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February 26, 2014 – 4:54PM

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Weakness in the mining sector is trumped by solid advances by QBE and NAB after a busy day for earnings updates.

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4:54pm: That’s it for Markets Live today.

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

Thanks for reading and your comments.

See you all again tomorrow morning from 9.

4:53pm: A series of well-received half-year company results and growing optimism that domestic business conditions are improving helped the local stockmarket edge higher despite disappointing local construction data and looming concerns about volatility in China.

The benchmark SP/ASX 200 Index eked out a gain of 3.2 points, or less than 0.1 per cent, on Wednesday to 5437, while the broader All Ordinaries Index added 3 points to 5447. Rises in a number of major stocks in response to interim financial reports, coupled with gains in the big four banks, buoyed the market.

“Overall, reporting season has been better than expected and outlook statements encouraging leading many strategists to lift their target for where the market will end 2014,” Patersons Securities strategist Tony Farnham said.

The biggest miners weighed on the bourse as the spot price for iron ore, landed in China, fell to its lowest price since July at $US119.10 a tonne.

Moves by the People’s Bank of China this week to depreciate the yuan have led to a fall in Chinese equities and softer commodity prices making investors cautious.

In economic news, ABS data showed that construction work done in the December quarter fell by 1 per cent, missing consensus expectations for a 2 per cent rise. Residential construction was particularly disappointing down 1.8 per cent.

“If capital expenditure data released on Thursday disappoints it could prompt those economists tipping the next move in interest rates is up to reconsider,” Mr Farnham said.

4:48pm: Time for the day’s best and worst, and there were some sharp moves among the top 200 stocks, none more so than in the shares of Paladin Energy, as the uranium miner popped 21 per cent on reports that Japan was set to reactivate shuttered nuclear power plants.

The engineering and contractor sector had some winners, with Worley Parsons jumping 10.6 per cent, Ausdrill 9.2 per cent, and Transfield Services 7.2 per cent.

The big name in the winners was QBE, up 4.8 per cent.

Shares in Virtus Health slumped 8.4 per cent after an earnings update.

Best and worst performers in the ASX 200 today.

4:26pm: The market managed a slight gain after a late afternoon slide threatened to leave shares in the red for the day.

The SP/ASX 200 added 3 points to 5437, while the All Ords was up a similar amount to 5447.

The market’s sectors ran hot and cold.

Mining was the biggest drag, down a hefty 1.5 per cent after BHP slumped 1.3 per cent, Rio fell 2.4 per cent, and Fortescue finished 2.7 per cent lower.

But energy stocks were up 1.4 per cent in aggregate, health care was 1 per cent higher, and industrials gained 0.9 per cent, and financials 0.2 per cent.

NAB added 1 per cent, and was the best of the banks. QBE jumped 4.8 per cent, while Worley Parsons popped 10.6 per cent.

3:37pm: Perhaps the big talking point on the floor today has been around the iron ore price, IG’s Chris Weston notes:

We saw a fairly average report from BC Iron, with the stock falling 7%, however price action in FMG and RIO is looking a little more bearish and shareholders will be hoping Spot iron ore can hold last May’s low of $US110 per tonne.

Whether the correlation between the AUD and iron ore firmly re-establishes itself is unclear, but I’m sure it will if we see a move below $US110 since the 30-day correlation is currently -1%.

3:12pm: Time to take a tour of the region’s sharemarkets:

Japan‘s Nikkei is 0.1 per cent higher

Hong Kong‘s Hang Seng is up 0.2 per cent

China‘s Shanghai Composite index is up 0.1 per cent

Taiwan‘s TAIEX is 0.5 per cent higher

Korea‘s KOSPI has gained 0.1 per cent

Singapore‘s Straits Times index is down 0.5 per cent

The Thai stock exchange is 0.1 per cent higher

Indonesia‘s Jakarta Composite is 0.6 per cent lower

The Kiwi NZX 50 is 0.1 per cent lower

3:03pm:China’s yuan is looking a bit more stable today, trading just below Tuesday’s close. The yuan has been on a rare decline, falling more than 1 per cent over the past six session.

Dealers suspect the People’s Bank of China has engineered the recent decline in its currency to inject more two-way volatility into the market and wrong foot speculators that had amassed huge positions wagering on its continued rise.

The Chinese currency was a favourite among emerging market currencies in 2013, gaining nearly 3 per cent even as most of its peers depreciated against the US dollar. Most analysts expect it to appreciate another 2-3 per cent this year, but the change in direction has rattled confidence.

Some analysts believe the PBoC may be preparing the markets for more reforms.

“Putting such a warning shot over the bows of the FX community could also be seen as a sensible move ahead of any possible widening of the CNY’s trading band,” says ANZ analyst Patrick Perret-Green.

ANZ believes the band will be widened to 2 per cent from the current 1 per cent within the next couple of months, a move toward liberalisation that should be seen as a positive step.

Yet he also cautions that the weakness is not confined to the yuan and equities. Prices for copper and steel have fallen sharply while money markets rates are broadly lower, a risk-off shift that suggested growing worries about the economy.

“So far, the reaction of other global markets has been remarkably relaxed, if not perverse. It is questionable how long this can persist.”

