ASX drops 2.5pc as global markets tumble on virus, trade worries
Shares finished the session at lows of the day, with double-digit losses in travel stocks as coronavirus cases climbed.
- Qantas $1.4bn placement covered
- Flight Centre falls to double-digit loss
- CBA lifts outlook on ‘green shoots’
- Orica completes upsized private placement
That’s all from the Trading Day blog for Thursday, June 25. Australian stocks tumbled by 2.5pc, after global markets sank on worries about growing coronavirus infections and trade disputes, while oil prices also dived.
Webjet and Flight Centre were hit in a travel sell-off, as Qantas launched a $1.9bn equity raise and slashed 6000 jobs. Overnight, the S&P 500 slid 2.6pc and weakness looks set to persist, with futures lower.
John Durie 9.00pm: Joyce puts Qantas in recovery mode
Qantas boss Alan Joyce’s decision to raise $1.9bn just happened to come on the eve of Deloitte’s decision on who may own rival Virgin Airways.
Both companies are in a world of pain, mainly thanks to their business being shut down by the government for COVID-19 reasons. But while the latter is in administration, Joyce will be raising $1.9bn to lift his cash levels to just over $5bn.
Qantas earns roughly two-thirds of its money from loyalty and domestic travel, which by year’s end should be back to at least 70 per cent capacity. But that, it must be noted, is outside Joyce’s control.
Richard Gluyas 7.55pm: Banks win code of practice reprieve
Banks have won a temporary reprieve from some provisions in the industry’s code of practice, after ASIC accepted the effects of COVID-19 should be part of any consideration of whether a bank has met its obligation to engage fairly and ethically with small business customers.
The Australian Securities & Investments Commission also said that the industry might not always be able to meet timelines in the Banking Code of Practice for customer communication.
The changes were welcomed by the Australian Banking Association. “These temporary changes will help continue the flow of credit to small and family businesses during current economic challenges, but recognising that the assessment of business loan applications presents unique challenges in the current environment,” the ABA said.
James Kirby, Alan Kohler 7.24pm: Listen to Money Cafe podcast
Here’s this week’s Money Cafe, with Wealth editor James Kirby and InvestSMART’s Alan Kohler.
They discuss how recession brings a new wave of retail investors and why fewer financial advisers should mean better advice.
Listen to the podcast for the details:
Send your own questions to James Kirby and Alan Kohler via moneycafe@theaustralian.com.au
Richard Gluyas 7.01pm: UBS: Market wise to ‘bank debt speak’
Investors will “look through” any capital relief granted to banks if the industry extends loan deferrals beyond their scheduled expiry in October, with the sector also likely to report lower bad debts and funding costs in the second half, according to an analyst.
UBS said in a report on Thursday that talk of the Australian Prudential Regulation Authority allowing capital relief was “academic”.
“Experience overseas has shown that where regulators grant relief from non-performing loan recognition - for example, ‘extend and pretend’ or forming new categories - the market looks through this,” analyst Jon Mott said.
David Ross 6.39pm: EY giving back with bonuses
EY said on Thursday it would top up the pay of staff whose remuneration was cut as part of measures introduced during the pandemic lockdown, with the business tipping in a 1 per cent COVID-19 Recognition Bonus.
The outcome for staff who had their FY20 pay reduced by 3.3 per cent would be they instead would only suffer a 2.3 per cent cut. Staff have also been given an extra two days leave.
The bonus, announced by EY Oceania chief executive Tony Johnson on Thursday came after the 6000-strong EY workforce had their pay and hours cut by 20 per cent for three months earlier this year.
David Swan 6.07pm: Google agrees to pay for news content
Google has landed agreements with a number of publishers to license news content, including in Australia, in an about-face that shows the tech giant is ready to begin paying for news.
After years of declaring it would not pay media companies for using their content, Google said late on Thursday that it had reached agreements with Adelaide-based local newspaper publisher Solstice Media, Schwartz Media and The Conversation, as well as Germany’s Spiegel Group, publisher of Der Spiegel; and Brazilian media company Diarios Associados.
Google has not signed any partnerships with publishers in the US however, or with any major publishers in Australia including News Corp, publisher of The Australian, or Nine. It is understood to be in advanced talks with Australian Community Media, which publishes about 160 rural titles.
5.12pm: Freedom Foods $60m writedown, redundancies
Freedom Foods announced to the ASX after market close an additional writedown figure of $35m, adding to the estimated $25m advised on May 29.
It said it had made 41 staff redundant and a total of 61 positions had been terminated.
The health food company said that following a meeting of its board on Thursday, it “was not in a position to make any further comment at this time in relation to the employment position of Rory MacLeod” and a further announcement would be made next week. Shares in the company fell on Wednesday after it said chief executive Mr MacLeod was on leave as of Wednesday. Chief financial officer and company secretary Campbell Nicholas resigned on Tuesday.
The statement on Thursday said the writedown related to “obsolete and out-of-date stock” but added there was increasing demand and customer enquiry across key brands and markets “with an emphasis on dairy, nurtitionals and plant beverages”.
Freedom Foods shares are suspended and last traded at $3.01 a piece.
4.40pm: Flight Centre falls to double-digit loss
Qantas was sharply in focus in the local session as the airline completed a $1.4bn placement and laid out plans to restructure its workforce with 6000 jobs to be cut.
