Trading Day blog: live markets coverage; plus analysis and opinion
Local shares take a hit from heavyweight financials as the Turnbull government backflips on an bank inquiry.
And that’s the Trading Day blog for Thursday, November 30.
Samantha Woodhill 4.45pm: Bank probe hits sharemarket
The local share market fell sharply as investors sold off financials following the announcement of a royal commission into the banking sector.
At the close of trade, the benchmark S & P/ASX200 was down 41.217 points or 0.69 per cent at 5969.898 points. The broader All Ordinaries index was down 38.853 points or 0.64 per cent, at 6057.2 points.
The market failed to fully recover from a one per cent fall in early trade, weighed down by the Big Four after the banks, and then Malcolm Turnbull, reversed their earlier opposition to a royal commission. citing the need for certainty.
“It doesn’t seem like this is something that will spill through to tomorrow, one suspects that this is a one day affair,” said IG chief market strategist Chris Weston.
“We traded down pretty sharply on the open and we sort of gravitated a little bit higher so it’s not all doom and gloom.
“The fact that the banks have asked for the inquiry suggests that they’ve had a good amount of time to sort themselves out and should be OK.”
Among the banks, NAB added 0.03 per cent to $29.59. Commonwealth Bank fell 1.91 per cent to $79.43. Westpac edged down 0.03 per cent to $31.47 and ANZ weakened 1.08 per cent to $28.46.
BHP gave up 1.23 per cent to $27.30 while Rio Tinto backtracked 1.05 per cent to $70.95.
3.53pm: Retail Food Group on track
Coffee, bakery and pizza franchise owner Retail Food Group says challenging domestic conditions will weigh on its Australian division.
But the group, which includes Gloria Jean’s, Donut King, Crust Pizza and Brumby’s Bakery, expects its international and commercial divisions to offset its weak domestic business.
Retail Food Group chief executive Andre Nell says as a result, the group has maintained its full-year guidance of about six per cent growth in underlying net profit — AAP
RFG last up 2.7 per cent on $4.50
Andrew White 3.36pm: Whiplash follows note from banks
If only you could get a loan approved so quickly.
From the shock at 8.30am this morning of the banks releasing a statement calling for a commission of inquiry, to the Prime Minister’s endorsement of said call half an hour later, this has to be one of the quickest and most thorough about-faces in recent political history.
The government even had draft terms of reference ready to go.
And that may say a lot about who is driving this commission process.
After years of opposing calls from within its own ranks, consumer advocates, Labor and the Greens, the government has decided that, actually, they should have a commission.
3.04pm: WATCH: John Durie on bank inquiry
2.39pm: Australia’s great property divide
The great divide between house prices in Sydney and Melbourne compared with the rest of the country has been highlighted by new research on the best performing markets over the past 10 years.
The CoreLogic data looked at markets serviced by major transport and commercial hubs with populations between 30,000 and 130,000 people.
Topping the list was Wyndham in Melbourne’s outer southwest where home values climbed almost 130 per cent in the last decade, to $540,644.
2.05pm: WATCH: ABA struck by bank inquiry pace
Stephen Bartholomeusz 1.35pm: Banks’ in containment mode
Having reluctantly reached the conclusion that a commission of inquiry into the financial sector was inevitable, the major banks have sensibly determined that they’d fare better if the government dictated its terms of reference rather than the unholy alliance between the National and the Greens. The government has reluctantly but sensibly concurred.
It became obvious this week that there would be an inquiry after the Nationals and the Greens successfully negotiated the detail of legislation to establish one. Labor, while preferring a Royal Commission of its own making, could have been expected to support them, as would the crossbenchers.
Faced with the prospect of what would be an open-ended exercise in bank-bashing — one designed to provide a forum for bank-bashing with its terms reflecting the full range of the Nationals and Greens’ anti-bank prejudices — the major banks’ chairs and chief executives have sensibly decided they’d fare better if the inquiry were intelligently-framed and conducted at arms-length from parliament.
1.05pm: Capex rises in September
Australian business investment rose one per cent in the September quarter, matching economists’ forecasts, official figures show.
The figures from the Australian Bureau of Statistics, cover investment in capital goods which includes buildings, other structures, machinery and equipment.
