Trading Day: ASX surges on US transition, Covid vaccine news, border move
Stocks hit a fresh nine-month high as US presidential transition begins, amid good news on COVID vaccine and domestic borders.
- Iron ore drives export surge
- GetSwift’s Canada move under threat
- Mayne Pharma disappoints
- Oxford Uni vaccine up to 90pc effective
That’s all from Trading Day for Tuesday, November 24. Australian stocks surged on news a US presidential transition appears to be finally underway and after world markets welcomed news of another promising result on a COVID-19 vaccine. The Dow rose 1.1 per cent, the S&P 500 added 0.6 per cent and the Nasdaq gained 0.2 per cent. RBA deputy governor Guy Debelle delivered a speech “Monetary policy in 2020” at 1.30pm (AEDT).
James Kirby 8.00pm: Love the shares, but not the cars
As one state after another moves to tax electric cars, Australian investors are pouring money into electric car stocks in unprecedented numbers -- especially Tesla, which is the top overseas stock held by local investors.
Matt Leibowitz, the CEO of Stake, an online platform that specialises in overseas trading, says: “We are seeing a rush into all electric car stocks.”
Data from online broker CommSec also shows Elon Musk’s Tesla comfortably ahead of all rivals as the most popular overseas stock. Over the last week Tesla had nearly 8 per cent of all CommSec’s offshore trades, while the second most popular offshore stock was also an EV (electric vehicle) stock, the Chinese electric car company NIO with 5 per cent.
As Australian investors swarm to buy EV stocks -- that are in part thriving on government incentives -- the wider Australian public remains resistant to actually buying or driving electric cars.
While Australian EV take up is lagging on most international measures, the Victorian government has just introduced an electric car impost in its state budget which will mean EVs get taxed at about 2.5c per kilometre -- or around $500 a year on average.
The move by the Andrews government aims to capture electric cars among road taxes. It follows South Australia, which led the way with the first tax of this kind a fortnight ago.
Elise Shaw 7.50pm: Climate Council says Narrabri project to have ‘devastating impact’
The federal government has cemented its position as a climate change laggard and driver of environmental destruction by approving Santos’ polluting Narrabri Gas Project, said the Climate Council.
“In greenlighting the Narrabri gas project, the federal government shows a lack of care for the families, farmers, and wildlife who need a safe climate to survive,” said Climate Councillor Will Steffen, who gave evidence to the NSW Independent Planning Commission.
“Australians have suffered through a horror year of scorching heatwaves, devastating droughts and unprecedented bushfires. This is the cost of continuing to mine and burn gas and other fossil fuels.
“People have lost lives, homes, and jobs; and over a billion animals have died. Australia cannot afford any more climate inaction.
Professor Steffen said the science was clear. “We need to keep global warming well below 2 degrees Celsius, and in order to achieve that we need to rapidly reduce greenhouse gas emissions.This means no new fossil fuels, and a rapid transition to renewable energy,” said Professor Steffen.
Professor Lesley Hughes, Climate Councillor and Distinguished Professor of Biology, said: “The Narrabri project will have devastating impacts on local biodiversity and water resources, and will accelerate dangerous climate change.
“Australia does not need new gas, and a majority of Australians don’t want it. Governments and investors should be helping to transform Australia into a world leader in renewable energy. This would get Australians back to work now, while future-proofing our economy,” said Professor Hughes.
Elise Shaw 7.03pm: Xero announces $US600m convertible notes offering
Xero announced a $US600m ($819m) convertible notes offering of senior unsecured convertible notes due 2025 to be issued by its wholly-owned subsidiary, Xero Investments Limited, and guaranteed by Xero.
Xero CEO Steve Vamos said in a statement released to the ASX after the market closed on Tuesday: “This announcement represents the next step in our ongoing program to optimise Xero’s financial structure as we continue to execute our strategic priorities.”
It is intended that the notes will be listed on the Official List of the Singapore Exchange Securities Trading Limited.
Xero CFO Kirsty Godfrey-Billy said: “The new offering, combined with the restructuring of our existing convertible note liability, will benefit shareholders and provide Xero with additional financial flexibility to pursue strategic investments, and deliver ongoing innovation and support of our customers and partners.”
Goldman Sachs and Morgan Stanley are acting as joint lead managers on the offering.
Perry Williams 6.20pm: Santos to kick-off Narrabri appraisal progam
Santos will kick off a 12-18 month gas appraisal program for its $3.6bn Narrabri project after winning federal environmental approval, with a decision over whether to proceed with the investment expected late 2021 or early 2022.
The South Australian producer said the conditions are largely in line with its $US18.5bn GLNG project in Queensland where it has already drilled thousands of coal seam gas wells.
“We accept the conditions from the Commonwealth, which are very much in line with our other operations across the country and welcome the approval that all relevant matters of national environmental significance have been adequately addressed,” Santos chief executive Kevin Gallagher said.
No fracking will be undertaken at Narrabri and all of the gas will be developed for domestic use, Santos has previously stated.
Still, with no drilling at Narrabri undertaken in the last six years, analysts said there would be intense interest in the appraisal phase.
“Federal approval was an expected milestone. The more critical next phase will be appraisal drilling to delineate and de-risk the potential development. We might expect more details from Santos next week at their Investor Briefing Day,” Credit Suisse analyst Saul Kavonic said.
Disruptive protests and separate environmental approvals for a new $500m pipeline planned by APA Group to transport Narrabri gas to customers also loom as potential hurdles.
“We still cannot rule out further social licence risks to the project, given scope for activist protests alongside further environmental approvals that may be required including for pipelines to enable a larger scale development in the future,” Mr Kavonic said.
Santos said it had already started workover activities on existing wells under its exploration tenures.
The Australia Institute think tank blasted the federal environmental approval.
“The Federal Government’s decision to approve the Narrabri gas project not only endangers water and the environment, but will permanently lock NSW manufacturers into high gas prices,” said Richie Merzian, Climate & Energy Director at the Australia Institute.
Elise Shaw 5.40pm: ARA: More needed to repair Victoria’s retail sector
The Australian Retailers Association (ARA) said it welcomes key business measures delivered by the Victorian Treasurer Tim Pallas in today’s 2020-21 Victorian State Budget, but said the Budget does not go far enough to rebuild the state’s most broken business sectors like retail.
ARA CEO Paul Zahra applauded initiatives to preserve and create jobs, particularly for women, along with payroll tax concessions and a digital adaption fund for SMBs, but said the measures would be insufficient to repair the lockdown damage for many SMB retailers.
“It’s a big positive to see jobs support including a New Jobs Tax Credit and a wage subsidy should provide the sector with a substantial incentive to hire new staff. Women represent more than half of the retail workforce at 54.5 per cent, and younger employees aged 15 to 24 years old represent 30.8 percent of our sector, meaning this can provide a significant boost to retailers,” he said.
“Many retail employees, who are young women, are set to benefit from additional funding for child care, which will assist their return to the workforce,” he said.
“However, Victoria’s lockdowns have left local retailers saddled with extraordinary debt levels and trading deficits - sales are down 4 per cent since March, compared to 5 per cent growth nationally. Unfortunately, pre-Christmas sales are also predicted to fall by 3.3 per cent in the state, likely leaving many without the sales boost they need to survive and thrive into next year,” said Mr Zahra.
“As JobKeeper and JobSeeker wind back, retailers need cash and financial support to repair and rebuild, rather than debt and loan schemes. While permanent changes to payroll tax are welcome, deferrals may create a debt overhang in future, compromising future prospects for growth.The ARA is disappointed in the announcement for the Secure Work Pilot Scheme which, in its final form, will introduce an additional cost to business at a time they can least afford it.
“Unfortunately, the effect of some job creation initiatives will be nullified by what is effectively a new tax on employment, imposing an additional 25 per cent loading on wages to fund sick leave for casuals. This measure is an impediment for retailers which are facing the toughest economic climate in a century,” Mr Zahra continued.
Mr Zahra commended the Victorian government on the Wellbeing and Mental Health support programs and the $20m Small Business Digital Adaptation Fund to help sole traders and micro and small businesses to build digital capability in their day-to-day operations, two key areas of ARA advocacy in recent months.
“Retail is Australia’s largest private sector employer - employing one in ten Australians. It’s important to see investment in rebuilding this important part of our economy. The recent lockdown period has shown us that, as the freight and distribution capital of Australia, we need the Victorian economy to fire in order to stimulate national economic outcomes,” said Mr Zahra.
“The ARA stands ready to support the retail recovery that is crucial for the economic health of Victoria, and look forward to working with the government to support the skills development that will be crucial to the long-term growth of the retail industry,” Mr Zahra concluded.
