ASX aims for Tuesday reopen after tech glitch

The ASX apologised on Monday for a technical glitch that caused an early close. It’s aiming to reopen on Tuesday.

Picture: Gaye Gerard

• ASX apologises for outage
• Elders delivers earnings bump
• CSL to open $800m vaccine facility
• Nine CEO to leave by June
• NAB raising $750m with hybrid

Welcome to Trading Day. The ASX apologised on Monday for a technical glitch that caused an early close. It’s aiming to reopen on Tuesday. Australian shares surged in early trade, following strong gains on Wall Street and a lift in US futures. The outage is the longest in four years.

The NSW inquiry into Crown Resorts continued and ASIC released its review into the buy now, pay later sector. RBA governor Philip Lowe will address a CEDA dinner tonight.

Jared Lynch 8.05pm: Elders’ call to ‘de-escalate’ China trade dispute

Elders chief executive Mark Allison has called for Beijing and Canberra to tone down their trade tensions, to avoid the spat that has hit a range of agricultural commodities getting worse.

Mr Allison said Elders’ commercial relationships in China remained strong, despite the country’s communist regime banning or disrupting the trade of Australian products from barley and beef to wine and lobster.

But he said it was not up to the commercial sector to smooth the geopolitical tensions and called on both governments to work together.

Mr Allison’s comments come as former prime minister John Howard advised Scott Morrison that repairing the relationship with Beijing is best done at the leadership level, urging him to seek out a face-to-face meeting with President Xi Jinping.

“We should aim to de-escalate rather than escalate,” Mr Allison said.

“The way I see it is that the Elders’ result has always been controlling what we can control. For our trade relationship with China, at a commercial level we are maintaining very strong partnerships and relationships — we get lots of support from our Chinese trading partners. So at a commercial level we can control that, but at a geopolitical level we can’t control that.

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Eli Greenblat 7.42pm: Taylors Wine sweats on shipment to China

Taylors Wine chief executive Mitchell Taylor will know just before Christmas if he will be the latest target of Chinese government payback for the souring trade relationship with Australia, as four shipping containers carrying his premium red wine from the Clare Valley arrive at port to be inspected by Chinese customs.

Only a month ago Taylors, which is a third-generation family-owned winemaker, had its wine held up at a Chinese port when customs officials demanded documentation that proved the wine group was more than 50 years old, as stated on its bottle packaging.

Farcical of course, but one of the many bureaucratic hoops Australian businesses must now go through to conduct business in China. Mr Taylor eventually tracked down historic documents showing Taylors’ winemaking history does go back to the 1950s.

Now shipments of his winery’s best reds, which his Chinese customers love — such as St Andrews and his special release The Visionary and The Legacy — are heading to China, although he almost took them off the ship given recent concerns about Australian wine being rejected at Chinese ports.

“They (the four containers) went from Adelaide to Melbourne. We considered whether to take them off the boat in Melbourne but it looked a bit too difficult, so they are on their way to China.

“It will arrive in China in about two to three weeks. We have heard nothing yet about hold-ups and there has been no official announcement,’’ Mr Taylor told The Australian.

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7.05pm: China’s economic recovery ‘on track’: CommSec

China’s economic recovery remained on track in October with the handover from industrial-led to consumption-driven growth strengthening following the virus shock, says CommSec senior economis Ryan Felsman.

“Consumer confidence lifted to six-month highs in September (latest reading) due to the effective containment of the coronavirus. And China’s official services purchasing managers index lifted for an eighth successive month in October with vehicle sales up 12.5 per cent on a year ago – all pointing to a lift in consumption – ahead of today’s data release.

“An easing of government restrictions boosted domestic travel and spurred shopper traffic during the Golden Week holiday with retail spending up 4.3 per cent in October from a year ago – gaining momentum amid signs of pent up demand and falling unemployment. Online spending surged 10.9 per cent cumulatively from the same period last year.

“China’s jobless rate eased to 5.3 per cent in October from 5.4 per cent in September, edging closer to the average unemployment rate of 5.15 per cent in 2019. National Bureau of Statistics’ spokesman Fu Linghui said that the Chinese government had hit its full-year employment target and ‘economic growth is expected to accelerate further in the fourth quarter [of 2020}’.

“The industrial sector continues to display resilience in the face of a weakening in economic activity in Europe - due to virus lockdowns - and the US amid soaring virus cases and election uncertainty.

“While external headwinds could re-intensify, China’s export growth still accelerated in October, up by 11.4 per cent from a year earlier. And domestic manufacturing and construction activity continue to be supported by fiscal policy initiatives focused on job creation, infrastructure spending, tax relief and ultra-low interest rates. Demand for steel and cement remain strong and the production of motor vehicles, electronics and electricity continue to lift amid a broad-based economic recovery.

“Australia’s trade tensions with China persist. Exports to our largest trading partner have eased from record high levels in recent months on the back of political sparring over the pandemic. But a reset of relations could be in the offing. Australia and China are among 15 nations that yesterday signed the world’s largest regional free-trade agreement – the Regional Comprehensive Economic Partnership (RCEP).

“The RCEP trade pact covers 2.2 billion people with a combined GDP of $US26.2 billion, according to Bloomberg. Proposals to reduce tariffs are timely with China recently imposing import duties on Aussie barley. China has also been targeting Aussie coal shipments - perhaps on environmental grounds - and an array of agricultural-related produce, including wine, sugar, beef, wheat, timber, cotton and lobsters. That said, China may have redirected some of its imports of these goods to the US in an attempt to fulfil its ‘Phase 1’ trade agreement.”

6.02pm: ASIC focussed on ensuring ASX reopens

ASIC said in a statement late on Monday: The ASX cash equity market trading platform did not reopen for trading today Monday, 16 November 2020, after an outage occurred during the opening auction. ASIC remains in regular communication with ASX, market participants, and members of the Australian Council of Financial Regulators. We are focussed on ensuring that ASX reopens in an orderly manner on Tuesday 17 November, and that market integrity is not compromised. ASIC will also monitor for any impacts resulting from the failure of ASX Trade to open for most of the day.

ASIC views outages of this nature with significant concern. It has had a significant impact on the market, including market participants and investors. The ASX is one of the world’s most active and visible public markets and forms a critical part of Australia’s national economic infrastructure. Well-functioning financial market infrastructure is critical to the integrity and reputation of the Australian equity market and the trust and confidence investors have in it. As the primary equities market in Australia, ASX performs a vital role.

