BusinessNow: Live coverage of financial markets and companies, plus analysis and opinion
The local market added $21 billion today in a pre-election rally.
- ASX up on Clinton win hopes
- Court halts Exxon-InterOil deal
- UGL board backs takeover
- Aussie spikes as FBI clears Clinton
- Westpac posts flat FY earnings
Welcome to the BusinessNow blog for Monday, November 7. Westpac has broadly met expectations with its full-year results, the Aussie dollar and ASX have jumped as the FBI closed its investigation into Hillary Clinton, and Domino’s is among companies holding AGMs.
8.22pm: UK bank hack hits 20,000
Tesco Bank is temporarily stopping online transactions after about 20,000 customers had money removed from their accounts after an attack by fraudsters over the weekend.
The British bank, wholly owned by supermarket chain Tesco, said it had discovered there had been “significant” fraudulent criminal activity on customers’ current accounts late on Saturday and early Sunday. Benny Higgins, the bank’s chief executive, said 40,000 of current accounts had experienced suspicious transactions and about half had money taken from their account.
He said they had now stopped online transactions until they got the situation under control, although customers could still use their cards in shops and to withdraw money from ATM machines.
“Any financial loss that results from this fraudulent activity will be borne by the bank,” he told BBC radio. “Customers are not at financial risk.” He said the cost to the bank, which says it has nearly eight million customer accounts, would be a “big number but not a huge number”.
“It’s 20,000 customers, we think it would it be relatively small amounts that have come out but we’re still working on that,” he said. Reuters
7.57pm:What’s bridling Aussie innovation?
Damon Kitney
A lack of collaboration between academia and business is one of the key issues holding back the nation’s innovation, science and research system, according to Innovation and Science Australia chairman Bill Ferris.
Ahead of the public release of ISA’s audit of Australia’s existing innovation systems that will be provided to federal government next month, Mr Ferris revealed the 20 findings in the audit would focus on three circles of activity: knowledge creation, knowledge transfer and commercialisation.
“Coming up with ideas and new research, we rank really high in world terms. In the creation part of it all, it is a very good story. On the transfer, we are pretty weak in terms of international metrics on that. And in terms of actual outcomes, be they marketplace driven or otherwise, the answer is we are only OK,’’ Mr Ferris told The Australian ahead of the annual Creative Innovation conference starting in Melbourne on Tuesday.
“Where do I finish up? I’d say at a glass half full. And on the preliminary findings on why we are not doing better on transfer and have the premature licensing and sale of intellectual property to others offshore and not developing it locally, much of it relates to lack of collaboration.’’ Read more.
7.32pm:European stocks rally in opening deals
European stocks leapt in opening deals on Monday after the FBI said Hillary Clinton would not face charges over her use of a private email server.
In initial deals, London’s benchmark FTSE 100 index rallied 1.6 per cent tot 6,798.42 points, on the eve of the US presidential election.
In the eurozone, Frankfurt’s DAX 30 won 1.5 per cent to 10,410.56 points and the Paris CAC 40 index won 1.4 per cent to 4,440.11 compared with Friday’s close. AFP
7.19pm:Japan office raided after ‘overwork’ death
Japanese authorities raided the country’s top advertising agency Dentsu on Monday as they launched a criminal investigation into the suicide of a 24-year-old employee due to overwork on suspicion of systematic illegal overtime at the company.
Monday’s investigation follows the government’s recognition in late September that Matsuri Takahashi died of “karoshi,” or death from overwork. Chief Cabinet Secretary Yoshihide Suga said investigators from the Health, Labor and Welfare Ministry raided Dentsu’s Tokyo headquarters and three branch offices on suspicion the company broke the law by forcing Takahashi to engage in chronic overwork.
Investigators suspect widespread illegal overtime at the company. In Japan, labour officials are allowed to conduct criminal investigations and hand over cases to prosecutors for possible indictments.
Karoshi causes hundreds of deaths and illnesses every year in Japan despite efforts to curb overwork.
Labor officials found Takahashi’s overtime pushed past 100 hours a month, way over 80 hours, a threshold for karoshi. But she was reportedly asked to report overtime only below the company’s own 70-hour monthly limit at the time. On top of the 40-hour work week the labour standards law sets for most workers, as an exception that serves as a loophole companies can establish voluntary ceilings for overtime, making the law toothless.
