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Markets Live: Banks lead rebound

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June 14, 2013 – 4:12PM

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Stocks fire on all cylinders, adding $30b to the market’s value in the biggest one-day rally in 17 months.

5:15pm: That’s all from us here at blog central – thanks for reading, and have a good weekend. We’ll be back Monday at 9.30am.

Here’s our evening wrap for the session.

4:44pm: Australia’s rebalancing act is going slower than expected, HSBC chief economist Paul Bloxham writes in a note, leading the bank to lower its GDP forecasts to 2.5% for 2013 and 2.8% for 2014 (previously 2.9% and 3.1%).

“We expect the Australian dollar will depreciate further yet, supporting a rebalancing of Australia’s growth,” Bloxham says. “We now also expect that the RBA may cut rates by another 25bp in coming months.”

Previously Bloxham had been one of the few economists to call an end to the central bank’s easing cycle.

HSBC also notes:

  • The USD is in the midst of a powerful rally; one we expect to continue.
  • The intensification of the Currency War is playing its part in the USD’s gains.
  • As the USD rally picks up steam we expect the EUR’s resilience to wane.
  • The USD has already risen, but this is just the beginning.

4:36pm: And here’s a look at the main winners and losers among the ASX200:

Today's winners and losers (changes in %).

Today’s winners and losers (changes in %).

4:30pm: On the local market, all sectors bar health (-0.2%) rose, with miners, retailers and banks leading the rally.

Here’s how some of the main players did:

  • BHP: +2.5%
  • Rio: +4.7%
  • ANZ: +3%
  • CBA: +2%
  • NAB: +3.6%
  • Westpac: +2.7%
  • Woolies: +1.6%
  • Wesfarmers: +3.3%
  • Telstra: +1.3%

4:25pm: Japan’s Nikkei also soared 2 per cent today, recovering from yesterday’s plunge into bear market territory (down more than 20% from May peaks).

Looking ahead, European stock index futures are pointing to a higher open, after solid US data calmed fears over whether the world’s biggest economy could withstand the winding down of the Federal Reserve’s stimulus measures.

Futures for Euro STOXX 50, for UK’s FTSE 100, for Germany’s DAX and for France’s CAC are up 0.4-0.7 per cent.

Wall Street futures are flat, however, indicating the New York bourses are likely to take a breather from yesterday’s rally.

Strong US economic data plus reduced fear about a premature rate hike from the US Federal Reserve buoyed global markets today, says AMP Capital head of investment strategy Shane Oliver: ‘‘Look at the underlying global growth dynamics and they remain favourable.’’

4:16pm: The stock market has closed within a whisker of the day’s highs. The benchmark SP/ASX200 index jumped 96 points, or 2 per cent, to 4791.8, posting its biggest one-day rally since January 2012.

The broader All Ords rose 90.6 points, or 1.9 per cent, to 4775.5.

3:53pm: Australian equities today made the most of the positive offshore leads with broad based gains sending the ASX200 soaring, says CMC trader Tim Waterer:

  • After a recent run of outs on the local market, today it seemed as if the shackles had been released with traders seeking stocks that have recently been oversold.
  • However, global market sentiment remains fickle at best which is why it is too early to suggest if this is the start of a sustained move higher by the ASX200 back towards the 5000 level in the coming weeks.

3:41pm: THe dollar has been trading just below 96 US cents for most of the local session, down from the overnight high of 96.66 US cents but also well off a 33-month trough of 93.25 US cents plumbed on Tuesday.

It is up 0.8 per cent so far this week, snapping five straight weeks of losses.

But the main action was around the yen, against which the Aussie remains under pressure. It’s currently fetching 91.5 yen, down from an overnight high of 92.5 and well off the April high of 105 yen. The Aussie remains not far from a 5-1/2 month low of 88.90 yen plumbed on Thursday.

Today’s trading has been marked by caution surrounding the volatile Nikkei, which is keeping a squeeze on short-yen positions that is underpinning the Japanese currency.

“To a large extent the recent weakness in AUD … can be attributed to the pressure being seen on ‘carry trades’ more broadly as the market moves to price an earlier and swifter Fed tapering of their bond purchases,” says John Horner, strategist at Deutsche Bank.

“Whether the statement accompanying the FOMC announcement and ensuing press conference by chairman Bernanke on Wednesday pushes back on these expectations, will be critical then for the near-term AUD … outlook,” he says, referring to the Fed’s June 18-19 policy meeting.

3:24pm: Meanwhile, the local market is firing on all cylinders. If the ASX200 holds on to its current gains it’ll be the biggest jump since last July.

3:23pm: A bit of talk from a prominent Fed watcher seems to have hit home, and has seen traders looking at the capital markets through slightly more optimistic eyes, says IG’s Chris Weston:

  • Throw in some good US data in the shape of US retail sales and weekly jobless claims and you have the SP 500 closing up 1.5%, with the bulls completely dismissing the terrible Nikkei tape.
  • Certainly the 0.6% month-on-month gain in retail sales is obviously positive, however it has to be said that it needs to be viewed in the context that both personal income and savings are still very subdued and certainly won’t have altered the Fed’s view in any shape or form.
  • Still, it has provided more ammunition for the bulls whom were already in a buoyant mood going into these releases – when you see a 200 pip rally in AUD/USD and steady gains in emerging market currencies, you know things are looking better.
  • The Hilsenrath article seems to have put the market back in check and more aligned with our call that ‘tapering’ will occur in December, if not early Q1. There doesn’t seem too much new news in the article to be fair, and we have heard already from the Fed that tapering wouldn’t occur at once, and would not result in a huge shift in monetary policy.
  • Most strategists and economists would have long realised that a slowing of asset purchases is nothing like the raising of short-term rates; however both these views saw an eight basis point (bp) move lower in US bond yields and a flattening of the curve to 187 bp. The irony being USD/JPY rallied to 95.81 even though yields fell, thus this divergence from the yield spreads shows that the pair is being primarily driven by the JPY right now.

3:11pm: Hot in the wake of HSBC’s cutting two-year mortgage rates to record lows, Westpac says it will also cut rates on its two and three-year fixed loans, by 0.1 percentage points next week to 4.99 per cent.

The nation’s second biggest mortgage lender has notified brokers of the change, which will take effect on Tuesday.

3:01pm: A NSW government plan to allow electricity retailers to make fatter profits in a bid to drive down power prices, has been slammed as the ‘‘inappropriate’’.

The sharp rise in electricity prices in particular, which have doubled for some households over the past five years, has resulted in a surge of disconnections and an increase in so-called ‘energy poverty’ as more households struggle to pay their utility bills.

The NSW government’s pricing regulator, the Independent Pricing and Regulatory Tribunal (IPART), is finalising a decision to allow a further 3 per cent rise in power prices from July 1.

A large part of the proposed price rise is to ensure electricity retailers such as AGL, EnergyAustralia and Origin Energy can make bigger profits, which will it claims will boost competition.

Under the IPART proposal, which is to be finalised on June 17, a typical household will pay an extra $143 a year to ensure there is sufficient competition. Yet without allowing for this higher margin, power prices would have fallen for many households.

Read more

2:20pm: Banks are stepping up their attempts to reignite the mortgage market through fixed-rate home loans, with HSBC cutting rates on two-year fixed loans to a record low.

The Australian arm of HSBC today cut its two-year fixed rate for “new to bank” loans to 4.59 per cent. This rate is only available to customers who bring some amount of new business to the bank.

It also cut rates on three-year fixed loans to 4.79 per cent and five-year products to 5.09 per cent.

The aggressive move from the British-owned lender comes as borrowers flock to fixed-rate loans, with figures this week showing the highest share of fixed-rate mortgages in more than five years.

Read more

2:15pm: UBS banking analyst Jonathan Mott has been one of the most pessimistic bank-watchers in recent months, arguing stocks had entered ‘‘bubble’’ territory.

Now, after the collapse in stock prices in recent weeks, he says the sector may represent better value.

In a note to clients, Mott points out the sector’s total return has fallen by 14 per cent since the start of May.

In US dollars – which is what matters to many of the foreign buyers who have been flocking to the banks – returns are down 22 per cent. This fall has pushed the yield on bank stocks up to 6 per cent, and he says their return on equity is now closer to global peers.

‘‘While banks are still not cheap, much of the valuation stretch has now been removed. As a result, we believe the case for an aggressive underweight stance in the banks has largely played out,’’ Mott says.

It seems investors have come to the same conclusion. Since the beginning of the week, Westpac shares are up 4.2 per cent, CBA shares are up 2.9 per cent, NAB has risen 3.4 per cent, and ANZ by 4 per cent.

2:05pm: There are mates’ deals and there are mates’ deals, writes Michael West in a stinging comment on ASIC and its role in  the Kagara imbroglio:

The recent revelations by Jeff Knapp from the University of NSW that the corporate regulator produced an accounting relief order for Kagara on the same day the application was received exposes the soft underbelly of the Australian Securities and Investments Commission – its conflicts of interest.

Nine senior ASIC staff members, including the chief legal officer, are associated with a quick-fire process to render assistance to a former colleague.

The ASIC email chain for Kagara is chilling: a bat phone to high ranking ASIC offices, inappropriate pressure placed on Commission staff by the special counsel with a cc to the chief legal officer, and an exchange of draft documents before a fee is paid for the application.

Read more

2:02pm: This yarn is still garnering a lot of interest:

Qantas will slash fuel surcharges for economy seats on international flights by as much as two-thirds to close a loophole in its alliance with Emirates which has allowed frequent flyers to avoid hundreds of dollars in fees.

Qantas will lower fuel surcharges for one-way economy tickets to Europe by $150 to $230. The biggest cut by Qantas will be to the fees its charges for economy flights to the Middle East, which will drop by $200 to $115.

But the move to align fees between the two airlines has resulted in Emirates increasing its fuel surcharges for a one-way economy flight to Europe from $75 to $230, and to Asia from $30 to $145.

Qantas and Emirates emphasised that the change in the make-up of fares would not alter the overall cost of tickets. Fuel surcharges are mostly an expensive irritant for frequent-flyer members.

Read more

1:50pm: The highest court in the United States has ruled that human genes cannot be controlled by companies.

The decision could lead to the overturning of thousands of patents already granted on human genes and may have ramifications for a case currently under way in Australia challenging the patent on the so-called breast cancer gene, BRCA1.

Rebecca Gilsenan, the principal lawyer at the company fighting the Australian patent, Maurice Blackburn, said the US decision was exciting and encouraging.

“The Australian court is not bound by the what the US Supreme Court has decided, however, I expect that an Australian court will be very interested in what the Supreme Court has decided and the reasons it had, and will take notice of that,” she said. “It’s a very significant development by a very significant court.”

In February, Maurice Blackburn lost an Australian Federal Court case challenging the ruling that a patent could be granted on a mutation in the BRCA1 gene that drastically increases a person’s risk of cancer.
In August an appeal will be heard, in which the law firm will argue Federal Court Justice Nicholas erred in finding that simply isolating a gene outside the body constituted a form of new manufacture.

Read more

1:38pm: It looks like it’s a good day to be a blue chip trader:

  • BHP: +1.7%
  • Rio: +3.1%
  • ANZ: +2.6%
  • CBA: +1.7%
  • NAB: +3.2%
  • Westpac: +2%
  • Fortescue: +4.4%
  • Woolworths: +1.3%
  • Wesfarmers: +2.7%
  • Telstra: +0.9%

1:21pm: As financial markets have been selling off in recent weeks due to concerns of rising US rates, what happens in India, an economy with slowing growth and a heavy dependence on foreign money, could well determine if this is merely a short-term rout or a full-blown crisis.

India’s rupee currency has weakened the most among emerging markets after the South African rand since May as investors flee assets most vulnerable to the end of super-loose US monetary policy.

Other markets are falling, albeit to a smaller extent, due to a reversal in flows received since 2008 when the Federal Reserve embarked on the first of its series of stimulus programmes. Stock and bond markets in Thailand, Indonesia and Philippines have suffered massive outflows of funds.

“There was a lot of hot money in Thailand, Indonesia and the Philippines and these remain the most vulnerable as long as the contagion persists,” said Tim Condon, Asia economist at ING.

“If one domino were to fall, I would be looking at India because of the current account deficit.”

Condon thinks the odds of a wider contagion descending into a regional crisis, like in 2007 or in 1997, are extremely low.

Circumstances are vastly different. Growth in most of Asia is strong. Debt levels are high, fostered by the availability of cheap money in the past four years, but it isn’t the kind of short-term fickle debt that led to the 1997 Asian crisis.

1:01pm: Here’s a quick snap shot of how the region is performing:

  • Japan(Nikkei): +2.8%
  • Shanghai: -0.1%
  • Taiwan: +0.1%
  • South Korea: +0.4%
  • Singapore: +0.8%
  • New Zealand: +0.5%

12:51pm:

Australian investors are joining a record boom in borrowing US dollars to pay themselves dividends, adding to the debt loads of their acquisitions even as the local economy slows.

Melbourne-based Pact Group Industries Pty borrowed more than $885 million to help fund payouts for owners, while Hoyts Cinemas Group, the movie theater chain bought by Pacific Equity Partners Pty in 2007, took out a similar loan to pay itself about $150 million, people familiar with the situation said. Global dollar-denominated loans for dividends swelled to $12.2 billion in May, the highest-ever monthly total, according to Standard Poor’s Capital IQ Leveraged Commentary Data.

Borrowers are rushing to take advantage of record-low US borrowing costs as the Federal Reserve considers scaling back bond purchases. The loans charge interest based on a benchmark rate standing at 0.2733 per cent, compared with 2.8233 per cent for the comparable Australian measure. Dividend loans do little more than add leverage, which companies will seek to support with earnings growth even as the economy expands at its slowest annual pace in almost two years.

12:44pm:Europe’s carbon price has surged to its highest level in months, prompting analysts to tip a rosier outlook for Australia’s future carbon market.

The spike came midweek as EU lawmakers expressed for the first time bipartisan support for efforts to fix Europe’s ailing emissions trading scheme (ETS).

The EU parliament in April voted against a plan to temporarily ‘‘backload’’, or remove, 900 million permits from its market in a bid to double its carbon price.

The rejection saw prices plunge to record lows, and bleak projections that Australia’s carbon price would fetch less than $3 per tonne when it links with Europe’s ETS in 2015.

But the price of European carbon permits hit a two-month high this week after conservative politicians indicated they’d support an amended backloading plan.

The proposal is now expected to proceed to the EU parliament once again, where it will go to a final vote on July 2.

12:32pm:The man synonymous with Australia’s failed airline Ansett, Gary Toomey, has been selected as chief executive of India’s second-largest airline Jet Airways.

The appointment of Mr Toomey, the former chief executive of Air New Zealand-Ansett, comes just months after Middle East airline Etihad bought a 24 per cent stake in Jet Airways for $US379 million.

He replaces Nikos Kardassis as chief executive of Jet Airways, which has lost money for the last six years.

Mr Toomey, who is also a former Qantas chief financial officer, has kept a low-profile since since the collapse of Ansett in 2001. For the last four years, he has been chief executive of Papua New Guinea carrier Airlines PNG since June 2009.

He stepped down as chief executive of Air New Zealand, which owned Ansett, in October 2001, just a month after Australia’s then second-largest airline collapsed. Air New Zealand had to be bailed out by the New Zealand government due to its disastrous foray across the Tasman.

12:14pm: Japan’s Nikkei has lost some of its early momentum but is still up more than 2 per cent, after the index slipped into bear market territory yesterday, down more than 20 per cent from its May highs.

‘‘Psychologically the market feels like we’re nearly done with the correction,’’ says Nomura strategist Juichi Wako.

That may be beyond local control, as the Japanese market has been very much in the hands of overseas investors over the past months, the Atlantic notes in an interesting article:

Foreigners have been the ones pushing the Nikkei up during the Abe-boom. Japanese savers have actually been net sellers during this historic rally. You can see that in the chart below, which compares the Nikkei and net foreign buying since right before Abe unveiled Abenomics. The market jumped up as more and more overseas buyers jumped in, and fell down as fewer and fewer did.

