Trading Day: live markets coverage, plus analysis and opinion
The ASX closed higher after a sharp turnaround, following strength in US equities in the wake of Donald Trump’s speech.
Welcome to the Trading Day blog for Wednesday, January 31.
Bridget Carter 4.35pm: UBS closes on Manuka role
Investment bank UBS is believed to be in the box seat for a role with Pacific Equity Partners on a potential sale or listing this year of Manuka Health — considered a star performer in the stable of the buyout firm.
PEP bought the New Zealand business in 2015 for around the $100m mark and, since the acquisition, it is understood that the group has doubled its earnings as demand for the product out of China remains strong.
The Australian-based private equity firm has been on the acquisition trail of late.
Allied Mills food and drinks business and the previously-listed Patties Foods are purchases made in the past two years by PEP and the businesses are expected to be divested at some stage.
4.25pm: ASX ends higher after turnaround
The local share market ended the session higher after a sharp turnaround in afternoon trade, following strength in the US futures market off the back of President Donald Trump’s State of the Union address.
At the close of trade, the benchmark S & P/ASX200 was up 14.901 points or 0.25 per cent at 6037.699 points. The broader All Ordinaries index was up 11.231 points or 0.18 per cent, at 6146.5 points.
CMC Markets chief market strategist Michael McCarthy said the State of the Union address didn’t address much to do with markets but the US futures market reacted, which prompted an improvement in the local bourse.
“We are looking at a surprisingly good day for Australian investors,” he said.
“Interesting to note that telcos are once again leading the charge, and that recovery in the Telstra share price — obviously good news for a lot of Australian shareholders, but also good news for the broader market.”
4.20pm: Asian stocks higher after Trump
Asia-Pacific shares broadly turned around early declines as President Donald Trump struck a mostly conciliatory tone in his first State of the Union address.
After some of the biggest declines in several months yesterday, indexes in Australia, Hong Kong and Korea turned higher, gaining as much as much as 0.5 per cent.
“It is not a market-upsetting speech; rather a motherhood and apple pie in the great American tradition,” said Rob Carnell, head of research for Asia-Pacific at Dutch bank ING.
He noted there was no major criticism of Russia and China while details on infrastructure spending were thin. Elaborating on the latter could have pushed bond yields higher still, playing into recent market nervousness.
Mr. Trump mostly stayed away from surprises and signalled a willingness to work across party lines.
New Zealand’s NZX 50 saw the biggest gain and finished up 1.7 per cent thanks to a 55-point spike at the close, which saw the index rise 0.5 per cent for the month. It’s the 13th straight monthly gain for an index that jumped 22 pe recent in 2017, the best year since 2012.
Dow Jones
3.40pm: Investors swap safe stocks for lithium, tech
Investors are steering away from safe stocks and are turning to more glamorous options such as tech and lithium stocks which are centred around innovation, an investment director at Bennelong Asset Equity Partners says.
Julian Beaumont believes investors have, over the past year, become deterred from blue-chip stocks like Telstra and the big banks due to faults and bad returns and are instead choosing “exciting” companies which have the potential to grow.
“Coming out of the Global Financial Crisis (GFC) people were pretty scared and were always wondering what was around the corner in terms of a market brush-off so they went to what they knew — the warm and cuddly blue-chip stocks,” Mr Beaumont said.
“Now investors are getting a little bit more comfortable and investing into true equities that are a bit more exciting like some of the tech sector and some of those smaller names.
The investment director expects the market to grow by about 5 to 6 per cent over the next 12 months and said there are promising opportunities in a number of successful Australian exporters and global businesses such as Treasury Wine Estates, CSL Limited and Artistocrat Leisure.
He said the companies which are doing well are those that are expanding globally and acquiring businesses, with innovation one of the biggest attractions to investors.
“There are companies on the Australian market that really stand for something in terms of a brand, product and innovation and that really play well in the offshore markets,” he said.
“The reason why people are going for these bright lights is because they are exciting and there are potentially big returns, but it is also very hard to disproved in the short term similarly to Bitcoin and with a number of these pre- revenue concept stocks.” Despite this, Mr Beaumont said some investors are still picking companies for the dividend rather than the business model.
He said an example is Telstra, which pays consistent dividends, but its share price fell almost 29 per cent in 2017, and it announced a cut in dividends late last year.
