S&P/ASX 200 backtracks to finish lower after RBA keeps cash rate on hold
The local sharemarket reversed a strong early lead to finish slightly down after the RBA reaffirmed the cash rate.
- ‘An extremely courageous forecast’
- Higher rate pressure on stocks to return
- Greensill Capital facing possible insolvency
Welcome to the Trading Day blog for Tuesday, March 2. The ASX 200 fell just over 1 per cent after early gains faded. The RBA kept the cash rate on hold as expected while the USDA is putting the brakes on a massive Rio Tinto and BHP copper project.
7.42pm:Hong Kong stocks sink
ong Kong stocks sank more than one percent Tuesday after a top Chinese central bank official warned bubbles were forming in global financial markets and a correction was likely.
The Hang Seng Index fell 1.21 percent, or 356.71 points, to 29,095.86. The benchmark Shanghai Composite Index also lost 1.21 percent, or 42.81 points, to 3,508.59, while the Shenzhen Composite Index on China’s second exchange slipped 0.70 percent, or 16.41 points, to 2,332.76
AFP
Ben Wilmot5.58pm:Australian Unity under new attack
Funds manager Australian Unity has come under attack as it seeks to fend off a bid for a near $2.5bn portfolio of hospitals and medical centres from Canada’s NorthWest Healthcare Properties.
The battle for control of the properties is sharpening after the local manager tried to shut the door on the bid by refusing to engage with the bidder.
Australian Unity last week also warned that the offshore bid significantly undervalues the assets, and could upset ties with healthcare operators, but the suitor has struck back, complaining about how the trust that owns the assets is run.
A successful move on the Australian Unity Healthcare Property Trust, by Northwest, which is backed by capital partner, Singaporean heavyweight GIC, would see the Canadian group become Australia’s dominant private medical landlord.
The Canadian suitor has snared a 16.2 per cent stake in the vehicle and is understood to have written to Australian Unity with concerns that interests of trust unit holders are not being independently represented and raising potential conflicts held by the manager.
NorthWest is insisting that its offer price for the trust is reasonable and has been privately critical of Australian Unity’s refusal to hold talks.
The Canadian suitor is holding out the lure of lifting its offer price, which equates to $2.20 per wholesale unit, once it can see the trust’s books.
It believes that the support of the trust’s largest investor, Hume Partners, shows its proposal has merit and has argued for the appointment of an independent expert to guide considerations on its takeover proposal.
The takeover could become a more public fight as the trust is a critical part of the Australian Unity funds empire and the manager has flagged plans for more than $1bn worth of developments in future.
The trust board said last week it had “carefully considered” the takeover plan and found it was not in the best interests of unitholders to “engage in any further discussions with NorthWest, having regard to the value, conditionality and lack of certainty associated with the indicative proposal”.
4.35pm:ASX backtracks to finish down
The local sharemarket reversed a strong early lead to finish slightly down after the RBA reaffirmed the cash rate but shied away from aggressive posturing on yield curve control, sending bond yields up as the market begins to up price in a rate rise earlier than expected.
The ASX 200 fell 27 points, or just over 1 per cent, to close at 6762.3 as the energy index dragged the bourse down, falling 1.85 per cent.
Only consumer staples and the financial updates gained ground today, with A2 Milk and Coles pushing up the consumer staples index with a 7.55 per cent and 1.42 per cent lift respectively.
In the financials index banks made small gains between 0.4 and 1.13 per cent, with Suncorp leading the pack, up 1.58 per cent.
Overall A2 Milk performed the best through the day, followed by metal recycling company Sims, up 5.22 per cent.
Eagers Automotive pulled back from earlier gains to finish up 4.50 per cent, as did Nine Entertainment, up 4.42 per cent.
Underperforming stocks include Gold Road Resources, down 8.05 per cent and litigation funder Omni Bridgeway, down 7 per cent.
Mesoblast fell 4.88 per cent after issuing $130m worth of new shares in a private placement while Zip Co fell 5.83 per cent and Afterpay, 1.73 per cent following early gains as investors pulled back from growth stocks in the afternoon.
The Australian dollar was trading at $US0.7754 cents at the day’s end following a spike after the RBA announcement.