Market licensees are required to operate a market that, to the extent reasonably practicable, is fair, orderly and transparent, and to have sufficient resources (financial, technological and human) to operate the market, including for any outsourced services. Following the reopening of the market, ASIC will determine whether ASX followed the relevant regulatory requirements under the Corporations Act and met its obligations under its Australian Market Licence.

In addition to ASIC’s expectations that this outage will be resolved as soon as is possible in a safe manner, ASX will be required to provide a full incident report to ASIC.

We note that the Chi-X market remained open for participants to trade ASX listed equities, as well as Chi-X quoted ETFs and TraCRs.

Ben Wilmot 4.22pm: Pub landlord ALE posts bump in valuations

Pub landlord ALE has unveiled a bump in its property valuations with its portfolio of ALH Group-run hotels now worth $1.23bn.

The independent valuation of ALE’s 86 freehold pub properties was a 4.4 per cent lift over their valuation at the end of June.

It took into account November 2018 determinations of a rent dispute with the Woolworths-backed ALH and the weighted average adopted yield tightened marginally from 5.08 per cent to 4.94 per cent.

Analysis showed that an uncapped and uncollared rent for the overall portfolio was about one third higher than current passing rent but this was not distributed evenly across the portfolio.

The first uncapped/uncollared rent review on the pubs will take place in 2028, for properties where the tenant exercises its option to renew.

ALE separately commenced proceedings in the Supreme Court of Victoria to set aside the 19 determinations for properties in Victoria on the basis that they were the outcome of the application of an incorrect methodology.

4.09pm: ASX ‘sincerely apologises’ for outage

The ASX said in a statement that that it “deeply regrets” the disruption to trade today caused by a software issue.

The company said it had identified the root cause of the issue, as well as a resolution path to fix it.

“ASX is very disappointed with today’s outage and sorry for the disruption caused to investors, customers and other market users,” said ASX chief executive Dominic Stevens.

“The outage falls short of the high standards we set ourselves and the standards others expect of us.

“Notwithstanding the extensive testing and rehearsals, and the involvement of our technology provider, ASX accepts responsibility. The obligation to get this right and provide a reliable and resilient trading system for the market rests with us.”

The outage came on the ‘go live’ day for the refreshed ASX trade system, which followed specialist third party testing for over a year, including four dress rehearsals, the company said.

David Swan 3.45pm: Only ‘small amounts of debt’: Afterpay

Afterpay has hit back at claims from ASIC that its users are missing out on essential items due to buy now, pay later accounts, with the company’s executive vice president Damian Kassabgi declaring that it has ’very small amounts of debt’ relative to its size and marketshare.

Speaking at UBS’ Australasia conference, Mr Kassabgi said that ASIC’s own research found that Afterpay has over 70 per cent of the marketshare, but less than 30 per cent of the consumer debt.

ASIC‘s report into buy now, pay later, released Monday, found 21 per cent of users said they had missed a payment in the last 12 months, while 20 per cent said they had missed or cut back on essentials such as meals.

“When we are thinking about late payments and consumer outcomes, we don‘t think that the focus is on our particular service, and we checked that,” he said.

“We looked at 144,000 Afterpay users and found that there was no kind of correlation in relation to the use of Afterpay and either an increase or decrease in their spending on essentials. If anything, where we do see potentially problematic behaviour is a fact that we know that credit card debt now and credit cards that involve an interest payment, around 40 per cent of that debt is for essential purchasing in the economy.”

Bridget Carter 3.41pm: NBN taps bond market for at least $1bn

The National Broadband Network is tapping the Australian bond market for the first time with the hope of securing several billion dollars in funding.

Working on the raise are banks ANZ, CBA, Westpac and NAB.

The raise is part of the NBN’s plan to secure $27.5bn by 2024.

Of that, $19.5bn consists of a loan that needs to be repaid to the federal government within four years.

It is understood that on offer to investors is a five to ten-year bond that is rated A1 stable by rating agency Moody’s and AA negative by agency Fitch.

It is expected that the bond will have a 1.8 per cent or 1.9 per cent yield over 10 years.

Investors were being briefed on the details as of Monday, with meetings scheduled for Thursday or Friday.

The raise will capitalise on the booming conditions for issuers in the Australian bond market.

Ben Wilmot 3.21pm: ANZ turns upbeat on housing market recovery

The bounce-back of the housing market driven by owner-occupiers has prompted ANZ to upgrade its outlook for residential property and it is tipping healthy price rises over next year.

The bank’s economists Felicity Emmett and Adelaide Timbrell are predicting a strong 2021 for Australian housing as the sector turns a corner.

“We now expect house prices at the national level to rise modestly over the balance of this year. Next year, we expect price gains of around 9 per cent across the capital cities,” the bank’s economists said.

After falling since April, national house prices were flat in October and are set to rise over coming months, the pair said.

“The strength is largely being driven by owner-occupiers, with low interest rates appealing to buyers in secure employment,” they wrote, saying this was spreading to buyers who are upgrading as well as first home buyers.

ANZ has dumped an earlier view espoused during the depths of the pandemic that house prices would fall heavily.

“Our view that house prices would decline around 10 per cent, peak to trough, has proven too pessimistic: low rates have trumped factors like elevated unemployment and low population growth,” the economists said.

They cited government income support and the deferral of home loan repayments as backing the market.

Lachlan Moffet Gray 3.17pm: China risks only identified in hidsight: Crown inquiry

The idea that management of Crown Resorts should or did know that the risk to their staff in China was growing in the lead up to their arrest in 2016 is only possible with the benefit of hindsight, the company’s counsel has told a NSW Inquiry.

Neil Young QC told the inquiry into the company’s suitability to operate the Barangaroo casino that the 2015 arrest of South Korean casino staff by Chinese authorities was not instantly recognisable as a large escalation of risk to executives and managers Michael Johnston, Rowen Craigie, Barry Felstead, Jason O’Conner and Michael Chen.

He said that portraying the incident as such regarded a “strong element of hindsight judgement”.

“In the eyes of Mr Johnston, Mr Cragie, Mr Felstead, Mr O’Conner and Mr Chen, and their expert advisors...on consideration and examination of the different circumstances, the South Korean arrests were not regarded as an obvious escalation of risk,” he said.

“The failing was in not bringing the matter to the attention of the risk management committee.”

On the 2015 questioning of a Crown employee in China by the Chinese police, Mr Young said the incident was not considered an escalation of risk as external legal advice had long advised that the company: “be cautious, staff questioning may occur, it’s better to avoid that scenario”.

After the incident occured Mr Young said one external firm, WhilmerHale did not see it as “alarming in the sense that Crown needed to change its operations” in China.

