Shares have closed in the red for a sixth time out of the last seven sessions, amid investor caution ahead of Donald Trump's address to Congress on Tuesday night.

The ASX slipped 0.25 per cent to 5724.2, weighed down by 1.9 per cent slide in the energy sector following a drop in oil prices.

"Trump reflationistas will be desperately looking for some long awaited clarity on the fiscal front, with a disappointment seeing US dollar selling emerge and gold possibly jumping higher again," said OANDA managing director Illka Gobius.

The spot price for gold was at $US1256 an ounce, hovering near a 3-1/2-month high of $US1260 hit on Friday.

Among heavyweights posting losses, Woodside slid 1.2 per cent and Santos was down 4.1 per cent. 

Losses in two of the big banks weighed heavily on the index, with CBA falling 0.9 per cent and Westpac down 0.8 per cent. ANZ slipped 0.2 per cent while NAB gained 0.25 per cent.

Among companies reporting today, QBE added 2.4 per cent after it flagged a $1 billion share buyback, while Lendlease jumped 3.6 per cent and gaming company Aristocrat's shares added 5.1 per cent after it increased its profit guidance.

Average wages in China's manufacturing sector have soared above those in countries such as Brazil and Mexico and are fast catching up with Greece and Portugal after a decade of breakneck growth that has seen Chinese pay packets treble.

Across China's labour force as a whole, hourly incomes now exceed those in every major Latin American state apart from Chile, and are at around 70 per cent of the level in weaker eurozone countries, according to data from Euromonitor International, a research group.

The figures indicate the progress China has made in improving the living standards of its 1.4bn people, with some analysts arguing that increases in productivity could push manufacturing wages even further beyond what are traditionally seen as middle-income countries.

But the fast-rising wage levels mean China could also start to lose jobs to other developing countries willing to undercut it.

The data also highlight the problems facing Latin America, where wages have stagnated and sometimes fallen in real terms, and Greece, where average hourly wages have more than halved since 2009, according to Euromonitor.

"It's remarkable how well China has done compared to everybody else," said Charles Robertson, global chief economist at Renaissance Capital, an investment bank focused on emerging markets.

"It's converging with the west when so many other emerging markets haven't."

Average hourly wages in China's manufacturing sector trebled between 2005 and 2016 to $3.60, according to Euromonitor, while during the same period manufacturing wages fell from $2.90 an hour to $2.70 in Brazil, from $2.20 to $2.10 in Mexico, and from $4.30 to $3.60 in South Africa.

"We have seen pretty explosive wage growth in China since the period of joining the WTO," said Alex Wolf, senior emerging markets economist at Standard Life Investments.

Euromonitor compiled its data from information provided by the International Labour Organisation, Eurostat and national statistics agencies, subsequently converting them to US dollar terms and adjusting for inflation. But the data do not take into account differing costs of living.

Read more at the FT ($).

Shares in homewares retailer Adairs have plunged 14 per cent after the company warned full year earnings could fall as much as 31 per cent.

The new profit warning - the second in three months - follows weaker-than-expected trading in the December half, when Adairs failed to respond to a shift in fashion trends and broader retail spending deteriorated.

Adairs shares have plunged 14.3 per cent or 20¢ to $1.20 on Monday and are now trading at half their June 2015 issue price of $2.40.

Adairs was forced to discount stock to clear inventories, crunching gross margins.

Net profit for the six months ending December fell 35.3 per cent to $8.6 million and EBIT declined 39.6 per cent to $12 million.

Total sales rose 5.7 per cent to $124.5 million but same-store sales fell 4 per cent, compared with growth of 15.4 per cent in the year-ago period.

Adairs' new chief executive Mark Ronan, who took over from long-serving CEO David Maclean in September, now expects full-year EBIT to fall between 18 and 31 per cent to between $27 million and $32 million.

This compares with its November guidance for EBIT to fall 15 per cent.

While total sales are expected to rise at least 3 per cent to between $255 million and $265 million, same-store sales are expected to come in flat or down 3 per cent. This follows two consecutive years of strong double digit same-store sales growth.

Despite weak same-store sales, Adairs is pushing ahead with plans to open new stores and expand into new categories.

Adairs is the second retailer spun off by BB Retail Capital to issue a profit downgrade.

