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

The local market closed at a two-month low as it endured a fourth week of losses in a row.

• Stocks close at 2-month low
• The Aussie dollar’s wild ride
• Sour September could strike again
• PEP execs to depart Link board
• Stocks hit 2-month low
• Woolies freefall not over
• Origin confirms new CEO

Welcome to the BusinessNow blog for Friday, September 9. Will the local market notch up a fourth week of losses in a row?

8.07pm:MasterCard stares at $24.5bn fees suit

Britain’s former financial services watchdog is suing MasterCard for £14 billion ($24.46 billion), alleging the firm slapped excessive charges on millions of transactions.

Law firm Quinn Emanuel filed the suit Thursday at the Competition Appeal Tribunal on behalf of Walter Merricks, a former UK financial services ombudsman.

The firm says the claim is the biggest in British legal history and could bring a payout to 46 million British MasterCard users. Read more.

7.23pm: Bargains for beach house buyers

They say if you have to ask the price you can’t afford it, but there are bargains aplenty for luxury beach house buyers this Spring, whether its Queensland’s laid-back Sunshine Beach or the Victoria’s Portsea, playground for the ultra wealthy,writes Lisa Allen.

Glamour beach shacks might have been out of reach for many buyers eight years ago but as values drifted down post global financial crisis, particularly in Queensland’s volatile holiday markets, there are bargains for canny investors.

Victoria’s property market has not sustained Queensland’s price volatility, but bargains can still be had in Portsea particularly if a property does not meet buyer’s expectations at first glance. Read more.

6.54pm: A magnate’s mystery stockpile

Two years ago, a California aluminium executive commissioned a pilot to fly over the Mexican town of San Jose Iturbide, at the foot of the Sierra Gorda mountains, and snap aerial photos of a remote desert factory.

He made a startling discovery. Nearly one million tonnes of aluminium sat neatly stacked behind a fortress of barbed-wire fences. The stockpile, worth some $US2 billion and representing roughly 6 per cent of the world’s total inventory — enough to churn out 2.2 million Ford F-150s or 77 billion beer cans — quickly became an obsession for the US aluminium industry.

Now it is a new source of tension in US-Chinese trade relations. US executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system.

Aluminium-industry representative Jeff Henderson says he is convinced that China Zhongwang Holdings Ltd., a Chinese aluminium giant controlled by billionaire Liu Zhongtian, tried to evade US tariffs by routing aluminium through Mexico to disguise its origins, a tactic known as transshipping.

“My Moby-Dick has been Zhongwang,” says Mr Henderson, president of the Aluminum Extruders Council, a US trade group. Read more.

6.23pm:Aged care at the mercy of mandarins

It doesn’t sound like much: Amanda Vanstone’s sandwich and a milkshake, with a doughnut thrown in, writes Tim Boreham.

But multiply that snack as lost daily revenue across all aged-care residents and it equates to a week in hell for Estia Health (EHE, $3.22), Regis Healthcare (REG, $4) and Japara Healthcare (JHC, $1.90).

Investors are still grappling with last Friday’s decision by the Department of Health to disallow so-called “capital refurbishment and asset replacement fees”.

These operator-imposed imposts were aimed at offsetting a tweak to the Aged Care Funding Instrument (ACFI), which allocates per-resident subsidies according to their assessed needs levels. In short, residents will be ­“re-scored” more harshly under the measure, which targets savings of $528 million.

And in turn that prompted stockbroker Macquarie to estimate the $20 a day per-resident hit, based on a $20.50 per day impact for every high-needs resident. Read more.

5.50pm:Aussie dollar softer as Fed eyed

After a wild ride overnight, the Aussie dollar was weaker against the greenback in late afternoon on Friday and trading within a narrow range, with the market now looking for more clues on the timing of an expected US hike in interest rates.

At 5.50pm (AEST) on Friday, the local unit was trading at US76.19 cents, down from US76.44c on Thursday.

