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Healthscope’s shares have plunged, with rival Ramsay also hit, while gaming stocks are under pressure.
- ACCC probes Tabcorp-Tatts merger
- ASX weakens as sell-off spreads
- RBA to lift rates in 2018?
- Healthscope shares dive
- BHP shrugs off charges
- NAB dividends not sustainable
- Charges laid over Samarco
Welcome to the BusinessNow blog for Friday, October 21. Healthscpe shares are sharply lower after it issued a profit warning, while BHP shares are showing resilience despite Brazilian prosecutors charging 22 people over the Samarco disaster and chairman Jac Nasser announcing his retirement.
7.04pm: European stocks claw higher
European stocks firmed in Friday’s opening deals, with Frankfurt, London and Paris each adding 0.1 per cent, buoyed by takeover activity in the tobacco sector.
In initial trade, London’s benchmark FTSE 100 index gained ground to stand at 7,036.23 points compared with Thursday’s closing level.
In the eurozone, Frankfurt’s DAX 30 rose to 10,710.51 and in Paris the CAC 40 increased to 4,546.65 points.
London’s top gainer was British American Tobacco, whose share price rallied almost four percent after launching a $47-billion bid for control of US rival Reynolds American.
The region’s equities had already climbed higher on Thursday after the European Central Bank (ECB) maintained the size and scope of its bond-buying stimulus programme.
Asian markets also swung higher Friday on the back of this week’s ECB news, which left investors eyeing December for the next move for monetary policy.
Mr Draghi on Thursday dismissed reports the bank was considering gradually tapering its stimulus, but he added: “I would say an abrupt ending to bond purchases, I think it’s unlikely.” The ECB stimulus scheme, known as quantitative easing (QE), involves the purchase of public and private bonds at the rate of €80bn per month, and is currently set to end in March 2017. AFP
6.15pm:Beat new rules to grow your super
Glenda Korporaal
With the federal government’s draft legislation on the proposed changes to superannuation now released to the market, there is no time to wait for people approaching retirement who want to boost their superannuation.
Peter Hogan, technical director of the Self Managed Superannuation Fund Association, says there are five points which should be on the “to do” list for people wanting to maximise the potential opportunities in super in the current financial year before the tougher changes come into effect on July 1, 2017.
Maximise concessions
With the proposed cuts in the concessional super caps, employees in particular have to act now if they want to take advantage of higher salary sacrifice opportunities available this financial year. Read more.
5.42pm:Tokyo stocks retreat
Tokyo stocks fell off a six-month high on Friday as investors locked in profits, while Nintendo dived with markets left underwhelmed following a sneak peak at its new games console.
The Nikkei 225 index, which had been up at the lunch break, closed 0.30 per cent, or 50.91 points, lower at 17,184.59, ending a five-day winning streak.
The Topix index of all first-section issues was down 0.40 per cent, or 5.51 points, at 1,365.29. AFP
5.27pm:Dollar softer in late trade
The Australian dollar continues to slide, following weakness shown in the latest employment data.
At 5pm (AEDT) on Friday, the local unit was trading at US76.38 cents, down from US76.68c on Thursday.
The Australian dollar was at US77.3c before the release of September’s job report on Thursday, and a big decline in full-time employment has driven its fall since, Moody’s Analytics economist Emily Dabbs said.
Some “upbeat” Chinese house price data released after the Australian jobs data was not enough to help the Aussie recover any lost ground, she said. There are risks the Australian dollar could fall further if inflation figures to be released on Wednesday are weaker than forecast, Ms Dabbs said. AAP
4.53pm:Cooke labels Healthscope plunge an ‘overreaction’
Eli Greenblat
Healthscope chairman Paula Dwyer and boss Robert Cooke have labelled the near 30 per cent collapse in the private hospital operator’s share price this morning as an “overreaction” following its profit warning, as guidance of weak hospital volumes also hit rival Ramsay Health Care (RHC) to shed a combined $1.5 billion in market value.
Shares in Healthscope tanked as much as 27 per cent to an eight-month low on the dismal first quarter trading update, before paring losses to end 18.8 weaker at $2.38.
Healthscope lost $750 million in market value through the session, while Ramsay has seen a little over $700m sliced.
“That’s an overreaction, and we have taken a really cautious view to our outlook statement and we are talking about a couple of per cent of volume,’’ Mr Cooke told The Australian after stepping from the stage at Healthscope’s annual meeting today. Read more.
