ASX down 0.6pc as gold boom lifts resources

The boom in commodities helped iron ore and gold miners to finish in the green, while bank weakness sent the broader market down 0.6pc.

The price of gold has topped $US2000 an ounce for the first time. Picture: Bloomberg

• Byres details APRA’s pandemic ‘pivot’
• NSW outbreaks to slow state recovery
• Virgin unveils new strategy
• BNPL regulation ‘stalled’ amid pandemic

That’s all from the Trading Day blog for Wednesday, August 5. The local market slipped 0.6 per cent but held on to the key 6000 level by the close, as banks pared early losses, while strength in gold prices prompted a fresh rally in gold miners.

Weakness came even as Wall Street ticked higher on optimism over a US economic aid package overnight. The Dow gained 0.62 per cent, the S&P 500 added 0.36 per cent and the Nasdaq rose 0.35 per cent.

Locally, Virgin Australia set out its plans as it emerges from administration.

Ben Wilmot 8.08pm: Need for property regulation reform

Steep costs imposed by NSW’s planning system are generating shortages in the supply of apartments and driving up prices, particularly in inner Sydney, according to a new Reserve Bank of Australia paper.

The report, The Apartment Shortage, found that the excessive planning restrictions associated with delivering apartments in inner Sydney were disproportionately high on a national basis.

The bank said it cost an average of $873,000 for a new apartment in Sydney, even though it only costs $519,000 to supply — a gap of $355,000, or 68 per cent of costs. This compared with smaller gaps of $97,000, 20 per cent of costs, in Melbourne and only $10,000, 2 per cent of costs, in Brisbane.

The report concluded that the gap between the supply cost and the delivery to market cost was sustained by planning restrictions and planning risk. Further costs arise due to the excessive time taken to obtain approvals in the NSW planning system and the high degree of risk associated with approvals, despite the strong demand for new apartments.

Urban Taskforce chief executive Tom Forrest said the findings highlighted the need for significant reform to planning regulation in NSW, particularly in the wake of the coronavirus crisis.

Read more

James Kirby 7.04pm: Gold pumps up ETF interest

The price of gold has cruised past the $US2000 milestone to reach a new peak of $US2028 on Wednesday and retail investors are chasing it hard through Exchange Traded Funds.

In the local ETF market, two of the top six funds in terms of turnover in the last week were based on gold: ETFS Physical Gold and VanEck Vectors Gold Miners.

No wonder. The returns for gold ETFs when set against a volatile sharemarket are looking very attractive. Most ASX listed gold ETFs are up about 27 per cent this year to date, tracking the lift in the underlying price of bullion.

With ETF trends invariably set on Wall Street, the chances are high we will see more inflows to local funds over the coming months. Overseas, the inflows to gold ETFs are up 30 per cent already this year.

Globally, gold ETFs now hold more gold than many countries, including Germany. Overall gold holdings in the ETF industry rank second only to the US government.

How high will the gold price go? Nobody knows. What’s the value of a perceived safe haven at a time of turmoil?

But here’s the thing. The upward swing in bullion is not due to the onset of inflation as it has been during historic bull runs of the past such as the 1970s.

Read more

Lachlan Moffet Gray 6.11pm: Sumo ‘enticed’ customers: ACCC

The competition regulator has instituted proceedings against retail energy provider Sumo Power, alleging the company made “false or misleading representations” about its energy plans to Victorian consumers, using climate change as an excuse for large price increases.

The ACCC says that between June and November 2018, Sumo promoted 12-month plans with low rates and “pay on time” discounts of up to 43 per cent to residential customers, while knowing it would, or might, increase prices after a couple of months.

Sumo also allegedly represented to consumers that it would either maintain or not materially increase the rates, and that the “pay on time” discount would be available for 12 months – but in November 2018 the underlying rates for some customers increased by 30 to 46 per cent.

The ACCC alleges these price increases were part of a non-disclosed, predetermined strategy.

The ACCC also alleges that the price increases substantially eroded or eliminated consumers’ pay on time discount.

“We allege Sumo enticed consumers to enter into electricity plans with the promise of low cost electricity prices, while planning a significant rate increase which meant consumers were charged significantly more for their electricity than they were led to expect,” ACCC chair Rod Sims said on Wednesday.

Read more

4.43pm: Record gold rally lifts miners

Gold miners outperformed in Wednesday’s session as record gold prices reignited their recent rally.

St Barbara clocked a gain more than 5pc as Northern Star lifted 4.3pc while Saracen’s early rally lost steam, sending shares down 1pc by the close.

Banks and CSL were the biggest drag, while engineering group Monadelphous continued its losing streak with a 3.9pc slip.

Here’s the biggest movers by the close:

Perry Williams 4.26pm: BP may sell stakes in Woodside projects

BP may sell stakes in Woodside Petroleum’s North West Shelf LNG plant and Browse gas project in West Australia following its decision to sell $US25bn ($34.8bn) in global assets, Credit Suisse says.

The British oil giant announced a radical restructure on Tuesday including a plan to move away from fossil fuels and towards lower carbon energy along with the asset sell off.

BP had already been named as a likely seller of its stake in the NW Shelf following Chevron’s decision to shed its share of the LNG plant while its focus on cutting carbon has also sparked speculation it may quit the high emissions Browse development.

BP’s NW Shelf and Browse stakes “could become candidates for divestiture,” Credit Suisse analyst Saul Kavonic said.

“We anticipate a NW Shelf M&A shake-up could bode well for Woodside over the coming three years”, while noting it could take some time for any deal to progress.

BP in June signalled a gloomy outlook for the global energy industry, taking a writedown of as much as $US17.5bn and warning it may leave oil and gas in the ground amid a fast-moving transition away from fossil fuels.

