Giving you all the latest in Stock Market Information as it happens
 

Month: September 2010

GE Capital Australia launches 5-year bond

Reuters

GE Capital Australia Funding Ltd has launched a five-year benchmark Australian dollar bond, a joint lead has said.

Indicative pricing suggests around 175 basis points over swap and BBSW, according to a fund manager who has seen the terms.

ANZ and National Australia Bank are jointly leading the issue expected to price on Friday.

GE Capital Australia, a unit of General Electric Co is rated AA-plus by S&P and Aa2 by Moody’s.

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Gold miners return to net hedging in Q2: report

Reuters

LONDON – Gold miners returned to net hedging for the first time since the last quarter of 2005 in the second three months of this year, metals consultancy GFMS and Societe Generale have said in a quarterly report.

But the release showed they are lifting their estimated rate of de-hedging for the full year, with gold miners now seen cutting the amount of gold they have sold forward by 4.21 tonnes this year, up from a previous estimate of three tonnes.

The hike is due to a recent announcement by number three gold miner AngloGold Ashanti that it will accelerate its buy-backs of outstanding hedges to gain greater exposure to soaring spot gold prices.

“In previous reports, we have referred to the likelihood of short-term, significant cuts to the remaining book being low, due to the limited size of the remaining book,” the report said. “However, the September announcement by AngloGold Ashanti has heralded just such a swift transaction.”

Hedging allows producers to lock in guaranteed prices for future output, but it can backfire if the price of spot metal rises above the hedged price. The buying back of outstanding hedge positions was a key element of demand in past years.

The report said indications were that AngloGold will have completed its de-hedging by early 2011. The miner still had 3.06 million ounces hedged by the end of the second quarter.

AngloGold is currently the only major miner with a large outstanding hedge book, after the world’s biggest gold producer, Barrick Gold closed out its hedges last year.

Barrick chief financial officer Jamie Sokalsky told Reuters at an industry event on Monday that the move gave the company “100 per cent of the upside” to gold prices.

“It takes something that was negative in our stock price from a perception standpoint off the table,” he said.

Hedging returns

Figures included in the GFMS/SocGen report showed the global hedgebook increased 160,000 ounces in the second quarter on a net basis, against a reduction of 780,000 ounces in the first three months of 2010.

“The book was expanded primarily by way of additions to the options portion of the book, with new collar options positions added by St Barbara Mines to cover production from its King of the Hills deposit,” the report said.

Other forward sale positions totalling 300,000 ounces were also added by Perseus Mining, Integra Mining and Regis Resources, it added.

This was offset by some continued de-hedging activity, with AngloGold’s outstanding position falling 290,000 ounces in the second quarter.

The report added that GFMS and SocGen do not believe the gold mining industry is returning to gold hedging. “There is yet to be a discernable swing by producers towards a renewed appetite for strategic hedging,” it said.

“The new hedges seen in the second quarter… (were) based around project finance.”

Mr Sokalsky said he did expect the company to consider hedging again in the foreseeable future.

“What became clear to us and others that were hedging was that investors in supply gold shares do want the leverage to the gold price,” he told Reuters.

“They look at us not only as a company that generates real earnings but also as a warrant on the gold price. They believe in the price of gold, they want companies that are unhedged.”

“I believe the pressures to hedge again are going to be very minimal, and I don’t see hedging coming back in favour in a large manner at all, even at higher gold prices. It is off the table for us.”

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Oil prices soar

NYMEX

Oil prices soared on Wednesday after the US government reported a sharp drop in weekly crude inventories in the world’s top oil consumer.

New York’s main contract, light sweet crude for November delivery soared $US1.68 to $US77.86 a barrel, after briefly touching its highest level since August 11 at $US78.13 a barrel.

London’s Brent North Sea crude for November gained $US2.06 to reach $US80.77.

The Energy Information Administration reported crude inventories declined by 475,000 barrels for the week ending September 24, more than forecast by most analysts.

