4:56pm:A relief rally in bank stocks following the release of the final report from the Financial System Inquiry, and a falling currency, pushed the Australian share market higher on Monday despite continued weakness in the resources sector after the oil price sank again.

The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each gained 0.7 per cent, on Monday to 5372.7 points and 5348.9 points respectively with the big four banks leading the charge.

In China on Monday, National Bureau of Statistics trade data showed that country’s trade surplus jumped to a record $US54.5 billion in November, roundly beating estimates for a $US43.95 billion surplus, as imports fell sharply while exports inched higher.

When the local market closed the Shanghai Composite Index peaked above 3000 points for the first time since 2011. A positive session around Asia added to the upbeat sentiment on the local bourse.

“The financial system inquiry released on Sunday was not as demanding in its recommendations to increase their capital requirements as many had expected,” Wilson Asset Management senior equity analyst and dealer Martin Hickson said.

“Following the release of the interim report in July some brokers had been estimating the big four banks could need to hold an additional $30 billion in capital, but initial estimates doing the rounds on Monday put that figure closer to $20 billion,” Mr Hickson said.

Any increase in the safety net banks are required to keep on their balance sheet will be dependent on the government accepting the inquiry’s recommendations. On Sunday, Federal Treasurer Joe Hockey stressed that he is confident Australian banks are already well capitalised and said he will consult with the Australian Prudential Regulation Authority.

While all of the big four banks posted strong gains on Monday, all remain below peaks seen earlier in the year.

Findex chief investment officer Kieran Canavan said that regardless of the outcome of the financial system inquiry he remains nervous about bank share prices in the year ahead.

“We are concerned that the international Basel III regulatory reforms will put pressure on bank dividend payouts,” Mr Canavan said.

4:46pm: Fun fact for the bulls: the “decennial cycle” points to a big year for the US sharemarket next year!

This from the analysts from RBC Capital Markets, who are throwing together a few “sundries” ahead of their big outlook piece next week:

“Markets are no strangers to cycles: from the monetary cycle to the Presidential cycle to the decennial cycle to Kondrateif waves. Heading into 2015, we examined the Dow Jones Industrial Index data from 1900 and teased out the decennial cycle. We also made sure to control for the long term upside bias. The results, we think, were surprisingly bullish.

“There are three noteworthy observations. First, the beginning half of a decade is generally less bullish than the second half. Next and most importantly, it is the 5th year where you generally see the strongest return.

“Finally, after the strong surge in the 5^th year of the decade, you generally see two years of below average returns. Focusing more closely on the 5^th year, our study suggests the variance in the returns is actually relatively low at 3.9% compared with 4.6% for the entire set.

“Even if the most bullish and most bearish outliers are taken from the results, you still end up with an average gain of 22.2% with a full 9 cycles seeing returns above the average 7.3% return for any given year.”

Years that end with '5' tend to be good ones for the US sharemarket - no bull. Source: RBC Capital Markets

4:35pm: And here are today's winners and losers, with Qantas flying high above the rest. And no, we never grow tired of aeronautical puns - it just comes too easy. See posts at 9:13 and 1:29 for more on the Flying Kanga.

Ten Network added a couple of cents, enough for a 13 per cent gain, as traders wax and wane on the prospects of a takeover, while analysts idly speculate on how long it will take for the company to go bust (see 10:30 post).

Skilled Group had a day to forget, plunging 16 per cent. Not entirely clear why as yet (see post at 12:32), but expect some announcement in the coming days.

4:25pm:Banks have propelled the sharemarket to a strong gain to start the trading week, as the release of the Murray Report removed much of the uncertainty that had been hanging over the sector.

The ASX 200 lifted 37 points, or 0.7 per cent, to 5372.7, while the All Ords gained 35 points to 5348.9.

NAB was the best of the Big Four, adding 1.8 per cent, while CBA and ANZ gained 0.9 per cent, and Westpac 1 per cent. Regional banks - which analysts said stood to benefit from the inquiry's recommendations around leveling the playing field - actually fell. Bank of Queensland dropped 1.8 per cent and Bendigo & Adelaide Bank 0.2 per cent.

CSL had a strong day, up 2.9 per cent.

