ASX clocks 2.2pc monthly gain despite daily weakness

Shares closed at their lowest levels of the day, but still held on to a 2.2pc monthly gain to mark a 33pc recovery from March lows.

The ASX was expected to start the week lower. Picture: AAP

• Half of deferred loans likely delinquent: UBS
• Weakest profit season in a decade: CommSec
• Temple & Webster profit soars
• Nova chief jumps to oOh!media

That’s all from the Trading Day blog for Monday, August 31. Australian stocks finished a choppy session at their daily lows, while the Aussie dollar slipped from 18-month highs.

In local equities, retailer Mosaic soared 17pc after inking a deal with landlord Scentre, while Fortescue weighed with a 7.7pc drop as it traded ex-dividend for its record $1 per share payout.

7.57pm: Buffett buys into energy in Japan

Warren Buffett’s Berkshire Hathaway took stakes of slightly more than 5 per cent in five of Japan’s most venerable corporate names with big investments in energy.

Berkshire disclosed the investments in Mitsubishi Corp, Mitsui, Sumitomo, Itochu and Marubeni just before the Tokyo stockmarket opened Monday.

Shares in the five companies surged at least 5 per cent and in some cases more than 10 per cent, helping drive the Nikkei Stock Average up 2 per cent in intraday trading.

Berkshire didn’t say how much it spent to acquire the stakes. Based on the companies’ Friday closing prices, a 5 per cent stake in each would collectively be worth about $US6bn ($8.2bn).

The five are often called trading companies, but investment company might be a more precise description. All have stakes in a variety of businesses including interests in energy and mining. Mitsubishi and Itochu each control a major convenience-store chain in Japan.

“I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies we have chosen for investment,” said Mr Buffett in a statement. He said the five “have many joint ventures throughout the world and are likely to have more of these partnerships”. The Wall Street Journal

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7.29pm: TikTok deal talks thrown off track

Plans to quickly complete a deal between the Chinese parent company of TikTok and suitors for the app’s US operations have been thrown off track as the parties huddled over the weekend to weigh new Chinese restrictions that appear designed to affect a potential sale, according to people familiar with the discussions.

China late on Friday issued new restrictions on the export of artificial-intelligence technology that forced ByteDance, TikTok’s parent, to slow down talks with companies including Microsoft, Walmart and Oracle for a portion of the social-media app, according to people familiar with the matter.

ByteDance, which had received the broad outlines of bids on Friday for the TikTok assets, had been expected to enter into exclusive discussions with one group of suitors over the weekend, the people said. The Trump administration in early August set a mid-September deadline for ByteDance to sell its US operation. The Wall Street Journal

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David Swan 7.02pm: Buy now, pay later rollercoaster

Australia’s buy now, pay later stocks have continued their wild ride up and down the bourse, with Sezzle tumbling nearly 10 per cent but Splitit climbing 3 per cent as a decision about future regulation looms large over the sector.

Splitit reported its 2019-20 half-year results on Monday, lifting its merchant sales volume by 133 per cent year on year to $US89.1m. The company’s gross revenue jumped 244 per cent year on year to $US3.1m, while its average order was up 59 per cent to $US845.

Unlike Zip and Afterpay, which are based on new debt, Splitit connects to an existing Visa or MasterCard credit card, and has deals in place with online payment providers such as Stripe. The company has also signed on retailers including The Hut Group, Specialized, Frederique Constant, Echelon Fitness and 77 Diamonds.

The company said its active merchants had jumped by 92 per cent in the past year to 519, while monthly active shoppers were up by 28 per cent to 149,000.

However, its net loss also widened by 134 per cent to $US9m as the company embarked on global expansion. In August, Splitit announced a $100m capital raising from institutional investors including US-based Woodson Capital.

“Splitit’s value proposition for merchants and consumers has proved to be relevant now more than ever. This, coupled with strong execution of our high-growth strategy, has helped us deliver record merchant sales volume and revenue in the half-year,” Splitit CEO Brad Paterson said. “The momentum is continuing into the second half.”

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James Kirby 6.30pm: IOOF’s big move

Who wants to be the biggest dinosaur in Australian financial services? It looks awfully like IOOF which is now asking its unfortunate shareholders to stump up in a big way for NAB’s unwanted wealth subsidiary, MLC.

To finance the deal, IOOF has launched a jaw-dropping $1bn equity raising.

To get it over the line the non-bank wealth manager is to offer its shares at a 24 per cent discount, which tells you how badly IOOF wants this deal to fall into place.

Market analysts had not expected IOOF would have to stretch quite so far over to get the cash. Most estimates were closer to a 15 per cent discount.

It’s worth recalling that when NAB originally bought MLC - from Lendlease, two decades ago - at least it did not turn around to its shareholders and demand they bankroll the exercise.

And all for what exactly? IOOF aims to create a major integrated financial advice and funds management group.

Read more

Ben Wilmot 5.59pm: Event revenue plunge

Entertainment and hotels company Event Hospitality & Entertainment has been hit by a 22.3 per cent revenue plunge to $784m as the pandemic hit, driving earnings down by 54.2 per cent to $105m.

The entertainment unit’s first half was impacted by delayed releases and COVID-19 restrictions and it now has a backlog of films resulting in a strong future film line up, albeit subject to timing of releases by studios.

Some hotels were also shuttered during the pandemic and trading is not expected to return to pre-COVID-19 levels until the government lifts international travel restrictions.

Event warned that based on current lower average room rates, occupancy of between 50-60 percent was required for the group’s owned hotels to be profitable.

Overall, the company crashed to an $11.4m net loss after tax, including $54m of significant items, and chief executive Jane Hastings called out the impact of bushfires, floods and COVID-19 government-mandated restrictions.

Despite the bushfires the company had been performing well before COVID-19 struck with revenue edging up 2.5 per cent, earnings up 1.7 per cent and normalised profit up 2.2 per cent in the eight months ended February.

But the final four months of the year were defined by the impact of COVID-19 government mandated restrictions, crunching revenue, which was down $262m for the pandemic period.

Event slashed costs by $140m, partly by drawing on JobKeeper, excluding the benefit of negotiated rent relief which will be recognised once agreements are signed.