At Dentsu and many other companies, much overtime routinely goes unreported, labor officials say.
Dentsu president Tadashi Ishii said the company will cooperate in the investigation. The company has acknowledged at least two other karoshi cases since the 1990s and says it is trying to prevent overwork, going so far as to turn off lights in its headquarters after 10 p.m.
Suga told reporters the government also will seek to reduce overtime. Under Prime Minister Shinzo Abe’s “womenomics” initiatives, the government is urging men to help out more at home, while encouraging businesses to create more job opportunities for women. The strategy seems to be making little headway, however.
“Nobody should lose their precious lives from overwork,” Suga said. “We plan to push for reforms from the workers’ point of view.” AP
6.30pm:HSBC swings to quarterly loss
HSBC Holdings has swung to a third-quarter loss, weighed by the impact from the sale of its Brazilian business and an unfavorable foreign-exchange environment.
On Monday, the UK banking giant said it swung to a third-quarter loss of $US204 million ($265.6m) from a year-earlier profit of $US5.23 billion ($6.81bn), due in part to a $US1.74bn ($2.27bn) loss from the disposal of its operations in Brazil. HSBC completed the sale of its Brazil business to Banco Bradesco SA in July.
On a pretax basis, the bank’s profit plunged 86 per cent to $US843m from $US6.1bn. Its adjusted revenue rose 2 per cent to $US12.79bn, due in part to higher contributions from its fixed income businesses, as the bank gained market share in Europe, HSBC said.
The weak results come against the backdrop of concerns about its Asia strategy and questions about the effects of the UK vote to leave the European Union. On Thursday, a UK court ruled that Prime Minister Theresa May can’t start the exit process without approval from parliament. Read more.
5.55pm:Tokyo stocks add 1.6pc
Tokyo stocks rose on Monday on news that market-favourite Hillary Clinton would not face criminal charges over her use of a private email server, easing worries over her US presidential bid.
“’President Trump risk’ has receded, and market sentiment is getting back to normal,” said Toshiyuki Kanayama, a Tokyo-based senior market analyst at Monex Inc.
“With expectations of increased support for her (Clinton), it’ll be easier for investors to buy stocks,” he told Bloomberg News.
The benchmark Nikkei 225 index gained 1.61 per cent, or 271.85 points, to finish at 17,177.21 while the broader Topix index was up 1.17 per cent, or 15.76 points, at 1,362.80. AFP
5.30pm:Dollar holds steady, US in focus
The Australian dollar is flat against its US counterpart as investors nervously await the outcome of the US Presidential election, with Democrats candidate Hillary Clinton now expected to win by a slight margin.
At 5pm (AEDT) on Monday, the local unit was trading at US76.76 cents, barely higher from US76.69c on Friday.
JPMorgan fixed income and foreign exchange analyst Sally Auld said the Aussie spiked at US77.05c just before 8am (AEDT) after the FBI announced it had again cleared Mrs Clinton following its latest email investigation, boosting her prospects of a win.
“That gave risk markets a bit of a boost and sort of helped the Aussie temporarily but the gains were pretty short lived,” Ms Auld said. CommSec market analyst Steven Daghlian said the Aussie dollar and the share market got a boost as the chances of a Clinton victory improved on the back of the FBI news.
In the next few days, the key for the Aussie will be Chinese trade data for October, which will be released early on Tuesday afternoon (AEDT), followed by the long-awaited outcome of the US election. AAP
5.15pm:Hopes stir for rare earths
Barry Fitzgerald
Could it be that there is finally some hope for rare earths producer Lynas Corporation (LYC) and the handful of ASX- listed juniors that have hopes of one day becoming producers themselves?
It seems so, particularly if their production — as in the case of Lynas and as would be the case for the hopefuls — is weighted towards the rare earths of neodymium, praseodymium and dysprosium used in permanent magnets.
Industry consultant and London-based forecaster Roskill’s latest market outlook for rare earths says that neodymium-iron-boron (NdFeB) magnet demand is forecast to grow strongly until 2021. “The traditional consumer electronics and automotive sectors account for the majority of NdFeB demand, but these magnets will experience strong growth from the emerging green technologies of wind turbines and new energy vehicles (NEVs),’’ Roskill states.
