Trading Day: ASX drops $81bn as coronavirus keeps markets on edge
Shares clawed back some ground after a loss as much as 9pc, but still finished at their lowest level since December 2012.
- Stocks hit 7-year low as investors weigh shut down
- More companies withdraw guidance
- Wine harvest at risk amid shutdown
- Santos slashes activity as oil plunges
Welcome to the Trading Day blog for Monday, March 23. The ASX sunk to new 7-year lows with losses across all sectors led by the major banks. It comes as many parts of the country prepare for a full shutdown and despite the government’s latest suite of measures designed to cushion Australian from coronavirus, but more volatility lies ahead.
Companies are increasingly withdrawing their earnings guidance citing uncertainty from the virus. The latest warnings came from from Tabcorp, JB Hi-Fi, NIB and Flight Centre.
Max Maddison 5.01pm: Crown to close gaming, restaurants
James Packer-owned Crown Resorts has foreshadowed a future financial hit, as investors are warned the company faces “unprecedented challenges”.
In an ASX announcement, one of Australia’s largest entertainment groups reiterated that the Federal and State government closures of non-essential businesses would impact the majority of its operations. This includes gaming activities and the closure of restaurants and bars. Hotel accommodation will continue in a reduced capacity.
CEO of Crown Ken Barton, said: “In accordance with the statements issued by the Commonwealth Government and the Direction of the Victorian Deputy Chief Health Officer, we have closed certain of Crown’s facilities in Melbourne and Perth. Crown is a major employer in both Victoria and Western Australia with over 18,500 people working across our complexes”.
Crown said it will continue to assess the financial impact from the changes to its business operations.
The company halted trading on March 20, after its shares plunged nearly 50 per cent to $6.12.
Perry Williams 4.57pm: Strike makes play for Warrego Energy
The first takeover play has emerged since oil prices crashed with some of Perth’s most influential business executives scrapping for the spoils of a big gas deposit in Western Australia’s onshore Perth Basin.
Strike Energy – chaired by Future Fund and Crown Resorts director John Poynton with ex-Fortescue boss Nev Power also on the board – lobbed a bid for its joint venture partner Warrego Energy.
The deal proposed 1.2 Strike shares for each Warrego share but was dismissed by Warrego for fundamentally undervaluing the company. It was lodged with Warrego on March 17 and disclosed to the market on Monday.
The two energy juniors each control half of a Perth Basin gas discovery which could rival the huge onshore Waitsia field owned by Beach Energy and Mitsui.
Strike operates the field, 350km north of Perth, which is located next door to the giant Waitsia field which holds an estimated 844 billion cubic feet of gas and has been described as Australia’s largest onshore conventional gas find for 40 years.
Strike estimates somewhere between 900bcf and 1.3 trillion cubic feet are in place at West Erregulla.
The Waitsia find kicked off a takeover tussle for its owner AWE with Mitsui ultimately proving successful with a $602m takeover.
Former AWE boss David Biggs sits on the board of Warrego while other Strike directors include Queensland coal seam gas deal-maker Stephen Bizzell and former Santos finance boss Andrew Seaton.
Strike responded to Warrego’s rejection of its bid saying its offer represented a 28 per cent premium to Warrego’s 5-day volume weighted average price to March 20 before the bid was announced.
Strike fell 9 per cent to 9c and Warrego crashed 15.8 per cent to 8c.
Bridget Carter 4.21pm: Webjet persists with equity raise
DataRoom | Webjet appears to be persisting with efforts to raise equity through a book build scheduled for Wednesday.
A term sheet has been sent to investors, with pricing details yet to be confirmed and the exact raise size to be confirmed.
However, DataRoom understands that the pricing would be at a discount to its last traded share price of at least 40 per cent and the group has been hoping to raise about $250m.
Private equity firm Kohlberg Kravis Roberts is also currently weighing a possible investment via a placement.
The company has been in a trading halt since late last week, pending an equity raising, but has so far been unable to lock in a deal.
Webjet is hoping to embark on a fully underwritten placement and institutional offer.
4.13pm: Shares sink to 7.5 year low
Local shares took a hit as much as 9 per cent in Monday’s trade as investors mulled the impact of broad city shutdowns of all non-essential services, sending the benchmark to its lowest closing level since 2012.
Shares touched lows of 4402.5 after the shut down came into effect in Victoria and New South Wales at midday, while the larger scale lock down of New Zealand also rattled the market, raising the prospect of similar measures in Australia.
By the close, the benchmark ASX200 had clawed back some ground, finishing down 271 points or 5.62 per cent to 4546.
Meanwhile, the All Ordinaries closed down 290 points or 5.98 per cent to 4564.1.
Perry Williams 4.03pm: Woodside plots virus response plan
Woodside Petroleum is working on a package of cost cutting measures and potential project deferrals in response to the oil price crash as Australian energy producers scramble to lighten their exposure in the event of a prolonged market rout.
With Oil Search and Santos announcing plans to reduce spending by 40 per cent this year, Woodside’s board is understood to be signing off a move to substantially reduce its planned investment after holding talks with its biggest shareholders last week.
Most analysts expect its Burrup Hub development in Western Australia to be delayed. The concept involves Scarborough gas being piped to an expanded Pluto plant and gas from Browse being processed through the existing North West Shelf plant.
The Perth producer’s BBB+ rating was placed on creditwatch negative by S&P on Monday after cuts to its oil price assumptions including $US30 a barrel crude for 2020.
“The CreditWatch placement indicates a high likelihood of a downgrade in the next month or so if the company does not take adequate steps to preserve its financial profile, amid depressed oil and LNG markets and a significant capital expenditure pipeline,” S&P said.
Citi sees a temporary breach of its 30 per cent funds to debt ratio for 2020, troughing at 26 per cent. Dividends could be dumped in the 2021 financial year but it says the company remains robust.
“We assume that in the absence of material capex from project sanctions, a credit-rating agency will look through this temporary breach. Regardless, Woodside is three notches above sub-investment grade,” Citi said.
Woodside last down 5 per cent to $15.19.
Read more: Santos slashes spending as oil prices plunge
Max Maddison 3.38pm: Lifestyle Communities falls despite reassurance
Residential property group Lifestyle Communities has withdrawn its financial guidance for the remainder of 2020, as the company’s share price plunged 21 per cent.
Despite reassuring investors that the company hadn’t seen a “material change” in enquiry levels, forward sales or cancellation rates, Managing Director James Kelly said the “high levels of uncertainty” around the COVID-19 pandemic meant it would withdraw all forward looking guidance.
The company, which is catered towards Australian residents aged over 50, owns 18 communities across Australia.
At 3:32pm, Lifestyle Communities’ shares had fallen to $4.76 – a 20.53 per cent decline – the lowest since February 2018
3.32pm: Indian market halted as stocks plunge 10pc
Trade on the Indian Sensex and Nifty markets has been halted during the first hour of trade, after plunging more than 10pc and triggered the markets’ circuit breaker.
For the second time in two weeks, trade in the nation’s markets will be halted for 45 minutes before resuming later today.
