BusinessNow: Live coverage of financial markets and companies, plus analysis and opinion
Materials strength has led the local sharemarket to a firm rebound, as investors discount US concerns.
- ANZ to book loss on Asian sale
- Fortescue is at it again
- Qantas stages stunning recovery
- Blackstone out of race for Moly-Cop
- Stocks limp into October month end
- Iron ore hits six-month high
Welcome to the BusuinessNow blog for Monday. October 31. ANZ Bank is offloading its Asian operations, Qantas’ shares have staged a remarkable turnaround after plunging 9 per cent in early trade, and stocks look set to limp into the end of a shocking month.
7.19pm:European stocks dip at the open
Europe’s main stock fell at the start of trading on Monday, with London’s benchmark FTSE 100 index down 0.4 per cent at 6,969.67 points.
In the eurozone, Frankfurt’s DAX 30 slipped 0.4 per cent to 10,658.67 points and the Paris CAC 40 index lost 0.5 per cent to 4,525.60 compared with Friday’s close. AFP
7.01pm:10 reasons to bond with property
Elizabeth Moran
There is something about property that makes our hearts swell.
It can make a statement about who we are and what we value. One of its most redeeming features is that it’s tangible and can be beautiful, often invoking an emotional response.
It seems the must-have accessory these days isn’t the latest Giant road bike or Chanel handbag, rather it’s an investment property.
First-home buyers are commiserating over their inability to break into the market, while generation Xs and baby boomers borrow big to get ahead.
Historically, direct property investment has been rewarding.
But in recent times, there has been a string of commentators and regulators warning the market is overheating and it’s about time for a correction.
Some cities and country towns exposed to the resources sector — such as Perth — are already feeling the pinch, with prices dropping as companies pull out or downsize.
But what if I told you that you don’t have to borrow big or worry about falling prices to invest in property and can achieve good income of between 3 and 7 per cent a year? Property companies issue corporate bonds, which can be a great way to invest without the hassle and offer a lower concentration of risk than direct property investment.
The investment then becomes a much more rational assessment of the risks and returns available. Read more.
6.09pm:Are you a Buffett or a Rockefeller?
Don Stammer
If you want to ignite a discussion on investments, it’s easy: simply express a strong view on dividends.
Legendary investors have taken opposite positions on whether dividends are the shareholder’s friend or enemy.
John D Rockefeller, in his day the world’s richest investor, set out his preference this way: “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
At the opposite extreme is Warren Buffett of Berkshire Hathaway. Buffett accepts that “above all, dividend policy should always be clear, consistent and rational”. But he commits “(to) relish the dividends we receive from most of the stocks that Berkshire owns, but pay out nothing ourselves”.
In my view:
●Dividends will remain a large part of total returns to Australian investors.
●Our high dividend payouts will crimp the ability of companies to grow their earnings — but the concern is less valid than is usually claimed.
●When interest rates are extremely low dividends are more highly valued.
●Dividend yields can help investors identify when it’s a good time to invest in shares, and also assist their selection of which individual shares to hold.
●Investors should be alert to “dividend traps”. Read more.
5.36pm:Tokyo stocks unnerved by US
Tokyo’s benchmark index edged lower on Monday on the back of growing worries about US presidential candidate Hillary Clinton’s email controversy and ahead of a central bank policy announcement.
The Nikkei 225 index fell 0.12 per cent, or 21.39 points, to close at 17,425.02 while the Topix index of all first-section issues ticked up 0.04 per cent, or 0.61 points, to 1,393.02. AFP
5.12pm:Dollar becalmed before RBA
The Australian dollar kept to a narrow range Monday ahead of a central bank policy meeting Tuesday.
While markets are pricing virtually no chance of an interest rate cut, some economists argue that still-benign inflation gives the Reserve Bank of Australia justification to ease policy settings if it wants.
A survey of 10 economists by The Wall Street Journal showed seven expect the RBA to leave the official cash rate steady at a record-low 1.50 per cent, after cuts in May and August. Financial markets have priced in just a 5 per cent chance of an interest-rate cut.
At 5pm (AEDT), the Australian dollar was trading at US76.13 cents, from US75.90c on Friday.
