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Rio Tinto shares have tumbled despite commodity prices lifting overnight, while Ansell and JB Hi-Fi are surging.

The earnings season has hit its straps.

• NAB profit down 3pc to $1.6bn
• Santos takes huge $US1.5bn writedown
• Newcrest ends dividend drought
• Ansell blasts off as mining giants sink

Welcome to the BusinessNow blog for Monday, August 15. Earnings season really hits its straps this week and today results are expected from NAB (Q3), Ansell, JB Hi-Fi, Newcrest, and Aurizon, among others.

7.05pm: London stocks step up in early deals

The Lonodn stockmarket was slightly higher mid-morning, led by the oil and gas sector as oil prices rose. At 10.05am local time (7.05pm AEST) the benchmark FTSE 100 index had carved out 17.5 points, or 0.25 per cent, to 6933.57 points.

At the same time, the Stoxx Europe 600 index had stepped up 96 points, or 0.28 per cent, to 347.05 per cent.

6.21pm:Flags go up on CBA stock

Commonwealth Bank’s record full-year profit hasn’t received the applause it would have expected, with investors left questioning whether the stock can deliver the returns needed to justify its premium valuation over its rivals.

As Australia’s largest bank, CBA is viewed as a yardstick of the industry’s financial strength. The 3 per cent rise in cash profit to $9.45 billion was in line with analyst expectations, with the bottom line fattened by a high demand for mortgages, fuelled by record low interest rates, and cost savings.

But beneath the headline generating 2016 profit, there were some red flags that investors need to watch: the bank’s net interest margin continues to be squeezed, capital demands continue to grow and troublesome loans are rising. No wonder it’s the worst performer among the big four banks with an 11 per cent decline in its share price this year. Read more.

5.10pm:The squeeze in Santos’ pipeline

Santos’ Gladstone plants have been built with several decades of production in mind, but that isn’t much help today, writes Stephen Bartholomeusz.

Santos’ explanation for its $AU1.5 billion writedown of its 30 per cent interest in the $US18.5 billion GLNG export project in Queensland illustrates the twin pressures on the three coal seam methane-fed projects at Gladstone. Read more.

4.30pm:Technicals heavy as market eyes BHP

Australia’s S&P/ASX 200 share index finished up 0.2 per cent at 5540, well above the early low of 5510.8, although a 5 point retreat in the closing match may be slightly disconcerting to the bulls.

Ansell surged 18 per cent on a mooted divestment of its Sexual Wellness segment, JB Hi-Fi jumped 9.9 per cent on a knockout FY16 result and a positive start to FY17, and Orora surged 9.8 per cent after its results also beat expectations. NAB rose 0.9 per cent despite a slight miss to consensus earnings expectations for FY16, and the other major banks followed suit.

But Aurizon dived 6 per cent after its earnings undershot expectations, and BHP, Rio Tinto, South32 and Fortescue fell at least 2.5 per cent despite stronger commodity prices. Focus turns to BHP’s FY16 report tomorrow.

Technicals and absolute valuation for the overall market continue to look heavy, despite supportive relative valuation versus bonds.

4.21pm:Stocks close in the black

The Australian sharemarket has shaken off a weak start to end the first day of the week higher, boosted by a strong showing from financials after NAB released its latest quarterly numbers.

At the closing bell, the benchmark S&P/ASX 200 index tacked on 9.1 points, or 0.16 per cent, to 5,540, while the broader All Ordinaries index added 7.5 points, or 0.13 per cent, to 5,633.8. Read more.

4.18pm: China working on growth plan

China will propose a joint initiative to revive weak global growth at next month’s meeting of leaders of Group of 20 major economies amid rising protectionist sentiment in the United States and Europe, officials said on Monday. Read more.

3.46pm:Chinese stocks surge to 7-month high

China stocks have jumped to a seven-month high, led by property and financial shares, as investors intensified their bets that disappointing economic data for July would prod Beijing to unleash fresh stimulus.

Hong Kong shares rose to a fresh nine-month high, as depressed global interest rates pushed some investors to hunt for yields in emerging market equities.

By the lunch break, China’s blue-chip CSI300 index rose 3.2 per cent, to 3,398.67 points, while the Shanghai Composite Index gained 2.4 per cent, to 3,122.30 points. Read more.

