ASX higher as RBA holds rates
A 1.5pc rise was led by growth and value sectors, while the defensive Health Care and Consumer Staples sectors underperformed. Reserve Bank keeps rates on hold.
- Temple & Webster earnings jump
- Credit Corp lifts first half profit
- Australia’s Ellume in US Covid test deal
That’s all from the Trading Day blog for Tuesday, February 2. Tuesday’s 1.5pc rise was led by a mix of growth and value sectors, while the defensive Health Care and Consumer Staples sectors underperformed. On Wall Street the Dow gained 0.8 per cent, the S&P 500 added 1.6 per cent and the Nasdaq jumped 2.6 per cent. Locally the Reserve Bank board kept rates on hold at its first meeting for 2021.
David Ross 7.51pm: Emirates, CGU seek talks over Collingwood racism findings
Major Collingwood sponsors air carrier Emirates and insurer CGU are seeking talks with the football club after a damning report painting a culture of racism was released this week.
The concerns come after evidence of systemic racism at the AFL club emerged in a high profile report released on Monday.
Major sponsors Emirates and CGU Insurance are both in dialogue with the club after findings of racism.
CGU Insurance, which will walk away from the club at the end of the 2021 season, said it was “deeply concerned and disappointed” by the findings of racism at the club.
“We are a significant supporter of reconciliation in Australia and as a business we are focused on promoting diversity, inclusion and belonging in all our communities,” a CGU spokeswoman said.
“We’ll continue to engage with the Club to further understand the findings from the report and their plans for implementing the recommendations.”
James Kirby 6.13pm: China may backdown on coal crackdown
China’s ban on Australian coal could be about to crack after months of rising prices and a severe northern winter have combined to pressure the restrictions.
Daniel Hynes, senior commodities analyst at ANZ, this week raised the possibility in a note suggesting “traders are reassessing the market amid reports that China is considering allowing some stranded Australian coal shipments to be unloaded”.
Australian coal exporters have been frustrated by the stand off as China informally banned Australian coal late last year.
On top of that, a severe winter increased China’s coal demand. By early January this year it was clear the move had backfired.
Both steel making (coking) and heating (thermal) coal prices have moved higher in recent weeks with a 25 per cent lift in steel making coal since Christmas.
Moreover, Australia has rapidly managed to find alternative new markets for its coal with China’s boycott compensated by rising exports to Japan, South Korea and Thailand.
Overall, Australian coal exports in December were up 9 per cent year on year.
Eli Greenblat 5.56pm: DJs aligns online and physical store boss
Upmarket department store David Jones is restructuring its store operations, bringing together the physical stores and growing online platform under one executive.
A David Jones spokesman told The Australian Kate Bergin would be the retailer’s new omnichannel director.
“We are delighted to confirm the appointment of Kate Bergin as omnichannel director and look forward to Kate’s further contribution as we continue to build and enhance a seamless online and instore experience for David Jones customers,” he said. “Kate has driven rapid growth at davidjones.com and has significant retail transformation experience in Australian and international markets, both online and in stores.”
The changes have also brought on the departure of director of retail and operations, Aaron Faraguna, after 16 years with the company. Mr Faraguna has joined luxury watch business Kennedy. “We thank Aaron for his significant contribution and commitment, and wish him well in his future endeavours,” the spokesman said.
Many retailers run their online stores and physical stores separately, with their own dedicated staff and managers, but David Jones has taken the step to combine the both platforms in what it hopes will be a seamless link for shoppers between online and the in-store experience.
The move after David Jones’ owner, South Africa’s Woolworths Holdings, recent overhaul of its boards for David Jones and Country Road Group in Australia to have only full-time managers on both boards, rather than a mix of managers and non-executive directors.
James Madden 5.25pm: Telstra, Kayo in new sport deal
Foxtel’s Kayo Sports and Telstra have signed a landmark deal to capitalise on the booming “streaming generation”, with millions of Australian sport fans set to access top-tier sporting events at a heavily discounted price.
The three million Telstra customers who are already signed up to its Live Pass App will be eligible to access all AFL and NRL games, including the finals, on Kayo, as well 50 local and international sporting fixtures. The fixtures will be available on the various platforms — mobile phone, tablet, television — for $5 a month.
Other Telstra customers can sign up to the Kayo deal for $15 a month. The existing Kayo package costs $25 a month.
Patrick Delany, the chief executive of the Foxtel Group, said the deal was aimed at the burgeoning “streaming generation”, which is are consuming sport in “ever-evolving ways”.
“Kayo is a bold and unique thing in the world, to have 50 sports streamed live. It’s made for the streaming generation, which is on the boil and moving,” Mr Delany said.
“That streaming generation, that love a different form factor — and clearly love this way of viewing these sports — now have an opportunity to get fully behind Kayo.”
4.45pm: ASX ends +1.5% on US leads, dovish RBA
Australia’s sharemarket rose strongly as gains in US futures and crude oil futures added to bullish leads from Wall Street and the RBA extended its QE program by $100bn.
The S&P/ASX 200 closed up 100 points, or 1.5pc, at 6762.6 after hitting a 4-day hgh of 6774.7, with S&P 500 futures up 0.5pc and WTI crude oil futures up 1.1pc.
On the charts, Monday’s “false break” of range support from the December low at 6585 and subsequent “hammer” pattern sets the index up for a test of the recent 11-month peak at 6832.6.
Fundamentally, the global risk appetite has stabilised after recent degrossing by global hedge funds in response to the social-media led short squeeze on stocks like GameStop and AMC Entertainment.
The RBA has helped the valuation outlook for Australian shares at the margin by extending the QE program a bit sooner and by a bit more than most economists expected, helping trim the Aussie dollar.
The local market is also going into what should be a strong earnings period for resources, retailers and banks, as outlined by UBS in a report today.
