Trading Day: Vaccine trial restart a shot in the arm for ASX
Australia’s share market has closed slightly higher, led by resources stocks and encouraged by the re-start of AstraZeneca COVID vaccine trials.
That’s all from the Trading Day blog for Monday, September 14. Australian stocks gained by the close, after US futures were lifted by the resumption of AstraZeneca COVID vaccine trials. The ASX had mixed leads from Wall Street, ahead of a week that includes RBA minutes and a meeting of the US Fed.
John Stensholt 8.44pm: Caledonia’s $1bn bet on US gaming group
Sydney private investment firm Caledonia has doubled down on its bet on global wagering and gambling-related stocks, splashing out more than $1bn on US gaming and slots-machine group Scientific Games.
Caledonia’s latest play, overseen by chief investment officers Will Vicars and Michael Messara, will result in it emerging with a reported 39 per cent stake in the Las Vegas-based provider of gambling products and services such as poker machines. It adds to the group’s already large holding in London-listed bookmaker Flutter Entertainment, global owner of the Australian betting brand Sportsbet, and Nasdaq-listed fantasy sports and betting operator Draftkings.
The Scientific Games play, reported by Bloomberg and the Financial Times as Caledonia paying a significant premium to the firm’s share price at Friday’s close, will see Caledonia buy the roughly 39 per cent stake held by US billionaire Ronald Perelman.
Perry Williams 8.06pm: Refiners struggling despite subsidies
Australian oil refiners have warned of a tough outlook despite the Morrison government rollout of an industry subsidy package, with adverse market conditions to continue pressuring local operations over the medium term.
Prime Minister Scott Morrison announced plans on Monday to invest in new domestic diesel storage facilities, create a minimum onshore fuel stockholding and a 1.15c-a-litre refinery subsidy to keep the nation’s four refining facilities afloat.
Refinery operators Viva Energy and Ampol both backed Canberra’s support but remain cautious over the outlook for the sector given soft margins, high costs and plunging demand due to COVID-19 lockdowns.
“The refining sector globally is under enormous pressure and it’s probably going to remain so until global demand for oil products recovers,” Viva chief executive Scott Wyatt told The Australian.
“In the meantime refineries in our region are going to look far and wide to export their surplus production. Australia is an obvious market for that and that is putting pressure on Australian refining margins.”
7.52pm: Central banks turn to MMT
Central banks might be the last to admit it, but the path to Modern Monetary Theory is wide open.
Thanks to the pandemic, the once-radical idea that nations can issue massive amounts of sovereign debt — monetised by central banks — with little or no negative ramifications, is no longer unthinkable.
The second part of that is arguably well under way in the US.
The Fed’s balance sheet grew from $US4 trillion in March to $US7 trillion ($9.6 trillion) by June.
Yet while the long-awaited shift to average inflation targeting revealed by US Federal Reserve chair Jerome Powell last month will certainly allow rates to stay low for longer once inflation picks up, Fed officials haven’t hinted at new policies to get the inflation ball rolling or soak up a potential deluge of debt.
Barring disaster, they’re unlikely to do anything this close to the presidential election in November.
John Stensholt 7.23pm: Waislitz tips tech IPOs
Billionaire investor Alex Waislitz believes up to six of the small and emerging technology companies he has stakes in could be headed for initial public offerings this financial year.
Waislitz splits his tech investments between his private group Thorney and his listed investment company Thorney Technologies (TEK).
One Waislitz is particularly excited about is a venture capital firm backed by billionaires Nick Molnar and Anthony Eisen’s Afterpay, the buy now, pay later business that has surged in value this year and become a market darling.
Waislitz’s TEK has backed the AP Ventures investment vehicle that reportedly intends to invest $50m-$60m in five or six ventures in the next few years. One of its investments is LayAway Travel, a firm that allows travellers to lay buy their trips.
Waislitz said he expects AP Ventures to list next year.
“Probably in 2021 they will come to market,” he told a recent TEK investor briefing. Afterpay has a 44 per cent stake in AP Ventures.
“Think about Google Ventures and all the other venture arms that come off the major tech platforms. They’re seeing a lot of opportunities and while it doesn’t fit directly with their business nonetheless they’re very commercially appealing to be involved in.”
Ben Wilmot 6.48pm: ALH Group avoids rent rise
The country’s largest pub landlord ALE Property Group has failed to win hope for increases in rent from the Woolworths-backed ALH Group with a long-running dispute between the pair resulting in only limited rises.
The properties that make up its $1bn portfolio are all leased to ALH, a unit of Endeavour Group, which is 85.4 per cent owned by Woolworths, with the remainder held by billionaire Bruce Mathieson.
But the landlord is still dragging in rents from its 86 venues even though its tenant is unable to run its famed Victorian pubs while coronavirus restrictions are in place.
The listed trust had been at loggerheads with ALH about rent increases it had pushed across its portfolio in the wake of a review dating back to 2018.
ALE said on Monday it had received the 2018 rent determinations from the five independent determining valuers called in to the resolve their dispute.
The independent valuers assessed that rent for the 43 properties in dispute, that were the subject of determinations, would remain “substantially unchanged” from the rent immediately preceding November 2018 with the outcome being a small 0.1 per cent dip.
