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3:13pm: For all the efforts to shore up electronic markets in the aftermath of one of America’s biggest trading catastrophes, yesterday’s options malfunction by Goldman Sachs shows the dangers haven’t gone away.
A programming error caused the firm to send unintentional stock options orders in the first minutes of trading, pushing prices on dozens of contracts to a dollar each, according to a person briefed on the matter yesterday and data compiled by Bloomberg.
Any losses for Goldman Sachs won’t be known until exchanges determine which contracts should be cancelled, said the person.
‘‘It can happen to anybody, no firm is immune,’’ says Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor. ‘‘Because it’s Goldman Sachs, the error could be pretty large.’’
3:11pm: And while we’re looking at troubled emerging market currencies: India’s rupee has declined 0.2 per cent to 63.3750 per US dollar in the spot market, according to prices from local banks compiled by Bloomberg. It plunged to an all-time low of 64.12 yesterday.
Volatility in the rupee is at a three-year high as the central bank’s steps to support growth countered concern the US will pare stimulus as early as next month.
The Reserve Bank of India will start buying government debt to pump funds into markets and consider reducing weekly sales of cash-management bills to rein in a surge in bond yields that threatened the economy, according to a statement yesterday.
The RBI’s ‘‘steps will trigger knee-jerk positivity but there is little by way of other domestic catalysts to effectively turn the mood,’’ Radhika Rao, an economist at DBS Bank in Mumbai, wrote in a research report today. ‘‘The only watch factor on the horizon is external, that is the direction of the U.S. Fed QE tapering exercise.’’
2:59pm: And while we’re looking at troubled emerging market currencies: the Indian rupee has declined 0.2 per cent to 63.3750 per dollar in the spot market, according to prices from local banks compiled by Bloomberg. It plunged to an all-time low of 64.12 yesterday.
The Reserve Bank of India will start buying government debt to pump funds into markets and consider reducing weekly sales of cash-management bills to rein in a surge in bond yields that threatened the economy, according to a statement yesterday.
The RBI’s ‘‘steps will trigger knee-jerk positivity but there is little by way of other domestic catalysts to effectively turn the mood,’’ Radhika Rao, an economist at DBS Bank in Mumbai, wrote in a research report today. ‘‘The only watch factor on the horizon is external, that is the direction of the US Fed QE tapering exercise.’’
2:55pm: Malaysia’s ringgit is back on the way down, erasing an earlier gain, before a report that may provide clues as to the timing of a reduction in US monetary stimulus.
The ringgit dropped 0.2 per cent to 3.2943 per US dollar. It climbed as much as 0.2 per cent earlier and reached 3.302 yesterday, the weakest level since June 2010.
The Federal Reserve will release minutes of its July policy meeting today, after reports this month showed jobless claims fell and housing starts climbed in the world’s largest economy.
The ringgit, which has dropped 7.2 per cent against the US dollar this year, has weakened too much for an economy set to perform better in the coming months, Abdul Wahid Omar, minister in the Prime Minister’s Department, said yesterday.
‘‘The market is so uncertain on whether tapering is going to start in September, as most economists think,’’ says Wong Chee Seng, a currency strategist in Kuala Lumpur at Ambank Group. ‘‘Until you have this settled, it’s still a dollar-buying environment.’’
2:32pm: While other commodity prices have come under pressure, iron ore is holding near five-month highs at just below $US140 a tonne, supported by brisk steel production in top market China as mills brace for the peak consumption season.
China’s daily crude steel output averaged 2.14 million tonnes in the first 10 days of August, up almost 3 per cent from the previous 10-day period, according to industry group China Iron and Steel Association.
That should support demand for iron ore as Chinese mills ensure they have enough of the raw material to keep pace with steel demand anticipated to strengthen during the seasonally brisk September and October period when most construction activity resumes due to better weather.
Indications of a stabilising Chinese economy and Beijing’s commitment to boost investment in urban infrastructure and railways are also pushing steelmakers to keep output high.
“Most people had expected China’s economy to continue to soften and that did not happen. Nor did it grow really fast, but it’s not growing at the exceptionally low rate that people were expecting,” says Joel Crane, vice-president of research at Morgan Stanley.
“The issue here is a demand surprise not a supply surprise. If anyone is surprised why the iron ore price is high, it’s not because they got supply wrong, it’s because they got demand wrong.”
2:12pm: The dollar remains under pressure, trading at 90.38 US cents after hitting the day’s low of 90.18 US cents around midday.
