ASX, Aussie dollar edge higher despite bank hit as NAB raises equity

Hope that COVID-19 had reached its peak helped shares gain 1.5pc, with only financials still in the red, while the Aussie dollar traded at 6-week highs.

Australian stocks are set for early gains.

• Aussie dollar hits six-week high
• NAB trims earnings, kicks off $3.5bn raise
• Viva plans partial Geelong shutdown
• Charter Hall seeking $275m
• Property slowdown prompts Domain cuts

That’s it for the Trading Day blog for Monday, April 27. The ASX clocked a 1.5pc lift to start the week, despite a decline in the major banks after NAB unveiled a 51pc drop in first half profits and launched a $3.5bn equity raise. Elsewhere, Charter Hall, Qube and Monash IVF are all halted for capital raisings too while the Aussie dollar surged to six-week highs.

4.53pm: Banks left behind as ASX lifts

Capital raisings were squarely in focus after NAB brought forward its first half earnings and kicked off a $3.5bn equity raise, and as Charter Hall, Qube and Monash IVF joined the raising rush.

While NAB was halted, the three remaining majors took a hit amid speculation of who would raise next, and likely also to free up funds to participate in NAB’s offer.

By the close Westpac had fallen the most, down 4.4 per cent to $14.66 as reports circulated that the bank would again tap the market after its $2.5bn raise in November.

ANZ shares slipped by 2.3 per cent to $15.65 ahead of its results to be released on Thursday, while Commonwealth made back its losses to finish flat at $58.88.

Macquarie bucked the negativity to finish higher by 4.2 per cent at $99 as Bendigo and Adelaide Bank gave up 2.1 per cent to $5.68 and Bank of Queensland lost 1.1 per cent.

4.12pm: ASX joins risk-on rally

Australian shares marched higher in all sectors bar financials to cap the session just shy of daily highs as Asian shares too lifted across the board.

By the close on Monday, the ASX200 was up by 79 points or 1.5 per cent to 5321.4 – from highs of 5329.4.

Industrials and tech stocks were the biggest gainers – both sectors finishing higher by 3.6pc while real estate too added 3.1pc.

4.07pm: $A charges higher, 65c within reach

The Aussie dollar is leaping higher as global markets push higher in a risk-on rally.

At the local close, AUDUSD is up by 1.3pc to US64.66c – its best levels in six weeks.

Nick Evans 3.56pm: Stanmore customers defer delivery

Stanmore Coal has slashed its earnings guidance for the financial year, saying its customers had deferred delivery of the company’s entire June output.

On Monday Stanmore cut its earnings guidance by $12m to $15m, saying it now expected underlying earnings before interest, tax, depreciation and amortisation of $80m to $85m, down from $92m to $100m.

It blamed the downgrade on the impact of COVID-19, saying “term customers have advised Stanmore in the past week that they will be deferring taking delivery of contracted coal shipments that they were due to take in June until later in the year”.

“This will now cause a material deferral in revenue and earnings with no sales now forecast for June, being a reduction of around 250,000t of sales which were previously expected,” the company said.

Stanmore said the tumbling coking coal price, which it says has seen its benchmark coking coal index fall from $US163.5 a tonne in mid-March to $US118.5/t on Friday, would also have an impact, but it would not be material as its June quarter sales prices were largely locked in place.

SMR shares last traded down 2pc to $1.

Read more: Coal customers defer delivery

3.15pm: Petrol prices hit 15-year low

Last week’s collapse in oil prices has sent local petrol prices to their lowest since 2005.

The Australian Institute of Petroleum has reported the national average of unleaded fuel fell by 6.6 cents to a 15-year low of 100.6 cents per litre.

In metro areas, the average fell by 6.5 cents to 96.2 cents per litre, while regional averages fell to 109.6 cents per litre.

“Over the March quarter, petrol prices fell by almost 6 per cent, subtracting an estimated 0.2 percentage points from the Consumer Price Index – due for release on Wednesday,” CommSec senior economist Ryan Felsman writes.

[REPORT] Petrol prices hit 15-year low: The national average price of unleaded petrol fell by 6.6 cents to a 15-year low of 100.6 cents a litre last week https://t.co/zJczX6jUzy #ausbiz #ausecon pic.twitter.com/1kW49kAyiY

— CommSec (@CommSec) April 27, 2020

3.12pm: ASX lift best in two weeks

The Australian sharemarket had been on track for its best day in two weeks, but in another swift move has trimmed gains to just 0.9pc.

The S&P/ASX 200 lifted as much as 1.5pc to a 4-day high of 5323.8 as banks halved their early losses amid reports that the $3bn institutional part of NAB’s $3.5bn equity raising was covered.

Traders are also hearing that ANZ won’t be raising capital when it reports this Thursday, albeit a dividend cut is expected and Westpac could well need to raise again.

2.57pm: Expect more bank capital management: S&P

Credit rating agency S&P says NAB’s equity raise will help it contend with higher credit impairments and weaker operating income expected as a result of the coronavirus downturn, and will likely be followed by the rest of the major banks.

In a bulletin after NAB’s results this morning, and the announcement of its $3.5bn raise, S&P estimates the extra capital will add about 80 basis points to its regulatory capital ratio.

