Aussie stocks rebound despite ‘retail apocalypse’ warning and bumpy ride on Wall Street

Australian stocks have endured another volatile week, finishing slightly up as poor jobs data is balanced against a relaxation of coronavirus restrictions.

The whipsaw action on the Australian share market has continued for a fifth straight day of back-and-forth action.

After rising Monday, falling Tuesday, rising Wednesday and falling again Thursday, the S&P/ASX200 benchmark index finished Friday up 76.1 points, or 1.43 per cent, to 5,404.8 points, while the All Ordinaries index was 74.8 points higher, or 1.38 per cent, at 5,492.8.

All up for the week the ASX was up 0.2 per cent, with miners spearheading the recovery on Friday, as both Xero and Afterpay slumped, down 5.6 per cent and 1.1 per cent respectively. BHP rose 3.5 per cent to $31.67 and Rio Tinto was up 2.5pc to $85.36.

Local focus continues to be on bids for Virgain and Westpac as it lodged its defence of money laundering claims.

The ASX has had another rollercoaster week. Picture: AAP

The market continues to be adversely affected by poor jobs data at home and in the US, that has been balanced by the easing of health restrictions in Australia.

The Australian dollar was buying 64.49 US cents, up from 64.37 US cents at the close of trade on Thursday.

Earlier in the day, the Australian Stock Exchange rebounded in opening trade, after Wall Street rallied late on another day of volatile trading.

On the local bourse, shares were up 1.1 per cent in the first half hour of trading. Gains were seen across all sectors except for consumer staples. The positive start to trading on Friday came despite warnings of a ‘retail apocalypse’ in America, as the COVID-19 epidemic dramatically accelerates the decline of bricks and mortar retailing.

The ASX was up 59 points in early trade to 5387, bouncing back from yesterday’s loss of 1.7 per cent. BHP has led the way with a gain of 2.2 per cent, while all of the major banks are up around 1.5 per cent.

WARNING OF GRIM FUTURE FOR RETAIL

Australian retailers have been warned of a grim future for bricks and mortar trading with 100,000 stores expected to be killed off in the US by a combination of Amazon and the coronavirus.

A report by Wall Street analysts UBS also forecasts 100 malls to close across America as the ongoing pandemic leads more shoppers in lockdown to continue buying online.

And those shoppers who do feel brave enough to go to stores are likely to get in and out quickly, rather than linger and browse.

“Even when stores do open, it may take a while before people will regain their confidence about being safe in crowded places,” UBS analysts Michael Lasser and Jay Sole said in a note to clients.

Empty shops and malls are the result of online shopping and virus lockdowns. Picture: Getty

Clothing, electronics and home furnishings stores would be affected the most if online shopping increased to 25 per cent of retail sales up from its current 15 per cent, leading to the closure of malls which would be redeveloped for residential and other more profitable.

In May alone, major retailers with 2500 stores and 120,000 employees have closed down.

Retailers fear few people will return when lockdowns ease in the US. Picture: AP

“If this isn’t the retail apocalypse I don’t know what would be,” Sarah Wyeth, the lead analyst for retail and restaurants at S & P Global Ratings, told the Wall Street Journal.

In broader employment news, the government said another 3 million people filed new applications for jobless benefits last week – taking the total to 36 million claims in eight weeks.

Several states are struggling under the weight of the demand with more than half of the applicants saying their claims have been turned down, according to the New York Times.

Australian retailers have been hit hard by COVID-19. Picture: Tim Hunter.

The jobless update came a day after the Federal Reserve chair, Jerome H. Powell, warned that the United States was experiencing an economic hit “without modern precedent” and risked long-term damage if government did not do more to prevent long-term joblessness.

Stocks swung between slight and sharper losses Thursday, as Wall Street’s hopes for a quick economic bounceback faded to grim doubts that it would happen in the foreseeable future.

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Stocks fell heavily in New York before rebounding to close slightly higher. Picture: AFP

The S & P 500 dropped to a quick loss of 1.9 per cent in the morning, only to bounce back and finish slightly higher.

Stocks in Asia and Europe fell to sharper losses, while Treasury yields sank in a sign of increased pessimism.

Another possible flare-up in tensions between the world’s largest economies is also hitting markets, with comments from President Donald Trump about China further weighing on them.

“The market was perhaps overly optimistic, and this is a reality check,” said Mark Hackett, chief of investment research at Nationwide.

“Things are pretty lousy, and we don’t have a very clear trajectory of reopening.”

Markets were down around the world. Picture: AFP

The volatile Australian share market plunged 1.7 per cent at the close.

The S & P/ASX200 benchmark index finished down 1.72 per cent, while the All Ordinaries index closed 1.74 per cent lower.

The ASX hopes to finish the week in positive territory. Picture: AAP

“It truly seems like we’re having a turnaround in sentiment on almost a daily basis,” said IC Markets general manager Nick Twidale in Sydney.

“We’ve seen a lot of gloom and doom from the central banks … but I’m not too despondent even though we’re having a bad day.”

GOOGLE SENDS SOARING REVENUE OFFSHORE

Google Australia’s revenue soared by another $600 million in 2019 to $4.8 billion, with most of that sent to its corporate cousins in low-taxing Singapore.

However, the internet search and advertising giant’s accounts do show it had to make a $50 million catch-up tax payment following an earlier “under provision”.

Notes attached to the accounts filed with the Australian Securities and Investments Commission on Thursday disclose that about $3.6 billion of last year’s revenue was transferred offshore, up from $3.1 billion in 2018.

“The Group reports revenue from advertising and other services sales net of associated direct cost of sales, as the performance obligation is to facilitate the sale of advertising between Google Asia Pacific Pte Ltd and the advertiser, for which the Group earns a commission,” said Google Australia, referring to itself as the “Group”. Google Asia Pte Ltd is based in Singapore, which has a company tax far lower than Australia’s 30 per cent.

Once those payments were stripped out, Google Australia was left with revenue of $1.24 billion versus $1.07 billion in 2018.

Its Australian expenses rose faster than revenue, meaning gross profit declined to $134 million from $156 million.

Its tax bill was $100 million, including the $50 million for the previous under-provision, meaning net profit shrank to $34 million from $129 million.

A Google Australia spokeswoman said it “invested almost $1 billion” in its Australian operation in 2019.

Google’s local expenses are set to increase in the future due to having to pay Australian media businesses for news content under a world-first code being developed by the Australian Competition and Consumer Commission.

Originally published as Aussie stocks rebound despite ‘retail apocalypse’ warning and bumpy ride on Wall Street