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View Count: 98 |  Publish Date: April 04, 2014
Markets Live: Late comeback for ASX

2:45pm: Even as the Fed trims its stimulus, ‘‘yellow lights’’ in markets suggest investors are taking on excessive risk and may jeopardise financial stability, Federal Reserve Bank of Dallas president Richard Fisher has warned.
With US credit markets ‘‘awash in liquidity,’’ potentially unsustainable stock-market valuations and bond yields ‘‘give rise to caution’’ and must be closely monitored, said Fisher, who votes on policy.
Bond buying has pumped up Fed assets to a record $US4.24 trillion.
‘‘We have a liquidity pool that is more than sufficiently deep and wide enough nationwide to finance job-creating capital expansion and reduce labour market slack,’’ Fisher said to the Asia Society Hong Kong Centre, warning about ‘‘raising the ghost of irrational exuberance.’’ He said he is ‘‘more than supportive’’ of the decision to taper bond buying.
Warning of market risks, Fisher cited rising stock market capitalisation relative to economic output and a high level for a measure of US equity market valuation based on an inflation- adjusted price-earnings ratio. He also referred to high levels of margin debt and junk-bond yields nearing record lows.
In three meetings since December the FOMC has reduced monthly bond purchases in $US10 billion increments to $US55 billion. Fisher predicts the Fed will end bond purchases in October if it continues to taper buying at the current pace.
Are the ghosts of irrational exuberance awaking? Upvotes:1 Downvotes:0 Copy Link
2:28pm: Asia has largely had a day to forget, and to say traders have been largely sidelined is an understatement, IG’s Chris Weston notes, picking up David Scutt’s theme.Whether this is just because of today’s US payrolls is debateable, as I get the sense that this is a market that is really keen to see a genuine improvement in US data again and look to regain the momentum the economy was building prior to polar vortex.Traders are now seeing fragmentations in the stance among G10 currency central banks again and are trying to differentiate those who are thinking about rate hikes and those who could become more loose.The Federal Reserve fits into the future tightening camp, along with the BoE and RBNZ, with a number of Fed members giving explicit timeframes for when they see a rise in funds rate.A solid payrolls print will do wonders for market confidence that the US is back on track and while there are cries for ‘buy the rumour, sell the fact’, I would question why anyone would sell USDs,  equities or commodities on a good print, regardless whether a number above 200,000 is priced in. My gut suggests it would be more ‘buy the rumour, do nothing after the fact’, however I do think it will set the platform for something much more substantial for the USD.
Economists are predicting that US employers added 200,000 people to non-farm payrolls last month, the most since a 274,000 increase in November and up from the 175,000 workers added in February.
The unemployment rate is seen slipping to 6.6 per cent, from 6.7 per cent in February. Upvotes:0 Downvotes:0 Copy Link
2:14pm: A whistleblower at Gina Rineharts Roy Hill iron ore project in Western Australias Pilbara region claims workers on 457 visas are working excessive hours and being grossly underpaid.
The CFMEU says it has asked Employment Minister Eric Abetz to start an urgent investigation.
The whistleblower says up to 200 white-collar 457 visa workers, about half of whom are Korean nationals aged under 30, are clocking up more than 84 hours a week. Many are female.They are employed by the contractor Samsung C&T and being paid about $16 an hour, the union says.
Many are not working in the occupations approved for their visas - a breach of the sponsoring employers obligations, the CFMEU claims.
Read more Upvotes:0 Downvotes:2 Copy Link
2:08pm: That kind of day ...
Being a trader is tough on days like these... The only market participants who have it worse are the media who have to report on it...— David Scutt (@David_Scutt) April 4, 2014 Upvotes:1 Downvotes:1 Copy Link
1:50pm: Bankers are going undercover to catch the bad guys, The Economist writes in its latest edition:
A midsized American bank has taken a leaf out of Ian Fleming’s book with a project, known internally as “Honey Banker”, to smoke out fraudulent payments. It has created a coterie of non-existent bankers, with fake e-mail addresses and biographies, whose details appear on bogus web pages not linked to the rest of the bank’s website.
If a transfer request comes in to one of these aliases, it is likely to be from a fraudster. The bank blocks the sender’s internet address, pending further investigation. (The Economist is withholding the bank’s name so as not to blow its cover.)
Though not yet widespread, this sort of counter-intelligence tactic is becoming more common as banks look for creative ways to ensnare the online scammers, says Aaron Glover, a fraud expert at SunTrust, another American bank. Some banks have hired professional spies, as HSBC did when it employed a former head of MI5.
