Business Now: live markets coverage; Aussie hits fresh 2-year high; plus analysis and opinion
The local bourse has dipped, as the dollar ripped past US81c for the first time in over two years.
Welcome to the BusinessNow blog for Friday, September 8.
Angus Bird 4.45pm: Stocks dip as dollar rips higher
he local share market fell on Friday as caution lingered in the wake of North Korea’s latest nuclear test, while the Australian dollar surged past US81 cents for the first time in over two years.
At the close, the S&P/ASX200 index was 0.3 per cent, or 17.3 points lower on 5672.6, while the broader All Ordinaries index closed down 0.3 per cent, or 14.4 points to 5739.4.
3.50pm: Aussie dollar surges past US81c
The Australian dollar goes from strength to strength in late trade, surging past US81 cents for the first time since May 2015 as China imports surge and the US dollar falls against most major currencies.
Denominated against the greenback, the chart below shows the USD weighted against a basket of peer currencies — falling in the wake fresh central bank talk and Hurricane Irma’s approach toward Florida.
Meanwhile, the local currency moves in seemless counterpoint as it breaks a fresh psychological barrier and China trade data for August showed a 13pc surge in imports over the period.
“The slowdown in export growth in August may be temporary while imports are likely to be solid in the near future,” said ANZ senior China economist Betty Wang.
“Admittedly, there are some uncertainties down the road which may affect China’s longer-term trade outlook, particularly the US’s investigation of China’s intelligence property practices.”
The local currency last traded 0.7 per cent higher at US81.02 cents.
3.45pm: Macquarie wields golden scalpel
Gold miners are on the chopping block at Macquarie, but the Western Australian govenrment’s new hike in gold royalties isn’t the main driver according to its analysis.
While the heat is on those running threadbare margins, WA gold operations enjoying healthier cash profits before tax will find that sum hit at most by 5 per cent, according to Macquarie estimates.
Instead, analysts at the investment bank throw the blame on an overzealous market. The spot price of gold ($A1670.95) remains on a tear that has seen it gain over 10 per cent since mid-July and Macquarie sees a similar enthusiasm in local equities.
“Since mid-July low the bulk of the Western Australian gold miners have experienced a strong share price rise,” said the analysts, “lead by NST which is up 29 pc in less than two months, EVN, NCM, DCN, RRL and SBM have all seen share price rises over 15 pc.”
“Higher margin Western Australian producers NST, RRL, SAR and SBM [are] all up over 40pc.”
At the pointy end of the analysis are Northern Star (NST) and Saracen Minerals (SAR), both cut to “neutral” from “outperform”, while Regis Resources (RRL) has been cut to “underperform” — the investment bank’s year-ahead price target for each remain unchanged.
Read more: New gold levy will cost jobs, writes Paul Garvey
Read more: Gold miners hit out at Labour, writes Andrew Burrell
3.20pm: Home loan approvals jump in July
Home loan approvals rose 2.9pc in July according to Australian Bureau of Statistics data, with economists expecting a more modest 1pc increase ahead of the release this morning.
The value of investors loan approved over the period fell 3.9pc on the month prior, while value of owner occupied loans rose 0.9pc on the same basis.
These are encouraging signs for ASIC and APRA after the implementation of measures to steer consumers away from riskier loans.
Alongside the July data, the same figures for June was revised up across the board by the nation’s statistician.
2.45am: APRA names CBA probe panel
Bank regulator the Australian Prudential Regulation Authority has announced the appointment of three panel members to conduct the prudential inquiry into the Commonwealth Bank.
Former APRA chairman John Laker, former ACCC chairman Graeme Samuel and businesswoman Jillian Broadbent will undertake the regulator’s injury into the bank’s governance, culture and accountability.
APRA announced the inquiry in the wake of allegations by financial intelligence agency Austrac that CBA breached anti-money laundering legislation — read more
CBA last down 0.8pc at $73.36
Paul Garvey 12.30pm: Mining chief spruiks fickle nickel fix
A year after revealing a Nigerian nickel discovery that looked too good to be true, former Western Mining Co chief Hugh Morgan believes his team has cracked the technical challenges presented by the mystery mineralisation.
Mr Morgan’s private company Comet Minerals has discovered what looks to be a vast and unique nickel deposit comprising an abundance of balls of almost pure nickel.
When he first unveiled the discovery at last year’s Africa Down Under conference, Mr Morgan was hopeful that separating the balls from the surrounding soil would be a relatively simple process.
But major variations in both the size and density of the nickel balls meant Comet has struggled to assay the system and understand the nature and scale of the deposit.
Bridget Carter 12.08pm: UBS, Deutsche to float Vodafone NZ
Investment banks UBS and Deutsche have won the roles to embark on a $1 billion initial public offering of Vodafone’s New Zealand operations across the Tasman, according to sources.
