Markets Live: Dollar jumps above US93c
1:34pm: Heres the full RBA statement:
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth. Chinas growth remains generally in line with policymakers objectives, though it may have slowed a little in early 2014. Commodity prices have declined from their peaks but in historical terms remain high.
Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.
In Australia, the economy grew at a below trend pace in 2013. Recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have improved from a year ago and exports are rising. But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans. Public spending is scheduled to be subdued.
The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth is slowly picking up. Dwelling prices have increased significantly over the past year. The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.
Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.
In the Boards judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates. Upvotes:0 Downvotes:0 Copy Link
1:34pm: BHP shares have enjoyed a bit of a lift - now up 1.7 per cent to $37.11 - following a Fairfax Media scoop that the Big Australian is planning on slimming down via some major asset sales.
Investors like the idea of asset sales at BHP. Upvotes:0 Downvotes:0 Copy Link
1:30pm: The Reserve Bank has left the cash rate unchanged at 2.5 per cent.
The dollar has spiked to 93.04 US cents after the central bank said the exchange rate remains high by historical standards, a fairly mild form of jawboing that doesnt impress markets much. Upvotes:0 Downvotes:0 Copy Link
1:19pm: The market appears to be betting big on engineering contractor UGL being unsuccessful in selling DTZ property arm, a CBA analyst opines, with 12.2 per cent of UGL stock short as at March 25.
“The second part of that bet appears to be the potential for an equity raising, something we had considered in May 2013, but looks contingent on an unsuccessful DTZ sale,” Brownette writes in a research note.
UGL will narrow the field of potential buyers of DTZ to about half a dozen this week as it accelerates efforts to either sell the business or spin it off into a separately listed entity.
It is understood interest has stemmed exclusively from private equity players, with the Texas-based buyout firm TPG widely viewed as the strongest contender.
Raising equity is not a certainty, CBA’s analyst says.
“The market appears to not only be betting that DTZ will not be sold, but also appears to be betting on a large equity issue.”
The shares are trading 3.5c down to $6.985. This time last year they fetched north of $10 each.
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12:58pm: Australias exposure to China is growing, making us more vulnerable to a slowdown, UBS economists Scott Haslem and George Tharenou write in a note:Despite a slowing in China’s annual GDP growth from 9-10% in 2010-11 to 7-8% in 2012-13, Australia’s exports to China have recently re-accelerated to be up 30% over the past year, led by resources (almost 90% of our goods exports to China).More interestingly, Australia’s penetration into China has increased sharply, with our (export) share of China’s imports up from 4% to almost 5% over the past year. This follows a 17yr period to 2007 when Australia’s exports remained relatively steady at 2½% of China’s imports, before jumping to average 4% in the 4yrs to 2012.Few countries or regions have managed to lift their share of China’s imports over the past decade.Firstly, this is good story for Australia. The 30% y/y growth in the value of Australia’s exports to China reflects the fact that volume growth (~32% y/y) is offsetting what has to date been a relatively modest fall in overall commodity prices.Even as commodity prices are forecast to fall further, there’s still a large volume response to come over the next few years (across coal, iron ore and LNG), which will continue to underpin Australia’s growth and income.The ongoing penetration of Australia’s exports to China, relative to Brazil, India & Russia, likely reflects Australian resources producers’ favourable position on the cost curve and reliability of supply growth.Secondly, without doubt, Australia is becoming more exposed to China’s economic cycle, given our exports to China are now 7% of our annual GDP growth. This places a strong onus on policy makers – as we venture out the risk/reward frontier with China – to ensure Australia has monetary and fiscal policy levers ‘on hand’ to replenish domestic income if and when China experiences a sharp downturn.
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12:41pm: BHP is considering spinning off non-core assets including aluminium, nickel and bauxite in a transaction that could create a new $20 billion resources company that would be handed back to shareholders.
It is understood a team advised by investment Goldman Sachs and using the name “project river” is working on a number of strategic options for non-core businesses including a demerger and individual asset sales.
