Trading Day: Stocks jump on dole boost
Australia’s sharemarket rose strongly as the government boosted the dole and US futures jumped. Turnbull to chair Fortescue Future Industries. BoQ led gains, travel stocks surged. Afterpay down as bond yields spike.
That's all from the Trading Day blog for Tuesday, February 23. Australia’s sharemarket rose strongly as the government boosted the dole and US futures jumped. Wall Street had ended mostly lower, as rising bond yields weighed on big technology stocks. The Dow added less than 0.1 per cent but the S&P 500 slipped 0.8 per cent and the Nasdaq shed 2.5 per cent. Locally, as earnings season continues, results have come from Oil Search, Spark Infrastructure, G8, Alumina, APA Group and Worley, among others.
6.21pm:Seven West Media and Facebook set up new partnership
Seven West Media has signed a Letter of Intent to provide news content to Facebook.
The LOI is subject to signing a long-form agreement between the two companies, expected to be executed over the following 60 days. Seven West Media will provide more details following the execution of the agreement.
Seven West Media Chairman Kerry Stokes AC said: “The establishment of this new partnership with Facebook is a significant move for our business and reflects the value of our original news content across our successful metropolitan and regional broadcast, digital and print properties.
“On 15 February we announced a LOU for a partnership with Google, to provide news content to the Google Showcase product.
“Together, the two announcements are a strong recognition of the quality and credibility of our leading news brands and entertainment, and will enable us to continue to build our digital platform,” he said.
“These partnerships would not have been possible without the leadership and vision of Prime Minister Scott Morrison, the Chair of the Australian Competition and Consumer Commission, Rod Sims, Treasurer Josh Frydenberg and Communications Minister Paul Fletcher, and we thank them.”
6.07pm:Stanwell looking for renewable energy projects
Stanwell is casting the net nationwide for expressions of interest from renewable energy projects looking to play a key role in Queensland’s transition to a lower carbon future.
Stanwell CEO Richard Van Breda said that Stanwell was undertaking an expression of interest process to identify high quality renewable energy projects based in Queensland that could be incorporated into Stanwell’s portfolio.
“The energy market is changing rapidly, and we are evolving our business in line with our customers’ changing needs and community sentiment for greener energy and lower emissions,” Mr Van Breda said.
“Through our expression of interest process, we will build a portfolio of renewable projects that meet our retail customer requirements, support the development of Queensland’s large-scale renewable industry, and enable us to diversify our portfolio and reduce our carbon intensity.”
Mr Van Breda said the expression of interest process would also play an important role in Queensland’s post-COVID economic recovery, particularly in terms of economic investment and supporting employment and job creation.
“We are excited about our future and the important role we will play in ensuring Queenslanders have access to secure and reliable energy as the energy sector transitions to lower carbon generation alternatives.”
The expression of interest process is now open. Interested projects should register their interest before 3pm AEST on 24 March 2021.
For more information visit www.stanwell.com/renewable-energy
Bridget Carter 5.28pm:Greenhill banker Jon Gidney joins Citi
Greenhill investment banker Jon Gidney has been hired by investment bank Citi as its vice chairman and head of financial institutions for Australia and New Zealand.
Mr Gidney joined Greenhill in 2015 from JPMorgan where he was vice chairman and previously headed mergers and acquisitions for Australia.
He will focus on clients including Westpac, NAB, AMP, NIB and international groups such as HBOS, Aviva and GE Capital.
In the past, he has worked on major transactions for Westfield, Dexus Property Group, SAB Miller, Macarthur Coal, ABB Grain and Consolidated Minerals.
He has also advised on market transactions for large Australian companies such as Wesfarmers Woolworths and Sonic.
Mr Gidney will start in the role on June 1.
Ben Wilmot 5.09pm:Ingenia snaps up two parks
Retirement and tourist park company Ingenia Communities Group has bought two Queensland properties as it outlays capital from its $178m capital raising last May.
Ingenia bought the Nature’s Edge over 50’s community in Buderim, for an undisclosed sum.
The property on Queensland’s Sunshine Coast has 181 homes and the deal includes The Village Forest Glen and the Forest Glen Holiday Resort, which forms part of an approved 68-home expansion of Nature’s Edge.
It also picked up the BIG4 Townsville Woodlands Holiday Park in Townsville. The holiday accommodation includes 22 cabins, 26 ensuite sites and 55 powered and unpowered sites, with approval in place for a further five cabins.
Ingenia chief executive Simon Owen said that following completion of these acquisitions the equity raised last year would be fully deployed, and further acquisitions are anticipated this financial year, despite a marked increase in competition for sites.
4.40pm:Turnbull to chair Fortescue Future Industries
Former PM Malcolm Turnbull has been named chair of Fortescue Future Industries and Minderoo Foundation, the company said in a statement to the ASX.
Fortescue says Turnbull will start in February.
Nick Warner will start this month as FFI Special Adviser International Affairs.
4.35pm:ASX +0.9% on dole boost; US futures
Australia’s sharemarket rose strongly as the government boosted the dole and US futures jumped.
The S&P/ASX 200 closed up 0.9pc at a 3-day high of 6839.2 after bouncing from 3-week low of 6839.2.
The move came as the government boosted the dole by $50 a fortnight and S&P 500 futures rose 0.5pc.
Strong gains in the Energy, Real Estate, Materials and Financials sectors outweighed falls in Tech, Consumer Discretionary, Communications, Utilities, Staples and Health Care.
Afterpay dived 7.2pc as a fresh 11-month high in 10 bond yields pressured valuations, Cochlear lost 1.4pc as the A$ hit a fresh 3-year high of 0.7935, and Wesfarmers fell 3.2pc, Domino’s fell 9pc and Amcor lost 0.7pc ex-dividend.
Bank of Queensland rose 13pc, leading a surge in banks after its capital raising, highly accretive acquisition of ME Bank and improved earnings guidance
Adbri rose 11pc after its FY20 earnings beat expectations by about that much, while Lendlease rose 8.4pc after Credit Suisse upgraded.
Oil producers were particularly strong with Oil Search up 6.4pc and Santos up 5.9pc ex-dividend.
Elsewhere travel stocks were on a tear with Corporate Travel up 10pc, Sydney Airport up 6.5pc, Flight Centre up 6.2pc and Qantas up 6.4pc on economic reopening hopes.
That theme also helped the mall owners with Unibail up 7.3pc, Scenre up 5.9pc, Vicinity Centres up 5.2pc and Dexus up 4.8pc despite the rise in bond yields.
3.50pm:ASX extends rise to 0.7pc
Australia’s sharemarket has extended its rise to a fresh 3-day high in late afternoon trading.
The S&P/ASX 200 rose 0.7pc to 6832.2 as US futures and commodity price gains added to the share market strength that followed the government’s decision to boost the dole by $50 a fortnight.
S&P 500 futures are up 0.5pc, while WTI crude is up 1.5pc and LME copper is up 1.1pc.
Strong gains in the Energy, Real Estate, Materials, Industrials and Financials sectors are outweighing falls in Tech, Discretionary, Communications, Utilities, Staples and Health Care.
Greg Brown 3.18pm:Facebook to reinstate Australian news
Australian news will be back on Facebook under a new deal struck between the global media behemoth and the Morrison government.