But in some pubs ALE got through rises - notably rents for the 36 properties that had previously been increased by 10 per cent, the most allowed under a cap arrangement. This meant the rent for 79 properties subject to review had increased by 4.4 per cent.
In addition to the 2018 rent reviews, 85 of ALE’s 86 property leases continue to benefit from annual CPI increases.
Macquarie analysts said the outcome was below expectations that the 43 pubs could get a lift of about 5 per cent.
“While the level of under-renting on the remaining 43 properties was below expectations, we still believe the assets are significantly under-rented at the group level. Further, we do not factor in any potential upside from capital management initiatives,” Macquarie said.
Lachlan Moffet Gray 5.37pm: AFG changes clawback policy
Australian Finance Group’s in-house lending division is modifying its clawback structure so that its mortgage brokers won’t lose their entire commission when a mortgagee refinances a loan within a year of settlement.
Lenders generally “clawback” 100 per cent of the commission it pays a broker within a year of settlement if the mortgagee refinances the loan, and a smaller amount - usually 50 per cent - in the year thereafter.
Some brokers may pass on this fee to their customers.
On Monday, AFG said the current model was “arbitrary” and that all loans funded by AFG Securities – including the AFG Retro and AFG Link products – would proportionally reduce the amount clawed back from the broker from 100 per cent for each month after three months have passed.
The changes will apply to all relevant loans settled after September 15.
AFG Securities’ general manager Damian Percy said the company had been looking to establish a “fairer” clawback model that balances the measures of brokers and lenders “for some time.”
“Lenders will assert that upfront commissions should reflect the value that the broker delivers and must necessarily recognise that a loan that only lasts a year or two is, at best, a break-even proposition for the lender,” Mr Percy said.
“In contrast, brokers can reasonably argue that the arbitrary clawback ‘cliffs’ that exist today simply don’t reflect the fact that as time goes on the lender’s position improves.”
Noting that no clawback regime is perfect, Mr Percy called on other lenders to follow AFG’s lead and change their policies appropriately.
“The step-down approach is, we believe, simple, reasonable and supports our brokers to meet their best interests duty,” he said.
“I hope other lenders will, in due course, recognise that the industry’s approach today needs work and follow suit.”
4.25pm: ASX posts slight rise
Australia’s S&P/ASX 200 share index finished up 0.7pc at 5899.5 after hitting a two-day high of 5903.2 in early trading as global markets after Astrazeneca-Oxford coronavirus vaccine trials resumed over the weekend. Heavyweight miners were among the biggest points contributors as Rio Tinto surged 3.9pc following a jump in London after the miner axed its CEO on Friday, while Newcrest rose 3.6pc and Evolution jumped 5pc after Credit Suisse upgraded them to Outperform and Fortescue Metals gained 2.2pc after JPMorgan upgraded its rating to Overweight, while commodity price gains also helped the sector.
Economic “reopening trades” also outperformed thanks to renewed hopes of a vaccine, with NAB up 1.5pc, Corporate Travel up 4.8pc, Webjet up 4.5pc and Qantas up 3.1pc.
But Macquarie fell 4.7pc after flagging a bigger-than-expected fall in first half profit and Cleanaway lost 7.1pc after admitting it hard a corporate culture problem involving its CEO
The Australian dollar was steady against the US dollar and trading around US72.87c by the end of the ASX session.
Bridget Carter 3.30pm: DGO Gold raising $25m
DGO Gold is raising $25m by way of a placement at $3.45 per share.
Working on the raise are Bell Potter, Canaccord Genuity and MST Financial.
In addition to the placement , DGO chairman Eduard Eshuys is selling 650m shares at the same price, amounting to $2.2m. DGO owns 16 per cent of De Grey Mining and the raise is to help fund a participation in De Grey’s recent raise.
It also holds about 13.5 per cent of NTM Gold and a 40 per cent interest in Yilgarn Exploration. In addition to these investments the company also holds exploration land positions in the Pilbara.
Of the funds raised, $12m will go to an acquisition of De Grey shares, $2m in Yilgarn, $8m to greenfield exploration activities and $3m for general working capital and capital raising costs.
Last week, De Grey Mining launched its placement through Bell Potter, selling shares at $1.20 each. The group was to raise about $100m through the issue of about 83.3 million shares by way of a placement.
De Grey Officers, including Simon Lill, Andy Beckwith and Craig Nelmes also sold down about 2.6 million shares at the same price as the placement by way of a special crossing, equating to $3.1m. The group’s shares closed before the raise at $1.435.
De Grey Mining is a Western Australia-based mining company focused on gold exploration and development activities. It has a market value of $1.72bn.
1.55pm: ASX up 0.5%; weakest in region
Australia’s share market is lagging well behind regional markets today.
In fact the S&P/ASX 200 is currently the weakest in the region with a 0.5pc intraday gain.
It also looks set to lag well behind the US market with S&P 500 futures up 1.2pc and Nasdaq futures up 1.6pc. As was the case last week, this underperformance looks to be due to a lack of buying rather than strong selling, since volume is about 26pc below average.
Perhaps the Australian dollar is hindering offshore buyers at these levels.
Bridget Carter 1.26pm: PEP in $449m Citadel play
Private equity giant Pacific Equity Partners has made a $449 million takeover play for enterprise software and services company Citadel Group.
Citadel has entered into a scheme of arrangement with the private equity firm, where it will pay $5.70 per share in cash.
