Trading Day: Australian stocks hold momentum to notch record high and record close
The Australian market has soared to its highest intra-day levels and held on to momentum to clock its best ever close.
- The stocks likely to surprise: Goldmans
- Regulators make lending hard: Hartzer
- Crown to face watchdog
- ASX sets new all-time record
- Consumer confidence jumps on refunds: ANZ
That’s it for the Trading Day blog for Tuesday, July 30, 2019. Australia’s benchmark ASX200 has soared to its highest levels on record intra-day and set new records at the close as investors hold out for cuts from the US Fed and progress in US-China trade talks.
The benchmark closed out the session higher by 19.3 points at 6845.1.
Samantha Bailey 4.24pm: ASX smashes intra-day, closing records
The ASX surged past its 2007 records on Tuesday to set a fresh intraday high before closing firmly in the green at an all-time closing high.
“The Australian share market is looking through short-term uncertainties around the economy and focussing on lower interest rates and bond yields making shares ultimately boost growth, high iron ore prising boosting mining companies and a positive global lead,” AMP Capital chief economist Shane Oliver said.
“Going through past bull market highs after a long period below can attract investors into the market so it could push on for a bit. But after such a huge run – the market is now up 21 per cent year to date – its vulnerable to a short-term correction.”
Local stocks are feeding off US market positivity ahead of the US Fed meeting this week, with a 25 basis point cut priced in by the market.
Adding to that, today’s building approvals missed estimates, suggesting recovery in the property market is still out of reach.
In the local miners, BHP climbed 0.6 per cent to $40.83 while Rio Tinto crept up 0.2 per cent to $99.00. Fortescue grew 0.9 per cent to $8.22.
In financials, NAB edged up 0.2 per cent to $28.65 while Commonwealth Bank inched 0.2 per cent higher to $83.40. ANZ made 0.5 per cent to $28.00 while Westpac added 1 per cent to $29.00 after chief Brian Hartzer called out regulators for making lending harder for banks.
Weak building approvals weighed on the Aussie dollar, sending it to multi-week lows of 68.95c. At the close of local trade, the AUDUSD was at 69.02c.
4.16pm: Crown rejects illegality allegations
Crown Resorts has told the market it “absolutely rejects” allegations of illegality made in Parliament today, as it pledged to assist with investigations.
In a statement, a crown spokesperson noted the referral of the investigation to the law enforcement watchdog but said allegations were “ill informed”.
“Crown absolutely rejects allegations of illegality made in Parliament today and in recent media reporting. We believe these allegations are ill-informed and an attempt to smear the company,” the spokesperson said.
“If there is any evidence of unlawful conduct, we encourage individuals or organisations to contact the relevant authorities.”
CWN shares finished the session down 1.88pc to $12.03.
4.12pm: ASX firms in record-breaking session
The local market has capped a record-breaking session firmly higher - breaking through its highest levels on record intra-day and setting a new record closing high.
At the close of trade, the benchmark ASX200 was 19 points or 0.28 per cent higher to 6845.1, surpassing the previous November 2007 record of 6828.7.
Meanwhile, strength in the All Ords continues, with the index closing 17 points or 0.24 per cent to 692
8.3.
Supratim Adhikari 3.36pm: Tough conditions weigh on Vodafone
Tougher market conditions are taking a toll on Vodafone Hutchison Australia, with the country’s third biggest mobile operator recording weaker revenue for the half year ended June 30 2019
The telco, jointly owned by Vodafone Group Plc and Hutchison Telecommunications (Australia) Limited, has seen total revenue for the period slip 1.7 per cent year-on-year (YoY) to $1.7 billion. Average revenue per user (ARPU) was also 5 per cent weaker YoY at $34.52, weighed down by falling prices of mobile plans and increasing data inclusions.
Vodafone has also made no gains in the market during the period, with its mobile customer base coming in at 5.9 million, down marginally from the 6.02 million it had on its network six months ago.
The one bright spot for the telco in the half is its earnings before interest, tax, depreciation and amortization (EBITDA), which increased 14.3 per cent YoY to $584.6m.
Vodafone, which is yet to post a profit in Australia, has seen its net loss increase YoY from $92m to $153m during the period.
Nick Evans 3.33pm: EMR mulls copper asset float
Owen Hegarty’s EMR Capital is quietly testing the waters for float of its copper assets, launching a round of introductory talks with instos over a possible initial public offering next year.
In the mix are EMR’s Golden Grove base metals mine in WA, bought for $US210 million from MMG in 2017, and 80 per cent of the Lumbabe copper mine in Zambia, acquired in a $US97 million deal the same year.
