BusinessNow: Live coverage of financial markets and companies, plus analysis and opinion

Goldman Sachs says CBA shares could climb above $80 in the next 12 months.

The energy sector is dragging the ASX lower today.

• Deutsche Bank ditches banks for miners
• Jobless rate at 3-yr low
• Quadrant in Great Southern buy
• Buy back into CBA?
• Macquarie sells JB Hi-Fi shares
• Energy sector weighs on ASX

Welcome to the BusinessNow blog for Thursday, September 15. The sharemarket has turned positive thanks to CBA’s heavy lifting, while the jobless rate is at a three-year low.

8.40pm:US banks hint at Fed stress test suit

A group that represents executives from some of the largest US banks concluded in a paper that the Federal Reserve likely acted illegally in adopting central parts of its annual stress tests, the latest evidence that some in the banking industry are contemplating a potential lawsuit.

The Committee on Capital Markets Regulation, a nonprofit organisation of academics and financial executives, was set to release the paper on Thursday, and The Wall Street Journal reviewed a copy. The groups’ members include senior executives at big banks J.P. Morgan Chase & Co, Citigroup, Goldman Sachs, Wells Fargo & Co, and State Street Corp.

A committee that represents executives from some of the largest US banks concluded in a paper that the Federal Reserve likely acted illegally in adopting central parts of its annual stress tests, the latest evidence that some in the banking industry are contemplating a potential lawsuit.

“We find that the Federal Reserve has likely not complied with the [Administrative Procedure Act’s] procedural requirements in adopting key aspects of its Comprehensive Capital Analysis and Review stress tests,” the paper says.

Following those requirements “would result in better public policy outcomes and reduce the threat of a legal challenge to the Fed’s actions.” Wall Street Journal

7.59pm: Oil market still jittery

Oil prices were mixed on Thursday amid misgivings from traders and money managers about the continued global oversupply of crude and refined products.

The November contract for Brent, the global benchmark, was up 0.26 per cent at $US45.97 while its US counterpart West Texas Intermediate was down 0.02 per cent at $US43.57 for October deliveries of light, sweet crude.

The market remains jittery after a series of bearish reports from the Organisation of the Petroleum Exporting Countries, the Paris-based International Energy Agency and the US Energy Information Administration this week.

All three confirmed the continuing oversupply of crude that has engulfed the market and kept prices low over the last two-and-a-half years.

US crude stocks fell by 600,000 barrels for the week ending September 9, which went against almost all forecasts by industry observers who had predicted a large stock build. The London-based Energy Aspects said in a note that while it might look bullish, crude stocks still stood at 511 million barrels in the US, 55 million barrels higher than the corresponding week in 2015. Dow Jones.

7.15pm: How to land that dream job at Google

By Helen Trinca

Marissa Senzaki is one of Silicon Valley’s top recruiters. Now based at messaging service Slack’s new headquarters in Melbourne, the 33-year-old psychology major has hired staff for Facebook, Google and Skype. Read more.

6.43pm:British shoppers shrug off Brexit

UK retail sales remained resilient in August after a strong July, in a further sign that consumers have largely shrugged off the country’s surprise decision to exit the European Union.

The Office for National Statistics said on Thursday that retail sales fell 0.2 per cent in August from July, a smaller decline than the 0.5 per cent fall analysts polled by The Wall Street Journal were expecting. Sales were 6.2 per cent higher than a year earlier, however, and July’s sales figures were revised up, marking the strongest annual growth for the month of July since 2001.

The figures add to signs of resilience in the UK economy, confounding fears of a sharp slowdown after June’s referendum on leaving the EU. Britons voted 52 per cent to 48 per cent to exit the bloc, but surveys showed a rebound in consumer confidence and business activity over the summer once the initial surprise of the result had faded. Dow Jones.

5.49pm:Tokyo stocks droop

Tokyo shares closed more than 1 per cent lower on Thursday, led by a sell-off in bank stocks following reports that Japan’s central bank will consider slashing interest rates deeper into negative territory.

