ASX slides on impeachment talk, geopolitics, Afterpay soars

That's it for the Markets Live blog for today.

As always, thanks for stopping by and all your comments, especially those who offered feedback. Keep them coming. 

My favourite comment today comes from 'Bennnbenn', who wrote: "APT: I’ve never been interested in this one. I believe it’s heavily exposed to risk. In saying that, I think Thomas25 deserves full credit for predicting the rise of this stock. I believe as an investor, it’s important to critique your own views before others and separate emotion and personal subjectivity from investment strategy. So I’ll concede that there’s probably a market for this and I might be wrong to think it was a dud stock. I’ll be interested to see it’s volatility and viability during the next downturn. Good work Thomas."

Credit where credit is due. Nice!

I'll be back here again tomorrow. Hope to see all then.

Weighed down by an escalation in trade tensions between the United States and China, political uncertainty surrounding Donald Trump and steep falls in commodity prices, Australian shares fell for a second consecutive session on Wednesday, recording the first back-to-back decline since the start of September.

The benchmark S&P/ASX 200 index slid 38.7 points, or 0.6 per cent, to 6710.2, dragged lower by weakness across the energy, resources and telecommunications sectors.

Following a large decline in crude oil prices overnight, the energy sector slumped 1.6 per cent. With base and bulk commodity prices also weaker, the materials sector was also under pressure, declining 1.2 per cent.

Despite continued falls in bond yields, telecommunications also endured a tough session with a fall of 1.6 per cent.

The losses elsewhere ranged from 0.2 to 1 per cent. Financials, the largest component in the index by market weighting, fell 0.3 per cent.

While most sectors finished in the red, there were some pockets of resistance, most notably from information technology. It managed to climb 1 per cent, helped in part by a surge in Afterpay Touch which rose 13.3 per cent to $36.00, closing at the highest close on record. Shares in the buy now, pay later provider were boosted by a broker upgrade from Goldman Sachs.

Along with the tech sector, gains of 0.4 and 0.6 per cent respectively from REITs and utilities helped to cushion the decline for the broader index.

With gold prices climbing on the back of lower bond yields, a weaker US dollar and lift in risk aversion, the S&P/All Ordinaries gold index also finished with a gain of 0.7 per cent.

The local market is on track to record its first back-to-back decline since early September with the S&P/ASX 200 down 0.5 per cent in late trade.

Information technology is up 1 per cent while utilities and REITs have added 0.6 and 0.5 per cent respectively, offsetting falls in all other sectors.

Energy, with a decline of 1.7 per cent, is leading the losses, closely followed by resources and telecommunications with falls of 1.4 and 1.2 per cent.

Afterpay remains the standout performer for the session, sitting up 12.9 per cent to $35.87, leaving it on track to close at fresh record highs. Bravura Solutions has also risen 4.5 per cent to $4.325.

Beach Energy is the largest decliner on the index, sliding 6.1 per cent to $2.525.

Global bond yields have fallen sharply this year, hitting unprecedented lows in some circumstances, including in Australia.

AMP Capital’s head of investment strategy and chief economist Shane Oliver says the continued decline in yields, not only this year but over recent decades, has proven to be a boon for growth assets over this period.

“Shares and growth assets have literally climbed a wall of worry this decade with a revolving door list of worries around public debt, the Eurozone, deflation, inflation, rate hikes, Trump, North Korea, China, trade wars, growth and house prices,” Mr Oliver said in note. “But returns benefitted from the recovery after the GFC and a search for yield as interest rates have collapsed depressing yields on most assets.”

However, with yields so low, or negative in some developed nations, Mr Oliver says investors will need to re-adjust their expectations for returns in the period ahead.

“It’s basic to investing that the price of an asset moves inversely to its yield all other things being equal. But as yields decline it means a lower return potential going forward,” he said. “Low yields and constrained GDP growth indicate it’s not reasonable to expect sustained double-digit or even high single-digit returns.”

While the Reserve Bank of New Zealand (RBNZ) kept interest rates unchanged today, economists don’t believe it will stay that way for long with most predicting the cash rate will be reduced again when the bank next meets in November.

“Although the RBNZ offered a contingent easing bias and a balanced outlook one-year out, we retain our 25 basis point cut to 0.7 per cent in November,” TD Securities senior Asia-Pacific rates strategist Prashant Newnaha said in a note. “We see downside risks to domestic growth and susceptibility to weaker offshore conditions as likely catalysts for a November cut.”

Kiwibank chief economist Jarrod Kerr is also forecasting a rate cut in November. However, he thinks that may not be the last cut in the current easing cycle.