Multiple sources close to the process said no final decision had been made and stressed the project had been running for more than a year without a conclusion.
But they said the work “had gathered momentum” with senior BHP executives leaning towards spinning off the company with potential listings on the Australian, London and South African stock exchanges.
It is understood there are also still deliberations about what assets would be included in any sale or demerger process if it were to go ahead.
Shares are up 2 cents at $36.49, after earlier slipping to $36.14.
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12:39pm: The explosive claim by acclaimed business author Michael Lewis that the world’s largest stock market is “rigged” by high-frequency trading has sent Wall Street into a flux of chatter, self reflection and, in some cases, denial.
‘‘The United States stock market, the most iconic market in global capitalism is rigged ... by a combination of the stock exchanges, the big Wall Street banks and the high-frequency traders,” Lewis says.
Larry Kudlow, an economist and well known US financial market commentator, says Lewis is exaggerating by calling the market rigged:There are imperfections, and Mike Lewis, who is a very bright guy, has fingered some of these imperfections.I never like to blame the technology, because somebody is always going to come up with a better mouse trap.
High-frequency trading advocates have strongly refuted the Lewis claims. They argue high-frequency trading is supporting other investors by adding liquidity, price discovery and depth to the share market.
Peter Nabicht, senior adviser to the Modern Markets Initiative trade group and former chief technology officer at high-frequency-trading firm Allston Trading, says the game is not rigged in the favour of professional traders who employ HFT:Rather, they work hard to compete with each other to bring liquidity to the markets, benefiting average investors.
But does holding stocks for a split second really support capital formation in equity marks?
Read more, also on the five key issues with HFT, at afr.com ($) Upvotes:0 Downvotes:0 Copy Link
12:30pm: Echo Entertainment, Crown, Lend Lease and Chinese giant, Greenland Holdings, have lodged formal expressions of interest for building a new casino at the Queens Wharf development in Brisbane.
Deputy Premier Jeff Seeney told state parliament 12 companies had paid $100,000 to lodge their formal interest, with six consortiums interested in the Brisbane development and another six keen on building a new integrated casino development in regional Queensland.
Echo Entertainment, which owns Brisbane’s only casino, the Treasury, will take on James Packer’s Crown for a possible second casino in the Queensland capital, following their battle for market dominance in Sydney.
Other consortium bidding for the new Brisbane casino licence, including a Far East Consortium/Chow Tai Fook Enterprises joint venture, construction company Lend Lease, SKYCITY Entertainment Group and the Chinese company Greenland.
In a twist, Packer will be going up against a Hong Kong billionaire who is linked to his joint venture partner in Macau. Packer’s Crown and Lawrence Ho each own 33.6 per cent of Melco Crown, which operates casinos in Macau and is developing a casino in The Philippines. Upvotes:0 Downvotes:0 Copy Link
12:09pm: The rise of the official Chinese manufacturing data does not mark an economic turning point - as the HSBC version underscores, Nomura writes in a note:We are not convinced the economy has passed a turning point and growth will recover from here. New orders only rose marginally by 0.1pp yet new export orders rose significantly by 1.9pp, which means domestic order actually dropped again.Indeed, the People’s Bank of China’s corporate survey shows that domestic and overseas orders dropped significantly to their lowest in almost five years. The finished goods inventory index rose, consistent with weak demand.We maintain our view that GDP growth will slow to 7.3% y-o-y in Q1 and 7.1% in Q2. Without a pick-up in policy easing, growth will likely drop below 7% in Q2 or Q3.We reiterate our view that both monetary and fiscal policies will be loosened in Q2. We expect a cut of reserve requirement ratio by 50bp in Q2 and another cut in Q3. The likelihood of an interest rate cut is rising as well, although it is not yet our baseline view.
ANZ points out that, adjusting for the seasonality effects, today’s PMI figures suggest that China’s manufacturing sector is weaker than the number suggests, as historical data show that the March PMI rose by 2.8pts on average from February:Looking forward, we view that the continuous deterioration in growth momentum will be arrested by pro-growth measures, cyclical upturn of newly started projects, and eased monetary policy.However, the strength of the cyclical upturn will hinge on whether the PBoC can permanently lower the funding costs facing the enterprises. The weighted lending rate is at 7.34%, still very high relative to falling profit margins.