4.12pm: Shares hold on to 6000

Shares bounced off their daily lows at the close, trimming daily gains to 0.6pc as a boom in gold stocks helped to make up ground.

At its worst, the benchmark ASX200 lost as much as 1.1 per cent, but finished the day down 36 points or 0.6 per cent to 6001.3.

Consumer staples and health care stocks were the worst performers over the day, while materials edged up by 0.7pc thanks to strength in commodities.

Lachlan Moffet Gray 3.41pm: Pantoro raising $50m

DataRoom | West Australian gold producer Pantoro is raising up to $50m million through Argonaut Securities and Tamesis Partners

The $300m company, which listed in 2006, has seen its share price more than treble from a February low of $. 08 a share on the back of a strong global gold price and positive developments at its recently acquired Norseman gold project, of which it owns half alongside Norseman Gold PLC.

The raising will see shares sold at 24c each, a discount of 5.9 per cent of Pantoro’s last closing of $0.255 a share, with 187.5 million shares on offer.

A non-underwritten share purchase plan will also be offered to eligible shareholders to raise up to $5 million at the offer price in addition to a $45m placement.

The raising comes after Pantoro announced changes to its board, with Fiona Van Maanen replacing Michael Jefferies as independent non-executive director.

The results of the placement will be announced on Friday, with an anticipated settlement date of August 14.

The company remains in a trading halt.

3.04pm: Modest recovery enough for Corporate Travel

The second wave threat to travel stocks has knocked Corporate Travel shares 44pc from their mid-June highs, but Morgans says the stock has upside potential … so long as investors are patient.

Raising the stock to Add, analysts led by Belinda Moore write that the stock is well positioned to benefit from a domestic travel recovery, even at modest levels.

“We expect that travel demand remains relatively depressed throughout 1H21 and assume that CTD breaks even, followed by a partial recovery in demand during the 2H21 which sees the company return to profitability,” Ms Moore says.

Still, she forecasts the group to lag their pre-COVID performance at least until FY23, but with balance sheet capability to withstand up to 23 months of challenges.

The broker has an Add rating on the stock with a target price of $12.85.

CTD last traded up 3pc to $8.55.

2.44pm: Victoria’s AAA rating on creditwatch: S&P

S&P Ratings has put Victoria’s AAA rating on “creditwatch with negative implications” following the declaration of a state of disaster due to coronavirus this week.

“We expect to resolve the CreditWatch listing within the next few months, when there is greater clarity about the fiscal effect of the latest lockdown, the government’s policy direction, and the government’s ability to control the latest outbreak,” the ratings agency says.

Eli Greenblat 2.01pm: CC Amatil invests in Indonesian start-up

Bottler Coca-Cola Amatil said its corporate venture capital platform Amatil X had completed a strategic investment in Indonesian start-up Wahyoo as part of its $US5m Series A capital raise.

Founded in 2017, Wahyoo is focused on digitising and improving the business operations of warung makan – traditional small-scale local eateries and restaurants dedicated to serving Indonesia’s burgeoning working-class population.

CC Amatil said Wahyoo works directly with local eateries to improve and digitise their operations, offering digital tools and services to attract customers, enhance marketing efforts, implement loyalty programs, order and receive groceries, manage financial accounts, and provide educational training on best practices through the company’s Wahyoo Academy.

There are 35,000 warung in Jakarta alone.

These venues can also earn additional income via advertising and brand partnerships with Wahyoo. Wahyoo last completed an undisclosed Seed financing round in 2019.

Head of Amatil X, Alix Rimington, said the investment in Wahyoo supported the Indonesian business’ broader strategy to be the leading beverage supplier on B2B platforms servicing the important SME sector.

“Our partnership with Wahyoo will help SMEs overcome the digital barrier and spur growth in Indonesia’s e-commerce industry. We are proud to partner with Wahyoo to help digitise the warung market,” she said.

Perry Williams 1.57pm: Investors demand faster coal-exit for AGL

AGL Energy, the nation’s biggest carbon polluter, has received a shareholder resolution demanding a faster exit from its coal-fired power plants over climate change concerns.

The Australasian Centre for Corporate Responsibility said the power giant accounts for 8.1 per cent of Australia’s emissions and was on a “collision course” with both Paris climate targets and investors under its current plans, urging shareholders to vote for the proposal at its annual general meeting on October 7.

AGL’s Bayswater coal station in NSW is due to run until 2035 with its Loy Yang A facility in Victoria not scheduled to close until 2048. Its Liddell plant in NSW will exit in the 2022-23 summer.

“Despite issuing a Climate Statement at the end of June 2020, AGL continues to evade any substantive commitment to reduce emissions – and most importantly failing to bring forward the closure of coal-fired power stations, which investors have long been asking of AGL,” ACCR climate and environment director Dan Gocher said.

Australia’s largest electricity generator rejected a sizeable shareholder vote at its 2019 AGM calling for it to bring forward the planned closure of its coal power plants arguing it needs to balance the emissions goals of the Paris climate accord with the reality of ensuring the power grid stages an orderly transition away from the fossil fuel.

The company said in June it would consider the early shutdown of its coal power plants after issuing a climate statement, but only if all of its customers demand green power and a leap in technology allows cheaper alternative forms of electricity to replace the fossil fuel in the nation­’s energy mix.

AGL said it was considering ACCR’s shareholder resolution and will respond through an AGM notice of meeting in late August.

Read more: COVID puts more pressure on coal

AGL’s Liddell Power Station in Muswellbrook, in the NSW Hunter Valley region. Picture: AAP / Dan Himbrechts.