Banks are also using similar strategies to infiltrate the dark recesses of the internet in which criminals buy and sell stolen financial data. A fraud investigator at a large American bank says that since the massive theft of credit-card data last year from Target, a retailer, his bank has become a more active participant in “carder forums”, where card numbers are hawked for between $US20 and $US100 apiece, often in batches of 1m or more. Two recent sales were dubbed “Tortuga” and “Eagle Claw”.
Heres the whole article
Banks are scouring forums in the hope of gathering intelligence on which of their cards have been compromised. Photo: Reuters Upvotes:0 Downvotes:0 Copy Link
1:33pm: BHP Billiton has secured key tax exemptions for a potential $20 billion demerger of non-core assets while pushing forward discussions with governments in moves that suggest the resources giant is leaning towards approving the transaction.
Sources close to the process told Fairfax Media that BHP Billiton had secured exemptions from the Australian Tax Office as far back as last November for capital gains, dividend and stamp duty issues that could have derailed the demerger option.
While no decision has been made on exactly how to dispose of the non-core assets – which could include aluminium, nickel, zinc as well as energy coal in South Africa – it is understood the BHP board will seriously consider the option of handing the assets back to shareholders in the form of a new company when it meets either later this month or in June.
BHP is actively considering the demerger proposal given potential members of the new company’s executive team and board have been identified, sources said.
Fairfax Media revealed on Tuesday a team advised by investment bank Goldman Sachs has been working on Project River, which is examining a number of strategic options for assets that do not fit within chief executive Andrew Mackenzie’s “four pillars” strategy.
Read more Upvotes:1 Downvotes:1 Copy Link
1:28pm: Australia Post chief executive Ahmed Fahour has emerged as significant shareholder of broking house Bell Financial Group, which is facing pressure from some investors to improve its market performance.
It is understood Fahour - a former executive at National Australia Bank - owns about 4 per cent of the $150 million brokerage.
His shareholding is revealed in a feature article covering the challenges and opportunities facing Bell Financial to be published in The Saturday Financial Review. The article also revels Bell Financial flirted with a merger with rival Patersons in recent months while Melbourne investor Alex Waslitz - who runs the Pratt family investment vehicle Thorney - owns about 1 per cent of the company.
It is believed Fahour is friends with Bell Financial director Andrew Bell and holds the stock for personal investment reasons.
Bell Financial employees about 300 private client brokers and is one of the oldest and more successful names in Australian stockbroking. It has generated profits for five of the six years it has been a listed company.
However, despite no debt and about $50 million in cash, the company’s share price has failed to keep pace with the broader market over the past two years. While the S&P/ASX 200 Index has climbed almost 25 per cent, Bell Financial is up just 3.7 per cent.
Shares are flat at 56 cents today. Upvotes:0 Downvotes:2 Copy Link
12:44pm: Closely watched hedge fund manager Jim Chanos says he has the best barometer for gauging where the ultra rich are putting their money: Sothebys shares.
Shares of Sothebys have peaked before every major financial bubble since 1987, Chanos told CNBC. And theyre currently rallying due to the Feds super-low interest rates and aggressive asset purchases.
The contemporary art market has gone bonkers under the Feds easy money policies, Chanos said. Thats what people are buying.
Its as if the Fed now includes asset prices as part of its mandate, Chanos told CNBC. But record selling prices at auction houses dont trickle down to the 99 per cent.
This is still driven by art, which is socially acceptable conspicuous consumption, he said. Its one of the ultimate barometers of the 1 per cent, or the one-tenth of 1 per cent.
Gambling on art ... The Card Players by Paul Cezanne was sold in 2011 for $US269.4 million, currently the highest price paid for a painting. Upvotes:2 Downvotes:1 Copy Link
12:16pm: Many fear the recent housing market slowdown in China could easily become a crash, dragging down the countrys financial system along with it, business site Quartz writes:
Whether or not it’s time to start the doomsday countdown depends on a question, though: Does China actually have a housing bubble? The answer depends on whether you think China’s soaring housing prices are due to speculation (which would mean a bubble) or a genuine lack of supply.
... China’s lousy official data make it impossible to know whats what. On top of that, its knotty household registration system limits who can buy property where, distorting potential demand and obscuring the country’s actual urban population.
That means we may need to wait and see if prices keep falling - a sign that there was a bubble - or level out as they bump up against real demand.
Heres the whole article
Upvotes:1 Downvotes:0 Copy Link
12:12pm: Analysts at Deutsche Bank have calculated afresh gold miners “all-in sustaining costs” (AISC) of producing an ounce of gold.
“We believe the analysis helps to identify assets that can make free cash flow and those that are not viable in the new gold price environment,” they write in the note.
