ASX notches record 7pc lift as government unveils new stimulus

A leap at the close helped the ASX to soar by a record 7pc to a two-week high as the PM unveiled a further $130bn stimulus package.

David Rogers and Melissa Yeo

44 min read

5:47AMMarch 30, 2020.

Updated 5:24PMMarch 30, 2020

A volatile week lies ahead for Australian stocks, analysts warn. Picture: AAP

PM to hand out $130bn in wage subsidies
Webjet still working on $250m raise
Surgical glove demand buoys Ansell
Big 4 banks pledge further support
NIB postpones premium hike

That’s it for the Trading Day blog for Monday, March 30. The local market extended gains at the close to notch a record 7 per cent lift at the close, as the Prime Minister unveiled a further $130bn in fiscal stimulus, including wage subsidies.

Analysts warn volatility is set to ramp up in coming weeks as the coronavirus crisis deepens while banks have unveiled more relief measures for business, helping all of the majors to notch gains in the local session.

Lily Vitorovich 4.28pm: Nine shares lift on cost cutting

Nine Entertainment is targeting cost savings of $266m this year and fast-tracking $100m in cost cuts from its free-to-air broadcast business, as the coronavirus crisis hits the economy and advertising revenue.

Just 11 days after dumping its annual earnings guidance, Nine said it is “focused on major short and long-term cost initiatives across all of its businesses”, including big savings from its marquee sporting event, the National Rugby League.

Nine also said its third quarter revenue was in line with its previous guidance. However, the advertising market is “increasingly uncertain with likely material negative impact from April”. No specific details about the ad downturn were released.

Of the $266m in cost savings identified, Nine expects $102m to be delivered in the six months to June 30 and the remainder in the second-half of 2020.

Nine has identified $130m in broadcast savings if the NRL 2020 season is cancelled, of which will be equally booked in the 2020 and 2021 financial year.

NEC shares finished Monday’s session higher by 11.7 per cent to $1.05.

Richard Ferguson 4.25pm: PM to hand out $130bn in wage subsidies

Scott Morrison will hand out $130bn in wage subsidies to Australians whose jobs are forced into hibernation during the coronavirus pandemic.

The government will set up a JobKeeper payment which will provide employees up to $1500 a fortnight.

“We will pay employers to pay their employees, and make sure they do,” he said.

“We want to keep the engine of our economy running ... it may run idle, but it will continue to run.”

4.12pm: Shares surge a record 7pc

Local shares started the week at a win, clawing back ground as banks pledged more support for customers caught up in coronavirus restrictions and ahead of new fiscal stimulus measures.

An early blip lower sent shares to a low of 4833.1 early, but the index held positive momentum through the session to clock a gain of 7 per cent or 339 points to close at a two-week high of 5181.4.

Meanwhile, the All Ords put on 320 points or 6.56 per cent to 5194.

Announcement of more fiscal stimulus was likely a driver of the late boost - as Prime Minister Scott Morrison outlined an unprecedented plan to subsidise the wages of workers laid off during the pandemic.

Eli Greenblat 4.02pm: Nick Scali to shut 58 stores

Furniture retailer Nick Scali has decided to shut down its 58 stores and stand down the majority of its 360 staff as it becomes the latest retailer to close its doors in the wake of the coronavirus pandemic.

The stores will close at the end of business on Monday and remain closed until for an initial period May 1.

Nick Scali’s managing director Anthony Scali said “The decision we have made today to close stores and stand down loyal team members was not made lightly, but I believe it is the right decision for our people and our Company in the long-term”.

“We thank our customers, suppliers, landlords and most importantly our team members for their understanding and support during this difficult time”.

Nick Scali will continue to monitor advice from both state and federal governments in the jurisdictions in which it operates and will make further updates should the company deem it appropriate to do so, it said.

Richard Ferguson 4.01pm: PM to unveil wage subsidy plan

Scott Morrison is set to unveil an unprecedented plan to subsidise the wages of workers laid off during the coronavirus pandemic in Canberra.

The payment is believed to be worth as much as $1500 per employee per fortnight and could be the biggest fiscal measure the Prime Minister has unleashed thus far to deal with the COVID-19 economic crisis.

Josh Frydenberg has earlier denied the wage subsidy would be similar to the subsidy of 80 per cent of an employee’s pre-pandemic income that has been introduced in the UK, saying “we will have an Australian style system, not a UK style system”.

Labor is calling for parliament to be recalled as soon as possible to pass the wage subsidies.

Follow the speech at our coronavirus live blog

Gerard Cockburn 3.45pm: AusUnity postpones premium increase

Australian Unity will postpone an increase on all private health insurance premiums in a bid to alleviate some further financial pressure on customers during the coronavirus pandemic.

The insurer had scheduled to increase fees from April 1, but says it will push that back until at least October.

Its decision comes after a number of other private health care providers halted premium hikes in light of the virus outbreak, including NIB which will increase hospital cover for more than 560,000 existing members over the next three months.

Australian Unity has said all its policyholders, irrespective of their cover, will be covered for chest, heart, lung and kidney hospital admissions, if the visit is COVID-19 related.

“The wellbeing of our customers and our people is our highest priority in these challenging times and we are doing everything we can to support and care for them,” managing director Rohan Mead said.

3.34pm: Demand risks remain for REITs: Moody’s

Moody’s Investor Service says support measures for retail-focused AREITs announced by banks today will support their financial viability, but demand risks from COVID-19 remain.

“The impact from the coronavirus outbreak on retail-focused AREITs will be moderated by measures announced today to support the financial viability of shopping center tenants such as restaurants, cafes and other small businesses,” says Moody’s vice president Saranga Ranasinghe.

“However, retail-focused AREITs remain exposed to the risk that demand for retail space could remain subdued even once the virus is contained, as coronavirus-related disruptions will have weakened tenants’ credit profiles.”

The Australian Banking Association said it will extend repayment deferrals to businesses with loans up to $10 million and banks agreed not to enforce terms for non-financial breaches of loan contracts, such as changes in valuations, during the six-month deferral period.

Michael Roddan 3.31pm: Get on with it: court urges Westpac, Austrac

Westpac and the anti-money laundering regulator Austrac have been asked by the Federal Court to forge ahead with the creation of an agreed statement of facts relating to the bank’s alleged child exploitation funding scandal and not to get bogged down in “every last jot and tittle”.

Appearing on a video conference court session yesterday, Federal Court Chief Justice James Allsop sided with Westpac, which had argued that mediation between the bank and Austrac should continue with a view to producing an agreed statement of facts in the coming months.

Austrac’s lawyer from the Commonwealth Director of Public Prosecutions, Simon White, SC, said it was difficult to produce such a statement while there were still disputes between the regulator and the bank about certain particular claims alleged against the lender.

Mr White also said that “data that has been received by Austrac from Westpac that is relevant to the case is now the subject of investigation by Commonwealth entities”, and that further facts could be uncovered in the lead up to any potential defence hearing.

