ASX adds 1.1pc, Aussie dollar lifts as iron ore rises
Supply concerns are pushing iron ore prices higher, sending Fortescue to a new record and the Aussie dollar to its best levels since February.
- Iron ore boost sends Fortescue to new high
- Vicinity warning rattles mall owners
- Iress lobs OneVue takeover bid
- Aussie dollar outperforms
That’s all from the Trading Day blog for Monday, June 1. The ASX finished at its best levels of the daily, fighting back from an early loss thanks to mining strength as iron ore futures traded past $US100/t for the first time this year.
In company news, Vicinity Centres launched a $1.4bn capital raise while Iress lobbed a bid for OneVue.
US futures are pointing to a minor gain on the session to come, despite concerns of civil unrest across the country.
David Swan 8.45pm: Atlassian software crucial to SpaceX launch
Software from Australian technology outfit Atlassian was crucial to the SpaceX rocket launch on the weekend, with billionaire company co-founder and co-CEO Mike Cannon-Brookes declaring that all his employees should feel proud of the role they played in the historic moment.
On Saturday morning Australian time, Elon Musk’s SpaceX rocket blasted off from the Kennedy Space Centre, carrying two American astronauts into space and launching a new era of private spaceflight.
The launch meant SpaceX, founded by Elon Musk, is the first private company to successfully put astronauts in space.
While there were no Australian astronauts on-board the Falcon 9 rocket, Australian software played an outsized role in making the blockbuster lift-off happen.
SpaceX relied on products from Sydney company Atlassian for the launch, including team software Jira, Bitbucket and Confluence. SpaceX used the Australian-made products to co-ordinate its coding teams, and its rocket scientists.
“All Atlassians can feel very proud that our products helped to send the first private spacecraft carrying humans into orbit,” Mr Cannon-Brookes told The Australian.
Nick Evans 8.23pm: Miners surge as iron price tops $US100
Iron ore futures on the Dalian exchange rose more than 3 per cent on Monday as the iron ore price breezed through the $US100-a-tonne mark to the highest levels in 10 months, lifting shares in Fortescue Metals to record highs.
The resurgent iron ore price came as stocks of iron ore at Chinese ports fall as its industrial heartland recovers from the coronavirus pandemic, and as Brazil’s rampant outbreak puts Vale’s production in renewed doubt.
Late last week Vale successfully fended off a move by Brazilian authorities to close the Itabira iron ore hub — accounting for 36 million tonnes of production in 2019, or about 12 per cent of its total output.
John Durie 7.55pm: McFarlane ‘fixing Westpac’s problems’
Westpac chairman John McFarlane has identified two potential shortcomings with the bank — “diffused accountability” and ability to implement strategy — and is in the process of trying to fix both.
The bank will shortly release a copy of the panel report on its treatment of the Austrac issues and the assurance report from Promontory over its board governance. The reports were commissioned by former chairman Lindsay Maxsted in December last year in the wake of the Austrac charges, which sparked the departure of former boss Brian Hartzer and Maxsted himself.
The panel — comprised of former Suncorp chairman Ziggy Switkowski, Energy Security Board chairman Kerry Schott and board guru Colin Carter — has already handed its report to the bank.
Lilly Vitorovich 7.28pm: Bidders circling AAP newswire
A consortium led by former News Corp Australia and Foxtel boss Peter Tonagh is understood to have submitted its bid for AAP newswire, which is being considered by the 85-year-old media group's board, as others continue to circle.
A representative from Australia's biggest media union MEAA has told AAP staff that the "Tonagh-fronted consortium has formally submitted its bid, which is being considered by the board".
"As it stands the bid is for the Newswire only, although Medianet could still potentially be involved," the MEAA representative said in an email, seen by The Australian, on Monday.
Medianet is AAP’s press release distribution business, and could also be of interest to former Isentia boss John Croll, who is understood to be in the process of setting up a new monitoring organisation.
The development comes a week after Tonagh revealed that he is heading up the consortium, which includes Samuel Terry Asset Management boss Fred Woollard and Australian Impact Investments boss Kylie Charlton, and is hoping to pressure its management to strike a deal before AAP closes on June 26.
Mr Tonagh hasn't returned calls seeking comment on the bid, while an AAP board spokesman said "confidential talks are continuing".
The MEAA representative said there are "a couple of other contenders also still potentially in play".
"One reason they might be considered by the board (despite the tight time frame) is because they could also involve other divisions of AAP, which don't interest the Tonagh group."
The Australian reported last week that finder.com.au founder Fred Schebesta is also interested in AAP newswire. Mr Schebesta was in early talks with AAP management and their consultancy TMT Partners last week, but stressed any interest in the company was preliminary.
6.39pm: Emirates boss: 4 years to rebuild network
Emirates president Tim Clark says it might take the airline four years to rebuild its network which has been devastated by the coronavirus pandemic. “I think probably by the year 2022-23, 2023-24, we will see things coming back to some degree of normality and Emirates will be operating its network as it was and, hopefully, as successfully as it was,” he said in a webcast interview.
