Markets Live: Gold dives, TPG shines

We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.

Advertisement

This was published 10 years ago

Markets Live: Gold dives, TPG shines

Shares clawed back some early losses but finish lower, led by gold miners, despite strong profit updates from TPG Telecom and Premier Investments, while the dollar pushes higher.

Latest posts

That’s it for Markets Live today.

You can read a wrap-up of the action on the markets here.

Thanks for reading and your comments.

See you all again tomorrow morning from 9.

Global macro-economic worries overshadowed some positive domestic company news to push shares lower on Tuesday.

Concerns about the threat to financial market stability posed by Russian politics and Chinese monetary policy, compounded with lingering concerns about the effects of reduced United States stimulus, resulted in a broad-based sell-off.

The benchmark S&P/ASX 200 Index fell 9.8 points, or 0.2 per cent, on Tuesday to 5337.1, while the All Ordinaries Index also shed 0.2 per cent to 5351. Shopping centre operator Westfield Group led the bourse lower, shedding 2.1 per cent at $10.23.

Local shares fell sharply at the open, taking a negative lead from offshore after major equity markets in the United States, London and Europe all closed lower.

Following Monday's unexpected decline in the HSBC-Markit flash reading of China's manufacturing purchasing managers index, the comparable survey for the US and European manufacturing sectors for March also came in below expectation.

Asian markets provided mixed cues in the afternoon session with China's Shanghai Composite Index trading higher at the local close, while Japan's Nikkei was flat and Hong Kong's Hang Seng behind.

"We are holding a little bit more cash than ordinarily as we wait to see how the political situation in Russia pans out," Contango Asset Management portfolio manager Shawn Burns said.

The US and its closest allies have ousted Russia from the Group of 8 in retaliation for the annexation of Crimea from neighbour Ukraine.

"Another reason for caution is waiting to see how the Chinese government manages the process of de-leveraging the economy," Mr Burns said.

"China has an advantage over Western countries in that it has more control over market participants and access to stimulus tools if credit tightening creates too much of a drag on the economy," he said. "But there is still a risk of some more soft growth numbers before Chinese policy-makers get the balance right."

Read more.

And here are the best and worst for the day, led by two companies which reported solid earnings updates, while gold miners were the laggards.

 

 

Best and worst performing stocks in the ASX 200 for the day.

Best and worst performing stocks in the ASX 200 for the day.

Advertisement

RBA deputy governor Phil Lowe has passed on the opportunity to describe the Australian dollar as "uncomfortably high", saying that the exchange rate has fallen as the mining investment boom has declined.

 

Local shares have been caught in a broad sell-off, with the ASX 200 index dropping 0.2 per cent to 5336.6 and the All Ords shedding a similar proportion to 5351.

Only 42 of the top 200 names advanced. Among the bluechips, Westpac was the biggest booster, adding 0.7 per cent, while BHP and Rio both gained strongly, up 0.5 and 1.4 per cent, respectively. Fortescue jumped 1.6 per cent.

Westfield (down 2. per cent) and Newcrest (-5 per cent) were the biggest drags on the benchmark index.

Gold miners were the worst performers, falling 5 per cent as a group, while telcos (up 0.3 per cent), consumer staples and metals and mining (both up 0.1 per cent) were the best.

Scott Minerd, the chief investment officer of Californian-based, $200 billion investment manager Guggenheim Partners is one of several investors who have grown increasingly apprehensive about the risks of Japan’s extreme version of quantitative easing.

He’s shorting Japanese government bonds, which, at the 10-year point, yield just 0.60 of a percentage point.

It’s a position that has infamously been dubbed “the widow-maker” trade because Japanese bonds have refused to crash for over two decades.

He recalled the reaction to his trade when he discussed it with a group of hedge fund managers in Davos last year. “They said ‘welcome to the house of pain: it’s short, we have been living with it for 10 years and it never works’.”

But at a yield of 0.60 per cent, there’s not much “pain” relative to the risks Minerd believes Japan is creating. The prospects of Japan falling into hyperinflation are not to be ignored, he says.

“What we are experiencing in Japan and the risks [it poses] are unprecedented in the history of the world. There has never been a time in world history where every major economy is operating on a fiat currency.

“All of this money printing, whether it’s Japan, the US, Great Britain or Europe, is tantamount to filling your basement with gasoline and saying ‘everything is OK as long as no one strikes a match’. ”

“Once one country begins to spiral into an uncontrolled inflation environment, the prospect of contagion is extremely high.”