The 10 year Australian Government Bond Yield finished at 1.722 per cent, up more than five basis points.
4.06pm:RBA will lift rates next year - KPMG
Stocks have slipped into the red on the local market as the ASX 200 extends its decline to to 13 points, hitting 6776.6 shortly before 4 pm.
The slide comes after the RBA hold rates steady and indicated it was willing to be more flexible with its yield control and QE bond buying, albeit in a dovish way, which sent the 10 year Australian government bond yield up more than 8 basis points to 1.738 per cent.
KPMG Australia Chief Economist Brendan Rynne told The Australian that the bond yield spike and market slide are correlated: there is an expectation that the RBA will have to lift the cash rate before its 2024 estimate.
“Clearly there is a difference of expectations between what the market believes is going to happen in the short to medium term around interest rates compared to the rhetoric that is being provided by the Reserve Bank,” Dr Rynne said.
“That’s not to say the market’s anticipating the cash rate to go up immediately, but whether or not the RBA can hold on at historically low levels for the next three years remains to be seen.”
Dr Rynne said KPMG had forecast an increase in the cash rate sometime next year.
“If the economy continues to perform strongly, and our expectation that from a GDP perspective Australia’s GDP will return to the same level it was pre pandemic in the second half of this year.
“From an economic growth perspective, it is probably going to be in towards the second half of 2022 when you are going to start needing to look at raising the cash rate if the economy is performing strongly.”
However, Dr Rynne said it was unlikely the RBA would lift the cash rate to deal with strong housing price growth anytime soon, even though the market grew its fasted in 17 years in February.
“The reality is though house price movements that we are seeing at the moment are quite normal,” he said.
“We have been going through an extended period of moderating growth and with the economy improving, the fact there has been a buildup of savings and interest rates low, it’s not surprising you are starting to see this.
“I think the thing with housing is there are other levers besides the cash rate to pull.
Mackenzie Scott3.59pm:Buyers outpacing sellers in property
The rise in the number of new properties that came onto the market last month did little to replenish stock levels given the high levels of buyer demand, with the total number of available dwellings dropping by almost three per cent.
New listings rose 52.4 per cent in February, equating to 76,430 new properties being added to the market in the past 30 days, according to data house SQM Research. The figure is 6 per cent higher than the same time last year, when word of the emerging coronavirus issues started to spook sellers.
While vendors have started to return to the market, it has not yet matched the level of buyer demand. The fear of missing out has caused properties to sell quickly, with abnormally high activity at open homes and at auctions, which has resulted resulting in the total number of properties available falling 2.7 per cent month-on-month to 257,952.
Total listings were down 13.1 per cent in February last year.
SQM managing director Louis Christopher said the rate of absorption is increasing, with listings over 180 days falling 8.5 per cent last month and 26.7 per cent on the same time last year.
“The key takeaway from February’s property listing numbers is that despite the rise in new listings nationwide (year-on-year and month-on-month), absorption rates are picking up pace, so much so that total listings actually fell over the same period,” Mr Christopher said.
“Right now demand is swamping supply. And no where more is this the case than regional Australia.
Eli Greenblat 3.28pm:Department stores ‘stuck in the 1950s’: Adore Beauty
Adore Beauty co-founder and executive director Kate Morris said as the Covid-19 pandemic emerged as a major threat to business, the economy and health in March 2020, she cobbled together a “war room” of other online retailers - some of them direct competitors - to share knowledge and advice.
At the Australian Governance Summit held by the Australian Institute of Company Directors on Tuesday, she said traditional department stores that have not innovated cosmetics counters in 70 years have left the shopper experience stuck in the 1950s, but those shoppers are now moving on.
Looking to create an opportunity from the Covid-19 crisis and pushing ahead with disrupting the entrenched traditional retailers, Ms Morris has revealed she was taking on a new role at the online beauty and wellness retailer Adore Beauty of chief of innovation to put innovation at the forefront of the company’s strategy and planning.
“First of all I would say it (innovation) is fundamental to what has made Adore successful and if you think about our story of starting in a garage 20 or 21 odd years ago with no money and no experience and did we have any right to waltz into an $11bn market and decide we were going to disrupt some really big well-resourced incumbents.