The Dubai-based airline was flying to 157 destinations in 83 countries before it grounded passenger flights in March and had since operated limited services. Earlier, Emirates said it had made some staff redundant due to the impact of the pandemic, with two company sources saying trainee pilots and cabin crew had been affected.
“We reviewed all possible scenarios in order to sustain our business operations, but have come to the conclusion that we unfortunately have to say goodbye to a few of the wonderful people that worked with us,” a spokeswoman said. “The company is doing everything possible to protect the workforce wherever we can,” she added.
The state-owned airline, which has about 60,000 employees and is part of the Emirates Group, did not say how many staff had been affected by the job cuts. Emirates said on May 10 that a Dubai government commitment to provide it with “equity injections” would allow it to preserve its skilled workforce. Emirates Group’s airport services subsidiary Dnata has also laid off some staff and placed thousands of others on unpaid leave.
Reuters
6.12pm: SAfrica govt to fund a SAA restructure
The South African government has agreed to fund a restructuring of South African Airways (SAA), if a business rescue plan for the struggling state-owned airline is adopted, a copy of the draft plan shows.
SAA entered business rescue - a local form of bankruptcy protection - in December, after which administrators took over the running of the airline and have been working on a plan to save the business.
The draft plan said the government had agreed to make a working capital injection, which the administrators estimated at not less than 2 billion rand ($A170.5 million), fund employee layoffs, which could cost up to 2 billion rand, and make an allocation of at least 600 million rand towards the repayment of general concurrent creditors.
A spokeswoman for the administrators confirmed the draft plan was genuine.
Reuters
Richard Gluyas 5.46pm: Will heads roll at Westpac?
Expectations of a further round of board and executive bloodletting at Westpac after the imminent release of two reports on the Austrac debacle are wide of the mark.
It’s more likely the conclusion will be that cultural factors - and not bad individual actors - are to blame for the bank’s most debilitating crisis since its 1990s near-death experience.
Consequences? There will be many.
Freshman chief executive Peter King and new chairman John McFarlance will turn the place upside down to instil a culture that gives equal weight to financial and non-financial risk.
However, in a couple of years’ time, the re-making of Westpac after its collision with Austrac will broadly mirror Commonwealth Bank’s experience.
Scarring will be evident, but the foundations should be in place for the type of institution envisaged by McFarlane and King.
That means clearer lines of accountability, a greater sense of urgency, zero tolerance for catastrophic own-goals, and a much stronger risk culture.
The reports to be released by Westpac include Promontory Financial Group’s review of the bank’s financial crime program, and consideration by an external, three-person panel of board accountability issues.
They will be out before the end of this month, more likely in the front end of June than the back end.
John Stensholt 5.16pm: Zoom and boom for Anthony Pratt
COVID-19 has caused billionaire Anthony Pratt to make the transition from corporate jets to Zoom chats for vital meetings with customers.
Pratt has long said making boxes is a relatively homogeneous business, which has made the customer-centric focus his Visy and Pratt Industries businesses have a vital part of doing business.
Before the coronavirus pandemic, it meant spending roughly half the year in the US and the other half in Australia.
In either country, but particularly the US, it meant Pratt would often spend a day flying around across the continent on his Bombardier Global Express Jet for face-to-face meetings.
4.51pm: Housing stimulus boosts listed builders
The local housing and construction industry was in focus as the government hinted at further stimulus targeted at the sector. That’s despite CoreLogic’s data drop for May showing housing prices slipped by 0.4 per cent – described by Westpac as the start of the COVID-19 correction.
“We have long expected significant direct policy stimulus to support housing. However, media reports indicate an unprecedented package will be announced this week that is both materially bigger (perhaps towards ~$10bn) and earlier (effective as soon as July 1),” UBS economist George Tharenou said, adding the move could dial back his forecast of a 10 per cent drop in house prices.
“Sales volumes seem likely to have already troughed, albeit still around the lowest level in 27 years, which is a negative for related spending,” he added.
As such, building materials suppliers led the rally – Adelaide Brighton jumped 8.8 per cent to $2.96 to be the most improved stock in the top 200 while Boral added 6.8 per cent to $3.32.
James Hardie put on 1.7 per cent to $26.38 while Brickworks put on 1.2 per cent to $15.63.
Here’s the biggest movers of the day:
4.14pm: Mining boost sends ASX up 1.1pc
Strength in commodities and the major banks sent the local sharemarket higher to start the month, finishing Monday’s session at daily highs.
Concerns as to the impact of US riots restrained Australian shares early as US futures traded in the red, but the ASX200 turned higher by midmorning to finish at its best levels of the session – up 64 points or 1.1 per cent at 5819.2.
Meanwhile, the All Ordinaries added 66 points or 1.13 per cent to 5938.4.