This time last year jewellery chain Lovisa was forced to issue a profit warning after margins were squeezed by the weaker Australian dollar. Lovisa cut its final dividend following a 46 per cent fall in net profit to $16.5 million in 2016.

However, Lovisa bounced back in the latest December-half, reporting a 50 per cent increase in net profit to $20.3 million following strong sales and gross margin gains.

Just in case you were wondering, here are the five best and worst performers on the day of their results this reporting season.

The average result on the day was -0.2 per cent.

Over the weekend, revered investor Warren Buffet again professed his unwavering love for almost all things American - he remains dark on active hedge fund managers -  but there are several lessons Australian investors can take away from Berkshire Hathaway's yearly letter to investors. 

The case for buybacks

There has been much criticism of companies spending their excess cash on buying back shares rather than funding expansion, but Buffett insists it is a great way to use lazy capital or if the price is particularly attractive. 

"From the standpoint of exiting shareholders, repurchases are always a plus," he writes. "Though the day-to-day impact of these purchases is usually minuscule, it's always better for a seller to have an additional buyer in the market. 

"For continuing shareholders, however, repurchases only make sense if the shares are bought at a price below intrinsic value."

Buffett's words come as QBE announces a $1 billion share buyback. 

Credit Suisse's equity strategist Hasan Tevfik has long believed in the added value buybacks create for investors, outlining how the average ASX200 company can increase earnings-per-share hansomly from the process. 

"We do like buybacks, not least because those Aussie stocks retiring equity have a good history of outperformance," says Tevfik. "And we are not worried if the right buyback means less capex."

While investors are hungry for growth and many have suggested a pickup in capex, during the earnings season just gone many companies displayed a conservative approach to managing their balance sheets.

Rio Tinto plans to buyback shares in the near future while Aurizon's new chief executive Andrew Harding pointed out he will focus on creating shareholder value and is "not diversifying for diversifications sake".

Whitehaven Coal, which has enjoyed a stellar return to form thanks to a recovering coal price, has said all forms of capital distribution were on the table. 

Here are a few more Buffet-isms for local investors

The latest summary of the reporting season is from Bank of America-Merrill Lynch analysts, who have titled their note "inflation bites" as rising input costs bite into margins.

Overall, they calculate, the consensus EPS estimate for 2017 is 13.4% vs 11% at the start of January (see chart).

Their high level observations:

1. Ex-Resources, sales growth year-on-year is tepid (around 2%);
2. Top-line performance is price driven rather than through higher volumes;
3. Inflation is starting to bite in a number of sectors and 60 per cent of ex-resources companies saw margin compression;
4. The number of companies with improving cash conversion is lower than last period; and
5. A nice pick-up in capital return.

And their key (often related) themes from reporting season:

• Inflation biting
  Input costs (particularly electricity, energy, food and enterprise bargaining related wage costs) were called out by Asaleo Care, Ansell, Alumina, BHP, DUET Group, IAG, Medibank Pvt, Origin, Oil Search, Qantas, Suncorp, Telstra and Wesfamers.
• New productivity
  New and ongoing initiatives announced by Amcor, AMP ($50m cost saving), Worley Parsons (target $450m for FY16-17), Bendigo & Adelaide Bank (target flat cost growth), Computershare (Phase 1-3), Magellan (lower staff costs) and Seven West Media.
• Pricing power
  Was evident in banks, health insurance, healthcare, online media, REITs and single stocks such as Treasury Wine.
• Margins
  Ex-Resources, just 40% of companies saw margins expand yoy. Expansion is particularly evident in Consumer disc./staples (Star Entertainment, Tabcorp, Trade Me, Treasury Wine), with compression evident in Financials (ASX, IOOF, Magellan, Medibank), Industrials (Qube, Transurban, Virgin Australia) and Telecoms. Cochlear and Goodman Group saw margin expansion.
• Cash realisation
  Ex- Resources, Financials and REITs, 54% companies saw improvements in their cash realisation. We saw large improvements in consumer discretionary/staples (Healthcare (Cochlear, Primary Healthcare)
• Improving capital return
  A still nascent theme with just 5 companies surprising - AMP (+$500m buy-back), Coca-Cola Amatil ($350m buyback), Rio (+$500m buy-back, +15c DPS), Sirtex ($30m buy-back) and Transurban (+1c DPS).