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11:54am: After the official China manufacturing PMI data came in better than expected, a private survey of manufacturing has disappointed.
HSBCs China manufacturing PMI slipped to 48.0 in March, down from 48.1 in the previous month and missing expectations of a 48.1 reading.
The dollar lost all its gains and more, dropping to 92.60 US cents, before stabilising at 92.78 US cent - pretty much exactly where it was before the first PMI was published at midday.
Up, down, and back where we started - the dollar reacts to Chinese PMI data. Upvotes:1 Downvotes:0 Copy Link
11:31am: Australia’s economy is vulnerable to a slowdown in China, where risks are ‘‘tilted to the downside’’, meaning the dollar could slide even as domestic demand shows signs of improvement, Pimco says.
A decline in mining investment will be the biggest drag to growth in 2014, blunted to some extent by a rise in residential dwelling investment and improvements in business confidence, Adam Bowe and Robert Mead, Sydney-based money managers at Pimco, write in a commentary on the firm’s website.
The bond fund manager favours positioning for declines in the Aussie as a way to hedge against a negative shock from China, which isn’t its central case, according to the report.
‘‘While we still expect Chinese growth to slow gradually over the cyclical horizon, uncertainty has risen recently and risks to the outlook are tilted to the downside,’’ they write.
Should China’s economy expand less than 6.5 per cent, it will have negative implications for Australian growth with ‘‘additional policy accommodation likely needed from the Reserve Bank of Australia’’. Upvotes:0 Downvotes:2 Copy Link
11:29am: Nexus is a low-cost way for Kerry Stokes to get into the energy industry, writes BusinessDay columnist Elizabeth Knight:
It was a the price is right moment for West Australian billionaire Kerry Stokes when his Seven Group Holdings offered to outlay $400 million to buy and revive the ailing oil and gas company Nexus Energy. The deal conjures all those words used to described low-ball offers - cheap, opportunistic and cheeky - and only capable of success because Nexus is in such a financially parlous shape that it has two choices: Stokes or bankruptcy.
Nexus has been hanging on to solvency by a thread for several months trying to restructure its finances, including selling assets or raising fresh equity. But an electrical problem that caused it to shut down its only cash-producing asset, the Longtom gasfield in Bass Strait, tipped the balance.
Seven Group seized the opportunity to pick up Nexus, which owns some good prospective assets off Western Australia, for 2¢ a share, - which represents about a third of the price at which the shares last traded on the Australian Securities Exchange.
And as for potential skeletons inside Nexus closet, Seven has that covered.
Until a few months ago, Seven Groups chief executive, Don Voelte, was Nexus chairman so he is particularly well acquainted with the value of its assets.
Read more. Upvotes:1 Downvotes:0 Copy Link
11:04am: Chinas official manufacturing PMI for March has come in slightly ahead of expectations, at 50.3, up from last months 50.2 and against an expected 50.1.
The data has lifted the local dollar 0.2 US cents to the days high of 92.93 US cents.
The final reading on HSBCs manufacturing PMI for March is due in 45 minutes. Upvotes:1 Downvotes:0 Copy Link
10:58am: The Australian Securities Exchange has stepped up its push for the government to abolish ownership rules that restrict entities from holding a more than 15 per cent stake in the bourse.
ASX said in a submission to the financial system inquiry that the ownership rules were no longer necessary as regulatory settings were now more clearly defined.
With direct controls of systemically important financial markets infrastructure in place, there is a case to remove the 15 per cent ownership restriction that currently applies only to ASX, it said.
This limit provided additional protection when the regulatory settings were less well defined. ASX has asked the inquiry for its views on the need for ownership restrictions.
The ASXs 15 per cent rule falls under the Corporations Act and is intended to provide the government with additional control over local market infrastructure.
