View Count: 122 |  Publish Date: March 31, 2014
Markets Live: End of quarter rally

3:29pm: A bit of a dive at the close wasnt enough to take the shine of a good start to the week - and end for the quarter - for the local sharemarket.
The ASX 200 index closed at 5394.8, but traded about 5400 for the most of the day, to record gains of 28 points, or 0.5 per cent, with the All Ords up a similar amount top 5403.
Gold miners had the best of it in the end, up 1.9 per cent as a group, while the broader metals and mining sector gained 0.8 per cent. BHP added 0.9 per cent and Rio 0.5 per cent, while Fortescue fell 1.7 per cent.
Health care was one of two sectors two decline, after CSL lost 0.4 per cent, while a 0.5 per cent decline in Wesfarmers weighed on consumer staples.
ANZ was the best of the banks, adding 0.7 per cent, while its three peers in the Big Four gained 0.4 per cent each. Upvotes:0 Downvotes:0 Copy Link
3:06pm: Frank Lowys Westfield Group faces an uphill battle to get its proposed demerger off the ground, as investors in the related Westfield Retail Trust look for a sweetener before they cast their votes.
It is widely anticipated the deal will be re-jigged in coming weeks, despite Westfield saying in February that it would proceed in its original form.
In a survey by broking group, CLSA, it shows that more than half of surveyed WRT investors will vote the scheme down in its current form.
The respondents say they want to see a lower price for the management [that is being paid to Westfield Group] of the WRT business; the Lowy family to maintain some ownership and reduced gearing in Scentre.
Last week Westfield formalised $22 billion in funding facilities, which are required for the proposal to restructure the business. The Independent Experts report, on the planned de-merger, is (subject to court approval) expected to be dispatched late next month.
The disgruntlement, mainly from the WRT shareholders, has been brewing since last December, when the Westfield non executive chairman Frank Lowy, and his sons and co-chief executives, Steven and Peter Lowy, announced they would split the global retail property empire in two.
Under the plan, a newly-formed Westfield Corp would focus on the international business in the northern hemisphere and a new group, Scentre - which would replace WRT - would own and manage the Australian and New Zealand shopping centres.
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2:58pm: Turkeys lira has firmed to its strongest level in five weeks, after Turkish Prime Minister Tayyip Erdogan declared victory in local polls that had become a referendum on his rule, stirring hopes months of political turbulence would ease.
The US dollar is trading at 2.1727, sharply down from a level of 2.1921 late on Friday, with the lira touching its strongest level since February 24.
Erdogans authoritarian response to corruption scandals, reassigning thousands of police offices, giving the government more control of the courts, and banning Twitter and YouTube had unnerved investors and raised questions about Turkeys political future.
The election result appears to be more or less what the doctor ordered: a solid win for the AKP which shores up the position of Turkeys ruling party, said Nicholas Spiro, head of Spiro Sovereign Strategy.
Sentiment towards Turkish assets was already improving before the election and is likely to improve further. Yet any sense of relief ... needs to be tempered by the realisation that the election has thrown the bitter political divisions in Turkish society into even sharper relief.
The lira has gained around 9 per cent since touching a record low of 2.39 on January 27, triggering the central bank to raise interest rates massively the next day. It gained in the days prior to the local election on expectations of a strong showing by Erdogans AK Party.
Turkeys lira has recovered from its lows at the peak of the EM worries earlier this year. Upvotes:0 Downvotes:0 Copy Link
2:53pm: China’s biggest banks more than doubled the level of bad loans they wrote off last year, in a sign that financial strains are mounting as growth in the world’s second-largest economy slows.
The five biggest Chinese banks, which account for more than half of all loans in the country, removed Rmb59bn ($10.3bn) from their books in debts that could not be collected, according to their 2013 results. That was up 127 per cent from 2012, and the highest since the banks were rescued from insolvency, recapitalised and publicly listed over the past decade.
The sharp acceleration in write-offs is the latest indication of the turbulence now buffeting China’s financial system. The bond market suffered its first true default in March, two high-profile shadow bank investment products were spared from collapse by last-minute bailouts earlier this year, and a small rural lender suffered a brief bank run last week.
Data also point to a deeper economic downturn in the first quarter than expected, putting China on track this year for its slowest growth since 1990.
The deterioration has fuelled expectations that Beijing will act soon to shore up the economy.
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2:27pm: With pressures mounting on hard coking coal prices in north Asia, steaming coal is following suit, with Glencore Xstrata reportedly agreeing to a 14 per cent price cut in the key Japan market.