It is expecting that between 2016 and 2021, global NdFeB magnet production will grow by 4-5 per cent annually as the decarbonising world goes crazy for NEV’s (electric, hybrids and so on) and wind power. Read more.
4.29pm:ASX rebounds from Friday’s flop
The Australian sharemarket has broken a four-day losing run, surging over 1 per cent after a well-received earnings report from Westpac and as positive sentiment swelled around the chances of Hillary Clinton in the US presidential race, Daniel Palmer writes.
At the close, the benchmark S&P/ASX 200 index surged 70 points, or 1.35 per cent, to a four-month low of 5,250.8, while the broader All Ordinaries index bounced 67.8 points, or 1.29 per cent, to 5,330.9.
The strong session snubbed a weak lead from US trade on Friday night as the S&P 500 stretched its losing run to nine days, the longest winless run in 35 years.
The year’s largest IPO captured attention today, with Inghams joining the ASX.
After an inauspicious open, the poultry giant made its mark on investors through the session, winning 2.2 per cent by the close as it was aided by the strength in the broader market.
The finance sector also caught the eye of traders after a steady earnings report from Westpac.
Flat profit for the full year represented a fairly strong result through a mixed earnings season for the major banks and was enough to push the company’s shares up 2.7 per cent by the close.
Commonwealth Bank and NAB were swept along in the Westpac euphoria, jumping 2.2 and 1.5 per cent, respectively, although ANZ failed to flatter with a modest 0.3 per cent uptick.
The materials sector performed strongly after iron ore prices struck another six-month high.
Fortescue leapt 3.4 per cent to $5.47, Rio Tinto gained 1.1 per cent to $53.92 and sector heavyweight BHP rallied 1.9 per cent to $22.70.
3.48pm:Domino’s hikes FY guidance
Domino’s Pizza has made a substantial upgrade to its full-year profit guidance at its annual general meeting today.
The shares briefly stopped trading while the news was being absorbed by the market and resumed 5.6 per cent higher at $70 - a new three-week high.
The board told investors it will deliver earnings growth of 30 per cent in fiscal 2017, up from the 25 per cent previously expected.
The shares rallied despite the fact Domino’s remains one of Australia’s most expensive stocks, with a forward price to earnings ratio of 48 times.
CEO Don Meij said the company’s strategy is delivering higher sales across its international network.
“In addition to growth in existing stores, we are opening new stores in all regions and expect store openings to be at the higher end of our guidance of between 175 and 195 stores,” Mr Meij said.
“An increasing number of our customers’ orders are being placed through our websites, in all of our regions.
“This financial year we are seeing very strong digital growth, with digital sales growth outpacing offline growth, with year-on-year growth in digital sales of +36.9 per cent in Australia/New Zealand, +38.1 per cent in Europe, and +24 per cent in Japan.”
3.23pm:Australia’s prosperity ‘on the wane’
Five countries sit above Australia in the latest world prosperity rankings, according to a London-based think tank, while the USA sits surprisingly low.
2.46pm:Tokyo stocks track higher
Tokyo stocks were higher at midday (local time), after the FBI said market-favourite Hillary Clinton would not face criminal charges over her use of a private email server, easing worries over her US presidential bid.
“’President Trump risk’ has receded, and market sentiment is getting back to normal,” said Toshiyuki Kanayama, a Tokyo-based senior market analyst at Monex.
Tokyo’s benchmark Nikkei 225 index gained 1.36 per cent, or 230.04 points, to 17,135.40 by the midday break while the broader Topix index was up 1.09 per cent, or 14.64 points, at 1,361.68.
The dollar soared to ¥104.21 from ¥103.04 in New York on Friday, as investors pushed into higher risk assets. The yen tends to be bought as a safe bet in times of uncertainty.
“US political uncertainty ahead of Tuesday’s presidential elections will continue to generate dollar volatility as most swing-state polls suggest the election outcome will be a close call,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney.