Market Slumps, #Sensex hits 10% circuit. Trading in Indian market stopped for 45 minuteshttps://t.co/QGeezcaFYe
— CNBC-TV18 News (@CNBCTV18News) March 23, 2020
3.22pm: BHP, CSL trim ASX losses
The local market is trimming early losses as heavyweights CSL and BHP tick higher – but is still on track for its lowest close since October 2012.
With an hour of trade to go, the benchmark ASX200 is lower by 5.2 per cent to 4567.2.
The bounce is largely thanks to reversal of losses in the health sector – CSL is now higher by 1.9pc, while BHP is adding 1.5pc to $27.33.
3.04pm: SkyCity closes NZ facilities
SkyCity has announced the immediate closure of its New Zealand facilities, including Auckland Casino, following the Arden government’s announcement of a full lockdown of the country to combat the coronavirus spread.
The casino operator has properties in Auckland, Hamilton and Queenstown – each of which will be closed immediately, except for any guests currently staying at its Auckland hotels.
Chief Graeme Stephens described the nationwide closure as “unprecedented” and said he was continuing to assess the financial implications of the closures.
The group employs 4000 employees in New Zealand.
SKC shares are lower by 12.1pc to $12.75.
2.46pm: Sydney Airport bouncing from 5yr low
Sydney Airport is clawing back ground after significant selling over the past weeks, as it reassured investors it had a strong balance sheet and was reviewing its capital expenditure program for the year.
In an update to the market this morning, the airport said its average debt maturity had a tenor of over 6 years, while it had unrestricted cash flow of over $370m and $1bn of available undrawn bank facilities.
The airport had forecast capex spend of between $350m and $450m this year, but those plans have been scrapped as it deals with the blow from travel restrictions and broad flight cancellations.
“Last year we demonstrated strong operating cost control. We are accelerating this focus in the current environment, and we are eliminating all discretionary spend in order to keep operational costs to a minimum. This includes working with our airline and other business partners to optimise the safe and secure facilitation of our passengers at a lower cost,” it said.
SYD last up 3.4pc to $5.03, after hitting five-year lows of $4.37 earlier in the session.
2.29pm: Who’s next to raise capital?
As the sharemarket continues to plunge and the number of Australian companies withdrawing their earnings guidance surges at an unprecedented rate, it may be only a matter of time before a whole range of companies tap the market for deeply-discounted and significantly dilutive equity raisings. It’s another reason for investors to be wary as the government applies more stringent lockdowns.
oOh!media may be first to do so and there are plenty of directly affected companies in highly exposed industries that could tap the market. But there are some stocks like Boral which were looking vulnerable even before COVID-19 hit, and so must be near the top of the list of equity raising candidates.
After falling 18pc to a 19-year low of $1.80 today, Boral had was down 64pc since the market peaked on Feb 20, so the market is clearly wary. With cashflow tumbling before COVID-19, Boral’s net debt of $2.32bn must be getting uncomfortable
2.17pm: Woolies installs shields to protect workers
Woolworths is taking further steps to protect its supermarket workers – today moving to install protective shields across its store network to stop the coronavirus spread.
In the coming weeks all of the chains 1000 stores will have the new shields installed at thousands of check-outs.
Sydney food chain Harris Farm has also started to roll out perspex shields in front of its tills to protect workers there. Privately owned Harris Farm has 26 stores across NSW.
BREAKING: Supermarket giant @woolworths has started implementing new shields instore to protect workers/customers and stop the spread of COVID-19 @theheraldsun https://t.co/r0hoU9ljR8
— Sophie Elsworth (@sophieelsworth) March 23, 2020
Ben Wilmot 2.01pm: Childcare sector vulnerable: Arena REIT
Childcare centre owner Arena REIT has pulled its guidance as concerns grow about the sector’s vulnerability to shutdowns due to the coronavirus.
The federal government has said that businesses that operate in the sector which close because of the coronavirus will still receive federal subsidies to ensure they can reopen.
Arena said its tenants were compliant with their rent obligations but Macquarie analyst Darren Leung said childcare operators were likely to see continued headwinds as social distancing measures increased.
About 5 per cent of the tenant base is considered high-risk although Macquarie expect further risk to this number in the future.
The federal government will continue to pay the Child Care Subsidy, that can represent up to 85 per cent of the daily cost of a child’s care, if they are directly forced to close because of COVID-19.
“This is a clear positive with the government stepping in to maintain the revenue of the operators,” Leung said. “The bulk of the impact from COVID-19 appears to be funded by the government.”
Health care centres comprise 15 per cent of Arena’s portfolio. “We believe these are less likely to be impacted by shutdowns, given they are likely to be classified as essential services,” Macquarie said.
ARF shares last traded lower by 5.07pc to $1.41.
Max Maddison 1.49pm: Broncos warns of profit hit
The Brisbane Broncos have warned investors of an impending profit hit, as the National Rugby League side reels from the COVID-19 shutdown.
In an ASX announcement, the Brisbane Broncos Group prepared investors for a “material” impact on revenue and profits.
Company Secretary Louise Lanigan said management was prioritising the identification and implementation of cost saving measures to “mitigate the impact as much as possible’’.
“Given the constantly evolving nature and heightened uncertainty of the situation, it is not possible to forecast with accuracy the quantum of the financial effect on the Group or the time frame for recovery at this stage,” Ms Lanigan said.
BBL shares hit a low of 37 cents in today’s trade – their lowest since October 2016.
Tonight the NRL - National Rugby League has decided to push on into Round 3.
— Brisbane Broncos (@brisbanebroncos) March 22, 2020
Read 📖 more: https://t.co/eC8RLyYkT9
Michael Roddan 1.46pm: Delphi Bank shutters head office
Bendigo Bank subsidiary Delphi Bank has shuttered its head office at Melbourne’s iconic Rialto Towers after a man who had visited level 50 of the building tested positive for coronavirus.
“The positive case was not on a floor that is occupied or operated by Delphi Bank. The office will remain closed for 48 hours,” a statement from the bank read.
Rialto management said a visitor on Tuesday spent the afternoon in a tenancy on Level 50 from 12:45pm to 4:20pm and that he spent the entirety of his visit within the tenancy “apart from one trip to the men’s toilets on that floor”.
On Wednesday he developed symptoms of COVID-19, on Thursday he was tested, and on Saturday he received a confirmed diagnosis.
“The health authorities were contacted” and the “tenant will close their office until at least the 27th and several employees will remain in self — isolation for 14 days in accordance with health authority guidance”.
“Rialto Property Management were informed of this today and immediately commenced contacting the tenants on this floor.”
Perry Williams 1.40pm: Freedom Oil first casualty of virus uncertainty
Crashing oil prices and coronavirus market turmoil has sparked Australia’s first corporate collapse in the energy sector with Freedom Oil and Gas, backed by former BHP petroleum boss Mike Yeager, plunging into administration.
The US shale sector junior appointed administrators on Monday saying it had failed to pull off a recapitalisation due to the crude rout and volatile global equity markets.
“The current oil price environment combined with COVID-19’s impact on the global equity markets has impacted the company’s opportunities to recapitalise and contributed to the director’s decision to put the company into voluntary administration,” Freedom said in a statement.
