ASX, $A fall on offshore jitters; Westpac steadies after fine
The $A was around a 9-week low and shares fell after Fed officials said more stimulus was needed, but Westpac provided some recovery for the ASX 200.
- Austrac puts corporate Australia on notice
- ‘Refreshed strategy’ for Coles
- WHSP delivers bumper profit
- Westpac to pay $1.3bn fine
That’s all from Trading Day for Thursday 24 September.
Australian shares and the dollar remained shaky after Fed officials highlighted an urgent need for new US fiscal stimulus which was lacking before the US election. But while the $A fell steadily to a 9-week low of 0.7031, the ASX 200 pared more than half of a 1.7 per cent opening fall to end down 0.8pc at 5875.9 amid ongoing speculation of new stimulus on Budget day.
Perry Williams 6.40pm: BHP takes copper project stake
BHP has struck a deal to take a majority stake in a Northern Territory copper project, underlining a greater focus on building joint exploration ventures with junior miners as it boosts exposure into “future facing” commodities including copper and nickel.
The mining giant can acquire a 75 per cent stake in Encounter Resources’ Elliott copper development in the NT’s Beetaloo Basin through spending $22m over 10 years.
Shares in Encounter soared 31 per cent to 19c after it revealed the tie-up with the potential for copper to be found under shallow cover in the NT.
Ben Wilmot 5.30pm: Dunk Island investors funds ‘sunk’
A provisional liquidator’s report into the beleaguered financial investment house Mayfair 101 reveals investors have little or no hope of clawing back their financial investments into a unit of the group which focused on buying up hundreds of millions of dollars worth of real estate assets in Far North Queensland.
Mayfair 101 had promoted controversial plans to transform Dunk Island and Mission Beach into a $1.5bn tourism mecca, but Grant Thornton was appointed as provisional liquidators of debenture schemes backing the plans in a Federal Court case last month.
Mayfair 101 provisional liquidator Said Jahani, national managing partner of Grant Thornton, said in a report to the court that of the $107.9m investors ploughed into the Mayfair investment vehicle just $63m was used to make real estate investments.
John Durie 5.14pm: Woolies seeks PFD buy clearance
Woolworths has sought clearance of its $552m acquisition of 65 per cent of number two food service provider PFD.
The deal was monitored by the ACCC pending lodging of its application which has now happened.’
The ACCC is due to make its decision on December 12.
The Smith family will continue managing the business from Melbourne but some supplies are concerned about the deal.
They argue if they apply both, the supermarket and the food service company they might be under pressure to deal with both on set terms.
PFD is number two behind Bidvest in a fragmented industry but Woolworths dominance of the supermarket sector is where the ACCC concerns will lie.
Bridget Carter 4.42pm: Blackstone looks again at property offload
Private equity firm Blackstone is once again exploring a move to offload its $700m portfolio of Australian industrial properties that are managed by Fife Capital.
It is understood that the New York-based buyout fund, which has $US564bn of assets under management globally, is in the early stages of revisiting an exit, with a sales process yet to be launched.
Allan Fife owns about 10 per cent of the industrial portfolio through his Fife Capital business, while Blackstone owns the remainder. It is understood that Mr Fife is keen to retain his holding.
4.20pm: ASX -0.8% after late bounce
The S&P/ASX 200 closed down 0.8pc at 5875.9, near an intraday high of 5881, after a late extension of its rebound from an intraday low of 5824.8.
The late improvement came as AUD/USD appeared to bottom at a 9-week low of 0.7030 and S&P 500 futures pared some of their intraday fall.
Technology was weak it was on Wall Street, with Afterpay down 5.8pc.
The Energy, Communications and Materials sectors also underperformed, with Newcrest down 3.7pc and Woodside down 2pc on weaker gold and oil prices.
Economic reopening trades rose again amid some encouraging trends regarding coronavirus and lockdowns in VIC and QLD. Mirvac rose 3.4pc, Transurban rose 1.9pc, Bank of Queensland rose 1.3pc, Bendigo Bank rose 0.7pc and NAB rose 0.4pc.
Westpac recovered from a 2.4pc opening fall to close down 0.1pc at $16.37 as investors judged the bad news was out of the way after a paying a record $1.3bn fine to AUSTRAC for money laundering.
3.45pm: $A extends fall toward 100-DMA
AUD/USD is fast exteding its 40day tumble toward its 100-day moving average at 0.7002.
The currency was down 0.6pc at 0.7031 in late afternoon trading in Sydney as global markets remained risk averse. A Head & Shoulders top pattern targets 0.6982, but AUD/USD is severely undershooting its lower Bollinger Band. Unless it’s heading for the kind of selloff seen in March, it could bottom at the 100-DMA, along with gold.
Bridget Carter 3.28pm: Competition ramps up for David Jones site
As the competition to buy the real estate of the iconic David Jones store in Sydney enters its second phase, new names are emerging as parties that have shown interest in the highly prized site.
DataRoom understands that among the groups that have been competing are Ashe Morgan and also Victor Comino, along with Sean Bonnett’s Precision Group and Charter Hall.