Treasurer Josh Frydenberg and Communications Minister Paul Fletcher say changes to the News Media and Digital Platforms Mandatory Bargaining Code were “intended to operate and strengthen the framework for ensuring news media businesses
are fairly remunerated”.
Under the changes, the government will notify a platform ahead of any intention to force it to comply with the code.
“A final decision on whether or not to designate a digital platform would be
made no sooner than one month from the date of notification,” Mr Frydenberg and Mr Fletcher said.
Arbitration will only be at a “last resort” if commercial deals between digital giants and publishers cannot be reached.
“These amendments also add further impetus for parties to engage in commercial negotiations outside the Code – a central feature of the framework that the Government is putting in place to foster more sustainable public interest journalism in Australia,” they said.
Lachlan Moffet Gray 3.16pm:Technology One founder hits out at proxy advisors
Technology One founder and CEO Adrian De Marco has hit out at proxy advisors that advised shareholders against adopting the company’s remuneration report over long term incentives (LTIs) after it received its first strike at today’s AGM.
“I note that some Proxy Advisors recommended a vote AGAINST the TechnologyOne Remuneration because of the use of Board discretion pertaining to LTIs, whilst others recommended a vote FOR the TechnologyOne Remuneration,” Mr Di Marco said.
“This in itself, shows the level of confusion and contradictory advice in the area of Remuneration that Boards have to contend with.”
Earlier in the month CGI Glass Lewis and Ownership Matters recommended the report not be adopted over the board’s decision to vest LTIs despite some key performance benchmarks not being reached.
But Mr De Marco said COVID-19 has rendered some of the targets “unrealistic.”
“The Board is very aware of the need to retain and motivate its high performing executives,” he said.
“The Board believes our executives should be rewarded for the strong performance delivered during a global pandemic; as well as the very successful change in strategy to drive SaaS ARR growth, without any loss of their LTI award because of unrealistic and aggressive targets that were set prior to COVID19 or set before we changed our strategy to drive SaaS growth.”
38.21 per cent of shareholders adopted against the adoption of the report.
3.11pm:Shares vulnerable to short-term correction: Oliver
Surging bond yields could trigger a “long overdue correction” in shares, according to AMP Capital’s head of investment strategy and chief economist, Shane Oliver.
The warning of a correction - normally defined as a 10 per cent fall in a share index from a peak to a trough on a daily close basis - comes after the global benchmark 10-year US Treasury bond yield rose as much as 5.6pc to a 12-month high of 1.3925 on Monday.
The S&P 500 share index fell 0.7 per cent to a three-week low daily close of 3876.5, having fallen five days straight.
It was the longest losing streak in the US share index in 12 months.
The tech-heavy NASDAQ 100 fell 2.5 per cent, its biggest fall in almost four weeks.
Australia’s 10-year bond yield rose as much as five-basis points to an 11-month high of 1.653pc early Tuesday before turning down.
The S&P/ASX 200 share index hit a three-week low of 6765.3 before rising as much as 0.7 per cent to a two-day high of 6828 after the government announced a $50 a fortnight increase in Australia’s “Jobseeker” dole payments.
The news briefly pushed the Australian dollar up to a fresh three-year high of US79.35c
However shares are “at risk of a short-term correction” and “rising bond yields could be the trigger”, Dr Oliver said.
The S&P/ASX 200 index hit a 12-month high of 6917.3 points last week, having bounced 58 per cent since March 2020.
That followed a 39 per cent from a record high of 7197.2 to a 6.5-year low of 4402.5 over a few weeks in February and March which marked the fastest ever “bear market”
Meanwhile the US S&P 500 as of last Friday had risen as much as 80 per cent to a record high of 3996.7
AMP Capital’s Dr Oliver said high PE growth stocks and yield plays are most vulnerable to a correction sparked by rising bond yields.
But while he also saw a case to consider inflation hedges and avoid sectors vulnerable to higher inflation, Dr Oliver said the fundamental backdrop of improving growth, rising profits and still low rates continues to support the case for “solid 6-12 month returns from shares”.
“Focussing back to the current cyclical recovery - bond yields could still go a lot higher in the short term before they settle down again and this could cause the long overdue correction in equities,” he said.
“But the big cyclical backdrop of still low underlying inflation and spare capacity in jobs markets combined with economic and profit recovery and low interest rates is a positive one for growth assets, particularly shares, and this includes Australian shares.”
David Swan 3.03pm:Tech giants, aviation and travel in ACCC spotlight
Despite its significant task of producing Australia’s media bargaining code legislation, Australia’s competition tsar Rod Sims has flagged a heavy workload for the ACCC in 2021 including more action against the tech giants, and a renewed focus on aviation and travel.
Speaking at a Committee for Economic Development of Australia (CEDA) event in Sydney, Mr Sims pinpointed airline competition as a particular priority for the ACCC as the sector begins to recover from the COVID-pandemic.
“Thee COVID-19 Enforcement Taskforce will be actively monitoring forward sales practices by travel businesses due to concerns about misrepresentations in advertising and marketing material, particularly given the huge uncertainty around the imposition and lifting of travel restrictions,” he said.
“The impacts of the pandemic are particularly evident in the aviation sector, as evidenced by the direction received from the Treasurer in 19 June 2020 for the ACCC to monitor and provide a quarterly report to government on prices, costs and profits of the Australian domestic aviation sector.”
Mr Sims said that competition in the aviation industry remains fragile, and the watchdog will remain focused particularly on the ability of smaller players including Rex to compete in the market.
Lachlan Moffet Gray 2.19pm:Uniti Group hands down record half year earnings
Internet provider Uniti Group has handed down a record half year earnings and has “locked in” future growth as its fibre order book expands.
Revenues increased 148 per cent to $54.6m while EBITDA lifted 307 per cent to $29.3m.
However, profit dipped 23.6 per cent to $3.9m due to acquisition and restructuring costs emanating from the purchase of OptiComm, Harbour ISP and Telstra’s Velocity and South Brisbane exchange assets.
On an underlying basis, net profit lifted from $4.9m in the prior comparable period to $24.7m.
No dividend was declared.
CEO and managing director Michael Simmons said the outlook for the company was bright.
“The fact that 75% of our existing fully funded, contracted fibre order book will be deployed in the coming 5 years , and is continuing to grow at improving rates, assures our shareholders of continued steep earnings growth and free cash generation over both the near and longer term,” he said.
Perry Williams 2.10pm:Oil Search to open talks in march on Alaskan project stake sale
Oil Search will open talks with companies in March about selling a 15 per cent stake in its $US3bn ($3.8bn) Alaskan oil project as it seeks to nail down funding for the development.
The project was put on hold last year after COVID-19 sparked a steep fall in crude demand but Oil Search will resume negotiations on trimming its 51 per cent stake with the aim of securing a deal by the end of 2021.
“We wanted conditions in America to settle down a little bit post the election and the Biden administration coming into office,” Oil Search managing director Keiran Wulff said after releasing its annual results.
“We’re starting off with soft soundings in March with a broader campaign commencing April. The idea is for us to have indicative proposals by July/August with a view to closing off when a final investment decision is made at the end of the year.”