“During this period of uncertainty we expect other major Australian banks to also take similar capital management initiatives to prepare for adverse operating conditions,” it says.

Further to that, S&P points out that credit impairments as a percentage of gross loans and acceptances rose 23bps to 38pc from 15pc previously.

“The additional collective provision is forward looking and largely reflects a top-up to the economic adjustment for uncertainties relating to COVID-19 effects. We expect that credit costs will also increase significantly for other Australian banks.”

Read more: NAB raising $3.5bn as profit slumps

Perry Williams 2.27pm: Debts may force Atlas Arteria raise: CS

Toll road operator Atlas Arteria may be forced into an equity raising with the company in danger of breaching debt covenants on a €350m ($589m) facility, Credit Suisse says.

Traffic on its biggest roads in the US and Europe fell 70 per cent in the last week of March and tapping its shareholders for cash may be required based on COVID-19 restrictions being mostly lifted in September.

Atlas Arteria, previously known as Macquarie Atlas Roads, may breach the covenant in December with net debt to EBITDA at 7.2 times compared with a 6.5 times threshold, according to the broker.

Raising equity to pay the debt down could be required to avoid the potential breach or it may renegotiate or refinance the facility.

Credit Suisse maintained its neutral rating and lowered its target price to $6 from $7.90 previously.

Atlas Arteria last up 3 per cent to $5.70.

2.24pm: ‘Peak virus’ likely behind share surge

As the ASX steps up its daily rally to 1.2pc, OANDA’s Jeffrey Halley suggests the latest virus numbers are likely fuelling global optimism.

“Peak virus seemed to be the overriding theme of the week, with the rate of new cases and deaths falling in Europe and the United States, the COVID-19 epicentres,” he writes.

“Although life is not about to return to normal anytime soon, the hope that peak virus is upon us has lifted financial markets modestly in Asia today. Whether COVID-19 returns in a second wave is a story for another day.

“The hopes that even a partial return to regular economic activity begins, to draw a line under the economic carnage wrought by the pandemic, should see markets such as equities outperform this week.”

2.16pm: Share rally picks up speed

Shares are shrugging off the bank drag, extending their rally to 1.2 per cent as tech and property stocks stride higher.

The benchmark ASX200 is trading at daily highs of 5311.1, up 69 points – its best levels in four days.

Real estate trusts are higher by 4.2pc as Goodman group adds 3.4pc, GPT Group lifts by 5.1pc and Dexus puts on 2.9pc.

Even Westpac has trimmed its daily losses – last down 3pc to $14.87 after an earlier slip to $14.53.

S&P 500 e-mini futures are up 0.6pc after initially falling 0.6pc today, while Japan’s Nikkei 225 is up 2.3pc.

AUD/USD has also gone “risk-on” today, rising 1pc to a 2-week high of 6439.

2.10pm: James Hardie a top idea: JPM

JP Morgan has tipped James Hardie as one of its top ideas, saying the stock had valuation support based on a medium term recovery.

In a note led by Brook Campbell-Crawford, the broker says James Hardie is rarely “cheap” but opportunities did emerge time to time “due to temporary market issues or execution missteps”.

“We firmly believe now is one of those times as the share price appears to be baking in very conservative long-term metrics.”

He adds that during past demand shocks, the stock’s price relative to the ASX benchmark have reached lows well before housing data began to improve.

“We believe skipping the final FY20 dividend would be prudent and not seen as a significant disappointment by investors,” Mr Campbell-Crawford adds.

JPM rate the stock at Overweight with a price target of $25 apiece.

JHX last traded up 3.5pc to $18.44.

1.32pm: BoJ ramps up emergency easing

The Bank of Japan on Monday ramped up its emergency monetary easing, lifting the cap on its buying of government bonds and increasing purchases of other assets, while cutting its growth forecasts.

After a meeting shortened from two days to one, the central bank said it would shift to unlimited government bond buying and more than double its capacity to purchase corporate bonds and commercial papers — a move to support Japan Inc’s financing as the country grapples with the spread of coronavirus.

Previously, the bank had set a ceiling of JPY80 trillion per year but now said it would purchase “a necessary amount of JGB’s without setting an upper limit so that 10-year yields will remain around zero per cent”.

These moves were broadly expected by markets and shouldn’t have much additional impact after the Australian dollar rose 1pc and the S&P/ASX 200 share index rose 0.6pc today.

Importantly, the BoJ hasn’t been buying anywhere near as much as JPY80 trillion a year and today’s announcement doesn’t necessarily imply it will exceed that previous limit.

The move is supporting Japans stockmarket – the Nikkei up 2.2pc.

With AFP

1.22pm: Volatility, outflows delay AMP recovery

Morgan Stanley had expected AMP earnings would bottom this year, but market volatility and large outflows will delay the group’s recovery.

In a note to clients, analyst Andrei Stadnik writes that AMP’s wealth arm will continue to face weak flows through FY21, tipping $6.5bn in net outflows this year as corporate super redemptions continue and with some impact from the early release of Super.

Outflows will likely ease to $4.5bn in FY21, however, Mr Stadnik makes the point that the rebuild of its wealth platform is contingent on the sale of its Life business.

In his base case, he tips a target price of $1.54 saying, “vertical integration slowly unbundling as AMP remodels its business over 3+ years to hold the status quo”.

