Shares shrug off Westpac results, geopolitical tension to add 1.4pc

The major banks led an intraday reversal on the market, as Westpac shrugged off a profit slip while Afterpay rocketed up by 24pc.

David Rogers and Melissa Yeo

33 min read

8:46PMMay 04, 2020

A plastic model of the COVID-19 coronavirus at a research lab in Beijing. Picture: AFP

Good news priced in for US stocks: Citi
Westpac defers payout as profit plunges
IAG warns on dividend
Crown mulls shutdown audit options

That’s all from the Trading Day blog for Monday, May 4. The ASX reversed an early loss as much as 1.5pc to notch a gain of 1.4pc with all sectors bar energy in the green, even as US President Donald Trump levelled a new attack on China for a perceived mishandling of the coronavirus crisis.

Earlier today, Westpac deferred its dividend decision as its first half profit dropped by 70pc while the Australian Bureau of Statistics building approval data showed a 4pc slip for March.

US futures are indicating losses to come in the overnight session.

David Swan 8.45pm: Afterpay surges as Tencent buys stake

Afterpay’s shares skyrocketed by as much as 30 per cent on Monday with investors hoping the company’s partnership with Chinese tech giant Tencent will translate to a lucrative push into Asia.

The “buy now, pay later” provider began life as a side project for co-founder Nick Molnar who was running an eBay jewellery store, and will now look to take on China’s $US2 trillion ($3.1 trillion) e-commerce market thanks to a “deep and long-term business partnership” with Tencent, which emerged with a 5 per cent share in Afterpay late last week.

Tencent is one of the world’s largest companies and is the fifth biggest in the world by valuation, with more than a billion people using its services every day. Through its investments it’s also considered the world’s biggest video game company.

“We actively invest in pioneering companies with focus in fintech and upstream content companies which can provide strategic benefits via partnerships and expansion into new markets such as China,” a Tencent spokesman told The Australian.

Perry Williams 8.06pm: Total lights up power market

French energy giant Total has revealed plans to supply electricity to large industrial customers in a major Australian expansion pitting it against Shell and the nation’s big three power retailers.

Total — valued at $135bn and owner of stakes in Australia’s GLNG and Ichthys LNG projects — has applied for a licence to sell electricity from June 1, with a focus on big users rather than household accounts, according to filings lodged with the Australian Energy Regulator.

It marks the latest move by some of the world’s biggest energy names to target the country’s power and renewables industries as part of an investment shift away from their oil and gas strongholds to less polluting and cheaper power sources.

Total is expected to build up its retail clients to help underpin further investments in wholesale renewables and gas-powered generation.

Emily Ritchie 7.45pm: Isolation sparks tourism innovation

Australia’s tourism industry has been one of the hardest hit by the coronavirus pandemic, with many businesses in the throes of “woe and disillusionment” after losing nearly 100 per cent of revenue.

For some, isolation has forced adaptation and sparked innovation in the way they create, sell and market their products in order to make ends meet.

Brisbane’s Riverlife, which typically rents kayaks, has expanded into bicycle hire during COVID-19 isolation; the Australian Reptile Park is broadcasting twice daily live streams of behind the scenes action; and Mogo Wildlife Park on the NSW south coast, which narrowly escaped destruction during this summer’s bushfires, is posting a regular #AskAZookeeper segment on social media.

Rochford Wines, in the Yarra Valley on the outskirts of Melbourne, has transformed from a cellar-door restaurant and concert venue to a grocery store and home delivery service.

7.32pm: Hong Kong downturn ‘worst on record’

Hong Kong’s economy suffered its largest decline on record in the first quarter according to preliminary data, as the coronavirus dealt a blow to a city already crippled by months of political unrest and trade tensions.

Advance gross domestic product data released Monday showed a contraction of 8.9pc in the first quarter. That is the steepest since 1974 and threatens to push Hong Kong into its first-ever back-to-back annual recessions. GDP fell by 2.1pc last year.

The result was worse than the median forecast for a 5.2pc contraction taken from five economists polled by The Wall Street Journal.

On an quarter-on-quarter seasonally adjusted basis, January-to-March GDP fell 5.3pc, also the steepest drop on record, according to the data from Hong Kong’s Census and Statistics Department.

Both export activities and domestic demand are expected to remain under “notable pressure in the near term,” as the pandemic keeps weighing on global economies while U.S.-China trade tensions could bring further uncertainties, a government spokesperson said.

Hong Kong officials last week warned of worse-than-expected economic slump this year. Financial Secretary Paul Chan gave a forecast projecting annual economic decline between 4pc and 7pc in 2020.

Dow Jones Newswires

7.24pm: US futures, FTSE 100 falling

US futures continue to point to a hit to markets in America when they open.

In London, the FTSE 100 is trading 0.43pc lower at 5738.55.

Travel-related stocks are down, with Intercontinental Hotels Group softer by 3pc after Deutsche Bank cut its price target. Rolls-Royce Holdings slipped 5pc after reports claimed the jet-engine maker was planning to cut up to 8000 jobs.

with wires

7.10pm: Chinese consumers slow to rebound

Global brands are hoping China’s gigantic consumer market will help rekindle growth as the world tries to recover from the coronavirus pandemic. They are facing an uphill battle.

Companies from Lego to Domino’s Pizza say they are seeing a solid bounceback in China, at least compared with a month or two ago. But a full return to normal, much less growth, is proving harder because so many people have lost jobs and income, or want to save more.