Tuesday’s rise was led by a mix of growth and value sectors, while the defensive Health Care and Consumer Staples sectors underperformed.
Tabcorp rose 8.8pc to a 12-month high close of $4.46 after confirming it had a number of unsolicited approaches, including for a breakup, as flagged by The Australian.
Afterpay surged 7.9pc as a “bull flag” pattern plays out. Webjet surged 7.5pc in an apparent short squeeze.
Among large cap standouts, CBA rose 2.3pc, BHP rose 2.2pc, Rio Tinto rose 3.4pc, Transurban gained 3.4pc and South32 surged 5.7pc.
4.05pm: GameStop saga heads to Netflix, big screen
The ending hasn’t been written yet, but Hollywood is moving quickly to bring the story of the GameStop investment saga to the screen.
Separate projects at Netflix Inc. and Metro-Goldwyn-Mayer Inc. are already in development about the past week on Wall Street, in which an investing-focused group on a Reddit message board banded together to boost the share prices of struggling companies such as GameStop Corp. and AMC Entertainment Holdings Inc., in the process crippling the hedge funds that had bet against them.
Netflix is in talks with screenwriter Mark Boal, who dramatized real-life events such as the Osama bin Laden raid in “Zero Dark Thirty,” for a movie that would include the streaming company’s breakout 24-year-old star, Noah Centineo, according to a person familiar with the matter.
At MGM, executives are planning to develop a forthcoming manuscript by Ben Mezrich about the saga titled “The Antisocial Network.” The studio moved so fast that it acquired the rights to Mr. Mezrich’s book proposal, which is being shopped to publishers for purchase this month, according to a person familiar with the deal.
It isn’t a surprise that the week that wrecked Wall Street drew producers’ attention, given its colorful cast of characters and the dramatic success the amateur traders had in disrupting the best-laid plans of hedge fund owners.
The Wall Street Journal via Dow Jones Newswires
3.56pm: Exxon to create ‘low carbon’ business unit
Exxon Mobil Corp. is forming a business unit that will focus exclusively on technologies to lower carbon emissions, as the oil giant faces increasing pressure to step up its sustainability investments.
Exxon said Monday that the new business, dubbed “low carbon solutions,” would invest $3 billion through 2025 on lower emission energy technologies, primarily on carbon capture and storage projects, which gather carbon emissions from industrial processes or directly from the air and deposit them underground. Those investments would represent roughly 3% to 4% of Exxon’s planned annual capital expenditures.
Exxon has a large research-and-development division that has invested in carbon capture for years, and Exxon says it has captured more carbon than any other company. Currently, the only large-scale use for captured carbon is to help produce more fossil fuels by pumping in the gas to squeeze more oil and gas out of the ground.
The Wall Street Journal via Dow Jones Newswires
3.37pm: Biden keeps aluminium tariffs on U.A.E
The Biden administration has reversed a last-minute decision by former President Donald Trump to lift aluminum tariffs on the United Arab Emirates.
Mr. Trump on his final day in office, Jan. 20, issued a proclamation to exempt the U.A.E. from a 10% tariff on aluminum imports, citing “an important security relationship,” and said a quota would suffice. The tariffs were first imposed in 2018.
The exemption for the U.A.E. would have gone into effect Feb. 3, but Monday night, President Biden blocked it. “In my view, the available evidence indicates that imports from the U.A.E. may still displace domestic production, and thereby threaten to impair our national security,” he wrote in a proclamation.
The Wall Street Journal via Dow Jones Newswires
Mackenzie Scott 3.23pm: House buyers outpace sellers: SQM Research
New property listing data suggests buyers are outpacing sellers in the housing market, with the numbers of new dwellings made available in January down by a quarter despite staying up on the same time last year.
Data house SQM Research found the number of new listings brought to the market over the traditionally slower month of January was down by 24.5 per cent compared with December. But, in a positive sign for buyers, the number of sellers testing the market was up 4.3 per cent compared with the year prior.
Most capital cities recorded gains on new listings, except for Hobart (down 33.3 per cent, Canberra (down 26.1 per cent) and Sydney (downs 2.5 per cent) recording gains.
SQM managing director Louis Christopher said the slowdown in numbers was expected.
“The month of January traditionally records falls in properties listed for sale as the market is still in a summer holiday mode. This year was no exception,” Mr Christopher said.
“However, when we consider the number of new listings compared to January 2020, there was a material rise in nearly all cities. This finding is consistent with the observed early start to the auction market over January and February.”
“The overall numbers suggest there are more buyers than sellers in the marketplace. You can see this in the reduction of older listings in most cities year-on-year”
The total number of dwellings listed nationally was down by 2.9 per cent last month from December’s 265,116. Compared to 12 months ago, overall listings were down by 10.5 per cent. The two largest markets of Sydney and Melbourne recorded the only gains in total listings, up 4.5 per cent and 21.1 per cent respectively.
Perry Williams 3.04pm: Woodside facing further Myanmar delays
Woodside Petroleum faces the risk of further delays to its Myanmar gas project following a military coup which could hinder its current drilling campaign, Credit Suisse said.
The WA producer has up to 100 staff and dependents in the country and recently started a three-well drilling project as part of a development aimed at sending gas to Myanmar and Thailand by pipeline.
“After Thailand political instability - a target market for Myanmar gas - Covid and now Myanmar political developments, Woodside’s Myanmar project can’t catch a break,” Credit Suisse analyst Saul Kavonic said. “The commercial side of progress had already been dragging on as it is.”
Woodside said in a statement it was “working with our stakeholders to understand how these planned activities may possibly be impacted and preparing our forward plan.”
The project has slipped down Woodside’s priority list in recent years and faces further deferral.
“It may be premature to determine impact here but clearly there is risk of further delay to developments,” Mr Kavonic said. “We don’t think the market ascribes material value to Myanmar, so this presents little value risk. Frankly, we think the market may be happy to see Myanmar capex curtailed.”