David Jones is selling the site of its flagship Sydney city store, but will remain as a tennant.
More to come
Lilly Vitorovich 3.15pm: Emma Alberici joins Compare the Market
Former ABC chief economics correspondent Emma Alberici has landed a media gig with online insurance comparison website Compare the Market, a month after leaving the public broadcaster.
Compare the Market has appointed Alberici as its chief strategy of government relations and communications officer.
Its Australian boss Rob Clancy says Alberici “will draw on 30 years’ experience as a respected business reporter to analyse key market dynamics, identify strategic opportunities, and engage with a wide range of regulatory and governmental stakeholders.”
The Australian last month revealed Alberici had accused the ABC of kowtowing to personal complaints by former prime minister Malcolm Turnbull during her departure negotiations from the broadcaster.
Alberici subsequently settled her dispute with the ABC and is writing a book called “Rewrite the Story”, which will claim her reputation has been unfairly “smeared” over her controversial corporate tax story in 2018.
3pm: US futures turn down again
US stock index futures are nearing intraday lows in bearish fashion after regaining the unchanged mark for a while.
S&P 500 futures are down 0.4pc and Nasdaq futures are down 0.7pc.
WTI crude futures are down 1.5pc after the intraday bounce faded.
The US dollar index has turned up 0.1pc and the US10-year bond yield is at intraday lows.
These latest evidence of risk aversion and safe haven demand in global markets bode poorly for the Australian dollar and shares before the local session close.
The S&P/ASX 200 is down 1.2pc at 5855 and AUD/USD hit a fresh 9-week low of 0.7034.
Gold remains the odd one out as it trades down 0.5pc at $1853.52, near the 2-month low of $US1853.60 it this this morning.
Will gold and gold equities be the first to buck this flight to US dollars?
Spot gold is fast approaching its 100-day moving average, as its AUD/USD and the US dollar index.
2.50pm: Uptick in employment: ABS
The latest ABS labour force data shows an uptick in employment in the three months two August, with healthcare and social assistance remaining the biggest employer, followed by retail trade and construction.
In seasonally adjusted terms, employment rose by 421,800 in the three months to August.
Meanwhile 368,700 people lost their jobs in the year to August.
“The coronavirus health crisis and the resulting economic lockdown have hit Aussie workers hard,” CommSec senior economist Ryan Felsman said.
“The downturn has taken a huge toll on younger and older Aussies, females, casual and part-time workers, in particular.”
More than 1.45 million people were claiming JobSeeker as of July.
2.40pm: Aussie population grows 1.4 per cent
Australia’s population growth has sunk to an 8½ year low according to analysis of ABS data by CommSec. The population grew by 357,000 people to 25.65 million people over the year to March. For the period, population growth was strongest in Victoria, followed by Queensland and Western Australia.
A net total of 220,500 people migrated over the year to March, compared to 225,600 for the year through December, while 305,000 babies born in the period, down from 306,200 births over the year to December.
2.20pm: ASX volume remains light
S&P/ASX 200 share trading volume has remained light despite the 1.7pc fall to 5823.9 at the open and subsequent intraday bounce to 5873.
Composite turnover worth $3.121bn so far today is more than 18pc below the 20-day moving average of $3.81bn for this time of day.
It suggests shares are down more on a lack of strong buying rather than strong selling today.
Interestingly, the Australian dollar’s fall to a 9-week low of 0.7048 doesn’t seem to be attracting offshore buyers. Perhaps a bigger risk is offshore profit taking in shares as the currency starts to wobble after bouncing as much as 35pc since March.
The index was last down 1.1pc at 5859.4
Elise Shaw 2.11pm: CBA upgrades gold, silver price forecasts
Gold and silver prices have been two of the best performing commodities this year, says CBA’s Global Markets Research team. Prices have broadly been supported by i) a weaker US dollar, ii) falling US 10-year real yields and iii) safe-haven demand. Silver has also found support from industrial demand, supply cuts and a low silver‑gold price ratio, the group says in a note.
“Falling US 10-year real yields is the main driver of higher gold prices. We don’t expect US 10-year real yields to drop meaningfully from here.
“We forecast gold rising very mildly to a peak of $US1970 and ounce by Q2 2022. We’ve also upgraded our long‑run gold price forecast by 5.6% to $US1488 an ounce. We think silver will peak at $US25.60 an ounce by Q2 2020 and have also upgraded our long‑term silver price by around 5.6% to $US25.80 an ounce.”
1.50pm: Gold miners step back
The major gold miners have backtracked in today’s trade after the spot gold price fell to a 2-month low overnight on a stronger US dollar.
“US equities have declined as global growth concerns intensify from the ongoing spread of COVID‑19,” said Commonwealth Bank mining and commodities research director Vivek Dhar.
“That raises the risk of new lockdowns, particularly in developed economies.
“The US dollar has also strengthened as hope fades that the US Congress can agree to a fiscal package before the US election.”
At 1.50pm (AEST), Newcrest was 4.1 per cent to $30.56 while Northern Star was 3.2 per cent lower at $13.18 and Evolution Mining had dropped 5.7 per cent to $5.51.
