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12:01pm: The dollar briefly breached 90 US cents, jumping more than half a cent after the China data and is currently trading at 89.86 US cents.
11:54am: Some welcome relief for the market: HSBC’s flash purchasing managers’ index for China has come in at a much higher than expected 50.1.
Markets were expecting a reading of 48.2 after last month’s 47.7.
The index reading indicates an acceleration of expansion in China’s manufacturing sector, which spells good news for local miners.
The ASX jumped on the data and is currently down just 0.5 per cent, well off the day’s lows of 1.2 per cent.
11:40am:Insurance profits have this year benefited from rapid premium increases of recent years – with premiums increasing at more than twice the rate of inflation.
But IAG boss Mike Wilkins today said the growth in home and car premiums is slowing considerably.
On a call with analysts, Mr Wilkins said he expected “low single digit” increases in home and car insurance premiums in the year ahead.
This contrasts with home insurance premium rises of about 10 per cent for the last year.
The main reason is because there are less costs from reinsurance to pass through than in the past, he said.
“We feel that we’ve now actually recovered the reinsurance rate increases that we need to put through,” Mr Wilkins said.
IAG shares are down 1.4 per cent to $5.85 in morning trade.
11:34am:Fortescue Metals Group has beaten analyst expectations across most measures on its way to reporting a net profit of $US1.74 billion.
The result is easily better than the $US1.56 billion underlying net profit after tax that analysts were expecting and has allowed Fortescue to pay a 10 cent dividend to shareholders.
Despite reports today that the iron ore exporter would axe plans to sell down a stake in its infrastructure assets, Fortescue today said it would retain the option to sell down a stake should a satisfactory offer emerge.
The company said it fielded many offers for the assets, but none that were considered fair value in the current market.
Fortescue shares fell by more than 3 per cent in the hour prior to the results being released, despite the iron ore price being steady.
Fortescue shares have now firmed to be down just 0.2 per cent at $4.09.
11:29am:Mirvac has announced the sudden resignation of its chairman James MacKenzie, who held the top job since 2005, but unlike the replacement of its chief executive, there was no immediate replacement for the position.
Analysts said that the board started looking for a new chief executive at least six months before the sudden departure of Nick Collishaw and consequent appointment of Susan Lloyd-Hurwitz in October last year.
The board shake-up comes 24 hours before Mirvac releases its full year earnings results.
The group held an investor strategy update in mid May, where Ms Lloyd-Hurwitz reaffirmed the earnings guidance for the full year in the narrow range of 10.7 cents to 10.8 cents to June 30, 2013. Broker estimates are for a net profit after tax of $366.2 million, with a distribution of 4.3 cents. That would be unchanged on the 2012 result.
After the May briefing, John Kim from CLSA said he found Mirvac’s strategic review to be high in substance but low in “wow” factor, with no material changes in strategy.
11:14am: Macquarie analyst Lachlan Fitt has weighed in on today’s result from Echo, saying the gambling company is currently ahead of expectations for the financial year.
- Overall, Echo’s operational result was consistent with our expectations once taking into account the changed normalisation rate for VIP earnings. Compositionally, the result was a little softer with growth in VIP being stronger than expected, which made up for a softer second half from the “grind” domestic business. At NPAT, higher than expected D&A was offset by a low tax rate, resulting in NPAT of $126.9m.
- At The Star, domestic revenue growth of +5.5 per cent was mostly driven by non-gaming (+25.1 per cent) and the main gaming floor (+5.6 per cent). EGM revenue trends did improve across the year, with FY13 growth of +1.1 per cent compared with -0.9 per cent in 1H13 (implies ~3.3 per cent growth in 2H13). VIP front-money was +40.9 per cent across the year, an acceleration of the trend seen in 1H13. Positively, Echo has significantly reduced its trade receivables in the VIP business, which contributed to a 118 per cent cash collection ratio during FY13 (vs 89 per cent in FY12). EBITDA at The Star in FY13 was $260.3m, compared with our forecast of $260.5m.
