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The ASX is rallying hard but hundreds of millions have been wiped off the aged care sector.

Stocks were set to open higher, following Friday’s rises on Wall Street.

• Estia halved in value in 6 days
• Telstra hits back at ACCC
• Blue-chip comeback
• Woodside to buy BHP gas assets

Welcome to the BusinessNow blog for Monday, September 5. Blue-chip stocks are in the black, while aged care stocks are in a world of pain after the government updated fee payment guidelines. Elsewhere, Woodside is buying some of BHP’s gas assets and services sector activity is at a two-year low.

8.58pm:Oil price rallies on co-operation hopes

Oil prices rallied on Monday on hopes of greater co-operation between major oil producers but gave up some of the gains as investor’s questioned the likelihood of any plans gaining traction, Dow Jones reports.

Brent crude, the global oil benchmark, rose 2.5 per cent to $US48.11 a barrel on London’s ICE Futures exchange after rallying more than 5 per cent in earlier trade. West Texas Intermediate futures, the US crude benchmark, were trading up 2.4 per cent at $US45.52 a barrel.

Speaking ahead of a meeting between major oil producers later this month, Saudi and Russian energy officials agreed to form a working group to monitor the market. The talks between the two heavyweight suppliers fuelled hopes that major producers will agree to an output freeze amid concerns about the persistent glut in the market.Read more.

8.11pm:Russia, Saudi Arabia sign oil MOU

Riyadh and Moscow have signed a memorandum to achieve stability in the oil market, in a move Russia’s engery minister has labelled a historic moment and a turning point for the countries. Both countries are optimistic the decision will spur a broader consensus ahead of OPEC’s next meeting. Dow Jones

7.16pm: Eurozone momentum slips, ECB eyed

A closely watched survey is showing that the 19-country eurozone is losing some economic momentum and that its largest economy, Germany, is at the heart of the slowdown.

Financial information company IHS Markit says its purchasing managers index - a broad gauge of economic activity - for the eurozone fell to a 19-month low of 52.9 in August from 53.2 the previous month. The fall was unexpected as the initial estimate for August was 53.3.

Anything above 50 still indicates expansion and IHS Markit says the August reading is pointing to quarterly economic growth of 0.3 percent.

The firm’s chief economist Chris Williamson says Monday the survey was “clearly disappointing” and that it may fuel expectations of a further stimulus package from the European Central Bank this week. AP

6.28pm:Stock picks for value seekers

Reporting season is over and it’s time to move on, writes David Walker.

The All Ordinaries Index has corrected some 200 points from its peak of 5,692 on August 1 and value investors who patiently stood aside during the buoyant market conditions of August will now be looking for ideas to add to the portfolio if the correction extends. The odds favour this because equity index volatility fell to historic lows last month so is very unlikely to fall further. Read more.

5.35pm:JB Hi-Fi set to buy The Good Guys next week

Electronics retailer JB Hi-Fi is on course to purchase The Good Guys next week in a deal expected to fetch between $850m and $900m, according to sources.

The competition watchdog recently cleared a path for the acquisition and fund managers are bracing for a $300m raise to fund the purchase.

The move was earlier foreshadowed by The Australian’s DataRoom section.

5.01pm:Blue-chips bargain hunters swoop

Investors swooped on beaten-up market majors today, pushing the local market to its best session in almost two months, despite aged care stocks finding themselves in a spectacular meltdown.

At the close the S&P/ASX 200 was 1.1 per cent higher for the day at 5429.6 points, which makes it the best day since July 11.

Aged care names made for jaw-dropping viewing as investors continue to flee following a serious earnings miss from Estia Health last week along with the unexplained departure of founder Peter Arvanitis.

In the last six days Estia has slumped 43.5 per cent, with 11.8 per cent wiped off the stock today. Regis Healthcare lost 16.7 per cent and Japara Healthcare dropped 14.7 per cent.