It is also likely to add its Capricorn copper operation to the package, bought for $45 million in 2015 and subsequently given a $100 million face-lift.
Combined the three operations are likely to be producing in excess of 50,000 tonnes of copper a year, and Golden Grove has traditionally produced a handy sideline in zinc, lead silver and gold.
It is understood EMR has been quietly introducing the potential float to institutional investors over the last week, sounding out the prospects for the first float of producing assets onto the Australian market in some time, and introducing the assets quietly to individual investors rather than running a full-blown roadshow.
3.25pm: Stocks likely to surprise: Goldmans
Ahead of the local earning season start, Goldmans Sachs has identified its top seven picks to deliver positive earnings surprises, tipped to deliver either an earnings beat, guidance surprise or capital management.
Top of the list is Seven Group, with analyst Alex Karpos suggesting results and guidance will reflect management’s positive view on the long term cyclical drivers of mining capital expenditure and infrastructure spend.
Coles is a positive for its recent cost out program while JB Hi-Fi results are likely to reflect a change in consumer sentiment.
Bluescope, NewsCorp, HUB24 and Qantas round out the top positive surprise candidates.
Meanwhile, Treasury Wines is tipped to disappoint given subdued wine trends in the US while Sims Metal Management will likely be challenged by subdued scrap markets.
Tabcorp, Spark NZ, Adelaide Brighton, Bendigo Bank, Bega, Aurizon, IAG, Medibank and Ramsay Health round out the list of negative surprise candidates.
Perry Williams 2.55pm: NSW backs NEG despite gov’t standstill
NSW is “willing to go it alone” delivering lower power prices and less emissions if the Morrison government fails to introduce an integrated energy and climate policy.
The state’s energy minister Matt Kean delivered the ultimatum as frustrations grow over the Coalition’s lack of policy ambition since Malcolm Turnbull’s national energy guarantee was dumped last year.
“We need a national framework that properly integrates climate and energy policy,” Mr Kean told the Clean Energy Summit in Sydney today. “The NSW government still supports the national energy guarantee. If the Commonwealth will not get on board, NSW will consider going it alone.”
Federal Labor took the NEG to the election as part of its policy platform which had enjoyed broad support among big business as a way of ending a decade of climate wars.
However, Scott Morrison says the Australian people rejected Labor’s more ambitious climate ambitions.
Instead, the Coalition will forge ahead with elements of the policy including the retailer reliability obligation to ensure enough generation exists to meet power users’ needs and the looming ‘big stick’ legislation which the electricity industry opposes.
State energy ministers have voiced their frustrations over the policy standstill.
2.47pm: Tesla agrees to $470m in Chinese taxes
Electric auto maker Tesla said it has agreed to pay 2.23 billion yuan ($470 million) in taxes every year to authorities in China, for a factory the company is building in Shanghai.
In a filing to the US Securities and Exchange Commission, Tesla said it has an operating lease arrangement for an initial term of 50 years with the local government of Shanghai that allows the US company land rights, where it is constructing its Gigafactory.
“Under the terms of the arrangement we are required to spend CNY14.08 billion in capital expenditures over the next five years and to generate CNY2.23 billion of annual tax starting at the end of 2023,” the filing late Sunday said.
Telsa said it believes the capital expenditure requirement and the tax revenue target would be attainable even if its actual vehicle production was far lower than the volumes they are forecasting.
WSJ
2.12pm: Regulators make lending hard: Hartzer
Westpac chief executive Brian Hartzer says regulators’ post-royal commission focus on responsible lending has had unintended consequences on the economy, with banks itching to lend but finding it harder to do so.
Mr Hartzer on Tuesday said credit availability had been tightened by a “highly prescriptive” legal and regulatory approach, and that it needed to start flowing again if Australia’s economy was to reignite.
“The environment, and banks’ responses to today’s highly prescriptive rules creates a real issue for the future,” Mr Hartzer told the Trans-Tasman Business Circle in Sydney.
“Given the severe consequences of getting it wrong, it’s not surprising that bankers are building extra buffers into their policies and processes to make sure they stay well clear of the line.” Mr Hartzer also said moves by the Reserve Bank of New Zealand to increase the amount of capital the country’s banks needed to hold had gone further than required.
AAP
1.58pm: Tech restrains record run
The local market is holding just above its former record, and is looking likely to close at these levels to round out its record run.
Yesterday, the stock closed just three points off its closing high, but quickly surged to meet its intra-day record in early trade today.
To clinch the double-record the benchmark just needs to hold above the key 6828.7 level at the close.
At present, its trading 28 points or 0.4 per cent at 6853.4.
Technology stocks are the major weight, after a strong rally in Monday’s trade and despite fresh records on the Nasdaq overnight.