“It is time to be more careful with spending,” said Wu Yun, a 40-year-old executive at a private Chinese conglomerate in Shanghai. Though his own income has not been affected by the crisis, Mr Wu said he was reining in spending, cancelling foreign holidays and planning to buy a new property.

The Wall Street Journal

Glenda Korporall 6.15pm: Sage of Omaha doesn’t have answers

It was one of those critical moments in Warren Buffett’s 4½-hour video show on the weekend, when the Sage of Omaha revealed what he really thought.

And it wasn’t optimistic.

Despite the rah rah about never betting against America (a standard Buffett line that can be heard at almost every annual meeting), it was clear that the 89-year-old billionaire was painfully aware that he and everyone else simply do not know what is going to happen with the unprecedented coronavirus pandemic that is sweeping the world.

After an excruciatingly long, rambling introduction of almost two hours, where the master salesman went from the Louisiana Purchase of 1803 to the US Civil War of 1861 to 1865 to the stockmarket crash of 1929 and the fact that it took until 1951 to get back to its highs, Buffett’s way of talking up the strengths of America, his real thoughts were more evident in the subsequent question and answer period where he was (thankfully for Berkshire Hathaway shareholders) much sharper.

James Kirby, Wealth editor 6.04pm: How to use your early super

The government’s early release super scheme is being examined by all age groups as a potential “superannuation strategy” where funds from the scheme can be used for a range of tax advantages along with funding home buying.

As the government reports that $1.3bn has been withdrawn from super in the first week of the program’s operation, a new survey by AMP has shown the controversial measure was the No.1 most asked about topic across its financial planning network over March and April.

The wide adoption of the scheme - more than a million people have already registered - is set to trigger much broader use than younger unemployed workers who have been at the top of the queue.

Advisers say experienced investors, business owners and home buyers are examining the legitimate possibilities unleashed in the scheme which allows $20,000 to be taken from super in the next two years. ($10,000 before June 30, $10,000 from July 1).

“People are using the money to achieve investment targets - for anyone trying to buy a home it can make sense. Many couples can afford loan repayments they just can’t get a home deposit together. If someone used their super and they complete a deposit then they are keeping the money in a tax protected environment - it’s a rare opportunity,” says financial adviser James Gerrard.

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4.55pm: Afterpay surge lifts tech 5pc

The standout in trade was Afterpay, surging by as much as 37pc to put its shares less than $2 off their February records, after Chinese tech giant Tencent bought a 5 per cent stake in the company.

By the close the stock was up by $23.80 to support the tech sector to gains of 5 per cent.

Across the rest of the high growth stocks, WiseTech lifted by 4.7 per cent to $18.66, Altium added 2.1 per cent to $33.72 and Xero gained by 2 per cent to $79.04.

Here’s the biggest movers at the close:

4.51pm: Trade war risk back on the table

IG Markets analyst Kyle Rodda said the prospect of a trade war was now back on the list of concerns for market participants.

“The rhetoric from the Trump administration has gone quickly from innuendo, to accusations, and now to outright threats. The possibility of tit-for-tat tariffs and sanctions appears as a non-negligible risk for market participants, with markets being forced to factor in the real possibility of higher international trade-barriers,” he wrote.

“If fundamentals weren’t feeble enough before, then the potential headwinds posed to the global economy from another drop in international trade will add weight against the notion global growth can launch a “V-shaped” recovery at the back of the COVID-19 crisis.”

4.14pm: Shares rebound by 1.4pc

Buyers returned to the market on Monday after Friday’s brutal $83bn sell off, helping the ASX to rebound by 1.4 per cent.

The shift in tone was despite rising geopolitical risk, as US President Trump warned of punishment tariffs against China for a perceived lack of action in response to the coronavirus crisis.

The rhetoric pulled the ASX200 to lows of 5169.6 early, but by the close, the index had held on to a gain of 74 points or 1.41 per cent to 5319.8.

Meanwhile, the All Ords lifted by 65 points or 1.21 per cent to 5389.5.

3.25pm: What EPS rise needed for rebound?

How high would ASX 200 earnings per share need to be on a 12 month forward basis to get the index back up to 7000 points?

Based on a number of PE ratio assumptions JP Morgan’s head of research Jason Steed has backsolved for the required change in the consensus EPS estimate.

He finds that assuming a 2-year average 12-month forward PE ratio of 15.9 times, EPS would need to rebound 47 per cent to $440.40, which might be a stretch this year or next.

Based on a historic record high 12-month forward PE multiple of 19.1 times, EPS would need to rise 25 per cent, which might still be hard to achieve within 12 months at least.

Assuming a 10- year average PE multiple of 14.5 times, then EPS would need to rise by an impossibly-large 62 per cent.

Of course record low rates have widened equity risk premiums, such that higher than average PE multiples are warranted.

And unprecedented quantitative easing by the Fed in particular may also warrant higher-than-average PE multiples.

3.09pm: Perseus, Megaport in top 200 contention

Perseus Mining and Megaport are top contenders to join the benchmark ASX200 at its next rebalance in June, after postponement of the March reshuffle due to volatility.

Morgan Stanley notes that Perseus Mining is the highest ranked stock on a 6-month average float-adjusted market capitalisation, but after a surge in recent weeks, Mesoblast too could be in contention for the coveted spots.