All three recovered throughout the session after diving between 22 per cent and 31 per cent at the open.

Major banks and miners were the heroes of the day after selling off during last week’s 2.6 per cent ASX 200 fall, with CBA bouncing back 2 per cent, Westpac lifting 1.7 per cent, ANZ adding 1.5 per cent and NAB gaining 1.8 per cent.

BHP Billiton jumped 2.5 per cent, Rio Tinto rose 1.5 per cent and Fortescue Metals shot up 3.7 per cent after the price of iron ore regained 0.9 per cent in the last session.

Telstra rallied from a slightly negative start to end 0.6 per cent higher for the day, while CSL closed flat.

3.59pm:Grilling on Dick Smith demise

A public examination into the demise of fallen electronics retailer Dick Smith has begun at the NSW Supreme Court in Sydney.

Former Dick Smith company secretary and head of investor relations, David Cooke, was among the first to appear in court on Monday morning.
Read the whole story

3.51pm:Don’t expect an RBA move tomorrow

The Reserve Bank is likely to hold its benchmark interest rate steady at tomorrow’s meeting, with the main focus set to be on potential signals of future moves.

All 13 economists surveyed by AAP expect the cash rate to be held at its all-time low of 1.5 per cent when the central bank’s board meets on Tuesday. The futures market indicates the chance of a rate cut is just five per cent. The RBA has cut interest rates twice in the past four months in a bid to boost sluggish inflation.

2.58pm:Triple-A rating remains on a knife’s edge

A major global credit ratings agency has again expressed concerns about Australia’s ability to repair the budget in the face of a “splintered Senate”.

Prime Minister Malcolm Turnbull and his cabinet have their work cut out in reducing the budget deficit.

However, Moody’s Investors Service says Australia’s triple-A rating remains supported by sustained robust growth, even as the economy adjusts to dampened revenue due to lower commodity prices.

Figures on Wednesday are expected to show annual economic growth remaining above a solid 3 per cent pace, even though over the June quarter expansion is expected to be much slower than in the first three months of the year.

Moody’s says while Australia’s government debt burden is moderate compared to similarly rated peers, the Turnbull government will face challenges in narrowing the budget deficit at the pace envisaged in the May budget.

2.20pm:Aged care’s $420 million day

Over $420 million has been wiped off Australia’s listed aged care stocks today as investors dump Estia, Regis and Japara in spectacular fashion.

The snowball has been building since last week when Estia produced a serious miss to earnings estimates and founder Peter Arvanitis inexplicably resigned and sold his 10 per cent stake.

The whole sector has been slammed as a result but Estia is now half the size it was six days ago.

At 2:10pm AEST Estia shares are down 16.2 per cent, recovering from a much larger fall early, which represents a dollar-figure fall of around $100 million.

Japara is down 19.1 per cent, or around $102 million, and Regis, which is the largest by market cap has seen 16.4 per cent, or $219 million walk out the door.

Worth mentioning is that all this is going on during the ASX’s best day in almost two months. The local index is 1 per cent higher with less than two hours remaining in the session.

2.07pm:MG reviews dairy scheme

Milk processor Murray Goulburn is reviewing its controversial support package for dairy farmers after admitting the program has disappointed its suppliers and is testing their loyalty.

MG’s support package has disappointed its suppliers.

Murray Goulburn chairman Philip Tracy released a letter to Murray Goulburn supplier-shareholders today acknowledging the problems in the Milk Supply Support Package (MSSP) that was designed to claw back loans made to farmers after a shock cut to farm gate milk prices in April.

“Since its introduction it has become very clear that the MSSP is not considered by suppliers to have addressed their most significant concerns and is potentially proving counter-productive from the perspective of their continued loyalty,” Mr Tracy writes in the letter.
AAP
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1.57pm:Job ads rebound in August

Job advertisements have rebounded, suggesting the unemployment rate may fall over the next year.