Meanwhile, Chinese shares are slightly higher, with the Shanghai Composite up 0.2 per cent, after having slumped more than 5 per cent over the past days.

The US dollar has been strengthening against the yuan.

3:03pm:Government help or a pursuit of assets sales will be ”palliative, not panacea” for Qantas, warn CLSA analysts who point out the airline was not beating the drum about an ”uneven playing field” in the decade after the collapse of Ansett when it had a near monopoly.

In a hard-hitting analysis ahead of Qantas revealing on Thursday the extent of job losses, the CLSA analysts said they were sympathetic to the airline about the foreign ownership restrictions imposed on it.

”[But] government help would be palliative, not panacea and clearly needs improvements driven by Qantas itself,” they said.

They said the benefit to the airline from removing the Qantas Sale Act was not in giving more foreign investors the chance to buy a stake, but allowing it to offshore and outsource parts of its operations.

CLSA said the removal of the act could be a ”game-changer” for reducing Qantas’ costs.

Qantas management is under pressure from investors to reveal a credible way of cutting $2 billion in costs when it unveils its half-year results tomorrow, a day before Virgin Australia reports.

2:51pm:Finbar Group says first-half profit has risen 35 per cent to $18.9 million boosted by the settlements of lots in the residential developer’s Pilbara and Perth projects.

Revenue nearly doubled to $134.2 million from $68 million in the six months to December, reflecting the Karratha and Highgate projects. The company, which develops medium- to high-density buildings in WA, reaffirmed its full-year profit guidance of $31 million.

After repaying $87.1 million in debts and retiring the finance facilities on three projects – two of which were Pelago in Karratha and St Marks in Highgate – the company ended the period with a record cash position of $64.1 million, putting it in a strong position to meet land purchase commitments and working capital requirements, it said.

Finbar raised its interim dividend 14 per cent to 4¢ from 3.5¢. The company’s shares rose 2.5¢, or 1.5 per cent, to $1.725 after the announcement. They have risen 14 per cent over the past 12 months.

The company, that makes 87 per cent of earnings from residential sales, is benefiting from continued strong demand in WA, even as a demand remains subdued in the office-leasing market that makes up the rest of its business.

2:46pm:Graincorp may have caused few surprises Tuesday when it forecast a steep profit fall this financial year on the prolonged dry weather in parts of Queensland and northern NSW, and UBS for one reckons its shares are still a ‘buy’.

It has a $9.40 price target.

“We believe the magnitude of the [profit] downgrade reflects poor seasonal conditions, an increasing competitive landscape and market share loss,” the broker told clients in a note earlier today.

It estimates the GrainCorp share of the eastern Australian crop production in FY14 will fall to around 45 per cent from about 55 per cent in FY13 but diversification to less seasonal businesses will stabilise earnings over time. Hence its ‘buy’ stance.

Graincorp shares were up 1.9 per cent at $7.92 in afternoon trading, holding near the day’s high of $7.95.

2:46pm:Billionaire Gina Rinehart’s Roy Hill iron ore project is close to finalising a $US7.8 billion financing deal, Reuters reports, quoting unnamed sources. The deal would be a vital step towards an end-2015 start for the giant mine in Western Australia’s iron-rich Pilbara district.

The 55-million tonnes-a-year project, which would make Roy Hill Australia’s fourth-largest iron ore producer, will add to hefty new supplies coming on line from Rio Tinto, BHP Billiton and Fortescue. It could also add to the wealth of mining magnate Rinehart, already Australia’s richest person with a $US17.7 billion fortune, according to Forbes.

Roy Hill is likely, however, to be the last new project of this scale to get off the ground, given worries over shaky underlying demand for iron ore in China, the world’s biggest consumer of the steel-making raw material.

Other miners are rethinking expansion and cutting costs as iron ore prices drop. At just below $US120 a tonne, prices have fallen more than 11 per cent so far this year and are down almost 40 per cent from a record high of $US200 reached in February, 2011.

“The agreement is not completely settled yet. All the views have to be gathered as there are a lot of stakeholders. But as of now I don’t see any problems, and a March signing looks likely,” one source with direct knowledge of the negotiations told Reuters.

2:18pm:Fears among older first time mothers that their age could lead to babies born with conditions caused by genetic abnormalities like down syndrome are driving revenue growth from diagnostic tests for fertility clinic network Virtus Health.

Virtus, which leads to the birth of about 4,000 babies annually, announced a 10.5 per cent rise in net profit to $16.9 million in the six months ended December 31.

The company announced a maiden interim dividend, fully franked of 12¢ a share to be paid on April 17.

Chief executive Sue Channon said although revenue linked to the provision of the IVF cycles remained stable at about $9500 in Virtus’ full service clinics, and $7500 in its lower cost option, the growth was due to patients paying for diagnostic tests.

The company increased the number of number of in-vitro fertilisation cycles it performed by 4 per cent to 7,618, in the six months ended December 31. The average revenue earned per cycle increased 3.7 per cent to $13,284.

Revenue rose 7.9 per cent to $101 million in the six months ended December 31. EBITDA rose 5.6 per cent to $32 million in the half. Virtus Health’s former owners Quadrant Private Equity listed the business in June 2013. The company has increased its share of the $500 million fertility clinic market to 45 per cent, from 44.2 per cent in December 2012.