Michael Blythe, chief economist at the Commonwealth Bank of Australia perhaps sums up the mood of the market best. He forecasts a cut to the cash rate target, but adds he has “no conviction” around the call.
Data earlier on bank lending from the RBA showed that investor borrowing for housing is still strong.
Economist at ANZ, David Gradwell said credit for housing investors is back to its strongest levels since August 2015.
“It provides further evidence, along with the recent pickup in house prices and auction results, that sentiment in the housing market remains positive,” he said. Dow Jones
4.24pm:Stocks surge well into the black
Daniel Palmer
The Australian sharemarket has shunned a negative market lead from the US and weakness across Asia to surge higher on the first trading day of the week.
Investors were encouraged by Qantas’ quarterly update as well as rising iron ore and copper prices, as they discounted the risks associated with a potential Donald Trump presidential victory in the US.
At the close, the benchmark S&P/ASX 200 index jumped 33.9 points, or 0.64 per cent, to 5,317.7, while the broader All Ordinaries index surged 31.5 points, or 0.59 per cent, to 5,402.4.
The action shows a significant swing from a flat open and represents a rebound from a soft result last week, when more than 2.5 per cent was stripped from the market as it underperformed its global peers.
Local macroeconomic news is set reclaim the spotlight this week as the Reserve Bank prepares to deliver its annual rates call on Tuesday, with traders betting on a hold.
“Incredibly six economists (including St George and CBA) are calling for a cut, which can only be described as a huge contrarian call given the 6 per cent probability priced into the interest rate markets,” IG chief market strategist Chris Weston said. Read more.
4.06pm:Ardent loses more ground
Ardent Leisure shares have continued to lose ground, extending a tumble that has wiped more than 22 per cent of the group’s market value since four people were killed in an accident at Dreamworld last Tuesday.
It follows the company abandoning plans to reopen the park over the weekend, while analysts continue to warn visitor numbers could plunge when the Gold Coast facility eventually reopens.
About 200 staffers have returned to work at Dreamworld, while the theme park remains closed to visitors indefinitely.
Mr Davidson said they had started a “cautious and staged approach” allowing staff to return. “They are working their way through administration tasks and maintenance and upkeep of the park,” Mr Davidson said.
Shares in Dreamworld’s parent, Ardent Leisure, closed 1 per cent lower at to $2.20 on Monday. Read more.
3.31pm:Clinton probe hits Asian shares
Asian shares were broadly lower on Monday, tracking US losses amid expectations of a tightening gap between the US presidential candidates in the run-up to the election next week.
The Nikkei Stock Average was down 0.3 per cent in mid-morning trade, hitting a two-day low. The Shanghai Composite Index slipped 0.5 per cent and Korea’s Kospi was off 0.6 per cent, while the Hang Seng Index changed direction to trade 0.1 per cent higher.
On Friday, the Federal Bureau of Investigation said it was re-examining how Democratic presidential candidate Hillary Clinton used her email.
The policies of Mrs Clinton are generally seen as more favorable to Asian markets than those of her Republican rival, Donald Trump.
According to recent polls, the lead Mrs Clinton held over Trump shrank following the news, down from double digits last week. Election day is November 8. US markets, buoyed initially by firmer third-quarter gross domestic product data, reversed from early gains to end lower.
“Politics is dominating everything at the moment,” said Chris Weston, chief market strategist at IG Markets. “The FBI investigation has seen a bit of money flowing into people backing a Trump win … [and] people are really concerned.”
In Japan, equity markets came under additional pressure on Monday as industrial-production and retail-sales data missed economists’ forecasts. Dow Jones.
3.05pm:Stocks push higher in afternoon trade
Australian stocks have shot higher in afternoon trade, taking the edge off a nasty monthly loss for October.
At 2:50pm AEDT the S&P/ASX 200 was 0.9 per cent higher for the day at 5328.4 points, which compares with a SPI 200 prediction of a 0.1 per cent fall this morning.
Could the market be suddenly expecting a rate cut tomorrow? No. Nobody expects the RBA to move tomorrow. The market is currently pricing in a 5.8 per cent chance of a 25 basis point cut, but perhaps today’s solid performance from equities hints investors are increasingly predicting an implicit easing bias?