John Sheahan, QC, acting on behalf of Westpac, said there was no reason the parties could not produce a “partial” agreed statement of facts, and where Westpac did not agree it could defend the claims in court.

3.16pm: Shares headed for 5pc daily gain

Australia’s S&P/ASX 200 is rising by a stunning 4.5pc intraday to 5065.1.

At this rate it will be up 5pc or more by the close, unwinding most of Friday’s 5.3pc fall.

It comes as S&P 500 futures pare a 2pc intraday fall to 0.2pc. But ASX200 value is still 48pc below the 20-day average for this time of day.

It still looks like a lack of selling rather than strong buying is lifting the index.

3.06pm: China unveils larger than tipped stimulus

China’s central bank has rolled out further stimulus measures to support the ailing economy as workplaces reopen after a wide scale shutdown.

The People’s Bank of China (PBoC) today cut 7-day reverse repo rates by 20 basis points to lower Chinese corporates’ funding costs - moves that ANZ says will likely be followed by cuts in the medium term lending facility rates and loan prime rates.

“The larger-than-anticipated cut implies that China is willing to join the G20 consortium in a coordinated effort to stabilise the global economy,” ANZ china markets economist Zhaopeng Xing writes in a March 30 note.

“In fact, as we forecast previously, the Chinese authorities will likely announce their economic recovery plan in a high profile manner as unemployment rises.”

The bank says the PBoC will stay in an easing mode with accommodative liquity to avoid systemic risks like those that happened in the US.

3.03pm: Oil prices fall near 17-year lows

Oil prices extended losses in Asian trade Monday and languished at 17-year lows, with the coronavirus crisis escalating around the world and no end in sight to a vicious price war.

US benchmark West Texas Intermediate fell 5.3 percent to trade at $20 a barrel, while international benchmark Brent crude was off 6.5 percent at $23.

The falls came after the death toll from the pandemic surged past 30,000 at the weekend as cases in hard-hit Europe and the United States showed no sign of letting up.

Senior US scientist Anthony Fauci estimated the virus could possibly result in 100,000 to 200,000 deaths in the United States, while President Donald Trump extended “social distancing” guidelines until April 30.

The president also said he expected the country to “be well on our way to recovery” by June 1 - dropping his previous target of mid-April.

AFP

2.53pm: Why the ASX sell-off is hard to justify: GS

Goldman Sachs equity strategist Matt Ross says the magnitude of ASX underperformance is “hard to justify”. Here’s his reasons why:

the Australian Government has acted earlier in taking measures to contain the spread of the virus
the government is in a strong position to provide fiscal stimulus to help offset the economic impacts of the virus
the Australian dollar has been one of the weakest currencies since the onset of the outbreak - providing a strong offset to falling corporate profits
Australian corporate balance sheets are in a relatively strong position versus global markets.

“We find it hard to reconcile the underperformance of Australia’s equity market since the onset of the virus outbreak given the country appears to be in a relatively better position than most other developed nations,” Mr Ross says.

As of Friday, the ASX 200 was still down 32 per cent from its year-to-date high, having been left behind during the recent bear-market rally. At that point it was 7pc above its recent low while the MSCI World index was 16pc above its equivalent low.

And the valuation discount of the Australian index was at the bottom-end of its typical valuation range, with a 10pc PE discount to MSCI World index.

Mr Ross says his “top-down” expectation is for a 25 per cent fall in ASX 200 EPS over the next 12-months versus a 33 per cent fall for the S&P 500.

He notes that after significant increases in gearing in recent years the Net Debt/Equity of the S&P 500 is currently sitting around 85pc vs 50pc for the ASX 200.

“Earnings dilution from discounted capital raisings was a significant drag on earnings during the financial crisis, and while this period is likely going to see many more firms come under a much greater short-term liquidity squeeze, balance sheets are in a much better position than they were before the GFC, when the median firm had Interest Coverage ratios of 5.7 times in 2007 versus about12 times today.”

The ASX200 is up 3pc at 4988 after rising as much as 3.6pc to 5013.6 today.

Bridget Carter 2.49pm: Webjet could increase equity raise

DataRoom | Speculation is mounting that Webjet could be looking to increase the size of its attempted equity raising from $250m to offer more certainty of the company’s prospects in the months ahead.

Last week, attempts made by Webjet to tap the market for about $250m were understood to have been unsuccessful. However, some market participants believe that securing such funds will be an impossible task.

It is understood that fund managers shied away from the transaction because, out of the $250m it wanted to raise, $190m would go back to clients to whom the money needed to be returned at a time when revenue is down about 100 per cent.

However, now the thinking is that more funds would offer stronger prospects of the company seeing out the coronavirus crisis and capitalising on an increasing amount of travel in the aftermath, likely to be at least six months to one year away.

Last week, Goldman Sachs, Credit Suisse and Ord Minnett were believed to be looking to raise about $250m at around $2 per share.

2.14pm: Shares extend gain as Asia weakens

Australia’s S&P/ASX 200 rose 3.2pc to an intraday high of 4995 despite a sea of red in Asian markets and US futures.

S&P 500 futures rose to an intraday high of 2507.3 but were still down 0.8pc after opening down 2pc.

WTI crude is down 5.5pc, COMEX copper is down 0.9pc and Dalian iron ore is down 2pc.

The price action has been so choppy that the ASX200 VIX volatility index has risen 40.8 per cent despite recovery in the Australian market today.

After massive rebounds in equites from last Monday’s lows, concern about the prospect of extended shutdowns may soon overwhelm the recent optimism over monetary and fiscal stimulus.

One thing is for sure, global markets will be super volatile before month-end given forecasts of massive rebalancing from asset managers at a time of still heightened risk aversion in global markets.

Gerard Cockburn 2.02pm: QBE edges up despite guidance withdrawal

Uncertain economic and investment conditions have prompted insurance provider QBE to ditch its financial outlook for 2020, including the retraction of its combined operating ratio and net investment returns targets for the 12 months to December 31.

Its previous outlook statement, released on February 17, indicated that the group had set a combined operating ratio between 93.5 per cent and 95.5 per cent. It had also indicated a net investment return between 2.5 per cent and 3 per cent, over the same period.

“Premium rate momentum in 1Q20 has continued in accordance with the strong trends reported in the second half of 2019. The Group’s capital position and liquidity are strong. We continue to implement our business continuity plans to ensure our services remain available to our business partners and customers,” QBE chief executive Pat Regan said.

QBE last traded higher by 1.4pc to $8.17.

1.44pm: Utilities dividends most sustainable: RBC

Utilities and infrastructure stocks have the greatest dividend sustainability of Australian companies as they weather “a severe set of operating and financial challenges”, according to RBC Capital.

The broker says these challenges are “almost certainty to have significant near-term – one or two quarter – impacts” and warns that “the more lasting impacts of this crisis are also currently very difficult to predict”.

In a “deep contraction in economic activity over the next 3-6 months, followed by a gradual recovery”, RBC analysts found that companies most able to sustain dividends select companies in Utilities and Infrastructure.