The company has 34 clinics, six day hospitals and 84 fertility specialists.

2:05pm:Australia‘s largest regional airline has launched a scathing attack on Qantas‘s attempts to have the Abbott government guarantee its debt.

The attack on Qantas comes after Rex reported a 60 per cent fall in first half profit, down to $3.6 million.

Passenger numbers fell 5.1 per cent compared to 2012 to just under 550,000.

Rex will not pay an interim dividend, as its usual practice.

Regional Express deputy chairman John Sharp attacked Qantas’s lack of efficiency compared with his own company’s, which ranked first in on time departures and had the lowest cancellation rate in the first half of the 2014 financial year.

Virgin Australia‘s regional operation has consistently improved since joining the market in 2011, Mr Sharp said.

”There’s a lot that Virgin seems to be able to do to manage their affairs successfully that Qantas could, and some would argue should, be doing to manage their affairs better.”

Mr Sharp said that if the government decides to guarantee Qantas’s debt, it should guarantee the debt of the whole airline industry in Australia.

”We all agree with a level playing field, but if you don’t guarantee the other airlines, and only guarantee Qantas, you will be creating an unlevel playing field, and we’ll be on the unlevel part of it. Give us the same guarantees, and other operators the same guarantees that you give to Qantas,” Mr Sharp said.

Rex shares are trading 3.8 per cent higher to 82 cents.

Be warned: Capex survey “relatively imprecise guide,” says RBA

1:58pm: Ahead of the release of the capex numbers tomorrow, Commonwealth Bank economist Diana Mousina has pointed out some useful factors to take into account.

For one, the survey of companies by the ABS was taken over January and February this year, when the Australian dollar was trading between US86.60¢ to just over $US90¢.

The dollar is also tipped to slipped further this year, after falling more than 14 per cent in 2013. Business confidence and conditions had been affected by the recent elevated levels of the Australian dollar, and have both improved in recent months.

Another key factor is that the survey has historically underestimated actual mining and non-mining capex, notes Ms Mousina.

“The non-mining component of capex expectations is particularly underestimated. The ABS capex survey excludes some large non-mining sectors such as agriculture, health care and social assistance and education and training.

“Lending data for the excluded sectors has been indicating a solid rise over the past few months.

“The RBA have warned against the reliability of the capex data noting that “the expectations component of the ABS capital expenditure survey … tends to be a relatively imprecise guide to firms’ realised spending.”

1:34pm: Here’s an excerpt from the SMH’s economics editor, Ross Gittins. We start some way through Ross’s opinion piece on how low political principles have reached:

For an example of state politicians willing to blatantly mislead their electorates, look no further than the Victorian and NSW governments’ dishonest explanation for the looming jump of about 25 per cent in the price of household gas.

The true reason for the rise is that the building of natural gas liquefaction plants in Gladstone will soon allow gas producers on Australia‘s east coast to export their gas and obtain the much higher prices paid on the world market. The east coast will go from being outside the world market to inside it.

The price rise is thus inevitable unless governments were to prohibit the companies from exporting their gas, forcing them to continue accepting below-world prices. There has been no suggestion of penalising the gas producers in this way. Rather, state politicians have taken up the dishonest claim of the gas companies that permitting them to build new and controversial coal seam gas plants would somehow prevent gas prices from rising or force them back down. But as any student of economics could tell you, there’s no way NSW and Victoria could ever produce enough natural gas to significantly affect the world price of gas.

The price of gas in NSW and Victoria would stay below the world price only if the new producers were compelled to sell their gas to local users at below the world price. Again, there’s been no suggestion of this.

1:21pm: The market, and currencies in particular, moves in mysterious ways:

The half-a-cent fall in the Australian dollar this morning before the release of the construction work data was due to market positioning, says NAB‘s senior currency strategist Emma Lawson.

Ms Lawson said there was no fundamental explanation for the fall in the Australian dollar, which slipped below US90¢ to US89.69¢, as no data had been released at that time.

“It does seem to be some stops being take out below US90¢ and below $NZ1.08 and this is the general explanation being given by the market,” Ms Lawson said.

Gold moves most in line with (inverse) real bond yields.

1:17pm: In such an apparently “risk-on” environment it is curious that gold has not given back January’s gains, writes Paul Jackson, a member of Societe Generale’s global “macro advisory team”:

The chart is a reminder that gold is more closely correlated (inversely) to real yields than to either EUR/USD or inflation expectations.

It also shows that real yields have not really recovered in recent weeks and that inflation expectations have been pretty flat.

Put another way, the recovery in risk sentiment has benefited equities but has not overly punished bonds.

Possible explanations include:

1. Equities are rallying in expectation of more central bank support (on both sides of the Atlantic) and this would hold down bond yields;

2. A belief that improved economic performance is not resulting in inflation (helped by the weakening of the yuan, for example), which is good for equities without being bad for bonds; or

3. One or other of the markets has got it wrong.

In truth it is likely to be a mix of all three but to the extent there is an anomalous disconnect between asset classes, then either bond and gold prices come down from here or equity prices should fall again.

We suspect it is gold and bonds that will suffer.

Decline in construction work done – only temporary?