With the market noticeably underperforming this month, it mightn’t take much for the index to push higher tomorrow.
The five biggest stocks on the index — CBA, BHP, WBC, RIO and ANZ — are all more-than 1 per cent higher for the day, while Telstra gains 0.9 per cent and NAB lifts 0.5 per cent.
Woolworths is on the outer, down 1.9 per cent and Macquarie is feeling the pain of a Credit Suisse rating downgrade to neutral from outperform — it’s lost 2.3 per cent.
The best performing stock on the index today is mineral company Orocobre, which is up 23.6 per cent following a healthy guidance update.
2.10pm:Term deposits back in vogue?
An interesting tweet from CommSec today shows Australians are heading back into the slow-and-steady option of term deposits, despite record-low interest rates making returns minimal.
Commsec says the answer is found in rising inflation numbers.
“The Bureau of Statistics data indicated that inflation had lifted from recent lows. Now the more-timely monthly inflation gauge from Melbourne Institute is showing the same. In fact the latest October data shows that the annual rate of inflation has equalled the fastest annual growth in seven months. Over the past five months, annualised growth has lifted to near 3 per cent. There are more signs globally of a lift in inflation. And domestically there are similar indications, together with a lift in economic activity.”
2.02pm:ASX lifts despite weak offshore markets
Australia’s S&P/ASX 200 is up 0.5 per cent to 5311 at lunchtime and is on track to end a three-day losing streak.
After underperforming as yield stocks suffered from rising bond yields last week, the local market is now outperforming.
ANZ leads the major banks with a 0.6 per cent rise after selling its “non-core” Asian operations.
Among the miners, Rio Tinto is up 1.2 per cent after spot iron ore rose 1.3 per cent, and Dalian futures are up 2.7 per cent today.
Slightly lower bond yields and Deutsche Bank’s comments that it’s too early to dump yield stocks are helping bond proxies.
In that group, Sydney Airport is up 2.1 per cent, Transurban is up 1.1 per cent and Scentre Group has gained 0.8 per cent.
Woolworths is down 2.8 per cent after failing to break $26 on good sales results last week.
Meanwhile, Macquarie has slipped 2.4 per cent since Credit Suisse cut its rating to Neutral.
Oil Search is down 2 per cent after WTI crude fell 2.1 per cent on Friday night and 0.5 per cent this morning.
1.50pm:Woolies’ demands ‘haphazard, unreasonable’
Supermarket giant Woolworths acted in a “slapdash, haphazard and unreasonable manner’’ in demanding payments from suppliers to make up a shortfall in its own profits, the Federal Court has heard.
Woolworths had conceived the scheme in November and did not bother to properly train staff who would be asked to approach suppliers for payments to meet its own profit targets, the court heard today.
The Australian Competition and Consumer Commission has launched Federal Court proceedings against Woolworths, alleging it engaged in unconscionable conduct in dealings with a large number of its supermarket suppliers.
Andrew White
1.36pm:ACCC puts insurers on notice
Australian insurance groups have been put on notice by the consumer watchdog for not properly notifying customers of reductions in their coverage, writes Daniel Palmer.
In its annual report into the private health insurance sector, the Australian Competition and Consumer Commission said Australians were regularly let down by their insurers through a shortage of information around coverage and benefits.
“With over 13 million people in Australia holding some form of private health insurance, the ACCC’s report reveals the challenges in finding out about, understanding and responding to insurer initiated changes to coverage and benefits,” ACCC deputy chair Delia Rickard said.
1.04pm:Woolies and Wesfarmers fight it out
Woolies remains in the sin bin today, while rival Wesfarmers is pushing higher following a week of nasty losses.
At just before 1pm AEDT the country’s two biggest retailers were fighting it out on the ASX, with Wesfarmers, the owner of Coles, pushing 1.4 per cent higher to $40.89 in a flat market.
Wesfarmers lost 8.5 per cent last week after poor sales numbers and the board’s mention of tough competition put investors into selling mode.
Meanwhile Woolworths is down 2.6 per cent today to $23.60 and hit a three-week low as investors see cracks in the company’s turnaround story.
The supermarket giant unveiled its first increase in food sales in almost two years last week and said it’s making progress on its turnaround strategy, but investors seem to be waiting for more proof.