Gasoline stocks fell by 3.47 million barrels where experts widely expected a rise by 500,000 barrels. Distillate stocks fell 1.27 million barrels, the EIA also said.

Oil prices were further supported by the continued slide of the US dollar against most key currencies, with the greenback hitting at five-month low against the euro.

In other Nymex trading in October contracts, heating oil rose 6.60 cents to settle at $US2.1905 a gallon and gasoline gained 4.76 cents to settle at $US1.9765 a gallon. Analysts expect both contracts to be active since they expire Thursday. Natural gas for November delivery added 1.1 cents to settle at $US3.962 per 1,000 cubic feet.

COMEX

Gold extended its record-breaking rally, rising above $US1,310 an ounce while silver hit a 30-year peak, as the dollar hit a five-month low against the euro on growing expectations of more US monetary easing.

Gold’s strength also lifted other precious metals, with palladium hitting its highest level since March 2008 and platinum a four-month high.

Spot gold hit $US1,313.20, its 10th record high in the past 12 trading days, and was up 0.2 per cent at $US1,309.30 at 3:29 pm EDT (0529 AEST). US gold futures on the COMEX division of the NYMEX for December delivery settled up $US2 at $US1,310.30 an ounce.

COMEX gold open interest rose to new record at 619,408 lots, and the exchange estimated final gold volume at 121,300 lots, about six per cent higher than its 30-day average, preliminary Reuters data showed.

The dollar fell for a fourth straight session to hit a new five-month low against the euro as broadly weak economic data reinforced the belief the US Federal Reserve could resume its purchases of Treasuries to keep interest rates low.

BASE METALS

Copper jumped to a more than two-year peak on Wednesday, with prices in London vaulting above the key $US8,000 a tonne level, as the dollar slipped and demand prospects brightened in response to robust manufacturing data in China.

China is the world’s leading copper consumer, whose imports this year stand at 2.954 million tonnes – just below levels in 2009, when imports broke all previous records.

Copper for December delivery on the COMEX metals division of the New York Mercantile Exchange gained 2.45 cents to end at $US3.6615 per lb, which marked the highest level on a settlement basis for the third position futures contract since July 22, 2008.

The benchmark December contract is up more than 30 per cent since hitting a recent bottom at $US2.77 per lb in early June.

On the London Metal Exchange (LME), copper for three-month delivery peaked at $US8,075 a tonne, a high dating back to August 2008, before ending at $US8,064, up $US154 from Tuesday’s close.

Demand prospects for the red metal were bolstered by a rise in HSBC’s China Purchasing Managers’ Index to a five-month high in September.

The data pointed to renewed, though moderate, momentum in the vast industrial sector, seen as the backbone of China’s economy.

Aluminum closed up $US32 at $US2,341 a tonne. On Tuesday, it hit a five-month high at $US2,336.25.

LME stocks of the metal slipped 3,350 tonnes to 4.35 million tonnes, with a large portion of the metal tied up in finance deals.

Nickel rose $US175 to end at $US23,350 from $US23,175, lead rose $US19 to $US2,300, and zinc closed up $US10 at $US2,225.

Tin peaked at $US24,390 a tonne, a peak not seen since May 2008, before ending up $US325 at $US24,325.

The metal, used in electrical solder, is plagued by supply worries in top exporter Indonesia.

Stockland ups Aevum stake to 54%

Stockland has increased its ownership in takeover target Aevum Ltd above 50 per cent and its revised offer of $1.80 a share will be extended until October 13.

Stockland says it held a 54.56 per cent majority stake in Aevum at close of trade on Wednesday.

“Our offer now has good momentum and this extension will provide additional time for remaining Aevum shareholders to accept the offer,” Stockland managing director Matthew Quinn said in a statement on Thursday.

Mr Quinn said the consolidation of the two businesses would almost double the size of Stockland’s retirement living business.

