Trading Day: live markets coverage; ASX recovers ground, closes flat; plus analysis and opinion

The local sharemarket pared losses to close little changed, while Solomon Lew issued an ominous warning to Myer’s new chairman.

Solomon Lew has a win at the Myer AGM.

Welcome to the Trading Day blog for Friday, November 24.

Samantha Woodhill 4.35pm: Stocks recover ground to close flat

The local sharemarket finished the session flat amid a lack of direction from Wall Street due the Thanksgiving public holiday and despite solid gains in commodity prices.

At the close of trade, the benchmark S&P/ASX200 was down 3.595 points, or 0.06 per cent, at 5982.6 points. The broader All Ordinaries index was down 4.397 points, or 0.07 per cent, at 6063.1 points.

Investors put money in defensive stocks while IT and industrials weighed on the market, ASR Wealth Advisers equities analyst Tumul Sinha said.

“Without any lead from the US market overnight, due to Thanksgiving holiday, the Australian market opened in the red this morning despite the key commodities like iron ore and crude oil noting positive gains,” he said.

“The market bounced back in the afternoon session with consumer staples gaining, however it was still dragged down by information technology and industrials.”

Woolworths put on 0.42 per cent to $26.31 while Wesfarmers added 0.75 per cent to $43.21.

In financials, NAB lost 0.61 per cent to $29.56, Commonwealth Bank shed 0.38 per cent to $80.57, Westpac drooped 0.32 per cent lower to $31.51 and ANZ lowered 0.65 per cent to $28.88.

Iron ore miners made slight gains after a 1.4 per cent surge in the price of iron ore to $US66.50 a tonne, up 13.7 per cent from the beginning of the month and 6.7 per cent from Monday.

Eli Greenblat 3.45pm: Tagliaferro part of the problem: Lew

Retail billionaire Solomon Lew has issued an ominous warning to new Myer chairman Garry Hounsell and his fellow directors that “their time was up” and that “change is on the way”, with the department store’s biggest shareholder claiming his success in handing Myer a ‘first strike’ on its remuneration report was just round one.

But Mr Lew also widened his attack to target veteran fund manager Anton Tagliaferro whose Investors Mutual fund is Myer’s second biggest shareholder and who did not support Mr Lew’s bid to vote down all resolutions at the AGM this morning including rejecting the election of three directors.

In a savaging of Mr Tagliaferro’s investment performance, he said he had lost $55 million on his stake in Myer — which was worse than Mr Lew’s Premier Investments — and that his own shareholders would judge the fund manager on that.

Mr Lew said Mr Tagliaferro was now part of the Myer problem, and then revealed Investors Mutual tried to sell its stake to Premier Investments, taking cash or Premeir scrip for the sale.

“If Mr Tagliaferro had voted with Premier, Mr Hounsell and the other two directors would have probably not got on the board today, as a result he is, Mr Tagliaferro, is part of the Myer dismal performance and any disappointment to come in the future, I’m sure his investors and super funds would not be happy as he is losing more dollars for his funds than Premier,’’ Mr Lew said.

“I calculate his loss at about $55 million.’’

More to come

David Swan 2.55pm: Apple’s new megastore

Apple has picked one of the biggest days in Australian retail — Black Friday — to open its giant new redesigned Chadstone store, a huge space three times the size of its predecessor.

The new outlet is Apple’s first new store design in Australia, boasting 4.2m tall bronze pivot doors, a ‘Genius Grove’ filled with trees from Queensland, and a large skylight that sits 7.6m above the store floor.

The California tech giant, which is expected to sell millions of its iPhone X smartphones globally, said it plans to redesign other Apple stores across Australia but wouldn’t reveal which one is next.

Today is a mammoth day for retail in Australia, with Amazon rumoured to be launching locally today and stores across the country flogging ‘Black Friday’ sales. Apple is itself today holding a one-day shopping event, offering up to $210 in added value with the purchase of selected Apple gifts.

Read more

Dana McCauley 2.20pm: Ten’s time up on ASX

Ten Network’s time as a publicly listed company has come to an end.

After a long and tortuous sale process, the now American-owned free-to-air network will be removed from the Australian Stock Exchange today, ending nearly two decades as a publicly listed company.

