Markets Live: ASX brightens up

Less than 24 hours after Gary Cohn, the former Goldman Sachs executive and opponent of the tariffs planned by the White House, announced his plan to quit as Mr Trump's top economic adviser, the EU floated proposed duties on a range of US goods that could include Harley-Davidson motorcycles, Levi jeans and bourbon.

While rising trade tension have soured the broad backdrop, the reaction so far has been modest. The Canadian dollar and Mexico peso — currencies exposed to the potential collapse of the North American Free Trade Agreement — have weakened, as have the shares of major exporters such as Boeing and Caterpillar.

Global car markers and steel producers have also been sold by rattled investors.

The risk to corporate profits from a series of retaliatory tariffs imposed by the world's biggest economic powers is hard to estimate, but analysts say a weaker global economy, accompanied by more inflationary pressures, may well extend the correction that shook markets at the start of February.

"The important issue is whether or not Cohn's departure will mark a radical shift in US trade and economic policies," said Stephen Gallo, European head of foreign exchange strategy at the Bank of Montreal. "If it does, it could have massive implications for global growth."

Read the full Financial Times story here

They noted that, after running up to around $US380 a tonne on news of US tariffs, investors appear to be wondering how high steel prices can rise.

Investors seem to be weighing up the impact of lifting US steel utilisation rates which at 79 per cent are at the highest level since early 2015 and possible demand destruction, the analysts added.

"While we expect some short-term volatility as markets assess the impact of proposed steel tariffs, we remain comfortable with the long-term outlook," they said.

"We also think the market has yet to pay up for growth potential within the ASEAN business," the analysts added.

They have a buy rating on BlueScope and lifted their price target to $18.75 from a previous level of $18.10. Shares rose 1 per cent to $16 on Thursday.

The trade deficit recorded in December was revised to $1.1 billion.

The trade balance was in surplus for seven consecutive months in 2017 before it fell into deficit in December.

The Australian dollar rose to US78.35¢ after the release of the data, up from US78.26¢.

On a quarter-on-quarter basis, GDP rose a revised 0.4 per cent in real, price-adjusted terms. That compared with the initial reading of 0.1 per cent growth and economists' median estimate of a 0.2 per cent gain.

- Reuters

Broadly, Australia's major banks face a deteriorating revenue growth outlook and increased political and regulatory scrutiny, with little room to deliver a positive surprise on expenses, loan losses, capital management or dividends, the broker said.

However, ANZ's ROE, EPS and dividend outlook is more attractive than peers, the broker said, as it also noted downside risk to ANZ's margins in retail and institutional banking.

Morgan Stanley forecasts ANZ's revenue will fall around 2 per cent this year given a net $450 million headwind from asset sales and non-recurring items and a 2.5 per cent drag from lower markets income.

Underlying income growth should improve to around 3 per cent to 4 per cent in fiscal year 2019 but revenue from Asian retail and wealth operations will drop a further $750 million and forecasts rely on a moderation of Institutional margin pressure, the broker added.

ANZ shares were up 0.6 per cent at $28.38.

The findings, released on International Women's Day, show that the number of top 200 companies which have no women around the board table now stands at five, down from 14 recorded this time last year.

Galaxy Resources and Beach Energy both left the list earlier this year, but Pilbara Minerals has been named, alongside ARB Corporation, Speedcast International, Ardent Leisure and TPG Telecom, after entering the ASX 200 in December.

AICD Chairman Elizabeth Proust says the result marks the highest rate of female appointments to ASX 200 boards since the AICD began tracking gender diversity statistics.

Across the ASX 200, a total of 74 companies - such as Fortescue Metals Group, Medibank Private, Nine Entertainment and Woolworths - have reached or exceeded the 30 per cent representation target.

US stocks ended mostly lower but off their worst levels overnight after the White House said there would be carve-outs for Mexico, Canada and others, based on national security grounds.

Australian stocks tumbled yesterday after the resignation of key White House economic adviser Gary Cohn ratcheted up concerns that potential US metal tariffs will lead to a full-blown trade war.

Banks took the brunt of the selling yesterday but took back some of those losses on Thursday, with CBA up 0.7 per cent, NAB up 0.7 per cent, ANZ up 0.5 per cent, Westpac up 0.4 per cent and Macquarie higher by 1.3 per cent .

BlueScope Steel shares were up 1.8 per cent but metal extractors were broadly losing ground.

BHP fell 1.9 per cent, South32 lost 2.1 per cent, Newcrest traded down 0.8 per cent and Regis Resources fell 2.4 per cent.

"The problem for us as an industry is that we're not doing enough to actually advertise our industry to the students that are coming out. The banks are getting them, the accounting firms, the management consulting firms, they're getting in ahead of the funds management industry," said Catherine Allfrey of WaveStone Capital.

"They just don't know our industry exists; I don't think we've done enough to promote it."

The custodians of capital are showing a willingness to change. The asset consultants and super funds need to "ask the same questions that we ask about boards and management teams of their investment teams," said Jacqueline Fernley, a portfolio manager at Colonial First State Global Asset Management, in the core Australian equities team.

One industry super fund has already stepped up. Hesta is surveying 70 of its Australian and international investment managers about their gender diversity from the analyst level to the investment committee. Hesta sees diversity as an indicator of a well-run organisation more likely to drive results. That means beating the market.

Vesna Poljak reports

"There are potential carve outs for Mexico and Canada based on national security, and possibly other countries as well based on that process," she said.

"That would be a case-by-case and country-by-country basis, but it would be determined whether or not there would be a national security exemption."

When George W Bush imposed tariffs on steel in 2002, Mexico and Canada were spared due to them being signatories to the North American Free Trade Agreement.

Australia has been arguing for an exemption on national security grounds and on the basis it is a strong defence ally.

Earlier this week, trade hawk Peter Navarro, director of the White House's National Trade Council, said while there would be no country exemptions, there was scope for exempting individual businesses from the 25 per cent levy on steel and 10 per cent levy on aluminium.

Phillip Coorey reports

There are still too many unanswered questions to think it safe to increase exposures to risk assets with any real conviction, and my view that Monday's 1.1% rally in the S&P 500 was "unconvincing" is one that I continue to hold here.

The overnight session, and the effective lead for Asian markets today is clearly less negative than feared.

There is little inspiration to be taken from the moves in the S&P 500 sub-sectors where financials, materials and energy are all lower by 0.3% or more and most of the index support has come from US tech.

Energy has been the noticeable underperformer and this is clearly a reflection of a 2% fall in crude, with the barrel falling into the low $61 area.

If S&P 500 implied volatility is telling us anything it is that traders are not convinced this trade saga morphs out into a genuine vol event like we saw in 2002.

That said, let's keep an eye out for the formal announcement, which is due either tonight or Friday. This should be interesting as the facts are what the market craves.

The focus also comes at a time when the market has to navigate itself through tonight's (23:45 aedt) ECB meeting and tomorrows US payrolls and wage data.

One could argue the market will be eyeing China trade data. The fact economists are expecting a trade deficit of $5.7 billion is interesting.

Perhaps it is not so much about the absolutely level of China's trade data but whether their $21.8 billion trade surplus with the US heads lower and appeases Donald Trump and the likes of Wilbur Ross and Peter Navarro.

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