3.31pm:JB Hi-Fi’s best sales growth since GFC

JB Hi-Fi chief executive Richard Murray has told The Australian that consumers were prioritising purchases of new mobile phones, computers and other home entertainment products despite the wider concerns about the strength of the Australian economy. Read more.

2.16pm:Ansell, JB Hi-Fi- soar, while miners dive

The Australian index is keeping its head above water this afternoon with banks and Telstra offsetting the sharp falls from resources.

Rio Tinto has tumbled 3.6 per cent today despite a lift in commodity prices overnight

At 2:05pm AEST the S&P/ASX 200 was 0.2 per cent higher at 5539.7 points, despite the damage being done by Rio Tinto and BHP Billiton, which are down 3.6 per cent and 2.3 per cent respectively.

Major banks are working higher, with CBA and Westpac adding 0.6 per cent, ANZ gaining 0.3 per cent and NAB pushing 0.8 per cent higher after a disappointing open.

Telstra is up 1 per cent as investors start to forgive a lacklustre earnings result on Thursday, which took the telco to a 3.5 per cent weekly loss on the ASX.

Ansell is shooting the lights out with a 14.7 per cent gain despite the company reporting a 15 per cent full-year profit fall, while JB Hi-Fi also impressed the market with its result — the retailer is up 8.6 per cent.

1:40pm:Bookies face a tought time in NT

Corporate bookmakers could be hit with an increased wagering tax in the Northern Territory to boost government revenues annually by $100 million, writes Sarah-Jane Tasker.

Deutsche Bank believes the government may consider upfront licensing fees as well as a higher wagering tax rate, currently capped at $575,000.

Read more

1:20pm:McAleese rescue deal is under a cloud ... again

The recapitalisation plan designed to stave off bankruptcy at distressed transport group McAleese is again under a major cloud as a planned meeting to approve the deal is forced back.

In its latest update, McAleese said it would request shareholder approval on the deal with Hong Kong debt trader SC Lowy in the week of September 19, well after the September 9 deadline.
Read more

1.10pm:Ansell’s sexual wellness business under the microscope

Condoms and gloves manufacturer Ansell’s (ANN) sexual wellness business could be sold as the company launches a review of the division.

The company revealed today, after delivering a 15 per cent slide in full-year profit, that Goldman Sachs would review the sexual wellness business, with a sale among the options.

Read more

12:55pm:James Hardie upgraded by Citi, Credit Suisse

James Hardie (JHX) shares are performing well today after upgrades from Citi and Credit Suisse. Citi notes JHX is leveraged to US single housing starts, which are still 25 per cent below mid-cycle levels, but it sees growth in interiors and R&R volumes as more important to the earnings story. Citi upgraded the stock to ‘buy’ vs ‘sell’, with a new target price of $20.80 vs $18.60. Meanwhile, Credit Suisse sees greater confidence around the secular growth and market penetration story after a material investment in SG&A and new capacity, which the broker says will position the company to extract maximum value from the cycle.

While Credit Suisse’s $22.70 target price implies a FY17 P/E of about 30 times, adjusted for asbestos liabilities, this falls to 25x in FY18, more in line with its recent trading range. It also expects the on-market buyback to provide additional share price support. It moved JHX to ‘outperform’ from ‘neutral’, and lifted its target price to $22.70 from $20.60. JHX was last up 4.4 per cent at $22.27.

12:35pm:JB Hi-Fi results get a tick from analysts

Analysts are heaping praise on JB Hi-Fi after its FY16 results. UBS expects “modest consensus upgrades” after a “strong result” for FY16 due to stronger second-half sales and steady margin. The broker also notes the strong start to FY17, with July like-for-like sales up 9.5 per cent year-on-year.

Analysts are heaping praise on JB Hi-Fi after its strong FY16 results. Pic: Cormac Hanrahan.

Macquarie points to the full-year dividend of $1.00 per share being well ahead of consensus expectations of $0.96 and notes that JB-Hi-Fi expects the uplift in sales resulting from the exit of Dick Smith to continue in the first half of FY16.

No surprise then that the stock hit a record high of $29.56 today after its results. DSH was last up 6.6 per cent at $29.19.

12:20pm:Regis Resources’ Mark Clark cashes out half his stock for over $10m

Regis Resources executive chairman and chief executive Mark Clark has cashed out half his stock in the goldminer, reaping over $10 million in the process.