4.17pm:ASX ends week in the red
The Australian sharemarket has ended the week in lacklustre fashion, weighed down by soft crude prices and a disappointing trading update from Healthscope, writes Daniel Palmer.
At the close, the benchmark S&P/ASX 200 index dipped 11.8 points, or 0.22 per cent, to 5,430.3, while the broader All Ordinaries index slid 12.3 points, or 0.22 per cent, to 5,513.9.
The local bourse weakened 0.1 per cent through a volatile week that started poorly amid a heavy sell-off in gaming stocks after the shock arrest of 18 Crown Resorts employees in China.
Crown ended down 19 per cent on the week, despite a modest 1.6 per cent bounce to $10.92 on Friday.
4.02pm:Triguboff’s Surfers Paradise buy
Sydney apartment tsar Harry Triguboff has unveiled the purchase of a major site in Surfers Paradise, as he stocks up on sites outside of Sydney in the face of warnings about a major oversupply of units in the Australia’s capital cities.
His private Meriton has bought a site overlooking the beach in Surfers Paradise and may use it to develop the Gold Coast’s highest apartment towers, with the project’s end value likely to top $1bn.
The site on the Esplanade near Cavill Avenue will be house a tower that will include serviced apartments — Meriton has become one of the country’s top operators — as well as units.
Ben Wilmot
3.05pm:ACCC probes Tabcorp-Tatts merger
The ACCC has formally launched its expected inquiry into Tabcorp’s $11 billion takeover of Tatts but most in the industry expect the deal to get through.
When the ACCC blocked the Tabcorp bid for the Queensland TAC in 2006, the bidder also controlled half of Victoria’s poker machines with Tatts the other half and corporate bookmakers were only talked about.
Now the corporate book markers dominate the airwaves around key sporting events and they present a real competitive threat to Tabcorp.
John Durie
Read more
2.45pm:China house prices rise 9.5%
Average housing prices in China climbed more rapidly in September from a month earlier, amid widespread concerns of a rising property bubble in major Chinese cities.
The average price of new homes in 70 cities rose 1.8 per cent in September from the month before, according to calculations by The Wall Street Journal based on data released on Friday by the National Bureau of Statistics. That compares to a 1.3 per cent month-over-month gain in August.
On a year-over-year basis, the average new home price rose 9.3 per cent, compared with a 7.5 per cent gain in August.
Dow Jones
1.48pm:BoJ may lower inflation forecast
Bank of Japan Governor Haruhiko Kuroda said on Friday that the central bank may temper its upbeat inflation projection for the next year, highlighting his continued struggle to end a cycle of weak prices.
“It’s already in the middle of the fiscal year, but the rate of price increases is in negative territory,” Mr Kuroda said in parliament of consumer prices including energy. He said it was possible the central bank would revise its forecast that core inflation will reach 2 per cent in fiscal 2017.
Mr Kuroda was referring to a closely watched price forecast in the BoJ’s quarterly outlook report. Japan’s fiscal 2017 runs from April 2017 through March 2018.
His, by undertaking aggressive additional easing whenever prices show weakness. Dow Jones
1.32pm:BARTHO: Nasser era ends on a sombre note
The Jac Nasser era at BHP Billiton will end on a far more sombre note that it began, writes Stephen Bartholomeusz.
The way in which the company’s board and management adapted to the seachange in industry conditions that occurred between his elevation to the chair in 2010 and today, however, explains why he will leave on his own terms.
Nasser told last night’s annual meeting in London that, having been urged by his fellow directors to defer his plan to retire from the board last year because of the Samarco tailings dam disaster, he wouldn’t seek re-election at next year’s annual meeting.
BHP will conduct a global search for his successor, although for a number of reasons it is probable that the next chairman of BHP will come from within the board’s existing ranks.
12.50pm:ASX pares losses on China data
Australia’s S&P/ASX 200 has pared most of a 0.6 per cent intraday fall to a two-day low of 5410.8.
The bounce appears to have been helped by signs that home-buying curbs in China are working.
New home prices excluding government subsidised housing rose in 63 of 70 cities monitored last month.
That’s a slight but welcome fall from the August data, where prices rose in 64 of 70 cities.
China’s latest housing data could pave the way for additional policy stimulus.