Resources were a drag, as BHP Billiton fell 1.1 per cent and Woodside 0.9 per cent.

Coca-Cola Amatil retreated 1.7 per cent as it announced further job cuts and revealed trading conditions remain weak.

4:04pm:Petrol prices are near 30-month lows but sliding oil prices could take them down another 10 cents per litre before Christmas, according to analysts.

The prediction came as Brent crude oil fell as much as 2 per cent today, taking it close to five-year lows, after Morgan Stanley became the latest investment bank to cut its price forecast for oil - with a bear-case scenario of just $US43 a barrel for 2015.

Figures from the Australian Institute of Petroleum showed that the national average Australian price of petrol fell to 136.2 cents a litre in the week to December 7, reported Commsec.

"The Australian petrol price is already at a 2½-year low but it has further to fall," said Commsec. "In fact the Singapore gasoline price is at 5-year lows with the domestic wholesale (terminal gate) price at 4-year lows. The bottom-line is that consumers have additional spending power at just the right time for retailers – the all-important Christmas and post-Christmas sales period."

Commsec chief economist Craig James said the national average Australian price of petrol would fall to between $1.30 and $1.25 cents per litre.

Average unleaded petrol prices in Sydney fell by 7.6 cents to 132.3 cents per litre while in Melbourne they fell by 2 cents per litre to 126.2 cents per litre. Melbourne prices have fallen for the past 50 days.

Commsec also stressed that low petrol prices would help to keep interest rates at 2.5 per cent until August 2015, when there would be a move upwards.

Oil prices have dropped by more than a dollar today to near their lowest levels since 2009 after Morgan Stanley cut its price forecast for Brent crude, saying oversupply will likely peak next year with OPEC deciding not to cut output.

The fall in the oil price is trickling down to the bowser. Photo: AP

3:50pm: Former Treasurer Peter Costello has added his voice to calls for cuts in interest rates to stimulate a flagging economy as China’s leadership prepares to further ratchet down Chinese growth projections.

Costello said the case for reductions in rates was becoming more compelling amid signs of a slowing Australian economy and slackening Chinese demand for resources.

Costello also urged the government to avoid new taxes and focus on getting expenditures down. He did not single out specific taxing measures, but it was clear he was referring to Prime Minister Tony Abbott’s paid parental leave scheme.

“There is, in my view, no case for increasing taxes and the government should continue with its efforts to get the budget on to a sustainable basis by reining in expenditures,’’ he said.

“The easiest way to restrain expenditures is by avoiding new commitments. This meant not taking anything away from anybody, you’re just not adding to it.’’

Peter Costello calls for rate and budget cuts. Photo: Josh Robenstone

3:41pm: The Chinese sharemarket is up more than 40 per cent in local currency terms in 2014 (it’s up 49 per cent in Aussie dollars), with half of those gains made in the past month alone.

But don’t worry if you’ve missed this year’s rally, there could be plenty more to come, reckons AMP Capital’s head of dynamic asset allocation, Nader Naeimi.

“Within Asia and emerging markets, China continues to impress us the most from a risk/reward point of view,” writes Nader. “Despite the gains so far, Chinese shares remain cheap and monetary policy is becoming increasingly supportive”.

Naeimi, whose fund is up 10.1 per cent over the 11 months to the November, reckons the wide valuation gap between developed and emerging market equities should start to narrow in 2015.

“We have had a significant exposure to China A share market [and that] has been a strong source of value add for the Dynamic Markets Fund in 2014.”

Helping EM outperformance will be the “apparent shift” in monetary policy across several emerging economies, and in particular within Asia. He points out that EM and Asian equities have lagged their developed market counterparts since 2009/10 – a period where policy rates in the former regions were “generally raised to curtail inflationary pressures”.

“Falling commodity prices together with structural reform in selected counties have seen a sharp fall in inflationary pressures and paving the way for monetary easing,” Naeimi writes.

“With strong valuation support, an easier monetary policy setting is likely to lead to better performance from EM and in particular Asian equities. Of course, there are exceptions – within EM, Brazil and Russia still suffer from rising inflation and tight monetary policy and that suggests that EM investing should be done selectively.”

AMP Capital reckons there's plenty of legs in the China sharemarket bull.