12:40pm: So what’s the takeaway from the construction work done data out today?

For one, residential construction has weakened by 1.7 per cent for the December quarter. As Barclays chief economist for Australia Kieran Davies notes housing has been adding to GDP as construction picked up.

But he says the fall is expected to be temporary, given that forward indicators such as building approvals and housing finance have been strong.

“The housing drop seems unusual but given what we know from all the other indicators for housing activity, I don’t think that weakness will persist. I think you will still get the turnaround in housing within GDP,” Davies says.

At the same time, mining investment, which is mainly engineering construction,should continue to slide as work finishes up on the giant gas projects, Davies adds. Engineering construction fell 0.5 per cent for the quarter.

12:18pm: Time to check the best and worst so far today, and uranium miner Paladin Energy is up big time (see previous post).

Worley Parsons announced what at first glance seem pretty underwhelming results, but turns out the market had been holding their breath for worse, as the stock jumps 6.8 per cent.

Ramsay Health Care continues gaining ground, as do QBE and Cabcharge.

BC Iron was up at the open but then fell steeply and is now trading 5 per cent lower despite some very strong profit numbers.

Best and worst performers in the ASX 200 so far.

12:15pm:Credit Suisse falsified visa applications and conducted business in secret, remote-controlled lifts as part of a “cloak and dagger” effort to hide $US10 billion in funds for its American clients, the US government claims.

Bankers reportedly made 150 trips to the US between 2002 and 2008, to orchestrate an alleged large-scale tax evasion scheme more than twice the size originally thought, according to a report by the US Senate Permanent Subcommittee on Investigations.

The operation was shrouded in James Bond-like secrecy to prevent thousands of American clients being detected by US authorities. In one instance, a Credit Suisse banker travelled to New York’s Mandarin Oriental Hotel and allegedly handed a customer bank statements hidden in a copy of Sports illustrated magazine.

Another customer, who visited one of Credit Suisse’s bankers in Switzerland, was taken to an anonymous meeting room in a lift that “had no buttons and was controlled remotely”, rather than being led to the banker’s office, it was claimed.

The subcommittee published its findings ahead of a hearing in Washington later today, in which four bankers, including Credit Suisse chief executive Brady Dougan, will be grilled by senators.

12:07pm:

This from the ABC, presumably explaining why uranium miner Paladin Energy has popped 19 per cent this morning:

The Japanese government has announced its intention to restart the country’s 48 nuclear reactors, after two years of inactivity.

Japan has released its first draft energy policy since the Fukushima meltdown three years ago.

It states nuclear power will be a core source of electricity.

The policy expected to be approved by Cabinet next month, says nuclear reactors that meet new safety standards should be restarted.

The draft Energy Plan says a mix of nuclear, renewables and fossil fuels will best serve Japan’s future energy needs.

Japan has 48 commercial reactors but all have been offline since the Fukushima disaster.

11:55am:Mining services group AJ Lucas has announced a downgrade to forecast earnings for this June financial year, saying EBITDA is expected to be “approximately breakeven” ahead of interim profits results on Friday.

“The markets across all of the group’s operating business activities continue to be very challenging,” said the company in a statement to the ASX. “The expectation of a rebound in activity in the Drilling Division has not materialised so far.”

In November the company said EBITDA for FY14 would be between $12 million and $15 million.

The shares are down 3 per cent to 98 cents., and have fallen 20 per cent since late January. They were trading at $1.60 in early August.

11:48am: The Australian dollar has slipped almost half a cent after a weaker-than-expected reading of construction work done for the December quarter.

The latest data from the Bureau of Statistics, one of the indicators that will feed into the fourth-quarter GDP figures released next week, showed that the value of construction work done fell 1 per cent in the three months to December. Expectations were for a 0.2 per cent rise.

The local currency, which was trading about US90.10¢, fell to US89.69¢ after the new numbers were published.

The ABS said total building work done in the December quarter, including homes and non-residential buildings like offices and shops, fell 1.6 per cent from the September quarter.

Engineering work done, which includes mines, roads, bridges and the like, was down 0.5 per cent in the quarter.

11:26am: A resurgent housing market has boosted the earnings of one of the country’s biggest mortgage brokers, Mortgage Choice.

The broker reported a net profit of $11 million for the six months to December, up 46 per cent from a year earlier.

This included gains made on the sale of its LoanKit business.

The company lifted its interim dividend to 7.5 cents, fully franked, up from 6 cents.

Chief executive Michael Russell said the company was benefiting from improved conditions in the property market.

”We expect the number of loan settlements to be even higher over the coming six months, buoyed by strong conditions in the housing market and historically low interest rates,” he said.

”With interest rates sitting at historical lows and lenders competing hard for new mortgage customers, I am confident that we can improve on these results.”

Mortgage choice wrote $6.2 billion worth of housing loan approvals in the period, up from $5.1 billion in the previous corresponding period.

Its loan book grew 4.4 per cent to $46.4 billion.

Mr Russell said while job cuts forecast for the auto industry and Qantas made consumer sentiment fragile, demand for home loans remained strong.

”A lender panel has an insatiable appetite at the moment to write mortgages,” he said.

”Even if there is a rate rise in the foreseeable future …. we’d suggest that there are enough positives strengths in the market to continue to fuel the housing market.”

