Trading Day: live markets coverage, plus analysis and opinion

The local bourse ended the day higher with nearly all sectors in the green.

The local sharemarket ended the session slightly higher, with nearly all sectors in the green.

Welcome to the Trading Day blog for Wednesday January 24.

Samantha Bailey 4.35pm: Stocks finish slightly higher

The local share market finished the session slightly higher following strong offshore leads, with nearly all sectors in the green.

At the close of trade, the benchmark S & P/ASX200 was up 17.737 points or 0.29 per cent at 6054.699 points. The broader All Ordinaries index was up 18.112 points or 0.29 per cent, at 6168.8 points.

Moody’s economist Katrina Ell said gains came despite speculation steel and aluminium could soon be subject to higher US tariffs.

“Pleasingly, and like the rest of Asia, Australian equities have largely brushed aside President Trump’s announcement on Tuesday that tariffs on foreign-made solar panels and washing machines would be significantly increased,” she said.

“This is part of Trump’s broader “America First” strategy and really the first concrete action he’s taken towards greater U.S. trade protectionism. There’s speculation that steel and aluminium could be next on the agenda for greater tariffs and this will have a greater impact on Asian stocks if it comes to fruition.”

Michael Roddan 4.03pm: ASIC slams bank advice failures

The corporate watchdog has slammed the “inherent” conflicts of interest in large banks that own financial planning businesses, after an investigation revealed more than two-thirds of customers are shunted into “homebrand” products that may be against their best interests.

The Australian Securities & Investments Commission today revealed the ugly results of its latest investigation into the nation’s financial advice industry and said it would force the industry to be more transparent in the anti-competitive use of approved product lists large companies give their advisers.

In its study review, conducted over two years to 2017, the watchdog found financial advisers did not comply with their duty to act in the best interests of clients in 75 per cent of advice files it reviewed.

Matt Chambers 3.05pm: US SEC takes aim at Rio Tinto

The US Securities and Exchange Commission has stepped up its rhetoric in the Mozambique fraud case against Rio Tinto and former executives Tom Albanese and Guy Albanese, repeating allegations of deception and urging the case judge to ignore Rio’s requests to the throw the case out.

In letters filed with the US District Court of Manhattan yesterday, the SEC said its allegations of fraud were adequate, countering January 16 letters on behalf of Rio and the executives that the case, which alleges a $US3.7 billion impairment of Rio’s Mongolian coal assets was deliberately delayed, should be dismissed.

“Rio Tinto, Albanese, and Elliott faced enormous pressure to structure a successful deal in light of the fact that they were responsible for an earlier disastrous multi-billion dollar acquisition,” the SEC said yesterday, referring to the $US40 billion acquisition of Alcan in 2007.

2.45pm: Stocks climb, miners still weak

Australia’s S & P/ASX 200 share index has hit a fresh 6-day high of 6059.7 this afternoon despite falls in most of Asia.

Copper futures have recovered 0.8pc after falling 2.7pc last night but the diversified miners remain weak.

Energy, health care, industrials, IT and utilities are still outperforming.

Volume is about 20pc above average, which is pretty normal for a Wednesday.

Index last up 0.4pc at 6058.4.

Samantha Bailey 1.25pm: Shareholders vote Murray River chairman out

Shareholders in Murray River Organics Group have voted to remove chairman Craig Farrow and directors Lisa Hennessy and Dr Ken Carr from office at an extraordinary general meeting.

Andrew Robert Monk, Steven Si and Keith Anthony Mentiplay were appointed in their place.

It comes as newly appointed CEO George Haggar delivered a trading update identifying a $4 million one-off impact to first-half earnings due to inventory writedowns, in addition to the $4.3 million of writedowns previously announced.

“Notwithstanding this disappointing update, I can see momentum building as I progress my 100-day plan. We have commenced our 2018 harvest in a positive way and we are starting to see benefits from supply chain improvements that are being well supported by our team,” Mr Haggar said.

“I maintain a positive outlook for improved performance, sustained profitability and enterprise value creation in the coming years.”

Shares in Murray River Organics Group last down 1.28 per cent to 38 cents.

12.37pm: Bennelong tops Mercer table

Bennelong Concentrated Equities Fund has been ranked the top-performing Australian fund manager with an impressive 30.7 per cent return in the year to December.