 

12:00pm: Elders has received at least one bid for its main rural services business and is working to finalise a sale.

Debt-laden Elders has been looking to sell its agricultural products business since late October 2012, and rival Ruralco was recently given approval from the competition watchdog to pursue a takeover.

Elders says it has now received ‘‘one or more final or near final bids’’ for its agricultural business, as well as its automotive business Futuris.

The sale process for Futuris, which makes car interiors, has been underway since August 2012. The company gave no indication of who the final bidders are.

Elders shares are in a trading halt.

11:56am: Stocks are hanging onto their early gains, as high-yielding stocks including flagship banks underpin the local market.

Despite the recent turbulences, the market is actually up for the week, round about 0.4 per cent. That’s mainly due to the big banks, which have been snapped up after last week’s selloff.

Westpac is leading the rebound, up 4.3 per cent for the week, while ANZ and NAB are both up 3.3 per cent and CBA has gained 2.4 per cent.

“I think that the yield play is still extremely valid, I think that investors will continue to seek high-yielding stocks such as the banks,” says Tim Radford, global analyst at Rivkin Securities.

11:32am: ANZ currency strategist Andrew Salter says this morning’s fall in Australian dollar is “just collateral damage,” caught up in a volatile market place.

“It’s something that’s not really Aussie specific at the moment, it looks to be a consequence of what’s going on in the Nikkei and yen in Japan,” Salter says.

Through June, the yen has been strengthening against major currencies. It has jumped 6 per cent against the US dollar, 3.3 per cent against the euro and 5.9 per cent against the Australian dollar.

Salter says the volatility surrounding the Australian dollar is linked to uncertainty surround the US Federal Reserve’s intentions relating to quantitative easing.

“I don’t think markets have a clear understanding of that. We’ll wait for the FOMC meeting next week.  Until then, I think this volatility continues and in times of uncertainty you go towards investments that are safe and the yen is traditionally one of those,” Salter says.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

11:04am: The end of Rupert Murdoch’s third marriage would usually be one for the gossip pages, but since the media magnate’s last divorce cost him around $US1.7 billion and this one comes smack bang in the middle of News Corp’s split, investors are waiting for some more details on the separation from his wife of 14 years, Wendi.

The divorce filing, which was sealed, comes just days before News Corp is to split into two companies, one containing its entertainment assets and the other holding its publishing business. Murdoch, who Forbes says is worth $US9.4 billion, is to be chairman of both publicly traded companies.

Despite the timing, there is no connection between the divorce and the corporate split, Reuters quotes a source close to News Corp who was not authorised to discuss the matter publicly.

Analysts said the end of the Murdochs’ marriage was unlikely to have an impact on the media empire. Murdoch and Deng had a prenuptial agreement, according to a person familiar with the situation. Their girls, Grace and Chloe, have stakes in the family trust that holds the Murdochs’ stake in News Corp, but they do not have voting rights.

“I doubt it has a substantial impact on the spin,” Gabelli Co analyst Brett Harriss said, referring to the News Corp separation. “Given that it’s his third wife, I see it unlikely that he didn’t plan for this contingency.”

News shares are up 1 per cent this morning.


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10:46am: Toll road owner Transurban is offloading one of its US roads. The Pocahontas 895 in Virginia, in which Transurban held a 75 per cent stake, will be transfered to the lenders that funded the roadway, Transurban said.

Transurban reduced its value of the Pocahontas 895 by $138 million to zero in 2012, due to lower-than-expected traffic volumes and toll revenue.

The removal of the toll road from Transurban’s books, therefore, would have no cash impact on the company’s balance sheet, it said.

Transurban shares are down 0.5 per cent.

10:41am: The dollar’s rally is quickly running out of puff – the currency has just dropped to the morning’s low of 95.97 US cents, after a tumultous night that saw the dollar shooting up as high as 96.66 US cents, more than 2 cents higher than yesterday’s lows.

It seems the currency’s recent rollercoaster ride is set to continue.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

10:31am: And here’s an overview of the ASX200′s main winners and losers this morning:

Winners and losers this morning

Winners and losers this morning

10:28am: Back to the local market: one stock not swept up in the local rally is ASX, which is down nearly 5 per cent at $33.56 after completing the institutional part of its discounted share program.

It allowed institutional investors to buy two shares for every 19 shares at a lower price of $30.

There was a slight shortfall in the take-up, however, with large fund managers and other investors soaking up approximately 96 per cent of the shares.

10:23am: The USD/YEN exchange rate is one worth keeping an eye on, says IG’s Stan Shamu:

  • While it can be argued that the stronger-than-expected US data (retail sales and jobless claims) was good for confidence, we feel the impact this had on USD/JPY was the key ingredient.
  • Most of the moves we’ve been seeing recently have been Japan driven, and this data helped USD/JPY move back above ¥95 to a high of ¥95.48. This recovery brought out the bargain hunters who then pushed equities higher.
  • However, a (Fed watcher) Hilsenrath headline saying the Fed is likely to push back on market expectations of a rate increase might see some of this work undone. If the USD comes under pressure again, then things could swiftly turn sour for Asian equities.

The US dollar’s rise against the yen seems indeed to have been short-lived – it’s fallen back towards 95.1 yen this morning.

10:17am: As expected, Japan’s Nikkei index is also rallying, jumping 3.1 per cent at the open, after a steep decline in the previous session, as robust data eased concerns over whether the US economy can withstand a pullback in stimulus by the Federal Reserve.

The Nikkei was up 389.71 points at 12,835.09. On Thursday, it tumbled 6.4 per cent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy.

Japan’s monetary policy meeting minutes are due out this morning and perhaps this might offer more clarity on how the BoJ looks to stabilise its bond market and keep the economic recovery on track.

10:11am: The market has opened strongly higher: the ASX200 is up 53.8 points, or 1.1 per cent, at 4749.6, after jumping as much as 1.4 per cent, while the broader All Ords has jumped 50.2 points, or 1.1 per cent, to 4735.1.

Share gains are broad-based, with miners leading the rally. Health is bucking the trend, down 1.1 per cent.

10:05am: First snapshot of the open: the market is jumping higher. ASX200 up 0.7 per cent.

9:58am: The local market isn’t the only one expected to rise strongly this morning: Nikkei futures are pointing to a near 4 per cent gain of the Japanese market at the start of trade.

The Nikkei fell into bear market territory yesterday after losing nearly 22 per cent since its May peaks.

9:56am: ASX Ltd says it has completed the institutional component of its fully underwritten, 2-for-19 accelerated capital raising.

However there was a slight shortfall in the take-up with large fund managers and other investors soaking up approximately 96 per cent of the shares.

All up this raised gross proceeds of approximately $267 million. The retail leg of the offer opens to existing shareholders on Monday.

The operator of the Australian securities exchange this week unveiled a surprise $553 million capital raising to help it meet tough new capital rules expected for its new clearing house service.

The trading halt on ASX shares will be lifted this morning.

9:44am: The major local story this morning is the resurgent Aussie dollar, which has gained three US cents since Tuesday, snapping a 10 US cent slide which began in early May.

The local unit traded as high as 96.64 US cents early on Friday, after slipping to a 33-month low on Tuesday of 93.26 US cents, as investors bet that the US central bank will continue its economic stimulus program, also known as quantitative easing.

BK Asset management managing director Kathy Lien said speculation about the possible tapering of the Federal Reserve’s asset purchase program was the main factor driving the Australian dollar and share markets higher.

“The Fed may not be as eager to taper asset purchases as was suggested,” she said from New York. “That’s, obviously, good for risk assets and negative for the US dollar.”

9:33am: After combined losses over the past two days of more than 1.2 per cent, the ASX is expected to greet the opening bell in a much rosier mood today, thanks to a strong performance on Wall Street. The Dow snapped three days of losses to post a 1.2 per cent, while the SP500 was nearly 1.5 per cent higher. And that’s SP500′s biggest gain since January 2.

It came off the back some strong economic data, which showed US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, signs of economic resilience in the face of belt-tightening in Washington.

“The economy is showing more evidence of the positive feedback loop, particularly through the housing channel, but we still have this push and pull of monetary policy and fiscal policy,” said Robert Dye, chief economist at Comerica in Dallas.

You can read more about the US data here.

9:28am: Hi everyone. Welcome to the Markets Live blog for Friday.

Contributors: Jens Meyer, Max Mason, Georgia Wilkins

This blog is not intended as investment advice

BusinessDay with agencies


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Stocks fire on all cylinders, adding $30b to the market’s value in the biggest one-day rally in 17 months.

5:15pm: That’s all from us here at blog central – thanks for reading, and have a good weekend. We’ll be back Monday at 9.30am.

Here’s our evening wrap for the session.

4:44pm: Australia’s rebalancing act is going slower than expected, HSBC chief economist Paul Bloxham writes in a note, leading the bank to lower its GDP forecasts to 2.5% for 2013 and 2.8% for 2014 (previously 2.9% and 3.1%).

“We expect the Australian dollar will depreciate further yet, supporting a rebalancing of Australia’s growth,” Bloxham says. “We now also expect that the RBA may cut rates by another 25bp in coming months.”

Previously Bloxham had been one of the few economists to call an end to the central bank’s easing cycle.

HSBC also notes:

  • The USD is in the midst of a powerful rally; one we expect to continue.
  • The intensification of the Currency War is playing its part in the USD’s gains.
  • As the USD rally picks up steam we expect the EUR’s resilience to wane.
  • The USD has already risen, but this is just the beginning.

4:36pm: And here’s a look at the main winners and losers among the ASX200:

Today's winners and losers (changes in %).

Today’s winners and losers (changes in %).

4:30pm: On the local market, all sectors bar health (-0.2%) rose, with miners, retailers and banks leading the rally.

Here’s how some of the main players did:

  • BHP: +2.5%
  • Rio: +4.7%
  • ANZ: +3%
  • CBA: +2%
  • NAB: +3.6%
  • Westpac: +2.7%
  • Woolies: +1.6%
  • Wesfarmers: +3.3%
  • Telstra: +1.3%

4:25pm: Japan’s Nikkei also soared 2 per cent today, recovering from yesterday’s plunge into bear market territory (down more than 20% from May peaks).

Looking ahead, European stock index futures are pointing to a higher open, after solid US data calmed fears over whether the world’s biggest economy could withstand the winding down of the Federal Reserve’s stimulus measures.

Futures for Euro STOXX 50, for UK’s FTSE 100, for Germany’s DAX and for France’s CAC are up 0.4-0.7 per cent.

Wall Street futures are flat, however, indicating the New York bourses are likely to take a breather from yesterday’s rally.

Strong US economic data plus reduced fear about a premature rate hike from the US Federal Reserve buoyed global markets today, says AMP Capital head of investment strategy Shane Oliver: ‘‘Look at the underlying global growth dynamics and they remain favourable.’’

4:16pm: The stock market has closed within a whisker of the day’s highs. The benchmark SP/ASX200 index jumped 96 points, or 2 per cent, to 4791.8, posting its biggest one-day rally since January 2012.

The broader All Ords rose 90.6 points, or 1.9 per cent, to 4775.5.

3:53pm: Australian equities today made the most of the positive offshore leads with broad based gains sending the ASX200 soaring, says CMC trader Tim Waterer:

  • After a recent run of outs on the local market, today it seemed as if the shackles had been released with traders seeking stocks that have recently been oversold.
  • However, global market sentiment remains fickle at best which is why it is too early to suggest if this is the start of a sustained move higher by the ASX200 back towards the 5000 level in the coming weeks.

3:41pm: THe dollar has been trading just below 96 US cents for most of the local session, down from the overnight high of 96.66 US cents but also well off a 33-month trough of 93.25 US cents plumbed on Tuesday.

It is up 0.8 per cent so far this week, snapping five straight weeks of losses.

But the main action was around the yen, against which the Aussie remains under pressure. It’s currently fetching 91.5 yen, down from an overnight high of 92.5 and well off the April high of 105 yen. The Aussie remains not far from a 5-1/2 month low of 88.90 yen plumbed on Thursday.

Today’s trading has been marked by caution surrounding the volatile Nikkei, which is keeping a squeeze on short-yen positions that is underpinning the Japanese currency.

“To a large extent the recent weakness in AUD … can be attributed to the pressure being seen on ‘carry trades’ more broadly as the market moves to price an earlier and swifter Fed tapering of their bond purchases,” says John Horner, strategist at Deutsche Bank.

“Whether the statement accompanying the FOMC announcement and ensuing press conference by chairman Bernanke on Wednesday pushes back on these expectations, will be critical then for the near-term AUD … outlook,” he says, referring to the Fed’s June 18-19 policy meeting.

3:24pm: Meanwhile, the local market is firing on all cylinders. If the ASX200 holds on to its current gains it’ll be the biggest jump since last July.

3:23pm: A bit of talk from a prominent Fed watcher seems to have hit home, and has seen traders looking at the capital markets through slightly more optimistic eyes, says IG’s Chris Weston:

  • Throw in some good US data in the shape of US retail sales and weekly jobless claims and you have the SP 500 closing up 1.5%, with the bulls completely dismissing the terrible Nikkei tape.
  • Certainly the 0.6% month-on-month gain in retail sales is obviously positive, however it has to be said that it needs to be viewed in the context that both personal income and savings are still very subdued and certainly won’t have altered the Fed’s view in any shape or form.
  • Still, it has provided more ammunition for the bulls whom were already in a buoyant mood going into these releases – when you see a 200 pip rally in AUD/USD and steady gains in emerging market currencies, you know things are looking better.
  • The Hilsenrath article seems to have put the market back in check and more aligned with our call that ‘tapering’ will occur in December, if not early Q1. There doesn’t seem too much new news in the article to be fair, and we have heard already from the Fed that tapering wouldn’t occur at once, and would not result in a huge shift in monetary policy.
  • Most strategists and economists would have long realised that a slowing of asset purchases is nothing like the raising of short-term rates; however both these views saw an eight basis point (bp) move lower in US bond yields and a flattening of the curve to 187 bp. The irony being USD/JPY rallied to 95.81 even though yields fell, thus this divergence from the yield spreads shows that the pair is being primarily driven by the JPY right now.

3:11pm: Hot in the wake of HSBC’s cutting two-year mortgage rates to record lows, Westpac says it will also cut rates on its two and three-year fixed loans, by 0.1 percentage points next week to 4.99 per cent.

The nation’s second biggest mortgage lender has notified brokers of the change, which will take effect on Tuesday.

3:01pm: A NSW government plan to allow electricity retailers to make fatter profits in a bid to drive down power prices, has been slammed as the ‘‘inappropriate’’.

The sharp rise in electricity prices in particular, which have doubled for some households over the past five years, has resulted in a surge of disconnections and an increase in so-called ‘energy poverty’ as more households struggle to pay their utility bills.

The NSW government’s pricing regulator, the Independent Pricing and Regulatory Tribunal (IPART), is finalising a decision to allow a further 3 per cent rise in power prices from July 1.

A large part of the proposed price rise is to ensure electricity retailers such as AGL, EnergyAustralia and Origin Energy can make bigger profits, which will it claims will boost competition.

Under the IPART proposal, which is to be finalised on June 17, a typical household will pay an extra $143 a year to ensure there is sufficient competition. Yet without allowing for this higher margin, power prices would have fallen for many households.

Read more

2:20pm: Banks are stepping up their attempts to reignite the mortgage market through fixed-rate home loans, with HSBC cutting rates on two-year fixed loans to a record low.

The Australian arm of HSBC today cut its two-year fixed rate for “new to bank” loans to 4.59 per cent. This rate is only available to customers who bring some amount of new business to the bank.

It also cut rates on three-year fixed loans to 4.79 per cent and five-year products to 5.09 per cent.

The aggressive move from the British-owned lender comes as borrowers flock to fixed-rate loans, with figures this week showing the highest share of fixed-rate mortgages in more than five years.

Read more

2:15pm: UBS banking analyst Jonathan Mott has been one of the most pessimistic bank-watchers in recent months, arguing stocks had entered ‘‘bubble’’ territory.