Read more ($).

Advertisement

The Reserve Bank will probably try to weaken the dollar, which jumped today to a three-month high against the US dollar, ANZ chief executive Mike Smith says.

The Aussie hasn’t declined along with commodity prices in spite of the currency’s links to raw materials, Smith told Bloomberg TV in Hong Kong today.

“Is it a little bit too high?” Smith said. “Probably it is and I’m sure the Reserve Bank governor will try to push it down a little bit.”

RBA chief Glenn Stevens is speaking at the Credit Suisse Asian Investment Conference in Hong Kong tomorrow.

The dollar is trading at 91.37 US cents, after rising to a three-month high of 91.58 US cents around midday.

For the record, RBA deputy Philip Lowe, who's currently speaking at the ASIC conference in Sydney, doesn't mentioned monetary policy in his speech, Bloomberg has just said. But there's always the ensuing Q&A.

The currency has been on the way up this month, as economic data fuels speculation the central bank will raise interest rates sooner rather than later. That has overshadowed concern commodity exports to China, Australia’s largest trading partner, will fall as the Asian nation’s economic growth slows.

Automotive Holdings will extend its car and truck dealerships and logistics business in two deals worth $184 million.

The Perth-based company, which entered a trading halt this morning, has struck a deal to buy Scott’s Refrigerated Freightways for $116 million and NSW car dealership Bradstreet Motor Group for $68 million.

The Scott’s deal will be funded from $71 million cash, $15 million of AHG shares and $30 million of finance leases, the company said in a statement to the ASX.

AHG managing director Bronte Howson said the acquisition would deliver $4 million a year in savings by the end of 2016 and make the company the biggest temperature controlled carrier in Australia.

Sydney-based Scott’s is forecast to generate sales worth $237 million this year and earnings before interest, tax, depreciation and amortisation of $25 million.

The Bradstreet deal will lift AHG’s network to 169 franchises across 96 dealerships in Australia and New Zealand.

Bradstreet’s dealerships are mainly in Newcastle and represent seven car makers: Toyota, Mazda, Holden, Nissan, Kia, Subaru and Great Wall.

“This is a strategic addition to our NSW dealership network,” Mr Howson said. “The dealerships operate from well-maintained properties on long-term leases and require no significant capital expenditure.

“They also complement our established Newcastle truck hub, giving AHG a very strong presence in the Newcastle region.”

The Bradstreet deal will be funded in cash. Both acquisitions are subject to the completion of due diligence.

Fortescue chief executive Neville Power has sought to reassure investors about the risks of falling iron ore prices on the company’s profitability, and the threat posed by increased mining rivals in China.

Speaking to a room of investors, at the Credit Suisse Asian Investment Conference in Hong Kong, Power played down the impact of falling iron ore prices and said the company’s profit margins were strong enough to withstand a further correction in the year ahead.

“There will always be short term volatility but not anything that we are concerned about long term,” he said. “The key with all of these resource projects is being well positioned on the global supply curve.

“We are very comfortable with how we are positioned. A $US100 a tonne iron ore price or sub $US100 a tonne is ok, particularly if we repay debt."

Credit Suisse head of Australian equity sales Chris Mayne said as long as the iron ore price stays relatively stable over the next 12 months, Fortescue should be able to meet its target of repaying $2 billion in debt by the end of this year.

Advertisement

Asia’s changing palate could help fuel Australia's next commodities boom as the unprecedented investment in the mining sector winds down, a global report by HSBC says.

The increasing demand for foods such as meat and dairy reflected the growing economies in Asia and other regions, with the expanding incomes of the new middle-class fuelling the shift in preference towards more high-quality foods.

Australia, as one of the world’s biggest exporters of soft commodities such as meat, dairy, wheat and sugar, is well-placed to benefit from the changing tastes of the growing middle-class in Asia - the fastest-growing part of the global economy, HSBC’s chief economist for Australia Paul Bloxham says:

  • Agricultural product prices have risen by far less than metals and energy prices over the past decade, but could be the next big story.
  • It may, in fact, be the case that food prices have the potential to outperform relative to metals and energy prices in coming years, as growing middle class incomes continue to boost demand.


The analysts estimate about 1.3 billion people could reach at least middle-income levels by 2030, while another 2.6 billion could achieve that income status in the following two decades.

This in turn could lead to a change in diet and a taste for finer foods, benefiting soft commodities exporters such as Australia, Brazil and New Zealand.

<p>

Most Viewed in Business

Loading