A day ahead of the federal budget, Australian shares posted heavy early losses following a sharp selloff of US shares on Friday and European election results which threaten recent progress on the eurozone debt crisis.
11.40am: In bad news for job seekers, ANZ job ads dropped 3.1 per cent in April. The bank, meanwhile, has acknowledged that it has had reliability issues with one of the data providers for the forward looking reading on the labour market.
11.37am: Retail trade rose in the month to a seasonally adjusted $21.231 billion, compared to a upwardly revised $21.032 billion in February the ABS says.
For the three months to March, retail spending rose 1.8 per cent.
11.34am: The dollar has gained on the release, rising to $US1.0130.
11.30am: Retail sales data from the ABS is in - and there's finally some good news for the beseiged sector. Sales for March rose 0.9 per cent, well above the expected 0.2 per cent gain.
11.25am: The dollar, meanwhile, continues to be under pressure. It's now at its lowest point for the session, trading at $US1.0111.
11.18am: Investors don't like the outlook for Australia's retailers, stripping more than 1.5 per cent from the some the major names so far:
- Wesfarmers - down 1.73%
- Harvey Norman - down 1.37%
- David Jones - down 2%
- Myer - down 2.48%
- Woolworths - down 0.78%
11.14am: The big banks are weathering the storm today and remain well ahead of the general market. An hour into today's session they are outperforming both the mining sector and the major retail stocks:
- CBA is 0.53% lower to $52.34
- ANZ is 0.81% lower to $23.25
- NAB is 1.1% lower to $24.86
- Westpac is 0.65% lower to $22.76
11.08am: We’ll also have a rush of economic numbers to digest in the next few minutes.
Retail sales for March will tell us how much the general consumer gloom has translated into actual spending (or the lack of it). The market is still tipping a 0.2 per cent increase for the month, matching the gain in February
Building approvals for March will also be out. A 3 per cent month-on-month gain is tipped by economists, but the year-on-year number may look ugly – off 18 per cent.
And we’ll get business conditions from NAB and job ads from the ANZ ... so it’s a big pre-budget day of economic stats.
11.02am: While we're on the subject of polls, Australians are lowering their hopes for the dollar. A Fairfax online poll today of about 3000 people tipped the Aussie would end the year below parity, and 75 per cent tip it will be at parity or lower. Have you say.
10.55am: Looking at this morning's poll, which just closed, 59 per cent of today's 2074 voters reckon the ASX200 will close more than 1 per cent lower. That's a pretty safe bet at this stage with the ASX200 back to a loss of 1.5 per cent.
Still, spare a thought for the contrarians. Seventeen per cent predicted the market would close more than 1 per cent higher. Here are the full results.
10.54am: Whitehaven Coal is continuing its expansion, launching a $172 million offer for NSW coal explorer Coalworks.
Whitehaven took a 17 per cent share in Coalworks when it bought Aston Resources for $720 million in April. Now, Whitehaven has offered $1 for each remaining Coalworks share in an off-market takeover bid, well above the 85.5 cents the shares last traded at.
Earlier this year, Whitehaven became the nation's biggest independent coal miner when it agreed a $2.5 billion takeover of Aston and a local coal explorer, both controlled by electrician-turned billionaire Nathan Tinkler.
10.46am: Rio has clawed back some its early losses. Its shares are 3.02 per cent lower to $62.95. That's well ahead of the general market, which hit bottom at 1.5 per cent lower but has edged back to a loss of 1.3 per cent down.
Why is it suffering such a rough start to the week? As resources writer Peter Ker notes, it could have something to do with one of its mines in Guinea, West Africa.
Investors could be reading reports out of London that a Chinese consortium is trying to swoop on Rio’s Simandou iron ore project in Guinea. Perhaps more significantly, the benchmark iron ore price into China was slightly lower over the weekend, falling $US2 to $US145 per tonne. This was largely due to an increased amount of Brazilian iron ore coming onto the market.
Perhaps punters are also taking some cover ahead of a Federal Budget tomorrow which could hit miners in a couple of places.
10.39am: ANZ has weighed in on interest rates, reviewing its forecast of how many rate cuts the RBA has in store this year. In a note this morning, ANZ writes:
- In Australia recent anecdotes on the mining sector have not been positive, and we have upgraded our forecasts to now look for an additional 75bp of rates cuts this year, on top of the 100bp already delivered so far this cycle.
- The tightness in fiscal policy likely to be formalised in tomorrow's budget will likely keep domestic sentiment under pressure, with consequent implications for the AUD.
How much of those cuts ANZ decides to pass on is another question altogether.
10.35am: One reason for the dollar’s retreat is that a weaker global economy is likely to prompt the Reserve Bank to cut official interest rates again soon.
This morning, investors were viewing the likelihood of a rate cut of 25 basis points when the central bank next meets on June 5 as a four-in-five chance. In one year’s time, the cash rate will be down to 2.75 per cent, according to Credit Suisse.
If true, that 2.75 per cent would be below the 3 per cent mark during the depths of the global financial crisis.
As noted a few moments ago, Japan’s benchmark Nikkei 225 share index is down 2.8 per cent. Easy to see why: money is flooding into the yen as that currency resumes its haven status.
10.32am: "We’ve got what may well prove to be the next wave of instability from Europe," says Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. "There’s a clear voter rejection of austerity evident."
The Australian dollar has continued losing ground, hitting $US1.0121 just a few minutes ago, but falling as low as $US1.0110, the lowest since December 29. It lost 0.4 per cent to 80.95 yen, after trading at 80.57, the weakest since January 30.