1.23pm: Tech sector leading the day’s falls
The buy now, pay later players are being sold off in today’s trade amid a weakening among the tech sector generally.
Afterpay last down 5.6 per cent at $74.35, Zip was down 4 per cent at $5.99 and Xero last 1 per cent lower at $97.61.
The IT sector is the worst performing sector in today’s trade.
1.19pm: Oz Minerals acquires Cassini Resourses
Copper miner Oz Minerals will acquire Cassini Resources after the Supreme Court of Western Australia approved the schemes of arrangement.
Cassini Resources will be spun off from ASX-listed Cassini as part of the sale.
Cassini shareholders will be issued 1 Oz Minerals share for every 68.5 Cassini shares held.
Oz Minerals last down 3.8 per cent at $13.80.
1.15pm: Westpac needs IT fix: JPM
JPMorgan’s Andrew Triggs stays Neutral on Westpac with an $18.20 price target even as he notes that it “trades on undemanding multiples” and “the settlement will gives the market greater certainty which may be viewed as positive.”
“However, we believe the AUSTRAC issues partly stem from the significant complexity of Westpac’s IT systems, which we think will continue to hamper its cost growth outlook relative to peers and likely requires further investment to fix,” he warns.
WBC last -0.7pc at $16.28 after opening down 2.4pc at $16.00, which equalled a 5-month low at that level on Tuesday.
1pm: Brickworks flags plans to invest again
Brickworks managing director Lindsay Partridge says demand for the company’s products remained resilient throughout the year and the company now plans to invest again, a key sign that the worst of the coronavirus has passed.
“From an operational point of view, manufacturing has continued across most sites, albeit with strict protocols in place,” he said.
His comments follow Brickworks earlier posting a 60 per cent jump in net profit for financial 2020 to $315m. After stripping out one-time gains underlying profit fell 38 per cent to $146m.
“I am also pleased to say that after initially pausing a number of capital projects to preserve cash during the peak period of uncertainty, we have now re-initiated our capital program, where we have mobility and availability of engineering crews,” Partridge tells analysts.
This includes construction of a new $75m Austral Masonry plant in Sydney and a new $125 million face brick plant at Horsley Park, also in Sydney.
When complete, this will be the most advanced brick facility ever built. Perhaps the biggest ongoing risk and challenge we now face is the limited mobility of our staff, including our critical engineering crews who are required to complete these major projects, he says.
“From a financial standpoint, Brickworks entered the crisis with a strong balance sheet and this has been critical to protect shareholders from a dilutive capital raising at a discounted issue price”.
Brickworks last traded at $18.72, down 14c.
12.55pm: Westpac “ends disapointing chapter”: UBS
Westpac’s $1.3bn anti-money laundering fine from AUSTRAC was less than UBS’s expectation of $1.5bn and “ends a disappointing chapter for Westpac”, says analyst Jon Mott.
He keeps a Buy rating and $20.50 target for the bank, incorporating his expectation of $1bn of writedowns on St George Bank goodwill, life insurance carrying value, the Panarama investment and other capitalised software balances which Westpac is reviewing
“We believe its Balance Sheet is relatively well provisioned for most likely economic outcomes,” Mr Mott says.
“However, its weaker capital position remains an overhang, implying that the potential sale of any Specialist Businesses is likely to be well received by the market.
We believe Westpac requires substantial investment in technology and integration (including St George) to achieve the necessary efficiency gains to help offset the weak revenue outlook.
However, at 0.9x book we find its valuation appealing as the economy recovers.”
12.44pm: Risk aversion dominating now: IG
IG market strategist Kyle Rodda says investors are reducing their exposure to risk assets as a lack of additional US stimulus fuels concern about the economic outlook.
“It would be hard to take sides between growth or valuation driven declines for Wall Street having seen tech stocks falling in tandem with the rest of the sectors in the Wednesday session,” he says.
“De-risking appears to be the case tracking the broad-based equities pullback paired with the US dollar strengthening, which had in turn weighed on the likes of gold prices.”
Comments from Fed officials this week have only fuelled concerns of a lack of further fiscal support from an US administration gearing up for elections and having clear distractions with supreme court nominations and while August data had mostly reaffirmed the strong rebound, such reinforcement had mostly been missing this week, Mr Rodda cautions. He notes that Markit PMIs for September also reflected disappointing readings across the services gauge for both the US and eurozone, fuelling concerns of faltering recovery even as the manufacturing indices held up.
“More Fed talks up ahead with Fed Powell and US treasury secretary Steven Mnuchin also due to testify before the Senate Banking Committee, ones to keep US equities on the line,” he says.
12.05pm: ASX, A$ remain shaky at noon
The Australian dollar and shares remain shaky at midday.
After Fed officials stressed the need for more US fiscal stimulus which seems unlikely before the US election, global markets have been hit by risk aversion.
That may continue tonight as US stock index futures have mostly traded weaker.
AUD/USD has just hit a fresh 9-week low of 0.7056.