2.42pm: RBA flags another $100bn QE
The RBA has left key policy rates unchanged but flagged another $100bn of QE when the current program ends in mid-October.
While $100bn was in line with market thinking, the announcement came sooner than expected.
The RBA also said the additional QE will be conducted at the current rate of $5bn a week.
AUD/USD fell from 0.7660 to 0.7636 on the QE extension news but remains up 0.2pc for the day..
The S&P/ASX 200 was up 1.3pc at 6748.4 after a slight positive reaction.
Bridget Carter 2.01pm: DDH1 prices IPO
DataRoom | DDH1 has priced its initial public offering at $1.10 per share as it looks to raise $150m.
The company will have a $376.5m market value, as revealed by DataRoom on Monday.
Primary proceeds will be $41m and proceeds from the secondary sell down will be $109m.
The pricing equates to 5.3 times the group’s forecasted earnings before interest, tax, depreciation and amortisation for the 2021 financial year on an enterprise value basis and 12.5 times annual forecasted net profit.
Working on the float is Bell Potter Securities, Aitken Murray Capital Partners, Macquarie Capital and UBS.
More to come.
Bridget Carter 1.41pm: Tabcorp confirms approach
DataRoom | Australian betting giant Tabcorp has confirmed to the market that it has received approaches in relation to a potential transaction involving its wagering and media business.
In a statement, Tabcorp said: “Tabcorp confirms that it has received a number of unsolicited approaches and proposals in relation to a potential transaction involving Tabcorp’s Wagering and Media business”.
Tabcorp said that the proposals were expressed to be confidential, indicative, non-binding and subject to numerous conditions, including due diligence, financing and various regulatory approvals.
The company said that its board is assessing the proposals and Tabcorp would update the market in due course.
Read more: Breakup targets Tabcorp wagering
12.51pm: ASX at three-day high
Australia’s share market remains strong before the RBA statement at 2.30pm (AEDT).
The S&P/ASX 200 rose 1.3pc to a three-day high of 6749.3 in early afternoon trading.
It comes as S&P 500 futures rise 0.4pc and WTI crude oil futures surge 1pc to $US54.09 in APAC trading.
The cause appears to be a 0.2pc fall in the US dollar (BBDXY) index.
11.48am: ASX trims early rise as US futures waver
Australia’s share market trimmed a big intraday gain as US futures wavered.
Just before midday the S&P/ASX 200 was up 0.9pc at 6720.
After a massive rebound from a two-month low of 6517.2 on Monday, the bounce continued Tuesday.
The index rose as much as 1.2pc to a three-day high of 6741.1 as a 0.2pc rise in S&P 500 futures initially added to strong leads from Wall Street.
But the US futures subsequently wavered, causing the local index to dip back to opening levels just above 6700, where buying support emerged.
The chart continues to favour a retest of the 11-month high of 6832.6 in the near term after the “false break” of support on Monday.
RBA communications this week could also help by upgrading economic forecasts but also justifying sustained stimulus.
The Technology sector was still leading reasonably broad-based gains with Afterpay extending today’s impressive to 6pc.
A “bull flag” pattern suggested Afterpay will retest its record high in the near future.
Transurban was underpinning Industrials with a 2.3pc rise.
Credit Corp pared its intraday rise to 7pc as profit taking emerged after it surged 14pc on improved FY21 earnings guidance.
Iron ore miners are surging despite the iron ore pullback with BHP up 2pc and Rio Tinto up 3.2pc.
Banks are also faring well with CBA up 1.4pc before its report next week.
The RBA’s monetary policy decision and post-meeting statement are due at 2.30pm (AEDT).
Perry Williams 11.45am: Worley plunge may revive takeover plans
A plunge in Worley’s shares may spark renewed takeover interest from its largest investor, Dar Group, as several brokers downgraded the stock after the resources contractor warned of a steep fall in first half profits.
Worley shares sank 11 per cent on Monday and fell a further 3 per cent in early trading on Tuesday to trade below $10. That could see Dar run the ruler over a bid, according to Credit Suisse, after it offered $2.9bn for the company in 2016.
“Dar Group holds ~23 per cent of Worley shares and in Nov‐2016 submitted an indicative proposal to acquire Worley. Significant weakness in the shares could renew DAR Group’s interest, in our view. Alternatively, Jacobs has ~10 per cent of the shares and is unlikely to be a long‐term holder, in our view,” the broker said.
Credit Suisse cut Worley to neutral from outperform and slashed its target price by 21 per cent to $9.20 from $11.70 while UBS also lowered its rating to neutral from buy and dropped its price by a quarter to $10.80 from $14.45.
Citi still rates Worley a buy but reduced its price target by 15 per cent to $12.10 while Morgan Stanley remains equal-weight with a $10.50 price target. Goldman Sachs remains a buy and bullish $15.10 price target.
Analysts were divided on whether Worley faces a short-term blip or more fundamental structural headwinds that could threaten the fossil fuel dependent part of its business.
UBS said the revenue outlook looks “challenged” through the 2022 financial year given higher than expected project deferrals while Credit Suisse said it was surprised by the rapid change in momentum for the company.
“At the Worley Sustainability Investor Day on 1 December 2020, management gave an operating update but there was no hint of this magnitude of deterioration in business conditions,” Credit Suisse said.
Lachlan Moffet Gray 11.14am: Online investors try to ‘GameStop’ Webjet
Webjet, one of the most shorted stocks on the ASX200, is up 6.40 per cent in early trading as online ASX stock tipping communities attempt to replicate the short squeeze effect that sent GameStop shares skyrocketing over the past few weeks.
The travel company, which has approximately 15.5 per cent of its shares shorted, according to Bloomberg, has seen its price more than halve in one year as COVID smashed the travel industry.