The deal is the second major stock sell-off from Mr Clark this year.
Read more

12:05pm:Banks are battling a common headwind

Within the flurry of bank reports over the past week there has been a consistent and somewhat disconcerting narrative, writes Stephen Bartholomeusz.

The themes within the results were echoed in National Australia Bank’s third quarter trading update today: bad and doubtful debts are picking up; funding costs are edging up and margins are tightening.
Read more

11.40am:Ansell rockets 13 per cent despite huge profit hit

Condoms and gloves manufacturer Ansell has enjoyed a 13 per cent rally in its shares despite booking a 15 per cent slide in full-year profit as it felt the impact of wild currency fluctuations, writes Daniel Palmer.

Currency headwinds were blamed for a 15 per cent tumble in full-year profit for Ansell

Ansell (ANN) today said its profit fell 15 per cent $159.1 million for the 12 months through to June.

Revenue for the company dropped 4.4 per cent to $1.57bn.

Currency market volatility heavily impacted the multinational group, which was founded in 1929. Sales were down 4 per cent year-on-year, but were steady on a constant currency basis. Earnings before interest and tax was also 8 per cent higher in constant currency.
Read more

11:15am:Japan’s growth engine stutters

Japan’s economy grew unexpectedly slowly in the second quarter as companies cut back on capital spending and exports fell, highlighting weakness in the world’s third-largest economy, despite massive government stimulus and central bank easing.

Japan’s economy expanded an annualised 0.2 per cent in the April-June quarter, compared with a 0.7 per cent expansion forecast by 20 economists surveyed by The Wall Street Journal. The increase came after a 2.0 per cent expansion in the first three months of the year.
Read more

11:00am:S&P/ASX 200 turns slightly positive as banks bounce

Australia’s S&P/ASX 200 has turned slightly positive after an earlier 0.4 per cent intraday fall. Banks led the recovery, with NAB up 0.7 per cent after initially falling 1.3 per cent after its third-quarter update.

Ansell and JB Hi-Fi also landed support after their results, while resources are still the main drag on the index despite recent gains in commodity prices.

The technical set up remains bearish, but needs a weaker close today to reinforce that view. The index was last flat at 5331.

10:58am:GPT first-half profit surges 39pc

Property group GPT has reported a near 40 per cent surge in net profit in the first-half and raised its guidance for the full year.

Net profit bounded 39 per cent to $586.4 million in the six months to June 30, while funds from operations per security lifted 6.1 per cent to 15.2c.
Read more

10:45am:The positives in NAB’s result

Capital generation was the key positive for NAB in the June quarter as growth in risk-weighted assets was subdued, despite NAB’s elevated dividend payout ratio, according to Macquarie.

NAB shares swung positive after a weak start this morning

“While we continue to believe that current payout ratios will be difficult to sustain when NAB’s earnings normalise as a result of lower trading income, higher BDDs and reduction in Life earnings, in the short term, a better than expected capital position could provide support for an elevated dividend,” Macquarie analysts say.

“We continue to see near-term revenue headwinds as the key risk for NAB’s ability to generate earnings growth, although recognise valuation support given recent underperformance.

“Pleasingly, NAB was able to partially offset weaker revenue trends with better cost management, however, on an underlying basis the result was still marginally below our forecast and consensus expectations.”

NAB shares are currently up 0.7 per cent at $27.15, reversing a 1.3 per cent intraday fall.

10:32am:Ansell blasts off as mining giants sink in early trade

Ansell shares have surged 10 per cent at the open despite the rubber glove and condom maker recording a 15 per cent slump in full-year profit.

The problems seem to be taken as mostly currency-related, which were factored in by the market, so investors appear willing to overlook the nasty headline figures.

The broader market opened 0.2 per cent lower at 5519 points, with the index expected to join the rest of Asia in a lacklustre session today.

BHP Billiton and Rio Tinto were hit hard despite the price of iron ore and oil both seeing solid gains overnight, with the miners dropping 2.7 per cent each in early trade.

Newcrest, which delivered a dividend to shareholders despite a 12 per cent fall in profit, fell 1.5 per cent as investors potentially expected more from the miner after watching the gold price soar this year.

Elsewhere, the big banks slipped around 0.3-0.4 per cent, while NAB lost 0.7 per cent after fronting investors with a slightly weaker-than-expected third-quarter trading update.

JB Hi-Fi jumped 5.7 per cent after a healthy profit result confirmed the retailer is loving life with rival Dick Smith out of the picture, while Telstra edged 0.3 per cent higher after tumbling 3.5 per cent last week.

