BusinessNow: Live coverage of financial markets and companies, plus analysis and opinion
The Australian dollar initially rose following the data, before falling back below US77c.
- Aussie dollar down on jobs data
- Jobs data disappoints
- NSW sells Ausgrid for $16bn
- Murray Goulburn shares slide
- Woodside boosts FY guidance
- All eyes on presidential debate
Welcome to the BusinessNow blog for Thursday, October 20. The Australian dollar is lower on weaker-than-expected jobs data, while NSW has sold Ausgrid for $16 billion.
8.23pm:Katter, Xenophon back rival Kidman bid
Dow Jones
Nationalist lawmakers have teamed up with local ranchers to try to counter a bid involving Chinese buyers for the S. Kidman & Co cattle empire, in what would be one of Australia’s biggest agribusiness deals.
Independent and small-party lawmakers courted by Prime Minister Malcolm Turnbull to backstop his one-seat majority, threw their influence on Thursday behind a potential “all-Australian” offer for the Kidman ranches, which cover an area larger than Ireland.
The bid by the BBHO syndicate, yet to be formalised, is expected to value the ranches at $385 million ($US295m) and would pit some of Australia’s wealthiest ranchers against mining billionaire Gina Rinehart and China-based partners Shanghai CRED Real Estate Stock Co. They have offered $365 million for Kidman. Read more.
7.45pm:Why banks, commodities could sync
David Rogers
Switching between the banks and resources companies has long been a popular strategy among traders and active fund managers, due to the supposed defensive characteristics of the banks and growth features of the resources companies. But Deutsche Bank says a rise in both sectors isn’t out of the question.
Since commodity prices bounced off extremely low levels this year amid mine closures and surprising economic resilience in China, the S&P/ASX 200 Materials Index has risen 29 per cent.
At the same time, the S&P/ASX 200 Banks index has fallen 8 per cent on slowing loan growth and growing pressure on margins, dividends and capital. Indeed the two biggest sectors of the domestic sharemarket have broadly diverged since the peak of the mining boom and the resumption of interest rate cuts in 2011. Read more.
7.11pm:Tokyo stocks hit 6-month high
Japanese stocks rose to their highest level in six months on Thursday, driven up by a recovery in recently battered stocks and the speculation that Democratic nominee Hillary Clinton solidified her standing following the US presidential debate.
The Nikkei Stock Average rose 236.59 points, or 1.4 per cent, to 17235.50 following a 0.2 per cent rise on Wednesday. Thursday’s closing level was the highest since April 27.
Gains were led by companies recovering from recent crises and real estate developers that had suffered from concerns about demand for condominiums.
The market was helped by the view that Mrs Clinton solidified her lead over Republican rival Donald Trump following the third presidential debate.
Still, Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management, didn’t share the apparent enthusiasm. “Stocks are up, but trading volume isn’t growing,” he said. In a robust market recovery, trading volume tends to increase as well.
About 1.85 billion shares changed hand on the first tier of Tokyo Stock Exchange, falling short of the 2 billion mark said to be the threshold for a healthy trading day. Dow Jones
6.33pm: European stocks await ECB
Europe’s main stock markets steadied in opening deals on Thursday, ahead of an interest rate decision by the European Central Bank.
In initial trade, London’s benchmark FTSE 100 index was virtually unchanged at 7,021.31 points, compared with Wednesday’s closing level.
In the eurozone, Frankfurt’s DAX 30 rose 0.2 per cent to 10,665.75 and in Paris the CAC 40 also added 0.2 per cent, to 4,528.66 points.
ECB chief Mario Draghi is likely to prep markets for an extension of a huge monetary stimulus program on Thursday after investors were rattled by talk that massive bond purchases may be drying up.
Policymakers are not however expected to make changes to the ECB’s record low interest rates, cheap loans to banks or €80 billion per month asset-buying program.
But markets will be watching Draghi’s news conference closely for signs of its next moves to support hesitant growth and inflation in the eurozone single currency area.
“Focus will shift into the European Central Bank meeting later today for any indication on whether the bank is considering tightening monetary policy soon,” said FXTM’s chief market strategist Hussein Sayed.