As you can see from the chart, Beadell (rated a buy by DB), Alacer (sell) and Independence Group (buy) have the lowest AISC “this year”.
“However this is short lived for both Beadell and Alacer with costs rising next year,” write the analysts. Regis is consistent in forward years (at around $930/oz).”
Evolution (hold), Silverlake (hold) and St Barbara (hold) are the highest cost producers, according to the analysis.
The analysts rate Newcrest a sell.
Commenting on the analysis, IGs Chris Weston says:
“Naturally if the underlying metal price is going to stay under pressure then gold stocks will struggle as a consequence, although I don’t see an all-out collapse here like we have seen at times over the last couple of years.”
“Still if anyone wants to choose a gold stock to short to take advantage of a weaker gold price, then traders are going to look at one’s which have balance sheet issues, high cash costs and corporate concerns.”
All-in sustaining costs of listed gold miners to produce an ounce of gold. Upvotes:2 Downvotes:1 Copy Link
11:32am: Here are the best and worst so far topday in the top 200.
Skilled Group is the best performer, up 5.7 per cent, and it warms the cockles of our hearts to see Fairfax get a guernsey among the top 10.
Magellan is the worst performer, followed by OzForex.
Best and worst performers in the ASX 200 thus far. Upvotes:0 Downvotes:0 Copy Link
10:51am: While there is considerable debate over the outlook for house prices, there is less disagreement over the increasingly positive outlook for housing construction, RBC notes:We have been constructive on this sector and its increasing contribution to activity in the year ahead for some time. The most recent partials - lending, approvals - point to increasing momentum.While there are numerous supportive factors, an often underappreciated one is the continued above-trend pace of population growth. Recently released Q3 data confirmed population growth continuing at a decent 1.8% y/y pace driven by migration.This is among the highest in the OECD and well above the OECD average, which has been stagnant around 0.7% for much of the last decade and a half.
Upvotes:0 Downvotes:0 Copy Link
10:33am: BHP Billiton’s non-core portfolio spin-off (SpinCo) would be better suited to the ASX than a London listing, according to UBS:We believe that a mid-tier diversified miner, with $US6-$10 billion [$6.5 billion to $10.8 billion] market capitalisation, would be attractive in Australia given there are not many similar globally listed miners in this space.Given the expected market capitalisation of SpinCo is expected to be $US6-$10 billion, we believe the ASX is more appropriate given it would be a bigger proportion of the ASX and therefore would attract greater investor interest.
BHP earlier this week confirmed Fairfax Media reports it was considering structural changes. Upvotes:0 Downvotes:0 Copy Link
10:28am: Investors have reacted cautiously to a proposed merger of CSR and Boral’s brickmaking operations.
The two companies expect the joint venture would deliver savings of around $7-10 million per year, and ensure the viability of brick making operations in Australia. The joint venture proposal requires approval from the competition watchdog.
Market reaction has been cautious, with Boral shares down 0.2 per cent at $5.68 and CSR shares flat at $3.57.
CSR would own 60 per cent of the joint venture, while Boral will have a 40 per cent stake, reflecting the relative sizes of their respective brick businesses. The merged entity is expected to have a combined revenue of around $230 million a year. Upvotes:0 Downvotes:0 Copy Link
10:21am: The share market has turned lower, after its flat start, pulled down by losses in all the big banks:ANZ: -0.15%CBA: -0.3%NAB: -0.4%Westpac: -0.5%
Here are the biggest percentage winners and losers in the ASX200 this morning:
Upvotes:0 Downvotes:0 Copy Link
10:12am: The China Banking Regulatory Commission has told banks to step up controls on bad loans and strengthen their balance sheets, the Shanghai Securities News is reporting, citing an internal document sent to the banks in March.
The CBRC said banks should also watch out on their bad loan ratio and that the commission will soon launch stress tests in various regions, the paper said. Upvotes:0 Downvotes:0 Copy Link
9:20am: David Jones chief Paul Zahra has welcomed the prospect of a sweetened merger offer from Myer but has reiterated that formal merger talks are months rather than weeks away.
Well always welcome a higher price if its in the best interests of shareholders, Mr Zahra told Fairfax Media.
But I dont think it makes any difference to the other work we need to do assessing the synergies and looking at our future strategic direction plan and making the right decision for shareholders.
We have started the work and are taking it seriously, we are doing a very detailed analysis … and weve said it will take a couple of months to complete. We do believe the work will be closely scrutinised, so we want to make sure we assess the synergies appropriately.
Myer is investigating ways to make its merger proposal more attractive, possibly by augmenting its original offer of 1.06 shares for every David Jones share with cash.