During the 2017/18 financial year, businesses collectively expect to invest $108.9 billion, which is 1.6 per cent higher than the corresponding estimate made at the same time last year.
AAP
12.55pm: The Trading Day ahead
Join the conversation with our Trading Day experts for breaking news and analysis in financial markets here and on Sky News Business (Ch: 602)
1.50pm: Live cross — Bloomberg Asia
2.00pm: Rob Brierley — Head of Research, RM Capital
2.20pm: Tim Larkworthy — Fixed Income Sales Director, FIIG Securities
2.30pm: Daniel Hynes — Senior Commodity Strategist, ANZ
2.45pm: Elliot Clarke — Director and Senior Economist, Westpac
(All times in AEST)
12.17pm: Fortescue names Gaines new CEO
Fortescue has appointed Elizabeth Gaines as its new chief executive officer, succeeding Nev Power who announced in September that he would be stepping down in February next year after seven years at the helm — read more
FMG last down 1.1 per cent on $4.57
12.04pm: ASX under pressure on banks hit
Local shares remain under pressure, the ASX200 down 0.6 per cent on 5997.3 as heavyweight bank stocks are hit by heaving selling in the wake of the Turnbull government’s backflip over a royal commission into the financial services sector.
CBA last traded down 1.9 per cent, Westpac last 0.8 per cent lower, while ANZ and NAB both remain 0.4 per cent in the red.
“We haven’t seen the worst of it, but I also think we’ll see it pass fairly quickly given [supportive] global growth sentiment,” says Charles Schwab’s Ben Le Brun.
“It’s not going to surprise me seeing another couple of per cent coming out of these banks in the next couple of days. I think when we bounce, we’ll bounce very hard.”
SWING STOCKS
+ oOh Media (1.6pc), Beach Energy (1.5pc), JB Hi-Fi (1.4pc), Newscorp (1.2pc)
— Independence Group (4.5pc), Aristocrat Leisure (3.6pc), Altium (2.9pc), Aconex (2.6pc)
11.38am: Dairy conduct requires code: ACCC
The competition watchdog has recommended a mandatory code of conduct be established for the dairy industry to address the power imbalance between dairy processors and farmers.
The Australian Competition and Consumer Commission (ACCC) says, in its dairy industry inquiry interim report, that processors, often under pressure from supermarkets or export market competition, use their bargaining power to shift risks onto dairy farmers.
The ACCC’s 12-month inquiry follows dairy processor Murray Goulburn’s surprise cut to the price it paid dairy farmers for their milk in April 2016, which caused chaos in the dairy sector.
AAP
11.30am: October building approvals surprise
Building approvals rose 0.9 per cent in October, compared to a 1 per cent fall expected by economists.
Compared to the same period a year prior, approvals rose 18.4 per cent.
The Australian dollar registered little reaction to the data and last bought $US75.70 cents.
Michael Roddan 11.27am: CBA responds to royal commission
Commonwealth Bank issued a terse statement, acknowledging “the announcement by the Prime Minister and Treasurer that the Federal Government will establish a Royal Commission into the Australian financial services sector”. The bank said it also “notes” the draft terms of reference that have been released.
“The Commonwealth Bank will co-operate fully with the Royal Commission,” CBA said.
CBA has provided politicians with a seemingly endless stream of fodder for bank bashing rhetoric. The allegations it broke anti-money laundering legislation more than 53,000 times, claimed by the regulator Austrac in a Federal Court filing in August, came on top of a life insurance scandal where the company was found to be using outdated definitions of heart attacks to deny claims.
It also followed a wideranging debacle in wealth management, where planners were found to be selling poor financial advice. The collapse of Storm Financial had also tarred the image of the lender in the eyes of many Nationals MPs.
Eli Greenblat 10.36am: Oroton collapses after halt
The worst trading conditions in decades for the retail sector has this morning claimed its biggest victim in a year dominated by the collapse of well known fashion brands and stores, with Australian luxury brand and retailer Oroton placed into voluntary administration.