The price is a 43.2 per cent premium to the last closing price of $3.98 per share.
A scrip alternative also exists to the cash offer.
The company will declare a special dividend of 15c per share before the deal comes into force, which would enable shareholders to receive up to 6.4c per share of additional benefit from franking credits, the company said in a statement.
Shareholders will also receive the previously declared fully franked final dividend of 6c per share on October 1.
The offer is being recommended by the Citadel board.
On an enterprise value basis, the offer is worth $503m.
The proposal by PEP, which has $5bn of assets under management, comes after it last week agreed to buy the Australian arm of the education provider Modern Star from Navis Capital for $600m.
The transaction was funded by Morgan Stanley and HPS.
Shareholders are due to vote on the PEP transaction in early December.
Working for Citadel is Macquarie Capital and law firm Gadens.
Citadel describes itself as a software and technology company that specialises in secure enterprise information management across health, national security, defence and corporate enterprises.
Its share price reached its 2020 high at the start of the year of $8.68.
1.15pm: Distancing no longer needed on NZ planes
Air New Zealand and public-transport operators will no longer need to require physical distancing, though masks will still be needed, New Zealand Prime Minister Jacinda Ardern said.
Pandemic restrictions for the country, excluding Auckland, will also fall to the lowest level from September 22 if cases remain low, Ms Ardern told a press conference.
Auckland, which ended New Zealand’s three-month coronavirus-free streak with an outbreak last month, could move to a lower level of restrictions from September 23, she said.
Dow Jones Newswires
1.10pm: Asian markets higher after vaccine boost
Asian markets pushed higher as investors creep back after a recent sell-off, with coronavirus vaccine hopes given a boost and traders looking ahead to the Federal Reserve’s latest policy meeting.
But the reimposition of virus containment measures in several countries, worries about high valuations, Brexit tensions and uncertainty over the US presidential election are keeping gains in check.
Trials on one of the most advanced vaccines resumed at the weekend after being paused briefly after a volunteer fell ill. British regulators gave AstraZeneca and Oxford University the go-ahead to push on following an investigation.
Oxford University said that “in large trials such as this, it is expected that some participants will become unwell and every case must be carefully evaluated”.
And AstraZeneca said it remained hopeful the vaccine would still be available “by the end of this year, early next year”.
The news provided much-needed relief for markets, just as governments across the world see a worrying surge in new infections, forcing Israel to introduce a three-week lockdown.
Analysts said attention is turning increasingly to the November presidential election, with Donald Trump battling to keep the White House against Joe Biden, who is leading in opinion polls.
In early trade Hong Kong added 0.9 per cent and Shanghai was up 0.4 per cent while Sydney put on 0.5 per cent.
Tokyo rallied 0.7 per cent thanks to a surge of nearly 10 per cent in SoftBank after it said Monday it is to sell British chip designer Arm to NVIDIA of the US for up to $US40 billion, in what would be one of the biggest purchases in the world this year.
This week’s Fed meeting is on the radar for investors looking for an update on the state of the world’s top economy and hoping for fresh guidance on its monetary policy.
However, while the bank’s wall of cash has provided support to markets, observers point out that crucially US lawmakers are still no closer to agreeing a new stimulus package to help beleaguered Americans, which is keeping people from spending and holding the recovery back.
AFP
12.44pm: Super saves taxpayer billions: report
The super guarantee supplemented with a means-tested age pension is a much lower cost to the budget than a more generous publicly-funded age pension, analysis by Rice Warner Actuaries shows.
Its report found the superannuation guarantee will save the budget $17 billion this year, rising to $100 billion, (in current dollars) by 2058.
The new report was commissioned by Industry Super Australia.
The report also found the scheduled rise in the super rate will improve the budget bottom line through lower age pension payments in future, and increased revenues on assets accrued through compound returns.
Lachlan Moffet Gray 12.17pm: Super withdrawals slowing
Australians appear to be turning off the superannuation withdrawal tap, with the weekly amount paid out under the government’s COVID-19 early release of super scheme reaching a new low for its fourth consecutive week.
The scheme allows Australians who have seen their income reduced due to the impacts of the pandemic withdraw up to $20,000 from their retirement savings in two tranches: one this financial year and one last financial year.
From the outset in late April, money was withdrawn enthusiastically at a rate of several billion dollars a week – but that amount began to slow in August.
Data released by the Australian Prudential Regulatory Authority on Monday shows that in the week to September just $360m was paid out, bringing the total amount of superannuation withdrawn prematurely to $33bn by 4.3 million fund members.
The average payment made to fund members over the scheme’s lifetime is $7678, with Australians who chose to double dip and use both tranches seeking, on average, $8426.
The scheme, originally anticipated to end next week, has been extended by the government to conclude on December 31.
Treasury estimates that by the end of the year, Australians will have withdrawn around $42bn from their super, despite concerns about the impact it will have on their retirement savings.
11.58am: Australian stocks higher at noon
Australia’s share market has reacted positively to the restart of the AstraZeneca-Oxford University coronavirus vaccine trials, which were paused when a volunteer fell ill.
The S&P/ASX 200 was up 0.5pc at 5890 just before lunch after rising as much as 0.8pc to a two-day high of 5903.2, as S&P 500 futures rose as much as 1pc.