The stock has lost 5 per cent in the last two sessions.
12.20pm:Future Fund moves away from property
The Future Fund has scaled back its exposure to property in the first quarter as it reported returns in line with its mandated target, writes Daniel Palmer.
For the three months to September 30, the sovereign wealth fund recorded a 1.5 per cent return, pushing its funds above $124 billion.
The breakdown of asset allocation at the end of the quarter showed a significant move away from property, with its share of assets sliding 0.5 percentage points to 6.5 per cent.
More to come
11.50am:October on the ASX: what went wrong?
October was supposed to be our glorious month of gains… what happened?
Over the last five years October has been, on average, the best performing month for Australian shares. But with just one session remaining, October 2016 has been the second-worst of this year.
So what went wrong? What has kept investors on the sidelines and when will spirits lift?
Markets Editor David Rogers and BusinessNow Blog Editor Chris Kohler will be answering all your questions in a live Q&A from 12pm. Head over there now to submit your questions.
11.30am:Investors cool on ANZ’s Asian selldown
Investors seem unenthusiastic about ANZ’s selldown of Asian wealth and retail operations to DBS.
Shares in the bank fell as much as 1.1 per cent to a four-week low of $27.32 when trading reopened, underperforming the other major banks.
ANZ was last down 0.5 per cent at $27.48.
11.23am:S&P’s property market warning to banks
Standard & Poor’s has trimmed the outlook on 25 Australian lenders to negative amid developing concerns around swelling house prices and high private sector debt, writes Daniel Palmer.
In a statement this morning, the ratings agency warned any further build-up in house prices from its base case of moderating growth for the next two years would raise the threat of a “sharp correction” for Australian real estate.
“Our base-case scenario remains that the growth in property prices and private sector debt will moderate and remain at relatively low levels in the next two years,” S&P said.
10.54am:ANZ to book loss on Asian units sale
ANZ has confirmed it’s selling its wealth management and retail banking operations in China, Singapore, Hong Kong, Indonesia and Taiwan to DBS.
The bank will book a $265 million net loss, including writedowns, on the sale and it will add 15-20 basis points to its CET1 capital ratio.
ANZ says Asia remains core to its strategy though it is now shifting its focus to institutional banking.
This deal isn’t big enough to have much impact on ANZ’s share price.
ANZ shares remain in trading halt.
More to come
10.55am:Fortescue is at it again
Fortescue Metals has gained another 2 per cent today, hitting a fresh more-than two-and-a-half-year high of $5.62.
The latest move follows another 1.5 per cent rise in the iron ore price to $63.96 but, as always, Fortescue is showing an exaggerated move.
Fortescue has now shot up more-than 200 per cent so far this year, which makes it the second-best* performing stock on the ASX 200 and a serious thorn in the side of analysts, which are largely sticking to their negative view.
Bloomberg data show just three ‘buy’ ratings on Fortescue, which include JP Morgan and Macquarie, while six analysts have the stock as ‘neutral’ and 12, including Goldman Sachs and Morgan Stanley, recommend selling.
* Only Whitehaven Coal’s 340 per cent year-to-date gain has bested Fortescue this year.
10.49am:Qantas jumps 5.4% after 9.2% fall
Qantas shares have risen as much as 5.4 per cent to $3.10 after earlier falling 9.2 per cent on a profit warning.
Share trading volume has been more than four times the 20-day moving average.
While there’s obviously strong support near the June low of $2.58, the bounce was a bit crazy.
Expect some consolidation below the recent support level at $3.08.
10.38am:Impressive intraday bounce for Qantas
After plummeting 9.2 per cent to a five-month low of $2.67 on its profit warning, Qantas shares are now up 3 per cent at $3.04.
This is a very impressive intraday bounce from the vicinity of major technical support at $2.58.
Qantas shares remain cheap versus global peers and short interest remains near a two-year high.
But it’s still range trading while it remains below the August 24 high at $3.58.
10.35am:Risk-averse investors push stocks lower
The Australian sharemarket has edged down in early deals as investors showed concern around the US election, writes Daniel Palmer.