The Australian dollar peaked after well received Chinese trade data on Thursday, but backtracked after the head of the European Central Bank said the bank had not even discussed an extension of its quantitative easing program. Traders now await a speech on Monday next week by Lael Brainard, a member of the US Federal Reserve’s board of governors, which will be analysed for hints of a possible lift in US interest rates in September. Read more.

5.36pm:European stocks open lower after ECB

Europe’s main stock markets fell further at the start of trade on Friday, one day after the European Central Bank failed to deliver new stimulus measures.

Sentiment was dampened by earlier losses in most of Asia, where investors were rattled by concerns over North Korea’s nuclear test.

In opening deals, London’s benchmark FTSE 100 index started the day 0.2 per cent lower at 6,842.81 points.

Frankfurt’s DAX 30 dipped 0.3 per cent to 10,641.81 points and the Paris CAC 40 sagged 0.2 per cent to open at 4,531.42 compared with Thursday’s close.

The ECB opted against fresh stimulus, with president Mario Draghi calling for “patience” to see the effect of vast amounts of cash already injected into the system.

Policymakers made no any changes to the ECB’s ultra-loose monetary policy, keeping its asset-buying policy steady at €80 billion per month and holding eurozone borrowing costs at record lows.

“Markets continue to digest disappointment that ECB President Draghi did not offer more,” said Mike van Dulken, head of research at trading firm Accendo Markets.

“This likely stems from a combination of his hands being tied for now — things not markedly worse, but not better either — and wanting to see what peers do (Bank of England, Bank of Japan, Federal Reserve) over the next couple of weeks.” AFP

5.11pm:Woolies’ exec pay jumps in 2016

The salaries of Woolworths’ executives crept higher in fiscal 2016 despite the group’s disappointing performance,writes Daniel Palmer.

In its annual report, released after market on Friday, the retailer noted it had dished out $10.8 million in salaries and incentives to its key personnel, a $1.4m lift on the prior year.

The base salaries offered to its core executives rose more modestly, from $8.1m to $8.3m.

In both cases it represents a far cry from the halcyon days of giant pay packets, with the group’s total remuneration seen at $19.5m just two years ago. Read more.

4.17pm:Stocks close at two-month low

The Australian sharemarket has settled at its lowest mark in two months after a fresh sell-off driven by weakness in the big banks.

At the closing bell, the benchmark S&P/ASX 200 index slumped 46.6 points, or 0.87 per cent, to 5,339.2, while the broader All Ordinaries index skidded 44.2 points, or 0.81 per cent, to 5,440.4.

The lacklustre session forced the benchmark into the red for the fourth straight week and leaves it less than one per cent above where it started the year.

The banks were among the biggest disappointments during Friday’s session, with the big four alone wiping over 21 points from the benchmark index, or almost half the total loss for the day.

The heaviest retreat was tracked at Commonwealth Bank as it stumbled 1.7 per cent to $70.87, while ANZ lost 1.1 per cent, NAB yielded 1.3 per cent and Westpac gave back 1.6 per cent.

Daniel Palmer
Read more

3.40pm:Moody’s positive on earnings season

The recent earnings season failed to inspire traders, but it painted a largely positive picture on Australia’s largest companies for a leading ratings agency.

In a report on the annual reporting season, Moody’s said less than 20 per cent of the corporates it rates delivered results that raised questions about the sustainability of their current debt rating.

In contrast, almost half delivered earnings reports that lifted confidence in the current rating.

“Of the 21 non-financial corporates that we rate, 10 reported credit positive results, seven reported credit neutral results and the remaining four reported credit negative results,” Ian Chitterer, a Moody’s vice president and senior analyst said.

3.05pm:The Aussie dollar’s wild ride

The Australian dollar is set to end the week a long way north of where it started as traders weigh talk from the world’s two most important central banks.

The Australian dollar ended the week higher as traders eye the ECB and Fed.

European Central Bank president Mario Draghi left the door open to further monetary easing at last night’s meeting and lowered growth and inflation forecasts only slightly.

Meanwhile the market is eyeing the possibility of a ‘live’ Fed meeting in September — will Janet Yellen and the team pull the trigger on an unexpected rate hike?