A third investment bank is also to be mandated on the deal.
Vodafone New Zealand has opted to embark on an initial public offering after plans to merge the company last year with Sky Television collapsed.
More to come from DataRoom
11.53am: Roots unearthed in CBA hunt
Harry Wilson writes:
The New Zealand-born boss of Royal Bank of Scotland is in the running to head the Australian lender he worked for before joining the UK taxpayer-backed bank five years ago.
Ross McEwan has been identified as a potential successor to Ian Narev as chief executive of Commonwealth Bank of Australia, six years after he missed out on the top job, prompting him to leave and become head of retail banking at RBS.
A beauty parade is under way for headhunting firms pitching for the contract to find Mr Narev’s replacement. Mr McEwan, 60, has been identified as one of the leading contenders to replace the 50-year-old when he leaves next year, according to the Financial Times — read more
CBA last down 0.5pc at $73.64
Ben Wilmot 10.55am: Centuria poised for Propertylink play
Listed property funds manager Centuria Capital Group (CNI) has raided the register of Propertylink (PLG), taking control of a 17 per cent stake in the industrial property and funds specialist.
The acquisitive group took a 9.3 per cent direct interest in Propertylink for $53 million and its listed industrial fund, Centuria Industrial REIT, has also acquired a 7.7 per cent stake in Propertylink.
The combined stake of 17 per cent positions Centuria to make a take over play for Propertylink, which has struggled to garner investor support despite growing its funds empire to about $2 billion.
Centuria said it would seek to initiate discussions with Propertylink regarding “potential strategic initiatives” — read more
PLG last up 9.3 per cent at $0.945
10.40am: ASX200 hits lows as dollar soar
The local sharemarket dives early trade after futures tipped an early rise by 0.2 per cent as caution resurfaces amid Hurricane Irma’s progression toward Florida and continuing North Korea anxiety.
The S&P/ASX200 index is 0.3 per cent lower at 5672, US index futures are broadly down 0.2 per cent fall and spot gold hits a fresh 12-month high of $US1350.63.
Financials are providing the most significant drag, CBA down 0.3 per cent amid similar losses in Big Four peers after APRA named the panel for its inquiry into the bank over “governance, culture and accountability”.
Amcor shares fell as much as 1 per cent at the open but have since recovered after a Bloomberg report raised the possibility it is considering a takeover of US rival Bemis — shares in the $4.3bn company listed on the NASDAQ rose as much as 10 per cent in US trade overnight.
Meanwhile, the Australian dollar has hit a fresh two year-high of US80.68 cents, up over 0.2 per cent indicating the somwhwat muted measure of risk aversion present in global markets.
Ahead, investors eye housing finance data due from the Australian Bureau of Statistics at 11:30am AEST, ABS data released yesterday revelling slowing retail sales in July reflected in reduced trader appetite for consumer staples in the session previous.
10.20am: Speedcast not ‘actively’ seeking buyers
Speedcast said it is “not actively seeking buyers for the business” and remains focused on its core operations.
The statement to the ASX this morning comes in response to an article in The Australian’s DataRoom that the company had approached investment banks Macquarie and Credit Suisse to find a suitor, the search thus far proving unsuccessful.
SDA last down nearly 1pc at $3.59
9.55am: ASX200 eyes lift amid global caution
Australia’s S&P/ASX 200 is expected to open up about 0.2pc after a flat close on Wall Street.
The big news is Bloomberg’s report that Amcor is exploring a $5.4b takeover of Bemis, which jumped 10pc last night.
Otherwise trading should be cautious as Hurricane Irma makes its way toward Florida and North Korea is expected to do more missile tests over the weekend.
BHP ADR’s point to a 0.4pc rise in the resources sector heavyweight, though spot iron ore fell 1.6pc last night.
The technical outlook remains bearish after the recent break below the 200-DMA and triangle pattern supports.
Ex-dividend stocks today include APN, BSL, QAN, RCG, SMX, SHL, SXL and TGR.
Index last 5689.9.
9.45am: Analyst rating changes
Vocus raised to Overweight — JPMorgan
Breville cut to Neutral — JPMorgan
Dexus initiated at Hold; $9 target price — Deutsche Bank
Regis Resources cut to Underperform — Macquarie
Saracen Minerals cut to Neutral — Macquarie
Northern Star cut to Neutral — Macquarie
Suncorp raised to Buy — Citi
9.40am: Amcor responds to Bemis takeover talk
Packaging heavyweight Amcor has responded to media speculation it is on the hunt for US rival Bemis, saying it is “continually reviewing opportunities” to improve shareholder value and “regularly assesses a range of strategic options.”
Bemis shares shot 10pc higher overnight in Wall St trade after a Bloomberg report raised the potential of a takeover, citing people familiar with the matter.