“But it’s a bumpy ride, defending wealth earnings proves tough, the slower-than-expected remediation affecting the remodelling of AMP’s advice business. Franchise momentum remains sluggish with flows not recovering until FY23.”

He keeps the stock at equal-weight, with a target of $1.40.

AMP last traded up 1.5 per cent to $1.32.

1.01pm: Tech, industrials offset bank drag

The local market is holding higher thanks to strength in industrials and tech, countering a drag from the major banks.

At 1pm, the benchmark ASX200 is lower by 15 points or 0.3pc to 5257.8 – after surging as much as 0.8pc.

As NAB shares are halted for its $3.5bn capital raise, the rest of the big four are firmly lower. Westpac the worst hit, down 4.1pc, amid speculation it will be the next to raise capital.

Here’s the biggest movers at 1pm:

12.42pm: Rare chance to buy world’s best: Morgans

Morgans Financial analyst Tom Sartor sees the recent sell-off in global equities uncovering a “once-in-decade opportunity to gain exposure to some of the world’s best businesses”.

“The dominant global franchises offer protection against COVID downside,” Mr Sartor. “Their balance sheets do the same, and should facilitate consolidation/ acquisition optionality ahead of the resumption of impressive growth.”

He profiles 10 consumer and tech leaders – including Amazon, Microsoft and Visa – which he feels investors should be looking at to improve the quality and international diversification of their portfolios.

12.36pm: Shares get offshore boost

Australia’s sharemarket is getting a boost from offshore gains despite more than $3.75bn of capital raisings today.

The S&P/ASX 200 rose 0.8pc to a 4-day high of 5283.8 after falling 0.5pc to an intraday low of 5214.8.

It came as S&P 500 futures turned 0.3pc after falling 0.4pc intraday, while Japan’s Nikkei 225 is up 2.1pc, Hong Kong is up 1.5pc and South Korea’s KOSPI is up 1.4pc.

Banks remain weak amid NAB’s $3.5bn equity raising, with Westpac down 4pc after The Australia’s Data Room tipped it will be next to raise.

The Energy sector is also down as WTI crude dives almost 7pc to $US15.81 a barrel in Asian trading.

12.30pm: $A closing in on 4-week high

The Aussie dollar is surging by 0.7 per cent in lunch trade, as markets turn risk-on amid signs of the coronavirus curve flattening across Europe.

At 12.30pm, AUDUSD is trading at US64.32c, near recent highs of US64.42c.

If the currency can reach those levels, it will be the best the market has traded since March 12.

12.24pm: Chinese industrial profits fall 35pc

China has reported a 35 per cent drop in industrial profit for March, as lockdowns crimp the country’s activity.

For the first quarter, profits fell by 36.7 per cent year-on-year.

The data shows all sectors bar agriculture processing recorded a drop for the month – with oil processing and ferrous metal smelting some of the hardest hit sectors.

Still, the Shanghai Composite is trading higher by 0.7pc.

12.18pm: NAB earnings a ‘messy result’: Citi

Citi analyst Brendon Sproules keeps his Buy rating and $25.50 target price on NAB despite a “messy result overshadowed by the overlay, markets impact and notable items driving the need to raise capital”.

“Looking forward, we expect capital headwinds will partially reverse and stronger credit growth will contribute to earnings,” he says.

NAB’s probability-weighted economic overlay at $807m is “closer to the V-shape vs the L-shaped recovery, Mr Sproules adds.

“With 1H20 BDDs of $1.16bn vs our forecast $1.67bn, we would note that scenario losses appear significantly lighter than our expectations, but with a potential offset of higher risk weight sensitivities.”

He also notes that dividends per share have been “reset”, but he sees a “brighter outlook for capital going forward.”

“The reset DPS will aid capital generation in 2H20 and while FX has already partially reversed, notable items will subside and credit growth largely draws on facilities.”

Read more: NAB in halt for raising as profit slumps

12.07pm: US oil prices falling again

US oil prices fell heavily Monday on renewed concerns over storage capacity as the coronavirus throttles demand, even as producers start slashing output to boost markets.

US benchmark West Texas Intermediate dropped 9.3 per cent to $US15.36 a barrel in Asian morning trade.

Brent crude, the international benchmark, was off 3.2 per cent at $US20.75 a barrel.

Prices have collapsed in recent weeks as demand for the commodity evaporated owing to lockdowns and travel restrictions imposed worldwide to fight the virus.

Last week, US oil fell below zero for the first time as investors scrambled to offload it before the expiry of a trading contract, but could not readily find buyers.

AFP

11.59am: Domain most improved on spending cuts

Domain shares are leading the markets best performing at noon, buoyed after broad spending cuts across its senior executives and promising market trends pre-COVID-19.

In its update this morning, the group said total revenue had increased by 1pc for the quarter and 10pc for March, which “provides confidence that Domain is well positioned when markets return to normal,” it said.

Read more: Domain plan to slash staff costs

11.51am: Seven West confirms WA land offer

Seven West Media confirms a report in The Australian’s DataRoom column that it has received a non-binding offer on a sale and leaseback basis from a party undertaking due diligence to acquire the Osborne Park facility in Perth, land and buildings.