The Aussie dollar was buying US76.46c at just after 2:30pm AEST, which compares with US75c on August 30.

The local unit cracked a four-and-a-half week high yesterday evening of US77.33c but has cooled this afternoon as investors look to the possibility of a Fed rate hike.

The Fed has previously mentioned weak global sentiment as a reason not to lift interest rates, and the ECB is keeping talk loose.

“For the time being, the changes are not substantial enough to warrant a change in policy,” Mario Draghi said. “There is no question about the will to act, or the ability to do so.”

However, he warned that the eurozone faces “downside risks” that could mean growth is weaker than expected, including the fallout from Brexit.

2.40pm:Bob Ell buys ACT shopping centre

Billionaire Bob Ell has taken full control of the $240 million Tuggeranong Hyperdome in the ACT by buying out co-owner Vicinity Centres.

The property developer, whose Leda Holdings operation has a four-decade history, was this year ranked as the second richest person in Queensland with a $1.33 billion fortune.

Mr Ell keeps a low profile but has ridden the residential boom by rolling out estates across NSW and Queensland, as well as reaping the benefits of the rising values on his retail, office and industrial holdings.
Ben Wilmot
Read more

2.15pm:Chinese inflation slows to 1.3%

China’s consumer price inflation has slowed to its weakest pace in almost a year, pulled down by abating food costs, although an encouraging moderation in producer price deflation added to recent evidence of a steadying economy. The consumer price index (CPI) rose 1.3 per cent in August from a year earlier, compared with a 1.8 per cent increase in July, the National Bureau of Statistics said on Friday.

That was the slowest pace of inflation since October 2015. Analysts polled by Reuters had expected a 1.7 per cent gain.

Consumer inflation has remained well below China’s official target of around 3 per cent in 2016, despite concerns that severe northern summer flooding, which has disrupted public infrastructure and agricultural production, would ramp up inflationary pressures.

1.49pm:Sour September could strike again

Post-earnings season blues have sucked the life out of the market so far this month as September shapes up to be more of the same flat and dreary market we saw in August.

Stocks may typically struggle in September but on the plus side it’s time for the AFL finals.

So far this month (yes, I realise we’re only seven sessions in) the S&P/ASX 200 is down 1.6 per cent to last trade at 5341.1 points, and while you might argue that’s entirely to do with a disappointing earnings season and the correction of an overpriced market, it’s actually dead in line with monthly characteristics.

Over the last five years September has been the second-worst month of the year with an average fall of 2.6 per cent — May is the only month more notorious for dropping stocks with an average 3 per cent fall.

And while September looks likely to stick to its disappointing theme, August was the villain this year, with stocks falling 2.3 per cent compared with a five-year average fall of 1.8 per cent.

Attention could simply be elsewhere in September, after all it’s finals footy time.

1.21pm:A retail version of a Ponzi scheme

From Stephen Bartholomeusz’s column today:

After the first week of public examinations of former Dick Smith executives and non-executives, the key flaw in the group’s business model that led to its collapse early this year appears to have been identified. It was unwittingly running something analogous to a retailing version of a Ponzi scheme.

In a Ponzi scheme, apparent (and usually high) returns to investors are paid, initially from their own capital and then from the funds contributed by subsequent investors in an ever-expanding cycle — until it collapses when the flow of new capital dries up.

In Dick Smith, there wasn’t the fraud associated with Ponzi schemes, but apparent incompetence. An inexperienced chief executive took some perhaps half-understood advice from a vastly experienced mentor and pushed it beyond its limits and drove Dick Smith into the corporate graveyard.
Read more

1.03pm:A user-pays model for road use?

Australians are open to trying a fairer and more transparent way of paying for their road use and a system based on user pays does not dramatically change the way people use their cars, according to the findings of a landmark study released today by toll-road operator Transurban.

Transurban chief executive Scott Charlton told the Infrastructure Partnerships Australia conference in Melbourne that privacy and technology were no longer substantial barriers to the introduction of user-pays models for road pricing.