As for those likely to be booted from the index, Morgan Stanley tips Pilbara Minerals, Estia Health and Hub24, among others.

“We estimate passive demand from the additions to be approximately $327m value to trade,

whilst the exclusions may see up to $158m in outflow for net value to trade of $194m for the ins/outs.”

In the top 20, the broker tips Aristocrat to replace Amcor and A2 Milk to replace AMP in the top 50.

2.56pm: Salmat declares dividend after sales

As dozens of companies hit the pause button or delay dividends, marketing company Salmat declares a special fully franked dividend of 11 cents per share payable on May 2.

This represents a total payment of $22m and follows the sale of Salmat’s two main operating divisions.

Salmat sold its marketing solutions business to IVE group in January for $25m its MicroSourcing unit in February for $100m.

Shares in Salmat last traded at 80.5c, up 4.5 per cent.

2.23pm: Westpac can take higher provisions: S&P

Westpac still has sizeable headroom to absorb further credit losses stemming from the coronavirus downturn, according to ratings agency S&P.

After the bank this morning handed down its interim results, S&P notes its strong capital base, decision to defer the interim dividend and the strength of its banking franchise keep it in good stead to absorb higher loan loss provisions.

“We forecast that a contracting economy, weak business and consumer confidence, falling property prices, and high unemployment due to the COVID-19 outbreak and containment measures will further increase Westpac’s, and other Australian banks’, credit losses in the next year or so, to about 85 basis points (bps) of their gross loans and advances,” S&P says.

The agency adds that the full extent of the damage will take some time to materialise, likely not til the moratorium on debt servicing ends and the government reduces fiscal support.

WBC last traded up 3.3pc to $15.84.

2.06pm: Buyers return as ASX adds 1pc

Buyers were scarce on Friday when the ASX200 tumbled 5pc in its worst day in 5 weeks but today it’s back to the extreme “buy-on” dips mentality that prevailed in the later part of March and April.

It’s the sort of market you have when the Fed is injecting buying about $US26bn a day into global markets via asset purchases.

The S&P/ASX 200 is up 1pc at 5301.2 midafternoon after falling 1.5pc in early trading.

It comes as S&P 500 futures recover to -0.6pc after falling 1.7pc this morning.

1.57pm: Morgan Stanley cautious on ASX

Morgan Stanley Australia equity strategist Chris Nicol is cautious about the local share market after it topped the league tables in US dollar terms with a 15.3pc rise last month.

“After closing out a very strong rebound in the month of April, the focus now moves to sustainability of the rally, multiple and also earnings and returns,” he says.

“We still see evolving data being difficult to digest particularly as earnings still remain well above where we see the ultimate base. On the earnings front, consensus expectations continue to adjust lower.”

While consensus FY20 EPS growth is now at -10pc, his top down models suggest that the base for FY20 will be in the order of negative 20-30 per cent and valuations continue to stretch with the 12-month forward market P/E ratio at 17.2 times, with Industrials ex-Financials at 25.6 times.

“As such we treat the strength in April with some caution while developments remain fluid and in many cases uncertain,” Mr Nicol says.

The S&P/ASX 200 is up 0.8pc at 5289 after a surprising intraday bounce from 5169.6 to 5297.5.

1.42pm: Flight Centre slips as sales dive

Flight Centre is trading lower by 6pc after its latest update, on a warning its transaction volumes for April were about five to 10 per cent of normal levels.

The travel agent group says its continuing to win new corporate accounts and generating some sales despite the heavy restrictions.

On Sunday, Flight Centre also announced the waiver of cancellation fees for refund requests from March 13 onwards, a move RBC describes as “the right thing”.

“While a negative from a near-term cash perspective, if FLT wish to participate in the eventual recovery in leisure travel they are going to need returning customers and confidence in the brand,” analyst Tim Piper writes in a note to clients.

He adds that the company’s recent raise gives it an estimated 14 month runway under current conditions until liquidity covenants are reached.

“Today’s announcement of OPEX tracking towards expectations and one-off costs to be lower than expected provides a positive cash flow offset against the change of cancellation fee policy.”

FLT last traded down 5.6pc at $9.49.

Flight Centre has posted a plunge in sales amid coronavirus restrictions. Picture: Britta Campion / The Australian.

1.24pm: Good news priced in for US stocks: Citi

Citi’s chief US equities strategist Tobias Levkovich says he suspects that the good news for equities from an “enormous policy response” to an “extraordinary health crisis” is now priced in.

Massive firepower from fiscal programs and extreme monetary stimulus, better news on health care, and talk of reopening the economy have “diminished the economic sting for now, one cannot ignore 30 million lost jobs in six weeks either”.

But in his view the intermediate effects will be “challenging” and it is “hard to imagine how things get back to normal quickly given appropriate concerns about social distancing continuing for a period of time as the world economies reopen”.

Moreover, vaccines or herd immunity arguably are “needed to allow for a real transition to a pre-COVID-19 world.”

He notes that the sharemarket normally bottoms before the unemployment rate peaks, “so the rebound in share prices is appropriate, but it seems to have been too much”.

“Unfortunately, as many as 20 million of the jobs lost may take a significant period of time to reverse which has important economic ramifications,” Mr Levkovich says.