“Seven is not in receipt of a binding offer however if it receives and accepts one in binding form it will update the market,” Seven West says in a statement.

As reported online by DataRoom on Friday, it is believed the Kerry Stokes-backed Seven West is about to sell its 2 hectare Osborne Park property – which is home to The West Australian and Sunday Times newspapers – on the outskirts of Perth’s central business district to Prime West for $74.5m.

SWM last up 2.4pc to 8.7c.

Read more: Seven West Media banking on restructure deal

Bridget Carter 11.06am: Who is the next bank to raise equity?

DataRoom | Westpac is expected to be the next bank to head to the market for an equity raising after the NAB on Monday announced it would move to secure $3.5bn from investors.

As announced to the market on Monday, NAB will raise funds at $14.15 per share, an 8.5 per cent discount to the stock’s last closing price of $15.46 as it slashed its dividend payment and announced a fall in earnings.

Working on the raising is Macquarie Capital and Goldman Sachs.

Talk about Westpac raising funds comes as its new chief executive Peter King this month revealed that the bank would have to pay about $900m as a penalty to Austrac for anti-money laundering penalties.

Westpac only tapped the market for $2.5bn in November, calling on the services of JPMorgan, UBS and Citi. At that time it cut its dividend and said the raise was needed when costs had increased amid a low interest rate environment and its cash profit had declined.

Read more: Westpac pays price for transition

11.03am: Shares fall into the red

Negative momentum in the heavyweight financials was too much to bear on the local market – with shares slipping into the red.

In the second hour of trade, the ASX200 is down by 6 points to 5236.7 – after earlier hitting as much as 5258.8.

Westpac’s decline has accelerated to 4.2pc as ANZ sheds 3.4pc and Commonwealth Bank loses 2.2pc.

10.54am: NAB raising boosts buffers: Moody’s

Moody’s is positive on NAB’s planned $3.5bn equity raising, saying the move will help it defend likely economic weakness to come.

In a note following the bank’s brought-forward earnings this morning, the ratings agency says the equity raising will “significantly strengthen its capital base and boost its buffers against potential credit losses and rising capital requirements amid the broad economic downturn”.

“Furthermore, the bank’s decision to increase its collective provisions to $4.4bn underlines its balance sheet strength to combat the uncertainty ahead.”

$NAB with an extra ~20% provisions for coronavirus impact. The major US banks took ~500%. Up to investors to make the call which one is more likely to be in the ballpark. pic.twitter.com/k0U3QNoXfd

— Luke Winchester (@lukewinchester9) April 26, 2020

10.50am: Equities defying economics: State Street

Global equities are “defying economic gravity”, according to Altaf Kassam, EMEA head of Investment Strategy & Research at State Street Global Advisors.

“As we progress through an unsurprisingly brutal earnings season, investors seem to be focusing more on flattening case and mortality curves and pretending the terrible economic data, including the awful earnings reports, just aren’t happening,” Mr Kassam says.

“At some point the market will wake up to the real effect of lockdown, and a slower-than-anticipated return from it, when corporates start to fill in the guidance blanks with red ink and economic data doesn’t rebound in a crisp ‘V’.

“In other words, equities appear to be defying economic gravity and we suspect further volatility and weakness to come.”

10.40am: Selling in banks, property to back raisings

Australia’s sharemarket has been restrained by a sell-off in banks and REITs amid capital raising, as well as falls in US stock index and crude oil futures.

The S&P/ASX 200 turned down 0.2pc to 5234 after opening up 0.3pc versus a 1.4pc rise projected by Friday night futures trading.

The Financials sector fell 1.4pc with Westpac down 3.3pc, ANZ down 2.6pc and CBA down 2.2pc as investors raised funds to participate in NAB’s $3.5bn equity raising.

There may also be concern about dividend cuts and coronavirus related writedowns after similar moves by NAB but the falls in banks have so far been fairly modest considering those risks.

Similarly, the Property sector fell 0.6pc with Goodman down 1.2pc, Dexus down 1.7pc and GPT down 1.5pc as investors raised funds for at $275m equity raising by Charter Hall REIT.

The Materials sector is down 0.6pc with BHP down 1.3pc versus a 0.2pc rise projected by its ADR’s equivalent closing price.

Weaker offshore markets may be weighing on the Materials sector with S&P 500 futures down 0.3pc and WTI crude futures down 4pc.

Jared Lynch 10.31am: Costa hires ex-Sigma CFO

Under pressure fruit and vegetable grower and wholesaler, Costa Group, has sought an antidote for its woes, hiring Sigma Healthcare’s Wayne Johnston as its new chief financial officer.

“On behalf of the company I welcome Wayne to the role of Chief Financial Officer and note that he will bring to it a breadth of experience gained from a career spent leading finance functions for a number of Australian ASX listed companies, including Symbion/Mayne, as CFO of Spicers Paper and his most recent role as interim CFO of Sigma Healthcare,” said Harry Debney, Costa Group chief executive.

After soaring to a high of $8 apiece in 2018, Costa’s shares have since struggled to stay ahead of its 2015 IPO price of $2.20 a share, closing at $2.66 on Friday.

At the time of its float, the company pitched itself to investors as an industrial technology player. But like most agribusinesses it has since struggled with the usual risks of primary production, including severe drought and more recently bushfires.