- Queensland trends remain weak. EGM revenue in 2H13 was down 3.8 per cent, which drove a lower than expected EBITDA result from the division. Table performance across the Queensland properties remained robust, with growth of +6.5 per cent during 2H13. The outlook for Queensland remains dependent on general economic conditions, with discussions continuing regarding Echo’s potential investment in Brisbane and the Gold Coast. Plans for Echo’s investment here are expected to be revealed “in the near future”.
- Trading update currently tracking ahead of expectations. While still only a short period, Echo’s trading update for the first 7 weeks of FY14 is ahead of our expectations for the full year. Normalised revenue growth of +9.6 per cent compares with our FY14 forecast of +6.6 per cent. No breakdown was provided between VIP and domestic growth. Looking forward to the remainder of the year, we anticipate an improvement in consumer sentiment following the election next month and the relaunch of The Star’s loyalty program at the end of FY13 is expected to provide continued growth across the domestic business into the coming year. On the cost front, Echo expects its cost optimisation program to deliver “over $60m of cost savings” with “incremental savings in excess of $30m in FY14”.
11:07am:The Reserve Bank is still more likely to cut rates than lift them, providing an opportunity to benefit from the widest gap between long- and short-term rates since 2009, Pimco’s Sydney-based money manager Robert Mead says:
Mead on Downunder: RBA easing bias intact, earnings season soft, nothing to taper. Roll down steepest Aussie yield curve since 2009
— PIMCO (@PIMCO) August 21, 2013
10:53am: Citi analyst Justin Diddams said Fairfax’s results were “broadly in line with consensus forecasts, with”EBITDA delivered at the top end of management guidance, although down 28 per cent year on year.”
“Cost savings progress remains on track, in line with previous guidance,” he told clients.
“Outlook statement highlights ongoing challenging revenue condition.
“Metro digital and domain revenue growth [was] weaker than Citi expectation [but] not enough here to get more positive or negative on the investment thesis on Fairfax.”
10:45am: Japan’s Nikkei is also down heavily, falling 159.4 points, or 1.2 per cent.
10:42am: With shares down 1.3 per cent, the ASX has lost around $20 billion from its market capitalisation.
10:31am:Shares in Fortescue Metals Group are slumping ahead of the release of its full year results later this morning.
Fortescue shares have fallen by almost 3 per cent in the first half hour of trading.
The fall comes despite iron ore prices being steady, and the share prices of Pilbara neighbours Atlas Iron, BHP Billiton and Rio Tinto being steady so far.
10:29am:The Aussie has slipped below 90 US cents for the first time in two weeks after the Fed gave more clues about when they will begin trimming its massive stimulus next month.
Australia’s dollar tumbled after the Fed Open Market Committee released its minutes from its July meeting, which revealed its members broadly supported chairman Ben Bernanke’s tapering timetable.
This firmed up market expectations that winding back the $US85 million stimulus will begin in September and be stopped altogether mid next year.
The Aussie reacted immediately, falling from 90.35 US cents before the release of the minutes, to 89.75 US cents afterwards.
The dollar is now at 89.51 US cents.
Westpac currency strategist Sean Callow says the Aussie is vulnerable in the near-term with no obvious support ahead of 89 US cents.
But Callow said expecting the tapering to begin next month may be a little hasty.
‘‘Closer inspection [of the minutes] revealed some members also felt patience was required, leaving some to question whether September was still the most likely time for tapering to commence.’’
10:21am:Treasury Wine Estates, the world’s second-largest listed wine company, has posted full-year profit that beat analyst estimates as increased earnings in Asia helped blunt the impact of a writedown at its US unit.
Net income fell to $42 million in the year ended June from $89.9 million in the previous 12 months, the company said. That came in well above analyst expectations of $26 million.
A 13 per cent weakening in the dollar this year is raising the local currency returns on Treasury’s wine exports, as increasing demand for wine in Asia lifts income. That’s helping the company ride out a $160 million writedown announced last month as it discounted and destroyed old stock in its US business.