S&P 500 valuations are “no longer as supportive anymore” and while the Fed’s willingness to take in junk bonds as collateral has helped the US equity market by narrowing high yield credit spreads “that now is behind us, unless one wants to believe that the Chair Powell will call for the central bank to buy stocks, which we consider a bridge too far for policy makers”.

People receive protective masks and bandannas as they are handed out in New York City as face coverings become mandatory. Picture: Spencer Platt/Getty Images/AFP.

1.19pm: Large building approvals drop looms

While the slip in building approvals for March was less than anticipated, NAB warns a larger fall looms as the pandemic-driven recession stalls the housing market recovery.

The bank had tipped the latest read to fall by 23pc – but it came in at a much more mild 4pc.

Still, economist Kaixin Owyong writes that a plunge is coming, similar to partial indicators from the residential property market.

“New home sales fell by more than 20pc in March, while in the existing housing market listings have collapsed, rents are falling and house price growth has slowed,” she says.

“Going forward, NAB forecasts price falls of 9pc this year and another 4pc next year, where residential construction activity is forecast to fall 13pc in 2020.

“Low interest rates should underpin an eventual recovery in activity, but the closure of Australia’s border means demand from migration will be weak for an extended period.”

1.02pm: Shares extend gains as banks lift

Shares are pushing further into positive territory at lunch, thanks to a reversal in the major banks.

At 1pm, the ASX200 is higher by 29 points or 0.6 per cent to 5275.0, after hitting lows of 5169.6 earlier in the session.

The big four banks have been the key factors in the market turnaround – Westpac now up by 2.7pc as Commonwealth, NAB and ANZ all put on between 1.1pc and 1.3pc.

Commodity-linked stocks are the key laggards after US President Trump threatened the “ultimate” punishment against China for its mishandling of the coronavirus crisis.

Afterpay continues to surge after Tencent joined its register – the stock is higher by 23pc as the best performing stock in the top 200.

Check out the biggest movers here:

12.35pm: Oil starts week on back foot

Oil prices fell on Monday after strong gains last week, with continued concerns about oversupply and storage capacity due to a coronavirus-triggered demand shock overshadowing massive output cuts.

US benchmark West Texas Intermediate fell about 8 per cent to trade at $US18.19 a barrel.

International benchmark Brent crude fell 3 per cent to change hands at $US25.56 per barrel.

Oil markets have been in turmoil for weeks as the virus strangles demand due to business closures and travel restrictions, with US crude at one point falling into negative territory for the first time.

AFP

12.09pm: ASX turns positive

Australia’s sharemarket has turned positive after a sharp intraday fall.

The S&P/ASX 200 rose 0.6pc to 5278.1 after falling 1.4pc to an 8-day low of 5169.6.

This is more like the strong support on dips that characterised the 25pc bounce from the 23 March but was absent when the index fell 5pc on Friday.

It came as S&P 500 futures pared a 1.5pc intraday fall to just 1pc and the Australian dollar went from -0.7 to -0.4pc intraday, yet WTI crude oil futures remained down 7pc.

Patrick Commins 12.04pm: Virus hit to linger for two more months

More than 40 per cent of businesses have said the government’s JobKeeper program influenced their decision to keep on staff through the COVID-19 crisis, even as separate data showed job advertisements collapsed by 50 per cent in April.

The third of the special Australian Bureau of Statistics’ business surveys, conducted over the week commencing April 22, also revealed around three in four businesses said they expected the blow to turnover from the pandemic to last for the next two months.

The ABS report showed that three in five companies had or intended to enrol in the $1500 a fortnight wage subsidy program. Of these, close to three-quarters expected more than half of their employees to be eligible for the scheme.

Separately, ANZ revealed there was a 53 per cent plunge in job ads in April, almost five times the previous record monthly fall of 11 per cent.

Matt Lanigan’s Lucky Penny cafe has kept staff amid the crisis, with notable changes to service to adhere with coronavirus restrictions. Picture: Mark Stewart

11.55am: Trend home approvals slip 4pc

Home approvals fell by 4pc in March as apartment sales tumbled, even before any real hit from coronavirus.

In the latest figures from the ABS, seasonally adjusted dwelling approvals were pulled lower thanks an 8.2pc drop in private dwellings excluding houses. Private sector houses also fell by 1.2pc.

The value of total building approved rose 1.3 per cent in March, in trend terms, and has now risen for the last four months. The value of residential building rose 0.5 per cent, while non-residential building increased 2.3 per cent.

Damon Kitney 11.44am: Crown mulls shutdown audit options

The James Packer-backed Crown Resorts believes the dire impact of the coronavirus pandemic on its operations should be treated as a one-off event, setting the scene for a large number of companies seeking similar treatment from auditors and regulators in the lead-up to the end of the financial year.

Crown will discuss with its auditors the treatment of income earned following the shutdown of its operations in late March due to the coronavirus pandemic after making a bottom line profit of around $210 million for the first nine months of the fiscal year.

Crown said on Monday it made normalised (which removes the volatility of high-roller win rates) EBITDA of around $500m and a normalised net profit of approximately $210m from July 1, 2019 to March 23, 2020, the day its ceased gaming and other non-essential services at its Melbourne and Perth properties.

It also said it would discuss with its auditors the treatment of income earned between March 23 and June 30 following the shutdown.

CWN last down 1.4pc to $9.30.

Crown argues that the impact of coronavirus should be treated as a one-off event. Picture: AAP Image/Michael Dodge.