10.29am: Mesoblast climbs to 5-year high

Mesoblast shares have extended their winning run, jumping by more than 60pc in early trade after early indications of the success of its treatment for COVID-19 patients on ventilators.

On Friday, the stock jumped 38pc on the ASX, while its US-listed shares surged 139.5pc.

Mesoblast’s Nasdaq-listed shares gained $US9 to close at $US15.45 — a five-year high — after it reported a significant increase in survival rates on COVID-19-infected patients after a fortnight of testing its new therapy Remestemcel-L.

Now, its ASX stock is catching up – soaring to a five-year high of $4.45.

MSB last up 45.8pc to $3.98.

Read more: Mesoblast surges on coronavirus trial hopes

Mesoblast CEO Silviu Itescu. Picture: Stuart McEvoy / The Australian.

10.12am: Major bank jitters restrict ASX

The local market is pushing higher in early trade, though less than projected by overnight futures as the big banks wind back following NAB’s capital raise and dividend cut.

At the open the ASX200 is higher by 15 points or 0.29 per cent to 5257.6.

While NAB shares are halted, Westpac is down by 3.3pc, Commonwealth Bank by 2.2pc and ANZ by 2.1pc.

It seems investors are weighing up the likelihood that they too may soon follow NAB in similar capital preservation measures.

Elsewhere, tech and consumer discretionary stocks are leading the march higher.

10.07am: Monash IVF seeks $80m

Monash IVF is seeking $80m in an placement and entitlement offer to reduce debt and pursue growth opportunities through the COVID-19 crisis.

The group unveiled details of its offer this morning, saying its trading performance had been materially impacted by the government’s suspension of non-urgent elective surgery.

As part of the raise, Monash is seeking $39.8m in a placement to institutional investors at 52c apiece, representing a 26.8pc discount to the stock’s last traded price of 71c.

An entitlement offer of $40.2m will then consist of a 1-for-3.05 accelerated pro rata non-renounceable entitlement offer for both institutional and retail holders.

9.41am: Capital raisings to restrain ASX

Equity capital raisings and weaker US equity and oil futures should restrain the Australian sharemarket today.

Despite a 1.4pc rise implied by Friday night futures trading, the S&P/ASX 200 may actually fall as investors raise funds to participate in multiple capital raisings and the rebound in US equities and crude oil fades.

NAB is raising $3.5bn, Charter Hall Retail REIT is raising $275m and Monash IVF and QUBE Logistics have also entered trading halts for capital raisings.

As well as unexpectedly raising $3.5bn at $14.15 a share, NAB has cut its interim dividend more than 60pc to 30 cps and announced a 159pc lift in bad debt charges to $1.16b, including $807m for COVID-19 impact.

In other news, Aristocrat has suspended its interim dividend and slashed staff while Domain announced a new debt facility and relief on covenants, plus a voluntary program to cut staff costs by 20pc.

In offshore markets, S&P 500 futures are down 0.4pc and WTI crude oil futures are down 2.5pc in early trading.

Technically, a bearish wedge pattern on the S&P/ASX 200 continues to warn of a retest of the March low.

9.35am: What’s on the broker radar?

• ALE Property cut to Underweight – JP Morgan
• ANZ target price cut 5pc to $19 – Bell Potter
• Atrum Coal raised to Buy – Bell Potter
• Carindale Property cut to Neutral – JP Morgan
• Domino’s raised to Add – Morgans
• Evolution Mining cut to Neutral – Credit Suisse
• Hotel Property raised to Overweight – JP Morgan

Bridget Carter 9.34am: Qube halted for raise

Qube Holdings has this morning requested a trading halt as it completes a capital raising, following reports the listed logistics and infrastructure operator is seeking $500m.

In a notice to the market, Qube said it was “considering, planning for, and expects to announce, a pro-rata capital raising”.

The trading halt is expected to remain in place until May 1.

Bank of America and UBS are understood to be working on the raise for the group that has seen its market value fall to about $3.6bn from a peak this year of about $5.9bn at a time that many companies are suffering deeply from the COVID-19 disruptions.

Read more: Qube Holdings eyeing $500m raising

9.31am: Monash IVF joins race for capital

Trade in Monash IVF has been halted ahead of the open, pending the announcement of a capital raise.

The group this morning requested the halt until Tuesday, or until it made an announcement regarding the outcome of the raise.

The group earlier this month deferred its interim dividend as the National Cabinet temporarily suspended all non-urgent elective surgery, though a staged restart is underway today.

Read more: IVF firm eyes capital raising

Perry Williams 9.17am: Viva plans partial Geelong shutdown

Viva Energy will shut down part of its Geelong refinery from early May after COVID-19 slashed demand for fuel.

The fuels retailer, which runs 1290 Coles Express petrol stations, said it had started preparations to shut down the refinery’s residual catalytic cracking unit and a smaller crude distillation segment with the rest of the refinery to remain open.

Petrol sales have fallen by up to 40 per cent across Coles Express service stations as COVID-19 slows traffic use on Australian roads with Viva lowering spending guidance and delaying the onmarket portion of a $680m share buyback.