The Tokyo Stock Exchange’s benchmark Nikkei 225 index fell 1.26 per cent, or 209.23 points, to 16,405.01. The broader Topix index of all first-section issues was down 1.04 per cent, or 13.63 points, at 1,301.11. AFP

5.30pm:Dollar edges back in late trade

The Australian dollar was lower in late trade on Thursday, following news the economy created fewer jobs than expected in August.

At 5.30pm (AEST), the Australian dollar was trading at US74.58 cents, down from US74.69c at the same time on Wednesday. Read more.

4.53pm:Aussie winemakers battle heating climate

Neil Paulett, a winemaker in South Australia’s Clare Valley, stopped his vehicle in front of a row of vines on a recent rainy afternoon. The grapes growing here, he said, are ripening a month earlier than when he started the wine label that carries his name in the early 1980s.

More grapes are ripening at the same time, too, shortening the traditional harvest season by two weeks as it moves “insidiously forward,” said Mr Paulett, who traverses his vineyard in a white ute.

Some scientists attribute these changes to warming temperatures, which they say could pose a threat to winemakers globally. Grapes that ripen too early may not develop ideal flavours, and harvesting them later could lead to higher, unpalatable alcohol levels, scientists and winemakers say.

Some of Australia’s biggest wine companies, along with academics and researchers, are investigating ways to mitigate the impact. At stake are roughly 24,000 jobs in Australia’s winemaking and grape-growing industries, as well as wine exports valued at $2.1 billion ($US1.6bn) annually. Read more.

4.19pm:Stocks close on a high note

The Australian sharemarket has ended on a high for a second straight day as a re-rating of Commonwealth Bank shares and strength in the miners offset weakness in the energy space.

At the closing bell, the benchmark S&P/ASX 200 index rose 12.2 points, or 0.23 per cent, to 5,239.9, while the broader All Ordinaries index advanced 10.5 points, or 0.20 per cent, to 5,337.1.

The steady showing came after a red open, with the market only reaching positive territory with a little over an hour left of the trading day.
Daniel Palmer
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3.44pm:Pay hit for Origin’s Grant King

Outgoing Origin Energy chief executive Grant King has failed to receive a short-term incentive payment for the first time through his 16 years at the helm of the group after a tumultuous year for the energy retailer and producer.

Origin Energy’s Grant King has missed out on a short-term incentive payment.

In the group’s annual report, released this morning, it was revealed Mr King’s base salary stayed at $2.5 million, with his take-home pay essentially equal given a lack of short-term incentive payments.

Last year, Mr King received $1.3m in short-term incentive payments.

The lack of short-term incentives was isolated to the chief executive, however, with the group’s energy markets boss – and incoming CEO – Frank Calabria receiving around $650,000 in short-term cash incentive payments, just $100,000 shy of last year.

The group’s acting CFO, Gary Mallett, former CFO Karen Moses and the chief of its integrated gas business, David Baldwin, also received short-term incentive payments.

Over fiscal 2016, Origin’s share price more than halved from $11.70 to $5.75 as an oil price rout crimped profits.
Daniel Palmer

3.25pm:Stocks turn positive as CBA jumps

Australian stocks have peaked into positive territory with an hour of trade remaining, with CBA doing much of the heavy lifting.

At just before 3:15pm AEST the S&P/ASX 200 was 0.1 per cent higher at 5231.9 points after spending the entire session in the red and looking set to notch up yet another negative finish.

CBA is the hero of the day following an upgrade to ‘buy’ from Goldman Sachs, shares in the nation’s biggest lender have staged a 2.4 per cent intraday turnaround to last trade at $71.56.

2.40pm:NAB’s apartment glut warning

Sydney and Melbourne may be adding apartments at a rate more than double that required to meet demand, NAB economists have warned in their latest update on the Australian economy, although it is the Melbourne apartment market seen at most risk of a market correction.

In its regularly updated outlook on the Australian economy, NAB again reiterated its view for economic growth to slow across the next couple of years as the LNG export boom loses steam and as the residential construction cycle “turns down”.

It is the latter facet of the projected slowdown in growth from 3.3 per cent in fiscal 2016 to 2.6 per cent in calendar 2018 that will draw the most focus, given the concerns flagged by economists and the Reserve Bank about the remarkable uptick in apartment supply over the past couple of years.
Daniel Palmer
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2.25pm:Rate cuts helping economy: RBA

The Reserve Bank has expressed confidence interest rate cuts still have a significant positive impact on the economy, while incidentally sinking the argument for holding back the rate cut made by Commonwealth Bank chief executive Ian Narev last month.