“We believe that our businesses will rebound relatively quickly once restrictions are lifted due to pent-up demand and we have already seen green shoots, when this has occurred, across the group,” Ms Hastings said.

Event last month increased debt facilities to $750m and the majority of this matures in 2023. Event’s current net debt is about $450m and has a strong balance sheet, underpinned by a solid property portfolio with a fair value of $2bn.

Event last month said there will be no final dividend.

Chairman Alan Rydge said completing the refinancing process in July and the response to COVID-19 positions the group to navigate through this challenging period and improve earnings as restrictions ease.

Event operates cinemas in Australia and NZ primarily under the Even, BCC and GU Filmhouse brands, and in Germany under the CineStar brand. In hotels it has the Rydges, QT and Atura brands and owns a half share of Jucy Snooze. It also owns the Thredbo Alpine Resort and has significant property holdings.

Nick Evans 5.43pm: IGO ‘selling out’ of New Century Resources

WA nickel miner IGO appears to be selling out of New Century Resources only months after emerging as the zinc and nickel plays biggest shareholder.

Stockbroker Euroz was offering a block of 180m shares of New Century stock at a floor of 15.5c a share on Monday night, well below the company’s last traded price of 19c a share.

IGO paid 15c a share for 180m shares in New Century shares in June, just before the Queensland zinc producer went public with its bid to acquire Vale’s troubled Goro nickel mine in New Caledonia.

New Century is still locked in negotiations with Vale over the precise terms of the deal, but the Brazilian mining major has indicated it is prepared to kick in about $US500m to smooth the path to offloading the loss-making operation.

IGO’s sellout of New Century is only the latest in a long line of withdrawn corporate plays for the nickel miner, which also owns a 30 per cent stake in the Tropicana gold mine in WA.

Last year IGO took a stake in fellow WA nickel miner Panoramic before launching - then withdrawing - a hostile $312m takeover tilt.

In June it spent $13m topping up its stake in another WA nickel play, Mincor Resources, in its $60m raising.

It has previously also taken a stake in Gold Road Resources before selling out at a profit.

New Century closed Monday at 19c, with IGO finishing the day down 2c to $4.43.

Ben Wilmot 5.37pm: Boost from first home buyer’s scheme

One in eight of first home buyers accessed the Morrison government’s First Home Loan Deposit Scheme according to new research from the National Housing Finance and Investment Corporation.

Key workers accounted for more than 1800, or one in six, first home buyers using the system, with teachers the largest group, followed by nurses.

Major cities attracted 62.3 per cent of buyers under the scheme while 37.7 per cent purchased in regional areas, the report said.

Property groups have pushed for a lift in lift price thresholds so that more homes in Sydney are covered.

NHFIC found that more than half of the homes purchased in capital cities were between 15 and 30 kilometres from the CBD, with couple applicants typically buying further away from the CBD than singles.

Purchasers are tending to stay in their own areas with first home buyers moving an average of just 7.6 kilometres from their existing residence. Victorian purchasers moved the greatest distance at 10.4km from their existing home.

Almost 70 per cent of buyers using the scheme purchased a detached house, with one quarter buying an apartment and 5 per cent purchasing a townhouse. The median purchase price for houses was $385,000 compared with $475,000 for apartments, and most of these units were in capital cities.

About half of scheme guarantees were issued to single buyers with taxable incomes of $60,000 to $80,000. Couples were concentrated in the $90,000 to $125,000 earnings bracket.

Of the 10,000 places released for the six months to 30 June, more than half of the homes had already settled and another 13.4 per cent of applicants had signed contracts to purchase a home. About 31.9 per cent had been pre-approved and were looking to buy.

Based on NHFIC’s analysis, the scheme enabled first home buyers without alternative financial means to bring forward their purchase by an average of four years.

NHFIC chief executive Nathan Dal Bon said analysis of the First Home Loan Deposit Scheme’s first six months of operation found the scheme had broad appeal. “Demand for the scheme in the six months to 30 June continued despite the onset of the COVID-19 pandemic,” Mr Dal Bon said.

“First time buyers across age and income spectrums around the country accessed the scheme, and we saw strong interest from buyers in outer metropolitan and regional areas.”

Samantha Bailey 5.12pm: Apollo’s road to recovery

Apollo Tourism has touted an uptick in demand for motorhome sales but flagged a hit to its rentals business, which the company said is likely to continue until international borders reopen.

Apollo reported a statutory after tax loss of $61.2m on Monday compared to a $4.67m profit a year ago, partly due to the impact of the coronavirus crisis which resulted in a non-cash impairment charge of $38.9m and the loss on the sale of the US fleet of $12.5m.

“The impact of the coronavirus and its associated government restrictions has been devastating for the global tourism industry,” chief executive Luke Trouchet said. Shares in Apollo fell 7 per cent by the close on Monday to 26.5c.

Read more

Samantha Bailey 4.57pm: Online move boosts AuMake

Shares in AuMake shot up nearly 17 per cent on Monday after the daigou company told investors that it managed to grow its annual revenue despite having to close its stores during the second half of the financial year due to COVID restrictions.

With a net loss of $4.36m, compared to a loss of more than $8m a year ago, AuMake said boarder closures in Australia and New Zealand in the second half of the 2020 financial year meant a significant reduction in Asian tourist traffic and associated revenue.

Still, the company managed to grow revenue by 35 per cent to more than $60m for the period. Shares in AuMake closed up 13.3 per cent at 7c each on Monday.

Read more

4.36pm: Scentre lifts, Fortescue lags

Shares fought to remain in the green for most of the day, but weakness in the final hour pushed the benchmark to a daily loss.

Fortescue was by far the largest drag on the market, losing 7.7pc to $17.42 as it traded ex-dividend for its record $1 payout.

Weakness in offshore earners added to the drag – especially CSL who lost 1.3pc to $286.01, while Cochlear extended its losing streak to 9 days with a 1.36 per cent loss, its longest losing streak in 10 years.

On the upside, retail landlord Scentre jumped 5.6 per cent to $2.26 after resolving its rental dispute with womenswear chain Mosaic.

Here’s the biggest movers at the close:

Ben Wilmot 4.27pm: Proxy advisor backs Weiss’ for Cromwell

The battle for Cromwell Property Group has taken a new turn with proxy advisor Ownership Matters telling clients to back a bid by corporate radar Gary Weiss and businessman Joe Gersh to be elected to its board.

