4:52pm: Local stocks dived 1.7 per cent, led down by a rout in the energy sector as the oil price fell to a fresh five-year low. Mining giant BHP also fell to a five-year low, while banks retreated after yesterday’s gains, dragging the market down further.

The All Ordinaries dropped 1.7 per cent to 5258.30 while the ASX200 fell 1.7 per cent to 5282.69.

Wall St set the tone for the market, after the Dow tumbled 106.3 points, or 0.6 per cent, to 17,852.5 following the drop in oil and further soft economic data from Japan and China.

Oil tumbled 4 per cent to a new five-year low around $US66 a barrel for brent crude, while iron ore dropped beneath $US70 per tonne, taking it close to last month's lows.

"The oil price keeps going from bad to worse," said Credit Suisse analyst Damien Boey. "It's very rare to see an oil price drop of the severity that we've seen. You're going back to the 1980s."

Talk of rate cuts, meanwhile, was unsettling the market. "It appears there's some sort of adverse growth development which we can't put our finger on just yet. That's what the market is reacting to."

The energy rout has really affected the junior oil explorers, said Alistair McCorquodale, a senior private client adviser with Morgans. "They have much greater leverage and really start to get hurt." Elsewhere in the market, "it's only those really defensive companies, primarily in the healthcare space, that hold up on days like today." 

Santos was hit hardest among the big energy stocks and has lost about half its value or $7.5 billion in just three months on the back of a slide in the oil price and credit rating cuts.

Shares are down another 7.2 per cent to $7.70 amid fears of a capital raising and a slashed credit rating.

S&P cut its credit rating for Santos to BBB/negative outlook from BBB+/negative outlook, primarily because of a "severe decline in oil prices," with Brent Crude plunging more than 40 per cent over the past four months.

BHP shares dropped 4.1 per cent to a five-year low of $28.88. Rio Tinto dived 2.9 per cent to $55.50. 

National Australia Bank shares fell 1.12 per cent to $32.60 after its European operations suffered a substantially larger bottom-line loss in 2014. For other banks, ANZ dropped $1.60 to $31.88, Westpac dipped 0.87 per cent to $33.06 and Commonwealth Bank dropped 0.45 per cent to $82.02.

Photo: Graphic: Fairfax Media

4:42pm:Hundreds of rich Australians have come forward to declare billions of dollars in untaxed assets and income stashed in bank accounts in Switzerland and in other countries.

The rush comes as what the Australian Taxation office says is the last tax amnesty it will ever offer comes to an end.

In a warning to anyone feeling reluctant to come forward, ATO said it has an "informer" who has already handed them a list of 122 Australians with Swiss bank accounts.

To date, 750 Australians have declared a total of $240 million in income and $1.7 billion in assets under the amnesty and another 800 expected to make voluntary disclosures.

The biggest individual disclosure by a taxpayer was $50 million in income $160 million in assets that had been held in Lichtenstein and Switzerland. The smallest was a disclosure of $10,000.

Only 130 individuals made declarations about property. The vast majority of voluntary disclosures were related to income and shares.

Read more

4:34pm: And here are today's winners and losers among the top 200.

Skilled Group has recovered somewhat after assuring investors that it wasn't about to announce a nasty earnings downgrade off the back of falling oil prices (see post at 1:10) - it's the best performer today.

Bradken has continued to rise - it was up 36 per cent on Friday on reports private equity were bidding for the mining services business.

Among the losers were the smaller oil and gas stocks after oil continued to dive overnight (see post at 9:31), and while Santos isn't on this list, it got smacked again, down 7.2 per cent (see post at 11:58).

Iron ore also fell overnight, with junior miners feeling the pinch.

Best and worst performing stocks in the ASX 200.

4:23pm: Shares have suffered a nasty reversal, as energy and mining stocks dragged the ASX 200 down 90 points, or 1.7 per cent, to 5282.7. The All Ords was down a similar amount to 5258.3.

BHP was crunched, dropping 4.1 per cent to $28.88, its lowest on more than five years. Rio and Woodside both dropped 2.9 per cent. The energy sector was the hardest hit, down 4.8 per cent, as oil continued to fall. Santos plunged 7.2 per cent.

Banks gave up much of yesterday's gains, with ANZ falling 1.6 per cent. NAB retreated 1.1 per cent, Westpac 0.9 per cent, and CBA 0.4 per cent lower.

Investors ran to the relative safety of healthcare, with Cochlear 1.2 per cent higher, ResMed closed 0.6 per cent up and Sonic 0.2 per cent up, although the sector as a whole was slightly down.

4:06pm: Sources have told the AFR's Street Talk column that the Australian Prudential Regulation Authority is briefing the major banks on new restrictions that would limit lending for housing.