“We remain focused on creating a large scale, national retirement living business, leveraging our experience as Australia’s largest residential developer and appealing to Australia’s growing retirement-age population,” Mr Quinn said.

Stockland first offered $1.50 cash for Aevum in August, which was rejected by directors.

Stockland then offered Aevum shareholders $1.77 per Aevum share, paid in cash within three business days of acceptance together with Aevum’s three cent final dividend directly from Aevum, resulting in a total value of $1.80 per share.

In response to the higher offer, Aevum said it was not fair, but was reasonable for short to medium term investors.

Stockland first bought a strategic 14.4 per cent stake in Aevum in October 2008.

Stockland’s revised offer has been automatically extended to close at 7pm (1900 AEDT) on Wednesday, October 13, unless extended further.

Shares in Aevum closed at $1.77 on Wednesday.

Telstra yet to confirm scope of job cuts

Telstra Corporation says it has not confirmed how many jobs will be cut under its plan to simplify its business.

Media reports on Thursday suggest the telco giant will cut 6,000 staff over the next three years as part of its $1 billion plan to reverse its falling financial performance.

Telstra says its new strategy is aimed at maintaining and growing market share and will involve a simplification of its business, cost cutting and an improvement in customer service.

A spokesperson for Telstra said the company had not determined how many jobs it would cut as part of the program.

“Telstra has not confirmed the number of affected employees and when we do, we will first speak directly to them,” the spokesperson said.

The company told investors on Wednesday it would incur $220 million in redundancy costs in the 2010/11 financial year.

“It is always difficult to make decisions that inevitably affect jobs,” the spokesperson said.

“However, Telstra offers retraining and generous redundancy arrangements to affected employees.”

Telstra has cut over 12,000 jobs since 2005 as part of a transformation process implemented by former chief executive Sol Trujillo.

Aust strong as global banks improve: RBA

The health of the major international banks has improved despite lingering areas of uncertainty, while Australia’s economy and financial system are relatively strong, the Reserve Bank of Australia (RBA) said in its half-yearly review.

“In the period since the previous Financial Stability Review the health of the major international banks has mostly improved, despite a significant amount of uncertainty in financial markets,” the RBA said in the review, released on Thursday.

The uncertainty has focused on concerns about sovereign debt in the euro area and the potential for negative feedbacks through credit and funding markets, the RBA said.

Despite support packages and the stress-testing of euro area banks, “some country specific concerns within the euro area have recently re-emerged”.

“These events have influenced markets outside Europe and there have been periods of renewed weakness in international funding markets,” the RBA said.

In contrast, the RBA said financial conditions were “quite buoyant” in faster-growing Asian and Latin American economies.

For Australia, the RBA was upbeat.

“The financial system remains in relatively strong condition, as does the broader economy,” the central bank said.

The effects of the global crisis and ensuing recession on Australia were “quite mild” and economic growth “has now broadly returned to trend” it said.

The RBA said indicators of the strength of the Australian banking system had improved further recently.

“The flow of bad debt charges has generally peaked, while the stock of non-performing assets on banks’ balance sheets appears to be stabilising at a level that remains low in comparison with previous cyclical experience,” the RBA said.

And, while there had been “some upward drift” in the rate of arrears on housing loans, it remained “fairly low overall”.

The financial position of the housing and business sectors remained sound, the RBAsaid, with loan impairments and losses mainly concentrated in the business loan portfolio, in particular for commercial property loans.

Households were not having trouble servicing their debts, however.

“Despite being more indebted, households’ debt-servicing ability is currently strong, supported by ongoing income growth,” the RBA said.

The RBA said housing price rises had stayed broadly in line with growth in incomes since a significant rise in the price to income ratio between the late 1980s and early 2000s.

“Since then, during a time of strong population growth in Australia, price rises nationally and in capital cities have on average been broadly in line with growth in incomes.”

Rental yields (the ratio of rental income to dwelling prices) had been steady in most of Australia for the past decade.