READ MORE: Victorian budget sparks warnings from ratings agencies
Elise Shaw 5.33pm: Pandemic poses APAC income inequality risks: Moody’s
Moody’s Investors Service says in a new report that the impact of the coronavirus pandemic will exacerbate income inequality in APAC, posing credit risk for sovereigns across the region and in particular for those with weaker fiscal capacity and social protection systems.
“Growth in APAC has outpaced other regions globally for decades. Although this has reduced poverty, it has been accompanied by increases in income inequality for nearly half of Moody’s rated APAC sovereigns,” says Anushka Shah, a Moody’s Vice President and Senior Analyst.
“The shock from the pandemic will make these inequality gaps starker as it hits vulnerable and lower income groups disproportionately,” adds Shah.
Rising disparities could spur governments to intervene with fiscal policy. Spending on social measures typically reduces income disparity. But nearly all APAC emerging and frontier markets, barring a few exceptions, have weak redistribution systems, although efforts to strengthen these systems are underway.
Tax policies, particularly the use of progressive income taxes, can also address income inequality, but only when tax leakage or evasion is minimal. In APAC – with the exception of some advanced economies – the role of taxation in reducing inequality has been limited, since personal taxes account for a small share of tax revenue and they are not aligned with taxpayers’ capacity to pay.
Over the long term, governments with weak social systems and limited scope to raise fiscal spending will face particular challenges in tackling income inequality. India, Indonesia and, to some extent, Malaysia and the Philippines stand out in this regard. Frontier markets such as Papua New Guinea and Sri Lanka face similar pressures.
Low revenue constrains the ability of these governments to shore up financing for spending on social transfers. If growth remains below pre-pandemic rates, these governments may face tough choices between addressing inequality before it has persistent and wide-ranging effects – particularly, but not limited to, social and political strains – and implementing fiscal consolidation.
Although China, Hong Kong SAR and Singapore have high income inequality, their fiscal space provides leeway in quelling immediate pressures.
Perry Williams 5.21pm: Santos gets Narrabri gas project environmental approval
Santos has won environmental approval from the Morrison government for its controversial $3.6bn Narrabri gas project in NSW, clearing a final hurdle for the development which aims to supply half the state’s gas needs by 2025.
The green light from Environment Minister Sussan Ley removes a final planning hurdle for the South Australian energy producer after a four year wait.
The federal department had 30 business days to deliver a verdict under the Environment Protection and Biodiversity Conservation Act.
“I am satisfied that the conditions, and the staged nature of work in the area, will safeguard the biodiversity of the Pilliga Forest,” Environment Minister Sussan Ley said. “My approval has also been informed by advice from the Commonwealth Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development to ensure the ongoing protection of precious water resources.”
Santos in September accepted 134 conditions imposed on the project by the NSW Independent Planning Commission with Ms Ley noting strict conditions on clearing limits and rehabilitation of rural land.
Conditions to protect water, one of the major fears raised among opponents of the project, include an early warning system to monitor water bores and identify issues with aquifers before they occur, stop work provisions at gas wells when groundwater limits are forecast and a chemical risk assessment. A $120m community benefit fund will also be set up with local Narrabri residents.
Attention will now turn to the cost and timing of gas supplies from the development with Santos expected to make a final investment decision by late 2021 or early 2022.
NSW Premier Gladys Berejklian has indicated the state will tap LNG imports if Narrabri fails to move ahead, to meet a federal government deal to supply an extra 70 petajoules of gas into the east coast domestic market.
Still, some big users remain concerned the new supply source may do little to reduce gas prices on the east coast which they argue places Australian manufacturers at a disadvantage to their international rivals.
Narrabri gas will need to be sold for $8 to $10 a gigajoule to achieve an economic return on investment assuming well performance as well as capital and operating costs similar to Queensland coal seam gas fields, JP Morgan said.
READ MORE: First great gas battle is over, now for the war
Elise Shaw 5.11pm: Aussie stronger against US dollar
The Australian dollar was 0.43pc stronger against the US dollar by the close of the ASX session, trading around US73.17c.
Commonwealth Bank’s Global Markets Research team says AUD/USD recovered all its losses following US PMIs and was also supported by the higher NZD.
“AUD ignored the speech by RBA Deputy Governor Debelle. Debelle said the AUD would be higher if not for this month’s policy easing. That may be true, but by only a few cents, and not enough to materially change the trajectory of the Australian economy. We still expect AUD to lift because of the China‑led world economic recovery.”
Bridget Carter 4.50pm: Booktopia IPO sees ‘strong demand’
The initial public offering for online book retailer Booktopia closed on Tuesday and has been met with strong demand, with institutional investors volunteering up to $120m for the listing.
The company’s initial public offering size was $43m, and the primary raise was $25m, making the institutional offer five times oversubscribed.
Cornerstone pre-IPO investors include Su-Ming Wong of Champ Ventures, Perennial, Ellerston, Regal, Washington H. Soul Pattinson, Ellerston and Regal Funds management, all of which have either maintained or increased their holdings in the company.
The online book retailer is set to start trading on December 3 with a $315m market value after shares were sold at $2.30 each.
The pricing equates to 1.5 times the company’s forecasted revenue on an enterprise value basis.
4.42pm: ASX ends +1.3pc at 9-month high
Australia’s S&P/ASX 200 finished up 82.5 points, or 1.3pc, at a nine-month high of 6644.1, adding $26bn of market capitalisation.
It rose as much as 1.5pc to a nine-month high of 6661.4 on an intraday basis.
After a 0.5pc rise in the S&P 500 after stronger-than-expected US PMI data, very encouraging phase 3 trial results for the AstraZenca-Oxford coronavirus vaccine and reports that former Fed Chair Janet Yellen was US President elect Joe Biden’s pick for Treasury Secretary, the market got a further boost as S&P 500 futures surged 0.8pc after General Services Administration chief Emily Murphy sent a letter of presidential acertainment to Joe Biden.
The Australian market was also helped by news of a further easing of COVID restrictions with confirmation that the NSW-QLD border will fully reopen on December 1st.
Value stocks tied to economic reopening were particularly strong with the Energy, Financials and Consumer Discretionary sectors outperforming. In those sectors Beach Energy rose 8.2pc, ANZ rose 3.1pc, QBE gained 3.4pc, Webjet soard 4.7pc and Wesfarmers rose 1.8pc.
Travel related stocks in the industrials sectors also surged ahead with Qantas up 3.9pc, while iron ore miners also outperformed with BHP up 3.4pc.
But tech stocks were surprisingly strong with Xero up 3.9pc, Afterpay up 2.5pc and Computershare up 3.7pc.
Computurshare, insurers and banks were helped by a rise in bond yields, with the 10-year yield up 4.5bps to 0.89pc.
Gold miners sank with Newcrest down 6.1pc as the spot price dived amid a switch back to riskier investments.
Elise Shaw 4.20pm: Aussie ‘beats’ for economic data surprise and delight: CommSec
The run of Australian economic data has improved, notes CommSec senior economist Ryan Felsman.
“In fact, the last time there were so many Aussie economic data ‘beats’ (releases above surveyed economist’s expectations) was August 2006!” he says.
“In the year to October, the goods trade surplus (exports less imports) was $70.3bn, down from the record high of $87.3bn in April. The value of iron ore exports hit a record high of $10.9bn in October. Rolling annual exports of iron ore (metalliferous ores & metal scrap) hit a record $136.6bn. The value of coffee, tea and spices exports climbed to $448m on a rolling annual basis in October – also a record high.
Australia’s political tensions with China have been headline news. But exports to China grew by 7.4 per cent in October to $12.7bn on the back of our largest trading partner’s insatiable appetite for iron ore, Felsman says.
“The value of Aussie exports of the steel-making ingredient hit fresh record highs of $10.9bn in October. On Friday, iron ore futures on the Singapore Exchange hit 6-year highs - within touching distance of $US130 a tonne - on the back of strong Chinese steel mill demand. And the value of Aussie exports of coffee and tea manufactures were also at record high levels in October.”
Bridget Carter 3:46pm: Fantastic IPO market valuation
Float prospect Fantastic Furniture is hoping to list at 11 times its net profit, taking its market value to between $430m and $530m.
It is understood that the terms are yet to be finalised, but the pricing is due to be set this week at around those numbers.
Fantastic Furniture, which is owned by Steinhoff International subsidiary Greenlit Brands, has plans to list through Macquarie Capital and Credit Suisse as early as this year.
The IPO plans have been on the cards since the start of this year, as flagged by DataRoom.
Fantastic Furniture is forecast to generate $650.7m of sales for the 2021 financial year, up from $550.7m in the 2020 financial year to June.
Earnings before interest, tax, depreciation and amortisation is expected to be $76.7m, up from $61.7m in the 2020 financial year to June.
Net profit for fiscal 2021 is expected to be $47.6m, up from $38.5m for the 2020 financial year.