Meanwhile, BoJ minutes showed many board members agreed the central bank had plenty of options for further easing. AFP
2.23pm:Click Energy hires Macquarie to help IPO
By Bridget Carter
Online energy retailer Click Energy has hired Macquarie Capital as part of its preparations to float on the Australian Securities Exchange in 2017.
The company is expected to have a market value between $100m and $500m, generating about $200m of revenue annually.
Across Australia, the group has about 1 per cent of the electricity market, operating in Queensland, Victoria, NSW and South Australia. The company also provides gas in Victoria and is entering the NSW gas market.
Behind the business is former Origin Energy executive Dominic Drenen, and it is one that prides itself on providing a more transparent view of pricing to its customers.
A global non-deal road-show will be launched on November 11 in Hong Kong, London, Copenhagen, Zurich, New Zealand and Australia.
Its listing plans come at a time that the industry faces a period of disruption and the company has strongly invested in back end technology, helping to grow its market share at 25 per cent annually to almost 150,000 clients.
Click is currently owned by a consortium of international private equity and venture capital partners, including LA based Angeleno Group, Zurich based Robecco Sam, and CleanTech Ventures.
2.14pm:Click Energy hires Macquarie ahead of IPO
Click Energy has hired Macquarie Capital as part of its preparations to float on the Australian Securities Exchange.
More to come
2.09pm: ASX risking a pre-election rally
Australian stocks continue to flex their muscles today after a shocking run saw the local index close within reach of a four-month low on Friday.
It’s interesting to see investors diving into equities ahead of the biggest piece of news of the year — the US election — but with trading volumes 7 per cent below the daily average it could be traders recalibrating their positions rather than investors making decisions.
At just before 2pm AEDT the S&P/ASX 200 was 1.2 per cent higher for the day at 5243.8 points — slightly off the day’s high but still a chance to record its best session in four months.
Banks are driving gains, with investors applauding Westpac’s full-year profit result, which held broadly flat earnings and an unchanged dividend.
Westpac is up 2.9 per cent to $30.57, CBA has gained 2.1 per cent to $72.45, NAB is up 1.9 per cent to $26.36, Macquarie is 2.7 per cent higher for the day at $79.20 and ANZ is lagging behind with a 0.4 per cent rise to $27.
BHP Billiton was 1.8 per cent higher to $22.67, which compares with a 0.5 per cent fall predicted by the company’s American Depository Receipts, while Rio Tinto was 1.2 per cent in the black and Woodside Petroleum gained 0.9 per cent.
Gold stocks are wallowing today as positive news for the Clinton campaign hurt the price of the yellow metal. Evolution, Northern Star, Resolute, St Barbara and Regis are the worst performing stocks on the 200 today — down between 3.4 per cent and 5.1 per cent.
Mayne Pharma shot higher as bargain hunters swarm the stock following Friday’s 15 per cent selloff, the healthcare company is 7.1 per cent higher for the day.
2.00pm:Westpac readies for Trump triumph
Westpac has readied for a potential Donald Trump triumph in the US election by taking “conservative” positions in financial markets ahead of ongoing volatility, according to chief Brian Hartzer, writes Michael Bennet.
Less than a week after Westpac’s analysts warned a Trump win “would have larger long-term global ramifications than ‘Brexit’”, Mr Hartzer today said the bank had prepared for Tuesday’s vote to shield against market sell-offs.
1.55pm:ASX 200 surges 1.3%, consolidation due
Australia’s S&P/ASX 200 has surged 1.3 per cent to a three-day high of 5250.4 and is on track for its biggest one-day rise in four months.
Additional strength this afternoon comes as Japan’s Nikkei 225 has also gained 1.3 per cent.
US S&P 500 futures are 1.3 per cent higher, while USD/JPY rose as much as 1.3 per cent after the FBI closed its investigation into Hillary Clinton’s emails.
But the Mexican peso has consolidated this afternoon after rising 2.5 per cent in early trading.
Barring fresh developments, the S&P/ASX 200 might consolidate before the US election.
Expect resistance from the 200-day moving average at 5266.
The index was last up 1.2 per cent at 5243.
1.40pm:The great SMSF property lie
One of Australia’s greatest superannuation scare campaigns has proved to be a fizzer, writes Robert Gottliebsen.