The currency is again being sold by investors as a hedge against weakness in Asian markets more broadly.
“A big fall in Indonesia’s rupiah and significant volatility in Asian currencies are keeping the Aussie off,” says Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore, who sees the Aussie testing recent lows of 88.48 US cents.
Part of the move was caused by a spike in the euro across the board on talk European investors are repatriating funds from emerging markets.
1:55pm: And while we’re looking at Kiwi companies, it’s worth mentioning that New Zealand’s biggest listed company posted earnings today.
Fletcher Building’s annual net profit after tax for the year ending June 30 jumped 76 per cent to $NZ326 million ($286 million), from $NZ185 million last year.
But last year’s earnings included impairment charges of $NZ132 million, which once stripped out left the firm with an operating profit of $NZ317 million, down from $NZ359 million in 2011.
A strong performance in the New Zealand market was dulled by weak conditions in the Australian market, Fletcher chief executive Mark Adamson said. The operating earnings increase was driven by rising levels of new house building activity and strong momentum with rebuild and repairs following the Christchurch earthquake.
This helped lift Fletcher’s Australian listed shares, which are up 5.8 per cent today.
1:45pm: Shares in Trade Me have dropped to a two-month low after New Zealand’s largest online auction site said earnings growth would slow in the coming year as it invests more in its business.
Trade Me shares fell 4.2 per cent to $NZ4.50, making the stock the worst performer on New Zealand’s benchmark index.
‘‘There is going to be a significant increase in the cost base and capital expenditure over the next year,’’ said Shane Solly of Mint Asset Management. ‘‘Trade Me is trading up to some extent – it will take time to see how the investment pays off.’’
1:29pm: How the mighty have fallen! Look where the supposedly world-beating BRIC countries are today: Brazil is mired in protests, China’s growth is slowing, Russia is addicted to self-destructive spy games, and India’s currency is at an all-time low.
Of the four, India has the brightest prospects for growth ahead, so why has the rupee taken such a dip?
Yesterday, the Indian rupee crashed to a record low of 64.13 per US dollar, before India’s central bank took steps to support the beaten-down bond market, in moves that might just help prop up the rupee.
Even though China is growing faster right now, India has many more years of rapid expansion ahead simply because it hasn’t urbanised or adopted new technologies to the same extent.
You’d think foreign investors would be desperate to get in on the ground floor of this long-term boom, but naturally they’re more fickle – and less patient – than that. And since the value of the rupee in global markets depends on their demand as well as its supply, you have to consider both to understand what’s happening.
1:18pm: Here’s a quick glance around the region, as Japanese shares fall to a seven-week low.
- Nikkei: -0.8%
- Shanghai: -0.3%
- Taiwan: -0.9%
- South Korea: -1%
- Singapore: -0.4%
- New Zealand: +0.9%
1:00pm: Ailing paper merchant PaperlinX has incurred another loss but says its financial performance is improving.
PaperlinX made a net loss of $90.2 million in the 2012-13 financial year, an improvement on a $266.7 million loss in the prior year.
The previous year’s loss included $214 million in losses from asset writedowns, business sales and restructuring costs, while costs from restructuring and asset writedowns in the 2012-13 financial year totalled $51.7 million.‘‘2013 demonstrates that we are delivering our turnaround strategy,’’ PaperlinX chief executive Dave Allen said.
The company shed 600 staff in the year, about 12 per cent of its workforce.
Shares are down 12.9 per cent at 5.2 cents.
12:39pm: Prominent debt collector Mick Gatto and business partner Matt Tomas have staved off the collapse of their crane hire business by the last minute payment of a $67,057 debt.
Brooklyn-based Elite Cranes was facing insolvency over a long-running debt to subcontractor APAC Cranes, which the Supreme Court had ordered must be paid by August 7 or the company would be liquidated.
Mr Gatto and Mr Tomas kept control of their business after the dispute was settled on the court house steps ahead of the scheduled hearing.
The money will go to the creditors of APAC Cranes, which placed into administration in 2011 with debts of more than $1 million. Administrator Philip Newman of PCI Partners confirmed Elite had paid its bill in full and the legal proceeding had been discontinued.
12:23pm: I don’t know about you guys, but I think there’d be rebellion if this happened in Australia.
Bars in Denmark risk running out of draft beer after a labour dispute caused production to be halted at a brewery operated by Carlsberg.
The brewery, located in the town of Fredericia, produced all of Carlsberg’s draft beer in Denmark, spokesman Jens Bekke said today.