3:31pm: It’s been a busy start to the week with Asia reacting to US jobs and a couple of releases from Japan and China, IG's Stan Shamu notes:

• With global central banks continuing to expand balance sheets and holding a huge number of assets, naturally investors are gravitating towards macroeconomic as an indication of where to invest.
• A very clear pattern at the moment is the divergence between the US dollar and its major global peers. This is (and is likely to continue to be) the most significant development in global markets, as the US continually reprices the timing of the first rate hike.
• Many analysts will now be expecting a hawkish shift in tone in next week’s Federal Reserve policy meeting, with a mid-2015 hike being a very realistic prospect. As a minimum, the market is likely to be pricing in the probability of the ‘considerable time’ reference being dropped.

Locally it’s been all about the financials today with the big banks all putting on over 1 per cent.

"The weekend Murray inquiry has worked out to be a net positive for Australian banks as the amount of capital speculated that will need to be raised seems fairly achievable, with the end result being a more stable banking sector," Shamu adds.

"The Murray Inquiry had been a source of uncertainty for the banks in past weeks and with this weight lifted, there could be room for further gains."

3:24pm: Just when you thought things couldn’t get any worse…

A "highly serious incursion" of red fire ants at Port Botany could cost the economy billions if eradication efforts are not successful, the Department of Primary Industries has warned.

The colony, which is thought to have arrived on a cargo ship, originated in Argentina, according to genetic tests. An emergency response team of 25 biosecurity and pest experts and three odour detection dogs have been working around the clock for almost a week.

The ants are "highly aggressive" and "a serious exotic pest that can inflict painful bites on people, pets and livestock", the NSW Minister for Primary Industries, Katrina Hodgkinson, said.

Invasive Species Council chief executive Andrew Cox said the outbreak poses a threat to the community if it is not contained. "It's going to be a disaster for the environment, and it's going to transform our way of life," he said. Unless the ants were eradicated immediately, Mr Cox said they could spread to other parts of the country. "They will take over open areas, grassy areas, and you won't be able to walk around with thongs anymore for large parts of Australia."

Read more.

Justin Gibson, senior handler BioSecurity Queensland, holds a red fire ant sample.

3:03pm:Societe Generale has suspended its involvement in financing Gina Hancock's $10 billion coal mine, rail and port project in Queensland, which the billionaire is developing together with  India's GVK conglomerate.

The French bank's decision is the latest twist for a project originally scheduled to produce coal from 2014, but which has suffered challenges from landowners and green groups, and been complicated by coal prices falling to more than five-year lows.

Developer GVK Hancock said that before seeking financing it is focused on finalising approvals for the project's Alpha coal mine in the Galilee Basin in Queensland, fighting legal disputes against approvals already won, and securing supply agreements.

"We have been working with Societe Generale on a specific element of the financing arrangements for our projects, but are not currently working on that specific work package and as such do not require their services at this time," GVK Hancock said in an emailed statement.

The French bank said on Twitter on Friday that, "In the context of the Alpha coal project's delay, Societe Generale has decided, in agreement with GVK-Hancock, to suspend its mandate. The bank has therefore no involvement with the project."

 

GVK's coal mine, rail and port project has been troubled by delays. Photo: Glenn Hunt

2:36pm: Meanwhile, markets around the region are mostly higher, with Tokyo unchanged after a downward GDP revision placed the country into a deeper recession, while Chinese markets continue their rally:

• Japan (Nikkei): flat
• Hong Kong: +0.4%
• Shanghai: +0.4%
• Taiwan: +0.05%
• Koea: -0.3%
• ASX200: +1%
• Singapore: +0.2%
• New Zealand: +0.1%

 

‘‘After digesting the positive US employment data and the weaker yen, the market could trade cautiously as it eyes the possibility of higher US interest rates,’’ says Shoji Hirakawa, chief equity strategist at Okasan Securities. ‘‘The consensus for US rate hikes is currently mid- next year, but that could begin to be brought earlier.’’