News reports from Tokyo put the contract price agreed beween Xstrata and Tohoku Electric Power Co at $US81.80 per tonne, for delivery from April, which is down from $US95 a tonne a year earlier.
Even so, the price decline is only around 6 per cent from the market price seen during the latter part of 2013, and up around 10 per cent from recent spot prices.
The settlement comes as coal producers have been cutting costs, including widespread retrenchments as they prepare for continued weak prices.
In coking coal, recent settlements have been reported for hard coking coal at around $US120 a tonne in north Asia, which is down from $US168 a tonne a year ago.
The declines in both steaming coal, which is primarily used for power generation, and coking coal, which is used in steel making, comes amid an oversupply, with a number of coal miners forced to continue selling into the market due to take-or-pay transport agreements with shippers. Upvotes:0 Downvotes:0 Copy Link
2:13pm: Electricity distributor SP AusNet will pay $50 million to enable the early termination of a deal for the external management of its assets, following similar infrastructure companies that have moved to bring that role in-house.
The agreement to end the management services agreement was flagged by SP AusNet at its half-year results in November, when the Melbourne-based company said it was reviewing the deal.
SP AusNet said it had agreed to terminate the services agreement with SPI Management Services, a fully owned subsidiary of its major shareholder Singapore Power. The two have also agreed to unwind shared IT services provided by SP AusNet to SPIMS under an agreement that dates from September 2008.
The $50 million fee represents an early termination fee representing the present value of the payment that would have been made if the management services agreement had terminated on September 30, 2015, plus the present value of estimated performance fees that would have been payable until that date.
The restructuring of SP AusNet’s IT services as a result of the unwound IT agreement, should not exceed $7.5 million, it said.
Singapore Power recently sold a 19.9 per cent stake in SP AusNet to State Grid Corporation of China.
SP AusNet shares are back trading and are up 1.9 per cent to $1.33. Upvotes:0 Downvotes:0 Copy Link
2:02pm: Shares in Recall have jumped on resuming trade, after the document storage business announced a 10-year information management deal with HSBC that is estimated to be worth about 2 per cent of the companys current revenue.
Recall will be responsible for securing and managing an additional 4.5 million carton equivalents of documents and files, the company said.
Shares are up 6.5 per cent at $4.815, after earlier being down by as much as 1.3 per cent. Upvotes:0 Downvotes:0 Copy Link
1:56pm: BofAML economist Saul Eslake remains one of the shrinking number of economists convinced we wont see a rate rise this year, and that further easing is much more likely.
It remains our view that the RBA will potentially need to ease rates further in the second half of the year. At the very least we expect that it will remain on hold for an extended period and likely well into 2015, Eslake writes in a note out today.
This is based on the still many challenges the economy must face over 2014 and the years following. Despite recent encouraging data flow in some sectors we think it is premature to forecast rate rises this year as some are now doing.
Eslake goes on to list the reasons why he reckons a further rate cut is possible:Below-trend growth: Growth will remain below trend in 2014 in our view. Further, like 2013, it will be characterised by weak domestic  demand and an above average contribution from net exports. The mining investment decline hasn’t started: The primary reason we think forecasting hikes in 2014 is premature is because we have seen almost nothing of the decline in mining investment.Terms of trade are declining more rapidly: The recent decline in the iron price will weigh heavily on the terms of trade in the first quarter at least. And if no rebound occurs this will start to impact economic growth as gross domestic income growth slows sharply.The non-mining recovery isn’t convincing: Investment intentions for non-mining sectors have not shown any convincing signs of recovery in 2014-15. The business sector is looking for better conditions before ramping up investment and employment.Unemployment rate rising: We anticipate that the unemployment rate will continue to rise in 2014 and likely beyond. It is our view that recent solid employment growth figures should be looked through due to statistical factors.Inflation will come off: We remain confident that the acceleration of the inflation rate in recent quarters will be transitory. This is based on a stable outlook for the A$ and softer wages growth persisting. Fiscal drag on growth: May’s budget will be at least modestly contractionary in the short term. And in particular it will weigh on house income growth.Dollar remains high: It is our forecast that the A$ will remain elevated throughout 2014 finishing at $US0.880. But so far this year the A$ seems well supported above $US0.900 despite a relatively more hawkish Fed outlook and lower commodity prices.
