BusinessNow: Live coverage of financial markets and companies, plus analysis and opinion
The local market pared losses in afternoon trade but still ended in the red on miner weakness.
- Property crash unlikely: AMP
- Slaters faces $250m class action
- CSL suffers first strike on pay
- ASX slumps as resources weigh
- BHP under pressure
- Vocus directors head for the exit
Welcome to the BusinessNow blog for Wednesday, October 12. The local market is lower following a sell-off on Wall Street and a pullback in commodity prices overnight.
4.20pm:Stocks pare losses in late trade
The Australian sharemarket has finished in the red despite a significant paring of losses in afternoon trade as defensive sectors won back the interest of investors.
At the closing bell, the benchmark S&P/ASX 200 index weakened 5.2 points, or 0.09 per cent, to 5,474.6, while the broader All Ordinaries index lost 7 points, or 0.13 per cent, to 5,555.2.
The benchmark index had dipped as much as 0.8 per cent in morning trade as the resources sector turned laggard following a strong recent rally.
The big four banks helped to soften the losses in the mining and energy sectors, while CSL’s confirmation of a $500m share buyback in the coming 12 months pushed the stock 1 per cent higher to $106.54, despite the board suffering a ‘first strike’ on executive remuneration.
Daniel Palmer
3.28pm:Property crash unlikely: AMP
AMP Capital chief economist Shane Oliver remains confident a broad property market crash is “unlikely” despite his expectation apartment prices in Sydney and Melbourne will plunge as much as 20 per cent in around two years.
In his latest note on the housing market, Dr Oliver said people had long spruiked a property market crash and while there was an “increasing risk” given surging prices in Melbourne and Sydney and a potential glut of apartments, several reasons cast doubt on the argument.
Included among the reasons to question the chances of a more than 20 per cent collapse were the lack of a generalised oversupply, record low interest rates keeping repayments down and more robust lending standards as against countries hit by the GFC.
A crash would either rely on a recession pushing the jobless rate higher, a surge in interest rates raising mortgage stress or an oversupply that would require the construction boom to continue for several more years. All events are currently seen unlikely but price falls in the order of 5 per cent for the broader market are still tipped for 2018.
Daniel Palmer
2.42pm:Onthehouse takeover hurdle cleared
A Macquarie-led consortium has cleared the last major hurdle to winning control of ASX-listed property software group Onthehouse as the target’s shareholders overwhelmingly threw their support behind the proposal.
The $70 million takeover offer was first agreed in July after months of negotiations, with a vote today showing 99.71 per cent approval.
The action follows a drawn out sales process after the Macquarie-owned PIQ1 Pty Ltd and Macquarie Corporate upwardly revised a December offer of 75.5c a share to 85c in March.
Daniel Palmer
More to come
2.20pm:Australia to outpace peers in 2016: Moody’s
Australia’s economy is showing a higher level of resiliency than its commodity exporting peers, with growth outpacing fellow AAA-rated sovereigns such as Canada, Norway and New Zealand and leaving the country well-placed despite rising government and household debt.
The latest report into the local economy by ratings agency Moody’s Investors Service noted the Australian economy had held up well during a period of distress for commodity prices, although a warning was issued on the nation’s reliance on external financing as debt levels swell.
“Australia will be the fastest growing AAA-rated commodity exporting economy in 2016 – a reflection of its resilience to shocks, as export volumes have increased strongly despite falls in metals prices, and the services sector has benefited from a weaker domestic currency,” Moody’s analysts headed by Marie Diron said.
Daniel Palmer
1.50pm:Macmahon shares slide 4%
Shares in beleaguered mining services company Macmahon have tumbled 4 per cent after it informed investors of plans to exit Nigeria and as it struggled to contain red ink in relation to Newcrest’s Telfer project in Western Australia.
The company flagged a potential plan to shift out of Nigeria in August due to “heightened security concerns”, with the decision to pull the plug coming more than a year ahead of the contracted schedule.
Daniel Palmer
1.15pm:Dollar dented by greenback rally
Rising expectations of a US rate hike, plus falling oil prices, are keeping the Australian dollar near the bottom end of its recent trading range.
At noon (AEDT) on Wednesday, the local unit was trading at US75.58c, nearly unchanged from US75.57c on Tuesday.
OANDA Australia and Asia Pacific senior market analyst Jeffrey Halley said the Aussie was being dented by rising expectations of a US rate hike before the end of 2016.
12.39pm:Broker rating changes
NAB cut to Neutral vs Buy - Citi
Vocus raised to Buy vs Neutral - Citi
12.20pm:Property in super: live Q&A on now
What do the new changes to superannuation rules mean for property? Are property investors untouched or tangled in the latest reforms? Join Wealth Editor James Kirby until 12.45pm AEDT to find answers to the torrent of questions facing all investors.