Non-fluoride toothpaste sales to China and South Korea are soaring and showing early signs of being a new boom product, Red Seal said while reporting an uptick in first half sales. 

The company, which was acquired by EBOS Group 16 months ago, said it has experienced a doubling in organic toothpaste sales in the past year.

Red Seal sits alongside EBOS's other assets including a 50 per cent stake in the Terry White Chemmart Group which operates 500 retail pharmacies in Australia.

EBOS chief executive Patrick Davies said today there was huge demand from South Korea and China for its range of non-fluoride toothpastes and they had significantly outperformed other Red Seal product lines.

"It's the export star at the moment. You'd put it as the hero," Davies said.

He emphasised the sales were off a low base, but said there was increasing appetite for toothpastes made from all-natural ingredients.

Red Seal was acquired for $NZ80 million in late 2015 and in the first half of 2016-17 the overall business lifted sales by 8.4 per cent. Non-fluoride toothpaste sales jumped 100 per cent. It was a new avenue for the "grey market" of Chinese entrepreneurs buying products in Australia and selling them into China.

Red Seal's overall sales to China, which also includes herbal teas, vitamins and health supplements, climbed by 24 per cent on a comparable basis.

Here's more at the AFR

Oil prices are edging higher, with Brent oil set to rise for five out of seven sessions as a global supply glut appears to ease, but rising US production limited gains.

Brent crude oil has climbed 0.4 per cent to $US56.22 a barrel. Oil prices tumbled on Friday after US Energy Information Administration data showed US crude inventories rose for a seventh straight week.

But the market has been supported within a tight $US4 to $US5 range since November, when the Organisation of the Petroleum Exporting Countries (OPEC) and other producers agreed to cut production.

"EIA data showed stocks rose 564,000 barrels to 518.7 million last week," ANZ said in a note.

"However, it was the lowest increase over the past couple of months. If this trend of lower imports and smaller gains in inventories persists over the coming weeks, it would suggest that the OPEC led production cuts are starting to have an impact."

OPEC's record compliance with the deal has surprised the market, and the biggest laggards, the United Arab Emirates and Iraq, have pledged to catch up with their targets.

Saudi Arabia has offered to reduce oil production if rival Iran caps its own output this year, four sources familiar with the discussions told Reuters, as Riyadh tries to strike an elusive OPEC deal to curtail supply and boost prices.

Money managers raised their net long US crude futures and options positions in the week to February 21, to the highest on record, based on data going back to at least 2009, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

The pound weakened against all its major peers after a report said UK Prime Minister Theresa May's team was preparing for Scotland to potentially call for an independence referendum in March.

Sterling fell as much as 0.6 per cent to $US1.2392 after the Times of London said May could agree to a new Scottish vote, but on condition it's held after the UK leaves the European Union, citing unidentified government sources. The Aussie is up 0.5 per cent against the pound, fetching 61.87 pence.

Leveraged and macro funds hit bids in response to the report, an Asia-based foreign-exchange trader said. Scotland voted 55 per cent to 45 per cent in September 2014 to stay inside the UK's union.

"If the market does seriously think there can be another independence referendum much sooner than that, then remembering how hard the pound fell in early September 2014 just in front of the prior referendum, then the memory of that makes sterling a fairly easy sell here," said Ray Attrill, global co-head of foreign exchange at NAB. "I suspect there's been a bit of an overreaction here."

Chinese iron ore futures are roaring back amid planned curbs in steel production in key areas and a pickup in seasonal demand.

Dalian futures are up 4.5 per cent at 723.5 yuan ($US105.23), providing some tailwind for the spot price, which fell 0.9 per cent to $US90.50 a tonne on Friday night.

Steel producers in the Hebei-Beijing-Tianjin area have been asked to shift their peak-load production to reduce pollution ahead of the start of China's National People's Congress on Friday, said Helen Lau, analyst at Argonaut Securities.

Steel inventory held by Chinese traders fell to 16.29 million tonnes as of February 24 from 16.39 million tonnes in the prior week, the first decline since last November, due to seasonal demand recovery, she said.

"Looking ahead over short and mid-term, China's steel market will remain tight on the back of production regulation and seasonal demand recovery. We expect to see more upside in steel prices in both spot and futures markets," Lau said in a note.