The S&P/ASX 2000 share index is down 1.1 per cent at 5857 after paring a 1.7 per cent opening fall to 0.9 per cent intraday. Gold and copper miners are among the weakest stocks with Evolution down 5 per cent, OZ Minerals down 4 per cent and Newcrset down 3.8 per cent after LME copper dropped as much as 3.4 per cent this morning and spot gold fell 2.1 per cent overnight.
Tech is the weakest sector, with the market darling, Afterpay down 4.7 per cent after the renewed dive in the Nasdaq overnight. The Materials and Energy sectors are also underperforming.
Major banks are down 0.6-1.2 per cent. Westpac recovered from a weak open following news of its record $1.3bn money laundering fine to AUSTRAC.
11.40am: Reliance in good shape despite virus: Macquarie
Rising rates of coronavirus infections in the UK present a near-term risk to Reliance Worldwide’s performance, despite competitors and industry partners recently reporting solid demand, Macquarie says. Still, the bank thinks the plumbing-fittings supplier’s business is in
“good shape” as “exposure to less cyclical elements of the market, improved execution and efficiency gains continue to support a solid earnings outlook.”
“We continue to monitor a rising copper price as it relates to brass input costs, but note its overall impact on profitability is more diluted than it was.”
Reliance has an investor day on Oct. 1. Shares last down 0.3 per cent at $3.91.
Dow Jones
11.25am: ASX -0.9 per cent; US futures bounce
Australia’s share market staged an intraday bounce but it will struggle to keep rising without a marked improvement in the global risk appetite. That will be hard without another big boost from US fiscal policy, which is hard to see this side of the November election.
Significant damage to the US economy and corporate profits could be done in the interim.
The S&P/ASX 200 recovered to be down 0.9 per cent at 5873 as S&P 500 futures turned up 0.2 per cent.
That followed a 1.7 per cent drop to 5824.8 at the open as S&P 500 futures fell 0.5 per cent, adding to sharply negative leads from Wall Street.
Richard Ferguson 11.20am: Austrac puts corporate Australia on notice
Austrac chief executive Nicole Rose has warned corporate Australia she will take on more large entities failing to meet anti-money laundering standards after Westpac’s $1.3bn settlement.
Westpac announced on Thursday it had agreed to pay a huge $1.3bn fine, dwarfing Commonwealth Bank’s $700m settlement with Austrac in 2017, over its failure to identify money laundering risks which benefited terrorists and paedophile rings.
When asked in Canberra if Austrac- the anti-financial crime agency - would take on more big cases, Ms Rose replied, “Yes.”
“More absolutely needs to be done through our 15,000 entities. there are varying, different maturities through our entities,” she said in Canberra.
“We’re ramping up our guidance and education this year to ensure that they are well aware of their requirements.
But I have to say since the Commonwealth Bank action, we’ve seen an increase in suspicious transaction reporting. So businesses are starting to take this very seriously.”
11.00am: TSLA news bearish lithium: MS
Tesla’s new battery tech and lithium supply announcements at its “Battery Day” were bearish for lithium miners, according to Morgan Stanley.
While noting that Tesla’s plans to increase production and reduce costs of batteries should support electric vehicle sales in the longer term, the broker also expects them to reduce lithium usage and production costs.
“Before the event, investors had expressed optimism regarding the potential for cheaper batteries, expected to translate into higher EV penetration and lithium demand,” MS analysts say. “We believe the excitement will be replaced by concerns, as the new technologies announced can reduce lithium usage and production costs.
Tesla’s announcement of its own new, lower-cost and more sustainable lithium mine was also negative and the analysts highlight Elon Musk’s comments that there is “a massive amount of lithium in the world” and “there is enough lithium in Nevada to convert the entire USA fleet.”
“This is in line with our thesis that lithium is a commodity and supply will be able to adapt to growing demand,” they say.
Lithium may have bottomed but there will be no price recovery any time soon, they say.
“Prices have to stay below marginal cost of production for longer to adjust to the supply and prevent new capacity from coming online too early,” they note.
“As new and low cost capacity comes to the market, such as that announced by Tesla or like the expansions under construction by SQM, we do not think lithium prices need to go
above the marginal cost of $US7-8k/t, under current technology.”
The rout in Lithium stocks continues today.
Galaxy is down 7.5 per cent after falling 12 per cent yesterday and 27 per cent this week.
Orocobre is down 2.3 per cent today and 11 per cent this week.
Pilbara Minerals is down 3 per cent today and 15 per cent this week.
10.40am: Sezzle slumps despite new tie-up
Shares in buy now, pay later payments platform Sezzle have tumbled in early trade despite the company announcing it had teamed up with Ally Lending, a subsidiary of NYSE-listed Ally Financial.
“Our collaboration with Ally Lending enhances our customer financing offerings, making it possible for consumers to better manage their finances,” said Sezzle CEO and executive chairman Charlie Youakim.
“Ally’s dedication to its customers and commitment to innovation aligns with our own vision and culture – making this partnership a good fit for us.”
Sezzle last down 4.3 per cent at $6.56.