The embattled network, sold to CBS after falling into administration, has weathered plenty of ups and downs since its float in 1998.

Known for shows like and Survivor, I’m a Celebrity — Get me out of here! and the Bachelor franchise, Ten slipped into administration in June after reporting a $232m half-year loss and its shares were placed in a trading halt.

The network’s takeover by CBS was delayed by a court challenge by a trio of disaffected shareholders, upset at the loss of their shares for no payment.

The Supreme Court of NSW finally approved the transfer of its shares to the US giant earlier this month after Justice Ashley Black found there was no prejudice in the deal.

Read more

Eli Greenblat 1.24pm: Myer’s Umbers defends clearance floors

Myer chief executive Richard Umbers has defended the roll out of ‘clearance floors’ across the Myer store network, arguing they provided a ‘value’ proposition in the marketplace and had been successful.

Mr Umbers said these special clearance floors only took up about 4 per cent of Myer’s total floor space nationally.

A shareholder pushed the board on the ‘clearance floors’ — dedicated floorspace where Myer sold heavily discounted clothing and apparel — calling them a “disgrace”.

In the past Mr Lew lashed out at the clearance floors, having personally toured some of them, saying they sold stock so old they belonged at the Salvation Army.

Myer chairman Paul McClintock said Premier Investments’ criticisms of the clearance floors were wrong, and the Myer board and management had spent a year on planning it.

He said Myer’s critics couldn’t have it both ways where they sought to “freeze Myer in a straitjacket” in terms of its operations and models and then expect it to compete effectively.

Eli Greenblat 1.01pm: McClintock reflects on Lew impact

Myer chairman Paul McClintock said shareholders have clearly shown they are not prepared to hand over Myer to another company, meaning Premier Investments, and that he hoped now the relationship between Myer and Premier would return to what it was.

Solomon Lew did win a rejection of the remuneration report, but lost his bid to block the election of three directors.

He said it was difficult to have constructive talks with Premier when they were also holding a gun to Myer’s head.

Mr McClintock said before Solomon Lew’s fashion conglomerate bought a 10.8 per cent stake in Myer in March the two companies had a good relationship.

In an answer to a question from a shareholder about the small number of Myer shares currently held by Myer directors, Mr McClintock said it was a “fair question to ask” and that the board might well consider that.

Eli Greenblat 12.36pm: Lew triumphs in Myer first strike

Solomon Lew, Myer’s biggest shareholder and for the last few months its savage critic has won in his bid to vote down Myer’s remuneration report.

Votes against the remuneration report were 160.7 million, or 29.33 per cent, well above the 25 per cent hurdle to trigger a ‘first strike’ against Myer. There were 69 per cent, or 382 million votes, in favour of the remuneration report.

But Mr Lew failed in his bid to vote down the re-election of three Myer directors: Votes against the re-election of JoAnne Stephenson were 29.99 per cent, while 29.34 per cent voted against the re-election of Garry Hounsell and 28.73 per cent against Julie Ann Morrison.

There were also strong votes against the granting of performance rights to Richard Umbers — 30.15 per cent.

Just over 28 per cent voted against the amendment to the constitution regarding the holding of hybrid AGMs, while 27.8 per cent voted against the renewal of takeover provisions in the constitution. These two resolutions were ‘special resolutions’ that required 75 per cent of shareholder approval to get through. With both receiving just above 71 per cent Mr Lew has then won these two battles as well as the rejection of the remuneration report.

More to come

Richard Gluyas 12.15pm: Turnbull to unveil last resort compo scheme

The Turnbull government is set to unveil the next stage of its banking reforms — a last resort compensation scheme for consumers who have been denied redress because of a firm’s lack of resources.

Canberra is understood to have been putting the final touches on the scheme, leading to the series of one-on-one meetings between Scott Morrison and the chairs of the major banks that was flagged in The Australian earlier this week.

Westpac chair Lindsay Maxsted told The Australian’s Competitive Advantage Forum yesterday that he and National Australia Bank chair Ken Henry were due to meet with the Treasurer that afternoon.

“It will be, I think, on a relatively narrow piece of the reform agenda that the government has in mind,” Mr Maxsted said.

