Trading Day: ASX extends record run past 7000 on trade deal signing
Australian stocks pushed further into record territory, setting a fresh high at the close amid US-China optimism.
- CSL breaks past $300 apiece
- Couche-Tard goes further into Caltex data room
- Trump hails ‘momentous’ trade deal
- Ords cuts Super Retail on bushfire risk
That’s it for the Trading Day blog for Thursday, January 16. The Australian stocks market rounded out its third consecutive record-breaking session at all-time highs of 7041.8. The signing of a “momentous” trade deal between the US and China fuelled the rally, led by a 1.7 per cent lift in tech stocks. Quarterly reports have prompted a lift in Woodside while South32 and Whitehaven finished flat.
4.46pm: Record-breaking heavyweights lift ASX
Records were smashed across the benchmark on Thursday, not just on the index but for 22 stocks in the top 200.
CSL was a standout early, becoming the first local stock to rise above $300 as it set a record high of $301.04. The stock settled to a gain of 1.1 per cent at $300.89.
Tech was the best performing sector as the trade deal gave more clarity on intellectual property, the local sector finishing up by 1.7 per cent led by a 4.3 per cent jump in Altium to $38.14.
WiseTech lifted 4.1 per cent to $25.32, Xero rose by 1.9 per cent to $86.21 after a record of $86.48 and Afterpay put on 1.3 per cent to $33.24.
The major banks finished higher led by a 0.96 per cent rise in Commonwealth Bank as it closed at a 12-month high of $84.46.
Westpac edged up by 0.85 per cent to $24.90, National Australia Bank gained 0.75 per cent to $25.36 as it cut its savings rates and ANZ advanced by 0.7 per cent to $25.42.
Here’s how the biggest movers finished up:
4.40pm: Westpac names Carter for panel
Westpac has appointed Colin Carter as the final member of its three-member advisory panel assessing board risk governance and accountability in relation to issues raised in the Austrac scandal.
Mr Carter has been on the board of Lendlease since April 2012 and has been a member of boards of Wesfarmers, Seek and Origin Energy.
He joins previously announced panel members Ziggy Switkowski and Kerry Schott.
4.13pm: ASX closes out at daily high
The ASX notched its third record-breaking session on Thursday, shooting past a key 7000 barrier on a wave of optimism after the signing of a phase one US-China trade deal.
In the US, the Dow Jones Industrial Index lifted past 29,000 for the first time, providing a strong lead for Australian shares, which smashed past 7000 within minutes of the open.
Positive momentum was maintained through the session, pulling the ASX200 to close the day at its daily highs of 7041.8, a 47 point or 0.67 per cent gain for the session.
Meanwhile, the All Ords lifted 45 points or 0.63 per cent to 7158.6.
3.25pm: ResMed settles US civil action
Medical-equipment manufacturer ResMed agreed to pay about $37.5 million to settle civil claims that it violated a federal law prohibiting kickbacks, Justice Department officials said Wednesday.
San Diego-based ResMed develops equipment and services to treat respiratory disorders and other chronic diseases. The case originated with whistleblower complaints, according to the department.
ResMed said in a statement it didn’t violate any laws. A spokesman said ResMed denies any wrongdoing.
“We are pleased to put this matter behind us and avoid the expense, inconvenience and distraction it would cause to gain the favourable outcome we deserve,” the company said.
Last July, ResMed executives told investors the company had reached what was then a tentative agreement with the Justice Department regarding the matter.
The company allegedly provided other medical-equipment manufacturers with free telephone call centre services that allowed them to order supplies for patients with sleep apnoea, according to the Justice Department.
Local shares in the company were trading higher by 0.26 per cent in afternoon trade, last at $23.05.
Dow Jones Newswires
2.43pm: Surge in loan repayments bad for retail: UBS
November credit data showed a slight lift in personal loans but record repayments will maintain pressure on retail, according to UBS.
Following the release of the latest figures from the ABS, economist George Tharenou notes that repayments on credit cards spiked to a record high in November, likely the result of policy stimulus being used to pay down debt.
The stock of personal credit is down -5 per cent year on year for November.
“The surge in new loans has been largely offset by a faster pay-down rate on the back-book, meaning that credit growth actually slowed further in recent months to a cycle low; albeit we still expect modest acceleration ahead. We still think the economy needs more policy stimulus,” Mr Tharenou says.
2.37pm: Record Aussies travelling overseas
Perhaps it’s the tax refunds – but a record 972,700 Aussies travelled overseas in November, up almost 3 per cent in the month and the largest increase in six months.