Meanwhile, the major miners are tracking solid gains, as well as strength in telcos Telstra and TPG.
Crown Resorts is underperforming the benchmark after the government referred its case to the Law Enforcement watchdog.
ASX200 last at 6851.8.
1.38pm: VGI Partners top 5 long picks
Listed fund manager VGI Investment Partners outline the five stocks they have gone long on – interestingly VGI’s top five long investments represent 35 per cent of total portfolio value.
“We do not diversify for diversification’s sake,” the fund manager says in its latest investor letter.
“We believe that carefully concentrating investments remains the best strategy for preserving and growing our collective capital”.
For the twelve months ended 30 June 2019, VGI Partners Global Investments Limited generated a post-tax net return of 10.2 per cent after all fees.
- Nasdaq-listed CME Group - a derivatives exchange with an effective monopoly in the exchange trading of US interest rate derivatives and a dominant position in the trading of global commodities, foreign exchange, equity index and energy derivatives. This is VGI’s latest single investment.
- NYSE-listed Mastercard - the world’s second largest global payments processor, behind Visa. Mastercard’s shares have increased the 34.6 per cent over the course of the year.
- Nasdaq-listed Amazon – Shares in the tech giant have increased 11.4 per cent over the course of the year. “We believe that Amazon has built a non-replicable global logistics network, providing it with a very wide and expanding economic moat in the rapidly growing online retail space,” VGI says.
- NYSE-listed Linde – This company is the result of a merger between two of the big four industrial gas providers, Praxair Inc. and Linde AG. VGI says the company has pricing power, long term contracts, existing infrastructure and is highly consolidated.
- ASX-listed Medibank - Medibank’s recent share price performance has largely been driven by the re-election of the Coalition government. The ALP had threatened to cap private health Insurance premium increases at 2 per cent per annum for two years if elected, which would have been a short-term headwind for the industry. As the largest player, VGI says that Medibank is best positioned to benefit from consolidation in health sector over time.
Richard Ferguson 1.33pm: Crown to face watchdog
The Coalition and Labor will shut down a parliamentary investigation into Crown Casino.
However Attorney-General Christian Porter will refer allegations that Commonwealth officials fast-tracked visas for Chinese high-rollers visiting Crown properties to the Australian Commissioner for Law Enforcement Integrity.
Crossbench MPs Andrew Wilkie and Rebekha Sharkie called today for a joint parliamentary committee to investigate Nine Entertainment Co reports about links between Crown and Chinese organised crime.
Mr Porter said the commissioner would be the best avenue for an investigation as they had the power to take out search warrants.
CWN shares last down 3pc to $11.89 after touching a six-week low of $11.69.
1.28pm: Houses stablise, apartments slide: NAB
Residential building approvals were down 1.2 per cent in June, missing expectations of a slight uptick but NAB says data on private-sector houses does provide a bright spot.
NAB economists Kieran Davies and Koosha Rafiee note that private-sector houses have held broadly steady since March after dropping approximately 20pc from their 2018 peak.
“Private-sector units continue to unwind the mini-recovery earlier this year, falling 7pc in June to be almost back at the five-year low reached in December, down almost 60pc from the 2017 peak,” they say.
“Recent rate cuts and APRA’s change to mortgage serviceability calculations are a positive for the housing market, particularly with some stabilisation in house prices, but construction activity has only reflected part of the decline in approvals to date and falling work done will remain a drag on growth over the rest of 2019 and into 2020.”
1.02pm: Crown pulls back as inquiry debated
Any bounce in Crown shares this morning has been completely wiped out in lunch trade, following reports the government is considering an inquiry into allegations the casino group had links to Chinese crime bosses, drug syndicates and money laundering.
The stock had been trading higher after a dip yesterday, reaching highs as much as $12.39 but have retreated since the issue was brought to the floor - last down 0.57pc to $12.19.
Attorney general Christian Porter told Parliament he had referred the allegations to the Australian Commission for Law Enforcement Integrity, but the parliament is divided on their support of the move.
Labor’s legal affairs spokesman Mark Dreyfus said the Opposition did not back a joint parliamentary committee, as the matter had been referred to ACLI.
12.57pm: BOJ keeps monetary policy steady
The Bank of Japan has kept its monetary policy steady, maintaining its short term interest rate and 10-year JGB yield targets.
The result is largely in line with forecasts.
Japan's labour market remained tight in June with unemp back down to 2.3%, jobs to applicants ratio around highest since 1974 (helped by falling labour force tho).