10:15am: All major sectors are down at least 1 per cent:
- Consumer discretionary: -1%
- Consumer staples: -1.1%
- Energy: -1.4%
- Financials: -1%
- Gold: -3%
- Materials: -2.1%
- Property trusts: -1.3%
10:12am: The market has opened sharply lower, with the benchmark S&P/ASX200 falling 67.9 points, or 1.3 per cent, to 5032.1. The broader All Ords is down 64.9 points, or 1.3 per cent, to 5025.4.
9:58am: The Fed certainly seems to have mastered the art of keeping the market guessing, but investors concentrated on the fact that the minutes showed broad support for the tapering timeline already given by Fed chief Ben Bernanke, IG’s Stan Shamu says:
- Keeping an eye on emerging market currencies and indices makes more sense than ever. After the big spike in US yields overnight we could see further stress, despite measures from individual central banks to curb the rapid falls.
- The Indian rupee hit a new all-time low against the greenback yesterday, despite measures by the government to stem the falls, while announcing it was buying long-dated bonds to push yields lower.
- Earnings will be in focus today, particularly with around 24 companies set to report. This makes it a very busy day on the earnings front and we feel Fortescue Metals will be the most significant report today.
- The market expects a strong increase of revenue by FMG to $8.2 billion, with NPAT anticipated to print $1.2 billion. As with BHP and Rio, traders will be keen to look out for on-going costs, while also keeping an eye on commentary around Solomon and an update on the TPI sale process.
- At 11.45am today we get China HSBC flash PMI and the market anticipates a slight improvement in the contraction, with a print of 48.2 expected. A miss on this reading could send the AUD lower.
9:45am:Fairfax Media has trimmed losses for the 2013 financial year, but weakness in its regional and agricultural business led to hundreds of millions in impairments.
Reporting a $16.4 million loss for the year, Fairfax said trading in first six weeks of this financial year “saw a slight moderation of previous trends, with year-on-year revenue down 8 per cent on the comparable period.”
The result includes a non-cash impairment charge of $444.6 million.
Fairfax said it was on track to deliver at least $311 million in annualised savings by June 2015 and reported better-than-expected take-up of subscriptions for the Sydney Morning Herald and The Age websites since paywalls were erected in July.
“We achieved half of our 12-month target for paid subscribers in the first four weeks since introducing digital subscriptions for Sydney Morning Herald and The Age,” chief executive officer Greg Hywood said in a statement.
9:41am:Toll reported a rise of almost 4 per cent in earnings before interest and tax to $426 million for the year to June, which was slightly ahead of market expectations.
Toll will pay a final dividend of 14.5 cents a share on October 21, up from 13.5 cents in 2011-12. It takes the payout for the year to 27 cents.
The Melbourne company posted a 29 per cent rise in net profit to $92 million for the year. Revenue was flat at $8.7 billion. The statutory profit includes $191 million in one-off charges, including a write down in the value of shipping vessels in its Toll Marine Asia business.
The company said the external business environment remained uncertain, making the ‘‘disciplined capital management approach Toll is undertaking even more important’’.
9:39am:Cabcharge has reported a small increase in statutory profit, up 1 per cent to $60.6 million.
Revenue increased 2.2 per cent to $196.6 million. Revenue from taxi service fee income moved marginally higher to $90.7 million.
Cabcharge will pay a final dividend of 12 cents, down from 18 cents, on October 30.
9:31am: In the US, banking giant Wells Fargo says it is cutting 2,300 jobs because of declines in mortgage refinancings in the wake of higher interest rates.
Wells Fargo, the nation’s largest bank by market capitalisation and the country’s largest mortgage originator, gave a 60-day notice to the affected employees, who work on mortgage finance as part of a consumer lending group of more than 70,000 workers.
While interest rates ‘‘remain very favourable by historical standards for homebuyers, a recent rise in rates has affected consumer demand for mortgage refinancing, causing volumes to fall below what we experienced throughout 2012 and early 2013’’, said a Wells Fargo statement.