While its shares were halted, the rest of the travel sector felt the sting – Flight Centre fell 11 per cent to $11.46 as Webjet lost 8.6 per cent to $3.39 and Corporate Travel dropped 8 per cent to $9.66.
Energy stocks took a 4.4 per cent hit after oil prices dived by 5 per cent overnight. Woodside lost 4.2 per cent to $20.67, Santos gave up 3.4 per cent to $5.18 and Oil Search dropped 7 per cent to $3.06.
Here’s the biggest movers at the close:
4.13pm: Shares sink to daily lows
Weakness was broadbased on the local market in Thursday’s session, as rising coronavirus cases at home and abroad spooked investors and prompted a $46bn sell-off.
A sharp rise in infections in the US and a warning on global growth by the IMF sparked hefty losses on Wall Street, providing a weak local lead, exacerbated by concerns of escalating trade tensions with Europe.
The benchmark ASX200 went some way to paring the day’s losses intraday but finished the session at daily lows, down 148 points or 2.48 per cent to 5817.7 – a seven-day low for the index.
3.41pm: Lufthansa agrees to cost-cutting package
German airline Lufthansa AG said Thursday that it has agreed on a workforce package with the Independent Flight Attendants’ Union that will save more than 500 million euros ($US562.6m) as it deals with the effects of the coronavirus pandemic.
The airline said the package includes the suspension of pay increases, reductions in flying hours and corresponding pay, and temporary reductions in contributions to the company pension scheme.
Both parties have also agreed on a package of voluntary measures and severance programs, such as unpaid leave, voluntary reduction in working hours, and the subsidised, early transfer to the company pension scheme.
“With the crisis package that has now been agreed, the company can avoid lay-offs for the 22,000 cabin staff of Deutsche Lufthansa during the crisis,” said Lufthansa in a statement.
Dow Jones Newswires
Gerard Cockburn 3.20pm: ATO cracks down on JobKeeper fraud
The Australian Taxation Office has flagged it will crackdown on businesses illegally accessing JobKeeper payments.
The ATO said it is identifying fraudulent behaviour relating to JobKeeper claims where businesses and employees are not eligible for the subsidy scheme.
“We work closely with businesses that have made honest mistakes to avoid overpayments, the ATO said. “However, where we see businesses deliberately engaging in fraudulent or illegal behaviour, we are responding quickly.”
The ATO said it will be monitoring for falsified records or revised activity statements which allow a business to meet the scheme’s fall in turnover test. It will also flag applications for people who do not meet the eligibility requirements or are not current employees with a business.
Applications where there is no evidence of carrying on a business or no proof of assessable income will also undergo integrity checks.
Read more: APRA ramps up surveillance of super funds
3.12pm: Sell-off accelerates into the close
Australia’s share market is heading lower in the afternoon session to hit a new 7-day low.
The S&P/ASX 200 fell 2.1pc to 5839.7 points and is on track for its biggest one-day fall in 8 days.
NAB fell 3.5pc, BHP fell 2.4pc, Scentre lost 6.6pc, and Sydney Airport fell 5.6pc.
Still, health care is holding on to gains as CSL adds 0.7pc.
Even with recent selling the #ASX 200 is up 15%in the June Qtr & is on track for its best quarterly performance since Sept 2009 where it rallied ~20% #ausbiz
— CommSec (@CommSec) June 25, 2020
Bridget Carter 2.42pm: Qantas placement covered
DataRoom | The $1.4bn placement launched by Qantas Airways on Thursday is covered, say sources.
The raise was launched on Thursday through Macquarie Capital and JP Morgan in a quest to boost the balance sheet of the airline, as it announced 6000 jobs would be lost due to COVID-19.
Read more: Qantas to cut 6000 jobs, 15000 stay stood down
2.13pm: Outlook still uncertain for Qantas: Citi
Any delays to the resumption of domestic travel could risk Qantas’ recovery, along with other factors outside of its control, so says Citi.
After the airline this morning announced its intention to raise $1.9bn to fund its “right sizing” and “restructuring”, analyst Jake Cakarnis notes that the operating outlook is still highly uncertain for the national carrier.
“While efforts to bolster liquidity and support the balance sheet will help, the path to recovery will be impacted by a multitude of factors beyond Qantas’ control,” he says.
“A return to domestic operations and reduced operating costs will be key for stabilising the business. With a weaker outlook for global economic growth, potential for structural changes to demand and competition, Qantas will need to adapt to a significantly changed global aviation industry.
“We see near-term risks from a delayed start to domestic operations, impacts from lower yields and airfares to stimulate demand and a more gradual return to travel for the lucrative business and SME segments.”
1.11pm: SoftBank CEO resigns from Alibaba
SoftBank Group chief executive Masayoshi Son said Thursday that he is stepping down from the board of Chinese e-commerce giant Alibaba Group, effective the same day.
Mr Son’s announcement, which he made at the end of SoftBank’s annual shareholder meeting, follows the resignation – also effective Thursday but announced last month – of Alibaba co-founder Jack Ma from SoftBank’s board.
The pair of resignations brings to an end around a decade and a half during which the two powerful entrepreneurs- Mr Son from Japan and Mr Ma from China – cemented their close relationship by serving as directors of each others’ companies.