Go to the live Q&A to submit your questions and read James’s answers
11.55am:Slater & Gordon faces $250m class action
Maurice Blackburn has today filed a class action against stressed law firm Slater and Gordon in a bid to recoup losses for shareholders from a share price collapse tied to a calamitous UK expansion.
Confirmation of the $250 million-plus class action, among the largest ever shareholder class actions in Australia, forced beaten-down Slater and Gordon shares 6 per cent lower in morning trade.
The previously flagged class action relates to any investor who purchased Slater and Gordon shares between March 30, 2015 and February 24, 2016, a period in which around $2 billion was stripped from the law firm’s valuation.
Daniel Palmer
11.40am:Consumer sentiment on the rise
Consumer sentiment has improved marginally in October, extending a stable run over the past six months despite mixed signals on the crucial housing market.
The Westpac Melbourne Institute Index of Consumer Sentiment revealed a modest 1.1 per cent improvement to 102.4 in October, up from 101.4 in September.
“Over the last six months the index has held within a relatively tight 4 per cent range with five of the six readings hovering just above 100 indicating that optimists have remained slightly in the ascendancy,” Westpac chief economist Bill Evans said.
Daniel Palmer
11.28am:Inghams shares priced at $3.57 to $4.14
Inghams Enterprises has priced its shares at a range between $3.57 and $4.14, according to the company’s prospectus lodged today.
The company’s owners, TPG Capital, will raise between $767m and $1.12bn.
Overall, the group’s market value will be between $1.33bn and $1.53bn.
Bridget Carter
11.12am:ASIC flags life insurance concerns
The corporate watchdog has found “significant shortcomings” in the way life insurers deal with claims, especially those for total and permanent disability, following a review of the scandal-ridden industry.
One insurer refused 37 per cent of total and permanent disability (TPD) claims, the Australian Securities and Investments Commission said in a report released today.
Separately, the regulator said that a wide-ranging and complex investigation into key life insurance player Comminsure, an arm of the CBA, was “anticipated to continue for some time”.
The investigation was sparked by media reports that Comminsure was wrongly denying claims, often using outdated medical definitions.
“The investigation remains a priority for ASIC and we will provide public updates where appropriate as the matter progresses,” ASIC said.
Ben Butler
10.50am:CSL suffers first strike on pay
Shareholders have lodged a protest vote against CSL’s generous director remuneration, which has seen chief executive Paul Perreault’s pay packet surge to nearly $11 million -- a fifth higher than his predecessor Brian McNamee, who left the company in 2013 after a 20-year-long stint with the Australian vaccines manufacturer.
It was the first strike recorded against the company, which is Australia’s largest biotechnology group, with shareholders registering their displeasure at Mr Perreault’s salary doubling over the last three years.
CSL chairman John Shine said he was disappointed that “just over” 25 per cent of shareholder votes went against the remuneration report and pledged to get the salary model right before next year’s annual general meeting.
Michael Roddan
10.35am:ASX slumps after Wall St sell-off
The Australian sharemarket has slumped in early deals after a heavy sell-off on Wall Street and a sharp pullback in commodity prices overnight.
At the 10.15am (AEDT) official market open, the benchmark S&P/ASX 200 index weakened 33.6 points, or 0.61 per cent, to 5,446.2, while the broader All Ordinaries index lost 33.7 points, or 0.61 per cent, to 5,528.5.
Resources led the way down, with deep red numbers commonplace in both the materials and energy sectors in a reversal of recent trends.
In energy, Santos slid 2 per cent to $3.86, Origin Energy softened 1.2 per cent to $5.72, while Woodside eased 1.3 per cent to $29.645.
In materials, BHP Billiton fell 2.1 per cent away from an 11-month high of $23.29, Rio Tinto skidded 2.2 per cent to $52.01 and Fortescue gave back 1.8 per cent to $5.085.
10.22am:Magellan finally sees sense
Magellan Financial Group has finally seen the light and withdrawn an extraordinary motion from tomorrow’s annual general meeting which would have given chief Hamish Douglass’ family up to $10 million on his death or illness.
This form of self-insurance from shareholders must be close to a first in corporate Australia and must also make you wonder what is happening in the minds of the fund’s managers.
All its talk about value investing seems to have gone when it applies to Douglass’ own pay packet as shown by this year’s move to increase his pay to 1.5 per cent of operating profits.
The last guy to pull that stunt was Wal King during his Leighton reign.
John Durie
10.08am:BHP under pressure
BHP Billiton looks set to give up a hefty 2.5 per cent today, according to the miner’s ADRs, following UBS’ move to cut the mining giant to ‘neutral’ from ‘buy’.