— Shane Oliver (@ShaneOliverAMP) July 30, 2019
IP -3.6%mom/-4.1%yoy weaker than expected.#BoJ unchanged and dovish - "will not hesitate" to ease more if needed
12.46pm: Sezzle sizzles on ASX debut
Sezzle, the latest buy now, pay later provider to join the local bourse has doubled its market value on its debut on the ASX, proving demand for the sector is still running hot.
The North American focussed platform targetted toward millenials raised $43.6 million in its IPO, with CDIs offered at $1.22 a piece.
On its debut, the stock reached as much as $2.58 - to give it a market value of $202.7 million.
The company says funds will be used to support its growth strategy, with a focus on expanding its retail merchant base and product offering - including funding for produt development and engineering, sales and marketing, data sciences, merchant and customer support and general administration.
“In becoming an ASX listed company, we are extremely proud to have attracted the support of our IPO investors, including many institutional investors who possess an extremely detailed understanding of the ‘buy now, pay later’ sector and the immense opportunity ahead for Sezzle,” chair and chief Charlie Youakim told the market.
SZL last traded at $2.14, while rival Afterpay is lower by 1.78pc at $26.69.
Samantha Bailey 12.40pm: Iron ore should stay elevated: Moody’s
Iron ore prices should remain elevated through the remainder of this year and throughout 2020 according to Moody’s Investors Service, as supply remains tight in the wake of the deadly dam collapse in Brazil and Cyclone Veronica in Australia.
The spot price for Australia’s largest export was steady overnight, edging back 0.3 per cent to $US118 at tonne.
“Tight iron ore supply fundamentals prompted us to revise our price-sensitivity ranges upward,” Moody’s analysts said.
“Several events in Brazil and Australia have contributed to diminished supply of iron ore and we expect this situation to only slowly improve through 2019 and 2020.”
Today’s spot price was firmly up from around $US75 a tonne in January prior to the dam collapse in Brazil, when global iron ore supply was first squeezed after operations across a number of Vale’s iron ore mines in Brazil were suspended.
12.23pm: Offshore food stocks to fare better: Citi
Australian food and beverage companies with offshore exposure are likely to fare better in the reporting season ahead, according to analysts at Citi.
In a review of the sector, analyst Craid Woolford said tough trading conditions, including challenges in raising prices, growing volumes and increased competition, would weigh on the sector.
He notes misses are more likely than beats, noting likely weakness in Coca-Cola Amatil and Domino’s and a tough backdrop for Costa amid deteriorating mushroom pricing.
Treasury Wines is described as a “shining light” with good earnings grwoth from Asia and a currency translation boost on top.
“With limited visibility on demand and a need for price realisation for most companies, any guidance or commentary on the next 6-12 months, is likely to be conservative,” Mr Woolford adds.
That said, Citi has a buy rating on Costa and Domino’s, thanks to their medium term growth outlooks.
Coca-Cola, Inghams and Tresury Wines are rated at Sell, with earnings forecasts below consensus expectations.
11.59am: Focus on bright bank outlook: Citi
Investors may look through a messy set of bank results and focus on a brighter outlook, according to Citi analyst Brendan Sproules.
He says the six months to June 30 was a different time of tighter monetary and fiscal policy before the Election, a pessimistic environment for property given pending tax changes, lending standards and regulatory tightening.
“Much of this has reversed in recent months post the Election, suggesting that investors may look through a messy set of results and focus on a brighter outlook.”
But while the unexpected Election result in May has brought renewed optimism, the direct impact of a stabilising property market, lower funding costs from a declining BBSW-OIS spread and the conclusion of the impact of the Royal Commission, will be absent from these results and trends from the last 18 months will continue to dominate - moderate loan growth, front book competition and loan switching pressuring net interest margins, declining fee income, and significant impact from customer remediation provisions.
Mr Sproules says management actions in the face of challenging market environment may be required to support both CBA’s and BEN’s elevated share prices. In particular, cost management programs and capital initiatives could be viewed favourably.
CBA is due to report August 7th and Bendigo Bank results are due on August 12th.
11.39am: Building approvals miss restrains $A
Building approvals data for June missed estimates, compounded by a revision downwards of May figures.
A 1.2 per cent fall for June was below Bloomberg’s survey median estimate of a 0.2pc increase while May was revised down to a 0.3pc rise from 0.7pc first reported.
Year-on-year growth is now running at minus 25.6pc.
Overall weak building approvals data saw AUD/USD hit a new multi-week low of 0.6895.
11.12am: MS cautious on equities short term
Morgan Stanley Wealth Management remains cautious on equities on the short term, but says the outlook for the the Australian market has improved.
In a note on its asset allocation, strategist Alexandre Ventelon says the rally in equities looks stretched in the short term, led purely by monetary expectations, while deterioration of global PMIs suggest a macro environment with plenty of downside risk.