Moderators at online reddit community ASX Bets - an Australian counterpart to the infamous WallStreetBets forum - recently announced it would delete posts and ban users that called for co-ordinated market plays, over fears regulators could take action against the forum for hosting pump and dump schemes.
“So for now, stop. If a great crusade comes along, If someone kicks your dog or we find evidence of manipulation, we’ll grab our pickforks with you, but arranging a pump so someone else will hold your bags isn’t the same thing,” the moderators wrote last week.
Users on popular stock tips forum HotCopper have also discussed the possibility of co-ordinated buying of the stock, although some users have noted that the situation is not comparable to the GameStop situation, where more than 130 per cent of the company’s shares were held in a short position prior to the current situation.
10.28am: ASX jumps 0.8pc; Credit Corp up 13pc
Australia’s share market rose solidly as expected in early trading after big gains on Wall Street.
The S&P/ASX 200 was up 0.8pc at 6717.9 and S&P 500 futures edged up 0.2pc at the start of APAC trading.
The Technology sector was strongest after a strong showing from the NASDAQ, with Afterpay surging 4pc.
Other outperforming sectors included Industrials, Energy, Materials and Financials.
In those sectors Transurban rose 1.7pc, Woodside rose 1.8pc, BHP was up 1.6pc and CBA rose 1pc.
Credit Corp stood out with a 13pc rise after upgrading its FY21 earning guidance.
Treasury Wine, Healius, ALQ, Treasury Wine and Janus Henderson rose more than 4pc.
10.16am: Bullish reporting season ahead: UBS
UBS quantitative analyst Pieter Stolz flags a bullish February reporting period in Australia.
After falling 24.4pc in FY20, EPS is expected to rebound 23.3pc in FY21, driven by a rebounding economy and near record high commodity prices.
The consensus is for resources to lead EPS growth in FY21 with a 42.4pc rise, followed by the financials at 23.3pc, while the industrials ex-financials are expected to lag with EPS growth of just 3.1pc.
If commodity prices remain resilient, resources sector EPS could continue to be revised up, according to Mr Stoltz.
UBS are also well ahead of consensus for financial EPS, largely due to our expectations the banks could reverse provisions and institute share buybacks.
Key themes include the end of the “dividend recession” and a potential lift in payout ratios. a cautious restart of guidance and outlook statements, European exposed stocks facing COVID impacts, beneficiaries of stimulus and strong housing activity and the effect of COVID-related costs on earnings.
UBS sees upside risk for earnings on Sims Metal, BlueScope Steel, Stockland, Mirvac, and Charter Hall; upside risk for the outlook on Sims Metal and BlueScope.
Key overweights for the broker include Sims Metal, BlueScope Steel, Stockland, Mirvac and Charter Hall.
TPG Group is a key underweight, with given downside risks to earnings and outlook, according to UBS.
Ben Wilmot 10.10am: Unibail in for more market pressure
Mall owner Unibail-Rodamco-Westfield faces another rocky day on the markets after dramatic price rises last week driven by a short squeeze on hedge funds positioning against the stock.
Hedge funds have been betting on more falls in the embattled retail landlord’s share price as Europe faces the prospect of a wave of lockdowns and border closures as it fights the latest coronavirus variant.
The mall company, which bought the international Westfield empire for $32bn in 2017, has been a favourite target of hedge funds in the wake of the pandemic which has shattered malls across Europe and the United States where it operates.
The bet against the company went partially wrong when it last year dumped a proposed 3.5bn euro recapitalisation plan and instead turned to debt markets to get through the crisis.
The hedge funds were further caught short as retail investors also ploughed into the dramatically undervalued stock, which has a secondary listing on the Australian Securities Exchange, where the CDI units have mirrored the battle playing out in European markets.
The contest between hedge funds, punting on the long-term deterioration in malls accelerating dramatically, and retail investors, who believe that the oversold company will recover, will likely prompt more wild share price swings as it plays out.
Eli Greenblat 9.56am: Adams set to extend as Metcash CEO
Grocery, liquor and hardware wholesaler Metcash has announced that the employment agreement of its group chief executive, Jeff Adams has been extended subject to the renewal of his visa, which is due to expire in August this year.
The company said the existing terms of his employment agreement are unchanged and include a maximum period equivalent to his visa (four years), and a notice period of 12 months for both Mr Adams and Metcash.
Mr Adams has held the position of CEO since December 2017.
Metcash chair, Rob Murray said: “We are delighted that Jeff has agreed to extend his time with us. Under Jeff’s leadership the company has delivered on its purpose of championing the success of our independent retailers.
“He has been integral in driving significant progress under our five-year MFuture program focused on improving the competitiveness of our independent retail networks, and he remains the right person to continue taking Metcash forward.”
Eli Greenblat 9.48am: New Hanes chief appointed
Tanya Deans has been appointed as president of Hanes Australasia, effective February 8, giving her leadership of the former Pacific Brands business in Australia that includes fashion, apparel and clothing brands such as Bonds, Bras N Things, Berlei, Champion and Sheridan.
Ms Deans succeeds David Bortolussi who in August announced his departure to take up the role as CEO of A2 Milk.
She has been with Hanes for 25 years and over this time has held a range of brand and product leadership roles across Hanes Australasia, most recently leading the Bras N Things business.
Ms Deans will lead 4400 staff across the region and will also be responsible for a rapidly growing e-commerce business and a network of more than 450 stores.
9.40am: ASX rebound set to continue
The Australian sharemarket rebound is set to continue, with a bigger-than-expected rise possible today.
Overnight futures relative to fair value suggest the S&P/ASX 200 will open up 0.7pc at 6710.
However, the “Hammer” candlestick pattern that formed after the “false break” of chart support at 6587 yesterday could soon generate a test of the recent 11-month peak at 6832.6.
After hitting a two-month low of 6517.2, the index bounced as much as 2.4pc intraday on Monday before closing up 0.8pc at 6663, right on its 50-day moving average.