In a newly released paper, members of the central bank’s economic group looked to assess the impact of a rate cut on both net borrowers (largely mortgage holders) and net lenders (largely retirees), declaring the effect greatest on the spending habits of the former.

A simulated 100 basis point rate cut – if passed on in full – was deemed likely to lift aggregate disposable income by 0.9 percentage points.

Importantly, the spending habits of borrowers were deemed more elastic, with a one dollar fall in mortgage repayments likely to raise durable goods spending by 21c for borrowers, compared to a one dollar increase in interest income lifting durable goods spending by just 4c for lenders.
Daniel Palmer

2.02pm:The Reject Shop rockets

Shares in The Reject Shop have rocketed higher today on the back of positive note from Morgan Stanley.

At just before 2pm AEST the stock was 7.9 per cent higher at $10.875, marking its best one-day rise since February.

The shares had tumbled as much as 35 per cent since hitting their highest point for the year on August 22, two days before the retailer unveiled a poorly received profit result.

But Morgan Stanley says that sharp fall has uncovered a buying opportunity and the analysts have upgraded the stock to ‘overweight’ from ‘equal-weight’, saying the share price could have a 27 per cent upside.

“We think the turnaround is intact and we expect the company to show an improvement in margin and drive sustainable revenue growth over the next two to three years,” Morgan Stanley analysts led by John Stavliotis said.

“We believe the risks are more than accounted for in the share price … Although we do not see an immediate catalyst, at this pricing we are attracted to TRS for the turnaround which we have confidence will deliver EBIT margin expansion and sustainable like-for-like sales growth over the next two to three years.”

The Reject Shop was removed from the S&P/ASX 200 index in the September 2014 rebalance – the broader index is down 0.2 per cent for the day at 5220 points.

1.41pm:Tokyo stocks fall sharply

Japanese stocks were sharply lower in morning trade, as a firmer yen stung sentiment.

The Nikkei Stock Average slid 1 per cent in morning trade, with its week-to-date losses extending to 3.1 per cent. Elsewhere, South Korea, China and Taiwan were closed for a public holiday.

“There’s a holding pattern in the market today,” said Chris Weston, a market analyst at IG Market Ltd “We’re just really trying to take our cues from what happens in the States at the moment.”

The US Federal Reserve will kick off its two-day meeting on Tuesday, during which central bankers will vote on whether to raise interest rates. Higher rates would typically result in money flowing out of emerging markets. Dow Jones

1.20pm:Dollar inches back in early afternoon

The Australian dollar was trading lower after official figures showed a drop in the number of people with jobs in August.

At 1.20pm (AEST), the local unit was swapping hands at US74.57 cents, down from US74.69c on Wednesday.

12.50pm:Deutsche Bank is ditching banks for miners

Value in the mining sector is becoming hard to ignore, while investors looking for any kind of growth should be walking right past Australia’s banks, according to Deutsche Bank.

Deutsche Bank says there could be value in the miners.

Equity strategist Tim Baker points out that price-to-earnings ratios in the mining sector should be heading even lower as commodity prices march south, and with miners still on the nose with analysts and investors, there could be value to be had.

But sentiment remains low across the market and firm decisions from investors are few and far between.

“Conviction is very low – the number of ‘buy’ ratings is around record lows, and subdued volatility suggests investors feel likewise,” Mr Baker said.

Miners have been boosted to overweight from underweight, while banks have been cut to neutral.

Housing exposure remains attractive, according to Mr Baker, and defensive stocks should still be treated with caution, even in a flat market.

Deutsche Bank has added South32 and Telstra to its model portfolio and cut CSR and Vocus.

12.20pm:Jobless rate at 3-year low

Australia’s unemployment rate has dipped to 5.6 per cent in August despite a significant miss in the number of jobs added for the month.

Official figures from the Australian Bureau of Statistics revealed the jobless rate slid 0.1 percentage points to 5.6 per cent, due entirely to a drop in the participation rate from 64.9 per cent to 64.7 per cent.