The boutique fund was also number one in the three- and five-year time frames, where it returned 23.6 and 22.4 per cent respectively, according to the latest Mercer Australian Shares Survey.

12.20pm: GetSwift shares suspended

GetSwift shares have been suspended amid allegations the logistics software group failed to tell investors it had lost contracts.

GetSwift asked for its shares, which have been in a trading halt since Monday, to be suspended until it responds to ASX inquiries about a Fairfax Media report it breached its continuous disclosure obligations.

GetSwift, whose shares soared tenfold in 2017 before dropping from $4.60 to their current price of $2.92, says it expects to respond before the market opens on Thursday.

AAP

Eli Greenblat 11.47am: Clouds darken over retail sector

Fresh evidence has emerged that the dark clouds hanging over the nation’s $300 billion retail sector caused a slowdown over December and the crucial Christmas trading period, raising fears that a flood of profit warnings and retail collapses could wash through the economy in the next few months.

Sales at cafes and restaurants remained strong in the period but, confirming the fears of other retailers, year on year sales growth at department stores was weaker as spending on clothing and footwear sank.

While official ABS retail trade figures for December are still weeks away from being released, the National Australia Bank has harvested customer data based on around 2 million transactions to provide a snapshot of retail trade — and it doesn’t look good.

Read more

11.30am: Macquarie bullish on miners

Macquarie predicts a strong year ahead for the bulk commodity miners after upgrading its price forecasts.

Indeed its new forecasts are still conservative when looking at spot prices for most commodities, particularly for BHP, RIO and S32.

“Stronger demand and supply restrictions have driven material upgrades to our short- and medium-term bulk commodity price forecasts,” the broker says.

“We lift our calendar 2018 forecast for coking coal by 40 per cent, thermal coal by 30 per cent and iron-ore and manganese by 20 per cent. Upgrades to 2019 and beyond are more modest with higher coking coal, alumina, iron-ore and copper prices the key highlights.”

That has seen a 27-52 per cent rise in its earnings forecasts for BHP and a 27-38 per cent rise for RIO and S32 over the next two years. Earnings estimates for pure play coal miners rose 50-100 per cent and FMG’s earnings were revised up 15-39 per cent.

On the back of that, Macquarie has revised its price targets up 14pc to $38 for BHP, up 12pc to $95 for RIO and up 14pc to $4.00 for S32.

The broker has also raised WHC to Neutral and raised AWC to Outperform.

11.08am: Bell Potter savages McGrath

Brokerage Bell Potter has savaged real estate agency McGrath, slapping a sell rating on the stock and declaring a “loss of confidence” in the business. The comments follow the mass walkout this week of McGrath’s CEO and board as founder John McGrath attempts to take control.

Bell Potter has issued a price target of 45c a share, down from 65c and materially downgraded its forecasts in each of the next three years including a loss this year.

The broker says its FY19 earnings forecast is also modestly below the anticipated underlying FY18 earnings “given a full year of cost savings may not be realised in the period” and “also our lack of confidence in the ability of the company to forecast earnings”.

“In our view the lack of a leadership team and also options for the company (outside of privatising) support this recommendation,” Bell Potter adds. McGrath last traded at 53.2c

10.43am: Stocks lift at open

Australia’s S & P/ASX 200 share index jumped 0.4 per cent to a six-day high of 6058.2 in early trading after further gains on Wall Street.

Energy stocks are leading broad gains, with Santos up 2.6c after crude oil rose 1.5 per cent overnight to $US64.73 a barrel.

Financials are also strong, with banks up again, and QBE has jumped 5 per cent after JPM upgraded it to Buy after it hit a 4-month low on a profit warning yesterday.

Bond proxies are outperforming after US 10-year bond yields fell 4 basis points. They hit a 3.5-year high earlier this week.

But miners are notably weaker, with BHP, RIO and S32 all down between 0.8 per cent and 1.3 per cent after LME copper fell 2.7 per cent last night.

The fall in miners could pull the index back to the 50-DMA at 6023.

Index last up 0.2pc at 6048.

10.31am: Santos lifts revenue, cuts debt

Santos has lifted full-year revenue 20 per cent to $US3.1 billion ($3.88bn), with higher prices offsetting falls in production and sales volume. The energy producer says fourth-quarter production was flat at 15 million barrels of oil equivalent, but that a 27 per cent rise in average realised prices over the period lifted revenue 9 per cent to $US861 million. Full-year average realised prices rose 25 per cent on 2016’s, to $US57.90 and Santos paid down debt by 23 per cent to $US2.7 billion.