2:25pm: China's November trade data, released earlier today, suggest that both external and domestic demand softened last month, says Capital Economics China economist Julian Evans-Pritchard:

• The fall in headline (export) growth partly reflects the easing of distortions caused by the round-tripping of precious metals to avoid capital controls, which inflated the trade figures in previous months. That said, the magnitude of the fall suggests that underlying export growth has weakened too.
• Import growth fell even more sharply. The easing of round-tripping is likely to have played a role here too. And falling commodity prices, which will have weighed on the value of commodity imports, is almost certainly to blame as well. But the sharp fall also hints at a further cooling of domestic demand.
• Despite today’s data, we still expect exports to fair reasonably well going forward given that global growth looks set to continue to recover next year. In contrast, import growth is likely to remain weak given the ongoing structural slowdown in investment.

 

Growth in Chinese imports is expected to remain weak.

2:02pm:Veteran investment banker and now private investor David Kingston has slammed Quadrant Private Equity’s float of aged care operator Estia Health, calling it overpriced and opportunistic, and casting doubt on its profit forecasts.

Kingston, the founder of K Capital who used to run Rothschild’s investment banking division, said Quadrant cynically exploited investor interest in the aged care sector.

The $1 billion initial public offering on Friday was the third aged care operator to float this year after Japara Healthcare and Regis Healthcare, but it failed to live up to the hype. The stock fell 17.6 per cent on debut, making it the worst large float of the year. It's up 0.4 per cent at $4.76 today.

“The general expectation was this would come to the market in 2015 but with Regis and Japara trading so well it seems somewhat cynical that the IPO was expedited to exploit a market window,” he said.

Quadrant first invested in the Victoria-based operator Estia in July. It merged South Australian operator Padman Health Care and Queensland and NSW-based Cook Care in October.

“In round numbers the individual value of the three components was $500 million and became an IPO of over $1 billion,” Kingston told Fairfax Media. “There can be synergies but [increasing the value by $500m] is asking investors to believe in Santa Claus.”

After Japara listed with a market capitalisation of $525 million in April 2014, Regis was the second sector IPO with a $1.1 billion market value in October.

Kingston raised doubts over Estia’s ability to hit its 2015 earnings forecasts, on the basis of a number on a “anomalous” comparisons with Regis, which he described as the market leader in terms of quality and reputation.

Regis has 4719 operational places, compared to Estia’s 3613. Based on both companies’ prospectus forecasts for 2015-16, Regis is forecasting a sales to earnings before interest, tax, depreciation and amortisation margin of 20.3 per cent.

Estia’s forecasts suggest a sales to EBITDA margin of 23.7 per cent. “Estia are forecasting a far superior sales to EBITDA margin than the market leader Regis and also a much lower depreciation charge,” he said.

The float of aged care operator Estia Health has been slammed 'overpriced' and 'opportunistic'.

1:56pm: As those pesky asset consultants pile pressure on Vocation’s institutional shareholders past and present, lawyers are waiting to see how long it will be before fund managers look to shift the blame and back lawsuits against the embattled training company, report’s the AFR’s Street Talk columnists.

There is a strong feeling within equity capital markets that Vocation looms as a test case exploring the obligations of boards, investors, management, underwriters and lawyers in and around equity raisings.

Bankers and lawyers say Vocation’s $74 million institutional placement has already changed practices and made firms more cautious before backing deals.

Fund managers, too, reckon they’re asking more questions.

Vocation received a claim by shareholder John Webster as trustee for the Elcar Pty Ltd Super Fund Trust, which Vocation said it would defend vigorously. But unless there is some action from one of the big-name funds involved, the changes may prove to be short-lived.

Asset consultants are running around quizzing small-cap fund managers who bought into Vocation’s now infamous equity raising.

The consultants want to know why fundies thought Vocation was a good buy at $3.05 a share on September 10 and what sort of work they did around the training company’s valuation and potential regulatory risks.

Some reckon that pressure could prompt the fundies to turn up the heat against Vocation and its advisers, and use the courts to find out more about the robustness of their due diligence.

Vocation isn’t the first raising to lose money for investors and it will not be the last. But a 94 per cent drop in Vocation’s share price in less than three months warrants extra scrutiny, particularly given the company’s misjudgment of a regulatory review.

Fundies have done reasonably well backing equity capital markets deals this year.

Most placements, rights issues, initial public offerings and block trades have traded higher in the secondary market, despite the recent volatility, including large transactions for Transurban Group, AGL Energy and Healthscope.