Bridget Carter 4.08pm: Real estate in demand for deal-makers
DataRoom | With Vicinity Centres raising $1.4bn and talk of Charter Hall as a potential buyer of the Caltex petrol station sites, the real estate sector continues to be a major talking point.
But it is not just Charter Hall and Vicinity Centres that is in focus for real estate market watchers and deal makers – National Storage REIT continues to be under the spotlight.
Apparently, investment bank UBS was busy buying up stock in the company late last week and on Monday, which led some to wonder whether a suitor such as Blackstone was once again circling the listed storage asset owner.
The trading volumes in the stock were large on Friday, and it is thought that the Swiss investment bank has bought more than 3 per cent of its shares since Thursday.
However, the understanding from those close to the situation is that the trading was not on behalf of any strategic buyer. Rather, it was purely stock changing hands through the UBS equities desk.
While nothing may be currently going on, most do not think it is inconceivable that another party comes forward with an offer for National Storage REIT in the near future.
Jared Lynch 3.24pm: Star gains ground on pokies deal
Star Entertainment says it will be entitled to compensation from NSW taxpayers if the NSW government reneges on its deal to make the Pyrmont-based casino group Sydney’s pokies king.
Star will be the only casino in Sydney to offer gamblers pokie machines until at least 2041, after striking a deal with the Berejiklian government which the company says delivers regulatory certainty.
It comes as rival Crown Resorts is set to open its casino in Barangaroo in December and Star prepares to partially re-open its Pyrmont casino complex – including private gaming rooms – this week.
Under the new tax arrangement with the NSW government, Star pay the same duty rate on table games as Crown ensuring competitive neutrality.
“The Star has agreed flat domestic gaming tax rates with the NSW Government for a 20-year period. All rebate gaming revenue will continue to be taxed at a flat rate of 10 per cent, consistent with current arrangements,” Star said in a statement to the ASX.
SGR last traded up 1.9pc to $3.01.
3.19pm: Beach hires ex-Quadrant exec
Beach Energy has hired former Quadrant Energy and Santos exec Ian Grant as its new chief operating officer.
In an announcement to the market this afternoon, Beach said Mr Grant would start from July 20, following his relocation from Perth.
Most recently, Mr Grant was chief operating officer for Quadrant and before that vice president of production operations for Santos.
“We are thrilled to welcome someone the calibre of Ian to our executive ranks. Ian is joining Beach at an exciting time as our company continues its focus on growth, safety and cost discipline,” chief Matt Kay said.
3.07pm: COVID housing correction is here
The drop in home values for May marks the start of a coronavirus-triggered correction that will likely move sharply lower in the months ahead, according to Westpac.
Senior economist Matthew Hassan writes that the 0.5pc slip in CoreLogic’s home value index is the first monthly fall since June last year.
Still, sales are a third below pre-COVID levels and at 30 year lows as a share of the dwelling stock and Mr Hassan notes the figures on turnover were less negative than expected.
“That said, direct disruptions are not expected to be the main source of price weakness, which we instead expect to come indirectly from the shock to incomes and jobs,” he writes.
“With policy measures cushioning the shock and delaying the impact on key aspects of the market (’urgent sales’ in particular) prices may be slow to fully reflect the shift. However, as it comes through we expect declines to see prices nationally down 10pc for the year.”
Read more: ‘Pretty good outcome’ for property
2.41pm: Aussie dollar outperforms
The Aussie dollar is trading up by 0.9 per cent in afternoon trade to its best levels since mid-February.
A flight away from the US dollar, amid concerns of rioting across the country, are helping AUDUSD up to US67.24c, after hitting a high of US67.42c earlier in the session.
OANDA senior market analyst Jeffrey Halley writes that the Aussie dollar’s status as a proxy for China is adding to the positivity.
“Having closed above, it’s 200-day moving average (DMA) at 0.6655 on Friday, the technical picture, geopolitics and economic data all point to higher levels in the near-term. AUD/USD’s next upside target is 0.6770 and then 0.6850,” he says.
2.19pm: Bank deposits growing in liquidity rush
Australian bank deposits have grown sharply over the past two months as customers increase their liquidity positions amid the coronavirus crisis, so says Credit Suisse, citing the latest APRA statistics.
The broker notes that Westpac deposits grew by $4.9bn during March, to take total deposits for the half to $19bn while ANZ saw a $54.7bn increase over the first half, mostly thanks to $41bn from its institutional division.
NAB increased customers deposits by $22.6bn over the same period, with $12.5bn from their corporate and institutional division.
“More customers are shifting to at-call accounts, and out of term deposits so they can be more liquid and also because of the lower rates reducing the benefits of term deposits,” Credit Suisse analysts write.
They say Westpac pointed to a liquidity shift from government and corporate clients while NAB attributed inflows to market volatility impacting their larger customers.
2.05pm: Dexus reinstates distribution guidance
Dexus has reinstated its FY20 distribution guidance, albeit below that provided in February.
