presentation is heavy on the reminders that this is a company which employs a lot of people, has a lot of customers and returns 75 per cent of its profits to more than 800,000 shareholders.
Here's more at the AFR
Explosives, industrial chemicals and fertiliser supplier Incitec Pivot has appointed chemical engineer Jeanne Johns as its next chief executive officer and managing director.
Incitec says Johns has more than 25 years of experience in international industrial and commodity businesses, including petrochemicals and oil and gas, and in various executive positions including at BP.
Johns, currently a non-executive director of Tate & Lyle plc and Parsons Corporation, will step into the role in November succeeding James Fazzino, who the company said in February would step down within 12 months.
Shares are down 0.5 per cent at $3.33.
Consumer sentiment slipped to its lowest in more than a year in August as worries over family finances swamped increasing optimism about the economic outlook, once again widening the gap to the buoyant business mood.
The survey of 1200 people by the Melbourne Institute and Westpac Bank found consumer sentiment fell 1.2 per cent in August, from July when it edged up 0.4 per cent.
The index reading of 95.5 was 5.5 per cent lower than in August last year, showing pessimists outnumbered optimists, and the lowest since April 2016.
"The index components point to clear pressure on family finances," said Westpac chief economist Bill Evans.
"Much of the weakness is likely to reflect a mix of weak growth in wages; increases in key costs such as electricity and emerging concerns about rising interest rates."
Wage growth is running at record lows while media coverage of surging power prices has been wall-to-wall.
The impact on consumers was clear in the survey with its measure of family finances compared to a year ago sliding 5.1 per cent. Likewise, its index of whether it was a good time to buy a major household item dived 4.9 percent.
Those falls overshadowed improvements elsewhere. The economic outlook for the next 12 months added 0.4 per cent, and that for the next five years rose 2.3 per cent.
The grim mood in the survey is in marked contrast to increasingly upbeat business polls. A NAB survey out on Tuesday showed firms felt conditions were the best since early 2008 with sales, profits and employment all strong.
Analysts note that, historically, business surveys have a far closer correlation to activity in the broader economy than do polls of the consumer mood, which can prove fickle from month to month.
Indeed, while consumers might sound pessimistic in a survey that does not necessarily translate to spending habits.
Official data has shown retail sales rebounded strongly in the second quarter as heavy discounting stoked demand, while sales of new vehicles are at record highs.
Back to topWBC-MI consumer conf dips 1.2%, continuing the divergence b/n consumers & business, things good at work not good at home? #ausbiz pic.twitter.com/fZweazYxla
— Alex Joiner (@IFM_Economist) August 9, 2017
Shares have opened higher, buoyed by a rally in the bourse's biggest stock, CBA, following better-than-expected annual results.
The ASX is up 0.4 per cent at 5765.7, with a 0.7 per cent rise in financials leading the gains.
CBA has added 1.2 per cent on the back of a 5 per cent rise in cash earnings, lifting the other big banks around 0.5 per cent in its wake.
"Overall, it was quite a good result with very few issues. The modest beat to expectations was driven by continued low bad debts," said Regal Funds Management portfolio manager Omkar Joshi.
The Carsales result isn't getting as much approval with investors, who have pulled the shares down 2.6 per cent.
Mayne Pharma is the biggest loser among the top 200 stocks, falling 6.2 per cent after the company warned yesterday that revenue and earnings would come in below expectations, while writing down the value of its Teva drug portfolio. That sparked a share slump yesterday.
Bond markets have played a key role in forcing Australia's biggest mining companies to haul back on investment spending since 2012, pushing states like Queensland and Western Australian into significant economic downturns, suggests the Reserve Bank.
In a speech surveying Australia's bond market developments over recent years, RBA assistant governor Christopher Kent said signals from debt markets influenced the behaviour of mining firms.
After increasing their bonds on issue by three-fold from 2008 and 2015, peaking at close to $80 billion dollars, mining companies saw their gearing ratios - or the ratio of net debt to the book value of their equity - gallop over 40 per cent from well below 20 per cent, Kent said.
As commodity prices then started falling from late 2012 onwards, bond market investors triggered a sharp rise in mining industry bond yields compared to benchmark government bonds.
"The sharp rise in bond spreads on resource company debt from 2015 into early 2016, in response to the large declines in commodity prices, signalled the concerns in these markets about the health of some resources companies," Kent told a function hosted by Bloomberg News in Sydney.
"Not surprisingly, mining companies responded to those signals in commodity and bond markets by reining in their costs significantly," he said. "Much of that was driven by a reduction in expenditure on a wide range of things."
Kent noted that yields on longer-term government debt remain "quite low," monetary policy remains "very accommodative across advanced economies and inflation remains low."
"Moreover, given the decline in bank bond spreads since mid-2016, the same is true of the costs of banks' funding in longer-term wholesale debt markets," Kent said. "Funding costs in short-term debt markets are also low."
