ASX 200 soars 1.7pc in best day in five months; jobless rate jumps; Aristocrat jumps; Incitec, Fonterra rise

Andrew Forrest's Fortescue will be 'doing the numbers' on hydrogen plant: Incitec. Bourse jumps 1.7 per cent as jobs data adds to rate cut optimism. Aristocrat soars. Incitec, Fonterra rise. Namoi falls. 

Jobs and rate cut pathways are in focus on equity markets. Picture: Gaye Gerard

Welcome to the Trading Day blog for Thursday, May 16. The ASX 200 index closed 1.7 per cent higher at 7881.30 points, after rising as much as 1.9 per cent. Wall Street rallied to record highs on cooling US inflation. 

The Aussie dollar gave up its gains after the jobs data and is trading near US66.77c.

Updates

4:42 pm May 16, 2024 Highlight

Forrest 'doing numbers' on hydrogen: Incitec

Nick Evans

Andrew Forrest's Fortescue will be "doing the numbers" on its stalled Gibson Island hydrogen plant in Queensland with a major federal government subsidy scheme bolstering the case for proceeding, project partner Incitec Pivot said.

The Gibson Island project has been the flagship of Fortescue’s proposed hydrogen production centres in Australia but the company has delayed several investment decisions for moving forward with the development at Incitec's former Queensland fertiliser plant.

"It’s early days [but] I’m sure they have been doing the numbers," Incitec managing director Mauro Neeves told The Australian. "We are hopeful that with the incentives that were put in place… to make those projects economic will be more likely to happen."

The Hydrogen Production Tax Incentive will provide a $2 incentive per kilogram of renewable hydrogen produced for up to 10 years per project between 2027-28, and 2039-40 for projects which reach final investment decisions by 2030.

"We have been talking about our work with Fortescue on the Gibson Island ammonia plant," Mr Neeves said.

"We have advanced that to engineering studies to the point where now we depend on the principal partner FFI to make a decision of initial financial closure on their side, and it is very much reliant on the cost of energy."

Fortescue said in February it was still working on front-end engineering and design studies for the project “as Australia struggles to shed its petrostate status and still suffers structurally high green electricity costs”.

4:29 pm May 16, 2024

ASX 200 ends up 1.8pc; best day in five months

David Rogers

Australia's share market soared to a six week high and finished with its biggest one-day gain in five months as weaker than expected labour force data added to optimism about interest rate cuts after weaker US CPI and retail sales data.

The S&P/ASX 200 index closed up 127.6 points or 1.65 per cent at 7881.3 points after hitting a six-week high of 7900.2, near a record high of 7910 reached early last month. Thursday's close was the third highest on record.

Gains were led by property, tech, consumer discretionary and financials.

Goodman soared 4.1 per cent and Xero jumped 4.8 per cent as the 1-year bond yield fell 12bps to 4.19 per cent.

Aristocrat leapt 12 per cent as started a review of some assets, James Hardie jumped 3.2 per cent and Macquarie rose 2.9 per cent.

Major banks rose 1.4-2.4 per cent with CBA hitting a record high of $122.26.

The index rose 1.3 per cent after the S&P 500 jumped 1.2 per cent on Tuesday, then extended its rise to 1.9 per cent after the jobs data.

Australia's unemployment rate hit 4.1 per cent versus 3.9 per cent expected.

However, the employment rose 38,400 versus 23,700 expected, the participation rate hit 66.7 per cent versus 66.6 per cent expected.

The employment to population ratio was steady at 64 per cent showing that , employment was keeping pace with population growth.

"This suggests that the labour market remains tight, though less tight than late 2022 and early 2023," the ABS said.

2:42 pm May 16, 2024 Highlight

Air Vanuatu owes almost $110m

Robyn Ironside

A report to creditors of Air Vanuatu has revealed the airline owes almost $110m, and has about $11m in assets.

Ernst & Young Australia were appointed voluntary liquidators to Air Vanuatu last Thursday, after wind up proceedings were launched against the carrier.

The report noted that prior to their appointment, Air Vanuatu's "poor financial position had meant aircraft had been repossessed and it was unable to pay its debts".