Job ads on the internet and in newspapers jumped 1.8 per cent in August, after slipping 0.8 per cent in July.

In the year to August, job ads were up 8 per cent, figures from ANZ show. ANZ head of Australian economics Felicity Emmett said the bounce was an encouraging sign that labour market conditions are firming.
AAP
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1.42pm:BoJ rules out stimulus reduction

Bank of Japan Governor Haruhiko Kuroda has ruled out a stimulus reduction, emphasising instead his resolve to undertake additional easing measures as long as their economic benefits outweigh their drawbacks.

“A reduction in the level of monetary policy accommodation, which is being called for by some market participants, will not be considered” through a policy review due for release at the coming policy meeting September 20-21, Mr Kuroda said in prepared remarks for a seminar.
Dow Jones

1.23pm:Palmer faces grilling over Queensland Nickel

Clive Palmer ordered “major adjustments” to Queensland Nickel’s financial statements the year before it collapsed, to increase the value of the refinery and slash its environmental liability.

Mr Palmer denies he acted as a shadow director. (AAP Image/Dan Peled)

Former QN chief financial officer Daren Wolfe told the Federal Court that a draft budget prepared in August 2015 contained some big changes to previous years.

Both were ordered by Mr Palmer, the ultimate shareholder of the company but not a director at the time.
Sarah Elks
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12.40pm:Amcor jumps on North America deal

Amcor has been given a pat on the back by analysts, and the market, following news the paper and packaging giant struck a deal to buy North American business Sonoco Products for $US280 million.

Deutsche Bank analysts today boosted their rating on Amcor to ‘buy’ from ‘hold’ and raised the 12-month price target by 5 per cent to $17.35.

“We view the acquisition of Sonoco’s diversified products business for US$280m to be positive for Amcor as we estimate it will be EPS accretive by 3.5 per cent, generate a pre-tax return on capital of 16.6 per cent, and it is complementary to Amcor’s existing diversified products business,” Deutsche Bank analysts led by Mark Wilson said.

Investors agree, with the shares jumping 2.9 per cent today to $16.30, within reach of the three-month high of $16.50 they hit back on August 26.

Analysts are generally positive on the stock, with Bloomberg data showing six buy ratings, six hold ratings and two sells, and a consensus 12 month price target of $16.51. 

12.23pm:Company profits rise 7%

Australian company gross operating profits rose 6.9 per cent in the second quarter from the prior quarter, the Australian Bureau of Statistics said.

Company profits were unchanged on the corresponding quarter a year earlier.

The value of inventories, or stocks, held by Australian companies rose 0.3 per cent in the second quarter from the prior quarter, the ABS said.
Read more

12.05pm:Stocks on track for best day in weeks

Aussie stocks are on track for their best day in almost two months as blue chips rip higher, more-than offsetting a complete meltdown from aged care stocks.

At midday the S&P/ASX 200 was 0.9 per cent higher at 5422.6 points. Despite being a fairly modest rise it will be the strongest day the market has seen since July 11, which goes to show how flat earnings season was!

The market is mopping the floor with Estia Health, Japara and Regis Healthcare, which are down 24.8 per cent, 22.6 per cent and 16.6 per cent respectively. Estia has halved in value in six days.

The big four banks are all between 1.3 and 1.5 per cent higher, while BHP jumps 2.6 per cent and Telstra swings positive after a flat start to trade 1.4 per cent higher heading into lunch.

11.53am:Former Westpac exec joins start-up

Former Westpac and Commonwealth Bank CIO Bob McKinnon has become chairman of shopper engagement start-up Sprooki as it readies itself for an ASX listing.

Mr McKinnon, who has had more than 40 years of experience in business and technology including stints as CFO of MLC and Lend Lease, said Sprooki’s innovative platform instantly piqued his interest.