“No doubt I will take the opportunity, Ken and others will take the opportunity to try and understand what’s happening in terms of likely parliamentary inquiries and responses and so on.

“But no, he has asked for the meeting so it’s his agenda, really.”

A compensation scheme of last resort, which has been under review by the Ramsay inquiry into the financial system’s external dispute resolution framework, is designed to mitigate against severe financial hardship and loss of trust and confidence in the broader EDR framework.

Eli Greenblat 11.30am: McClintock’s olive branch to Lew

Outgoing Myer chairman Paul McClintock has sat down after delivering his final chairman’s address to shareholders at the Myer AGM this morning, ending his speech with a possible olive branch to Solomon Lew.

He asked that Mr Lew and his Premier Investments heed the wishes of shareholders when votes are taken on resolutions and a winner is announced. Mr Lew is urging ‘against’ votes for all resolutions including the election of three directors. Mr McClintock said he hoped Myer and Premier could return to its constructive relationship.

Myer chief executive Richard Umbers has now begun his speech, he says Myer anticipates continued “challenging trading conditions” in the second quarter after first quarter sales fell 2.8 per cent.

Eli Greenblat 11.20am: Myer warns against “aggressor” Premier

Outgoing Myer chairman Paul McClintock has made an impassioned plea to shareholders at the department store’s annual general meeting this morning to rally around the board and its management in the face of aggressive tactics from its biggest shareholder, Solomon Lew’s fashion conglomerate Premier Investments.

Mr McClintock also warned Premier Investments, which had representatives in the audience this morning sitting with other shareholders, that Mr Lew’s behaviour over the last few months, led by his relentless and personal attacks on the board, had made Premier into an “aggressor” that was alienating it from one of its most important customers, Myer.

Premier Investments chairman Solomon Lew & CEO Mark McInnes. Picture: Stuart McEvoy for the Australian.

“I believe that the roles of aggressor and partner are inconsistent, and that Premier shareholders will come to view that this campaign has alienated one of their important business partners,’’ Mr McClintock said this morning.

He also warned Premier Investments wanted to gain control of Myer, without paying a takeover premium, and would use its control to sell more Premier-owned fashion and take advantage of Myer’s attractive rentals.

The Myer AGM kicked off minutes ago and as yet retail billionaire Solomon Lew had yet to show up, although his media advisers and proxys for Premier Investments — believed to be from law firm Arnold Bloch Leibler — were in attendance.

Read more

11.08am: China tumble weighs on stocks

Australian shares are trading lower in early trade, with investors wary after a sharp decline in the Chinese markets on Thursday and with Wall Street closed for a public holiday.

The benchmark S&P/ASX200 stock index was down 0.52 per cent after the first half-hour of trade, with all sectors other than telecom in the red. The session is likely to be relatively quiet, apart from concern about the sell- off in China, Patersons strategist Tony Farnham said.

“It might get a bit more intense, watching if there is further decline, given the uncertainty about deleveraging there,” he said.

“Other than that, this has the hallmarks of a quiet day.” US markets were closed on Thursday for the thanksgiving holiday, while European stocks ended flat.

However, Chinese shares tumbled as the blue-chip index suffered its worst fall in nearly 18 months as worries about a sell-off in the bond market bled into equities.

Falls in consumer and healthcare stocks dragged the CSI300 index down three per cent.

In the local market, most sectors have been under pressure.

Energy shares were mixed with Santos creeping higher but Oil Search and Origin Energy trading lower.

Mining giants BHP Billiton and Rio Tinto also fell, despite continued gains in the iron ore price.

Each of the big four banks were trading lower, while healthcare stocks also dragged on the market, with Cochlear and Sirtex Medical shares each down more than one per cent.

Myer shares were down nearly one per cent ahead of its annual general meeting that is shaping up as a public showdown between the board of the beleaguered department store chain and retail veteran Solomon Lew.

Meanwhile, the Australian dollar is slightly higher against the greenback which has extended its losses after weaker data inflation expectations triggered a loss of confidence.

The local currency was trading at US76.23c at 1030 AEDT on Friday, from US76.19c on Thursday.