The $2.7bn company, led by Paul Weightman, last week reported an operating profit lift of 27 per cent to $221.2m, even as the coronavirus pandemic crisis struck its investments, including a controversial $1bn Polish shopping centre portfolio.

Meanwhile, unhappy major shareholder ARA launched its proportional takeover and is attempting to install Dr Weiss and Mr Gersh to Cromwell’s board at a September meeting.

OM recommended investors support the election of both Dr Weiss and Mr Gersh to Cromwell’s board.

“OM opines it is reasonable for ARA, as a 26.7 per cent Cromwell securityholder, to hold a level of board representation approximate to its equity ownership. If ARA’s board nominees are both appointed, they will have two directors on a board of eight directors, equivalent to 25 per cent of the board,” the proxy advisor said.

Dr Weiss has recently reduced his high board workload, with a departure from the listed Ridley Corp and has committed to a departure from Straits Trading if appointed to Cromwell.

OM also recommended “for” the election of Weiss at the failed meeting ARA called in March.

Industry sources claimed that the bulk of investors on Cromwell’s register who subscribe to OM backed the incumbent board’s argument the appointments amounted to “takeover by stealth” and voted against it last time.

OM subscribers account for about 7 per cent of the register but in previous votes its recommendations had not been widely followed, sources said.

Read more: ARA launches new Weiss bid for Cromwell board

4.11pm: Shares up 33pc from March trough

The local market has finished a choppy session at its lowest levels of the day, with heavy drag from ex-dividend trade in Fortescue.

By the close on Monday, the ASX200 was down 13 points or 0.22 per cent at 6060.5.

Still, the benchmark held on to a 2.2 per cent monthly gain, its fifth consecutive lift since the pandemic-induced trough in March.

At these levels, the benchmark is 33.3 per cent higher than its March low but still 15.4 per cent off its February peak.

4.02pm: Chinese banks post rare profit drop

China’s “big four” banks suffered rare profit declines in the first half of the year and its two oil giants posted losses, joining a growing global tide of pandemic-induced red ink.

Bad-loan provisions rose as the pandemic hammered Chinese business activity, causing a historic first-quarter contraction and weighing on an economy that was already in a long-term growth slowdown.

Bloomberg News said the profit declines – reported over the weekend – were the largest in more than a decade for the banks, which are closely supervised by the Chinese government and for years have typically posted slight but steady increases.

“The pandemic sent the world economy into a serious recession, posing heavier pressure on banks’ business operations and asset quality in 2020,” Industrial and Commercial Bank of China ICBC said in an earnings report.

ICBC, the world’s largest lender in terms of assets, and Bank of China both said first-half profit fell around 11 per cent, while China Construction Bank and Agricultural Bank of China each reported a decline of around 10 per cent.

Shares in the four banks, all listed on the Hong Kong and Shanghai stock exchanges, were barely changed on Monday.

AFP

3.22pm: Credit to remain under pressure: Westpac

Private sector credit growth contracted in July, its third consecutive monthly loss and likely not the last, says Westpac.

Senior economist Andrew Hanlan notes a cumulative 2pc reduction in business credit, 3.8pc drop in personal credit and “anaemic” 0.6pc rise in housing over the past three months.

“Housing credit grew by only 2.5pc annualised in the three months to July, slowing from 3.6pc at the start of the year. This result matches the low of this time a year ago – which is a record low for the series,” Mr Hanlan writes.

“The pandemic represents a significant shock to the housing market. The April lockdown created the greatest disruption to the established housing market, triggering a collapse in turnover.

“Since then, outside of Melbourne, a rebound is evident, underpinning a 6pc bounce in new lending in June. Despite that, housing credit remained stuck at 0.20pc in July, constrained by accelerated repayments.”

He adds that there will be some lasting impacts from the pandemic, “notably higher unemployment, reduced confidence and near-term weakness in population growth”.

3.03pm: Half of deferred loans to be delinquent: UBS

A recovery rally in the major banks will be swift when the COVID-19 threat settles, just as it was after the first wave in May, notes UBS, but delinquent loans could blow out to 50pc of those deferred.

In a sector update after the latest results, banking analyst Jonathan Mott notes that while pre-prepared results tried to portray confidence, management were “somewhat hesitant and justifiably cautious”.

He questions the banks reliance on excel models, noting that relative credit risk weightings are not always the best indicator of true risk: “We believe caution needs to be taken, as none of the models were designed for this environment, volatility or policy response”.

The bank’s own modelling suggests that while we have passed the peak of loan deferrals with 10-15pc of customers starting repayments, the “full impact of the pandemic is unlikely to be felt until deferrals can no longer be pushed back in Jan/Feb”.

“While it is highly subjective at this point in time, we estimate that ~40-50pc of these loans are likely to be delinquent or require restructuring.”

Patrick Commins 2.48pm: Jobs increasing but hours dropping: ABS

Close to 870,000 Victorians reported they had a job but were working zero hours in mid-August, or around 17 per cent of the state’s adult population, according to a newly released ABS household survey.

Premier Daniel Andrews at the start of the month said Melbourne’s lockdown and tighter restrictions across the state to suppress a second wave of COVID-19 cases would double the number of stood-down workers to 500,000.

But the latest survey from the Australian Bureau of Statistics on the pandemic’s impact on households suggests the number could be significantly higher.

The 16.9 per cent of adult Victorians who said they had a job and were working no hours compared with only 4.6 per cent in a similar situation across the rest of the country, the ABS report showed.

Nationally, the proportion of Australians aged 18 years and over who had a job working paid hours remained stable at around 60 per cent between early July and mid-August, the ABS said.

Read more: 17pc of Victorian adults have job, but no work

2.20pm: NAB upgrades GDP estimates

NAB has upgraded its second quarter GDP estimates after better than expected company profits and non-farm inventories.

The bank now predicts a smaller, 5pc fall in the second quarter, better than earlier forecasts of 5.8pc.

Still, it's the largest hit to GDP since WWII.

“Company profits spiked 18pc q/q on a GDP basis, the largest quarterly rise since 1975. The sharp rise largely reflects massive government support to counter the economic impact of the pandemic, notably the JobKeeper wage subsidy and business cashflow support payments,” NAB markets economist Kaixin Owyong notes.