Fundies have done reasonably well backing equity capital markets deals this year, Vocation's being a big exception. Source: AFR

1:29pm: Qantas chief executive Alan Joyce plans to see through a $2 billion cost-cutting program at Australia’s largest carrier, as the airline's shares soar on a profit upgrade, extending this quarter's gains to a thumping 70 per cent.

With shares more than doubling this year and its international unit set to post its first profit since 2011, Joyce says he’s got no plans to move.

‘‘I’m here to complete the job that I started,’’ he said on a media call today after forecasting the best half-year earnings in four years. ‘‘With the company turning the way it is, I’m very confident that my tenure - as long as the board and shareholders are comfortable with what I’m doing - will continue.’’

Joyce’s handling of 94-year-old Qantas has been criticised over the past year as it lost its investment-grade credit rating, posted $2.8 billion of losses, and started cutting 5000 jobs.

Independent senator Nick Xenophon has called for him to resign and Prime Minister Tony Abbott in March blamed management for losses as he ruled out providing the formerly state-owned carrier with a government debt guarantee.

The airline is looking healthier now and will benefit further as savings come through from a 23 per cent fall in fuel prices since October 1, said Michael Maughan, a portfolio manager at Tyndall Investment Management in Sydney.

‘‘They are on track or a bit ahead of plan on these transformation savings,’’ he said. ‘‘Given that they were upgrading earnings without a huge benefit from fuel in the period, it augurs well for the full year.’’

Qantas shares have soared 14.5 per cent to $2.405 today, after hitting a record-low 95.25 cents in December 2013 amid a market-share war with Virgin.

The airline is the best-performing stock this quarter on the ASX200, up more than 70 per cent since October 1, and the best-performing carrier outside the US with more than $US1 billion in revenues this year.

In for the long haul: Alan Joyce. Photo: Getty Images

1:19pm:China's trade surplus jumped to a record $US54.5 billion in November, well above estimates of $US43.95 billion, as imports dropped sharply while exports edged higher.

Imports fell 6.7 per cent year on year, disappointing predictions of a 3.8 per cent rise, while exports climbed 4.7 per cent (est: 8 per cent).

The Australian dollar fell about a third of a cent to 82.8 US cents, mainly because of the drop in imports, suggesting further slowing demand for Australian commodities.

12:58pm: With its exposure to the resources sector, Qube was collateral damage to the widespread selling of iron ore stocks the past few weeks, hitting long term lows of $2.06 last week before finding some buying support thanks to news on progress with a contested ‘inland port’ in western Sydney.

The good news has continued with broker Citi telling clients the recent selling has been overdone, arguing there is ‘‘too much value upside to join the hecklers’’.

It has upgraded Qube to a ‘‘buy’’ pointing not only to the agreement on the Moorebank terminal but also a New Zealand acquisition for its view, with a $2.62 price target.

‘‘We consider the concerns over iron ore to be overdone, and while we do not forecast the benefits of future uses of its around $350 million of capacity, we believe the business with high incremental returns will continue to deliver.’’

So far today its shares are ahead 3.7 per cent at $2.325.

Collateral damage ... Qube was sold off heavily ion the past weeks, due to its exposure to the resources sector. Photo: Nic Walker

12:43pm:Oil prices have dropped by more than a dollar to near their lowest levels since 2009 after Morgan Stanley cut its price forecast for Brent, saying oversupply will likely peak next year with OPEC deciding not to cut output.

"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015," Morgan Stanley said in a report.

Brent crude for January delivery dropped 2 per cent to a low of $US67.73 a barrel, near last week's trough of $US67.53 which was its weakest since October 2009. It's down 1.4 per cent at $US68.08.

Morgan Stanley slashed its 2015 base case forecast for Brent to $US70 from $US98 and for 2016 to $US88 from $US102. In its bear-case scenario, the bank sees the crude benchmark falling to a low of $US43 in the second quarter of next year.

Top oil exporter Saudi Arabia blocked calls from poorer members of the Organisation of the Petroleum Exporting Countries to reduce production at the group's meeting on November 27, fuelling a further slide in oil prices which have lost more than 40 per cent since June.

"With OPEC on the sidelines, oil prices face their greatest threat since 2009, but we expect a volatile 2015 rather than a one-way trade," Morgan Stanley said in its report.