But the ASX said increased regulatory control was now being addressed and the rule was now redundant.
Once all regulations have been implemented there is a case to remove the 15 per cent ownership limit. Regulators will retain full control of the physical market infrastructure under any ownership scenario, and the normal foreign investment controls continue to apply, it said.
It would create a level playing field – there are no ownership requirements for any of the overseas operators that are licensed in Australia.
Read more. Upvotes:1 Downvotes:0 Copy Link
10:38am: The affordability of iron ore for Australian households fell a further 2 per cent over the December quarter, after plunging 10 per cent in the prior three months, sharpening concerns among economists that an entire generation of younger Australians will be priced out of the market.
Only five years ago the average Aussie household could afford more than 1600 tonnes of iron ore, based on the average household income. That number has almost halved to 834 tonnes in the latest reading.
At the start of the century, iron ore fetched less than $US20 a tonne. Now the price of the Australian dream runs at more than five times that at more than $US100/tonne.
The fact that an increasing abundance of local supply seems to have not flowed through to lower iron ore prices has puzzled local economists. With a number of new projects coming on line or ramping up, iron ore production is forecast to increase by up to a quarter to 851 million tonnes by 2019.
But recent anecdotal evidence from iron ore agents, particularly in some areas of Sydney, suggests that offshore buying – particularly from Chinese investors – is driving up prices.
Indeed a recent analysis by TBTF Bank suggests as much as 60 per cent of iron ore is bought by mainland Chinese.
The sharp plunge in the HIOA index over the past five years is causing concern among economists that a generation of first iron ore buyers won’t be able to break into the market.
“My parents were able to buy as much iron ore as they wanted, and at an early age, and without selling their souls to the bank,” said 21-year old university student and aspiring acrobatist, Lucinda Bettington.
“At this rate, all I’ll be able to afford is shavings.”
Upvotes:10 Downvotes:4 Copy Link
10:34am: Thérèse Rein faces a multi-million dollar payday after selling her multi-national jobseeker company, Ingeus, to a US employment firm in a deal worth as much as $US206 million.
The wife of former prime minister Kevin Rudd has struck a deal with the Nasdaq-listed Providence Service Corporation that could see her personally earn up to $US140 million in cash and shares if certain performance targets are met.
According to a statement released this morning by Providence, Rein has agreed to stay on as managing director of Ingeus for at least five years as part of an earn out with management.
Rein joined the BRW Rich list in 2013 (in 199th position) with an estimated fortune of $210 million. She fell off the following year but the deal with Providence suggests she remains one of the wealthiest woman in Australia.
Providence has agreed to buy 100 per cent of parent company Ingeus, which is 95 per cent owned by Rein, and its British division, which is 50 per cent owned by accounting firm Deloitte.
Cashed up: Rein could earn as much as $US140 million through the sale. Photo: Andrew Meares Upvotes:0 Downvotes:0 Copy Link
10:30am: Last months 2.3 per cent surge in house prices was really down to strong rises in two cities: Melbourn and Sydney, RP Data research director Tim Lawless notes:That growth is very much confined to two capital cities. Its really Sydney and Melbourne thats driving that very high level of growth. Every other capital city is showing a more measured rate of capital gain.I think if there is any danger of the market place overheating, you can point the finger at Melbourne firstly and secondly at Sydney, and yields are a really good sign of that disparity.I think there are some natural barriers to prevent the housing market from continuing to see this pace of growth. The first is simply affordability. Sydneys median house price is now $713,000. So inherently you have that natural price barrier that will start to slow the market down.And I think the second factor that will start to slow the market down is the fact that investors will simply be turned off the market place thats yielding so low.Nobody wants to buy into the market place at a very mature end of the growth cycle and have limited prospects for capital gain at the same time as have a very low yield. That seems to me to be the situation in Sydney and Melbourne at the moment.
Overheating? Melbournes real estate market set the pace in March. Photo: Jessica Shapiro Upvotes:1 Downvotes:0 Copy Link
10:07am: Here are this mornings best and worst performing stocks in the top 200.