“We assign an uncomfortably high probability of a move to 0.5 per cent at 40 per cent,” he told clients. “The direction of change has been down and remains weighted heavily to the downside.”

Mirroring similar calls in Australia, Mr Kerr said monetary policy stimulus alone is unlikely to see the RBNZ achieve its full employment and inflation objectives.

“What’s missing is not a monetary policy response, it’s fiscal,” he said. “It’s high time for the government to inject much needed investment. We will get more monetary stimulus. But what’s needed is expansive fiscal policy.”

So I’m new to blogging, meaning I’m learning in real-time in this forum.

If you have any suggestions on how it could be improved, feel free to email me, tweet me or leave comments on the site.

All l feedback is welcome, whether positive or negative. I have a thick skin.

David. 

Regional markets are trading lower midway through the session, continuing the selloff in the US seen overnight. However, as a few of you have already pointed out, there’s been some dip-buying in US futures in Asia, indicating the latest slide may not last.

The steepest declines have been seen in small cap stocks in China with the CSI 500 (small caps listed in Shanghai and Shenzhen) down 1.3 per cent while the tech-heavy ChiNext Composite has shed 1.4 per cent.

Large cap stocks are faring better with the benchmark Shanghai Composite down 0.6 cent. The SSE 50 – the largest of the large firms listed in Shanghai – is only down 0.2 per cent.

Elsewhere, the Hang Seng in Hong Kong has fallen 1 per cent with smaller falls of between 0.6 to 0.8 per cent seen in Singaporean, Taiwanese and South Korean markets.

The Topix in Tokyo is weathering the latest selloff well, sitting down only 0.2 per cent with 90 minutes left to trade.

Following the RBNZ’s decision to keep interest rates unchanged in September, the NZX 50 in New Zealand is flat.

After the physical index slid 0.8 per cent overnight, US S&P 500 futures suggest a modest rebound may be in order this evening. They’re currently up 0.2 per cent.

Wesfarmers managing director Rob Scott will take home $6.75 million in pay for the 2019 financial year after receiving 86.6 per cent of all available remuneration bonuses.

Mr Scott’s base pay came in at $2.35 million, but the director will pocket an additional $3.91 million through Wesfarmers’ Key Executive Equity Performance Plan (KEEPP).

However, despite these hefty benefits, Mr Scott’s pay was only slightly up on the year prior, due to changes in the company’s issuance of long and short-term incentives following the demerger of Coles last year.

Bunnings managing director Michael Schneider also pocketed a significant amount of bonuses, receiving $2 million in share-based payments on top of his $1.39 million salary.

The Perth-based retailer also announced the retirement of non-executive director Tony Howarth, one of the company’s longest-serving board members.

“To me Wesfarmers embodies the best of a capitalist society by providing an opportunity to invest in an organisation which has long term shareholder interest at its core, supported by outstanding management and a genuine desire to do the right thing by its stakeholders,” Mr Howarth said in a statement.

The public float of Latitude Financial could be a go as early as tomorrow with the three current shareholders KKR, Deutsche Bank, and Varde Partners expected to meet no later than Monday to make the final decision on its second float attempt in two years.

The company, Australia’s largest non-bank lender, forecast a cash net profit of $278.1 million for this year in broker reports that were presented to potential investors ahead of the prospective initial public offering which is expected to value the group at up to $4 billion.

A prospectus is expected to be made available as soon as a decision is made by investors - assuming they all vote for another IPO attempt.

Latitude, formerly known as GE Money, makes about half its operating income from instalment loans, with most of the remainder coming from personal loans, car loans and credit cards. It has more than 2.6 million customers and about 1600 full-time staff, with a distribution network across more than 1950 merchant partners.

It's all happening in Bass Strait. Fresh from announcing it wants to sell its portfolio in the turbulent waters off southern Victoria, Esso Australia has sealed a deal with AGL to supply 50 petajoules of its output from the field.

The deal, announced on Wednesday morning to the ASX, will run from two years from 1 January, 2021. AGL did not disclose the value of the contract which it said would help it supply its domestic customers.

The order is not the first time in recent time that AGL has said it'd like more supply from the Esso / BHP joint-venture's wells. In May, AGL announced it had signed a deal for 78 petajoules of Bass Strait gas from BHP Billiton.

Wednesday's announcement reiterates AGL's commitment to building a new gas import jetty just up the road nearer Melbourne. That project has suffered delays over environmental approvals meaning it is unlikely to take its first deliveries until early 2023.