US crude fell 96 cents to $US64.88 a barrel, after hitting a session low of $US64.63. West Texas Intermediate crude dropped to $US63.72 last week, its lowest since July 2009.

Last week, Saudi Arabia cut its monthly prices for crude it sells to the United States and Asia, a move that analysts say show it is stepping up its battle for market share.

Investors are also eyeing trade data from China during the day with further evidence of economic weakness in the world's No. 2 oil consumer likely to pile more pressure on prices.

Morgan Stanley expects peak oversupply in the second quarter of 2015. Photo: Greg Newington

12:32pm: The big banks' share prices have strengthened further, with NAB now up 2 per cent, Westpac 1.8 per cent, ANZ 1.5 per cent and CBA 1.3 per cent.

“You see these type of reactions sometimes before budgets, the government leaks information that it’s going to be an awful budget and then investors on the night, or households, go ‘it’s not as bad as what we thought it could be’,” explains Perpetual’s Matt Sherwood.

“The changes will make the banking sector more competitive but it’s not as onerous on the bank balance sheet as what the market was expecting.”

The report wasn't as helpful to regional banks, at least according to their share price movements so far today: Bank of Queensland is down 1.1 per cent, Suncorp is 0.4 per cent lower, while Bendigo & Adelaide Bank is 0.2 per cent up.

Still, early days.

Meanwhile, Qantas share have taken off following their earnings update, now 12.9 per cent up.

On the other end of the scale is labour-hire firm Skilled Group. The stock plummeted 18 per cent - it's biggest plunge in 13 years, says Bloomberg - and is now 15.2 per cent lower at $1.28. No obvious catalyst aside from a downgrade of the stock by UBS, to neutral from buy, with a price target of $1.64, so that's not exactly a damning report.

UBS cited rising unemployment, muted wage growth and the collapse in the oil price as factors weighing on Skilled's business and share price.

Indeed, the analyst community remain upbeat, at least for now: there are seven "buys", four "holds" and no "sells" on the stock.

11:57am: As the case builds for the Abbott government to get rid of a host of tax breaks that primarily benefit the rich, create distortions and increase financial risk, the question then becomes, how politically palatable is it?

The financial system inquiry report by former Commonwealth Bank chief executive David Murray calls for the examination of a raft of tax breaks that he says distorts borrowing and raises the risk of the financial system collapsing.

These include negative gearing, capital gains tax concessions, super concessions and dividend imputation.

Together, these tax breaks cost the federal budget hundreds of billions of dollars every year.

"We are struggling to find good reasons to keep these policies," Grattan Institute chief executive John Daley said. "They are resulting in a loss of money, primarily benefiting the wealthy, and counterproductive from a policy perspective."

He said negative gearing was a factor that was making property more expensive and reducing home ownership, while capital gains tax concessions were driving behaviour that favoured capital gains over income. "Half of the CGT concession goes to the top 2 per cent of taxpayers; it must be the worst-targeted tax concession in Australia," Mr Daley said.

While it may not be good policy, when Tony Abbott and Joe Hockey sit down to do their tax review, here's the political reality: There are 1.4 million people (voters) who negatively gear. There are millions of shareholders and self-managed super funds who rely on franking credits. And there are millions of wealthy Australians taking advantage of capital gains tax concessions and super concessions.

Bank of America-Merrill Lynch chief economist Saul Eslake agrees with Mr Murray's suggestions for all these tax breaks to be reviewed. "It makes sense," he said. "But, it's one thing to review it and another to [make a change that will] create a situation that will create winners and losers."

Read more.

David Murray has called for the examination of a raft of tax breaks that he says raises the risk of the financial system collapsing.

11:27am:So much for secular stagnation.

In the wake of November’s surge in employment and stronger wages, even sceptics of the US economic recovery are turning into optimists.

The 321,000 advance in payrolls followed a 243,000 increase in October that was stronger than previously reported, US Labor Department figures showed yesterday. It marked the 10th straight month that employment has increased by at least 200,000, the longest stretch since the 19 months that ended in March 1995. The jobless rate held at a six-year low of 5.8 per cent, and earnings rose by the most since June of last year.