Sprooki was founded in Singapore in 2011 by Australians Claire Mula and Michael Gethen, and is already used across several major shopping centres and by thousands of retailers in South East Asia.
David Swan
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11.35am:Estia halved in six days

Estia Health has now lost 51 per cent of its value in six days.

The aged care provider, which is now worth around $484 million – compared with double that last week – has tanked another 23 per cent today and earlier hit a record-low $2.17 a share.

The company has been smashed every day since producing a significant miss to earnings guidance, and the departure of founder Peter Arvanitis and his subsequent dumping of his holdings has seen the selloff turn into a wipeout. Its shares are under renewed pressure after the government announced updated guidelines for charging additional fees in residential aged care.

Fellow aged care company Japara Health is also taking a hammering today, down 22.3 per cent to a record-low $1.58.

11.08am:FIRB chairman joins The Carlyle Group

Foreign Investment Review Board chairman Brian Wilson has been appointed senior advisor to The Carlyle Group’s Asian buyout team.

Brian Wilson will advise The Carlyle Group’s Asian buyout team.

Mr Wilson is currently the chairman of the Australian Foreign Investment Review Board, Chancellor of the University of Technology Sydney, a non-executive director of Bell Financial Group and a member of the Payments System Board of the Reserve Bank of Australia.

Mr Wilson will advise the Carlyle team and company executives for the private equity firm’s portfolios on key trends, support investment due diligence and serve on company boards for its portfolios.

He becomes part of a group of 30 senior business executives who have been engaged as consultants to help Carlyle invest wisely and create value across a range of industries.

Mr. Wilson has more than 30 years of financial markets experience.
Bridget Carter
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10.55am:Telstra hits back at ACCC

Telstra has wasted little time in hitting back at the Australian Competition and Consumer Commission’s decision to mull the prospect of regulating access on mobile networks, with the telco warning that such a move will have a chilling effect on network investment.

As Supratim Adhikari reports, the competition regulator has initiated an inquiry into whether or not to declare a wholesale domestic mobile roaming service. If granted, the measure would allow mobile service providers to provide coverage for their customers in areas where they don’t have their own network.

However, the incumbent telco said that such a declaration would remove any incentive for current mobile operators to invest in increasing their coverage in regional areas.
Read more

10.33am:Blue-chip comeback, aged care bleeds

After a horror week the local market is back up and about today, with investors diving into beaten-up blue chips.

The local market has lifted in early trade.

At just before 10:20am AEST the S&P/ASX 200 was 0.8 per cent higher at 5415.4 points. The index tumbled 2.6 per cent last week — its worst effort for 10 weeks.

BHP Billiton took centre stage with a 2.2 per cent rise, a healthy beat on what its ADRs suggested, while Rio Tinto rose 1.2 per cent and Fortescue Metals shot up 3.8 per cent.

The big four banks did plenty of the heavy lifting, with CBA gaining 1.2 per cent, Westpac growing 1.5 per cent, NAB adding 1.4 per cent and ANZ gaining 0.8 per cent.

Telstra shares slipped 0.1 per cent, while CSL gained 0.4 per cent.

The aged care sector is in meltdown mode after the government updated fee payment guidelines, with Estia tumbling another 26 per cent after missing profit guidance last week and waving goodbye to its founder, who promptly sold his 10 per cent stake. Japara has been smashed 24.5 per cent, and Regis is down a whopping 18.2 per cent..

On the brighter side of things, gold miners have jumped today, with the price of the precious metal up 1.2 per cent in three days. Evolution, Regis Resources, St Barbara and Northern Star have all gained more than 4.6 per cent.

10.20am:Woodside to buy BHP gas assets

Woodside Petroleum has agreed to buy half of BHP Billiton’s Scarborough natural gas assets in the Carnarvon Basin offshore Western Australia.

As Matt Chambers reports, the purchase was not on many pundits radars, given the big, ExxonMobil-run field, and some smaller nearby ones, are generally thought to have little chance of near or mid-term development in the current market.