Regulated utilities like Spark and AusNet and those with longer term contracts and take or pay type contracts like APA Group and Infigen Energy have “the most defensive distributions”.

But the user pays transport infrastructure names Atlas Arteria, Sydney Airport and Transurban have more exposure to changes in volumes which flows through to earnings and are hence more impacted by social distancing and lockdown measures currently in place.

Those facing a greater risk in the sustainability of their dividends, including a number of companies that are indeed expected to reduce payments to shareholders, include the energy exploration and production and travel sectors.

Glenda Korporaal 1.39pm: Pass on petrol price cuts: ACCC

Australian Competition and Consumer Commission (ACCC) chair Rod Sims has warned petrol companies to cut their prices to well below $1.20 a litre, passing on lower world oil prices to consumers battling the COVID-19 crisis.

In a speech to an online financial conference today, Mr Sims said the ACCC would be pressuring petrol retailers which were charging above $1.20 a litre to cut their prices.

Mr Sims said the average price of petrol in Adelaide last week was only 97 cents per litre, while prices were much higher in other capital cities.

He cited high petrol prices of $1.34 cents a litre in Brisbane, $1.30 a litre in Melbourne, $1.26 a litre in Sydney, $1.37 a litre in Canberra and $1.44 a litre in Hobart last week as being too high in the current crisis as world oil prices were falling.

“World oil prices have plummeted with prices just over $US20 a barrel,” he said.

A service station in Sydney selling fuel for 168.9c per litre this weekend. Picture: Bill Hearne.

Gerard Cockburn 1.27pm: Oz Minerals maintains output guidance

Copper producer Oz Minerals has maintained its earnings guidance for the full year, but says its cutting its cash spend by $150m and making plans should operating conditions deteriorate further.

The company said the COVID-19 outbreak had not had a material change on its production levels, as it reiterated its guidance for copper output in the range of 83,000 – 100,000 tonnes and gold production between 207,000 – 234,000 ounces.

“While the circumstances remain fluid, an extensive range of preventive and contingency measures have been actioned across the company to ensure our employees remain safe and our sites continue to operate,” chief executive Andrew Cole said.

Still, the group said its growth-related activities would be scrapped, with workers reassigned to optimise the business to allow for the rapid restart of activities as conditions changed, the miner also unveiled a $150m cut to cash spend from both capital and operating costs to shore up its balance sheet.

Mr Cole said border closures in South Australia, where most of its sites are located, will have limited impact on operations, as 85 per cent of workers reside in the state.

“We have planned for a range of scenarios including operating with a South Australian workforce only, extending rosters to enable isolation of sites through to care and maintenance,” Mr Cole said.

The company also noted its Brazilian workforce has not experienced border or operating restrictions.

OZL shares last down 1.7pc to $6.97.

Lisa Allen 1.18pm: Webjet shakes tin for $250m

Webjet continues to work on a proposed capital raising which is expected to be announced as early as this week.

Webjet managing director John Guscic said the online travel agency was looking to raise around $250m.

“We are still working through all the options, we have got an equity raising that is still one of the options,” Webjet managing director, John Guscic, said.

“We have got lots of options we are right in the middle of it,” he said. Mr Guscic said it was ‘most likely’ Webjet would announce the deal this week.

The Mallorca-based Mr Guscic spent last week in Australia meeting with bankers.

Webjet’s shares remain suspended with the company’s shares entering a trading halt more than one week ago

1.10pm: Flight Centre extends share suspension

Flight Centre has requested a further one-week extension to its share suspension as it firms its coronavirus response plan.

The travel group requested a halt last Monday to weigh the impact of coronavirus on it business plan, after a battering in the days prior as governments ramped up restrictions on travel.

Today, it said it would need further extension to April 6 “as the process of assessing the impact of coronavirus on its business is ongoing”.

The Australian’s DataRoom has reported the group is mulling plans for a capital raise, similar to that of rival Webjet.

FLT shares last traded at $9.91 – a 75 per cent drop from February’s highs of $40.04.

1.01pm: Shares extend gains as health outperforms

The local market is setting fresh daily highs in lunch trade, shrugging of its early blip into the red.

At 1pm, the ASX200 is higher by 118 points or 2.4 per cent to 4961.

The market has slowly climbed through the morning, fuelled by a lift in health stocks as Ansell and Mayne Pharma outperform.

Here’s the biggest movers at 1pm:

Eli Greenblat 12.46pm : Myer could breach debt covenants

Myer could breach its debt covenants if it doesn't secure rent relief from its shopping centre landlords after its decision late Friday to shut its 60 stores and stand down 10,000 staff in the wake of the coronavirus pandemic.

The nation’s biggest department store owner is currently seeking to refinance its debt, which matures in February 2021.

JP Morgan analyst Shaun Cousins said in a new report that Myer is well positioned on two of its three covenants, yet the fixed charge coverage ratio (FCCR) covenant is under pressure in the absence of rent relief, which has been assumed.

“In the absence of rent relief, Myer could breach its FCCR covenant in fiscal 2020 and first half of 2021, based on our estimates, which have been reduced dramatically due to COVID-19,’’ Mr Cousins said.

A spokesman for Myer said the retailer could advise there are no immediate risks to covenants.

“As reported at our half-year results our balance sheet is in a strong position, we have reduced debt, and have significant liquidity within our financing facilities, and banks are supportive of our plans.”

A Myer store in Sydney. Picture: AAP Image/Joel Carrett.

Ben Wilmot 12.40pm: Weiss fails in bid for Cromwell board

Cromwell Property has seen off a bid by dissident shareholder ARA Asset Management to elect corporate raider Gary Weiss to its board.

In a meeting controversially held on Monday morning, the proposal to elect Dr Weiss to the board was resoundingly defeated, partly as another Singapore group that had been supportive of him failed to vote.

Dr Weiss lost a poll in which he won 40.91 per cent of the vote and 57.63 per cent of votes were cast against him, with a small percentage giving their votes to the chair to vote at his discretion.

About 6000 security holders voted, a surprisingly higher level than the 4800 at an annual meeting last year when Dr Weiss was first put up as a board candidate.

Industry sources suggested that the Tang family that holds 14.31 per cent of the company, and had been aligned with ARA, had failed to vote.

12.37pm: Expect raisings in April: Macq

The mass withdrawal of corporate earnings guidance signals a of flood equity capital raisings to come, according to Macquarie’s Australian equity strategist Matt Brooks.

“Guidance withdrawal may signal need for capital,” he warns.

“Of the first 12 to withdraw guidance, 3 – Webjet, Cochlear and oOh!media – were in the market looking to raise equity 6-9 days later. Given the surge in guidance withdrawals did not start until March 19, we may see more equity raisings in coming weeks.”

Mr Brooks notes that a third of ASX100 companies and 25pc of the Small Ordinaries index have withdrawn or reduced their guidance in the last three weeks.

About 70 companies under Macquarie’s coverage withdrew earnings guidance in the past week, up from 52 in the prior two weeks, with about 24 per cent of those on the ASX 100 having scrapped their targets as of Friday.