Now, after the collapse in stock prices in recent weeks, he says the sector may represent better value.

In a note to clients, Mott points out the sector’s total return has fallen by 14 per cent since the start of May.

In US dollars – which is what matters to many of the foreign buyers who have been flocking to the banks – returns are down 22 per cent. This fall has pushed the yield on bank stocks up to 6 per cent, and he says their return on equity is now closer to global peers.

‘‘While banks are still not cheap, much of the valuation stretch has now been removed. As a result, we believe the case for an aggressive underweight stance in the banks has largely played out,’’ Mott says.

It seems investors have come to the same conclusion. Since the beginning of the week, Westpac shares are up 4.2 per cent, CBA shares are up 2.9 per cent, NAB has risen 3.4 per cent, and ANZ by 4 per cent.

2:05pm: There are mates’ deals and there are mates’ deals, writes Michael West in a stinging comment on ASIC and its role in  the Kagara imbroglio:

The recent revelations by Jeff Knapp from the University of NSW that the corporate regulator produced an accounting relief order for Kagara on the same day the application was received exposes the soft underbelly of the Australian Securities and Investments Commission – its conflicts of interest.

Nine senior ASIC staff members, including the chief legal officer, are associated with a quick-fire process to render assistance to a former colleague.

The ASIC email chain for Kagara is chilling: a bat phone to high ranking ASIC offices, inappropriate pressure placed on Commission staff by the special counsel with a cc to the chief legal officer, and an exchange of draft documents before a fee is paid for the application.

Read more

2:02pm: This yarn is still garnering a lot of interest:

Qantas will slash fuel surcharges for economy seats on international flights by as much as two-thirds to close a loophole in its alliance with Emirates which has allowed frequent flyers to avoid hundreds of dollars in fees.

Qantas will lower fuel surcharges for one-way economy tickets to Europe by $150 to $230. The biggest cut by Qantas will be to the fees its charges for economy flights to the Middle East, which will drop by $200 to $115.

But the move to align fees between the two airlines has resulted in Emirates increasing its fuel surcharges for a one-way economy flight to Europe from $75 to $230, and to Asia from $30 to $145.

Qantas and Emirates emphasised that the change in the make-up of fares would not alter the overall cost of tickets. Fuel surcharges are mostly an expensive irritant for frequent-flyer members.

Read more

1:50pm: The highest court in the United States has ruled that human genes cannot be controlled by companies.

The decision could lead to the overturning of thousands of patents already granted on human genes and may have ramifications for a case currently under way in Australia challenging the patent on the so-called breast cancer gene, BRCA1.

Rebecca Gilsenan, the principal lawyer at the company fighting the Australian patent, Maurice Blackburn, said the US decision was exciting and encouraging.

“The Australian court is not bound by the what the US Supreme Court has decided, however, I expect that an Australian court will be very interested in what the Supreme Court has decided and the reasons it had, and will take notice of that,” she said. “It’s a very significant development by a very significant court.”

In February, Maurice Blackburn lost an Australian Federal Court case challenging the ruling that a patent could be granted on a mutation in the BRCA1 gene that drastically increases a person’s risk of cancer.
In August an appeal will be heard, in which the law firm will argue Federal Court Justice Nicholas erred in finding that simply isolating a gene outside the body constituted a form of new manufacture.

Read more

1:38pm: It looks like it’s a good day to be a blue chip trader:

  • BHP: +1.7%
  • Rio: +3.1%
  • ANZ: +2.6%
  • CBA: +1.7%
  • NAB: +3.2%
  • Westpac: +2%
  • Fortescue: +4.4%
  • Woolworths: +1.3%
  • Wesfarmers: +2.7%
  • Telstra: +0.9%

1:21pm: As financial markets have been selling off in recent weeks due to concerns of rising US rates, what happens in India, an economy with slowing growth and a heavy dependence on foreign money, could well determine if this is merely a short-term rout or a full-blown crisis.

India’s rupee currency has weakened the most among emerging markets after the South African rand since May as investors flee assets most vulnerable to the end of super-loose US monetary policy.

Other markets are falling, albeit to a smaller extent, due to a reversal in flows received since 2008 when the Federal Reserve embarked on the first of its series of stimulus programmes. Stock and bond markets in Thailand, Indonesia and Philippines have suffered massive outflows of funds.

“There was a lot of hot money in Thailand, Indonesia and the Philippines and these remain the most vulnerable as long as the contagion persists,” said Tim Condon, Asia economist at ING.

“If one domino were to fall, I would be looking at India because of the current account deficit.”

Condon thinks the odds of a wider contagion descending into a regional crisis, like in 2007 or in 1997, are extremely low.

Circumstances are vastly different. Growth in most of Asia is strong. Debt levels are high, fostered by the availability of cheap money in the past four years, but it isn’t the kind of short-term fickle debt that led to the 1997 Asian crisis.

1:01pm: Here’s a quick snap shot of how the region is performing:

  • Japan(Nikkei): +2.8%
  • Shanghai: -0.1%
  • Taiwan: +0.1%
  • South Korea: +0.4%
  • Singapore: +0.8%
  • New Zealand: +0.5%

12:51pm:

Australian investors are joining a record boom in borrowing US dollars to pay themselves dividends, adding to the debt loads of their acquisitions even as the local economy slows.

Melbourne-based Pact Group Industries Pty borrowed more than $885 million to help fund payouts for owners, while Hoyts Cinemas Group, the movie theater chain bought by Pacific Equity Partners Pty in 2007, took out a similar loan to pay itself about $150 million, people familiar with the situation said. Global dollar-denominated loans for dividends swelled to $12.2 billion in May, the highest-ever monthly total, according to Standard Poor’s Capital IQ Leveraged Commentary Data.

Borrowers are rushing to take advantage of record-low US borrowing costs as the Federal Reserve considers scaling back bond purchases. The loans charge interest based on a benchmark rate standing at 0.2733 per cent, compared with 2.8233 per cent for the comparable Australian measure. Dividend loans do little more than add leverage, which companies will seek to support with earnings growth even as the economy expands at its slowest annual pace in almost two years.

12:44pm:Europe’s carbon price has surged to its highest level in months, prompting analysts to tip a rosier outlook for Australia’s future carbon market.

The spike came midweek as EU lawmakers expressed for the first time bipartisan support for efforts to fix Europe’s ailing emissions trading scheme (ETS).

The EU parliament in April voted against a plan to temporarily ‘‘backload’’, or remove, 900 million permits from its market in a bid to double its carbon price.

The rejection saw prices plunge to record lows, and bleak projections that Australia’s carbon price would fetch less than $3 per tonne when it links with Europe’s ETS in 2015.

But the price of European carbon permits hit a two-month high this week after conservative politicians indicated they’d support an amended backloading plan.

The proposal is now expected to proceed to the EU parliament once again, where it will go to a final vote on July 2.

12:32pm:The man synonymous with Australia’s failed airline Ansett, Gary Toomey, has been selected as chief executive of India’s second-largest airline Jet Airways.

The appointment of Mr Toomey, the former chief executive of Air New Zealand-Ansett, comes just months after Middle East airline Etihad bought a 24 per cent stake in Jet Airways for $US379 million.

He replaces Nikos Kardassis as chief executive of Jet Airways, which has lost money for the last six years.

Mr Toomey, who is also a former Qantas chief financial officer, has kept a low-profile since since the collapse of Ansett in 2001. For the last four years, he has been chief executive of Papua New Guinea carrier Airlines PNG since June 2009.

He stepped down as chief executive of Air New Zealand, which owned Ansett, in October 2001, just a month after Australia’s then second-largest airline collapsed. Air New Zealand had to be bailed out by the New Zealand government due to its disastrous foray across the Tasman.

12:14pm: Japan’s Nikkei has lost some of its early momentum but is still up more than 2 per cent, after the index slipped into bear market territory yesterday, down more than 20 per cent from its May highs.

‘‘Psychologically the market feels like we’re nearly done with the correction,’’ says Nomura strategist Juichi Wako.

That may be beyond local control, as the Japanese market has been very much in the hands of overseas investors over the past months, the Atlantic notes in an interesting article:

Foreigners have been the ones pushing the Nikkei up during the Abe-boom. Japanese savers have actually been net sellers during this historic rally. You can see that in the chart below, which compares the Nikkei and net foreign buying since right before Abe unveiled Abenomics. The market jumped up as more and more overseas buyers jumped in, and fell down as fewer and fewer did.

 

12:00pm: Elders has received at least one bid for its main rural services business and is working to finalise a sale.

Debt-laden Elders has been looking to sell its agricultural products business since late October 2012, and rival Ruralco was recently given approval from the competition watchdog to pursue a takeover.

Elders says it has now received ‘‘one or more final or near final bids’’ for its agricultural business, as well as its automotive business Futuris.

The sale process for Futuris, which makes car interiors, has been underway since August 2012. The company gave no indication of who the final bidders are.

Elders shares are in a trading halt.

11:56am: Stocks are hanging onto their early gains, as high-yielding stocks including flagship banks underpin the local market.

Despite the recent turbulences, the market is actually up for the week, round about 0.4 per cent. That’s mainly due to the big banks, which have been snapped up after last week’s selloff.

Westpac is leading the rebound, up 4.3 per cent for the week, while ANZ and NAB are both up 3.3 per cent and CBA has gained 2.4 per cent.

“I think that the yield play is still extremely valid, I think that investors will continue to seek high-yielding stocks such as the banks,” says Tim Radford, global analyst at Rivkin Securities.

11:32am: ANZ currency strategist Andrew Salter says this morning’s fall in Australian dollar is “just collateral damage,” caught up in a volatile market place.

“It’s something that’s not really Aussie specific at the moment, it looks to be a consequence of what’s going on in the Nikkei and yen in Japan,” Salter says.

Through June, the yen has been strengthening against major currencies. It has jumped 6 per cent against the US dollar, 3.3 per cent against the euro and 5.9 per cent against the Australian dollar.

Salter says the volatility surrounding the Australian dollar is linked to uncertainty surround the US Federal Reserve’s intentions relating to quantitative easing.

“I don’t think markets have a clear understanding of that. We’ll wait for the FOMC meeting next week.  Until then, I think this volatility continues and in times of uncertainty you go towards investments that are safe and the yen is traditionally one of those,” Salter says.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

11:04am: The end of Rupert Murdoch’s third marriage would usually be one for the gossip pages, but since the media magnate’s last divorce cost him around $US1.7 billion and this one comes smack bang in the middle of News Corp’s split, investors are waiting for some more details on the separation from his wife of 14 years, Wendi.

The divorce filing, which was sealed, comes just days before News Corp is to split into two companies, one containing its entertainment assets and the other holding its publishing business. Murdoch, who Forbes says is worth $US9.4 billion, is to be chairman of both publicly traded companies.

Despite the timing, there is no connection between the divorce and the corporate split, Reuters quotes a source close to News Corp who was not authorised to discuss the matter publicly.

Analysts said the end of the Murdochs’ marriage was unlikely to have an impact on the media empire. Murdoch and Deng had a prenuptial agreement, according to a person familiar with the situation. Their girls, Grace and Chloe, have stakes in the family trust that holds the Murdochs’ stake in News Corp, but they do not have voting rights.

“I doubt it has a substantial impact on the spin,” Gabelli Co analyst Brett Harriss said, referring to the News Corp separation. “Given that it’s his third wife, I see it unlikely that he didn’t plan for this contingency.”

News shares are up 1 per cent this morning.


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10:46am: Toll road owner Transurban is offloading one of its US roads. The Pocahontas 895 in Virginia, in which Transurban held a 75 per cent stake, will be transfered to the lenders that funded the roadway, Transurban said.

Transurban reduced its value of the Pocahontas 895 by $138 million to zero in 2012, due to lower-than-expected traffic volumes and toll revenue.

The removal of the toll road from Transurban’s books, therefore, would have no cash impact on the company’s balance sheet, it said.

Transurban shares are down 0.5 per cent.

10:41am: The dollar’s rally is quickly running out of puff – the currency has just dropped to the morning’s low of 95.97 US cents, after a tumultous night that saw the dollar shooting up as high as 96.66 US cents, more than 2 cents higher than yesterday’s lows.

It seems the currency’s recent rollercoaster ride is set to continue.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

10:31am: And here’s an overview of the ASX200′s main winners and losers this morning:

Winners and losers this morning

Winners and losers this morning

10:28am: Back to the local market: one stock not swept up in the local rally is ASX, which is down nearly 5 per cent at $33.56 after completing the institutional part of its discounted share program.

It allowed institutional investors to buy two shares for every 19 shares at a lower price of $30.

There was a slight shortfall in the take-up, however, with large fund managers and other investors soaking up approximately 96 per cent of the shares.

10:23am: The USD/YEN exchange rate is one worth keeping an eye on, says IG’s Stan Shamu:

  • While it can be argued that the stronger-than-expected US data (retail sales and jobless claims) was good for confidence, we feel the impact this had on USD/JPY was the key ingredient.
  • Most of the moves we’ve been seeing recently have been Japan driven, and this data helped USD/JPY move back above ¥95 to a high of ¥95.48. This recovery brought out the bargain hunters who then pushed equities higher.
  • However, a (Fed watcher) Hilsenrath headline saying the Fed is likely to push back on market expectations of a rate increase might see some of this work undone. If the USD comes under pressure again, then things could swiftly turn sour for Asian equities.

The US dollar’s rise against the yen seems indeed to have been short-lived – it’s fallen back towards 95.1 yen this morning.

10:17am: As expected, Japan’s Nikkei index is also rallying, jumping 3.1 per cent at the open, after a steep decline in the previous session, as robust data eased concerns over whether the US economy can withstand a pullback in stimulus by the Federal Reserve.

The Nikkei was up 389.71 points at 12,835.09. On Thursday, it tumbled 6.4 per cent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy.

Japan’s monetary policy meeting minutes are due out this morning and perhaps this might offer more clarity on how the BoJ looks to stabilise its bond market and keep the economic recovery on track.

10:11am: The market has opened strongly higher: the ASX200 is up 53.8 points, or 1.1 per cent, at 4749.6, after jumping as much as 1.4 per cent, while the broader All Ords has jumped 50.2 points, or 1.1 per cent, to 4735.1.

Share gains are broad-based, with miners leading the rally. Health is bucking the trend, down 1.1 per cent.

10:05am: First snapshot of the open: the market is jumping higher. ASX200 up 0.7 per cent.

9:58am: The local market isn’t the only one expected to rise strongly this morning: Nikkei futures are pointing to a near 4 per cent gain of the Japanese market at the start of trade.

The Nikkei fell into bear market territory yesterday after losing nearly 22 per cent since its May peaks.

9:56am: ASX Ltd says it has completed the institutional component of its fully underwritten, 2-for-19 accelerated capital raising.

However there was a slight shortfall in the take-up with large fund managers and other investors soaking up approximately 96 per cent of the shares.

All up this raised gross proceeds of approximately $267 million. The retail leg of the offer opens to existing shareholders on Monday.

The operator of the Australian securities exchange this week unveiled a surprise $553 million capital raising to help it meet tough new capital rules expected for its new clearing house service.

The trading halt on ASX shares will be lifted this morning.

9:44am: The major local story this morning is the resurgent Aussie dollar, which has gained three US cents since Tuesday, snapping a 10 US cent slide which began in early May.

The local unit traded as high as 96.64 US cents early on Friday, after slipping to a 33-month low on Tuesday of 93.26 US cents, as investors bet that the US central bank will continue its economic stimulus program, also known as quantitative easing.

BK Asset management managing director Kathy Lien said speculation about the possible tapering of the Federal Reserve’s asset purchase program was the main factor driving the Australian dollar and share markets higher.

“The Fed may not be as eager to taper asset purchases as was suggested,” she said from New York. “That’s, obviously, good for risk assets and negative for the US dollar.”

9:33am: After combined losses over the past two days of more than 1.2 per cent, the ASX is expected to greet the opening bell in a much rosier mood today, thanks to a strong performance on Wall Street. The Dow snapped three days of losses to post a 1.2 per cent, while the SP500 was nearly 1.5 per cent higher. And that’s SP500′s biggest gain since January 2.