“Nonetheless, many markets have experienced very strong capital growth in recent years, particularly in Melbourne, and the recent slowing in price appreciation is a welcome development for the resilience in household finances,” the RBA said in the review.

The RBA’s board meets next Tuesday for its monthly monetary policy meeting.

The minutes of the previous meeting, on September 7, revealed that the board members had been briefed on the RBA’s assessment of the stability of the financial system and a summary of it appeared in the minutes, released last week.

So this will not be a new input to the decision-making process.

Even so, it does confirm that the RBA is less anxious about the resilience of the global and Australian financial systems than it was six months ago, and that the hurdle for a rate rise next week is lower than it was as a result.

Qantas passenger numbers rise 8.5%

Qantas Airways Ltd says passenger numbers have risen 8.5 per cent over the year to August 2010.

Qantas says its revenue seat factor for the year was down 0.9 per cent to 79.6 per cent.

Revenue passenger kilometres increased by 6.8 per cent and available seat kms rose by 7.7 per cent.

Passenger numbers for the month of August, grew 7.8 per cent over the same month a year earlier.

Total domestic yield rose 1.3 per cent in the year to August 2010, when compared with the corresponding prior year.

Total international yield, excluding foreign exchange, for the year to June 2010 rose 12.1 per cent, when compared with the prior corresponding year.

The airline says it has hedged 58 per cent of its remaining fuel requirement in 2010/11 at a worst-case crude oil price of US$87.80 per barrel, including option premium.

Qantas has hedged 36 per cent of its remaining operational foreign exchange exposure in 2010/11 at a worst case AUD/USD equivalent rate of 0.7800 inclusive of option premium.

Wall Street failed to maintain gains

Wall Street failed to maintain early gains on Wednesday, closing below the red line as traders continue to speculate on a nearing Federal Reserve intervention to buttress the economy.

With no economic indicators released to give stock indexes a clear direction, trade fluctuated around the flatline throughout the day, remaining at relative low volume.

The blue-chip Dow Jones Industrial Average fell 22.86 points, or 0.21 per cent, to 10,835.28 in closing trades, while the broader S&P 500 index was down 2.97 points, or 0.26 per cent, to 1,144.73 points.

The tech-rich Nasdaq composite index lost 3.03 points, or 0.13 per cent, to 2,376.56 points, little effected by heavyweight Hewlett-Packard 2.2 per cent rise in share price after it forecast a higher-than-expected yearly revenue.

Traders were also concerned about the continuing slide of the US dollar against key currencies in recent days, said Joseph Hargett, analyst at Schaeffer’s Research Investment.

LONDON – European markets fell Wednesday in listless trading as hesitant investors, unsure of the direction of the world economy, stayed largely on the sidelines.

In London, the FTSE 100 index shed 0.17 per cent to close at 5,569.27 points while in Paris the CAC 40 lost 0.67 per cent at 3,737.12 points. The Frankfurt the DAX dropped 0.42 per cent to 6,246.92 points.

With no economic indicators due, trade was cautious as investors continued to speculate on whether the US Federal Reserve would soon renew its crisis-era policies to buttress the ailing economy.

Speeches by two key Fed officials were to be closely watched to gauge the possibility of new quantitative easing – the injection of money into the economy.

Traders were also concerned about the continuing slide of the US dollar against key currencies in recent days, said Joseph Hargett, analyst at Schaeffer’s Research Investment.

In London, banks dragged down the index following a report that a rescue by Ireland of one of its ailing lenders, Anglo Irish Bank, could cost more than 30 billion euros.

Elsewhere, Madrid fell 0.98 per cent, Amsterdam 0.69 per cent, Milan 0.82 per cent and the Swiss Market Index 0.36 per cent.

TOKYO – The Nikkei average clawed up 0.7 per cent on Wednesday on window-dressing before the end of Japan’s financial first half, but it pared earlier gains as the yen’s strength revived and resistance held strong.