In his weekly address, President Barack Obama said today that the job gains aren’t a “fluke” and they are found in high-wage industries.

“Overall wages are on the rise, and that’s some very welcome news for millions of hardworking Americans,” Obama said. “Because even though corporate profits and the stock market have hit all-time highs, the typical family isn’t bringing home more than they did 15 years ago. And that still has to change. And a vibrant jobs market gives us the opportunity to keep up this progress and begin to undo that decades-long middle-class squeeze.”

From factories to offices and retailers, employers took on more staff last month, giving American consumers the bump in pay needed to drive holiday spending. Economists including former US Treasury official Brad DeLong, Nobel Prize winner Paul Krugman and Stephen Stanley of Amherst Pierpont Securities say the hiring surge shows the outlook has finally improved.

It was “the first good monthly report of the recovery,” DeLong wrote yesterday on his blog and in a Twitter post. That’s because it’s the first since before the recession in which payroll growth exceeded 300,000 with unemployment below 6 percent, he said.

Krugman, a Princeton University economist, wrote yesterday in his New York Times blog that this was “a genuinely good employment report.” At the same time, he said there is a risk that the Fed tightens policy too soon.

Summers stuck with his warning that the economy could be mired in an era of low growth.

“When I put forward secular stagnation, it wasn’t to say that we were permanently doomed never to have a good month,” Summers, now a professor at Harvard University, said. “The economy certainly does not appear to be stagnant at the moment,” he said, although “whether growth can be sustained at rapid rates at normal type interest rates conducive to financial stability is certainly not yet fully established.”

11:20am:Farewell CrapCo, DudCo, and all the other pejorative titles we’ve thunk up for BHP Billiton’s non-core spin-off since the $15 billion demerger was confirmed in August. The guessing game is about to be over. The Big Australian will unveil the name of the new entity this afternoon (when UK shareholders are crawling out of bed).

This will mark the beginning of BHP’s marketing campaign for the new entity, to be created by a shareholder vote in May 2015. The silver, manganese, alumina, aluminium, nickel and metallurgical coal company will be based in Perth and listed in Australia, Johannesburg and London.

11:01am: The Japanese economy shrunk more than expected over the September quarter, with GDP falling 0.5 per cent over the three months against the consensus forecast of a fall of 0.1 per cent. That moves the country back into a technical recession after GDP shrank 0.4 per cent the prior quarter.

The yen was largely unmoved, with 1 US dollar fetching 121.65 yen.

The Japanese sharemarket is yet to open.

10:41am: If you thought the release of David Murray's financial system inquiry was exciting, then you ain't seen nothing yet – get ready for some of the biggest lobbying battles in years.

In the blue corner is the financial services sector, which sees itself not only as the grease that keeps the economy turning, but the big wheel itself.

In the red corner is one of their own, the former Commonwealth Bank chief executive David Murray. A man who has never met a speech he wouldn't give and who always speaks his mind.

And sandwiched in the middle? A government with bigger things on its mind, regulators with their own agendas and problems, and consumers who, as the Murray report makes clear, deserve better.

Five key lobbying battlegrounds are likely to emerge in the coming days, months and perhaps even years, given the transition periods usually allowed for big changes in the financial services sector: bank capital, super fees, industry super funds, borrowing in SMSFs, and the regulators.

Read more.

Former Commonwealth Bank boss turned bankbuster David Murray. Photo: Dominic Lorrimer

10:30am:Ten Network has two years to turn itself around or it could go broke, analysts say.

As investors in the third-placed commercial television network brace for the company's independent non-executives to respond to four takeover offers, analysts have underscored the urgency with which the broadcaster needs to sell out and/or recapitalise its balance sheet.

It was possible Ten's independent directors could reject the first round of non-indicative bids, including one from Discovery and Foxtel, which was pitched at 23 cents a share - 5 cents higher than analysts' consensus target price, Bloomberg said.

Shares in Ten are trading at 20.25c, underlining expectations that none of the bids - from Discovery-Foxtel, Anchorage Capital, Saban Capital and United States-based acquisition vehicle Silver Eagle - offer a significant premium to the prevailing share price.

Analysts said Ten had enough headroom in its $200 million loan from Commonwealth Bank to ensure it stayed afloat until FY2017, when they expected the loss-making broadcaster to return to a break-even position.