CommSec chief economist Craig James reports that Japan is one of the countries favoured for holidays, but South Korea, Samoa and New Caledonia are also seeing record flows.
“More people leaving our shores for holidays is good news for the airlines, but may result in fewer dollars spent at Australian retailers,” he said in CommSec’s latest analysis.
The gap between Aussies travelling abroad and tourists coming to Australia is the biggest in 4½ years – and despite a soft Aussie dollar. Growth in tourist numbers was flagging ahead of the bushfires.
But the US-China trade deal may serve to lift tourist numbers from mainland China – currently down 1.9 per cent on the year, Mr James said.
2.10pm: Biotech spin-off edges higher in debut
Junior biotech Nyrada, a spin-off from listed Noxopharm, has edged higher in its first hours of trade after raising $8.5m in its IPO.
Shares in the company were offered at 20c apiece, and traded as high as 30.5c in its debut on Thursday.
Funds raised in the IPO will be used to progress the development of four of its drug candidates, including one to limit the extent of secondary brain damage after a stroke or traumatic brain injury.
Nyrada was spun out of Noxopharm (NOX) in 2017 to pursue non-oncology opportunities.
“Nyrada has an unusual combination of drugs targeting some of the world’s largest market opportunities, novel medical insights and relatively capital light development programs,” chairman John Morre said.
“To match the opportunity we have assembled a Board with an unusual blend of domain and business development expertise to potentially create outsized shareholder returns.”
NYR shares last at 24c.
ASX welcomes Nyrada Inc. $NYR raised A$8.5 million after receiving strong support from investors in Australia as well as from overseas. https://t.co/uG1jmtKrq6 #ipoonasx #ListASX pic.twitter.com/WNYspJgoW9
— ASX 🛠The heart of Australia's financial markets (@ASX) January 16, 2020
David Swan 2.04pm: Telstra joins global telcos in 5G forum
Telstra has banded together with other telcos globally to create a new 5G forum, an exclusive club it says will further develop specifications for the new technology.
The 5G Future Forum, launched on Thursday, was formed to “collaborate to develop interoperable 5G specifications across key geographic regions”.
The telcos involved are América Móvil, KT, Rogers, Telstra, Vodafone and Verizon, and they’ll focus on building out 5G across the Americas, Asia-Pacific and Europe.
TLS shares last up 0.8pc to $3.87.
1.34pm: Michael Hill steady despite retail warning
Shares in jewellery retailer Michael Hill International are steady in afternoon trade, after warning the Australian retail market was particularly challenging.
The chain posted a second-quarter same-store sales rise of 4 per cent on-year in Australia.
All store sales for the company, which also has outlets New Zealand and Canada, rose 3.3 per cent to $203.5 million in the quarter, it said.
“Pressure on gross margin continued in all markets, with deep discounting from many competitors,” Michael Hill said.
MHJ shares are steady at 7.1c.
1.02pm: Stocks hold ground past key level
The ASX200 is holding is ground past a key 7000 barrier amid a wave of investor confidence following the signing of a phase one US-China trade deal.
Shares touched a high of 7041.6 in the first hour of trade, and have maintained those levels to trade up 40 points or 0.57 per cent to 7034.7 at 1pm.
All sectors are higher, led by a boost in tech stocks, as the deal provides some reassurance of IP protection.
Here’s how the biggest movers on the Top 200 are shaping up:
12.38pm: Ords cuts Super Retail for bushfire risk
Ord Minnett has downgraded Super Retail to Hold, citing downside risk from the group’s exposure to bushfires, especially its BCF stores.
In a note to clients, Ords noted that the camping and outdoor focus of the BCF chain was a direct risk to earnings as less consumers took holidays, coupled with the group’s regional store location skew across its Supercheap Auto and Macpac chains.
Adding to that, it said an indirect threat for consumer discretionary stocks more broadly was a reallocation of funds from retail spending to donations.
Consequently, Ords cut its like-for-like sales forecasts for BCF and Supercheap Auto, reducing its earnings per share estimates by around 2pc in FY20 and 3pc in FY21.
SUL shares last down 5.2 pc to $9.85.
11.58am: New home loans rise 1.8pc in Nov
The value of new home loans rose by 1.8 per cent in November last year, underpinned by owner occupiers, according to the latest ABS figures.
In the owner occupier segment, loan value rose by 1.6 per cent – its sixth straight month of growth.