1.48pm: Byres details APRA’s pandemic ‘pivot’

APRA chairman Wayne Byres has used the pandemic-era buzzword ‘pivot’ to describe the regulator’s shift in focus amid the pandemic, saying it had helped to steer the industry through an ‘unprecedented period’.

In an opening statement to the House Economics Committee, Mr Byres said APRA had focused on its core function of supervision, putting off policy initiatives until September 30.

“Our aim has been to help steer the industry through an unprecedented period, seeking a balance between regulatory flexibility and maintaining a prudent level of resilience,” he said.

He emphasised that the financial system went into the crisis in a strong position, saying the sector had been an “important shock absorber” to the broader economy.

“Experience in Australia and elsewhere tells us that when the broader economy encounters severe stress, so does the financial system,” he said.

“We have therefore deployed resources to increase the intensity of our stress testing, and have been refining and improving our contingency planning. We need to be prepared, and agile, to manage pressure points as they inevitably arise.”

1.42pm: Home loan lift no turnaround: CBA

The lift in value of new home loans last month is more to do with weakness in the previous months than a marked recovery, notes CBA.

Economist Kristina Clifton notes today’s data showing a 6.2pc jump in new home loans in June, saying they were likely aided by the reduction in COVID-19 restrictions after the first wave.

“Auction clearance rates also recovered in June. However the reinstatement of stage 4 shutdowns in Victoria are likely to weigh on new home lending over coming months,” she writes.

“We do not see this month’s data as a turning point in home lending.”

Ms Clifton adds that refinancing activity pulled back in June, but remains very strong as the uncertain economic backdrop prompts borrowers to search for the best deal.

1.01pm: Shares pare early losses

Australia’s share market has seen a “buy on fact” reaction to confirmation of a record rise in VIC COVID-19 cases after traders “sold the rumour” earlier today.

The index is down 0.7pc at 5955 after paring roughly a third of its earlier 1.2pc fall to an intraday low of 5964.9.

Miners are the only sector in the green, buoyed by strength in gold names, while banking stocks and CSL do most of the damage.

Here’s the biggest movers at 1pm:

12.52pm: NSW outbreaks to slow recovery: Westpac

Economic growth in NSW will, like Victoria, lag behind the rest of the country in the current quarter as local outbreaks prompt risk aversion, even without the implementation of statewide restrictions, according to Westpac.

In the bank’s latest growth outlook statement, chief economist Bill Evans says he has “never seen a more uncertain economic outlook than we currently face both domestically and globally”.

He tips NSW growth in the September quarter to be the second worst, behind only Victoria, with an estimated growth profile of 2pc, noting that any major outbreak in the state was the dominant risk to his forecasts.

“There has been some concern around NSW with various local “outbreaks” being reported. Those concerns are likely to slow progress in the September quarter relative to the other states

outside Victoria as government policy and community attitudes remain cautious,” Mr Evans writes.

“But we must remember that NSW entered the September quarter with considerable momentum through June and, despite consistent reports of 10-20 cases per day there has been no dramatic “lift off” in the way we have experienced in Victoria.”

Across the rest of the country, Victoria is tipped to contract by 9pc, while Queensland, South Australia, Tasmania and the Northern Territory were headed for growth of 3pc.

Lachlan Moffet Gray 12.30pm: ASIC expediting Westpac investigation

ASIC Chair James Shipton also said that the investigations relating to the Westpac money laundering case are ongoing, while deputy chair Daniel Crennan said that efforts were being made to speed up the process, including the use of “external resources”.

“The investigation is being expedited the best it can during these circumstances and the investigations did commence very shortly under the statement of claim was filed in court by AUSTRAC,” he said.

Ben Wilmot 12.05pm: Dexus winning backers for healthcare fund

Property major Dexus is winning fresh backers for its Healthcare Wholesale Property Fund, securing $70m from a new domestic institutional investor as it buys a Brisbane office occupied by a radiology company for $36.5m.

The healthcare-focused fund is one of the first of its kind and has a portfolio that will be worth about $654m when finished. NorthWest Healthcare Properties, Australian Unity, Centuria, Barwon also run healthcare property funds.

The Dexus fund includes a major project in the northern Sydney suburb of St Leonards as well as the newly-acquired College Junction complex in the Brisbane suburb of Clayfield, which it bought for $36.5m. The building accommodates radiology company Qscan’s head office, a radiology clinic and other healthcare tenants.

Dexus executive general manager, funds management, Deborah Coakley said the new equity gave HWPF additional capacity to diversify and grow the fund’s portfolio of high-quality healthcare assets.

HWPF has defied the pandemic-related falls in shopping centres and offices and generated a one-year return of 10.9 per cent last financial year.

Ben Wilmot 11.59am: Cold storage deals running hot

Global real estate investment manager DWS has swooped on a half stake in a massive $305m cold storage facility in Queensland, in a sign of the strong demand for the sector.

Singapore’s Frasers Logistics & Commercial Trust sold the stake in the complex in Parkinson, capitalising on rising prices for cold storage that have defied the coronavirus crisis.

DWS purchased a half interest in the cold store complex in June 2019, for smaller sum of $134m, and has now acquired the remaining 50 per cent for $152.5m to take full control of the property.

The distribution centre is in one of southeast Queensland’s major industrial estates, and is fully leased to Coles with 12 years remaining on the current lease term.

Cold storage is growing strongly and is popular mainly due to the longer lease stability. The resilience of the food industry and related sectors, coupled with rapid growth in online retailing and healthcare demand are major contributors to the increased demand for cold store facilities, agents JLL said.

The deal was brokered by JLL’s Tony Iuliano, Adrian Rowse and Gary Hyland.