Mr Son has been on Alibaba’s board since 2005, five years after SoftBank took a major stake in the then-small Chinese online retailer. Mr Ma came on SoftBank’s board a few years later, in 2007.
Dow Jones Newswires
1.01pm: Shares extend losses to 2pc
Shares are extending early losses at the halfway mark, with all sectors bar healthcare now solidly in the red.
At 1pm, the benchmark ASX200 is lower by 107 points or 1.79 per cent to 5858.8.
Travel names continue to be the biggest losers in the session – Flight Centre now off by more than 10pc as Corporate Travel takes a 7pc hit and Webjet drops 8.6pc.
In the market heavyweights, Commonwealth Bank is off by 1.3pc and the best performing bank as Westpac, NAB and ANZ all drop between 1.7pc and 2.5pc. Afterpay is shedding 3.8pc too.
Here’s the biggest movers at 1pm:
12.50pm: CBA lifts outlook on ‘green shoots’
Commonwealth Bank has revised higher is expectations of Australia’s GDP profile, noting “green shoots” were emerging in the local data.
The bank now expects a contraction of 3.2pc for GDP this year, versus earlier expectations of 4.2pc, and an increase of 2pc in the year following.
It adds that the official unemployment rate will continue to rise, but “true” unemployment likely peaked in May and is now headed lower.
Economist Gareth Aird isn’t put off by the growing coronavirus case count in Victoria, noting that the numbers are still “low in the scheme of things”.
“We have updated our forecasts for the Australian economy to take into account the earlier than expected reopening of the economy, the faster than anticipated rebound in consumer spending and the material improvement in consumer confidence,” Mr Aird says.
“There are clearly a lot of downside risks to the outlook, particularly around net overseas migration and the roll off of various stimulus measures (though we expect some policy changes on that front that will mean the Government takes a taper type approach). But some previously identified upside risks have materialised.”
Gerard Cockburn 12.29pm: Accent jumps 11pc on online surge
Footwear retailer Accent Group says a surge in online shopping has offset a sales slump from its physical stores, as it sets out forecasts for a 10pc annual earnings boost.
In a trading update on Thursday, the company said it expects earnings before tax and interest for the 2020 financial year to be roughly 10 per cent above the $108.8m recorded in FY19.
Accent, which has the local distribution rights for Hype DC, Doc Martens, Platypus and Athlete’s Foot, noted its digital sales growth had strengthened during the lockdown period, with online sales growing 150 per cent between April and June to date.
As at June 21, online sales represented 23 per cent of total sales for June. Digital sales for May were $29m.
Accent chief executive Daniel Agostinelli said the spur in online activity in the past two months had pushed its digital penetration strategy ahead of its expected schedule.
AX1 shares are up 11pc to $1.51.
12.21pm: US futures send ASX lower
Australia’s share market has extended its intraday fall as US futures tumble.
The S&P/ASX 200 is down 2pc to a 7-day low of 5845.8 as S&P 500 futures fall 0.7pc.
Japan’s Nikkei 225 is down 1.2pc and South Korea’s KOSPI is down 1.2pc while China and Hong Kong are closed for holidays.
Patrick Commins 11.51am: Job vacancy drop largest on record
The number of job vacancies collapsed by the most on record in May, with new data from the Australian Bureau of Statistics showing a 43 per cent collapse from February.
The steep decline in the quarterly survey was well beyond the previous largest fall of 27 per cent during the 1990s recession.
The job ads figures come as Qantas announced mass lay-offs on Thursday morning, as the closure of international borders and remaining restrictions on interstate travel has devastated the airline industry.
Listings for private sector roles fell 45 per cent, and by 29 per cent in the public sector, the seasonally adjusted figures showed.
There were falls across states and territories, but job ads in Victoria suffered the hardest hit, halving between February and May in raw terms.
Read more: Qantas to cut 6000 jobs, 1500 stay stood down
11.48am: Optus plots $850m debt raise
Singapore Telecommunications’ Australian unit is planning to raise $850m through issuance of two senior notes.
Optus will raise $350m through issuance of 5-year notes carrying a 1.60pc annual coupon, Singtel said Thursday.
Another $500m will be raised via issuance of 10-year notes paying an annual coupon of 2.50pc.
Proceeds from the notes sale would be used for meeting general corporate needs, Singtel said.
Australia and New Zealand Bank, Commonwealth Bank and Westpac are among the banks advising on the note offering.
Dow Jones Newswires
11.25am: Online boom sends Redbubble to record
Online artist marketplace Redbubble has surged 26pc in early trading, after reporting a 42pc year-to-date revenue jump.
The group said operating earnings were up 101 per cent year to date to $11.9m, compared to the same time last year as demand for its marketplace products increased.
For the June quarter, to June 22, revenue growth was 107pc, 96pc on a constant currency basis.
Still, Redbubble said it was cutting staff as it moved to realign its organisational structure, focused on artists, users and audience understanding and loyalty.
RBL shares hit a high of $2.30 in morning trade and last traded up 24.8pc to $1.96.
11.15am: ASX bounces off 7-day low
Australia’s S&P/ASX 200 more than halved a 1.8pc fall after hitting a 7-day low of 5856.7.