AAP

10.25am: Westpac lifts AUD forecast

Westpac has revised its year end forecast for the Australian dollar to US72c, up from its previously forecast US70c.

That follows a decision to increase the number of Fed rate hikes it expects in the coming year to three from two previously.

“In a surprising development the USD Index has in fact depreciated by around 4 per cent since mid-December despite a sharp widening in the US yield differential,” Westpac chief economist Bill Evans says.

“In response to this lower starting point for the USD and the expected impact on business investment from the accelerated depreciation allowances in the US tax package we have raised our forecast for growth in the US economy to 2.5pc from 2.2pc in 2018.”

“Lower tax rates, a lower USD, and a subsequent 6 per cent lift in the US share market have markedly eased financial conditions — despite higher bond rates — clearing the way for a Fed rate hike in March.”

He says that would lift the Fed funds rate to 2.125pc by September, comfortably above the “zero real” rate and an “appropriate point to pause”.

Westpac keeps its target of 3pc for the 10-year US bond rate while recognising upside risks given the higher profile for the Fed.

Mr Evans says the “puzzle” as to why the USD has weakened despite widening rate differentials could be explained by concerns around budget deficits associated with the Tax Package or heightened expectations for more aggressive tightening “signals” from ECB and BOJ, or the “overshoot” of around 9pc in the USD Index through 2015 in anticipation of the FED’s first rate hike. The USD Index has subsequently lost all its gains through 2015 and now sits at around its end 2014 level before the market’s excitement about Fed tightening.

Samantha Bailey 10.22am: Michael Hill to exit US

Jewellery retailer Michael Hill has announced it will exit its struggling US operations, as it assesses the viability of its Emma & Roe branded stores, raising the possibility of store closures.

It comes after the retailer said in a half-year trading update it was closely monitoring the US business given its continued “poor” performance. Sales in the US tumbled 10 per cent in the first half.

“Our time in the highly competitive US jewellery market taught us a lot and helped to strengthen our core business including the development of our bridal collection strategy and the development of our Professional Care Plan,” said chief executive Phil Taylor.

“However, our US operations have not gained sufficient traction in recent years and the level of capital required to scale-up the business is not warranted under current trading conditions.”

10.05am: Stocks expected up 0.3pc; commodities mixed

Australia’s S & P/ASX 200 share index is expected to open up 0.3 per cent at 6055 but could dip to the 50-DMA at 6023 from there.

Netflix led gains on Wall Street but Asian markets have already reacted to the after-hours rise in the entertainment company.

The Dow Jones index was flat amid falls in Johnson & Johnson and Proctor & Gamble.

Bond proxies outperformed as US bond yields fell 4 basis points to 2.61 per cent.

LME copper slipped 2.7 per cent, while iron ore fell 0.8 per cent — not as bad as futures showed yesterday — and coking coal was down 1.2 per cent.

Spot gold rose 0.7 per cent and WTI crude rose 1.8 per cent to $64.73 a barrel.

BHP ADR’s equivalent close, at $30.46, was 1.1 per cent below the miner’s Sydney close.

9.57am: Senate confirms Powell as Fed chairman

The Senate confirmed Jerome Powell to become the 16th chairman of the Federal Reserve, clearing the way for a new leader likely to continue raising interest rates to keep the economic expansion on track.

Mr Powell, who was confirmed Tuesday by an 85-12 vote, will take over when Chairwoman Janet Yellen’s four-year term as chief ends on February 3. She has said she would leave the Fed board of governors once her successor is sworn in.

Dow Jones

9.22am: Analyst rating changes

GrainCorp cut to Outperform; target price cut 10pc to $8.80 — CLSA

ResMed raised to Outperform — CLSA

ResMed cut to Underperform — Macquarie

St Barbara cut to Underperform — Credit Suisse

QBE raised to Overweight — JPMorgan

McGrath cut to Sell — Bell Potter

Whitehaven raised to Neutral — Macquarie

Alumina raised to Outperform — Macquarie

Galaxy Resources cut Underperform — Macquarie

Pilbara Minerals raised to Outperform — Macquarie

Syrah Resources raised to Outperform — Macquarie

QBE raised to Outperform — Macquarie

9.05am: Qantas names Wirth new loyalty CEO

Qantas has named Olivia Wirth as the new chief executive officer of its loyalty business. Ms Wirth, who has been with the airline for nine years and is currently the group’s chief customer officer, replaces Jayne Hrdlicka, who announced her departure from the Group in December last year.