The shutdown was required “in order to further reduce surplus production and continue operations during a period where fuel demand is lower than normal,” Viva said, with its refining intake cut to 2.5m barrels a month.

No impact to fuel supply is expected and any financial hit will be immaterial given the current refining margin environment.

Viva’s Geelong refining margin for the first quarter fell to $US2.70 a barrel from $US4.90 a year ago due to higher crude premiums from deals struck at the end of 2019 and lower regional margins from softer global demand.

A major maintenance turnaround at its Geelong refinery is also under review due to the pandemic.

It has been scheduled from late August to October but would be difficult to safely conduct due to measures necessary to manage the virus. A decision would be made before the end of June, Viva said on Monday.

Viva refinery in Geelong will be partially shutdown as fuel demand slows. Picture: Supplied.

Gerard Cockburn 9.12am: Property slowdown prompts Domain cuts

Property listing group Domain is cutting staff costs by 20 per cent in a bid to sustain its balance sheet during the coronavirus lockdown, with staff undertaking voluntary pay cuts or reducing work hours.

The company, which is 59pc owned by media conglomerate Nine Entertainment, said it was aiming to cut staff costs by 20pc through the voluntary exchange of salary for share rights and reduction in working hours. It said a majority had opted for the rights, which vest in November 2021.

Chief Executive Jason Pellegrino and board members have opted to exchange 50pc of salary for rights, with executives taking 30pc when the plan takes effect for six months from May. Domain said it will deliver the shares through on-market purchases or the issue of new shares.

Domain has also attained a further loan facility of $80m, with an expiry date set for 18 months, to add to the additional $225m bank loan facility which was announced in November 2019. As at March 31, its net debt position was $149.5m.

“In a time of rapid digital transformation, the employee program and additional debt facility provide Domain with flexibility to maintain the pace of our business model evolution,” Domain chief executive Jason Pellegrino said.

For the third quarter ending March 31, Domain posted a 3 per cent quarterly increase in its digital revenue, while its total revenue increased by 1 per cent over the same period.

With Dow Jones

Nick Evans 9.07am: Jupiter plots full manganese restart

Jupiter Miners said it will be able to return its Tshipi Borwa manganese mine back to full operations from May 1 after the South Africa government said it would relax restrictions on the operation of open cut mining.

The Brian Gilbertson-chaired company’s mine has been closed since March 24, when the South African government imposed a mandatory 21 day lockdown in an attempt to halt the spread of COVID-19.

It won the right to a partial resumption of work from April 14, but said on Monday it will be able to return to full operations at the end of the month.

Jupiter shares last traded at 24c.

9.02am: NAB’s raise offered at 9pc discount

NAB has revealed the details of its $3.5bn capital raise, here’s a quick summary:

• A $3bn placement will be offered to sophisticated and institutional investors at a fixed price of $14.15 apiece – a 8.5pc discount to the bank’s last closing price of $15.46
• The placement will result in approximately 212 million new shares being issued, representing 7.1pc of NAB’s existing ordinary shares on issues
• A non-underwritten share purchase plan will be offered to eligible investors to raise $500m at the lower of the placement price or the VWAP of NAB ordinary shares traded during the five days up to the SPP closing date less a 2pc discount
• Depending on the level of demand, NAB may decide to scale back applications, or raise an amount higher than $500m, at its absolute discretion.

8.53am: Aristocrat suspends payout, cuts staff

Poker machine maker Aristocrat has suspended its FY20 interim dividend and cut the pay of its chief executives and board as it grapples with the closure of all of its land-based operations due to coronavirus restrictions.

In an update this morning, the gaming group said it was standing down 1000 staff from May 1 until the end of June, while 200 roles would be removed permanently, “reflecting changed priorities”.

In addition, until the end of September, 200 full time roles will move to part time, 1500 staff will take pay cuts between 10pc and 20pc, board fees will be cut to by 20pc and the base salary of chief Trevor Croker will be trimmed by 30pc.

“These changes, and other prudent steps we are taking as part of our COVID-19 response, will deliver important operational and financial flexibility, focus and efficiency through this period of uncertainty,” chief Mr Croker said.

“We are highly focused on protecting and leveraging our strategic advantages, including industry-leading Design & Development and effective User Acquisition investment, which Aristocrat will continue to prioritise.”

ALL last traded at $21.66.

Bridget Carter 8.47am: Charter Hall raising $275m

DataRoom | Charter Hall Retail REIT is raising $275m through JPMorgan and UBS.

Shares are being sold at $2.90 each, a 7.9 per cent discount to the last closing price of $3.15.

The raise by way of a placement will strengthen the group’s balance sheet.

More to come

Bridget Carter 8.20am: NAB raising $3.5bn

DataRoom | The National Australia Bank is raising $3.5bn through Macquarie Capital and Goldman Sachs.

The bank earlier went into a trading halt, saying there would be an equity capital raising comprising an institutional placement and share purchase plan.

It came as NAB announced a 51pc fall in cash net profit and said that given uncertainty amid the COVID-19 pandemic, it was taking steps to strengthen its balance sheet.

Read more: NAB in halt for $3.5bn raising

NAB shares have been halted ahead of the local open as it seeks to raise $3.5bn. Pictures: AAP / Angelo Velardo.