The index is down 1.1pc at 5903 after paring its decline to just 0.8pc. But a close in the green is hard to imagine unless US futures turn up.
While led by defensive sectors including Health Care and Consumer Staples, iron ore miners bounced off their lows.
But the index needs more help from the Financial sector, with the major banks down 1.2-2.4pc.
Gerard Cockburn 11.02am: Which lender has the lowest variable rate?
Online home loan lender Freedom Lend is offering the lowest variable rate in Australia at 2.17 per cent.
The small lender on Thursday slashed its variable rate by 12 basis points, eclipsing Reduce Home Loans which moved its variable rate to 2.19 per cent last week.
In comparison the lowest variable rate advertised at a major bank is 2.69 per cent, offered by both Westpac and NAB.
Freedom Lend’s principle and interest variable rate can be obtained if a borrower holds a loan-to-value ratio of less than 70 per cent.
Loan applications for the variable rate must be submitted by July 31, for a maximum loan amount of $1.5m.
“Week after week we’ve seen the smaller providers chip away at each other in a bid to claim the title of the lowest variable rate lender,” RateCity research director Sally Tindall said.
“This kind of competition is great for anyone willing to capitalise on the market competition by switching.”
10.53am: Puma Energy sells down APN stake
Service station group Puma Energy has sold its stake in landlord APN Convenience Retail.
In a notice to the market this morning, APN said Puma had sold its 6.08pc holding in the fund at $3.30 apiece.
APN Property Group, the parent of the listed fund, picked up a portion of the sale, to lift its aggregate holding to 17.3pc.
AQR last traded down 2pc to $3.50.
10.38am: Shares hit 7-day low
Australia’s S&P/ASX 200 share index fell 1.8pc to a 7-day low of 5856.7 in early trading after the S&P 500 dived 2.6pc overnight.
But it has rapidly trimmed its fall to 1.1pc, regaining the minor support level around 5880 that held for the last week.
Falls are being led by the Energy, Financials, Materials and Real Estate stocks after those sectors underperformed on Wall Street.
Travel, tourism, entertainment and shopping mall stocks are getting hit by the US coronavirus pandemic. Among the worst off are Flight Centre, Unibail-Rodamco, Webjet, Crown and Scentre, with falls of 3.8-6pc.
The major banks are down about 1.5pc, while CSL which is up 0.6pc amid outperformance in defensive sectors including Health Care and Consumer Staples.
10.30am: Base metal prices headed higher: UBS
UBS analyst Glyn Lawcock has upgraded his forecasts for base metals including copper and nickel by more than 10pc for 2020 to reflect a higher-than-expected June quarter outcome and his expectation that prices lift further from current levels in the second half.
Mr Lawcock has also raised his spot iron ore forecasts on the back of under-delivery by Brazil, with $US91 a tonne forecast for 2020 but he still thinks $US100 a tonne is unsustainable for the long-term. His long-term forecast rose 10pc to $US60 to reflect his view of the cost curve.
Meanwhile his coal price forecasts have been lowered again, but he says it’s “near the bottom with the majority of the cost curve under water on an all-in basis”.
“This is not sustainable and we see coal prices moving higher as India emerges from COVID-19 and monsoon season.”
“We advocate switching precious metals into base metals and laggards,” Mr Lawcock says.
He notes that the re-emergence of COVID-19 or a broader sell off in global equity markets remain the biggest risks to his call for a further lift in base metal prices and related equities in the second half, while continuing supply constraints provide fundamental support for the sector.
“To date, consumer appetite has been stronger than expected as mobility restrictions are lifted, plus we have unprecedented monetary and fiscal stimulus which is expected to drive increased demand,” he says.
“Further support is likely to come from under investment by the miners with significant capital deferred by up to 12 months as a result of COVID.”
Mr Lawcock has upgraded Sandfire Resources and downgraded Western Areas.
10.10am: Travel names lead ASX drop
Local shares have followed global markets lower, shedding 1.3 per cent in early trade as coronavirus cases continue to climb.
At the open, the benchmark ASX200 lower by 98 points or 1.64 per cent to 5868.
All sectors are trading in the red, led by a 3.3pc drop in energy after oil prices tanked by 5pc overnight, while Materials are off by 2.2pc.
Travel names in particularly are taking a beating – Flight Centre down by 6.5pc as Sydney Airport sheds 3.4pc, and Webjet drops by 5.4pc.
9.55am: Orica completes $725m private placement
Commercial explosives group Orica has completed a new $725m placement in the US private market, upsized after strong demand.
In a notice to the market this morning, Orica said it had initially launched a $US250m issue to refinance a US private placement set to mature in October, but after it was 5x oversubscribed the placement was lifted to a $US451m and $70m issue of fixed rate senior unsecured notes.
“The additional capital we have been able to raise will further strengthen our balance sheet, which is more important than ever in the current climate,” chief Christopher Davis said.
JP Morgan Securities LLC and Citigroup acted as joint placement agents on this transaction. ANZ Securities, Inc acted as co-agent.
9.43am: ASX vulnerable after offshore drop
Australia’s sharemarket is vulnerable after sharp falls in offshore markets, with overnight futures relative to fair value suggesting the S&P/ASX 200 will open down 1pc at 5905 points.
