ASX 200 falls; Lendlease soars on US asset sale; Brambles US CEO quits over 'cultural differences'; WiseTech billionaire selldown

Anglo fire lights up rival coal miners. Brambles US chief to exit in six months over 'cultural differences'. Lendlease to sell US military business for $480m. WiseTech billionaire's $139.5m June selldown.

Rates and retail sales discussions will drive investor sentiment this week. Picture: Nikki Short

Welcome to the Trading Day blog for Monday, July 1. The ASX 200 index closed down 0.2 per cent to 7750.70 points with tech stocks the worst hit. 

The Aussie dollar is trading around US66.70c at 5pm AEST.

Updates

4:40 pm July 1, 2024

ASX 200 ends down 0.2pc; iron ore miners rise

David Rogers

Australia's share market ends slightly weaker with most sectors down but the resources sector lending support and futures pointing to a US rebound on Monday.

The S&P/ASX 200 index closes down 0.2 per cent at an intraday high of 7750.7 after hitting an intraday low of 7710.3 in early trading.

S&P 500 futures rise 0.3 per cent with Nasdaq 100 futures up 0.5 per cent, damping negative leads from bearish key reversals on Wall Street where month/quarter end rebalancing flows probably weighed and political uncertainty may be a factor.

Also lending support to the Australian stock market, Singapore iron ore futures rise as much as 2 per cent to a two-week high of $108.85. Fortescue rose 1.6 per cent.

However, most sectors fall with tech, health care, communications, consumer staples and financials underperforming.

WiseTech drops 5.2 per cent as CEO share sales continue to be reported.

CSL dives 1 per cent and Cochlear drops 2.7 per cent after strong FY23 gains.

CBA falls 0.9 per cent but ANZ jumps 0.6 per cent.

Whitehaven Coal jumps 6.1 per cent as Anglo American suspends mining at its Grosvenor coal mine in central Queensland as it battle a underground fire.

Lendlease soars 4.3 per cent after selling its US Military Housing business for a higher than expected $480m.

Brambles falls 2 per cent after its America's CEO left due to "cultural differences."

Attention turns to US ISM manufacturing data on Monday, RBA minutes on Tuesday, domestic retail sales data on Wednesday, and US jobs data on Friday.

The US is closed Thursday for Independence day.

12:50 pm July 1, 2024 Highlight

Anglo fire lights up rival coal miners

Valerina Changarathil

Shares in mid-cap Queensland coal producers Coronado Resources and Whitehaven are making strong gains after overseas competitor Anglo American suspended operations at its Grosvenor mine after an underground fire.

At 12.45pm AEST, Coronado (CRN) is up nearly 10 per cent to $1.30, making it one of the bourse's top performers, while Whitehaven (WHC) is 6 per cent stronger near $8.10. Stanmore Resources is up 5.5 per cent to $3.74 and New Hope Corporation has gained 3.8 per cent to $5.07.

A weekend note from Anglo American stated it suspended production at the steelmaking coal mine following an underground coal gas ignition incident on Saturday.

The former BHP takeover target said its mine team is working with specialist teams from the Queensland Mines Rescue Service and the regulatory authorities to extinguish the underground fire, prior to being able to assess the steps towards a safe re-entry into the mine. These procedures are expected to take several months as a result of the likely damage underground.

12:04 pm July 1, 2024

ASX 200 down 0.4pc in quiet trading

David Rogers

Australia's share market remain in the red but trading is very quiet as usual on the first day of the financial year as fund managers are tied up with their reports.

The S&P/ASX 200 index is down 0.4 per cent at 7738.3 points after dipping to 7710.3 then bouncing to 7749.3. Trading value is more than a third below average.

July is normally a strong month with a an average gain of about 3 per cent over the past decade or about 2 per cent over the past 20 years as inflows are deployed.

Most sectors are down though property joins materials and energy in the green.

Tech, health care, staples and financials underperform with WiseTech down 4 per cent on CEO share sales, CSL down 0.8 per cent and CBA down 0.9 per cent.