The number of loan commitments to owner occupier first home buyers fell 0.9 per cent in November following a 0.4 per cent fall in October – the first back-to-back fall since January 2019.
11.48am: Suitor one step closer to Caltex: RBC
Caltex’s agreement to open up its data room to Alimentation Couche Tard brings it one step closer to the pump, according to RBC.
Analyst Irene Nattel notes that the situation is moving forward as anticipated, after the Caltex board officially rejected the $34.50 per share deal.
“A potential acquisition of Caltex would be consistent with ATD’s 5-year plan to double the size of the company through a combination of strong organic performance and acquisitions, and management’s commentary on the attractiveness of the Australian market,” Ms Nattel says.
“Based on conversations with management, Australian c-store networks are compelling due to a well-developed fuels industry, while generally undermanaged inside store operations provide meaningful opportunity to surface incremental value.”
She adds that the suitor typically looks for 35pc to 50pc earnings accretion from cost synergies, and would remain disciplined on price paid, “offering a fair price for CTX shareholders while retaining upside for ATD shareholders”.
CTX shares last flat at $35.56.
11.27am: Traders nervous as shares surge
Traders are expressing a degree of nervousness as the sharemarket continues to surge.
A 5.3pc year-to-date rise in the S&P/ASX 200 is the strongest in decades and its PE multiple has hit a record high near 18 times but despite some similarities to 2000 and 2007, the lack of leverage this time around is somewhat reassuring for investors.
It lessens the risk of forced selling from margin calls and a consequent “snowballing” effect in the event that the market dips for any reason.
Thus there seems to be somewhat less chance of a self-sustaining sell-off in shares occurring than there was in 2007 but there’s no doubt that record-low interest rates are artificially boosting the sharemarket. Dallas Fed chief Robert Kaplan said as much in a Bloomberg TV interview last night.
In that regard, anything that threatens the narrative of falling interest rates could be a problem for shares.
ASX200 last up 0.6pc at 7036.
11.14am: Djerriwarrh posts $24m profit
Listed fund-Djerriwarrh has posted a first half profit of $24.1 million, up 1.4 per cent on the previous corresponding period.
Djerriwarrh is linked to the AFIC family of listed funds, but this fund, which has more than $800m under management, is tilted towards generating a fully franked income that beats the S&P/ASX 200. This means it is skewed to higher-dividend yielding companies.
The fund said while dividend income for the half year was steady (excluding demerger dividends), three of the four major banks have cut their dividends over the past 3 years.
Djerriwarrh’s total portfolio return, including franking, for the six months to end-December was 3.8 per cent, in line with the return of the S&P/ASX 200 Accumulation Index return.
The major contributors (including dividends and option income) to Djerriwarrh’s portfolio performance over the six-month period were CSL, Macquarie Group, Wesfarmers, James Hardie Industries and Sydney Airport.
10.57am: CBA downgraded ahead of results: BP
Commonwealth Bank has been downgraded by Bell Potter, as it forecasts the bank to maintain its first quarter earnings momentum at its upcoming results.
Analysts led by TS Lim retained the bank’s $86 price target, but trimmed their rating to hold after a lift in its shares over the past three months.
In morning trade on Thursday, CBA was higher by 0.8 per cent to $84.33.
Bell Potter has tipped the bank to hand down statutory net profit after tax of $5.79bn, including $1.5bn from the sale of its Colonial First State arm.
“Unaudited cash NPAT on a continuing basis was ~$2.35bn in 1Q20 and our forecast implies ~$2.00bn in 2Q20, again another conservative figure and probably justified given lower expected general insurance income from current bushfire claims,” Mr Lim said.
10.52am: Futures expiry could be adding to rally
Activity related to today’s futures expiry could be exaggerating the local gains.
The ASX200 has surged 0.7pc to a record high of 7041.6, smashing futures which had suggested it would open up 0.3pc at 7015.
The exaggerated rise could just be the effect of buyers coming in on the break of 7000 but GFC veterans will recall that the November 1, 2007 peak at 6851.5 was also an expiry day.
Indeed there was some funny business that day, sparking an ASX investigation.
S&P/ASX 200 last up 0.6pc at 7035.
10.36am: Which stocks are leading the rally?
Strength in tech stocks is leading the rise on the local benchmark to record highs of 7041.6.
The US-China trade deal is good news for tech names, after agreement on provisions to protect intellectual property rights, and eases competition concerns.
Tech is up by 1.3 per cent, led by a 0.82pc jump in Afterpay, 2.5pc lift in Altium and 1.7pc gain in Xero.