Oil Search’s partner, Repsol, is also reducing its stake and the two companies will consider selling a combined share to a bigger investor while also retaining the rights to pursue individual deals.
A number of banks including Goldman Sachs and JPMorgan Chase have ruled out providing funding to Alaskan oil projects but Oil Search said there remained plenty of willing financiers.
“Our funding requirements is a little over $US500m and we are very comfortable that there is a large pool of Australasian banks in particular that will support the project and are very keen to support Oil Search.”
Oil Search shares last up 6.4 per cent to $4.31.
Bridget Carter 1.49pm:Highbury tapped for Unity review
Australian Unity Office Fund’s management has hired Highbury Partnership for a strategic review of the listed landlord.
The company said while delivering its results that a strategic investment was underway after the office fund traded at a significant discount to its net tangible assets.
While delivering results on Tuesday, the fund’s responsible entity, Australian Unity Investment Real Estate Limited (AURIEL), said its directors had initiated a strategic assessment to examine all options to maximise returns and unlock value for investors.
Highbury’s appointment comes after it was also recently hired to work with fund manager Centuria on its efforts to buy Blackstone’s $3bn-plus Milestone Logistics Group.
Real estate banker Ben Roberts recently joined the firm from UBS.
The company said that the outcome and conclusion from the review would be communicated to the market over the coming months.
For the six months to December, Australian Unity Office Fund delivered a $20.1m net profit, down 13 per cent from the previous corresponding period.
David Swan 1.45pm:Air travel a priority for watchdog
Despite its significant task of producing Australia’s media bargaining code legislation, Australia’s competition tsar Rod Sims has flagged a heavy workload for the ACCC in 2021, including more action against the tech giants and a renewed focus on aviation and travel.
Speaking at a Committee for Economic Development of Australia (CEDA) event in Sydney on Tuesday, Mr Sims pinpointed airline competition as a particular priority for the ACCC as the sector begins to recover from the COVID-pandemic.
“Thee COVID-19 Enforcement Taskforce will be actively monitoring forward sales practices by travel businesses due to concerns about misrepresentations in advertising and marketing material, particularly given the huge uncertainty around the imposition and lifting of travel restrictions,” he said.
“The impacts of the pandemic are particularly evident in the aviation sector, as evidenced by the direction received from the Treasurer in 19 June 2020 for the ACCC to monitor and provide a quarterly report to government on prices, costs and profits of the Australian domestic aviation sector.”
Mr Sims said that competition in the aviation industry remains fragile, and the watchdog ill remain focused particularly on the ability of smaller players including Rex to compete in the market.
Lachlan Moffet Gray 1.37pm:Analysts upbeat on G8
Analysts at RBC Capital Markets say G8 Education’s full year results contain “green shoots” in what was a uniquely challenging year for the childcare sector.
The company recorded a statutory loss of $187m due to a $237m non-cash impairment expense, but underlying net profit after tax fell 11.3 per cent to $60m as revenue declined almost 15 per cent to $788.1m.
The company said that occupancy was just 4 per cent lower in February than it was a year prior - but said going forward, the lack of COVID-19 childcare subsidies would begin to have an impact on the business.
“Today’s result saw GEM delivering a healthy result amidst the challenging environment,” the analysts said.
“We note improving occupancies in February with the gap with CY19 levels now tracking better than November levels.
“However, we note that the occupancy recovery is slightly behind that of some other smaller sized listed peers who have reported.
“Overall, we remain constructive on recovery trends for GEM on a 12-month view with occupancy levels recovering off lows.”
1.25pm:Dole boost lifts shares, A$
A proposed increase in Australia’s dole payments by $50 a fortnight boosted the Australian dollar and shares after Prime Minister Scott Morrison confirmed the move early this afternoon.
AUD/USD rose as much as 0.3pc to a fresh 3-year high of 0.7935 after the announcement.
The S&P/ASX 200 share index rose as much as 0.7pc to a two-day high of 6825.4.
Confirmation of this additional government stimulus is a “small plus” for the market, a trader says. But shares remain “nervous and choppy” with the recent surge in bond yields promoting a rotation from Tech and other high-PE stocks to “reopening” stocks.
The 10-year yield turned down 2bps to 1.578 after hitting an 11-month high in early trading.
12.45pm:Moody’s cuts VIC credit rating
Moody’s Investors Service has cut Victoria’s credit rating after a similar move by Standard & Poor’s last year. The international ratings agency downgraded the senior unsecured ratings of Treasury Corp of Victoria to Aa1 from Aaa. It also cut TCV’s issuer rating to Aa1 from Aaa, its backed senior unsecured medium-term note program rating to (P)Aa1 from (P)Aaa, and its backed senior unsecured shelf rating (foreign currency) to (P)Aa1 from (P)Aaa.
Moody’s affirmed TCV’s backed commercial paper P-1 rating (foreign currency), but downgraded TCV’s Baseline Credit Assessment (BCA) to aa3 from aa1.
The outlook is “negative”.
“Today’s rating actions conclude the review for downgrade initiated on 10 December 2020 and reflect Moody’s assessment that the state’s governance has weakened, with policy priorities leading to a very sharp increase in the state’s debt burden for a prolonged period, significantly diminishing the state’s capacity to respond to future shocks,” Moody’s says.
Standard & Poors cut VIC’s credit rating by two notches to double-A in December.
Lachlan Moffet Gray 12.25pm:Insurers accused of misleading travellers
The corporate regulator has charged Allianz Insurance and AWP Australia with making false or misleading statements in connection with the sale of Allianz’s travel insurance products.
The Australian Securities and Investments Commission on Tuesday said it alleges that Allianz and AWP published information online that misrepresented “the characteristics or level of coverage of travel insurance” on sale.
“In some instances, ASIC alleges that Allianz’s website advertised the maximum travel insurance benefits payable to customers, but failed to state that particular sub-limits, terms, conditions or exclusions could operate to limit those benefits,” ASIC said in a statement.
ASIC alleges that the conduct breached section 1041E of the Corporations Act and could lead to a maximum penalty of $8.1m as well as three times the value of what was gained through the act.
If the value cannot be ascertained, the court could order a fine of 10 per cent of the body corporate’s turnover “during the 12-month period ending at the end of the month in which the body corporate committed, or began committing, the offence.”
Allianz, the underwriter of the travel products has been hit with seven counts making false and misleading statements.
AWP, which distributed the products, was hit with one count.
David Swan 12.20pm:Hipages getting the job done
ASX-listed online tradie platform Hipages has posted its first half-year results as a public company, declaring a net profit after tax of $1.5m, up from a loss of $5.3m a year earlier.
The company, which is about 25 per cent owned by News Corp, publisher of The Australian, posted monthly recurring revenue of $4.6m for December 31 2020, up 31 per cent. Pro-forma EBITDA was $6.9m, up from $0.1m. The company reaffirmed its FY21 guidance.
“January was a strong month for us, and despite some of the outbreaks and things like that, we have a resilient business model,” CEO Roby Sharon-Zipser said. “We are delivering on our numbers and will continue to drive growth rates in FY22.”
Its shares are up 3.1 per cent to $2.23 at 12pm AEDT.