Mr Young also said that the submission by counsel assisting that Crown supported the employee to lie about organising gambling tours “can’t properly be founded...and should be rejected” as it would be irresponsible for Crown to “inform” on their employee by correcting any statement from the employee that could be considered misleading.

“These events have no real relevance to questions of current suitability,” Mr Young said.

3.15pm: Virgin to delist tomorrow

Virgin Australia shares will be removed from the official list of the ASX from the close of trading tomorrow as after the Federal Court granted the deed administrators leave to transfer all issued shares to US private equity firm Bain Capital.

The 20-year-old carrier went into voluntary administration in April after its major shareholders, including the Virgin Group, failed to provide funding.

3.00pm: Trading to remain closed

Trading on the ASX will not reopen for the rest of the day but will commence tomorrow.

This will make it easily the worst ASX outage in more than nine years.

“The underlying cause of the issue has been identified and a resolution path is in place to allow trading to commence tomorrow at 10am,” the ASX said in a statement.

2.41pm: Value rally may continue: Macquarie

The recent surge in value stocks may continue in 2021 as coronavirus vaccines are likely to support the current expansion in the global economic cycle, according to Macquarie Equities.

With the OECD Leading Indicator showing the US economy remains in expansion, Australian AGM’s mostly positive in recent weeks, and Pfizer’s vaccine news suggesting effective coronavirus vaccines will soon be widely available, the broker sees potential for a stronger-than-expected earnings upgrade cycle. “We also argue the returns in the recent value rally could be a sign of what’s to come in 2021,” says Macquarie’s Australian equity strategist, Matthew Brooks.

“With 62 per cent of AGMs completed, there were five times more FY21 upgrades than downgrades.”

Some of the upgrades are “Covid-19 winners” where the momentum continues - for example JB Hi-Fi and Wesfarmers - while other upgrades are “Covid-19 losers”, where the AGM gave some reason to be less pessimistic- like Qantas, Transurban, Crown, The Star Entertainment, Nine Entertainment and IAG. Mr Brooks also argues that government bond yields are too low, with bullish implications for the Financials sector.

“Our Macro Strategy Team sees US 10-year yields at 1.5 per cent by the end of calendar year 2021,” he says.

Based on indicators including US Institute of Supply Management’s purchasing managers data, the copper/gold ratio, and the Industrials/Utilities ratios, the 10-year yield should already be at 2 per cent.

“Vaccines can address the health problem and reduce the need for central banks to keep yields low,” Mr Brooks says.

“Banks and insurers will benefit when yields rise, with gold potentially a key loser.”

He also argues that earnings forecasts are “too conservative.”

“Australia’s earnings have been weak for so long that disappointment is normal,” Mr Brooks says.

“But what if a vaccine plus unprecedented monetary and fiscal stimulus drives a sustained upgrade cycle?”

He notes that earnings upgrades are already at their highest level since 2005, and we have not even started to experience the post-vaccine boom in activity in services sectors hit most by the pandemic.

“Maybe the financial year 2022 PE (ratio) is not high, it’s just that analysts’ forecasts are too conservative?”

He also notes that a record 86 per cent of US companies reporting 3Q2020 results surprised positively.

Macquarie therefore continues to favour reflation trades - cyclicals, value, commodities.

“We again highlight Oil Search, Worley, Ampol, GPT Group, Lendlease, Graincorp, United Malt Group, Crown Resorts, Telstra, Sydney Airport, Seven Group, Ramsay Healthcare, ANZ and Westpac as value and/or Covid-19 losers in the strategy portfolio,” Mr Brooks says.

Lachlan Moffet Gray 2.35pm: Crown ‘did not breach’ Chinese business law: inquiry

Crown counsel Neil Young QC has continued to detail to a NSW Inquiry into the company’s suitability to operate Sydney’s Barangaroo casino that a covert office operated by the company in China “shouldn’t have been operating”.

“It shouldn’t have been operating, and if it were operating, it should have been drawn to the most senior levels of management,” Mr Young said.

“And it was considered to be a matter warranting it, in their judgement, brought to the management of risk committees.”

The inquiry previously heard that prior to the arrest of 19 Crown staff in China in 2016 for illegally promoting gambling, the staff were operating out of an unmarked, residential building in Guangzhou.

Mr Young said Crown’s Australia-based executives were unaware of the office, and had legal advice which was unclear, so it could be interpreted that there was no need for Crown to obtain a licence to operate in China without an office.

“There’s no suggestion that there is a breach of Chinese business law by proceeding to having employees in China as employees of a foreign corporation - that’s to the contrary of the suggestion of counsel assisting, that there was a positive obligation that you needed to register or obtain a license to conduct any of these activities,” Mr Young said.

1.10pm: Flexigroup touts ‘lowest fees’ after ASIC’s review

Buy now, pay later player Flexigroup has welcomed ASIC’s latest report into the sector, which includes the targeted use of its new product intervention power to address artificial business models and other misleading and deceptive conduct.

The review found that 21 per cent of users missed a payment in the 2019 financial year. Missed payment fee revenue totalling $43m across Australia’s buy now, pay later players, up 38 per cent compared to the previous financial year.

Flexigroup chief executive Rebecca James. Picture: supplied

Flexigroup responded to ASIC’s report by saying its late payment fees were the lowest on the market.

“The report also confirms that humm makes substantially less than its peers from late payments fees, with only 2 per cent of all revenue coming from missed payments,” chief executive Rebecca James said.

“These fees are already one of the lowest in the market, as our business model is designed not to profit from a customer’s inability to repay.

“Our continued arrears performance and low default rates demonstrate that we are delivering finance in the best interest of our customers.”

1.05pm: China economic data mixed

China’s latest economic data for October delivered a mixed versus market expectations.

Industrial production rose 6.9pc year on year versus 6.7pc expected, while retail sales rose 4.3 per cent year on year versus 5 per cent expected and non-rural fixed assets investment rose 1.8pc year on year for the year to date versus 1.6 per cent expected, according to Bloomberg.

Patrick Commins 12.56pm: One in 10 mortgage holders struggle to meet repayments

One in ten households with a mortgage said they had experienced trouble meeting repayments over the four weeks to mid-October, more than twice the proportion in June during the peak of the coronavirus recession.

The latest Australian Bureau of Statistics’ COVID-19 household impacts survey revealed the proportion of mortgage holders struggling to pay the loan on their home or investment property had more than doubled from 5 per cent in June to 11 per cent four months later.