It came off the back some strong economic data, which showed US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, signs of economic resilience in the face of belt-tightening in Washington.

“The economy is showing more evidence of the positive feedback loop, particularly through the housing channel, but we still have this push and pull of monetary policy and fiscal policy,” said Robert Dye, chief economist at Comerica in Dallas.

You can read more about the US data here.

9:28am: Hi everyone. Welcome to the Markets Live blog for Friday.

Contributors: Jens Meyer, Max Mason, Georgia Wilkins

This blog is not intended as investment advice

BusinessDay with agencies


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June 14, 2013 – 4:12PM

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Stocks fire on all cylinders, adding $30b to the market’s value in the biggest one-day rally in 17 months.

5:15pm: That’s all from us here at blog central – thanks for reading, and have a good weekend. We’ll be back Monday at 9.30am.

Here’s our evening wrap for the session.

4:44pm: Australia’s rebalancing act is going slower than expected, HSBC chief economist Paul Bloxham writes in a note, leading the bank to lower its GDP forecasts to 2.5% for 2013 and 2.8% for 2014 (previously 2.9% and 3.1%).

“We expect the Australian dollar will depreciate further yet, supporting a rebalancing of Australia’s growth,” Bloxham says. “We now also expect that the RBA may cut rates by another 25bp in coming months.”

Previously Bloxham had been one of the few economists to call an end to the central bank’s easing cycle.

HSBC also notes:

  • The USD is in the midst of a powerful rally; one we expect to continue.
  • The intensification of the Currency War is playing its part in the USD’s gains.
  • As the USD rally picks up steam we expect the EUR’s resilience to wane.
  • The USD has already risen, but this is just the beginning.

4:36pm: And here’s a look at the main winners and losers among the ASX200:

Today's winners and losers (changes in %).

Today’s winners and losers (changes in %).

4:30pm: On the local market, all sectors bar health (-0.2%) rose, with miners, retailers and banks leading the rally.

Here’s how some of the main players did:

  • BHP: +2.5%
  • Rio: +4.7%
  • ANZ: +3%
  • CBA: +2%
  • NAB: +3.6%
  • Westpac: +2.7%
  • Woolies: +1.6%
  • Wesfarmers: +3.3%
  • Telstra: +1.3%

4:25pm: Japan’s Nikkei also soared 2 per cent today, recovering from yesterday’s plunge into bear market territory (down more than 20% from May peaks).

Looking ahead, European stock index futures are pointing to a higher open, after solid US data calmed fears over whether the world’s biggest economy could withstand the winding down of the Federal Reserve’s stimulus measures.

Futures for Euro STOXX 50, for UK’s FTSE 100, for Germany’s DAX and for France’s CAC are up 0.4-0.7 per cent.

Wall Street futures are flat, however, indicating the New York bourses are likely to take a breather from yesterday’s rally.

Strong US economic data plus reduced fear about a premature rate hike from the US Federal Reserve buoyed global markets today, says AMP Capital head of investment strategy Shane Oliver: ‘‘Look at the underlying global growth dynamics and they remain favourable.’’

4:16pm: The stock market has closed within a whisker of the day’s highs. The benchmark SP/ASX200 index jumped 96 points, or 2 per cent, to 4791.8, posting its biggest one-day rally since January 2012.

The broader All Ords rose 90.6 points, or 1.9 per cent, to 4775.5.

3:53pm: Australian equities today made the most of the positive offshore leads with broad based gains sending the ASX200 soaring, says CMC trader Tim Waterer:

  • After a recent run of outs on the local market, today it seemed as if the shackles had been released with traders seeking stocks that have recently been oversold.
  • However, global market sentiment remains fickle at best which is why it is too early to suggest if this is the start of a sustained move higher by the ASX200 back towards the 5000 level in the coming weeks.

3:41pm: THe dollar has been trading just below 96 US cents for most of the local session, down from the overnight high of 96.66 US cents but also well off a 33-month trough of 93.25 US cents plumbed on Tuesday.

It is up 0.8 per cent so far this week, snapping five straight weeks of losses.

But the main action was around the yen, against which the Aussie remains under pressure. It’s currently fetching 91.5 yen, down from an overnight high of 92.5 and well off the April high of 105 yen. The Aussie remains not far from a 5-1/2 month low of 88.90 yen plumbed on Thursday.

Today’s trading has been marked by caution surrounding the volatile Nikkei, which is keeping a squeeze on short-yen positions that is underpinning the Japanese currency.

“To a large extent the recent weakness in AUD … can be attributed to the pressure being seen on ‘carry trades’ more broadly as the market moves to price an earlier and swifter Fed tapering of their bond purchases,” says John Horner, strategist at Deutsche Bank.

“Whether the statement accompanying the FOMC announcement and ensuing press conference by chairman Bernanke on Wednesday pushes back on these expectations, will be critical then for the near-term AUD … outlook,” he says, referring to the Fed’s June 18-19 policy meeting.

3:24pm: Meanwhile, the local market is firing on all cylinders. If the ASX200 holds on to its current gains it’ll be the biggest jump since last July.

3:23pm: A bit of talk from a prominent Fed watcher seems to have hit home, and has seen traders looking at the capital markets through slightly more optimistic eyes, says IG’s Chris Weston:

  • Throw in some good US data in the shape of US retail sales and weekly jobless claims and you have the SP 500 closing up 1.5%, with the bulls completely dismissing the terrible Nikkei tape.
  • Certainly the 0.6% month-on-month gain in retail sales is obviously positive, however it has to be said that it needs to be viewed in the context that both personal income and savings are still very subdued and certainly won’t have altered the Fed’s view in any shape or form.
  • Still, it has provided more ammunition for the bulls whom were already in a buoyant mood going into these releases – when you see a 200 pip rally in AUD/USD and steady gains in emerging market currencies, you know things are looking better.
  • The Hilsenrath article seems to have put the market back in check and more aligned with our call that ‘tapering’ will occur in December, if not early Q1. There doesn’t seem too much new news in the article to be fair, and we have heard already from the Fed that tapering wouldn’t occur at once, and would not result in a huge shift in monetary policy.
  • Most strategists and economists would have long realised that a slowing of asset purchases is nothing like the raising of short-term rates; however both these views saw an eight basis point (bp) move lower in US bond yields and a flattening of the curve to 187 bp. The irony being USD/JPY rallied to 95.81 even though yields fell, thus this divergence from the yield spreads shows that the pair is being primarily driven by the JPY right now.

3:11pm: Hot in the wake of HSBC’s cutting two-year mortgage rates to record lows, Westpac says it will also cut rates on its two and three-year fixed loans, by 0.1 percentage points next week to 4.99 per cent.

The nation’s second biggest mortgage lender has notified brokers of the change, which will take effect on Tuesday.

3:01pm: A NSW government plan to allow electricity retailers to make fatter profits in a bid to drive down power prices, has been slammed as the ‘‘inappropriate’’.

The sharp rise in electricity prices in particular, which have doubled for some households over the past five years, has resulted in a surge of disconnections and an increase in so-called ‘energy poverty’ as more households struggle to pay their utility bills.

The NSW government’s pricing regulator, the Independent Pricing and Regulatory Tribunal (IPART), is finalising a decision to allow a further 3 per cent rise in power prices from July 1.

A large part of the proposed price rise is to ensure electricity retailers such as AGL, EnergyAustralia and Origin Energy can make bigger profits, which will it claims will boost competition.

Under the IPART proposal, which is to be finalised on June 17, a typical household will pay an extra $143 a year to ensure there is sufficient competition. Yet without allowing for this higher margin, power prices would have fallen for many households.

Read more

2:20pm: Banks are stepping up their attempts to reignite the mortgage market through fixed-rate home loans, with HSBC cutting rates on two-year fixed loans to a record low.

The Australian arm of HSBC today cut its two-year fixed rate for “new to bank” loans to 4.59 per cent. This rate is only available to customers who bring some amount of new business to the bank.

It also cut rates on three-year fixed loans to 4.79 per cent and five-year products to 5.09 per cent.

The aggressive move from the British-owned lender comes as borrowers flock to fixed-rate loans, with figures this week showing the highest share of fixed-rate mortgages in more than five years.

Read more

2:15pm: UBS banking analyst Jonathan Mott has been one of the most pessimistic bank-watchers in recent months, arguing stocks had entered ‘‘bubble’’ territory.

Now, after the collapse in stock prices in recent weeks, he says the sector may represent better value.

In a note to clients, Mott points out the sector’s total return has fallen by 14 per cent since the start of May.

In US dollars – which is what matters to many of the foreign buyers who have been flocking to the banks – returns are down 22 per cent. This fall has pushed the yield on bank stocks up to 6 per cent, and he says their return on equity is now closer to global peers.

‘‘While banks are still not cheap, much of the valuation stretch has now been removed. As a result, we believe the case for an aggressive underweight stance in the banks has largely played out,’’ Mott says.

It seems investors have come to the same conclusion. Since the beginning of the week, Westpac shares are up 4.2 per cent, CBA shares are up 2.9 per cent, NAB has risen 3.4 per cent, and ANZ by 4 per cent.

2:05pm: There are mates’ deals and there are mates’ deals, writes Michael West in a stinging comment on ASIC and its role in  the Kagara imbroglio:

The recent revelations by Jeff Knapp from the University of NSW that the corporate regulator produced an accounting relief order for Kagara on the same day the application was received exposes the soft underbelly of the Australian Securities and Investments Commission – its conflicts of interest.

Nine senior ASIC staff members, including the chief legal officer, are associated with a quick-fire process to render assistance to a former colleague.

The ASIC email chain for Kagara is chilling: a bat phone to high ranking ASIC offices, inappropriate pressure placed on Commission staff by the special counsel with a cc to the chief legal officer, and an exchange of draft documents before a fee is paid for the application.

Read more

2:02pm: This yarn is still garnering a lot of interest:

Qantas will slash fuel surcharges for economy seats on international flights by as much as two-thirds to close a loophole in its alliance with Emirates which has allowed frequent flyers to avoid hundreds of dollars in fees.

Qantas will lower fuel surcharges for one-way economy tickets to Europe by $150 to $230. The biggest cut by Qantas will be to the fees its charges for economy flights to the Middle East, which will drop by $200 to $115.

But the move to align fees between the two airlines has resulted in Emirates increasing its fuel surcharges for a one-way economy flight to Europe from $75 to $230, and to Asia from $30 to $145.

Qantas and Emirates emphasised that the change in the make-up of fares would not alter the overall cost of tickets. Fuel surcharges are mostly an expensive irritant for frequent-flyer members.

Read more

1:50pm: The highest court in the United States has ruled that human genes cannot be controlled by companies.

The decision could lead to the overturning of thousands of patents already granted on human genes and may have ramifications for a case currently under way in Australia challenging the patent on the so-called breast cancer gene, BRCA1.

Rebecca Gilsenan, the principal lawyer at the company fighting the Australian patent, Maurice Blackburn, said the US decision was exciting and encouraging.

“The Australian court is not bound by the what the US Supreme Court has decided, however, I expect that an Australian court will be very interested in what the Supreme Court has decided and the reasons it had, and will take notice of that,” she said. “It’s a very significant development by a very significant court.”

In February, Maurice Blackburn lost an Australian Federal Court case challenging the ruling that a patent could be granted on a mutation in the BRCA1 gene that drastically increases a person’s risk of cancer.
In August an appeal will be heard, in which the law firm will argue Federal Court Justice Nicholas erred in finding that simply isolating a gene outside the body constituted a form of new manufacture.

Read more

1:38pm: It looks like it’s a good day to be a blue chip trader:

  • BHP: +1.7%
  • Rio: +3.1%
  • ANZ: +2.6%
  • CBA: +1.7%
  • NAB: +3.2%
  • Westpac: +2%
  • Fortescue: +4.4%
  • Woolworths: +1.3%
  • Wesfarmers: +2.7%
  • Telstra: +0.9%

1:21pm: As financial markets have been selling off in recent weeks due to concerns of rising US rates, what happens in India, an economy with slowing growth and a heavy dependence on foreign money, could well determine if this is merely a short-term rout or a full-blown crisis.

India’s rupee currency has weakened the most among emerging markets after the South African rand since May as investors flee assets most vulnerable to the end of super-loose US monetary policy.

Other markets are falling, albeit to a smaller extent, due to a reversal in flows received since 2008 when the Federal Reserve embarked on the first of its series of stimulus programmes. Stock and bond markets in Thailand, Indonesia and Philippines have suffered massive outflows of funds.

“There was a lot of hot money in Thailand, Indonesia and the Philippines and these remain the most vulnerable as long as the contagion persists,” said Tim Condon, Asia economist at ING.

“If one domino were to fall, I would be looking at India because of the current account deficit.”

Condon thinks the odds of a wider contagion descending into a regional crisis, like in 2007 or in 1997, are extremely low.

Circumstances are vastly different. Growth in most of Asia is strong. Debt levels are high, fostered by the availability of cheap money in the past four years, but it isn’t the kind of short-term fickle debt that led to the 1997 Asian crisis.

1:01pm: Here’s a quick snap shot of how the region is performing:

  • Japan(Nikkei): +2.8%
  • Shanghai: -0.1%
  • Taiwan: +0.1%
  • South Korea: +0.4%
  • Singapore: +0.8%
  • New Zealand: +0.5%

12:51pm:

Australian investors are joining a record boom in borrowing US dollars to pay themselves dividends, adding to the debt loads of their acquisitions even as the local economy slows.

Melbourne-based Pact Group Industries Pty borrowed more than $885 million to help fund payouts for owners, while Hoyts Cinemas Group, the movie theater chain bought by Pacific Equity Partners Pty in 2007, took out a similar loan to pay itself about $150 million, people familiar with the situation said. Global dollar-denominated loans for dividends swelled to $12.2 billion in May, the highest-ever monthly total, according to Standard Poor’s Capital IQ Leveraged Commentary Data.

Borrowers are rushing to take advantage of record-low US borrowing costs as the Federal Reserve considers scaling back bond purchases. The loans charge interest based on a benchmark rate standing at 0.2733 per cent, compared with 2.8233 per cent for the comparable Australian measure. Dividend loans do little more than add leverage, which companies will seek to support with earnings growth even as the economy expands at its slowest annual pace in almost two years.

12:44pm:Europe’s carbon price has surged to its highest level in months, prompting analysts to tip a rosier outlook for Australia’s future carbon market.

The spike came midweek as EU lawmakers expressed for the first time bipartisan support for efforts to fix Europe’s ailing emissions trading scheme (ETS).

The EU parliament in April voted against a plan to temporarily ‘‘backload’’, or remove, 900 million permits from its market in a bid to double its carbon price.

The rejection saw prices plunge to record lows, and bleak projections that Australia’s carbon price would fetch less than $3 per tonne when it links with Europe’s ETS in 2015.

But the price of European carbon permits hit a two-month high this week after conservative politicians indicated they’d support an amended backloading plan.

The proposal is now expected to proceed to the EU parliament once again, where it will go to a final vote on July 2.

12:32pm:The man synonymous with Australia’s failed airline Ansett, Gary Toomey, has been selected as chief executive of India’s second-largest airline Jet Airways.

The appointment of Mr Toomey, the former chief executive of Air New Zealand-Ansett, comes just months after Middle East airline Etihad bought a 24 per cent stake in Jet Airways for $US379 million.

He replaces Nikos Kardassis as chief executive of Jet Airways, which has lost money for the last six years.

Mr Toomey, who is also a former Qantas chief financial officer, has kept a low-profile since since the collapse of Ansett in 2001. For the last four years, he has been chief executive of Papua New Guinea carrier Airlines PNG since June 2009.

He stepped down as chief executive of Air New Zealand, which owned Ansett, in October 2001, just a month after Australia’s then second-largest airline collapsed. Air New Zealand had to be bailed out by the New Zealand government due to its disastrous foray across the Tasman.