The Frasers trust also bought a $22.5m logistic property in Victoria. That complex spans 14,263sq m and sits in Melbourne’s south east in the Braeside Industrial Estate.

Lachlan Moffet Gray 11.55am: ASIC building new case against AMP

AMP is under investigation by ASIC over “a significant number of matters”, deputy ASIC chair Daniel Crennan told the House Standing Committee on Economics.

Mr Crennan said that the financial services company, which has been embroiled in a number of scandals since the Royal Commission into financial services, is subject to “more than five” yet “significantly less than 50” matters.

He said a case against the group was set to be filed with the federal court by the end of the year.

AMP shares last down 1.6pc to $1.43.

11.51am: Share slide extends to 1.2pc

Australia’s share market continues to slide with the S&P/ASX 200 down 1.2pc at 5965.

While growth in NSW coronavirus cases remains linear, the market is fretting about exponential growth in VIC, where the government is expected to confirm a record 725 new cases at least 13 deaths in the past 24 hours.

The Financials sector continues to lead declines with the major banks down at least 2 per cent and NAB and Bendigo both down 2.7pc after Macquarie downgraded to Underperform and US 10 year bond yields hit a record-low close.

Among other Melbourne-exposed stocks, Tabcorp is down 2.7pc, Transurban is down 1.9pc and SkyCity Entertainment is down 1.8pc.

Gold miners are outperforming with St Barbara up 4.7pc and Evolution up 3.4pc after the spot price hit a record high of $US2031.14 in early trading.

Lachlan Moffet Gray 11.48am: BNPL regulation ‘stalled’ amid pandemic

ASIC Commissioner Sean Hughes has told the House Standing Committee on Economics that there are “amber lights” concerning the by now pay later industry concerning its regulatory status.

The sector, which encompasses companies like Afterpay and Zip, has been caught in controversy over how much regulation aspects of its business, like the fees they charge merchants, should be subject to.

Mr Hughes said that “there were some harms relating to overcommitment, missed payment fees and overcharging of merchants that we wanted to follow up on,” but that ASIC’s work on the matter has “stalled” due to the COVID-19 pandemic.

“It will be complete by the end of the third quarter of this year,” Mr Hughes said, adding that the corporate regulator has consulted with a number of domestic and international stakeholders, and has examined international regulation of the sector.

Lachlan Moffet Gray 11.43am: Broker ‘best interest’ changes delayed

ASIC Commissioner Sean Hughes has told the House Standing Committee on Economics that new guidelines provided to mortgage brokers that stipulate they must act in the best interests of their customers have been delayed due to the coronavirus.

“The guidance itself, although it has been published, does not apply until the first of January,” Mr Hughes said, saying six months’ relief has been granted to allow the industry to prepare for the new regime.

Mr Hughes says the new guidelines do not create a “positive duty” to search through “thousands” of mortgage products to find the best one for a customer, only to inform the customer if they cannot provide a product in their best interest.

“There is a duty to deliver to the best interests, but as I understand it there is not a duty to find the very best product on the market,” he said.

11.38am: Home loans beat estimates

Home loans beat estimates in June with 6.2pc growth by number versus expectations of no change and a strong bounce back from a 11.6pc fall in May.

Owner occupied loan value rose 5.5pc, also beating an expected 3.5pc rise after a 10.2pc fall in May, while investor loan value rose 8.1pc versus 2pc expected after a 15.6pc fall in May.

AUDUSD last up 0.27pc to US71.79c.

Lachlan Moffet Gray 11.25am: Shipton grilled over Moneysmart inaccuracies

ASIC chairman James Shipton has pledged to update outdated and inaccurate information on the regulator’s Moneysmart website, as he told a House Economics Committee that he is “committed to making a real difference to the way our economy and community navigates this difficult time”.

In questions during a review of the regulators annual report, Mr Shipton said that while ASIC continues to protect consumers, maintain “the integrity of numbers,” and support business, work is still being done to enforce rulings of the financial services Royal Commission, despite the limitations placed on their ability to interview during the COVID-19 pandemic.

Liberal MP and chair of the committee Tim Wilson questioned ASIC over outdated and inaccurate advice listed on its consumer-facing Moneysmart finance website regarding the costs of managing a SMSF, and accused the regulator of misleading the public.

Mr Shipton said that the website would be amended as soon as possible and would be “triple checked.”

Liberal MP Jason Falinski questioned why ASIC would not hold itself to the same standard it holds financial companies, an assertion Mr Shipton rejected.

“We certainly do hold ourselves to that exact same standard … It was at the time the best available data,” Mr Shipton said.

11.15am: Bain reaffirms Scurrah as chief

As Virgin Australia today unveiled its plans to reboot the ailing airline, new owner Bain Capital has affirmed its support of chief executive Paul Scurrah.

In a statement, Bain managing director Mike Murphy said Virgin had a “great management team”.

“We reaffirm that we are backing Paul to successfully lead Virgin through the current turbulence and into the future.

“In the context of the toughest aviation market dynamics in history, we are fully supportive of management’s plans to preserve as many roles as possible as we help reset the airline for long term sustainable success.”

Read more: Virgin to cut 3000 jobs, axe Tigerair

Virgin Australia CEO Paul Scurrah with administrator Vaughan Strawbridge of Deloitte. Picture: John Feder/The Australian.

11.02am: ‘Material risk’ to bank earnings: Macq

Macquarie Equities analyst Victor German says he continues to see “material downside risk” to 2020-21 consensus earnings estimates for banks.

“While significant and continuing government stimulus provides scope for a shallower impairment cycle, ongoing uncertainty leaves us cautious,” he says.

With 10-15 per cent of consumer and small-medium sized enterprise loans already deferred, he warns that a weak economic outlook and challenges stemming from the recent lockdowns in Victoria give further material downside risk to bank earnings.