9:22am: Bourse operator ASX Ltd has posted a 2.7 per cent increase in full-year profit after trading volumes climbed.
Net income in the 12 months to June 30 rose to $348.2 million from $339.2 million a year earlier, in line with market expectations. Trading volumes of equity derivatives and interest-rate futures increased.
Equity trading volumes were buoyed by a 17 per cent surge in the S&P/ASX 200 Index in the year through June 30, even as competition grew from Chi-X Australia and dark-pool operators, which don’t publicly display prices until after the transaction has taken place.
‘‘The global economy was generally more stable,’’ CEO Elmer Funke Kupper said. ‘‘This flowed through to improving activity levels in Australia’s financial markets as the year progressed.’’
9:20am: A surge in revenue has not been enough to drag Atlas Iron into the black, with the Pilbara exporter today reporting a loss from its ordinary operations.
The narrow underlying loss of $500,000 sank to a final loss of $245 million once asset write downs were accounted for.
But despite the loss, Atlas shareholders will again receive a 3 cent dividend based on the strong cashflows being generated by the company and its plans to increase exports by about 25 per cent in the 2014 financial year.
Atlas has been prioritising growth and spent $277 million on improving infrastructure and expanding mines.
It sold 32 per cent more iron ore than in 2012, and grew revenue by about 13 per cent.
9:19am:Markets around the region are bracing for a rough ride this morning after minutes from the Federal Reserve July policy meeting were taken as affirming the outlook for a near-term tapering in stimulus, sending Treasury yields to two-year highs.
Wall Street stocks sold off, the US dollar surged and borrowing costs rose globally. All of which is bad news for emerging markets that have come to rely on cheap dollars to underpin domestic demand and fund current account shortfalls.
South America provided a taste of what was likely to come for Asia, with the Brazilian real tumbling 2.5 per cent and the Mexican peso 2.2 per cent. The turmoil was enough to make Brazil’s central bank chief cancel a trip to the United States.
Dealers said the violence of the market reaction was partly because some investors had hoped the Fed would lean against the recent climb in Treasury yields. Instead the minutes showed most Fed members felt the outlook for tapering had not changed.
“That does not smack of a Fed going out of its way to fight the back-up in bond yields at the time, which is partly why Treasuries have sold off,” said Alan Ruskin, global head of foreign exchange strategy at Deutsche Bank in New York.
“Most other asset markets are taking their lead from Treasuries, and the minutes provide no obvious relief for the stresses in the emerging market world.”
Markets from India to Indonesia have already been under intense pressure from expectations Western investors will repatriate funds now that yields at home are rising. A confused policy response by some governments has only added to the sense of foreboding and sent funds fleeing the region.
Traders expect currencies and stocks in India, Indonesia and Thailand will be under particular pressure today, likely requiring more official action to support assets.
Investors also face an added hurdle in HSBC China Flash PMI for August due later today. A weak reading would give markets another excuse to push the currencies and shares lower.
9:12am:Origin Energy has posted a sharply lower net profit of $461 million for the year to June, in the wake of a series of difficulties encountered in energy markets.
The profit is down from $1.04 billion a year earlier.
The underlying profit declined a more modest 15 per cent to $760 million from $893 million a year earlier.
The underlying earnings before interest, tax, amortisation and depreciation slipped to $2.18 million from $2.25 million a year earlier, it said.
The Queensland export gas project the company is developing is now 45 per cent complete, it said.
It has declared a steady 25 cents a share final dividend.
9:07am: Turning to some other events this morning: a few Federal Reserve officials thought last month it would soon be time to slow the pace of their bond buying “somewhat” but others counselled patience, according to meeting minutes that offered little hint on when the US central bank might reduce its purchases.
The minutes of the Fed’s July 30-31 meeting, released on Wednesday, showed that almost all of the 12 members of the policy-making Federal Open Market Committee agreed changing the stimulus was not yet appropriate.