Resources stocks were leading fairly broad-based gains - albeit on typically quiet Monday volumes - with Rio Tinto up 3.3pc after its UK listing jumped following the axing of its CEO.
Economic reopening trades were also strong thanks to the vaccine trial restart and Victoria’s $3bn economic support package announced over the weekend.
In that group, Flight Centre and The Star Entertainment rose 4.4pc, Qantas rose 2.2pc and three of the four major banks rose more than 1pc.
But Macquarie Group was down just over 4 per cent after warning that its 1H profit will fall 35pc on year to a lower than expected $900m.
Cleanaway lost 6.7pc after saying it’s monitoring its CEO after unfavourable press coverage of his corporate culture.
The Tech sector fell despite a rise in Nasdaq futures, with Afterpay down 4.2pc on looming US competition from PayPal and Neamap down 5.5pc after its capital raising.
Lilly Vitorovich 11.40am: Perpetual Equity swoops on HT&E
Perpetual Equity Investment has bought shares in media comany HT&E, which operates radio stations KIIS and The Edge, citing its strong balance sheet and solid prospects.
In its latest monthly investment update to the ASX, Perpetual Equity says it views the sell-off of HT&E shares in March as a “attractive opportunity to establish a position” in the group, led by Ciaran Davis.
It says the market is underestimating a number of factors, including HT&E having no debt and $90m of cash at the end of June, leaving the group with a “very strong balance sheet”.
“In contrast, peers within the traditional media sector were forced to undertake capital raisings in recent months which we considered were deeply discounted and heavily diluted.
“HT1’s position meant the company was able to use its cash to opportunistically acquire an approximately 4.7 per cent stake in oOh!media.” Perpetual Equity says in the update.
Plus, HT&E’s radio business ARN is “market leading in terms of share of ratings as well as revenues”.
Perpetual Equity also believes the market is underestimating the value of HT&E’s 25 per cent stake in Soprano Design, which provides customers with a communications platforms that facilitates automated mobile messaging.
“Soprano is profitable and generated $75m in revenue in FY20. Given the valuations being ascribed to listed peers, we believe Soprano could easily be valued at more than $500m,” it said, adding it considers the value of HT&E’s stake in Soprano to be material and not reflected in the current shar eprice.
HT&E comprised 2.7 per cent of the Perpetual Equity portfolio at the end of August.
In late morning trade on the ASX, HT&E shares were down 4.8 per cent to $1.38.
11.38am: Insurers save from lockdowns: analysts
One sector quietly booming from lockdowns is the insurance industry. Driving data suggests up to 70 per cent reduction in mobility in Victoria, according to brokerage Morgan Stanley, which estimates may save $40m-$70m in payouts for Insurance Australia Group, which is behind brands including RACV and NRMA.
“At industry level, the net loss ratio for domestic motor (insurance) fell to sub-50 per cent in the June quarter – lowest in the past ten years,” Morgan Stanley says.
“However, the second wave of COVID has led to up to a 70 per cent reduction in driving trends in VIC. We estimate this could translate to $40-70m claim savings for IAG, which would provide further funding for any potential business interruption or other losses,” Morgan Stanley says.
IAG shares last down 0.6 per cent at $4.68 each.
11.35am: Economy ‘reopening’ news boosts stocks
A number of so-called “reopening trades” have had a boost from weekend news of the AstraZeneca-Oxford coronavirus vaccine trial restart and Victoria’s $3bn small business package.
Star Entertainment and Flight Centre rose 4pc, Qantas rose 2.1pc and Bendigo Bank rose 1.9pc. Major banks are also getting a lift, with CBA up 0.9pc, ANZ up 1.2pc, NAB up 1.3pc and Westpac up 1.4pc while the broader market rose 0.5pc at 5888.7.
Ampol rose 2.9pc and Viva Energy rose 4.3pc after the government announced a $200m plan to build more fuel storage and introduce support for refineries to keep their domestic operations running.
11.30am: Starpharma hails anti-Covid virus spray
Starpharma says new US research shows its antiviral nasal spray inactivates more than 99.9 per cent of SARS-CoV-2, the virus that causes COVID-19.
According to studies conducted by professor Philippe Gallay at the Scripps Institute in the US, the antiviral activity of the nasal spray meant it could be used before or after exposure to the virus.
“Starpharma’s COVID-19 nasal spray has potential to be an important near-term preventative product, and given it is based on an already marketed active, its path to market is both faster and less complex than a completely new product,” Starpharma chief executive Jackie Fairley said.
The company told the market last month that it was expediting the development of the nasal spay.
Starpharma shares last up 5 per cent at $1.68 each.
11.06am: Humm launch lifts Flexigroup
Flexigroup shares have lifted in early trade after the buy now, pay later player launched its humm product in New Zealand.
The company told the ASX that humm would be the only buy now, pay later service in the New Zealand market that allowed purchases of up to $NZ10,000.
FXL shares last up 2.3 per cent at $1.11 each.
10.54am: Rio ‘accountability’ welcomed
The $US370bn Janus Henderson Investors said there is “accountability at last” from Rio Tinto. The comments follow the exit of Rio chief executive Jean-Sébastien Jacques and several executives following pressure over the mining giant’s destruction of an archaeological site in the Pilbara.