A 4pm (AEST) dial in conference will be held to provide details to the banks about the rules, which are referred to as macro-prudential regulation.

4:00pm:Further changes will be made to the way official employment statistics are compiled following an independent review of the process, but not this month.

The Australian Bureau of Statistics has already implemented the two main recommendations of the review, and will accept the remaining 14, most of which relate to closely monitoring and considering its methods.

The review, conducted by a former ABS and World Bank employee, was triggered by an outbreak of unexplained volatility in the jobs figures over July and August.

The ABS is already using a re-worked seasonal adjustment method, which was the main recommendation of the review.

The resulting large revisions to the July and August numbers prompted widespread scepticism among economists about the usefulness of the figures, even after the bureau had revamped its methodology.

In line with another recommendation, the ABS says it has changed its procedures so that if such a problem crops up again, changes to survey procedures will automatically be considered as a possible cause.

November jobs figures will be released on Thursday, and the bureau said no changes will be made to those numbers in light of the review’s recommendations.

Source of confusion: ABS jobs data

Marketing 101 failure?

3:55pm: After the biggest corporate branding exercise in Australia this year, resources giant BHP Billiton appears to have failed Marketing 101 in its launch of its new South32 business – it didn’t register the website.

Visitors hitting up South32.com expecting to see a polished website explaining the vision behind BHP’s new company are instead greeted by a three minute video of a woman’s tongue, inviting interested parties to purchase the domain name.

A Brisbane-based web hosting firm Fabulous Domains is listed as the owner of the domain. Fabulous Domains is as a division of a company known as Dark Blue Sea, which is based in Fortitude Valley.

When contacted by The Australian Financial Review, Fabulous Domains referred to records showing that the domain was actually purchased in August by a Malibu-based company known as Kari Bian Film Company. Any company interested in acquiring the web address would need to make them an offer.

The Financial Review has attempted to contact Kari Bian Film Company, which appears to be in the business of buying potentially valuable web addresses, with 18,967 domains under is control.

A spokesman for BHP Billiton said the company had considered the website in its planning for the company launch, but would not be looking to buy the South32.com address.

3:44pm: John Johnston has hauled in plenty of big fish in his time.

The 96-year-old, who loves the cut and thrust of retailing and is equally enthusiastic about big game fishing, will mark one another milestone in an extraordinary business career tomorrow when vacuum cleaner group Godfreys lists on the ASX in a $78 million float.

Johnston is the largest shareholder in Godfreys, a business he first joined in 1936 when it was in its infancy.

“It’s been my life,’’ he says.

He thrives on business and still enjoys heading out to Godfreys stores when he can. “That and fishing are the two things I love,’’ he says.

But Godfreys, which has grown into a business with 209 stores and is the market leader in the $1.3 billion cleaning products segment, isn’t the only business which Johnston has an interest in.

He holds a stake in the Shaver Shop chain of 76 stores around Australia, and is a major shareholder in the parent company which owns footwear and clothing brands Diana Ferrari, Mathers, Williams and Colorado. The parent entity of those brands is Fusion Retail Brands, which was previously known as Colorado Group. Colorado Group went into receivership in 2011 after a rough time under private equity ownership.

Johnston steers clear from the limelight and lives a quiet life in Adelaide, but relishes the chance to get out on the road and talk to Godfreys store operators and staff when his health is up to it. He was at a Godfreys store in the Adelaide suburb of St Marys talking to the store owner on the day the float was officially announced on November 25.

The skittish sharemarket means it hasn’t been completely smooth sailing in the lead-up to tomorrow's listing. Godfreys initially set out to raise up to $103 million, but the float was downsized to $78 million.

Here's more ($)

Godfreys: one of the two things major shareholder John Johnston loves. Photo: Rob Carew

3:10pm:Australia’s largest active managers reduced their exposure on the big banks heading into the financial system inquiry, analysis by the Financial Review shows.

However in a funds management industry notorious for hugging indices, the ten largest active funds had more than a quarter of their portfolios invested in the big four.

The ten largest actively managed Australian share funds held an estimated average of 27 per cent of their portfolios in shares of the big four,according to analysis using data supplied by Morningstar.

Of the ten largest active funds identified by Morningstar, only CFS and Perpetual Industrial funds held more than the current 30.14 per cent index weighting of the big four banks to the overall S&P/ASX 200 share-market index.

Every one of the ten funds held an underweight position in Commonwealth Bank with an average weight of 7 per cent, compared to the bank’s index weight of nearly 10 per cent. National Australia Bank was favoured, with 70 per cent of the funds holding an overweight position.

Many funds say they shifted out of the banks simply because they were too expensive. UBS Asset Management’s head of Australian equities Jakov Males told the Financial Review that the fund had switched from an overweight position based on “valuation grounds”.