Rate cut scenario: Saul Eslake doesnt expect the RBA to lift rates anytime soon. Upvotes:1 Downvotes:0 Copy Link
1:35pm: Christopher Joye’s warning that house prices near record levels could be in for a major correction of up to 20 per cent is causing the predictable stir. Hundreds of comments have been added to the article, which is by far today’s top rating yarn.
In what’s shaping up as a bit of a fashion around housing market forecasts - think Rory Robertson sending Steven Keen on a hike up Mt Kosciuszko - it’s also prompted economist Stephen ‘The Kouk’ Koukoulas to offer Joye a cash bet with odd of 10-1: if prices fall 20 per cent or more over the next three years,  Koukoulas will pay Joye $10,000, and if they don’t he will get just $1000.
In a second part to the bet, Koukoulas will pay $1000 if house prices rise 10 per cent or more over the next three years, and will receive $1000 if they fail to rise by that much.
Following their correspondence on Twitter, it’s not looking like Joye has accepted the bet. Upvotes:2 Downvotes:0 Copy Link
1:23pm: Argentina has been approached by financial institutions offering it loans at favourable rates, marking a tentative reopening of international credit markets for the first time in over a decade.
The economy ministry issued a statement on Sunday, saying it had received offers of credit from abroad. It did not name the institutions.
In recent weeks ... various financial institutions have presented proposals of access to external financing with repayment timetables and interest rates similar to those offered to other countries in the region, it said.
It would be the first time Argentina has received loans from international creditors since a massive default in 2002.
The offers followed Argentinas $US5 billion settlement with Spains Repsol over its expropriation of YPF and progress on talks to repay over the $9.5 billion the country  owes the Paris Club creditor nations, said the ministry. Upvotes:0 Downvotes:0 Copy Link
1:04pm: BusinessDay columnist Michael West highlights just one case of what would be many that highlight how commissions distorts financial advice:
Raymond Tatnells financial adviser told him the investment was a no-brainer. He was right.
Tatnell lost money and has now brought a case before the NSW Supreme Court against his advisers from Westpac and Macquarie Bank, which made the product.
There is rich irony in the no-brainer recommendation because MQ Gateway, which Macquarie marketed to Westpac and which Westpac in turn sold to its clients, took considerable brains to concoct - perhaps too many brains.
MQ is one of those ludicrously complicated products that entails taking out a large loan to buy units in a derivative and then another loan to meet the interest payments on the first loan.
Tatnells case goes to the heart of the debate over the Future of Financial Advice reforms that the government sought to wind back until the Sinodinos affair put the amendments on hold last week.
Macquaries MQ is the embodiment of an overly complex and leveraged investment with excessive fees and low transparency. Boiling it down, Tatnell is claiming his Westpac advisers didnt understand what they were selling but simply trotted out the Macquarie line that it was a no-brainer and couldnt help but make money.
Another irony in the no-brainer claims is that MQ was also marketed as capital protected and tax-effective. In short, it purported to have the lot.
Where MQ really did have the lot was on the fee front. The commissions are not stipulated in the Tatnell pleadings. However, a former Macquarie banker with knowledge of the product estimated that, in selling Tatnell a $12.5 million Structured Product Investment Loan facility and a Capitalised Interest Assistance Loan, the Westpac salesmen stood to make $543,000 in upfront fees and trailing commissions from Macquarie.
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12:44pm: Global markets expert Marc Faber has warned of an impending correction in United States stocks, urging investors to crystallise their gains and move into emerging markets before a savage retracement materialises.
The contrarian commentator, known widely as “Doctor Doom”, told attendees at a Melbourne conference this morning that the recovery in US stocks was ageing and that it was time for investors to get out.
“We are approaching the fifth anniversary of the economic recovery,” he said. “Usually after five years in a bull market in the US, the typical decline is more than 20 per cent.”
The Swiss-born author of The Gloom, Boom and Doom Report is best known for correctly anticipating the 1987 crash and the 2009 rebound. He has amassed a huge following, due to his idiosyncratic style and occasionally left-field pronouncements.
Fans were not left disappointed by his presentation, which contained some classic “Faberisms”, including his claim that the tech bubble of 2000 was deliberately created by former Federal Reserve chairman Alan Greenspan and the 1994 Mexican bailout was actually a bailout of Goldman Sachs.
The bulk of his speech, however, was devoted to the rise and rise of emerging markets and the opportunities for investors.
Read more at Smart Investor.
Central banks are in deep shit, Marc Faber says. Upvotes:1 Downvotes:0 Copy Link
12:26pm: An industrial dispute involving tugboat workers at Port Hedland is threatening to halt shipping of iron ore through the port, and disrupt Australias most lucrative export chain.