Current executive manager of sales and distribution Vanessa Hudson will take on the role of chief customer officer.

“At the senior executive level we have a number of very high calibre individuals who have a deep understanding of our business, and Olivia and Vanessa are two standout examples of that,” Qantas CEO Alan Joyce said.

8.40am: Kathmandu flags big profit jump

Outdoor clothing and equipment retailer Kathmandu expects first-half profit to rise by at least 20 per cent following a successful Christmas trading period. The dual-listed retail chain says it expects net profit of at least $12 million when it reports on March 20, despite overall same store sales declining by 0.8 per cent in the 25 weeks to January 21 due to a weaker performance in New Zealand.

“Striking the right balance in the key Christmas trading period between generating sales growth and improving our gross margin has fuelled healthy earnings growth,” chief executive Xavier Simonet said in a statement on Wednesday.

AAP

8.28am: Oil leaps on IMF growth outlook

Oil has risen more than one per cent, with benchmark Brent crude hitting $US70 a barrel for the first time in a week, boosted by healthy world economic growth prospects and expectations for continued production curbs by OPEC, Russia and their allies.

US West Texas Intermediate (WTI) crude futures closed up 90 cents to $US64.47 a barrel, for a gain of 1.4 per cent. WTI reached its highest since December 2014 on January 16 at $US64.89.

Brent crude futures settled up 93 cents, or 1.4 per cent, to $US69.96, not far off the three-year high of $US70.37 reached on January 15.

Reuters

8.05am: S & P 500 ticks higher

The S & P 500 climbed to a fresh record Tuesday following the latest batch of corporate earnings.

Investors say a rosy economic and policy backdrop has stocks poised to continue marching higher, though some are concerned about the pace of the rally and elevated earnings expectations. The S & P 500 has set 12 records this month — the most ever in January, according to WSJ Market Data Group.

The S & P 500 added 0.2 per cent, while the Dow Jones Industrial Average closed down 4 points, or less than 0.1 per cent, at 26,211. Both indexes swung between small gains and losses. The tech-heavy Nasdaq Composite climbed 0.7 per cent.

Dow Jones

7.56am: Netflix shares leap 10pc

Netflix’s market value blew past $US100 billion for the first time on Tuesday, extending a stock market rally that also helps explain why the junk-bond market remains so sanguine.

(AFP PHOTO/Ryan Anson

The video streaming service’s stock jumped 10 per cent in Tuesday trade after the company said Monday evening it added a record amount of streaming subscribers in the final three months of year despite price increases. The company’s stock has shot up more than 80 per cent in the last month, riding a wave of investor excitement about fast-growing companies with technology focuses.

Dow Jones

7.41am: ASX tipped to open higher

The Australian share market looks set to open comfortably higher after strong gains on major international markets and a mainly positive lead from Wall Street thanks to upbeat earnings reports.

At 7am (AEDT), the share price futures index was up 16 points, or 0.27 per cent, at 6,002.

The US market got a lift from upbeat earnings from companies and relief over the temporary US government funding deal, which boosted confidence about global growth and corporate earnings.

Global borrowing costs also eased as the Bank of Japan’s reassurances in Asia. However, some of the enthusiasm was kept in check by President Donald Trump’s slapping of steep import tariffs on washing machines and solar panels, putting a cloud over global trade at a time when its revival has fuelled hopes for a stronger world economy.

In late trading, the Dow Jones Industrial Average was flat, the S & P 500 was up 0.16 per cent and the Nasdaq Composite was 0.67 per cent higher at 7.30am (AEDT).

Locally, no major economic news is expected on Wednesday.

In equities news, energy company Santos is slated to post a quarterly report, while Australian Pharmaceutical Industries has its annual general meeting scheduled.

The Australian market on Tuesday posted its best daily gain since October as investors welcomed an end to the US government shutdown.

The benchmark S & P/ASX200 index gained 45.1 points, or 0.75 per cent, to 6,037 points, while the broader All Ordinaries index added 44.5 points, or 0.73 per cent, to 6,150.7 points.

Meanwhile, the Australian dollar is a smidgen higher, creeping back toward 80 US cents.