But their forecast is subject to a range of factors, including revenue share and programming costs. There are others that Ten's management can't control.

"We are wary that any significant downturn in the ad market could result in pressure against the [$200 million debt] facility," Deutsche Bank media analyst Entcho Raykovski said.

Read more.

Ten's chief executive Hamish McLennan.

10:18am: Looks like investors have taken the Murray report well, with banks driving the market higher at the open.

The ASX 200 has advanced 41 points, or by 0.8 per cent, to 5376.3, while the All Ords is 38 points higher at 5351.1.

Of the banks:

• CBA up 0.9%
• ANZ up 1%
• Westpac up 1.6%
• NAB up 1.4%
• Bendigo & Adelaide up 0.2%
• BoQ up 0.1 per cent

 

Resources are a drag, with BHP 1 per cent down, Newcrest 2.7 per cent lower and Woodside 0.6 per cent down.

Coca-Cola Amatil has slipped 1.4 per cent on its announcement of job cuts, while Qantas has surged 8.6 per cent on its earnings forecast update.

10:00am:“Sticker shock!”

That’s the title of a note put out by Credit Suisse analysts on the Murray inquiry report and what it means for the banks.

The analyst have upgraded Bendigo & Adelaide Bank to outperform from neutral, as they believe it is the regional banks able to best capitalise (pun unintended) on recommendations in the report that would level the playing field between the Big Four and the smaller lenders.

They also upgrade CBA to neutral from underperform, on the premise that CBA has the “advantage of a strong organic capital generating franchise”, and so will be able to meet potential higher reserve requirements with less need to tap shareholders.

But they downgrade ANZ to neutral from outperform, pending an expected capital raising.

“We see major bank equity Tier 1 ratios as 0.6%-2.2% short of the final report's benchmark, and see this being satisfied by a combination of both higher capital ratios and a mortgage risk weight floor,” they write.

“At a headline level Westpac is the most / NAB is the least [hurt by] the capital recommendations.”

“We see major banks as immediate losers from the final report (likely cum capital raisings, which are not in current multiples or consensus estimates) and regional banks as medium-term winners (slightly clearer pathway to advanced accreditation, greater regulatory capital neutrality, margin /profitability tailwind opportunity to follow the majors up in any product repricing).”

“With each major bank needing (rounded numbers) approximately $8bn of additional equity Tier 1 capital but net earnings retention and ordinary DRP participation only generating approximately $800mn per major bank per half year, major banks appear to be cum capital raisings (CBA raised first and ANZ last during the GFC).”

9:47am:The Financial Services Inquiry is truly far reaching, writes BusinessDay columnist Elizabeth Knight:

The new model former banker David Murray puts forward will affect every Australian. If you own a credit card, have a loan, a bank deposit, superannuation, an insurance policy or own shares in a bank, the tentacles will touch your financial position.

The massive overhaul of the Australian financial system is aimed to act as a bulwark to secure the system in the event of a future shock such as the global financial crisis.

It seeks to iron out many of the competitive inequities in the system that disadvantage smaller regional banks and acknowledge that the digital revolution is changing the financial landscape, ushering in new entrants that need to be accommodated within the regulatory framework

The inquiry has also exposed a structurally deficient superannuation system that is expensive for the consumer and lacks competition.

The new super system package recommended by the Murray inquiry has the potential to increase an average weekly earning-male by 25-40 per cent in retirement, according to the report's authors. And changes recommended to credit card surcharges will see consumers pay lighter fees.

The price of bolstering the safety of the banking industry will come at a cost – particularly to the big four banks, Westpac, Commonwealth Bank National Australia Bank and ANZ – because they will need to carry a greater capital reserve buffer, one that will place it in the top ranks of their international peers.

Read more.

9:44am: The Australian dollar has slumped to another fresh 4 ½ year low this morning, as strong employment data from the United States piles more pressure on the local currency.

The Aussie fell slipped below US83¢ and has touched as low as US82.90¢.

On Friday, US non-farm payrolls smashed forecasts with data showing that 321,000 new jobs were created across the country last month, the biggest monthly total since January 2012. Economists had been expecting 230,000 new jobs.

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