“Seeing so many companies provide negative earnings guidance so soon after the February reporting season reflects how quickly operating conditions have deteriorated in such a short space of time,” Mr Brooks warns.

Gerard Cockburn 12.25pm: Webjet extends halt as raising stalls

Travel agent Webjet says its shares will remain in voluntary suspension as it continues to work on its proposed capital raising.

“Because the company has not yet reached an outcome, the voluntary suspension of its securities has been extended,” it said in a filing to the market, asking for a further five days.

The company has been in the spotlight as it tries to raise equity, with suggestions last week that the raising would be called off due to lack of demand.

On Friday, The Australian’s DataRoom reported that it was understood that fund managers shied away from the transaction because, out of the $250m Webjet wanted to raise, $190m would go back to clients to whom the money needed to be returned at a time when revenue is down about 100 per cent.

WEB shares last traded at $3.76 each.

Bridget Carter 12.22pm: Credit Suisses hires capital markets co-head

DataRoom | Credit Suisse has embarked on a shake up within the top of its local ranks, with Angelo Scasserra being appointed Co-Head of Investment Banking & Capital Markets in Australia for Credit Suisse.

Current co-head, Mark Carlile, will shift into the role of Vice Chairman of investment banking and capital markets in Australia.

The role will likely see Mr Carlile, a prominent and well regarded energy and resources banker, step away from hiring and firing responsibilities at the bank and offer more focus on securing business, rather than compliance and administration.

Mr Scasserra is an Asia Pacific real estate investment banker who has worked with Credit Suisse for 15 years and will now jointly run investment banking in Australia with James Disney, who had previously worked at overseas at Credit Suisse before he stepped into the position.

Paul Garvey 12.17pm: Woodside plans slammed as ‘suicide roster’

A plan by Woodside Petroleum to have employees work 14-week shift has been slammed as a “suicide roster” by the WA Maritime Union.

Union boss Christy Cain told ABC Radio in Perth that Woodside had proposed the extended shifts for workers at its Western Australian oil and gas platforms and operations as part of its response to the COVID-19 outbreak.

Mining and oil and gas companies have been considering extended rosters in an effort to reduce travel and the associated risks of spreading the virus. They are also readying themselves for the potential introduction of a hard closure of the Western Australian border that would prevent workers based in the eastern states from entering WA for work.

But Mr Cain slammed the plan, saying that the maximum swing should be four weeks on followed by two weeks in isolation.

“This is a suicide roster and Woodside should be ashamed of themselves for going down that path,” he said.

Woodside has been contacted for comment.

Ben Wilmot 12.12pm: Mall owners reel on evictions freeze

Mall owners have lost ground in early trading in the wake of the prime minister’s announcement there would be no evictions for commercial tenants for six months.

The federal government has called on commercial tenants, landlords and financial institutions to sit down and work through ways of ensuring that businesses can survive. But apart from general principles few guidelines have emerged with talks to come about cost-sharing or deferral of losses between landlords and tenants, with all levels of government and lenders to “consider mechanisms to provide assistance”.

Macquarie analysts said that while shopping centres remain open, 16 groups across 5,443 shops had already announced closures with some groups publicly stating they will not pay rent due on April 1. Smaller retailer shutdowns are also occurring under the radar and more are cutting back their hours.

In morning trade, Scentre was off by 2.65 per cent to $1.47 and Vicinity Centres was off by 3.62 per cent to 93c.

Macquarie has said Vicinity and Scentre will take an 11-12 per cent hit to Funds From Operations from a 50 per cent reduction in rents for three months across all speciality retailers. The loss of ancillary income will also be a headwind. Charter Hall Retail REIT and SCA Property Group were likely to be less impacted given greater exposure to staples, Macquarie said.

Office and industrial landlords were also not immune. Despite having fewer abatements than retail, they said note Dexus, Mirvac and GPT have removed their guidance statements.

In particular small business, retail, tourism and other services-related office tenants have come under pressure. But retail represents 5-10 per cent of income of an office building.

Gerard Cockburn 11.49am: No disruption to shipments: Fortescue

Fortescue Metals will continue with the expansion of two of its projects in Western Australia, as government COVID-19 restrictions prompt the suspension of the rest of its Australian and overseas activities.

Still, the iron-ore giant said its mining, processing and shipping activity remains on track to meet its 2020 financial year iron ore shipment guidance at the upper end of its 170 – 175 megatonne range.

“While COVID-19 has brought uncertainty and volatility to global markets, including the iron ore market, Fortescue’s shipments continue from Port Hedland as scheduled,” chief Elizabeth Gaines said.

The company noted it had $US4.3bn of liquidity available, including $US3.3bn in cash reserves and a $US1bn revolving credit facility.

Fortescue’s Eliwana mine and rail project and Iron Bridge Magnetite project in the WA are the only two operational as restrictions across the rest of the country and overseas halt activity elsewhere.

“We appreciate that the State and Federal Governments have acknowledged the importance of the sector’s contribution to the economy and have identified the resources sector as providing essential services and exempted mining and other resources industries from some of the travel restrictions and other guidelines introduced across the country,” Ms Gaines said.

In a bid to reduce flights, the company has temporarily changed its FIFO rosters to four week rotations, while workers will be subjected to temperature checks at Perth airport and the company’s aerodromes and non-critical site-based employees have been directed to work from home.

11.45am: Beware of complacency on ASX: JPM

JPM Australia head of research Jason Steed warns against “misguided complacency” about the earnings outlook for some Australian companies that are yet to update on the impact of coronavirus.

He notes that companies have come under intense pressure to update guidance and outlook statements since COVID-19 morphed from a regionalised crisis to a global pandemic.

And as a result, over 50 per cent of the ASX200 has provided market updates, in most cases withdrawing guidance altogether while slashing dividends or indefinitely deferring dividends.

He also finds that companies that have not updated their guidance have “markedly outperformed” those that have.

It terms of sectors, the proportion of companies that haven’t updated is greatest in Utilities, Energy, Materials, Financials and Staples.

“While this largely stands to reason, there is a misplaced complacency building among some of those yet to update,” Mr Steed warns.

He also notes that ASX Listing Rule 3.1 which requires companies to “disclose when earnings will be materially different from market expectations”.

“In these unprecedented times, that is probably the case for almost every company across the market, whether they’ve provided an update or not,” he says.

Mr Steed still expects a 10pc fall in consensus aggregate EPS for the Australian sharemarket and with that number down 4.7pc so far “it would appear that we’re only at the halfway point to that scenario.”

Michael Roddan 11.28am: Challenger dumps bonds, equities, raising

The prudential regulator has given the nation’s biggest annuities provider, Challenger, a two-year reprieve on replacing its hybrid capital notes after debt markets froze, risking a situation where the company would have to potentially downgrade investors into equity positions.

The move to buy itself time to launch a new capital raising to replace the unsecured debt notes came as Challenger, which sells longevity insurance products known as annuities to thousands of retirees, revealed it had sold hundreds of millions of dollars worth of high-yield corporate bonds and about $1bn worth of equities to de-risk its investment portfolio amid the coronavirus pandemic.