“We believe that the ‘pause’ in US/China trade tensions post-G20 does little to address these risks. Moreover, earnings estimates are generally too high and the back end of 2Q earnings season - or a ‘disappointing’ FOMC outcome - could drive adjustments,” Mr Ventelon says.
That said, longer term he is more optimistic, amid a more supportive central bank policy backdrop, resilient consumer spending and labour markets globally.
“The current environment is still more favorable to defensives, but the performance differential between defensives versus cyclical is extreme. A (mild) macro recovery completed by a re-steepening of the curve should revert some of that. Growth and quality versus value should
follow a similar pattern,” he adds, saying the Australian outlook has improved but current valuations limit the upside in the short term.
10.51am: Redbubble surges on quarterly boost
Global marketplace Redbubble is surging in Tuesday’s trade after reporting a 41 per cent boost to its full year revenue.
Lodging its quarterly report today, Redbubble said its TeePublic custom t-shirt acquisition had helped to boost its performance, pushing marketplace revenue to $257 million, with gross profit of $95m.
The company said its prorities remained growing its customer base, selling products that artists want to design, building relationship and maintaining strong growth and synergy value of TeePublic.
“RB Group will no longer provide specific short term financial guidance. The business is focused on the strategic work to reach the milestone of $1 billion in sales and current economics demonstrate that this can be achieved profitably,” it said.
RBL shares are outperforming the market, last up 29 per cent to $1.29.
10.40am: Northern Star premium hinges on outlook
Results from Northern Star were “slightly softer” at a group level on production, according to RBC.
Handing down its June quarterly, the company reported recovered gold of 226 ounces, and 232 ounces sold at an all in sustaining cost of $1238 per ounce.
RBC mining analyst Paul Hissey says while Pogo improved quarter-on-quarter the company will need to provide further details on its outlook.
“NST has had a strong share price run of late (along with peers) given general enthusiasm for gold exposure from investors. It will remain important for the company to deliver an improving outlook to justify the premium,” Mr Hissey says.
NST shares are trading higher by 0.3 per cent to $13.24.
10.21am: Broad surge leads market to highs
The Australian sharemarket is holding higher after breaking above its November 1, 2007 intraday peak of 6851.5.
Whereas it was expected to open up about 0.5 per cent near 6860 based on overnight futures, the index soared up 0.7pc to 6872.5 soon after the open.
Bond proxies in the Communications, Utilities, Healthcare and Real Estate sectors were leading broadbased gains.
It comes as Australia’s 10-year bond yield remains near a record low of 1.19 per cent reached yesterday.
Heavyweight miners, healthcare, communications and banking stocks are the biggest contributors to strength.
Quiet a surge once the market went thru 6851 - up 18pts in 7mins
— Evan Lucas (@EvanLucas_INV) July 30, 2019
10.11am: ASX sets new all-time record
The local market has surged past its 2007 records at the open, setting new record highs of 6866.8 with gains across all sectors.
The previous record from November 1,2007 was 6851.5.
9.51am: Burrup delays to persist for Orica
Commercial explosives group Orica has told the market its Burrup operation will continue to drag for the year ahead after denting its results last financial year.
Defective equipment at its new ammonium nitrate facility in Western Australia prompted a $191 million write down earlier this year, and dented the company’s share price accordingly.
But in a presentation to investors this morning, it said the plant would still be limited in the year ahead.
For FY20, it said it expected overal equipment effectiveness (OEE), that is the amount of time spent running at quality, full rates versus demand, would be just 50 per cent following the commencement of operations, weighted to the second half.
It said the plant will be loaded from FY20 with its current contracts, but that it remains a 30+ year asset in the Pilbara.
ORI last traded at $20.50.
9.34am: Northern Star hits sales records
Gold miner Northern Star says it has set a new quarterly and annual sales record thanks to continued progress at its Pogo mine in Alaska.
The company on Tuesday said it had sold a record 232,042 ounces of gold across its entire operations during the June quarter, including record sales of 184,033 ounces from its Kalgoorlie and Jundee operations in WA.
Pogo sales rose 33 per cent for the quarter to 48,009 ounces, with all-in sustaining costs (AISC) at the mine dropping by 18 per cent to US$1,207/oz compared to the March period.
Northern Star said full-year FY19 sales came in at a record 840,580oz at an AISC of $US1,296/oz, slightly higher than the US$1,225/oz to $US1,275/oz guidance range offered in April.
AAP
9.36am: Consumer confidence jumps on refunds
Consumer confidence moved higher over the weekend as many taxpayers cashed in their refunds, an ANZ analysis suggests.