Mr Beaumont said this may encourage people to focus on stocks that will perform better, or even start considering fixed rate assets once interest rates start rising.
In regards to the upcoming earnings season, he said companies are also becoming more realistic, having previously been too optimistic only to let investors down.
He said with that in mind, the upcoming earnings season should be “generally positive”.
“For example people have been pretty pessimistic on retail ... so the expectations will be low but the numbers will do reasonably well.” “I think people feel reasonably well at the moment.”
AAP
Bridget Carter 3.00pm: Specialty Fashion soars on takeover talk
Specialty Fashion Group shares have surged after the company confirmed former boss Gary Perlstein is part of a consortium that has launched a takeover bid for the company he used to run.
The Australian’s DataRoom column revealed earlier today that Mr Perlstein is trying to privatise the company behind the Millers, Rivers and Katies brands.
Shares gained 6 per cent on the news in afternoon trade to 17c.
Mr Perlstein stepped down as chief executive of SFG in November after 14 years at the helm and the company has remained under pressure from tough retail conditions.
SFG said in a statement today that the board had received a number of confidential, non-binding, indicative proposals for a change of control of the group or an acquisition of certain brands.
“One of the proposals received it from a consortium including Gary Perlstein.”
SFG said that the board has been undertaking a comprehensive structural review and assessment of all options and opportunities to improve shareholder value.
“In the course of that review, the board has received a number of confidential, non-binding, indicative proposals for a change of control of the group or the acquisition of certain brands,” the company said.
“The proposals are subject to a number of conditions, including the satisfactory completion of due diligence, and are expressed as being non-binding and incomplete.”
SFG said discussions concerning the matter are ongoing and not regarded as advanced enough to warrant any further disclosure at the current time.
Dana McCauley 2.45pm: Ten creditors in surprise payday
Ten creditors have won a surprise payday, with the network’s former administrator today announcing payments of 100 cents in the dollar to key content providers left out of pocket when the troubled free-to-air broadcaster went into administration last year.
Warner Bros, Endemol Shine, ITV Studios and FremantleMedia are among creditors that will have their debts paid in full, administrator KordaMentha confirmed today.
Financial, statutory and other creditors — including the Commonwealth Bank of Australia — could receive as much as 66 cents in the dollar, substantially more than the original estimate of 34 cents, after total claims from creditors came in lower than had been estimated.
These creditors will receive a first dividend of 45 cents in the dollar, then an estimated final dividend of 21 cents to be paid before June 2018.
Michael Roddan 2.30pm: CBA braces for Austrac fine
Commonwealth Bank has indicated it may book a provision worth hundreds of millions of dollars in its upcoming half-year accounts, for any possible fine stemming from its fight with the anti-money laundering regulator Austrac in the Federal Court.
Responding to reports the bank had received legal advice a settlement with Austrac could cost as much as $500 million but that the regulator was pushing for a penalty of at least $1 billion, CBA said it will consider any potential fines as it finalises its half-year financial statements.
“As part of CBA’s accounts preparation process, the CBA Board will consider a range of factors, including any potential penalty, in determining whether it is appropriate to recognise a provision in accordance with the requirements of Australian Accounting Standards in the half year financial statements in relation to the proceedings,” the bank said in a short statement.
“The recognition of any provision in the half year financial statements is subject to finalisation of CBA’s half year financial statements, auditor processes and CBA Board approval.”
CBA unveils its accounts for the six months through December next Wednesday.
2.20pm: Stocks lift on rate hike doubts
Fading expectations of RBA policy tightening this year and a pullback in the Australian dollar are helping the share market today.
The OIS implied chance of the RBA hiking by July fell to 26.6pc vs. 41.7pc and the chance of a December hike fell to 69.2pc vs. 78.3pc yesterday.
Australian 10-year bond yields fell to 2.81pc vs. 2.87pc and 3-year bond yields have fallen to 2.14pc vs. 2.23pc after lower than expected CPI data.
The lessening of rate hike expectations has pushed the Australian dollar as low as 0.8047 vs. 0.8100 pre-CPI.
The S & P/ASX 200 share index is up 0.2pc at 6035 after an early fall to 5993.6.
Richard Gluyas 2.15pm: Liberty snaps up MoneyPlace
Liberty Financial’s acquisition of marketplace lender MoneyPlace highlights the rapid development of the local fintech sector, with the hype of 2015 forgotten as the value of strategic partnerships is reinforced.