Carlsberg estimates it controls about 70 per cent of the country’s draft beer market.
Workers in a part of the brewery where beer is transferred to kegs had walked out last Wednesday because a new hire wasn’t affiliated to a union that all other employees were, Mr Bekke said. The 130 strikers were part of a total workforce of 800 at the site, he said.
Production of soft drinks is also affected.
12:08pm:Hanging out for a big fat pay rise? If the economy-wide statistics are any guide, don’t bank on a huge increase right now, writes BusinessDay‘s Clancy Yeates.
Conditions are, of course, different in every workplace, but official figures show wages are now growing at their slowest pace in several years. Economists think that as the labour market weakens further during the next year or so, this could be a taste of things to come.
According to the Bureau of Statistics, wage growth in the year to March was the slowest since the global financial crisis, at 2.9 per cent. Workers at the Holden plant in South Australia have even agreed to a wage freeze in order to keep their jobs, though this reflects specific challenges in the car-manufacturing industry.
It’s a far cry from just a couple of years ago, when employers were complaining about skills shortages pushing up pay packets to unsustainable levels.
Why is the outlook for wages so bleak?
For one, many employers are looking to cut costs at a time of economic weakness. Wages are an obvious place to start.
11:52am:The Brazilian real has sunk to its lowest level against the US dollar in four years, hurt by market expectations of higher US interest rates.
On Monday, the Brazilian currency closed at 2.4169 to the greenback, trading above the 2.4 mark for the first time since March 3, 2009. It opened on Tuesday at 2.398.
‘‘The dollar will continue on this downward trend,’’ said Luiz Gustavo Pereira, an analyst at Corretora Futura in Sao Paulo.
‘‘There is this situation with the probable hike in US interest rates and all emerging countries will continue to suffer,’’ he added.
The weakening of the real comes as Latin America’s economy is experiencing anemic growth and rising inflation.
And anticipation of tighter US monetary policy from next month is making the dollar more attractive on international markets.
Higher US interest rates would mean a reduction in liquidity injections by the Federal Reserve Board through its monthly purchases of Treasury bonds.
11:36am:The Australian government has sold $800 million of April 21, 2025, Treasury bonds.
The Australian Office of Financial Management (AOFM), which conducts bond auctions on behalf of the government, said the bonds were sold for a weighted average yield of 4.1682 per cent.
The sale attracted bids totalling $1.815 billion, giving a coverage ratio of 2.27.
11:21am: Here are the best and worst performers on the ASX200 so far today:
11:13am:South Korean exports for the first 20 days of this month rose by a strong 15.6 per cent from a year earlier, customs data showed today, adding to signs of the trade-dependent economy gathering momentum.
South Korea’s overseas shipments between August 1 and 20 stood at $US26.092 billion, data that Korea Customs Service published on its website showed.
Imports for the same 20-day period fell 3.9 percent in annual terms to $US26.114 billion, generating a trade deficit of $US22 million, the data showed.
11:07am: With its bid for gas distributor Envestra stalled, pipeline owner and operator APA Group has more than doubled its net profit, as it benefitted from the earlier acquisition of another pipeline group Hastings Diversified.
In the year to June, APA boosted its net profit to $298.8 million from $130.6 million.
Extraordinary items cut the final profit for the year to $178.7 million from $140.3 million.
Earnings a share rose to 23.1 cents from 21.9 cents following a share issue during the year.
Earnings before interest, tax, depreciation and amortisation for the year rose to $768.8 million from $525.8 million.
For the year ahead, it flagged a lower profit at this level of $715-730 million.
It forecast the payout to be maintained at 35.5 cents in the year ahead.
10:55am:Tokyo shares have opened up 0.2 per cent following a mixed showing on Wall Street as investors await the release later of the minutes from the US Federal Reserve’s July meeting.
The Nikkei index at the Tokyo Stock Exchange rose 32.74 points to 13,429.12 in the first minutes of trading.
10:46am: The peak super investment body has expressed concern over companies that exclude the cost of impairments from bonus calculations, saying it distorts long-term corporate performance in favour of higher executive pay.
The Australian Council of Superannuation Investors, whose members manage $350 billion in assets, said it had issued revised governance guidelines to its members to take into account new expectations of board practices, executive pay and capital raisings.
The guidelines come as companies release their annual reports for the 2013 financial year, which detail executive salaries and long-term incentives.
‘‘The use of normalised and adjusted earnings in bonus plans will be in the spotlight this reporting season,’’ ACSI chief executive Ann Byrne said.