In what may be taken as a mildly positive sign for the property sector, Dexus sees a distribution consistent with FY19.
The property developer had withdrawn its guidance on March 26, citing “the COVID-19 situation and the uncertainty that lies ahead”.
At its half-year results on February 26, it guided the market to expect 5.5pc growth in its FY20 distribution per security.
DXS last up 1.7pc to $9.15 after an earlier slip to $8.73.
Read more: Dexus flags pressure on city towers
1.52pm: Aussie PMI falls to all-time low
A measure of Australia’s manufacturing economy hit its lowest level on record in May, as COVID-19 measures hit output.
Commonwealth Bank’s purchasing managers’ index (PMI) fell to 44, from 44.1 in April, with output and purchasing demand both falling at record rates. Any measure below 50 signals a contraction in activity.
“Falling sales, material shortages and, in some cases, factory closures led to a record decline in production volumes during May,” CBA says.
“With sharply reduced output requirements, companies sought to reduce capacity by cutting their staff numbers for a sixth straight month. Backlogs of work fell at a new record rate.”
The bank added that time taken to deliver inputs to factories also blew out due to reduced freight capacity, delays in transport routes and supply shortages.
Despite that, business sentiment improved to the strongest in five months as firms expected output to rise in the coming year.
Bridget Carter 1.38pm: PEP retreats from Healthscope NZ race
DataRoom | Australian-based private equity firm Pacific Equity Partners is understood to have retreated in the contest to buy Healthscope’s New Zealand pathology assets.
It comes as the JPMorgan-run sales process remains in full swing, with management presentations believed to be underway.
The thinking is that an agreed sale could be decided upon next month.
With PEP out of the mix, it likely leaves pension funds from Europe and North America, such as Morgan Stanley Infrastructure, to battle it out.
Also said to have been pursuing the assets is Keppel Infrastructure out of Singapore.
The business has a $550m book value.
Brookfield purchased Healthscope – Australia’s second-largest health private hospital operator – for $4.4bn last year.
Read more: Healthscope’s NZ pathology unit sale nears
1.01pm: Shares rising 0.9pc
The local market is trading at its best levels of the day as banks extend their recent rally.
At 1pm, the benchmark ASX200 is up by 54 points or 0.93 per cent to 5809.4, coming back from an early 0.6pc slip.
Strength in iron ore is helping the major miners, and sending Fortescue to new record highs of $14.49.
Meanwhile, the major banks are holding gains of 1pc to 1.5pc and travel names are pushing higher – Flight Centre up by 7.3pc and Webjet up by 4.8pc.
Eli Greenblat 12.40pm: COVID-19 the final blow for Dr Roebuck’s
Success with high-profile beauty retailers was not enough to save Australian-based skincare brand Dr Roebuck’s from collapsing into voluntary administration.
However, it looks like the Australian skincare business that found fame in the US was also beset by other problems before the coronavirus health crisis gripped the world, with the business facing a large claim from a former employee in the US and some creditors from 2019 starting legal claims against the company.
It has also emerged that the family owners of Dr Roebuck’s tried to sell the company before it was placed into voluntary administration.
At a first creditors meeting administrators to the failed business have also raised concerns over the accuracy of accounts for Dr Roebuck’s and that inventory of more than $1.4m on its books could be overstated and not properly accounted for in the Australian company.
12.37pm: Stimulus hopes boost construction names
Building materials stocks are performing strongly as the government talks about stimulating housing and construction.
Adelaide Brighton rose 8.5pc to a 3-month high of $2.96, Boral rose 6.2pc to a 3-month high of $3.30, Fletcher Building rose 3.8pc to a 4-week high of $3.50, while US focused James Hardie rose 1.3pc to $26.28.
The S&P/ASX 200 is up 0.8pc at 5802.8.
12.28pm: Iron ore boost sends Fortescue to fresh high
Supply concerns have sparked a jump in iron ore prices, sending Fortescue shares to new record highs.
The miner set a new intraday high of $14.42, and last traded up 3.3pc to $14.36.
It comes amid concerns of Brazilian iron ore supply as COVID-19 case numbers soar in the country and threaten to disrupt mining operations.
The commodity rose 4.2pc over the course of last week and futures on the Singapore exchange were last trading just shy of $US100 a tonne.
12.11pm: Vicinity warning rattles mall owners
As the broader market reverses early losses mall owners are still feeling the pressure, after heavyweight Vicinity warned of a valuation hit from renegotiated rental agreements.
The owner of Chadstone shopping mall, among others, said its preliminary draft valuations indicated a decline of up to $2.1bn in aggregate asset value.
It said for the three months from March to May just under half of billings had been received, though it said it expected rent receipts to improve as stores reopen and lease negotiations are completed.
“Where rental relief is being negotiated, lease extensions are also sought where appropriate,” Vicinity said.