The ANZ-Roy Morgan Australian Consumer Confidence index rose 1.9 per cent from the previous week, with respondents’ perception of the economy - including the outlook for the next 12 months - jumping 5.8 per cent while prospects about conditions in the next five years were unchanged.
The weekly survey of consumer mood, which is based on about 1,000 face-to-face interviews conducted on Saturdays and Sundays, also recorded a 0.9 per cent fall in how people felt about their financial condition compared to a year ago and a 1.2 per cent increase in sentiment regarding the finances of themselves and their family over the next 12 months.
AAP
9.30am: Stocks to test record levels
Australia’s sharemarket is expected to rise despite offshore falls, with futures suggesting the S&P/ASX 200 will open up 0.5 per cent at 6860, above the 2007 all-time high of 6851.
That’s despite a 0.2pc fall in the S&P 500 and the MSCI All-Country World index in US dollars.
Reflecting expectations of lower-for-longer interest rates, the S&P/ASX 200 is exceeding Bloomberg’s “bottom-up” Best 12-month Target Price by the most since at least early 2000.
Forward EPS estimates for the S&P/ASX 200 have risen in the past week despite numerous rating downgrades by analysts.
Events today include the 1130 AEST release of domestic building approvals data for June and the outcome of the BoJ’s monthly policy meeting this afternoon.
But with China’s PMI data due tomorrow and the FOMC outcome due early Thursday, S&P/ASX 200 price action around the record high could be the main focus.
Index last 6825.8.
9.23am: What’s impressing analysts, what’s not
- Bingo Industries cut to Hold, price target raised 9.4pc to $2.56 - Morgans
- Brambles price target raised 16pc to $12.50 - Morgan Stanley
- Cimic raised to Neutral, price target cut 8.7pc to $4 - Macquarie
- Credit Corp raised to Buy - Canaccord
- Medibank Private cut to Underweight - JP Morgan
- nib cut to Underweight - JP Morgan
- Pilbara Minerals cut to Speculative Buy - Blue Ocean
- Reliance Worldwide cut to Hold - Baillieu
- Steadfast price target raised 20pc to $3.60 - Credit Suisse
9.04am: Speedcast raises debt leverage ratio
Satellite communications business Speedcast has increased its net leverage ratio, just weeks after a shock profit downgrade wiped $340 million off its market value.
Earlier this morning, Speedcast said it searnings would be between $200 million and $215m, from earlier expectations of $229m to $245m.
Since then, shares have dropped by 47 per cent, and today, the company said it had increased its net leverage ratio to 4.5x from 4x so as not to require additional equity to be raised.
The company said it did not expect the ratio to reduce this year, but that it would be a priortity for the ratio to reduce in the year following.
“The Board remains confident that Speedcast’s Net Leverage Ratio will be below 4.0x at the end of 2019. The added headroom provided by increasing the maximum Net Leverage Ratio to 4.5x provides greater certainty that the Company will continue to meet its financial covenant and not require additional equity to be raised,” it said.
8.45am: Temple & Webster posts first profit
Online furniture and homewares retailer Temple & Webster has posted its first full year of profit, bucking retail negativity.
Releasing its full year results to June 30, the retailer posted a 41pc jump in revenue to $101.6 million, to take earnings to $1.1m, from a $0.7m in the prior period.
“Despite broader retail challenges we continue to buck the trend with record active customer growth, and our first $1 million day in June,” chief Mark Coulter told the market.
He said July trading had started srong, with revenue in line with the months prior and that the company would be investing in future growth opportunities such as mobiles apps, private label products, expanding logistics and investing in B2B trade and commerical.
“Now is the time to reinvest, to take advantage of a once in generation structural shift towards online. This reinvestment strategy supports Temple & Webster’s stated goal of becoming the first place Australians turn to when shopping for their homes and work spaces” Mr Coulter said.
8.35am: NAB appoints Ferrier as HR head
National Australia Bank has appointed Susan Ferrier as its group chief people officer, luring her from the same role at KPMG Sydney.
Ms Ferrier will join NAB on October 1, subject to regulatory approvals and chief executive Philip Chronican said her appointment was key in the bank’s transformation program.
“To deliver on our strategy and to meet the expectations of our customers and the community, we must have the right culture and right plan in place to build the capability of our people and attract the best talent,” he said.
She joins from KPMG, but has also had experience across global financial services firms such as HSBC, Deutsche Bank, ING Barings and Barclays.
7.50am: Oil edges up
Oil prices rose overnight as the prospect of an expected interest rate cut by the US Federal Reserve overshadowed pessimism over US-China trade talks and worries about slower global economic growth.