At the 10.15am (AEDT) official market open, the benchmark S&P/ASX 200 index dipped 1 point, or 0.02 per cent, to 5,282.8, while the broader All Ordinaries index inched down 3.6 points, or 0.07 per cent, to 5,367.3.
The losses were driven by the big banks and energy giants, while the materials sector shone after iron ore prices struck a six-month high.
10.30am:CSR mops up Boral’s stake in Bricks JV
CSR has mopped up Boral’s 40 per cent stake in Boral CSR Bricks JV for $126.5m.
The deal was struck on a forward EBITDA multiple of 5.8-6.0 times.
CSR will fund the deal from existing cash and debt facilities.
Boral will recognise a $20m-$25m post-tax profit on the sale.
Boral shares hit a five-month low of $6.08 but have bounced to $6.29, down 0.9 per cent.
CSR shares were last up 0.3 per cent at $3.67.
10.26am:CS cuts Macquarie to neutral
A solid earnings beat from Macquarie is not enough to impress Credit Suisse at the moment, which has cut the financial giant to a ‘neutral’ recommendation from ‘outperform’ with an unchanged target price of $85.
Analysts led by James Ellis said the headline earnings surprise was largely driven by a tax boost.
“A strong headline beat, but compositionally softer earnings, with net revenues buoyed by principal investment gains and lower loan impairment offsets (margin and sales & trading income was softer),” Mr Ellis and his team said.
“With an unchanged $85 target price we downgrade our rating to neutral from outperform, reflecting valuations (the share price is approaching our target) and peaking earnings growth.”
10.20am:Qantas slumps after profit warning
Qantas shares fell as much as 9.1 per cent to a five-month low of $2.67 after the airline issued a profit warning.
Chart support from the June 28 low comes in at $2.58, which would mark a 13 per cent fall.
The $2.58 level is the 50 per cent Fibonacci retracement of the 2013-2016 rise.
Expect $2.58 to remain solid, particularly since a 13 per cent fall was the limit of the expected fall in profit.
QAN shares were last down 5.8 per cent at $2.76.
10.04am:Origin Q1 production jumps
Origin Energy has logged a 55 per cent jump in first quarter production, driven by increased production at its flagship Australia Pacific LNG project in Queensland, writes Daniel Palmer.
For the three months to September 30, the group’s production lifted 55 per cent compared to the corresponding quarter last year, to 74.2 PJe.
9.56am:Blackstone out of race for Moly-Cop
Private equity firm Blackstone is understood to be out of the contest to buy Arrium’s Moly-Cop, with the race for the $US1.1 billion division understood to be a three-way contest between US-based KPS Capital, equity investors for a float and another unnamed bidder.
Arrium’s voluntary administrator, KordaMentha, is meeting with lenders this morning to determine whether its $US1.1bn-plus division will be sold to a prospective buyer or head to the boards as an initial public offering.
Bridget Carter
9.52am:DBS to buy ANZ’s Asian retail, wealth ops
DBS says it is to buy ANZ Bank’s retail and wealth business in five Asian countries.
DBS made the announcement along with its quarterly results this morning.
This looks like good news for ANZ, depending on prices received for these operations.
ANZ remains in a trading halt pending an update on its Asian operations.
9.48am:Qantas forecasts profit fall
Qantas has trimmed its capacity forecasts as it expects a slump in profit.
The airline expects interim domestic capacity to be down 1 per cent whereas previously it was expected to be flat to down 1 per cent.
Meanwhile, interim underlying profit is expected to be $800m-$850m vs. $921m a year ago.
The airline also says international airfares will be lower versus the previous year.
Qantas shares have fallen 30 per cent from a high of $4.22 in April, and today’s news could see it test the June low at $2.48.
QAN last traded at $2.94.
9.38am:Crown lost 1% for every arrested employee
The worst is behind Crown, according to UBS, which says the share price is now largely factoring in the downside relating to a string of arrests of employees in China on suspicion of gambling crimes.
The broker has raised Crown to buy from neutral and lifted the 12-month price target to $13.10 from $12.30.
“Crown shares have declined by ~18 per cent since the disclosure that 18 staff have been detained in China,” UBS analysts Matt Ryan said.