“As such, profits in hard-hit industries rose sharply – profits in other personal services more than tripled! This brings home how important government support has been in cushioning the impact of the pandemic, although it also highlights concerns that the recovery in Q4 may waver as government support is withdrawn.”

Read more: Stimulus sparks 15pc surge in company profits

Ben Wilmot 1.50pm: Retail weakness hurting REITs: Fitch

Fitch Ratings has called out the weak performance of the retail sector, which has been crimped by tough measures imposed by governments to contain the coronavirus pandemic, as hurting Australian retail REITs.

Scentre Group, owner of the local Westfield empire, and Vicinity Centres, co-owner of Chadstone, plunged to heavy losses, and Fitch Ratings warned against expecting a meaningful industry improvement in the second half.

Fitch Ratings says the poor performance of retail property portfolios was driven by the impact of rental relief provided to tenants in the June quarter, as well as a decline in valuations due to expectations that structural changes in the sector, including the shift to online retailing, have accelerated.

“We expect some recovery in the second half as social distancing measures are relaxed and visitations improve, although this remains vulnerable to stricter social distancing curbs that may be implemented to combat localised outbreaks,” Fitch said.

The ratings agency predicted the strain would continue to be felt across the sector, particularly as retailers navigate prolonged spending weakness as the federal government support moderates and retailers say they will shut down more stores to reflect lower consumer spending.

By contrast, office and industrial properties benefited from their resilient nature, with office properties protected by the longer weighted average lease expiries and industrial properties benefiting from increased online shopping and the rising logistics industry.

Read more: Westfield owner’s $3bn loss sparked by COVID-19

Fitch says retail weakness is weighing on REITs. Picture: Darrian Traynor/Getty Images.

Bridget Carter 1.26pm: IOOF beat out three PE firms

DataRoom | Three other private equity firms in the final stages to buy NAB’s MLC wealth management business are understood to have put in offers that valued the business at about $1 billion to $1.2bn.

More to come

1.18pm: Weakest profit season in a decade: CommSec

The latest profit season was the weakest in a decade, with just 75 per cent of companies reporting statutory profits for the year to June, according to data crunched by CommSec.

Chief economist Craig James notes that of the 137 companies reporting their full year results over the past month, just 103 companies of 75pc produced a net profit after tax.

That compares to a historic average of 88 per cent of companies reporting profits rather than losses over the past 10 years.

And while the uncertainty lingers, dividends were slashed and cash holdings bolstered – with only 69pc of companies electing to pay out any return to shareholders this past year.

As such, cash holders rose by 31pc on a year ago, to $110bn.

“We expect sharemarket returns to be largely flat over 2020, supported by easy monetary and fiscal conditions. While shares remain ‘expensive’ valuation-wise relative to history, clearly these are not normal times,” Mr James says.

“Earnings from financial assets are low. Corporate earnings will remain challenged in the near-term and dividend payouts are likely to be lower. From here much depends on virus containment, finding a vaccine and opening domestic and international borders.”

He adds that short positions in top 200 companies is now at the lowest since November 2017, at just 1.7pc.

1.01pm: ASX fights against Fortescue drag

The local market is fighting to hold gains as ex-dividend trade in Fortescue pulls the index lower.

At 1pm, the benchmark ASX200 is higher by just 10 points or 0.2 per cent to 6083.9.

The biggest drag is Fortescue, down 8.1 per cent to $17.35 as it trades ex-dividend, while Afterpay’s 4.5pc lift is helping to make up some of the slack, along with a 0.8 per cent jump in BHP.

Retailer Mosaic Brands is a standout with a 22.9pc lift after coming to a deal with landlord Scentre and reopening its stores outside of Victoria.

Here’s the biggest movers at 1pm:

12.40pm: AGL buy highlights retailing risks: Ords

AGL’s acquisition of amaysim’s Click Energy business highlights challenges in energy market for smaller retailers, notes Ord Minnett.

The $115m sale will provide an additional

customers for AGL.

amaysim previously flagged the sale after a strategic review which found risks “with ongoing exposure to a challenging and changing regulatory environment and a potential COVID-19 related increase in bad debt”.

“We would continue to highlight the challenges being faced by smaller retailers: more volatility in wholesale prices has lifted the cost of financial risk management; while the introduction of reference prices has benefited lower cost retailers,” Ord Minnett writes.

AGL shares last up 0.4pc to $14.85 as amaysim slips by 4.2pc to 68c.

Read more: AGL buys amaysim’s energy unit

12.22pm: BNPL rivals mixed after results

Buy now pay later peers Splitit, Sezzle and Openpay each delivered results this morning and have been met with mixed shareholder reaction.

The three groups are smaller players in the growing sector, up against Afterpay who is today approaching a market value of $20bn.

Handing down its half year results this morning, Sezzle said underlying merchant sales were up 338pc, while its loss blew out to $US8.2m, from last year’s $US4.8m.

Splitit said its merchant sales volume was up 133pc to $US89.1m while it posted an operating loss of $US9m.

Openpay meanwhile handed down its annual results, detailing a $36.6m annual loss while revenue jumped by 66pc.

OPY shares are down by 4.9pc while SPT adds 2.5pc and SZL trades down 7.5pc.

Patrick Commins 12.10pm: Stimulus boosts company profits

Company operating profits surged 15 per cent over the June quarter amid plunging sales as government COVID-19 stimulus poured into corporate coffers and shielded businesses’ bottom lines through the national lockdown.

Sales of goods and services in the manufacturing sector dropped 8.6 per cent over the three months against the prior quarter, while wholesale trade sales fell 6.7 per cent, according to seasonally adjusted data from the Australian Bureau of Statistics.

In what the ABS said was a quarter which had been “impacted by the receipt of government subsidies”, there was a 3.3 per cent drop in wages and salaries paid over the quarter – a decline which the ABS said would have been more severe had it not been for government support.

Economists had expected a 6 per cent quarterly drop in gross operating profits.

11.55am: Buffet’s Japan push a ‘rebound trade’

OANDA’s Stephen Innes says the substantial new share holdings of major Japanese trading companies by Warren Buffett’s Berkshire Hathaway is a “complimentary rebound trade” to his recent foray into Canadian gold miner Barrick Gold which gives both diversification away from the US dollar and exposure to a potential global economic rebound.