Myer chief Bernie Brookes says Myer has not upped its offer and is not in negotiations with David Jones.
But Fairfax Media has learnt that Myers advisers are looking at options to make a merger more attractive without forcing Myer shareholders to give away too much.
Since the deal was made public in late January, David Jones shares have risen 14 per cent while Myers have fallen 12 per cent.
If Myer offered 1.4 shares for every David Jones share (valuing DJs at $3.15) Myer would emerge with only 42 per cent of the combined group despite being the larger entity.
Read more. Upvotes:0 Downvotes:0 Copy Link
9:20am: Mario Draghi and the ECB board turned dovish overnight, giving the market a real sense that QE is coming - but the question is, what form of QE? IG’s Evan Lucas notes:It can’t really be the QE in its traditional sense like what has been seen in the US, as Europe uses bank funding rather than bonds.So as Draghi mentioned, the discussions centred on possible negative real deposit rates and other forms of unconventional monetary policy. The ECB really is looking at all possibilities as it looks to close the gap in the periphery.We still think it is unlikely to see QE in the eurozone, despite what was suggested overnight considering the forward estimates from the bank itself. The bank is forecasting inflation to moderate in the coming two months before returning to 1% by the end of the northern summer.This timeframe should be fast enough to see the bank holding firm – however if this doesn’t happen we will see QE enacted. Upvotes:1 Downvotes:0 Copy Link
9:20am: Shares are trading slightly weaker at the open, with miners the early standouts.
The ASX 200 and All Ords are 5 points down early, to 5404.2 and 5410.3, respectively.
The banks are trading lower, aside from ANZ, while BHP is up 0.2 per cent.
Consumer discretionary is a drag, with David Jones down 4.2 per cent on more merger talk. Upvotes:1 Downvotes:0 Copy Link
9:05am: The ACCC has cleared the Transurban consortiums bid to acquire Queensland Motorways Group.
The consortium is made up of Transurban Group, AustralianSuper and Tawreed Investments.
The ACCC concluded that the acquisition of QM Groups tollroad operations in Queensland would be unlikely to substantially lessen competition, the competition regulators chairman, Rod Sims, said in a statement on Friday.
The ACCC determined that the proposed acquisition would not enable Transurban to raise prospective rivals costs, through higher roaming fees, for future opportunities to own and operate tollroad concessions.
Read more. Upvotes:1 Downvotes:1 Copy Link
9:02am: More fuel for the housing market bears: Australian household debt has hit a record 177 per cent of annual disposable income while housing valuations are “flashing red”, says Barclay’s chief economist Kieran Davies.
“House prices now equate to 4.3 times annual income and 28 times annual rent, both within a fraction of their historic highs,” Davies writes in a note.
The respected former treasury economist believes the RBA is “worried about the strength of the housing market, where the evolution from recovery to boom has brought jawboning by the governor into play.”
“We’re paying more attention to house prices and credit than the currency to see if the RBA changes its mind on macro-prudential tools [which limit lending growth] to gauge if housing strength could trigger a rate rise this year.”
Last month, RBA governor Glenn Stevens warned “we need to be alert to the possibility that the past year of strong rises in dwelling prices leads people to assume that this is the norm”.
“Were such an assumption to lead to increasing speculative activity, accompanied by a renewed increase in household leverage with all the associated risks to the housing market … that would be unwelcome,” Stevens said.
Using ABS data on total Australian household liabilities and incomes, including small business debts that are excluded from similar RBA metrics, Barclays found that the ratio of household debt to disposable incomes has hit a record of 177 per cent.
“This is up from a recent low of 173 per cent and exceeds the previous high of 175 per cent reached in 2010,” Davies noted.
In striking contrast to consumers in the US and UK, Australian families have boosted debt relative to incomes since the 2008 crisis. The RBA put the household debt to income ratio at 149 per cent in December, just a touch off its 153 per cent peak in 2006.
Read more
Upvotes:0 Downvotes:0 Copy Link
8:37am: Declining demand has led Boral and CSR to propose a $230 million joint-venture which will combine their brick operations across the east coast of Australia.
The companies have identified an initial $7-$10 million is savings per year should the deal get approval from the competition watchdog.
The joint-venture will be 60 per cent owned by CSR and 40 per cent by Boral, which the companies said is reflective of the value of the individual operations. There will be no cash paid in the transaction.
The Australian cladding industry has faced major changes in demand over the past 30 years resulting in a significant reduction in brick use, Boral chief executive Mike Kane said.
This joint venture is aimed at driving efficiencies across the combined network of operations and would provide a path for Boral to realise acceptable returns for our brick business and therefore secure our long-term commitment to the industry.