‘‘Of particular concern are companies that exclude costs and impairments from bonus calculations.’’
‘‘An impairment charge should not be excluded from the bonus calculations for the CEO and executive team which acquired the asset that has been impaired.’’
10:38am: By the looks of the comments yesterday and today, real estate seems to be at the tip of everybody’s tongue, or keyboard rather.
So here’s an interesting real estate story out of the US where some foreclosures are working out well for borrowers.
Florida’s five-year deadline to foreclose on a home is ticking on thousands of aging cases state-wide, giving lucky borrowers a shot at a free house and catching banks with muddled files unaware.
The statute is common contract law that says a person has five years to sue on a debt, with the right to collect that money expiring at the end of the time period.
But its application to foreclosures is unsettled. A very specific set of circumstances must be in play for a homeowner to walk away a jackpot winner, and without clear case law or a high court’s ruling, its impact on foreclosures filed between 2007 and 2009 is hazy.
Still, a few prominent judgments in favour of owners, including a multi-million-dollar waterfront mansion in Boca Raton, have presented another surreal twist in Florida’s lengthy foreclosure fiasco.”
10:24am: BHP’s profit, which came put yesterday after the local market closed, isn’t being received too well, with shares down 1.8 per cent at $35.88, while rival Rio is up 0.2 per cent.
The mining giant’s underlying earnings of $US11.8 billion missed expectations of a $US12.6 billion profit.
Here’s Mal Maiden’s take on the earnings:
BHP and Rio Tinto are Australia’s two mining whales, and they are swimming through similar, slightly chilly water this year as the resources bubble deflates and they focus much more tightly on costs and productivity.
Investors are taking on different risks depending on which whale they ride. Rio is the biggest punt on the iron ore price. BHP is a more evenly weighted bet on a basket of commodities, and a less risky conveyance as a result.
10:21am: The stock market has opened slightly higher. The benchmark S&P/ASX200 index is up 9.7 points, or 0.2 per cent, to 5087.9, while the broader All Ords has gained 10.4 points, or 0.2 per cent, to 5079.2.
Losses in the materials sector (-0.6%) are being offset by gains in most other sectors, including a 0.4 per cent rise in financials.
10:07am: The dollar has just dived to the day’s low of 90.48 US cents, extending this week’s falls from above 92 US cents on Monday.
Investors are waiting for the US Federal Reserve minutes of its July meeting, which may provide clues on when policy makers plan to slow stimulus that has inflated asset prices around the world.
‘‘If we do see a reiteration that the Fed will start tapering as early as September, I think 90 US cents will be breached on the downside, bringing 88 1/2 into play,’’ says Michael Judge, a trader at OZForex. ‘‘Broader-term weakness in the Aussie is still very much intact.’’
10:02am: No surprises in Suncorp’s 2013 profit, says Morningstar’s David Ellis in a snap analysis:
- Suncorp Group’s (Suncorp) adjusted cash profit for fiscal 2013 of $596 million is in-line with our expectations and includes the $632 million loss on sale of the non-core bank to Goldman Sachs announced in July. Divisional results and dividends are consistent with the earlier announcement.
- The standout is the impressive performance from the General Insurance division with profit nearly doubling to AUD 883 million and the 13.1% insurance margin exceeding medium term guidance to “meet or beat” an underlying margin of 12%.
- Core Bank profits were flat at AUD 289 million and the Life Division disappointed with a significant decline in profits to AUD 60 million from AUD 251 million in 2012.
- We remain positive on the outlook with higher targeted cost savings and core business profits expected to grow consistently during our forecast period. The sale of the non-core bank is a relief and enables the group to focus on the profitable core businesses.
- The group is well placed to deliver on key medium term commitments including an insurance margin of at least 12% and return on equity of at least 10% in fiscal 2015.”
9:49am: Someone who’s not yet had enough of earnings season:
Really good snapshot into corporate Australia today via result announcements #ausbiz Must say, despite all the noise, earnings are OK
— Peter Esho (@PeterEsho) August 20, 2013
9:47am:Higher production and a lower petroleum rent tax helped Woodside Petroleum lift its net profit to $US873 million from $US818 million in the June half.
Revenue totalled $US2.86 billion, up from $US2.80 billion. Earnings a share rose to US106c from US100c, it said.
It also hiked the interim dividend to US83c a share from US65c paid a year earlier.
Production rose a strong 22.5 per cent to 41.9 million barrels of oil equivalent, it said, reflecting a full half year contribution from the Pluto project.