The retailer has 81 stores nationally and generated 29 per cent of its sales during the 2020 financial year from online, when shoppers stayed home since March due to the Covid-19 pandemic.
Founded in 1989, selling outdoor furniture at Parklea Markets in Sydney before opening its first store in 1991, Fantastic Furniture sources furniture from third party suppliers.
It was listed in 1999 before being purchased by Greenlit and delisted in 2016.
At the time, the company included the Plush and Original Mattress Factory brands.
Elise Shaw 3:46pm: Growth rate of goods spending up 22pc: CBA
According to the Commonwealth Bank (CBA), card spending in the week to November 20 lifted by 12 per cent on a year ago compared to an 11 per cent lift for the previous week, reports CommSec.
“Spending on services rose 1 per cent from a year ago (previously: flat). But the annual growth rate of goods spending climbed 22 per cent. Annual growth in spending in South Australia fell to 9 per cent last week (previously: +15 per cent) due to the virus lockdown,” says CommSec senior economist Ryan Felsman.
3:25pm: ASX +1.5% as US futures surge
Australia’s sharemarket continues to surge alongside, albeit more than US futures.
After hitting a 9-month high of 6661.4 points, the S&P/ASX 200 share index is up a remarkable 1.5pc for the day, 1.9pc for the week and 12.4pc for the month.
On the charts, an upward break from an ascending wedge pattern suggests the index could “melt-up” toward the record high at 7197.2, just over 8pc away, notwithstanding some likely month-end rebalancing.
Domestically, plans to reopen the NSW-QLD border on Dec 1st are encouraging, as are the fact that the government has backed the highly-effective AstraZeneca coronavirus vaccine.
Official recognition in the US of the election win by president-elect Joe Biden is expected to lessen US political uncertainty and hasten US fiscal stimulus, while the expected appointment of Janent Yellen as Treasury Secretary would add a steady had to the mix.
Combined with effective coronavirus vaccines that should help the economic outlook, even as the virus continues to spread at alarming levels in the US and Europe.
Wall Street is expected to surge overnight with S&P 500 futures extending their intraday gain to 0.8pc in APAC trading.
Bridget Carter 2.29pm: HWL Ebsworth downsizes IPO
The raise will consist of a $20m primary selldown and a $131.4m secondary selldown by existing investors.
The company’s market value will now be $407.4m.
More to come.
2.20pm: Business key to current account
RBA deputy governor Guy Debelle said the possibility of Australia continuing to run a current account surplus depended on the level of business investment post COVID-19.
“At least prior to this we’ve run current account surpluses for a while and it was conceivable it was going to continue for a while,” Mr Debelle said, saying he views the current account from a savings-investment perspective.
Dr Debelle said that although household savings may be structurally higher going forward, an “appropriate” government deficit means the level of business investment will be highly determinative in setting the current account going forward.
2.14pm: Debelle ‘not convinced' on negative rates
RBA deputy Guy Debelle says the central bank does not favour a policy of negative interest rates as he is not convinced they have the desired effect of stimulating the economy.
“I find in terms of supporting the flow of credit, I don’t find the evidence all that convincing,” he said.
Dr Debelle said that his colleagues at other central banks have observed instances of households saving more, not less, under negative interest rates.
“From a theoretical point of view you may say that’s not sensible, but that’s what’s happening in some of these jurisdictions,” he said.
He also said he saw no risk of the current level of fiscal and monetary support overstimulating the economy.
“We don’t see a risk of having inflation too high or having unemployment too low,” he said.
2.11pm: RBA asset purchasing
RBA deputy governor Guy Debelle was asked about the RBA’s policy preferences in regard to asset purchases. What would happen if government bond yields around the world were to, say, double next year from their current low levels, as a result of widespread deficit financing - particularly in the US - and a normalisation of economic growth as vaccines control COVID, he was asked. Dr Debelle says if the economic outlook changes the RBA would change its assessment. But its focus of policy is on the 3-year part of the curve and much less on the long end.
2.07pm: RBA doesn’t see much pressure on house prices
RBA deputy governor Guy Debelle is asked about the house price outlook, during a Q&A session following his speech to business economists.
Overall, he says he doesn’t see much pressure on house prices in the short term, but notes that in an environment where interest rates aren’t going anywhere for a long time, asset prices should be supported.
“It’s quite different across the different parts of the market both in terms of higher density versus detached and around different parts of the country,” Mr Debelle said of the housing market.
“So we’ve got much slower population growth in the next couple of years...so the dynamics there in the short term at least are a lot of supply coming on to the market.
“On the other side of the equation, the detached market is actually doing pretty well - now living on the outskirts of big cities is a good thing, rather than a bad thing.”
1.37pm: Uneven recovery ahead: RBA
The Reserve Bank of Australia expects the likely global release of a COVID-19 vaccine in the coming months to boost confidence and investment across the economy, although recovery will be uneven and monetary and fiscal stimulus will need to remain in place for some time.
“While the news about vaccines should help bolster business confidence, the recovery will be uneven,” RBA deputy governor Guy Debelle said in a speech to business economists.
“It is likely to be some time before the vaccines will be widely available and distributed. That said, the fiscal and monetary support will boost spending in the economy,” he added.
The comments come as global share prices jump on more reports around the likely provision of an effective vaccine against the coronavirus next year.
Dow Jones
1.30pm: Australia’s debt ‘very manageable’
Reserve Bank deputy governor Guy Debelle has offered a comprehensive review of the central bank’s monetary policy actions and aims since the COVID crisis, culminating in its decision to cut key interest rates, including its official cash and official interest rates to almost zero and start large scale asset purchases this month.
He has also examined the lessons from the crisis and argues that Australia’s public debt is “very manageable.”
As well as the fact that Australia’s public debt is being low relative to GDP - even after the “sizeable stimulus” that’s being implemented, he argues that the debt dynamics for the state and federal governments are “absolutely sustainable” because the cost of borrowing is at historically low levels and borrowing costs are “likely to remain very low for quite some time, and almost certainty until the economy is considerably stronger”.
As outlined previously by the RBA, Dr Debelle argues that the ensuing decline in interest rates across the yield curve following its policy action has lowered the exchange rate, “relative to what it would otherwise be”, and has also lowered borrowing costs, boosted cash flows and supported asset prices.
While conceding that longer-term yields have risen “a little” since the November board meeting along with the exchange rate, this is “largely due to the news about vaccines”.
“But I would argue they are both lower than they would be absent the November policy package,” Dr Debelle says.
Also, as stressed previously, he says the RBA is “carefully monitoring the impact of its bond purchases on the market”.
“We are alert to any sign of dysfunction in the market, and are prepared to adjust the program if necessary,” Dr Debelle says.
So QE is the RBA’s main policy tool now. And while noting that vaccine news “should help bolster that confidence”, he says “the recovery will be uneven”.
“It is likely to be some time before the vaccines will be widely available and distributed,” Dr Debelle says.
“That said, the fiscal and monetary support will boost spending in the economy. This will increase employment and, in time, reduce unemployment.
“A materially lower unemployment rate is clearly desirable in itself, but will also be necessary before we will see sustainably higher wages growth and inflation.”
Perry Williams 1.23pm: Morrison to cave on climate: Turnbull
Malcolm Turnbull has predicted Prime Minister Scott Morrison will give in to international pressure and sign up to a net zero emissions target by 2050 after clinging too closely to Donald Trump’s rhetoric.
“I’m confident Morrison will move to that. He probably over-channelled Trump, he was clearly dazzled by Trump and went full in with that in a number of areas whether in foreign policy and all the talk about being against globalism and so forth was channelling the Donald, including on climate,” Mr Turnbull told a business summit on Tuesday.
“The reality on climate is all of our major trading partners have a net zero target and the Biden administration will return to the climate fray with a real enthusiasm and he’s announced John Kerry - who is a real climate action evangelist with huge global credibility - will be the climate tsar and so Australia has to get on board.”
Mr Morrison says net zero carbon emissions by 2050 is achievable but has not committed to a hard energy target for the mid-century.
“We will pay a heavy price for this in international trade, believe me. We are kidding ourselves to think the Europeans will not have climate in the Australia-Europe free trade agreement,” Mr Turnbull said.
“We’re absolutely kidding ourselves and I can see the Americans making that a condition of trade agreements right around the world. What Scott has to do now is pivot or dismount - whatever you want to call it - whether it’s done elegantly or not it doesn’t really matter - as long as he does it.”
Bridget Carter 1.00pm: NRW recruits for Primero bid
NRW Holdings has tapped Longreach Capital and law firm Corrs Chambers Westgarth for its $100m takeover attempt of Primero.
Primero is working with Sternship Advisers and law firm Thomson Geer.
NRW announced on Tuesday that it had agreed to buy Primero for 55c each in a cash and scrip deal that values the business at $100m.