“The so called ‘establishment’ — the large superannuation funds, top financial experts and big slabs of the media — forecast that self-managed funds would gorge on the ability to borrow big sums and invest in houses. Their predictions went on to assert that as a result, this ability to invest in houses would cause a housing bubble that risked destroying the main purpose of superannuation.
My suspicion was that it was orchestrated by some of the big superannuation funds to discredit self-managed funds and get back some of the market share they had lost because of their own mistakes.
But I could not prove it...”
1.24pm:Coopers FY profit slides on writedown
Australia’s biggest locally owner brewer, South Australia’s Coopers Brewery, has booked its 23rd year of continuous volume growth despite lean times for the brewing industry that have seen per capita consumption collapse to lows not seen since World War II.
However, tougher trading conditions in the US in the DIY home-brew sector have punctured the value of its American brewing business, Mr Beer, with the offshore operation also losing some key accounts which triggered a $7.5 million writedown in the Coopers accounts.
It meant for fiscal 2016 Coopers actually recorded a 16.3 per cent slide in full-year net profit, the first time in a number of years that earnings have gone backwards for the nation’s third largest brewer.
Eli Greenblat
1.20pm:Record price for Rio diamonds
Rio Tinto said an annual tender of diamonds from its Argyle mine, in Western Australia, received the highest average price per carat since the tender began in 1984.
The Anglo-Australian miner didn’t disclose the price.
Rio Tinto’s 2016 tender included 63 rare pink, red and violet diamonds. It said the most precious stone was a 2.83-carat violet diamond, which was sold to US-based L.J. West Diamonds. Dow Jones
12.20pm:Inghams struggles for direction on debut
Inghams Group is struggling for direction upon its debut on the local bourse, indicating traders feel comfortable the pricing on the deal was around fair value, writes Daniel Palmer.
The muted trading action comes after private equity-owned group raised close to $600 million from investors at $3.15 a share.
The offer delivered a market capitalisation just shy of $1.2 billion, with a late repricing of the IPO taking it well away from earlier expectations for a $1.5bn valuation.
12.01pm:Signs of improvement in jobs market
The Australian labour market is showing signs of improvement, with job advertisements rising strongly through October, writes Daniel Palmer.
The ANZ job advertisements series showed a seasonally adjusted 1 per cent lift in the month, bringing the year-on-year gain to 5.2 per cent.
October’s strong rise came after a flat reading in September, while the annual rate of growth ticked up from 3.8 per cent in the prior month.
11.49am:Healthcare stocks in fine fettle
Mayne Pharma is bouncing back strongly today following a savage 15 per cent selloff on Friday.
Investors panicked following a Bloomberg report that said a two-year US Department of Justice investigation of suspected price collusion in the sector had broadened to more than a dozen companies and over two dozen drugs — one of the companies implicated was Mayne Pharma and its shares were hammered as a result.
Those concerns appear to have been overblown in the short-term, however, with the stock rebounding 6.9 per cent higher this morning to be the best performing stock on the index.
Investors may be encouraged to use the selloff as an entry point, with Credit Suisse naming Mayne Pharma as one of its ‘future market darlings’.
Staying with the healthcare space — Sonic shares were 3.9 per cent higher at 11:30am AEDT after jumping as much as 5.5 per cent earlier in the session.
Investors and analysts are cheering the company’s decision to buy a German laboratory group for €120 million.
Elsewhere the broader S&P/ASX 200 is a healthy 0.9 per cent higher for the day, which compares with a SPI 200 estimate of a hefty fall.
Big banks are pushing the index higher, with Westpac up 2.6 per cent, CBA gaining 1.7 per cent, ANZ adding 0.7 per cent and NAB lifting 1.7 per cent.
BHP Billiton is 1.8 per cent higher for the day, Rio Tinto is 1.5 per cent in the black and Woodside Petroleum is 0.9 per cent higher this morning.
11.09am:ASX up 1% amid hopes of a Clinton win
Australia’s S&P/ASX 200 has surged 1 per cent to 5232, and is on track for its biggest rise in 5 weeks, after the FBI downplayed the Clinton emails.
Global risk assets are surging on hopes Clinton will defeat Trump, with MXN/USD jumping 2.5 per cent and US S&P 500 futures gaining 1.4 per cent
Safe haven demand is evaporating, with the US 10-year bond yield down five basis points at 1.83 and spot gold down 1.1 per cent at $US1290.