BHP gains 0.7 per cent, Goodman rises 0.9 per cent, Rio Tinto adds 0.9 per cent and Whitehaven adds 5.5 per cent and Lendlease climbs 2.9 per cent on asset sales.

S&P 500 futures are up about 0.3 per cent, potentially signalling a better day ahead for Wall Street after month/quarter end rebalancing, although Friday's bearish key reversals from a record high wasn't a good look on the chart.

11:35 am July 1, 2024

RBA out of synch: RBC

David Rogers

The RBA may be "out of synch" with major central banks including the Fed, ECB and BoC and "reluctantly forced to hike" but an extended hold is more likely according to RBC Australia chief economist, Su-Lin Ong.

If the RBA hikes again in the next 12 months it would more likely be because it "should have taken rates more restrictive last year" rather than a more specific trigger that has been evident in previous episodes, Ms Ong says.

But while she agrees with market pricing of a 40 per cent chance of the RBA hiking next month, she doubts the Bank will pull the trigger.

Still, she notes "heightened uncertainty" around the RBA’s August meeting. June labour force data (July 18) could see "an outsized reaction" if unemployment falls, and 2Q trimmed mean CPI (July 31) above 1 per cent in 2Q "may well force the RBA's hand."

Ms Ong says the RBA "should hike" as it would be "the prudent course for policy", but notes that it has been on hold since november despite her expectation of additional tightening. She sees two potential scenarios for the August Board meeting.

The first is a steady rate decision and "strikingly hawkish" guidance after discussion of a rate hike and upwardly revised inflation forecasts, in which case markets will continue to price in the risk of higher rates and long bonds may underperforms if the market starts to fret about inflation and the RBA’s commitment to its target.

The second is a 25bp hike and a tightening bias, leading markets to expect a follow-up hike in September or November as "a single fine-tuning hike" would be unlikely in the event of such a "sharp turnaround" in RBA thinking versus earlier this year.

"Both scenarios suggest that the front bill strip is too flat," Ms Ong says.

11:26 am July 1, 2024

RBC negative on Anglo after mine fire

Joseph Carbone

RBC issues a note stating there will be negative sentiment on the news former BHP takeover target Anglo American's Grosvenor site suffered an underground ignition.

After the Queensland mine suffered the underground fire, RBC said: "with AAL currently under pressure to execute on an ambitious restructuring plan which involves selling these assets, the downgrades to production will likely weigh on the stock and the potential sale of the division.

“AAL’s steelmaking coal mines have been facing complex geotechnical challenges which led to steelmaking coal emerging as the division with the largest fall in guidance in the Dec 23 investor update.”

The company expects its steelmaking coal business to produce circa 8 million tonnes in 1H24, with circa 2.3 million tonnes expected to be contributed by Grosvenor.

11:11 am July 1, 2024 Highlight

Aus to earn $1bn-plus on uranium

Joe Kelly

Uranium exports are forecast to earn Australia more than one billion dollars for the first time in 2023-24 and reach $1.7bn in 2025-26, but overall resource export earnings are estimated to have declined by ten per cent in the current financial year.

The new updates are revealed in the June 2024 Resources and Energy Quarterly (REQ) as the Coalition, business and mining bodies push for restrictions on uranium mining to be lifted to help global decarbonisation efforts.

Energy commodities — including coal, gas and uranium — were experiencing strong prices, with the REQ saying there were expectations for enhanced exploration activity over the next few years.

Increasing nuclear energy demand is forecast in Asia and there is renewed interest in nuclear power in Eastern Europe.

"Over the outlook higher prices are likely to incentivise the development of new mines and increased output from existing mines, however, this is unlikely to be sufficient to meet the projected supply shortfall," the quarterly update said. "With a primary market shortfall expected to persist, prices are projected to remain high and to continue rising through till 2026 as inventories and existing mine capacity come under pressure."