AAP

10.33am: Miners cling to gains as stocks slide

Resources companies Rio Tinto and Fortescue Metals clung on to meagre gains in early trade as the broader share market opened sharply lower, with no lead from Wall Street as US markets closed for the thanksgiving public holiday.

At 1015 AEDT on Friday, the benchmark S&P/ASX200 index was down 24.9 points, or 0.42 per cent, at 5,961.3, while the broader All Ordinaries index was down 22.8 points, or 0.38 per cent, at 6,044.7 points.

In futures trading, the SPI200 futures contract was down 22 points, or 0.37 per cent, at 5,970 points.

Michael Roddan 10.13am: A banking royal commission alternative?

The Turnbull Government could launch an independent panel to investigate ongoing claims of misconduct in the banking sector, funded by an increase in the bank levy, as part of a compromise deal to head off a backbench push for a royal commission.

Banking analyst Craig Williams, with investment bank Citi, told clients today that the federal government may set up a panel to deal with “legacy cases” that have been the bugbear of regional members of parliament, who have been inundated with constituents complaining of improper treatment by the major banks.

A spokesman for the Treasurer said the government would not comment on market speculation.

The Citi note, which does not cite sources, was sent to clients as the Turnbull Government appears set to try to find a compromise solution to head off a banking royal commission.

Read more

Samantha Woodhill 9:55am: Iron ore rallies on fresh optimism

The price of iron ore rose again overnight as demand remains strong and steel futures in China continue to rise.

The spot price for Australia’s biggest export grew 1.4 per cent to $US66.50 a tonne overnight according to The Steel Index, up 13.68 per cent from the beginning of the month and 6.74 per cent from Monday.

China’s monthly imports of iron ore hit 100 million tonnes in September. (Pic: AFP)

“Physical iron ore traders appear to be happy to chase prices higher for the moment,” said ANZ senior international economist Tom Kenny.

Read more

9.30am: Rio extends iron ore deal

Rio Tinto has again extended an agreement to sell iron ore to Chinese state- owned steel company Sinosteel beyond the end of the decade.

The two businesses have agreed to extend their Channar Mining joint venture in WA, under which Rio will supply an additional 10 million tonnes of iron ore in return for an upfront payment of $US15 million ($19.7m) as well as production royalties linked to the iron ore price.

This is the third extension for the joint venture, that is 60 per cent owned by Rio and 40 per cent by Sinosteel, and was first formed in 1987 for the joint development of the Channar mine in the Pilbara.

8.55am: Gold steadies as greenback swoons

Gold prices have steadied to trade nearly flat after rising nearly 1 per cent in the previous session as the dollar extended its swoon amid reduced expectations for US interest rate hikes next year.

The dollar suffered its biggest drop in five months on Wednesday after minutes from the US Federal Reserve showed “many participants” were concerned inflation would stay below the bank’s 2 per cent target for longer than expected. The greenback was still nursing losses on Thursday, supporting dollar-priced gold by making it cheaper for non-US investors.

Spot gold settled 0.1 per cent lower at $US1,290.80 per ounce on Thursday. US gold futures for December delivery were 0.1 per cent lower at $US1,290.70.

“Gold is obviously still in need of a spark, but we still see a chance of it reaching our year-end target of $US1,325,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“The outlook for inflation is still low, long yields will remain subdued and then we have geopolitical risks rising this year. That’s enough to prompt investors to buy gold, even though the growth outlook is still strong across the world.”

Trading was lighter than usual on Thursday, with Japanese financial markets shut for a public holiday and US markets closed for the thanksgiving holiday. In other precious metals, silver slipped 0.5 per cent to $US17.07 an ounce, platinum fell 0.6 per cent to $US933 an ounce, while palladium was up 0.7 per cent at $US1,010 an ounce.

AAP

7.30am: Stocks set to open lower

The Australian share market looks set to open lower, with no real lead to offer direction with US markets closed for the thanksgiving holiday.

At 7.35am (AEDT), the share price futures index was down nine points.

Europe’s key indexes closed flat, while Asia was mainly sharply negative with the CSI 300 dropping 2.96 per cent, Shanghai down 2.29 per cent, and the Hang Seng one per cent lower. The Nikkei 225, however, lifted half a per cent.