“We do not expect any action in today’s meeting but the euro will be driven by forward guidance from Mr Draghi, who will be faced with questions related to a recent unofficial report indicating tapering asset purchases.” AFP
6.01pm: Bank regulator orders mortgage fraud review
Michael Bennet
The banking regulator has ordered the major banks to have their fraud systems externally reviewed, amid concerns mortgages are being sold on inflated incomes and generous living expense assumptions.
Appearing before the Senate Economics Legislation Committee, Australian Prudential Regulation Authority chairman Wayne Byres revealed the regulator had informed the “largest institutions” to get their external auditors to review fraud control mechanisms to ensure they are working.
A survey from UBS this month flagged that 28 per cent of mortgage customers stated their application was not factually accurate, with a higher proportion of misrepresentation among those who used a broker than went through bank channels.
Asked today if banks approving inaccurate loans may be systemic or in isolated cases, Mr Byres said APRA was taking the issue “seriously” and had homed in on verification processes, such as evidence of income, as part of broader efforts to strengthen lenders’ serviceability assessments. Read more.
5.04pm: Genesee & Wyoming buys Glencore’s G’Rail
Genesee & Wyoming has shaken off competition from Aurizon and Pacific National to buy G’Rail from Glencore, in a deal worth $1.14 billion.
Genesee & Wyoming had been working with Macquarie’s infrastructure arm on the transaction and was working with Bank of America Merrill Lynch, while Royal Bank of Canada was selling the asset for Glencore. Read more.
4.35pm:Stocks defy data to close in black
The Australian sharemarket has limped to its third straight positive close despite soft employment data and a bevy of mixed production reports and company updates.
At the close, the benchmark S&P/ASX 200 index edged up 6.7 points, or 0.12 per cent, to 5,442.1, while the broader All Ordinaries index rose 7.8 points, or 0.14 per cent, to 5,526.2.
A 2.5 per cent jump in crude prices in offshore trade set the tone for the positive session, alongside gains on Wall Street, but gains were kept in check as official labour market numbers showed an unexpected reduction in jobs in September.
While analysts do not anticipate the jobs data to lead to another rate cut this year, it undoubtedly raised the prospect of further moves and weighed on the banks and the Australian dollar as a result.
“When the market starts to get excited about a trend developing we see the newsflow throwing doubt into traders’ mindsets and that has occurred somewhat today with a poor September employment report,” IG chief market strategist Chris Weston said. Read more.
4.03pm:Morgan Stanley raises alarm on unit glut
The looming apartment glut in inner-city regions has captured the attention of Morgan Stanley analysts, with a new report warning on complacency as the lines of defence against a hard landing become “stretched”.
Commentary from the investment bank came on the same day the head of banking regulator APRA expressed concern over “elevated” risks within the housing market.
APRA’s worries appeared tame, however, against Morgan Stanley’s alarm bells of an imminent and swift halt to apartment construction amid expectations of a glut of around 100,000 properties within two years.
The oversupply will largely be tied to the Melbourne, Brisbane and Perth apartment markets, but Sydney is also at risk given an uptick in construction.
Daniel Palmer
3.38pm:Draghi to prep markets on stimulus
ECB chief Mario Draghi is likely to prep markets for an extension of a huge monetary stimulus program on Thursday after investors were rattled by talk that massive bond purchases may be drying up.
Policymakers at the European Central Bank are not expected to make changes to the bank’s record low interest rates, cheap loans to banks, or 80-billion-euro-per-month asset-buying program at this week’s governing council meeting.
But markets will be watching Draghi’s news conference closely for signs of its next moves to support hesitant growth and inflation in the eurozone single currency area.
AFP
3.04pm:Cresco Pharma surges on debut
Medical marijuana company Creso Pharma has jumped as much as 40 per cent on debut after raising $5 million through an initial public offering, writes Daniel Palmer.
The company is looking to tap into a growing market that could soon expand to Australia, with Creso developing products for both humans and pets.
Creso chairman and co-founder Boaz Wachtel is a familiar name in the space, having been a co-founder of the first medical marijuana company to list on the local exchange — MMJ Phytotech. Since then others have joined the local bourse including Medlab Clinical and MGC Pharmaceuticals.
The Creso IPO was first reported in The Australian in June, with the company noting it was looking to differentiate itself from the increasingly crowded medical marijuana field by incorporating pharmaceutical expertise into its products pipeline.