Brent crude gained 25 US cents to settle at $US63.71 a barrel, while US West Texas Intermediate (WTI) crude futures rose 67 US cents to settle at $US56.87 a barrel.
“Prices appear to be treading water ahead of this week’s events,” said John Kilduff, partner at Again Capital Management.
Traders and investors are watching the Fed this week, with US central bankers expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago.
Reuters
7.40am: ASX expected to open higher
The Australian share market is expected to open higher despite a mixed session on Wall Street overnight.
At 7am (AEST) the SPI200 futures contract was up 33 points, or 0.49 per cent, at 6,792.0, suggesting an early rise for the benchmark S&P/ASX200.
It comes after Australia’s benchmark share index yesterday closed less than three points short of the record 6828.7 mark that has stood since November 1, 2007.
On Wall Street, the Dow Jones Industrial Average finished up 0.11 per cent, the S&P 500 was down 0.16 per cent and the tech-heavy Nasdaq Composite was down 0.44 per cent.
The Aussie dollar is buying US69.01 cents from US69.08 cents yesterday.
AAP
6.45am: Wall St mixed ahead of Fed
The Dow gained, but the S&P 500 and Nasdaq pulled back from records ahead of a much-anticipated Federal Reserve meeting, a highlight in a news-jammed week that also includes trade talks.
The Dow Jones Industrial Average edged up 0.1 per cent to close the session at 27,221.35.
The broadbased S&P 500 slipped 0.2 per cent to finish at 3,020.96, while the tech-rich Nasdaq Composite Index slid 0.4 per cent to 8,293.33.
After closing yesterday just short of a record high, Australian stocks are set to open firmly higher. At 6.40am (AEST) the SPI futures index was up 33 points.
US stocks have been in rally mode since early June when Federal Reserve Chair Jerome Powell adopted a more dovish tone on monetary policy.
The Fed is expected to cut interest rates on Thursday (AEST) for the first time in a decade, but the question of whether the US central bank will have to deliver more stimulus this year remains the subject of intense debate.
“Basically it’s the Fed, whether they will cut, by how much and what they say regarding future rate cuts,” said Sam Stovall of CFRA Research.
Besides the Fed, other significant events this week include a trove of corporate earnings reports from Apple, Exxon Mobiland others; the resumption of trade talks between the US and China; and the July US jobs report.
Among individual companies, generic drug company Mylan shot up 12.6 per cent after it announced plans to combine with Pfizer’s non-patent drug division. Dow-member Pfizer, which lowered some of its full-year financial targets, fell 3.8 per cent.
Large technology companies mostly fell, with Amazon shedding 1.6 per cent, Facebook 1.9 per cent and Netflix 0.9 per cent.
AFP
6.40am: Trump complicates Fed move
The Federal Reserve is set to “vaccinate” the US economy against a slowdown with the first interest rate cut in a decade, but the decision has been made more difficult by unrelenting political pressure.
President Donald Trump has constantly berated the Fed and its chairman, Jerome Powell, for failing to provide additional juice to the economy, which he has promised will grow by three percent and more each year.
“The EU and China will further lower interest rates and pump money into their systems, making it much easier for their manufacturers to sell product,” Trump tweeted Monday.
“In the meantime, and with very low inflation, our Fed does nothing - and probably will do very little by comparison. Too bad!”
The central bank’s challenge is to tune out politics ahead of Thursday’s (AEST) announcement, and base the direction of monetary policy on the economic data.
....countries that know how to play the game against the U.S. That’s actually why the E.U. was formed....and for China, until now, the U.S. has been “easy pickens.†The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!
— Donald J. Trump (@realDonaldTrump) July 29, 2019
AFP
6.35am: China-US trade talks to restart
US and Chinese negotiators meet in Shanghai on Tuesday to resurrect trade talks between the world’s two biggest economies, with both sides downplaying expectations there will be an imminent deal.
The negotiations in China’s financial hub will be the first face-to-face discussions since negotiations collapsed in May, when US President Donald Trump accused China of reneging on its commitments.
Washington and Beijing have so far hit each other with punitive tariffs covering more than $US360 billion in two-way trade, in a tense stand-off centred on demands for China to curb the alleged theft of American technology and provide a level-playing field to US companies.
The two days of talks are to be led on the US side by trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
AFP
6.30am: Ryanair faces 737 Max hit
European budget airline Ryanair is looking at flight cuts, slower growth and job losses if deliveries of Boeing 737 Max jets keep being delayed.
The airline was supposed to get 58 Maxes by next summer, but it now expects 30 before the peak summer travel season, CEO Michael O’Leary said on an earnings conference call.