11.12am: Decmil confirms one firm village offer

Decmil Group has confirmed reports its in talks with three parties for the sale of its Homeground Gladstone Accommodation Village, adding that it had received one firm offer to date.

It comes after The Australian’s DataRoom reported that there were three strong offers in the works.

“Decmil confirms that there is a sale process underway for the Homeground Gladstone Village and it is currently negotiating with three parties and has received one firm offer to date,” the company said in a filing to the market.

“Decmil will update the market when it reaches a decision with respect to the negotiations.”

The workforce accommodation village was last valued at $85.4m in the company’s books and is up for sale through Resolute Advisory as Decmil remains in strife over contracts.

DCG shares last traded down 2.4pc to 20.5c.

10.46am: Trump lifts threat of China tariffs

Shares are falling further as US President Trump ups his anti-China rhetoric.

Bloomberg headlines have Trump saying tariffs would be “ultimate punishment” on China and that there’s a “strong report coming on how the virus developed in China”.

“I think they made a horrible mistake and they didn’t want to admit it,” Trump says according to Bloomberg.

Australia’s S&P/ASX 200 fell 1.4pc and US S&P 500 futures fell 1.5pc in thin trading with Japan and China closed for holidays.

Strangely, USD-CNH hasn’t extended its early rise and AUD-USD hasn’t extended its early fall on this news.

"Can you please explain to us why you didn't act sooner to prepare this country for this pandemic?"

Trump: "On January 23rd, I was told that there could be a virus coming in but it was of no real import... Shortly thereafter, I closed down the country to China." pic.twitter.com/0ISu3c9fWO
— Daily Caller (@DailyCaller) May 3, 2020

10.39am: Afterpay soars as Tencent joins register

Afterpay shares jumped 37pc to a 10-week high of $39.59 after Tencent disclosed late Friday that it was a substantial holder of Afterpay shares after buying a 5pc stake worth $300m.

However, there was obviously a lot of selling on the rally as Afterpay is now up 19pc at $34.70.

“We expect Afterpay’s multiple to expand on the back of this announcement given that the investment by Tencent further validates Afterpay’s business model and value proposition to both consumers and merchants and the potential exists to enter China by leveraging a domestic partner,” Citi’s Siraj Ahmed said.

Morgan Stanley’s Andrew Stadnik said Tencent could help Afterpay enter Asian markets and also help it diversify further from its initial focus on fashion and beauty retail segments, and Tencent’s digital expertise could help Afterpay to improve its tech platform.

10.33am: Shares fall to 7-day low

Jittery global markets weighed on Australian shares with the S&P/ASX 200 falling 0.7pc to a 7-day day low of 5206.9 in early trading.

The Energy sector is leading broadbased falls as WTI crude falls almost 8pc to $18.25 a barrel, while S&P 500 futures trade down 1.4pc as the US blamed China for the virus.

Woodside, Origin and Oil Search are falling more than 3pc, while Rio Tinto is lower by 1.8pc.

Choppy trade in Westpac saw the bank edge briefly into positive trade but settle to a loss of 1.5pc after deferring its interim dividend.

Afterpay was the biggest points contributor after surging as much as 37pc after Tencent revealed it took a 5pc stake.

Gold miners were also outperforming with Newcrest up 4.7pc and Qube rose 10pc after completing its capital raising.

10.17am: Westpac outperforms bank peers

The local market has slipped by 0.5 per cent early, as tech strength offsets a dip in energy stocks.

At the open, the ASX200 is lower by 24 points or 0.5 per cent to 5222.1.

Westpac shares are outperforming the rest of the majors this morning, only 0.1pc lower despite the bank deferring its dividend this morning and posting a 70pc profit slump.

Bridget Carter 10.15am: Marley Spoon raising $16.6m

DataRoom | Meal kit company Marley Spoon is capitalising on its booming share price, raising $16.6m through a placement, overseen by Canaccord.

Shares are being sold at $1.05 each to fund its growth strategy and for general working capital.

Shares last traded at $1.08 and the raise is a 2.8 per cent discount to the company’s last closing price.

It comes after the company’s shares have soared since the onset of COVID-19 movement restrictions. In early March, Marley Spoon’s share price was 26c.

The company listed in 2018 with a market value of almost $200m, where shares were sold at $1.42 each. At that time, the company was yet to be profitable.

Marley Spoon’s owners at that time included co-founders Fabiean Siegel and they raised about $70m from the public market.

Eli Greenblat 10.02am: Adairs online sales boom

Home furnishings retailer Adairs says home isolation has proved a boon for online shopping with the company providing a trading update Monday morning that revealed its online sales rocketed 221 per cent since its stores closed last month.

Although total sales for the homeware and bedding retailer are down 37 per cent for this period against last year, its online platform is doing a brisk trade with its recently purchased online retail chain Mocka posting online sales growth of 151 per cent on last year.

Adairs said its stores will commence opening on May 7 with all its stores expected to be open by the end of June while negotiations with its landlords over rent are continuing.

9.40am: Risk-off sentiment to dent $A, ASX

Risk aversion looks set to dominate global markets Monday giving downside risk for the Australian dollar and shares.

AUD/USD tumbled 0.6pc to a 5-day low of 0.6380 in early trading as S&P 500 futures fell as much as 1.4pc and WTI crude oil futures fell 6pc.