US shale producers have been racing to cut costs with the plunge in crude to $US22 a barrel placing companies in peril with many suppliers needing a $US40 a barrel price to turn a profit.
However, Freedom struggled in the last few months even before the oil price crisis.
Read more: Freedom Oil collapses amid global coronavirus, oil plunge
Ben Wilmot 1.38pm: Listed pubs owner halted
Australians may see pubs as performing an essential role but as government rules mandate closures, the country’s largest listed pub owner, the Redcape Hotel Group, has gone into a trading halt.
The company also runs its $1bn portfolio and will likely update the market shortly on the impact of the NSW premier’s announcements about COVID-19 detailing cessation of “non-essential services” on hotels.
Leisure operators have already closed Queensland theme parks and cinemas have also been shut down. The Redcape halt may give the company time to assess whether drive through and bottle shop can remain open.
RDC shares last traded at 44c.
1.33pm: Big banks take 10pc tumble
The Financials sector continues to lead a massive 7.5pc fall in the Australian sharemarket after the ASX200 fell as much as 8.6pc to a 7-year low of 4402.5.
Anything exposed to the consumer and financial markets is getting slammed on debt concerns – why REITs and Consumer Discretionary stocks are also underperforming.
The four major banks are down about 10pc and Westpac fell almost 15pc earlier, while Macquarie, AMP and Janus Henderson are down 15pc, Magellan is off 12pc and is currently off 15pc and Challenger is down 25pc.
If New Zealand’s “Level 4” lockdowns announced today are any guide, Australia could soon be facing European-style lockdowns which would have an even more devastating economic impact than has been priced in.
Eli Greenblat 1.27pm: Deep freezers, gaming behind JB Hi-Fi lift
Panic buying of deep freezer units, new fridges and a host of electronic games consoles, tech gear and other items to keep people entertained and connected during the coronavirus pandemic has helped bolster sales for JB Hi-Fi but even that’s not enough to keep the company from withdrawing its earnings guidance given virus uncertainty.
It has seen The Good Guys record one of its highest ever quarterly sales bursts with like-for-like store sales at the whitegoods retailer up more than 10 per cent through the March quarter.
In a trading update to the market, the consumer electronics retailer, which also owns whitegoods specialists The Good Guys, said sales momentum since the new year had continued into March as shoppers turn to products that could be of benefit during the crisis, with more people working from home or stocking up on food and needing larger freezers to store their hoarded purchases.
JB Hi-Fi said that for the March quarter to date sales for the period 1 January 2020 to 22 March 2020 saw sales growth for JB HI-FI Australia of 9.1 per cent with comparable sales growth of 8.8 per cent. Total sales growth for JB HI-FI New Zealand was down 2 per cent with comparable sales growth of also down 2 per cent.
JBH shares last down 16.5pc to $23.02.
1.15pm: Southern Cross halted to assess damage
Southern Cross Media has been halted in afternoon trade, after dropping more than 30 per cent for the session.
In a notice to the market, the company said the halt was “necessary to enable SCA to assess the impact of the COVID-19 crisis on its business and to make an announcement to inform the market about those impacts and the actions being taken by SCA to address them”.
The halt on shares is until March 25, or when the announcement is released to the market.
SXL last at 16.5c, an 81 per cent decline from its highs of 87c in mid-February.
1.09pm: Asian markets add to sell-off
Hong Kong stocks nosedived at the open on Monday, with investors spooked by the rising worldwide coronavirus death toll and the failure in Congress to agree on a trillion-dollar US emergency economic package.
The Hang Seng index dropped 5.02 per cent, or 1,145.52 points, to 21,659.55 at the open.
Mainland China’s benchmark Shanghai Composite Index also opened down, shedding 2.38 per cent, or 65.39 points, to 2,680.23.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, opened 2.36 per cent, or 40.23 points, lower at 1,664.23.
AFP
1.02pm: ASX drops as shutdowns kick in
The local market is under pressure at lunch, trading near 7-year lows as major cities shutter all non-essential activity and New Zealand announces the strictest restrictions seen yet.
At 1pm, the benchmark ASX200 is lower by 343 points or 7.1 per cent to 4473.1.
Gold miners are the only notching gains, buoyed by safe haven demand as the rest of the market dives deep into the red.
Financials are leading the drop – with major banks down between 8pc and 11pc.
Here are the biggest movers at 1pm:
David Swan 12.50pm: Optus customers hit with outage
Australia’s second biggest telco Optus has been hit by an outage, with customers complaining they are unable to make or receive mobile calls.
Outage website Down Detector says there are congestion problems across Australia’s capital cities, with dozens of issues logged across Brisbane, Melbourne, Sydney, Adelaide and Perth.
Optus this months said it would give its prepaid mobile customers an extra 10GB of data and postpaid customers an extra 20GB, as workers and students increasingly stay home.
The telco has been contacted for comment.
It comes hours after the government’s MyGov website crashed, leaving Australians unable to access Centrelink amid a broad business shutdown.
Follow the latest developments at our live coronavirus blog
12.43pm: Challenger slides 25pc
Shares in retirement savings and annuity provider Challenger are sliding 25.2 per cent to the lowest level since August 2009.
The move comes amid deep cost to Challenger as it continues to pay annuity income to customers while bond markets and equity markets collapsing.
Challenger last at $2.88, shares down more than 68 per cent since the start of March.
Read more: Challenger Financial junks guidance
Michael Roddan 12.37pm: APRA shifts all focus to virus plan
The banking regulator dumped its regulatory program for the year, urging banks, superannuation funds and insurers to “fullest attention” to the spiralling coronavirus crisis.
In a short statement outlining the scuppering of its annual timetable, Australian Prudential Regulation Authority chairman Wayne Byres said the financial system was “strong and resilient”.
“But right now it is more important that banks, insurers and superannuation trustees – as well as APRA – devote their energy and resources to responding to the impact of COVID-19,” Mr Byres said.
Following a daylong meeting with other financial regulators on Friday, APRA said it would be “suspending the majority” of its regulatory work at least until the end of September so it can focus on ensuring the financial system remains capitalised and functional.
12.25pm: NZ lockdown spooks shares
Harsh “level 4” lockdowns just announced in NZ are a worry in terms of where Australia’s coronavirus policy response is heading.
The NZSE50 extended its fall to 10pc and Australia’s S&P/ASX 200 has just hit a fresh 7-year low, down 8.6pc at 4402.5.
PM's speech just now on NZ's shutdown - "Everything you will all give up for the next few weeks, all of the lost contact with others, all of the isolation... it will literally save lives. Thousands of lives" - https://t.co/YDQujYM2RM
— Kim Baker Wilson (@kimbakerwilson) March 23, 2020
Lachlan Moffet Gray 12.15pm: NZ PM unveils large scale country closure
New Zealand will almost completely shut down within two days, with Prime Minister Jacinda Ardern telling the country on Monday that if community transmission rates skyrocket “tens of thousands of New Zealanders will die”.
”Our plan is simple – we can stop the spread by staying at home and reducing contact,” said Ms Ardern.