“Once the global economy starts to lift off again when the virus burns itself out or via a vaccine, these giant trading houses that deal in the imports and trading of resources will be a hot commodity as they will be the conduits to stoke Japan’s colossal economic engines on the global recovery,” Mr Innes says.

“I would also expect more internalisation policy in the near future geared to bring back key manufacturing jobs to Japan, possibly via tax incentives.”

He also see’s Buffett’s move as a hedge against modern monetary theory monetary policy in the US that could see the dollar depreciate significantly over time.

“I don’t think he is betting so much on a stronger Yen but rather hedging against a weaker US dollar so we could see more Hathaway global rotation shortly.”

11.52am: China factory activity growth slows

An official gauge of China’s factory activity expanded at a slower pace in August, as the country’s small manufacturers struggled to survive while massive floods hurt production.

China’s official manufacturing purchasing managers’ index fell to 51.0 in August from 51.1 in July, the National Bureau of Statistics said Monday.

The reading was lower than the median forecast of 51.2 from a Wall Street Journal poll of economists. The result marked the sixth consecutive month that the major gauge of China’s manufacturing activity was above the 50 mark that separates expansion from contraction.

The subindex measuring production dropped to 53.5 in August, compared with July’s 54.0. Total new orders increased to 52.0 in August, compared with 51.6 in July. New export orders rose to 49.1 and while it still below the 50 mark it was an improvement from July’s 48.4.

Around half of the small enterprises surveyed by the statistics bureau reported insufficient market demand and tightened liquidity and said their production and operations still faced many difficulties, said Zhao Qinghe, an analyst with the statistics bureau. Some enterprises in Chongqing, Sichuan and other places were affected by floods, he added.

China’s non-manufacturing PMI, which includes service and construction activity, was also released Monday and rose to 55.2 in August compared with 54.2 in July.

Dow Jones Newswires

Lisa Allen 11.23am: SeaLink shares lift despite annual loss

SeaLink Travel Group delivered a statutory after tax loss of $13.5m for the financial year dragged down by the performance of its marine and tourism divisions, which the company said were greatly affected by border closures.

Adding to its woes, one of SeaLink’s accommodation assets on Kangaroo Island, Vivonne Bay Lodge, was destroyed by bushfires earlier this year while COVID-19 completely shut down its tourism operations for three months.

However, the Adelaide-based travel group, which provides public transport and marine and tourism services to 14 local islands, was helped along by the Federal Government’s JobKeeper program which was made available to 60 per cent of its employees. Waivers and relief for SeaLink’s berthing, landing fees, rent, wharfage and payroll tax costs also helped the group which carries around 125 million passengers annually.

SLK shares last up 8.1pc to $4.81.

11.14am: Forbidden Foods shares double on debut

Plant-based snack maker Forbidden Foods has doubled its market value as it joined the boards, after raising $6m in its IPO.

The group, which makes health foods under three brands Forbidden, Funch and Sensory Mill, raised funds at 20c apiece to accelerate its sales, marketing and band development in Australia and globally.

Shares jumped to highs of 40c in its debut on Monday, and last traded up 0.9pc to 38c.

11.08am: ASX extends rally to 0.2pc

Australia’s S&P/ASX 200 share index rose 0.2pc to 6084.3 as offshore markets continued to rise with S&P 500 futures up 0.6pc.

Japan’s Nikkei 225 is also up 1.9pc after Berkshire Hathaway increased its stake in 5 major Japanese trading companies and said it may buy more.

China’s August PMI data look healthy with manufacturing PMI at 51.0 vs 51.2 expected and services PMI at 55.2 vs 54.2 expected by economists according to Bloomberg.

#China manufacturing PMI for August at 51.0, slightly below expectations but still pointing to ongoing recovery. Non-manufacturing stronger than expected at 55.2, highest since Jan 2018, a good sign of improving domestic consumption. pic.twitter.com/VCglFcVtdd

— Khoon Goh (@Khoon_Goh) August 31, 2020

10.49am: MLC sale part of NAB simplification plan

NAB’s sale of MLC Wealth to IOOF for $1.44bn has been touted as a means for the bank to deliver its simplification strategy.

Chief Ross McEwan said progress had been made over the past two years to modernise and strengthen the group for a sale, and that he was confident the sale to IOOF was the best outcome for NAB shareholders and MLC stakeholders.

“Consolidation has the potential to deliver significant benefits for clients and members, including scale and reducing costs, complexity and risks. The combined business is expected to be a highly competitive, advice-led retail wealth manager,” he said.

The purchase price represents a multiple of 17.3x MLC’s cash earnings and will boost NAB’s tier one capital by approximately 30bps to a ratio of 11.9pc, along with a modest lift in the bank’s ROE.

“The transaction is estimated to result in a post-tax loss on sale of approximately $400m, which includes estimated post-tax separation and transaction costs for NAB of approximately $200 million,” the bank said.

NAB last traded up 0.34pc to $17.99, as IOOF was halted at $4.63.

Read more: IOOF confirms $1.4bn MLC deal

10.14am: Banks, BHP support shares

The local market is edging higher in early trade, defying expectations of a slip amid support from banks and BHP.

At the open, the ASX200 is higher by 4 points or 0.06 per cent to 6077.7.

Biggest drag is from the consumer staples sector as Blackmores and Woolworths weigh while health too is in reverse.

Wagering group Pointsbet is down 7.3pc after its spectacular raise on Friday, while CSL is weighing with a 0.6pc slip.

Victorian coronavirus trends have helped to some extent with Sydney Airport up and Qantas up more than 2pc after the state reported 73 new cases, the lowest daily rise since July 3.

Gold miners are also performing well with Newcrest and Evolution up about 2pc after spot gold rose 1.8pc to $US1965 on Friday.

The Energy and Technology sectors are strongest with Santos up 1.4pc and Afterpay up 1.9pc.

Resources are also mixed, with gains in BHP and Rio Tinto offsetting ex-dividend falls in Fortescue and Alumina.