Mortgage Choice has also benefited from increased upfront and trailing commissions from Macquarie Bank in November.

11:23am:James Packer’s Crown Resorts is one step away from a one-off cash injection of $US64 million ($71 million) and then ongoing dividends from Melco Crown, after the board of its Macau joint venture approved the special dividend and an ongoing distribution policy overnight.

The payment of the special dividend must now be approved by Melco’s shareholders. Crown and Lawrence Ho, the son of Macau casino mogul Stanley Ho, both hold a 33.6 per cent stake each in Melco.

In a statement to the market on Wednesday Crown reiterated that the Australian company’s board will review its own dividend policy after assessing the effect of the new Melco dividend policy and the special dividend.

“Any such review will be completed prior to Crown announcing its full year results in August 2014,” the company said.

Melco has proposed a special dividend representing US11.47¢ a share. Crown’s share of the special dividend would be about $71 million.

11:11am: Japanese stocks have opened sharply lower, after the yen gained amid concern about growth in China and US data showed slower home-price growth and weaker consumer confidence.

The Nikkei declined 1 per cent to 14,899.63 after yesterday closing above 15,000 for the first time this month. The yen advanced 0.3 per cent against the US dollar yesterday as China’s currency and stocks slumped amid concern the nation’s growth is slowing.

‘‘Investors are poised to sell to take profit as the US economic outlook worsened a bit and we saw a pause in the yen’s weakness,’’ says Hiroichi Nishi, an equities manager at SMBC Nikko Securities. ‘‘The market is likely to retreat today after arbitrage buying sent the Nikkei above 15,000 yesterday.’’

11:08am:Casino company Donaco International, which is run by the two nephews of Malaysian gambling magnate KT Lim, has announced it will spin off its technology business iSentric into a separately listed company.

Donaco chief executive Joey Lim said move would allow iSentric, which was bought in June 2013, to “pursue its own growth path in the rapidly evolving m-commerce space.”

“The transaction will also confirm Donaco as a pure play entertainment and leisure business, tapping the huge demand for gaming services from the expanding middle class in Asia,” Mr Lim said.

Donaco’s core business is the operation of a casino in the Lao Cai region of Northern Vietnam. The company is mid-way through a redevelopment of the casino, which will add a new 428-room hotel.

The company reported an 80 per cent increase in revenue to $12.9 million in the six months ended December 31. Net profit rose 9 per cent to $3.0 million in the period.

11:01am:BC Iron’s simple business model has continued to deliver strong results, as the iron ore exporter revealed a near tenfold improvement in half-year profits.

Improved iron ore prices and higher exports have helped BC improve underlying profits from $7.73 million in the first half of fiscal 2013 to $70.3 million today.

The half year profit was better than the $65 million profit that UBS had expected and rose to $70.6 million on a statutory profit basis.

The company has been a consistent payer of dividends in recent years, and that has continued on Wednesday with a 17¢ fully franked interim payout to shareholders.

The company has a longer-term goal of setting a regular dividend payout ratio of between 30 per cent and 50 per cent.

The company exports its iron ore under a joint venture partnership with Fortescue Metals.

BC digs up the ore then simply trucks it over to Fortescue for transport and sale to customers.

10:59am:SydneyAirport has forecast it will increase its distributions to shareholders by 4.4 per cent in the current financial year after reporting a 7.3 per cent rise in full-year EBITDA to $910 million in 2013.

The EBITDA improvement outpaced international passenger growth of 4.1 per cent, with revenue and yields growing as a result of commercial expansion. It was also higher than analyst consensus of $877 million before the result.

Sydney Airport has made a full-year distribution of 22.5¢ per security which was fully covered by operating receipts and has given new guidance for a distribution of 23.5¢ in the current year.

“This guidance is underpinned by our continued growth in operational performance and distributable cash, as well as the business commitment towards growing investor distributions,” the airport operator said. “It is subject to external shocks to the aviation industry and material changes to forecast assumptions.”

Sydney Airport noted the Australian government had indicated it expected to make a decision on the site of a second airport in the current term. The company has the first right of refusal.

Sydney Airport said it had “ample” unused capacity at Kingsford-Smith throughout the day, with average slot usage at 65 per cent in 2013.

10:51am: Details have come to light of the heated fall-out between the co-founder of the world’s biggest bond fund Bill Gross and the outgoing chief executive slated to one day replace him.

The Wall Street Journal reports that last June, Gross, who co-founded Pimco in 1971, openly argued with Mohamed El-Erian, Pimco’s chief executive—something employees say they rarely had seen.

“I have a 41-year track record of investing excellence,” Gross told El-Erian, according to the two witnesses. “What do you have?” The Wall Street Journal reported.

“I’m tired of cleaning up your shit,” El-Erian responded, referring to conduct by Gross that he felt was hurting Pimco, these two people recall.

The heated exchange came at a time of immense pressure at Pimco with both Gross accused of misjudging the impact of the Federal Reserve’s decision to eventually taper its $US85 billion a month in bond purchases.

Pimco had record redemptions totaling an estimated $US41.1 billion last year in the $237 billion Total Return Fund, which trailed 64 per cent of peers and fell 1.9 per cent, its biggest loss since 1994, Bloomberg reported.