“The only reason we were able to do that was because we were willing to innovate and nterrupt the way things always worked in our industry,” Ms Morris told the Australian Governance Summit held by Australian Institute of Company Directors on Tuesday.
“And to give you an idea of how important we think that is, my new title at Adore is actually chief of innovation and so that is going to be my role, going back to being an entrepreneur.”
Lachlan Moffet Gray 3.04pm:10-yr Aussie govt bond yield climbing
The 10-year Australian government bond yield has begun climbing after an initial six point basis point spike following the RBA’s 2.30pm rates announcement.
At 2.30pm the yield lifted from 1.67 per cent to 1.72 per cent before pulling back and again rising, this time to 1.736 per cent.
It comes after the RBA doubled its daily bond purchase on Monday after yields spiked at the end of last week.
“The Bank remains committed to the 3-year yield target and recently purchased bonds to support the target and will continue to do so as necessary,” RBA Governor Philip Lowe said today.
“Also, bond purchases under the bond purchase program were brought forward this week to assist with the smooth functioning of the market.”
In that same time period the ASX 200 declined around 23 points to 6785.3, showing markets are still willing to test the bounds of the RBA’s monetary policy.
2.30pm:RBA keeps cash rate on hold
The Reserve Bank of Australia kept the cash on hold at 0.1 per cent after its March board meeting.
After the announcement, the S&P/ASX 200 was slightly lower at 6783.60.
The Australian dollar held steady after the announcement, slightly weaker for the day against the US dollar at US77.60c, having been around US77.42c before the announcement.
In a statement after the RBA board meeting, governor Philip Lowe said the Bank remains committed to the 3-year yield target and recently purchased bonds to support the target and will continue to do so as necessary.
“Also, bond purchases under the bond purchase program were brought forward this week to assist with the smooth functioning of the market. The Bank is prepared to make further adjustments to its purchases in response to market conditions.”
He said a further $100bn will be purchased following the completion of the initial program and the Bank is prepared to do more if that is necessary.
The benchmark 10-year government bond lifted to a 1.710 per cent yield following the announcement.
Together with the prospect of further significant fiscal stimulus in the United States has seen longer-term bond yields increase considerably over the past month, the RBA statement said.
“This increase partly reflects a lift in expected inflation over the medium term to rates that are closer to central banks’ targets. Reflecting these global developments, there have been similar movements in Australian bond markets.
“Changes in bond yields globally have been associated with volatility in some other asset prices, including foreign exchange rates. The Australian dollar remains in the upper end of the range of recent years.”
The ASX 200 had been flat shortly before the RBA’s monthly announcement on the cash rate, at 6805.4 points.
The consumer staples index was leading the charge up 0.97 per cent, with A2 Milk up 5.30 per cent.
The financial index gained 0.69 per cent as the banks made small advances while Omni Bridgeway fell more than 6 per cent.
The energy sector was the worst performing, down 1.16 per cent as Worley slid 3.45 per cent.
Nine Entertainment was the strongest performing share, up 6.46 per cent following the resignation of director Patrick Allaway last night, while Gold Road Resources was the worst performer overall, falling 6.78 per cent.
Bridget Carter 2.09pm:Molycop sales process ‘underway’
American Industrial Partners is understood to have kick started the sales process for Molycop with promotional material now out in the market for the Australian-based mining consumables business.
Working on the sale are Record Point and Morgan Stanley.
Flyers are out in the market, sources have said.
Molycop was previously part of the steel manufacturing company Arrium.
The US-based private equity firm purchased Molycop in 2016 for $1.6 billion after Arrium was placed into administration earlier in the year and may now fetch a price north of $2bn.
More to come
John Durie2.01pm:Yarra Capital to takeover Nikko Asset Management Australia
Yarra Capital will takeover Nikko Asset Management Australia creating a fund manager with $20 billion under management and introducing Nikko as a 20 per cent shareholder and distributor for the group in Japan
Under the plan Yarra chief and co-founder Dion Hershan will become an executive chair to concentrate full time on his portfolio management duties and the combined firm is looking for a new manager.
Nikko will own a 20 per cent stake with Yarra staff to cut its holding from 50 to 40 per cent as will founding shareholder TA Capital.