The ASX-listed retailer, known for its high-priced Oroton handbags, branded fashion accessories and whose public face for many years was actor Rose Byrne, had been in a trading halt since Tuesday when the company called for the halt citing the outcome of a six month-long strategic review — read more
ORL last $4.85
Michael Roddan 10.28am: Inquiry call shrinks ‘fringe’ risk: ABA
Australian Bankers Association chief executive Anna Bligh said the government-controlled royal commission was necessary to avoid an inquiry with terms of reference set up by “fringe elements” and minor parties in the parliament.
“This is an extraordinary and unprecedented step,” Ms Bligh told reporters on the sidelines of a superannuation conference in Sydney this morning.
Ms Bligh was aware of the letter sent to the government by the chairmen and chief executives of the major banks, but the paces with which the Prime Minister announced the royal commission surprised the former Queensland Premier.
More to come.
10.24am: ASX erases week’s gains
Australia’s S & P/ASX 200 is down 0.7pc at a 4-day low of 5968.4.
The index is heading for its worst day in two weeks as banks lead a relatively broad sell-off.
Major banks are down 1.2-2.4pc after the Turnbull government endorsed their call for a royal commission to end “political uncertainty.”
The other significant falls are in the materials sector after LME copper fell 1pc and nickel lost 1.9pc.
BHP is down 0.5pc at $27.50 and Rio Tinto is down 1.2pc at $70.80.
AWE remains in a trading halt after receiving a takeover proposal.
Sarah-Jane Tasker 10.19am: CrownBet ends Tabcorp-Tatts plight
The James Packer-backed CrownBet has confirmed it will not appeal the regulatory approval of the Tabcorp (TAH) and Tatts (TTS) merger, after securing a racing vision deal with Tabcorp.
The racing vision deal clears one of the final hurdles for Tabcorp to complete the Tatts deal by the end of the year, with it now just waiting on confirmation from the competition regulator that it also won’t appeal approval.
Tabcorp said the vision supply agreement would see Tabcorp supply a digital stream of Sky 1 and Sky 2 to CrownBet for use by its wagering customers on their mobile and PC devices. CrownBet will make payments to Tabcorp, subject to an annual minimum amount.
More to come.
10.12am: China group lobs AWE takeover bid
AWE says it has an indicative proposal from China Energy Reserve & Chemical Group to buy the company for $0.71/share.
AWE shares currently in trading halt, last $0.545.
10.07am: Bank shares fall at the open
Banks shares fall at the open after the Turnbull government backflipped to support a royal commission of inquiry into financials services sector earlier this morning.
Commonwealth Bank falls as much as 2.1 per cent to $79.28, Westpac down 1.8 per cent to $30.92, ANZ drops 1.3 per cent $28.40 while NAB falls 1.4 per cent to $29.17.
Index last down 0.6 per cent on 5973.9
9.57am: US boosts Aristocrat profit
Poker machine supplier Aristocrat Leisure’s full-year net profit has jumped 41.3 per cent, helped by strong growth in its Americas business.
The company says revenue for the year to September 30 has risen 15.3 per cent to $2.45 billion and it has lifted its final dividend by a third to 20 cents a share, partially-franked, from 15 cents a year ago.
Aristocrat has also announced it is acquiring Seattle-based social gaming company Big Fish Games for $US990 million ($A1.4 billion) to expand its digital business into the fast growing social gaming market — AAP
ALL last $23.60
9.53am: WATCH: Bank inquiry budget $75m
Treasurer Scott Morrison says the government has allocated $75 million dollars for the Royal Commission into the financial sector #auspol @SkyNewsAust pic.twitter.com/AXM2tR6Lvc
— Amy Greenbank (@Amy_Greenbank) November 29, 2017
9.34am: ASX risks adverse bank reaction
Bank shares are likely to fall today and they may also weigh on the broader share market.
That follows the announcement of a planned royal commission into bank’s alleged misconduct in the financial system.
The Turnbull government has endorsed a call by banks for a “properly constituted” inquiry that will report in 12 months time.
“This is a regrettable but necessary course of action,” Treasury Scott Morrison says.
Bank shares are likely to fall because a royal commission was not widely expected to be announced at this time.
However, the banks index is down about 10 per cent since May, whereas the broader market has hit a decade high.
Much of the underperformance from banks is due to the bank tax announced in the Federal budget, but a royal commission was also a risk.