The deckhands are seeking improved pay and increased leave entitlements, in a bid to bring their conditions into line with the better paid engineers and masters that also man the tugboats.
The exact demands are unclear, as different claims have emerged from both sides, and a hearing today will see the talks go behind closed doors at the Fair Work Commission in front of Vice President Graeme Watson.
But its clear the tugboat workers already earn six-figure salaries, and work on a roster that sees them work four weeks on, then four weeks off.
When exports through the port are halted, the entire Pilbara supply chain soon follows suit, because only so much ore can be piled up in the stockyards at Port Hedland.
Read more Upvotes:0 Downvotes:1 Copy Link
12:18pm: Bonds yields are still remarkably low, Jonathan Shapiro observes over at the AFR. Despite the Feds taper and signalling rates rises next year, the 10-year US Treasury is yielding just 2.72 per cent, while the Aussie 10-year is hovering at 4.10 per cent.
It begs the question: why are bond yields still so low? There’s no obvious answer but there are several contributing factors, according to Damian Mcoulough of head of interest rates strategy at Westpac:One is that the market is still undecided about the fate of the US economy and how much of a factor bad weather played in the recent spate of weak data. Until there is greater clarity investors are reluctant to sell bonds.Also shorting bonds is not that cheap. Even when they yield 2.72 per cent the cost of funding a short position in bonds means investors need to get the timing right.Mcoulough adds that geopolitical factors – while the overriding factor– cannot be discounted. Even as equity markets edge higher there is still a safe-haven bid for bonds.Another factor is that the so-called carry trade is alive and well. Investors are still searching higher yields either in long term bonds or in higher yielding markets such as Australia.The rising Australian dollar is making the carry traders more confident that it will be harder for the RBA raise interest rates too much and catch them out.
Remarkably low: yields on both 10-year US Treasuries (white line) and Australian 10-year government bonds have not risen as much as expected. Upvotes:0 Downvotes:0 Copy Link
12:07pm: Three of the worlds largest banks have warned that the flood of hot money into China is at risk of sudden reversal as the yuan weakens and the US Federal Reserve brings forward plans to raise interest rates, with major implications for global finance.
A new report by Citigroup told clients to brace for a second phase of the taper tantrum that rocked emerging markets last year, but this time with China at the eye of the storm.
Theres a dangerous scenario in which the combination of rising US short-term rates and a more volatile RMB (yuan) could lead to a rather large capital outflow from China, said the report, by Guillermo Mondino and David Lubin.
They argue that Chinas credit boom has become a function of external dollar funding, mostly through offshore lending in Hong Kong and Singapore to circumvent internal curbs. It is a powerful side-effect of super-loose policies by the Fed, which the Chinese have been unable to control. If so, this may snap back abruptly as dollar liquidity dries up and fickle money returns to the US.
Bank lending to emerging markets has surged by $US1.2 trillion over the last five years to $US3.5 trillion. The banks have funded most of these loans from short-term sources, leaving the whole nexus extremely vulnerable as the US prepares to tighten.
Read more. Upvotes:0 Downvotes:1 Copy Link

11:55am: The US stock market is a rigged game where high-frequency traders with advanced computers make tens of billions of dollars by jumping in front of investors, according to best-selling author Michael Lewis, who spent the past year researching the topic for his highly anticipated new book “Flash Boys”.
While speed traders’ strategies, developed over the past decade with help from exchanges, are legal, “it’s just nuts” that they’re allowed, Lewis said during an interview on CBS’s “60 Minutes. The tactics are too complicated for individual investors to understand, he said.
Theyre able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price, says Lewis. The speed advantage that the faster traders have is milliseconds...fractions of milliseconds.
“The US stock market, the most iconic market in global capitalism, is rigged,” Lewis, whose books “Liar’s Poker” and “The Big Short” highlighted Wall Street excesses, said during the interview. “It’s crazy that it’s legal for some people to get advance news on prices and what investors are doing,” he said.
Everyone who owns equities is victimised by the practices, in which the fastest traders figure out which stocks investors plan to buy, purchase them first and then sell them back at a higher price, said Lewis. Upvotes:5 Downvotes:3 Copy Link
11:49am: Investors in exchange-traded funds that buy US government debt are signalling their conviction the Federal Reserve is intent on raising interest rates sooner rather than later.