An additional boost came from a poor December outlook in the Bank of Japan’s “tankan” survey of business sentiment, which some market players said could increase expectations the central bank will discuss easing monetary policy further at a meeting next week.

This week also marks the end of the April-September first half in Japan, and some analysts said window-dressing, or buying by fund managers of some of the quarter’s better performers to improve their books, likely provided help.

Still, market players said the longer-term outlook for the benchmark was poor, given the dollar’s persistent weakness, and resistance around 9,660 – the upper level of the Nikkei’s Ichimoku cloud on daily charts – would hold.

The benchmark Nikkei ended up 63.62 points at 9,559.38, while the broader Topix gained 0.5 per cent to 846.97.

The Nikkei has gained about 8 per cent this month, its best monthly performance since March, helped by short-covering in exporter shares after intervention by Japanese authorities to weaken the yen two weeks ago.

Trade was moderate with some 1.75 billion shares changing hands on the Tokyo exchange’s first section. Advancing stocks outnumbered declining ones by about 5 to 1.

NEW ZEALAND – The New Zealand sharemarket continued to drift on Wednesday with the benchmark NZX-50 index closing down 3.349 points, or 0.10 per cent, at 3226.88.

There were 43 rises and 32 falls among the 107 stocks traded.

Turnover was worth $86.74 million.

$A trading near 2yr high on $US weakness

The Australian dollar was slightly lower, but still trading around a two year high on US dollar weakness, as investors adjust their portfolios at the end of the month.

At 0700 AEST, the Australian dollar was trading at 96.93 US cents, slightly down from Wednesday’s close of 97.03 cents.

Since 1700 on Wednesday the local unit traded between 96.73 cents and 97.30 cents.

Overnight the local currency reached its highest level since it touched 97.92 US cents on July 25, 2008.

Commonwealth Bank vice-president of institutional banking Tim Kelleher said the Australian dollar pushed higher after the Dow Jones index recorded its strongest September since 1939.

“What happened is that portfolio managers had to adjust their currency weightings and they’ll be selling US dollars,” Mr Kelleher said from Auckland.

“Some of them have pre-empted it a bit but the majority will wait until London open.

“You’ll see all the currencies, the Euro, Sterling, Kiwi, Aussie, the Canadian dollar, all get paid higher tonight.”

Wall Street failed to maintain early gains on Wednesday, closing below the red line as traders continue to speculate on a nearing Federal Reserve intervention to buttress the economy.

With no economic indicators released to give stock indexes a clear direction, trade fluctuated around the flatline throughout the day, remaining at relatively low volumes.

Mr Kelleher said domestic building approvals and job vacancies data to be released on Thursday would not be “major movers”.

“They would have to be significantly different to change the sentiment I would have thought,” he said.

He predicted the local unit would be supported around its current levels and trade between 96.70 US cents and 97.20 cents on Thursday.

“It’s probably just going to trade sideways today,” he said.

Newcrest may take major stake in PNG JV

Australia’s biggest gold miner Newcrest Mining Ltd has signed an agreement which includes the possibility of taking a majority interest in an exploration joint venture in Papua New Guinea.

Newcrest signed a heads of agreement with PNG and Vietnam focused gold explorer Triple Plate Junction Plc where Newcrest can earn a majority interest in the Manus Island joint venture in PNG.

Newcrest will be able to earn a 60.78 per cent interest in the joint venture by spending $6 million over five years, with a minimum commitment of $1 million over the first two year, the Melbourne-based miner said in a statement on Thursday.

Newcrest will manage the joint venture, based on a 674 square km tenement on Manus Island in PNG.

The current joint venture participants were Triple Plate, with 76 per cent, Golden Success Ltd, with 10.6 per cent, an Pacrim Energy Ltd, with 13.4 per cent.

The parties were negotiating definitive agreements, subject to required approvals by PNG authorities.