“We support the management change announced by Rio Tinto’s board in response to the destruction of culturally significant sites in Western Australia. Our investment process places great importance on ESG (economic, social and governance) considerations and our team had been calling for further action following the Juukan Gorge debacle,” says Janus Henderson senior portfolio manager Tal Lomnitzer said.
“The initial sanctions of senior executives losing their bonuses were insufficient and irrelevant in the context of the destruction of irreplaceable heritage sites, the value of which is impossible to calculate,” he said.
“The reaction to the mounting pressure on the board and executives, demonstrates that genuine accountability does operate within Rio Tinto”.
10.44am: Mondelphous seals BHP contracts
Shares in Mondelphous have made ground in early trade after the engineering company told the market it had secured a series of construction and maintenance contracts with BHP, worth about $120m.
Under the agreements, Monadelphous will provide upgrades at the Newman Hub site in the Pilbara and provide multi-disciplinary construction services at the Olypic Dam copper mine in South Australia.
Mondelphous shares last up 2.3 per cent at $10.70 each.
10.20am: ASX opens higher
Australia’s S&P/ASX 200 share index rose 0.7pc in early trading, matching a rise in S&P 500 futures after AstraZeneca-Oxford coronavirus vaccine trials resumed over the weekend.
Resources stocks led gains amid strength in base metals and iron ore prices and some upgrades in the sector. Rio Tinto rose 3.7pc and BHP rose 2.6pc, while OZ Minerals, Newcrest, South32 and Evolution climbed 2.3-2.9pc. Incitec Pivot rose 3.6pc after UBS upgraded to Buy.
Cleanaway fell as much as 11pc after its CEO was been accused of leading a culture of bullying and harassment. Macquare fell as much as 5.6pc after flagging a bigger than expected fall in profit.
9.58am: Oracle wins bidding for TikTok in US
Oracle Corp won the bidding for the US operations of the video-sharing app TikTok, a person familiar with the matter said, beating out Microsoft Corp. in a deal to salvage a social-media service that has been caught in the middle of a geopolitical standoff.
Oracle is set to be announced as TikTok’s “trusted tech partner” in the U.S., and the deal is likely not to be structured as an outright sale, the person said.
Microsoft earlier said in a statement that it was notified earlier in the day of the decision by TikTok parent ByteDance.
“We are confident our proposal would have been good for TikTok’s users, while protecting national security interests,” the statement said. “To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement. We look forward to seeing how the service evolves in these important areas.”
Dow Jones Newswires
9.55am: SoftBank selling Arm to Nvidia
Japan’s SoftBank Group said it is selling British chip designer Arm to US chip company Nvidia Corp for up to $US40 billion, potentially creating a new giant in the industry.
“We reached a final agreement with... NVIDIA to sell all shares in Arm... at the value of up to $US40 billion,” SoftBank said in a Japanese statement.
The deal is subject to approval by authorities in several jurisdictions, including Britain, China, the United States and European Union, the statement added.
AFP
9.50am: Cleanway CEO sanctioned over ‘overly-assertive’ conduct
Cleanaway Waste Management says it implemented a range of measures to monitor the conduct of its chief executive Vik Bansal following a media report that revealed he had been accused of leading a culture of bullying and harassment.
Responding to the media report this morning, Cleanaway said that it had conducted an independent investigation into the issues raised and that the board had been working closely with Mr Bansal to ensure his workplace conduct meets the board’s expectations.
Mr Bansal acknowledged that his behaviour should have been better, the company said in a statement to the market.
“Mr Bansal had some issues with overly-assertive behaviour in the workplace and has acknowledged that he needed to address them,” chairman Mark Chellew said.
“The board is disappointed in the circumstances but has taken appropriate action.
“We have noted the committed and sincere manner in which Mr Bansal has responded.
“The board will not tolerate any further instances of unacceptable conduct.”
9.45am: What’s impressing analysts?
Evolution raised to Outperform: Credit Suisse
Galaxy Resources cut to Underweight: JPMorgan
Fortescue Metals raised to Overweight: JPMorgan
Newcrest raised to Outperform: Credit Suisse
Perseus raised to Outperform: Credit Suisse
Regis Resources raised to Outperform: Credit Suisse
Incitec Pivot raised to Buy: UBS
A2 Milk raised to Hold: Bell Potter
9.40am: ASX expected flat; Macquarie in focus
Australia’s share market will weigh disappointing earnings guidance from Macquarie, with weekend news that Astrazeneca-Oxford vaccine trials have resumed.
S&P 500 futures rose 0.7pc in early trading, suggesting Australia’s S&P/ASX 200 share index may rise despite a slight fall in SPI futures on Friday.
But Macquarie may suffer a double-digit percentage fall after guidance that first-half profit may fall 35pc year-on-year to $950m, which is about 14pc below Bloomberg’s consensus estimate.
Also drawing attention today are reports that SoftBank is set to revive talks about taking the group private after confirming a $US40bn sale of chipmaker, Arm, to NVIDIA.
“The Japanese conglomerate’s senior executives will be revisiting a management buyout plan, which had earlier met with internal opposition, according to Bloomberg.
Traders are wondering if Softbank is rushing to privatise so it doesn’t have to report any losses on its recent US tech options splurge after the market reversed sharply this month.
The possibility of Softbank selling tech stocks to make up for any losses on call options, may continue to weigh on market sentiment in the short term, particularly given the amount of new retail exposure.