The revival in futures could push spot iron ore prices back toward $US100 a tonne, after retreating last week as some traders cast doubt on the sustainability of this year's rally amid ample stocks of the raw material in China.

Meanwhile, doubts remain about the sustainability of the recent surge in iron ore prices.

China has reached peak iron ore usage, which will force lower-grade producers such as Fortescue to offer increasingly large discounts to steel mills, according to participants at China's main iron ore industry conference. 

Peak iron ore was not supposed to happen for at least another decade, but Greg Pan, the chief executive of diversified miner and steel mill owner China Hanking Holdings, said there would be little to no growth in demand for foreign iron ore from mainland steel mills this year and the trend of imports displacing higher cost Chinese producers was largely over.

"People need to understand, from a growth perspective, China is no longer the main driver for iron ore," Pan said on the sidelines of the Metal Bulletin conference in the port city of Dalian last week.

Iron ore imports to China rose 7 per cent to a record 1.04 billion tonnes last year, or 81 per cent of China's overall consumption. Australia supplied 68 per cent of these imports.

Even though the rising price of iron ore has boosted profits of producers like Fortescue, Pan said "that figure – on total imports – will be very similar this year and next year".

Even though iron ore prices were nudging $US95 a tonne last week, their highest level since 2014, they are forecast to fall in the second half of this year. China's official government forecaster has the iron ore price averaging $US65 a tonne this year and getting as low as $US55 a tonne at times.

Australia could be set to post its first current account surplus since the mid-1970s this year, as soaring commodity prices, rising export volumes, and a narrower net income deficit work to push the balance into the black.

Tomorrow, the ABS will release fourth-quarter current account figures, which are expected to show a deficit - as has been the case during most of Australia's history - but a much narrower one than in previous quarters.

According to economists at UBS, this expected marked narrowing of the deficit is expected to lay the groundwork for the country to report a rare surplus in early 2017.

A current account surplus would likely give additional support to the Australian dollar, which has already risen strongly against a basket of currencies since the start of the year.

"The current account is extremely significant to the dollar," said Commonwealth Bank chief currency strategist Richard Grace. 

Countries or regions which run current accounts surpluses - like Japan, Switzerland or the Eurozone - have far more expensive currencies than those who do not, low interest rates notwithstanding. 

"Current account balances are much more of a long-run determinant of currency valuations than interest rate differentials," Grace noted.

Countries that run current account surpluses have, by definition, more money going into the economy than leaving it, so they do not need higher interest rates to attract capital. Countries that run current account surpluses are also often seen as lower risk places to invest by global investors. 

In a note released on Friday, UBS economists argue a current account surplus for Australia is firmly in view. They expect this to flow through to the currency, which they forecast to stay at around US78¢ for the rest of the year.

Here's more 

Despite a fairly benign reporting season scorecard to date, the market response has been cautious, Morgan Stanley notes.

While the overall share price volatility on reporting day has been lower than in the past two season, the attached chart shows that stocks that have beaten meaningfully this result season have tended to be sold down relative to the benchmark after the initial result-day outperformance (dotted line).

This weaker follow-through on strong results is a sign of market caution, the analysts say.

"Historically, beats have typically exhibited a degree of post-earnings announcement drift, whereby stocks that beat on results overall have tended to show some subsequent outperformance (~3-4%) up to 10 trading days after the day of the result,and vice versa to a lesser degree," the analysts say in a note to clients. 

"The price action based on the post-result drift is more negatively biased in cyclical higher-beta sectors (eg, materials, energy and discretionary) and more positively biased within defensive sectors (health care, utilities,and staples)."

CBA and other lenders are raising borrowing rates by up to 50 basis points, cutting discounts, reintroducing $600 administrative fees and revamping product ranges as strong buyer demand for property in Melbourne and Sydney enables lenders to offset rising costs and rebuild margins.

Other lenders are raising rates because of fears a demand surge could overwhelm their administrative systems and accelerate volumes to the regulatory speed limits.

CBA, the nation's biggest mortgage lender, is raising rates for the second time in two weeks and reintroducing some fees.

The bank is set to announce an increase of 47 basis points, or a rise to 4.73 per cent, on its three-year "special rate" investment loans. The rate on its owner-occupied "special rate" loan is rising by 30 basis points.