‘I’m tred of cleaning up your shit’ … Mohamed El-Erian is reported to have said to Bill Gross. Photo: Virginia Star

10:48am:Engineering group WorleyParsons signalled it was considering a restructure as it reported a 27 per cent fall in first-half net profit to $119.8 million and cut more than 500 jobs.

WorleyParsons’ chief executive Andrew Wood said the company was undertaking an “in-depth review” to drive future earnings growth by improving services to customers and offering “more competitive value”.

“This is well under way and we will advise more details once it is complete,” Mr Wood said.

WorleyParsons will take $13.6 million in restructuring costs in the first half after cutting more than 500 jobs from “overhead roles”.

The company will pay an interim dividend of 34¢ per share, 25 per cent franked, compared to 41.5¢ a year earlier.

The company warned investors in November that 2014 profits would be lower than expected, cutting its full year guidance from “increased earnings” on 2013’s reported net profit of $322 million to a new range of between $260 million to $300 million.

First half underlying net profits after tax were $100.7 million, down 35 per cent on a year earlier but in line with analysts’ revised expectations.

Profits dropped in WorleyParsons’ three operating divisions – hydrocarbons; minerals, metals and chemicals; and infrastructure – as projects were cancelled or postponed.

Mr Wood reiterated the group’s current profits guidance for 2014, arguing cost cutting and recent contract awards should position the company for “medium term growth.”

Investors responded to the announcement by bidding the stock up 5.9 per cent to $16.41.

10:42am: Shares in Billabong have resumed trading this morning and are down 11.5 per cent to 65.5 cents after the company announced it had raised $19 million from institutional investors at 63 cents per share.

That represented an uptake of 95 per cent among eligible large investors, said the company.

The retail component of the planned $50 million total raising will take place from February 27 to March 18.

Shares last traded on Friday, when they closed 22 per cent higher for the day to 74 cents.

10:33am:Chinese stocks have slid the most in eight months, but big investors are still doubtful if now is the time to buy.

The Shanghai Composite Index declined 2 per cent yesterday, extending its four-day retreat to 5.1 per cent, the largest since June.

The slump, which came amid speculation a weaker property market and falling yuan will curb corporate earnings, sent valuations on the Chinese benchmark index to 8 times estimated earnings, a 24 per cent discount to the MSCI Emerging Markets Index, according to Bloomberg.

“We’ve said to be extremely careful, in taking advantage of weaker valuations, because valuations can become weaker,” said Quincy Krosby, a market strategist for Prudential Financial. “We also want to hear what the government’s plans are in terms of any targeted stimulus, and we’re also watching the currency.”

The yuan has fallen about 1 per cent against the US dollar over the past week – a big hit for the regulated currency which has been appreciating gradually for years.

China’s Industrial Bank said yesterday it will delay loans for property projects until the end of March, fuelling speculation that a weaker housing market will erode demand for everything from electric appliances to cars.

“We’ve had an underweight projection for China for some time based on what we feel was a slower macro environment,” said Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Capital Management. “We think that the situation will improve eventually, but at this point it’s too early to step in and buy.”

On the way down .. the Shanghai Composite has been under pressure for years.

10:25am:Early gains in the big four banks have outweighed some sharp falls among the major miners, with the ASX 200 and All Ords indices trading 7 points higher.

Westpac and NAB are the best of teh banks, up 0.7 per cent, while QBE has advanced 1.8 per cent.

Wesfarmers and Woolworths are both up, as is Woodside.

Sydney Airport is up 1.7 per cent after releasing annual profits.

BHP is 1.2 per cent lower, while Rio is down 1.6 per cent and Fortescue 1.9 per cent amid investor worries around China.

Westfield Group is a major early drag on the market after reporting a fall in full-year profit in 2013.

10:13am: Troubled Mt Gox, once the world’s biggest bitcoin exchange, abruptly stopped trading yesterday and its chief executive says the business is at “a turning point,” sparking concerns about the future of the unregulated virtual currency.

Several other digital currency exchanges and prominent early-stage investors in bitcoin responded with forceful statements in an attempt to reassure investors of both bitcoin’s viability and their own security protocols.

The website of Mt Gox suddenly went dark on Tuesday with no explanation, and the company’s Tokyo office was empty – the only activity was outside, where a handful of protesters said they had lost money investing in the virtual currency.

Hours later, Mt Gox CEO Mark Karpeles told Reuters in an email: “We should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can’t tell much more for now as this also involves other parties.” He did not elaborate on the details or give his location.

The company’s shutdown is rumored to be caused by a “hack” or “security breach” that resulted in a loss up to 744,000 bitcoin, or about $US400 million (based on yesterday’s wildly fluctuating bitcoin rate). That would be about 6 per cent of the Bitcoin in circulation.

Magic The Gathering Online Exchange no more.

10:08am:Wotif.com has reported an 18 per cent fall in first-half earnings to $22.6 million, at the top end of its guidance issued in December.

The online travel group said the fall in earnings was primarily related to its increased spending on marketing.

Wotif reported record revenue of $75.8 million in the first half, up 3.5 per cent from last year, due to increased commission margins and continued growth in its flights business.