It comes after the S&P 500 bounced strongly off its 50-day moving average, with degrossing from hedge funds in response to the recent short squeeze apparently having run its course.
Domestically, the share market could be encouraged by a combination of stronger economic forecasts and indications of sustained policy support from the RBA this week.
The RBA concludes its monthly board meeting with a statement from Governor Lowe at 2.30pm (AEDT).
Dr Lowe will flesh out his view in a speech on “The Year Ahead” at the National Press Club from 12.30pm (AEDT) on Wednesday. He will then appear before the House of Representatives Standing Committee on Economics on Friday morning when the statement on Monetary Policy is also due.
Iron ore price slippage is a risk for iron miners and Vale results on Wednesday could affect the outlook.
But even with spot iron ore down 1.3pc to $US156.05 a tonne last night, BHP ADR’s equivalent close at $US44.89 suggests the resources sector heavyweight will open up 1.8pc today.
Offsetting the fall in the iron ore price to some extent was a 2.8pc jump in WTI crude to $US53.68 a barrel. However, in a sign of lingering risk aversion, the Bloomberg US dollar index rose 0.4pc and broke above a key chart level.
9.35am: GameStop saga heads for the screen
The ending hasn’t been written yet, but Hollywood is moving quickly to bring the story of the GameStop investment saga to the screen.
Separate projects at Netflix Inc. and Metro-Goldwyn-Mayer Inc. are already in development about the past week on Wall Street, in which an investing-focused group on a Reddit message board banded together to boost the share prices of struggling companies such as GameStop Corp. and AMC Entertainment Holdings Inc., in the process crippling the hedge funds that had bet against them.
Netflix is in talks with screenwriter Mark Boal, who dramatised real-life events such as the Osama bin Laden raid in “Zero Dark Thirty,” for a movie that would include the streaming company’s breakout 24-year-old star, Noah Centineo, according to a person familiar with the matter.
At MGM, executives are planning to develop a forthcoming manuscript by Ben Mezrich about the saga titled “The Antisocial Network.” The studio moved so fast that it acquired the rights to Mr. Mezrich’s book proposal, which is being shopped to publishers for purchase this month, according to a person familiar with the deal.
Dow Jones
Lilly Vitorovich 9.26am: Ad market ‘quickly rebuilding’
Advertising spending has increased for a third straight month following a COVID-ravaged 2020.
Ad spending rose 2 per cent in December from the same period a year earlier, with spending across the digital and television sectors up 15.9 and 11 per cent, respectively, according to industry group Standard Media Index.
SMI local boss Jane Ratcliffe says the worst is over for the Australian ad market.
“There’s now no doubt that the market has moved strongly beyond the COVID ad recession and is quickly rebuilding,’’ she said. “The evidence is clear as total ad spend for the December quarter is now up 5.4 per cent and we can see that well more than half of all the SMI product categories grew their media investment in this period. And our forward pacings data – which tracks confirmed future ad bookings – shows ongoing growth across numerous categories.’’
SMI said the jump in digital ad spend was mainly due to the market’s ongoing attraction
to social media sites, with the sector now the digital media’s second largest after search.
For 2020, ad spending was down 15 per cent from the prior year following double digital falls across the majority of segments.
The cinema industry recorded the biggest drop in ad spending, down 67.9 per cent in December from a year earlier, followed by the magazine (-42.4 per cent) and outdoor (-38.4 per cent) segments.
Ben Wilmot 9.21am: Centuria Industrial REIT rides logistics boom
The Centuria Industrial REIT has unveiled a healthy first half result after a busy period in which it bought nine properties worth $694m as it took its portfolio to $2.4bn.
The deals propelled the company, which is Australia’s largest domestic pure-play industrial REIT listed on the ASX, although it may be challenged if Blackstone lists the $3.5bn Milestone Logistics trust.
Fund manager Jesse Curtis said the company had targeted acquisitions within tightly-held industrial sub-sectors with favourable supply demand dynamics, and noted it expanded into the data centre and cold storage sectors.
It bought the $416.7m Telstra Data Centre in Clayton, Victoria, as well as four cold storage facilities, worth $214.1m, in key infill markets along the eastern seaboard.
“During the COVID period we observed a rapid increase in demand for data warehousing with a shift to cloud based data storage coupled with an increase in online shopping, particularly for non-discretionary items such as groceries and pharmaceuticals,” Mr Curtis said. “We believe these trends are here to stay and investing in the undersupplied industrial sub-sectors of data centre and cold storage is a sound strategy,” he said.
Due to strong leasing and the acquisitions, the trust upgraded fiscal 2021 funds from operations guidance to no less than 17.6c per unit.
Lachlan Moffet Gray 9.05am: Credit Corp lifts first half profit
Debt buyer Credit Corp saw a profit lift on the back of flat revenue in the first half of the financial year due to strong debt ledgers, with the company reinstating a dividend and upgrading its full year outlook.
Revenue for the period was $187.99m, down two per cent on the year prior, while net profit after tax was $42.277m, up 10 per cent.
The board declared a fully franked dividend of $0.36 cents per share after suspending its full-year payment last year.
The company attributed the result to a strong US purchased debt ledger, record half-year purchased debt ledger investment and a strong recovery in consumer lending over the December quarter.
The company said it would expect these trends to continue for the remainder of the year and expects to take advantage of its debt-free status to make more acquisitions following its purchase of the Collection House debt book.
The company now expects to make between $310m-$330m of ledger acquisitions, up from $270m-$330m.
Net profit after tax for the full year is forecast to be $85m-$90m, up from the $70m-$85m forecast in December.
Lachlan Moffet Gray 8.45am: CBA life sale adds 17pts to CET ratio
Commonwealth Bank says the proceeds of its $668m sale of its stake in BoComm Life to MS&AD Insurance group have been received by the bank, adding 17 basis points to its Common Equity Tier 1 ratio that will be recognised in half-year results.