The trend away from detached housing, which is traditionally more brick intensive, towards higher density living has put particular strain on the construction industry, the companies said in a statement to the ASX.
Read more. Upvotes:0 Downvotes:0 Copy Link
8:29am: The net loss of listed accounting software provider Xero has more than doubled in a year it embarked on expansion and breaking into the US market.
The New Zealand-based company lost $NZ35 million ($32.4 million) in the 12 months ending March 31, compared with $14.4 million in the previous year.
In a statement to the NZX on Friday, Xero said a strong New Zealand dollar had weighed on operating revenue, which was up 83 per cent to $NZ38.4 million. It said the increase would have been stronger, about 92 per cent, on a constant currency basis.
But the company, which is also listed on the ASX, was upbeat about its outlook. In the past 12 months, it has almost doubled its staff, from 382 to 758 employees, and has $NZ210 million in cash to fund further growth.
On Tuesday it signed a deal to work with Twitter founder Jack Dorsleys Square in the US. The agreement will allow transaction data from Squares payments devices to be integrated with Xero accounting systems.
The deal with Square came amid fierce competition between Xero and rival MYOB, which has launched a payments device based on technology from Squares Australian rival Mint Wireless.
Shares in the company are down 18 per cent over the past couple of weeks.
Read more.
Xeros losses are set to widen even as revenue jumps - will investors stay patient? Upvotes:0 Downvotes:0 Copy Link
8:22am: The European Central Bank opened the door overnight to turning on its money-printing presses to boost the eurozone economy and keep inflation from staying too low.
It kept interest rates steady at 0.25 per cent at its regular meeting, but afterwards ECB President Mario Draghi said he and his colleagues were committed to doing anything they could to stop low inflation from dragging on too long.
This included quantitative easing, the printing of money to buy assets, something that previously was considered highly undesirable by some eurozone central bankers, and only to be considered if prices were falling outright.
But policymakers have been willing in recent weeks to publicly broach cutting deposit rates below zero - effectively charging banks to hold cash with the ECB - or embarking on QE bond purchases as the United States, Japan and Britain have, if the threat of deflation became more acute.
We will monitor developments very closely and we will consider all instruments available to us, Draghi said. We are resolute in our determination to maintain a high degree of monetary accommodation and act swiftly if required.
He added: The Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation.
That marked a significant shift of tone from last month when Draghi appeared to set quite a high bar to action.
The euro weakened against the US dollar after his comments, hitting its lowest level since February 28, but then recovered, as many investors remained unconvinced the ECBs dovish talk will soon be followed by action.
Our base case still is that the ECB is done easing and that major unconditional measures will not be taken, barring a major shock to the economy, said Holger Sandte, chief European analyst at Nordea.
ING referred to it as The Art of Doing Nothing.
Mario Draghi teases markets with dovish talk: We will consider all instruments available to us. Photo: Bloomberg Upvotes:0 Downvotes:1 Copy Link
8:07am: Local stocks are poised to open flat as investors pause ahead of the crucial US payrolls report tonight.
Heres what you need2know:SPI futures down 6 points to 5404AUD at 92.27 US cents, 95.89 Japanese yen, 67.27 Euro cenmts and 55.61 British pence at 6.05am AEDTOn Wall St, S&P500 -0.1%, Dow Jones flat, Nasdaq -0.9%In Europe, Euro Stoxx 50 +0.6%, FTSE100 -0.2%, CAC +0.4%, DAX +0.1%Spot gold falls 0.3% to $US1286.77 an ounceBrent oil rises 1.4% to to $US106.22 per barrelIron ore adds 0.2% to %115.50 per metric tonne
Whats on today:US – Non-farm payrolls, unemployment rate at 11:30pm AEDT (March)
Stocks to watch:Infratil lowers full-year earnings on weaker tradingSt Barbara says access road to mine closed due to floodingTransurban may get a regulatory ruling on its Queensland Motorways proposalXero sees full-year loss extending to $NZ 35 million, even as revenue jumps 83 per centAtlas Iron raised to outperform at RBCGoodman Fielder cut to underperform versus buy at BoA/MLDeutsche Bank has a “buy” recommendation on Westfield Retail Trust and a 12-month target price of $3.40 a share, adding that the stock “remains one of our top picks – with or without the Scentre Group deal”JPMorgan retained its “underweight” rating on ALS Limited, but put a new $6.95 a share December 2014 price target on the stockTrading ex-dividend today: Austbrokers Holdings, Clime Capital, David Jones, Fonterra Co-operative Group, Gowing Brothers. Upvotes:0 Downvotes:0 Copy Link
8:07am: Good morning and welcome to the Markets Live blog for <today>
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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