11.54am:ASX back to flat flat after minor dip
Australia’s share market was little changed in mixed trading near midday.
The local bourse has mostly bucked weak offshore leads linked to surging bond yields.
The S&P/ASX 200 index was up about two points at 6783.5 after dipping 0.2pc to an almost three-week low of 6765.3 points as US futures wavered.
Gains in the Energy, Materials and Real Estate sectors offset falls in interest rate sensitive sectors including Technology and Health Care.
Bank of Queensland surged 9pc after its capital raising after boosting its earnings guidance as it confirmed a highly-accretive purchase of ME Bank.
Among other standouts, Corporate Travel rose 8pc, Flight Centre rose 4.6pc, Qantas soared 3.8pc and Sydney Airport was up 3.6pc amid optimism about vaccines and economic reopening.
Oil stocks also surged with Oil Search up 7pc after its results and Santos up 4.4pc even after trading ex-dividend.
Other ex-dividend stocks today include Wesfarmers, IPH, Domino’s, Challenger and Amcor.
Richard Ferguson 11.34am:News Corp in talks with Facebook after ban
News Corp Australia is in talks with Facebook after its sweeping ban last week on Australian news content, as the Morrison government’s media bargaining code edges closer to passing parliament.
On Tuesday, News Corp Australia executive chairman Michael Miller said in a statement that Facebook misread the mood of the nation when its news ban also captured state health services, emergency fire departments, domestic violence prevention hotlines, and cancer charities.
Mr Miller said News Corp was in talks with Facebook but he looked forward to the media bargaining code - which sets up a framework for big tech companies to pay news organisations for their content - passing the Senate as early as this week.
“Facebook has misread the mood of Australians and their actions have attracted worldwide attention - and universal criticism,” he said in a statement.
“I can tell you that we are in continuing conversations with Facebook but we have not reached an agreement yet.
“At the same time, the media bargaining code of conduct legislation that is so crucial in this issue is listed for debate in the Senate this week and I am hopeful it will become law as early as this week.”
The media bargaining code entered the Senate late on Monday night and will likely pass as early as Wednesday. Labor will support the bill, despite the government deciding to not pursue any more amendments after the Facebook news ban.
11.24am:ASX slips to three-week low
Australia’s share market dipped slightly in late morning trade, in line with US futures.
After edging up to 6788.7 in early trading, the S&P/ASX 200 slipped 0.2pc to 6765.3 - its lowest point since February 4.
It came as S&P 500 futures dipped 0.1pc and NASDAQ futures slipped 0.1pc before rebounding.
Australia’s 10-year bond yield is back for square after initially rising 5bps to an 11-month high of 1.653pc.
There’s no US Treasury trading in Asia with Tokyo closed for a holiday.
S&P/ASX 200 last down 0.1pc at 6773.
Lachlan Moffet Gray 11.08am: New player in Vocus offer
Macquarie Infrastructure and Real Assets Holdings (MIRA) has entered into a consortium with Aware Super to advance an indicative, non-binding takeover proposal for Vocus.
MIRA arrangement comes after it announced its bid for Vocus on February 8. The offer price is still set at $5.50 per share and contains all the same terms and conditions, Vocus informed the market today.
“The consortium’s due diligence investigations are continuing,” the company said.
“The Vocus board notes that there is no certainty that the proposal will result in a binding offer for Vocus.”
10.29am:ASX bucks weaker offshore leads
Australia’s share is bucking weaker offshore leads that followed surging bond yields.
The S&P/ASX 200 was flat at 6780 despite a jump in US and Australian 10-year bond yields to their highest levels in about a year and the Australian dollar’s rise to a fresh 3-year high.
Falls in bond proxies and high-PE stocks in the Tech, Consumer Discretionary, Communications, Health Care and Utilities sectors were offset by gains in Energy, Materials, Real Estate and Financials.
Afterpay and Xero fell about 5pc, while Telstra fell 0.9pc, while G8 Education lost 4.5pc and Seek lost 2.6pc after reporting.
But travel stocks soared on the reopening theme with Corporate Travel up 11pc and Qantas up 6.4pc.
Oil Search surged 7.3pc after its results and Santos jumped 4.2pc.
BHP rose 1.2pc on commodity price gains.
Wesfarmers, IPH, Santos, Domino’s, Challenger and Amcor were trading ex-dividend.
Lachlan Moffet Gray 10.25am: Austal shares sink
Shares in Austal have plunged 9.72 per cent to $2.23 in early trade after the company announced the resignation of its US president Craig Perciavalle, as investigations by ASIC and the US Justice Department and Securities Exchange Commision into LCS shipbuilding program continue.
USA CFO Rusty Murdaugh will assume the role as interim CEO.
Lachlan Moffet Gray 10.20am: AUB shares jump after upgrade
AUB Group has upgraded its full year guidance following strong organic and acquisition growth in the first half of the year, particularly in its Australian Broking Division.
Shares in the company lifted 7.68 per cent to $18.48 in early trade.
The company said it expects a net profit after tax in the range of $63m-$65m for the full year, representing growth of 17.9 per cent and 21.7 per cent on the prior year.
Net profit tax for the half year was $30.7m, up 44.2 per cent, while a dividend of 16 cents a share was declared, fully franked.
10.13am:Travel stocks take off again
Travel stocks are soaring again in early trading.
Webjet rose 9pc, Corporate travel rose 8pc, Flight Centre rose 4pc, Qantas rose 3.3pc and Sydney Airport rose 1.3pc in the first 10 minutes of trading.
It follows a very strong move up in travel stocks on Wall Street as the economic reopening theme takes off amid encouraging reports on vaccinations.
It comes as Victorian Premier Daniel Andrews says the state is “well-placed” for a further easing of coronavirus restrictions on Friday.
Lachlan Moffet Gray 10.02am:PolyNovo swings to loss
PolyNovo has swung to a half year loss as COVID-19 impacted revenues from hospital surgeries.
The company recorded a net loss after tax of $3.54m, including share based payments of $1.23m and unrealised foreign exchange losses of $1.44m.
Revenue for the period was higher - $12.60m compared to $10.18m, with commercial sales of the flagship NovoSorb BTM up 31.2 per cent to $11.25m.
No dividend was declared.
Lachlan Moffet Gray 9.55am:Hub24 upgrades funds target
Fund manager Hub24 has significantly upgraded its funds under administration target for the end of the 2022 financial year, from $28bn-$32bn to $43bn-$49bn.
It comes as the company recorded a 39 per cent increase in FUA in the first half of the year to $22bn, or $31bn when counting the recently acquired Ord Minnett.
Net profit for the half increased to $6.1m and a dividend of 4.5 cents a share was declared.
Perry Williams 9.51am:Oil Search plunges to loss
Energy producer Oil Search has slumped to a huge annual net loss after taking a writedown hit, and has flagged a rise in production costs due to Papua New Guinea maintenance shutdowns.
Net profit after tax fell to a loss of $US321m ($405m) in 2019 from a $US312m profit a year prior, missing consensus of a $US299m loss, as average LNG prices slipped by 32 per cent over the year and oil declined by 41 per cent.
Stripping out the impairment, net profit scraped in at a $US22m profit compared with $7m consensus while earnings before interest, tax, depreciation and amortisation dropped 37 per cent to $721m.