While its shares are halted, the rest of the sector is feeling the sting – Scentre Group is trading off by 2.2pc while SCA Property Group is lower by 3.4pc and Stockland by 2.1pc.
Bridget Carter 11.57am: BGH taps UBS for Virgin tilt
DataRoom | BGH Capital has brought another adviser into its tent to assist with its bid for Virgin Australia, with UBS now working for the Australian private equity firm.
It comes as BGH, headed by former Macquarie Capital boss Robin Bishop and TPG Capital executives Ben Gray and Simon Harle, wait to learn as to whether they have been ushered through to the final round of the competition to buy the airline.
Virgin Australia was placed into voluntary administration during April, as most of its fleet was grounded due to COVID-19 disruptions. At the time, it had debts worth $6.8bn.
Already aiding BGH are the restructuring specialists at advisory firm Moelis and law firm Arnold Bloch Leibler.
The appointment is an interesting one for BGH, given the firm’s close links to Macquarie Capital, the major rival for the Switzerland-based UBS.
Read more: Brookfield plans $500m Virgin cash injection
11.49am: Aussie dollar, shares lift
The US riots had dented risk sentiment earlier today, but Wall Street is fighting back – S&P 500 futures have turned up after falling 1.6pc early Monday.
Together with a bounce in banks, the recovery in US futures has pushed Australia’s S&P/ASX 200 up 0.5pc after a 0.9pc fall.
Meanwhile AUD/USD has surged 1pc to 0.6738 – its highest point since February 13.
The exchange rate is benefiting from a broadbased fall in the US dollar.
Stronger iron ore prices are helping, with Dalian futures up 4.3pc to CNY760.15 a tonne as the pandemic threatens Brazilian supply.
The Aussie is the best-performing G-10 currency so far today.
Robyn Ironside 11.33am: ACCC upgrades Qantas, Alliance probe
The competition watchdog has upgraded its examination of Qantas’s acquisition of a 19.9 per cent stake in smaller airline Alliance from a standard merger review to an enforcement investigation.
The Australian Competition and Consumer Commission provided an update on Monday on the now 16-month investigation in response to queries from various stakeholders.
The ACCC said with the aviation industry in a state of major upheaval, it was now more than ever concerned that competition by smaller airlines was not hindered.
QAN last traded up 0.9pc to $4.02.
Read more: Regulator increases scrutiny on Qantas, Alliance deal
11.24am: Bank bounce sends ASX higher
The Australian sharemarket has turned up on a strong bounce in banks.
The S&P/ASX 200 rose 0.2pc to 5770.9 after falling 0.9pc to a 4-day low of 5705.4.
ANZ rose 1pc after falling 2.7pc, NAB rose 0.7pc after falling 3pc, Westpac rose 0.1pc after falling 3pc, and CBA was down 0.8pc after falling 2.3pc.
Gerard Cockburn 11.10am: Early super withdrawals rise to $12bn
The superannuation sector has been drained of more than $12bn from Australians requesting super withdrawals due to the coronavirus pandemic.
Latest figures from the Australian Prudential Regulatory Authority have revealed 1.78 million applications have been lodged with the Australian Taxation Office, expected to cost the super industry $13.2bn.
As at May 24, 1.63 million applicants claiming financial hardship had received funds to a total value of $12.2bn.
The federal government implemented the early release scheme in April, as a measure to assist Australians impacted by the economic downturn sparked by COVID-19. To be able to access the scheme, a person must be unemployed or experienced a reduction in working hours.
The average withdrawal request is $7,476, with payments usually made in 3.3 business days.
Read more: Early super withdrawals pass $10bn
10.29am: Riots weigh on US futures
The threat of US riots has added to weakness on Australia’s share market at the open, as US futures come under pressure.
The S&P/ASX 200 fell 0.9pc to a 4-day low of 5705.4 after S&P 500 futures fell 1.6pc but the local market has subsequently pared its fall to 0.6pc with S&P 500 futures down just 0.2pc after the early tumble.
Cyclical sectors including real estate, financials and energy led declines after benefiting from a switch from growth to value last week.
The four major banks did most of the damage, with falls of 2-3pc, led by Westpac after Jefferies’ Brian Johnson cut the bank to Underperform.
Mall operators have also given up some of last week’s gains, with Scentre and Unibail-Rodamco-Westfield down about 4pc. Healthcare looks to be getting a minor safe-haven lift with CSL up 1.8pc.
BHP, Rio Tinto and Fortescue rose 1.3-1.5pc after the iron ore price jumped 4.6pc as the pandemic threatens Brazilian supply.
Ben Wilmot 10.26am: Citi warns of downside risk for Event
Cinema and hotel company Event Hospitality & Entertainment has been downgraded to neutral by Citi after a sharp 52 per cent share price increase since March 23 when coronavirus fears peaked.
The broker warned there were still downside risks relating to the cinema division outlook and the $2bn fair value for Event’s property holdings.