“We been overweight since the GFC, and the sector overall has performed very well but went underweight in the middle of the year,” he said. “Banks performed very well which meant they were not as attractive as they were. Any kind of threat of regulation has to play into your thinking – we have seen this impact returns in many cases before.”

Here's more ($)

Index-hugging active funds managers embrace the big four banks, investing on average a quarter of their portfolios in the stocks.

2:20pm:China’s stock market boom has reached outright mania, with equities galloping higher at a parabolic rate, despite threats of a crackdown by regulators and the continued slowdown of the national economy, the London Telegraph's Ambrose Evans-Pritchard writes:

The Shanghai Composite Index has risen more then 30 per cent in the past six weeks, blowing through 3000 points yesterday to a three-and-a-half-year high even though corporate earnings are declining steeply. It's up slightly today, despite other regional markets posting hefty losses.

The China Securities Regulatory Commission said late last week that it would “increase market supervision, resolutely crack down and earnestly safeguard normal market order”. It warned that stock manipulators had been “raising their head” and would be dealt with.

The cautionary words have been ignored by retail investors as they throng brokerage offices, lured by momentum trades. The government itself is partly responsible for letting the genie out by talking up “cheap stocks” in the official media two months ago, but now appears alarmed by what it has done.

Many families are taking out brokerage loans to buy stocks, increasing leverage and risk. Margin debt has risen to more than $US130 billion from nothing three years ago. This is now 1.2 per cent of GDP.

“Turnover, leverage and account openings have all soared and there is a sense of mania taking hold,” said Mark Williams, from Capital Economics.

The latest surge follows a shift by the Chinese authorities towards “targeted easing” in October, intended to stop the housing market crumbling after five months of falling prices. This was followed by a surprise cut in interest rates last month.

But aspects of the equity surge are bizarre. Financial stocks have jumped most, yet the rate cut was negative for banks since it reduced their margins. Deflationary pressures are eroding wafer-thin profit margins.

Chen Long, from Gavekal in Hong Kong, said the momentum on the Shanghai bourse has become unstoppable but is losing touch with economic fundamentals. “When the tide recedes, the backwash is likely to be vicious,” he said.

In one sense Chinese stocks are cheap after the battering they have taken since the Shanghai index topped 6000 on the glory days of the pre-Lehman boom. It has lost two-thirds of its value from the peak, one of the worst bear markets in any major country in the past century.

Even so, the stock boom comes as Chinese industry battles with massive overcapacity in everything from steel to shipbuilding, coal output, cement and solar panels.

Here's the full article

A blow-out in margin lending is fuelling the rally. Source: Capital Economics

1:57pm: BHP Billiton's orphan collection of unwanted assets has been named South32 – which the blog team thinks sounds more like a two-man advertising agency or a funky over-priced vodka brand than a cluster of "non-core" mining assets.

But just because it's a lame name doesn’t mean you should reject South32. It’s well known among value investors that spin-offs make marvellous investments.

From the WSJ: “Some analysts and academics who have studied the phenomenon attribute the initial dip to a lack of familiarity with the spinoff among investors and the subsequent rebound to a sharper focus on the company's main business from both management and investors. In essence, the argument is that shares of a spinoff can be underpriced early on.”

In the US, the Guggenheim ETF Spin-off has smoked the broader S&P 500 index, rising 141 per cent over five years compared to an 86 per cent rise in the benchmark index.

Meanwhile at home, recent local spin-offs have also comfortably outperformed the broader market, as the following chart shows:

Amcor spinoff Orora (white line) has gained nearly 60 per cent over the past 12 months, while Recall (ex Brambles) is up 41 per cent, both leaving the ASX200 (green line) far behind.

1:34pm:"Lost decades" are so hot right now, and now Bloomberg columnist William Pesek has now added our own economy to the list of potential losers - hopefully we have reached "peak pessimism" with this one:

As economists debate whether Shinzo Abe can end Japan's long funk, I can't help but wonder if another wealthy, seemingly world-beating economy isn't headed for its own lost decade: Australia.

This mere suggestion will strike many as hyperbolic. The economy Down Under has avoided recession for more than two decades. The government enjoys a fiscal position that inspires envy in Washington and Tokyo. There remain vast resource deposits underground, while new infrastructure is coming online to extract and ship that treasure to China and elsewhere.

Australia's good fortune, however, looks to be waning. Slowing growth in China, driven in part by the government's efforts to rebalance the economy, has devastated commodity prices: Iron ore, Australia's biggest export, now fetches half of the $US140 per tonne it did last December; coal prices have tumbled as well. These are long-term, not cyclical trends. And unfortunately, the trajectory plotted by Prime Minister Tony Abbott over the last 14 months has left the country less prepared for that difficult future than when he took office.