Revenue fell 32 per cent to $US1.07bn while the final dividend declined by 89 per cent to US0.5c from 4.5c back in 2019.
Unit production costs will rise to $US10.50-11.50 per barrel of oil equivalent for the 2021 financial year due to scheduled maintenance for PNG LNG trains one and two.
Oil Search in July flagged a writedown of up to $US400m after the oil price crash lowered the value of its Papua New Guinea oil and gas licences.
Chief executive Keiran Wulff started the financial year by slashing nearly 600 jobs, a third of its workforce, as part of a major cost-cutting drive sparked by the oil price crash.
“The company took decisive action to ensure that we limited discretionary spend, enhanced our liquidity, rightsized the organisation and materially reduced our operating cost base and breakeven for new and existing projects,” Mr Wulff said.
“We are now, however, a more focused, leaner and lower cost resilient business in a strong position to commercialise our world class resource base and leverage the oil price upside.”
Oil Search on Monday started the engineering and design phase for its $US3bn Pikka oil project in Alaska as it seeks to add a new source of earnings growth from its mainstay Papua New Guinea gas business.
The first phase of the project aims to deliver 80,000 barrels of oil a day by 2025 at a breakeven cost of less than $US40 a barrel including a 10 per cent return.
Nick Evans 9.50am:Worley keeps payout despite profit tumble
Contracting giant Worley has declared a 25c a share interim dividend, the same as a year ago, despite revenue and profits tumbling in the face of the pandemic.
Worley released its half-year results on Tuesday, saying revenue and profits both fell as its clients were hit by the impact of lockdowns on their end markets.
The company booked half-year aggregated revenue of $4.5bn for the half, down 25 per cent on the first half of the previous year, with underlying earnings before interest, tax and amortisation down 43 per cent to $207m and net profits off 61 per cent to $60m.
Chief executive Chris Ashton said the company’s result had been hit by project deferrals, particularly in the Americas, and restrictions on accessing major sites.
“Customer discussions indicate deferred projects are likely to return as global economic circumstances improve,” he said.
“We believe our strong cash result, cost savings programs and our sustainability pivot have set the business up for the future. To date, we have delivered $286 m of operational savings and increased the target to $350m by June 2022.”
Worley shares closed Monday at $10.54.
9.47am:Shares vulnerable to bond yield surge
Australia’s share market is vulnerable to surging bond yields and a rising exchange rate.
However, the rise in bond yields should help the financial sector and resources stocks should be supported by surging commodity prices.
Overnight futures relative to fair value suggest the S&P/ASX 200 index will open down about 0.1pc near 6774, near a 3-week low of 6769.9 reached last week.
The US 10-year bond yield rose as much as 5.6bps to a 12-month high of 1.3925pc before easing to 1.3619 after reassuring comments from the ECB.
ECB President Christine Lagarde said the ECB is closely monitoring the evolution of longer-term nominal bond yields.
High PE growth stocks reacted negatively to the jump in yields with the Nasdaq down 2.5pc and the S&P 500 down 0.8pc for its 5th consecutive fall.
However, the financial, energy and travel related stocks led a 0.1pc rise in the DJIA.
Australia’s 10-year bond yield rose as much as 5bps to an 11-month high of 1.653 in early trading.
The Australian dollar hit a fresh 3-year high of 0.7929 overnight.
Focus also remains on results, with 16 of the top 200 companies reporting.
Lachlan Moffet Gray 9.35am:Ex-CBA boss Narev to head Seek
Former Commonwealth Bank CEO Ian Narev will succeed Andrew Bassat as CEO and managing director of recruitment and job classifieds platform Seek.
Mr Narev, who left CBA after the bank was embroiled in a money laundering scandal, was appointed COO of Seek in April 2019. He will take over as Seek CEO on July 1.
Mr Bassat will then transition to a full time role as CEO and executive chairman of Seek Investments while remaining a regular director at Seek.
The company also confirmed that it is looking to sell down its 61 per cent stake in its Chinese platform Zhaopin to an unnamed interested “consortium.”
The platform was the focus of a short seller report by Blue Orca into the company late last year.
Separately, the company recorded a half year net profit after tax of $69.7m, down 8 per cent on the prior comparable period.
Revenue declined six per cent to $819.1m and an interim dividend was not declared - but the company did say it would repay $9.8m of government subsidies, including Jobkeeper and upgraded full year guidance, with expected profit to be “in the order of $100m.”
9.32am:What’s impressing analysts?
Audinate target price raised 26pc to $10.10; Buy rating kept: UBS
Audinate target price raised 11pc to $10; Overweight rating kept: MS
Bank of Queensland raised to Hold: Jefferies
Bank of Queensland target price raised 12pc to $9.60; Equalweight rating kept: MS
Bingo Industries cut to Neutral: CS
CSL raised to Hold: Morningstar
Costa cut to Neutral: Credit Suisse
Costa cut to Neutral; target price raised 35pc to $4.60: UBS
Costa target price raised 26pc to $5.10; Buy rating unchanged: Bell Potter
Insurance Australia raised to Buy: Morningstar
Integral Diagnostics cut to Neutral: CS
Integral Diagnostics cut to Accumulate: Ord Minnett
Lendlease raised to Outperform: CS
Mirvac Group raised to Buy: Morningstar
New Hope Coal raised to Neutral: Macquarie
oOh!media raised to Buy: Canaccord
Reliance Worldwide raised to Hold: CCZ Statton Equities
Reliance Worldwide cut to Hold: Jefferies
Stockland raised to Hold: Morningstar
Tyro Payments raised to Buy: GS
Lilly Vitorovich 9.25am: oOh!media upgraded
Morningstar has lifted its fair value estimate on oOh!media by 8 per cent to $1.35 a share following the outdoor media group’s bullish revenue recovery after a COVID-19 plagued year.
“The upgrade reflects the likely higher operating leverage from the current revenue recovery, aided by abatement of rentals on the group’s lease concessions,” analyst Brian Han says.
Han has also upped his Ebitda forecasts by an average of 7 per cent over the next few years.
Han says the entire positive surprise in the 2H was oOh!media’s underlying Ebitda of $52m vs his $32m forecast was due to fixed rent savings and cost cuts of $47m in the 2H vs $16m in 1H.
Just 18 per cent, or $11m, of the abatement savings is lapsing in 2021, and is “likely to be offset by continuing cost restructure ($10m in current annual run rate)”, Han says.
“As such, oOh!media is well-positioned to reap the earnings benefits of advertisers returning, with oOh!media’s current March quarter revenue back at 80 per cent of pre-COVID levels, up
from 30 per cent to 50 per cent in mid-2020,” he notes.
Han says continuation of the remaining $52m rent abated in 2020 is also subject to audience and revenue outcomes.
Nick Evans 9.22am:Markets recovering: Alumina
Alumina has declared a US2.9c a share final dividend on the back of a $US146.6m full-year profit, saying global aluminium markets are recovering from the impact of the coronavirus pandemic.
Alumina released its full-year financial results on Tuesday, saying it had achieved a solid result despite a dire period as its markets were hit by crashing global demand for its products as the pandemic shut down industrial centres across the world.