A recovery in hotels and ski resort Thredbo’s earnings may be supported by Australians taking more domestic holidays due to international travel restrictions but Citi expects hotels to face challenges from lower corporate travel following COVID-19 due to increased use of video conferencing which may be partially offset by lower airfares.
In cinemas, Citi is worried about longer term reductions in annual visitation given the increased trial and adoption of streaming during the lockdown and unfavourable commentary from major studios about releases.
Citi put a target price of $9.75 on the stock, and it opened Monday’s session flat at $9.10.
Gerard Cockburn 10.17am: Zip halted pending acquisition
Buy now, pay later provider Zip has requested its shares be placed in a trading halt, pending an announcement relating to a proposed acquisition and capital raising.
The ASX granted Afterpay’s rival a pause from trading on Monday morning, with the company expected to release information regarding the capital boost and takeover in the next three days.
Zip’s stock will be held in a trading halt until June 3, or until the company notifies the share market of its announcements.
Zip last traded at $3.75 per share.
10.12am: ASX pulls back
Shares are pulling back in early trade following a solid week of trade, as US protests hang over global markets.
At the open, shares are slipping 46 points or 0.8 per cent to 5709.3.
All sectors are in the red bar materials and health care, with financials the biggest drag after standout performance last week.
All four of the majors are down by around 2pc to 3pc, while Scentre group is taking a 3.1pc hit as rival Vicinity raises funds to cover rent relief.
Bridget Carter 9.48am: Iress lobs OneVue takeover bid
DataRoom | Iress has launched a takeover bid for Onevue Holdings at 40c per share.
The offer values the company at $107m.
The price is a 66.7 per cent premium to the wealth manager’s last closing share price of 24c.
The friendly deal sees Iress, a financial software business, gain access to OneVue’s wealth management software.
The deal is expected to conclude in late September.
Iress will raise $170m to help fund the transaction, with Goldman Sachs underwriting a $150m placement at $10.42, a 7 per cent discount to its last closing share price.
Gerard Cockburn 9.40am: Star reopens Sydney casino
Sydney’s Star casino will re-open its private gaming rooms and up to 12 food and beverage venues after a prolonged shutdown period, as the company agrees with NSW authorities on a 20-year tax and pokies agreement.
From Monday, the casino will be limited to 500 loyalty club members at a time and is by invitation only. Other areas of complex will be available to the general public including, The Darling and The Star Grand hotels. Restaurants will be permitted up to 50 seated customers at a time, in line with government mandates.
The group flagged operating expenses for the month of June are estimated to be $20m, mostly due to increased employee wage costs.
The Star chief executive Matt Bekier said the current restrictions will still mean the casino will be operating at lower levels than normal, while its Queensland venues are planning for a staged reopening.
Alongside the news, Star said it had reached an agreement with the NSW government on its gaming taxes applicable until the end of FY2041, including a deal to preserve the Star as the exclusive casino provider of electronic gambling machines.
“New 20-year arrangements commence in FY2022 comprising flat rates of tax as a percentage of revenue. The International VIP Rebate business and the domestic rebate business gaming tax remains unchanged at 10pc of revenue,” the group said.
9.35am: US protests to weigh on markets
US protests over the weekend pushed S&P 500 futures down as much as 1.6pc in early trading.
S&P 500 futures have since recovered to be down 0.6pc, but still point to a weaker-than-expected open for Australian shares.
After Donald Trump’s somewhat tame speech on China on Friday, the S&P 500 rose 0.5pc and futures pointed to a 0.5pc fall in the ASX200. But with the US protests threatening to delay economic reopening, Australia’s sharemarket could open down 1pc.
On the charts, the S&P/ASX 200 has a potential uptrend line coming in at 5650 today, and there should be strong support from former resistance in the 5500-5600 area.
The recent ascending triangle pattern continues to target 6030, but that will possibly be via a further pullback early this week.
Any serious threat to the US economy could prompt the Fed to increase its asset buying program that has helped boost shares globally since March.
China’s May PMI data on Sunday printed 50.6 versus 51.1 expected but the components were encouraging and non-manufacturing PMI met expectations.
The RBA meets Tuesday and it’s a big week for data with highlights including US Markit PMI today, US ISM on Tuesday, domestic GDP on Wednesday and US non-farm payrolls on Friday.
Bridget Carter 9.25am: Vicinity suspends payouts, raising $1.4bn
DataRoom | Vicinity Centres is raising $1.4bn as it announces the suspension of dividend payments.
The shopping centre owner will secure $1.2bn through an institutional placement underwritten by Macquarie Capital and Credit Suisse and $200m through a share purchase plan.
Shares are being sold at $1.48 each, an 8.1 per cent discount to the last closing price of $1.61.
Major shareholder The Gandel Group will subscribe to $100m of new shares.
The funds are being used to strengthen the company’s balance sheet after negotiating with tenants that may be unable to afford rent during the coronavirus disruptions.
The group will pay no distribution for the six months to June 30.
9.11am: What’s on the broker radar?