However, the economy lost 3,900 jobs for the month, in seasonally adjusted terms, well short of market forecasts for a rise of 15,000.

The jobless rate is now at its lowest point since September 2013.
Daniel Palmer
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12.11pm:Quadrant to buy stake in Great Southern

Quadrant Private Equity has agreed to buy a major stake in tourism rail company Great Southern Rail from Allegro Funds Management.

Great Southern operates luxury Australian transcontinental passenger rail services, The Ghan, The Indian Pacific and the Overland.

Allegro, widely considered more of an opportunistic player in the private equity space, has owned the asset for 16 months — initially buying GSR in May 2015 — and during the ownership period, it stabilised the business and more than doubled its earnings.

Bridget Carter
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11.55am:Time to buy CBA, Goldman Sachs says

It’s time to dive back into Commonwealth Bank shares, according to Goldman Sachs analysts, who say the bank’s share price could jump above $80 in the next 12 months.

CBA, which is the largest stock on the Australian market, has lost 18.2 per cent in the year to date and noticeably underperformed the nation’s other big banks.

The shares hit a three-year low yesterday at $69.44 but are up 1.1 per cent today to $70.94.

Goldman has today upgraded the bank to ‘buy’ from ‘neutral’, saying “the underperformance is now complete”, making now the time to strike.

“While CBA’s return on tangible equity premium versus its peers has closed in recent years, we think the market is getting too bearish about its future returns trajectory,” analysts, led by Andrew Lyons, said.

“We upgrade CBA to buy, with our new $82.79 target price implying 23 per cent total shareholder return over the next 12 months versus 8 per cent for our coverage universe.

Macquarie analysts also see a better deal on CBA following the evaporation of the bank’s mighty premium, but stopped short of recommending the stock as a ‘buy’.

Macquarie has today raised its call to ‘neutral’ from ‘sell’ on CBA, saying it continues to see risk around CBA’s Western Australia exposure but the high dividend yield and price to earnings level gives it “wiggle room”.

Macquarie points out: “Over the last quarter, CBA has underperformed the ASX200 by ~3 per cent and the average of the other majors by ~6 per cent.

Take a look at this share price comparison of the big four banks since July 7:

The big four banks

11.40am:Macquarie sells $19m of JB Hi-Fi shares

Macquarie is selling $19 million worth of shares that were not taken up by institutional fund managers in the electronics retailer JB Hi Fi in its recent funding drive to acquire white goods retailer, The Good Guys.

The deal price has been fixed at a floor price of $26.20.
Gretchen Friemann

11.20am:BHP bullish on Chinese steel

BHP Billiton still expects China’s steel production to continue to grow despite almost all other forecasters and the Chinese industry itself saying peak production has already passed, writes Barry Fitzgerald.

BHP chief commodities forecaster Huw McKay acknowledges Chinese steel production has fallen in recent times, with most analysts forecasting output will hover at 800-830 million tonnes a year.

“We’re not convinced,’’ Mr McKay wrote in BHP’s corporate blog, Prospects.

“We expect Chinese demand will rise modestly over the next decade.’’
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10.50am:Energy sector weighs on ASX

The Australian sharemarket is being weighed down by the energy sector in early deals after a session of relative calm on Wall Street overnight, Daniel Palmer writes.

At the 10.15am (AEST) official market open, the benchmark S&P/ASX 200 index weakened 9.5 points, or 0.18 per cent, to 5,218.2, while the broader All Ordinaries index gave back 10.4 points, or 0.20 per cent, to 5,316.2.

The moves have the market on track for its fifth fall in six sessions.

While iron ore skidded over 1 per cent, a strong rise in most base metals helped materials enjoy a positive start.

BHP Billiton rallied 0.7 per cent to $19.94, Rio Tinto tacked on 0.1 per cent to $46.86 and Fortescue bounced 0.8 per cent to $4.695.

It was a different story in energy as a 3 per cent slump in crude prices forced the big names into the red.
Read more

10.34am:It’s a crazy day on the ASX calendar

It’s a big day on the ASX calendar and that could make for an … interesting … session, according to CMC Markets chief strategist Michael McCarthy.