Challenger chief executive Richard Howes said the unprecedented shareholder update on Monday was “designed to reassure the market that we remain strongly capitalised”.

The company also said it had $400 million from a fully-drawn banking facility with was being held in cash outside of the life insurance company. If things deteriorated, Challenger said it could inject $250 million of this cash into the company to shore up its capital levels “and APRA has confirmed no objection to this”.

CGF shares are higher by 2.8 per cent to $3.70.

Deborah Cornwall 11.19am: Why this microcap surged almost 400pc

Listed biotech developer Cellmid surged by as much as 390 per cent in morning trade on news its pin prick test for COVID-19 was set to hit Australia this week.

The test claims to identify if a patient is positive to the virus in under 15 minutes and is set to be a major game changer in Australia’s push to “flatten the curve” of infections.

CEO of the Australian biomedical research company, Cellmid, Maria Halasz, says the rapid diagnostic test can identify COVID-19 antibodies very early – within two to four days of infection.

“Our test is a very small finger prick – it takes 20 microlitres of blood – and in our experience we are getting results within three to 15 minutes,’ Ms Halasz told The Australian on Sunday.

Shares in the $10m company finished Friday’s session at 9.9c – but surged to as much as 49c in the first hour of trade. By 11.20am, the stock was trading up 182pc to 28c.

Bridget Carter 11.16am: BGH shelves Abando dental deal

DataRoom | BGH Capital’s move to buy Australasian dental care provider Abano has been shelved, the target said on Monday in a statement.

It comes at a time that Abano’s Australian and New Zealand dental practices are closed.

The scheme of arrangement agreement has been terminated because a Material Adverse Change had occurred, Abano said in an announcement to the NZX across the Tasman.

It comes as all Australian dental practices owned by Abano will close Monday on advice from the Australian Government’s Australian Health Protection Principal Committee. Its New Zealand centres have been closed since March 24.

No break fee will be paid by each party walking away from the deal.

Abano said that the bidder had indicated it was willing to explore whether there was an alternative potential transaction, but added there was no certainty that a transaction would take place and there had been no discussions on price.

Joyce Moullakis 11.12am: Comyn warns of 10pc March GDP drop

Commonwealth Bank chief executive Matt Comyn has warned of a 10 per cent contraction in the economy in the March quarter, as Australia weathers a “substantial demand shock” caused by the COVID-19 pandemic.

Mr Comyn said he had revised down his expectations from a week ago, when he expected a 5 per cent or 6 per cent slump in output, given the notable decline the nation’s largest retail bank was seeing in transaction data.

“There is no question there is going to be a substantial demand shock, and you’ve seen that particularly across a number of different sectors,” he told a live-streamed event on Monday.

“It’s (pandemic impact) not something we’ve seen probably since the early 1900s. It’s very different to other economic situations … this is really overlayed with very serious and significant health crisis.”

Travel, tourism education took an early hit in spending, according to CBA data, with a large increase occurring at supermarkets and pharmacies. But Mr Comyn said the slump in spending had now spread more broadly through the retail sector.

Angelica Snowden 11.08am: Woolies to launch ‘Basics Box’

Woolworths will launch a ‘Basics Box’ that can be posted to people unable to leave their homes due to coronavirus.

The package contains snacks, meals and a few essential items and will cost $80.

The company says the new service will allow them to “get more essential items to many more vulnerable customers faster”.

Woolworths Group CEO Brad Banducci said in a statement that their older and more vulnerable customers would be “anxious” about their grocery needs.

“Going to the supermarket is a key part of everyday life for many of them, and some will have never even considered ordering groceries online before,” Mr Banducci said.

“We’re working at pace to reshape our business, and thanks to the support of the likes of Australia Post and DHL, we will be able to better service those in self-isolation.”

The service will be available to customers in the ACT, NSW and Victoria initially and is expected to be rolled out to more states and territories in the coming weeks.

WOW shares last up 1.4pc to $35.28.

Gerard Cockburn 10.56am: Evans Dixon brokerage fees up, but pain ahead

Financial services group Evans Dixon has withdrawn its earnings guidance due to the coronavirus pandemic, saying revenue streams from its investment divisions are likely to take a hit.

The group noted that an increase in trading activity in the past two months had generated strong brokerage revenues, but said longer term, its wealth advice business would be hit from significant reductions in the market value of funds under advice.

“Our financial performance will be negatively impacted in the near term as a result of the substantial drop in value across global financial markets and the resulting impact on the level of corporate transactions,” the group said in a statement.

ED1 shares are trading lower by 6.7 per cent to 56c in the first hour of trade.

Perry Williams 10.46am: Boral outlook cut to negative: S&P

Building materials supplier Boral faces a significant earnings cut and cash flow pressures with its outlook downgraded to negative by ratings agency S&P.

The coronavirus pandemic and pending recession will slash earnings across all of Boral’s core divisions, hiking pressure on its ability to maintain funds from operations to debt ratio above 30 per cent.

S&P lowered its outlook on Boral to negative from stable and affirmed its BBB long-term rating on the company.

“We expect Boral to take decisive action to preserve cash amid a downturn in activity. This includes implementing cost-saving measures that could include plant slowdown and shutdown programs, particularly in the absence of a tangible industry rebound,” S&P said.

Others in the market expect Boral may look to raise equity in the current environment with its shares down 58 per cent so far this year.

“What the market seems to be now focused on is that Boral is sitting on a large and very uncomfortable net debt pile of $2.32bn and this is at a time where almost every company has been seeing their cashflows tumbling,” Bell Potter’s head of institutional sales and trading Richard Coppleson said on March 24. “Its share price is telling us that they are a big candidate to raise equity.”

S&P says Boral faces no immediate liquidity risks with $800m in a syndicated loan facility, no further maturities due before the 2022 financial year and no earnings based covenants.

“The company is publicly committed to maintaining the ‘BBB’ rating, which we believe implies Boral’s commitment to take necessary actions to preserve its financial health.”

Boral last down 5.5 per cent to $1.90.

Bridget Carter 10.42am: oOh! raise a bitter pill, but necessary: CS

DataRoom | oOh!media’s $167m equity raising offers the outdoor advertising company the ability to navigate the choppy environment in the coming months, says analysts from Credit Suisse.

Last week, oOh!media secured $39m through a placement and $128m through an entitlement offer by selling shares at 53c each, a 37 per cent discount to its last closing price.

The raise was not only deeply discounted, but highly dilutive.

Credit Suisse analysts said in a research note that the raise by oOh!media removes near term liquidity risk and provides welcome headroom relative to its debt covenants in order to navigate what is likely to be a choppy environment in the coming months.

This is despite the raise being “clearly a bitter pill for shareholders to swallow,” the analysts said.

The company, which relies on advertising revenue for signs and billboards at a time much of the country has been forced indoors, will see severe earnings per share declines of between 80 per cent and 90 per cent, but questions around oOh!media’s future had now been put aside, the analysts said.