“In our view, this event could potentially lead to lower VIP volumes going forward. Despite the current negative sentiment, we believe that Crown’s shares are now largely factoring in the risks that we know about. In addition, the outlook in Macau has stabilised in recent months.”
9.30am:Qantas Q1 revenue slides on lower airfares
Lower international airfares have pushed Qantas’ first quarter revenue lower, while its capacity is tipped to grow at a slower rate than expected through the first half, writes Daniel Palmer.
The developments are tipped to force earnings down 10 per cent through the first six months of the fiscal year.
For the three months to September 30, the airline booked a 3 per cent slide in sales amid lacklustre domestic demand and strong international competition.
9.25am:Broker rating changes
Ardent Leisure cut to Hold vs. Buy — Bell Potter
Aurizon cut to Hold vs. Buy — Shaw & Partners
Carsales raised to Hold vs. Sell Shaw & Partners
Crown Resorts raised to Buy vs. Neutral — UBS
AMP cut to Neutral vs. Outperform — Credit Suisse
Macquarie cut to Neutral vs. Outperform — Credit Suisse
Northern Star raised to Neutral vs. Sell — Goldman Sachs
Western Areas cut to Sell vs. Neutral — Goldman Sachs
Sandfire Resources raised to Neutral vs. Sell — Goldman Sachs
Wesfarmers raised to Overweight vs. Neutral — JP Morgan
9.15am:WTI crude opens down 0.8%
WTI crude has opened down 0.8 per cent at a four-week low of $US48.26.
That follows news that OPEC failed to reach agreement over the weekend on how to implement cutbacks.
OPEC members are due talk again before the official meeting on 30 November.
WTI fell 2.1 per cent on Friday, before the latest OPEC talks wrapped up.
The Australian energy sector is likely to underperform with WTI down 3 per cent since Friday’s close.
9.10am:Estia taps interim boss for CEO role
Estia Health has permanently hired interim boss Norah Barlow less than two months after the departure of Paul Gregersen as chief executive.
Mr Gregersen’s sudden exit after a period of turbulence for the once high-flying aged care group forced the company to turn to director Ms Barlow as a temporary replacement while a global search took place for a permanent chief executive.
Six weeks after that search began the company has opted to retain Ms Barlow in the top role, while also tapping Ian Thorley to serve as chief operating officer.
9.05am:ASX leaders and laggards
The local market dropped 2.7 per cent last week and is hovering worryingly close to the 200-day moving average of 5255 points, while the overall direction of the market was shaped by weakness from blue chips.
Wesfarmers had a horror week in which it lost 8.3 per cent, or $4.45 billion, to finish at $40.32. That nasty fall weighed on the market, but significant declines from high-yield bond proxies and banks pulled the index to its worst week since June.
High-yield defensive stocks continue to come under pressure as bond yields recover, which strips back equities’ competitive advantage as a source of income.
Sydney Airport lost 7.9 per cent last week, Transurban fell 5.4 per cent and Westfield gave up 3.8 per cent.
Ardent Leisure dominated the headlines after a horror accident at Dreamworld theme park cost four lives.
The stock fell 22.14 per cent over the five sessions as investors and analysts scrambled to find a way of translating the tragedy into some sort of outlook for the company.
The entire tourism industry is suffering as a result, with Qantas dropping 9.5 per cent last week, while Village Roadshow and Mantra saw sharp falls too.
Bega Cheese, meanwhile, lost a whopping 22.1 per cent after warning its move into infant formula wasn’t going as well as planned.
Chairman Barry Irvin bluntly used the words “oversupply”, “headwinds” and “very challenging business environment” at the company’s AGM last week, which tend to send investors sprinting for the exit.
On the positive side of the ledger, Aconex bounced back from the recent sell-off with a 10.5 per cent rise last week, while Fortescue continued to defy the nonbelievers with another 7.6 per cent weekly gain.
8.57am:ANZ in halt ahead of Asian update
ANZ shares have been placed in a trading halt pending an update on the review of its Asian operations, writes Daniel Palmer.
The local giant said it planned a 10.30am (AEDT) release “relating to the outcome of the bank’s review of its retail and wealth business in Asia”.