12:14pm: Japan’s Nikkei has lost some of its early momentum but is still up more than 2 per cent, after the index slipped into bear market territory yesterday, down more than 20 per cent from its May highs.

‘‘Psychologically the market feels like we’re nearly done with the correction,’’ says Nomura strategist Juichi Wako.

That may be beyond local control, as the Japanese market has been very much in the hands of overseas investors over the past months, the Atlantic notes in an interesting article:

Foreigners have been the ones pushing the Nikkei up during the Abe-boom. Japanese savers have actually been net sellers during this historic rally. You can see that in the chart below, which compares the Nikkei and net foreign buying since right before Abe unveiled Abenomics. The market jumped up as more and more overseas buyers jumped in, and fell down as fewer and fewer did.

 

12:00pm: Elders has received at least one bid for its main rural services business and is working to finalise a sale.

Debt-laden Elders has been looking to sell its agricultural products business since late October 2012, and rival Ruralco was recently given approval from the competition watchdog to pursue a takeover.

Elders says it has now received ‘‘one or more final or near final bids’’ for its agricultural business, as well as its automotive business Futuris.

The sale process for Futuris, which makes car interiors, has been underway since August 2012. The company gave no indication of who the final bidders are.

Elders shares are in a trading halt.

11:56am: Stocks are hanging onto their early gains, as high-yielding stocks including flagship banks underpin the local market.

Despite the recent turbulences, the market is actually up for the week, round about 0.4 per cent. That’s mainly due to the big banks, which have been snapped up after last week’s selloff.

Westpac is leading the rebound, up 4.3 per cent for the week, while ANZ and NAB are both up 3.3 per cent and CBA has gained 2.4 per cent.

“I think that the yield play is still extremely valid, I think that investors will continue to seek high-yielding stocks such as the banks,” says Tim Radford, global analyst at Rivkin Securities.

11:32am: ANZ currency strategist Andrew Salter says this morning’s fall in Australian dollar is “just collateral damage,” caught up in a volatile market place.

“It’s something that’s not really Aussie specific at the moment, it looks to be a consequence of what’s going on in the Nikkei and yen in Japan,” Salter says.

Through June, the yen has been strengthening against major currencies. It has jumped 6 per cent against the US dollar, 3.3 per cent against the euro and 5.9 per cent against the Australian dollar.

Salter says the volatility surrounding the Australian dollar is linked to uncertainty surround the US Federal Reserve’s intentions relating to quantitative easing.

“I don’t think markets have a clear understanding of that. We’ll wait for the FOMC meeting next week.  Until then, I think this volatility continues and in times of uncertainty you go towards investments that are safe and the yen is traditionally one of those,” Salter says.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

11:04am: The end of Rupert Murdoch’s third marriage would usually be one for the gossip pages, but since the media magnate’s last divorce cost him around $US1.7 billion and this one comes smack bang in the middle of News Corp’s split, investors are waiting for some more details on the separation from his wife of 14 years, Wendi.

The divorce filing, which was sealed, comes just days before News Corp is to split into two companies, one containing its entertainment assets and the other holding its publishing business. Murdoch, who Forbes says is worth $US9.4 billion, is to be chairman of both publicly traded companies.

Despite the timing, there is no connection between the divorce and the corporate split, Reuters quotes a source close to News Corp who was not authorised to discuss the matter publicly.

Analysts said the end of the Murdochs’ marriage was unlikely to have an impact on the media empire. Murdoch and Deng had a prenuptial agreement, according to a person familiar with the situation. Their girls, Grace and Chloe, have stakes in the family trust that holds the Murdochs’ stake in News Corp, but they do not have voting rights.

“I doubt it has a substantial impact on the spin,” Gabelli Co analyst Brett Harriss said, referring to the News Corp separation. “Given that it’s his third wife, I see it unlikely that he didn’t plan for this contingency.”

News shares are up 1 per cent this morning.


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10:46am: Toll road owner Transurban is offloading one of its US roads. The Pocahontas 895 in Virginia, in which Transurban held a 75 per cent stake, will be transfered to the lenders that funded the roadway, Transurban said.

Transurban reduced its value of the Pocahontas 895 by $138 million to zero in 2012, due to lower-than-expected traffic volumes and toll revenue.

The removal of the toll road from Transurban’s books, therefore, would have no cash impact on the company’s balance sheet, it said.

Transurban shares are down 0.5 per cent.

10:41am: The dollar’s rally is quickly running out of puff – the currency has just dropped to the morning’s low of 95.97 US cents, after a tumultous night that saw the dollar shooting up as high as 96.66 US cents, more than 2 cents higher than yesterday’s lows.

It seems the currency’s recent rollercoaster ride is set to continue.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

10:31am: And here’s an overview of the ASX200′s main winners and losers this morning:

Winners and losers this morning

Winners and losers this morning

10:28am: Back to the local market: one stock not swept up in the local rally is ASX, which is down nearly 5 per cent at $33.56 after completing the institutional part of its discounted share program.

It allowed institutional investors to buy two shares for every 19 shares at a lower price of $30.

There was a slight shortfall in the take-up, however, with large fund managers and other investors soaking up approximately 96 per cent of the shares.

10:23am: The USD/YEN exchange rate is one worth keeping an eye on, says IG’s Stan Shamu:

  • While it can be argued that the stronger-than-expected US data (retail sales and jobless claims) was good for confidence, we feel the impact this had on USD/JPY was the key ingredient.
  • Most of the moves we’ve been seeing recently have been Japan driven, and this data helped USD/JPY move back above ¥95 to a high of ¥95.48. This recovery brought out the bargain hunters who then pushed equities higher.
  • However, a (Fed watcher) Hilsenrath headline saying the Fed is likely to push back on market expectations of a rate increase might see some of this work undone. If the USD comes under pressure again, then things could swiftly turn sour for Asian equities.

The US dollar’s rise against the yen seems indeed to have been short-lived – it’s fallen back towards 95.1 yen this morning.

10:17am: As expected, Japan’s Nikkei index is also rallying, jumping 3.1 per cent at the open, after a steep decline in the previous session, as robust data eased concerns over whether the US economy can withstand a pullback in stimulus by the Federal Reserve.

The Nikkei was up 389.71 points at 12,835.09. On Thursday, it tumbled 6.4 per cent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy.

Japan’s monetary policy meeting minutes are due out this morning and perhaps this might offer more clarity on how the BoJ looks to stabilise its bond market and keep the economic recovery on track.

10:11am: The market has opened strongly higher: the ASX200 is up 53.8 points, or 1.1 per cent, at 4749.6, after jumping as much as 1.4 per cent, while the broader All Ords has jumped 50.2 points, or 1.1 per cent, to 4735.1.

Share gains are broad-based, with miners leading the rally. Health is bucking the trend, down 1.1 per cent.

10:05am: First snapshot of the open: the market is jumping higher. ASX200 up 0.7 per cent.

9:58am: The local market isn’t the only one expected to rise strongly this morning: Nikkei futures are pointing to a near 4 per cent gain of the Japanese market at the start of trade.

The Nikkei fell into bear market territory yesterday after losing nearly 22 per cent since its May peaks.

9:56am: ASX Ltd says it has completed the institutional component of its fully underwritten, 2-for-19 accelerated capital raising.

However there was a slight shortfall in the take-up with large fund managers and other investors soaking up approximately 96 per cent of the shares.

All up this raised gross proceeds of approximately $267 million. The retail leg of the offer opens to existing shareholders on Monday.

The operator of the Australian securities exchange this week unveiled a surprise $553 million capital raising to help it meet tough new capital rules expected for its new clearing house service.

The trading halt on ASX shares will be lifted this morning.

9:44am: The major local story this morning is the resurgent Aussie dollar, which has gained three US cents since Tuesday, snapping a 10 US cent slide which began in early May.

The local unit traded as high as 96.64 US cents early on Friday, after slipping to a 33-month low on Tuesday of 93.26 US cents, as investors bet that the US central bank will continue its economic stimulus program, also known as quantitative easing.

BK Asset management managing director Kathy Lien said speculation about the possible tapering of the Federal Reserve’s asset purchase program was the main factor driving the Australian dollar and share markets higher.

“The Fed may not be as eager to taper asset purchases as was suggested,” she said from New York. “That’s, obviously, good for risk assets and negative for the US dollar.”

9:33am: After combined losses over the past two days of more than 1.2 per cent, the ASX is expected to greet the opening bell in a much rosier mood today, thanks to a strong performance on Wall Street. The Dow snapped three days of losses to post a 1.2 per cent, while the SP500 was nearly 1.5 per cent higher. And that’s SP500′s biggest gain since January 2.

It came off the back some strong economic data, which showed US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, signs of economic resilience in the face of belt-tightening in Washington.

“The economy is showing more evidence of the positive feedback loop, particularly through the housing channel, but we still have this push and pull of monetary policy and fiscal policy,” said Robert Dye, chief economist at Comerica in Dallas.

You can read more about the US data here.

9:28am: Hi everyone. Welcome to the Markets Live blog for Friday.

Contributors: Jens Meyer, Max Mason, Georgia Wilkins

This blog is not intended as investment advice

BusinessDay with agencies


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Stocks fire on all cylinders, adding $30b to the market’s value in the biggest one-day rally in 17 months.

5:15pm: That’s all from us here at blog central – thanks for reading, and have a good weekend. We’ll be back Monday at 9.30am.

Here’s our evening wrap for the session.

4:44pm: Australia’s rebalancing act is going slower than expected, HSBC chief economist Paul Bloxham writes in a note, leading the bank to lower its GDP forecasts to 2.5% for 2013 and 2.8% for 2014 (previously 2.9% and 3.1%).

“We expect the Australian dollar will depreciate further yet, supporting a rebalancing of Australia’s growth,” Bloxham says. “We now also expect that the RBA may cut rates by another 25bp in coming months.”

Previously Bloxham had been one of the few economists to call an end to the central bank’s easing cycle.

HSBC also notes:

  • The USD is in the midst of a powerful rally; one we expect to continue.
  • The intensification of the Currency War is playing its part in the USD’s gains.
  • As the USD rally picks up steam we expect the EUR’s resilience to wane.
  • The USD has already risen, but this is just the beginning.

4:36pm: And here’s a look at the main winners and losers among the ASX200:

Today's winners and losers (changes in %).

Today’s winners and losers (changes in %).

4:30pm: On the local market, all sectors bar health (-0.2%) rose, with miners, retailers and banks leading the rally.

Here’s how some of the main players did:

  • BHP: +2.5%
  • Rio: +4.7%
  • ANZ: +3%
  • CBA: +2%
  • NAB: +3.6%
  • Westpac: +2.7%
  • Woolies: +1.6%
  • Wesfarmers: +3.3%
  • Telstra: +1.3%

4:25pm: Japan’s Nikkei also soared 2 per cent today, recovering from yesterday’s plunge into bear market territory (down more than 20% from May peaks).

Looking ahead, European stock index futures are pointing to a higher open, after solid US data calmed fears over whether the world’s biggest economy could withstand the winding down of the Federal Reserve’s stimulus measures.

Futures for Euro STOXX 50, for UK’s FTSE 100, for Germany’s DAX and for France’s CAC are up 0.4-0.7 per cent.

Wall Street futures are flat, however, indicating the New York bourses are likely to take a breather from yesterday’s rally.

Strong US economic data plus reduced fear about a premature rate hike from the US Federal Reserve buoyed global markets today, says AMP Capital head of investment strategy Shane Oliver: ‘‘Look at the underlying global growth dynamics and they remain favourable.’’

4:16pm: The stock market has closed within a whisker of the day’s highs. The benchmark SP/ASX200 index jumped 96 points, or 2 per cent, to 4791.8, posting its biggest one-day rally since January 2012.

The broader All Ords rose 90.6 points, or 1.9 per cent, to 4775.5.

3:53pm: Australian equities today made the most of the positive offshore leads with broad based gains sending the ASX200 soaring, says CMC trader Tim Waterer:

  • After a recent run of outs on the local market, today it seemed as if the shackles had been released with traders seeking stocks that have recently been oversold.
  • However, global market sentiment remains fickle at best which is why it is too early to suggest if this is the start of a sustained move higher by the ASX200 back towards the 5000 level in the coming weeks.

3:41pm: THe dollar has been trading just below 96 US cents for most of the local session, down from the overnight high of 96.66 US cents but also well off a 33-month trough of 93.25 US cents plumbed on Tuesday.

It is up 0.8 per cent so far this week, snapping five straight weeks of losses.

But the main action was around the yen, against which the Aussie remains under pressure. It’s currently fetching 91.5 yen, down from an overnight high of 92.5 and well off the April high of 105 yen. The Aussie remains not far from a 5-1/2 month low of 88.90 yen plumbed on Thursday.

Today’s trading has been marked by caution surrounding the volatile Nikkei, which is keeping a squeeze on short-yen positions that is underpinning the Japanese currency.

“To a large extent the recent weakness in AUD … can be attributed to the pressure being seen on ‘carry trades’ more broadly as the market moves to price an earlier and swifter Fed tapering of their bond purchases,” says John Horner, strategist at Deutsche Bank.

“Whether the statement accompanying the FOMC announcement and ensuing press conference by chairman Bernanke on Wednesday pushes back on these expectations, will be critical then for the near-term AUD … outlook,” he says, referring to the Fed’s June 18-19 policy meeting.

3:24pm: Meanwhile, the local market is firing on all cylinders. If the ASX200 holds on to its current gains it’ll be the biggest jump since last July.

3:23pm: A bit of talk from a prominent Fed watcher seems to have hit home, and has seen traders looking at the capital markets through slightly more optimistic eyes, says IG’s Chris Weston:

  • Throw in some good US data in the shape of US retail sales and weekly jobless claims and you have the SP 500 closing up 1.5%, with the bulls completely dismissing the terrible Nikkei tape.
  • Certainly the 0.6% month-on-month gain in retail sales is obviously positive, however it has to be said that it needs to be viewed in the context that both personal income and savings are still very subdued and certainly won’t have altered the Fed’s view in any shape or form.
  • Still, it has provided more ammunition for the bulls whom were already in a buoyant mood going into these releases – when you see a 200 pip rally in AUD/USD and steady gains in emerging market currencies, you know things are looking better.
  • The Hilsenrath article seems to have put the market back in check and more aligned with our call that ‘tapering’ will occur in December, if not early Q1. There doesn’t seem too much new news in the article to be fair, and we have heard already from the Fed that tapering wouldn’t occur at once, and would not result in a huge shift in monetary policy.
  • Most strategists and economists would have long realised that a slowing of asset purchases is nothing like the raising of short-term rates; however both these views saw an eight basis point (bp) move lower in US bond yields and a flattening of the curve to 187 bp. The irony being USD/JPY rallied to 95.81 even though yields fell, thus this divergence from the yield spreads shows that the pair is being primarily driven by the JPY right now.

3:11pm: Hot in the wake of HSBC’s cutting two-year mortgage rates to record lows, Westpac says it will also cut rates on its two and three-year fixed loans, by 0.1 percentage points next week to 4.99 per cent.

The nation’s second biggest mortgage lender has notified brokers of the change, which will take effect on Tuesday.

3:01pm: A NSW government plan to allow electricity retailers to make fatter profits in a bid to drive down power prices, has been slammed as the ‘‘inappropriate’’.

The sharp rise in electricity prices in particular, which have doubled for some households over the past five years, has resulted in a surge of disconnections and an increase in so-called ‘energy poverty’ as more households struggle to pay their utility bills.

The NSW government’s pricing regulator, the Independent Pricing and Regulatory Tribunal (IPART), is finalising a decision to allow a further 3 per cent rise in power prices from July 1.

A large part of the proposed price rise is to ensure electricity retailers such as AGL, EnergyAustralia and Origin Energy can make bigger profits, which will it claims will boost competition.

Under the IPART proposal, which is to be finalised on June 17, a typical household will pay an extra $143 a year to ensure there is sufficient competition. Yet without allowing for this higher margin, power prices would have fallen for many households.