It is also reintroducing a $600 establishment fee, or $8 monthly loan service, for the special rate offers, starting immediately.

Other big name lenders such as AMP Bank, a division of the nation's largest diversified financial conglomerate, and National Australia Bank, are revamping their product offerings.

For example, AMP has pulled a 4.09 basis point offer on a three-year fixed rate and raised the rate to 4.59 basis points.

Here's more at the AFR

Company profits boomed last quarter as surging resource prices showered cash on miners, a potential boost to incomes across the economy and a much-needed windfall for government tax coffers.

Today's data (see post at 11.35pm) showed gross company profits soared 20.1 per cent in the fourth quarter, from the third quarter, a result beaten only once before, in March 2001.

Mining boasted a rise of almost 50 per cent, while profits at the pre-tax level surged by no less than 470 per cent.

Encouragingly, however, non-mining profits also posted a strong increase (+8.7%) with a number of sectors posting double digit gains, ANZ noted.

"However, the softer-than-expected wage result will temper some of the resultant enthusiasm, and provides further evidence that a soft inflationary environment is going to persist for an extended period," economist Daniel Gradwell said.

CommSec chief economist Craig James noted that 135 of the ASX 200 companies had reported so far in the current earnings season and all but eight made a profit.

Of those, 69 per cent increased profit over the year, above the long-term average near 60 per cent, while total holdings of cash rose by 9 per cent to over $108 billion.  And almost 89 per cent of full-year reporting companies elected to pay a dividend.

Headlining was BHP Billiton which turned a net loss of $5.7 billion a year ago into a profit of $3.2 billion. The mining giant also more than doubled its interim dividend, cash which will make its way into the economy in one form or other. Excluding BHP, aggregate profits lifted by 37 per cent.

In particular, policy makers are hopeful the influx of liquidity will provide the funds for a pick up in investment.

"Balance sheets across corporate Australia are in good shape," said James. "Cash levels are near the highest in the 14 earnings seasons we have covered."

A revival is badly needed as business investment was a heavy drag on the economy last year. Today's data also showed firms added to inventories at a slower pace in the fourth quarter, subtracting around 0.2 percentage points from economic growth.

Figures on gross domestic product (GDP) due on Wednesday are forecast to show growth of around 0.7 per cent, bouncing from a shock 0.5 per cent contraction in the third quarter.

Such an outcome would keep alive Australia's 25-year run without a technical recession - two consecutive negative readings for GDP - and on course to surpass the all-time record currently held by the Netherlands.

Yet annual growth would only be a tepid 1.9 per cent, with the economy barely expanding over the second half of the year.

"It looks like being a reasonable bounce, but not one that's going to set the world on fire," said David de Garis, a senior economist at NAB.

He noted that wages and salaries had actually declined in the fourth quarter, a rare event that could sap consumption.

Here's a nice take from Perpetual head of investment strategy Matt Sherwood on the potential for monetary and fiscal policies to play at cross purposes:

It just seems so strange that by March 2017 the US economic cycle will be the equal third longest since 1781 (only the 1980s and 1990s expansions were more extended) and economic data has recently accelerated which has the US Fed talking about the timing of rate hikes, yet the main topic of conversation is how large will US fiscal stimulus be? Does that strike anyone else as strange? What is the rationale of stimulus when the US economy is already growing well above trend and is any policy maker at 1600 Pennsylvania Ave considering the unintended consequence of what the US Fed could be forced to do?

While trend growth is an abstract concept and there is a fair bit of underemployment remaining, there is little virtue in pushing growth further beyond trend when there is as little spare capacity as there was in 2007.

It seems like governments around the world are struggling to help the private sector create jobs especially for those on low incomes as either computers and machines increasingly do manual labour, or new industries such as IT don't need much capital or labour to produce output. This is the next big challenge for all governments as there are so many research pieces out that more than one-third of jobs are at risk of being done by computers by the end of the next generation.

Even if that number is 75% wrong – it is a huge economic and social dislocation and what we need is thorough analysis and sensible policy decisions to address the issue. What we don't need is politicians adding vast amounts of stimulus when central banks are doing the complete opposite, giving vast corporate tax cuts to boost investment spending which will prove fruitless unless consumer spending surges higher, or defending and extending 1960-type industrial relation's policy when the world has irreversibly changed.