While recognising the chance of a relief rally – given the sector is trading at a deep discount to its long term-history and on arguably already depressed earnings – Mr German sees banks delivering lower underlying returns in the medium term.

Given the near-term risks relating to higher than expected impairment charges, where Macquarie is well below consensus, he has an underweight rating on the sector.

Macquarie cut NAB and Bendigo Bank to Underperform, while upgrading ANZ to Neutral.

David Ross 10.48am: Reliance unaffected by Vic lockdown

Reliance Worldwide Corporation has confirmed its operations in Melbourne will continue to operate despite the increased levels of restrictions after flagging potential disruptions on Monday.

The business has received advice that its operations fall under the Victorian government’s “permitted industry” category.

Reliance operates four plants in Melbourne which supply both the domestic and international market.

In its statement to the market Reliance said it had appropriate plans in place to manage COVID-19 at its plant.

“Our primary focus will continue to be the health and safety of our employees while at work,” it said.

RWC shares last up 1.5pc to $2.67.

David Swan 10.42am: Splitit jumps 12pc on $90m raise

ASX-listed buy now, pay later provider Splitit is jumping 12pc early after receiving commitments to raise $90m, split into two tranches, with a range of new investors to join its register including New-York based Afterpay investor Woodson Capital Management.

The company, which offers a way for consumers to spread out payments using their existing Mastercard or Visa credit card, is raising the funds to ramp up its growth as consumers – and investors – continue to lap up the convenience of buy now, pay later.

Splitit is issuing 34.6 million shares to raise $45m, followed by a second tranche of an additional 34.6 million shares in September, each priced at $1.30 per share.

Shares lifted by 12.1pc to $1.53 in early trade on Wednesday.

The company is also kicking off a share purchase plan, in which it will raise up to $10m worth of shares priced at $1.30.

“We’re going to be using the funds to dramatically accelerate our growth,” chief executive Brad Paterson told The Australian. “We’ll be accelerating our merchant acceptance and usage via sales and marketing. We know the product is loved, we can see the strategy is working, now is the time to accelerate.”

Read more: Beware pitfalls of buy now, pay later

10.13am: ASX slipping despite gold boost

Mining strength isn’t enough to keep the Australian market out of the red in early trade, with shares slipping despite gains offshore overnight.

At the open, the ASX200 is lower by 46 points or 0.77 per cent to 5991.2, potentially exacerbated by Victoria’s latest coronavirus count of 725 cases.

Traders sense there maybe less testing over the weekend, lower the new case count early before a midweek rebound.

Gold miners are the one ray of light – booming after gold prices surged to $US2000 overnight. Newcrest is lifting 2.8pc, Evolution higher by 3.9pc and Saracen up by 1.8pc.

Elsewhere, the major banks are driving much of the weakness – ANZ losing 1.8pc as Westpac slips 2.2pc, NAB drags by 2.1pc and Commonwealth Bank loses 2pc.

AUDUSD up 0.2pc early to US71.74c.

10.05am: Village Roadshow, BGH talks extended

Theme park owner Village Roadshow continues to negotiate with BGH Capital over its takeover deal, today extending the period for exclusive discussions for a fourth time.

The two parties had an initial deadline of June 18 but Village Roadshow today said the process deed had been amended, with an extension to August 6.

“VRL will continue to keep the market informed of any material developments in accordance with its continuous disclosure requirements,” it said.

Read more: Suspense as clock ticks for Roadshow

Village Roadshow’s Movie World reopens on the Gold Coast with new COVID-19 restrictions. Picture: NCA NewsWire /Steve Holland.

9.53am: Services lead private sector recovery: CBA

Recovery in the services sector gained momentum last month, with the latest PMI data showing the fastest rise in private sector business activity for over three years.

In the latest release from Commonwealth Bank, the purchasing manager index rose from 52.7 to 57.8 – thanks in large part by a growth in services activity.

Readings more than 50 indicate an improvement in activity from the previous month, while readings below 50 signal contraction.

The bank noted that a return to growth in manufacturing output had also contributed somewhat.

“The rise in business activity was accompanied by a further strengthening in demand. Order book volumes rose sharply in July, with the rate of increase the strongest for three years. However, the rebound in sales was driven by the domestic market as external demand continued to deteriorate. Foreign orders fell further in July,” the bank said.

9.40am: Strong commodities to support shares

Australia’s share market should be supported by offshore gains amid hope of a US budget deal, as well as stronger commodity prices and lower bond prices.

Overnight futures relative to fair value suggest the S&P/ASX 200 will open little changed after surging 1.9pc to 6037.55 on Tuesday.

Overnight, the S&P 500 rose 0.4pc to a 5-month high of 3306.51, the Nasdaq rose 0.4pc to a record high of 10941.17, and small caps surged again with the Russell 2000 up 0.7pc to a 2-month high of 1517.2.

Treasury Secretary Mnuchin said politicians were “not at the point of being close to a deal but we did try to agree to set a timeline that we’re going to try to reach an overall agreement, if we can get one, by the end of this week, so that legislation could then pass next week”. House Speaker Nancy Pelosi added she also hoped a deal could be reached this week.

The Energy sector led gains in the US market after WTI crude oil rose 1.7pc to $US41.70, while gold and iron ore miners also outperformed.

Spot gold rose 2.1pc to a record high close of $US2019.21 overnight and has touched $US2026.19 this morning. Spot iron ore rose 1.4 per cent to a 12-month high of $US118 and Dalian iron ore futures rose 2.7 per cent to CNY884.5 a tonne.

Meanwhile in the bond market, the US 10-year bond yield fell 5bp to a record low close of 0.5069pc.