That could drop to zero, he said, using an expletive to talk about how Boeing needed to get its act together to win regulatory approval to get the planes back in the air.
The Max has been grounded since March and deliveries suspended after crashes that killed 346 people in Indonesia and Ethiopia.
AP
6.25am: Spain’s BBVA charged with corruption
Spain’s second biggest bank BBVA has been charged with corruption for alleged corporate spying involving a disgraced former police chief, a court said.
Spain’s National Court, which handles major financial cases, charged the bank with “corruption and breach of confidence”, a spokeswoman for the court said.
The announcement comes five days after prosecutors asked that the bank be charged.
Earlier this month, nine former or current managers at the bank were put under formal investigation in the same case.
BBVA is suspected of having used Jose Manuel Villarejo, a now retired police superintendent, to illegally tap the phones ofjournalists, politicians and businesspeople to push back an unwanted shareholder, according to Spanish media.
In January, the bank admitted it had previously used the services of a business intelligence group called Cenyt and had launched an internal probe into the issue.
AFP
6.20am: Sterling sinks on Brexit woes
The pound fell to levels not seen in over two years on Monday as a no-deal Brexit seemed ever more likely, while London stocks surged thanks to bubbling takeover activity.
“The British pound started weakening sharply today, with the market awaking to the reality of a new UK government, its rather combative stance on the current EU-UK Brexit deal and its open remarks on the rising probability of a no deal Brexit,” said ING strategist Petr Krpata.
Calling the fall a “meltdown”, Krpata said sterling’s woes were unlikely to be over, as “politics should remain the key negative for sterling in the months to come”.
Monday’s level in terms of the US dollar was the worst since March 2017. Prime Minister Boris Johnson has vowed to lead Britain out of the EU on October 31 even if this means doing so without a divorce agreement.
London stocks, meanwhile rallied on corporate takeover news, with the FTSE 100 benchmark index of major blue-chip companies adding nearly two per cent, vastly outperforming eurozone peers which ended on a softer note.
Britain’s Just Eat and Takeaway.com of the Netherlands unveiled a plan to join forces to create a heavyweight in the rapidly-growing food delivery sector with around $US8 billion in annual sales.
The combination of the two firms would create a delivery platform worth around $US11 billion capable of competing against Britain-based Deliveroo and Uber Eats of the United States with a strong presence in Britain, Canada, Germany and the Netherlands.
The news sent Just Eat’s share price rocketing by over a quarter, topping the FTSE 100 risers board.
The second biggest gainer was the London Stock Exchange itself after it confirmed talks over a massive $US27-billion takeover of US financial data provider Refinitiv, a move that would place it in direct competition with Bloomberg.
The FTSE was also buoyed by the weak pound, which hands a major boost to exporters. It closed up 1.8 per cent.
In Paris, Peugeot shares were sharply weaker after chief executive Carlos Tavares told the Financial Times that he would be forced to shut a UK facility if market conditions turned “bad” as a result of a problematic EU departure.
Paris closed down 0.2 per cent and Frankfurt ended flat.
AFP
6.15am: Pfizer in deal with Mylan
Pfizer announced it will combine its off-patent drug business with the generic drugmaker Mylan to create a global leader in low-cost treatment, as drugmakers face intense political pressure to drive down pricesin the United States.
The new entity will be 57 per cent owned by Pfizer shareholders, and 43 per cent owned by Mylan’s. Its portfolio includes impotence drug Viagra, cholesterol pills Lipitor, painkiller Lyrica and the emergency allergy treatment EpiPen, according to a statement.
The combined company, to be named after the transaction is complete, will be led by Robert Coury, current chair of Mylan’sboard, who will serve as executive chairman.
Michael Goettler, head of Pfizer’s off-patented drug business Upjohn, will serve as CEO, while Heather Bresch, the current CEO of Mylan, will leave the company.
Formally, Pfizer will give Upjohn independence as part of a tax-optimising strategy. It will then merge with Mylan.
AFP
ASX treads water before US jobs data; CBA and Westpac hit highs
ASX ends flat as markets await key US jobs numbers. CBA and Westpac hit record highs and NAB an 18-year high. Domino's jumps 21 per cent, as Collins Foods and Nick Scali also gain. Amazon falls after earnings disappoint.
ASX ends up 0.5pc; Brookfield enters Insignia battle; former Star CEO cops ban
ASX 200 gains 0.5 per cent, led by resources, tech, property, industrials and communications. Macquarie weighs on financial sector. Google owner Alphabet's earnings disappoint. Brookfield lobs new offer to takeover target Insignia. Amcor lifts on reaffirmed guidance, estimates win. Former Star CFO cops ban.