2.54pm:Van Onselen to head RAMS
Westpac Banking Group has tapped Ainslie van Onselen to lead the lender’s wholly-owned subsidiary RAMS Home Loans.
Ms Van Onselen, the current director of Westpac’s women’s markets, inclusion and diversity division, starts as executive director of RAMS in November and replaces Martine Jager, who moves to head of marketing for the nation’s second largest lender.
Ms van Onselen, a former chief of staff to Westpac boss Brian Hartzer, comes from Western Australia where she has been a deputy chair of the WA Insurance Commission and a member of the WA Legal Practice board.
Michael Roddan
2.30pm:Impact of Crown arrests unclear
Crown Resorts chairman Rob Rankin has warned it is too early to determine the material impact the arrest of its China staff will have on the casino company.
Mr Rankin, fronting shareholders at Crown’s annual general meeting in Perth today, said given the current lack of information available it was not possible for anyone to be able to provide any informed commentary on the detentions.
“Likewise, any assessment at this time as to any material impact on our business is both premature and speculative,” he said.
The James Packer-backed Crown Resorts has been under investor pressure this week following the arrest of 18 of its staff in China, including three Australians. It is believed the arrests are linked to the marketing of the Australian casinos to Chinese high rollers, which is illegal in the economic powerhouse.
Sarah-Jane Tasker, Andrew Burrell
2.15pm:Ten shares tumble on FY loss
Ten Networks Holdings’ share price has plunged by more than 15 per cent after the free-to-air television broadcaster unveiled a $156.8 million net loss, which was around half the prior year’s loss of $312.2m.
Weighing the results down was a TV licence impairment charge of $135.2m, which more than offset a steady 7.5 per cent advance in TV revenue to $676.4m.
Ten Network warned of the need for urgent media reform as it narrowed its full-year loss amid an improved showing in the crucial 25 to 54-year-old audience segment.
Jake Mitchell
2.10pm:Jobs market closer to “deterioration”
Capital Economics notes that Australia’s jobs market seems to be edging closer to the “deterioration” that RBA governor Lowe hinted this week could prompt more rate cuts.
But the firm’s chief economist Paul Dales says there are two reasons why investors can’t rely on the jobs data released today.
He says September’s 9,800 fall in jobs would have been dragged down by about 10,000 due to the end of temporary contracts of people employed by the Census in August.
And the ABS stated that it has altered the headline figure because the incoming rotation sample for Queensland was “considerably different to the rest of the Queensland sample”.
“These two effects may cancel each other out,” Mr Dales says. “After all, the fall in the annual growth rate of employment from 2.1 per cent in April to 1.4 per cent is consistent with private business surveys.”
And the unemployment rate fell only because of another big drop in the participation rate, to 64.5 per cent from 64.7 per cent, which is unlikely to be sustained.
“Overall, the RBA will probably continue to describe the labour market as ‘mixed’, although recently there have been more signs of a softening than a strengthening,” he says.
2.03pm:Markets indecisive on US presidential debate
The third and final US presidential debate has proved somewhat indecisive for markets.
While the Mexican peso weakened slightly from the beginning of the debate, the magnitude of the fall was minimal.
USD/MXN is currently trading around MXN18.54, up less than 0.1 per cent since the NY close.
But after rallying 7 per cent since the first debate, MXN may have already risen as far as it can until US election uncertainty is resolved.
Spot gold is up 0.3 per cent at $1272, but it’s a continuation of a rise that’s been underway the past three days.
AUD/USD is little changed since it fell from 0.7723 to 0.7686 on weak jobs data.
1.42pm:Ausgrid enterprise value at $20.7bn
The New South Wales Government has achieved a price for Ausgrid that took its overall enterprise value to $20.7 billion, according to sources.
NSW Premier Mike Baird today announced the sale of a 50.4 per cent long-term lease in the nation’s electricity distribution network, Ausgrid, to AustralianSuper and IFM for $16.189bn.
The sale price equates to 1.4 times Ausgrid’s regulated asset base and 15.2 times its earnings before interest, tax, depreciation and amortisation.
In the sales process run for the operation earlier this year, it was understood that State Grid was offering to pay more than $16bn or 1.5 times to 1.7 times its regulated asset base for the stake and Cheung Kong Infrastructure, around $12 to $14bn.