10.59am:Orica cut to Neutral vs Buy — Citi
Citi has downgraded Orica to Neutral vs Buy, while increasing its price target to $17.50 vs $16.90.
“We remain positive on fundamentals but Orica has rebounded strongly, up 38 per cent over the last four months so it may be due a period of consolidation given the timing risks common at cyclical low points,” the broker says.
ORI shares were last down 3.9 per cent at $16.29.
10.43am:Court halts Exxon-InterOil deal
The long-running saga over Oil Search’s partner in the Elk-Antelope field in Papua New Guinea, InterOil, has taken another twist, with a Yukon appeals court overturning approval of Exxon Mobil’s $4 billion takeover of InterOil after an appeal by the target’s founder, Phil Mulacek.
InterOil on Friday said a Yukon appeals court overturned approval for its tie-up but said it will find a new path to closing the deal.
Shares of New York-listed InterOil dropped 5.8 per cent to $45.75 on Friday.
Matt Chambers
10.38am:Westpac results ‘OK’ — CLSA
Westpac’s FY16 results were “OK at first glance”, according to CLSA.
“The margin was in line, with modestly below-consensus expectations on revenue and expenses offset by a lower-than-expected loans loss charge but a higher-than-expected tax rate, with benefits related to the finalisation of prior period taxation matters in 1H16 not repeating,” CLSA analysts say.
“Overall the result was OK at first glance with issues well flagged — the 3Q16 asset quality and capital update with the slight earnings downgrades.
WBC shares were last up 1.7 per cent at $30.20.
10.28am:Westpac results ease concerns — Macquarie
Westpac’s FY16 results should alleviate concerns about its underlying performance and dividend sustainability, Macquarie says.
“While some of the lower quality positives like lower bad and doubtful debts were offset by the lower quality negatives like trading income and tax rate, the core result was largely in-line and dividend was maintained, supported by core tier one of 9.5 per cent.
“Westpac also provided guidance of 2-3 per cent expense growth for FY17, a small positive for FY17, although we understand that tax expense is likely to remain higher going forward, which is a small negative.
“We remain overweight on the banks sector and coupled with Westpac’s recent relative share price underperformance, we maintain our Outperform recommendation.”
WBC was last up 1.1 per cent at $30.05 after rising as much as 2 per cent in early trade.
10.10am:ASX jumps early as Clinton cleared
Australia’s S&P/ASX 200 has lifted 0.6 per cent to 5210 in early trade despite offshore markets ending weaker on Friday.
“Shorts getting hit here,” IG chief market strategist Chris Weston said. “Up she goes.”
The early lift comes amid strength in risk assets after the FBI said Hillary Clinton’s emails weren’t a crime.
Among the banks, Westpac surged 1.6 per cent at the open after it posted flat full-year results.
10.04am:Grant King to head BCA
Former Origin Energy boss Grant King has been appointed the next president of the Business Council of Australia.
Mr King’s appointment comes just a week after vacating the top job at Origin.
The board said in a statement that Mr King had been unanimously voted in.
He will replace Catherine Livingstone on November 17 at the council’s annual general meeting.
10.00am:Westpac payout ratio elevated — Watermark
Westpac’s FY16 results were in line with expectations but the dividend payout ratio remains elevated, according to Watermark Funds Management.
While the dividend was maintained at 94c for the second half, the payout ratio rose from 75 per cent in 2015 to 80 per cent in 2016 due to a decline in EPS of 5 per cent, partly due to the capital raising last year, Watermark analyst Omkar Joshi notes.
“If EPS growth continues to flounder, the sustainability of the dividend will remain an issue given the elevated payout ratio,” he says.
Cash earnings were flat on the previous half and in line with consensus expectations, while underlying profits declined by 2 per cent in the second half and were 1 per cent below expectations.
Revenue and costs both grew by 3 per cent over the year and Westpac is now targeting cost growth at the lower end of its 2 per cent-3 per cent range.
The net interest margin fell 3bps to 2.11 per cent over the half due to the impact of rising funding costs, although these were partially offset by the repricing initiatives in the mortgage book.