While a solid bounce off intraday lows was encouraging, the US share market remained weak on Friday with the tech giant falls leaving the Nasdaq down 0.6cp at 10853.5.
RBA minutes and China’s monthly economic activity data on Tuesday, and domestic employment data are due Thursday, along with OPEC, Fed, BOE, BOE and BOJ meetings.
Australia’s S&P/ASX 200 fell 0.8pc to 2.5-month low close of 5859.4 on Friday.
John Durie 9.35am: Rents disappoint for ALE
ALE Property Group has suffered a lower than expected rental increase from Woolworths’ pubs, based on an external review completed late last week that resulted in a 4.5 per cent increase across the 86 hotels.
The decision, expected to be confirmed on Monday, followed a scheduled review of lease payments after agreement was reached on valuations of 40 of the hotels with arbitration needed on the remainder.
The increase was expected to be closer to 10 per cent.
The move comes as Andrew Wilkinson hands over his position as chief executive of the property group to Guy Farrands.
Endeavour had agreed to a 10 per cent increase in rent on 40 of the hotels.
But the net result of the review is just a 4.5 per cent increase across the group which is lower than expected.’
Endeavour pays $55 million a year in rent, which will now increase by $2.75 million.
The increases are indexed, so the lower than expected rental review will mean, lower increases in future years.
The hotels were folded into Endeavour drinks earlier this year and as a result Bruce Mathieson exchanged his 25 per cent stake in the hotels to 14.6 per cent of the wider group, which includes BWS and Dan Murphy’s. This was well timed as it came just before COVID, which saw many of the hotels shut.
Endeavour will be spun out of Woolworths next year with Woolworths and Mathieson to retain 14.6 per cent shareholdings and the rest to be transferred to Woolworths shareholders.
9.12am: Nufarm CFO resigns
Agricultural chemicals business Nufarm is on the hunt for a new chief financial officer after announcing that Paul Binfield has resigned after nine years in the role, and will leave the company at the end of December.
Mr Binfield will take up the role of chief financial officer at Cleanaway Waste management, following the retirement of Brendan Gill.
Bridget Carter 9.10am: Logos eyes Qube move
DataRoom | Logos Group is poised to enter exclusive due diligence for Qube’s $2 billion Moorebank logistics park by the end of the week, with sources saying that the industrial property owner has put forward a knock-out offer for the land at the Sydney-based inland port.
The company is believed to have fended off competition from Blackstone, Dexus Property Group and the Warburg Pincus-backed ESR.
Qube is scheduled to hold a board meeting around the middle of the week to approve Logos’ move towards an acquisition.
The bullish bid by the Sydney-based company has come as an upset in the contest, with some earlier suspecting that it may not have the fire power to compete with other larger competitors.
Logos is an Australian-based logistics property specialist with operations across the Asia Pacific, with ARA Asset Management as a major shareholder.
ARA has $88bn in gross assets under management globally.
Other investors are Canadian real estate investor Ivanhoe Cambridge, which has $C64bn ($67bn) of real estate assets globally, and Logos founders, including joint managing director John Marsh.
9.05am: Holman to be Metcash director
Metcash has appointed former Telstra executive Christine Holman as non-executive director.
Ms Holman is currently a director on the boards of CSR, Collins Foods and Blackmores. She has previously held board positions with Wisetech Global and Vocus.
“We are delighted to have Christine join the board,” chairman Rob Murray said.
“Christine’s extensive and diverse experience will be an asset to the company. The board and I warmly welcome Christine to Metcash.”
Ms Holman previously held the roles of chief financial officer and commercial director of Telstra Broadcast Services.
8.40am: Macquarie flags 35pc earnings fall
Macquarie has flagged a 35 per cent drop in earnings for the first half and said its overall profitability for the full year is uncertain.
“Macquarie states that market conditions are likely to remain challenging, especially given the significant and unprecedented uncertainty caused by the worldwide impact of COVID-19 and the uncertain speed of the global economic recovery,” the company said in a statement ahead of an investor presentation today.
The company is scheduled to report its first half results on November 6.
Bridget Carter 8.11am: Hume lifts Unity Office stake
Hume Partners Investment Group has lifted its stake in the Australian Unity Office Fund, fuelling talk at the weekend that fresh takeover efforts for the company could be on the agenda.
However it is understood while the Scanlan family-backed Hume Partners now owns 19.9 per cent of the company, it wants to average down its investment in the company and has no aspirations of an acquisition.
Last year Hume lifted its interest in AOF to block attempts by Charter Hall to buy the landlord with backing from Abacus Property Group.
Some had suspected with the latest increase, Hume may have been looking to privatise the business.
The office landlord’s shareprice last traded at $2.11, with its market value at $344m.
Charter Hall and Abacus last year sold down interest at the equivalent to $2.95 per AOF share to get more votes for their takeover deal to pass, given their stock was ineligible when it came to participation in a vote as part of a Scheme of Arrangement.
The target last year was advised by UBS.
An independent expert at the time had said the takeover price of $3.04 cash per unit was “fair and reasonable” and in the best interests of shareholders.
Cliona O’Dowd 5.50am: Stocks set for steady start
The Australian sharemarket is in for a cautious start to the week following mixed overseas leads, with technology and energy names likely to face some pressure as traders eye a meeting of the US Federal Reserve and economic data out of China.