MoneyPlace’s founders, including new Fintech Australia chair Stuart Stoyan, can no longer dream of becoming billionaires.
But as part of the nation’s only investment-grade non-bank, MoneyPlace’s funding lines are now secure, and the group will be able to piggyback on its new parent’s distribution through a national network of broker relationships.
At a stroke, MoneyPlace is transformed from a start-up to a scale-up, with plans to join the likes of SocietyOne and Ratesetter in a land-grab of several percentage points in the $100 billion consumer lending market over the next five years.
1.50pm: Stocks swing into black
Australia’s S & P/ASX 200 share index turned positive in early this afternoon after falling 0.5pc in early trading.
The intraday reversal of weakness came after lower than expected CPI data argued against an RBA rate hike any time soon.
It was helped by slight gains in US stock index futures, although Trump’s State of the Union address hasn’t moved the dial so far.
China’s monthly PMI data were mixed, with manufacturing slightly below and services slightly above estimates.
Index last up 0.1pc at 6027.1.
Bridget Carter 12.55pm: Goldmans joins Colonial First State line-up
Speculation is mounting that Goldman Sachs has joined the line-up of banks working on the Commonwealth Bank of Australia’s float of its $5 billion wealth manager Colonial First State Global Asset Management.
It comes after CBA was said to have held a meeting on Tuesday with joint lead managers that will potentially work on a float of CFSGAM and is said to have included JPMorgan, UBS and Goldman Banks.
None of the investment banks have confirmed the speculation.
However, JPMorgan and UBS are known to have been on the ticket for some time, while Goldman Sachs early last year was said to be involved.
12.35pm: Stocks falter as energy, materials weigh
The Australian share market is trading lower after Wall Street’s Dow Jones index suffered its largest two-day fall in more than a year, and as most commodities’ prices fall.
The benchmark S & P/ASX200 index has regained some ground from heavier losses at the open but continues to trade lower — down 0.21 per cent at 1200 AEDT on Wednesday — following its sharpest fall in two months on Tuesday. The heavyweight energy, materials and banking sectors are leading the losses, while healthcare stocks provide a bright spot.
Shares in the Commonwealth Bank have sunk 0.3 per cent to $78.82 after news the Australian Securities and Investments Commission has begun court action against it for allegedly engaging in unconscionable conduct and seeking to manipulate a key inter-bank interest rate.
The other banks were also weaker, with Westpac down 0.1 per cent at $30.94, ANZ shed 0.2 per cent to $28.43, and National Australia Bank also shed 0.02 per cent to $29.065.
Oil prices slipped for a second day in a row, putting pressure on local energy stocks.
Woodside Petroleum declined 1.1 per cent to $33.00, Santos dropped 1.8 per cent to $5.065, and Oil Search was 2.1 per cent lower at $7.545.
Origin Energy was down two per cent at $9.16 despite announcing its half-year oil and gas production was up 12 per cent, while revenue rose 40 per cent. Oil and gas producer and explorer AWE was off 0.5 per cent at 97 cents after announcing a flat production report for the December quarter, even though sales revenue was up 13 per cent.
It has also given suitor Mineral Resources three business days to match a superior proposal lobbed by Japanese firm Mitsui & Co.
As for major miners BHP Billiton, Rio Tinto and Fortescue, they were between 0.6 and 0.8 per cent weaker as iron ore prices dipped overnight. Helping the healthcare sector was positive news from liver cancer treatment developer Sirtex Medical which soared 45.7 per cent to $27.44 after agreeing to a $1.6 billion takeover offer from US company Varian.
In other company news, Treasury Wine Estates jumped 0.8 per cent to $17.13 after lifting first-half profit 37.4 per cent to $187.2 million and announcing it is targeting accelerated growth for the next two years and beyond. Meanwhile, the Australian dollar has fallen on a weaker-than-expected inflation rate.
AAP
12.05pm: Sirtex soars on takeover bid
Shares in liver cancer treatment developer Sirtex Medical have soared, gaining almost 50 per cent after resuming trading on Wednesday following news that US cancer care firm Varian has agreed to pay $1.6 billion for the company.
Sirtex announced Varian’s offer on Tuesday night — endorsing the Californian company’s all-cash offer of $28 for each Sirtex share, which is a 49 per cent premium to Sirtex’s closing share price of $18.83 on January 29. Sirtex shares were $8.75, or 46.5 per cent higher at $27.58 at 1105 AEDT.