After pouring into the ETFs to start the year, investors pulled $US10.3 billion in March, the biggest exodus since December 2010, data compiled by Bloomberg show. The $7.86 billion iShares 1-3 Year Treasury Bond ETF alone lost a third of its assets from withdrawals, the most of any fixed-income fund this month.
The retreat shows how quickly ETF investors recalibrated expectations as Fed Chair Janet Yellen said March 19 that a strengthening US economy may prompt the central bank to lift its benchmark rate six months after it stops buying bonds.
While treasuries have confounded forecasters by outperforming this year, ETF investors are shifting money into riskier assets such as junk loans and small-cap stocks to capture greater returns.
“When the market thinks the Fed is going to raise rates, they don’t tend to stick around in short-dated bonds,” Thomas Higgins, global macro strategist at Standish Mellon Asset Management, which oversees $167 billion of fixed-income assets, said from Boston. “With the Fed signalling rate hikes and the economy slowly but steadily humming along there is less and less value in treasuries.”
Higgins said his firm favours speculative-grade corporate bonds and has been selling Treasuries.
The redemptions in March have all but erased the net inflows US government bond ETFs garnered in the first two months of the year, when an economic slowdown in China, crises from Thailand to Ukraine and questions over the strength of the US economy caused investors to seek out the safest assets.
Traders anticipate a 64 per cent chance the Fed will start increasing its benchmark rate, which has been close to zero for six years, in June 2015, based on futures trading on the CME Group Inc.’s exchange. Prior to Yellen’s comments, the likelihood was 42 per cent.
Read more at Bloomberg. Upvotes:1 Downvotes:0 Copy Link
11:28am: Just on the RBA financial aggregates again, weve charted the trend in annual growth for housing and business lending since 1991.
Starting with housing, the average annual growth in housing between January 1991 and July 2007 was 15 per cent (investor housing loans averaged closer to 25 per cent).
Since then housing lending has grown at an annual rate of 7 per cent, and substantially lower than that in recent years - as you can see from the chart.
Business lending growth fell off a cliff in 2008 before bouncing off very low levels in late 2009/early 2010. But the rebound hit a road block in 2012, business lending growth slowed down, and now looks to have picked back up, if slowly.
The trend in 12-month growth in housing and business lending. Upvotes:2 Downvotes:0 Copy Link
11:14am: RBA has released financial aggregates data this morning, which slow a bit of an uptick in business lending for the month and a bit of a fall in housing loans - see table below.
On a 12-month basis, its clear that housing credit has picked up over the past year, while business lending is equivalent to this time in 2013..
Housing and personal lending is growing faster than it was a year ago. Upvotes:1 Downvotes:0 Copy Link
11:04am: The by far best-rating business story this morning is Christopher Joyes housing bubble warning, which we flagged on Friday. In case you missed it, heres an updated version.
Some of the highlights:Australia is just months away from having the most expensive residential property market in history.According to a valuation benchmark regularly cited by the RBA – Australian house prices divided by family incomes – the asset class is three months from piercing the valuation peaks touched in June 2006 and June 2010.Theres no evidence the boom is abating. In 2014, national auction clearance rates have consistently punched above 70 per cent – echoing the 2009 ebullience induced by low rates and the governments first time buyers bonus.When prices do start sliding, it is not inconceivable that we could see unprecedented 10 to 20 per cent losses across the board.This has ramifications for home owners and investors in the banks, which are, on average, leveraged 25 times and only need a circa 5 per cent fall in the value of the assets held on their balance sheets – 60 per cent of which are home loans – to have their equity capital wiped out. My message is: buyers beware.
Upvotes:0 Downvotes:1 Copy Link
10:43am: Only a matter of weeks after quitting as the chairman of Nexus Energy, Seven Group chief executive Don Voelte has outlined plans to seek control of the troubled explorer.
Seven said it intends offering shareholders 2 cents a share, which is significantly less than their last traded price of 5.9 cents a share.
When he quit the Nexus board in mid-February, Voelte, a former chief executive of Woodside Petroleum, said his position was no longer appropriate given Seven Groups strategic focus on opportunities in the oil and gas sector.
Trading in shares in Nexus has been suspended since late February due to operational problems at the Longtom unit, which has clouded the financial fortunes of the explorer.
As part of the conditional offer, Seven will offer Nexus an immediate $40 million as well as commit to a $400 million spending program which will help put the troubled companys operations onto a firmer financial footing. Upvotes:0 Downvotes:0 Copy Link
10:31am: Sales of new homes jumped in February on strong demand for detached houses, the latest sign that low interest rates are fuelling a revival in the market.