Eli Greenblat 10.35am: Coles CEO outlines ‘refreshed strategy’
Coles chief executive Steven Cain has told shareholders in the supermarket’s annual report that the retailer continues to transform since its demerger from conglomerate Wesfarmers to improve its fresh offer and win over customers.
“Since our successful demerger from Wesfarmers during the 2019 financial year, Coles has been executing our refreshed strategy to transform our business and lay the foundations for long-term sustainable growth,’’ he said in his CEO message in the annual report released on Thursday.
Mr Cain told investors that COVID-19 had seen Coles classified as an ‘essential service’ and its focus has been on team and customer safety and supporting vulnerable Australians in the community.
But the health crisis had not stopped Coles from improving its fleet of stores or its plan to shift to automated distribution centres.
It is part of Coles’ ‘smarter selling’ strategy that should achieve cost savings of $250 million, driven by the further use of technology in its supply chain.
“This included streamlining our store support centre and implementing new systems across finance and procurement, more efficient use of logistics so more trucks carry both inbound and outbound loads, new technology to help our store teams order the right amount of stock, reduced energy consumption through use of LED lights and refrigeration control systems, and improved measures to reduce stock loss in stores.
“Further progress was also made in tailoring our store formats to the needs of local communities, with 70 renewals completed during the year, including 10 Format A, 31 Format C and three Coles Local supermarkets.”
According to the Coles annual report Mr Cain had fixed salary of $2.069m in 2020, up from a fixed salary of $1.815m in 2019, with his total remuneration for 2020 hitting $6.965m against $5.396m in 2019.
10.25am: ASX slumps in early trade
Australia’s S&P/ASX 200 opened down 1.7 per cent at 5825.8 versus a 1 per cent fall indicated by overnight futures as a 0.5 per cent fall in S&P 500 futures added to a 2.4 per cent drop in the benchmark overnight.
Gold and copper miners suffered the biggest falls with OZ Minerals down as much as 10 per cent and Evolution down 4.5 per cent after commodity prices were hit by a stronger US dollar and growth jitters amid worsening coronavirus trends in the US and Europe.
Westpac lead falls in banks with a 1.9 per cent drop after paying a record $1.3bn fine to Austrac over money laundering charges.
The Materials, Energy and Tech sectors were weakest with BHP fell 1.4 per cent, Woodside down 1.8 per cent and Afterpay down 3.6 per cent.
10.20am: Westpac shares drop on Austrac news
Westpac shares have slumped in early trade following news the bank agreed to pay a $1.3bn fine to settle its civil court case with Austrac.
The bank had failed to identify all its money laundering and counterterrorist financing risks, according to a statement of agreed facts and admissions.
Westpac last down 1.6 per cent at $16.13.
9.50am: What’s impressing analysts?
- AusNet cut to Sell: Morningstar
- Domain Holdings cut to Sell: Morningstar
- OceanaGold cut to Outperform: Raymond James
- Resolute Mining raised to Buy: EL & C Baillieu
- Service Stream raised to Buy: Bell Potter
- Treasury Wine raised to Outperform: Credit Suisse
9.45am: ASX expected -1%; downside risk
Australia’s share market may fall more than expected today but should outperform Wall Street in the next three weeks thanks to expectations of more policy stimulus in Australia.
Overnight futures relative to fair value suggest the S&P/ASX 200 will open down 1 per cent at 5865 after the S&P 500 dived 2.4 per cent to a 6-week low close of 3236.9 and the Nasdaq fell 3 per cent to an equivalent close at 106329.
Unexpected sharp falls on Wall Street more than reversed the previous day’s sharp gains as Fed officials stressed the need for fiscal stimulus, but that’s unlikely before the November election, which is also a major source of uncertainty.
An equivalent fall in the Australian market would retest the 3-month low of 5763.2 reached on Tuesday.
But with the S&P 500 potentially falling another 4 per cent before month end, the S&P/ASX 200 could test its June low at 5720 in coming days.
S&P 500 futures are down 0.6 per cent and Nasdaq futures are down 0.8 per cent in early trading, underscoring the risk of bigger than expected falls in Australia.
With the US dollar hitting two-month highs, commodities remain under pressure with spot gold down 2.1 per cent to $US1859, spot iron ore down 2.2 per cent to $US114.40 and LME copper down 2.8 per cent overnight.
Additional risk aversion this morning has seen WTI crude oil futures fall 1.6 per cent to $US39.29 and spot gold fall 0.4 per cent to $US1854.16, knocking AUD/USD to a 9-week low of 0.7065.
AUD/USD is likely to test 0.7000 before bottoming out, assuming the US dollar peaks.
Ben Wilmot 9.40am: HomeCo readies $800 shopping centre spin off
Retail property owner and funds manager Home Consortium says it’s on track to spin off its new $800m HomeCo Daily Needs REIT via an in-specie distribution.
The shopping centre trust will comprise a portfolio of stabilised, convenience-based assets targeting consistent growing distributions.
The HomeCo Daily Needs REIT will list in late November, making it the only property float of a tumultuous year in which the sector was hit by the coronavirus crisis.