Fund manager Magellan is among the biggest movers in the top 200, adding 1.3 per cent to touch a new record high of $64.26.
QBE and Pendal too are in the top 5, adding 2.1pc and 2.2pc respectively thanks to broker upgrades.
ASX200 last up 0.56 per cent to 7033.7.
10.23am: CSL breaks past $300 apiece
CSL has surged above the key psychological barrier of $300 a share.
The healthcare giant rose 1pc to $300.58, making its shares the most expensive in the market.
It comes as Credit Suisse lifts its target on the stock, from $305 to $320.
The broker notes that despite the stock trading at a 39.3x 12 month forward price-to-earnings ratio, and a 90 per cent premium to the ASX200 Industrials, it was still justified given its “strong market position in a niche industry that has robust fundamentals”.
CSL last up 0.8pc at $300.00.
RECORD high for $CSL today 🌟
— Julia Lee (@JuliaLeeAU) January 16, 2020
$10k invested in IPO in 1994 now worth a whooping $3.9 MILLION.
$10,000 invested 2000 worth $410,000
$10,000 invested 2010 worth $92,000
$10,000 invested a year ago worth$15,000
CSL share price from 1994 below pic.twitter.com/mm5BDkvC4q
Bridget Carter 10.20am: Singtel weighs $2bn Optus tower sale
DataRoom | Singaporean telecommunications provider Singtel is thought to be weighing a $2 billion sale of its Optus telecommunications towers.
Sources say that Bank of America has undertaken a scoping study for a sale, although the bank declined to comment.
Requests for proposals are said to have been sent out to investment banks for mandates to sell the assets, with a sale to fund growth and the rollout of its 5G network.
Sources say that there was talk late last year that a divestment could be afoot.
It comes as Australian telecoms providers remain under pressure to find ways to fund the rollout of 5G infrastructure, and late last year, Optus tower and satellite assets were in focus.
Optus has earlier said it had no plans to sell its satellites, but others have believed for some time that a sale is on the cards.
10.13am: Stocks edge further into record territory
Australia’s sharemarket has set an all-time high above 7000 points.
The benchmark S&P/ASX 200 share index rose 40 points or 0.6 per cent to a record high of 7037.6 points in early trading after Wall Street also set records after the signing of a US-China trade deal.
The local bourse is having its best New Year rise in more than three decades with a 5.3 per cent gain year to date.
It comes after the world’s major central banks responded to the 2018 economic slowdown and sharemarket sell-off by cutting interest rates and adding a vast amount of liquidity.
The S&P/ASX 200 is now trading on a record-high price-to-earnings ratio near 18 times based on earnings per share estimates for the coming 12-months. It is also trading on a decade-low dividend yield near 4 per cent.
The legacy All Ordinaries index rose 0.6 per cent to 7152 points after breaking 7000 last week.
S&P/ASX 200 companies hitting record highs today include Wesfarmers, National Storage REIT, REA Group, James Hardie, Premier Investments, Xero, Qube Logistics, Sonic Healthcare, CSL, Cochlear, Aristocrat, Magellan Financial, Breville Group, Domain and Downer.
10.06am: Early lift sends ASX past 7000
The local market has smashed past a key 7000 level in opening trade, setting a new high of 7007.7 in just the first minutes of trade.
It comes after a record-breaking session on Wall Street, where the Dow Jones Industrial Index pushed past 29,000 for the first time.
9.51am: Alcoa drops on weak quarterly
Alcoa reported fourth-quarter and full-year earnings Wednesday evening. The aluminium producer lost 31 cents a share, worse than the 21-cent loss Wall Street expected. The stock is down about 2 per cent in after-hours trading.
It’s a weak end to a tough year. Alcoa lost money in each quarter in 2019, losing about $1 a share overall. Including all the charges for shuttering assets and restructuring, full-year losses reached more than $6 a share.
The price of aluminium — Alcoa’s key commodity — are flat year over year. The price of alumina — another key commodity and a precursor to aluminium — fell year over year. Falling commodity prices hurt results. The weak environment led the company to close underperforming assets.
“In 2019, we acted to further strengthen Alcoa, completing the divestiture of uncompetitive assets, modernising labour agreements in three countries, implementing a new operating model,” said CEO Roy Harvey in the company’s news release.
“While the market in alumina and aluminium challenged us, we maintained a strong cash balance of nearly $900 million and drove operational stability.”
The weakness will likely rub off on its locally-listed joint venture partner Alumina.