The six-month COVID loan deferral periods extended by the banks at the beginning of the crisis began expiring at the start of October, although banks have said they will work with customers who are experiencing intense hardship.

While there have been clear signs the economy is recovering strongly from the sharpest contraction since the Great Depression, the transition away from unprecedented government stimulus and income support will inevitably leave some Australians struggling to fill the gap.

The unemployment rate peaked in June and July at around 7.5 per cent, before rapidly retracing to a current 6.9 per cent. Despite the official data showing signs of an improvement in the labour market the ABS survey revealed that 10 per cent of respondents reported one or more people in their household had problems getting a job in the four weeks leading up to the survey, up sharply from 6 per cent in June.

The Morrison government tightened its eligibility criteria and lowered the payment of the JobKeeper wage subsidy (aside from in Victoria) from the start of October, and also lowered the JobSeeker coronavirus supplement. Mutual obligation requirements were also fully reintroduced – once again, aside from Victoria – from September 28.

12.22pm: ASX identifies outage issue, working on a resolution

The ASX knows what’s caused the complete market outage since 10:24am AEDT, but hasn’t fixed it yet.

“ASX has identified the issue causing the market outage this morning,” ASX says in an update.

“ASX continues to work on a resolution and will provide a further update within 30 minutes.”

11.50am: ASIC monitoring ASX outage

ASIC is aware of the ASX trading outage this morning and is monitoring the situation, a spokesperson tells Trading Day.

All ASX trading has been paused due to a data issue since 1024 am AEDT.

“They think they know that the problem is,” the spokesperson says. “I will have another briefing in 10 minutes.”

The spokesperson notes that issue follows a system upgrade by ASX over the weekend.

He dismisses any notion that it could be due to a cyberattack.

Lachlan Moffet Gray 11.43am: China arrests ‘irrelevant’: Crown inquiry

Ian Young QC, representing Crown, has categorically rejected submissions made by counsel assisting two weeks ago about the arrest of 19 Crown staff in China having any bearing on the company’s suitability to operate Barangaroo.

“All those matters do not go to suitability in any relevant sense - they do not go to current suitability. The events in China occurred more than four years ago,” he said.

“The events in China are not a sound basis for evaluating suitability at the current time.”

Mr Young said Crown acknowledged shortcomings and failures but reiterated that the “root cause” was executives making decisions about operations in China “on the ground” based on advice from former Crown VIP executive Michael Chen and external lawyers.

“The executives ought to have engaged Crown’s risk management structures and procedures,” he said.

He also said that Crown’s policy for retaining and reviewing external legal advice has improved since 2016, a “significant change” from when Mr Chen would be the sole reviewer of legal advice concerning China.

But Mr Young said there was no clear evidence that these executives appreciated the full risk the staff in China faced and did nothing about it - which would impact the suitability of the company.

“Senior management did not appreciate at any point of time that there was a material risk of staff being arrested or convicted of gambling offences,” Mr Young said.

Inquiry commissioner Patricia Bergin interjected: “There is some evidence, to be fair, Mr Young,” referring to an email Mr Chen sent Australian resorts boss Barry Felstead in 2015 wherein Mr Chen said Crown’s staff in China “lived in fear” of being “tapped on the shoulder.”

But Mr Young said in hindsight management made what were many reasonable assumptions at the time, including that the company was operating within the bounds of Chinese law and that the questioning of two Chinese staff members by police in 2015 was at the time, something that could be expected to occur regardless of the legality of Crown’s operations.

Bridget Carter 11.42am: Dacian announces NTM Gold merger

Dacian Gold has tapped Treadstone Resource Partners for advice on its $284.6m merger with NTM Gold.

The deal was announced on Monday, where NTM Gold shareholders will receive one Dacian Gold share for each 2.7 NTM Gold shares held, creating a combined company with a $284.6m market value.

Following the transaction, Dacian will own about 68.4 per cent of NTM Gold, while NTM Gold shareholders will hold about 31.6 per cent of the merged group.

The mooted deal has been recommended by the boards of both companies and comes after speculation in the market of further mergers and acquisitions deals in the gold mining space following the $16bn merger between Northern Star and Saracen.

However, the question remains as to whether another suitor emerges with a higher price.

Among parties that may line up to make a rival offer include St Barbara or Red Five, while Saracen earlier was thought to have been a possible suitor, although it is likely now to be too distracted with its merger with Northern Star.

Leading the new entity will be Dacian Gold’s managing director Leigh Junk, while Dacian chairman Ian Cochrane will remain chairman.

NTM Gold director Eduard Eshuys will join the Dacian board.

The scheme of arrangement is set to be implemented on November 16 and shareholders are due to vote on the deal on February 18.

11.38am: Super withdrawals hit $35bn

Australians have now withdrawn $35bn from their superannuation funds as part of the government’s early release scheme, which allows members affected by COVID-19 to withdraw up to $20,000 from their super funds over two financial years.

Since the scheme’s inception, 4.6 million people have made a withdrawal, according to the latest APRA data.

Over the week to November 8, 25,000 applications were received by funds, of which 16,000 were initial applications and 8,000 were repeat applications.

Lachlan Moffet Gray 11.11am: China arrests have no bearing on Crown’s suitability: inquiry

Neil Young QC, who is representing Crown Resorts, has told the NSW casino inquiry that the arrest of 19 Crown staff in China in 2016 came about due to “honest mistakes by management” and do not have current bearing on the company’s suitability to operate the Barangaroo Casino.

Mr Young has argued that for a finding of unsuitability, it must be found that Crown is run by people who are not of “good repute,” implying dishonesty or lack of integrity.

“There is no basis in the evidence to find that Crown Resorts or any of its officers have acted dishonestly or with a lack of integrity,” he said.

The arrest of Crown staff in China for illegally promoting gambling was largely attributable to a small group of senior management who effectively determined the company’s risk operations of the China operations, which should have been the responsibility of the board.

“We submit that Crown accepts and there is no dispute that failings occurred in relations to its management of operations in relation to China,” Mr Young said.

“Risk management structures and processes were not utilized or engaged. That means that important developments in the operating environment in China were not escalated to any risk management committee.

“The failure to escalate those developments meant that a small group of individuals in senior management made the decisions on how to respond to developments on the ground in China.”

But Mr Young said this group of individuals, including former executive Jason Mr O’Conner, outgoing Australian resorts CEO Barry Felstead and former CEO Rowen Cragie, were operating honestly based on a “western perspective” of Chinese law and legal advice that was ultimately inadequate.

In hindsight, “one knows one cannot place any reliance on the rule of law in China,” Mr Young said.