The big miners, meanwhile, may get a boost on the back of solid gains in the iron ore price that drove both Rio Tinto and BHP higher in London trade.
The S&P/ASX 200 is tipped to open just four points, or a tenth of 1 per cent, higher ahead of the US central bank’s monthly meeting on Wednesday and Thursday, as well as retail sales, production and investment data out of China.
The expected soft start comes after US sharemarkets last week posted sharp losses led by traders taking profits in the high-flying technology stocks.
On Friday, the Dow Jones index gained 131 points, or 0.5 per cent, to 27,665.64 and the S&P500 index rose 0.1 per cent to 3340.97. But the Nasdaq index fell 66 points or 0.6 per cent to 10,853.55.
Over the week, the Dow slipped 1.7 per cent, the S&P 500 fell 2.5 per cent and the Nasdaq tumbled 4.1 per cent in its biggest weekly loss since mid-March. Facebook, Apple and Netflix all lost more than 5 per cent over the week.
Recent selling pressure of technology stocks in the US is a sign of a healthy correction, according to CommSec chief economist Craig James.
Mr James expects a degree of support for Rio Tinto and BHP on Monday, following a lift in the iron ore price late last week. Iron ore gained 2.2 per cent to $US129, driving Rio Tinto up 4.3 per cent and BHP up 2.1 per cent on Friday night.
“So I think certainly the prospects continue to be positive in terms of China’s economic recovery and that sustaining growth happening in terms of the iron ore price,” Mr James said.
“But in energy and technology, probably a little bit softer and probably a cautious start in terms of the rest of the industrials.”
All eyes will be on the US Federal Reserve later in the week, with onlookers hoping the central bank will provide further guidance on its long-term low interest rate strategy.
Locally, minutes of the Reserve Bank’s September policy meeting will be released on Tuesday, while the bank’s head of domestic markets, Marion Kohler, will speak at a conference on Thursday. The Australian Statistics Bureau will release labour force figures on Thursday.
The local sharemarket ended Friday’s session lower, down 49.1 points, or 0.83 per cent, at 5859.4, after opening at a 2½-month low. The All Ordinaries fell 51.1 points, or 0.84 per cent, to 6038.9.
The Australian dollar is up, at US72.83.
5.45am: Gilead to buy Immunomedics
Gilead Sciences. will pay $US21 billion to buy biotech Immunomedics and its prized breast-cancer drug, the company said, a sign of the value of the cancer-drugs business.
Immunomedics has a market value of roughly $US10 billion following a recent surge in its stock, meaning that Gilead is paying up to secure ownership of the company.
Gilead agreed to pay $US88 a share in cash for Immunomedics, whose shares closed at $US42.25 Friday. That represents a 108pc premium.
The deal will help Gilead accelerate its efforts to diversify into cancer, Chief Executive Daniel O’Day said.
“It’s allowing us to fast forward the work we’ve done over the past several years in developing a true franchise and portfolio in cancer, and it’s really not complete until you have a marketed product,” he said in an interview.
Immunomedics, based in Morris Plains, N.J., sells breast-cancer drug Trodelvy, which would be attractive to several large drugmakers, many of which have set their sights on adding more fast-growing oncology therapies to their portfolios.
Breast-cancer treatment is one of the most lucrative segments of the worldwide cancer-drugs market, which EvaluatePharma pegs at $US157 billion this year.
Dow Jones
5.40am: US stocks rallied, and many missed out
The rally in the stock market to new highs obscures a subtle yet notable trend: Stocks aren’t as popular as they used to be.
That might sound strange, given the surge of people trading shares on apps such as Robinhood, not to mention the enthusiasm around a rally that has pulled the major indexes up by about 50pc in five months.
Still, stocks aren’t as widely held in the US as they were before the 2008 financial crisis. In April, 55pc of people said they owned stocks either directly or through funds -- virtually unchanged since 2010, according to a Gallup survey. Before the financial crisis, it was consistently 60pc or higher.
“The financial crisis drove out a lot of people, and they just never came back,” said Lydia Saad, a senior editor at Gallup.
The reason behind some of that is psychological. The memory of the last financial crisis cast a long shadow, said Joseph Coughlin, director of the research program AgeLab at the Massachusetts Institute of Technology. “The recession and memory of it continues to reverberate because what Main Street remembers is, the system was broken,” he said.
To some people, the system looks broken now, but in a different way. Stocks have hit records even while 30 million Americans are collecting some form of unemployment benefits and Congress is deadlocked on how to provide any additional relief. That breeds mistrust, Mr. Coughlin said, and makes people wary of stocks’ big gains.
Dow Jones
5.35am: Buffett silent so far in election
Billionaire investor Warren Buffett was an active fundraiser and campaigner for the past two Democratic presidential nominees. In 2020, he’s yet to become publicly involved with former Vice President Joe Biden’s bid to reclaim the White House for Democrats.
His absence is notable for several reasons, including that he’s the most famous resident of Nebraska’s Second Congressional District. The Omaha-area enclave, which features one of this year’s most competitive House races, awards one Electoral College vote as part of a system used only by Nebraska and Maine that is unlike the winner-take-all methods elsewhere.
The district, which has strong ties to the insurance and railroad industries, could play a key role if the presidential election is extremely close. President Trump narrowly won there in 2016, as he did statewide. Not wanting to take any chances this year, both campaigns are investing resources.