The offer includes 27.5c per share cash and 0.106 NRW shares per Primero share and the offer has been backed by the target’s board.
NRW is a $1.1bn listed diversified provider of contract services to the resources and infrastructure sectors in Australia, generating most of its revenue from civil and mining services, with the remainder from drill and blast and mineral, energy and technologies work.
Primero Group provides engineering design, construction and operational services to the minerals, energy and infrastructure sectors.
The deal is further evidence of mergers and acquisition activity occurring in the West Australian services sector.
It comes after NRW in 2019 agreed to buy BGC Contracting for $310m.
At that time, NRW tapped Longreach Capital and UBS, while Macquarie Capital worked for BGC.
Nick Evans 12.57pm: CIMIC caves on supplier terms
Contracting giant CIMIC has finally caved to pressure and returned to 30-day payment terms for its thousands of small business suppliers across the country.
CIMIC shifted its payment terms to suppliers last year, pushing out payment terms to 65 days across its operating businesses, including engineering arm UGL and civil contractors CPB, and offering reverse factoring services provided by Greensill Capital if small business subcontractors wanted to be paid earlier.
The move attracted extensive criticism, particularly as the coronavirus pandemic gathered pace, as it meant small business suppliers were effectively forced to take a discount on their invoices to be paid within a reasonable time frame.
Faced with growing criticism, Greensill gave its clients until October 31 to reduce payment terms to beneath 30 days for small businesses or face the loss of its reverse factoring services, with CIMIC a major target of the threat.
In the face of Greensill’s threat, CIMIC began reducing its reliance on reverse factoring earlier this year, slashing more than $700m from its supply chain financing balance in the nine months to the end of September.
On Tuesday CIMIC said it would return to paying small businesses within 30 days from early 2021, when the Department of Industry, Science, Energy and Resources has set up a register of ‘small businesses’, in line with recent legislation passed by federal parliament.
12.51pm: NZ minister raises housing concerns with RBNZ
New Zealand’s finance minister said he has asked the central bank to provide advice on how it can contribute to a stable housing market as prices rise rapidly.
New Zealand house prices rose 20pc from a year earlier in October, fuelled by record low interest rates, potentially worsening inequality and putting home ownership out of reach for some.
Finance Minister Grant Robertson said he has written to Reserve Bank of New Zealand Gov. Adrian Orr for advice on whether stability in house prices could be a factor the RBNZ considers when making monetary policy decisions.
“Undertaking this work is not to suggest the Reserve Bank bears responsibility for house prices, but simply that it should have regard to something that is influenced by monetary policy,” Mr. Robertson said. “I want to be clear I am not proposing any changes to the mandate or the independence of the Reserve Bank,” he said.
The central bank’s mandate requires it to manage inflation within a 1pc - 3pc band and to maximise employment, while also avoiding any damaging instability in interest rates and the exchange rate.
Mr Robertson said the government is also looking at measures such as overhauling a cumbersome planning law to boost the supply of new housing.
Dow Jones
12.47pm: South32 sells royalties
South32 has agreed to sell three Australian gold royalties to Canadian-listed miner Elemental Royalties Corp for $US40m ($54.73m) in cash and $US15m worth of equity.
In a release to the TSX Venture Exchange in Canada late last night (AEDT), Elemental said it would acquire the Karlawinda, Laverton and Western Queen mine royalties operated by Capricorn Metals, Focus Minerals and Rumble Resources respectively.
At Karlawinda Elemental will be entitled to 2 per cent of net smelter royalty, at Laverton 2 per cent of gross revenue royalty, and at Western Queen, a $6-20/oz royalty.
The deal means South32 will become the largest single shareholder in Elemental, with 19.7 per cent of the company’s common shares.
Patrick Commins 12.15pm: Iron ore drives exports rise
Australia’s iron ore exports have surged to a record high of $10.9bn, accounting for more than a third of the country’s total international goods sales in October as Chinese demand for the steelmaking commodity continues to grow.
The latest figures from the Australian Bureau of Statistics show goods exports lifted by $1.8bn last month, or 6 per cent, to $30.5bn.
ABS head of international statistics Branko Vitas said “the primary driver for the increase in exports was an $833 million (7 per cent) increase in exports of metalliferous ores, most of which was iron ore headed for our largest trading partner, China”.
Despite the sharp deterioration in relations with China, the Asian giant’s appetite for key mineral commodities has only climbed through the pandemic, cushioning the economic blow of the COVID-19 recession.
November is likely to be another strong month for our miners, with the iron ore price surging above $US130 a tonne this week to a two-month high.
12.06pm: ASX pushes to fresh nine-month high
Australia’s sharemarket remained strong at midday after surging to a fresh nine-month high on diminishing US political risk and improving prospects for domestic and global economic growth.
The S&P/ASX 200 was up 1.2pc at 6638.5 after rising as high as 6640.5 on encouraging phase three trial results from the AstraZeneca-Oxford coronavirus vaccine, official recognition by the Trump administration of the US election win by President-elect Joe Biden, reports he’s picked former Fed chair Janet Yellen as Treasury Secretary, and news that the NSW-Queensland state border will fully reopen on December 1.
A 0.5pc rise in S&P 500 futures added to positive leads from Wall Street where the S&P 500 rose 0.5pc, led by a surge in value stocks that will benefit from faster economic growth.
It was a similar story on the Australian market, where the Energy and Financials sectors led gains, with Beach Energy up 9pc, Janus Henderson up 5.7pc, Challenger up 4.6pc, QBE up 3pc, and banks including Westpac, ANZ, Bendigo and Bank up Queensland up about 3pc.
Iron ore miners were also strong despite a fall in the spot price, with BHP up almost 3pc, while tech stocks stayed firm despite the switch to value, with Xero up 2.6pc and Afterpay up 1.3pc, while Computershare jumped almost 5pc as bond yields rose.
Gold stocks fell with the spot price with Newcrest down 4.7pc.
Focus turns to a speech on monetary policy by RBA Deputy Governor Guy Debelle from 1.30pm (AEDT).
11.57am: Kirin confirms talks with Bega
Kirin Holdings has confirmed that Bega Cheese is one of the parties in talks with the Japanese beverage giant over the sale of its Australian beverage and dairy business, Lion Dairy & Drinks.
A previous effort to sell the business to China Mengniu Dairy Co for $588m was blocked by the federal government, which said the deal would be “contrary to the national interest,” despite the deal receiving ACCC approval in February.
Previous interested parties in the deal include Asahi Group and Pacific Equity Partners.
Bega entered a trading halt yesterday pending an announcement about a proposed acquisition and capital raising.
11.51am: Ghanaian bid for Cardinal
Cardinal Resources has received a $1.05 cash per share takeover bid from the Ghana incorporated contracting firm Engineers & Planners Company limited.
The takeover is conditional on the acceptance of Cardinal shareholders and regulatory approvals, including from the Foreign Investment Review Board.
Cardinal is being advised on the offer by Maxit Capital LP, BMO Capital Markets, Euroz Hartleys Limited and Canaccord Genuity Corp.
The company, which has entered a trading halt, last traded at $1.010 a share.
Patrick Commins 11.40am: The task ahead for Yellen
News out this morning is that US president-elect Joe Biden has appointed former Federal Reserve boss Janet Yellen to be his Treasury Secretary - the first woman appointed to the job. You may recall that Donald Trump declined to reappoint Ms Yellen at the end of 2018 and replaced her with current Fed chairman Jerome “Jay” Powell, who has served with negligible change in policy from his predecessor.
In correspondence with The Australian from Washington, DC, Peterson Institute for International Economics president Adam Posen said he was “pleased” that Ms Yellen was one of a number of highly qualified women for the job.
Mr Posen said Ms Yellen faced two important tasks in her new role, “given the divided government and society in the US”.
“First, the Secretary has to be able to work with Congress, including the Republican majority Senate, to keep the budget discussions running responsibly,” Mr Posen said. “Second, the Secretary has to be able to reassure markets, and particularly foreign investors and governments, that division in the US will not lead to problems in the dollar or weaponisation of it.”
11.30am: Tokyo’s Nikkei opens sharply higher
Tokyo shares opened higher after US President Donald Trump said he no longer opposed government aid for Joe Biden’s transition team, with markets also buoyed by new vaccine news.
The Nikkei 225 index rose 1.91 per cent or 486.82 points to 26,014.19 in early trade, playing catch-up after a long weekend with surges in other markets. The broader Topix index added 2.00 per cent or 34.51 points to 1,761.90.
AFP
11.20am: Triple treat helps lift ASX 1.2pc
Value stocks are setting the pace today after a triple whammy of good news from the Astra-Zeneca/Oxford coronavirus vaccine results, official recognition of US President-elect Joe Biden’s win, and a decision to fully reopen the Queensland-NSW border on December 1.