- Afterpay cut to Hold – Morgans
- Ampol reinstated Neutral – Goldmans
- BHP raised to Buy – Bank of America
- Bingo Industries raised to Buy – Citi
- Costa raised to Add – Morgans
- Event Hospitality raised to Buy – Citi
- Freedom Foods cut to Hold – Morgans
- Lovisa raised to Buy – Citi
- PolyNovo cut to Hold – EL & C Baillieu
- Rio Tinto raised to Buy – Bank of America
- Super Retail target price raised 50pc to $9 – Macquarie
- Vicinity Centres raised to Outperform – Credit Suisse
- Westpac cut to Underperform – Jefferies
9.07am: Iress halted for acquisition
Iress Limited is the latest company to be halted pending a capital raise in connection with an acquisition.
The group said this morning it was launching an equity capital raising and a share purchase plan and expected to release details of the completion of the placement by tomorrow.
IRE shares last traded at $11.21.
Gerard Cockburn 8.49am: Vicinity halted for equity raise
Vicinity Centres has announced it will undertake a $1.2bn on-market capital raising in an attempt to boost its liquidity position.
Shares in the co-owner of Melbourne’s Chadstone shopping were placed in a trading halt on Monday morning, following an announcement it would initiate a fully underwritten institutional placement and security purchase plan for a further $200m.
The company’s raise follows a challenging period for the sector, which is slowly returning to normal trade after coronavirus-related shutdowns.
Vicinity on May 6 flagged trading conditions in the next 12-months would be challenging.
The trading halt will remain in place until Vicinity announces the capital raising has been successful, or by June 3.
Vicinity last traded at a $1.61 per share.
Eli Greenblat 8.46am: JB Hi-Fi appoints Wilson as director
JB Hi-Fi has appointed former Woolworths and Starwood Hotels exec Melanie Wilson as a non-executive director with effect from June 3.
The consumer electronics retailer said her retail experience includes online/e-commerce, store operations, merchandise systems, marketing, brand development and logistics/fulfilment.
Prior to her retail experience, Ms Wilson held roles with Bain & Company (Boston) and Goldman Sachs (Hong Kong/Sydney) and completed an MBA at Harvard Business School.
Ms Wilson is currently a non-executive director of Baby Bunting, iSelect Limited, EML Payments and Property Guru Group (Singapore), and was previously a non-executive director of Shaver Shop.
6.40am: Top US execs denounce racism
Amid protests over the fatal arrest of George Floyd, an unarmed black man in Minneapolis, the chief executives of several public companies have spoken out against police violence, racism and other injustices.
“No organisation is immune from the challenges posed by racial bias,” BlackRock CEO Larry Fink wrote on LinkedIn Saturday. “As a firm committed to racial equality, we must also consider where racial disparity exists in our own organisations and not tolerate our shortcomings.”
Jamie Dimon, chairman and CEO of JPMorgan Chase, and Brian Lamb, global head of diversity and inclusion, told the bank’s employees in a memo that “we are watching, listening and want every single one of you to know we are committed to fighting against racism and discrimination wherever and however it exists … This week’s terrible events in Minneapolis, together with too many others occurring around our country, are tragic and heartbreaking.”
Citigroup’s chief financial officer Mark Mason wrote on the firm’s website that he reacted with “horror, disgust and anger” after seeing George Floyd’s death. “Even though I’m the CFO of a global bank, the killings of George Floyd in Minnesota, Ahmaud Arbery in Georgia and Breonna Taylor in Kentucky are reminders of the dangers Black Americans like me face in living our daily lives,” he wrote.
Goldman Sachs’ chairman and CEO David Solomon said in a voicemail to the bank’s staff that, “I continue to grieve for the lives of George Floyd, Ahmaud Arbery, Breonna Taylor and countless other victims of racism,” but also said “the violence we’ve seen in some cities over the past two nights has no place in our society and threatens to undermine the message of harmony and reconciliation that we need today more than ever.”
Dow Jones
5.55am: Iron ore tops $US100
The spot price of iron ore is back above $US100, rising 4.7 per cent to $US100.90, according to CommSec.
5.50am: ASX set to open lower
Australian shares are poised to open slightly weaker on Monday, as local investors look past a slightly stronger Wall Street and maintain a cautious footing.
Futures trading were suggesting the benchmark S&P/ASX 200 will fall 0.4 per cent at the start of trade on Monday, adding to Friday’s 1.6 per cent fall.
It remains a key week for investors with the Reserve Bank board scheduled to meet on Tuesday, although no changes are expected for the cash rate, which is set at 0.25 per cent. The following day, the March quarter GDP growth data will be released.
Economists are expecting only a moderate contraction in the period as a pre-lockdown retail splurge offsets the impact of the COVID-19 lockdown that came into effect at the end of the quarter.
The figures will not capture the full impact of the health crisis on the economy, as restrictions only began to ramp up during the final two weeks of the quarter.