That seems optimistic considering the S&P 500 fell 2.6pc, the Euro Stoxx 50 fell 3.1pc and S&P 500 futures are down 0.3pc this morning.
A fall below 5881.1 would mark a 7-day low and possibly threaten last week’s low at 5720. A break of that point would form a downtrend that could generate the first correction in what has been the fastest-ever bull market. But if rising volatility threatens to trigger indiscriminate selling and tightening US financial conditions threaten to hurt the economy, it will only be a matter of time before the Fed dials up its asset purchases, supporting risk assets.
Negative catalysts overnight included the IMF revising down is 2020 global GDP forecast to -4.9pc from -3pc, the US proposing $US3.1bn in EU tariffs in retaliation for Airbus subsidies, a 5.9pc fall in WTI crude oil after EIA oil inventories rose by 1.4m barrels versus 300m expected, and the worsening coronavirus pandemic in the US.
33 US states showed increased infections from two weeks ago and the Texas governor declared a “massive outbreak” while New York, New Jersey and Connecticut now require visitors from hot spots to quarantine for 14 days.
A $1.4bn institutional equity raising by Qantas today will be an added drag on the market. Elsewhere, CSL has bought a haemophilia therapy from uniQure for $US450m ($655.9m).
The S&P/ASX 200 rose 0.2pc to 5965.8 on Wednesday.
Bridget Carter 9.31am: Qantas working on raise for two weeks
DataRoom | Qantas is believed to have spent the past two weeks preparing for its $1.9bn equity raising as speculation started swirling in the market that the COVID-19 pandemic could force the airline to slash a third of its workforce.
The raise is the largest this year behind the $3.5bn raise by the NAB and involves a $1.4bn placement and a $500m Share Purchase Plan, with shares sold at $3.65 each, a 12.9 per cent discount to their last close of $4.19.
Working on the deal is Macquarie Capital and JP Morgan and it comes after DataRoom flagged on April 22 that an equity raising was on the cards for Qantas.
In March, Qantas had said a raise was not on the agenda but many believed a move was inevitable as its fuel hedging contracts put it on the back foot.
The thinking is that Air New Zealand will be next in the industry to tap the market, with a raise of around $NZ500m expected while Sydney Airport is also a prime candidate.
The raise by Qantas to strengthen its balance sheet takes the airline’s net debt to $4.7bn against a market value of $6.25bn.
Read more: Qantas to cut 6000 jobs, 15000 stay stood down
Eli Greenblat 9.23am: Bapcor earnings hit less than feared
Automotive parts retailer Bapcor says the impact of COVID-19 restrictions on its business has not been as severe as anticipated, as it guided to full year profit between $84m and $88m.
The company, whose chains include Burson Auto Parts and Autobarn, said with the easing of restrictions its businesses had experienced stronger than expected demand, particularly in the retail and Burson trade segments in Australia. In addition most of the other businesses are recovering more quickly than anticipated in returning to their pre-COVID-19 demand levels, the company said.
Bapcor’s retail segment experienced strong demand in May and June, with Autobarn same store sales increasing over 45 per cent from the prior year. This followed on from April’s same store sales drop of around 3 per cent.
Bapcor said same store sales growth was achieved in both the company owned stores and franchised stores. On a full year basis to end of June 2020, it is estimated Autobarn same store sales increase will be around 8 per cent.
Given the strong performance of the business over the last two months, Bapcor now anticipates net profit (before significant items) for the financial year ending June 30, 2020 will be in the range of $84m to $88m, subject to normal year-end audit procedures.
“Future demand is anticipated to moderate as we enter the new financial year in an environment of economic uncertainty and as government stimulus reduces,’’ the company said.
BAP last traded at $5.89.
9.16am: What’s on the broker radar?
- Adbri cut to Hold – CCZ Statton
- Bellevue Gold cut to Hold – Sprott Capital Partners
- Class raised to Buy – Ord Minnett
- Coronado Coal raised to Buy – UBS
- FlexiGroup cut to Neutral – Credit Suisse
- GWA Group cut to Hold – CCZ Statton
- Mirvac Group cut to Hold – Jefferies
- Qube cut to Hold – Ord Minnett
- Qube cut to Neutral – UBS
- Ramelius cut to Sector Perform – RBC
- Reliance Worldwide cut to Sell – CCZ Statton
- Sandfire Resources raised to Buy – UBS
- Sonic Healthcare cut to Hold – Morgans
- Western Areas cut to Neutral – UBS
8.55am: Qantas to raise $1.9bn
Qantas has laid out plans to raise $1.9bn as it grounds 100 aircraft and cuts 6000 jobs or 20pc of its workforce.
Chief Alan Joyce this morning detailed the airline’s three year recovery plan as it grapples with a drastically changed flying environment thanks to COVID-19.
Here’s some of the key points:
- The group will slash 6000 jobs across all parts of the business, and continue the stand down of 15,000 employees, particularly those associated with international operations.
- Around 100 aircraft will be grounded for up to 12 months, and six of its remaining 747s will be retired immediately, six months ahead of schedule.
- The carrying value of Qantas’ A380 fleet will be written down by $1.25bn to $1.4bn
- Full year result is expected to be between break even and a small underlying profit, with the largest contribution from its Loyalty business with only a 5pc to 10pc reduction in earnings.