“The expiry of the quarterly share price index (SPI) futures contract this morning will see huge volumes of shares change hands. There is high potential for the largest institutional investors to take advantage of this surge in liquidity to reshape their portfolios,” Mr McCarthy said.

“This makes predicting the outcome of today’s trading exceedingly difficult.”

The S&P/ASX 200 opened 0.2 per cent lower to 5218.2 points this morning, which has it heading for a fifth negative session in six.

10.10am:Where’s the GARP?

GARP, or Growth At a Reasonable Price, is what all investors are searching for at the moment (and always, arguably).

Not carp ... GARP! (Growth At a Reasonable Price).

The question is; is there currently scarcity value in growth stocks, or are they becoming as vulnerable as defensives?

“The ‘defensive income’ trade has begun to come under pressure recently as central bank expectations adjust and bond yields push higher,” UBS equity strategist David Cassidy says.

“This has prompted questions with investors as to whether the ‘growth trade’ is also vulnerable. We do see some potential risks with the ‘growth’ trade above and beyond just the potential for long-term interest rates to push higher.”

Mr Cassidy points out the high, and expanding, price to earnings multiples seen by quality growth stocks, along with the risks posed by “patchy” earnings per share revisions in the area.

That said, UBS is throwing its weight behind the following as reasonably-priced growth stocks:

· Aristocrat Leisure, Healthscope, Brambles are “relatively attractive”, according to David Cassidy.

· Treasury Wine Estates and James Hardie are “more highly priced but less expensive than other market darlings.

· Orora, Star Entertainment and Wesfarmers are also good picks for growth at moderate P/Es, UBS says.

10.05am:BBY ‘used client money’

BBY executive chairman and major shareholder Glenn Rosewall instructed his finance manager to pull $12 million from a client account to meet capital demands from the ASX, a court has heard.

BBY’s former finance manager Amy Yuen told the Supreme Court that said the money was not returned until May 2012 and then only for two days following a query from the Australian Securities and Investments Commission about client accounts at the firm.

In testimony to a liquidators hearing Ms Yuen said Mr Rosewall had instructed her not to discuss financial matters with him via email, but only in person, and that he did not tolerate his instructions being questioned.

“The tone in the company is always that if Glenn asks you to do it you have to do it,’’ Ms Yuen told the court.
Andrew white
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9.50am:Apartment market is flashing red

From Robert Gottliebsen’s column today:

Look out from Sydney’s tower restaurant or Melbourne’s Eureka Tower and you will see a large number of cranes completing apartment developments across the skyline. There are fewer cranes now than six months ago but the numbers are still substantial.

The drama bubbling underneath the capital city apartment market will soon be unleashed.

But on the ground, underneath most of those cranes, a drama is taking place because there has truly been a substantial change in the Sydney and Melbourne markets.

The NSW, Victorian and Federal governments, the Reserve Bank, APRA, the chiefs of the top four banks and the general public don’t yet fully appreciate what these dramas will mean for the NSW, Victorian and national economies. But they’ll soon learn.

Nor do they fully understand that their separate actions are set to change the Australian economy. But they will.
Read more

9.30am:Seven West cleared to buy Sunday Times

The ACCC has cleared Seven West’s acquisition of The Sunday Times newspaper and Perth.now.com.au website from News Limited, writes John Durie.

In a statement today the regulator said the deal was unlikely to substantially lessen competition.

In its statement of issues published last month the ACCC noted there were no serious competition issues.

It did note the deal “may be likely to substantially lessen competition in relation to the supply of news and information to readers in Western Australia, by reducing choice and removing the competitive constraint between SWM and News.”

9.19am:Keep an eye on the miners today

Resources stocks could manage to bounce back this morning despite more bad news in the space.

Commodity prices have given up significant ground this week.

BHP Billiton’s ADRs are pointing to a 1.4 per cent rebound following yesterday’s 1 per cent fall took it to its lowest closing level in almost six weeks.

Shares in the world’s biggest miner have lost 4.7 per cent so far this week and last traded at $19.80.

The bad news is that the price of iron ore edged another 0.2 per cent lower last night to $US55.97, which stretches the losing streak to seven sessions and 5.8 per cent.