Locally, no major economic news is expected today.

In equities news, Myer, Village Roadshow, Automotive Holdings, Kathmandu, AWE and Select Harvests have their annual general meetings scheduled for Friday.

The Australian market yesterday closed flat as gains in the resources sector were offset by falls by the banks and consumer related stocks. The benchmark S&P/ASX200 index fell 0.2 points at 5,986.2 points. The broader All Ordinaries index was down 0.1 points at 6,067.5 points.

AAP

7.00am: Dollar higher

The Australian dollar is higher against its US counterpart, which has sustained further losses as investors trim bets on the outlook for US interest rate rises in 2018.

At 6.35am (AEDT), the Australian dollar was worth US76.24 cents, up from US76.19 cents yesterday.

The US dollar edged 0.1 per cent lower against a broad trade-weighted basket of currencies yesterday, after dropping 0.8 per cent on Wednesday, its biggest daily percentage fall since June.

There is no major economic news expected today that is likely to impact the local currency.

The Aussie dollar is steady against the yen but lower against the euro.

AAP

6.50am: ECB at odds over bond buys

European Central Bank policymakers disagreed on leaving the bank’s mass bond-buying program open-ended, with some arguing in favour of “a clear end date”, minutes from a meeting last month revealed.

The ECB last month announced it would halve its bond purchases to 30 billion euros ($US36 billion) a month from January as the eurozone recovery gathers pace, allowing the Frankfurt institution to begin winding down its crisis-era stimulus measures.

Policymakers said the purchases would continue until at least September 2018, and beyond if necessary, reassuring markets that the ECB stood ready to ramp up efforts again if needed.

But the minutes from the October 26 governing council meeting showed that “a few members” were “in favour of announcing a clear end date” for the scheme.

“A view was put forward that there was no longer a case for an open-ended extension, unless deflation risks were to re-emerge,” the minutes read.

“Some concerns were also expressed that the open-ended nature of the (bond purchases) might generate expectations of further extensions as the intended end date of the program approached,” they added.

In the end, however, “a large majority of members” backed an open-ended extension of the scheme to signal that the bank would not suddenly abandon its easy money policy at a time when sluggish inflation remained cause for concern.

“It was cautioned that any doubt about the governing council’s price stability commitment could entrench inflation expectations at low levels,” the minutes showed.

The ECB has spent more than two trillion euros on government and corporate bond purchases since March 2015 in a scheme known as quantitative easing (QE).

The program, along with low interest rates and cheap loans for banks, is aimed at pumping cash into the financial system, encouraging spending and investment in a bid to drive up growth and inflation.

AFP

6.40am: euro markets steady, US closed

Europe’s major stock markets were flat to firmer, with the US markets shut for thanksgiving.

“Equities are positive, but typically quiet,” in view of the US holiday, said Accendo Markets analyst, Mike van Dulken.

While London and Frankfurt were both more or less flat at the end of the session, Paris made much stronger gains, buoyed by the release of favourable economic indicators for both France and the wider eurozone, traders said.

Australian stocks are tipped to slip at the open. At 7am (AEDT), the SPI futures index was down 17 points.

Business rose sharply across the eurozone in November, a key survey showed, as job creation hit the fastest pace in 17 years and the economic recovery in Europe gained steam.

Analysts said the rise in the headline readings of the survey by data monitoring company IHS Markit was a confirmation that the eurozone economy was resilient against the shock of Brexit and would mean a banner year for economic growth.

In France, in particular, private sector activity rose its highest level in six and a half years.

IG analyst Chris Beauchamp noted that European markets had “had a little wobble” at the start of the session, following a downbeat session in Asia.

“The drying up of (trading) volumes over the past 24 hours prompted mini-routs in the FTSE and the DAX, but these seem to have run their course with both indices moving off their lows.”

German investor sentiment was subdued amid ongoing political uncertainty following the collapse of talks to form a new coalition government at the weekend.

London was burnt by domestic energy supplier Centrica issuing a gloomy profits warning that sent its share price diving almost 18 per cent to 134.30 pence.

Earlier, in Asia, equities were mostly deflated, with Tokyo also shut for a public holiday.

AFP