However, Treasurer Scott Morrison blocked both bidders from buying the asset in the final stages of the process on the back of national security concerns.
The latest transaction comes after Hastings-backed consortium’s bid for Transgrid, which was sold for 1.6 times RAB.
Comparables to Ausgrid are currently trading at 1.2 times the group’s regulated asset base.
While it is unclear whether the offer was higher than State Grid’s offer, it has been described as competitive.
In total, the bidders wrote out a cheque for $4.6bn, refinancing all of the debt on the asset worth $12bn, equating to $16.189bn in net proceeds after stamp duty.
All of the $12bn worth of debt on the entire asset was refinanced by 15 lenders, including Australia’s top four banks and Societe Generale.
It leaves $8.7bn of equity in the business, equating to a 60 per cent gearing ratio.
Bridget Carter
1.05pm:Reject Shop shares hit 14-month low
The Reject Shop shares are down 14 per cent at $7.58 after falling almost 7 per cent yesterday on the warning that sales growth has slowed in the first quarter.
Macquarie reiterated its Neutral rating and $10.50 share price target today, saying the FY16 results showed management has costs under control, so performance will largely come down to sales and gross margins.
“We remain positive on the business improvement strategies being implemented but remain cautious given the subdued like-for-like momentum ahead of the key Christmas trading period given the operating leverage in the model,” Macquarie analysts said.
12.56pm:Ausgrid sale an ‘excellent result’: Baird
The New South Wales Government has announced the sale of a stake in the state’s electricity distribution network Ausgrid for $16.189 billion to Australian Super and IFM.
It comes after two of the nation’s biggest superannuation funds last month emerged with an unsolicited bid for a 50.4 per cent interest in a long-term lease of the operation.
At the time, DataRoom revealed that the offer was at least $10bn.
The $100bn AustralianSuper, one of the country’s biggest super funds, and super fund-owned IFM Investors represents a more politically palatable deal for the NSW and federal governments.
In a press statement today, Premier Mike Baird said the transaction would deliver gross proceeds of $16.189 billion to the state and would help to fund critical infrastructure projects as part of the government’s $20bn Rebuilding NSW plan.
“This is another excellent result for the people of NSW after our successful $10.258 billion lease of TransGrid,” Mr Baird said.
Bridget Carter
12.32pm:Vocus, NextGen take aim at IBM
Vocus Communications and NextGen Networks have refuted allegations made by IBM that their negligence led to the census meltdown that cost taxpayers an extra $30 million, writes Supratim Adhikari.
IBM was picked by Australian Bureau of Statistics (ABS) to run the eCensus platform. Part of the service involved the implementation of a geoblocking service called Island Australia that was designed to stop international traffic from targeting the census website.
However, the website suffered a catastrophic 40-hour outage after it was subjected to four denial of service (DDoS) attacks, which IBM alleges were a result of poor implementation of the service by Nextgen and its upstream provider Vocus.
11.44am:Aussie dollar turns down on jobs data
The Australian dollar initially jumped from US77.23c to US77.34c as algos reacted to the lower-than-expected jobless rate, before falling to US76.96c because the data were overall weak.
Employment was much weaker than expected and full-time jobs slumped in the month.
And the jobless rate was flattered by a sharp fall in the participation rate.
The Aussie now has a catalyst to test support around US76c, but any sharp fall could be partly reversed before CPI data next week.
11.38am:Jobs data weaker than expected
Australia’s September employment data are overall worse than expected, despite the unemployment rate falling slightly.
The unemployment rate fell to 5.6 per cent in the month versus the 5.7 per cent expected by economists and an upwardly revised 5.7 per cent in August.
Employment fell 9,800 versus an expected 15,000 rise and a downwardly revised 8,600 fall in August.
Full-time jobs fell 53,000, while part-time jobs rose by 43,200.
The labour force participation rate fell to 64.5 per cent vs 64.8 per cent expected.
Unemployment would have been much worse if not for the slump in the participation rate.
11.35am:NSW sells Ausgrid for $16bn
The New South Wales Government has finalised a deal for Australian Super and IFM to buy a stake in its electricity distribution network Ausgrid for $16.2 billion.
It comes after two of the nation’s biggest superannuation funds last month emerged with an unsolicited bid for a 50.4 per cent interest in a long-term lease of the operation.