10.27am: Shares succumb to offshore weakness

Australia’s S&P/ASX 200 rose as much as 1.4pc to 4908 early, but weak global trade has pulled the benchmark into the red after just 30 minutes.

The ASX holding 8.5 points or 0.2 per cent higher to 4850.9 after slipping to 4833.1 – a sign of the volatility likely to persist through the session.

Confirmation that the US won’t reopen at Easter as previously envisaged by the US President is another reason for global risk assets to stay weak today. The US has called a one-month extension of the voluntary national shutdown and Mr Trump now says he thinks June 1 is “when things will start to open up”.

While it’s not clear how much Donald Trump’s optimism rubbed off on global risk assets last week, they’re certainly looking vulnerable this morning.

S&P 500 futures remain down 1.7pc after falling 2.3pc, WTI crude oil futures are down 5.6pc after falling 7.4pc to a 6-day low of $US19.92 and AUD/USD is down 0.5pc at 6140.

Share trading volume is 60c below average for this time of day.

Cliona O’Dowd 10.23am: Big four banks back more virus support

The big four banks have thrown their support behind businesses impacted by the COVID-19 pandemic, unveiling a suite of additional measures to support corporate Australia as it hibernates through the crisis.

It comes after the Australian Banking Association announced that banks would extend the six month deferral of loans to 30,000 more businesses across the country, with the support measures now covering 98 per cent of all businesses with a loan from an Australian bank.

Commonwealth Bank said it would provide repayment relief of up to $3.6bn for its business customers, delivering around $600m back into business cash flows each month.

More than 99 per cent of CBA’s business customers will be eligible for loan repayment deferrals and $1bn of the relief will benefit its commercial property customers, the bank said.

The new support measures include expanding the offer of six-month loan repayment deferrals to businesses with lending limits of up to $10m, up from $5m previously; automatically waiving merchant fees for three months for 70,000 small business customers; and specialised support for larger business customers impacted by coronavirus.

CBA higher by 2.5pc to $59.12 as the broader financial sector adds 1.6pc.

10.15am: ASX rebounds by 0.5pc

The local market is edging higher in early trade – putting on 0.5 per cent early despite a bleak picture on overnight US and crude oil futures.

The benchmark ASX200 is up 22 points to 4864.3 to spring back after a more-than 5pc tumble on Friday.

Health stocks are the clear outperformer – higher by 3.2 per cent.

Gerard Cockburn 10.01am: Volatility disrupts APN Property

APN Property Group has withdrawn its financial year distribution guidance, saying its revenue intake within the current coronavirus climate was too uncertain.

The group said elevated volatility was impacting management fees on its real estate securities within listed markets, while management fees in unlisted property trusts were more stable.

It also noted co-investment income derived from rental receipts on owned properties remain “relatively” well placed in the current environment.

“The Group currently maintains a net cash balance sheet position with limited drawn debt. The Group continues to take appropriate steps at a corporate and fund level to ensure it is best positioned to weather the current market conditions,” it said.

“As always, APN is monitoring the risk profile and performance of its funds, including a continual assessment of the potential impact to each fund as a result of the disruption.”

APD last traded at 48c.

9.55am: What’s on the broker radar?

Afterpay raised to Buy – Goldman
Atlas Arteria raised to Add – Morgans
Ramsay Health raised to Neutral – Goldmans
Tassal group raised to Outperform – Credit Suisse
United Malt Group rated new Buy – Bell Potter
Vicinity Centres raised to Neutral – Evans and Partners

9.47am: NIB postpones premium hike

NIB is postponing its April 1 health insurance premium increases for at least six months in a move to ease the economic burden on members. The insurance giant on Monday said freezing the premium increase – which averages 2.9 per cent – complemented other moves to provide direct premium relief for members experiencing financial hardship.

HBF was among the first in the industry to make the same move last week.

NIB is also offering coverage for COVID-19-related treatment across all products even if currently excluded.

The postponing of the premium will automatically apply to members’ health cover.

AAP

9.42am: Plunging US futures to pressure ASX

Plunging US stock index and crude oil futures prices will hit the Australian sharemarket today despite a flat close in overnight futures.

S&P 500 futures are currently down 2pc at 2467 points after the index dived 3.4pc on Friday. WTI crude oil futures are down 4.5pc at $US20.54 after falling 6.1pc in early trading.

Combined with the UK ratings downgrade over the weekend, these developments pushed AUD/USD down 0.9pc to 0.6114 after it had hit a 9-day high of 0.6200 amid US dollar weakness on Friday.

Clearly global markets aren’t impressed by the worsening coronavirus pandemic over the weekend.

There may also be an extension of the “buy-the-rumour, sell the fact” reaction to the $US2 trillion ($3 trillion) US fiscal stimulus signed on Friday.

In Australia, the lockdowns intensified over the weekend and the mass withdrawal of earnings guidance by corporate Australia continues, with Bank of Queensland, ARB and QBE doing so today.

There’s also a growing expectation of further capital equity raisings, although Commonwealth Bank CEO Matt Comyn says the bank can go “a long time” before tapping capital markets.

On the positive side, Treasurer Josh Frydenberg has indicated that wage subsidies are on the way, but that might just stop a depression rather than a steep recession.

The S&P/ASX 200 formed a bearish key reversal pattern on Friday, with a 7-day high followed by a 7.5pc intraday plunge to a two-day low close of 4842.2.

Angelica Snowden 9.40am: Trump to extend shutdown

President Donald Trump is extending the voluntary national shutdown for a month as the death toll from the coronavirus pandemic rises in the US.

The initial 15-day period of social distancing urged by the federal government expires Monday. It will now extend to April 30.

The federal guidelines recommend against large group gatherings and urge older people and anyone with existing health problems to stay home.

People are urged to work at home when possible and avoid restaurants, bars, non-essential travel and shopping trips.

The extension would leave the federal recommendations in place beyond Easter on April 12, by which time Trump had hoped the country and its economy could start to rev up again.

Alarmed public-health officials said Easter was sure to be too soon.

The US had more than 137,000 COVID-19 cases reported by late Sunday afternoon, with more than 2,400 deaths.

With AP

Gerard Cockburn 9.20am: Tyro feels the squeeze of business shutdowns

Business payment provider Tyro is feeling the squeeze of shut downs across the country, today withdrawing guidance as it said its small business merchants, predominantly in the hospitality, retail and health verticals, were processing a fraction of their usual transaction volumes.

In a statement to the ASX this morning, the company said its transaction value growth to March 27 was up 11 per cent compared against the previous corresponding period to $1.489bn – a compression from its former trajectory.

On a year-to-date basis, the same measure was up 27pc at $16.168bn.

Tyro chief executive Robbie Cooke said the company had been on track to deliver in line with its prospectus forecasts before the shut downs.

“The unfortunate reality of the measures being implemented to contain COVID-19 have compressed our transaction growth rates and, with the current uncertainty both as to the duration of the pandemic and the extent to which it will continue to impact our merchants, we can no longer be assured of achieving our forecast,” he said.