Lilly Vitorovich 10.53am: Nine sinks on CEO resignation

Nine shares drop 1.6 per cent to $2.40 in the wake of Nine CEO Hugh Mark’s surprise resignation after five years at the helm of the media group.

The company said in an announcement to the ASX that Mr Marks would leave “at some stage during the second half” to June after the 54 year-old sent a memo to staff on Saturday afternoon informing them of his departure following five years at the helm.

Mr Marks’ relationship with the company’s former commercial director Alexi Baker, who left Nine last month, was publicly revealed on Saturday morning.

Nine said Mr Marks will “actively continue” as CEO as the board, led by chairman Peter Costello, assesses its requirements and options, including both internal and external candidates.

Two senior Nine executives, digital and publishing boss Chris Janz and Stan boss Mike Sneesby, have emerged as the frontrunners to replace Mr Marks, who oversees the group’s free-to-air TV network, newspapers, radio stations and streaming business Stan. Nine also owns a near 60 per cent stake in online property listing group Domain.

Read more: Nine CEO Hugh Marks to leave by June

10.49am: Trade paused due to data issue

ASX trading in equities, ETFs and government bonds has been “paused” due to “market data issues”. The ASX says its investigating and working to rectify the issue as soon as possible.

Richard Gluyas 10.39am: BNPL missed payment revenue up 38 per cent

An ASIC review of the buy now, pay later industry has found the number of transactions nearly doubled in the 2018-19 financial year, but 21 per cent of users who were surveyed missed a payment over the same period.

Missed payment fee revenue for the six providers totalled $43m, up 38 per cent compared to the previous financial year.

“Our review shows additional costs are borne by some consumers who are incurring missed payment fees and who report financial stress and difficulty meeting other financial commitments,” the ASIC report, released on Monday, says.

“While most buy now, pay later arrangements are marketed as a budgeting tool or a way to make purchases more affordable, some consumers are missing payments and incurring fees as a result.

“From our research we also found that some consumers who use buy now, pay later arrangements are experiencing financial hardship, such as cutting back on or going without essentials (for example meals) or taking out additional loans, in order to make their buy now, pay later payments on time.

“There is also a risk that consumers may be paying inflated prices for some goods and services when using a buy now pay later arrangement.”

ASIC said regulatory changes that would soon be implemented, as well as an industry code of conduct, provided an opportunity to address consumer harm.

Design and distribution obligations, requiring the industry to design products that meet consumer needs, will come into effect in October 2021.

Companies are also developing a code of conduct to generate good consumer outcomes.

The buy now, pay later providers reviewed by ASIC included industry giant Afterpay, BrightePay, Humm, Openpay, Payright and Zip Pay.

The number of buy now, pay later transactions increased from 16.8m in the 2017-18 financial year to 32m in the financial year 2018-19, up 90 per cent.

Afterpay shares last down 0.4 per cent at $101.40 each.

10.24am: ASX surges to 8-month high

Australia’s sharemarket has surged to a fresh eight-month high after strong gains on Wall Street on Friday and US stock index futures this morning.

The S&P/ASX 200 rose 1.3pc to 6487.3, exceeding last week’s high at 6470.9, as a 0.7pc rise in S&P 500 futures added to positive US leads.

Fresh record high could pull in more buying, testing the 6500 chart level. Resistance at that point may extend to the March peak at 6524.3.

As was the case on Wall Street, the gains are being led by value stocks amid coronavirus vaccine optimism.

Unbail has surged 9pc and ANZ is up 2.9pc, while Scentre Group is up 2.8pc.

Lachlan Moffet Gray 10.20am: Crown inquiry resumes for final week

The NSW inquiry into the suitability of Crown Resorts to operate the Barangaroo Casino in Sydney has resumed for its final week of hearings to hear from Crown Resorts’ silk, Neil Young QC, who says the inquiry has failed to take into account actions Crown has taken to fix “shortcomings and failures.”

Mr Young said that counsel assisting’s submissions diverted from the strict legal definition contained within the NSW Casino Control act.

“One key example of that is that counsel assisting have made submissions on the question of suitability in a piecemeal fashion that pays no regard to any of the conscious and considered steps that crown have taken to address and eliminate shortcomings and failures that have been identified over the past years,” he said.

“An overall and comprehensive assessment of any failings that have existed are important to be coupled with the steps that have been taken in good faith and consciously to address all of those failings.”

Mr Young laid out the structure of Crown’s submissions, an undertaking that is likely to last most of the week.

“The first is some submissions as to the overall framework for assessing suitability,” he said.

“The second aspect is that I will address the China arrests including reforms and remedial steps put in place in the months following October 2016 as a result of the issues and shortcomings that had been identified.

“Thirdly we will address the junket issue.

“Next we will address some submissions to AML issues, then we will address the Melco Transaction and contentions that have been advanced in connection with the influence with CPH.”

Last week the inquiry heard from CPH’s counsel, who also represents James Packer, as he retains his shareholding in Crown through the company.

CPH’s submissions attempted to shift the blame for Crown’s shortcomings from Mr Packer and his nominee directors onto the broader Crown management.

Mr Young said he would conclude by comparing questions of suitability in NSW to other domestic and international regulatory regimes.

10.19am: Energy stocks lift despite oil price slump

The major energy stocks are higher in morning trade despite a slump in the price of oil on demand concerns, as tighter restrictions are imposed as COVID-19 cases surge in the US.

Oil demand is particularly exposed to restrictions that limit mobility since transport accounts for two thirds of global oil consumption.

The spot price for WTI crude fell 2.4 per cent to $40.13 a barrel overnight.

Still, Woodside was last up 0.9 per cent while Santos had gained 1.6 per cent and Oil Search had gained 2.2 per cent.

The ASX 200 is up more than 1.2 per cent.

9.55am: What’s impressing analysts

Afterpay price target raised 4.3pc to $120: MS

AUB Group started at Overweight: JPM

Lendlease cut to Hold: Jefferies

Lovisa Holdings raised to Neutral: Citi

Lovisa Holdings price target raised 61pc to $11.50: MS

Transurban cut to Neutral: JPM

9.53am: Elders delivers earnings bump

Rural services company Elders has booked a full-year statutory net profit after tax of $124.2m, up 80 per cent on the prior period, as it declared a full-franked 13c per share.

Underlying earnings before interest and tax lifted 62 per cent to $119.4m for the 12 months through September.

“The result was driven by gross margin growth across all state geographies and products, combined with continued cost control and capital allocation discipline,” the company said in its results announcement today.