HomeCo also intends that the HomeCo Daily Needs REIT will undertake an equity raising at the time of its listing. It will buy two Sydney neighbourhood centres as seed assets for the new REIT and will take the total assets under management of the vehicle to about $800m.
HomeCo has tapped ex-Stockland and investment banking heavyweight Simon Shakesheff as independent chairman and former Westfield executive Simon Tuxen as independent director for the new trust.
9.30am: Cleanaway removes Bansal bonus from AGM vote
Cleanaway Waste Management has withdrawn two resolutions from the shareholder vote at its up coming annual general meeting, relating to the performance rights of its chief executive Vik Bansal.
The company said in a statement to shareholders this morning that Mr Bansal volunteered to forgo the performance rights after he admitted to unacceptable conduct, following allegations he created a culture of harassment at the company.
It follows a 25 per cent reduction of Mr Bansal’s short term incentives due to COVID-19 related challenges.
“Cleanaway is committed to doing better as an organisation,” chairman Mark Chellew said.
“While we are disappointed in the events that have led us here, Mr Bansal continues to demonstrate a strong commitment to making necessary change that will be sustainable over the long term.
“This further act of contrition from the CEO is welcomed by the Board.
“Mr Bansal leads Cleanaway with a passion and dedication that has driven exceptional shareholder returns.
“Learning from this experience will allow him to take Cleanaway forward in its journey and deliver on its full potential.”
Cleanaway’s annual general meeting is scheduled for October 14.
Eli Greenblat 9.20am: WHSP delivers bumper profit
Washington H Soul Pattinson has posted a 284.3 per cent leap in statutory net profit to $953 million as it reaped a one-off profit from the merger of one of its portfolio investments TPG with Vodafone which helped counter a poorer performance by its coal company New Hope and a downturn in investment income due to the impact of COVID-19 on equity markets.
Once the effect of the TPG and Vodafone merger were stripped out from the result, Soul Pattinson said its regular profit was down 44.7 per cent to $169.8m with revenue for the 12 months to the end of July down 15.3 per cent to $1.368 billion.
Soul Pattinson chairman Robert Millner said fiscal 2020 was a difficult year with significant volatility across the market.
“But I am delighted once again that Soul Pattinson’s diversified portfolio delivered another good year where the assets performed better than the market and generated a strong increase in cash flows from dividends and interest income,’’ Mr Millner said.
“During the year, TPG was finally able to merge with Vodafone to create a very attractive telecommunications company. That merger resulted in an uplift to the value of our shareholding and facilitated a special dividend of $121 million to Soul Pattinson and a demerger of Tuas in which WHSP remains a 25 per cent shareholder.”
Mr Millner said unfortunately New Hope has still not received approvals for its new Acland Stage 3 mine as the process gets continually challenged in the courts despite New Hope winning all of its cases through the year.
The pandemic had also hurt energy prices.
“COVID-19 has caused a contraction in energy demand which is resulting in materially lower coal prices than we experienced last year.”
He said Brickworks was impacted by lower building activity in Australia and USA as a result of COVID-19. However, the property division is benefiting from demand for logistics industrial property and lower capitalisation rates.” Brickworks holds a 42.7% of the shares in diversified investment company Soul Pattinson and Soul Pattinson, owns 44.23 per cent of Brickworks. The cross-shareholding was created in 1969 via a share swap.
Soul Pattinson declared a final dividend of 35 cents per share, up 2.9 per cent, with a record date of November 23 and a payment date of December 14.
9.10am: WHSP flags upside from potential market dislocation
Washington H. Soul Pattinson managing director Todd Barlow says the company is well positioned to capitalise on a potential market dislocation amid the economic uncertainty triggered by the coronavirus crisis.
“One of WHSP’s key advantages is a flexible mandate to make long-term investment decisions and adjust the portfolio by changing the mix of investment classes over time,” he said.
“While the economic outlook is uncertain, we can be certain there will be some dislocation in a number of asset classes.
With dislocation comes opportunity and WHSP is well positioned with adequate liquidity to take advantage of the right investment opportunities.”
His comments came as the US and Australian share markets recently experienced their biggest pullbacks since March.
8.50am: Afterpay appoints new CFO
Salmat chief executive Rebecca Lowde will join Afterpay as its CFO after Luke Bortoli steps down next month following three years in the role.
“Luke has made a transformational contribution to Afterpay in its highly crucial years,” Afterpay CEO Anthony Eisen said in a statement to the market this morning.
“He has built a world class finance function that has grown from a small number of employees based in Australia to a high performing team operating across multiple regions and functions.”
Afterpay also announced this morning that Meahan Callaghan has been appointed to the role of chief people officer and Mark Teperson has been appointed chief strategy officer.
Eli Greenblat 8.48am: Brickworks profit surges
The nation’s biggest maker of bricks, Brickworks, has posted a 93.27 per cent lift in statutory net profit to $298.9m for 2020 as a one-off profit was recognised from the merger of TPG and Vodafone via its sizeable investment portfolio and cross-shareholding with Washington H Soul Pattinson.