Leading the pack is Lynas, up 8.3 per cent after the rare earths miner released upbeat operations update which, it said, was in line with its guidance.
Recall Holdings is up 2.6 per cent, while Ainsworth Game Technology clawed back some of its recent losses.
Among the worst are mostly miners, but also a host of media companies: Ten Network, Southern Cross Media and Seven Group.
Best and worst performers in the ASX 200 so far today. Upvotes:0 Downvotes:0 Copy Link
9:49am: BRW has published its latest executive rich list, ranking Australia’s wealthiest bosses. While the ASX200 rose a paltry 4.9 per cent over the past 12 months to March, the wealth of the top 100 execs jumped by a much more generous 16.7 per cent.
Topping the list is News Corp and 21 Century Fox executive chairman Rupert Murdoch, whose remuneration package is valued at $31.7 million, while the value of his shares jumped to $12.6 billion, from $9.1 billion.
Coming in second place is casino magnate James Packer, whose shares have risen in value from $4.3 billion last year to $6.2 billion (remuneration = 0). Third is star investor Kerr Neilson, managing director of Platinum Asset Management, whose shares are now valued at $2.4 billion, up from $1.6 billion. Neilson’s total remuneration was $439,532.
Next on the list are Kerry Stokes (Seven Group), David Teoh (TPG Telecom), Gerry Harvey (Harvey Norman), Graham Turner (Flight Centre), Len Ainsworth (Ainsworth Game Technology), Silviu Itescu (Mesoblast) and Rod Jones (Navitas).
For a full list of the top 100, click here.
Richest of the rich (by several billion): Rupert Murdoch Photo: Reuters Upvotes:0 Downvotes:1 Copy Link
9:32am: After an incredible surge that almost quadrupled its market value in a year, the bubble has burst for Prana Biotechnology.
A very poor clinical trial result has dragged the stock down by more than 75 per cent, taking a handful of the nation’s richest families with it.
The company announced late last night that its drug failed to show any benefit in reducing symptoms associated with Alzheimer’s disease in a 12-month phase 2b clinical trial.
Shares are currently down 77 per cent at 24 cents. This followed the stock’s ADRs plunging 71 per cent to $US2.80 overnight on the NASDAQ exchange.
Prana’s share register reads like the top end of BRW’s Rich Families list. According to the top 20 shareholder list in Prana’s latest annual report Vicki and Robert Smorgon hold 1 million shares, worth 0.25 per cent of the company. The pair are members of the $2.64 billion Smorgon family, who were last listed by BRW as the richest family in Australia.
A private company owned by the $2.1 billion Liberman family, the third richest in the country, owns 3.72 per cent of Prana. Chief executive Geoffrey Kempler owns 3.16 per cent of the company.
The stock has reached as high as $1.305 in February and had increased in value by 384 per cent to $1.04 on Friday, before it entered a trading halt. The massive boost in its market value, to just under $500 million, pushed Prana into the S&P/ASX300 just two weeks ago.
Steep rise, steeper fall: Prana shares. Upvotes:0 Downvotes:0 Copy Link
9:21am: Shares have opened lower despite a rally on Wall St overnight and a jump in the price of iron ore.
The ASX 200 is down 10 points, or 0.2 per cent, at 5385.3, while the All Ords is also 0.2 per cent down at 5392.5.
Energy, and telcos are among the hardest hit, falling 0.5 per cent, while financials are 0.3 per cent lower.
Apart from gold miners, which are 2.3 per cent lower, mining stocks are up 0.1 per cent, with Rio, Fortescue and BHP advancing. The defensive sectors of healthcare and consumer staples are also up.
Computershare is also a conspicuous big name recording sold gains: its up 1.8 per cent. Upvotes:0 Downvotes:0 Copy Link
9:05am: House prices soared 2.3 per cent in March, with every capital city recording a month-on-month rise in dwelling values.
After a flat February result, the RP Data – Rismark Home Value Index finished the March quarter in a strong fashion with dwelling values rising 2.3 per cent over the month to post a 3.5 per cent capital gain over the first quarter of the year.