10.30am: Japanese stocks are also sharply lower, with the Nikkei 225 heading for its biggest decline in six months, amid growing concern over Europe’s debt crisis.
The Nikkei 225 sank 2.7 per cent to 9122.97 as of 9:03am in Tokyo, set for its steepest drop since November 10.
10.27am: S&P500 futures down about 1 per cent, pointing to another tough day on Wall Street at the start of trade later today.
10.24am: It's a real mixed bag leading the market lower. Here are some of the biggest losers early on:
- BHP - down 2.5%
- Rio - down 3.22%
- Macquarie - down 3.22%
- Santos - down 2.83%
- Woodside - down 2.01%
- David Jones - down 2%
10.17am: Only nine companies in the top 200 are trading in positive territory. Losses on the ASX200 are now at about 1.57 per cent, or $19 billion. Looking at how the sub indices on the ASX200 are going, all are trading well into the red:
- Materials - down 2.3%
- Energy - down 2.04%
- Industrials - down 1.87%
- Consumer discretionary - down 1.47%
- Consumer staples - down 1.1%
- Financials - 1.08%
10.12am: In early trade, the All Ordinaries index is 66.9 points lower, or 1.5 per cent, to 4392.5, while the benchmark S&P/ASX200 is also 66.9 points lower, or 1.5 per cent, to 4329.1.
10.08am: Early losses now 1.1 per cent. Not all companies trading yet.
10.05am: Early take - shares have lost 0.8 per cent as the market opens. How low will they go?
9.55am: Latest figures show Australian building activity has continued to slide, due to weak demand and lower workloads.
The Australian Industry Group-Housing Industry Association’s performance of construction index fell 1.3 points to 34.9 in April. A reading below 50 indicates a contraction in activity and it means the index has been in contraction for 22 months.
The figures show most of the weakness is due to a sharp drop in apartment building activity, but house building is also weak.
9.51am: We've got a busy day of economics releases ahead:
- Australian Industry Group/Housing Industry Association performance of construction index (PCI) for April - more on this in a moment
- Australian Bureau of Statistics (ABS) retail trade data for March
- ABS building approvals for March
- ANZ job ads for April
- NAB business survey for April
9.48am: Where does that place markets today? IG Markets analyst Stan Shamu said he believed shares would fall as much as 1.8 per cent.
"This basically erases all of last week’s gains and leaves the market right near the support (level) from a few weeks ago," he said.
"Several traders are likely to attempt buying this market after the sharp drop we have seen from last week’s high. However, trying to pick a bottom is always a particularly risky strategy, and following the trend might just be the favoured strategy.
He added that there was likely to be "significant volatility in today’s session as traders look to reposition themselves."
9.44am: The US jobs news sent SPI futures down sharply, points to a loss of about 1.2 per cent at the open. The Australian dollar has also taken a battering since Friday. The Aussie dollar shed 1 US cent when trading resumed this morning, sinking to as low as $US1.0145 - its weakest point since since January 9 this year.
Robert Rennie, Westpac chief currency strategist, said he expects the dollar to test parity against the greenback soon.
“It shouldn’t be any great surprise that Hollande was going to win and the Greek elections were going to be extremely fractured,” he said.
“But we awaken Monday morning and it feels as if suddenly the financial markets have woken up and begun to realise the potential implications.”
9.41am: Meanwhile in Greece, election results have raised fresh concerns about that nation's willingness to stick to tough austerity measures as parties opposing more cuts, including neo-Nazis, won almost 60 per cent of the vote support at the polls.
9.38am: But worries are also coming from Europe where election results over the weekend threaten to undo recent progress on the eurozone debt crisis.
France has elected Francois Hollande as its first socialist president in 17 years. Mr Hollande warned that Germany would be the first nation to be told that Europe must put growth, employment and prosperity before austerity.
9.35am: One of the main reasons for the weak local outlook for shares today is jobs data released in the US on Friday. US markets lost 1.5 per cent on Friday on data showing employers reduced hiring for the third straight month, adding 115,000 workers in April, well below forecasts of 170,000. Traders' expectations had fallen during the week, but the softer jobs number missed even more pessimistic forecasts.
It was the third straight month in which hiring slowed, intensifying fears that the US recovery is losing momentum and opening the door a bit wider for the Federal Reserve to ease monetary policy.
"The bottom line is you don't have evidence that this economy has reached escape velocity," said Robert Tipp, an investment strategist at Prudential Fixed Income.
9.32am: Aussie shares appear to be in for a rough start to the week. We'll look at the main reasons for the negative leads in a moment. For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:
- AUD slides toward parity
- US stocks slide on weak jobs data
- Euro shares slump on weak economic data
- Steep fall in oil price on recovery fears
- Gold rises as QE3 talk intensifies
- Australian finance calendar: May 7-11
- Wall Street week ahead: All eyes on Europe
9.30am: Good morning folks. Welcome to the Markets Live blog for Monday.
This blog is not intended as investment advice
Contributors: Thomas Hunter, Peter Litras, Peter Hannam, Jens Meyer
BusinessDay with agencies
IG Markets analyst Stan Shamu said he believed the market would fall as much as 1.8 per cent.
‘‘This basically erases all of last week’s gains and leaves the market right near the support (level) from a few weeks ago,’’ he said.
‘‘Several traders are likely to attempt buying this market after the sharp drop we have seen from last week’s high," he said. "However, trying to pick a bottom is always a particularly risky strategy, and following the trend might just be the favoured strategy."
"There is likely to be significant volatility in today’s session as traders look to reposition themselves.’’