The building products supplier said revenue for the 12 months to the end of July 2020 rose 4 per cent to $953m, with a strong contribution from its property business adding $94m in value for the year while its core brick operations in Australia and the US performed well despite the disruptions of COVID-19.
Directors declared a fully franked final dividend of 39c per share, an increase of 1c on the prior year, bringing the full year dividend to 59c, up by 2c. The record date for the final dividend is October 15, with payment on November 25.
However, for the first time a dividend reinvestment plan will be offered to shareholders for the first time. Soul Pattinson will not participate in the DRP. The final dividend will be partially underwritten for an amount of $20m (representing approximately 34 per cent of the total dividend. Brickworks holds a 42.7 per cent of the shares in diversified investment company Soul Pattinson and Soul Pattinson, owns 44.23 per cent of Brickworks. The cross-shareholding was created in 1969 via a share swap.
Brickworks has recently embarked on an expansion strategy into the US, buying up three brick operations in North America. For fiscal 2020 Brickworks’ US operations delivered earnings of $10m, up 63 per cent.
In Australia its flagship building products operations posted a 9 per cent fall in revenue to $687m as earnings fell 43 per cent to $33m. Despite the coronavirus pandemic disrupting operations the business has now seen sales grow strongly in September as government stimulus pumps up spending.
Brickworks said on Thursday that a $244 million profit (after tax) was recorded by Brickworks in relation to Soul Pattinson significant items. This primarily relates to a one-off profit triggered by the merger of its associate TPG with Vodafone, resulting in a change in accounting treatment of this investment.
8.40am: Michelle Tredenick to retire from BOQ board
Bank of Queensland has announced that non-executive director Michelle Tredenick will retire in December after nearly a decade on the company’s board.
“Michelle has made a significant contribution to BOQ during her term.
“On behalf of the Board I would like to thank Michelle for her commitment to BOQ and its shareholders and to wish her all the best for the future.”
Ms Tredenick formerly held executive positions at NAB, MLC and Suncorp.
7.59am: Westpac to pay $1.3bn fine
Westpac announced it has agreed to pay a huge $1.3bn fine to settle it civil court case with financial crimes regulator Austrac.
Westpac said that as part of the agreement reached with Austrac, it had admitted to additional contraventions outlined in an amended statement of claim. The additional contraventions had added to the penalty, it said.
Westpac CEO Peter King apologised for the bank’s failings.
“We are committed to fixing the issues to ensure that these mistakes do not happen
again. This has been my number one priority. We have also closed down relevant
products and reported all relevant historical transactions,” Mr King said in a statement.
“This agreement is an important step in the court process. It provides more certainty
to all our stakeholders as we continue to implement the measures in our Response
Plan and complete the implementation of recommendations from the reviews that
have been conducted,” he said.
7.43am: Australia to get ‘Chapter11’-style laws
Thousands of small businesses facing imminent closure will be thrown a lifeline under new US-style Chapter 11 bankruptcy laws that will allow them to trade their way out of insolvency and avoid being wound up by “vulture” administrators.
The stay of execution for small and family-run businesses as well as sole traders owing less than $1m to creditors will be the most significant reform to corporations and insolvency laws in 20 years and will potentially save thousands more small companies that are on the brink of collapse.
The move could save tens of thousands of jobs that are under threat, with almost 2000 micro businesses having been put into administration between April and July. It will have no cost to the budget but will be framed as significant supply-side reform
Josh Frydenberg said the new laws would strip administrators from the process and apply a key feature of the US Chapter 11 laws that allows directors and owners of the company to maintain control of their business as they seek to restructure and trade out of insolvency.
There are now more than one million businesses and companies accessing JobKeeper payments to keep them afloat.
Emergency temporary measures introduced in March to shield distressed businesses from being forced into administration by creditors will expire at the end of the year. The permanent structural reforms to corporations law will apply only to small businesses, and are expected to rescue up to 76 per cent of businesses currently insolvent largely because of COVID-19.
7.15am: Keating lashes RBA
Paul Keating has accused the “high priests” of the Reserve Bank of “indolence” in responding to the economic crisis triggered by the pandemic, arguing they could have done more to “shoulder the load” and support the government’s fiscal response to the recession.
In an extraordinary attack on the country’s most revered economic institution, the former prime minister damned the central bank’s “indolence” through the COVID-19 crisis, accusing it in a statement of being “way behind the curve in supporting the government in its budgetary funding measures”.
“As history has shown, when a real crisis is upon us, the RBA is invariably late to the party,” Mr Keating wrote. “And so it is again.”
“Knowing full well that monetary policy can now no longer add to nominal demand, something that now only fiscal policy is capable of doing, the Reserve Bank is way behind the curve in supporting the government in its budgetary funding measures.’’
6.53am: TikTok appeals over ban
TikTok Inc. asked a US federal judge on Wednesday to stop the Trump administration from imposing a ban on the popular video-sharing app over national-security concerns.
In a court-filed injunction request, TikTok lawyers told a D.C. district court judge that the U.S. government’s proposed ban violates free speech and due process laws.