The price of WTI crude oil crept 0.4 per cent higher this morning but remains 5.5 per cent lower over the last three sessions.

Also weighing on BHP is that the miner’s Samarco bill could rise after the judge ordered a new damage review.

9.02am:ASX eyes a fifth weekly fall in a row

Timid trade looks set to continue on the local market as investors wait for Fed clarity before dipping back into anything even remotely risky.

The SPI 200 is pointing to a 0.4 per cent fall at the open but fair value suggests a shallower 0.2 per cent slide could be more likely.

Yesterday saw the ASX 200 close in positive territory for the first time in five as central bank uncertainty pushes investors to the sidelines.

Banks saw healthy buying and telstra gained an impressive 2.6 per cent, but major miners were back out of favour as commodity prices continue to slide.

A fifth negative week in a row beckons, with the index sitting 2.1 per cent in the red with two sessions remaining.

8.55am:Myer profit falls short

Department store operator Myer has delivered full year earnings in line with guidance, but has fallen just short of market expectations, writes Daniel Palmer.

For the 53 weeks to July 30, Myer reported a 10.6 per cent decline in underlying earnings to $69.3 million, meeting the $66m to $72m guidance put forward by the company.

The numbers were shy of market expectations for underlying net profit after tax of $70m.

Myer declared a fully franked final dividend of 3c a share, double the 1.5c prediction from UBS analysts.
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8.15am:European traders eye central bankers

Europe’s stocks struggled to find a clear direction Wednesday ahead of decisions by key central banks.

ECB President Mario Draghi

After three days in the red, London’s benchmark FTSE 100 index posted modest gains, helped by steady jobless data and a rebound in mining stocks, a day before the Bank of England meets.

“It might be in for a bit more movement tomorrow as investors await the latest (likely unchanged) rate vote and statement from the Bank of England,” Spreadex’s analyst Connor Campbell said in a note to investors.

Frankfurt’s DAX 30 nudged downwards at closing, with shares in German chemical giant Bayer only winning 0.3 per cent despite initially surging more than two per cent.

After a months-long pursuit, Bayer said it had agreed to buy the controversial US seeds and pesticides firm Monsanto for an improved offer of $66 billion.

Shares of Monsanto rose just 0.6 per cent to $106.76. well below the $128 share price embedded in the deal. Analysts viewed the gap as a sign the market thinks antitrust regulators could kill the deal.

In Paris, the CAC 40 was down for the fifth session in a row, with analysts pointing to caution ahead of a US Federal Reserve meeting next week amid uncertainty of a rate rise.

“The market remains anxious and caution has been predominant since the disappointment from the European Central Bank’s status quo,” said Alexandre Baradez, analyst at IG France.

Europe’s luxury goods sector lost some shine after a profits warning from Swiss group Richemont, which owns top global brands including Cartier. Shares in Richemont lost 3.9 per cent in Zurich.

Hermes meanwhile slumped 8.8 per cent in Paris as a cautious outlook from the French group offset its solid results.

“Richemont and Hermes have both delivered downbeat trading updates and their stocks are being sold off in sharp fashion as a result,” said Neil Wilson, market analyst at ETX Capital.

France’s upscale chain Galeries Lafayette also said it had seen a 15 per cent drop in foreign shoppers at its flagship Paris store in the first half of 2016 after the November terror attacks.

The profit warnings “come after a woeful summer for the sector, with Burberry and Swatch among several notable marques seeing sales and profits falling”, added Wilson, who pointed to sliding demand in Asia.

AFP

6.55am:Local bourse set to open lower

The Australian market looks set to open lower after major international bourses mainly fell overnight.

At 6.45am (AEST), the share price index was down 22 points at 5,211. Locally, in economic news on Thursday, the Australian Bureau of Statistics releases August Labour Force data, as well as new motor vehicle sales figures for the same month.

Meanwhile, the ACCI-Westpac survey of industrial trends is due out. In equities news, Myer is expected to post full-year results. In Australia, the market on Wednesday gained ground for the first time in a week, recovering from a hefty sell-off on Tuesday.

The benchmark S&P/ASX200 index was up 19.9 points, or 0.38 per cent, at 5,227.7 points.