AMC last $15.71
Damon Kitney 9.20am: Funds to plough cash into farming
The $25 billion top-performing industry superannuation fund Hostplus is looking to spearhead moves by the industry fund sector to plough potentially billions of dollars into the agribusiness sector.
While industry super funds now hold only one-third of 1 per cent of their funds under management in Australian agriculture, Hostplus chief investment officer Sam Sicilia said the group had held preliminary talks with other industry funds about pooling resources to back vertically integrated agriculture projects.
“We are looking at that seriously ... we would do it through a pool ... You would want to deploy $20 billion in agriculture over time (through a mix of debt and equity). You can’t just deploy $100m. That would require equity contributions from 6-10 super funds,” Mr Sicilia said in an interview with The Australian.
9.15am: APRA appoints CBA inquiry panel
APRA has appointed the panel to head its inquiry into the Commonwealth Bank following allegations of noncompliance with money laundering prevention measures by financial intelligence agency Austrac.
As foreshadowed by The Australian’s Richard Gluyas, the regulator has tapped chair of the Banking and Finance Oath Dr John Laker, Monash Business School’s Professor Graeme Samuel, and company director Jillian Broadbent undertake the inquiry into “any shortcomings in the governance, culture and accountability frameworks and practices within CBA.”
APRA expects the panel to submit a progress report to APRA by 31 January 2018, and a final report by 30 April 2018.
CBA last $73.98
9.00am: Canada shows way on rates
Faster than expected interest rate hikes in Canada may show what’s in store for Australia.
Notwithstanding some key differences between the two economies, the Aussie dollar again reacted positively to Canada’s interest rate hike this week — its second hike in the past three months.
While Canada’s rate hikes are reducing the Australian dollar’s interest rate advantage, the currency market is reacting more to the perception that the start of rate hikes in Canada — whose economy is also heavily reliant on commodities — means the Reserve Bank of Australia could also be close to tightening here.
After spiking above US80c for the third day this week, the excitement in the currency market was tempered by weaker-than-expected retail sales and international trade data for July, but traders appeared a bit more confident of a rate hike by mid-2018.
Interest rate swaps yesterday implied a 57 per cent chance of the official cash rate rising from 1.5 to 1.75 per cent by mid-2018, and an 80 per cent chance of a hike by the end of next year.
Bets on interest rate hikes in Australia have increased in recent months, helping push the dollar up to a two-year high of US80.66c and a 2.5-year high of 67.3 on the trade-weighted index.
While it can be argued that Canada until recently had an “emergency” cash rate setting of 0.5 per cent, Australia’s 1.5 per cent rate is highly stimulatory, as emphasised by the Reserve Bank’s recent estimate that the “neutral” rate is close to 3.5 per cent.
Andrew White 8.50am: Rising power prices boost to AGL
AGL Energy’s reliance on coal — rather than its widely proclaimed ambitions to exit the mineral by 2050 — has propelled a reassessment by investors, with a number of analysts upgrading their recommendations and target prices on expectations the out-of-favour generation business will be the biggest beneficiary of rising electricity prices.
AGL shares jumped 2.4 per cent yesterday, their biggest one-day rise since July, as analysts at Ord Minnett seized on a report by the Australian Energy Market Operator that said the risk of blackouts and shortfalls during the summer peak demand season would lead to higher and more volatile prices.
“We see AGL Energy as the biggest beneficiary of higher wholesale prices,” the broker said.
“We expect further upward pressure on wholesale prices to flow through to retail, and see earnings growing further (in the 2019 financial year)” — read more
AGL last $24.27
8.45am: Amcor circles US plastics player
According to a Bloomberg report, Amcor is considering a takeover of rival Bemis Co., say people familiar with the matter.
Listed on the NASDAQ index in the US with a market capitalisation of $US4.3bn ($AUD4.5bn), shares in Bemis — a rigid and flexible plastic products producer — shot up 10 per cent in overnight trade.
Amcor net profit attributable to shareholders rose 144.6pc in FY17 to $597m.
AMC last $15.72
7.40am: ASX looks set to open higher
The Australian market looks set to open modestly higher after Wall Street closed little changed after media stocks posed a late rally and with investors tracking Hurricane Irma.
At 7am (AEST), the share price futures index was up 16 points, or 0.28 per cent, at 5,693.
In the US, media stocks slumped on Walt Disney and Comcast’s negative business updates, while healthcare stocks such as AbbVie and Bristol-Myers Squibb buoyed indexes, and strength in Microsoft and Amazon helped keep the tech-heavy Nasdaq in positive territory.
The Dow Jones Industrial Average fell 0.1 per cent, the S&P 500 lost 0.02 per cent, while the Nasdaq Composite added 0.07 per cent.