Total transaction values in its core accommodation business fell by 6 per cent to $501 million but flights transactions rose by 44 per cent to $90.8 million.

The company has declared a 10¢ a share interim dividend, in line with Bloomberg consensus estimates, but down from 11.5¢ at this time last year.

The stock is down 1.4 per cent in early trading.

9:59am: There’s been a lot of focus on emerging markets and the pressure on most of these countries to lift rates as the Fed’s taper of stimulus prompts investors to repatriate funds to developed markets.

Brazil, for example, is expected to lift rates yet again overnight, to 10.75 per cent from currently 10.5 per cent, in a move to counteract asset outflows and strengthen the real, which is down nearly 16 per cent over the past 12 months. Turkey and South Africa are other countries that had to lift their rates.

However, as we’ve mentioned before, not all emerging markets are under external pressure to tighten their monetary policy. Hungary cut rates to a record low last week to bolster the economy. And just on Monday, the Bank of Israel lowered its base lending rate by 25 basis points to 0.75 percentage points, catching markets by surprise.

The Bank of Israel cited the weakness of the US dollar against the shekel and slow economies in the United States and Europe, two of Israel’s biggest export markets, for its decision to take rates to GFC lows.

Even as they were taken by surprise by the rate cut, economists said it was likely to be a one-time event.

“In our view, this is very likely to be the last cut in this cycle unless there is a serious decline in inflation and growth from this point,” said Daniel Hewitt, a senior emerging market economist at Barclays. “We expect the BOI to remain on hold over the next year and for the next move to be a hike.”

Defying global trends, the Israeli shekel has been one of the best performers against the US dollar over the past year.

9:47am:Energy retailer and power generator AGL has posted a sharply lower interim profit, hit by unseasonably warm weather and discounting.

In the December half, net profit fell 27.1 per cent to $261 million.

Stripping out the impact of futures contract valuations, the underlying net profit fell a more modest 11.4 per cent to $242 million.

Earnings a share dropped 28.2 per cent to 46.9c. The interim dividend has been held steady at 30c a share.

AGL said it reconfirmed year to June guidance of a net profit of $560-$610 million. Most analysts have pencilled in a profit forecast unchanged from the previous year at $600-610 million.

A return to more normal weather patterns and declining customer “churn”, where customers aggressively switch energy retailer, should help margins revive, it said. Recently, Origin Energy flagged an expectation of slowing discounting in the marketplace, which AGL appears to have supported with expectation of declining customer churn.

AGL described the interim earnings as a “solid result in a difficult operating environment“.

9:35am: Packaging company Pact Group has confirmed its full-year prospectus forecasts despite posting flat sales and profits in the six months ending December.

Net profit before significant items slipped 4 per cent to $21.7 million and Pact posted a bottom line loss of $2 million after booking $26.2 million in one-off costs associated with its $1.7 billion initial public offer in December.

Revenues were flat, rising just 0.2 per cent to $567.6 million, after the loss of volumes from a major customer in the second half offset higher prices in Australia and 3.4 per cent sales growth offshore.

EBITDA (before one-off costs) rose 0.4 per cent to $99.6 million and Pact’s chairman, Raphael Geminder, said the group was on track to deliver full year EBITDA of $196.7 million, or $201.9 million on a proforma basis, in line with prospectus forecasts.

Mr Geminder sold 60 per cent of his stake in the plastic and steel packaging manufacturer when Pact raised $649 million through the offer of 170.7 million shares at $3.80 a share in December. The shares have never traded above their issue price and are now trading at $3.56, compared with a December low of $3.20.

No interim dividend was declared, but directors reiterated their intention to pay a 9.5¢ a share dividend in October.

9:29am: Here’s a list of companies reporting today:

Abacus Property

AGL Energy

BC Iron

Corporate Travel Mgt

Flight Centre

Henderson

IRESS

Lend Lease

Mesoblast

Mortgage Choice

Silex Systems

Sunland Group

Sydney Airport

Tox Free Solutions

Virtus Health

Westfield Group

Westfield Retail Trust

Whitehaven Coal

Wotif.com

9:24am:Lend Lease has delivered a first-half profit of $251.6 million, down 16.4 per cent on the first half of 2013.

The property giant will pay an interim dividend of 22¢ for the 2014 first half, the same amount it paid out in the 2013 first half.

Chief executive Steve McCann said the outlook was positive and the company’s strategy was on track.

“Our development business is in a strong position to leverage positive trends in the residential sector and our construction business has proved resilient, despite more challenging conditions around the globe,” he said.

“Forward sales in our residential development business and embedded returns in our pipeline of opportunities clearly underpin our earnings visibility over the next three years.”

9:22am: The Westfield Group and the Westfield Retail Trust will not change the terms of the restructure announced in Decmeber.

At the full year results, joint chief executive Peter Lowy said the transaction would move ahead on the terms announced on December 4.

The $22.1 billion Westfield Group has delivered an after tax profit of $1.6 billion for the full 2013 year, down 6.7 per cent on 2012.

However, funds from operations (FFO) per security, one of the key metrics, rose 2.3 per cent to a target of 66.51¢, the company said.

Joint chief executives Peter and Steven Lowy said the portfolio had delivered a solid performance.

“Our business is in a strong position in each of the markets in which we operate,” they said.