CommSec chief economist Craig James said investors were “proceeding with caution” after good gains on the sharemarket, nine out of the past 10 weeks.
“It may be the case investors have gotten a little ahead of themselves and that could see a degree of consolidation come into the market,” he said. Data on building approvals, exports, inventories, retail sales and public spending will also be released during the week.
On Friday, Australia’s S&P/ASX 200 closed near its lows, down 95 points, or 1.63 per cent, at 5755.7. Even so, that marked a 4.7 per cent weekly gain for the market.
AAP
5.30am: US stocks outpacing world
US stocks have staged a furious rebound since late March, leaving global markets behind.
Optimism about state and business reopenings and the potential development of a coronavirus vaccine has lifted the S&P 500 36 per cent from its March low, cutting its losses for the year to 5.8 per cent. The index rallied 3 per cent last week to cap its best two-month stretch since 2009.
The Stoxx Europe 600, meanwhile, is down 16 per cent in 2020, and Hong Kong’s Hang Seng index is off 19 per cent.
Investors point to a booming technology sector and an unprecedented amount of stimulus from the Federal Reserve as reasons for the outperformance. The percentage of fund managers who deem U.S. stocks attractive has risen to the highest level in nearly five years, according to a recent Bank of America Global Fund Manager Survey.
The bank said its May survey found a net 24 per cent of respondents were overweight U.S. stocks, the most since July 2015. Meanwhile, the net share who were overweight eurozone and emerging market equities fell to the lowest levels since July 2012 and September 2018, respectively.
“It’s not so much U.S. versus Europe versus Asia-Pac. It’s really new economy versus old economy,” said Olivier Sarfati, head of equities at GenTrust, adding that the dominance of a handful of big technology stocks in the U.S. is partly responsible for the divide.
Investors this week will parse the May jobs report for further clues about the state of the labour market. They will also review the quarterly reports of companies including Campbell Soup Co. and J.M. Smucker Co. for insights into consumer behaviour during the pandemic.
Dow Jones
5.25am: China factory activity slows
Factory activity in China expanded at a slower pace in May as the country attempts to get back on track after the coronavirus, official data showed Sunday, with the global economic slump making the sector’s recovery difficult.
China’s factories have stirred back to life after the lifting of strict lockdown measures imposed when the deadly virus surfaced in the central city of Wuhan, but its spread worldwide has dragged down key foreign markets – weighing heavily on Chinese exports.
The Purchasing Managers’ Index (PMI), a key gauge of activity in China’s factories, was at 50.6 points in May, remaining above the 50-point mark separating growth from contraction each month.
But the figure was down slightly from 50.8 the month before, and 52.0 in March, according to the National Bureau of Statistics (NBS).
Dow Jones
5.20am: Wall St recap
Wall Street stocks finished a volatile session mostly higher Friday after newly announced US policies to punish China did not threaten a trade détente between Washington and Beijing.
At the closing bell, the Dow Jones Industrial Average stood at 25,383.11, down 0.1 per cent.
The broadbased S&P 500 gained 0.5 per cent to 3,044.31, while the tech-rich Nasdaq Composite Index jumped 1.3 per cent to 9,489.87.
Trading was choppy throughout the session, with major indices sinking into negative territory as a midafternoon White House speech by President Donald Trump began.
Trump harshly criticised China’s handling of the coronavirus, blaming the country for the deaths of 100,000 Americans, and announcing new actions including an end to funding for the World Health Organisation.
He also ordered probes of Chinese companies listed on American financial markets.
But Trump made no mention of the “phase one” trade agreement with China that walked back earlier trade tariffs, nor did he threaten new levies on US imports from the country.
“When (Trump) first started talking, he sounded pretty hawkish, there was an initial kneejerk sell-off,” said Briefing.com analyst Patrick O’Hare. “When it became clear he wasn’t saying anything about tariffs, there was a snapback rally.” Many analysts expect Trump to continue to rail against China in the months ahead as he faces a challenging path to re-election in light of COVID-19 and the resulting economic slowdown.
A US government survey showed a record 13.6 per cent drop in personal consumption in April, while personal income jumped 10.5 per cent due to the surge in government aid and unemployment payments under federal emergency spending measures.
Meanwhile, consumer sentiment gained slightly from March, but remains at its lowest since December 2012, according to a University of Michigan survey. However, confidence in the economic outlook ahead dropped sharply.
Federal Reserve Chair Jerome Powell said the central bank would roll outs its lending program for small businesses in the coming days as he reiterated the central bank’s plan to continue to take a muscular approach to supporting the US economy.
Among individual companies, Williams Sonoma surged 14.0 per cent as it reported a surprise profit despite having all its stores shuttered for more than half the quarter, fuelled by surging sales of cooking equipment with much of the US stuck at home under quarantine orders.
Salesforce.com fell 3.4 per cent following a disappointing forecast as the software giant reported a drop in first-quarter profits.
AFP
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