The banks index has also fallen 3.7pc in the last six weeks as 3 of the 4 major banks traded ex-dividend this month.
Overall a royal commission is “bad news” for banks, particularly because it wasn’t widely expected now.
But institutions are underweight the sector and are likely to buy after any sharp fall in the next few days.
They will take the view that a royal commission under the conservatives shouldn’t be a damaging as an inquiry under Labor.
Index last 6011.1
9.32am: Analyst rating changes
CSL target price raised to $160 vs. $152; Outperform rating kept — CLSA
IDX cut to Underperform; target cut to $1.93 vs. $2.33 — CLSA
NextDC initiated at Overweight; $6.50 target price — Morgan Stanley
Clydesdale Bank target price raised to $5.34 vs. $4.95; Neutral rating kept — Macquarie
Seek target price raised to $17.90 vs. $16.00; Hold rating kept — Deutsche
Sonic Healthcare cut to Hold — Morningstar
Melbourne IT cut to Hold — Bell Potter
9.28am: WATCH: Bank inquiry in national interest
.@ScottMorrisonMP says the government is acting in the national economic interest by taking what he describes as the regrettable but necessary action of a banking royal commission. MORE: https://t.co/JyT0SZVc5E pic.twitter.com/rCd7cqsrjE
— Sky News Australia (@SkyNewsAust) November 29, 2017
9.26am: WATCH: Bank inquiry report in 12m
The Royal Commission will cover the nation’s banks, wealth managers, superannuation providers and insurance companies. It will report back in 12 months time #auspol @SkyNewsAust pic.twitter.com/kmt0gYsThJ
— Amy Greenbank (@Amy_Greenbank) November 29, 2017
Greg Brown 9.10am: Turnbull backflips on bank inquiry
The Turnbull government has backflipped on its opposition to a banking royal commission and will back a powerful probe into the financial services sector.
Malcolm Turnbull said the constant speculation of an inquiry was starting to undermine the financial system and the economy, making one necessary.
“The speculation about an inquiry cannot go on. It’s moving into dangerous territory where some of the proposals being put forward have the potential to seriously damage some of our most important institutions,” the Prime Minister said.
“We have got to stop the banks and our financial services sector being used as a political football.
“Cabinet has met this morning and has determined the only way we can give all Australians a greater degree of assurance is a royal commission into misconduct into the financial services industry.”
The inquiry will go for a period of 12 months.
Read more
.@TurnbullMalcolm says the only way we can give Australians assurance about the financial services system is through a royal commission. MORE: https://t.co/JyT0SZVc5E pic.twitter.com/f5LnRIk86U
— Sky News Australia (@SkyNewsAust) November 29, 2017
John Durie 9.04am: Bank inquiry call Turnbull dynamite
The big four banks have raised the stakes for the Federal Government by calling for certainty over any bank inquiry and effectively waving the white flag saying if there is to be an inquiry it should be limited to key community concerns.
In effect the bank chief are saying: if you are going to have an inquiry lets do it in our terms.
The banks also want the Government to show some leadership by either bowing to pressure to have inquiry or to rule one out definitively.
A nice try but political dynamite for Prime Minister Malcolm Turnbull.
Richard Gluyas 8.45am: Banks pitch inquiry to Turnbull
The major banks have taken the extraordinary step of pitching the Turnbull government to set up a formal inquiry into the banking system.
In a letter signed by the four major bank chief executives and chairs, a formal inquiry is now said to be in the national interest.
Greg Brown 8.23am: Shorten tells Dastyari to quit roles
Bill Shorten has told Labor senator Sam Dastyari to resign from his role as the Opposition’s deputy whip in the Senate.
Senator Dastyari will go to the backbench after being accused of passing classified information onto a Communist Party of China-linked donor, Huang Xiangmo.
7.45am: Stocks set to dip at open
The Australian share market looks set to open lower as both the Nasdaq and the S & P head toward their biggest one-day losses in months.
At 7am (AEDT) on Thursday, the share price futures index was down nine points, or 0.15 per cent, at 6,010.