He said banks' use of short-term and long-term debt was "much less" than it was a few years ago as "a much larger share of funding" has been obtained via deposits.
Since the GFC, net capital inflows to Australia have been dominated by the government and the mining sector rather than banks, he said.
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Aussie financials are the must-watch space this morning, IG strategist Chris Weston says:
The ramifications of the biggest stock in the ASX 200 by market cap reporting should be felt through the wider equity market. There are not many corporates that can have an effect like this, but given NAB, WBC and ANZ report on a different calendar the trends and outlook portrayed by CBA could be a thematic that plays out in other stocks.
There is no particular directional trend in CBA's share price at present, so there is a limited risk that too much is being expected, so the report will be interesting, not just because of commentary around the recent negative news flow, but also for a deeper dive into trends around housing for more macro focused traders.
SPI futures were at 5682 when the ASX 200 cash market officially shut yesterday, so given this now sits at 5685 suggests a largely uninspiring open for the ASX 200. SPI futures are actually in a really interesting place now and for those trading the ASX 200 cash they absolutely should have the Aussie futures market on their radar, as the battle lines are clearly pronounced.
In trade yesterday, we saw the high of 5735 corresponding with a firm rejection of the June downtrend, this being the sixth time the index has rejected trend resistance drawn from the June highs. A closing break of the trend is needed to push the futures into 5800 and this would naturally push the ASX 200 into and above 5800 too. Clearly, a break of 5600 is still a possibility (in the SPI futures) and this would be a wholly bearish development.
The ASX 200 cash daily chart currently looks the sort of pattern an electrocardiograph machine (EKG) in a hospital would send off when a patient is being monitored, but this is why we can smooth it out using moving averages.
So it's all about CBA this morning and the impact on a financial sector that really needs to find a spark again and push through 6700. Aussie banks are holding in though and one can look at the credit markets where credit-default swaps (CDS) are trading at the lowest levels since September 2014. They are certainly are not finding the same love as European banks though which are flying right now.
Perhaps the more interesting aspect of the night has been the move lower in EUR/USD into $US1.1750, with a lower low printed on the daily chart. European equities will outperform here if we see EUR/USD, EUR/CNY and EUR/GBP lower here, but much still rides on this Friday's US core CPI.
Carsales' struggling lending arm has kept a lid on its earnings, neutralising a revenue bump from its core domestic classifieds business.
The company's full year results show total revenue grew 8 per cent to $372 million in the 12 months to June 30, driven by its domestic private listing businesses which saw 27 per cent revenue growth.
However, earnings from the company's finance services arm Stratton Finance fell by 12 per cent to $55.4 million due to "volume capacity reductions at a major lender" which hurt its performance, the company said.
The digital classifieds business reported a 7 per cent rise in pre-tax profit off the back of strong listings growth, taking its net profit up 0.2 per cent to $109 million for the 12 months to June 30. When adjusted to strip out non-controlling interests and fair value re-measurements and amortisation, net profit increased 8 per cent to $110 million.
Total revenue grew 13 per cent with domestic private listing the stand out performer, jumping 27 per cent. It will pay a final dividend of 21.5c, up 10 per cent from last year.
Carsales is forecasting solid revenue and earnings growth in the new financial year across its domestic and international segments.
Locally, this is the big one this morning: CBA has delivered a bumper a full-year profit of $9.88 billion and raised dividends for shareholders, not least thanks to strong home loans growth.
The bank also revealed that it will introduce a discounted dividend reinvestment program, consider selling its life insurance arm and will look to frame its money laundering compliance failures as a single error in a result that is sure to be heavily scrutinised.
CBA said cash earnings rose 4.6 per cent in the year to June 30, beating the market's expectations. Operating income grew 3.8 per cent, ahead of operating expenses of 2.3 per cent, helped by volume growth in its flagship home lending business.
About one in four home loans is with the CBA, and it said volume growth in the mortgage market, business lending and deposits had supported its interest income.
The lender is also benefiting from very low bad debt costs, as low interest rates have meant relatively few customers are failing to repay loans. Impaired loans as a share of its total loans fell to 0.15 per cent, from 0.19 per cent a year ago.
The profit comes as the bank is embroiled in allegations it repeatedly breached anti-money laundering laws. This has triggered a slump in its share price and raised questions about the tenure of chief executive Ian Narev - though the board today said it had "full confidence" in Narev.
CBA's financial filings gave little new information about the legal case, saying what it could say was limited while the matter was before a court.
As rival banks retreat from wealth management, CBA said it was considering selling CommInsure, which was previously found to have wrongly knocked back some customer claims on the basis of outdated medical definitions.
The final dividend for the second half was higher at $2.30 a share, up from $1.99 at the first half, taking the full year dividend to $4.29 fully franked, up from $4.20 a year ago.
The bank has also introduced a discounted dividend reinvestment program with eligible shareholders receiving a 1.5 per cent discount, which was expected by some analysts as a method of bolstering capital ahead of new directions from APRA.
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