Read more

2:20pm: Banks are stepping up their attempts to reignite the mortgage market through fixed-rate home loans, with HSBC cutting rates on two-year fixed loans to a record low.

The Australian arm of HSBC today cut its two-year fixed rate for “new to bank” loans to 4.59 per cent. This rate is only available to customers who bring some amount of new business to the bank.

It also cut rates on three-year fixed loans to 4.79 per cent and five-year products to 5.09 per cent.

The aggressive move from the British-owned lender comes as borrowers flock to fixed-rate loans, with figures this week showing the highest share of fixed-rate mortgages in more than five years.

Read more

2:15pm: UBS banking analyst Jonathan Mott has been one of the most pessimistic bank-watchers in recent months, arguing stocks had entered ‘‘bubble’’ territory.

Now, after the collapse in stock prices in recent weeks, he says the sector may represent better value.

In a note to clients, Mott points out the sector’s total return has fallen by 14 per cent since the start of May.

In US dollars – which is what matters to many of the foreign buyers who have been flocking to the banks – returns are down 22 per cent. This fall has pushed the yield on bank stocks up to 6 per cent, and he says their return on equity is now closer to global peers.

‘‘While banks are still not cheap, much of the valuation stretch has now been removed. As a result, we believe the case for an aggressive underweight stance in the banks has largely played out,’’ Mott says.

It seems investors have come to the same conclusion. Since the beginning of the week, Westpac shares are up 4.2 per cent, CBA shares are up 2.9 per cent, NAB has risen 3.4 per cent, and ANZ by 4 per cent.

2:05pm: There are mates’ deals and there are mates’ deals, writes Michael West in a stinging comment on ASIC and its role in  the Kagara imbroglio:

The recent revelations by Jeff Knapp from the University of NSW that the corporate regulator produced an accounting relief order for Kagara on the same day the application was received exposes the soft underbelly of the Australian Securities and Investments Commission – its conflicts of interest.

Nine senior ASIC staff members, including the chief legal officer, are associated with a quick-fire process to render assistance to a former colleague.

The ASIC email chain for Kagara is chilling: a bat phone to high ranking ASIC offices, inappropriate pressure placed on Commission staff by the special counsel with a cc to the chief legal officer, and an exchange of draft documents before a fee is paid for the application.

Read more

2:02pm: This yarn is still garnering a lot of interest:

Qantas will slash fuel surcharges for economy seats on international flights by as much as two-thirds to close a loophole in its alliance with Emirates which has allowed frequent flyers to avoid hundreds of dollars in fees.

Qantas will lower fuel surcharges for one-way economy tickets to Europe by $150 to $230. The biggest cut by Qantas will be to the fees its charges for economy flights to the Middle East, which will drop by $200 to $115.

But the move to align fees between the two airlines has resulted in Emirates increasing its fuel surcharges for a one-way economy flight to Europe from $75 to $230, and to Asia from $30 to $145.

Qantas and Emirates emphasised that the change in the make-up of fares would not alter the overall cost of tickets. Fuel surcharges are mostly an expensive irritant for frequent-flyer members.

Read more

1:50pm: The highest court in the United States has ruled that human genes cannot be controlled by companies.

The decision could lead to the overturning of thousands of patents already granted on human genes and may have ramifications for a case currently under way in Australia challenging the patent on the so-called breast cancer gene, BRCA1.

Rebecca Gilsenan, the principal lawyer at the company fighting the Australian patent, Maurice Blackburn, said the US decision was exciting and encouraging.

“The Australian court is not bound by the what the US Supreme Court has decided, however, I expect that an Australian court will be very interested in what the Supreme Court has decided and the reasons it had, and will take notice of that,” she said. “It’s a very significant development by a very significant court.”

In February, Maurice Blackburn lost an Australian Federal Court case challenging the ruling that a patent could be granted on a mutation in the BRCA1 gene that drastically increases a person’s risk of cancer.
In August an appeal will be heard, in which the law firm will argue Federal Court Justice Nicholas erred in finding that simply isolating a gene outside the body constituted a form of new manufacture.

Read more

1:38pm: It looks like it’s a good day to be a blue chip trader:

  • BHP: +1.7%
  • Rio: +3.1%
  • ANZ: +2.6%
  • CBA: +1.7%
  • NAB: +3.2%
  • Westpac: +2%
  • Fortescue: +4.4%
  • Woolworths: +1.3%
  • Wesfarmers: +2.7%
  • Telstra: +0.9%

1:21pm: As financial markets have been selling off in recent weeks due to concerns of rising US rates, what happens in India, an economy with slowing growth and a heavy dependence on foreign money, could well determine if this is merely a short-term rout or a full-blown crisis.

India’s rupee currency has weakened the most among emerging markets after the South African rand since May as investors flee assets most vulnerable to the end of super-loose US monetary policy.

Other markets are falling, albeit to a smaller extent, due to a reversal in flows received since 2008 when the Federal Reserve embarked on the first of its series of stimulus programmes. Stock and bond markets in Thailand, Indonesia and Philippines have suffered massive outflows of funds.

“There was a lot of hot money in Thailand, Indonesia and the Philippines and these remain the most vulnerable as long as the contagion persists,” said Tim Condon, Asia economist at ING.

“If one domino were to fall, I would be looking at India because of the current account deficit.”

Condon thinks the odds of a wider contagion descending into a regional crisis, like in 2007 or in 1997, are extremely low.

Circumstances are vastly different. Growth in most of Asia is strong. Debt levels are high, fostered by the availability of cheap money in the past four years, but it isn’t the kind of short-term fickle debt that led to the 1997 Asian crisis.

1:01pm: Here’s a quick snap shot of how the region is performing:

  • Japan(Nikkei): +2.8%
  • Shanghai: -0.1%
  • Taiwan: +0.1%
  • South Korea: +0.4%
  • Singapore: +0.8%
  • New Zealand: +0.5%

12:51pm:

Australian investors are joining a record boom in borrowing US dollars to pay themselves dividends, adding to the debt loads of their acquisitions even as the local economy slows.

Melbourne-based Pact Group Industries Pty borrowed more than $885 million to help fund payouts for owners, while Hoyts Cinemas Group, the movie theater chain bought by Pacific Equity Partners Pty in 2007, took out a similar loan to pay itself about $150 million, people familiar with the situation said. Global dollar-denominated loans for dividends swelled to $12.2 billion in May, the highest-ever monthly total, according to Standard Poor’s Capital IQ Leveraged Commentary Data.

Borrowers are rushing to take advantage of record-low US borrowing costs as the Federal Reserve considers scaling back bond purchases. The loans charge interest based on a benchmark rate standing at 0.2733 per cent, compared with 2.8233 per cent for the comparable Australian measure. Dividend loans do little more than add leverage, which companies will seek to support with earnings growth even as the economy expands at its slowest annual pace in almost two years.

12:44pm:Europe’s carbon price has surged to its highest level in months, prompting analysts to tip a rosier outlook for Australia’s future carbon market.

The spike came midweek as EU lawmakers expressed for the first time bipartisan support for efforts to fix Europe’s ailing emissions trading scheme (ETS).

The EU parliament in April voted against a plan to temporarily ‘‘backload’’, or remove, 900 million permits from its market in a bid to double its carbon price.

The rejection saw prices plunge to record lows, and bleak projections that Australia’s carbon price would fetch less than $3 per tonne when it links with Europe’s ETS in 2015.

But the price of European carbon permits hit a two-month high this week after conservative politicians indicated they’d support an amended backloading plan.

The proposal is now expected to proceed to the EU parliament once again, where it will go to a final vote on July 2.

12:32pm:The man synonymous with Australia’s failed airline Ansett, Gary Toomey, has been selected as chief executive of India’s second-largest airline Jet Airways.

The appointment of Mr Toomey, the former chief executive of Air New Zealand-Ansett, comes just months after Middle East airline Etihad bought a 24 per cent stake in Jet Airways for $US379 million.

He replaces Nikos Kardassis as chief executive of Jet Airways, which has lost money for the last six years.

Mr Toomey, who is also a former Qantas chief financial officer, has kept a low-profile since since the collapse of Ansett in 2001. For the last four years, he has been chief executive of Papua New Guinea carrier Airlines PNG since June 2009.

He stepped down as chief executive of Air New Zealand, which owned Ansett, in October 2001, just a month after Australia’s then second-largest airline collapsed. Air New Zealand had to be bailed out by the New Zealand government due to its disastrous foray across the Tasman.

12:14pm: Japan’s Nikkei has lost some of its early momentum but is still up more than 2 per cent, after the index slipped into bear market territory yesterday, down more than 20 per cent from its May highs.

‘‘Psychologically the market feels like we’re nearly done with the correction,’’ says Nomura strategist Juichi Wako.

That may be beyond local control, as the Japanese market has been very much in the hands of overseas investors over the past months, the Atlantic notes in an interesting article:

Foreigners have been the ones pushing the Nikkei up during the Abe-boom. Japanese savers have actually been net sellers during this historic rally. You can see that in the chart below, which compares the Nikkei and net foreign buying since right before Abe unveiled Abenomics. The market jumped up as more and more overseas buyers jumped in, and fell down as fewer and fewer did.

 

12:00pm: Elders has received at least one bid for its main rural services business and is working to finalise a sale.

Debt-laden Elders has been looking to sell its agricultural products business since late October 2012, and rival Ruralco was recently given approval from the competition watchdog to pursue a takeover.

Elders says it has now received ‘‘one or more final or near final bids’’ for its agricultural business, as well as its automotive business Futuris.

The sale process for Futuris, which makes car interiors, has been underway since August 2012. The company gave no indication of who the final bidders are.

Elders shares are in a trading halt.

11:56am: Stocks are hanging onto their early gains, as high-yielding stocks including flagship banks underpin the local market.

Despite the recent turbulences, the market is actually up for the week, round about 0.4 per cent. That’s mainly due to the big banks, which have been snapped up after last week’s selloff.

Westpac is leading the rebound, up 4.3 per cent for the week, while ANZ and NAB are both up 3.3 per cent and CBA has gained 2.4 per cent.

“I think that the yield play is still extremely valid, I think that investors will continue to seek high-yielding stocks such as the banks,” says Tim Radford, global analyst at Rivkin Securities.

11:32am: ANZ currency strategist Andrew Salter says this morning’s fall in Australian dollar is “just collateral damage,” caught up in a volatile market place.

“It’s something that’s not really Aussie specific at the moment, it looks to be a consequence of what’s going on in the Nikkei and yen in Japan,” Salter says.

Through June, the yen has been strengthening against major currencies. It has jumped 6 per cent against the US dollar, 3.3 per cent against the euro and 5.9 per cent against the Australian dollar.

Salter says the volatility surrounding the Australian dollar is linked to uncertainty surround the US Federal Reserve’s intentions relating to quantitative easing.

“I don’t think markets have a clear understanding of that. We’ll wait for the FOMC meeting next week.  Until then, I think this volatility continues and in times of uncertainty you go towards investments that are safe and the yen is traditionally one of those,” Salter says.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

11:04am: The end of Rupert Murdoch’s third marriage would usually be one for the gossip pages, but since the media magnate’s last divorce cost him around $US1.7 billion and this one comes smack bang in the middle of News Corp’s split, investors are waiting for some more details on the separation from his wife of 14 years, Wendi.

The divorce filing, which was sealed, comes just days before News Corp is to split into two companies, one containing its entertainment assets and the other holding its publishing business. Murdoch, who Forbes says is worth $US9.4 billion, is to be chairman of both publicly traded companies.

Despite the timing, there is no connection between the divorce and the corporate split, Reuters quotes a source close to News Corp who was not authorised to discuss the matter publicly.

Analysts said the end of the Murdochs’ marriage was unlikely to have an impact on the media empire. Murdoch and Deng had a prenuptial agreement, according to a person familiar with the situation. Their girls, Grace and Chloe, have stakes in the family trust that holds the Murdochs’ stake in News Corp, but they do not have voting rights.

“I doubt it has a substantial impact on the spin,” Gabelli Co analyst Brett Harriss said, referring to the News Corp separation. “Given that it’s his third wife, I see it unlikely that he didn’t plan for this contingency.”

News shares are up 1 per cent this morning.


Murdoch files for divorce (Video Thumbnail)
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10:46am: Toll road owner Transurban is offloading one of its US roads. The Pocahontas 895 in Virginia, in which Transurban held a 75 per cent stake, will be transfered to the lenders that funded the roadway, Transurban said.

Transurban reduced its value of the Pocahontas 895 by $138 million to zero in 2012, due to lower-than-expected traffic volumes and toll revenue.

The removal of the toll road from Transurban’s books, therefore, would have no cash impact on the company’s balance sheet, it said.

Transurban shares are down 0.5 per cent.

10:41am: The dollar’s rally is quickly running out of puff – the currency has just dropped to the morning’s low of 95.97 US cents, after a tumultous night that saw the dollar shooting up as high as 96.66 US cents, more than 2 cents higher than yesterday’s lows.

It seems the currency’s recent rollercoaster ride is set to continue.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

10:31am: And here’s an overview of the ASX200′s main winners and losers this morning:

Winners and losers this morning

Winners and losers this morning

10:28am: Back to the local market: one stock not swept up in the local rally is ASX, which is down nearly 5 per cent at $33.56 after completing the institutional part of its discounted share program.

It allowed institutional investors to buy two shares for every 19 shares at a lower price of $30.

There was a slight shortfall in the take-up, however, with large fund managers and other investors soaking up approximately 96 per cent of the shares.

10:23am: The USD/YEN exchange rate is one worth keeping an eye on, says IG’s Stan Shamu:

  • While it can be argued that the stronger-than-expected US data (retail sales and jobless claims) was good for confidence, we feel the impact this had on USD/JPY was the key ingredient.
  • Most of the moves we’ve been seeing recently have been Japan driven, and this data helped USD/JPY move back above ¥95 to a high of ¥95.48. This recovery brought out the bargain hunters who then pushed equities higher.
  • However, a (Fed watcher) Hilsenrath headline saying the Fed is likely to push back on market expectations of a rate increase might see some of this work undone. If the USD comes under pressure again, then things could swiftly turn sour for Asian equities.

The US dollar’s rise against the yen seems indeed to have been short-lived – it’s fallen back towards 95.1 yen this morning.

10:17am: As expected, Japan’s Nikkei index is also rallying, jumping 3.1 per cent at the open, after a steep decline in the previous session, as robust data eased concerns over whether the US economy can withstand a pullback in stimulus by the Federal Reserve.

The Nikkei was up 389.71 points at 12,835.09. On Thursday, it tumbled 6.4 per cent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy.

Japan’s monetary policy meeting minutes are due out this morning and perhaps this might offer more clarity on how the BoJ looks to stabilise its bond market and keep the economic recovery on track.

10:11am: The market has opened strongly higher: the ASX200 is up 53.8 points, or 1.1 per cent, at 4749.6, after jumping as much as 1.4 per cent, while the broader All Ords has jumped 50.2 points, or 1.1 per cent, to 4735.1.

Share gains are broad-based, with miners leading the rally. Health is bucking the trend, down 1.1 per cent.

10:05am: First snapshot of the open: the market is jumping higher. ASX200 up 0.7 per cent.

9:58am: The local market isn’t the only one expected to rise strongly this morning: Nikkei futures are pointing to a near 4 per cent gain of the Japanese market at the start of trade.

The Nikkei fell into bear market territory yesterday after losing nearly 22 per cent since its May peaks.

9:56am: ASX Ltd says it has completed the institutional component of its fully underwritten, 2-for-19 accelerated capital raising.

However there was a slight shortfall in the take-up with large fund managers and other investors soaking up approximately 96 per cent of the shares.

All up this raised gross proceeds of approximately $267 million. The retail leg of the offer opens to existing shareholders on Monday.

The operator of the Australian securities exchange this week unveiled a surprise $553 million capital raising to help it meet tough new capital rules expected for its new clearing house service.

The trading halt on ASX shares will be lifted this morning.

9:44am: The major local story this morning is the resurgent Aussie dollar, which has gained three US cents since Tuesday, snapping a 10 US cent slide which began in early May.