”Now is the time to act. That’s why Cabinet today met and agreed that, effective immediately, we will move to alert level three nationwide. After 48 hours – the time required to ensure essential services are in place – we will move to level four.
“These decisions will place the most significant restrictions on New Zealanders’ movements in modern history. This is not a decision taken lightly. But it is our best chance to slow the virus and to save lives.”
Read more: 2020 will be toughest year of our lives
Damon Kitney 12.02pm: Too late to panic sell: Franklin Templeton
Franklin Templeton head of equities Stephen H. Dover says it is too late to panic sell shares.
“In our view, it’s better now to consider reallocating within equities and to potentially rebalance asset allocations in balanced portfolios. We believe the current market should provide long-term opportunity for investors who stay the course or take opportunities as they arise,’’ he told clients this morning.
“Pessimists will miss the up market — Don’t become one. As noted, we think the best approach is to stay invested in the market and use this time to assess where the opportunities are, and/or to reallocate toward better companies. We believe some of the best opportunities may be in blue-chip companies that have a long history of paying dividends. Dividend yields may decrease as dividends could be reduced, but we are not seeing a massive shrinking in dividends at this time.”
He also said investors should try to project what the economy will look like in a year instead of extrapolating today’s events.
“Longer-term paradigm shift implications of population masses learning how to, and shifting to, working remotely or from home include: gig-economy essentials, supply-chain changes, social and event industries (restaurants, bars, movie theatres and travel), etc. During the 1918 influenza pandemic, marriages, divorces and birthrates all increased. Might we have a mini-baby boom?”
Max Maddison 11.47am: Aspen Group warns of short-stay weakness
Aspen Group have discarded its financial guidance for the remainder of the financial year as cratering tourism hits the company’s bottom-line.
In an investor update, the property group said that its diversified portfolio of residential, retirement and short stay accommodation including 100 ownership and control of these properties, would insulate the company during the downturn.
“Our short stay tourist product is likely to be the most impacted by the various isolation rules being implemented across the country. We are currently ramping up these efforts,” the announcement said.
Aspen Group’s shares fell 6.67 per cent to 84 cents following the announcement – a record low.
11.35am: RBA offers to buy $4bn in bonds
The RBA continues its bond buying program started Friday, today offering to buy up to $4bn of government ACG bonds.
The central bank is offering to buy May 2021, December 2021, April 2027 and November 2028 notes. But the Australian bond curve has flattened again with 10s down 14bps and 3’s down just 1bps amid recession fears.
Earlier today the RBNZ announced a large scale asset purchase program worth NZ$30bn for the next 12 months. That’s a massive QE package relative to the size of the NZ economy.
The RBNZ will be buying NZ$750m bonds a week and is starting the program this week with NZ$750m of purchases.
That helped drive NZD/USD down 1.9pc while lowering the NZ 10-year bond yield a massive 50 basis points
11.15am: $ A drops as US stimulus blocked
AUD/USD dropped 80 points or 1.4pc to 0.5705 after US Democrats blocked the US$1.2 tn ($2tn) stimulus bill.
That follows a massive 3.3pc retreat from the 2-day high of 0.5985 reached Friday as the S&P 500 tumbled 4.3pc.
AUD/USD had bounced to US59.5c on Friday after central banks opened swap lines with the Fed to add US dollar liquidity.
The currency had bounced a phenomenal 4.8 cents or 8.6pc from a 17-year low of 0.5510 on Thursday. The price action suggests AUD/USD has established a short-term trading range of 0.5500-0.6000.
NAB says the Aussie is now 30pc below its PPP (purchasing power parity) valuation, well in excess of a 16pc deviation reached in the GFC.
NAB’s end-Q2 target for the $A is now 0.57 and it sees $A in the low 60’s by the end of the year assuming the virus comes under control and China stimulus aggressively.
AUD/USD last down 0.4pc at 0.5762.
Max Maddison 11.12am: NIB warns of blow to profitability
Private health insurer NIB has abandoned its market guidance for the remainder of the calendar year, as it warns investors of an impending blow to profitability.
In a letter to shareholders, chairman Steven Crane said the company’s “claims exposure” meant the short term impacts of coronavirus were likely to be profound.
“As hospital admissions increase for COVID-19 related illness nib does face some additional claims exposure. Action is already underway to protect the gross margins for our International Inbound Health Insurance businesses reported for the first half of FY20,” Mr Crane said.
“Nevertheless, there is some risk sharing with underwriters and in combination with the poor sales outlook, profitability will be significantly impacted in the months ahead.”
At 10.57am, NIB shares had fallen 5.65 per cent to $4.68
11.09am: Why the democrats blocked US stimulus
Senate Minority Leader Charles Schumer on Sunday said Democrats opposed the massive coronavirus stimulus bill because it contained a “large corporate bailout with no protections for workers and virtually no oversight”.
Mr Schumer blamed Senate Republican leader Mitch McConnell for moving forward with the initial vote even though there was no deal. He said he was optimistic an agreement on a stimulus bill could be reached within in the next 24 hours.
“We are closer than we’ve been at any time over the past 48 hours to an agreement, but there are still too many problems in the proposed legislation,” he said.
Dow Jones Newswires
11.06am: Flight Centre cancels payout, cuts exec pay
Australia-based Flight Centre Travel Group cancelled its interim dividend and directed executives to take a 50pc pay cut as new travel restrictions to stop the spread of coronavirus continue wreak havoc on the travel sector.
The travel agency said the cancelled dividend, worth 40c per share and a total of $40m, was supposed to be paid to shareholders in April.
“Cancelling the dividend was not a decision that was taken lightly, but we felt it was appropriate to preserve cash and protect long-term shareholder value,” said Managing Director Graham Turner.
Flight Centre shares have also been suspended from trading, following a two-day trading halt, as the company scrambles to develop a comprehensive response to the draconian travel restrictions being implemented by governments worldwide. Authorities in Australia are advising against non-essential domestic travel in addition to restrictions on international travel.
Flight Centre added that it is discussing support packages with the government for businesses and people that are adversely impacted by the travel restrictions.
FLT last traded at $9.91.
Dow Jones Newswires
10.58am: Air NZ headed toward recapitalisation: UBS
DataRoom | Analysts at investment bank UBS believe that the terms of Air New Zealand’s $900m bridging loan offered by the government across the Tasman will ultimately lead to the airline embarking on an equity recapitalisation.
They have run a scenario based on the assumption that it will continue to burn through cash of about $209m each month.
They say that the impact on Air New Zealand’s equity value will depend on the duration of the boarder closure and pace of recovery from the coronavirus pandemic.
But under a scenario where the borders are closed until December, the analysts believe that its shares could be worth 50c.
They currently trade at about 85c.
Assuming the boarders are closed for nine months and Air New Zealand spends $209m of its cash monthly, the analysts believe it will need $1.9bn, which compares to its current $1.6bn funding capacity.
The current funding capacity includes the $900m bridging loan offered by the government and $700m of cash reserves.
Read more: NZ government props up Air New Zealand
David Swan 10.55am: Aussie tech darlings take new battering
ASX’s listed tech darlings, its ‘WAAAX’ stocks, have been hit hard Monday morning with millennial favourite Afterpay tumbling almost 25 per cent in early trade.