Falling bond yields should underpin the valuation of the overall market and bond proxies in the real estate and infrastructure sectors in particular.

9.39am: What’s on the broker radar?

• AMP cut to Underperform – Macquarie
• ANZ raised to Neutral – Macquarie
• Bendigo Bank cut to Underperform – Macquarie
• IGO raised to Overweight – JP Morgan
• Incitec Pivot raised to add – Morgans
• Monadelphous cut to Neutral – UBS
• NAB cut to Underperform – Macquarie
• Panoramic Resources raised to Neutral – Macquarie
• Saracen Minerals cut to Underweight – JP Morgan
• St Barbara raised to Overweight – JP Morgan
• United Malt rated new Buy – Jefferies
• Village Roadshow cut to Neutral – Citi

9.22am: Helloworld retail interest falls short

Retail take up of Helloworld’s latest raising has fallen well short of its target – with just $790,000 in shares taken up by retail investors.

Following the group’s $41.6m institutional placement, it said today it had closed its retail entitlement offer with 655 valid applications, raising $550,0000, with a further $240,000 applied for in excess of retail entitlements.

That’s short of the $5.4m it had hoped to raise, and represents a take-up rate of just 17.2pc from eligible investors.

Shortfall of the issue was allotted to sub-underwriters of the offer.

Read more: Helloworld shuts stores, raises capital

Ben Wilmot 9.10am: Centuria raising $341m for data centre push

Data centres are set to become a much bigger part of the property sector with Centuria Industrial REIT on Wednesday picking up a Telstra data centre for $416m.

The move will be backed by a $341m rights issue to be handled by investment banks UBS and JPMorgan, and marks a major step up for the property fund.

The race for the data centre, handled by UBS, also drew UniSuper, Charter Hall and Dexus before Centuria sealed the deal.

Industrial property has been one of the few areas to come through the coronavirus crisis almost unscathed although there have been outbreaks at distribution centres in Melbourne.

Data centres, however, are in unprecedented demand as working from home and streaming services dramatically increase data usage.

Telstra has sold $1.5bn in assets in a program to strengthen its balance sheet.

Centuria Industrial REIT will pay $416.7m for the data centre at Clayton in Victoria.

9.01am: Virgin unveils new strategy

Virgin has unveiled a first look at its plans under Bain ownership, set to focus on its “core strengths” including the scrapping of the Tigerair Australia brand and the loss of 3000 jobs from its 9000-strong workforce.

In a release to the market this morning, Virgin said it was resetting the airline to meet lower global and Australian demand, but would maintain its commitment to regional and charter flying.

International routes will be suspended until the global market recovers from COVID-19, which could be two to three years away.

“Our initial focus will be on investing in the core Virgin Australia domestic and short-haul international operation alongside our 10-million-member strong Velocity Frequent Flyer program, continuing to offer an extensive network of destinations, a domestic lounge network and value for money for customers,” chief Paul Scurrah said.

“While these changes are important to manage the impact of COVID-19, they involve some very tough decisions. We expect approximately 3,000 roles will be impacted as a result of the changes announced today.”

He added that the airline intended to secure approximately 6000 jobs when the market recovers, and as many as 8000 into the future.

The group will move to an all-Boeing 737 main line fleet – removing ATR, Boeing 777 and Airbus A330 and Tigerair Airbus A320 aircraft.

Read more: Virgin reboot: Lounges in, Tigerair grounded

Virgin Australia confirms 3000 jobs to go from airline; Tigerair discontinued and all Boeing 737 fleet

— Robyn Ironside (@ironsider) August 4, 2020

8.27am: Telstra sells data centre

Telstra says it is selling its data centre at Clayton in Victoria to Centuria Industrial REIT for $416.7m.

The deal includes a leaseback arrangement which means Telstra will retain ownership of all IT and telecommunications equipment, as well as ongoing operations and responsibility for building upgrades and repairs, future capex requirements and security.

Telstra says the sale will have no impact on customers.

The lease is for an initial period of 30 years with two 10-year options to extend.

Telstra CEO Andrew Penn said the sale was part of Telstra’s strategy to monetise up to

$2bn worth of assets to strengthen its balance sheet.

“This deal means we have now reached over $1.5 billion,” Mr Penn said.

7.56am: Can gold go higher?

Gold closed above $US2000 an ounce for the first time on record. Can it keep heading higher?

The most-active gold futures contract gained $US34.70, or 1.7pc, to $US2021, the highest close on record. (Gold’s performance, however, looks positively muted next to silver, which has gained 5.9pc to $US25.86.)

These are astonishing moves, and rather than a sign of fear, as gold’s rise is sometimes taken to be, they’re more a sign that investors are worried about a possible uptick in inflation. For good reason too as the Federal Reserve continues to buy massive amounts of bonds and the government spends, spends, spends.

“Gold has settled at its highest levels ever, and the message is clear: gold positioning indicates that investors’ attitudes toward the metal have changed amid the public health crisis, economic turbulence, and extremely easy monetary policy actions,” writes RBC strategist Christopher Louney. “Uncertainty is high amid the multiple crises, and political as well as geopolitical tensions are proliferating. As such, gold continues to step into its role as a ‘perceived safe haven’ quite well.”

So how high can gold prices go? We like maths, when it’s available, and BofA Securities metals strategist Michael Widmer provides it. He notes that a combination of the US Dollar Index at 90 – it’s currently at $US93.40 – and real interest rates at minus 2pc, gold would be worth $US2500 an ounce. With the Dollar Index at 85, real interest rates would have to be at minus 1.75pc. Real rates are currently around minus 1pc.