Thus while the S&P/ASX 200 was expected to open flat based on Friday night futures trading, it may now fall more than 1pc based on the moves in early Asian trading.

The early sell-off came after the US ramped up anti-China rhetoric over the weekend, with Secretary of State Mike Pompeo claiming there’s “enormous evidence” the coronavirus started in a Chinese lab. That followed a similar claim by US President Trump on Friday and his warning that he could impose $1tn of tariffs as retribution.

China is on holidays today and tomorrow and Japan is closed until Thursday so a lack of liquidity may exacerbate market moves.

On the charts, a double-top pattern may be forming after the index fell 5pc on Friday after approaching its April 17 peak. That leaves the immediate focus on whether or not it breaks support from the April 22 trough at 5100.7.

The $A may test equivalent support at 0.6254 after shying off its 100-DMA at 0.6557 last week.

9.37am: What’s on the broker radar?

GrainCorp raised to Buy – Morningstar
Growthpoint cut to Hold – Morningstar
JB Hi-Fi cut to Neutral – Macquarie
NextDC raised to Buy – Jefferies
NextDC target price raised 17pc to $10.50 – Morgan Stanley
Orica raised to Outperform – Macquarie
Regis Resources raised to Hold – Morningstar
Reliance Worldwide target price cut 26pc to $2.60 – Morgans
ResMed cut to Underweight – JP Morgan
Tyro Payments started at Underperform – Macquarie
Woolworths Group raised to Buy – Shaw and Partners
Worley target price cut 44pc to $8.4 – Morgan Stanley

9.28am: Transurban’s weekday traffic drops 42pc

Toll road operator Transurban says the coronavirus pandemic may change the way people travel in the long-term as it Monday reported a 42pc drop in workday traffic for April from a year earlier.

The company said traffic across its operations in Australia and the US began to decline in early March. It began to pick up in the second half of April, but was still 44pc down in the week that started April 26, the Australia-listed firm said.

The decline was most significant in North America, which showed a 61pc drop from the year before for the April 26 week.

April weekend and public holiday travel across the group was 67pc down on April 2019, Transurban said.

The company said it had already been considering potential long-term transport changes, including from mobility services and autonomous vehicles.

Dow Jones Newswires

Gerard Cockburn 9.18am: Tower Insurance appoints new chief

Tower Insurance has appointed Blair Turnbull as its new chief executive, who will attempt to modernise and digitise the New Zealand based company.

Mr Turnbull will return to his native NZ to join the insurer on August 1, after he ends his role as the managing director of Aviva Group’s UK Digital, UK and International divisions, based in London.

He replaces Australian Richard Harding, who took up the position in August 2015.

Tower chairman Michael Stiassny said Mr Turnbull has a proven track record in large scale digital and data innovation within the insurance sector.

“The Board is confident that Blair’s considerable expertise, together with his team-centric approach to leadership, are the skills required to successfully complete Tower’s transformation and to drive profitable growth and performance,” Mr Stiassny said.

Bridget Carter 9.16am: Another Charter Hall fund to raise

DataRoom | Charter Hall Social Infrastructure REIT is embarking on a $100m placement with help from JPMorgan.

It also plans to secure up to $15m for a unit purchase plan, which will not be underwritten.

Shares are being sold at $2.20 each, a 7.6 per cent discount to their last closing price of $2.38 on May 1.

The funds will be used to strengthen the company’s balance sheet amid the COVID-19 pandemic.

More to come

Eli Greenblat 9.10am: Marley Spoon halted for equity raise

Meal delivery service Marley Spoon has placed its shares in a trading halt pending a possible capital raising.

The company has experienced a leap in sales due to home isolation caused by the coronavirus pandemic and last month said it was showing accelerating growth of more than 40 per cent year-on-year compared to Q1 2019, with only the last two weeks of March showing the benefits of the recent surge in demand.

Last year it struck an equity deal with Woolworths where the supermarket invested $30 million for an initial 9.1 per cent stake.

Marley Spoon demand has jumped during the coronavirus lockdown. Picture: Adam Taylor.

8.59am: Inghams growth to stall amid virus hit

Poultry producer Inghams says it had been on track for earnings growth in the second half, but restrictions on supply chains and shutdowns in New Zealand and Australia have jolted demand for its products.

In a filing this morning, Inghams said it had experienced a sales surge in March and early April, similar to findings from the major supermarket chains last week, but that sales were normalising and trade to hospitality and tourism names had been significantly reduced.

The group said it was previously on track for second half earnings to exceed the first half, but “changes in volume and channel mix across our business today make it premature to draw any conclusions as to the trading results of our final 9 weeks of FY20”.

As such, Inghams has implemented a hiring freeze to cut costs, alongside management of annual leave balances, reducing discretionary spend and targeted reductions and deferral of capital expenditure.

It said while its hatchery projects remain on track, they will “inevitably” be delayed if international travel restrictions remain.

8.40am: IAG warns on dividend

IAG says year-to-date investment income outcomes and its forecast full year insurance profit means there is “presently limited scope” to pay a final dividend in September 2020.

It said in an update it will determine the final dividend in August 2020, and said it has retained its existing full-year guidance.

IAG said at the end of April, investment income on shareholders’ funds amounted to a financial year-to-date loss of approximately $280 million pre-tax, “reflecting the severe corrections witnessed in the second half of the financial year in equity and credit markets”.