Dow Jones Newswires
9.37am: ASX set to crack 7000
Australia’s sharemarket is poised to hit fresh record highs today with the benchmark S&P/ASX 200 index expected to open up 0.3pc at 7015 points versus the current all-time high of 6996.8.
At that point the index will be trading on a new record high PE ratio near 18 times based on 12-month forward EPS estimates, and a decade-low dividend yield below 4pc.
It comes after the S&P 500 closed up 0.2pc at a record high of 3289.29 after rising as 0.5pc to an all-time of 3298.66 intraday.
The phase-one US-China trade deal signed overnight largely met expectations for commitments on additional goods purchases, intellectual property and technology protections, market barriers and currency.
Bond yields were compressed by surprisingly-weak UK CPI data which lifted expectations of BOE easing this month and pushed the US 10-year yield down 3bps to 1.78pc. US PPI missed estimates while the Empire Fed Manufacturing survey was slightly stronger than expected.
Results from Bank of America and Goldman Sachs disappointed, sending shares in the former down by 1.8pc, while the latter ended flat.
Dallas Fed chief Robert Kaplan said US rate cuts, balance sheet expansion and guidance “are contributing to elevated risk-asset valuations … I think we ought to be sensitive to that.” That suggest the risk of financial instability from a surging sharemarket may be becoming an issue for the Fed.
November housing finance data are due at 11.30am.
S&P/ASX 200 last 6995.8 points.
Nick Evans 9.31am: Woodside well positioned for 2020 lift
Woodside Petroleum says it expects to lift output from its gas projects in 2020, after delivering an improved performance from its operations in the December quarter.
Woodside said it delivered production of 25.7 million barrels of oil equivalent (MMboe) in the December period, according to today’s fourth quarter production report, a 3 per cent lift on the September period, saying it is well positioned to lift output in 2020.
The oil and gas major, which this month ticked off on development of the Sangomar field off Senegal, said it produced 89.6MMboe for the full year 2019, and flagged a 7.5 to 15 per cent lift in 2020, to a range of 97MMboe to 103MMboe.
9.28am: Whitehaven output, sales drop
Whitehaven Coal reported steep drops in coal production and sales in the December quarter, after its Maules Creek mine was roiled by labour shortages and dust caused by eastern Australia’s ongoing drought, and it completed a longwall change at its Narrabri mine.
Whitehaven produced 3.1 million tonnes of coal in the three months through December, down 58pc on a year ago.
Coal sales of 4.5 million tonnes were 17pc lower than a year ago.
Whitehaven said its thermal coal fetched an average price of $US66 per tonne in the December quarter, while its metallurgical coal — used in steelmaking — achieved an average price of $US87 a tonne.
“The dynamics of the steel market are impacted by the trade tensions between China and the US, so the signing of the Phase 1 trade deal should have a welcome positive impact,” Whitehaven said in its outlook statement.
Dow Jones Newswires
9.19am: South32 trims coal output targets
South32 says its has reduced activity at its South African Energy Coal project in response to market conditions, tipping production at the bottom end of its target range.
That’s as it finalises the sale of the its stake in the coal project to Seriti Resources, expected to close in the December 2020 half year.
Presenting its quarterly results, South32 said metallurgical coal produced in the second quarter came in at 1.21 million tonnes, 1.7 per cent above Bloomberg consensus, along with 248,000 tonnes of aluminium, a 0.4pc year-on-year jump.
9.13am: Wisr raises $33.5m
Non-bank lender Wisr has raised $33.5m to accelerate growth of its platform, supported “exceptionally” by institutional and sophisticated investors.
Shares in the placement were offered at 18.5c per share, representing a 15.9 per cent discount to its previous five-day volume-weighted average price.
“Wisr will use the proceeds of the Placement to support the scaling of the core lending business, the ongoing development of our ecosystem of category-defining products, continue to attract the best talent from across industries in Australia and strengthen the balance sheet,” chief Anthony Nantes said.
Bridget Carter 9.09am: APA investors brace for $1bn raise
DataRoom | Investors in the $14bn APA are bracing themselves for a $1bn equity raising by the company as the gas pipeline owner closes in on a $2bn acquisition target in the US.
Sources say APA has been working on a deal to buy an asset in the US for up to seven months and an announcement may not be far away.
There are suggestions that the company, under the control of new chief executive Rob Wheals, is planning to outlay $2bn on a US-based gas interconnector asset and will fund the transaction through a $1bn equity raising. The remainder will be paid for with debt.