The S&P/ASX 200 share index has surged 1.2pc to a nine-month high of 6650, aided by a 0.5pc rise in S&P 500 futures.
The index has risen an incredible 12pc month to date, and is now just 8.4pc below its record high of 7197.2 reached on February 20th.
Energy and financials are the major beneficiaries of the developments as crude oil prices rise on the prospect of increased travel and bond yields rise on expectations of faster economic growth and higher bond yields.
WTI crude oil futures have risen 0.6pc to $US43.12 after rising 1.7pc overnight, while US 10-year bond yields have risen 1 basis point to 0.87pc after rising 3bp overnight. Beach Energy leads the Energy sector with a 8pc gain, while a range of Financials have surged, with Janus Henderson, up 7pc, Challenger up 3pc, Bendigo Bank and Bank of Queensland up 2.6pc and ANZ and Westpac up 2.5pc. Travel stocks also standout with Webjet up 3.9pc and Qantas up 3.4pc. although Sydney Airport is down 0.4pc after Morgan Stanley downgraded its rating to Neutral.
The consumer discretionary sector is surprisingly strong considering its outperformance since March as COVID boosted online shopping and work-from-home.
Apart from Webjet, ARB, Harvey Norman, Eagers, Brevilleand Premier Investments are up at least 2pc, while Wesfarmers and JB Hi-Fi are up 1.5pc.
Iron ore miners are also surprisingly strong considering that the spot price fell 2.1pc overnight. BHP, Rio Tinto and Fortescue are up 2.4-3pc.
Perhaps the biggest surprise is that the tech sector - arguably the biggest beneficiary of COVID - is so strong today.
Xero is up 3.7pc and Afterpay is up 2.1pc, while Computershare is up 4.2pc, which makes sense given its high correlation with bond yields.
David Swan 11.15am: GetSwift’s Canada move under threat
GetSwift’s plans to delist from the ASX and redomicile in Canada have hit a major hurdle, with the company receiving a letter from Treasurer Josh Frydenberg saying that such a move would be “contrary to the national interest” due to the company’s ongoing legal matters.
Mr Frydenberg said he was mulling an order prohibiting GetSwift from redomiciling under section 67 of the Foreign Acquisitions and Takeover Act.
“Without prejudging the outcome of Australian legal proceedings currently on foot, it is my preliminary view that the proposed acquisition would be contrary to the national interest at this time due to there being ongoing legal matters concerning the Target which are yet to be resolved,” the Treasurer wrote. “If the proposed acquisition and subsequent re-domicile of the Target were to take place before the current proceedings are resolved, this may have a negative impact on the interests of possible contingent creditors associated with those proceedings.”
GetSwift told the market on Tuesday it intends to respond to the Treasurer, and that its directors “continue to believe that the proposed scheme is in the best interest of GetSwift.”
Its shares are down 6.25pc to 30 cents at 11.10am AEDT. Its shares were at 85 cents in July.
The logistics tech company, which is facing an ongoing class action suit in Australia, in September entered into an implementation deed with GetSwift Technologies Limited, otherwise known as Holdco, located in British Columbia, Canada.
The company intends to list on Canada’s NEO exchange, with Holdco to acquire GetSwift and its subsidiaries.
GetSwift’s class action, which stems from alleged breaches of continuous disclosure obligations, is ongoing. Last year it had multiple class actions filed against it and endured a plummeting market capitalisation, as well as an ASIC investigation due to the alleged breaches of continuous disclosure obligations.
11.10am: Mesoblast holds AGM, as shares jump again
Mesoblast chairman Joseph Swedish has told shareholders at the company’s AGM that its flagship remestemcel-L product, designed to treat the respiratory effects of COVID-19, will be in demand after a successful vaccine rollout.
Mr Swedish said that even if the spread of the virus is eliminated, the lingering effects of COVID-19 are serious in vulnerable people.
“Even as COVID-19 vaccines become available, patients who have co-morbidities or are older are likely to continue to be at high risk of ARDS and subsequently death,” he said.
“This is why having a potential treatment that reduces mortality in these patients is so important.
“The loss of life due to the COVID-19 pandemic is the driving force behind our shared commitment to make available our transformational cellular therapy to these highest risk patients.”
Shares in the company have rallied by 50 per cent since Friday, when a partnership with Swiss biotech Novartis was announced with the aim of developing the treatment for respiratory issues caused by COVID-19.
One of the key terms of the deal is a $US50m payment from Novartis, including $US25m equity, an additional $US50m payment on the achievement of certain milestones, post-commercialisation payments of up to $US750m, as well as royalties on product sales.
Shortly before 11am Mesoblast shares were trading at $4.97, up 16 per cent on opening.
Perry Williams 10.55am: NSW facing legal threat over power plan
Power baron Trevor St Baker says investors would be considering legal options against the NSW government over its controversial $32bn energy plan, which has sparked a spending freeze and raised concern over the future of the state’s coal plants.
Mr St Baker, a co-owner of the Vales Point coal plant in NSW’s Hunter Valley, said the “gross intervention” by the NSW government into the power sector effectively represents a change of electricity law.
“The gigantic intervention into the electricity market in NSW - if not tempered with reality in how to operate and manage and regulate a complex open and competitive market - it has to be seen as a massive ‘change of Electricity Law’, which will have investors seeking legal redress against the government,” Mr St Baker said on Tuesday.
NSW Energy Minister Matt Kean has announced a plan to add 12 gigawatts of renewables backed up by 2GW of storage with the government to underwrite investment to ensure enough supply is in place when coal plants retire over the next two decades.
However, there is concern costs will be passed to consumers, while investors like AGL Energy have pulled back from sanctioning gas and battery deals due to uncertainty over how the state’s plan may hinder investment returns.
Mr St Baker, a major shareholder in Brisbane electric vehicle charging innovators Tritium and Evie Networks, said he was concerned by the NSW government move.
“It will have minimal contribution towards the replacement 24/7 dispatchability and essential system support and reliability services provided by the existing synchronous coal-fired generators,” Mr St Baker said.
The Vales Point coal plant is due to close by 2029 although Mr St Baker has previously suggested it could stay open for two decades longer if required.
Origin Energy chief executive Frank Calabria said he backed the decision made by AGL Energy to pause its NSW investments.
“I think it’s appropriate that those that are investing would wait to see what the rules being set by NSW would be. So I think it’s a sensible set of decisions,” Mr Calabria told a business conference on Tuesday.
“That it’s coordinated over the whole national energy market is important as well. But it is sending a signal of what investment is required in the NSW market as well.”
10.34am: Biden to get delayed presidential transition aid
President Donald Trump said he no longer opposes government aid for Joe Biden’s transition team, in his closest statement yet to finally conceding he lost the US election.
Mr Trump’s tweet that the General Services Administration should “do what needs to be done” came after the agency’s head Emily Murphy said she was releasing the long-delayed assistance.
Mr Trump has spent the last three weeks since the November 3 election claiming without any evidence that Biden’s convincing victory was the result of fraud.
Ms Murphy, who denies acting under political pressure, has refused until now to release the standard package of aid that her agency manages to Biden’s incoming team.
AFP
...fight, and I believe we will prevail! Nevertheless, in the best interest of our Country, I am recommending that Emily and her team do what needs to be done with regard to initial protocols, and have told my team to do the same.
— Donald J. Trump (@realDonaldTrump) November 23, 2020
10.30am: Queensland to fully reopen to NSW
Queensland will fully reopen its border to NSW state from December 1.
While by no means completely unexpected, this adds to the positive news for domestic risk assets, particularly travel-related value stocks.
S&P/ASX 200 last up 1.1pc at 6632.9
AUD/USD last up 0.3pc at 0.7304.
10.21am: ASX surges 1pc as US transition looms
Australia’s sharemarket has risen more than projected by overnight futures after the US General Services Administration released a letter of ascertainment for transition to a Joe Biden Presidency.
The S&P/ASX 200 rose 1.1pc to 6634 as the market priced out lingering US political risk, with S&P 500 futures up an additional 0.5pc in early APAC trading.
Until now, Donald Trump has refused to concede the presidential election, amid legal challenges and claims the vote was tainted by fraud.
It follows gains on Wall Street overnight following more encouraging news about a COVID-19 vaccine.
Value stocks in the Energy and Financials sectors are leading, with Woodside up 3.2pc and Westpac up 2.4pc.
Gold miners are on the back foot with Newcrest down 4pc after the gold price sank overnight.
10.17am: Ampol keeps sell rating
Goldman Sachs has maintained its sell rating on Ampol following the company’s announcement of a $300m off-market share buy back due to rationalisation in Australia’s oil refining industry.
Analysts said that Ampol’s $195m EBIT by 2024 growth target was capital intensive, involving between $1.3bn-1.6bn in investment including the share buy back, the rebranding of the company from Caltex to Ampol, international expansion and the potential conversion of the Lytton refinery.