Shares in the placement are being offered at $3.65 apiece, a 12.9pc discount to the last traded price of $4.19.
“We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term,” Mr Joyce said, also pledging to stay with the company at least until the end of FY23.
“Most airlines will have to restructure in order to survive, which also means they’ll come through this leaner and more competitive. For all these reasons, we have to take action now.”
Read more: Qantas to cut 6000 jobs
8.38am: Qantas halted for capital raise
Qantas shares have been halted ahead of the open, pending a capital raising.
The airline this morning said it was completing an institutional placement and share purchase plan, with shares to return to trade tomorrow.
QAN last traded at $4.19.
7.55am: Disney may postpone Mulan release
Walt Disney is considering postponing the July 24 release of “Mulan,” according to a person familiar with the matter, a rescheduling that could call into question hopes across Hollywood and the movie-theatre industry to have cinemas up and running next month.
“Mulan” is currently the first major studio film scheduled for release after theatres are expected to reopen in July.
That has made it an arbiter of Hollywood’s plans at large. Any postponement on Disney’s part would likely force exhibitors and other studios to re-evaluate current reopening schedules. For months, theatres have been closed to help battle the coronavirus pandemic. Reopening plans also could be complicated by rising numbers of coronavirus cases in certain parts of the U .S.
Disney executives are expected to make a decision on “Mulan” soon, according to people familiar with the matter. The live-action reboot of the 1998 animated film cost $US200 million to produce, and Disney will need to mount a marketing campaign imminently to get consumers reacquainted with the film, which was originally scheduled for release in March.
AMC Entertainment Holdings Inc. and other major exhibitors are counting on “Mulan” and “Tenet,” a science-fiction thriller scheduled for release on July 31, to get moviegoers back into seats. AMC said last week it expected to have most of its theatres operating by July 24, in time for “Mulan.”
Dow Jones
7.40am: Oil falls 5pc
Oil prices tumbled over 5 per cent, or more than $US2 a barrel overnight, after US crude storage hit another record and coronavirus cases rebounded in countries like Germany and surged in heavily populated areas of the United States.
The United States had its second-largest rise in infections since the pandemic began. Mounting infections there as well as in China, Latin America and India have unnerved investors and pressured oil prices.
“The market is signalling that if it doesn’t get constant reassurance that we are emerging from the breakdown in demand that happened because of the pandemic, then higher oil prices really don’t make sense,” said Gene McGillian, vice president of market research at Tradition Energy.
Brent crude settled at $US40.31 a barrel, down $US2.32, or 5.4 per cent. On Tuesday, Brent hit its highest price since early March, just before the pandemic and Saudi-Russia price war roiled markets.
US West Texas Intermediate (WTI) crude settled at $US38.01 a barrel, losing $US2.36, or 5.8 per cent.
A stronger US dollar, which moves inversely with oil, and a slump in equities also weighed on prices.
Reuters
7.15am: ASX to sink early as US slides on virus
Losses are likely early on the Australian share market after rising coronavirus cases in the US prompted a market sell-off.
At 7am (AEST) the Australian SPI 200 futures contract was down by 92.0 points, or 1.55 per cent, to 5,837.0.
In the US, the S&P 500 skidded 2.6 per cent after new coronavirus cases climbed to the highest level in two months.
The United States has recorded the second-largest rise in infections since the health crisis began, with a flare-up of cases in states where restrictions meant to contain the disease were lifted early.
The governors of New York, New Jersey and Connecticut announced that visitors from states with high coronavirus infection rates must quarantine for 14 days on arrival.
Chief market strategist at National Securities in New York, Art Hogan, said: “Today was finally the day markets came to terms with the fact that increasing COVID-19 cases could mean a slower recovery in the economy”.
The Australian dollar was buying US68.68 cents at 7am (AEST), down from US69.41 cents at the close of trade on Wednesday.
The Australian share market closed slightly higher for a fourth straight day on Wednesday, with investors apparently afraid to push the ASX200 over the 6,000 level.
The benchmark S&P/ASX200 index finished Wednesday up 11.3 points 0.19 per cent, at 5,965.7 points, while the All Ordinaries index was up 12.3 points, or 0.2 per cent lower, at 6,081.6.
AAP
Not sure but looks like this cases are going up in the U.S.
— David Ingles (@DavidInglesTV) June 24, 2020
Florida, California set daily records for new cases. Houston says its ICU beds are at 97% capacity. pic.twitter.com/l7Gedbp0vH
6.30am: Rights win for CSL Behring
UniQure said it entered a licensing deal which will provide CSL Behring exclusive global rights to etranacogene dezaparvovec, an investigational gene therapy for patients with haemophilia.
Under the terms of the deal, uniQure will receive an upfront payment of $US450 million in cash, and will be eligible for up to $US1.6 billion in milestone payments.
UniQure said it “will also be eligible to receive tiered double-digit royalties in a range of up to a low-twenties percentage of net product sales arising from the collaboration.”
The deal is contingent on completion of antitrust review in the US, Australia and the UK, the company said.
CSL Behring is a CSL company.
Dow Jones Newswires
6.10am: US stocks drop as infections surge
US stocks tumbled as pockets of coronavirus infections emerged in several states, intensifying fears of officials having to reinstate lockdown measures around the country.