8.10am: NAB cash profit sinks 51pc

National Australia Bank has announced a 51 per cent fall in half year cash net profit to $1.44bn, and increased provisioning to deal with the coronavirus pandemic.

The bank said statutory net profit was $1.31bn.

NAB announced a 30c interim dividend, down 64 per cent.

The bank said revenue declined 3.4pc. Excluding customer-related remediation, revenue was down 4.4pc.

NAB’s net interest margin declined one basis point (bp) to 1.78pc.

CEO Ross McEwan said the bank’s half year result had been “materially impacted” by the COVID-19 pandemic, with cash earnings declining 24.6pc relative to the first half last year, “driven by higher credit impairment charges and mark-to-market losses on our high quality liquids portfolio within markets and treasury”.

“We entered this challenging period in a robust position, with capital, funding and liquidity significantly strengthened over recent years. However, given the uncertain outlook, we have

taken proactive steps to further strengthen our balance sheet.

“Collective provisions now include $2.13bn of forward looking adjustments for anticipated stress in targeted sectors and across the broader economy, and capital is being bolstered via a

capital raising and a reduced interim dividend.”

NAB last week disclosed a host of first-half charges, noting profit will be hit by a $1.14bn reflecting software and life insurance writedowns and higher customer compensation.

UBS analyst Jon Mott said in a note to clients last week that it is “the most challenging outlook” for the banking sector in at least 75 years.

Bank regulator the Australian Prudential Regulation Authority this month urged banks to seriously consider deferring decisions on dividends until the economic outlook is clearer.

8.00am: NAB plans capital raising

National Australian Bank has gone into a trading halt ahead of an announcement on a capital raising.

“The trading halt is necessary as NAB expects to make an announcement to the ASX

in connection with a proposed equity capital raising comprising an institutional

placement and share purchase plan,” the bank told the ASX.

The move comes days ahead of the release of its interim results and follows the banking sector experiencing rising lending losses in the face of the slowing economy.

The trading halt will continue until the announcement, or until the opening of trade on Wednesday.

7.40am: Oil rises

Oil prices climbed in the final session of last week bringing an end to another week of losses that featured the US contract plunging to minus $US40 a barrel, as global production cuts could not keep pace with the collapse in demand caused by the coronavirus pandemic.

Oil trading was extremely volatile all week, in an extension of the selling that has dominated trading since early March as demand collapsed 30 per cent due to the pandemic.

Brent futures rose 11 US cents, or 0.5 per cent, to settle at $US21.44 a barrel, while US West Texas Intermediate crude rose 44 US cents, or 2.7 per cent, to close at $US16.94.

Oil futures marked their third straight week of losses, with Brent ending down 24 per cent and WTI off around 7.0 per cent.

Reuters

6.55am: US earnings season to ramp up

We’re in the thick of the US first-quarter earnings season: 142 S&P 500 components release results this week, followed by a similar number next week.

Big Tech companies are among the highlights. Alphabet reports this Tuesday (US time), Microsoft and Facebook go on Wednesday, and Apple and Amazon.com follow on Thursday.

Several major industrial firms also report: Caterpillar and 3M on Tuesday; Boeing, General Electric, and Northrop Grumman on Wednesday; Dow on Thursday; and Honeywell International on Friday. Carmakers Ford Motor and Tesla report on Tuesday and Wednesday, respectively.

Health care sector earnings this week include Merck and Pfizer on Tuesday, Anthem and Humana on Wednesday, Cigna on Thursday, and AbbVie on Friday. Other highlights will be results from Starbucks, AMD, and UPS on Tuesday; Mastercard, Qualcomm, and eBay on Wednesday; Twitter, Visa, and Comcast on Thursday; and Exxon Mobil, Chevron, and Charter Communications on Friday.

Dow Jones

5.50am: ASX set to lift in early trade

A solid close to the week on the US bourse is likely to flow on to Australian stocks when the market opens, with early gains of 1.5 per cent expected.

The S&P/ASX200 benchmark index finished Friday up 25.5 points, or 0.49 per cent, at 5,242.6 points, but over the week dropped 244.9 points, or 4.46 per cent. This snapped a four-week string of gains on the Australian stock market.

CommSec chief economist Craig James said the Australian futures market pointed to an 82-point rise on the ASX, or 1.5 per cent, in Monday’s early trade.

Mr James said the resource sector would benefit from the steady recovery of oil prices amid global production cuts prompted by a collapse in demand due to the COVID-19 pandemic, as well as a 1.1 per cent lift on the US Dow Jones on Friday.

“We have had a good track record since we hit the lows,” Mr James said.

Energy companies on Friday were the big winners, up 2.0 per cent as the price of Brent crude advanced four per cent. It now sits at $US21.44 a barrel. Woodside gained 1.8 per cent, Santos rose 1.9 per cent and Oil Search advanced 4.8 per cent, while miners BHP, Rio Tinto and Fortescue Metals lifted.

Mr James said Australian analysts would this week keep a close eye on inflation figures released on Wednesday, with a headline increase to the Consumer Price Index of 0.1 per cent and underlying increase of 0.4 per cent expected. Those figures would mostly reflect a pre-coronavirus economic environment. “It’s the March quarter figures coming out – it’ll really be dominated by lower petrol prices so that’ll keep the headline rate of inflation contained,” Mr James said.