The potential conversion of Lytton to an import terminal won’t happen to 2022 in the analyst’s view and implies a 22 per cent downside risk to earnings.
10.12am: US administration ready to transition: CNN
The US General Services Administration has told Joe Biden that the Trump administration is ready to begin transition, according to CNN.
This is giving risk assets a minor boost since it indicates that lingering US political uncertainty is about to be removed. Until now, Donald Trump has refused to concede the presidential election and claimed the vote was tainted by fraud.
S&P 500 futures rose 0.2pc and WTI crude futures rose 0.3pc in early APAC trading.
10.06am: Ramsay declines to give guidance
Ramsay Healthcare says it is unable to provide guidance due to the COVID-19 pandemic but told shareholders at its AGM that “industry fundamentals remain positive”.
Following a recent $1.5bn equity raising, CEO and managing director Craig McNally said the company will “invest and support new opportunities as they arise.”
In Australia, the company has resumed performing elective surgeries at 100 per cent unrestricted capacity as of November 23, helping drive revenue 1.5 per cent higher for the first quarter of the financial year.
However, elevated costs and the transfer of the Mildura Hospital back to the Victorian State Government has resulted in an EBITDAR decline for the Australian business.
Surgical volumes have increased by 5.4 per cent in France, where the company has a government revenue guarantee until the end of 2020 while private surgeries have resumed in the UK.
In the joint Asian venture with Slime Darby, Malaysian surgery volumes have continued to recover but remain lower than the previous corresponding period.
10.02am: Sydney Airport cut to neutral
Morgan Stanley’s Rob Koh has cut Sydney Airport to Neutral from Outperform on the basis that a vaccine-led recovery in and state border reopening prospects have been factored in after the share price rebound.
He notes that domestic is finally poised to improve as developments with state borders mean that flights between NSW and VIC/QLD, accounting for about 60pc of 2019 domestic passengers are likely before Christmas, while Auckland and Beijing show domestic recovery to minus 35pc is possible, albeit surges in virus transmission can send passengers back down, regardless of borders staying open. And while recent vaccination statements are a clear positive, it will take time to roll out with lesser developed countries which are 20-25pc of Sydney Airport’s international traffic.
Meanwhile the extent of structural capacity reduction from major carriers and the impact of the China-Australia political dispute, which accounts for 11pc of traffic, is unknown.
“We continue to factor a bounce back to minus 10-15pc before normalised growth resumes,” Mr Koh says.
“Sydney Airport should rebound faster, reflecting it being a natural hub, thus should get the first wave of resuming routes.”
His price target has been revised up 6.5pc to $7.09. SYD last at $6.89.
9.50am: SA shutdown dents confidence
South Australia’s limited outbreak of COVID-19 has interrupted a record 11-week run in consumer confidence growth, according to the ANZ Roy Morgan Consumer Confidence Index.
The headline index fell by two per cent to 104.5 points, not far below its long-run average of 112.6 points.
Sentiment on current financial conditions fell by 4.5 per cent but sentiment on future financial conditions remain unchanged.
The “time to buy a major household item” index fell by 1.6 per cent, a second consecutive decline.
ANZ Head of Australian Economics David Plank said confidence in all states but South Australia remained above the “neutral level.”
“The nationwide index remains above the neutral level, but South Australia’s index dropped below the 100 level,” Mr Plank said.
“New South Wales and Queensland gave up some recent gains, while Victoria saw a very modest decline.
“With South Australia reopening earlier than expected and restrictions in Victoria and New South Wales relaxed the impact on sentiment may be short-lived.”
9.42am: ASX to rise ahead of RBA speech
Australia’s share market is set for another positive day after renewed strength and a shift to value on Wall Street.
That follows very encouraging results from the Astra-Zenca/Oxford coronavirus vaccine trial, stronger-than-expected US PMI data, and reports that US President elect Joe Biden has picked former Fed chair Janet Yellen as his Treasury Secretary.
Overnight futures suggest the S&P/ASX 200 index will open up about 0.5pc, near Monday’s high at 6594.
Any move above that level will mark a fresh nine-month high in the index.
But traders should be wary of any sharp fall from Monday’s high or the top of the current rising wedge pattern, now defined by 6564-6604.
With the anticipated good news on vaccines confirmed, Thanksgiving looming as a COVID spreading event in the US, and a large amount of selling by balanced funds due before month end, the market is vulnerable to a short-term dip after rising 10.7pc month to date.
But value stocks in the Energy, Financials, Industrials and Materials sectors may lead gains today as was the case on Wall Street, albeit “COVID winners” in Health Care, Tech, Communications, Consumer Staples and Consumer Discretionary should underperform.
Global oil prices hit their highest level in 12 weeks on Monday as reports that Covid-19 vaccinations in the US could start as soon as December boosted hopes for a pick up in the demand outlook.
US Nymex rose 1.7pc to $US42.86 as focus turns to the OPEC meeting next Monday.
Spot iron ore fell 2.1pc to US$126.80 a tonne after BHP flagged downside risks from higher output and stockpiles.
Still, BHP ADR’s equivalent close at $37.80 was 2pc above BHP’s Sydney close.
Spot gold fell 1.8pc to $US1837.86, giving a headwind to the gold sector.
RBA Deputy Governor Guy Debelle speaks on “Monetary Policy in 2020” from 1.30pm (AEDT).
9.42am: NRW set to take over Primero
NRW Holdings has announced a takeover offer for Primero Group which values the construction and engineering group at $100m.
If accepted, Primero shareholders will receive $0.275 cash plus 0.106 NRW shares for every Primero share.
It equates to a per-share offer of $0.55, a 14.6 per cent premium to Primero’s Monday closing price.
The offer has been unanimously recommended by the Primero board.
9.34am: What’s impressing analysts?
Ampol: Cut to Sector Perform at RBC; PT A$28; Cut to
Neutral at JPMorgan; PT A$30; Cut to Equal-Weight at Morgan
Stanley; PT A$31; Raised to buy at UBS, PT $33.70
AusNet: Raised to Hold at Morgans Financial Limited
Tyro Payments: Rated New Hold at Jefferies
Pro Medicus cut to Neutral at UBS.
Nine Entertainment Cut to Neutral at UBS.
Sydney Airport cut to Neutral at Macquarie.
David Swan 9.29am: Pandemic lifts TechnologyOne
Listed enterprise software outfit TechnologyOne has been significantly bolstered by the COVID-19 pandemic and the economy’s widespread shift to remote work, with underlying profit up 13 per cent year-on-year and total revenue up 4 per cent.
The 32-year-old local tech company said it continued to dominate in the local government sector, closing 40 major deals in the last year worth more than $45m, while its software-as-a-service annual recurring revenue was up 32 per cent to $134.6m.
“This growth is all organic and includes no acquisitions,” the company said.
Underlying profit before tax for the year ending September 30 2020 was up 13 per cent to $86.1m, while reported profit before tax was up 8 per cent to $82.5m. The company reported expenses of $216.5m, up 3 per cent, and cash and cash equivalents of $125.2m, up 19 per cent.
It has increased its full-year dividend by 8 per cent year-on-year to 12.88 cents per share.
It noted its profits had been hit by an “unexpected judgment”, referring to a decision last month in which the court ordered TechnologyOne to pay a record $5.2 million to a former employee in an unfair dismissal case. The company said it ‘has retained very experienced counsel to expedite an appeal to the Full Federal Court’ to appeal.
“We see continuing strong growth in the future, and like we have in the past 32 years, we expect to double in size again in the next five years,” the company said in a note to investors. “This is a very strong result, as we continue to transition from our Legacy Licence business to Software-as-a-Service.
“Total revenue was up 4 per cent but we believe this is not a true indication of the growth of our business, as it includes our legacy licence business, which we are aggressively reducing, as we grow our SaaS business.”
TechnologyOne shares are sitting at $9 per share, giving the company a valuation of about $2.87bn.
9.25am: Could Star merger solve Crown’s problems?
Analysts at Macquarie say a merger of Australian casino companies Star Entertainment and Crown Resorts will provide earning per share accretion of 5 - 9 per cent, $150m of synergies and dilute major Crown shareholder James Packer’s stake to 23 per cent of the combined company.
In light of the regulatory risk faced by Crown Resorts from the NSW and Victorian gaming regulators as well as AUSTRAC, the analysts say that a merger could “accelerate” the potential to solve any “enforced undertakings” that may arise, while anti-competition concerns are nullified by robust slot machine competitiveness in pubs and clubs.
In addition, the merged company’s EBITDA would exceed $1.5bn in 2023, with an additional $1.5bn in balance sheet optionality to be pursued.