8.40am:Stocks limp into October month end
The last day of October looks unlikely to give investors anything to get excited about, other than maybe some Halloween lollies, with the local market set to end a shocking month on a weak note.
Over the last five years October has typically been the best month for Aussie shares with an average gain of 4.6 per cent… October 2016, however, has seen the ASX 200 drop 2.8 per cent and it stands as the second-worst month this year behind January.
Last week saw the local market fall 2.7 per cent — its worst week since June — to 5283.8 points, which is less than 30 points above the much-watched 200-day moving average. If that 5255 point level is decisively broken it signals serious selling.
Today the SPI 200 futures is pointing to a modest 0.1 per cent decline at the open.
Energy stocks will be worth keeping an eye on after WTI gave up 2.1 per cent in the most recent session and Brent lost 1.5 per cent. Elsewhere iron ore is up 1.5 per cent to $US63.96 and the Australian dollar has weakened, falling just below US76c.
8.35am:Mesoblast eyes Japan revenue stream
Stem cell therapy pioneer Mesoblast will try to shave years off approval times for several of its product candidates by using its late-stage clinical results in the US to get full or conditional approval in Japan, writes Rick Wallace.
The company will use Japan’s fast-tracked trial regimen, and potential partnerships with Japanese pharmaceutical companies, to try to craft a quick and low-cost path to new revenue streams in the world’s second-largest stand-alone pharmaceutical market.
Mesoblast believes Japan could become a substantial revenue stream.
8.20am:Bellamy’s, A2 face sales hole in China
Sharemarket high-flyers Bellamy’s Australia and A2 Milk could be facing a sales “hole’’ over the next year as growth from the crucial $US20 billion ($26bn) China infant formula market is threatened by crashing prices, writes Eli Greenblat.
Bloated stock levels, competition and regulatory risks covering the sale of formula and milk powders are combining to put a break on that sector’s growth
In a new report from Citi, which has slapped a sell recommendation on Bellamy’s and A2 Milk, analyst Sam Teeger has warned forecast sales growth for both companies could slow and remain volatile until January 2018 as a result of stricter Chinese infant formula rules.
8.05am:Chevron logs $6.6bn cost blowout
US oil giant Chevron has logged a $US5 billion ($6.6bn) cost blowout at its Wheatstone LNG project in Western Australia, writes Matt Chambers.
It brings the total cost overruns at the seven LNG mega-projects approved during the resources boom to $49bn.
The Wheatstone cost overruns, resulting from engineering underestimates and equipment delays, mean Woodside Petroleum faces up to $US650 million ($855m) in extra costs on the Wheatstone stake it paid $2.8bn for in 2015. Woodside has already been forced to write down the asset by $US868m.
7.10am:Australian market set to open flat
The Australian market looks set to open flat after Wall Street declined, as news the FBI will review more emails related to Democratic presidential candidate Hillary Clinton’s private email use spurred a sharp drop.
At 6.45am (AEDT), the futures market was down three points at 5,250, meaning the S & P/ASX200 could end a volatile October trading month in negative territory today.
The index lost 2.8 per cent during October, which is considered one of the traditionally strongest trading months of the year.
Locally, in economic news today, the Reserve Bank of Australia releases financial aggregates data, and TD Securities-Melbourne Institute’s monthly inflation gauge is due out.
No major equities news is expected.
In Australia, the market on Friday fell for the third straight day and ended its worst week in four months, thanks in part to a sharp drop in AMP shares. The benchmark S & P/ASX200 index lost 11.7 points, or 0.22 per cent, to 5,283.8 points.
The broader All Ordinaries index fell 7.5 points, or 0.14 per cent, to 5,370.9 points.
AAP
6.55am:Iron ore strikes six-month high
The iron ore price has jumped to a six-month high, seemingly defying gravity amid fresh analyst calls for the commodity to drop back below the $US50 level, writes Elizabeth Redman.
Iron ore rose 1.3 per cent to $US63.10 a tonne in the most recent session, according to The Steel Index, from $US62.30 the previous day.
6.45am:Dollar steady
The Australian dollar is virtually unchanged against its US counterpart, but has fallen against the euro and the yen.
At 6.35am (AEDT), the local unit was trading at US75.89 cents, hardly changed from US75.90 cents on Friday.
AAP
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