APA has declined to comment. However, it is understood Mr Wheals has briefed parties in the market about the likely deal and on the funding plans.
9.03am: What’s impressing analysts, what’s not
- Beach Energy cut to Neutral – JP Morgan
- Commonwealth Bank cut to Hold – Bell Potter
- Domain cut to Sell – UBS
- Incitec raised to Equal-Weight – Morgan Stanley
- National Storage REIT cut to Sell – Morningstar
- Pendal raised to Buy – Goldman
- Perpetual price target raised 7.1pc to $40.60 – UBS
- QBE raised to Outperform – Credit Suisse
- Resolute Mining target price raised 8pc to $1.40 – Macquarie
- Santos cut to Hold- Morgans
- Saracen Minerals rated new Overweight – JP Morgan
- Sims Metal cut to Sell – Morningstar
- Super Retail Group cut to Neutral – JP Morgan
8.52am: Dow closes above 29,000
The Dow Jones Industrial Average closed above 29,000 for the first time after President Trump signed an initial trade pact with China, halting a two-year trade dispute between the world’s two largest economies.
The blue-chip index advanced 90.55 points, or 0.3pc, to 29,030.22. The S&P 500 climbed 6.14 points, or 0.2pc, to 3289.29. The Nasdaq Composite rose 7.37 points, or less than 0.1pc, to 9258.70.
Both the Dow and the S&P closed at records, while the Nasdaq is within 0.2pc of Monday’s high.
As part of the trade deal, signed in a pomp-filled ceremony at the White House, Washington suspended planned tariff increases on Chinese imports and cut the rate of some existing tariffs. Meanwhile, Beijing committed to ramp up purchases of US goods and services by $200 billion over the next two years.
The pact also included provisions to protect intellectual-property rights of US companies in China, though it fell short of what the US had wanted. A host of other difficult issues have been postponed to the next round of trade negotiations.
Dow Jones Newswires
8.40am: Couche-Tard invited into Caltex data room
Caltex has confirmed it has entered into a confidentiality agreement with suitor Couche-Tard to potentially raise its takeover offer.
At the end of last year, Caltex knocked back a $34.50 per share cash bid for the group, saying it did not represent compelling value for shareholders.
The latest agreement between the two gives Couche-Tard access to select non-public information, hoped to allow it to formulate a revised proposal that “appropriately reflects the value of Caltex”.
“There is no certainty that the discussions between Caltex and ATD will result in ATD improving its indicative cash price or in ATD making a binding proposal,” Caltex said.
8.10am: US stocks post new records
The Dow and S&P 500 edged to records following a volatile session after the US and China signed a long-awaited trade agreement.
The Dow Jones Industrial Average gained 0.3 per cent to finish at 29,030.22, and the broadbased S&P 500 added 0.2 per cent to 3,289.30.
The tech-rich Nasdaq Composite Index climbed 0.1 per cent to end at 9.258.70.
Analysts said the choppy trading session reflects worries about lofty US stock valuations following the market’s surge since October.
AFP
7.20am: Stocks set to rise again
Australian share prices appeared headed for another record day after US stocks rose with the signing of a long awaited trade deal with China.
At 7am (AEDT) the SPI200 futures contract was up 23 points, or 0.33 per cent, at 6,953, following a new high on the Australian Stock Exchange of 6,971 points on Wednesday. At one stage the index came within three points of the 7000 mark, and is expected to test the level again today.
The rise comes after the first phase of a new trade agreement between the US- China trade deal was signed overnight in the US.
The Australian dollar was buying US69.04 cents, up from US68.96 cents at Wednesday’s close.
AAP
6.55am: Stocks rise as US, China sign deal
US stocks rose to new highs as President Trump signed an initial trade pact with China, halting a two-year trade dispute between the world’s two largest economies.
The Dow Jones Industrial Average gained 0.5 per cent in afternoon trading. The S&P 500 climbed 0.3pc, while the Nasdaq Composite rose 0.3pc. All three indexes hit intraday records.
Australian stocks are tipped to continue their record-breaking run, with the SPI futures index up 21 points at 6.45am (AEDT).
The trade pact was signed in a pomp-filled ceremony at the White House. As part of the deal, Washington suspended planned tariff increases on Chinese imports and cut the rate of some existing tariffs, while Beijing committed to ramp up purchases of US goods and services by $US200 billion over the next two years.
The deal also included provisions to protect intellectual-property rights of US companies in China, though it fell short of what the US had wanted. A host of other difficult issues have been postponed to the next round of trade negotiations.