“The strong results are particularly pleasing given they were achieved despite ongoing drought and bushfires in the first half of the year and without any government assistance in the form of JobKeeper or other COVID19 support measures.”

The dividend of 13c per ordinary share takes total dividends paid for the year to 22c fully-franked, up 4c on the previous year.

9.46am: Suncorp provisions $195m for COVID claims

Insurance major Suncorp has set aside an additional $125m provision for potential business interruption claims stemming from the Victorian lockdown as the state was battling its second wave COVID outbreak.

The increase takes Suncorp’s total cover for potential payouts linked to claims from the pandemic to $195m.

The insurer, which is behind brands including Suncorp, AAMI and GIO, said while it remained confident the “intention” of its business interruption policies was clear and that they did not pay out for pandemics, the provisioning was a prudent approach.

The comments come as the Insurance Council of Australia runs a business interruption insurance test case in NSW, aimed at removing any uncertainty over insurers obligations in paying out to cover pandemics.

Read more: Suncorp sets aside $195m for COVID claims

9.44am: ASX may set 8-month high

Australia’s share market may set a fresh eight-month high on a daily closing basis after a solid lift on Wall Street.

Strong gains since the US election suggest its risky betting against a year-end rally driven by lessening US geopolitical risk and coronavirus vaccine optimism.

Overnight futures suggest the S&P/ASX 200 will open up about 0.8pc near 6455 and a close above 6449.17 would mark a fresh 8-month high on a daily closing basis.

A bigger rise of more than 1pc, above last week’s intraday basis high at 6470.9 would probably require some reasonable gains in US index futures to start the week.

But the 1.4pc rise in the S&P 500 to a fresh record high close of 3585 on Friday was impressive, as was the switch back to value stocks, with Energy, Real Estate, Industrials, Materials and Financials leading.

Macquarie and AusNet are ex-dividend.

9.41am: CSL to open $800m manufacturing facility

CSL has announced plans to invest more than $800m in the construction of a new vaccine manufacturing facility in Melbourne to supply flu vaccines to Australia and the rest of the world.

The investment follows an agreement with the Australian government for the supply over 10 years of influenza pandemic protection for Australians; anti-venoms for Australian snakes, spiders and marine creatures; as well as a Q-Fever vaccine.

“As a proudly Australian company, we are pleased to make this investment in worldclass advanced manufacturing,” chief executive Paul Perreault said in a statement to the ASX.

“This decision will ensure the future of 1,000+ Science Technology Engineering & Manufacturing jobs in Victoria and a supply chain of more than $300m annually.”

CSL CEO Paul Perreault. Picture: Stuart McEvoy.

9.37am: CannPal, AusCann set to merge

CannPal Animal Therapeutics has entered into a takeover deal with medical cannabis company AusCann, which would see the two companies form a combined enity to accelerated the commercialisation of human and animal health products.

AusCann would acquire 100 per cent of CannPal shares at 18.4c each. Shares in the company closes at 14c each on Friday.

CannPal’s largest and founding shareholder, Merchant Opportunities Fund, which holds 19.88 per cent stake in CannPal, has backed the scheme.

“There is a great logic to combining Cannpal Animal Therapeutics Ltd with AusCann Group Holdings Ltd with the new business having enhanced capability to exercise the potential for new and stronger commercial pathways,” CannPal chairman Geoff Starr said.

“The synergies around local and overseas market knowledge and research and development know-how will enable faster to market solutions. It represents a unique and compelling value proposition for both companies.”

9.22am: Virus, vaccine in focus this week

US virus cases and vaccine news remain front and centre together with any development on the likelihood of a fiscal stimulus package during the lame duck Congressional session, says NAB’s head of FX, Ray Attrill.

“Vaccine news will also be watched closely with Moderna expected to report Phase 3 results and Pfizer/BioNTech potentially applying for an emergency use authorisation by the end of the week,” he notes.

“In the EU virus counts continue to dominate with anecdotal evidence of a plateauing of daily infections and drops in some European countries, suggestive of local lockdowns working.”

There’s also a EU Leaders summit on Thursday, while key US economic data include the US has the Empire State Manufacturing survey on Tuesday and retail sales on Wednesday.

Joyce Moullakis 9.16am: CS flags earnings lift for Liberty ahead of IPO

Analysts at Credit Suisse have released only a “qualitative” outline of non-bank lender Liberty’s valuation in research on an upcoming $1.8bn initial public offering.

Credit Suisse is spearheading the Liberty IPO and the deal team is rounded out by co-managers Shaw and Partners and Evans & Partners.

Credit Suisse’s research points to an expected adjusted net profit of $165.6m in 2020-21, or a net profit of $153.9m. Those figures are up from $142m and $130.3m respectively for last financial year.

The report lists Resimac and the regional banks as comparative stocks for Liberty on the ASX. Key risks for Liberty were identified including the potential for higher loan losses, the competitive environment and regulation.

The research is expected to be followed by a management roadshow and bookbuild in the last week of November, with the company listing before Christmas.

9.15am: Alceon launches takeover bid for listed childcare operator

Private equity company Alceon Group has launched a takeover bid for Think Childcare, offering $1.35 a share.

Shares in the company closed at $1.30 on Friday.

Think Childcare said this morning that it had entered into a process deed with Alceon which it has granted the private equity company a period of exclusivity up until 18 December 2020 to complete its due diligence.

The company also told the market this morning tha tit had acquired four trading purpose built childcare services, two of which were acquired from a third party incubator, while the other two were acquired from Think Childcare Development limited.

9.08am: Big week ahead for Aussie markets

There’s a lot on in Australia this week with RBA Governor Phil Lowe speaking this evening at 7:40pm AEDT on “Covid, Our Changing Economy and Monetary Policy” and Wednesday in a panel discussion from 0900 am AEDT.

Ahead of that important speech, China has monthly economic activity data at 01pm AEDT and Japan has 3Q GDP data.

Assistant Governor Chris Kent speaks to the Australian Securitisation Forum on Tuesday.

Data include weekly payrolls on Tuesday, Q3 Wage Price Index on Wednesday, October Employment on Thursday, and preliminary Retail Sales on Friday.

9.05am: New director for Stockland

Laurence Brindle has been appointed to the Stockland effective immediately, the property company said in a statement to the ASX this morning.

Mr Brindle is currently the chairman of both National Storage REIT and Waypoint REIT.

He is a former chairman of the Shopping Centre Council of Australia and has previously sat on the boards of Westfield Retail Trust and Scentre Group.