However the group has revised down its full year output forecast to 85-89 million barrels of oil equivalent from 88-94 forecast earlier.
9:42am: Putting earnings on the sideline for a few minutes, Bank of Japan Governor Haruhiko Kuroda has said he will not hesitate to adjust quantitative easing if downside risks from a planned sales tax or overseas economies increased, according to an interview in the Mainichi newspaper today.
Improvements in personal consumption and investment show that the BOJ’s expanded quantitative easing is heading in the right direction, Kuroda was quoted as saying.
Japan’s economy isn’t likely to slow if the government proceeds with a plan to raise the sales tax, and the government should take firm steps toward fiscal discipline, Kuroda was quoted as saying.
9:31am:Super Retail Group has reported a 23 per cent jump in profit to $102.7 million.
Sales revenue across the group which includes, Ray’s Outdoors, Supercheap Auto and Rebel Sport was $2 billion.
SRG will pay final dividend of 21 cents, fully franked, on October 2.
9:15am:Seek has reported a net profit of $141.1 million for the year to June, excluding one-off gains relating to acquisitions.
This was up 8 per cent from $130.2 million a year earlier.
Chief executive Andrew Bassat said the result was achieved “despite subdued macro conditions”.
“The key drivers of this result were strong growth across education (as a division), robust results in Seek international and a solid performance by Seek domestic,” he said.
The company posted a final dividend of 22 cents per share, up from 17.3 cents a year earlier. This will be paid out on October 16.
9:10am:The Reject Shop has posted a net profit of $19.5 million, down 10.9 per cent from a year earlier.
The company said, however, that the results were distorted, due to one-off insurance claims and the cost of new stores.
“Despite poor consumer sentiment and retail sales trends, we continue to trade well and we have now delivered positive comparable store sales growth in every quarter since re-opening the Ipswich distribution centre in October 2011,” managing director Chris Bryce said.
The company declared a final dividend of 13 cents per share, to be paid on October 14.
9:00am:iiNet has reported a 64 per cent rise in its annual net profit, to $60.9 million for the year to June.
The country’s second largest DSL internet provider said it had benefited from the integration of two acquired businesses, Internode and TransACT, throughout the year.
This offset “challenging economic conditions”, it said.
Its total 2013 dividend was up 36 per cent to 19 cents a share, fully franked.
8:58am: Buffeted by an uneven performance across divisions, building materials group Boral has posted a year to June net profit of $104.4 million, little changed on the net profit of $101.2 million a year earlier.
Revenue rose 6 per cent to $5.3 billion.
Firm earnings from domestic cement and the US were offset by continued weakness in the domerstic building products sector, and a flat performance by its gypsum unit.
Even with the flat profit, the company has decided to lift the final dividend to 6 cents a share from 3.5 cents a share paid previously, giving a steady 11 cent annual payout.
8:55am:Iluka has reported first half a profit of $34.3 million for the since months to the end of June, down from $274.4 million in the previous corresponding period.
Sales revenue for the half was at $381.7 million, down from $662.8 million in the first half of 2012.
Illuka will pay a fully franked dividend of 5 cents on October 2.
8:49am:Asciano has reported a net profit of $340 million for the year to June, up 41.2 per cent from a year earlier.
The company issued a final dividend 6.25 cents per share.
8:47am:Suncorp has posted a 32 per cent fall in full-year profit in line with its guidance last month.
Net income for the year to June 30, was $491 million compared with $724 million a year earlier, hurt by a loss on the sale of its mostly sour loan portfolio.
Suncorp’s banking unit recorded a loss of $343 million, compared with a profit of $26 million a year earlier.
It will pay a special dividend of 20 cents in addition to a final dividend of 30 cents.
Suncorp has posted a 32 per cent fall in full-year profit in line with its guidance last month.
Net income for the year to June 30, was $491 million compared with $724 million a year earlier, hurt by a loss on the sale of its mostly sour loan portfolio.
Suncorp’s banking unit recorded a loss of $343 million, compared with a profit of $26 million a year earlier.
It will pay a special dividend of 20 cents in addition to a final dividend of 30 cents.
8:45am: Webjet has reported full-year net profit after tax $6.5 million full-year profit, down from $13.6 million in the previous financial year.
8:23am: Good morning. Welcome to the Markets Live blog for Wednesday.
Contributors: Max Mason, Jens Meyer
This blog is not intended as investment advice
BusinessDay with agencies
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