The 18-month study, led by Transurban and supported by independent research and technology specialists, looked at how people used their cars on Melbourne’s road network under different charging options.
Damon Kitney
Read more

12.30pm:BHP a bright spot as banks suffer

Local stocks look set to notch up their fourth negative week in a row as the ASX limps into the weekend.

The S&P/ASX 200 was down 0.7 per cent at 12:15pm AEST to 5347.5 points, which puts it 0.5 per cent lower for the week.

Investors had hoped for a rebound following last week’s 2.6 per cent slide but broadbased selling in the last two sessions have seen the positivity dry up.

BHP Billiton is a bright spot, up 2.4 per cent to $20.75 and Rio Tinto has gained 1.4 per cent, but it’s pretty grim news from the other market majors.

The big four banks are down between 1.1 per cent and 1.3 per cent, while Telstra has given up 0.5 per cent and CSL slumps 2.2 per cent.

Sigma Pharma is the strongest performing stock on the index as investors continue to applaud a much better-than-expected first half result.

12.05pm:Sigma upgraded to ‘buy’ at UBS

Sigma Pharmaceuticals has been upgraded to ‘buy’ from ‘neutral’ at UBS in a classic case of ... ‘I wish you’d have told us yesterday’.

The stock has surged 19 per cent in the last two days after the company announced a 26 per cent rise in first-half profit and upgraded its full-year earnings forecast.

Sigma has “found its mojo”, according to UBS analysts, led by Andrew Goodsall, who says the base business is reliable and stable.

“After five years of progressive movement in operations and execution, Sigma’s 1H17 result appears to an inflection point on new growth opportunities,” Mr Goodsall and the team said.

11.49am:Housing finance dips

The value of home loans issued in Australia fell 1.8 per cent in July, official data show, driven by a sharp 3.1 per cent drop in finance to owner-occupiers.

Volatility in the reading has been common throughout the year, but the numbers reveal a slowdown in lending to investors has yet to surface despite the purported crackdown by the banks at the whims of regulators.

In terms of value, financing offered to investors rose 0.5 per cent on the month and 1.1 per cent on the year to July 31. In contrast, the value of loans to owner occupiers has retreated 0.1 per cent over the past 12 months.

11.15am:PEP execs to step down from Link board

Two Pacific Equity Partners executives will step down from Link Group’s board this afternoon as the private equity firm severs its association with the funds administration and share registry company it listed on the stock exchange last year.

The move follows the $873m selldown on Wednesday evening of PEP’s holding in the group.

UBS executed the trade, which was priced at $8.38 per share.

Paul McCullagh and Cameron Blanks are expected to confirm their resignations from Link’s board in an announcement to the ASX.

Their departure will mark an opportunity for board renewal at the group and will initiate a search for a new non-executive director.

Gretchen Friemann

11.05am:Aluminium mystery stokes US-China tensions

Two years ago, a California aluminium executive commissioned a pilot to fly over the Mexican town of San Jose Iturbide, at the foot of the Sierra Gorda mountains, and snap aerial photos of a remote desert factory.

He made a startling discovery. Nearly one million tonnes of aluminium sat neatly stacked behind a fortress of barbed-wire fences. The stockpile, worth some $US2 billion and representing roughly 6 per cent of the world’s total inventory — enough to churn out 2.2 million Ford F-150s or 77 billion beer cans — quickly became an obsession for the US aluminium industry.

Now it is a new source of tension in US-Chinese trade relations. US executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system.

Dow Jones
Read more

10.25am:Stocks hit two-month low

The Australian sharemarket has struck a two-month low after the banks again drew heavy selling in morning trade.

At the 10.15am (AEST) official market open, the benchmark S&P/ASX 200 index lost 43.6 points, or 0.81 per cent, to 5,342.2, while the broader All Ordinaries index yielded 41.3 points, or 0.75 per cent, to 5,443.3.

The action leaves the market at risk of its fourth straight weekly decline.

The heaviest retreat was tracked at Commonwealth Bank as it slid 1.1 per cent, while ANZ outperformed in falling 0.7 per cent.