The “phase-one” deal itself is a disappointment as it reflects a compromise measure, some analysts said.
President Trump “wants the U.S. economy to be humming along going into the presidential election,” said Lyn Graham-Taylor, fixed-income strategist at Rabobank. “But on the flip side, he doesn’t want to be seen as weak on China, so he is doing a balancing act.”
Investors were also paying close attention to the first week of US corporate earnings season. Strong earnings growth this year will help determine whether the stock market continues to rally.
Financial stocks declined as the latest round of big bank earnings largely disappointed. The Nasdaq KBW Bank index fell 1.4pc.
Overseas, the pan-continental Stoxx Europe 600 index inched up less than 0.1pc. The Shanghai Composite closed 0.5pc lower.
Dow Jones Newswires
6.48am: Michael Hill sales up 4pc
Jewellery retailer Michael Hill International said its second-quarter same-store sales rose 4pc on year and competitive pressures in Australia — its main market — were particularly challenging.
All store sales for the company, which also has outlets New Zealand and Canada, rose 3.3pc to $203.5 million in the quarter, it said Thursday.
“Pressure on gross margin continued in all markets, with deep discounting from many competitors,” Michael Hill said.
“The Australian retail environment was particularly difficult” reflecting low consumer confidence, competition and foreign exchange and gold price headwinds, the company said.
Its strongest sales growth was in its smallest market, New Zealand, with quarterly same-store sales up 5pc in local currency terms.
Dow Jones Newswires
6.45am: Trump hails ‘momentous’ trade deal
President Donald Trump ended two years of escalating trade battles with China, with a partial agreement to resolve some areas of conflict.
“Today, we take a momentous step, one that’s never taken before with China,” that will ensure “fair and reciprocal trade,” Trump said at a White House signing ceremony.
“Together, we are righting the wrongs of the past,” said the president, who also announced he planned to visit China in the “not too distant future.”
However, tariffs will remain in place on hundreds of billions of two-way trade until the second phase of trade agreement is completed.
Trump hailed the “phase one deal” during a lengthy ceremony taking place as the Democratic-led House of Representatives prepares to prosecute the president in a historic Senate trial.
Chinese Vice Premier Liu He read out a letter from President Xi Jinping which described the deal as “good for China, for the US and for the whole world.” It shows “our two countries have the ability to act on the basis of equality,” Xi wrote, adding that he hopes “the US side will treat fairly Chinese companies” as well as researchers and others.
AFP
6.38am: Markets await trade signing
Stock markets were mostly lower as investors took a step back after weeks of gains and awaited the signing of a long-expected China-US trade deal.
European indices followed Asia lower, though London’s benchmark FTSE 100 posted a rise owing to a weaker pound which boosts share prices of the index’s multinationals whose earnings in are foreign currencies.
The pound dropped versus the euro as annual British inflation slumped to a three-year low of 1.3 per cent in December, raising the chances of a Bank of England interest-rate cut on the eve of the country’s exit from the European Union.
In New York, the Dow index was above its all-time closing high, in intraday trades.
Elsewhere, official data showed that German economic growth fell sharply in 2019.
Business activity in the European powerhouse expanded by just 0.6 per cent last year, far less than the already modest increase of 1.5 per cent in 2018.
Oil prices drifted lower meanwhile after a monthly OPEC report estimated that stronger growth in demand for crude this year would be more than offset by increased production by non-OPEC members.
London closed up 0.3pc, Frankfurt was down 0.2pc and Paris fell 0.1pc.
AFP
6.36am: OPEC raises oil demand forecast
OPEC raised its 2020 estimate for growth in global demand for oil, while noting that increased output from non-OPEC members would probably more than make up for it.
The oil cartel now expects demand for crude oil to grow by 1.22 million barrels per day from last year’s level, a slight increase of 140,000 b/d from OPEC’s previous outlook.
Total demand would rise from 99.77 mb/d last year to 100.98 mb/d, the Vienna-based organisation said in its monthly oil report.
It said the revised forecast was due for the most part to “an improved economic outlook for 2020.” The global economy is expected to expand by 3.1 per cent this year, slightly stronger than the 2019 estimate of 3.0 per cent, OPEC said.
AFP
6.35am: Davos to sound alarm over climate
Business chiefs headed into their first global gathering of 2020 insisting they are not waiting on bickering governments to fight climate change, after Wall Street titan BlackRock joined a campaign pressuring companies to do more.