The bank also said the merger of Aussie Home Loans with online platform Lendi will form a new company in which CommBank has a 45 per cent shareholding, and is expected to be completed halfway through the calendar year.
The bank has made a number of operational changes, including the consolidation of all high net work clients into one business unit.
CommBank’s half year results will be handed down on February 10.
8.35am: What’s impressing analysts today?
GWA Group cut to Neutral: GS
Galaxy Resources cut to Sell: Bell Potter
Healius raised to Buy; target price raised 63pc: UBS
IGO target price raised 30pc to $7.50: UBS
OZ Minerals raised to Neutral: GS
Worley target price cut 15pc to $12.10; Buy rating kept: Citi
Worley raised to Neutral: JPM
Worley raised to Buy: Morningstar
Worley cut to Neutral; target price cut 25pc to $10.80: UBS
Deterra raised to Buy: UBS
Smartgroup raised to Buy: Ord Minnett
CSL target price cut 4pc to $272; Equalweight rating kept: MS
RMA Global cut to Hold: Bell Potter
Lachlan Moffet Gray 8.34am: Temple & Webster earnings jump
Online furniture retailer Temple & Webster’s pre-tax earnings increased by more than 500 per cent in the first half of the financial year as a strong pandemic-influenced demand for furnishings pushed through to the holiday period.
The company, which listed on the ASX in 2015, recorded revenue of $161.6m, up 118 per cent year on year in the six months to December 31.
In the same time period EBITA lifted 556 per cent to $14.8m, compared to $2.3m the prior year.
Temple & Webster CEO Mark Coulter said the strong result would be re-invested for growth through data insights and private label brands.
“It is great to see our revenue growth translating into operating leverage and significant profit growth,” he said. “This allows us to accelerate our investment into areas such as data, technology, private label and brand awareness to further differentiate our proposition”.
Throughout the period the company saw customers grow 102 per cent to 687,000 while fixed costs as a percentage of sales declined from 11.6 per cent to 7.5 per cent.
The company said sales momentum had continued, with January revenue growth in excess of 100 per cent due to strong tailwinds like the ongoing adoption of online shopping, a recovering economy and an increase in discretionary income due to travel restrictions.
8.21am: ASX to open higher as Wall Street rebounds
Australian stocks are poised to rise in early trade, as global markets rebounded from last week’s losses and as online traders set their sights on silver.
At about 8am (AEDT) the SPI futures index was up 52 points, or 0.8 per cent.
The Dow ended up 0.8 per cent, the S&P 500 was 1.6 per cent higher and the Nasdaq jumped 2.6 per cent.
Yesterday, the ASX ended 0.8pc higher after an impressive intraday bounce.
The Australian dollar is lower at US76.27c.
Spot iron ore is down 1.3 per cent at $US156.05 a tonne, Brent oil has jumped 2.4 per cent to $US56.35 a barrel, and gold futures are up 0.7 per cent at $US1863.90 an ounce.
Lachlan Moffet Gray 8.19am: SocietyOne launches loan product
Fintech lender SocietyOne has launched its first ever secured loan product after originations rebounded in December and January, pushing past the $1bn threshold last month.
The new product will allow borrowers to secure loans with an item like a vehicle or boat to gain access to larger loans - up to $70,000 - at a one per cent discount.
The product was tried with a few brokers in December, said SocietyOne CEO Mark Jones.
“We’re hitting the ground running in 2021 and building on our strong growth momentum by diversifying our product offering through a range of new product launches and improvements to the customer experience,” said Mr. Jones.
“With the launch of a secured loan product, we’re able to increase accessibility and flexibility for our customers, while maintaining our high credit quality for our investors.”
8.15am: Reddit users fuel rally in silver
Online investors who spurred a trading frenzy in the shares of GameStop Corp. and AMC Entertainment. have moved onto a bigger target: the global silver market.
Futures prices for silver in New York settled at their highest level in eight years, the latest work by a loosely knit group of speculators who congregate on social-media platforms including Reddit’s WallStreetBets. Some participants have been contending aggressive buying could power GameStop-like, quadruple-digit percentage gains in other arenas, with some chatter over the weekend focusing on the roughly $US50 billion physical market for silver.
Many traders with experience in commodities say the trade is highly speculative. There is more than enough silver to meet industrial demand for everything from semiconductors to solar panels, and producers can raise output to take advantage of higher prices. Previous efforts to corner the market have ultimately preceded crashes, most famously when the Hunt brothers artificially boosted silver in 1979 and 1980.
Still, the recent wave of speculation is unlike anything many in commodities have witnessed in the recently past. Shares of miners like First Majestic Silver Corp. and Hecla Mining Co. have been among the stock market’s best performers recently -- each rose 20pc or more on Monday -- while the largest exchange-traded fund tied to silver logged its biggest-ever daily inflow on Friday. Online silver dealers around the country have even reported soaring demand from retail buyers.
“It’s become like the GameStop of commodities,” said Edward Meir, a consultant focused on metals at brokerage ED&F Man Capital Markets. “It doesn’t make any sense... It could be equally ugly on the way down.”
Dow Jones
8.08am: Wall Street posts solid gains
US stocks rebounded, with major benchmarks recovering some ground following their worst week since October and the online day-trading crowd setting its sights on the silver market.
The Dow Jones Industrial Average rose 0.8 per cent, the S&P 500 gained 1.6 per cent and the Nasdaq Composite climbed 2.6 per cent. The gain in the S&P 500 put the index in positive territory for the year to date.
Stocks had a rocky January, both setting records and getting roiled by day traders using Reddit and social media to co-ordinate and drive trading of heavily shorted stocks like GameStop. The latter sparked a volatile wave of trading that rocked a number of large hedge funds.
Beginning a new month gives the market a chance to reset, said Greg Harmon, founder and president of Dragonfly Capital.