In the US, investors have bailed out of high-flying tech stocks and shifted bets to banks and other pockets of the market that could benefit from improving economic conditions, lower regulations and taxes, and higher interest rates. The Nasdaq looks set for its biggest one-day loss in more than three months while the S & P 500 is heading for its biggest one-day loss in more than five months.
The Dow Jones Industrial Average was up 0.32 per cent, the S & P 500 was down 0.11 per cent and the Nasdaq Composite had dropped 1.47 per cent, by 7.23am (AEST).
Locally, in economic news on Thursday, the Australian Bureau of Statistics releases September quarter private capital expenditure and expected expenditure data, and October building approvals figures.
The Competition and Consumer Commission is expected to release the interim report from its inquiry into the dairy industry.
The HIA new homes sales report for October is also due out, as is the National Australia Bank Customer Spending Behaviours report for the third quarter. In equities news, Aristocrat Leisure is expected to post full-year results, while Retail Food Group and Bank of Queensland hold their annual general meetings.
The Australian market on Wednesday rose, with the share market’s benchmark index breaching 6,000 points for second time in November thanks to gains by the major banks, miners and energy companies.
The benchmark S & P/ASX200 index rose 26.8 points, or 0.45 per cent, to 6,011.1 points.
The broader All Ordinaries index gained 29.4 points, or 0.48 per cent, to 6,096.1 points.
AAP
7.28am: Oil slips for a third day
Oil prices fell for a third straight day Wednesday as investors became less certain that major oil producing nations will strike a deal to extend their output cuts.
US crude futures fell 69 cents, or 1.19 per cent, to $US57.30 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 50 cents, or 0.79 per cent, to $US63.11 a barrel on ICE Futures Europe.
Investors are growing nervous that a coalition of countries that opted to reduce output last year to work off a supply glut is fracturing. A production cut deal between the Organization of the Petroleum Exporting Countries and other major producers, including Russia, is due to expire in March. OPEC is meeting Thursday and is expected to decide whether to continue holding 2 per cent of global oil production off the market.
Dow Jones
7.17am: Dollar dips further against greenback
The Australian dollar is lower still against a weaker US counterpart which lost gains made after Federal Reserve chair Janet Yellen spoke of continued US economic expansion and GDP was revised higher.
At 7.19am (AEDT) on Thursday, the Australian dollar was worth US75.77 cents, down from US75.88c on Wednesday.
Westpac’s Imre Speizer says the US dollar was also lower, losing its gains made earlier in the New York session.
“US bond yields rose after Fed Chair Yellen spoke of continued economic expansion and GDP (gross domestic product) was revised higher, but equities retreated amid tech stock selling. The USD gave up early gains. “The US dollar index made gains early in the New York session but later faded to be slightly down on the day,” Mr Speizer said in a morning note. “(The) AUD fell from 0.7600 to 0.7552 before rebounding to 0.7580 later in the NY session.” The main local event risks for the local currency on Thursday include the Australian Bureau of Statistics’ private capex “which is expected to rise 1.0 per cent,” Mr Speizer said, and “October dwelling approvals (which) are expected to fall one per cent”.
“Both high-rise and non-high-rise segments are still pointing to a likely slowdown. October private credit is seen to rise 0.4 per cent ...” He said the local currency was “vulnerable to revisiting the recent low at 0.7530, given slightly weaker risk appetite’.
The Aussie dollar is down against the yen and the euro.
AAP
7.11am: Wall St in tug of war
The two biggest slices of the S & P 500 — technology companies and financial firms — played tug of war with the broader index Wednesday.
Banks have led stocks higher this week, with investors saying the sector is benefiting from robust economic growth around the world, gradually rising interest rates and the prospect of tax cuts. The S & P 500’s financial sector hit its highest level of the year Wednesday.
At the same time, investors pulled back from tech companies, which have gotten pricier as they have fuelled this year’s run-up in stocks. Technology shares in the index — which accounted for nearly a quarter of the S & P 500’s value as of the end of last month — were on track for their worst day in months.
“It’s a bit of a shift toward a friendlier investment landscape for financials,” said Michael Hans, chief investment officer at Clarfeld Financial Advisors. Mr. Hans added, however, that the earnings backdrop is still favourable for technology stocks. “I don’t feel anything other than that shift in the momentum trade,” he said.