Ahead of next week’s annual conclave in Davos, the World Economic Forum released a survey that it portrayed as a call to arms after devastating wildfires in Australia and an inconclusive climate summit in Madrid last month.
The window to agree on decisive cuts to carbon emissions risks closing over the new decade and if the world fails to act, “we will be faced with a situation where we are moving the deckchairs around on the Titanic”, WEF president Borge Brende told a news conference.
In recent years, climate change and its likely consequences have emerged as top concerns shadowing the high-powered meeting of government and business leaders in the Swiss Alps, along with economic risks.
AFP
6.30am: BA complains over Flybe rescue
British Airways-parent IAG filed a formal complaint to Brussels over the UK government’s last-minute financial rescue of struggling no-frills carrier Flybe.
“IAG has submitted a complaint to the EU Competition directorate this morning about the state aid that the UK government has granted to Flybe,” the group said in a statement.
The European Commission early said it “stood ready” to discuss with London the compatibility of the proposed Flybe measures with EU state aid rules.
Prime Minister Boris Johnson’s government agreed late Tuesday to review air passenger duty (APD) paid by the Flybe’s customers, while its shareholders pledged extra investment.
However, neither the government nor Flybe disclosed financial details of the rescue agreement.
IAG chief executive Willie Walsh had already reacted with fury to the news, labelling it a “misuse of public funds”.
AFP
6.27am: Goldman Sachs profit falls 24pc
Goldman Sachs said its fourth-quarter profits dropped by 24pc from a year earlier, as the bank saw significantly higher legal and compensation expenses.
The investment bank said it earned a profit of $US1.72 billion in the quarter, or $4.69 a share, down from a profit of $US2.32 billion, or $6.11 per share, a year earlier. The results missed analysts’ expectations for earnings of $5.47 a share.
Despite having a strong quarter in trading, Goldman’s results were marred by significantly higher expenses. The bank set aside roughly $US500 million more to cover its legal expenses in the quarter. The bank is currently negotiating a settlement over its involvement in 1MDB, a Malaysian government-sponsored investment fund that became a scandal.
The bank also had a big jump in its compensation expenses, setting aside $US3.05 billion in the quarter to pay its well-compensated employees, compared with $US1.86 billion a year earlier. Many of Goldman’s employees earn the bulk of their pay in large year-end bonuses. For the full-year, however, compensation and benefits costs at the bank were basically flat – reflecting the difficult year Goldman had in many of its businesses.
For the full year, Goldman had a profit of $US7.9 billion, down from $US9.86 billion in the same period a year ago.
AP
6.25am: Bank of America profits fall
Consumer banking giant Bank of America is saying its fourth- quarter profits fell 4pc from a year ago, as the bank was impacted by the rapid decline of interest rates in late 2019.
The bank said that it earned a profit of $US6.99 billion, or 74 cents a share, down from a profit of $US7.29 billion, or 70 cents per share a year ago. BofA bought back roughly 900 million shares between 2018 and 2019, which is why the per-share earnings rose while the bank’s overall profit fell.
Still the bank’s profits beat expectations. Analysts were looking for BofA to earn 68 cents per share.
AP
6.20am: UK inflation hits three-year low
British annual inflation slid to the lowest level in more than three years in December, increasing the chances of an interest-rate cut by the Bank of England before Brexit.
The Consumer Prices Index 12-month rate dropped to 1.3 per cent last month from 1.5 per cent in November on falls in the prices of hotel rooms and women’s clothing, the Office for National Statistics said in a statement.
At 1.3 per cent, it was the lowest level since November 2016, while analysts’ consensus forecast had been for no change.
“This gives the Bank of England all the excuse it needs to cut later this month,” said Neil Wilson, chief market analyst for Markets.com.
The weak inflation update, that weighed on the pound, comes after official data on Monday showed British economic growth has stalled, as Brexit and political uncertainty slashed manufacturing output at the end of last year.
AFP
More Coverage
ASX sets record close despite pullback; HMC confirms Healthscope talks
David Di Pilla-led HMC eyes Brookfield-owned hospitals operator. Cochlear falls on trimmed guidance. Dividend disappointment weighs on AMP. GFG Alliance puts NSW coal mine on the block in debt plan. Mirvac soars on return to profit.
ASX steady as miners gain; CBA rises, IAG down
Sigma gains as $300m worth of shares change hands. Alliance Aviation's labour costs growing after first industrial action in two decades. IAG top loser as investors miss buyback. Temple & Webster top gainer. 'Cleaner result' sees ASX Ltd soar.