10:25am:Australian shares could tumble 5% — Deutsche Bank

The Australian sharemarket looks vulnerable to a fall of at least 5 per cent due to rising uncertainty in Europe, China and the US, according to Deutsche Bank.

Global market unease could wipe up to 5 per cent off the ASX

“Policy uncertainty has shot up in recent months, particularly in Europe in the wake of Brexit,” Deutsche Bank equity strategist Tim Baker warns.

He also says the direction of Chinese policy is unclear and expects US political uncertainty to ramp up before the Presidential election in November.

“The last time policy uncertainty was around these levels was in 2012, and the global PE ratio was 11-12 times, compared to 16 times now,” Baker says.

“Of course, there is now more supportive stimulus in place, and bond yields are plumbing new lows.

“Still, we don’t think such uncertainty should be totally ignored by risk assets, and expect a 5 per cent plus correction.

“We also note that high policy uncertainty tends to weigh on banks.”

10:05am:Newcrest ends dividend drought

Newcrest has delivered its first dividend to investors in three years despite reporting a 12 per cent slide in net profit to $US332 million ($433.9m), writes Daniel Palmer.

The gold and copper miner said revenue slid 9 per cent to $US3.3 billion on weaker commodity prices as underlying profit, which strips out the impact of one-off items, tumbled 24 per cent to $US323m.

The numbers were marginally below analyst forecasts.
Read more

9:55am:The bank deposit war is kicking off

One by one the big banks are calling a truce in the recent interest rate wars to attract home loans in preparation for their next battle — the race for bank deposits, writes Robert Gottliebsen.

The big question is: should savers put their money in term deposits now, or wait for higher rates?
Read more

9:45am:JB Hi-Fi gains on Dick Smith pain

Retailer JB Hi-Fi has reported a full-year result above its guidance as it reaped the benefits of the collapse of rival electronics goods seller Dick Smith, writes Daniel Palmer.

For the year to June 30, the ASX-listed JB Hi-Fi said net profit jumped 11.5 per cent to $152.2 million on sales up 8.3 per cent to $3.95bn.
Read more

9:37am:Will bargain hunters be circling Telstra?

Well, maybe not! The country’s biggest telco and undisputed ASX royalty was smashed 3.5 per cent last week — the seventh-worst performing stock in the ASX200 over the five sessions — to last trade at $5.45. It’s been plonked in the sin bin following Thursday’s dicey earnings result.

Telstra saw 3.5 per cent slide off its share price last week after a momentous profit and spending update.

Telstra (TLS) announced a massive $3.3 billion spending spree in the company’s full-year profit result, along with some unhealthy-looking churn numbers, writes Supratim Adhikari.

The market didn’t like the result one bit, with the shares slumping to their lowest level in six weeks.

Analysts made their reservations on the telco clear, with Bloomberg data showing three ‘buy’ ratings on the stock, 10 ‘holds’ and five ‘sell’ recommendations.

As Morgans analysts downgraded Telstra to hold from buy on Monday they said they expect the company’s dividend to remain stable, but “expect the outlook for organic profit growth to be reasonably subdued as net subscriber adds slow”.

But it could be short-term thinking from investors, with Stephen Bartholomeusz saying the telco is future-proofing itself against the huge landscape changes on the way as the NBN creeps closer to completion.

9:35am:Santos takes huge $US1.5bn writedown

Santos has taken a near $2 billion pre-tax impairment on its flagship LNG project as low oil prices torment the local energy giant, writes Daniel Palmer.

In a statement to the market this morning the company (STO) said it will take a pre-tax charge of $US1.5bn ($1.96bn) against the carrying value of the mammoth GLNG development in Queensland to recognise the current challenging market environment.
Read more

9:30am:Ansell full-year profit drops 15pc

Condoms and gloves manufacturer Ansell has felt the impact of wild currency fluctuations, booking a 15 per cent slide in full-year profit, writes Michael Roddan.

Ansell (ANN) today said its profit fell 15 per cent $159.1 million for the 12 months through to June.
Read more

9:10am:Is NAB about cop a whack at the open?

Australian stocks look set to ease into the week as investors pour through earnings figures from NAB, JB Hi-Fi and Newcrest, among others.