9.02am: US equities raised to overweight: BlackRock
BlackRock Investment Institute has upgraded US equities to overweight, with a preference for quality large caps riding structural growth trends – as well as smaller companies geared to a potential cyclical upswing.
The research arm of the world’s biggest fund manager expect the US share market market to benefit from both structural growth trends and a potential cyclical upswing during 2021.
“We prefer to look through any near-term market volatility as COVID cases surge,” say BlackRock Investment Institute strategists.
“Positive vaccine news reinforces our outlook for an accelerated restart during 2021, reducing risks of permanent economic scarring.”
They have also downgraded European equities to underweight and remain underweight in Japanese equities.
They note that Europe has a relatively high exposure to financials, which could be pressured by low rates.
And Japan may not benefit as much as other Asian countries from a cyclical upswing, and could see its currency driven up by a weaker dollar – from monetary easing and more stable trade policy under a Biden administration.
They see vaccine developments providing a constructive backdrop for risk assets as we approach 2021, but advocate a balanced approach.
The preference is for quality companies that should outperform even if fiscal support disappoints and selected cyclical exposures that are likely to thrive as the timeline for widespread vaccine deployment advances.
A key risk to their US equities view lies with risks ahead for overall US policy support, especially on additional fiscal relief, highlighted by the winding down of key Fed/Treasury emergency support facilities by the US Treasury.
8.59am: Mayne Pharma disappoints
Mayne Pharma has reported a 9 per cent fall in revenue to $140m in the first four months of the financial year due to the weakening US dollar and a “softer” result in its generics business.
The company was to tell its AGM today that gross profit margin remains at 47 per cent, while operating expenses have fallen by 20 per cent.
Some “high-value” generic products are yet to be approved by the US’s Food and Drugs Authority, impacting the divisional result.
Chairman Roger Corbett said the company was committed to turning its performance around.
“First of all, I would like to express my disappointment in the performance of Mayne Pharma and in the share price which has fallen significantly over the last four years,” he said.
“Your board and management team, who are significant shareholders in Mayne Pharma, are well aware of this and are committed and highly motivated to turnaround performance and restore shareholder value.”
8.50am: Brickworks hails strong start to year
Construction materials company Brickworks will tomorrow pay an increased dividend of 30 cents, bringing the full-year total to a payout of 59 cents following a resilient full year result in the face of COVID-19 disruption.
In a trading update released to the market today the company said it has had a strong start to the financial year, with results “well ahead” of the prior corresponding period.
CEO Lindsay Partridge said home building activity was solid in every state except for Western Australia, where the company is currently awaiting ACCC approval for the acquisition of local player Midland Brick.
Mr Partridge said the construction of a new $125m brick plant at Horsley Park in NSW is ready to commence, and the $75m Austral Masonry plant in Sydney is on track to be commissioned next year.
But in North America sales have been “below expectations in recent months” due to the impact of the COVID-19 pandemic, the deferral of projects by state authorities and political uncertainty impacting non-residential construction activity.
Mr Partridge said that once conditions normalise the North American business is poised for solid growth.
8.40am: Will Trump concede soon?
Excellent phase three trial results for the Astra-Zeneca/Oxford coronavirus vaccine result and reports that former Fed chair Janet Yellen is Joe Biden’s Treasury Secretary pick boosted risk assets overnight.
Traders are now wondering if there could be another piece of good news coming soon - the removal of residual US political uncertainty from a concession of defeat by Donald Trump.
With no tweets from the US President in the past 16 hours, traders are wondering if he’s now in the stage four of the five stages of grief - depression - before acceptance.
Coincidentally, US ABC News reports that as states start to certify election results that seal a victory for President-elect Joe Biden, Secret Service agents in the President’s detail are being asked whether they’re interested in transferring with Trump to Palm Beach, Florida.
8.35am: Banks face revenue challenges: analysts
The ASX200 banks index is up 16 per cent this month and down just 8 per cent year to date, a rally JP Morgan analysts say is justified given diminished tail risk and investors interested in dividend yield.
However, the analysts say this could result in a higher valuation multiple than what is justified given “long-term revenue challenges” facing the sector.
Some of these challenges to revenue include subdued credit growth, mortgage return pressures and a lack of room to further cut deposit interest rates paid to customers.
But analysts noted that fiscal and monetary stimulus have improved the capacity of mortgagees to resume payments and have slashed loan loss potential across all the banks.
The analysts have retained an overweight rating on ANZ, citing potential for credit and home loan growth while CBA was given an underweight rating, with analysts believing its valuation is stretched given its heavy exposure to retail banking.
NAB is overweight due to its pivot towards small business banking while Westpac is neutral as its capital buffer remains below that of the other three big banks, meaning it may need to enhance its buffer in the future.
8.05am: Wall Street rises on Covid vaccine results
US stocks climbed after promising results on a COVID-19 vaccine bolstered hopes for an economic rebound in 2021.
The Dow Jones Industrial Average was up 330 points, or 1.1 per cent, as of the close of trading in New York, getting the week off to a strong start after the blue-chips index closed last week with losses.
The S&P 500 added 0.6 per cent, while the technology-heavy Nasdaq Composite gained 0.2 per cent.
All three indexes rallied after the opening bell. They then retreated in choppy trading, with the S&P 500 and Nasdaq both dipping briefly into negative territory, before surging again in the mid-afternoon.
The University of Oxford and AstraZeneca said their vaccine was found to be as much as 90pc effective in preventing infections, depending on the dosage given, without serious side effects. The results -- based on a large trial -- added to optimism among investors that the deployment of effective vaccines can help bring coronavirus under control next year, allowing beaten-down sectors of the economy to recover.
“When you look into the details, it looks like very good news,” said Paul O’Connor, head of multi asset at Janus Henderson Investors. “There’s a growing prospect of a significant normalisation of economic activity in the second half of next year,” he added.
Unlike shots under development from Pfizer and Moderna, AstraZeneca’s vaccine can be stored at temperatures above zero degrees Celsius, potentially easing the distribution process.
Pfizer and partner BioNTech on Friday asked the Food and Drug Administration to clear the companies’ Covid-19 vaccine and said distribution could potentially begin in mid-December.
Meanwhile, preliminary data showed US business activity accelerated in November to a more than five-year high despite a surge in coronavirus infections and tightening restrictions. The data from IHS Markit, based on surveys of purchasing managers, showed both manufacturing and services activity remained in expansion territory.
Brent crude futures rose 2.4 per cent to $US46.06 a barrel, the highest settlement for the global oil benchmark since March. Crude prices rose Monday on reports that Yemen’s Houthi rebels attacked a Saudi Aramco distribution station in Jeddah, Saudi Arabia.
Dow Jones Newswires
7.20am: ASX set to open higher after vaccine news
Australian stocks are tipped to continue their rally, as world markets were buoyed by more promising news in the hunt for a COVID-19 vaccine.
At about 7am (AEDT) the SPI futures index was up 47 points, or 0.7 per cent.
On Wall Street, US stocks climbed towards the close, with the Dow up 1.3 per cent, the S&P 500 rising 0.7 per cent and the Nasdaq gaining 0.5 per cent.
On Monday, after hitting a nine-month high of 6594 points, Australia’s benchmark ASX 200 share index closed up 0.3 per cent at 6561.6, potentially signalling a short-term pullback. But it was still up by an amazing 10.7 per cent for the month to date.
The Australian dollar was lower at US72.92.
Spot iron ore is down 2.1 per cent to $US126.80 a tonne.
Brent oil is up 2.4 per cent to $US46.06 a barrel.
7.01am: Yellen set to be US Treasury Secretary
President-elect Joe Biden plans to nominate former Federal Reserve Chairwoman Janet Yellen, an economist at the forefront of policy-making for three decades, to become the next Treasury secretary, according to people familiar with the decision.
If confirmed by the Senate, Ms Yellen would become the first woman to hold the job. Mr. Biden’s selection positions the 74-year-old labour economist to lead his administration’s efforts to drive the recovery from the destruction caused by the coronavirus pandemic.
Ms Yellen, who was the first woman to lead the Fed, would become the first person to have headed the Treasury, the central bank and the White House Council of Economic Advisers.
Ms Yellen declined to comment by phone.
Dow Jones
Today, I’m announcing the first members of my national security and foreign policy team. They will rally the world to take on our challenges like no other—challenges that no one nation can face alone.
— Joe Biden (@JoeBiden) November 23, 2020
It’s time to restore American leadership. I trust this group to do just that. pic.twitter.com/uKE5JG45Ts
6.50am: Oil rises on vaccine progress
US oil futures rose, ending higher after another round of positive news on work toward a vaccine and treatments for COVID-19.
West Texas Intermediate crude for January delivery rose 64 cents, or 1.5pc, to close at $US43.06 a barrel on the New York Mercantile Exchange. The finish was the highest for a front-month contract since August 26, according to Dow Jones Market Data.