The company, which owns 40 per cent of Alcoa World Alumina and Chemicals, said its profit - effectively a dividend from AWAC - fell 31 per cent for the year on the back of low prices and demand, despite a strong operational performance from its assets.
Alumina chief executive Mike Ferraro said the company’s profit and cashflow demonstrated the resilience of the AWAC assets.
“In a year where the world was significantly impacted by COVID, AWAC’s mining and refinery operations both achieved record production. AWAC’s cash costs continued to fall and remain in the lowest quartile of the global cost curve,” he said.
“Primary aluminium demand fell over the first half of 2020 as a result of the pandemic but in the second half aluminium, and as a result alumina, demand recovered with the help of Government stimulus. Prices for both aluminium and alumina have recovered from COVID induced lows and have stabilised. We expect aluminium demand to increase during 2021. A narrowing rest of world alumina surplus in 2021 is expected to be exported to China to meet a deficit there.”
Alumina shares closed Monday at $1.69.
Lachlan Moffet Gray 9.11am:Adore beats expectations
Newly-listed online cosmetics retailer Adore Beauty has achieved half year revenue and earnings results ahead of prospectus forecasts, while booking a net profit of $2.54m.
At $96.2m, revenue was 8 per cent above forecast while EBITDA of $5.2m was 58 per cent above.
Active customers increased to 777,000, up 82 per cent on the prior comparable period.
No dividend or guidance was declared, but CEO Tennealle O’Shannessy said a COVID-19 shift towards online retail would continue to benefit the business.
“Looking forward, we are executing a clear strategy to cement our online market leadership position, and we are well positioned to capture market share in a large and growing market benefitting from structural tailwinds,” she said.
John Durie 9.12am:EU backs Australia against Facebook
The European Union markets regulator has come out strongly in favour of Treasurer Josh Frydenberg’s media bargaining code, underlining his need to hold firm against Facebook.
EU market chief Thierry Breton is quoted as condemning Facebook’s actions as unacceptable and saying the EU must back Australia.
“On Australia, I really feel that it’s a pity the way this platform (Facebook) has behaved to protest against certain actions,” Breton told EU lawmakers today.
His comments come ahead of today’s CEDA speech by ACCC chief Rod Sims outlimning his agenda for a year expected to be dominated by the digital platfiorms.
Sims will also call for mpre powers to combat mergers.
Breton said: “We must support Australia in its combat … This is an important point. I very much agree with you. I can affirm that we should say this loudly and publicly.”
Breton urged EU countries to enact national laws that would put into effect a new right for publishers to seek payment from platforms for publishing extracts of articles.
Breton’s comments also come as Microsoft and a group of press publishers called on legislators in Europe to include an arbitration mechanism in EU-wide or in national laws that would require “dominant” platforms to pay for press content.
“The best way that we can deal with and fight disinformation is to have authoritative, verifiable sources of information. High-quality journalism isn’t free, and it does have be remunerated,” he said.
Lachlan Moffet Gray 8.56am:G8 posts loss but childcare ‘recovering’
G8 Education says childcare enrolments are recovering faster than expected post-COVID-19, but flagged 2021 as a “recovery year” for the business, as it handed down a full year loss for 2020.
A statutory loss of $187m was recorded due to a $237m non cash impairment expense.
An $80m impairment was also recognised for an employee wage remediation program.
Underlying net profit after tax fell 11.3 per cent to $60m as revenue declined almost 15 per cent to $788.1m.
Dividends remain suspended, with a review of the policy set to be conducted in August.
The company said that occupancy was just 4 per cent lower in February than it was a year prior - but said going forward, the lack of COVID-19 childcare subsidies would begin to have an impact on the business.
Lachlan Moffet Gray 8.48am:Estia swings to a loss
Aged care provider Estia has swung to a half-year loss after the sector continues to battle rising costs in the face of COVID-19, and in particular, the second wave in Victoria.
The company said it recorded a $5.3m net loss after tax as COVID-19 related costs blew out to $20.1m and lower residency levels pushed revenue down by $5.8m.
The company was also hit with the costs of settling a shareholder class action at $11.7m.
No interim dividend was declared.
CEO Ian Thorley flagged increased COVID-19 costs as an ongoing expense to the business.
“The aged care sector, which cares for some of the most vulnerable members of the community, will need to continue to be on alert to COVID-19,” he said.
“As infections and clusters emerge in local communities it is likely that regular lockdowns, restrictions to visitor access and increased PPE usage will continue to be part of the normal operating mode of residential aged care homes for a significant time to come.”
7.08am:ASX set to open lower
Australian stocks are poised to open lower after Wall Street ended mixed, with rising bond yields weighing on big tech stocks.
After earlier signalling an opening rise, the SPI futures index was down 15 points, or 0.2 per cent.
Yesterday, the ASX 200 closed lower.
Brent oil is sharply higher, up 3.7 per cent to $US65.24 a barrel.
Spot iron ore is 2.0 per cent higher at $US175.60 a tonne.
The Australian dollar is back up above US79c, and this morning was at USD79.19c.
Perry Williams 8.43am: APA Group posts first half loss but lifts payout
Gas pipeline giant APA Group fell to an $11m loss for the first half of 2021 after taking a writedown hit, but retained its annual guidance and lifted its dividend flagging growth in energy infrastructure projects.
APA recorded a $11.7m loss after tax after being hit with a $249m writedown over delays and extra costs at its Orbost gas processing plant on Victoria’s Bass Strait coast.
The plant has been plagued by start-up issues which are still being investigated and have meant the facility is producing at rates a third below its target of 68 terajoules a day. Orbost is processing gas from Cooper Energy’s $600m offshore Sole field.
Earnings before interest, tax, depreciation and amortisation fell 2.3 per cent to $823m for the first half of the 2021 financial year while profit after tax excluding significant items drifted 7 per cent lower to $163m.
Revenue was largely flat, easing 0.6 per cent to $1.072bn, while it declared a 24c interim dividend which was up by 4.3 per cent.
“APA has again delivered a solid first half performance, with strong volume growth in key markets against a backdrop of challenging market conditions,” APA chief executive Rob Wheals said.
APA has exposure to build a number of new pipelines connecting to major gas projects including Santos $3.6bn Narrabri development and AGL Energy’s Crib Point LNG import terminal and emerging gas basins including the Northern Territory’s Beetaloo.
APA reaffirmed annual earnings guidance within a $1.625bn - $1.665bn range for the 2021 fiscal year, meaning either flat or falling profits during the earnings period, while upgrading its full year payout to shareholders to 51c per security
It also remains on the hunt for US targets in a potential $2bn to $4bn deal as it looks to add a higher margin business to its regulated Australian earnings, noting its search had stalled amid COVID-19 market ructions.
“Factors such as COVID-19, and the US Federal election, have resulted in a number of opportunities being put on hold during 2020. More activity is expected in 2021 as conditions stabilise,” APA said.
The oil market crash in 2020 increased pressure on the energy midstream sector including pipeline operators, processing facilities, gas gathering systems and LNG terminals, which could see companies place assets on the market to raise capital.
APA owns 15,000kms of gas pipelines worth $21bn across Australia and delivers half the nation’s gas along with stakes in storage facilities, power stations and wind and solar farms.