Woodside will pay $US250m to BHP when the transaction is completed, and a contingent payment of $US150m if an investment decision is made to develop the Scarborough field.

10.15am:Morgans cuts Woolies rating

A week after Woolworths’ ugly full-year loss of over $1 billion was announced, and shares surged to a 10-month high on encouraging turnaround talk from CEO Brad Banducci, Morgans analysts have axed their rating on the stock to ‘hold’ from ‘add’.

Morgans has cut its rating on Woolworths

Woolies unveiled a 43 per cent drop in net profit after tax, which was expected by the market, and investors chose to see light at the end of the tunnel, pushing shares sharply higher.

And while Morgans says Woolies is “close to the bottom … earning will be constrained for a period yet”.

“Evidence that new initiatives are working reduces downside risk in our view but we don’t see much valuation upside as any gains are likely to be reinvested to keep up with a very competitive environment,” Morgans analysts, led by Simon Dumaresq, said.

“While Woolworths faces considerable implementation risks over the next two-to-three years, the new plan by CEO Brad Banducci looks sensible to us and appears to have decent prospects of returning the company to profit growth from FY18.”

Translation: Good luck, but you’ve got a mountain to climb and we’re out.

Food and liquor sales growth

10.07am:Aged care under pressure

Aged care stocks are getting slammed after the government updated fee payment guidelines.

Shortly after the market open, Estia Health, Japara Healthcare and Regis Aged Care had all crashed more than 20 per cent.

As Sarah-Jane Tasker reports, Estia and its listed rivals Japara Healthcare and Regis Aged Care, already under pressure because of federal government cuts to aged care funding, have hit a new hurdle following Friday’s announcement of updated guidelines for charging additional fees in residential aged care.

The Department of Health outlined in its update on additional fees for aged care residents that they would not be supported by the legislation where the fee did not provide a direct benefit to the individual or the resident cannot take up or make use of the services, or where the activities or services subject to the fee were of the normal operation of an aged care home and fall within the scope of specified care and services.
Read more

9.57am:ACCC mulls regional mobile roaming

The Australian Competition and Consumer Commission (ACCC) is mulling the prospect of regulating access on mobile networks, with the regulator initiating an inquiry into whether or not to declare a wholesale domestic mobile roaming service.

If granted, the measure would allow mobile service providers to deliver coverage for their customers in areas where they don’t have their own network.

According to the ACCC, the inquiry is designed to expedite delivery of mobile services to regional areas that have traditionally been undeserved and had no options other than Telstra.
Supratim Adhikari
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9.47am:Services sector activity at two-year low

Activity in the Australian services sector has contracted, falling to its lowest level in almost two years and sounding a sobering warning about the fragility of the economy.

The Australian Industry Group’s Performance of Services Index (PSI) fell 8.9 points to 45.0 points in August, below the 50 point level that separated expansion from contraction.

The last time the index was that low was in November 2014.
AAP
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9.35am:Broker rating changes

Woolworths cut to ‘hold’ from ‘add’ at Morgans

Icar Asia raised to ‘add’ from ‘hold’ at Morgans

Spark Infrastructure raised to ‘equalweight’ at Morgan Stanley

Super Retail Group cut to ‘underperform’ from neutral at Credit Suisse

Huon Aquaculture raised to ‘outperform’ from neutral at Credit Suisse

9.10am:Leaders and laggards

Today could see some much-needed relief for local investors, who last week battled through the worst week on the ASX 200 since mid-June as falling commodity prices, and a general feeling the market could be overpriced, drove the index deep into the red.

READ: Australia Inc is in the doldrums — Stephen Bartholomeusz

The SPI200 futures index is pointing to a 0.7 per cent rise at the open, but fair value suggests a 0.4 per cent gain is more likely.

Keep an eye on BHP Billiton today — the mining giant’s ADRs point to a 1.9 per cent rise today after the price of iron ore bounced 0.9 per cent to $US59.39 in the last session.