S&P 500 futures jumped 0.5pc in Asian trading and Japan’s Nikkei 225 surged 1.5pc after Warren Buffett’s Berkshire Hathaway increased its stake in 5 major Japanese trading companies and said it may buy substantially more of their shares.

Bridget Carter 9.55am: IOOF raising $1.04bn for MLC buy

DataRoom | IOOF has launched its equity raising to buy wealth manager MLC from

NAB, asking investors for $1.04 billion through a placement and non-renounceable entitlement offer.

The raise includes a $452m placement and $588m entitlement offer, with new shares issued that are equivalent to 85 per cent of IOOF’s existing shares.

Shares are being sold at $3.50 each.

9.42am: $A strength to weigh on shares

Australia’s share market is expected to fall for a second day running as the surging Australian dollar crimps offshore income earners.

Friday night futures versus fair value suggested the S&P/ASX 200 would open down 0.8pc at a 3-week low of 6025.

The fall in overnight futures came as AUD/USD rose 1.5pc to a 2-year high of 0.7367 as the Fed’s new inflation framework weighed on the US dollar.

But it also pushed the US share market up to record highs, defying hopes of a dip, while the VIX index and US bond yields eased.

S&P 500 futures have surged 0.4pc this morning suggesting Wall Street will see further gains to start the week.

Thus while the S&P/ASX 200 may dip below the 50-day moving average at 6028, it’s hard to see a sustained fall at this point.

Focus turns to China’s August PMI data at 11.00am and Australia’s July Private Sector Credit and 2Q Company Profits and Inventories data at 11.30am.

A $1.04bn share placement from IOOF to buy NAB’s MLC wealth unit may weigh on the financial sector today.

Fortescue, Ansell, Alumina and Bingo will trade ex-dividend.

Bridget Carter 9.38am: Bubs raising $38.3m

DataRoom | Bubs Australia is raising $38.3 million at 80 cents per share.

The raise includes a $28.3m placement and a $10m share purchase plan.

Pac Partners and Bell Potter are working on the transaction.

The price represents a 12.6 per cent discount to the last closing share price.

The capital raising will fund global market expansion, including its China manufacturing with Beingmate, and strengthen the balance sheet.

Since listing, Bubs has become Australia’s major producer of goat milk dairy and one of the fastest growing infant formula brands.

The largest two shareholders include the Alibaba-backed C2 with 13.32 per cent and Chemist Warehouse with 4.3 per cent pre-placement.

Eli Greenblat 9.35am: Scentre, Mosaic call truce in rent war

Peace has broken out between shopping centre landlord Scentre Group and women’s fashion chain Mosaic Brands after a rent dispute this month saw Mosaic locked out of 129 of its stores.

Mosaic Brands, whose brands include Noni B, Katie’s, Millers and Rivers has announced that following successful negotiations with Scentre Group all non-Victorian stores in Westfield shopping centres have now reopened.

“By agreement with Scentre the commercial terms remain confidential,” Mosaic Brands said.

Victorian stores remain closed due to Stage 3 and 4 restrictions in the state.

Mosaic Chairman, Richard Facioni said: “We’re pleased to have reopened our Westfield stores over the weekend following a mutually agreeable outcome to our negotiations with Scentre Group.

“Our Victorian stores remain temporarily closed for health and safety reasons. We have had a longstanding relationship with Westfield enabling us to reach a solution that worked for both parties.

“This is a good outcome for Mosaic and, in particular, the 400 affected team members. As we noted last week, shuttered stores work for no one.”

The battle with its landlord reflected wider issues within the shopping centre sector as retail tenants demanded sizeable rent relief and a change in the way rent was calculated in the midst of the COVID-19 pandemic.

Read more: Mosaic could shut 300 to 500 stores amid rent dispute

9.32am: Bubs halted for capital raise

Shares in infant milk formula maker Bubs have been halted ahead of the open, pending detail of a capital raising.

The company is also due to hand down its full year results later this morning, and said it requested the halt in relation to a proposed raise.

BUB last traded at 91.5c.

9.24am: What’s on the broker radar?

• Ampol raised to Buy – Morningstar
• Autosports Group raised to Outperform – Macquarie
• Costa rated new Hold – Jefferies
• Link Administration cut to Hold – Morgans
• National Tyre and Wheel cut to Hold – Morgans
• Next DC raised to Overweight – JP Morgan
• OceanaGold cut to Neutral – UBS
• PointsBet cut to Underperform – Credit Suisse
• Sandfire Resources cut to Hold – Bell Potter

Cliona O’Dowd 9.19am: IOOF halted for raise to buy MLC

IOOF shares have been placed in a trading halt as it plans a capital raising it says will “partially fund a potential acquisition”.

“The trading halt is requested for the purpose of considering, planning and executing a capital raising, comprising an institutional placement, an accelerated, non-renounceable entitlement offer and a share purchase plan (Capital Raising), being conducted to partially fund a potential acquisition,” the company said in a market notice.

IOOF is today expected to announce it has agreed to buy NAB’s MLC wealth division in a deal that values the business at $1.5bn.

Read more: IOOF to buy MLC in $1.5bn deal

9.15am: Splitit optimistic on revenue in growth push

Splitit said it sees revenue growth continuing through the rest of 2020 after the buy-now-pay-later provider reported a larger first-half loss on the cost of expansion.

The listed instalment payments firm on Monday reported a net loss for the six months through June of $US9.0m, up from $US3.8m a year earlier. Revenue surged to $US2.6m from $US798,000, but the company logged big increases in marketing, administrative and R&D expenses over a period that included a capital raising and 92pc rise in merchants using the platform.

Splitit reported 519 active merchants by June and 149,000 active users. It had 116,000 users a year earlier.

Splitit, which allows users to make payments using untapped credit on existing card accounts, said recently agreed partnerships with Stripe Inc., Visa Inc. and Mastercard Inc. will help growth to continue through the remainder of 2020.

The company did not declare a dividend.

Dow Jones Newswires

Read more: Mastercard deal lifts Splitit

9.01am: Nova chief jumps to oOh!media

Billboard advertising group oOh!media has appointed Cathy O’Connor as its new managing director and chief executive, set to replace founder Brendon Cook from early 2021.

Mr Cook earlier this year announced his intention to step down from the group after more than 30 years, but will remain as consultant to the company until at least the end of 2021.