The S&P/ASX 200 was last down 0.1 per cent at 5435.
12.40pm:Brambles’ subdued start to FY17 - UBS
Brambles shares remain weak after it posted disappointing revenue numbers yesterday. The shares have fallen as much as 3 per cent to a four-week low of $11.69.
The pallet-maker reported first-quarter constant currency revenue growth of 7 per cent, at the bottom end of the 7 per cent to 9 per cent guidance range for FY17.
The key surprise was 4 per cent growth in Pallets Americas, which reflects a slowdown from the 8 per cent growth reported in FY16 and the Jun-16 half, according to UBS.
“We estimate that the recycled business - 20 per cent of Pallets Americas - declined about 5 per cent during the quarter, resulting in 6 per cent growth in the pooled pallets business,” UBS analyst Simon Mitchell says.
“This is still on the low side versus recent momentum and appears to reflect less pricing/mix benefit than FY16.”
Management said the modest growth reported in North America could improve in the second half of FY17 as there were some deferrals of new business opportunities in the first quarter.
But the market obviously has its doubts. A break of the September low at $11.46 could trigger a further sell-off.
12.14pm:ASX weakens as sell-off spreads
Australia’s S&P/ASX 200 has fallen 0.6 per cent to 5410.8 as the sell-off spread to all sectors bar consumer staples.
Healthcare and gaming stocks remain weak after profit warnings from Healthscope and SkyCity Entertainment.
Market darlings CSL, Newcrest and Brambles are all down more than 2 per cent.
The index looks to be heading for a test of the 100-DMA at 5396 and last week’s low of 5386.1.
A break there could extend to the 200-DMA at 5245 and the September low of 5192 in the coming weeks.
Volume looks decent though there was an index options expiry yesterday.
11.39am:RBA to lift rates in 2018: Goldman
The RBA will start increasing official interest rates in early 2018, according to Goldman Sachs.
“On the inflation front, we believe that 3Q2016 will mark an important transition point and the start of a gradual reflation in consumer prices,” Goldman Sachs’ chief economist Tim Toohey says in a report.
“These transition points are important for forward-looking policymakers and we believe the shifting dynamics will contribute to the RBA commencing a tightening cycle from
early 2018.”
11.23am:ASX slides amid healthcare selloff
Australia’s S&P/ASX 200 share index is down 0.3 per cent at 5422.6, bucking slight gains in offshore markets, amid a plunge in healthcare stocks.
Healthscope is down 17 per cent on disappointing revenue and that’s triggered a 6 per cent fall in its larger rival, Ramsay Health Care.
Elsewhere, SkyCity shares are down 12 per cent after it also warned of disappointing revenues, partly due to the arrests affecting Crown.
In the energy sector, Oil Search is down 2.7 per cent and Woodside is 0.9 per cent lower after WTI crude fell 2.3 per cent overnight.
Amid the gold miners, Newcrest is down 2.7 per cent and Evolution has slid 3.4 per cent after spot gold lost upward momentum.
Also weighing on the market, CSL is 1.6 per cent lower and Brambles is down 2.7 per cent despite a lack of catalysts.
BHP Billiton, Westpac and ANZ are lending support with gains of 0.5 per cent to 0.9 per cent.
11.00am:SkyCity shares slide on revenue, China
SkyCity shares are down 11 per cent at $3.58 after earlier hitting a 12-month low of $3.52.
First-quarter adjusted revenue fell 5.7 per cent year-on-year amid weaker high-roller spending at its Auckland casino.
Revenue from VIP’s in its international business fell 20 per cent amid lower volume.
The casino operator said it expects a short-to-medium term adverse impact from the detention of Crown Resorts employees in China.
10.48am:Buy Healthscope, says Market Matters
Marketmatters.com.au has just put out a recommendation to buy Healthscope below $2.40 after the hospital operator’s shares fell as much as 27 per cent to $2.15 on a profit warning.
“No earnings growth for a stock trading at a high multiple has led to a big drop in share price ... this presents an opportunity to get set in a medium-term position at an attractive level,” the advisory service says.
Healthscope shares were last down 16 per cent at $2.47.
10.35am:Healthscope shares plunge on profit warning
Healthscope shares nosedived 27 per cent at the open to an eight-month low of $2.15 after the company warned revenue from its hospitals unit slowed in the first quarter.