Apart from Perth, every capital city recorded a rise in dwelling values over the past three months, RP Data said. Melbourne posted the highest level of growth at 5.4 per cent over the quarter with Sydney and Hobart also recording a strong result in the March quarter with values up 4.4 per cent and 4.7 per cent respectively.
According to RP Data research director Tim Lawless, half of all Australia’s capital cities are now posting record high dwelling values, with Sydney’s housing market showing the most substantial increase beyond its previous market high.
Since the #RBA last eased in Aug 2013, the RP-Data Rismark Capital City HPI is +8.37%. In annualised terms that equates to +12.9% #ausbiz— David Scutt (@David_Scutt) March 31, 2014 Upvotes:0 Downvotes:1 Copy Link
8:51am: Iron ore’s biggest one day jump in nine months has pushed the bulk commodity back to levels seen before March’s ‘flash crash’.
Improving emerging market sentiment and increased hopes of stimulus in China saw iron ore lift 4 per cent overnight. The benchmark iron ore price, a measure from the port of Tianjin in China, has risen 5.7 per cent in the last week, now sitting at $US116.90.
Iron ore, emerging markets and riskier assets, in general, have had a strong run in the last week, Deltec chief investment officer Atul Lele says. The MSCI Emerging Markets Index has jumped 4.2 per cent in the last week.
The recovery in iron ore comes after a ‘flash crash’ three weeks ago, which saw the metal plummet more than 8 per cent in one day. The fall was attributed to financial arrangements which used iron ore as collateral being unwound.
However, Lele says investors should not expect a return to levels above $US130 per tonne:At present, none of the indicators suggest that we’re going to see a strong resurgence in the iron ore price. But that’s not withstanding any stimulus that comes through from China aimed at fixed asset investment.
Iron ores March flash crash a rapidly fading blip. Upvotes:0 Downvotes:0 Copy Link
8:46am: Perplexed by the continued slide in the copper price? Taking into account concerns over a slowdown in China, the forced reduction in stockpiles and then take in the overlay of the global majors lifting output with the prospect this will push the market into oversupply, then the copper price decline makes sense.
So how to make money out of it?
Bell Potter reckons the price decline could force asset rationalisation or consolidation among local copper stocks.
It reckons Oz Minerals is the best local play, on its improving fundamentals coupled with a deal involving its Carrapateena project with any partner to help with the funding needs here.
Others such as Sandfire Resources are fully valued and while Pan Aust is trading at a slight discount to what this broker reckons is fair value, it has the development of the Frieda River project in PNG to progress, which introduces an element of risk, putting it on the back foot in recommending this stock as well. Upvotes:0 Downvotes:3 Copy Link
8:41am: Italian dairy giant Parmalat has signed a deal to acquire Western Australia’s family-owned dairy and juice company, Harvey Fresh, for €79 million, sources told the AFRs Street Talk column ($).
The transaction comes amid heightened interest in Australian dairy assets, following the hard-fought battle for control of Warrnambool Cheese & Butter, which was eventually won by Canada’s Saputo earlier this year.
It’s already been signalled that Saputo may have further interest in Australia dairy plays, while New Zealand giant Fonterra has in the past six months crept further up Bega Cheese’s register, increasing its stake in the NSW business from 6 per cent to 9 per cent. Upvotes:0 Downvotes:1 Copy Link
8:35am: Australian manufacturing activity has contracted for the fifth-straight month as weak local demand and the recent rise in the Australian dollar hurt the sector, a new survey has found.
The Australian Performance of Manufacturing Index (PMI) slipped 0.7 points to 47.9 in March, according to the monthly survey by the Australian Industry Group (AiG). A figure below 50 points to a contraction in activity.
The latest Australian PMI shows that large parts of the economy are failing to gain traction in 2014, AiG chief executive Innes Willox said.
Subdued local demand and the newly resurgent dollar are weighing heavily against the efforts of manufacturers to rebuild their sales base in Australia and internationally.