Ms O’Connnor has spent the last 12 years as chief of Nova Entertainment Group.

“She brings a range of qualities which we felt were suited to taking the business through its next stage of growth, in particular her proven success in steering a media sales organisation, leading the technology strategy and driving organic growth initiatives, even in the most challenging of environment,” chairman Tony Faure said.

Read more: oOh!media chief, founder to exit

Current Nova chief Cathy O'Connor is moving to oOh!media. Picture: Britta Campion / The Australian.

Eli Greenblat 8.37am: Temple & Webster profit soars

Online furniture retailer Temple & Webster has posted a 269.5 per cent rise in full-year net profit to $13.9m as its revenue surged 73.5 per cent driven by a buying spree during the COVID-19 lockdown which consumers fill their homes with furnishings.

That momentum has spilt into the new financial year with Temple & Webster revealing that sales from July to late August had rocketed by 161 per cent.

Temple & Webster reported its fiscal 2020 results on Monday, showing that full year revenue rose 74 per cent to $176.3m. It said that EBITDA of $8.5m was up against $1.5m in the prior corresponding period.

The pure play online retailer said that second half revenue was up 96 per cent while fourth quarter revenue, during the peak of lockdowns, lifted 130 per cent.

Temple and Webster CEO Mark Coulter. Picture: Supplied.

8.30am: Sezzle posts first half loss

Buy now pay later firm Sezzle has nearly doubled its first half loss, to $US8.2m as its underlying merchant sales soared by 340pc.

Handing down its first half results this morning, Sezzle said it had booked revenue of $20.8m, compared to $4.3m at the same time last year.

The group said growth had continued into the new year too, with active customers reaching 1.6 million, up 7.1pc month-on-month, while active merchants reached 17,600 and active repeat usage was up to 88.1pc.

“The utility of Sezzle is evident in our record 1H20 performance and strong start to 3Q20 in July,” said Sezzle executive chairman Charlie Youakim.

“We are pleased to reiterate our underlying merchant sales (UMS) guidance of achieving an annualised run rate target of $US1.0bn in UMS by the end of 2020.”

8.14am: AGL to buy Amaysim’s energy business

AGL is buying Amaysim’s energy business for $115m in cash.

It comes as Amaysim posted a full year net profit of $922,000.

Amaysim says the sale to AGL will remove the risks associated with exposure to a “challenging and changing” regulatory environment and a potential COVID-19 related increase in bad debt.

It also says it streamlines Amaysim’s focus to a pure-play mobile business and provides capital for more investment in mobile.

7.15am: Veolia bids for 29.9pc of Suez

The French environment services group Veolia said Sunday it wants to buy 29.9 per cent of rival Suez from energy company Engie to build a “world champion in ecological transformation”.

Veolia’s offer, worth an estimated 2.9 billion euros ($US3.5 billion), would leave Engie with a holding of just over two per cent in Suez that it could sell later when Veolia makes a planned public offer for the remaining shares.

“This historic opportunity will enable us to build the French world champion in ecological transformation,” Veolia chairman and chief executive Antoine Frerot said in a statement.

“This project is part of a friendly approach, as we share the same businesses, corporate culture and values with Suez,” he added.

All three companies are French and to overcome potential competition issues, Veolia said it would sell Suez’s French water, engineering and research activities to Meridiam, a French infrastructure management company.

Dow Jones

7.05am: TikTok deal talks slowed

Plans to quickly finalise a deal between the Chinese parent company of TikTok and suitors for the app’s US operations have been thrown off track as the parties huddled this weekend to weigh new Chinese restrictions that appear designed to affect a potential sale, according to people familiar with the discussions.

China late on Friday issued new restrictions on the export of artificial-intelligence technology that forced ByteDance, TikTok’s parent, to slow down talks with companies including Microsoft Corp, Walmart and Oracle Corp for a portion of the social media app, according to people familiar with the matter.

ByteDance, which had received the broad outlines of bids on Friday for the TikTok assets, had been expected to enter into exclusive discussions with one group of suitors over the weekend, the people said. The Trump administration in early August set a mid-September deadline for ByteDance to sell its American operation.

Microsoft and Walmart have been working together, and Oracle has also been joined by ByteDance investors General Atlantic, Sequoia Capital and Coatue Management LLC.

“We are studying the new regulations that were released Friday,” ByteDance General Counsel Erich Andersen said. “As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the US and China.”

The talks are far from being scuttled, but the latest developments do make clear that China plans to keep as close a watch on any potential deal as the Trump administration. President Trump and other US officials have raised the spectre of privacy and national security concerns over TikTok’s data collection in demanding that its US operations be sold or that it face a ban. TikTok has said it hasn’t and won’t share data on US users with the Chinese government.

Dow Jones Newswires

Cliona O’Dowd 5.50am: Stocks tipped to fall

The Australian sharemarket is expected to start the week lower as earnings season comes to a close, with all eyes on IOOF as rumours swirl it will launch a $1bn raising to acquire NAB’s wealth business.

ASX futures are pointing to a 0.7 per cent drop at the open, despite US sharemarkets hitting record highs on Friday.

The Australian dollar skirting highs not seen since late 2018 could be one reason local sentiment is downbeat heading into the week, said CommSec senior economist Ryan Felsman.

“Typically, when the Aussie dollar is a bit stronger that does weigh on the market. Companies with offshore earnings would certainly be impacted by that. So that could be a factor. It got up to US73.65c on Friday,” he said.

“There’s been a little bit of a disconnect between expectations around our market and what’s happening in the US.”

The local bourse is lagging US markets, with the S&P 500 and Nasdaq both hitting record highs on Friday while the S&P/ASX 200 is still 15 per cent lower than its February highs.

The focus on reporting season had been a critical aspect of the underperformance, Mr Felsman said.

“The reporting season has possibly been the worst since the last recession in terms of earnings, and also a lot of focus on downgrades, particularly around guidance and dividends. Our market has lost momentum relative to what’s going on the US.”

IOOF will be one stock to watch as it hands down its full-year results amid expectations it will announce a deal to acquire NAB’s MLC wealth business.

“If it does succeed in that transaction, then both IOOF and NAB share prices will be something to watch,” said Mr Felsman.