“Things have settled down a little bit,” Mr. Harmon said. Trading volumes for GameStop are lower than last week, he noted, adding the stock has been halted for volatility only once so far Monday.
Many of the stocks popular with the Reddit community were down. GameStop fell 31pc, headphone manufacturer Koss dropped 45pc and Bed Bath & Beyond fell 14pc. AMC Entertainment Holdings, however, was up 0.5pc.
Much of the action among day traders appeared to move to the silver market.
The most actively traded silver futures climbed 9.3pc to $US29.398 a troy ounce, the biggest one-day percentage gain since 2009 and highest level since February 2013. The precious metal has gained in recent sessions after users on Reddit’s WallStreetBets forum posted about executing a “short squeeze” similar to ones credited with fuelling recent gains in other stocks such as GameStop and AMC. That suggests individual investors are taking on hedge funds that are betting on silver prices falling.
Broader market volatility declined. The Cboe Volatility Index, a gauge of stress in the U.S. stock market, fell 9.9pc, though it remains elevated after gaining 45pc in January. Some investors expect volatility to edge down this week as many hedge funds have already reduced short positions on stocks that have attracted a tremendous amount of attention on the internet.
Investors are continuing to monitor the corporate earnings season, with 111 companies from the S&P 500 index reporting this week. Results from big technology companies including Amazon.com and Alphabet are due tomorrow.
Dow Jones Newswires
5.55am: Ford to use Google’s Android system
Ford Motor Co. plans to use Google’s Android operating system to power its vehicle display screens starting in 2023, the latest auto maker to tap Silicon Valley amid the accelerating digitisation of the car business.
The Dearborn, Mich.-based car company said it has entered into a six-year agreement with the tech giant to embed Google’s suite of apps, including voice commands and navigation, in multimedia displays on all Ford models outside of China.
Ford also plans to involve Alphabet’s Google for cloud services to help the auto maker develop in-car features and manage the reams of data streaming from its vehicles. The computing service will also be used to organise production.
Terms of the agreement weren’t disclosed.
Dow Jones
5.15am: Wall Street climbs, silver soars
US stocks rose, with major benchmarks recovering some ground following their worst week since October and the online day-trading crowd setting its sights on the silver market.
In New York lunchtime trade the Dow Jones Industrial Average rose 0.8 per cent to 30095, the S&P 500 gained 1.6 per cent and the Nasdaq Composite climbed 2.5 per cent.
Stocks had a rocky January, both setting records and getting roiled by day traders using Reddit and social media to co-ordinate and drive trading of heavily-shorted stocks like GameStop. The latter sparked a volatile wave of trading that rocked a number of large hedge funds.
Beginning a new month will give the market a chance to reset, said Greg Harmon, founder and president of Dragonfly Capital.
“Things have settled down a little bit,” Mr. Harmon said. Trading volumes for GameStop are lower than last week, he noted, and the stock’s been halted for volatility only once so far Monday. “Maybe we’re back to normal.”
Many of the popular stocks with the Reddit community were down early Monday. GameStop fell 20 per cent, headphone manufacturer Koss dropped 40 per cent, and Bed Bath & Beyond fell 14 per cent. AMC Entertainment Holdings, however, was up 9.3 per cent.
Silver prices rallied, fuelled by a wave of fresh enthusiasm from online traders. The move indicates that the recent bout of volatility is likely to extend into a second week in at least some pockets of the global financial market.
The most actively traded silver futures climbed 7.1 per cent to $US28.81 a troy ounce, its highest level since February 2013. The precious metal has gained in recent sessions after users on Reddit’s WallStreetBets forum posted about executing a “short squeeze” similar to ones credited with fuelling recent gains in other stocks such as GameStop and AMC. That suggests individual investors are taking on hedge funds that are betting on silver prices falling.
“I totally underestimated this,” said Carsten Fritsch, a commodities analyst at Commerzbank. “I couldn’t imagine this could ever happen to a serious and large market like silver.”
Overseas, the pan-continental Stoxx Europe 600 advanced 1.2 per cent.
Dow Jones Newswires
5.10am: Australia’s Ellume in US Covid test deal
Officials at the US Departments of Defense and Health and Human Services have reached a $US230 million ($A300m) deal with Queensland company Ellume to produce at-home, over-the-counter COVID-19 tests, President Biden’s coronavirus response team announced.
The Food and Drug Administration previously authorised the test. So far, the FDA has cleared three COVID-19 tests that can be processed entirely at home, including Ellume’s. None are widely available at this point.
The company is expected to produce 19 million tests a month by the end of the year, Andy Slavitt, senior adviser to the White House COVID-19 response team, said. Based on the agreement, 8.5 million tests will be guaranteed to the U.S. government.
Ellume’s test is expected to cost around $US30 and requires a smartphone, the company has said. The test is authorised to be used by people both with and without symptoms. It can also be used on children as young as two years old.
Mr Slavitt said the government’s announcement was a step toward mass production and lowering prices. “There’s a chicken and egg problem, which we have taken a step to solve today,” he said during a briefing.
To run the test, a person uses a nasal swab and inserts their sample into the analyser. The test’s results are then transmitted to the person’s phone via Bluetooth, where the person can choose to share the results with a healthcare provider. The result can’t be accessed without downloading the app, the company says.
The mobile application requires users to input their zip codes and dates of birth. Names and email addresses are optional. The information is sent to public-health authorities.
Dow Jones Newswires
5.05am: Robinhood raises $US3.4bn amid GameStop saga
Online trading platform Robinhood, which has seen demand surge amid a social media campaign targeting GameStop and other companies, said it had raised $US3.4 billion to finance its needs.
That includes $US1 billion raised last week, then another $US2.4 billion “to continue to invest in record customer growth,” Robinhood said in a blog.
The funds represent more than the total amount raised by the company since its inception, The Wall Street Journal reported.