Locally, in economic news today, Reserve Bank of Australia governor Philip Lowe is slated to speak at a Bank of China dinner in Sydney, while RBA deputy governor Guy Debelle is scheduled to participate in a panel discussion at the 2017 FINSIA Regulations Panel, also in Sydney.
The Australian Bureau of Statistics is due to release housing finance data for July.
No major equities news is expected.
The Australian market yesterday closed steady as investors consider the possibility of another North Korean missile test.
The benchmark S&P/ASX200 index rose 0.2 points at 5,689.9 points. The broader All Ordinaries index was up 0.9 points, or 0.02 per cent, at 5,753.8 points.
AAP
7.00am: Dollar climbs above US80c
The Australian dollar is sharply higher against its US counterpart and well above the US80 cent mark after European Central Bank commentary failed to announce any tapering of its bond-purchasing program.
At 6.35am (AEST), the Australian dollar was worth US80.48 cents, up from US79.85 cents yesterday.
Westpac’s Imre Speizer says the US dollar, and European and US bond yields, are lower, following ECB commentary which did not announce QE tapering. “The ECB kept its policy rate unchanged, as was widely expected, but did not announce any changes to its QE program (which some in the market had expected),” Mr Speizer said in a morning note.
“(ECB president Mario) Draghi did say that the ECB will decide on the policy calibration for next year in the autumn, but did not expand. “Fed fund futures yields fell, now pricing the chance of a December rate hike at around 31 per cent (from 36 per cent yesterday). It’s unclear how much of that repricing is due to the ECB-inspired fall in yields rather than yesterday’s US debt ceiling extension (which pushes out the negotiation to December when the Fed was expected to hike).
“The US dollar index is down 0.8 per cent on the day, to a three-year low (while the) AUD rose from 0.7975 to 0.8045.”
The main event risk for the local currency today will be July housing finance data, with Westpac economists expecting a one per cent rise in the number of owner-occupier approvals.
He expected to see the Aussie dollar move “higher to test 0.8065 (a major high set in July), as long as the USD remains subdued”.
The Aussie dollar is also higher against the yen and virtually unchanged against the euro.
AAP
6.50am: Wall St ends flat
Wall Street has closed flat after a moderate late-day rally as media stocks, which slumped on negative business updates from Walt Disney and Comcast, were offset by gains in healthcare shares.
Comcast dropped 6.2 per cent after the cable operator warned of subscriber losses, while Disney shares fell 4.4 per cent after the company cautioned about its profit growth. The S & P 500 media index ended down 3.6 per cent.
Gains in healthcare stocks such as AbbVie and Bristol-Myers Squibb buoyed indexes, while strength in Microsoft and Amazon helped keep the tech-heavy Nasdaq in positive territory.
Investors were tracking Hurricane Irma, which was bearing down on Florida on the heels of devastation in Texas caused by Hurricane Harvey. Irma ploughed past the Dominican Republic toward Haiti after devastating a string of Caribbean islands. With Irma looming, shares of insurers were weaker, with the Dow Jones US Insurance index off 1.9 per cent.
“There’s further uncertainty because of Hurricane Irma that is supposed to be hitting Florida. You don’t know what kind of damage it is going to do,” said John Praveen, managing director at Prudential International Investments Advisers in Newark, New Jersey.
Combined with Harvey, in the short term, Praveen said, “maybe it will have a negative impact upon US GDP growth and it might hurt US earnings, and that’s probably why the markets are reacting negatively”.
The Dow Jones Industrial Average fell 22.86 points, or 0.1 per cent, to 21,784.78, the S & P 500 lost 0.44 points, or 0.02 per cent, to 2465.1 and the Nasdaq Composite added 4.56 points, or 0.07 per cent, to 6397.87.
Australian stocks are tipped to move higher at the open. At 6.55am (AEST) the SPI futures index was up 17 points.
Reuters
6.40am: Europe stocks rise on ECB
Europe’s main stock markets climbed and the euro jumped against the dollar after the ECB said it is keeping its vast armoury of economic stimulus measures in place, but would revisit them in October.
As European Central Bank chief Mario Draghi voiced concern over the single currency’s strength, which is putting the brakes on inflation at a time when policymakers are looking to wind down stimulus measures, the euro jumped above $US1.20.
“The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring,” Mr Draghi said as the ECB its left interest rates at all-time lows and said it would stick to its mass bond-buying program.
Mr Draghi said the ECB would decide next month about its next stimulus moves. “This autumn we will decide on the calibration of our policy instruments beyond the end of the year,” he said.
“Unless a risk that is not seen today materialises, we should be ready to take the bulk of these decisions in October.”
London closed up 0.6 per cent, Frakfurt ended 0.7 per cent higher and Paris was up 0.3 per cent.
AFP
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