The S & P 500 declined 0.1 per cent. The Dow Jones Industrial Average rose 91 points, or 0.4 per cent, to 23,927 and was on track for a fresh record, while the Nasdaq Composite — heavily weighted with tech companies — declined 1.3 per cent.
Dow Jones
7.08am: Europe lifts as FTSE falls
British shares missed out on a rising tide across European bourses on Wednesday as sterling rallied to a two-month high following reports Britain and the European Union had agreed the outlines of a Brexit divorce bill. The FTSE 100 sank 0.9 per cent to 7393.56, its worst loss in a month as the pound rose to a two-month high after EU diplomats said Britain has moved close to EU demands over Brexit.
European stocks rose 0.3 per cent, having earlier hit their highest in almost three weeks.
A firming pound is viewed as negative for the US dollar-earning companies that make up the bulk of the FTSE index, while an opposite swing in the currency gives them a corresponding accounting-related boost.
Internationally-focused dollar earners in the consumer staples sector dominated FTSE losses. Heavyweight tobacco firm British American Tobacco shed 3.4 per cent, while peer Imperial Brands fell 2.9 per cent.
France’s CAC, Milan and Madrid were all up between 0.5 and 0.7 per cent, and Germany’s DAX was flat, up 0.02 per cent at 13,061.87.
AAP
7.06am: Russia, Saudis differ as OPEC meeting looms
Russia and Saudi Arabia are trying to hammer out differences over petroleum output ahead of OPEC’s meeting on Thursday, highlighting the fragility of an energy alliance involving the world’s two largest crude-oil producers.
Saudi Arabia, the most influential member of the Organization of the Petroleum Exporting Countries, is pushing for higher oil prices as it attempts an economic transformation funded by the initial public offering of its state oil company next year. Oil prices have risen to around $US60 a barrel in 2017, up from lows of less than $US30 a barrel in 2016.
The Saudis want OPEC, Russia and other big producers to keep withholding about 2 per cent of global oil production for all of 2018, said people familiar with the matter. An agreement first struck a year ago and set to expire in March is aimed at reducing a global oversupply of oil caused in part by US producers.
Russia isn’t a member of OPEC but has emerged as an oil-and-politics powerbroker in the past year.
Moscow is pushing for a shorter agreement that could be changed if oil prices continue to rise and allow American shale producers to ramp up output, the people said. Russian oil companies have chafed under production limitations in the past year and want to cash in on higher prices before a flood of oil from the US. crashes the market again.
“There are differences over the amount of time we need,” Saudi energy minister Khalid al-Falih said to reporters in Dubai on Tuesday.
Dow Jones
6.58am: US economy humming along
The US economy is running at its full potential for the first time in a decade, a new milestone for an expansion now in its ninth year. US GDP growth was revised up to a 3.3 per cent rate for the third quarter, reflecting more business investment in equipment and software, and heftier government spending.
Dow Jones
6.45am: US Senate closer to tax vote
The full Senate prepared for an initial vote on the Republican tax plan later Wednesday after more GOP politicians said they would be able to support the measure because of late changes to the bill.
Dow Jones
6.38am: Bitcoin breaches $US11,000
Bitcoin crossed the $10,000 mark for the first time in its nine-year history, and then the $11,000 mark hours later. Traders attributed the latest rally to interest from individual investors.
6.24am: Siemens chooses Frankfurt exchange for IPO
Siemens AG said it would list its healthcare business next year on the Frankfurt stock exchange, not New York, paving the way for one of the largest public offerings in Europe in years.
Dow Jones
ASX braces after US falls on Trump tariff dance; Cyclone Alfred looms
'Erratic' Cyclone Alfred's growing risk. Equity markets jittery over day-to-day changes in Trump's tariff policy as Mexico wins reprieve. The European Central Bank cuts interest rates against a backdrop of trade and defence threats. Star in focus.
ASX 200 slumps; Star close to Queen’s Wharf deal
Casino operator's deal with Hong Kong partners to help avoid administration. Ex-dividend trading, oil price slide weigh on bourse. Insurers face $2bn-plus hit from Cyclone Alfred. APRA moves to tighten financial board rules.