At the time, DataRoom revealed that the offer was at least $10bn.
The sale is likely to spark further controversy among other rival infrastructure investors that were eager to compete for the asset, including Hastings Funds Management, Queensland Investment Corporation and GIP.
Bridget Carter
11.24am:Fortescue Q1 output beats expectations
Fortescue Metals has maintained its full-year guidance after outstripping market expectations for first quarter iron ore output.
For the three months to September 30, the WA-based miner (FMG) reported total shipments of 43.8 million tonnes, above the average analyst projection for 42.5 million tonnes.
Fortescue has reaffirmed guidance for shipments of 165-170 million tonnes for the 2017 financial year.
The miner also beat expectations on costs, with production expenses trimmed a further 5 per cent compared to the prior quarter, to $US13.55 per wet metric tonne.
11.05am:Murray Goulburn shares slide
Under pressure dairy co-operative Murray Goulburn has seen its share price fall as much as 6 per cent after it slashed profit and milk price expectations for the 2017 financial year, writes Daniel Palmer.
The company said a wetter than usual spring in Victoria had further reduced its milk intake, adding to supply pressure after a bevy of its farmer-suppliers walked away following a stunning price cut in April.
Murray Goulburn said the activity would result in its intake tumbling 20 per cent compared to the prior year, to 2.7 billion litres, and crimp its profits.
Such are the challenges currently confronting the company that Murray Goulburn refused to offer new earnings guidance, only telling investors its profit would come in below the $42 million figure forecast a couple of months ago.
10.40am:Energy, materials push ASX higher
The Australian sharemarket is on track for a third day of gains as strength in commodity prices pushed the materials and energy sectors higher in early deals, writes Daniel Palmer.
At the 10.15am (AEDT) official market open, the benchmark S&P/ASX 200 index climbed 12 points, or 0.22 per cent, to 5,447.4, while the broader All Ordinaries index rose 12.9 points, or 0.23 per cent, to 5,531.3.
CMC Markets chief market strategist Michael McCarthy said energy stocks would lead the way after US crude stockpiles fell overnight, pushing prices 2.5 per cent higher.
“Australian oil and gas plays may roar back to life after six days of selling,” he said.
“BHP’s AGM and Rio’s, South32’s and Fortescue’s quarterly production numbers may add additional impetus to resources.”
In energy, Santos bounded 2.7 per cent to $3.77, while Origin Energy added 0.9 per cent to $5.67 and Woodside jumped 1.8 per cent to $29.82.
In materials, BHP advanced 1 per cent to $22.705, while Rio Tinto underperformed in tacking on 0.5 per cent to $50.98 after downgrading its full-year production guidance and Fortescue lifted 0.6 per cent to $5.18 after topping the market’s Q1 forecasts.
10.35am:Woodside boosts FY guidance
Woodside Petroleum has beat third-quarter production and revenue expectations and boosted full-year production guidance after a record quarter from both its North West Shelf and Pluto LNG plants at Karratha in Western Australia, which are now both producing at well above nameplate capacity.
The Perth oil and gas producer produced 25.2 million barrels of oil equivalent in the three months to September 30, flat on the same quarter a year ago but up 14 per cent from the previous quarter and beating UBS expectations of 23.7 million barrels.
Sales revenue of $US988 million was down 9 per cent from a year earlier but up 20 per cent on the previous quarter and beating UBS expectations of $US956m.
Matt Chambers
10.25am:Ten narrows FY loss
Ten Network has warned on the need for urgent media reform as it narrowed its full-year loss amid an improved showing in the crucial 25 to 54-year-old audience segment, writes Daniel Palmer.
For the year to August 31, Ten reported a loss of $156.8 million, around half the prior year’s loss of $312.2m.
Weighing the results down was a TV licence impairment charge of $135.2m, which more than offset a steady 7.5 per cent advance in TV revenue to $676.4m.
10.15am:Brambles reaffirms FY guidance
Logistics group Brambles has reaffirmed its full-year guidance after reporting a modest 5 per cent rise in sales from continuing operations through the first quarter, writes Daniel Palmer.
In a statement to the market this morning, Brambles (BXB) booked a 7 per cent jump in constant currency sales, while sales revenue from continuing operations advanced 5 per cent to $US1.42 billion ($1.84bn).