The local unit traded as high as 96.64 US cents early on Friday, after slipping to a 33-month low on Tuesday of 93.26 US cents, as investors bet that the US central bank will continue its economic stimulus program, also known as quantitative easing.

BK Asset management managing director Kathy Lien said speculation about the possible tapering of the Federal Reserve’s asset purchase program was the main factor driving the Australian dollar and share markets higher.

“The Fed may not be as eager to taper asset purchases as was suggested,” she said from New York. “That’s, obviously, good for risk assets and negative for the US dollar.”

9:33am: After combined losses over the past two days of more than 1.2 per cent, the ASX is expected to greet the opening bell in a much rosier mood today, thanks to a strong performance on Wall Street. The Dow snapped three days of losses to post a 1.2 per cent, while the SP500 was nearly 1.5 per cent higher. And that’s SP500′s biggest gain since January 2.

It came off the back some strong economic data, which showed US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, signs of economic resilience in the face of belt-tightening in Washington.

“The economy is showing more evidence of the positive feedback loop, particularly through the housing channel, but we still have this push and pull of monetary policy and fiscal policy,” said Robert Dye, chief economist at Comerica in Dallas.

You can read more about the US data here.

9:28am: Hi everyone. Welcome to the Markets Live blog for Friday.

Contributors: Jens Meyer, Max Mason, Georgia Wilkins

This blog is not intended as investment advice

BusinessDay with agencies


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June 14, 2013 – 4:12PM

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Stocks fire on all cylinders, adding $30b to the market’s value in the biggest one-day rally in 17 months.

5:15pm: That’s all from us here at blog central – thanks for reading, and have a good weekend. We’ll be back Monday at 9.30am.

Here’s our evening wrap for the session.

4:44pm: Australia’s rebalancing act is going slower than expected, HSBC chief economist Paul Bloxham writes in a note, leading the bank to lower its GDP forecasts to 2.5% for 2013 and 2.8% for 2014 (previously 2.9% and 3.1%).

“We expect the Australian dollar will depreciate further yet, supporting a rebalancing of Australia’s growth,” Bloxham says. “We now also expect that the RBA may cut rates by another 25bp in coming months.”

Previously Bloxham had been one of the few economists to call an end to the central bank’s easing cycle.

HSBC also notes:

  • The USD is in the midst of a powerful rally; one we expect to continue.
  • The intensification of the Currency War is playing its part in the USD’s gains.
  • As the USD rally picks up steam we expect the EUR’s resilience to wane.
  • The USD has already risen, but this is just the beginning.

4:36pm: And here’s a look at the main winners and losers among the ASX200:

Today's winners and losers (changes in %).

Today’s winners and losers (changes in %).

4:30pm: On the local market, all sectors bar health (-0.2%) rose, with miners, retailers and banks leading the rally.

Here’s how some of the main players did:

  • BHP: +2.5%
  • Rio: +4.7%
  • ANZ: +3%
  • CBA: +2%
  • NAB: +3.6%
  • Westpac: +2.7%
  • Woolies: +1.6%
  • Wesfarmers: +3.3%
  • Telstra: +1.3%

4:25pm: Japan’s Nikkei also soared 2 per cent today, recovering from yesterday’s plunge into bear market territory (down more than 20% from May peaks).

Looking ahead, European stock index futures are pointing to a higher open, after solid US data calmed fears over whether the world’s biggest economy could withstand the winding down of the Federal Reserve’s stimulus measures.

Futures for Euro STOXX 50, for UK’s FTSE 100, for Germany’s DAX and for France’s CAC are up 0.4-0.7 per cent.

Wall Street futures are flat, however, indicating the New York bourses are likely to take a breather from yesterday’s rally.

Strong US economic data plus reduced fear about a premature rate hike from the US Federal Reserve buoyed global markets today, says AMP Capital head of investment strategy Shane Oliver: ‘‘Look at the underlying global growth dynamics and they remain favourable.’’

4:16pm: The stock market has closed within a whisker of the day’s highs. The benchmark SP/ASX200 index jumped 96 points, or 2 per cent, to 4791.8, posting its biggest one-day rally since January 2012.

The broader All Ords rose 90.6 points, or 1.9 per cent, to 4775.5.

3:53pm: Australian equities today made the most of the positive offshore leads with broad based gains sending the ASX200 soaring, says CMC trader Tim Waterer:

  • After a recent run of outs on the local market, today it seemed as if the shackles had been released with traders seeking stocks that have recently been oversold.
  • However, global market sentiment remains fickle at best which is why it is too early to suggest if this is the start of a sustained move higher by the ASX200 back towards the 5000 level in the coming weeks.

3:41pm: THe dollar has been trading just below 96 US cents for most of the local session, down from the overnight high of 96.66 US cents but also well off a 33-month trough of 93.25 US cents plumbed on Tuesday.

It is up 0.8 per cent so far this week, snapping five straight weeks of losses.

But the main action was around the yen, against which the Aussie remains under pressure. It’s currently fetching 91.5 yen, down from an overnight high of 92.5 and well off the April high of 105 yen. The Aussie remains not far from a 5-1/2 month low of 88.90 yen plumbed on Thursday.

Today’s trading has been marked by caution surrounding the volatile Nikkei, which is keeping a squeeze on short-yen positions that is underpinning the Japanese currency.

“To a large extent the recent weakness in AUD … can be attributed to the pressure being seen on ‘carry trades’ more broadly as the market moves to price an earlier and swifter Fed tapering of their bond purchases,” says John Horner, strategist at Deutsche Bank.

“Whether the statement accompanying the FOMC announcement and ensuing press conference by chairman Bernanke on Wednesday pushes back on these expectations, will be critical then for the near-term AUD … outlook,” he says, referring to the Fed’s June 18-19 policy meeting.

3:24pm: Meanwhile, the local market is firing on all cylinders. If the ASX200 holds on to its current gains it’ll be the biggest jump since last July.

3:23pm: A bit of talk from a prominent Fed watcher seems to have hit home, and has seen traders looking at the capital markets through slightly more optimistic eyes, says IG’s Chris Weston:

  • Throw in some good US data in the shape of US retail sales and weekly jobless claims and you have the SP 500 closing up 1.5%, with the bulls completely dismissing the terrible Nikkei tape.
  • Certainly the 0.6% month-on-month gain in retail sales is obviously positive, however it has to be said that it needs to be viewed in the context that both personal income and savings are still very subdued and certainly won’t have altered the Fed’s view in any shape or form.
  • Still, it has provided more ammunition for the bulls whom were already in a buoyant mood going into these releases – when you see a 200 pip rally in AUD/USD and steady gains in emerging market currencies, you know things are looking better.
  • The Hilsenrath article seems to have put the market back in check and more aligned with our call that ‘tapering’ will occur in December, if not early Q1. There doesn’t seem too much new news in the article to be fair, and we have heard already from the Fed that tapering wouldn’t occur at once, and would not result in a huge shift in monetary policy.
  • Most strategists and economists would have long realised that a slowing of asset purchases is nothing like the raising of short-term rates; however both these views saw an eight basis point (bp) move lower in US bond yields and a flattening of the curve to 187 bp. The irony being USD/JPY rallied to 95.81 even though yields fell, thus this divergence from the yield spreads shows that the pair is being primarily driven by the JPY right now.

3:11pm: Hot in the wake of HSBC’s cutting two-year mortgage rates to record lows, Westpac says it will also cut rates on its two and three-year fixed loans, by 0.1 percentage points next week to 4.99 per cent.

The nation’s second biggest mortgage lender has notified brokers of the change, which will take effect on Tuesday.

3:01pm: A NSW government plan to allow electricity retailers to make fatter profits in a bid to drive down power prices, has been slammed as the ‘‘inappropriate’’.

The sharp rise in electricity prices in particular, which have doubled for some households over the past five years, has resulted in a surge of disconnections and an increase in so-called ‘energy poverty’ as more households struggle to pay their utility bills.

The NSW government’s pricing regulator, the Independent Pricing and Regulatory Tribunal (IPART), is finalising a decision to allow a further 3 per cent rise in power prices from July 1.

A large part of the proposed price rise is to ensure electricity retailers such as AGL, EnergyAustralia and Origin Energy can make bigger profits, which will it claims will boost competition.

Under the IPART proposal, which is to be finalised on June 17, a typical household will pay an extra $143 a year to ensure there is sufficient competition. Yet without allowing for this higher margin, power prices would have fallen for many households.

Read more

2:20pm: Banks are stepping up their attempts to reignite the mortgage market through fixed-rate home loans, with HSBC cutting rates on two-year fixed loans to a record low.

The Australian arm of HSBC today cut its two-year fixed rate for “new to bank” loans to 4.59 per cent. This rate is only available to customers who bring some amount of new business to the bank.

It also cut rates on three-year fixed loans to 4.79 per cent and five-year products to 5.09 per cent.

The aggressive move from the British-owned lender comes as borrowers flock to fixed-rate loans, with figures this week showing the highest share of fixed-rate mortgages in more than five years.

Read more

2:15pm: UBS banking analyst Jonathan Mott has been one of the most pessimistic bank-watchers in recent months, arguing stocks had entered ‘‘bubble’’ territory.

Now, after the collapse in stock prices in recent weeks, he says the sector may represent better value.

In a note to clients, Mott points out the sector’s total return has fallen by 14 per cent since the start of May.

In US dollars – which is what matters to many of the foreign buyers who have been flocking to the banks – returns are down 22 per cent. This fall has pushed the yield on bank stocks up to 6 per cent, and he says their return on equity is now closer to global peers.

‘‘While banks are still not cheap, much of the valuation stretch has now been removed. As a result, we believe the case for an aggressive underweight stance in the banks has largely played out,’’ Mott says.

It seems investors have come to the same conclusion. Since the beginning of the week, Westpac shares are up 4.2 per cent, CBA shares are up 2.9 per cent, NAB has risen 3.4 per cent, and ANZ by 4 per cent.

2:05pm: There are mates’ deals and there are mates’ deals, writes Michael West in a stinging comment on ASIC and its role in  the Kagara imbroglio:

The recent revelations by Jeff Knapp from the University of NSW that the corporate regulator produced an accounting relief order for Kagara on the same day the application was received exposes the soft underbelly of the Australian Securities and Investments Commission – its conflicts of interest.

Nine senior ASIC staff members, including the chief legal officer, are associated with a quick-fire process to render assistance to a former colleague.

The ASIC email chain for Kagara is chilling: a bat phone to high ranking ASIC offices, inappropriate pressure placed on Commission staff by the special counsel with a cc to the chief legal officer, and an exchange of draft documents before a fee is paid for the application.

Read more

2:02pm: This yarn is still garnering a lot of interest:

Qantas will slash fuel surcharges for economy seats on international flights by as much as two-thirds to close a loophole in its alliance with Emirates which has allowed frequent flyers to avoid hundreds of dollars in fees.

Qantas will lower fuel surcharges for one-way economy tickets to Europe by $150 to $230. The biggest cut by Qantas will be to the fees its charges for economy flights to the Middle East, which will drop by $200 to $115.

But the move to align fees between the two airlines has resulted in Emirates increasing its fuel surcharges for a one-way economy flight to Europe from $75 to $230, and to Asia from $30 to $145.

Qantas and Emirates emphasised that the change in the make-up of fares would not alter the overall cost of tickets. Fuel surcharges are mostly an expensive irritant for frequent-flyer members.

Read more

1:50pm: The highest court in the United States has ruled that human genes cannot be controlled by companies.

The decision could lead to the overturning of thousands of patents already granted on human genes and may have ramifications for a case currently under way in Australia challenging the patent on the so-called breast cancer gene, BRCA1.

Rebecca Gilsenan, the principal lawyer at the company fighting the Australian patent, Maurice Blackburn, said the US decision was exciting and encouraging.

“The Australian court is not bound by the what the US Supreme Court has decided, however, I expect that an Australian court will be very interested in what the Supreme Court has decided and the reasons it had, and will take notice of that,” she said. “It’s a very significant development by a very significant court.”

In February, Maurice Blackburn lost an Australian Federal Court case challenging the ruling that a patent could be granted on a mutation in the BRCA1 gene that drastically increases a person’s risk of cancer.
In August an appeal will be heard, in which the law firm will argue Federal Court Justice Nicholas erred in finding that simply isolating a gene outside the body constituted a form of new manufacture.

Read more

1:38pm: It looks like it’s a good day to be a blue chip trader:

  • BHP: +1.7%
  • Rio: +3.1%
  • ANZ: +2.6%
  • CBA: +1.7%
  • NAB: +3.2%
  • Westpac: +2%
  • Fortescue: +4.4%
  • Woolworths: +1.3%
  • Wesfarmers: +2.7%
  • Telstra: +0.9%

1:21pm: As financial markets have been selling off in recent weeks due to concerns of rising US rates, what happens in India, an economy with slowing growth and a heavy dependence on foreign money, could well determine if this is merely a short-term rout or a full-blown crisis.

India’s rupee currency has weakened the most among emerging markets after the South African rand since May as investors flee assets most vulnerable to the end of super-loose US monetary policy.

Other markets are falling, albeit to a smaller extent, due to a reversal in flows received since 2008 when the Federal Reserve embarked on the first of its series of stimulus programmes. Stock and bond markets in Thailand, Indonesia and Philippines have suffered massive outflows of funds.

“There was a lot of hot money in Thailand, Indonesia and the Philippines and these remain the most vulnerable as long as the contagion persists,” said Tim Condon, Asia economist at ING.

“If one domino were to fall, I would be looking at India because of the current account deficit.”

Condon thinks the odds of a wider contagion descending into a regional crisis, like in 2007 or in 1997, are extremely low.

Circumstances are vastly different. Growth in most of Asia is strong. Debt levels are high, fostered by the availability of cheap money in the past four years, but it isn’t the kind of short-term fickle debt that led to the 1997 Asian crisis.

1:01pm: Here’s a quick snap shot of how the region is performing:

  • Japan(Nikkei): +2.8%
  • Shanghai: -0.1%
  • Taiwan: +0.1%
  • South Korea: +0.4%
  • Singapore: +0.8%
  • New Zealand: +0.5%

12:51pm:

Australian investors are joining a record boom in borrowing US dollars to pay themselves dividends, adding to the debt loads of their acquisitions even as the local economy slows.

Melbourne-based Pact Group Industries Pty borrowed more than $885 million to help fund payouts for owners, while Hoyts Cinemas Group, the movie theater chain bought by Pacific Equity Partners Pty in 2007, took out a similar loan to pay itself about $150 million, people familiar with the situation said. Global dollar-denominated loans for dividends swelled to $12.2 billion in May, the highest-ever monthly total, according to Standard Poor’s Capital IQ Leveraged Commentary Data.

Borrowers are rushing to take advantage of record-low US borrowing costs as the Federal Reserve considers scaling back bond purchases. The loans charge interest based on a benchmark rate standing at 0.2733 per cent, compared with 2.8233 per cent for the comparable Australian measure. Dividend loans do little more than add leverage, which companies will seek to support with earnings growth even as the economy expands at its slowest annual pace in almost two years.

12:44pm:Europe’s carbon price has surged to its highest level in months, prompting analysts to tip a rosier outlook for Australia’s future carbon market.

The spike came midweek as EU lawmakers expressed for the first time bipartisan support for efforts to fix Europe’s ailing emissions trading scheme (ETS).

The EU parliament in April voted against a plan to temporarily ‘‘backload’’, or remove, 900 million permits from its market in a bid to double its carbon price.

The rejection saw prices plunge to record lows, and bleak projections that Australia’s carbon price would fetch less than $3 per tonne when it links with Europe’s ETS in 2015.

But the price of European carbon permits hit a two-month high this week after conservative politicians indicated they’d support an amended backloading plan.

The proposal is now expected to proceed to the EU parliament once again, where it will go to a final vote on July 2.

12:32pm:The man synonymous with Australia’s failed airline Ansett, Gary Toomey, has been selected as chief executive of India’s second-largest airline Jet Airways.