The local index dropped 2.6 per cent last week, which is the worst weekly run since June 17.

Below are last week’s biggest leaders and laggards. As you can see healthcare stocks took a beating after Estia missed guidance and founder Peter Arvanitis quit and sold his 10 per cent stake.

But Ramsay shone as its profit numbers were well received; the shares jumped 7 per cent in the week, while Austal rocketed 23.5 per cent.

Source: Bloomberg

8.49am:Investors back wound treatment

Australian biotech QBiotics is on track to progress trials for a new wound-healing gel — developed from a plant from a north Queensland rainforest — to treat diabetic ulcers after investors backed its latest funding round.

QBiotics, which is chaired by Cochlear and ASX chairman Rick Holliday-Smith, was seeking $10 million from private investors but has already raised $13m, with the funding round open until the end of the week.

Chief executive Victoria Gordon said the new product re-initiated the wound-healing response of the body.
Sarah-Jane Tasker
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8.25am:CSL in court over royalties spat

Biotech giant CSL has been taken to court in the US accused of failing to pay royalties on a key drug used to protect transplant patients from life-threatening disease.

As Eli Greenblat reports, a lab linked to the University of Massachusetts and a non-profit community centre called Third Sector New England have taken court action against CSL in Massachusetts claiming that the blood plasma group threatened to stop paying them royalties on a plasma treatment called ­CytoGam.

University of Massachusetts Biologic Laboratories (MassBiologics), together with Third Sector, are seeking the court to declare the Melbourne-based CSL has a “continuing contractual obligation’’ to pay royalties to the pair for the FDA-approved CytoGam product as detailed in its contract.
Read more

8.13am:Poly hunts for Melbourne assets

Poly Australia, the local arm of Shanghai-listed Poly Real Estate, has revealed its ambitions to acquire prime office assets in Melbourne after completing the purchase of two buildings in

02/09/2016: Philip Best, marketing director of Poly Real Estate Australia.

Sydney’s CBD, where it plans to develop a major tower.

The company, which is beefing up its acquisition capacity with the appointment of a new acquisitions director, will also evaluate more residential projects in Melbourne after losing out in the contest for the Telstra tower earlier this year.

It will open an office in Melbourne this year as it seeks to further these plans, which build on its investments in South Yarra and Docklands apartment projects.
Maggie Lu Yueyang
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8.03am:Dollar lifts after US jobs data

The Australian dollar is higher on the back of a disappointing US jobs report.

At 7.08am (AEST), the local unit was trading at US75.70c, up from US75.39c on Friday.

Westpac senior market strategist Imre Speizer said the US payroll report released on Friday night, which showed lower-than-expected jobs gains and weak hourly earnings growth, pushed the greenback lower.

7.10am:Stocks set for higher start

The Australian market looks set to open higher after Wall Street advanced as a weaker-than-expected payrolls report dampened expectations of a September Federal Reserve interest rate rise.

At 6.45am (AEST), the share price index was up 35 points at 5,383.

In equities news, Dick Smith executives face a Supreme Court hearing into their role in the business’ demise.

In Australia, the market on Friday closed lower, pulled down by the health care and financial sectors.

The benchmark S & P/ASX200 index fell 42.8 points, or 0.79 per cent, to 5,372.8 points.

The broader All Ordinaries index was down 40.6 points, or 0.74 per cent, at 5,470.6 points.

AAP

6.55am:Iron ore firms amid bearish mood

The iron ore price has bounced back from a string of recent declines, despite a fresh warning that the commodity’s current level is unsustainable.

Iron ore rose 1 per cent to $US59 in the most recent session, from $US58.40 the previous day, according to The Steel Index.

Read more

6.45am: Dollar higher

The Australian dollar at 6.35am (AEST) was trading at US75.73c, up from US75.39c on Friday.