“IAG’s weighting towards growth assets (equities and alternative asset classes) in its shareholders’ funds portfolio has materially reduced from the 49pc allocation at 31 December 2019, to under 30pc at 30 April 2020.”

IAG said for the nine months to March 31, its underlying business performance had remained strong. But its performance in the next three months was subject to uncertainty due to the fallout from COVID-19.

“Subject to the impact of the uncertainties outlined above, IAG has retained its existing FY20 market guidance, of ‘low single digit’ gross written premium growth and a reported insurance margin of 12.5-14.5pc.”

8.20am: Flight Centre ‘progress’ on costs

Flight Centre Travel Group says it is making “significant progress” in reducing its global cost base towards a $65 million per month target by the end of July 2020.

The travel company has also decided to waive cancellation fees when airlines have axed services because of the coronavirus, following pressure over the issue.

Flight Centre says it expects the cost reductions will be implemented with less than the $210m in one-off costs that it originally anticipated.

“While heavy travel restrictions remain in place globally, the company also continues to generate some sales, with TTV tracking at approximately 5-10pc of normal levels in April,” it told the ASX.

“There has been some ongoing activity in most countries and we are seeing a slight uptick in bookings in countries like China as travel and trading restrictions ease,” added managing director Graham Turner.

“Importantly for the future, we continue to win and implement new corporate accounts that will help drive TTV growth when conditions recover and normalise.”

Flight Centre managing director Graham Turner. Picture: Liam Kidston.

Flight Centre on Saturday updated its coronavirus refund and cancellation fee policy following complaints by customers. The changes include a waiver of the usual cancellation fees when third party suppliers have cancelled their services because of the virus, and an additional credit of up to $200 per person for customers who elect to leave funds on file for future bookings.

However Flight Centre said it expected a net positive cash impact from several recent developments, including from the likely sale of its Melbourne head office and additional

government support initiatives.

Joyce Moullakis 7.55am: Westpac defers payout, profit plunges

Westpac has become the second major bank to defer a decision on dividends, as cash profit plummeted 70 per cent amid the COVID-19 economic turmoil and it labelled the result the “most difficult” in many years.

The bank posted a 70 per cent decline in interim cash net profit to $993m for the six months ended March 31, compared to the same period a year earlier, it said in an ASX statement on Monday.

Last week, National Australia Bank slashed its dividend to 30c per share from 83c six months earlier, while ANZ didn’t declare a dividend and deferred a decision until August.

A year ago, Westpac declared an interim dividend of 94c per share, before cutting that to 80c for its second half.

Chief executive Peter King said it was the “most difficult” result Westpac had delivered in many years, as it prepared for a sharp economic contraction linked to the pandemic.

He also announced a sweeping review of Westpac’s superannuation, platforms and insurance businesses.

Westpac’s statutory profit fell 62 per cent to $1.19bn for the half. Analysts had expected Westpac to report an interim profit of about $1.38bn.

In the past four weeks, the bank outlined impairment and other charges of $2.23bn pre-tax on its earnings, including a $1.6bn hit related to expected COVID-19 loan losses. An additional $1.43bn in after-tax writedowns and provisions was also disclosed, including the $900m it put aside for an anticipated financial crimes penalty.

7.30am: Oil firms

Oil producers should start the week buoyant after two industry benchmarks posted their first weekly gains in four weeks as OPEC and its allies cut output to tackle a supply glut from the coronavirus crisis.

In April, US crude fell to an all-time low and traded negative for the first time on record while Brent hit a near-21-year low as the pandemic eroded demand and OPEC and other producers ramped up production before reaching the new supply deal that kicked in on Friday.

Brent futures for July eased 4 cents, or 0.2 per cent, to settle at $US26.44 per barrel. The June contract expired on Thursday at $US25.27.

US West Texas Intermediate crude (WTI) ended the session 94 cents, or 5 per cent higher, at $US19.78 after climbing above $US20 earlier in the session. After three consecutive weeks of losses, Brent crude notched a gain of about 23 per cent while WTI increased about 17 per cent.

Reuters

5.45am: ASX set to dip at open

The Australian share market is expected to dip slightly when trade resumes for the week, but a significant sell-off which saw prices tumble on Friday is unlikely to be repeated.

The futures market suggests the benchmark S&P/ASX200 will fall by a modest seven points when trade opens on Monday.

That comes after the Australian market suffered its worst day in five weeks on Friday, with heavy losses across the board.

The S&P/ASX200 benchmark index finished Friday down 276.5 points, or 5.01 per cent, at 5,245.9 points, while the All Ordinaries index closed down 272.7 points, or 4.87 per cent, at 5,325 points.

International markets also closed weaker on Friday, with Wall Street selling off sharply after US President Donald Trump revived a threat of new tariffs against China in response to the COVID-19 pandemic.

All three major US stock averages closed down – well over 2.0 per cent – and for the week they all lost ground.

CommSec chief economist Craig James says the Australian sell-off isn’t surprising given the market experienced its best monthly gain in more than 30 years in April.

“It’s to be expected that you would see some profit taking come in after such a huge rebound,” he said.

“I think we’ve got that out of our system.”

Investors are now turning their focus to countries which are reopening after lockdowns and trying to track how successful they are, while keeping their eyes peeled for progress on treatments and vaccines.