To put it simply, if the dollar interest rates adjusted for inflation continue to fall, $US2500 gold doesn’t seem out of the question.

Dow Jones Newswires

7.35am: Smartpay CEO quits

EFTPOS provider Smartpay says CEO Bradley Gerdis has resigned and will step down from the role on September 1.

He will be replaced by current COO Marty Pomeroy.

Mr Gerdis will “remain engaged” in the company for a three-month transition.

Chairman Greg Barclay said: “Bradley has made an exceptional impact in his time with the business. Under his leadership we have cemented our leading position in the NZ payments market and built a fast-growing business in Australia which is seeing substantial success.”

6.40am: Disney loses nearly $US5bn

Walt Disney Co. said it lost nearly $US5 billion in the quarter ended June 27, as the majority of its business segments reeled amid global efforts to curb the spread of the coronavirus by shutting down public spaces.

Crippled by sweeping social-distancing measures, Disney’s earnings fell drastically during the company’s third fiscal quarter as it lost $US4.72 billion, versus a profit of more than $US2 billion in the year-earlier period. Total revenue fell by 42pc to $US11.8 billion from $US20.3 billion in 2019.

As expected, Disney’s theme-parks business was hit the hardest. The company estimated the pandemic had a roughly $US3.5 billion negative impact on the segment, which it said lost $US1.96 billion in the quarter, compared with $US1.72 billion operating income a year earlier.

The company’s domestic parks, resorts, cruise lines and Disneyland Paris were all closed during the entire quarter. Disney’s Shanghai Disney Resort and Hong Kong Disneyland were able to operate for a portion of the quarter.

Tourists visit Shanghai Disneyland after its reopening on May 11. Picture: Getty

Dow Jones Newswires

6.20am: ASX to open lower

Australian stocks are set to slip at the open, even as Wall Street posted gains on optimism about the passage of a US economic aid package.

At 6am (AEST) the SPI futures index was down 15 points, or 0.3 per cent.

Yesterday, Australian stocks added 1.9pc.

The Australian dollar was this morning higher at US71.60c.

6.10am: US stocks edge higher

US stocks ticked up modestly as investors held out cautious hope for progress in Washington on an aid package to support an economy roiled by a pandemic.

The Dow Jones Industrial Average was up 0.62 per cent as of the 4pm close of trading in New York. The S&P 500 rose 0.36 per cent. The technology-heavy Nasdaq Composite rose 0.35 per cent.

Investors are monitoring negotiations among Democratic leaders and White House officials on a new coronavirus aid package. The two sides remain at odds over whether to cut a $US600-a-week federal jobless supplement or provide aid to financially strapped states and localities.

“There’s a bit of a pause if you will, as investors are waiting for confirmation on what the shape of the stimulus will be,” said Lori Heinel, State Street Global Advisors’s deputy global chief investment officer. “Clearly the market is looking for another sugar rush.”

Many investors are on the sidelines of the stock market as they parse through the toll of COVID-19, which left millions unemployed and up-ended the economy. They are monitoring if a recent decline in new cases will hold up and how aggressively states will be able to stem the spread of the virus.

“One day’s data doesn’t mean anything, but I’m looking at whether that’s the beginning of a trend,” said Fahad Kamal, chief market strategist at Société Générale’s private banking and wealth management division Kleinwort Hambros.

Although the pandemic has crimped profits for many businesses, more than three-quarters of S&P 500 companies have reported earnings, with the majority beating analyst expectations, according to UBS. This has led estimates for the third quarter to rise by 2.5pc since the end of June.

Robust earnings from tech companies have lifted US stock markets higher in recent weeks. The advances by big tech stocks is acknowledgment by investors that certain companies have become major beneficiaries as people rely more on software, cloud computing and social media to stay connected and to work from home.

But the tech-heavy index showed muted gains Tuesday, and lagged behind the Russell 2000 index’s 0.62pc rise. This suggested that investors have questions about whether some tech names could be overpriced.

Front-month Comex Gold for August delivery, gained $US35.20 per troy ounce, or 1.79pc to $US2001.20. Front-month gold is on pace for its 8th record close in 9 trading days.

Richard Bernstein, chief investment officer of Richard Bernstein Advisors, said that gold’s march is one indication that investors are uncertain about whether stimulus measures by Federal Reserve and U.S. government will translate to a broader recovery.

“The market does view it as a good cushion,” he said, “But it’s very uncertain over how it works it way into the economy".

In the Asia-Pacific region, Hong Kong’s Hang Seng climbed 2pc, leading gains in the region. Japan’s Nikkei 225 gained 1.7pc.

Dow Jones

5.50am: Fox posts lower profit

Fox Corp. reported lower profit for its latest quarter, hit by a fall in advertising revenue amid a pandemic-related pullback in live sporting events.

Fox said revenue dropped 3.8pc to $US2.42 billion from a year earlier, hurt by advertising revenue which fell 7.6pc. Affiliate revenues rose slightly due to contractual price increases, especially from distribution-agreement renewals, however, net subscribers declined. Revenue pulled slightly ahead of analysts’ expectations of $US2.39 billion, according to FactSet.

Cable-network programming revenue fell 2.2pc to $US1.27 billion in the quarter, mainly as a result of lower advertising revenues from live sporting events. However, the company recorded higher advertising revenues at Fox News. Television revenue declined 6pc from a year ago to $US1.11 billion.

Fox posted a profit of $US122 million, or 20 cents a share, for the quarter ended June 30, down from $US454 million, or 73 cents a share, in the year-earlier period. Excluding special items, earnings were 62 cents a share. Analysts projected adjusted earnings of 58 cents a share.