Investors are anxiously waiting to see when the Fed will start to slow its $US85 billion monthly asset purchases, with most predicting September as the beginning of the end of the quantitative easing program, known as QE3.
The minutes provided few clues on the potential timing for a reduction but did little to dissuade people expecting a policy change next month.
9:03am:Echo Entertainment has reported a net profit of $83.5 million for the year to June – up 97.9 per cent from a year earlier.
The Casino group warned, however, that this figure was not strictly comparable to a year earlier, giving an underlying profit of $126.9 million, down 15.5 per cent.
Chief executive John Redmond said 2014 would be impacted by a number of factors, including subdued economic conditions, win-rate volatility in the VIP business and the impact of impact of regulatory changes.
The company posted a final dividend of 2 cents per share, fully franked.
The company’s shares have slumped since July 4, when Crown moved a step closer to winning approval for a rival casino in Sydney’s Barangaroo, adjacent to Echo’s Star complex, hitting a record- low close of $2.53 on August 7.
8:55am: Insurance Australia Group’s earnings have jumped 275 per cent to $776 million and after its bottom line was boosted by relatively few natural disasters.
A less volatile measure of performance, insurance profit, increased 65 per cent to $1.4 billion over the year to June.
The insurer, which owns the NRMA, RACV and CGU brands, also raised its final dividend to 25 cents a share.
This takes the full-year payment to shareholders to 36 cents a share, more than double last year’s distribution.
8:52am:Seven West Media has posted a profit after tax, excluding significant items, of $225 million on total revenues of $1.867 billion. The profit result is 1 per cent below last year’s and slightly above the company’s market guidance.
Seven West also reported a statutory net loss of $70 million following the inclusion of significant items of $295 million, which include impairments and restructuring costs.
A final fully-franked dividend of 6 cents has been declared and will be paid in October, taking the total dividend for the financial year to 12 cents a share. The dividend payout ratio remains unchanged at 50 per cent of net profit.
The business had been operating in a tough and challenging advertisement market, which declined 1.7 per cent, Seven West said. ‘‘There have been some improvements in market revenue trends in the second half, particularly in television where our market share improves consistently over the year to 40.5 per cent (January to June 2013).’’
8:48am:Brambles has reported a net profit of $US640.6 million, up 14 per cent in constant currency.
The logistics group said new businesses helped boost earnings amid subdued and uncertain economic conditions.
“This strong result – despite the subdued economic conditions in Europe and Australia – reflects our continued ability to provide value-adding services to our customers at the same time as we deliver improved operational and capital asset efficiency.
It posted a final dividend of 13.5 US cents, up from 13 US cents, to be paid on October 10.
Brambles’ said it is expecting sales revenue growth across the business in the current financial year, excluding its Recall division, which is demerging from the company.
8:45am:Pacific brands has reported a jump in full-year profits to $73.8 million, up from a $450.7 million loss in the previous corresponding period.
Net profit after tax before significant items saw an increase of 1.4 per cent to $73.8 million, up from $72.8 million.
Reported sales for last tear fell by 3.7 per cent.
Pacific Brands will pay final dividend of 2.5 cents on October 1, taking the total dividends for the year to 5 cents.
8:37am: It’s another huge day for earnings reports today.
Here’s what you need2know this morning:
- SPI futures down 39 points
- AUD fetching 89.75 US cents, 87.74 yen, 67.20 euro cents and 57.30 pence
- In the US, Dow Jones -0.7%, S&P500 -0.6%
- In Europe, EuroStoxx50 -0.5%, FTSE100 -1%, DAX -0.2%
- Gold down to $US1364 an ounce
- Oil slips to $US103.93 per barrel
- Iron falls to $US137.80 per tonne
- Reuters/Jefferies CRB down 0.7%
8:28am: Good morning and we hope you had a good weekend. Welcome to the Markets Live blog for Thursday.
Contributors: Max Mason, Jens Meyer
This blog is not intended as investment advice
BusinessDay with agencies
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Source Article from http://www.smh.com.au/business/markets-live-fortescue-shares-jump-20130822-2scel.html
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