Customers line up to get takeaway coffee in Annandale, NSW. Picture: Adrian Fowler/ NEWS360.

9.10am: Glove demand buoys Ansell

Ansell reaffirmed its earnings guidance for the 2020 fiscal year, as strong demand for protection products such as surgical gloves was balanced by weaker sales of some industrial products amid widespread city lockdowns.

Ansell said it was experiencing very strong demand for its AlphaTec hand and body protection products amid efforts to contain the spreading coronavirus. It also said many of its Microflex and TouchNTuff single-use examination gloves were highly sought after by customers, along with its Gammex and Encore surgical gloves.

“However, we expect this to be offset by declining demand for some industrial products, by temporary lockdowns, by export restrictions within the EU and elsewhere, by restrictions imposed to contain the spread of the virus combined with lowered economic growth outlook,” Ansell said.

Management added there is an increasing likelihood of delays and possible disruptions to transport and local distribution as global coronavirus containment strategies evolve.

Ansell, which has no debt maturing during the next 12 months, expects earnings per share in a range of $US1.12-$US1.22 in the year through June.

Dow Jones Newswires

Read more: Virus booster for Ansell

8.55am: Virus no hit to IAG after fire, floods

Insurance Australia Group is one of only a few locally-listed companies to maintain their earnings guidance amid the coronavirus uncertainty, helped by the sale of its Indian investment.

In a notice to the market this morning, Australia’s largest general insurer said its business performance was still strong, while overall year-to-date profitability had absorbed the hit from the bushfires and floods at the start of the year, and the recent severe investment market movements sparked by the coronavirus outbreak.

“IAG’s unchanged guidance for FY20 comprises ‘low single digit’ gross written premiums growth and a reported margin range of 12.5pc to 14.5pc,” the company said.

Still, it said it wasn’t immune to the market ructions, with an unrealised $100m pre-tax loss on technical reserves investment income from widening credit spreads, predominantly in March.

“With the extreme volatility presently surrounding such mark-to-market measures, IAG has not reflected this timing effect in its reported margin guidance,” it added.

“Given the high credit quality of the securities held, IAG anticipates this unrealised loss will be recovered as the securities mature.”

Meanwhile, IAG said it had completed the $640m sale of its 26pc interest in Indian insurer SBI General, set to deliver a $310m net profit in the second half of FY20 and increase its regulatory capital position by nearly $450m.

8.41am: BOQ cans dividend

Bank of Queensland has reassured investors it was well poised to ride out coronavirus uncertainty, as it withdrew guidance and canned plans for its dividend payout ratio.

The bank said its capital position and funding were strong after its recent capital raising, which gave it a large buffer in excess of APRA’s unquestionably strong capital requirements.

“Despite the significant shift in the economic environment, BOQ remains focused on executing its refreshed strategy, and importantly retains the flexibility to respond to changing market dynamics,” the bank said.

Just a month ago, the bank had guided that the year would be difficult given its transition plans, tipping a dip in year-on-year cash earnings of approximately 4pc to 6pc on FY19.

The bank is currently offering hardship support measures for customers including deferred payment periods for business loans, deferred mortgage repayments and fast track hardship assistance for impacted customers.

Bank of Queensland CEO George Frazis. Picture: Ryan Osland/The Australian.

8.10am: FIRB rules ‘unprecedented’

Treasurer Josh Frydenberg has labelled measures to tighten the ease of foreign investment as “strict and unprecedented”.

Changes announced on Monday will see all foreign investment subject to approval by the Foreign Investment Review Board, which will assess if it is in the “national interest”.

“We’re reducing the threshold from $1.2 billion effectively for countries with whom we have a free-trade agreement to zero” Mr Frydenberg said.

“This is a precautionary measure, a temporary measure, it reflects the extraordinary times we’re in. It will give the government greater visibility and scrutiny of foreign investment proposals to ensure that they remain in the national interest.

“What is very clear to us … in these extraordinary times, (we) need to more strictly assess the foreign investments that are coming into Australia.”

Mr Frydenberg denied the move was directed at China.

“This is not [about] one particular country,” Mr Frydenberg said on the ABC’s News Breakfast. “In fact, China last year was the fifth-largest foreign investor in Australia with investments of around $13 billion. This compares to the United States which was the leading foreign investor of $58 billion.

“What is very clear to us, and also to the European Union and other countries around the world, [is that] in these extraordinary times need to more strictly assess the foreign investments that are coming into Australia.”

8.05am: ASX set to edge higher

Australian stocks are poised to edge higher but analysts are anticipating another week dominated by COVID-19 volatility.

The SPI200 futures contract was up just six points, or 0.12 per cent, at 4,834 points at 8am (AEDT) on Monday, suggesting modest early gains.

The federal government is expected to make an announcement on Monday about wage subsidies to keep Australians working during the coronavirus pandemic.

Nervousness remains high however, according to IG Marets’ Kyle Rodda, with sectors most exposed to the increased lock down of the economy.

“Consumer, real estate and financial stocks, (are) displaying the most volatility,” Mr Rodda said in a note.

The S&P/ASX200 benchmark index gained two per cent in early trade on Friday but then faded throughout the day to finish Friday down 270.9 points, or 5.3 per cent, to 4,824.4.

For the week the market finished just 25.7 points up, or 0.5 per cent, with three days of gains totalling 567.2 points sandwiched by two days of losses on Monday and Friday.

Wall Street also fell in the final session of the week, ending a three-day surge as the number of coronavirus cases in the country climbed.

The number of COVID-19 cases continues to explode globally, most pertinently in the US.

The country’s reported caseload jumped to over 123,000 over the weekend, with the number of new daily cases still climbing day-by-day.

“If the market’s ultimate turnaround hinges on a “flattening over the curve” in the world’s largest economy, then logically, further downside in risk-assets ought to be assumed,” Mr Rodda said.

The Australian dollar was buying US61.56 cents at 8am (AEDT), up from US61.08 cents as the market closed on Friday.

AAP

7.40am: Oil posted 5th weekly loss

Oil prices plunged another five per cent and posted a fifth straight weekly loss as demand destruction caused by the coronavirus outweighed stimulus efforts by policymakers around the world.

Both contracts are down nearly two thirds this year and the coronavirus-related slump in economic activity and fuel demand has forced massive retrenchment in investment by oil and other energy companies.

Brent crude settled down $US1.41, or 5.35 per cent at $US24.93 a barrel. The contract fell about 8.0 per cent on the week.

US crude settled down $US1.09, or 4.82 per cent at $US21.51 a barrel. During the week, US crude fell more than 3.0 per cent.

Reuters

7.10am:US rebuffs calls to close market

The Trump administration has vowed to keep the stock market open, even as the coronavirus pandemic and a steep sell-off have led some commentators and politicians to suggest a temporary closure could soothe frightened investors.