The buy now, pay later provider, which had hit an all-time high of $41.14 just over a month ago, is down 24.76 per cent to $9.36 at 10.40AEST. Its tumbling share price last week forced its co-founders to issue a letter of calm to shareholders, but its price continued to fall.
Fellow tech stock WiseTech isn’t faring much better, down 8 per cent to $10.86, while electronics software maker Altium is down 7.4 per cent to $24.28 and Appen is down 11 per cent to $16.45.
New Zealand-based accounting software outfit Xero is down 10 per cent, to $55.60.
10.52am: Morgan Stanley cuts ASX target further
Morgan Stanley has cut its 12-month target for the ASX200 to 5800 from 6700, suggesting 20pc upside from Friday’s close but its “bear case” shows 19pc more downside.
“With a sharp recession now in the base case we cut our consensus earnings expectations significantly, although still see index upside on a relatively strong recovery, low $A and very low rates,” says MS Australia equity strategist Chris Nicol.
“Our model portfolio has outperformed this year, and we look to add some corrective value, removing Karoon, AP Eagers, Sydney Airport and Worley Parsons, and adding Woodside, TPG Telecom, Coles, NextDC, IAG and Adelaide Brighton.”
10.50am: New stimulus to bolster Aus standing: Moody’s
Ratings agency Moody’s has welcomed the federal government’s latest $66bn stimulus package, saying it will bolster Australia’s standing.
Moody’s Investors Service vice president Martin Petch said the county’s strong fiscal position will also help to limit the economic damage wrought by the COVID-19 pandemic.
“The package of measures announced by the Australian government will likely buffer, although not fully offset, the economic impact from coronavirus-related disruptions. Australia’s relatively strong fiscal position points to a limited impact of the economic downturn and the fiscal stimulus on the sovereign’s fiscal strength,” Mr Petch said.
Max Maddison 10.34am: HomeCo reassures investors it can handle virus
Retail property landlord Home Consortium has reassured investors of its strong liquidity position, while ditching its earning guidance for the financial year.
In an ASX announcement, HomeCo – owner of the former Masters hardware sites – said it had a well-capitalised position of $146m across cash and undrawn facilities, with no debt maturities until 2023, which would ensure the company was able to fully fund all future commitments.
CEO David Di Pilla said HomeCo’s portfolio mix – 90 per cent national retailers and service providers – which catered towards essential daily need placed the company in a solid position to handle the outbreak.
HMC shares last down 17.7pc to $1.42.
Lilly Vitorovich 10.31am: US group bolsters oOh!media stake
US investment management group HMI Capital has bolstered its stake in oOh!media to 18.6 per, two days before the outdoor advertising company called a trading halt to explore a possible capital raising.
The San Francisco-based firm, which was established during the global financial crisis in 2008, acquired 5.5 million oOh!media shares last Wednesday, according to a change in substantial holding notice lodged with the ASX on Monday morning.
Prior to the purchase, HMI held a 16.34 per cent stake in oOh!media.
oOh!media last Friday called a trading halt for 48 hours to give it time to meet shareholders and lenders to discuss a possible capital raising, which unnerved investors.
Outgoing chief executive Brendan Cook denied the company had liquidity problems, even though it had net debt of $354.5m at the end of December, which equates to 2.6 times its underlying earnings. He also denied it was in talks with potential buyers.
10.28am: JB Hi-Fi sales strong, but weakness ahead
Australian electronics retailer JB Hi-Fi said sales were strong in the March quarter, lifted by tech products for remote working and home appliances, but the company still withdrew fiscal 2020 guidance due to the coronavirus pandemic.
The company said total and same-store sales grew by 9pc in its main JB Hi-Fi Australia unit in the quarter to date, from January 1 to March 22. Total sales and same-store sales grew by 10pc at homegoods chain The Good Guys, though both metrics fell by 2pc in the company’s New Zealand unit.
The company withdrew its fiscal 2020 guidance given the uncertainty regarding the extent of the coronavirus pandemic, which is spreading around the world and could lead to prolonged shutdowns of many businesses. JB Hi-Fi said its balance sheet remains strong and it has significant headroom in its facilities and covenants.
The chain added that it is doing intensive cleaning of its stores, implementing social-distancing measures in high-traffic areas, encouraging cashless transactions and adopting flexible working arrangements.
WSJ
10.26am: ASX hits 7-year low
Australia’s S&P/ASX 200 share index was smashed 401 points or 8.3pc to 7-year low of 4415 at the open.
It came after US index futures opened down 8pc as US politicians failed to agree on the proposed $US1.2 trillion ($2 trillion) fiscal stimulus.
Investors are also concerned about the earnings implications of national state shutdowns and a flood of companies withdrawing their earnings guidance.
All sectors are deeply in the red with the Financials, Tech and Real Estate sectors down at least 10pc, while the Materials sector is outperforming.
The four major banks are down about 10pc, Macquarie is down 12 pc. BHP is only down 3.9pc at $25.96, which is impressive in the circumstances.
If the GFC was anything to go buy, this won’t end before we see a deeply-discounted and widespread capital raisings in the months ahead.
10.13am: Stocks drop by 400 points
The local market is lower by 408 points in early trade, with decline across most sectors as states close their borders and prepare to go into lockdown.
The benchmark ASX200 is lower by 8.5 per cent to 4408.1.
9.53am: Guidance withdrawals accelerating
The number of Australian companies withdrawing their full year earnings guidance because of coronavirus is accelerating rapidly.
Already today Charter Hall Retail, Link Administration, JB Hi-Fi, SkyCity Entertainment, Atlas Arteria, Stockland, Ainsworth Gaming and Tabcorp have withdrawn their guidance.
Caltex has warned on plunging jet fuel demand and others are in the process of updating, with NAB warning that COVID-19 will have an impact on credit quality.
The rush of guidance withdrawals and open-ended profit warnings in the past week or so is likely to be unprecedented.
It shows that the consensus EPS downgrade of about 2.8pc for the S&P/ASX 200 since the market peaked on February 20 is nowhere near enough.
If the consensus EPS estimate is could fall more than 10pc, then the current 12-month PE ratio of 12.85 times isn’t enough of a discount to the long-run average of 14 times.
During the global financial crisis, the forward PE ratio hit 7.8 times and the index fell 54pc vs the current fall of 33pc.
With the state and nationwide shutdowns announced over the weekend this will only get worse.
Ben Wilmot 9.49am: Stockland retracts guidance
The country’s largest residential property developer Stockland has bowed to the impact of the coronavirus dumping its guidance in the wake of a series of other developers dropping forecasts.
Stockland withdrew its funds from operations and distribution guidance for this financial year, citing the heightened uncertainty surrounding the coronavirus (COVID-19) outbreak.
It also withdrew forward-looking forecasts, including in relation to fiscal 2020 and 2021, but said it was well positioned, with total available liquidity of $850m, comprising cash and committed undrawn bank debt facilities available at the end of February.
Stockland chief executive Mark Steinert said the company had previously navigated many challenges and difficulties over it 68 year history.