New orders rose in March by 2.3 points to 52.3 last month, but manufacturing production slipped to 49.2 points. Employment in the manufacturing sector remained weak, falling 2.4 points to 50, the survey said.
Four and beverages were one of the four sub-sectors to expand in March. The other three were petroleum, coal, chemicals and rubber products, non-metallic minerals, and wood and wood paper products.
Mr Willox said manufacturers were still battling high local production costs and rising input prices. Upvotes:0 Downvotes:0 Copy Link
8:31am: Larry Fink, chief executive of the world’s biggest investor BlackRock, is bullish about the United States economy and its sharemarket but forecasts a looming slowdown in China.
He forecast the US sharemarket would keeping rising this year but said investors would have to get used to increased volatility in global financial markets.
“The world’s fine but it’s not great,” he said.
“Because of the lack of co-ordinated central bank behaviour you are going to see some parts of the world doing better than others.”
He predicted the US market would rise this year by about 8 per cent.
Mr Fink warned Australia not to fall into the trap of implementing an aggressive austerity program.
“I would argue that if there is a need for a little more fiscal stimulus for the economy I would be a little more open towards that,” he said.
“I am not much worried about Australia because you have such vast savings you are able to self-finance.”
However, he was cautious about the prospects for China.
“Government policies are going to be the difference between a great global world and a poor global world, and probably at the forefront of it is China,” he said.
“We wouldn’t be surprised to see the economy slow from 7.7 per cent to 7 per cent. The world will look at that as a negative. I don’t look at that as a negative.”
Read more ($). Upvotes:0 Downvotes:1 Copy Link
8:19am: Eurozone inflation hit its lowest level since November 2009 in March, a shock drop that raises expectations the European Central Bank will take radical action to stop the threat of deflation in the currency bloc.
Annual consumer inflation in the 18 countries sharing the euro was 0.5 per cent in March, with the pace of price rises cooling from Februarys 0.7 per cent reading, the EUs statistics office Eurostat said. Economists had predicted a 0.6 per cent reading - itself worrying for an economy that is barely pulling out of a record-long recession after a crisis that nearly broke up the currency area.
The eurozone is far from the deflation that Japan suffered from the early 1990s, when falling prices weakened demand, leading to wage cuts and even lower prices, but the blocs low inflation rate is a clear sign of economic fragility.
Inflation has now been in the ECBs danger zone of below 1 per cent for six consecutive months, and the flash reading increases the chances the ECB will cut interest rates when its Governing Council meets on Thursday.
Speculation has also grown that it may employ other easing measures such as a negative deposit rate or even US-style bond-buying. But this years late Easter, which has delayed the impact of rising travel and hotel prices at a time when many people go away in Europe, could encourage the euro zones central bank to wait until its June meeting to act.
This will keep the possibility of further monetary policy easing very much alive, said Nick Kounis, head of economic research at ABN AMRO in Amsterdam. Nevertheless, the central bank has shown quite some tolerance for low inflation recently.
The ECB, which targets inflation of just below 2 per cent, left borrowing costs unchanged at 0.25 percent in March and has argued that deflation risks in the bloc are limited.
The Australian dollar has been on the rise against the euro, but the weak eurozone data didnt really boost the Aussie. Upvotes:0 Downvotes:0 Copy Link
8:18am: Kazuyuki Mouri, a Japanese game developer, recently spent $500 on toilet paper and soft drinks on Amazon.com to last him for the next three months.
Like many shoppers in Japan, the 33-year-old stocked up before the country introduces the first increase of its national sales tax since 1997. The consumption tax rises to 8 per cent from 5 per cent today.
“I’ll need to cut back on expenses because we have to deal with the tax hike,” said Mouri, who was grocery shopping at an Aeon store in Shinagawa, central Tokyo.
Japan is bracing for a possible fallout after the tax takes hold, with companies including Kirin Holdings, Sony, Sharp. and Toyota anticipating softer demand following a spike in last-minute purchases.