The new funding round was led by Ribbit Capital and existing investors like ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA participated, Robinhood said.
“This funding is a strong sign of confidence from investors and will help us build for the future and continue to serve people through the exponential growth we’ve seen this year,” the company said in a blog.
AFP
5.00am: Global equity markets rebound; silver soars
Global stock markets bounced higher following last week’s bloodletting as bargain-buyers moved in, while silver prices soared to an eight-year peak after it became a new target of chatroom-driven retail buying, dealers said.
“The fear that dominated the markets last week has faded,” said market analyst David Madden at CMC Markets UK.
Equity markets faced their biggest reverse in several months last week as surging infections and a stuttering vaccination rollout offset long-term hopes for the economic recovery.
Fawad Razaqzada at ThinkMarkets said there has been “investor realisation that central bank QE stimulus will be running at full throttle for a while yet.”
Markets had also been worried that an online retail investors’ attack on Wall Street short traders was forcing some to sell equities or close out positions to cover their backs -- and losses.
After targeting shares in struggling video game store GameStop, retail investors have shifted to silver as their target.
The price of the metal zoomed to an eight-year peak at $US30.10 per ounce in early Monday morning deals, before paring gains.
Despite last week’s losses the new week started on a positive note in Asia, with Hong Kong and Seoul up more than two per cent, while Tokyo jumped more than one per cent and Shanghai won 0.6 per cent.
Data out of China at the weekend showed that growth in economic activity appeared to have slowed in January as officials imposed fresh containment measures to counter new virus clusters in parts of the country.
The positive tone on Asian markets carried over to European trading where the main indices all finished firmly higher.
London stocks closed up 0.9 per cent, Frankfurt added 1.4 per cent and Paris gained 1.2 per cent.
AFP
4.55am: US GDP ‘to recover from pandemic mid-2021’
The world’s largest economy will recover from the coronavirus pandemic by the middle of 2021, the US Congressional Budget Office (CBO) said, sooner that it had forecast last year.
However employment will take longer to recover, after business shutdowns to stop COVID-19 from spreading caused mass lay-offs in the United States beginning last March.
“CBO currently projects a stronger economy than it did in July 2020, in large part because the downturn was not as severe as expected and because the first stage of the recovery took place sooner and was stronger than expected,” the nonpartisan office serving Congress said.
“In CBO’s projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its pre-pandemic level in 2024,” while the labour force recovers by 2022.
AFP
4.50am: US manufacturing continues recovery
American factories continued to recover from the COVID-19 downturn in the first month of the year, albeit at a slightly slower pace, an industry survey said.
The Institute for Supply Management’s (ISM) manufacturing index was at 58.7 per cent in January, less than analysts had forecast but nonetheless above the 50-percent reading indicating expansion for the eighth straight month after the sector plunged as the pandemic began.
The softening has contributed to a decline in both new orders and production, but employment continued to recover even as factories complained the virus complicated operations.
AFP
4.45am: Silver hits eight-year high
Silver prices hit eight-year highs with support from investors carrying out action similar to that which sent shares in video game retailer GameStop surging.
The metal jumped to $US30.10 an ounce before falling back slightly to $US29.29, still a gain of 8.6 per cent.
Since Thursday, silver has gained around 16 per cent in value. “Retail traders are herding into silver in the same way they have driven the likes of GameStop over the last week,” said Neil Wilson, chief market Analyst at Markets.com.
Amateur investors, organising over Reddit and other online forums, are targeting shares of companies including GameStop that have been “short-sold” by hedge funds in a bet that the prices would fall.
Shares in GameStop, a company that has been financially ailing, soared during the Reddit group’s massive buying initiative -- mounted in protest against hedge fund bets on GameStop’s demise.
To cover their losses, the hedge funds have to buy back, at higher prices, shares they had sold.
Silver soared after investors reacted to messages appearing on the Reddit forum WallStreetBets talking about an opportunity to push up the price.
In this case it is banks that are being hurt rather than hedge funds. Hussein Sayed, chief market strategist at FXTM, said “influencing the price of silver will not be as easy” as it was with GameStop owing to the metal’s total market value of around $US1.5 trillion.
At its high last week, GameStop was worth $US22.8 billion.
But the tactic of pushing up silver prices could work should investors succeed in tightening the physical market for the metal, according to analysts.
GameStop traders switch to silver, putting Australia in the picture
4.40am: ASOS buys Arcadia clothing brands
Online clothing retailer ASOS bought brands including Topshop from collapsed Arcadia but has snubbed its stores, resulting in around 2500 job losses.
ASOS, which has enjoyed strong demand during the pandemic, also clinched the purchase the Topman, Miss Selfridge and HIIT brands in a transaction worth £330 million ($US452 million), administrator Deloitte said in a statement.
ASOS’ website-based business model already sells Arcadia’s key brands. Arcadia collapsed late last year capped a spectacular fall from grace for owner Philip Green. He was once dubbed “the king of the high street” but saw his reputation damaged by the high-profile collapse of UK department store chain BHS in 2016.
“After much speculation, ASOS has won the prized assets from the fallen kingdom of Arcadia,” said Russ Mould, investment director at stockbroker AJ Bell.
“This looks like a decent deal and one that gives ASOS the ability to earn higher margins from clothes that it was already selling through its platform under a previous partnership deal.” The announcement comes after rival online retailer Boohoo on Friday said it was in talks with Arcadia’s administrator to buy three of its other brands -- Dorothy Perkins, Wallis and Burton.
Boohoo last week agreed to purchase the intellectual property assets of failed department store chain Debenhams.
Arcadia and Debenhams collapsed in December -- costing up to 25,000 jobs -- having struggled to transition from a bricks-and-mortar business, long before the coronavirus pandemic forced shoppers online.
ASOS on Monday said its deal did not include the 70 retail stores that are attached to the brands it is purchasing.
AFP
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