As well as major housing estates, Stockland also owns shopping centres that could be partially closed as more shops are shuttered, and office towers and warehouses.
Last week supermarket landlord Charter Hall Retail REIT, Mirvac, GPT Group, and mall owners Scentre and Vicinity Centres pulled guidance.
Read more: Property stocks vulnerable as forecasts dumped
Max Maddison 9.44am: Dreamworld to close for two months
COVID-19 has forced the closure of Dreamworld and WhiteWater World until May 31 following the Queensland governments restrictions on non-essential mass gatherings.
In an ASX announcement, Ardent Leisure Group, parent company of the theme parks, said the decision to temporarily cease operations would mean the company would retain “minimal staff” during the period of the closure. Theme Parks CEO, Mr John Osborne said that all Board members would not take fees until further notice.
“The decision to close our parks is a direct result of the COVID-19 outbreak. We are deeply aware that the decision to close our parks will create a great deal of uncertainty for our team members, their families and the broader community,” Mr Johnson said.
“The health and safety of our team members and guests is the Board’s number one priority.”
While the company said it would aim to reopen by the end of May, the uncertainty surrounding the outbreak meant it wasn’t possible to determine how long the park would remain closed for.
On Monday morning, Ardent’s shares were trading at 20 cents, plummeting 86.17 per cent since February 21.
Bridget Carter 9.42am: oOh! Media embarks on $167m raise
DataRoom | oOh! Media is making efforts to embark on a $167m equity raising, securing $39m via a placement and $128m via an entitlement offer.
Calls were being made around the market on Monday after the stock entered a trading halt on Friday when it said it would be exploring a possible equity raising.
The attempted raise of $128m consists of an institutional entitlement offer and a retail entitlement offer, involving 315 million new shares being issued or 130 per cent of shares on issue.
Shares are being sold at 53c, which is a 37 per cent to the outdoor advertiser’s last closing price of 84c.
The offer will be conducted by way of book build to happen 10am Monday.
9.32am: Tabcorp warns on revenue amid pub closures
Tabcorp has warned more than a third of its revenues are at risk amid the closure of pubs and clubs, and as several sporting codes suspend their seasons to stem the spread of coronavirus.
In an update to the market this morning, the betting group noted that in the first half, revenue from Australian licensed venues, TAB agencies and on-course outlets accounted for 28pc of group revenues, and sports betting accounted for roughly 4pc – both of which were now at risk as a result of the latest government restrictions.
“Given this evolving situation, and the high level of uncertainty regarding the impact of COVID19 on the Group in FY20 and, likely, FY21, Tabcorp is not currently in a position to provide specific guidance on earnings or financial impacts,” the company said.
“Tabcorp is seeking to partially mitigate the impact of these changes by reducing operating and capital expenditure where it reasonably can, encouraging retail customers to use digital alternatives and actively promoting remaining available products.”
Updating the market on its debt position, Tabcorp added that its undrawn banking facilities are roughly $600m and that other than a US Private Placement of $171.5m which matures in December 2020, it had no other debt maturities until April 2022.
9.23am: REX cuts all passenger flights bar QLD
Regional airline Regional Express (REX) will cease all passenger air services from April 6, except those underwritten by the QLD government.
In a drastic move to shore up its balance sheet, the airline said the airline rescue packaged announced by the government last week was “grossly insufficient” to cover its $10m a month it expected to lose running its heavily reduced schedule.
Drawing parallels to the US government’s airline aid – it said Australia’s equivalent support should be $4.6bn, instead of the $715m proposed.
“If an assistance package of sufficient magnitude and viability can be negotiated by the end of the week, Rex may be able to reconsider its plans to suspend services,” it said, pointing the finger at state governments for not stepping up.
“Failure to achieve any traction in this regard will see regional communities lose their air services for many months ahead and even after this is all over, we are afraid that some of the more marginal communities will no longer have an air service.”
Read more: Airlines handed $715m bailout
Damon Kitney 9.19am: Investors too focused on downside: Almeida
The chief investment strategist of the world’s oldest mutual fund says too many investors focus on the upside in rising markets and the downside in falling markets.
“Their focus should be exactly the opposite,’’ says Robert Almeida, Global Investment Strategist at the Boston-based MFS Investment Management.
“For the past several years we’ve focused on the near-systemic misallocation of capital by companies fixated on goosing stock prices by returning capital to investors via stock buybacks and dividend hikes — funded by historically low interest rates and tight credit spreads — while sidestepping productive long-term capital investments.
“That misallocation resulted in all-time- high profits, margins and near-record valuations. But companies were engineered to win a sprint. They didn’t have the legs necessary to win a marathon. It took COVID-19 to expose the fragility of those overstated profits and the global economy,” he tells clients.
“Now, the focus should be on opportunities. Which companies will survive and which will be better positioned on the other side of the crisis if half of their competition is gone? We believe companies with something people need or want, that are not dependent on short-term funding and that have seen their stock prices arbitrarily decimated will prove attractive, in hindsight, once the crisis is behind us. That’s where we’re focused.”
9.16am: Virgin to cut more domestic flights
Virgin Australia says it is likely to cut more domestic flights as the nation prepares to bunker down following new coronavirus travel restrictions.
Virgin said on Monday it expected its domestic schedule to suffer a material impact as a result of new federal and state government travel bans at the weekend.
The airline last week reduced domestic capacity across Virgin and Tigerair brands by 50 per cent and ceased its international operations in response to tightening quarantine measures.
Virgin said more information will be provided in the coming days. The announcement comes as an increasing number businesses prepare to close their doors to comply with the latest travel and trading restrictions imposed to combat the coronavirus.
AAP
Read more: Government should not nationalise Virgin, says Qantas
9.14am: US futures open limit down
US stock index futures reopened limit down 5pc in early Asian trading as the spread of coronavirus worsened and lockdowns widened at the weekend.
This means Australia’s S&P/ASX 200 will fall much more than the 1.6pc opening fall that was expected based on Friday’s futures trading.
A lack of agreement in Congress over the proposed $US1.2 trillion stimulus plan is also weighing on sentiment.
US 10-year bond yields are down 5bps at 0.89pc and US WTI crude futures are down 12pc to $20.98 in early trade.
Eli Greenblat 9.10am: Wine harvest at risk amid shutdown
Maker of Australia’s famous Jacob’s Creek wine, Pernod Ricard, has warned its harvest could be ruined by enforced or shutdowns that could threaten the loss of an entire year’s production.
The warning follows calls from the brewing industry, led by majors Carlton & United Breweries and Lion, that unless they are included as essential industries in state government coronavirus lockdowns, Australia will run out of beer within weeks and could go without beer for at least three months.
The wine sector in particular has already been hit by the coronavirus pandemic because China, where it started, is a major buyer of Australian wine as well as a key source of tourism to local wineries.
It also comes after summer bushfires destroyed many vineyards and large sections of other winegrowing regions with grapes spoiled by smoke taint.
Bryan Fry, chairman and chief executive of Pernod Ricard Winemakers, owner of the Jacob’s Creek and St Hugo labels, said looming shutdowns came at a terrible time for the winemaker.