11.40am: A$ dips, shares bounce as CPI disappoints
AUD/USD fell from 0.8100 to 0.8054 and the share market pared declines as CPI and private sector credit data both missed estimates. The data may reduce the chance of a rate hike this year, undermining the currency while supporting bond proxies in the share market.
Headline Q/Q CPI rose 0.6pc vs. 0.7pc expected, with Y/Y up 1.9pc vs. 2.0pc expected.
The average of core measures was 0.4pc vs. 0.5pc expected on a quarter on quarter basis.
Year-on-year core measures averaged 1.9pc, which was in line with estimates.
Private sector credit rose 0.3pc vs. 0.5pc expected Q/Q and 4.8pc vs. 5.2pc expected Y/Y.
11.22am: ASX200 below 6000 on energy slump
Australia’s S & P/ASX 200 share index fell as much as 0.5pc to a one-week low of 5993.6 in early trading.
The energy sector led broadbased falls after WTI crude fell 1.6pc but the S & P/ASX 200 hasn’t matched US falls which were exaggerated by the dive in US healthcare.
Still, key technical support from the January 22 low at 5991.9 remains under pressure.
A break there could test 5966 — the target of a minor head & shoulders top pattern.
But a sustained break below former major resistance at 6000 could trigger a further slide.
In that case the 100 and 200 DMA’s at 5925 and 5843 could come into play.
Index last down 0.5pc at 5997.8.
10.45am: Energy, materials weigh on sharemarket
The Australian share market has opened lower, dragged down by the energy sector and the mining-focused materials sector, after the top Wall Street stocks had their largest two-day fall since September 2016.
At 1014 AEDT on Wednesday, the benchmark S & P/ASX200 index was down 24.9 points, or 0.42 per cent, at 5,997.8, while the broader All Ordinaries index was down 27.0 points, or 0.44 per cent, at 6,108.3 points.
In futures trading, the SPI200 futures contract was down 18 points, or 0.3 per cent, at 5,942 points.
10.44am: Aussie 4Q CPI data is at 1130
Headline CPI is expected to rise 0.7pc Q/Q and 2pc Y/Y, according to Bloomberg.
The average of core CPI measures is expected to rise 0.5pc Q/Q and 1.9pc Y/Y.
10.26am: Oil Search slides on crude drop
Oil Search fell as much as 3.8 per cent to a five-week low of $7.42 in early trade, after steep falls in offshore peers following WTI crude’s 1.6 per cent drop overnight.
Oil Search shares have fallen almost 9 per cent since they peaked at a two-year high of $8.13 amid booming oil prices earlier this month.
With a forward PE of almost 30 times, according to Bloomberg, it’s no wonder Oil Search shares finally came unstuck.
On the charts it will look vulnerable to a further slide to $7.00 unless it can close above the $7.58 pivot level today.
OSH last down 2.1pc at $7.55.
10.22am: Specialty Fashion in takeover talks
Specialty fashion confirms it’s in takeover talks with a group including CEO Gary Perlstein, who is on leave and will step down on Feb. 15.
It also says it has had a number of non-binding indicative proposals to buy the group or certain brands within the group.
An independent review committee has been established to assess the proposals received.
“Discussions concerning the matter are ongoing and are not regarded as sufficiently advanced to warrant any further disclosure at this time,” the group says.
10.05am: Stocks to slide at open
Australia’s S & P/ASX 200 share index is expected to open down about 0.3pc after US falls overnight.
While the Dow Jones index fell 1.4 per cent, US falls were exaggerated by a dive in the healthcare sector.
That follows news of a joint venture by Amazon, Berkshire Hathaway and JP Morgan to lower health care costs.
The US energy sector dived as WTI crude fell 1.6pc, but BHP ADR’s equivalent close at $30.31 was just 0.1pc below BHP’s Sydney close.
Banks should have some support from broker upgrades on CBA and Westpac today.
Focus turns to CPI data at 1130 AEDT, China manufacturing data at 1200 and Trump’s State of the Union address at 0100 AEDT.
Index last 6012.
Dana McCauley 10.00am: Patrick Delany named Foxtel CEO
Foxtel has appointed a new chief executive ahead of its planned merger with Fox Sports.