"It was clearly not in a position to meet its financial commitments from its own resources," said the report, by EY's Morgan Kelly, Andrew Hanson and Justin Walsh.

They noted that the airline had a fleet of six aircraft, only two of which were flight ready. Air Vanuatu also employed 441 people which was "a high number of staff for an operation of the company's size and nature".

The debt figure did not include the balance of employee entitlements which was unknown.

Passengers first became aware of Air Vanuatu's collapse when the airline cancelled flights on mass, including services to Brisbane and Sydney.

The liquidators estimated there were more than 4000 ticket holders with unused flights at the time of their appointment.

The report was issued ahead of the first creditors meeting set down for next Wednesday.

2:29 pm May 16, 2024

Microsoft's China staff relocation plan

US tech giant Microsoft is asking hundreds of employees in its China-based cloud-computing and artificial-intelligence operations to consider transferring outside the country, as tensions between Washington and Beijing mount around the critical technology.

Such staff, mostly engineers with Chinese nationality, were recently offered the opportunity to transfer to countries including the US, Ireland, Australia and New Zealand, people familiar with the matter said.

The company is asking about 700 to 800 people, who are involved in machine learning and other work related to cloud computing, one of the people said.

The move by one of America’s biggest cloud-computing and AI companies comes as the Joe Biden administration seeks to put tighter curbs around China’s capability to develop state-of-the-art AI. The White House is considering new rules that would require Microsoft and other US cloud-computing companies to get licenses before giving Chinese customers access to AI chips.

A Microsoft spokesperson said providing internal opportunities is part of its global business and acknowledged the company had shared an optional internal transfer opportunity with a subset of employees. Microsoft employs roughly 7000 engineers for its Asia-Pacific research-and-development group, with most based in China.

– The Wall Street Journal

1:59 pm May 16, 2024

PRRT changes on the way: Greens

Rhiannon Down

The Greens will pass Labor’s PRRT reforms – which will impose a $2.4bn tax impost on the gas industry – and new vehicle efficiency standard through the Senate unamended, after securing a carve-out to the government’s offshore gas fast-track bill they say equates to a “big win for the climate and First Nations voices”.

Greens leader Adam Bandt has been scathing of the government’s proposed changes to the petroleum resource rent tax, calling it “weak” and “not worth the napkin it was written on”, and had demanded it raise an extra $5.6bn from LNG producers.

In declaring the Greens had “killed Labor’s gas fast-track bill”, the party revealed a key mechanism that they say could have allowed industry to bypass environmental laws and consultation with Indigenous people would now be carved out.

Government sources said Labor would not abandon the consultation mechanism for offshore gas projects, but rather park it and revisit the changes later. Non-controversial elements of the bill on workers' safety are expected to pass parliament on Thursday.

The Greens said any matters relating to the offshore gas approval process would now be considered as part of the third tranche of Labor's Environment Protection and Biodiversity Conservation Act overhaul, which the party noted had been delayed indefinitely.
"The Greens have killed Labor’s gas fast-track bill,” Greens leader Adam Bandt said.

1:45 pm May 16, 2024

Greens-Labor deal hits offshore gas bill

Rhiannon Down

Greens Leader Adam Bandt has described Labor’s decision to shelve its offshore gas fast track legislation a “win for the climate” and for “First Nation’s voice”, after the party struck an agreement with the government on the passage of legislation.

“Labor's gas fast track bill would have allowed the Resources Minister to bypass environmental protections and ignore First Nations voices and fast track big climate-destroying gas projects,” he said. “Everyone from First Nations communities to climate groups to environment groups all opposed the bill. The bill had the backing of Labor and Liberal.

“The Greenes have stopped it. We know this bill happened because Santos wanted it. “Santos wrote to the Resources Minister asking for this bill to happen. “What we have shown today is with Greens in Parliament the big corporations don't always get what they want.

“Big corporations may have the other parties in their pockets but the Greens will take them on.” Santos shares are down 0.7 per cent to $7.67 at 1.40pm AEST.