“Westpac downgraded its ROE target from 15 per cent to 13-14 per cent, which is not surprising given the current environment, though this may again prove to be too optimistic if further capital is required by APRA,” Joshi says.
Capital surprised positively — a consistent theme this results season, with a CET1 ratio of 9.48 per cent being 14bps better than expected, though this was driven by the optimisation of model parameters, and is not necessarily sustainable.
Bad debts were 10 per cent below consensus expectations and the bad debt charge of 17bps also 2bps below expectations, Joshi says.
He notes that new impaired assets declined 56 per cent on the last half but stressed exposures as a percentage of total loans continued to increase to 1.20 per cent.
9.55am:Time to be bullish on Sonic Healthcare?
Morgan Stanley and Credit Suisse have both raised their rating on Sonic Healthcare following news the company will acquire a German laboratory group for €120 million.
Morgan Stanley hiked its view to overweight from equalweight with a bullish target price of $24.05 and Credit Suisse lifted to neutral from underperform with a new target price of $21.75.
Morgan Stanley says the share price pullback since late August presents a chance to buy.
“Share price pullback and potential earnings per share accretive acquisition provide opportunity,” analyst Sean Laaman said.
“We upgrade to overweight, as we believe the market is prepared to look through adverse FX and pay a premium for structural volume growth (~4 per cent); strong cash generation; balance sheet flexibility; and potential upside from rental regulation.”
Credit Suisse analysts Saul Hadassin and David Bailey saw the purchase as logical, but also pointed out that Sonic trades at an 11 per cent premium to ASX200 industrials excluding financials.
“We believe the acquisition is strategically sound, expanding SHL’s presence in certain regions where they have had limited exposure.”
9.50am:US recession warning on Trump win
The US economy could tip into recession and US stocks could drop up to 5 per cent if Republican presidential hopeful Donald Trump wins the upcoming election, according to new research from Citi analysts.
By contrast, Citi says a win for Democratic nominee Hillary Clinton would likely mean the US economy would continue to grow at a moderate pace or slightly better, with little market reaction.
Despite investors already starting to price in the risk of a surprise victory for Mr Trump, the bank expects further selling could be ahead.
Elizabeth Redman
9.40am:UGL board backs takeover
CIMIC’s hostile $524 million takeover bid for engineering and construction group UGL has been recommended by the target’s board after a month of analysis, writes Daniel Palmer.
In a statement to the market this morning, the UGL board advised shareholders to accept the $3.15 a share offer in the absence of a superior proposal.
However, the recommendation was not unanimous, with one of the five directors — Robert Kaye — voting against the deal.
More to come
9.35am:Broker rating changes
Orica cut to Underperform vs Sector Perform — RBC
Sonic Healthcare raised to Overweight vs Equalweight — Morgan Stanley
Sonic Healthcare raised to Neutral vs Underperform — Credit Suisse
AWE cut to Underweight vs Equalweight — Morgan Stanley
9.11am:Goodman reaffirms guidance on strong Q1
Goodman Group has reported sustained momentum through the first quarter as the demand for logistics space across the globe remains strong, writes Daniel Palmer.
For the three months to September 30, the property group maintained occupancy rates of 96 per cent, which led to the retention of full-year forecasts for 6 per cent growth in operating earnings per share to 42.5 cents.
“We have made a very positive start to FY2017, with strong performance right across our business,” chief executive Greg Goodman said.
9.03am:Stocks eye another rough session
Australian stocks look to be in for another rough session today, which would follow a shocking week of losses that saw the ASX tumble to a four-month low.
The SPI 200 is pointing to a 0.6 per cent fall today but fair value suggests a 0.8 per cent drop would be more likely.
However confirmation from the FBI that presidential candidate Hillary Clinton is in the clear after a follow-up review on her internal email server could see investors breathe a sigh of relief ahead of Tuesday’s election against Donald Trump.
Clinton is seen to be the more market-friendly of the two candidates.
Friday saw the S&P/ASX 200 fall 0.9 per cent to 5180 points, which took the week’s losses to 2 per cent and had the index head into the weekend within spitting distance of its lowest level since early July.
Also worrying investors is that the index closed the week well below the key 200-day moving average of 5266 points and below the September trough of 5192 points, a noticeably bearish signal.