Fox Sports boss Patrick Delany will replace Peter Tonagh as the head of Foxtel, the company confirmed this morning.
The changing of the guard follows weeks of speculation about which executive would be lead the combined entity.
News Corp’s chief executive Robert Thomson thanked Tonagh, who is leaving the company, for his excellent service, including leading the merger negotiations with Fox Sports.
“There is no question that Peter Tonagh has been a thoughtful, farsighted leader and his positive influence will resonate for many years to come,” said Thomson.
“Patrick’s astute and innovative leadership of Fox Sports, combined with his broad experience during his nine years at Foxtel, make him the ideal person to take the helm at such a profoundly important moment for Foxtel.”
Foxtel is jointly owned by Telstra and News Corp, publisher of The Australian and owner of Fox Sports.
The two companies are set to be merged under a deal approved by the competition regulator in December, ahead of a multibillion-dollar sharemarket listing.
9.57am: Morgans starts Wagners with Add rating
Wagners is fast coming onto the institutional radar with two new Buy ratings in the past day.
The Queensland construction company received an Add rating and $4.21 target price from Morgans today.
“Supported by strong profitability, a conservative balance sheet capable of pursuing new growth, and solid execution track record, we see WGN as an attractive exposure to improving construction activity on Australia’s east coast, while developments on a number of catalysts could deliver further upside,’ Morgans Adrian Prendergast says. Credit Suisse started Wagners coverage yesterday with an Outperform rating and a $4.20 target price.
9.45am: Bondcano just getting started: CS
The “Bondcano” that’s lifted the US 10-year yield to an almost four-year high is just getting started, according to Credit Suisse Australia equity strategist Hasan Tevfik.
Credit Suisse expects the US 10-year to hit 2.9 per cent by year end and Mr Tevfik says “the risk of an overshoot looms large.”
“So far the rise in bod yields has not been an impediment for the stock market because rising yields from low levels have signalled continued recovery and accommodative cost of capital,” Mr Tevfik says.
“Rising bond yields from high levels are likely to be more of a headwind as it will be consistent with tight liquidity. Right now, bad for bonds is good for equities.”
Still he notes that stocks with high PEs, high payouts and poor growth outlooks, as well as gold producers, have suffered.
Tevfik says investors should “tread with caution” in stocks at the top of the Bondcano, including Northern Star, Sydney Airport, BWP Trust and Ramsay.
Rather, investors should consider stocks at the bottom of the Bondcano, including BlueScope, BHP, Computershare and Macquarie Group.
9.40am: Beach lifts production target
Beach Energy has nudged up its annual production target and reduced its spending plans as it gets set to finalise a deal to buy a basket of oil-and-gas assets that will expand its position in key fields in Australia.
Beach said it now expects production of between 25.5 million and 27.6 million barrels of oil equivalent in the year through June, including the assets being acquired, from an earlier forecast of 24.9 million-27.2 million.
The target includes increased output from Beach’s existing operations, with production now expected to be between 10.6 million and 11.0 million barrels from those assets from 10.0 million-10.6 million previously.
Dow Jones
9.30am: Origin H1 gas production jumps
Origin Energy racked up a 40 per cent jump in first-half gas production revenue due to increased liquefied natural gas output and higher prices for its products.
Wholesale gas revenue for the six months through December rose to $1.36 billion from $973.9 million in the same period the year before, and was up 26 per cent year-over-year at $686.3m in the second quarter.
The quarterly report, released today, does not include revenue from Origin’s power generation or gas or power retailing.
9.10am: Analyst rating changes
Westpac raised to Overweight — JPMorgan
CBA raised to Add — Morgans
CBA raised to Neutral — JP Morgan
Wagners initiated at Add; $4.21 target price — Morgans
Credit Corp raised to Add — Morgans
3P Learning started at Overweight; $2.20 target price — Morgan Stanley
ELMO Software started at Equalweight; $5.15 target price — Morgan Stanley
Nearmap started at Overweight; $1.30 target price — Morgan Stanley
Treasury Wine raised to Buy; target raised 20pc to $21 — CLSA
Orocobre target price raised 31pc to $9.10; Buy rating kept — Bell Potter
Incitec Pivot raised to Neutral — Credit Suisse
Netwealth Group started at Sell: $5.55 target price — UBS
Tabcorp restarted at Neutral — Goldman Sachs
Elmo Software cut to Hold — Wilsons
Sandfire cut to Sell — Citi
Michael Roddan 8.48am: Fresh crisis for CBA
Commonwealth Bank faces a fresh crisis just a day after naming a new chief executive, with the corporate watchdog launching an explosive Federal Court suit against the bank over claims it rigged a key interest rate benchmark.