“I’m delighted to welcome Laurence to the Stockland Board. Laurence has extensive experience in the property sector, funds management, finance and investment, both in his executive career and more recently as a non-executive director,” chairman Tom Pockett said.

“Laurence’s appointment is part of our ongoing Board succession program which focuses on complementing and strengthening the Board’s experience and expertise and I look forward to his contribution.”

Stockland Chairman Tom Pockett. Picture: Jane Dempster

8.55am: Resignation comes at ‘opportune’ time: Nine CEO

Outgoing Nine Entertainment chief executive Hugh Marks has said now is an “opportune” time to announce his retirement, spruiking the proportion of the company’s earnings now derived out of digital assets, saying the progress provides a “clear growth profile” for the media company.

“When I was appointed CEO five years ago, my brief was to lead the transformation of what was then a television business, to a digitally-based media company,” Mr Marks said in a statement to the ASX this morning.

“We have achieved so much in that time frame. Bringing together three legacy media businesses, each with their own structural challenges, and investing in the assets that will ensure our position at the forefront of Australia’s media future.”

Nine chairman Peter Costello wished Mr Marks well in his future endeavours.

“Hugh has been an extremely successful CEO for Nine, and has achieved so much in building the Company in his time at the helm,” he said.

“The transformation of Nine to a multimedia and digital business has been all-encompassing and we now have an unreplicable suite of assets, fit to lead us through the digital age. We respect Hugh’s decision, allowing us plenty of notice to work through the next few months, and enable an orderly transition.”

Mr Marks resigned hours after his relationship with former commercial director Alexi Baker was publicly revealed on Saturday morning.

Read more: Nine CEO Hugh Marks to leave by June | Culture clash as Nine board splits over Hugh Marks’s sex scandal

Nine AGM

8.30am: NAB raising $750m with hybrid

NAB has announced it plans to raise approximately $750m through a Notes 5 offer.

The bank said in a statement to the market on Monday morning that it would use the net proceeds from the offer for general corporate purposes.

NAB said it invites current shareholders to apply for the offer, which is comprised of a reinvestment offer, a security offer for all registered holders of registered shares, a broker firm offer and an institutional offer.

The offer is expected to raise approximately $750 million, with the ability to raise more or less, NAB said.

NAB rival Westpac recently upsized its hybrid raising to $1.4bn and settled on a margin of 3.4 per cent

8.27am: SkyCity CEO resigns

Casino operator Skycity Entertainment said its chief executive has resigned and will be replaced by the company’s current chief operating officer.

Graeme Stephens, who has been CEO since 2016, will leave the company at the end of November and Michael Ahearne will become CEO, Skycity said Monday.

The New Zealand company did not say why Mr. Stephens had resigned, but described the change as a “seamless internal succession which had been planned for.” Skycity, which has three casinos in New Zealand and one in Adelaide, Australia said it can’t provide earnings guidance for its current financial year because of uncertainty stemming from the pandemic.

It said it remains on track to resume dividends at the end of its 2021 financial year “assuming no meaningful further Covid-19 disruptions.” The company also said its chief financial officer, Rob Hamilton, will leave the company at the end of February 2021 to pursue new opportunities. Chief Marketing Officer Liza McNally will leave the company at the end of March to relocate to Adelaide with family, it said.

Dow Jones

Angelica Snowden 7.39am: Qantas ramps up flights

Qantas domestic flights could be operating by more than half of their previous schedule by Christmas, CEO Alan Joyce says.

But the increase in flight routes is dependent on borders opening, Mr Joyce said.

“What we’re still thinking is that by Christmas we will get to over 60% of our schedule operating,” Mr Joyce told the ABC.

“Which I think is important for economic and social reasons … to get people back together for Christmas,” he said.

Monday marks the 100 year anniversary of Qantas.

When Qantas started selling Melbourne-Sydney flights again recently, 40,000 people snapped up seats in the first few days.

CEO Alan Joyce thinks Qantas will get more than 60 per cent of its schedule operating by Christmas. pic.twitter.com/88dQFIoBsa

— News Breakfast (@BreakfastNews) November 15, 2020

Mr Joyce said there is “huge demand” for domestic travel, after the company sold 40,000 seats on flights between Sydney and Melbourne ahead of the November 23 border lifting.

“Before COVID we were at 45 flights a day,” he said.

“Now we’re looking for 15 … People want to see family and friends and want to take that break after being cooped up for so long.

“So we have optimism that the travel will be there, domestically.”

Mr Joyce hoped to take advantage of the opportunities for domestic tourism too.

“Eleven million Australians went overseas every year and they are likely to want to have in the next year a holiday at home,” he said.

“That could be a big boom for domestic travel and then we are optimistic that with a vaccine, that we can start seeing international coming back and maybe even before the vaccine is fully rolled out, we could see bubbles to various markets like New Zealand, like Japan, like Korea, like Taiwan, which we’d be very interested in operating.”

6.48am: Alan Kohler Victoria sets stage for ourperformance

Victoria’s extraordinary performance in controlling COVID-19 has set the Australian economy up to significantly outperform the rest of the world next year, and an unwanted rise in the exchange rate could be the result.

Because of Premier Dan Andrews’ widely-vilified winter lockdown, Victoria has now had zero cases and zero deaths for 17 days; Andrews’ personal popularity has jumped 12 percentage points to 71 per cent, and on a variety of measures Victoria’s economy is bouncing back quickly.

The Stage 4 lockdown that began on July 7 and from which we are only now emerging has been a political and economic triumph.

It’s not just Victoria: the fact that Australia has had only 0.05 per cent of the world’s Covid 19 cases with 0.35 per cent of the population reflects on the courage of all the state premiers – but not so well on the Morrison Government, which had been hectoring them to open up.

It means Australia’s economy is likely to be among the world’s strongest in 2021, if not the strongest, although that probably isn’t saying much.

Much of the northern hemisphere is now going into harsh winter lockdowns to control horrifying infection breakouts. Over the weekend Austria announced an “around the clock curfew”, with the chancellor Sebastian Kurz closing schools and almost all shops, and generally sounding like Dan Andrews.

Read more: Victoria’s triumph is Australia’s

Jacquelin Magnay 6.50am: Vaccine has no serious side-effects, creator says

Professor Uğur Şahin says his Pfizer BioNTech vaccine has had no serious side-effects and believes it will more than halve COVID-19 transmission around the world, leading to a “dramatic reduction in cases”.

The United Kingdom has ordered 40 million vaccine doses by December, while as many as five million people in Australia will be able to receive the vaccine once it has obtained Australian regulatory approval in the new year.