The group forecast growth of 3.2 per cent in FFO for 2014 to 68.6¢ per security and distribution of 52.5¢ per security, up 3 per cent.

Westfield did note an improvement in specialty sales in the Australian malls, up 3 per cent in December quarter, and up again in January 2014, 4 per cent ahead of 2013.

Steven Lowy said the last four months of trading in the Australian malls had been the best period for four years.

9:19am:Flight Centre has broken another record after posting a 22 per cent rise in first-half net profit to $111 million as Australians’ love affair with overseas travel continued unabated.

Australia’s largest travel agency will pay a 55 cent-a-share dividend on April 17, up from 46 cents in the prior half.

It takes the total dividend payout since Flight Centre listed in 1995 to more than $1 billion.

Revenue rose 15 per cent to $1.1 billion for the half.

Flight Centre reported a 20 per cent rise in profit before tax to $155 million for the six months to December, which included a $9 million one-off gain from its wholesale business.

Flight Centre managing director Graham Turner said its Australia business had been its key contributor to overall earnings, although it had experienced growth in its overseas earnings.

Fluctuations in the value of the dollar had not stopped Australians from travelling overseas en masse. Its three largest businesses in Australia, the UK and the US generated almost 80 per cent of its total transaction value – the price at which goods and services are sold – in the first half.

9:07am: Local stocks are poised to open slightly lower as Wall Street heads down, although a raft of pre-open earnings results will set the tone for the day’s trading.

Here’s what you need2know:

SPI futures down 9 points at 5401 at 9am AEST

AUD at 90.19 US cents at 9am AEST

On Wall St, SP500-0.13%, Dow Jones -0.17%, Nasdaq -0.13%

In Europe, Euro Stoxx 50 +0.01%, FTSE100 -0.52%, CAC -0.1%, DAX -0.1%

Spot gold up $US5.92 to $US1342.89 an ounce

Brent oil slides 78 US cents to $US109.86 per barrel

Iron ore down just under 1 per cent to $119.10 per tonne

What’s on today in economics:

Preliminary construction work done, fourth quarter

Reserve Bank of Australia governor speaks in Melbourne

9:07am: Good morning and welcome to the Markets Live blog for Tuesday.

Your editors today are Jens Meyer and Patrick Commins.

This blog is not intended as investment advice.

BusinessDay with wires.

Featured comment:

Japanese government decision to restart the country’s 48 nuclear reactors, after two years of inactivity is good news for Uranium miners..

At the same time, does it reduce demand for LNG ? I think so. Love to hear opinions on this news.

Commenter
Ronn

Location

Sydney

Date and time

February 26, 2014, 12:50PM

has the housing bubble burst yet?

Commenter
Hugo

Location

Date and time

February 26, 2014, 9:21AM
- No but the sky is falling chicken little!
  
  Commenter
  Your boring
  
  Location
  
  Date and time
  
  February 26, 2014, 9:53AM
- POP heard in Prahran.
  
  Commenter
  no banks .. no party!
  
  Location
  
  Date and time
  
  February 26, 2014, 9:55AM
- Colleague sold his investment unit in Brisbane bought a few years ago for a 60k loss, or about 18%, and still has to pay the loss back to the bank. On the other side my sister is actively seeking out an investment property ‘because with the number of people they’re letting into this country you can’t lose.’
  
  Commenter
  Dave
  
  Location
  
  Brisvegas
  
  Date and time
  
  February 26, 2014, 10:02AM
- RE agents tell me their phones have stopped ringing…….
  
  Commenter
  linux
  
  Location
  
  Date and time
  
  February 26, 2014, 10:07AM
- Pop heard from no banks.
  
  Housing boom!
  
  Commenter
  Allan
  
  Location
  
  Prahran
  
  Date and time
  
  February 26, 2014, 10:10AM
- Hugo, your comment is getting a bit annoying but what it lacks in intelligence it makes up in consistency….
  
  Commenter
  Mack
  
  Location
  
  Sydney
  
  Date and time
  
  February 26, 2014, 10:22AM
- grow up.
  
  Commenter
  J.
  
  Location
  
  Syd.
  
  Date and time
  
  February 26, 2014, 10:33AM
- Still booming in Perth CBD !! No resourses NO Party
  
  Commenter
  Sullys Foot is Down
  
  Location
  
  South Freo
  
  Date and time
  
  February 26, 2014, 10:54AM
- @Dave,
  
  Typical property owners only factor in the supply of property and demand for it. They usually don’t (have to) consider the other supply issues – the supply of $’s the cost of them. So many thought a LNP govt assured an economic recovery was just around the corner. In case you haven’t noticed, just around the corner is the reality of rising unemployment (Qantas, car manufacturing and it’s suppliers.) so the other factor will be the supply of a job and the $ they pay.
  
  So, where are the jobs?
  
  For the optimistic – our $ will fall to facilitate the LNP govt creating 1M jobs.
  For the realists – unemployment and under employment increase and put a lid rents and property values.
  For the overly optimistic – (in case optimism fails) those flocking to our shores will bring not their own jobs and employment for all who seek it.
  
  Commenter
  nolongerconfused
  
  Location
  
  Date and time
  
  February 26, 2014, 11:11AM