The Housing Industry Association (HIA) said its survey of large builders showed sales of new homes rose 4.6 per cent in February from January, to their highest in almost three years. Sales of new detached houses surged 6.9 per cent in February, while the volatile multi-unit sector dropped 6.8 per cent.
Both sales and building approvals for detached housing are signalling faster momentum ahead for this component of new dwelling construction, compared to what was evident in the first phase of the recovery, said HIA chief economist Harley Dale.
This signal suggests more balanced growth ahead in the composition of new home building and adds a further positive dimension to the recovery for many of Australias manufacturers and suppliers.
The Reserve Bank has been counting on a revival in home construction to help support the economy as a long boom in mining investment finally peaks.
Momentum seen for construction. Photo: Tamara Voninski Upvotes:0 Downvotes:0 Copy Link
10:30am: SMH economics editor Ross Gittins says the Murray inquiry into the financial system should be asking whether Australia would be better off with a smaller finance industry:
Attention conspiracy theorists: see if you can detect a pattern in this. Tony Abbott wants to review the renewable energy target, so he appoints self-professed climate change sceptic Dick Warburton, who feels qualified to explain to the scientists where theyre going wrong.
Abbott wants to review the financial system, so he appoints a former boss of a big four bank, David Murray, who feels qualified to explain to economists where theyre going wrong.
So, which industry sector stands the better chance of getting what it wants from its review?
Can you imagine how many proposals Murrays committee will receive aimed at making the financial system bigger and better - and all in return for just a little more help from taxpayers?
I read that the Australian Bankers Associations submission proposes abolition of interest withholding tax, so as to support offshore fund-raising by local banks and to encourage overseas banks to lend more in Australia. It also calls for the removal of tax disincentives on bank deposits. All to increase this financial sectors contribution to economic growth and jobs, naturally.
The governments terms of reference say the inquiry is charged with examining how the financial system could be positioned to best meet Australias evolving needs and support Australias economic growth. Fine. But if its to be more than just an industry sales pitch, the inquiry needs rigorously to examine the industrys convenient assumption that the bigger it gets the more it benefits the rest of us.
In a brief submission that deserves more attention than its likely to get, Professor Ron Bird and Dr Jack Gray, of the Paul Woolley centre at the University of Technology, Sydney, summarise the growing evidence that the developed economies much expanded financial systems have been a bad investment from the perspective of the wider economy.
Read more. Upvotes:0 Downvotes:0 Copy Link
10:16am: Climate change is already being felt in all corners of the globe and some parts of the natural world may already be undergoing irreversible change, a major assessment by the UN Intergovernmental Panel on Climate Change has found.
The report on the impact of climate change – the first of its kind in seven years – stresses that the likelihood climate change will cause severe and irreversible damage to the planet grows if greenhouse gas emissions continue is high and the planet warms significantly.
The report is the result of years of work by a team of 309 lead global researchers. It is the second part of the IPCCs fifth assessment of climate change and focuses on its impact and how the world might adapt.
A 48-page summary released today says some threats from climate change are considerable at just one or two degrees warming above pre-industrial levels. The average temperature across the globe has risen 0.85 since 1880.
If youre interested, were live-blogging the release of the report and reactions. Upvotes:2 Downvotes:0 Copy Link
10:06am: Toy wholesaler Funtastic, which counts Lachlan Murdoch and Gerry Harvey as shareholders and hasn’t paid a dividend for six years, has once again withheld its interim distribution after reporting a bottom line loss of $25.88 million for the January half.
The wholesaler, which sells CHILLFACTOR slushy makers, Leapfrog toys and Power Rangers action figures, wrote down the value of its Madman Entertainment film distribution unit by $24.16 million after receiving offers for the business that were well below book value of $52 million.
Earnings before interest tax depreciation and amortisation from continuing operations also plunged 83 per cent to $1.69 million after a drop in sales of key agency brands such as Ben 10 and Power Rangers, while costs rose, fuelled in part by the weaker Australian dollar and international expansion activities.
The bottom line loss, which was flagged early in March, compared with a net profit of $9.3 million in the prior corresponding period.
Shares are still up 3.8 per cent at 13.5 cents this morning.
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10:02am: Network Ten has recorded its worst weekly audience share for prime time on record.
The free-to-air television network had a 13.8 per cent share of total audience from 6pm to midnight last week, placing it fourth behind the ABC, which had a 17.9 per cent share.