The Dow Jones Industrial Average fell 710 points, or 2.7 per cent. The S&P 500 declined 2.6 per cent, and the Nasdaq Composite lost 2.2 per cent. All 11 of the S&P 500’s sectors were in the red.
The falls mark the biggest daily percentage drop by the three indexes in almost two weeks, and snap an eight-day winning streak by the Nasdaq, its longest since December 2019.
After edging higher yesterday, the ASX is tipped to open sharply lower. At 6am (AEST) the SPI futures index was down 94 points, or 1.6 per cent.
New coronavirus cases have jumped in several states, with Arizona, Texas and California reporting daily records for infections.
The reports have raised concerns that a nascent economic recovery may be in jeopardy. Much of what investors have been betting on is that swathes of the US will be able to resume normal activity while avoiding a major resurgence in infections.
“If this does get worse and more endemic, they will have to lock down some of these states again,” said Charles Hepworth, an investment director at GAM Holding.
Shares of companies whose businesses have been particularly hard hit by the pandemic led the market’s declines.
Carnival shares lost 9.1pc and Norwegian Cruise Line fell 10pc after S&P downgraded the former company’s credit rating, saying the cruise industry faced a long period of weak demand. Bank stocks also tumbled, with Bank of America falling 3.4pc and Goldman Sachs losing 2.7pc.
Elsewhere, European stocks dropped, with the Stoxx Europe 600 falling 2.8pc. Germany’s Health Minister Jens Spahn said the coronavirus remained a risk after the western state of North-Rhine Westphalia on Tuesday locked down two municipalities following an outbreak at a meat packing plant.
Also weighing on stocks, the US said it was considering imposing tariffs on $US3.1 billion worth of products from the U.K., France, Germany and Spain. The warning, which targets products including olives and malt beer, came in a review of the long-running dispute over government subsidies to aircraft manufacturers.
Investors’ concerns about the rise in infections have in recent weeks had been tempered by optimism about stimulus measures from central banks and major governments. That helped stocks around the world bounce higher for much of the month.
But money managers are having to grapple with the possibility that the economic recovery will be slower and more uneven than they had expected, especially if countries are unable to tamp down a rise in coronavirus infections.
Economists at the International Monetary Fund said Wednesday that the global economy will contract 4.9pc in 2020, worse than its previous forecast of a 3pc contraction.
In Asia, Hong Kong’s Hang Seng index slipped 0.5pc, while India’s major gauge shed 1.6pc. South Korea’s Kospi gained 1.4pc after North Korea suspended military plans directed against Seoul.
Dow Jones
6.00am: Lufthansa shareholder backs rescue deal
Lufthansa’s top shareholder said he would back a nine billion euro government rescue package, removing the threat of a last-minute veto that could have plunged the German airline into bankruptcy.
“I will vote for the agreement,” German billionaire Heinz Hermann Thiele told the Frankfurter Allgemeine Zeitung newspaper on the eve of an extraordinary general meeting at which investors will decide on the fate of the coronavirus-hit giant.
Chief executive Carsten Spohr has warned that “the future of the company” is at stake after the pandemic throttled Lufthansa’s usual flood of passengers to a trickle for several months this year.
AFP
5.55am: Aid needed to avert 4m US lay-offs
A new private sector report is warning anew of continuing damage to the economy if Washington doesn’t deliver several hundred billion dollars in budget relief to states and local governments amid the coronavirus pandemic.
But Wednesday’s report by Moody’s Analytics, a private sector economic research firm, could also help illustrate a path for bipartisan agreement in Congress on next month’s fifth, and possibly final, COVID-19 response bill. The study warns that doing nothing to address the economic perils of state lay-offs and cutbacks could cost 4 million jobs. But it also says that significantly less money is needed than what’s being called for by House Democrats, who passed almost $US1 trillion in help for cash-poor states and local governments as part of a sweeping $US3.5 trillion rescue package last month.
AP
5.50am: Settlement in Roundup cases
German pharmaceutical company Bayer says it’s paying up to $US10.9 billion to settle a lawsuit over subsidiary Monsanto’s weedkiller Roundup, which has faced numerous lawsuits over claims it causes cancer.
In a statement, Bayer said it was also paying up $US1.22 billion to settle two further cases, one involving PCB in water.
The Leverkusen-based company said the Roundup settlement would “bring closure to approximately 75pc” of the current 125,000 filed and unfiled claims. It said the agreement is subject to approval by Judge Vince Chhabria of the U.S. District Court for the Northern District of California.
AP
5.45am: Stocks slump on virus, trade concerns
European and US stock markets sank as investors worried over rising coronavirus infections in several countries and fresh trade tensions between the European Union and the United States, dealers said.
Meanwhile, updated IMF economic forecasts also hit at sentiment as the institution sees the global economy contracting by 4.9 per cent this year due to the shutdown of transport and production meant to halt the transmission of the virus.
It sees the United States, the world’s top economy, facing an 8-per cent drop in GDP this year and the euro area’s GDP plunging 10.2 per cent.
China, which had been the source of much of the growth in the global economy this year, will eke out just 1 per cent growth this year, the IMF believes.
Meanwhile, the US said it is considering new taxes on $US3.1 billion in European imports amid a dispute over subsidies to plane maker Airbus, just days after the EU indicated it plans to move forward on a digital tax that would primarily hit US tech titans.