Daniel Palmer

10.17am:Mortgage arrears rising: S&P

A rising number of Australians are falling behind in their mortgage repayments despite interest rates being at a record low.

A new report from ratings agencies Standard and Poors (S&P) has found that arrears in June were 12 per cent higher than at the same time last year.

The levels of arrears remain off their peak but the result was still surprising given the official cash rate was just 1.75 per cent when the report was compiled to the end of June.
Scott Murdoch
More to come

10.02am:Woolies freefall far from over: Morgans

Woolworths has a lot further to fall … In fact another 27 per cent in the next 12 months would be reasonable, according to Morgan Stanley.

Analysts, led by Thomas Kierath, have reiterated their ‘underweight’ view on the retail giant and say the market is too bullish on fiscal 2017 earnings.

“Woolworths is paying the price for strategic missteps in the past [and] turning around a massive organisation takes a long time,” Morgan Stanley’s Thomas Kierath said.

The analyst paints a grim picture for Woolies, pointing to a bearish food margin, along with price investment from stiff competitors Coles and Aldi.

“We believe the consensus is over-estimating Woolworths’ fiscal 2017 earnings per share by [around] 10 per cent,” Mr Kierath said as he slashes its price target to $17 — a full 27 per cent below its last price of $23.27.

“The consensus broadly factors Woolworths holding its fiscal 2016 food margin into fiscal 2017, presumably as the new CEO has now effectively finished ‘rebasing’ expectations.

“We think there’s more rebasing to go and forecast food margins to reduce from 4.8 per cent in FY16 to 4 per cent in fiscal 2017.”

Woolworths shares have given up 5 per cent in the year to date and while the overall mood from analysts remains weak, Morgan Stanley’s price target sits well below the rest.

Bloomberg data show just two ‘buy’ ratings from analysts covering the stock, five ‘holds’ and eight ‘sell’ ratings.

Source: Morgan Stanley

9.43am:Origin confirms new CEO, King to retire

Origin Energy has confirmed the retirement of longtime chief executive Grant King, naming internal candidate Frank Calabria as his replacement.

Mr Calabria is currently serving as head of Origin’s energy markets unit.

The Australian’s Data Room column flagged the likely hiring of Mr Calabria earlier this week, with Mr King eyeing the exit after 16 years at the helm of the group.

The outgoing chief executive was Origin’s inaugural leader after it split from Boral in 2000.

Mr Calabria’s appointment is effective from the conclusion of Origin’s annual general meeting on October 19, while Mr King will formally depart the business at the end of October.

Daniel Palmer
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9.33am:‘It was all a stitch up’

The bitter legal feud between Woolworths and its partner, US hardware giant Lowe’s, deepened yesterday with claims by the American group that it had been the victim of a well-planned “stitch up” by the Australian retailer as it moved to exit from its hardware chain.

Lowe’s claims it’s been the victim of a well-planned “stitch up” by Woolworths PICTURE: BRENDAN RADKE

The fire sale of the Masters business has been under legal siege from Lowe’s for weeks, with the company blasting Woolworths for “oppressive conduct’’ and acting in “bad faith’’ over the chain’s planned shutdown in a surprise legal claim it sprung on the Australian group last month.

The sale includes selling Masters properties to a consortium of high-net-worth individuals and families led by former UBS boss David Di Pilla for more than $750 million, selling Home Timber & Hardware to Metcash for $165m and the sale of Masters inventory for about $500m.

At yesterday’s federal court hearing, Lowe’s barrister, Stuart Lawrance, told judge Lindsay Foster, that the group was seeking documents to put its case, potentially “showing this was all a stitch up that had all been planned well in advance”.

9.20am:Apple ditches iPhone sales gauge

Apple doesn’t plan to disclose first-weekend sales of the iPhone 7, in a departure from its past practice.

Apple has disclosed the figures for its new iPhones the past eight years. Last year, for example, Apple said it sold 13 million iPhone 6s and 6s Plus phones in their first three days of availability, up 30 per cent from initial sales of the iPhone 6 models the prior year.