The broader All Ordinaries index was up 16.6 points, or 0.31 per cent, at 5,326.6 points.

AAP

6.50am: Dollar slips against the greenback

The Australian dollar has continued to slide against the US dollar. At 6.35am (AEST), the local unit was trading at 74.70 US cents, down from 74.88 cents on Wednesday.

Uncertainty about the US interest rate outlook pressured the greenback against other currencies, but that didn’t stop the Aussie from slipping. The Australian dollar overnight traded in a sideways range of 74.50-74.96, Westpac’s Imre Speizer said in a note.

AAP

6.40am: Calm returns to Wall Street

Stocks and bonds steadied Wednesday after three sessions of swings. Major US indexes pulled back in afternoon trading, but the moves were small compared with the past few days.

Stockmarkets steadied overnight as traders eye the Fed’s September meeting.

Markets turned choppy late last week, with both stocks and long-dated government debt dropping on uncertainty over global-central-bank policy. The S&P 500 fell 2.5 per cent Friday, rose 1.5 per cent Monday and fell 1.5 per cent Tuesday.

The Federal Reserve and the Bank of Japan hold meetings next week, and investors are looking for clarity on how long ultra-easy monetary policy will continue and what it will mean for a rally that has sent the S&P 500 to highs and global government debt to record-low yields earlier this summer.

“We are doing nothing until we get through the Fed,” said Tom Carter, managing director at brokerage JonesTrading. “There’s a lot of cash sitting on the sidelines until they make a decision.”

The Dow Jones Industrial Average fell 31.98 points, or 0.2 per cent, to 18034.77, after rising as much as 97 points earlier in the session. The S&P 500 declined less than 0.1 per cent. The Nasdaq Composite rose 0.4 per cent.

Dow Jones

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6.30am: Oil prices drop as Libya moves to boost exports

World crude prices sank Wednesday as Libya’s state oil company said it would double production within four weeks after rebels handed it control of the vital Oil Crescent ports.

Also supporting prices was the weekly US oil reserves report, which showed an unexpectedly sharp increase in stockpiled refined products while crude stocks were only slightly lower.

US crude benchmark West Texas Intermediate (WTI) for delivery in October fell $1.32 to $43.58 a barrel.

In London, Brent North Sea crude for November delivery lost $1.25 to $45.85 a barrel.

The fall came after Libya’s National Oil Corporation said it would start working “immediately” to restore exports from the key ports that were seized from the government by rival troops on Sunday and Monday, threatening the country’s financial lifeblood.

On Tuesday the rebels said they would turn the ports over to NOC. Shortly after that NOC Chairman Mustafa Sanalla said in a statement that it could raise production from the current 290,000 barrels a day to 600,000 barrels “within four weeks.” By the end of the year, he said, NOC could by production 950,000 barrels a day.

That would add a substantial supply of crude to world markets even as the OPEC cartel and Russia are to hold talks this month on capping output.

Sanalla stressed in a statement that meeting those goals depends “on the Oil Crescent ports and the closed pipelines in the southwest being opened and kept open.” Meanwhile the US Department of Energy reported Wednesday that commercial crude inventories fell about 600,000 barrels in the week to September 9, but that a jump in stored refined products meant the overall petroleum stocks balance jumped by 6.0 million barrels.

“The oil report was not as bullish as the headline number may have suggested, so concerns about oversupply remain firmly in place,” City Index oil analyst Fawad Razaqzada told AFP.

“Not only did stocks of gasoline and distillates rise sharply, crude production was up for the first time in four weeks, too.”

AFP

6.15am: Bayer signs Monsanto buyout in $88bn deal

Bayer AG on Monday said it would buy Monsanto for $US66 billion ($88.25bn) including debt, creating one of the world’s largest agrichemical firms.

The deal ends a months-long courtship by the German pharmaceuticals and chemicals giant of the US seed maker and will be the largest foreign corporate takeover ever by a German firm.

Bayer plans to pay $US128 a share for Monsanto in an all-cash transaction, up from its latest offer last week of $US127.50 a share, the companies said. The agreed total price was a roughly 6 per cent increase over Bayer’s original offer in May of $US122 a share.

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