Brent oil is up 2.4 per cent to $US46.06 a barrel.
Crude was lifted after AstraZeneca said its vaccine candidate was up to 90pc effective. Crude has rallied in November, finding support as a number of vaccine candidates have shown high efficacy in late-stage trials.
Dow Jones Newswires
6.40am: GM quits Trump lawsuit against emissions rules
General Motors withdrew from a Trump administration-backed challenge to California’s fuel economy rules and endorsed President-Elect Joe Biden’s policy for boosting usage of electric autos.
GM and other automakers in October 2019 announced they supported a Trump administration challenge to California, arguing that fuel economy rules should be set at the federal level.
But on Monday, the US auto giant said it was “immediately withdrawing” from the lawsuit and inviting “other automakers to join us,” according to a letter from GM Chief Executive Mary Barra to environmental groups.
AFP
6.30am: Dow rises on COVID-19 vaccine results
US stocks climbed after promising results on a COVID-19 vaccine bolstered hopes for an economic rebound in 2021.
The Dow Jones Industrial Average rose 224 points, or 0.8 per cent, in afternoon trading, recovering some ground after it closed last week with losses.
The S&P 500 added 0.3 per cent, while the technology-heavy Nasdaq Composite ticked up 0.1 per cent.
All three indexes rallied after the opening bell but later pared gains in choppy trading, with the S&P 500 and Nasdaq both dipping briefly into negative territory.
The University of Oxford and AstraZeneca said their vaccine was found to be as much as 90pc effective in preventing infections, depending on the dosage given, without serious side effects. The results -- based on a large trial -- added to optimism among investors that the deployment of effective vaccines can help bring coronavirus under control next year, allowing beaten-down sectors of the economy to recover.
“When you look into the details, it looks like very good news,” said Paul O’Connor, head of multi asset at Janus Henderson Investors. “There’s a growing prospect of a significant normalisation of economic activity in the second half of next year,” he added.
Unlike shots under development from Pfizer and Moderna, AstraZeneca’s vaccine can be stored at temperatures above zero degrees Celsius, potentially easing the distribution process.
Pfizer and partner BioNTech on Friday asked the U.S. Food and Drug Administration to clear the companies’ COVID-19 vaccine and said distribution could potentially begin in mid-December.
Meanwhile, preliminary data showed US business activity accelerated in November to a more than five-year high despite a surge in coronavirus infections and tightening restrictions. The data from IHS Markit, based on surveys of purchasing managers, showed both manufacturing and services activity remained in expansion territory.
Still, analysts worry the surge of COVID-19 cases could weigh on U.S. economic growth in the coming months, especially as the impact of government stimulus programs enacted in the spring wears off.
Energy stocks, which were badly hammered this year after COVID-19 led to a sharp slowdown in travel and business activity, have gotten a boost recently from a rebound in the price of oil.
Brent crude futures rose 1.9 per cent to $US45.82 a barrel, putting the oil benchmark on track for its highest settlement since early September. Oil prices rose Monday on reports that Yemen’s Houthi rebels fired a missile at a Saudi Aramco distribution station in Jeddah, Saudi Arabia.
Overseas, the pan-continental Stoxx Europe 600 slipped 0.2 per cent. Asian markets were broadly higher, with China’s Shanghai Composite Index climbing 1.1 per cent.
Dow Jones Newswires
6.03am: Gold falls as vaccine hits precious metals
Gold futures finished sharply lower as investors unloaded the metal amid news on prospective vaccines and treatments for COVID-19 that may be momentarily undercutting demand for precious metals.
December gold settled off $US34.60, or 1.8 per cent, at $US1,837.80 an ounce.
The decline marked the steepest one-day drop for futures since a 5 per cent drop on November 9.
The drop bullion comes as drugmakers are making progress on a COVID-19 vaccine. Drugmaker AstraZeneca said a study found the vaccine it is developing with the University of Oxford showed 90pc efficacy in late-stage trials. Vaccine progress has been a drag on bullion because it undercuts the haven appeal for gold and silver, dealers say.
Dow Jones Newswires
5.15am: US directs GM to recall 5.9m cars
US auto safety authorities said they had ordered General Motors to recall nearly six million pick-up trucks and sport utility vehicles that contain Takata airbags.
The National Highway Traffic Safety Administration rejected a four-year old appeal from GM and concluded the automaker “has not met its burden of establishing that the defect is inconsequential to motor vehicle safety,” according to an agency statement.
GM said it disagreed with the decision, but will “abide” by the determination “and begin taking the necessary steps.”
AFP
5.17am: European markets shrug off vaccine news
European stock markets appeared unmoved by news of fresh Covid vaccine results, as investors mulled glum economic data that could herald another virus-driven downturn.
British drugs group AstraZeneca and the University of Oxford said their jointly developed vaccine had shown an average 70-percent effectiveness in trials involving 23,000 people.
The results ranged between 62 and 90 per cent efficacy depending on the vaccine dosage.
The announcement came after other trials of drugs developed by Pfizer/BioNTech and Moderna announced effectiveness above 90 per cent.
London’s benchmark FTSE 100 index nonetheless ended the day with a decline of almost 0.3 per cent, while AstraZeneca’s share price gave up 3.8 per cent to £80.
In the eurozone, the markets in Frankfurt and Paris were both almost 0.1 per cent lower.
“The biggest benefits will be saved for tourism and hospitality,” Oanda analyst Craig Erlam forecast.
The British pound rebounded however on reports that Brussels and London were set to unveil a long-awaited post-Brexit trade deal.
“The results of AstraZeneca and Oxford University’s COVID-19 vaccine trial result failed to trigger a major rally in equities with the 70-percent efficacy result perhaps disappointing in comparison to the results from Pfizer and Moderna,” said AJ Bell analyst Russ Mould.
“In relative terms one can understand why AstraZeneca’s result only triggered a shrug of the shoulders from investors.” The news came after Pfizer and its German partner BioNTech applied for emergency use authorisation for their drug, which could be rolled out next month.
Moderna is expected to make its own application soon.
Europe’s equity gains were also dented by a closely followed survey that showed economic activity had plunged in November with the fresh restrictions aimed at curbing the second wave of coronavirus -- indicating a quick return to recession.
AFP
5.10am: AstraZeneca/Oxford vaccine up to 90pc effective
British drugs group AstraZeneca and the University of Oxford said they will seek regulatory approval for their coronavirus vaccine after “effective” trials, in the latest potential boost to curbing the global outbreak.
The partners announced that while the vaccine showed an average 70-per cent effectiveness, the level jumped to 90 per cent depending on dosage.
Manufacturers Pfizer/BioNTech and Moderna last week said trials of their vaccines showed effectiveness above 90 per cent in what was hailed as a breakthrough in stopping the spread of the virus.
Britain’s Prime Minister Boris Johnson called the announcement “incredibly exciting”.
“There are still further safety checks ahead but these are fantastic results,” he said.
Despite varying outcomes, AstraZeneca chief executive Pascal Soriot insisted his firm’s vaccine would have an “immediate impact”.
“AstraZeneca will now immediately prepare regulatory submission of the data to authorities around the world that have a framework in place for conditional or early approval,” he said.
The firm said it would look to develop up to three billion doses of the vaccine in 2021 after passing regulatory hurdles.
Pfizer/BioNTech’s vaccine has to be stored at -70 degrees Celsius -- much colder than temperatures of a standard freezer.
That has prompted questions about distribution and storage, as well as higher costs, particularly for lower-income countries.
But the AstraZeneca/Oxford vaccine could be stored, transported and handled “at normal refrigerated conditions” of between two and eight degrees Celsius for at least six months.
The vaccine showed 90 per cent efficacy when given as a half-dose followed by a full-dose at least one month apart. The result was 62 per cent as two full doses in the same period.
“We think that by giving a smaller first dose that we’re priming the immune system differently, we’re setting it up better to respond,” Andrew Pollard, chief investigator of the Oxford Vaccine Trial, told an online press conference.
Peter Openshaw, professor of experimental medicine at Imperial College London, said a combination of half and full doses “is great news, potentially increasing the number of people that can be vaccinated and reducing costs”.
More than 23,000 adults in the UK and Brazil have taken part in the Astra/Oxford trials, with the number expected to rise to up to 60,000 thanks to testing also in other countries.
Early results suggested there were 131 cases of Covid-19 among the participants but none was serious.
AFP
5.00am: Eurozone economy in ‘steep downturn’
Eurozone economic activity plunged in November, a key survey showed, due to a resurgence of lockdowns across Europe as the second wave of the coronavirus tightened its grip.
“The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections,” said Chris Williamson, chief economist at IHS Markit.
The firm’s closely watched PMI index plummeted to 45.1 points from 50.0 points in October, well below the key 50-point level which indicates growth.
AFP
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