“We are in the midst of vintage at our Barossa Valley winery and have put in place unprecedented measures to protect the health of our staff, suppliers and customers,’’ Mr Fry said.
Read more: Winemakers fear virus shutdown
Perry Williams 9.05am: Santos slashes activity as oil plunges
Santos has slashed its spending for 2020, reduced its break-even oil price and delayed an investment decision on its $US4.7bn Barossa project in response to the plunge in crude prices and coronavirus volatility.
The South Australian producer will cut its spending this year by 38 per cent to $US550m ($947m), trim its production costs by $US50m and issued a target for 2020 free cash flow break-even oil price of $US25 a barrel from $US29 a barrel last year.
Santos had hoped to make a final investment decision on the Barossa gas project in Northern Australia by the June quarter but will defer any move until market conditions improve.
“Given the uncertain economic impact of COVID-19 combined with the lower oil price, we expect to defer FID on Barossa until business conditions improve. Barossa remains an important project for Santos due to its brownfield nature and its low cost of supply,” Santos chief executive Kevin Gallagher said.
Chris Jenkins 8.59am: Senior NAB exec calls time
Senior NAB business and private banking executive Anthony Healy is leaving the bank after 10 years.
NAB chief executive Ross McEwan praised Mr Healy’s contribution over that time.
“Anthony has been recognised for his strong customer focus, innovation and market leading results. He has been a champion for supporting our small to medium enterprises, the engine room of the Australian economy, and the development of regional and rural Australia,” Mr McEwan said.
“He has been a key member of NAB’s executive leadership team through a challenging period and I have valued his support since I joined NAB. I wish him well for the future.”
Mr Healy has been in his current role since 2018 and will leave NAB at the end of April. Michael Saadie will take over the position in an interim capacity until a permanent replacement is found, NAB said.
8.52am: What’s on the broker radar?
- IDP Education raised to Positive – Evans and Partners
- James Hardie GDRs raised to Buy – Jefferies
- Marley Spoon GDRs raised to Buy – Canaccord
- Oil Search raised to Hold – Shaw and Partners
- Reliance Worldwide raised to Buy – Jefferies
- Seek raised to Add – Morgans
8.38am: Jet fuel demand could collapse: Caltex
Caltex says the demand for jet fuel could be hit by as much as 90 per cent as airlines slash capacity amid broad travel restrictions.
Following a previous warning on demand for fuel just two weeks ago, Caltex this morning said it estimated jet fuel demand reductions “could be in the magnitude of 80pc to 90pc for the period during which the announced level of flight cancellations are in place”.
“Caltex is assessing the impact of this jet fuel demand reduction,” it added, along with the demand for Australian gasoline and diesel markets given the evolving situation.
Read more: Sharemarket rout may scupper Caltex bid: CS
8.04am: Adelaide casino to close
SkyCity Entertainment Group says it will close its Adelaide Casino by noon local time following the federal government’s coronavirus lockdown.
The government has mandated the immediate closure of all licensed clubs, pubs,
cinemas, casinos, nightclubs and places of worship.
SkyCity CEO Graeme Stephens said “We respect the Australian government’s decision to close the Adelaide Casino in order to combat the spread of COVID-19. We are now very focused on addressing the welfare of our 1000 employees in Adelaide.”
Mr Stephens said SkyCity had started consultation with the unions in South Australia and expected to finalise a plan for its employees over the next week.
As the closure does not apply to construction SkyCity will continue work on its Adelaide expansion project.
SkyCity says its New Zealand casinos currently remain open but it is preparing for their potential closure.
Given the Adelaide closure and other uncertainty, SkyCity is withdrawing its updated earnings guidance for the year ending June 30, 2020 released last week.
7.36am: Emirates reverses shutdown
Dubai carrier Emirates reversed its decision to suspend all passenger flights shortly after it said it would halt operations from March 25 amid the novel coronavirus outbreak.
The airline said it “received requests from governments and customers to support the repatriation of travellers” and will continue to operate passenger flights to 13 destinations, down from its usual 159.
The announcement was made just hours after a previous statement said the carrier “will have temporarily suspended all its passenger operations” by March 25.
AFP
7.25am: Gold rebounds
Gold rebounded on Friday, rising as much as 3.1 per cent, as a wave of fiscal and monetary stimulus by global central banks to counter the economic impact from coronavirus spread halted investors lure for cash.
Spot gold was up 0.7 per cent at $US1,480.53 per ounce. However, bullion lost more than 3 per cent for the week.
US gold futures settled 0.4 per cent higher to $US1,484.6.
Reuters
7.20am: Oil’s worst week since 1991
US crude tumbled 10.7 per cent on Friday and posted its biggest weekly decline since the 1991 Gulf War as the coronavirus epidemic dried up global demand and as officials in Washington said an envoy would head to Saudi Arabia to deal with fallout of a Saudi-Russia oil price war.
The week featured four days of massive selling as the growing pandemic kept people from driving and booking flights.
Major forecasters like trading giant Vitol and energy researcher IHS Markit said oil demand could drop by as much as 10 per cent.
Oil prices rose sharply on Thursday after days of selling, but the rally did not last.
US crude prices notched a weekly loss of 29 per cent, the steepest since the outset of the US/Iraq Gulf War in 1991.
Brent crude dropped by 20 per cent.
Both benchmarks have dropped for four straight weeks.
“With the economy continuing to grind more and more to a halt, it’s clear the demand destruction is continuing to grow. Whatever efforts are being made to cut production in the US and capital expenditures, it’s not enough right now,” said John Kilduff, a partner at Again Capital Management in New York. On Friday, Brent crude futures fell $US1.49, or 5.2 per cent, to settle at $US26.98 a barrel.
US crude futures for April fell $US2.69, or 10.7 per cent, to settle at $US22.53 a barrel.
Reuters
6.55am: RBNZ to bonds to keep rates low
The Reserve Bank of New Zealand says it will buy $NZ30 billion of government bonds over the next 12 months to keep interest rates low as the coronavirus pandemic takes a severe impact on the economy.
The economic impact of the pandemic has increased and heightened risk aversion has resulted in tighter credit conditions, reducing the impact of recent interest rate cuts, the central bank said Monday.
Dow Jones Newswires
Cliona O’Dowd 5.35am: Market in waiting game
Investors are bracing for another rough week on financial markets, with no end in sight to the volatility as countries around the globe struggle to contain the COVID-19 coronavirus and governments unleash a raft of stimulus measures in an attempt to reduce the impact of the economic shock from the spread of the disease.
The local sharemarket is expected to open lower on Monday despite Prime Minister Scott Morrison and Treasurer Josh Frydenberg on Sunday unveiling $66bn worth of measures designed to cushion the blow from the virus.
At 5.30am (AEDT) SPI futures were suggesting a fall of 87 points at the open, or about 1.8 per cent.
CommSec chief economist Craig James says the futures only give a sense of where investor sentiment was at on Saturday morning before that market closed. “What happens from there, unfortunately, you’d have to say, is anyone’s guess, because there is so much volatility in the markets,” Mr James said. “There’s no signs of that volatility ending any time soon. The ride continues and the battle continues against COVID-19.”