The company, whose businesses include Fox News, the Fox Broadcast Network, Fox Sports and local television stations, was spun off from 21st Century Fox and began trading as a separate public company in March of last year. Fox and The Australian’s parent News Corp share common ownership.

Dow Jones

5.45am: Hotel group Accor to cut 1000 jobs

France’s Accor, the world’s sixth largest hotel chain, said Tuesday it was slashing 1000 jobs worldwide in a major cost cutting plan accelerated by the effects of the coronavirus pandemic.

The group, which runs high-end chains such as Raffles and Sofitel and budget brands like Ibis, plans to cut costs by 200 million euros by 2022.

The pandemic has led to the closure of several Accor hotels around the world and 1,000 of the group’s 18,000 employees will lose their jobs, Financial Chief Jean-Jacques Morin said.

Sofitel Sydney Wentworth

AFP

5.40am: Gold hit $US2000 for first time

Gold prices hit $US2000 an ounce for the first time, the latest surge in a commodity seen as a refuge during economic uncertainty.

The precious metal hit the symbolically important benchmark before retreating somewhat then crossing the line again about 30 minutes later.

Gold prices have risen more than 30 per cent this year as the coronavirus outbreak has weakened the economy and clouded the global financial outlook.

Also weighing on investors were concerns over whether the United States will pass another spending measure to support the world’s largest economy as it weathers a prolonged and deadly coronavirus outbreak.

Democrats and Republicans in Congress have yet to strike a deal despite days of negotiations.

“The gold price is viewed as buying opportunities,” Commerzbank said in an analysis.

“This comes as no surprise in view of the ongoing high numbers of new COVID-19 cases, the continuing cliffhanger in US Congress over an additional economic aid package, ever more widespread negative real interest rates and highly-valued stock markets.”

AFP

5.35am: Markets buoyed by US stimulus optimism

Stock markets recovered from early weakness as optimism about a fresh US economic stimulus package crept back into trading rooms.

Democrats and Republicans are battling to hammer out a new package to help the US economy recover from the ravages of the pandemic, with analysts pointing to reports claiming good progress had been made.

“There’s a big desire from both parties to get some kind of stimulus passed. I think the market is expecting that,” said Bob Phillips, at Spectrum Management Group.

The US dollar weakened on expectations of more money being injected into the economy.

Adding to optimism about a recovery, already fuelled by upbeat data in recent days, were forecast-beating US factory order numbers published Tuesday.

Europe’s stock markets ended the session mostly higher, the main exception being Frankfurt, having clawed back earlier losses. London gained 0.1 per cent and Paris added 0.3 per cent.

Earlier, Asian stocks had rallied on the back of Wall Street’s strong overnight performance which saw the Nasdaq establish a new record high.

AFP

5.30am: Ford CEO to step down

Ford announced that Jim Hackett would step down as chief executive and be replaced by longtime auto executive Jim Farley as the car giant repositions itself.

Hackett, 65, will hand over the job to Farley, 58, on October 1, but stay on as a special Adviser through March 2021. Farley joined Ford in 2007 after a long tenure at Toyota and currently serves as chief operating officer.

The move comes as Ford introduces more electric car models and investors more aggressively in autonomous technology.

AFP

5.28am: EU launches Fitbit probe

The European Commission launched an “in-depth investigation” into whether US tech giant Google’s planned $US2.1 billion purchase of smartwatch maker Fitbit would give it an unfair market advantage.

“Our investigation aims to ensure that control by Google over data collected through wearable devices as a result of the transaction does not distort competition,” EU competition commissioner Margrethe Vestager said.

In November last year Google announced it had reached agreement to buy Fitbit, which produces wearable fitness trackers and watches that communicate with a health monitoring app.

But Google’s own smartwatch performs a similar function and Brussels is concerned that acquiring Fitbit’s user data will strengthen its already powerful position in targeted advertising.

Australia’s ACCC is also examining the deal.

Fitbit’s Charge 4 Picture: Supplied

AFP

5.25am: BP plunges to loss

BP plunged into a quarterly net loss of almost $US16.85 billion as the coronavirus pandemic ravaged oil demand and prices, triggering huge asset writedowns, the British energy giant announced Tuesday.

The company responded by cutting its dividend for the first time since the Deepwater Horizon oil rig disaster in 2010 that damaged BP’s finances and reputation.

“The ongoing severe impacts of the COVID-19 pandemic continue to create a volatile and challenging trading environment,” BP said in Tuesday’s earnings statement.

“Looking ahead, the outlook for commodity prices and product demand remains challenging and uncertain,” it added.

The quarterly loss after tax of nearly $US16.85 billion compared with net profit of $US1.82 billion in the second quarter of 2019, BP said.

AFP

5.20am: France suspends Morgan Stanley

Regulators in France have suspended US investment bank Morgan Stanley from acting as a primary dealer in French government bonds for at least three months after it was found to have manipulated prices.

As a recognised official trader, Morgan Stanley was allowed to take part in sales of French government debt managed by the state agency AFT, which imposed the sanction.

AFT said it had decided to suspend Morgan Stanley’s trader status “for a minimum period of three months, with effect from 4 August 2020, for … transactions that seriously affected the liquidity of the French sovereign bond market.” In December, france’s financial markets regulator fined Morgan Stanley 20 million euros over market manipulation at the height of the Greek debt crisis.

Regulators said Morgan Stanley had manipulated French and Belgian bond prices in June 2015 with the aim of causing an “abnormal and artificial rise” in sovereign bond prices and reselling them for a profit.

It said the bank bought up massive amounts of futures contracts for French and German bonds on June 16, 2015 in just 15 minutes as part of the plan.

Morgan Stanley denied manipulating markets and at the time described the fine as “disproportionate” and “unreasonable” and said it would appeal.

AFP