Lachlan Moffet Gray 8.39am:Monadelphous relishing commodities boom
Monadelphous Group has maintained its interim dividend of 24 cents a share after lifting its net profit by 10.9 per cent to $31.57m.
The engineering group said the result was underpinned by the thawing out of a work pipeline frozen at the height of the pandemic.
The engineering construction division saw revenue lifted 68 per cent to $460.3m - but the maintenance and industrial services division’s revenue slipped almost 16 per cent to $491.5m as work took longer to return.
The company said it anticipates that a continuing commodities boom would provide a “steady flow of opportunity for the company”, particularly in the iron mining industry, as well as lithium, gold and copper.
The company said it expected full year sales revenue to lift 10 per cent on the prior year.
Lachlan Moffet Gray8.35am:Westpac teams up with SocietyOne
Westpac and fintech lender SocietyOne have joined forces to enhance the big bank’s digital banking platform, following the partnership with Afterpay announced in October 2020.
It will bring Westpac’s banking services to SocietyOne customers in the second half of 2021.
SocietyOne CEO, Mark Jones said the move would enhance customer experience.
“With the launch of the SocietyOne app, customers will be able to access their credit score for free, apply for a SocietyOne loan and manage their existing loans, as well as deposit, withdraw, and transfer money from and within the new transaction account powered by Westpac’s digital platform,” he said.
“This move forms part of our long-term strategy to build a range of financial products that will help empower and educate our customers and assist them to achieve their goals faster.”
Lachlan Moffet Gray 8.30am: Spark lifts profit, payout
Spark Infrastructure has recorded a 8.5 per cent lift in its full year underlying net profit to $85.067m and has boosted its final distribution to 6.5 cents per share, providing franking credits for the first time.
It brings the full-year dividend to 13.5 cents per share, with 2.1 cents franked.
The company forecast a dividend for the current financial year of 12.5 cents a share, 25 per cent franked.
This is in part due to a successful tax appeal against the taxation commissioner which the company estimates will net it a $45m tax refund, including interest.
It is also due to five-year regulatory decisions for the SA and Victorian energy assets.
“These new regulatory decisions put downward pressure on revenues for these businesses largely due to sustained low interest rates affecting regulatory returns and the low inflationary environment,” the company said.
Throughout the year the company’s power infrastructure assets performed well despite the interruptions of COVID-19 - the Victorian Power Networks division saw EBITDA climb 6.4 per cent to $903.1m.
8.29am:Adbri net profit doubles
Building materials supplier Adbri said it would raise its final dividend as full-year profit roughly doubled.
Adbri has reported a net profit of $93.7 million for the 12 months through December. That was up 98 per cent on the same period a year earlier.
Earnings before interest and tax totalled $147.6 million, up 80 per cent year-on-year.
Directors declared a dividend of 7.25cents a share, up from 5 cents a share a year ago.
Dow Jones Newswires
8.07am:Wall Street ends mostly lower
The Nasdaq Composite finished lower, as rising bond yields and investors’ bets on an economic rebound later this year weighed on the shares of highflying technology stocks such as Apple and Microsoft.
The tech-heavy Nasdaq dropped 2.5 per cent. The broad-based S&P 500 slipped 0.8 per cent, while the Dow Jones Industrial Average gained less than 0.1 per cent.
Tech giants whose shares were recently trading at records posted broad declines. Microsoft dropped 2.5 per cent, while Apple slid 2.7 per cent and Amazon.com shed 2 per cent. Electric-car maker Tesla tumbled 8.2 per cent.
Such stocks powered the U.S. stock market’s rebound from the coronavirus selloff just under a year ago, and they also are a favourite of the small investors who have piled into stock and options trading over the past year. But the rally has prompted concerns that megacap tech stocks are overvalued, making them vulnerable to sudden slumps.
Among the factors behind their declines, investors said, are recent gains in U.S. government-bond yields. Treasurys have sold off in recent weeks as investors have grown increasingly confident about the prospects for an economic recovery, pushing up their yields, which move in the opposite direction from prices. That increases the attractiveness of government bonds -- often seen as a safe-haven investment -- while reducing the allure of tech stocks.
“As the yield goes up, there is more demand for [government bonds] in relation to other assets,” said Hani Redha, a portfolio manager at PineBridge Investments. “How much are you willing to pay for stocks? If you’re only getting a very low yield from bonds, you should be willing to pay a higher amount for stocks. But that starts to change when bond yields go up.”
The yield on 10-year Treasurys rose to 1.370 per cent, from 1.344 per cent Friday, extending its gains after climbing for three consecutive weeks.
Bond yields have climbed because of the rollout of Covid-19 vaccines and President Biden’s proposed $US1.9 trillion stimulus package, which investors expect will accelerate the economic rebound.
Oil prices have recovered to pre-pandemic levels amid expectations that mass vaccinations will lead to a revival of travel. Front-month U.S. crude futures gained 3.8 per cent on Monday to settle at $US61.49 a barrel, their highest level since January 2020. Analysts attributed the gains to a weaker dollar, which makes oil cheaper overseas, and expectations that inventory data to be released later this week will show a sharp drop in US stockpiles.
Investors are watching for any indication of how the Federal Reserve might react to the sharp rise in bond yields. Fed Chair Jerome Powell is set to testify before the Senate Banking Committee tonight (AEDT).
Overseas, the pan-continental Stoxx Europe 600 fell 0.4 per cent.
Dow Jones Newswires
6.35am:Spanish bank Santander to end coal sector support
Spanish banking giant Santander said it would stop doing business with companies most exposed to coal mining by 2030 as part of its efforts to fight climate change.
Santander will cut all exposure to thermal coal mining and stop providing services to power generation clients that earn more than 10 percent of their revenues from thermal coal, a statement said.
“Climate change is a global emergency,” the statement quoted Santander chairman Ana Botin as saying.
“As one of the world’s largest banks, with 148 million customers, we have a responsibility and an opportunity to support the green transition, and encourage more people and businesses to go green.” Santander also pledged to achieve net zero carbon emissions by 2050 to “support the goals of the Paris agreement on climate change”.
AFP
6.24am:Gold futures in highest finish in over a week
Gold futures climbed sharply as US Treasury bond yields eased back from the day’s highs, prompting prices for the precious metal to settle at their highest since February 12.
Gold rallied as the rise in bond yields took a pause, giving the precious metal a “chance to join in the broader bull market in commodities,” said Adrian Ash, director of research at BullionVault. “Rising interest rates are like kryptonite to gold, because it is so sensitive to the outlook for money’s real value.” The 10-year Treasury note yield was at 1.35 per cent after climbing to a high near 1.40 per cent, the highest in a year. April gold rose $US31, or 1.7 per cent, to settle at $US1,808.40 an ounce.
4.55am:Wall Street mixed, tech lower
The Nasdaq Composite fell, as rising bond yields and investors’ bets on an economic rebound later this year weighed on the shares of high-flying technology stocks like Apple and Microsoft.
The tech-heavy Nasdaq dropped 1.5 per cent in early afternoon trading. The broadbased S&P 500 declined 0.4 per cent, while the Dow Jones Industrial Average ticked up 0.3 per cent.