A continuation of the first quarter trend would see flat hospital underlying earnings in FY17 after an 8.3 per cent rise in FY16, it said.
At 10.30am AEDT the shares were down 20 per cent at $2.35.
10.30am:Energy stocks keep lid on ASX
The Australian sharemarket is trading around the flatline in early deals as strength in the banks offsets weak energy stocks after crude prices weakened offshore.
At the 10.15am (AEDT) official market open, the benchmark S&P/ASX 200 index tacked on 2.2 points, or 0.04 per cent, to 5,444.3, while the broader All Ordinaries index inched up 1.2 points, or 0.02 per cent, to 5,527.4.
10.18am:BHP shares shrug off Samarco charges
BHP shares are shrugging off murder charges against some of its employees over the Samarco disaster and the departure of chairman Jac Nasser announced overnight.
BHP shares were last up 1.7 per cent at $23.24 vs the $22.95 ADR equivalent.
10.10am:Rinehart to face new Kidman bid
Gina Rinehart will have to stare down a significant bid for the S. Kidman & Co cattle empire from some of the country’s wealthiest farming families, pitting the mining magnate against the pastoralists for control of the world’s largest portfolio of cattle stations, writes Kylar Loussikian.
The consortium of the Buntine, Brinkworth, Harris and Oldfield families, led by Northern Territory cattleman Sterling Buntine, is expected to bid about $385 million for Kidman, topping the $365m offered by Mrs Rinehart’s Hancock Prospecting and its minority Chinese partner Shanghai CRED.
Mr Buntine has recruited federal MPs Bob Katter and Nick Xenophon to back his proposal, appearing at Parliament House in Canberra yesterday to push the case for an entirely local bid.
10.01am:Halton joins ANZ board
Jane Halton, formerly one of Australia’s most powerful public servants, has joined the board of the David Gonski-chaired ANZ bank.
Ms Halton stepped down as secretary at the Department of Finance earlier this month after 33 years in the public service, which included a stint as head of the border control taskforce during the Tampa “children overboard” affair.
Michael Roddan
More to come
9.43am:Oz Min slashes gold production guidance
The recent statewide blackout in South Australia has forced OZ Minerals to slash its gold production guidance by 10,000 ounces, although the favouring of copper production has enabled its core commodity to be unaffected.
In its September quarter update, OZ Minerals reported a 5 per cent rise in copper production, on the prior quarter, while gold production dipped as “preferential treatment” was given to copper ore at its flagship Prominent Hill project.
The statewide outage stripped 56 hours of production, while processing was delayed by two weeks as full services took time to be restored in remote regions of SA.
Daniel Palmer
More to come
9.40am:NAB dividends not sustainable: Macquarie
Except for NAB, Australian banks can sustain their dividends in the current low-growth environment, according to Macquarie.
The broker says the other banks can continue to partially rely on DRPs to support their capital positions, maintain dividends and distribute franking credits to optimise value to their shareholders.
“We continue to see value in the banks sector and believe concerns around the sector’s dividend sustainability are overstated,” Macquarie says.
“On an adjusted sustainable basis, we believe ANZ offers the best yield in the sector of about 6.5 per cent, followed by CBA, WBC and NAB.”
9.21am:Broker rating changes
MG Unit Trust cut to Hold vs Add — Morgans
MG Unit Trust cut to Neutral vs Outperform — Macquarie
Sydney Airport raised to Buy vs Neutral — Bell Potter
9.15am:Santos posts strong production rise in Q3
Energy group Santos has reported a strong rise in production and sales through the third quarter, allowing it to narrow its guidance to the top end of its range.
For the three months to September 30, the oil and gas major logged a 31 per cent jump in sales volumes to 21.3 million barrels of oil equivalent (mmboe), while production advanced 7 per cent to 15.5 mmboe.
A ramp-up of the group’s flagship GLNG project in Queensland helped LNG sales volumes more than double to 755,500 tonnes, with GLNG producing 1.3 million tonnes of LNG in the quarter and shipping 21 cargoes.
Daniel Palmer
9.06am:Mixed leads for Aussie sharemarket
Australia’s S&P/ASX 200 faces another flat open based on overnight futures fair value.
Cooling bond yields in Europe, mixed US corporate earnings reports, choppy commodities and a weaker Australian dollar were the main features.
German 10-year bunds hit a 2-week low of -0.01 per cent as ECB chief Mario Draghi hosed down the recent Bloomberg report of a consensus within the ECB to taper its QE.