Seven Network won the week with a 33 per cent audience share, while Nine Network was second with a 31 per cent share.
After enjoying ratings success with the Big Bash League cricket competition, the Sochi Winter Olympics and the Australian Grand Prix, Ten has struggled to launch its general entertainment programming.
The network is trying to attract new programming executives and is locked in a court battle with Seven over the services of John Stephens who walked away from a signed contract with Ten.
Ten shares are flat at 27 cents. Upvotes:1 Downvotes:0 Copy Link
9:44am: Consumers prices have edged slightly higher this month to keep inflation at 2.7 per cent, a private survey has found.
The monthly inflation gauge, by TD Securities and the Melbourne Institute, found that prices rose by 0.2 per cent in March to take the year-on-year rate to 2.7 per cent. The annual rate is near the top of the Reserve Banks target band of 2 to 3 per cent.
The trimmed mean, a measure of underlying inflation and which is more closely watched by the central bank, lifted by 0.1 per cent this month to take the annual rate to 2.7 per cent, the report released today showed.
Inflation pressures are clearly building up, neither due to noise nor proof that Australia’s speed limit on growth is below 3 per cent, TD Securities head of Asia-Pacific research Annette Beacher says.
While the RBA board has a few months to voice the period of stability in the cash rate theme, the use-by date for the emergency cash rate is approaching fast. Upvotes:0 Downvotes:0 Copy Link
9:30am: Local shares have had a positive start to whats likely to be a bumpy week in which a range of key economic numbers are released here and abroad.
The ASX 200 is up 0.5 per cent, or 28 points, to 5395.1 in early trading, while the All Ords is 27 points higher at 5403.6.
Gains are being recorded across sectors, with metals and mining stocks leading the charge - up 1 per cent. Even gold miners have gained 0.6 per cent.
Most bluechips are up - as are three quarters of the top 200 - with BHP 1.2 per cent higher and the big banks, Telstra, Woolies and Wesfarmers all contributing the early upbeat mood.
CSL is the exception, down 0.1 per cent.
Two words can describe the ASX 200 today... window & dressing #ausbiz— David Scutt (@David_Scutt) March 30, 2014 Upvotes:0 Downvotes:0 Copy Link
8:53am: The AFR caught up with Saxo Banks resident contrarian, chief economist Steen Jakobsen, whos always good for a controversial quote.
Hes been fairly pessimistic about Australia, and in his most recent interview he again warns local investors about becoming too complacent about sharemarket gains.
You like to call yourselves the lucky ones, I like to call you the isolated ones. I think Australia is very much in its own world in terms of the monetary cycle and you’re probably the only housing market in the world that’s going up right now. Certainly the only one where the government and central bank support the housing market.”
To him, Australia with its structural issues, reminds him of the Britain before Margaret Thatcher came to power in 1979.“I see the unions want pay rises, when productivity is very low,” he says. “It shows inflexibility to understand how the world has become global.”
Here are a few more quotes challenging the (Aussie dollar) bulls:Dont be surprised if the Reserve Bank cuts the official cash rate to 1.75%.Theres more chance of [me] being selected to play football for Denmark than the official (RBA) cash rate rising.The Australian dollar might have a run up to US95c or US96c in the short term but by the end of the year it will be closer to US80c.Stand by for some clarifying comments from the governor of the RBA Glenn Stevens following his remarks last week on the Australian dollar.The Dow Jones could fall as much as 30 per cent from its peak.China will grow at 5 per cent not 7 per cent.The US Federal Reserve will soon be forced to taper its own tapering program.
Read more ($)
Saxo Bank’s Steen Jakobsen predicts the dollar will fall to $US80¢ and rates could be cut. Upvotes:2 Downvotes:1 Copy Link
8:33am: In case you missed it, Fleetwood Corp on Friday night announced the resignation of its CEO, Steve Price, effective June 30.
Price has run the temporary accommodation and caravan business for four years and through a particularly challenging period, the company said in a statement, during which time he implemented a series of reforms and initiated processes which will stand the group in good stead in the years to come.
The shares were up 2 per cent on Friday to $2.60 on Friday, but were closer to $10 a year ago. Upvotes:0 Downvotes:0 Copy Link
8:32am: In other corporate news, where its been pretty quiet this morning, insurance group Suncorp plans to raise $250 million through hybrid debt securities to help fund capital works.
The Brisbane-based company will issue convertible preference shares to raise the cash, which chief financial officer Steve Johnston was needed to fund ‘‘one or more regulated entities within the Suncorp Group’’.