In a new test for incoming chief executive Matt Comyn, who promised to overhaul CBA’s culture following a string of high-profile scandals, the bank said it “disputes the allegations” brought against it by the Australian Securities & Investments Commission, suggesting the lender plans to fight the claim in court.
The legal action blindsided the nation’s largest bank, the day after it surprised analysts and investors by naming the “insider” Mr Comyn as its incoming boss. Despite a global search, CBA chairman Catherine Livingstone said the current head of the bank’s retail division was the best candidate to drive cultural change at the scandal-plagued bank.
Outgoing boss Ian Narev brought forward his retirement after anti-money-laundering regulator Austrac alleged the bank had breached the law more than 50,000 times.
ASIC’s allegations that CBA rigged the bank bill swap rate follow action against ANZ, National Australia Bank and Westpac. ANZ and NAB have settled, agreeing to pay a combined $100 million in penalties.
8.40am: Treasury Wine lifts H1 profit to $187.2m
Treasury Wine Estates has lifted first-half profit 37.4 per cent to $187.2 million and is targeting “accelerated growth” for at least the next two financial years.
Revenue for the six months to December 31 was flat but earnings soared 24.9 per cent as TWE completed the integration of its Diageo acquisitions and cut supply chain costs, allowing it to lift its interim dividend by 2 cents to 15c.
“I am very excited about the outlook for the company, and am confident that the business model changes we are making this year, along with an increased availability of high-end wine, will set TWE up for accelerated growth in FY19, FY20 and beyond,” chief executive Michael Clarke said.
AAP
Sarah-Jane Tasker 8.35am: Sirtex agrees to $1.6bn takeover
Cancer drug developer Sirtex last night surprised investors with an agreed $1.58 billion takeover of the company, less than a year after it initiated a cost-cutting drive and restructure of the business.
The Australian listed company revealed late yesterday that after reviewing a list of unsolicited offers last year it had entered an agreement with US-based Varian Medical Systems to acquire Sirtex for $28 per share. The offer is a 49 per cent premium to the Sydney-based biotech’s share price before the deal was disclosed.
Sirtex chief executive Andrew McLean said interventional oncology was an expanding field in cancer medicine.
“We have a technology that is difficult to replicate, so it was a sought-after asset, which is why we achieved a material premium on the share price,” he said.
“Through the due diligence they (Varian) got a good look at our growth initiative and made an assessment of value based on the assets today and the future prospects.”
Supratim Adhikari 8.30am: Car sharing service hit with hack
Car sharing service GoGet has been hit with a hack that saw the alleged hacker gain access to the company’s database and personal information of members and those who have previously attempted to create a GoGet account.
According to GoGet, the breach was identified on June 27, 2017 and reported to NSW Police’s Cybercrime Squad. The action has seen NSW Police arrest a suspect, with a 37-year-old charged with two counts of unauthorised access, modification, or impairment with intent to commit serious indictable offence; and 33 counts of take-and-drive conveyance without consent of owner.
“It appears that the suspect was accessing GoGet’s systems in an attempt to use GoGet vehicles without permission,” GoGet chief executive Tristan Sender said in a statement on Wednesday.
“Based on advice from the NSW Police Cybercrime Squad, at this time there is no evidence that the suspect has disseminated any of the personal information of affected individuals.”
He added that GoGet had not informed members of the breach earlier after receiving advice from NSW Police.
8.12am: Wall St ‘fear gauge’ spikes
A measure of volatility on Wall Street on Tuesday rose to its highest level in more than 5 months as U.S. equity benchmarks extended a slide as the yield in a 10-year Treasury notes hovered around its highest level in more than three years. The CBOE Volatility Index was up at 14.57, up about 5.4 per cent, marking its highest level since Aug. 18, 2017, according to FactSet data.
The VIX uses bullish and bearish option bets on the S & P 500 index to reflect expected volatility over the coming 30 days, and it typically rises as stocks fall. However, the gauge, sometimes referred to as the fear index, has been abnormally low, trading below its historical average at around 20. To be sure, it is still holding at a level below that historic mean but its recent pick up suggests that investors are betting that volatility will accelerate in the future.