Some analysts and investors have viewed the numbers as a gauge of enthusiasm for the new phones. Apple says the figures are less relevant than in the past.
Dow Jones
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8.52am:Four down weeks in a row?

Australian stocks could limp into the weekend and notch up a fourth week of losses — something that looked out of the question on Wednesday.

The local market gas tumbled 3.4 per cent in less than three weeks.

The SPI200 futures index is pointing to a 0.2 per cent fall at the open, but fair value suggests a meatier 0.6 per cent drop is more likely, according to Bloomberg.

The local index is just 0.2 per cent higher for the week at 5385 points with one session remaining, with weakness from banks and miners, along with a hefty ex-dividend fall from Woolworths, pulling the market down from higher standings earlier in the week.

In two and a half weeks the local market has dropped 3.4 per cent, with last week’s 2.6 per cent drop taking the wind out of the market’s sails.

On the plus side BHP Billiton is heading for a 0.8 per cent rise this morning, according to its ADRs. The miner is currently 2.1 per cent in the black this week despite tumbling 2.3 per cent from Wednesday’s high of $20.72.

7.05am:Sharemarket set to follow Wall St down

Australian stocks look set to open lower after Wall Street was dragged down by Apple, although the decline was limited by gains in energy shares.

At 6.45am (AEST) on Friday, the share price index was down 16 points at 5,349.

Investors in the US appeared unimpressed by Apple’s new iPhone 7. The tech giant’s shares fell 2.6 per cent to $105.52, its biggest daily percentage decline since the Brexit vote on June 24 and prompting the Nasdaq to break a four-day streak of gains.

Locally, in economic news today, the Australian Bureau of Statistics is due to release housing finance data as well as overseas arrivals and departures figures, both for July.

No major equities news is expected.

However, Westpac’s consumer bank chief executive George Frazis is slated to speak at the trans-Tasman Business Circle event at the NSW Parliament House, while the NBN Co CEO is scheduled to speak at an Australia-Israel Chamber of Commerce lunch, also in Sydney.

In Australia, the market yesterday closed lower due to falls by the big banks and miners on a day with little news to influence investors. The benchmark S & P/ASX200 index was down 38.4 points, or 0.71 per cent, at 5,385.8 points.

The broader All Ordinaries index was down 36.5 points, or 0.66 per cent, at 5,484.6 points.

AAP

7.00am:Dollar sinks

The Australian dollar has fallen more than half a US cent against the greenback.

At 6.35am (AEST), the local unit was trading at US76.41 cents, down from US77.07 cents yesterday.

The US dollar touched a low against a basket of currencies before rebounding overnight.

AAP

6.50am:Iron ore extends losing streak

The iron ore price has dropped to a fresh six-week low, as it continues to retreat from levels widely seen as unsustainable given the oversupplied market.

Iron ore shed 1.5 per cent to $US57.40 a tonne overnight, according to The Steel Index, from $US58.30 the day before.

Read more

6.40am:Wall St drops as ECB holds

Tech shares dragged down US stocks overnight amid apparent disappointment over Apple’s new iPhone, while investors also digested inaction by the European Central Bank.

The Dow Jones Industrial Average fell 46 points, or 0.25 per cent, to 18480. The S & P 500 declined 0.2 per cent and the Nasdaq Composite lost 0.5 per cent.

In Europe, French and German markets fell after the ECB declined to offer fresh stimulus measures, although it left the door open to extending its bond-buying program.

The Australian share market is set to follow the weak global leads, with ASX futures down 12 points at 6.28am (AEST).

Dow Jones

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6.30am:ECB holds stimulus steady

European Central Bank President Mario Draghi Thursday left the door open to an extension of his bond-buying program beyond March 2017, as his economists lowered their growth and inflation forecasts for next year only slightly.

Earlier, the ECB left all of its key interest rates unchanged, holding off on shifting its main policy levers, even as inflation in the 19-country currency bloc remains stubbornly low.

Dow Jones

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