‘‘The CPS3 offer will further strengthen Suncorp’s capital position and is a key part of our ongoing funding and capital management strategy,’’ Johnston said.
The CPS3, to be issued at $100, will be quoted on the ASX. Trading is expected to start from May 9.
UBS has been appointed the sole arranger and joint lead manager with Deutsche Bank and NAB. Upvotes:0 Downvotes:0 Copy Link
8:25am: Electricity distributor SP AusNet has halted its shares from trading amid discussions with major shareholder Singapore Power on a management-services agreement between the two.
A review of the management services agreement comes as a consequence of Singapore Power’s sale of a 19.9 per cent stake in SP AusNet to State Grid Corporation of China.
In November, SP AusNet said its directors intended to end the agreement on or before September 30, 2015 and that discussions with Singapore Power on that were under way.
The agreement started on October 1, 2005 for an initial period of 10 years but continues for two further ten-year periods unless terminated by either party giving at least one year’s notice before the expiry of the relevant 10-year period.
Melbourne-based SP AusNet said the trading halt would last until the market open on Wednesday, or when it made an announcement on the future of the agreement. Upvotes:0 Downvotes:2 Copy Link
8:24am: There are no shortages of major economic reports on the calendar this week but we also have central bank rate decisions and a major change in fiscal policy in Japan, writes BK Asset Management forex strategy director Kathy Lien in a note titled ‘Five reasons why currencies could explode this week’:Japan set to raise the sales tax for first time in 17 yearsECB and RBA monetary policy decisionsUS, German and Canadian employment reportsChinese PMIsISM and PMI Reports from US, eurozone, Australia and Canada
There will be a lot of news for the market to absorb so directionality may be difficult to handicap but we know with confidence that all of these event risks will increase the volatility in currencies. Upvotes:1 Downvotes:0 Copy Link
8:21am: The Australian dollar is taking a breather after last weeks impressive rally and as investors await the Reserve Banks April board meeting tomorrow.
The local unit is fetching 92.47 US cents, down from 92.66 US cents late on Friday.
The local currency hit a four-month high of 92.95 US cents during the day on Friday following strong local economic figures and RBA governor Glenn Stevens upbeat view of the economy during a speech in Hong Kong.
The currency has dropped off as investors take profit ahead of tomorrows RBA meeting, Bank of New Zealand currency strategist Raiko Shareef says:The Australian dollar had a very strong week last week.It was the top performing major currency and that was driven mostly by governor Stevens last week failing to take a swipe at the Aussie dollar despite its strength.We think there was a bit of profit taking after an exceptional week and also just a bit of taking risk off the table ahead of the RBA meeting this week.
Strong rise since the last RBA meeting. Upvotes:0 Downvotes:0 Copy Link
8:07am: Australian shares look set to open slightly higher, following Wall Streets rise, but gains are likely to be limited ahead of Chinese PMI data, the RBA rates decision and US jobs numbers
What you need2know this morning:SPI futures up 12 points to 5368AUD at 92.47 US cents, 95.00 Japanese yen, 67.18 Euro cents and 55.49 British penceOn Wall St, S&P500 +0.5%, Dow Jones +0.4%, Nasdaq +0.1%In Europe, Euro Stoxx 50 +1.2%, FTSE100 +0.4%, CAC +0.7%, DAX +1.4%Spot gold up 0.3% $US1295.27 an ounceBrent oil rises 0.2% to $US108.07 per barrelIron ore is at $US112.30 per metric tonne
Whats on today:
Australia: Private sector credit for February, March’s monthly inflation gauge, Business counts (June 2013).
Stocks to watch:BC Iron chief executive Morgan Ball has told Smart Investor how the company has dodged the mining slowdown bullet.Bell Potter director Charlie Aitken has outlined three “high conviction ideas”: sell ASX, buy both Crown Resorts and Brickworks.Deutsche Bank is retaining its “hold” rating on Sigma Pharmaceuticals, for which it has a price target of 65 cents.Trading ex dividend today: Money3Corp, SPDR S&P/ASX 200 Lister Property Fund, Virtus Health, Webster.
read more in this mornings need2know Upvotes:0 Downvotes:0 Copy Link
8:03am: Good morning and welcome to the Markets Live blog for Monday.
Your editors today are Jens Meyer and Patrick Commins.
This blog is not intended as investment advice.
BusinessDay with wires. Upvotes:0 Downvotes:0 Copy Link


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