“But that’s not a big focus at the moment here in Australia, it’s all about growth … what happens to economic growth, jobs numbers and home prices.”

International trade prices would also be released on Thursday.

The Australian dollar was on Monday morning buying US63.84 cents, up from US63.56 cents at Friday’s close.

AAP

5.40am: Mnuchin sees rebound

The US economy should bounce back in July, August and September as closed businesses resume operations, Treasury Secretary Steven Mnuchin said in an interview aired Sunday.

“As businesses begin to open, you’re going to see [the] demand side of the economy rebound,” Mr. Mnuchin said on “Fox News Sunday.”

That resembles the forecast issued Friday by the Congressional Budget Office, which expects a sharp contraction in this quarter and then growth at an annual rate of 17 per cent in the second half of the year.

That rebound depends on many unknowns, including the spread of the novel coronavirus, the pace at which governors reopen their states’ economies and whether subsequent waves of infections happen. Some Republicans are raising concerns about the national debt. Mr. Mnuchin said the U.S. should spend whatever is needed.

Treasury Secretary Steven Mnuchin. Picture: AFP

Dow Jones

5.35am: Virus death tolls eases off

Europe’s hardest-hit countries reported promising drops in coronavirus daily death tolls, as governments around the world started peeling back lockdown measures in a bid to restore normal life and resuscitate crippled economies.

Children in Spain were allowed outside for the first time in six weeks on Sunday, while hairdressers and other shops are set to reopen in Switzerland this week.

Badly-hit Italy said many businesses would be able to resume next week and France planned to announce how it would start the slow crawl back to normality.

And in the US state of Georgia, a loosening of lockdown rules prompted beach gatherings at the weekend.

Leaders around the world are seeking to gradually reverse lockdowns while avoiding a dreaded second wave of infections amid warnings from the World Health Organisation that recovered people might not be immune to reinfection.

AFP

5.30am: Tas ties Vic for best economy

Tasmania has tied Victoria for Australia’s best economic performance in CommSec’s quarterly State of the States report.

It’s the first time since October 2009 that the Apple Isle has been on top of the performance rankings.

CommSec has for the last 11 years ranked Australia’s states and territories across eight key economic indicators, comparing each region’s performance against its decade averages.

“Victoria has now held top position in the economic rankings – either outright or shared – for eight quarterly surveys,” CommSec said.

Victoria fell four spots on equipment investment, three spots on dwelling starts and two on relative unemployment, while improving on housing finance. Tasmania lifted two places on relative unemployment and retail trade, and one spot on relative economic growth and construction work.

But it dropped five places on business investment and one spot on relative economic growth.

ACT and NSW switched places in the quarterly report, with the capital territory pipping Australia’s most populous territory for third place. But there was little to separate the top four states, CommSec said. South Australia also switched places with Queensland for the fifth spot. Western Australia remained in seventh position ahead of the NT.

AAP

5.25am: Legal right to work from home?

Germany’s labour minister wants to enshrine into law the right to work from home if it is feasible to do so, even after the coronavirus pandemic subsides.

Labor Minister Hubertus Heil told Sunday’s edition of the Bild am Sonntag newspaper that he aims to put forward such legislation this fall.

He said initial estimates suggest the proportion of the work force working from home has risen from 12pc to 25pc during the virus crisis, to around 8 million people.

“Everyone who wants to and whose job allows it should be able to work in a home office, even when the corona pandemic is over,” Heil was quoted as saying. “We are learning in the pandemic how much work can be done from home these days.”

Heil stressed that “we want to enable more home working, but not force it.” He said people could choose to switch entirely to working from home, or do so for only one or two days per week.

AP

5.20am: Wall St recap

Cautious optimism on Wall Street propelled US stocks to a positive finish on Friday, despite mounting evidence of the coronavirus pandemic’s deep damage to the American economy.

At the closing bell, the Dow Jones Industrial Average was up 1.1 per cent at 23,775.27.

The broadbased S&P 500 climbed 1.4 per cent to end at 2,836.74, while the tech-rich Nasdaq finished 1.7 per cent higher at 8,634.52.

However Wall Street finished the five-day stretch negative overall, with the Dow losing 1.9 per cent over the course of a week that began tumultuously as the US benchmark oil price crashed into negative territory for the first time as traders tried to unload futures contracts amid a supply glut.

Labor Department data released on Thursday showed the coronavirus cutting deeply into employment, with the number of new jobless claims rising to around 26 million since mid-March.

Meanwhile the Congressional Budget Office on Friday predicated the US economy would contract by 12 per cent in the second quarter, with the unemployment rate hitting 14 per cent.

And with the near total shutdown of airline travel, the Commerce Department reported that new orders for durable goods plunged 14.4 per cent, largely driven by cancellations of orders for Boeing aircraft.

Karl Haeling of LBBW said there was no clear reason for why stocks nonetheless staged a mild rally on Friday after a flat finish the day before.

However it seemed traders had grown used to the gloomy forecasts and were heartened by Congress’s passage of a bill providing an additional $483 billion of government funds to rescue small businesses.

“The market is now comfortable with the second quarter being absolutely horrible,” he said. “It’s a time issue about when the activity will start back up.”

AFP