Analysts and investors are starting to worry they’ve been having too much fun with BHP and the music is about to stop.
BHP shares have shot up 19 per cent in less than a month, with rising commodity prices and an increasing appetite for risk pushing resources stocks to the top of the pile as rising bond yields put pressure on Australian yield stocks.
Some party poopers are saying this year’s strong rise in commodity prices leaves the sector open to returning supply, which would be a problem.
“With commodity prices since the beginning of 2016 up in some cases greater than 100 per cent we see a heightened risk of mothballed capacity restarting, which could result in mean reversion of the commodity price,” UBS said as it cut BHP to ‘neutral’ from ‘buy’.
“With this in mind we have moved to review our stock calls, lowering our ratings on BHP Billiton and South32 to neutral from buy and our rating on Whitehaven Coal from neutral to sell.”
9.42am:Vocus directors exit after coup attempt
Telecommunications group Vocus has stunned the market with the sudden resignations of founder James Spenceley and fellow board member Tony Grist amid a fallout over the direction of the business.
In a frank statement on the surprise exits, Vocus said non-executive director Tony Grist had proposed a chief executive succession plan that would have seen current chief executive Geoff Horth forced out in early 2017.
Mr Spenceley, who led Vocus until the merger with the Mr Horth-led M2, backed the succession idea, but the two board members met significant resistance from within the board.
“The resignations follow a difference of opinion between the departing directors and the board on the future leadership of the company,” the company said.
Daniel Palmer
9.30am:Stocks in for a rough session
Aussie shares are staring down the barrel of a rough day following a shocking sell-off on Wall Street as investors fret over inflation figures and poor earnings.
The SPI 200 is pointing to a 0.8 per cent fall this morning, while fair value suggests a 0.7 per cent slide is more likely following a 1.2 drop on the S&P500 — the biggest fall in a month.
But local investors are unlikely to make any massive moves today, as all eyes fall to the FOMC minutes, set to be released early tomorrow morning (Australian time).
9.12am:Broker rating changes
BHP Billiton cut to Neutral vs Buy — UBS
OZ Minerals raised to Neutral vs Sell — UBS
South32 cut to Neutral vs Buy — BNP Paribas
Whitehaven Coal cut to Sell vs Neutral — UBS
Money3 initiated at Buy — Bell Potter
Qube Holdings initiated at Overweight — JPM
SCA Property raised to Overweight vs Neutral — JPM
South32 cut to Neutral — BNP Paribas
Tabcorp raised to Outperform vs Neutral — Credit Suisse
Sandfire Resources raised to Buy vs Hold — Shaw & Partners
8.46am:Catherine Livingstone to chair CBA
Catherine Livingstone is set to replace David Turner as chair of Commonwealth Bank.
Ms Livingstone, who currently serves as president of the Business Council of Australia, will assume the new role from December.
The ascension comes after The Australian flagged her as Mr Turner’s likely replacement in March upon an initial appointment to the banking giant’s board.
Ms Livingstone, who has also drawn the spotlight while in high-profile roles as chair of Telstra and chief executive of Cochlear, will step down from her position at the head of prominent lobby group the BCA in November.
Daniel Palmer
7.10am:Stocks tipped to open sharply lower
The Australian market looks set to slump at the open after a sell-off on Wall Street, where investors were disappointed with the start of the US earnings season.
At 6.45am (AEDT), the share price index was down 44 points at 5,421.
Locally, in economic news today, the Australian Bureau of Statistics releases June quarter building and construction data.
The Westpac/Melbourne Institute Survey of Consumer Sentiment is due out.
In equities news, CSL holds its annual general meeting in Melbourne.
In Australia, the market yesterday closed broadly steady as cautious investors awaited the next trigger to determine the direction of the market. The benchmark S&P/ASX200 index gained 4.4 points, or 0.08 per cent, to close at 5,479.8 points.
The broader All Ordinaries index rose 6.7 points, or 0.12 per cent, to 5,562.2 points.
AAP
7.00am:Iron ore tops $US56
The iron ore price has jumped for the second straight day as traders come back to their desks after last week’s public holiday in China, Elizabeth Redman writes.
Iron ore added 1.3 per cent to $US56.50 overnight, according to The Steel Index, from $US55.80 the previous day.
6.50am:Dollar continues slide against greenback
The Australian dollar has fallen against its US counterpart, which has lifted to its highest level against a basket of currencies since March.
At 6.35am (AEDT), the local unit was trading at US75.40 cents, down from US75.59 cents yesterday.
AAP
6.40am:Wall St slides on earnings
US stocks fell overnight as disappointing earnings results dampened investor hopes for a rebound in corporate performance.
European markets also closed lower, although Britain’s FTSE 100 reached a record intraday high as the weak pound boosted sentiment around exporters.
Dow Jones
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