But they will also have plenty of economic data and insights to sink their teeth into this week, with the Reserve Bank board holding its monthly meeting on Tuesday.

Figures on job advertisements, building approvals and inflation are set to be released on Monday and weekly payroll data is coming on Tuesday. The latest retail trade figures will also be released on Wednesday, with international trade figures the following day.

Mr James said the March readings for both the retail and international trade metrics were “quite impressive”, suggesting the Australian economy may have held up OK in the March quarter.

“Certainly we’re going to see a very big decline in the Australian economy in the June quarter, the quarter we’re currently in,” he said.

At 7am (AEST) the Australian dollar was buying US64.13 cents, down from US64.60 cents at Friday’s close.

The price of gold is $US1685.1.

AAP

5.35am: Pompeo blames China lab

US Secretary of State Mike Pompeo has continued to propagate the theory that coronavirus emerged from the Wuhan Institute of Virology, even going as far to contradict the nation’s intelligence community in saying the virus may have been man made.

Mr Pompeo told ABC’s This Week on Sunday that “there is a significant amount of evidence that this came from that laboratory in Wuhan.”

Last week the Office for the Director of National Intelligence released a rare statement saying there was no evidence to support the idea that the COVID-19 strain was grown or modified – but did not rule out the virus escaping from a scientific facility like the Institute of Virology, which is known to study coronaviruses.

However, Mr Pompeo went on to contradict this statement, saying: “The best experts so far seem to think it was man-made. I have no reason to disbelieve that at this point.”

When challenged by the interviewer who mentioned the Intelligence statement, Mr Pompeo backtracked.

“I’ve seen what the intelligence community has said. I have no reason to believe that they’ve got it wrong,” he said.

The theory that COVID-19 was made in a laboratory is often supported by supporters of US President Donald Trump and is a political wedge issue in North America.

5.30am: Lufthansa hopeful on aid deal

Europe’s biggest airline group Lufthansa said it was close to a deal with the German government on state aid to ease the impact of the coronavirus crisis.

The group, which says it is bleeding cash, had appeared to be stalled in its bid for up to 10 billion euros ($US11 billion) in aid, according to a report in the weekly Der Spiegel.

But in a note from Lufthansa directors to staff seen by AFP, the company said it has held “intense and constructive exchanges” with the German government on the financial help.

“In our view these discussions could be concluded in the near future,” it said. “Support from the German state constitutes an essential step towards ensuring our future,” it said, as Europe begins to ease measures taken to stem the spread of COVID-19.

Like other airlines worldwide, Lufthansa and its subsidiaries that include Swiss and Austrian Airlines have been essentially grounded and face an uncertain future once their operations are fully up and running again.

Lufthansa said its group sales in March fell by almost 50 per cent or 1.4 billion euros from the same month a year earlier.

AFP

5.25am: Rolls-Royce jobs at risk

Thousands of jobs could be at risk at British aircraft engine manufacturer Rolls-Royce, which on Sunday said it was in talks with unions about the impact of the coronavirus outbreak on operations.

As many as 8000 jobs could be affected, according to one person familiar with the matter, as the firm grappled with what it said was the “unprecedented” fallout from the global pandemic.

“We have taken swift action to increase our liquidity, dramatically reducing our spending in 2020, and strengthen our resilience in these exceptionally challenging times,” a spokesman said.

“But we will need to take further action,” he added.

The company, which has 50,000 staff in 50 countries, including some 24,000 in the UK, is working with employee and union representatives.

Further details on job losses would be given to staff before the end of the month, the spokesman said.

A Rolls-Royce Trent 1000 aircraft engine on display in London. Picture: Bloomberg

AFP

5.20am: Wall St recap

Wall Street stocks tumbled Friday following disappointing results from Amazon, Exxon Mobil and other companies amid worries of increased tensions between China and the United States over blame for the coronavirus.

The Dow Jones Industrial Average dropped 2.6 per cent, or more than 620 points, at 23,723.69.

The broadbased S&P 500 shed 2.8 per cent to 2,830.71, while the tech-rich Nasdaq Composite Index dropped 3.2 per cent to 8,604.95.

The losses marked an ugly start to a new month after major indices scored their biggest monthly gains in decades in April.

Amazon dived 7.6 per cent after the company cautioned that earnings in the second quarter would be entirely wiped out by expenses related to COVID-19 as it works to keep up with surging demand at a time when many brick-and-mortar stores are closed.

Exxon Mobil was another big loser, shedding 7.1 per cent as it reported a $US610 million loss in the first quarter, its first loss in decades. The oil giant faced sceptical questions from analysts on its rising debt levels and continued support for a generous dividend.

Analysts also pointed to comments from US President Donald Trump claiming that the coronavirus originated in a Chinese lab.

Trump threatened tariffs on Beijing, escalating a blame game between the two biggest economies and reviving investors’ trade war worries.

Trump “clearly wants to make China bashing a central platform for his re-election campaign,” said LBBW’s Karl Haeling.

“Let’s hope he just talks but doesn’t really do anything” significant, he said. Friday’s session punished several travel-oriented companies that clawed back some of their losses in April after devastating drops in March. These included American Airlines, down 11.4 per cent, Marriott International, down 6.8 per cent, and Boeing, down 5.5 per cent.

Tesla also plunged, losing 10.3 per cent after Chief Executive Elon Musk said on Twitter that shares were overvalued.

AFP