The S&P 500 has fallen 25pc since mid-February, the fastest decline from a record to a bear market in history. The volatility has also been unprecedented: The index has swung 5.2pc on average each day in March, on course to top the previous record of 3.9pc from November 1929. Even after the stock market’s remarkable three-day rally last week, many investors are still anxious as the US death toll climbs and many states are in lockdown.

Despite the severity of the sell-off, officials have said the market has functioned well. Closing stock markets could trigger a cascading series of consequences that would ultimately harm investors, financial executives and academics say.

The New York Stock Exchange. Picture: AFP

With the stock market closed, investors would be unable to sell securities in their brokerage or retirement accounts, forcing them to sell other assets if they needed cash — and potentially fuelling disastrous runs on banks and other markets such as bonds.

“We think it is in the best interest to keep the markets open,” Treasury Secretary Steven Mnuchin said at a Thursday meeting of the Financial Stability Oversight Council, a body of regulators that includes the heads of the Treasury, Federal Reserve and the Securities and Exchange Commission.

Representatives from the New York Stock Exchange, owned by Intercontinental Exchange Inc., and Nasdaq Inc. have also said they are committed to keeping their exchanges open.

Dow Jones

7.00am: Washington rearms Fed

The Federal Reserve quickly deployed a half-dozen emergency lending programs over the past two weeks to ensure cash keeps coursing through the US financial system. Now, Congress wants it to go much further, approving $US454 billion to reload the Fed’s own ability to lend.

Washington is relying on the Fed, to an unprecedented degree in peacetime, to preserve business balance sheets after elected officials and private industry have put the economy into the equivalent of a medically induced coma to stop the spread of the coronavirus pandemic.

The economic-rescue legislation President Trump signed on Friday asks the Fed to charge headlong into credit and fiscal policy, by financing businesses, states and cities. These are areas the central bank has normally regarded as matters best left to elected officials in Congress and the White House.

“Congress is the Fed’s boss and Congress has mandated them to lend to areas of the economy that they were previously uncomfortable doing,” said Julia Coronado, a former Fed economist and founder of economic-advisory firm MacroPolicy Perspectives.

The Fed has essentially unlimited power to lend during a crisis so long as officials consider their loans well-secured. By providing the Treasury Department with a sizeable pot of money, Congress has given the central bank more flexibility to ramp up lending because the Treasury will agree to absorb initial losses.

“This is an opportunity to leverage the unlimited balance sheet of the Fed,” Senator Pat Toomey told reporters last week. “It’s totally unprecedented. We’re hoping that it’s a mechanism to keep business alive.”

Dow Jones

Cliona O’Dowd 5.45am: Investors face further volatility

Volatility on sharemarkets will ramp up in the coming weeks as the coronavirus crisis deepens, industry experts say, warning the local market may have further to fall despite a 30 per cent-plus plunge from the February peak.

Volatility could rise when companies start to report the earnings impact of the virus, Paradise Investment Management director Matt Riordan told The Australian.

“I think there’s a lot more volatility to come; I don’t think that (sharemarket) increase that we saw last week is suddenly a sign of the end of (the volatility). The reality is, the biggest single up days always happen in bear markets,” Mr Riordan said.

“The next step, unfortunately, is the sticker shock when you actually start to see the real earnings impact. It’s one thing to pull back on guidance but it’s another thing to say what the final impact will be. Markets don’t like uncertainty and so we think (volatility) will come back.”

The local market is expected to start the week in slightly positive territory after dropping more than 5 per cent late on Friday.

ASX futures were pointing to a modest 6 point gain on Monday morning, with AMP Capital chief economist Shane Oliver saying this reflects the fact that the local market fell harder on Friday than its peers in the US and Europe.

The Aussie dollar was higher this morning at $US61.66c.

Wall Street snapped a three-day winning streak on Friday, dropping more than 3 per cent, despite the US House of Representatives approving a $US2 trillion ($3.2 trillion) package aimed at addressing the coronavirus crisis.

The Dow Jones Industrial Average ended the session at 21,636.78, down 4.06 per cent, while the S&P 500 fell 3.37 per cent to 2541.47 and the tech-heavy Nasdaq Composite lost 3.8 per cent to 7502.38.

Economic indicators such as the purchasing managers indexes will be closely watched in the coming week to determine the early impact on the manufacturing and service sectors.

China PMI data in particular will be in focus after it tumbled to 35.7 points in February, the lowest on record.

“We’ll also be watching for more company announcements about whether they’re going to continue to go ahead with issuing dividends or whether they suspend payments,” said CommSec chief economist Craig James said. “We’ve seen a significant incidence of companies wanting to hold back on cash and suspend dividends and/or guidance on their operations.”

Despite the local market plunging by more than a third in a matter of weeks, investors would have to get used to more volatility, Dr Oliver warned.

“Even if markets might be getting close to the bottom, we’re still going to have a lot of volatility. But it’s probably no longer a one-way street now.”

5.20am: Wall St recap

Stock markets on both sides of the Atlantic retreated on Friday as investors banked profits from the week’s rally sparked by massive government and central bank action to protect economies from the coronavirus.

“Today’s sell off is most probably a consequence of three days of strong gains and a paring of risk ahead of the weekend,” said Michael Hewson at CMC Markets UK.

He said it was “a welcome sight to see European stocks finish the week higher for the first time since mid-February, offering a welcome respite to some pretty battered portfolios.”

The Dow Jones Industrial Average sank 4.1 per cent, or 915 points, to finish at 21,636.78, but leaving the index with its biggest weekly gain since 1931.

Oil markets saw another dismal day under the twin impact of the pandemic and an ongoing price war, with European benchmark Brent crude plumbing lows last seen in 2003.

“European markets have pulled back … with caution being the order of the day after such a good rally,” said Neil Wilson, chief market analyst at trading group Markets.com.

“Stimulus efforts have calmed markets” this week, Wilson said. Earlier, Asian stock markets had mostly managed to record more gains.

NYSE trader Jay Woods works from home, with the trading floor closed. Picture: AP

Support has come largely from a $US2-plus-trillion US rescue package was signed into law late Friday by President Donald Trump The bill will pump $US100 billion into hospitals and health facilities in critical need of medical gear like personal protective equipment and ventilators, create a $US500 billion loan reserve for large corporations including airlines and provide $US377 billion in grants to suffering small businesses.

The legislation is a welcome reprieve, and includes cash payouts to most Americans and a huge expansion of unemployment benefits. But economists warn of a tough road ahead.

“It is clear that we have entered a recession” that will be worse than the aftermath of the global financial crisis in 2009, said IMF chief Kristalina Georgieva.

US Treasury Secretary Steven Mnuchin on Friday pledged to quickly send out direct cash transfers, saying, “Americans need that money now.” But there remains doubt about whether that can happen in the three weeks he has set as the time frame.

“The success of a massive stimulus package … will depend on how quickly the aid can get to beleaguered consumers and businesses — a huge challenge for federal and state agencies that aren’t built to move quickly,” said Art Hogan, chief market strategist at National Securities.

Hogan noted that the number of coronavirus cases in the United States is “exploding,” and that economic data will be “horrendous” in the upcoming period.

AFP