Electricity networks owner Spark Infrastructure has pointed to a greater than expected "pipeline of opportunity" emerging in renewable energy after posting a 7.9 per cent dip in full-year net profit.

Spark, owner of a 15 per cent stake in recently privatised TransGrid, said the NSW transmission grid owner had struck four deals for the connection of wind and solar projects since an investor day in December, with more in the pipeline.

NSW has an additional 1000 megawatts of renewables projects in an early development phase, while Victoria is targeting 5000 MW of renewable capacity, providing a "significant" opportunity for TransGrid, Spark said.

Sydney-based Spark joined with partners including Hastings Funds Management to buy TransGrid from the NSW government in late 2015 in a $10.3 billion deal for a 99-year lease.

"The pipeline of opportunity for its infrastructure services business, connecting renewable generation to the grid, is substantially greater and moving faster than we forecast at the time of acquisition," said Spark managing director Rick Francis.

Mr Francis said TransGrid was delivering in accordance with the business plan, including growing revenues in areas of business not covered by regulation. Those include the renewables connections operations, where returns are higher than for the regulated business, he added.

Transgrid is also proposing to build a new interconnector between NSW and South Australia that could help with SA's increased vulnerability to power interruptions. The line could cost cost up to $750 million.

The TransGrid deal also contributed a a 47.4 per cent increase in Spark's operating cash flow in 2016 to $305.6 million.

Spark, which is understood to be bidding for another NSW network owner, Endeavour Energy, alongside Hastings Funds Management didn't mention in its results presentation any plans for further acquisitions.

Net profit slid to $81.1 million from $88 million in 2015, while "underlying" net profit dropped 32 per cent, also to $81.1 million.

Spark put the decrease in profit mostly down to a lower share of profits from its 49 per cent-owned electricity networks in South Australia and Victoria, which have been operating under draft regulatory settings which have since been adjusted upwards. South Australia Power Networks and Victoria Power Networks will be able to recover additional revenues in future years.

JPMorgan analyst Mark Busuttil described the results as "broadly in line with our estimates".

Spark shares are 0.2 per cent lower at $2.35.

With the sun setting on the half-year reporting season, here are Deutsche Bank strategist Tim Baker's impressions:

1. Results modestly positive, and a strong profit rebound is confirmed. The tone of results has softened in recent days, following a robust start. Still, the picture is broadly positive. The beat/miss ratio is around average (51% vs 5-year average of 52%), while the proportion of companies with forecast upgrades is well above average (52%, vs 5-year average of 44%).
   Overall, December half earnings are 2% above expectations, and FY17F has been lifted by 1% (and lifted for each of resources, banks & industrials). The market response echoes this positive appraisal - some outperformance vs global markets, and a lack of big stock price moves. Perhaps most importantly, reporting season is confirming the earnings recovery - December half profits look to have grown by 17%.
2. The earnings picture outside of resources isn't too bad. The resources revival rightly gets most attention, but industrials and banks are grinding out some growth (5% and 1% respectively). And that earnings growth: (1) is better than the June half when earnings fell, and (2) has been upgraded a little during February, when the norm is downgrades.
3. Consumer trends look on the soft side. While some consumer-facing businesses have reported good growth (eg, JBH, NCK, KMD), that seems to be category- or company-specific. All the major REITs have reported a slow-down in specialty sales growth, and the growth rate is only 1-4%. The read-through on consumer demand from packaging and gaming stocks has also been subdued.
4. Resources have delivered the earnings, but share prices haven't responded. Earnings for resources look to be up 170% vs pcp, and that's 4% better than was expected a month ago. Yet miners' share prices haven't done much – they've actually de-rated quite heavily relative to the market. Perhaps this reflects profit-taking, or concern that commodity prices are peaking.
5. There has been little middle ground for high PE stocks this reporting season. Those with at least decent results have done very well (RMD, REA, SEK, CSL, CAR), while those that disappointed have de-rated heavily (BXB, JHX, DMP).
6. Rising margins continue to help industrials more than sales growth. Margins have been rising since hitting a decade-low in FY14, and look likely to rise again in FY17. But we don't want to overstate the weakness in sales growth. The median company is growing the topline by ~4% - the weighted average number is held down by large sales/low margin companies.