The local currency was trading at US79.97 cents at 7am (AEDT) on Wednesday, from US79.90c on Tuesday.

AAP

7.10am: S & P 500 eyes fresh record

The S & P 500 was on track for a fresh record Tuesday following the latest raft of corporate earnings.

Investors say a rosy economic and policy backdrop has stocks poised to continue marching higher, though some are concerned about the pace of the rally and elevated earnings expectations. Another record close for the S & P 500 would be its 12th this month — the most ever in January, according to WSJ Market Data Group.

With less than an hour of trade to go, the S & P 500 had added 0.2 per cent, while the Dow Jones Industrial Average was recently down 9.6 points, or less than 0.1 per cent, at 26203. Both indexes swung between small gains and losses. The tech-heavy Nasdaq Composite was 0.63 per cent higher.

Dow Jones

7.02am: Local dollar lifts against greenback

The Australian dollar is a smidgen higher against its US counterpart after US politicians agreed an interim funding bill but there was no major economic data to inspire the languishing greenback.

At 7.02am (AEDT), the Australian dollar was worth US79.97 cents, up from US79.90c on Tuesday.

Westpac’s Imre Speizer says equities managed to push to new highs in both US and parts of Europe, thanks mainly to sound earnings, but even there sentiment had faltered, and didn’t help the US dollar.

“The USD’s recent weak tone persisted despite intraday volatility,” he said in a morning note.

“The USD remained on the defensive despite some sharp intraday moves that hinted of broader retracements of its recent losses.”

Meanwhile, the Aussie dollar has continued its slide against both the yen and the euro.

AAP

6.55am: European markets mixed

Most stock markets around the world pushed higher Tuesday on investor relief over the end of the US government shutdown, dealers said.

Most major European bourses gained ground after Asia extended a new year rally on continued optimism about the upcoming earnings season.

Frankfurt’s DAX 30 struck a record high after a key survey showed surging German investor confidence in January.

The ZEW institute’s monthly index of financial players’ economic expectations added 3.0 points to 20.4, a much sharper gain than the 0.5-point increase forecast by analysts.

Equity markets remain upbeat, brokers say, despite having surged in recent weeks on the back of a robust global economy, on hopes for strong corporate profits and expectations of a positive hit from Donald Trump’s tax cuts.

Sentiment was bolstered by a report from the International Monetary Fund raising its world growth outlook and predicting at least a short-term boost from the president’s fiscal policy.

London’s FTSE 100 closed up 0.2 per cent, Frankfurt’s DAX 30 ended the session 0.7 per cent higher, while the CAC 40 in Paris edged 0.1 per cent lower.

AFP

6.48am: Asian markets hit fresh records

On Tuesday, Hong Kong continued to hit new records, surging 1.7 per cent, while Tokyo finished 1.3 per cent up at a 26-year high.

Shanghai climbed 1.3 per cent and Seoul jumped 1.4 per cent.

The yen edged down against the dollar after the Bank of Japan offered no new guidance on its plans for monetary policy after earlier this month easing back on its bond-buying stimulus.

While no moves were expected from the central bank, there had been hopes the board would provide some forward guidance as it edges away from its easy-money crisis-era policies to move in line with the Federal Reserve.

AFP

Simon Benson 6.43am: Trade win after Pacific deal sealed

The Trans-Pacific Partnership trade pact has finally been sealed, with the historic 11-nation deal set to come into effect by March ­following lobbying efforts by Japan and Australia to convince a reluctant Canada to sign back on to the agreement.

The multi-trillion-dollar trade agreement was finalised overnight in Tokyo, resurrecting a deal that was thought to have been killed off when Canada sabotaged negotiations in November by failing to attend a final vote at the APEC conference in Vietnam that would have ratified it.

The deal will lock in greater trade access for Australia to ­markets estimated to be worth ­almost $14 trillion.

Read more

6.38am: Johnson & Johnson takes tax hit

Johnson & Johnson reported an increase in sales for its fourth quarter, largely spurred by its pharmaceutical business, but reported a loss because of effects from the new tax law.

Dow Jones

6.25am: Disney to pay $1,000 bonuses

Walt Disney Co. will pay $1,000 cash bonuses to more than 125,000 workers and put $50 million into a new program to cover tuition costs for hourly workers, the company said Tuesday

Dow Jones