The Australian dollar was at US57.85c.
The government’s suite of measures includes allowing Australians who suffer financial hardship during the crisis to access up to $10,000 of their superannuation, giving those on welfare benefits an extra $550 a fortnight and providing wage subsidies of up to $100,000 to small businesses to keep staff on.
Small businesses will also be offered access to $250,000 in government-guaranteed unsecured loans.
Despite expectations of a positive reaction to the new economic package, the local sharemarket is likely to come under further pressure in the coming days, according to Tribeca Investment Partners portfolio manager Jun Bei Liu.
“I think the market may well head a little bit lower. But this enormous selling we saw in the last week or so, it’s difficult to see that repeat again. So, we may see the market track sideways or slowly downwards,” she said.
The speed of decline in the local sharemarket in recent weeks was “enormous” and unlikely to be matched in the near term, she predicted.
But volatility in financial markets would continue until there was a stabilisation of coronavirus cases in major economies, CommSec chief economist Craig James warned.
“At the moment we’re just playing a waiting game to see whether the measures that are being implemented in terms of trying to lock down countries and cities and regions will be successful,” he said.
“Certainly the (stimulus) measures are good, they are supportive, and everyone is getting behind the measures and saying that all the right things have been done. But at the end of the day, unless we start to see a stabilisation in the number of cases, the expectation is that more might have to be done in terms of stimulus and support for economies.”
The local sharemarket would take its lead from declines on Wall Street on Friday night, Ms Liu said.
US sharemarkets fell sharply at the end of last week as US governments moved to shut down more of the nation’s economy to reduce the spread of the outbreak.
The Dow Jones Industrial Average fell 913.21 points, or 4.5 per cent, to 19,173.98, the S&P 500 slumped 4.3 per cent to 2304.92 and the Nasdaq retreated 3.79 per cent to 6879.52 as investors sought safety in US government bonds.
Markets may also bounce when the US stimulus package was revealed, Mr James said.
US President Donald Trump is pushing for a $US1 trillion ($1.7 trillion) stimulus package to support the economy as it battles the spread of the virus. The package is currently being negotiated in the US Senate.
On a three-month view, Ms Bei Liu believes the local sharemarket will be “significantly higher” than now. “I’m reasonably optimistic on where the market is heading, simply on the basis that if we look at what’s happening in China, in Singapore and in the Asian market, with their virus numbers, it gives me a bit more confidence that this thing can be controlled, although it requires drastic measures.
“And then also knowing that there’s so much stimulus, that every government has stepped up and said that they will do whatever they can to support the economy through this period, it suggests to me that there is a floor under this.”
Reduced demand for Australian exports and lower commodity prices risked pushing the Australian dollar to re-test its 2001 low of US47.7c, AMP head of investment strategy Shane Oliver said.
5.25am: Tianqi postpones lithium plant
Tianqi Lithium Corp, one of the world’s biggest lithium producers, says it has postponed commissioning of the first phase of its flagship Australian processing plant due to rising liquidity problems after the coronavirus outbreak.
The Chinese firm started production from what was slated to be the world’s largest facility for lithium hydroxide, used in batteries for electric vehicles, in September 2019, with the ramp-up of the 24,000 tonnes per year first phase in Kwinana, Western Australia, expected to take between 12 and 18 months.
But Tianqi, which last month admitted having difficulty paying back loans taken out for the $US4.1 billion ($7.1 billion) purchase of a 23.8 per cent stake in Chilean miner SQM in 2018, said its “tight liquidity situation” had intensified since the start of 2020 due to the virus outbreak.
The commissioning of the first phase of the lithium hydroxide plant had therefore been postponed, Tianqi said in a filing to the Shenzhen Stock Exchange in response to questions from the securities regulator in its home province of Sichuan, without providing a further timeline.
Reuters
5.20am: Emirates to suspend all flights
Dubai carrier Emirates Airline says it will suspend all passenger flights from March 25 amid the novel coronavirus outbreak.
“By Wednesday 25 March, although we will still operate cargo flights, which remain busy, Emirates will have temporarily suspended all its passenger operations,” the airline’s chairman and CEO Sheikh Ahmed bin Saeed Al-Maktoum said in a statement.
“We continue to watch the situation closely, and as soon as things allow, we will reinstate our services.”
Emirates passenger flights normally serve 159 destinations.
AFP
5.15am: US relief plan up to $US4tr
An emergency coronavirus relief package that the US government is negotiating for businesses hit hard by the pandemic calls for up to $US4 trillion in aid, Treasury Secretary Steven Mnuchin said.
Under one component of the plan a “significant package working with the Federal Reserve will have up to $US4 trillion of liquidity that we can use to support the economy,” Mnuchin told “Fox News Sunday.”
America is enduring its own slice of the world upheaval that has seen businesses shut down en masse, workers laid off overnight, schools close and millions of people adjusting to life confined to their homes.
AFP
5.10am: Wall St recap
Wall Street stocks plunged again on Friday bringing the market’s worst week since 2008 to a grim conclusion, as the worsening coronavirus pandemic hammers the economy.
After a volatile session which saw stocks spend part of the day in positive territory, the Dow Jones Industrial Average lost 4.6 per cent, or around 915 points, to end at 19,173.98, again dropping below the level when President Donald Trump was inaugurated in January 2017.
The broadbased S&P 500 dived 4.3 per cent to close at 2,304.92, while the tech-rich Nasdaq Composite Index tumbled 3.8 per cent to finish at 6,875.52.
The mounting list of restrictions on commerce have led economists to slash their forecasts by the day.
New York Governor Andrew Cuomo ordered non-essential businesses to close and banned all gatherings, a dramatic escalation of mitigation steps after the nation’s most-populous state, California, on Thursday directed its 40 million residents to stay at home.
IHS Markit now sees a contraction of 13 per cent in the second quarter after projecting a 5.4 per cent decline just four days ago.
More analysts now view the economic hit from the virus as a drag for the foreseeable future.
“The damage is not likely to pass in a month or two,” FHN Financial said in a note. “Increasingly, it appears there will be a sharp drop in global activity, followed by a period of significant weakness lasting at least two quarters, followed by a partial recovery.
“In other words, for those savvy to the alphabet soup vocabulary of recession analysis, an L-shaped recession rather than a V-shaped recovery.” And Goldman Sachs warned of an “unprecedented surge in lay-offs,” citing data from US states, and a massive decline in revenues in many industries.
The Federal Reserve announced yet another slew of measures to boost liquidity, including a new program to inject funds into state and municipal money markets to keep the financial system from freezing up under the stress.
AFP
ASX 200 rises on banks; Arcadium top gainer
Rio Tinto's takeover approach lifts Arcadium Lithium appeal. West African Resources drops on Burkina Faso mining concerns. Qantas may avoid second strike after proxy backing.
Miners drag on ASX 200; Woodside, Mesoblast up
US President Joe Biden triggers oil price jump. Mesoblast top gainer. Sinopec wants price review on APLNG deal. Platinum grants Regal access for higher offer. Ratings upgrade for Cochlear. Optimism underpinning latest Bendigo Bank, UBS forecasts.