#Marr: Will society be back to normal by spring 2021?

BioNTech founder Prof UÄŸur Åžahin: "We can have a normal winter next year" if a high vaccination rate is achieved by autumn

Covid-19 https://t.co/yuuSb1O1wa pic.twitter.com/4ho76VHX0x

— BBC Politics (@BBCPolitics) November 15, 2020

Prof Şahin, who heads BioNTech, believes the vaccine’s roll-out will see life return to normal by mid-2021. He said side effects of the vaccine, administered in two jabs 21 days apart, were mild to moderate pain in the injection site for a few days, and a mild to moderate fever for one or two days.

5.37am: Small US stocks gain

Shares of small companies are posting outsize gains, driven by investors’ bets that a rebounding economy and expected Biden administration policies will boost profits at smaller U.S. companies.

The Russell 2000 index of small-company stocks rose 6.1% last week, hitting its first record close since 2018 and extending a recent race ahead of other major indexes. It finished the first two weeks of November up 13%, its best 10-session start to a month on record, according to Dow Jones Market Data. The broader S&P 500 gained roughly 9.6% in that period.

That marks a reversal from earlier in the year, when shutdowns hammered shares of small-cap companies, which tend to have fewer business lines and a greater reliance on the domestic economy than larger, diversified peers. The Russell 2000 lagged behind the market rebound and has now gained roughly 4.5% in 2020, according to FactSet data, compared with 32% for the Nasdaq Composite and 11% for the S&P 500.

Shares of giants including Apple Inc. and Amazon.com Inc. drove much of that bounce from March’s lows, lifted by bets those companies would benefit from consumers staying home in greater numbers. While Amazon, with its $1.6 trillion market value, is the biggest stock in the S&P 500’s consumer-discretionary sector, Penn National Gaming Inc., a roughly $10 billion operator of racetracks and casinos in 19 states, was the Russell 2000s largest consumer-discretionary company as of Oct. 31.

Hopes for a COVID-19 vaccine, however, have up-ended that trade in recent sessions, sparking a recovery in sectors such as energy, travel and entertainment. In the two sessions after Pfizer Inc. and partner BioNTech SE announced significant progress on a vaccine for COVID-19, the Russell 2000 beat the tech-heavy Nasdaq Composite by 8.52 percentage points -- the greatest margin since at least 1986, according to Dow Jones Market Data.

Dow Jones

5.35am: Tesla’s Musk ‘likely’ has COVID

After conflicting test results, Tesla CEO Elon Musk says he believes he has a moderate case of COVID-19. Musk said Sunday morning he wasn’t currently experiencing symptoms of COVID-19. Musk added that last week he had symptoms of a minor cold. Though he’s received mixed results from different labs, Musk said on Twitter Saturday, “most likely I have a moderate case of covid.”

Dow Jones

5.32am: Trump allies mull TV play

For nearly two years, allies of President Trump have been exploring ways to build up a formidable competitor to Fox News. One target they recently zeroed in on: the fledgling pro-Trump cable channel Newsmax TV.

Hicks Equity Partners, a private-equity firm with ties to a co-chair of the Republican National Committee, has held talks in recent months about acquiring and investing in Newsmax, according to people familiar with the matter, part of a larger effort that could also include a streaming-video service.

Newsmax’s viewership has risen sharply since Election Day, as it wins over viewers loyal to Mr. Trump who are frustrated that Fox News and other networks have declared Democrat Joe Biden the president-elect. Newsmax hosts have promoted Mr. Trump’s unsubstantiated claims that the election was stolen; his campaign hasn’t provided evidence of widespread irregularities.

It is unclear whether Hicks Equity’s talks with Newsmax will move forward. The discussions show the belief among some investors and allies of Mr. Trump that there is room to mount a real challenge to Fox News, which has dominated the conservative media landscape for two decades.

Dow Jones

5.29am: Major new APAC trade bloc

Fifteen Asia-Pacific countries on Sunday signed the world’s biggest free trade deal, seen as a huge coup for China in extending its influence.

The Regional Comprehensive Economic Partnership (RCEP) includes 10 Southeast Asian economies along with China, Japan, South Korea, New Zealand and Australia, with members accounting for around 30 per cent of global GDP.

First proposed in 2012, the deal was finally sealed at the end of a Southeast Asian summit as leaders push to get their pandemic-hit economies back on track.

“Under the current global circumstances, the fact the RCEP has been signed after eight years of negotiations brings a ray of light and hope amid the clouds,” said Chinese Premier Li Keqiang after the virtual signing.

“It clearly shows that multilateralism is the right way, and represents the right direction of the global economy and humanity’s progress.” The agreement to lower tariffs and open up the services trade within the bloc does not include the United States and is viewed as a Chinese-led alternative to a now-defunct Washington trade initiative.

The RCEP “solidifies China’s broader regional geopolitical ambitions around the Belt and Road initiative”, said Alexander Capri, a trade expert at the National University of Singapore Business School, referring to Beijing’s signature investment project that envisions Chinese infrastructure and influence spanning the globe.

“It’s sort of a complementary element.” But many of the signatories are battling severe coronavirus outbreaks and they are also hoping the RCEP will help mitigate the crippling economic cost of the pandemic

AFP

5.21am: Last minute Brexit talks

British and EU negotiators launched a desperate final stretch of trade talks Sunday, with both sides determined not to give ground, despite the looming threat of failure.

Britain’s David Frost returned to meet his EU counterpart Michel Barnier after a shake-up in Number 10 personnel left some wondering if the London might soften its stance.

But there was no sign of that in the message that Prime Minister Boris Johnson’s envoy tweeted as he headed back to Brussels.

“We are working to get a deal, but the only one that’s possible is one that is compatible with our sovereignty and takes back control of our laws, our trade, and our waters,” Frost said.

“That has been our consistent position from the start and I will not be changing it.” On Friday, Johnson’s senior aide Dominic Cummings -- one of the architects of the “leave” victory in the 2016 Brexit referendum -- was sacked, amid faction fighting in Number 10, but there has been no sign this will change the direction of trade talks.

Britain left the European Union in January, but the full economic effect of the bitter divorce will be felt at the end of the year when an 11-month transition period closes.

Relations between Britain and Europe could then be governed by a trade deal, but only if negotiations currently under way deliver, which is hardly guaranteed given still wide divergences.

Frost said the parties now “largely have common draft treaty texts, though significant elements are of course not yet agreed. We will work to build on these and get an overall agreement if we can.

“But we may not succeed,” he warned.

AFP