The materials sector should fare well today after base metal prices rose on Friday, but energy stocks could come under pressure following a drop in the oil price.

A data-heavy week will see the national accounts released on Wednesday, with expectations of a 6 per cent contraction in the June quarter.

Other data releases for the week will be home prices, building approvals, retail trade and international trade. Meanwhile, the Reserve Bank hands down its cash rate decision tomorrow, with economists broadly expecting no change to the current 0.25 per cent rate.

The local markets closed lower on Friday on the back of comments from US Federal Reserve chair Jerome Powell.

5.35am: Dow revamped

Even before Apple unveiled plans for a stock split, the Dow Jones Industrial Average struggled this year to keep up with its broader counterpart, the S&P 500 index.

The addition of three new components on Monday – when Apple starts trading on a split-adjusted basis – likely won’t help matters.

That is because the revamped Dow industrials put less emphasis on technology stocks, the engine behind the stock market’s rebound from the lows of March. Starting Monday, tech will constitute less than a quarter of the Dow’s weight versus nearly 28 per cent for the S&P 500. The broader index includes Amazon.com, Facebook and Google parent Alphabet – none of which are in the Dow.

The S&P 500 is outperforming the Dow industrials by roughly 8 percentage points in 2020 – the widest gap since 1932, according to Dow Jones Market Data. Short-term rifts between the two benchmarks aren’t uncommon, observers say, and the Dow and the S&P 500 tend to track each other more closely over longer periods. But this year has been markedly different due to how the pandemic has deepened a split within the market along familiar lines: growth versus value.

Dow Jones

5.30am: Global internet outages

A bug involving US-based telecoms giant CenturyLink briefly interrupted internet service in several global markets Sunday, affecting popular streaming services, gaming platforms and webcasts of European soccer, the company and specialised media reported.

“We are able to confirm that all services impacted by today’s IP outage have been restored …” the company said in a midmorning Twitter post.

“We sincerely apologise for the impact this outage caused.” Contacted by AFP, the company provided no further details.

CenturyLink is based in Monroe, Louisiana. It was not immediately clear whether the disruption was related to damage from destructive Hurricane Laura, which passed through Louisiana late last week, causing widespread power outages.

AFP

5.25am: TikTok owner will abide by new Chinese rules

The owner of popular video app TikTok said it will “strictly abide” by China’s new export rules, which could potentially complicate a sale of the business as demanded by US President Donald Trump.

TikTok has been at the centre of a diplomatic storm between Washington and Beijing, and Trump signed an executive order on August 6 giving Americans 45 days to stop doing business with TikTok’s Chinese parent company ByteDance – effectively setting a deadline for a sale of the app to a US company.

But China’s commerce ministry published new rules on Friday adding new items including “civilian use technology” to rules controlling the import and export of restricted technology.

The new regulations could make it more difficult for Bytedance to sell the wildly popular video app, which features clips of everything from dance routines and hair-dye tutorials to jokes about daily life and politics.

Bytedance said in a statement it would “strictly abide” by China’s technology import and export law and its restricted export technology list “to handle business relating to the import and export of technology.” The move marked the first time China has adjusted its list of technologies subject to export bans or restrictions since 2008, adding 23 new items.

The TikTok logo. Picture: AFP

AFP

5.20am: Virus lockdowns boost e-commerce

While large traditional retailers announce big lay-offs because of the pandemic, sometimes shedding thousands of staff, coronavirus lockdowns have in contrast given e-commerce a major boost.

Recent data shows a shift to shopping online – according to Kantar consulting group, international e-commerce grew 41 per cent in only three months compared with 22 per cent growth for 2020 as a whole to date, as the pandemic “transformed” retail habits.

The trend was brought into sharp relief on August 18, when British high street mainstay Marks & Spencer announced it was culling 7000 staff.

Hours later, in contrast, online behemoth Amazon said it was hiring 3500 in the United States.

Amazon warehouse, part of mobile robotic fulfilment systems also known as 'Amazon robotics', in France. Picture: AFP

The M&S slimdown is only one part of the picture in the UK, with 2500 more job losses announced at department store Debenhams, which in April entered administration for the second time in a year. Hundreds more jobs are also to be lost at other well known British high street chains.

By contrast, Britain’s largest supermarket chain Tesco placed a sizeable feather in its online cap by saying it was creating 16,000 permanent jobs to deal with strong growth in its online activities.

“It is very clear that the digitisation of commerce, (even) if in place for a long time, is accelerating enormously,” said Herve Gilg, managing director and distribution specialist at Alvarez & Marsal corporate transformation services.

The benefits are being reaped by those companies which were already carrying out a sizeable chunk of their activities online.

In France, the United Kingdom, Spain and China, the average market share of e-commerce went from 8.8 per cent of value (in 2019) to 12.4 per cent in second quarter 2020, said Kantar.

It added that in China, online shopping already amounts to “a quarter of expenditure on mass consumer products.”

AFP

5.15am: Wall Street recap

Wall Street on Friday hit a milestone in its recovery from the coronavirus downturn, with the Dow erasing its losses for the year and the S&P and Nasdaq hitting record highs.

The benchmark Dow Jones Industrial Average closed up 0.6 per cent at 28,653.87, bringing it back to where it was at the start of the year before it plunged in March as COVID-19 forced businesses closed across the United States.

The broadbased S&P 500 gained 0.7 per cent to end at 3,508.01, its sixth straight record high, while the tech-rich Nasdaq Composite Index posted its own record of 11,695.63 after an increase of 0.6 per cent.

US stocks have prospered in recent months thanks to gains made by tech giants as more consumers stayed home to avoid catching the coronavirus.

Also helping matters has been trillions of dollars in liquidity rolled out by the Federal Reserve to keep markets functioning normally, and traders were further emboldened by the central bank’s announcement this week that it would allow inflation to creep above its 2.0 per cent target before raising rates further.

The Nasdaq and S&P have repeatedly posted records since the March plunge, and Gregori Volokhine, portfolio manager at Meeschaert financial Services, said the lack of tech stocks in the Dow means it took time to build momentum.

For the week, the Dow was up 2.6 per cent, the S&P 3.3 per cent higher and the up Nasdaq 3.4 per cent, with the latter two indices hitting their fifth consecutive week in the black.

AFP