The company pinned the improved showing on strength in the Pallets Europe, Middle East & Africa unit, although growth was kept in check by a modest showing from its US arm.
10.06am:Half of BHP staff to be women by 2025
BHP Billiton is to set out tonight to drag the resources industry in to the 21st century on gender equality, with chief executive Andrew Mackenzie to announce a goal to have half of its workforce women by 2025, writes Barry Fitzgerald.
To give the goal some credibility, BHP will embed performance measures on reaching the target – women currently account for 17 per cent of the workforce - in the at-risk components in the remuneration packages of its mainly senior male executives.
But to steer clear of the potential for reverse discrimination litigation, particularly in the US, the 50:50 gender split will labelled by Mr Mackenzie at tonight’s London annual meeting (10.00pm AEDT) as an “aspirational goal’’ rather than the greater certainty that would come from it being set as a target.
BHP can expect the same sort of blow back that Australia’s major banks have copped from institutional proxy advisers on the setting of aggressive gender balance targets. But Mr Mackenzie will say tonight that more must be done to achieve gender balance, and that it will will be good for business.
9.50am:Shares to open flat ahead of jobs data
The local sharemarket is expected to be largely flat before domestic jobs data at 1130 AEDT and the third US presidential debate at 1200 AEDT.
Overnight SPI 200 futures fair value implies a likely 0.1 per cent rise in the S&P/ASX 200 index, following a 0.2 per cent gain in the US S&P 500.
Oil stocks should outperform after WTI crude hit a 15-month high of $51.93 on surprisingly weak US crude inventories data and potential OPEC cutbacks.
OPEC can stabilise prices and members have given “strong signals” they will cooperate, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said.
BHP’s Australian dollar equivalent ADR’s close was $22.64, implying a potential 1.3 per cent gain in the resources-sector heavyweight.
In regard to the US election, Credit Suisse has warned that a Trump win and full implementation of his policies could cause a 10-15 per cent fall in the S&P 500.
9.32am:All eyes on US presidential debate
The third and final US presidential debate is due at 12.00pm AEDT today, with traders watching the Mexican peso as the key barometer of the outcome.
“Never in the history of the United States of America has a candidate faced such a deficit in the polls as Trump currently holds, with at least two well-known sites putting an 85-90 per cent chance of a Clinton win,” says IG chief market strategist Chris Weston.
“But as 2016 has shown us, not just in politics, but in markets too, it can often pay to expect the unexpected.”
9.23am:Crown plans hotel IPO
Crown Resorts has said it will proceed with plans to float a 49 per cent stake in some of its Australian hotels amid a storm of controversy surrounding the group following the arrest of 18 of its staff in China this week.
In a brief statement ahead of its AGM in Perth today, the hotels and gaming giant said its board had now endorsed an idea to strengthen its balance sheet through a split of its hotel operations.
The planned split will involve an IPO of a package of its hotels, likely including the Crown Promenade and Crown Metropol properties in Melbourne and Perth.
Daniel Palmer
9.20am:Australian jobs data in focus
Australian jobs data for September are due at 1130 AEDT.
Economists expect the unemployment rate to edge up to 5.7 per cent from 5.6 per cent.
Employment is expected to rise by 15,0000 after a 3.9 per cent fall in August, while the participation rate is expected to be 64.8 per cent vs 64.7 per cent in August.
Any reaction to the jobs data may be partly reversed before 3Q CPI data next week.
9.10am:Broker rating changes
CIMIC raised to Hold vs Sell; target raised to $25.76 vs $23.20 — Deutsche Bank
Tatts raised to Outperform vs Underperform — Credit Suisse
LifeHealthcare raised to Buy vs Hold — Bell Potter
9.08am:Wall St could slump on Trump win: CS
US stocks could slump by as much as 15 per cent if Republican presidential hopeful Donald Trump wins the US election, according to research published today by Credit Suisse.
The investment bank modelled a scenario where Trump won the election and was able to fully implement his protectionist trade policies, including tariffs on imports from China and Mexico, withdrawing from the Trans-Pacific Partnership and renegotiating the North American Free Trade Agreement.
This could have the consequence of a global trade war, Credit Suisse said: “The operating environment for US corporates, and corporate earnings, could deteriorate significantly.”