“If the prohibitions are not enjoined, the harm to plaintiffs will be irreparable,” the company said.
TikTok sued President Trump and the Commerce Department, which is in charge of implementing the ban, on Friday, its second legal challenge to the proposed measure.
6.40am: Nasdaq hit hard as US stocks slide
Wall Street stocks tumbled on Wednesday as a September sell-off resumed amid worries over a coronavirus second wave and an increasingly contentious US presidential election.
The Dow Jones Industrial Average ended down 1.9 per cent, or 525 points, at 26,764.25.
The broadbased S&P 500 dropped 2.4 per cent to 3,236.92, while the tech-rich Nasdaq Composite Index shed 3.0 per cent to 10,632.99.
“The mega caps started weak and there was just no buying support,” said Briefing.com analyst Patrick O’Hare.
O’Hare said fresh restrictions in Europe in response to higher coronavirus cases raised worries about a similar dynamic in the United States.
Investors are also disappointed that Washington lawmakers haven’t reached an agreement on more stimulus and uneasy over speculation that the US presidential election could drag on due to slow vote counts or legal challenges, he said.
The Business Roundtable on Wednesday joined a chorus of groups and lawmakers calling for more stimulus spending, saying the failure to act risks “long-term damage” to the US economy.
Tesla sank 10.3 per cent after it said it was developing a $25,000 self-driving electric car model with upgraded battery technology, however Chief Executive Elon Musk signalled the model would not be available for about three years.
Some analysts said the presentation underscored Tesla’s technological advantage over other companies, but others said the announcement showed that Tesla is evolving into a manufacturer and losing some of its lustre as a tech company.
Nike shot up 8.8 per cent after the company reported blowout quarterly earnings on strong digital sales and its CEO cheered the return of pro sports. The athletic apparel giant notched an 82 per cent increase in digital sales.
Johnson & Johnson advanced 0.2 per cent as it announced it was entering the final Phase 3 stage of its COVID-19 vaccine clinical trial following positive results in earlier stages.
6.22am: Wells Fargo racism row
Wells Fargo’s chief executive apologised Wednesday over remarks that blamed the bank’s mostly-white operating leadership on a lack of available black talent as the embattled lender sought to quell a public uproar.
Charles Scharf, who was installed about a year ago as CEO to turn around the bank following a fake accounts scandal, told employees he was sorry following news reports spotlighting Scharf’s statements in June in the wake of racial justice protests.
“I apologise for making an insensitive comment reflecting my own unconscious bias,” Scharf said in a statement.
“There are many talented diverse individuals working at Wells Fargo and throughout the financial services industry and I never meant to imply otherwise.” But the comments – which were not publicly aired until this week – touched a nerve with politicians and other commentators, some of whom alluded to earlier lending discrimination settlements and other scandals.
“The CEO of #WellsFargo says there’s no diversity because there’s a very limited pool of black talent to draw from! However there’s an unlimited pool of black people to steal from!” said comedian DL Hughley on Twitter.
– An ‘unfortunate reality’? –
In the June 16 staff memo, Scharf pledged to fortify efforts to make the bank’s leadership more diverse, writing “This time it must be different.” The statement came as leaders throughout Corporate America were coming forward to condemn systemic racism in policing and pledge steps to diversify their companies and support black-owned suppliers.
But Scharf also alluded to “unique” challenges as the bank tries to turn itself and return to the good graces of regulators.
The Federal Reserve in 2018 imposed an asset cap on the bank following the fake accounts settlement and other scandals, an unprecedented penalty.
Pointing to this dynamic, Scharf said it was “imperative” to find staff for its operating committee who had dealt with similar issues elsewhere.
“While it might sound like an excuse, the unfortunate reality is that there is a very limited pool of Black talent to recruit from with this specific experience as our industry does not have enough diversity in most senior roles,” Scharf wrote in the memo.
The formulation was roundly mocked on social media.
AFP
6.15am: Telsa sues over China
Electric car manufacturer Tesla has filed a lawsuit against US President Donald Trump’s administration, aiming to end what it calls “unlawful” tariffs imposed on certain parts imported from China.
The lawsuit, filed Monday in the New York-based Court of International Trade, says the 25 per cent tariffs imposed by the US Trade Representative on a list of products including spare parts like terminals Tesla uses in its cars are “arbitrary, capricious, and an abuse of discretion.” The tariffs came amid a wider trade dispute between Washington and Beijing, and Tesla seeks their cancellation along with a “refund, with interest” of duties already paid.
The levies were imposed as part of an effort by Washington to wean its manufacturers off Chinese technology and reduce the yawning trade deficit with China.
The US and China engaged in months of trade conflict after Trump took office in 2017, and despite a “phase one” deal signed earlier this year marking a partial truce in the dispute, additional tariffs of 25 per cent remain on the equivalent of $250 billion in Chinese goods.
Beijing has retaliated for these levies, while Washington is aiming both to reduce its trade deficit and reform Chinese commerce practices it considers “unfair.”
AFP
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