Local shares will join in on a weak open from most Asian markets today, with banks and miners set to drag on the ASX, according to IG analyst Angus Nicholson. But there could be at least one bright spot: “Energy stocks may be the one bright spot today as WTI oil eyes up breaking through the $US45 level,” Mr Nicholson said.

The SPI200 is pointing to a 0.2 per cent fall at the open but fair value suggests a slightly shallower 0.1 per cent slip is more likely, according to Bloomberg.

NAB’s third-quarter trading update is grabbing the market’s attention this morning, with cash earnings and underlying profit numbers coming in slightly below expectations, as David Rogers notes below. Investors haven’t hesitated to give big financial stocks a smack for undershooting expectations. CBA and Westpac were hit hard by ruthless investors last week despite sharp share price falls so far this year, while AMP also felt some pain.

Keep an eye on major miners, too. The price of iron ore is back above $US60 a tonne after a 1.7 per cent rise on the Metal Bulletin, while the oil price shot up 2.3 per cent to $US44.49.

Despite that, BHP Billiton is looking down the barrel of a 2.2 per cent fall today, according to its ADRs, as it prepares to report its biggest-ever annual loss.

9:00am:NAB profit misses expectations

NAB’s third-quarter cash profit of $1.6 billion was about 1 per cent below market expectations and underlying profit was up to 2 per cent below, according to Watermark Funds Management’s Omkar Joshi.

Bad debts were 12 per cent below consensus, at $228m for the June quarter — quite low given NAB also topped up its overlay for mining and agriculture exposures, Joshi says.

But asset quality has deteriorated in the period with past due and impaired loans rising to 0.81 per cent of gross loans from 0.78 per cent last quarter … similar to what has been seen from other banks.

And while expenses fell 1 per cent, revenues were flat, and the net interest margin continued to decline as a result of rising funding costs — again not surprising given a similar trend among its peers.

“Overall, the result was a touch softer than expected but with asset quality deteriorating and margins under pressure,” Watermark’s Joshi says.

8:48am:Aurizon full-year profit slumps

Rail and logistics company Aurizon, has seen its profit tank following a string of write downs as the downturn in the resources sector impacts haulage across the country, writes Michael Roddan.

Aurizon booked a net profit of $72 million for FY16, an 88 per cent slide on last year’s $604m. Despite the slump in profit, the full-year dividend is up.
Read more

8.35am: The end of Mackenzie’s beginning

BHP Billiton is preparing to hand down its biggest ever annual loss, so why is the market putting such a premium on its stock? Its price-to-earnings ratio, based on consensus earnings forecasts, is currently sitting at 33.3 times.

The answer appears to be that the market buys the Andrew Mackenzie story of cost cutting and higher productivity, writes Alan Kohler.
Read more

7.55am: NAB profit down 3pc to $1.6bn

National Australia Bank has revealed a 3 per cent drop in profit in the wake of a considerable increase in souring loans and substantial margin pressure amid rising funding costs.

NAB today said its cash earnings for the June quarter were down 3 per cent year-on-year, falling to around $1.6 billion. The figures were also a 3 per cent slide on the earnings recorded for the three months through March.

Read more

7.05am:Lower start tipped on ASX

The Australian market looks set to open lower after Wall Street ended last week with a lacklustre performance following tepid economic data.

At 6.45am (AEST), the share price index was down 11 points at 5,474. Economic data showed that US retail sales growth was unexpectedly flat in July as people cut back on buying clothes and other goods, while the producer price index fell 0.4 per cent in July, the biggest drop in nearly a year.

On Friday the benchmark S & P/ASX200 index was up 22.9 points, or 0.42 per cent, at 5,530.9 points. The broader All Ordinaries index was up 26.9 points, or 0.48 per cent, at 5,626.3 points

6.55am: Dollar weakens

The Australian dollar has fallen against its US counterpart despite the greenback weakening following tepid economic data. .

At 6.35am (AEST), the local unit was trading at US76.59 cents, down from US76.87 cents on Friday.

The dollar fell 0.1 per cent against a basket of currencies. “The US retail sales data in particular is causing the dollar to weaken,” said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities in New York.

6.50am:Iron ore prices surge

The iron ore price has lifted back above the $US60 a tonne threshold, despite data showing a fall in Chinese steel output and predictions that the decline could continue.

Iron ore rose 1 per cent to $US60.20 a tonne in the most recent session, according to The Steel Index, compared with $US59.60 the previous day.

Read more