Sunday, October 20, 2013

Markets Live: ASX at five-year high

11:21am: FKP Property Group has continued with its restructure into a pure-play local retirement owner and operator with the sale of a stake in a New Zealand business.

FKP is the fund manager of Retirement Villages Group (RVG), and said one of its subsidiaries, the Retirement Villages New Zealand Limited (RVNZ), had appointed Goldman Sachs to sell the fund's 37.7 per cent equity interest in New Zealand retirement village owner and operator, Metlifecare Ltd.

Goldman Sachs was appointed ahead of the expiry of the escrow period for the 79.4 million shares on November 23 this year.

This sale comes as Stockland is embarking on the sale of its direct holding in FKP, which now stands at 11.6 per cent. Concurrently FKP is undertaking a share buy back.

11:14am: Michael West shines a light on the deal that was such a success that it became an embarrassment.

During the financial crisis in 2008, a couple of Macquarie bankers devised a tax-driven trade that fared so well that it virtually wiped out the profit of the bank's Australian business, and a large chunk of franking credits with it.

But in Hong Kong the deal was a monumental winner, delivering a profit in the order of $850 million, according to former executives au fait with the transaction.

Read more

11:09am: Last-minute resumes sent to Mario Draghi for the European Central Bank's new financial supervisor job are unlikely to feature many men.

Ten months after Yves Mersch joined the ECB's board in the wake of an outcry that its top management would become an all-male club, the next senior appointment needs to be a woman, said four euro-zone central bank officials. The leading candidate is Daniele Nouy of the Bank of France, they said on condition of anonymity because the hiring process is ongoing.

''It's almost a certainty that if a very good woman is put forward, all else being equal, the parliament will choose her,'' said Sharon Bowles, chairwoman of the parliament's Economic and Monetary Affairs Committee, who led protests over Mersch's appointment last year and expects to scrutinize the ECB's selection. ''There are several in France, so we're not short, and there are some in other countries.''

11:05am: Here's a nice chart courtesy of Deutsche Bank that shows just how bullish global equity investors have been this year, and that the temporary US shutdown didn't do much to dent their optimism.

The ASX200 isn't in the list but the corresponding numbers are: 15.4 per cent rise since the beginning of the year, and a 3.05 per cent gain since October 1, with most of that over the past five sessions.

Bullish ... stocks have been top this year, while gold was sold off.

Bullish ... stocks have been top this year, while gold was sold off.

10:56am: Here's how the sectors have opened:

Consumer staples: +1.2% Consumer discretionary: +0.6% Energy: +0.6% Financials: +0.9% Health: -0.1% Materials: +1% Gold +0.6%

10:48am:Onwards and upwards, it seems, according to one of the best of the local fund managers.

Platinum Capital told shareholders at today's annual general meeting of the following upbeat assessment received from its fund managers:

"The markets have been unusually resilient to bad news. The appetite for risk has been evident in blue sky areas like e-commerce and biotech, and in recent weeks this hunger for open-ended opportunities has been met with a growing queue of placements and listings. It would be no surprise for the markets to have some retracement, but the general improving economic tone and still massive printing of money suggests that a retreat in prices should be used as a buying opportunity."

10:39am: The market is really in rally mode now that the US debt default scare is out of the way, rising for a fifth consecutive day in a streak that has seen the ASX200 gain about 3 per cent. And investors reckon there may be more gains to come:

''The market will continue to rally based on improving economic fundamentals and a potential delay in tapering of the Federal Reserve's stimulus,'' says Angus Gluskie, managing director at White Funds Management. ''While the US government still needs to do more work on the debt issue and their budget, we're going into 2014 with the likelihood of synchronised recovery in Europe, Asia and the US.''

10:36am:Senior executives from Canada's Saputo, one of three known suitors for Warrnambool Cheese & Butter, have postponed flights to Australia as they consider their options in the wake of Murray Goulburn's surprise $420 million counterbid on Friday for Australia's oldest dairy company, the AFR is reporting.

Lino Saputo jnr had planned to fly into the country today for a series of meetings with Warrnambool suppliers and shareholders, but sources told the paper the visit had been postponed, possibly as Montreal-based Saputo, Canada's largest dairy processor, considers raising its $393 million offer for Warrnambool.

Bega Cheese is already considering raising its bid as it attempts to stay in the hunt for Australia's fourth-largest milk processor.

Bega shareholders will meet tomorrow, when they are expected to lift a cap to its cash-and-scrip bid, valued at $372 million on Friday. That offer was $48 million less than Murray Goulburn's bid, which trumped Saputo's offer.

Read more

WCB shares are up another 4.8 per cent at $8.27, or well above the bids that have come in so far, as investors bet on sweetened offers.

10:33am: The Australian dollar continues to hold strong, currently trading at 96.71 US cents after reaching a four-month high of 96.78 earlier in the session.

FXCM currency strategist, Ilya Spivak, is bullish on the dollar but warns this week will test the local currency's resilience amid some top-tier US economic data.

According to Spivak, the Aussie is still significantly sensitive to broad-based risk appetite trends and vulnerable to the outbreak of risk-aversion produced by two weeks'-worth of data delayed by the government shutdown, with the spotlight to be on September's delayed employment report due on Tuesday night.

BK Asset Management New York managing director Boris Schlossberg says the release of robust Chinese growth figures last Friday is behind the surge.

''The Aussie dollar initially sold off slightly on the Chinese numbers, but eventually recovered to trade back to day's highs as currency traders saw few red flags in the data.''

Mr Schlossberg said the Australian dollar is also strengthening because of increasing expectations that the Reserve Bank of Australia is coming to the end of its interest rate cutting cycle.

''RBA governor Glenn Stevens said that he 'personally' thought that a lower Australian dollar would be helpful to rebalance the economy,'' Mr Schlossberg said.