Elizabeth Redman
8.53am:Rio trims shipments guidance
Rio Tinto has marginally revised down its iron ore shipments guidance for the full year despite reporting record quarterly output at its flagship Pilbara operations through the third quarter, writes Daniel Palmer.
In the three months to September 30, the mining giant said its Pilbara ore production rose 2 per cent against last year’s corresponding number to 83.2 million tonnes, but shipments fell 5 per cent 80.9 million tonnes owing to port and rail maintenance activities.
For the year to date, Pilbara iron ore production is up 7 per cent and shipments have risen 3 per cent.
8.48am:Mortgage war will hurt dividends: JPM
The big banks must rely less on deep discounting of mortgages and instead target customers with selective pricing as part of efforts to protect dividends, according to a major report.
JPMorgan bank analyst Scott Manning said the banks should address “poor discipline” in managing mortgage books — including “spending” recent loan repricing benefits on discounts — by offering rates that differed by 2 percentage points depending on customers’ risk and loan purpose.
He found Commonwealth Bank, Westpac, ANZ and National Australia Bank’s return on equity from mortgages had slid to 25 per cent from 40 per cent between 2010 and 2015 amid higher capital requirements and greater customer “churn”.
8.40am:Crown a ‘victim’ of gambling crackdown
Crown Resorts believes it has been caught up in a fresh drive by the Chinese authorities to pursue gaming “whales’’ who gamble abroad, with some believed to have racked up debts of as much as $30 million.
As the company’s board prepares to front shareholders at its annual general meeting in Perth today, it is understood that Crown believes the detention of 18 of its employees in China relates to the authorities pursuing the names and financial details of so-called whales as part of a crackdown on consumption and capital flows.
When Crown employee Jiang Ling was arrested on Thursday night the police confiscated her phone, laptop, tablet and several hard drives. It is likely the same devices would have been sought from the other Crown employees in detention.
There is speculation that some Chinese ‘whales’ have racked up significant debts at the VIP area of Crown’s Australian casinos. One who is said to have racked up a $30m debt has not returned to Australia.
Damon Kitney, Rowan Callick
7.10am: Australian market set to open higher
The Australian market is tipped to start higher following modest overnight gains on Wall Street.
At 6.45am (AEDT), the share price index was up 14 points at 5,420.
Locally, in economic news on Thursday, the Australian Bureau of Statistics releases labour force data for September.
The National Australia Bank’s business survey for the September quarter is due out.
In equities news, Rio Tinto is slated to release its third quarter operations review, while Fortescue Metals also has a quarterly update and Ten Network is expected to post full-year results.
Crown Resorts, Amcor, Southern Cross Media and Spotless hold their AGMs.
In Australia, the market yesterday closed higher, with the gaming sector the standout following the announcement of an $11.3 billion merger between giants Tabcorp and Tatts Group.
The benchmark S & P/ASX200 index was up 24.6 points, or 0.45 per cent, at 5,435.4 points, while the broader All Ordinaries index was up 26.4 points, or 0.48 per cent, to 5,518.4 points.
AAP
7.05am:Iron ore holds firm
The iron ore price has taken a breather after its recent strong run of gains, but is managing to hold steady as exports look lacklustre, writes Elizabeth Redman.
6.55am:Saudi oil shortage warning
Saudi Arabia’s energy minister says the world’s oil industry will soon emerge from a crippling two-year slump but warned of an impending shortage of petroleum that could send crude prices up sharply.
Dow Jones
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6.50am: Dollar back above US77c
The Australian dollar has continued its surge against the US dollar, reaching its highest level since April.
At 6.35am (AEDT), the local unit was trading at US77.18 cents, up from US76.76 cents yesterday.
Pro-risk currencies including the Australian dollar got a lift overnight following a jump in oil prices.
AAP
6.40am:Wall St rises as oil rallies
US stocks rose overnight as shares of energy companies climbed with the price of oil and earnings offered fresh signs of profitability at banks.
European stocks also gained as investors looked ahead to the European Central Bank meeting tomorrow.
Dow Jones
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Trump’s trade war tariff thaw
In a thawing of relations, the US will delay raising tariffs on Chinese goods after “substantial progress” in trade talks.
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Shares in pure-play coal miners pared early sharp losses as fears of China port ban eased throughout the session.
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