1:40 pm May 16, 2024 Highlight

Cyber attack at healthcare operator

Jared Lynch

An Australian private healthcare operator has become the latest victim of a large scale ransomware attack.

But unlike high profile cyber assaults on Medibank and Optus, the Australian Signals Directorate and Australian Cyber Security Centre has not named the organisation.

"Yesterday (Wednesday) afternoon I was advised by a commercial health information organisation that it was the victim of a large-scale ransomware data breach incident," National Cyber Security Coordinator Michelle McGuinnes said in a statement.

"I am working with agencies across the Australian Government, states and territories to coordinate a whole-of-government response to this incident. The Australian Signals Directorate Australian Cyber Security Centre is aware of the incident and the Australian Federal Police is investigating.

"We are in the very preliminary stages of our response and there is limited detail to share at this stage, but I will continue to provide updates as we progress while working closely with the affected commercial organisation to address the impacts caused by the incident."

The attack comes as industry experts criticised the Albanese government's lack of cyber security investment in the federal budget on Wednesday. Chris Sharp, Asia Pacific chief executive of cloud marketplace Pax8, said a lack of attention to cyber defences “sleepwalks over the financial challenges of our small to medium businesses."

Home Affairs Clare O'Neil said she has been briefed on the attack. "The government convened a National Coordination Mechanism regarding this matter today," Ms O'Neil said.

1:24 pm May 16, 2024

ASX 200 up 1.6pc; best day this year

David Rogers

Australia's share market is having its best day so far this year as economic data fuel speculation of interest rate cuts in the US and Australia.

The S&P/ASX 200 index is up 1.6 per cent at 7875.7 after hitting a six-week high of 7891.5. A closing gain of more than 1.47 per cent would make it the biggest on-day rise since December 14th. A closing gain of more than 1.65 per cent would make it the best one-day gain since November 2022.

After rising 1.3 per cent after a strong rise in the US as CPI and retail sales data undershot expectations, the S&P/ASX 200 rose as much as 1.8 per cent after Australia's unemployment rate hit a three-month high of 4.1 per cent.

While employment growth of 38,500 beat an expected 24,000 rise, the unemployment rate easily beat a consensus estimate of 3.9 per cent, helped by an unexpected rise in the participation rate,

"The Australian interest rate market post this mornings Jobs data and Tuesdays Budget is now pricing in about a 30 per cent chance of a 25bp RBA rate cut by November and a 50 per cent chance of 25bp RBA rate cut by December," says IG market analyst Tony Sycamore. "The rates market started this week with a 25 per cent chance of a 25bp RBA hike by year end."

The RBA's predicted the unemployment rate would average 4 per cent in the June quarter so the latest data indicates its forecasts are on track.

1:05 pm May 16, 2024 Highlight

LNG exports down in April

Colin Packham

Australian projects shipped 6.82 million tonnes of liquefied natural gas (LNG) in April, from some 98 cargoes, lower than March's 7.24 million tonnes of LNG from 104 cargoes, data from research and consultancy company, EnergyQuest shows.

The figures are widely watched as indicative of the performance of Australia’s LNG industry amid signs that global energy demand is tapering.

EnergyQuest estimated that Australian LNG export revenue in April was $5.56bn, less than the $6.14bn in March. It reflected a 6 per cent decrease compared to April 2023 when revenue was $5.92bn.

12:35 pm May 16, 2024

Hopes fade for Incitec fertiliser sale

Bridget Carter

Analysts are doubtful of Incitec Pivot’s $1bn fertiliser unit sale being completed as the company continues negotiations with Indonesian suitor Pupuk Kalimantan Timur for the unit which has seen its valuation slashed by $498m.

“In our view, Incitec Pivot remains in the too hard basket near-term until we know what this company looks like going forward,” said analyst Belinda Moore in a research note from Morgans on Thursday. “The longer the sale process drags on for, the less likely it feels like a transaction will be completed.”

It comes as Incitec Pivot produced what she said was a “weak” result, but was higher than analysts across the board had been expecting.

Shares are up more than 3 per cent to $2.92 at 12.30pm AEST.