''The emphasis on personal rather official policy indicates that, at least for now, the RBA is willing to tolerate the pair above the 95.00 US cents.''

10:26am: The ASX is up, up and away - hitting a new five-year high in early trade this morning.

The benchmark S&P/ASX200 hit a peak of 5363.0 this morning, its highest mark since June 2008.

10:20am: Australia's unemployment rate is set to rise to around six per cent by early 2014, according to research into the state of the jobs market.

According to the Clarius Skills Indicator, which tracks the availability of skilled labour, there was oversupply of 134,000 jobseekers in September, meaning there were more people seeking jobs than positions to be filled.

The indicator found the oversupply of workers extended to most industries, including the engineering sector which has been hit by a slowdown in mining investment.

Clarius chief executive Kym Quick said the research indicated unemployment was set to continue to rise over the next few months, hitting a peak of around six per cent in March next year.

The unemployment rate was 5.6 per cent in September, according to figures from the Australian Bureau of Statistics.

10:11am: The market has opened higher, with the benchmark S&P/ASX200 adding 30.7 points, or 0.6 per cent, to 5352.2. The broader All Ords is up 38.8 points, or 0.6 per cent, to 5351.8.

10:07am: Spending fell for the first time in 13 months in September, but consumer confidence is expected to pick up in following months, according to the latest Commonwealth Bank's Business Sales Indicator.

Economywide spending was down 1.4 per cent in September, after a 2.5 per cent rise in August.

CommSec chief economist Craig James said the fall in spending coincided with a boost in housing data.

''Perhaps Aussie consumers were too busy at home auctions or sprucing their homes up for sale, but the evidence suggests that fewer people were at shopping malls or generally spending their money,'' he said.

''But with the election out of the road, the US budget and debt issues solved for now, consumer confidence lifting and with key sharemarket indexes at record highs, economywide spending should lift in coming months."

Mr James said the Reserve Bank of Australia would be watching economic data from the non-mining parts of the economy particularly closely.

''If spending doesn't lift, and at the same time if inflation is contained and the Aussie dollar lifts, then the Reserve Bank will be tempted to cut rates,'' he said.

''Much will depend on the housing market. If demand for homes remains strong then the Reserve Bank will be reluctant to cut rates again.''

9:56am: JP Morgan, America's biggest bank, has reached a $US13 billion ($13.4 billion) deal with US regulators to settle claims that it mis-sold bundles of toxic mortgage debt to investors in the build up to the financial crisis

The settlement, which has yet to be made official, is part of a broader investigation by the US authorities into the industry's mortgage activities in the years before the crisis of 2008. Banks are alleged to have lied about the quality of the sub-prime mortgage securities sold to investors at the time.

The JP Morgan settlement – the largest ever by a US company with the government – is expected to resolve civil claims against the bank, but will leave it open to criminal charges.

Read more

9:48am: CMC market analysts Ric Spooner has a look at the day ahead on the ASX:

Another push higher by US markets on Friday, should see a positive tone for early trading in the Australian market this morning.

The question before investors now is whether the current rally will simply see pre US debt ceiling price earnings values being recovered or whether the confidence of recent days will be a spring board to another leg into significant new ground in this bull market.

Technical analysis suggests that markets may have reached an inflection point that could provide some short term answers for this question. While the Australian 200 index broke narrowly into post 2008 highs last week, it's sitting just below a relatively flat trend line drawn across the May and September peaks. The US S&P 500 index arrived at a similar level on Friday. In this case, the trend line can be drawn across the August and September peaks.

A clear break above these trend lines could signal that investors are about to push price earnings multiples higher as they contemplate ongoing low interest rates and what looks like a period of plainer sailing from a risk point of view.

However, if profit taking sets in here and the resistance zone around these trend lines is respected, we may be in for a period of range bound trading as investors signal reluctance to push price earnings much beyond current levels. The unbroken rally since 9 October means support levels are well below current levels with the 50-day moving average around 5192 being the closest significant level.

9:41am:Former Leighton Holdings chief Wal King has spoken out for the first time since allegations surfaced that he approved the bribing of Iraqi officials.

Speaking for the first time since Fairfax Media revealed allegations that he approved the bribing of Iraqi officials, Mr King challenged his successor as CEO, David Stewart, on why, having claimed to have been told of the bribe, Mr Stewart never alerted the board.

"In my whole period at Leighton I absolutely and completely refused to be involved in anything tainted by corruption," Mr King said.

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Wal King.

Wal King. Photo: Nic Walker

9:35am:Nine Entertainment shareholders will be given initial details of its planned float, as marketing of year's largest sharemarket float moves into full swing.

There is speculation is up to $1 billion will be raised when it floats in December. Existing shareholders are likely to be given a price range for the float in a week.

Read more

9:28am: The Australian market looks set to open higher following strong gains on Wall Street that took the S&P 500 to a new all-time high and gave the Nasdaq a 1.3 per cent gain.

What you need2know:

SPI futures up 22 points to 5,343.
AUD fetching 96.71 US cents (it hit a four-month high earlier of 96.82 in the session), 94.63 yen, 70.67 euro cents, 59.79 pence On Wall Street, S&P500 +0.7%, Dow Jones +0.2% In Europe, Eurostoxx +0.8%, FTSE100 +0.7%, CAC +1.1%, DAX +0.6% Spot gold falls 0.3% to $US1316.25 an ounce Brent oil rises 0.8% to $US109.94 per barrel Iron ore at $US134.40 per tonne

9:28am: Good morning. Welcome to the Markets Live blog for Monday.

Contributors: Max Mason, Jens Meyer, Luke Higgs

This blog is not intended as investment advice

BusinessDay with agencies
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