As for individual performances last week, gold miners surged last week amid the US politics-led volatility, while Mayne Pharma and Webjet copped a battering.
Here are last week’s best and worst performing ASX 200 stocks:
8.46am:Risk assets jump on FBI’s Clinton update
Risk assets have jumped this morning, after the FBI reaffirmed Clinton’s use of private e-mail servers wasn’t a crime.
MXN/USD gained 2.2 per cent to $18.60, while AUD/USD rose to 0.7708 vs 0.7673 at Friday’s NY close.
While it might not affect the US election outcome, the latest news from the FBI is positive for risk assets today.
It could set Australia’s sharemarket up for a better performance than the 0.8 per cent fall indicated by SPI 200 futures fair value.
S&P/ASX 200 closed Friday down 0.9 per cent at 5180.8 after hitting a four-month low of 5178.0.
8.28am:Aussie spikes as FBI clears Clinton
The Australian dollar popped above US77c this morning for the first time in two weeks after the FBI declared the investigation into Hillary Clinton’s email server has been closed — again.
The local currency hit US77.08c — its highest level since October 20 — at 7:52am AEDT this morning, but by 8:15am it had cooled off and sat at US76.88c.
News the FBI had reopened the investigation into Democratic presidential candidate Hillary Clinton saw rival Donald Trump shoot higher in the polls.
Some of Trump’s proposed protectionist policies include tariffs on imported goods to the US from Mexico and China, and with China ranking as Australia’s number one trading partner; the news was taken as a negative for the Aussie dollar.
Five days ago the Aussie hit a low of US75.60c, but has since rallied as stability begins to return to the polls.
Americans will take to polling booths on Tuesday.
Aussie Dollar #AUD broke through USD 0.77 on news that FBI investigation into #HillaryClinton email server is over. Now 0.7697#ausbiz #fx pic.twitter.com/CZsUmqguy2
— CommSec (@CommSec) November 6, 2016
8.18am:CBA faces revolt over pay
Commonwealth Bank is under growing pressure to revise its pay policies after a raft of big superannuation funds opted to vote against the bank’s remuneration report and the grant of performance rights to chief executive Ian Narev at this week’s annual meeting, writes Damon Kitney.
The Australian understands super industry heavyweights Australian Super and UniSuper will join the powerful Australian Council of Superannuation Investors in voting against both the remuneration report and the grant to Mr Narev.
The latest moves have led to speculation CBA will suffer an embarrassing strike against its remuneration report at its AGM on Wednesday if it receives a “no” vote of 25 per cent or more.
7.54am:Westpac posts flat FY earnings
Westpac has broadly met market expectations as it reported flat earnings for the full year and kept its dividend unchanged, writes Daniel Palmer.
For the 12 months to September 30, the bank booked cash earnings of $7.82 billion, in line with last year and analyst projections.
Despite the steady result the group reported a 5 per cent slide in cash earnings per share and a 185 basis point reduction in return on equity to 14 per cent.
7.10am: ASX set to open lower
The Australian market looks set to open lower after the S & P 500 ended lower for a ninth straight day, the longest losing streak for the benchmark index in more than 35 years, as investors stayed on edge ahead of an uncertain US election.
At 6.45am (AEDT), the share price index was down 29 points at 5,124.
In Australia, the market on Friday fell to its lowest level in more than four months amid increased uncertainty over the imminent US presidential election.
The benchmark S & P/ASX200 index fell 44.8 points, or 0.86 per cent, to 5,180.8 points.
The broader All Ordinaries index lost 43.5 points, or 0.82 per cent, to 5,263.1 points.
AAP
6.55am:Dollar up again
The Australian dollar is higher against the US dollar, the yen but has fallen against the euro..
At 6.35am (AEDT), the local unit was trading at US76.73 cents, up from US76.69 cents on Friday.
AAP
6.45am:Rally to spark more supply
The iron ore price has hit another new six-month high even as analysts warn that the four-week rally could provide an incentive for more supply, particularly from producers outside the biggest miners, Elizabeth Redman writes.
Iron ore added 0.3 per cent to $US64.70 in the most recent session, according to The Steel Index, from $US64.50 the previous day.
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