The quarterly update forecasts resource and energy export earnings to drop from $466bn in 2022-23 to $380bn in 2024-25 and $356bn in 2025-26, after which commodity prices are thought to start leveling out.

10:59 am July 1, 2024 Highlight

Power prices to rise: UBS

Perry Williams

Power prices will rise in Australia's electricity grid as big coal power stations are shut down and the rollout of renewable and storage capacity slows down, UBS says, with NSW the most exposed once the giant Eraring plant closes.

The broker lifted its long-term wholesale prices to $90 per megawatt hour from $80/MWh, given the materially higher levelised cost of electricity from firmed renewable energy. Delays in renewable and storage capacity development alongside the closure of coal plants will see wholesale prices peak in 2029 at $104/MWh.

The "Goldilocks conditions experienced in 2023 of strong coal-fired generation availability, mild weather and strong renewable output do not repeat" through the decade, according to UBS.

"Renewable penetration has softened in 2024 thus far, with the gap in generation filled by higher coal-fired generation utilisation. The pipeline of committed and anticipated renewables projects has stalled, with the lowest number of investment decisions on new generation taken in years during 2023," UBS said.

"We forecast a material tightening in the market from coal capacity exiting, and insufficient replacement with renewables."

Futures prices are averaging $106/MWh for 2024 and $111/MWh for 2025, which remain above UBS' forecast for the next two years: "We believe the uncertainty around the closure of Eraring previously dragged on futures liquidity, particularly post 2025," UBS said.

10:40 am July 1, 2024

Lendlease soars on US asset sale

Valerina Changarathil

Investors in under-pressure property giant Lendlease are welcoming progress on its strategy to cash out on non-core assets.

The flagged sale of its US Military Housing business for $480m has triggered a 3 per cent jump for Lendlease to $5.55 at 10.35am AEST.

The deal and update on various other selldowns by Lendlease comes as interested parties circle its $48bn funds management operation while it tries to navigate losses, excessive debt and project writedowns and continues its search for a new chair.

Lendlease's deal with Omaha Beach Investment Holdings, an entity managed by Guggenheim Partners Investment Management, is anticipated to deliver operating profit after tax (OPAT) of $105m to $120m in the first half of FY25 with a deal a significant premium to book value, Lendlease told investors on Monday.

Lendlease has already flagged the $1.3bn sale of 12 Communities projects, which will need the ACCC's approval with a provisional date for the competition regulator's findings set for July 4. Together with the $147m sale of Asia Life Sciences interests to a new Asia Pacific Joint Venture, the transactions are anticipated to contribute $275m-$335m of OPAT in FY25.

10:34 am July 1, 2024

WiseTech leads tech sector falls

Valerina Changarathil

Shares in tech giant WiseTech, run by billionaire Richard White, are taking a beating in early trading in line with wider sector falls, but also likely impacted by its CEO's end of financial year clearance.

WiseTech is off 2.8 per cent to $97.55 at 10.25am AEST, following Mr White's selldown of $139.5m worth of shares last month.

That fall is worse than the 1.4 per cent for the tech index in trading so far, making it the worst sector on the bourse.

Fellow tech heavyweight and accounting giant Xero is down 1.3 per cent to $134.65, while data centres group NextDC is down 1.4 per cent to $17.39.

10:32 am July 1, 2024

Major MMA shareholder says yes to takeover

Cameron England

Major MMA Offshore shareholder Halom Investments has announced it will tip its 7.7 per cent stake in the company into the current $2.70 per share takeover offer.

Singaporean infrastructure firm Seraya Partners lobbed a $2.60 per share bid for MMA in March via subsidiary Cyan Renewables and last month increased it to $2.70. The Seraya bid is unanimously supported by the MMA board.

MMA shares are now changing hands for $2.66.

Thorney Investment Group, which holds 7.95 per cent of the stock, is also supporting the increased offer, which is being called best and final.

An independent expert’s report said the value of MMA Offshore shares was between $2.03 and $2.83, with a preferred value of $2.41.