Tech giants whose shares were recently trading at record highs posted broad declines. Microsoft dropped 3.4 per cent, while Apple slid 2.4 per cent and Amazon.com shed 1.9 per cent. Electric carmaker Tesla tumbled 4.8 per cent.
Such stocks powered the US stock market’s rebound from the coronavirus sell-off just under a year ago, and they are also a favourite of the small investors who have piled into stock and options trading over the past year. But the rally has prompted concerns that megacap tech stocks are overvalued, making them vulnerable to sudden slumps.
Among the factors behind their declines on Monday, investors said, are a recent climb in US government bond yields. Treasurys have sold off in recent weeks as investors have grown increasingly confident about the prospects for an economic recovery, pushing up their yields, which move in the opposite direction from prices. That increases the attractiveness of government bonds--often seen as a safe-haven investment--while reducing the allure of tech stocks.
“As the yield goes up, there is more demand for [government bonds] in relation to other assets,” said Hani Redha, a portfolio manager at PineBridge Investments. “How much are you willing to pay for stocks? If you’re only getting a very low yield from bonds, you should be willing to pay a higher amount for stocks. But that starts to change when bond yields go up.”
The yield on 10-year Treasurys rose to 1.352 per cent, from 1.344 per cent Friday, extending its gains after climbing for three consecutive weeks.
Bond yields have climbed because of the rollout of COVID-19 vaccines and President Biden’s proposed $US1.9 trillion stimulus package, which investors expect will accelerate the economic rebound.
“They are about to put lighter fluid onto the barbecue with this $US1.9 trillion in stimulus,” said Patrick Spencer, managing director of U.S. investment firm Baird. “You’ve got everything in your favour at the moment: good news on COVID-19 and stimulus and good earnings. That is why rates are higher.”
Meanwhile, money managers have rotated out of richly valued technology stocks into economically sensitive sectors, such as banking and energy, which could benefit from the anticipated recovery.
Oil prices were up due to a weaker dollar, which makes the commodity cheaper overseas, and expectations that inventory data to be released later this week will show a sharp drop in US stockpiles. Benchmark US crude futures gained 3.2 per cent to $US61.18 a barrel.
Investors are watching for any indication of how the Federal Reserve might react to the sharp rise in bond yields. Fed Chair Jerome Powell is set to testify before the Senate Banking Committee on Tuesday.
Overseas, the pan-continental Stoxx Europe 600 was down 0.4 per cent. In Asia, most major stock benchmarks retreated. The Shanghai Composite Index fell almost 1.5 per cent, while Hong Kong’s Hang Seng dropped 1.1 per cent.
Gold futures climbed 1.9 per cent to $US1,810.60 a troy ounce as the broader market sell-off led investors to buy the precious metal, seen as a haven asset.
Dow Jones Newswires
4.50am:Markets mark time, mull excessive valuations
European stock markets were in idle mode as falling infection rates and upbeat vaccine news failed to allay nagging concerns over high share valuations and inflation.
Even though the United States has reported almost 500,000 Covid deaths, optimism is rising as governments pursue immunisation programs that should allow economies to recover.
British Prime Minister Boris Johnson laid out a four-step plan to ease coronavirus restrictions Monday, and expressed hope that life could get back to normal by the end of June.
In Germany, a survey showed that business confidence has improved this month, with the robust industrial sector of Europe’s top economy withstanding the impact of coronavirus restrictions.
The Ifo institute’s monthly confidence barometer, based on a survey of 9,000 companies, climbed to 92.4 points from 90.3 points in January, when tougher measures to fight the pandemic were introduced.
But European stock markets “have kicked off the week on a somewhat unstable footing, with the fears over rising inflation and (US) Treasury yields once again dampening sentiment on a day that had promised to be dominated by reopening hopes”, noted Joshua Mahony, senior market analyst at the IG trading group.
The pound held gains above $US1.40 -- reaching its highest levels since April 2018 -- as the British vaccine drive moved forward.
Bitcoin fell to below $US54,000, having hit another record high of $58,350 and passing $1 trillion in market capitalisation.
The stock market rally that has characterised the past few months looks to have run out of steam as traders worry that prices might have risen too far.
Concern is also growing that an expected recovery and US stimulus package will fuel a surge in inflation, and that the Federal Reserve would then crank up record-low interest rates.
London closed down 0.2 per cent, Frankfurt shed 0.3 per cent, while Paris dipped 0.1 per cent.
AFP
4.45am:WTO to rule on US ban on ‘Made in Hong Kong’ label
The World Trade Organisation agreed to establish a dispute resolution panel on the new US rule that all goods imported from Hong Kong must be stamped “Made in China”.
The WTO’s Dispute Settlement Body accepted a second request from Hong Kong to establish a panel “to rule on US origin-marking requirements for goods”, a Geneva trade official said.
Hong Kong made a first request for arbitration at the Geneva-based global trade body on January 25, but the move was blocked by the United States.
Under WTO rules, a second request is, in practice, automatically accepted. However, a resolution is far from near, as the settlement of trade disputes at the WTO usually takes years.
In July last year, then-US president Donald Trump announced the end of the preferential conditions granted by Washington to Hong Kong, after the imposition by Beijing of sweeping new security laws on the semi-autonomous territory.
A month later, US customs announced that goods imported from Hong Kong would have to be stamped “Made in China” rather than “Made in Hong Kong”.
The new rules came into effect in November.
AFP
4.40am:Shares in Brazil’s Petrobras plunge 19pc
Shares in Brazilian state oil company Petrobras plunged after President Jair Bolsonaro changed the company’s chief executive, fuelling fears he will try to block further energy price hikes as he eyes re-election.
The company’s ordinary and preferential shares both dived by more than 19 per cent shortly after opening on the Sao Paulo stock exchange, which was pulled down more than five per cent overall.
Bolsonaro on Friday appointed army reserve general Joaquim Silva e Luna as president of Petrobras, shortly after saying that “people can’t be surprised” by the firm’s price increases.
Petrobras has increased fuel prices four times so far in 2021, a cumulative rise of nearly 35 per cent, as global oil prices have recovered to pre-coronavirus pandemic levels.
“The government has clearly showed interference in Petrobras, because Bolsonaro is openly against the system of floating fuel prices,” said economist Alex Agostini of credit rating firm Austin Rating. “It’s a clear signal he’s going to intervene on prices. And we know when that’s been done in the past under (former president) Dilma Rousseff, it led to very big losses for Petrobras,” he told AFP.
AFP
ASX ends up 0.5pc; Brookfield enters Insignia battle; former Star CEO cops ban
ASX 200 gains 0.5 per cent, led by resources, tech, property, industrials and communications. Macquarie weighs on financial sector. Google owner Alphabet's earnings disappoint. Brookfield lobs new offer to takeover target Insignia. Amcor lifts on reaffirmed guidance, estimates win. Former Star CFO cops ban.
ASX 200 ends flat as China retaliates to US tariffs
Australian stocks end flat, Aussie dollar dives 0.9 per cent as rebounds halted after US tariffs on China go ahead and China retaliates. Woolworths, Westpac announce leadership changes. Nine remains in 'difficult position': UBS.