“It would appear that President Trump is picking a trade fight with Europe in an effort to distract US citizens from the domestic health situation,” said analyst David Madden at CMC Markets UK.
Stock markets have rebounded strongly – the Nasdaq composite struck a record high on Tuesday – after having initially plummeted on the coronavirus lockdowns.
That is primarily due to the vast amounts of support governments and central banks have pumped into economies and markets.
But investors are nevertheless walking a tightrope between hopes the easing of restrictions will lead to an economic rebound and the possibility that the relaxation will inflame the pandemic again.
Meanwhile oil prices plunged more than five per cent after data showed that stocks of crude oil hit a record high in the US for the second straight week.
Oil prices had climbed in recent weeks on hopes of increased demand by consumers as economies reopen from coronavirus lockdowns and cuts by producers.
While stocks of petrol fell, renewed lockdowns would crimp demand recovery. “The oil price has tumbled on health concerns, as demand might be hit,” said CMC Markets’ Madden.
London closed down 3.1 per cent, Frankfurt lost 3.4 per cent and Paris shed 2.9 per cent.
AFP
5.37am: Pandemic boosts digital currency moves
The coronavirus crisis is likely to speed up the development of central bank digital currencies, the Bank for International Settlements (BIS) said in an except of its annual report.
Due to physical distancing measures imposed in many countries, contactless payment methods have boomed, said the international financial institution which brings world central banks together.
Meanwhile store shutdowns have led to a boost in e-commerce. While the use of coins and banknotes has decreased, holding cash as a precaution has nonetheless increased in come countries, as was seen during the 2008-2009 financial crisis and the turn of the millennium.
“The COVID-19 crisis, and the attendant rise of electronic payments, are likely to boost CBDC (central bank digital currency) development across the globe,” the BIS said a chapter on central banks and payments in the digital era, released ahead of its full annual report due out on June 30.
Established in Basel in Switzerland in 1930, the BIS is owned by 62 central banks, representing countries accounting for about 95 per cent of global gross domestic product.
AFP
5.35am: WTI oil price tumbles
The price of the main US oil contract tumbled more than five per cent Wednesday after data showed that stocks of crude oil hit a record high for the second straight week.
The price for a barrel of West Texas Intermediate (WTI) to be delivered in August fell by 5.7 per cent to $US38.08 at 1510 GMT, while the main international contract, Brent, shed 5.3 per cent to $US40.34.
Oil prices have climbed in recent weeks on hopes of increased demand by consumers as economies reopen from coronavirus lockdowns and cuts by producers.
AFP
5.30am: US considers new taxes on Europe
The United States is considering levying taxes on an additional $US3.1 billion in European imports amid a dispute over subsidies to plane maker Airbus.
A document released Tuesday from the US Trade Representative (USTR) listed products from France, Germany, Spain or Britain, ranging from olives to decaffeinated coffee, as possibly subject to the new tariffs.
Washington and Brussels have been squabbling for years over government subsidies to Airbus, with US President Donald Trump’s administration imposing $US7.5 billion in punitive tariffs with the authorisation of the World Trade Organisation.
The EU has threatened its own tariffs on Boeing, but in an April letter to USTR Robert Lighthizer, EU Trade Commissioner Phil Hogan said he saw the coronavirus pandemic as an opportunity to defuse the tensions.
AFP
5.22am: Milder growth hit to Australia
The Australian economy is forecast to be one of the world’s best performers through the coronavirus recession, despite fresh warnings of an even more dire global downturn than previously expected.
The International Monetary Fund in its latest world outlook has revealed the pandemic will lead to a deeper-than-expected 4.9 per cent plunge in global economic activity in 2020 — 1.9 percentage points worse than previously forecast.
Australia — alone among advanced economies — will suffer a milder-than-anticipated GDP contraction of 4.5 per cent this year, down from an April prediction of a 6.7 per cent drop.
Australia was one of “few exceptions” where March quarter growth wasn’t worse than expected, the IMF said, as it downgraded economic prospects across the developed world.
5.20am: IMF downgrades outlook for global economy
The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more severe economic damage from the coronavirus than it did just two months ago.
The IMF predicts that the global economy will shrink 4.9pc this year, significantly worse than the 3pc drop it had estimated in its previous report in April. It would be the worst annual contraction since immediately after World War II.
For the United States, the IMF predicts that the nation’s gross domestic product – the value of all goods and services produced in the United States – will plummet 8pc this year, even more than its April estimate of a 5.9pc drop. This, too, would be the worst such annual decline since the US economy demobilised in the aftermath of World War II.
AP
ASX sets record close despite pullback; HMC confirms Healthscope talks
David Di Pilla-led HMC eyes Brookfield-owned hospitals operator. Cochlear falls on trimmed guidance. Dividend disappointment weighs on AMP. GFG Alliance puts NSW coal mine on the block in debt plan. Mirvac soars on return to profit.
ASX steady as miners gain; CBA rises, IAG down
Sigma gains as $300m worth of shares change hands. Alliance Aviation's labour costs growing after first industrial action in two decades. IAG top loser as investors miss buyback. Temple & Webster top gainer. 'Cleaner result' sees ASX Ltd soar.