Dow Jones
8.10am: Dow books worst day since May
The Dow Jones Industrial Average fell 363 points on Tuesday, its second straight day of triple-digit declines and the worst day since August, amid a slide in healthcare shares and worries over rising bond yields.
The Dow Jones Industrial Average ended down 362 points at 26,076, the S & P 500 index slumped 1.1 per cent at 2,822, while the Nasdaq Composite Index declined 0.9 per cent at 7,402.
The drops Tuesday mark the first time this year that the indexes have fallen for two consecutive days.
Dow Jones
7.55am: Oil slides as risk appetite wanes
Oil prices have fallen for a second day, driven by ongoing evidence of rising US crude output, while wary investors sold off stocks, bonds and commodities. Brent crude futures were down 46 cents, at $US68.17 a barrel, while US West Texas Intermediate futures were trading $US1.04 lower, at $US64.59 a barrel. “Even though the market’s sentiment is strongly bullish, we need to see a good pullback soon that frees up some length for large traders to buy back in again at lower levels. I think we may be seeing that game starting now,” said Dean Rogers, senior analyst and general manager at Kase & Co in Albuquerque, New Mexico.
Reuters
7.26am: Stocks set to slide at open
The Australian share market is expected to start the day lower after US stocks, oil, gold and base metals prices backed away from their recent highs. At 7am (AEDT), the share price futures index was down 20 points, or 0.34 per cent, at 5,940.
In overnight trade, the Dow Jones index in the US suffered its steepest fall in eight months, and oil prices, gold and base metals prices also fell. The Australian market on Tuesday suffered its largest daily fall since mid-November, with the mining, energy and healthcare sectors the worst performers. The benchmark S & P/ASX200 index dropped 52.6 points, or 0.87 per cent, to 6,022.8 points.
However, the Australian dollar bucked the trend, continuing to eke out gains. At 7.20am (AEDT), the local currency was worth US80.82 cents, up from US80.66c on Tuesday.
In economic news on Wednesday, official inflation figures for the December quarter are due out, and in equities news Origin Energy releases its December quarter production report
AAP
7.14am: US stocks wilt as health swoons
The Dow Jones Industrial Average dropped more than 400 points Tuesday, a second straight day of triple-digit declines, amid a slide in healthcare shares and worries over rising bond yields.
The blue-chip index recently declined 392 points, or 1.5 per cent, to 26,047, on track for its worst day since May, after earlier falling as much as 411 points. The S & P 500 dropped 1.1 per cent and is set for its first daily decline of more than 1 per cent since August. A decline Tuesday would mark the first time this year that the indexes have fallen for two consecutive days.
Dow Jones — Read more
6.59am: European markets catch US chill
The Paris CAC 40 came close to crossing over into positive territory at one point as official data showed the French economy notching up its fastest growth in six years, expanding by 1.9 per cent in 2017. The 2.5 per cent growth for the eurozone was the best in a decade.
But the CAC ended the day down 0.9 per cent. Frankfurt gave up 1.0 per cent and London shed 1.1 per cent.
“The large sell-off in the US last night got traders nervous, and now the fear has spread,” said David Madden at CMC Markets UK.
Stock prices were also suffering from the higher US bond yields. While equities have been striking records, the question some investors may soon pose is how far the rally can go and whether bonds may once again offer better returns.
Yields on bonds are rising as central banks move to reduce massive injections of cash stimulus that has helped to prop up the global economy since the financial crisis of a decade ago.
AFP
6.47am: Local dollar lifts against greenback
The Australian dollar has managed to eke out some small gains despite broad based weakness across US markets and in commodity prices.
At 7.20am (AEDT), the local currency was worth US80.82 cents, up from US80.66c on Tuesday.
In overnight trade, the Dow Jones index in the US suffered its steepest fall in eight months, and oil prices, gold and base metals prices backed away from their recent highs.
AAP
ASX down; Insignia lifts; CBA dives; no deal yet: Star
Star 'unable to reach' Queen's Wharf deal with HK partners. Bain, CC Capital neck and neck in Insignia race. PolyNovo confirms internal turmoil. Orica's mixed update. King Island Dairy saved by unnamed businessmen. 'Erratic' Cyclone Alfred's growing risk.
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.