The appointment of Mr Toomey, the former chief executive of Air New Zealand-Ansett, comes just months after Middle East airline Etihad bought a 24 per cent stake in Jet Airways for $US379 million.

He replaces Nikos Kardassis as chief executive of Jet Airways, which has lost money for the last six years.

Mr Toomey, who is also a former Qantas chief financial officer, has kept a low-profile since since the collapse of Ansett in 2001. For the last four years, he has been chief executive of Papua New Guinea carrier Airlines PNG since June 2009.

He stepped down as chief executive of Air New Zealand, which owned Ansett, in October 2001, just a month after Australia’s then second-largest airline collapsed. Air New Zealand had to be bailed out by the New Zealand government due to its disastrous foray across the Tasman.

12:14pm: Japan’s Nikkei has lost some of its early momentum but is still up more than 2 per cent, after the index slipped into bear market territory yesterday, down more than 20 per cent from its May highs.

‘‘Psychologically the market feels like we’re nearly done with the correction,’’ says Nomura strategist Juichi Wako.

That may be beyond local control, as the Japanese market has been very much in the hands of overseas investors over the past months, the Atlantic notes in an interesting article:

Foreigners have been the ones pushing the Nikkei up during the Abe-boom. Japanese savers have actually been net sellers during this historic rally. You can see that in the chart below, which compares the Nikkei and net foreign buying since right before Abe unveiled Abenomics. The market jumped up as more and more overseas buyers jumped in, and fell down as fewer and fewer did.

 

12:00pm: Elders has received at least one bid for its main rural services business and is working to finalise a sale.

Debt-laden Elders has been looking to sell its agricultural products business since late October 2012, and rival Ruralco was recently given approval from the competition watchdog to pursue a takeover.

Elders says it has now received ‘‘one or more final or near final bids’’ for its agricultural business, as well as its automotive business Futuris.

The sale process for Futuris, which makes car interiors, has been underway since August 2012. The company gave no indication of who the final bidders are.

Elders shares are in a trading halt.

11:56am: Stocks are hanging onto their early gains, as high-yielding stocks including flagship banks underpin the local market.

Despite the recent turbulences, the market is actually up for the week, round about 0.4 per cent. That’s mainly due to the big banks, which have been snapped up after last week’s selloff.

Westpac is leading the rebound, up 4.3 per cent for the week, while ANZ and NAB are both up 3.3 per cent and CBA has gained 2.4 per cent.

“I think that the yield play is still extremely valid, I think that investors will continue to seek high-yielding stocks such as the banks,” says Tim Radford, global analyst at Rivkin Securities.

11:32am: ANZ currency strategist Andrew Salter says this morning’s fall in Australian dollar is “just collateral damage,” caught up in a volatile market place.

“It’s something that’s not really Aussie specific at the moment, it looks to be a consequence of what’s going on in the Nikkei and yen in Japan,” Salter says.

Through June, the yen has been strengthening against major currencies. It has jumped 6 per cent against the US dollar, 3.3 per cent against the euro and 5.9 per cent against the Australian dollar.

Salter says the volatility surrounding the Australian dollar is linked to uncertainty surround the US Federal Reserve’s intentions relating to quantitative easing.

“I don’t think markets have a clear understanding of that. We’ll wait for the FOMC meeting next week.  Until then, I think this volatility continues and in times of uncertainty you go towards investments that are safe and the yen is traditionally one of those,” Salter says.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

11:04am: The end of Rupert Murdoch’s third marriage would usually be one for the gossip pages, but since the media magnate’s last divorce cost him around $US1.7 billion and this one comes smack bang in the middle of News Corp’s split, investors are waiting for some more details on the separation from his wife of 14 years, Wendi.

The divorce filing, which was sealed, comes just days before News Corp is to split into two companies, one containing its entertainment assets and the other holding its publishing business. Murdoch, who Forbes says is worth $US9.4 billion, is to be chairman of both publicly traded companies.

Despite the timing, there is no connection between the divorce and the corporate split, Reuters quotes a source close to News Corp who was not authorised to discuss the matter publicly.

Analysts said the end of the Murdochs’ marriage was unlikely to have an impact on the media empire. Murdoch and Deng had a prenuptial agreement, according to a person familiar with the situation. Their girls, Grace and Chloe, have stakes in the family trust that holds the Murdochs’ stake in News Corp, but they do not have voting rights.

“I doubt it has a substantial impact on the spin,” Gabelli Co analyst Brett Harriss said, referring to the News Corp separation. “Given that it’s his third wife, I see it unlikely that he didn’t plan for this contingency.”

News shares are up 1 per cent this morning.


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10:46am: Toll road owner Transurban is offloading one of its US roads. The Pocahontas 895 in Virginia, in which Transurban held a 75 per cent stake, will be transfered to the lenders that funded the roadway, Transurban said.

Transurban reduced its value of the Pocahontas 895 by $138 million to zero in 2012, due to lower-than-expected traffic volumes and toll revenue.

The removal of the toll road from Transurban’s books, therefore, would have no cash impact on the company’s balance sheet, it said.

Transurban shares are down 0.5 per cent.

10:41am: The dollar’s rally is quickly running out of puff – the currency has just dropped to the morning’s low of 95.97 US cents, after a tumultous night that saw the dollar shooting up as high as 96.66 US cents, more than 2 cents higher than yesterday’s lows.

It seems the currency’s recent rollercoaster ride is set to continue.

The Australian dollar's three day ride.

The Australian dollar’s three day ride.

10:31am: And here’s an overview of the ASX200′s main winners and losers this morning:

Winners and losers this morning

Winners and losers this morning

10:28am: Back to the local market: one stock not swept up in the local rally is ASX, which is down nearly 5 per cent at $33.56 after completing the institutional part of its discounted share program.

It allowed institutional investors to buy two shares for every 19 shares at a lower price of $30.

There was a slight shortfall in the take-up, however, with large fund managers and other investors soaking up approximately 96 per cent of the shares.

10:23am: The USD/YEN exchange rate is one worth keeping an eye on, says IG’s Stan Shamu:

  • While it can be argued that the stronger-than-expected US data (retail sales and jobless claims) was good for confidence, we feel the impact this had on USD/JPY was the key ingredient.
  • Most of the moves we’ve been seeing recently have been Japan driven, and this data helped USD/JPY move back above ¥95 to a high of ¥95.48. This recovery brought out the bargain hunters who then pushed equities higher.
  • However, a (Fed watcher) Hilsenrath headline saying the Fed is likely to push back on market expectations of a rate increase might see some of this work undone. If the USD comes under pressure again, then things could swiftly turn sour for Asian equities.

The US dollar’s rise against the yen seems indeed to have been short-lived – it’s fallen back towards 95.1 yen this morning.

10:17am: As expected, Japan’s Nikkei index is also rallying, jumping 3.1 per cent at the open, after a steep decline in the previous session, as robust data eased concerns over whether the US economy can withstand a pullback in stimulus by the Federal Reserve.

The Nikkei was up 389.71 points at 12,835.09. On Thursday, it tumbled 6.4 per cent to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy.

Japan’s monetary policy meeting minutes are due out this morning and perhaps this might offer more clarity on how the BoJ looks to stabilise its bond market and keep the economic recovery on track.

10:11am: The market has opened strongly higher: the ASX200 is up 53.8 points, or 1.1 per cent, at 4749.6, after jumping as much as 1.4 per cent, while the broader All Ords has jumped 50.2 points, or 1.1 per cent, to 4735.1.

Share gains are broad-based, with miners leading the rally. Health is bucking the trend, down 1.1 per cent.

10:05am: First snapshot of the open: the market is jumping higher. ASX200 up 0.7 per cent.

9:58am: The local market isn’t the only one expected to rise strongly this morning: Nikkei futures are pointing to a near 4 per cent gain of the Japanese market at the start of trade.

The Nikkei fell into bear market territory yesterday after losing nearly 22 per cent since its May peaks.

9:56am: ASX Ltd says it has completed the institutional component of its fully underwritten, 2-for-19 accelerated capital raising.

However there was a slight shortfall in the take-up with large fund managers and other investors soaking up approximately 96 per cent of the shares.

All up this raised gross proceeds of approximately $267 million. The retail leg of the offer opens to existing shareholders on Monday.

The operator of the Australian securities exchange this week unveiled a surprise $553 million capital raising to help it meet tough new capital rules expected for its new clearing house service.

The trading halt on ASX shares will be lifted this morning.

9:44am: The major local story this morning is the resurgent Aussie dollar, which has gained three US cents since Tuesday, snapping a 10 US cent slide which began in early May.

The local unit traded as high as 96.64 US cents early on Friday, after slipping to a 33-month low on Tuesday of 93.26 US cents, as investors bet that the US central bank will continue its economic stimulus program, also known as quantitative easing.

BK Asset management managing director Kathy Lien said speculation about the possible tapering of the Federal Reserve’s asset purchase program was the main factor driving the Australian dollar and share markets higher.

“The Fed may not be as eager to taper asset purchases as was suggested,” she said from New York. “That’s, obviously, good for risk assets and negative for the US dollar.”

9:33am: After combined losses over the past two days of more than 1.2 per cent, the ASX is expected to greet the opening bell in a much rosier mood today, thanks to a strong performance on Wall Street. The Dow snapped three days of losses to post a 1.2 per cent, while the SP500 was nearly 1.5 per cent higher. And that’s SP500′s biggest gain since January 2.

It came off the back some strong economic data, which showed US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, signs of economic resilience in the face of belt-tightening in Washington.

“The economy is showing more evidence of the positive feedback loop, particularly through the housing channel, but we still have this push and pull of monetary policy and fiscal policy,” said Robert Dye, chief economist at Comerica in Dallas.

You can read more about the US data here.

9:28am: Hi everyone. Welcome to the Markets Live blog for Friday.

Contributors: Jens Meyer, Max Mason, Georgia Wilkins

This blog is not intended as investment advice

BusinessDay with agencies


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Posted by IQ - June 14, 2013 at 11:50 am

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Posted by IQ - June 2, 2013 at 10:01 am

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TSX opens slightly lower amid drop in commodity prices, while U.S. markets up

TORONTO – The Toronto Stock Market closed higher Tuesday despite falling commodity prices and disappointing earnings reports from several big-name companies, including food distributor George Weston Ltd., WestJet Airlines and Husky Energy.

The SP/TSX composite index was ahead by 10.19 points at 12,464.11, while the Canadian dollar climbed 0.24 of a cent to 99.51 cents US.

Analyst Kash Pashootan of Raymond James said the resource-heavy TSX is struggling under the weight of dropping prices in oil, gold and copper.

This downward trend in commodities, which has been around for at least the past two years, is likely to continue, he said.

“We’re seeing a continuation of the slowdown in growth in the commodity space,” said Pashootan from Ottawa.

“We’re in the late innings of the commodities cycle, and the market is looking for conviction before commodity prices go up.”

The June contract for gold bullion fell $19.20 to US$1,448.80 an ounce as the gold sector led with the most declines on the TSX with a drop of 2.84 per cent. Nearly all companies in the sector weakened including Aginico Eagle Mines (TSX:AEM), Alamos Gold (TSX:AGI) and Barrick Gold (TSX:ABX).

The July copper contract was down a penny at US$3.30 a pound, with the metals and mining sector falling by 0.43 per cent. Shares in Teck Resources were down by 0.11 per cent. Base metal miner First Quantum Minerals Ltd. (TSX:FM) beat analysts expectations by two cents per share as it reported Monday earnings of $153.8 million or 32 cents per share on revenue of $901.2 million. Its shares were up by 1.19 per cent to $17.80.

The June crude contract on the New York Mercantile Exchange faded 68 cents to US$95.58 a barrel.

Meanwhile, Wall Street continued to see major gains, boosted by news that the Reserve Bank of Australia is lowering its official interest rate by a quarter percentage point to 2.75 per cent amid some signs the economy is weakening.

The Dow Jones industrials closed up 87.31 at 15,056.20, the highest close on record.

The SP 500 also had a record close, advancing 8.46 points to 1,625.96 after climbing above 1,600 for the first time on Friday.

The boost comes after more than 80 per cent of companies in the SP 500 index have reported first-quarter earnings, and profits are at a record level. Of companies that have reported, nearly 70 per cent have beaten the expectations of Wall Street analysts for income, according to SP Capital IQ data.

The Nasdaq edged up 3.66 points to 3,396.63.

The U.S. also reported that employers posted fewer job openings in March compared with February. The Labor Department said job openings fell 1.4 per cent to a seasonally adjusted 3.8 million jobs. Total hiring declined 4.3 per cent to 4.3 million.

In earnings news, Canada’s second-largest airline reported its “best ever” quarter but left investors worried whether the carrier will be able to profitably fill its new capacity, sending its stocks down 7.48 per cent to $22.87.

WestJet earned $91.1 million or 68 cents per share in its latest quarter, up from $68.3 million or 49 cents per share in the same 2012 period. However, the airline said its load factor — a measure of how full its planes are flying — fell 3.5 percentage points to 82.7 during April, compared to the same month a year earlier.

Food processor and distributor giant George Weston Ltd. (TSX:WN) reported an almost 34 per cent increase in is first-quarter net earnings, due to foreign currency translation and amendments to its defined benefit pension plan among other things. However, the company’s adjusted earnings missed analyst expectations by two cents per share and the stock closed up only slightly by 16 cents to $81.24.

Husky Energy (TSX:HSE) shares were down 19 cents to $29.73 after it reported its first-quarter profit was down from a year ago, as the price for its heavy crude oil came under pressure. The company said it earned $535 million or 54 cents per diluted share, down from $591 million or 60 cents per diluted share a year ago.

The only major Canadian data report on Wednesday is the release of April housing starts, which is anticipated to come in at 175,000 — the same rate as for March.

Pashootan said markets are also watching for the latest GDP numbers due out of China this week, which may indicate how the world’s second-largest economy is doing.

If the reports are positive, it will likely drive up commodities. But if, as expected, they indicate a continuing slowdown, that will maintain a damper on prices.

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Posted by IQ - May 31, 2013 at 9:24 am

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USD/JPY Coiling Before Next Move

Daily Bars

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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FOREXAnalysis: It’s looking more or and more like a diagonal is unfolding from 90.84 in USDJPY. The diagonal lines should help with entry in the coming week(s). The line crosses about 101.36 on Thursday and increases about 13 pips per day. Remember, sometimes the market will experience a ‘throwover’ in which price exceeds the upward sloping diagonal line before reversing. Diagonal support line is at 97.86 on Thursday and increases 22 pips per day.

FOREXTrading Strategy: Will be shorting sometime in next few weeks but don’t know if the entry will be higher or lower…depends on resolution of the diagonal pattern. 99.00 is near term support.

LEVELS: 97.20 98.10 98.52 99.95 101.07 101.43

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Posted by IQ - May 24, 2013 at 2:51 pm

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NZD/USD Longs Favored below .8435 Towards mid .8500s

Daily Bars

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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FOREXAnalysis: It is possible that an important high is in place at .8675. The current high is at the channel that defines the advance from the November 2011 low. Near term, a flat correction appears to be unfolding from the 4.15 low. The implications are for strength above .8509 before the next top.

FOREXTrading Strategy: Order to go long at .8440, stop .8350, target .8550 but will be looking for a top in 1-2 weeks.

LEVELS: .8359 .8400 .8435 .8509 .8526 .8561

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Posted by IQ - May 24, 2013 at 9:50 am

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AUD/USD One More Low Would Present Trade Opportunity

Daily Bars

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREXAnalysis: The AUDUSD is nearing the trendline drawn off of the June 2012 and March 2013 lows. That line is at 1.0213 on Thursday and increases about 3 pips per day. The area that surrounds 1.0200 includes the reversal day close at 1.0194 and the 78.6% retracement of the rally from 1.0115 at 1.0215. Long lower wicks (close-low) suggest buying pressure.

FOREXTrading Strategy: Buying 1.0215 with a 1.0110 stop.

LEVELS: 1.0000 1.0115 1.0194-1.0215 1.0307 1.0358 1.0396

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Posted by IQ - May 24, 2013 at 8:50 am

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