That’s overall bullish for yield stocks, though it remains to be seen if US and Australian bond yields will follow the lead amid expectations of US tightening.
US earnings reports last night included a buoyant outlook for AMEX and Nestle’s outlook for the slowest growth in a decade.
Meanwhile spot iron ore rose 0.8 per cent to $US58.85 and WTI crude fell 2.4 per cent to $50.58, leaving BHP ADR’s pointing to a 0.4 per cent rise to $22.95.
AUD/USD dived from 0.7720 to 0.7621 on weak jobs data yesterday but a weekly close above the long-term downtrend line near 0.7600 would be bullish.
But the jobs data seem completely unreliable due a lack of resources in the ABS. Next week’s CPI will more likely influence the policy outlook.
The S&P/ASX 200 was last at 5442.14.
8.56am:Charges laid over Samarco
An Australian is among 22 people charged by Brazilian prosecutors over their roles in the collapse of a tailings dam at the Samarco Mineracao iron ore mine last November that killed 19 people.
Of the 22, 21 have been charged with qualified homicide. They include current and former officials of mining giants Vale SA and BHP Billiton and their joint-venture company Samarco.
The charges follow what is now considered to be the largest environmental disaster in Brazil’s history. The dam collapse released millions of tonnes of muddy mine waste, wiping out several small communities.
Prosecutors said Samarco ignored basic responsibilities and accused the mining companies of not taking into account the fate of communities downstream or even their own employees, saying there were not even “sirens or warning lights” in case of disaster.
Reuters
8.49am:Broker rating changes
Western Areas initiated at Buy, $3.00 price target — Shaw & Partners
CBL Corporation cut to Neutral vs Buy — UBS
8.43am:Chi-X Australia to start TraCRs trading
Chi-X Australia is on target to start exclusive trading of Transferable Custody Receipts (TraCRs) on February 7 on its investment products marketplace.
Subject to final regulatory approvals, the facility will allow Australians to own and trade the top US-listed companies on an Australian exchange in Australian dollars
TraCRs are based on an underlying asset that is a member of the primary index of a specified offshore market, which will initially include the NYSE and NASDAQ.
“TraCRs will be a game changer for Australian investors as for the first time they will be able to invest in some of the world’s biggest companies in Australian dollars, on an Australian exchange, protected by Australian regulations,” Chi-X Australia CEO John Fildes said.
8.20am:ACCC weighs Quadrant gym play
The ACCC has intervened in private equity firm Quadrant’s attempt to build a public float for its gym empire after the acquisition of Fitness First, writes John Durie.
7.10am:Australian market set to open flat
The Australian market looks set to open flat after the Dow Jones and S & P 500 fell slightly in a choppy session as investors digested the latest round of earnings reports.
At 6.45am (AEDT), the share price index was down one point at 5,424.
Locally, no major economic news is expected today.
In equities news, Qantas, IAG, Event Hospitality and Healthscope have annual general meetings scheduled.
In Australia, the market yesterday rose modestly, with gains in the resources sector offsetting losses from retail, health and telco sectors. The benchmark S & P/ASX200 index rose 6.7 points, or 0.12 per cent, to 5,442.1 points.
The all Ordinaries lifted 7.8 points, or 0.14 per cent, to 5,526.2 points.
AAP
7.05am:Iron ore taps six-week high
The iron ore price has again pushed higher, reaching its highest point in more than six weeks and rising above even the most bullish forecasts, Elizabeth Redman writes.
6.55am:Dollar falls nearly half a US cent
The Australian dollar has slumped against the US dollar after local jobs figures disappointed.
At 6.38am (AEDT), the local unit was trading at US76.23 cents, down from US76.68 cents yesterday.
AAP
6.45am:Charges filed in Samarco dam case
Brazilian federal prosecutors have filed homicide charges against 21 people in connection with a catastrophic dam collapse last year that killed 19 people.
Those charged include current and former officials of mining giants Vale SA and BHP Billiton Ltd. and their joint-venture Samarco Mineração SA.
Dow Jones
6.40am:Wall St steady as ECB holds
Corporate earnings drove some of the day’s biggest moves in stocks, though major US indexes were little changed overall.
Across the Atlantic, European stocks gained after the ECB hinted it could extend its bond buying program.
Dow Jones
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