Australian voters have soured on Abbott - his Coalition lost power in Victoria state's election last week, leading to chatter that he might not survive a full term in office - because of what they see as broken promises. A needlessly austere budget slashed education, health and welfare spending. The government appears to be coddling mining billionaires and backtracking on its environmental pledges. It even cut funding for national icon Australia Broadcasting Corporation.

Read more.

Australia's Tony Abbott and Japan's Shinzo Abe are both facing some testing economic questions. Photo: Reuters

1:10pm:Skilled Group shares have bounced close to 10 per cent today after yesterday’s nasty sell-off prompted the labour-hire firm to issue a market update.

The stock plunged 16 per cent yesterday for no apparent reason, which prompted a “please explain” letter from the ASX, which specifically asked the company whether it had plans to announce an earnings update for the six months to December 31 that might “differ materially” from previous guidance.

Not so, replied Skilled Group, nothing to see here, move on.

Company boss Mick McMahon said in the ASX announcement: “We see no reason for the recent fall in share price, and expect no near term impact from the recent fluctuations in oil prices”.

They then reaffirmed that fact with a one-page market update which confirmed its cost savings target for FY15 and said cashflows are in line with expectations.

The company is doing it tough as the drop-off in mining investment spending has weighed on its operations. The shares are down 40 per cent over the past month, and are 60 per cent lower this year.

12:51pm:Transpacific Industries will incur up to $20 million in costs relating to the grounding of its trucks after a fatal accident involving a Transpacific tanker in August.

The waste handler's 2800 strong fleet returned to full service on September 3, but the financial impact of the grounding was first disclosed this morning.

Transpacific said in a statement to the ASX that the grounding, examination and review process was expected to lower group earnings before interest and tax by $18 million to $20 million in the six months to December 31, 2014.

About $7 million of the cost is associated with vehicle repair. The balance of the costs relate to matters including roadworthiness inspections, subcontracting, vehicle write-offs and lost revenue during the suspension of service.

Some municipalities were told that residents should just leave their rubbish on the street as Transpacific trucks gradually resumed service from August 21.

Transpacific Industries chief executive Bob Boucher said the expenses were a one-off event.

The company's shares are down 2.7 per cent to 89.5 cents.

Read more.

Transpacific Industries chief executive Bob Boucher said the expenses are a one-off event. Photo: Simon Schluter

12:25pm:Morgan Stanley has admitted it got it wrong on Qantas, upgrading its guidance to “overweight”, as the airline’s shares rally for a second day on the back of a profit upgrade, bullish broker notes and another plunge in the oil price.

The surge comes after the airline yesterday forecast a surprisingly strong underlying half-year profit of $300 million to $350 million, up from a $252 million loss for the same period last year.

Qantas shares are up 1.7 per cent at $2.43, losing most of their early gains that took them as high as $2.57,  after the Brent crude oil price fell 4 per cent to a new five-year low of $US66.19 a barrel overnight, which should further bring down the price of jet fuel.

Morgan Stanley said it had failed to appreciate certain market factors and elements of Qantas’ turnaround strategy which led to its guidance upgrade.

“In the last six months Qantas has shown capacity discipline, a yield recovery, a weakened competitor, cost-out, and fuel upside – all of which we failed to fully appreciate,” it said.

The new price target for Qantas shares was $2.90.

New love for Qantas: eight analysts have a 'buy' rating on the stock, three a hold and just three see it as a 'sell'.

11:58am: Santos has been hit hardest among the big Australian energy stocks, losing about half its value or $7.5 billion in just three months on the back of a slide in the oil price and credit rating cuts.

Shares are down another 10 per cent, amid fears of a capital raising, but UBS analyst Nik Burns says Santos should be able to maintain its investment grade credit rating without tapping equity markets, unless credit agency Standard & Poor’s slashes its oil price forecast by $US20 a barrel.

S&P cut its credit rating for Santos to BBB/negative outlook from BBB+/negative outlook, primarily because of a “severe decline in oil prices,” with Brent Crude plunging more than 40 per cent over the past four months to $US68 a barrel.

The Adelaide-based energy producer has said it wants to keep its investment grade rating, which affects the rates at which it can raise debt. The company has announced plans cut costs next year and may also implement an underwritten dividend reinvestment plan.

S&P’s analysis is based on an oil price forecast of $US80 a barrel in 2015 and $US85 from 2016. UBS does not expect a massive change to these forecasts, given it also expects a price of $US80 in 2016.

“But we do expect the market to remain cautious on Santos, and the capital raising drums will beat louder if the oil price continues to decline,” Burns said in a research note to clients.

Santos shares (white line) have halved in value in just three months, following the oil price (green) down and underperforming Woodside (purple).