Mr. Buffett, 90 years old, chairman and chief executive officer of Berkshire Hathaway Inc., was an early supporter and informal economic adviser to former President Obama in his 2008 and 2012 races and campaigned for Hillary Clinton in 2016, even taking voters to the polls on Election Day on Omaha’s Ollie the Trolley as part of a get-out-the-vote effort.
Through his assistant, Mr. Buffett declined to comment. Biden aides wouldn’t weigh in on whether they have sought his backing.
Dow Jones
5.30am: Survival of Air France-KLM ‘not a given’
The survival of the Air France-KLM group is not guaranteed if the economic crisis caused by the coronavirus pandemic continues, Dutch Finance Minister Wopke Hoekstra warned.
France and the Netherlands, each with a 14-percent share of the group, have poured out billions of euros in aid to help national carriers that virtually came to a standstill in the first half of 2020.
“It’s not a given,” Hoekstra said in an interview with Dutch public television NPO, stressing the need to cut costs.
In the spring, Paris gave Air France seven billion euros ($8.3 billion) in loans, and The Hague granted KLM similar aid worth 3.4 billion euros.
The bailout for KLM must be accompanied by “a comprehensive restructuring plan” as well as commitments to re-establish performance and competitiveness.
Hoekstra said he had insisted in talks with KLM on the importance of changing direction.
Dutch press agency ANP said KLM has to develop a restructuring plan by October 1.
Air France-KLM suffered a loss of 2.6 billion euros in the second quarter as air traffic virtually shut down because of the coronavirus pandemic.
This followed a loss of 1.8 billion euros in the first quarter. Air France said it would cut almost 7,600 jobs by the end of 2022 and KLM up to 5,000 jobs.
AFP
5.25am: ECB’s Lagarde urges ‘no complacency’
European Central Bank president Christine Lagarde said Sunday there could “no complacency” in the battle to recover from the pandemic-induced downturn, urging governments to support central bank efforts with fiscal spending.
Although the eurozone was bouncing back from the lockdowns that devastated economic activity earlier this year, Lagarde said the recovery remained “uneven” and “uncertain” as several nations grapple with a renewed rise in coronavirus infections.
The ECB “continues to stand ready to adjust all of its instruments” to help steer the 19-nation currency club through the crisis, Lagarde said in an online speech addressing a meeting of Arab central bankers.
But she reiterated that eurozone governments had to share the load through public spending and investment.
“Continued expansionary fiscal policies are vital to avoid excessive job shedding and support household incomes until the economic recovery is more robust,” former International Monetary Fund chief Lagarde said.
She urged governments to quickly thrash out the remaining details on the European Union’s 750-billion-euro coronavirus recovery fund “so that the funds can start flowing on schedule in January 2021”.
The ECB itself has taken unprecedented action in recent months to cushion the blow from the pandemic fallout, rolling out a 1.35 trillion euro emergency bond-buying scheme while keeping interest rates at record lows and offering ultra-cheap loans to banks.
AFP
5.20am: Wall Street recap
Wall Street stocks finished a volatile week on a mixed note, with the tech-rich Nasdaq again sliding amid worries over excess valuations.
The Nasdaq Composite Index lost 0.6 per cent to 10,853.55, its fifth decline in six sessions.
The Dow Jones Industrial Average gained 0.5 per cent to 27,665.64, while the broadbased S&P 500 edged up 0.1 per cent to 3,340.97.
Tech shares have been under pressure since hitting a record on September 2, with investors questioning skyrocketing stock values.
Markets are also assessing the timing of vaccine candidates for COVID-19 and how much a vaccine could erode the advantage tech companies have attained from higher demand for e-commerce and digital services if the economy normalises quickly.
Art Hogan, chief market strategist at National Securities, said September has historically been volatile month for equities.
This year, there is also unease about the upcoming presidential election, rising tensions between Washington and Beijing and worries over coronavirus outbreaks, including at colleges, Hogan said.
“Volatility is going to be norm for the balance of this month and probably October also,” he said.
Software giant Oracle and home exercise company Peloton both reported good earnings, but still finished lower, with Oracle losing 0.6 per cent and Peloton dropping 4.2 per cent.
Electric truck company Nikola slumped 14.5 per cent, another drubbing following fraud allegations from a short-selling firm that it has vigorously denied.
But General Motors, which took a stake in Nikola, rose 1.0 per cent on ebbing worries about its risk. Their agreement requires Nikola to pay the Detroit automaker for components at “cost plus,” which limits GM’s exposure, JPMorgan Chase said in a note.
AFP
ASX 200 ends up 1.4pc on US rebound; CBA still tips Feb rate cut; Zip rises
Economists divided over Feb rate cut forecast after 56,000 jobs boost. Rio rises after 'good finish' to 2024. Zip jumps after Sezzle earnings upgrade. Star edges up. Softer US core inflation boosts equity sentiment.
ASX 200 ends down 0.2pc; WiseTech sold off; Premier, Myer build on losses; Arafura soars
WiseTech shares dive on heavy volume amid suspected institutional selling.Independent expert backs Premier, Myer deal after recalculations. Billionaire Rinehart-backed Arafura gets fresh Labor buy-in. Macquarie to invest in US data centres. Cash-strapped Star ticks up amid Macau intrigue. Billionaire's takeover interest fires up AVJennings.