The tax increase is part of Prime Minister Shinzo Abe’s effort to rein in the world’s biggest debt burden, even as he tries to spur 2 per cent inflation with his broader Abenomics economic stimulus.
“Retailers are trying to sell as much as they can ahead of the tax hike because nobody knows the exact impact yet,” said Yoshihiro Ito, chief strategist at Okasan Online Securities in Tokyo. “If you buy a 50 million yen condo, a 3 percent increase means about 1.5 million yen. That’s huge.”
While the effects for daily necessities and lower-priced consumer products could be short lived, sales of the more expensive goods and big-ticket items such as cars and home appliances could take a longer time to recover, he said.
Consumption plummeted in 1997 when Japan last raised its sales tax, from 3 to 5 per cent, contributed to an 18-month long recession.
Although analysts expect the latest hike to temporarily dent growth, it should not derail the economic recovery of Australias second biggest trading partner.
Martin Whetton, a Sydney-based strategist at Japans biggest securities trader Nomura, said while short-term volatility was expected, the medium-term outlook was positive and Prime Minister Shinzo Abes growth polices, known as Abenomics will work.
Read more at Bloomberg.
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8:10am: Federal Reserve Chair Janet Yellen gave a strong defense of the central banks easy-money policies, saying its extraordinary commitment to boosting the economy, especially the still struggling labor market, will be needed for some time to come.
In her first public speech since becoming Fed chair two months ago, Yellen cited the struggles of three American workers in backing the policies of low interest rates and continued bond-buying. She said there remains considerable slack in the economy and job market, a sign that further monetary stimulus can still be effective.
I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy-makers at the Fed, Yellen said at a community reinvestment conference.
The Fed, frustrated with the slow recovery from the 2007-2009 recession, has kept rates near zero for more than five years. It has said it will keep them there for a considerable time even after it ends a bond-buying program, which is to be wound down later this year.
In a speech that sounded political at times, Yellen, long concerned with the hardships of the unemployed and under-employed, said the U.S. economy remains considerably short of the Feds goals of maximum sustainable employment and stable inflation at 2 per cent.
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8:05am: A strong night on Wall St following dovish comments from US Fed Chair Yellen and a 4 per cent jump in the price of iron ore should support local stocks ahead of key Chinese manufacturing data and the RBA cash rate decision.SPI futures up 4 points to 5397 at 8.45am AEDTAUD at 92.68 US cents, 95.67 Japanese yen, 67.29 Euro cents and 55.59 British pence at 5.59am AEDTOn Wall St, S&P500 +0.8%, Dow Jones +0.8%, Nasdaq +1 %In Europe, Euro Stoxx 50 -0.3%, FTSE100 -0.3%, CAC -0.5%, DAX -0.3%Spot gold falls 0.9% to to $US1283.68 an ounceIron ore surges 4% to $US116.80 per metric tonneBrent oil down 0.3% to $US107.76 per barrel
What’s on today:RBA board meeting (cash rate decision and statement at 2:30 AEDT)China manufacturing PMI (middayish)AIG Manufacturing index (9:30am AEDT)RP Data/Rismark house prices for March
Stocks to watch:Deutsche Bank said an $11 million penalty imposed on Flight Centre is “immaterial” and its outlook is “vague, but upbeat”. It has a “buy” recommendation on the stock and a 12-month price target of $62 a share.Ainsworth Game Tech raised to buy from underperform at BBY, price target $4.25. The company told ASX yesterday afternoon it couldnt explain the recent sharp fall in its share price.Aquila Resources cut to neutral from outperform at Credit Suisse, PT $2.60New Hope raised to neutral from underperform at Credit Suisse, PT $3.10.Seven Group cut to neutral from overweight at JP Morgan, PT $8.64.Stocks trading ex-dividend today: 1300 Smiles, Auckland International Airport, GBST Holdings, Hunter Hall Global Value, Southern Cross Media Group.
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8:05am: Good morning and welcome to the Markets Live blog for Tuesday.
Your editors today are Jens Meyer and Patrick Commins.
This blog is not intended as investment advice.
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