Profits, dividends down, down, down at Myer and Oroton. As expected Myer reported awful interim results this morning, confirming why the board replaced long-time CEO Bernie Brookes with Richard Umbers earlier this month in a move that was made sooner than was previously expected. Myer lifted sales 1.5% to more than $1.76 billion, a rise of just $1 million a week or $26 million in the half year. But profits went south at a rate of knots — earnings after tax fell 23.1% to just over $62 million, and dividend was chopped to 7 cents a share from 9 cents previously. That was after the final was cut last year to 5.5 cents a share from 8 cents. And there was no good news — the stumbling department store just didn’t sell enough goods quickly enough. Myer also cut second-half profit forecasts as well because of higher costs, especially $7 million for the previously revealed strategic review, and $15 million of other cost increases. Second-half profit will be as low as $75 million, or down more than 22% on the $98 million reported last year. And from the other end of the retailing spectrum, OrotonGroup — our only claim to fame among upmarket retailers — reported an earnings slide, and lowered its dividend. Sales rose 6% to $66.8 million, but like-for-like sales sank 6% because the company has reduced the amount of discounting of the Oroton brand (can’t have the main brand being sold like cornflakes, now, can we?). Net profit fell to $2.2 million from $5.1 million and dividend was cut to 4.5 cents from 8 cents a share. — Glenn Dyer

Pins and Angels — US Fed version. Semantics alert at the Fed. The word “patient” has been dropped after a short career as the key signifier of United States monetary policy, but it has been replaced by the more cumbersome statement that that the Fed will move to lift US interest rates when “it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term”. Phew, what a mouthful. And now for slicing and dicing the meaning of “reasonably confident”. The statement made it clear this new wording does not mean the committee has made up its mind on when to raise rates. But the key takeaway for the markets from the post-meeting statement and other commentary from the two-day meeting was that the Fed now expects a much slower rise in rates than it did in December. Why? Well, the admission in this morning’s statement that “economic growth has moderated somewhat” since December. In other words, US rates will be slower for longer and slower to rise. Once that was realised, markets went mad — the US dollar plunged, the Aussie soared, gold jumped, shares surged, and even oil shook off the gloom and surged. Party time and raiding the sugar bowl, which will stay cheap for a while longer. — Glenn Dyer

Actually it’s all semiotics at the Fed. The reason for the rally wasn’t so much the statement, but the “dot plot”, which is issued with the forecasts (a series of 17 dots) that represent where Fed members think rates will be and in which year. Fifteen of the 17 thought rates would rise this year (two thought next year). On the latest plot, the 17 dots representing members’ predictions on where short-term rates should be at the end of this year have been lowered substantially. In the December report, views ranged between 1% to 2% with little by way of consensus. In the latest plot, there is an emerging consensus with seven members predicting that rates will end 2015 between 0.5% and 0.75%. With rates around 0% to 0.25%, that’s one or two rate rises, depending how you look at it. The market thinks this is a  more dovish outlook on rates from the Fed than was apparent from December onwards. That sparked the spectacular trading swings from 5am onwards in all financial markets. Interestingly, Fed chair Janet Yellen made it clear the stronger US dollar would impact inflation and growth (not to mention corporate earnings). That is partly why the Fed now predicts a lower interest rate at the end of 2015 and 2016: growth will be weaker, inflation lower and a lower level for full employment. Words (such as patient) and their perceived meanings (semantics) usually drive market reactions to Fed statements, speeches, etc. Now its also semiotics, a dot plot. Post-modern central banking arrives at last. — Glenn Dyer

Market moves — bad for Oz dollar. And amid the market’s lurchings, plunges and soarings, none reacted more violently than the US dollar, which plunged sharply, so much so that the euro leapt from around US$1.07 to more than US$1.10 — an incredible jump in the largest and most liquid forex markets in the world. The Aussie dollar followed suit, first regaining the 77 US cents level in New York and then rising past 78 cents in early Asian trading to a peak of 78.48. The low in the past day was actually 75.98 (according to Bloomberg data), so the Aussie’s surge was a massive 2.5 cents. Usually it falls by that much in bearish times, not in the crazy bull market boomlet we saw after 5am. But after 8am, the second thoughts started and down went the Aussie through 78 US cents and heading for 77.50. The US 10-year bond yield, which had fallen in the lead-up to the Fed announcement, continued falling and dropped under 2% in the minutes after the statement was released. — Glenn Dyer

Reality for Aussie market. Amid all the boom, the usual gloom for Australia — yet another slide in global iron ore spot prices, which fell 5.4% to a new all-time low (for the current pricing setting index system) of US$54.50 overnight Wednesday. That’s a fall of nearly 16% in the past week alone and more pressure for Fortescue Metals’ shares today and those of BHP Billiton (still basking in the warm afterglow of the South32 spin-off), and Rio. That fall in iron ore prices is hurting the federal budget, as The Australian Financial Review reported yesterday on page 1, and The Australian only caught up with the story this morning, as its page-1 lede. — Glenn Dyer

Stay calm, China’s houses are getting cheaper. Now that’s the optimists’ view of China’s property correction/plunge/yikes. Economic traditionalists, though, would be alarmed to learn that Chinese property prices fell at a record pace in February, again underlining the slowdown in the world’s second-largest economy. Figures from China’s National Bureau of Statistics show prices fell 5.7% in February, faster than the 5.1% pace in January and the 4.3% rate in December. That is a clear acceleration. Prices fell in 69 of the 70 cities tracked by the government since 2011. Complicating matters was the timing of the Lunar New Year holiday, and Chinese government economists say there will be an upturn in property transactions in March, according to Reuters. A sign of the strength or otherwise of a property sector is the amount of “land banking” by developers (they have to replace the land and buildings they develop to remain in business). Figures released yesterday by China’s National Bureau of Statistics showed new land purchases by developers fell 31.7% percent year-on-year in the first two months of 2015. That’s confirmation, if you need it, that the property sector is in a major downturn. Property sales fell 7.6% in 2014 and fell 15.8% in January and February of this year from the first two months of last year. — Glenn Dyer

Peter Fray

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