Nikko will distribute fixed income products for the group in Japan and its local equity team including Bratt Potter and Tim Johnston will operate independently under the old Tyndall name. Yarra started four years ago after buying the business from Goldman Sachs.
Will Glasgow1.54pm:Blame media and ‘ridiculous’ concerns for Aus-China breakdown
A senior Chinese diplomat in Canberra has blamed the Australian media and “totally ridiculous” security concerns for the breakdown in Australia’s relationship with China.
Addressing an audience of business people at a Chinese Lunar New Year dinner in Canberra, China’s deputy head of mission Wang Xining said the rising power would remember who was on its side during the bilateral dispute.
“History will prove that it is wise and visionary to be China’s friends,” said Minister Xining in the first lengthy address given by China’s embassy in Canberra since he spoke at the National Press Club six months ago
Mr Wang also delivered a warning to those “people in Australia [who] choose to make enemies to sustain a living”.
“Those who deliberately vilify China and sabotage the friendship between our two countries ... will be [cast] aside in history,” he said.
“Their children will be ashamed of mentioning their names,” he said, according to a transcript of the speech posted on the Embassy’s website.
The combative speech was the fourth major public intervention by China’s Canberra embassy since the already strained bilateral relationship spiralled to historic depths last April after the Morrison government called for an inquiry into the origins of the coronavirus without forewarning their Chinese counterparts.
1.02pm:USDA puts brake on massive Rio Tinto, BHP copper project
The U.S. Department of Agriculture will withdraw a key environmental review for a planned Arizona mine that could supply up to a quarter of U.S. copper demand.
The Forest Service in January released a final environmental impact statement and draft record of decision for Rio Tinto PLC and BHP Group Ltd.’s Resolution Copper project in Superior, Ariz., that opened the door to a land exchange needed to develop what is one of the world’s largest known, undeveloped copper deposits.
But the USDA on Monday directed the Forest Service to rescind those reports, saying more time was needed to fully understand concerns raised by tribes and the broader community about the project proposed on Oak Flat, a site sacred to local Native American communities.
“The Department is taking this step to provide an opportunity for the agency to conduct a thorough review based on significant input received from collaborators, partners, and the public since these documents were released,” the USDA said.
Another round of consultations on the project could take several months, it said.
The reports were released on Jan. 15, days before the end of Donald Trump’s presidency. Since taking office, President Joe Biden signed a presidential memorandum aimed at improving tribal consultation.
The Forest Service only has a limited capacity to protect Oak Flat because the land exchange was directed under the National Defense Authorization Act, the USDA said. “Long-term protection of the site will likely require an act of Congress,” it said.
The U.S. government was expected to swap national forest land for eight parcels privately held throughout Arizona by the Resolution Copper joint venture within 60 days of the final environmental statement being published.
The land exchange is a necessary step for the companies to access areas above the deposit, although it has faced opposition from some Native American tribes for whom the land is used for spiritual and traditional customs. Engaging with tribal leaders on their concerns will test the miners’ renewed focus on cultural heritage following Rio Tinto’s destruction of two ancient rock shelters in Australia last year that triggered the removal of its CEO.
“Resolution Copper is evaluating the Forest Service’s decision to rescind its final EIS and draft record of decision,” a spokesman for Resolution Copper said in an emailed statement. “In the meantime, we will continue to engage in the process determined by the U.S. government and are committed to ongoing consultation with Native American Tribes and local communities.”
Rio Tinto and BHP in 2013 started the permitting process for the Resolution copper deposit. The deposit sits well below the Earth’s surface, up to 7,000 feet deep, and the companies project a mine there could produce as much as 40 billion pounds of copper over four decades.
“The mining industry stands ready to support the Biden administration’s aggressive plans for electrification and modernizing our nation’s electric grid--actions that will require massive amounts of copper and other mined materials--but it is imperative that our permitting processes proceed in a timely manner to support those goals,” said National Mining Association President and Chief Executive Rich Nolan.
Dow Jones Newswires
Lachlan Moffet Gray 12.56pm:Hub24 completes Xplore Wealth purchase
Investment platform and technology company Hub24 has completed its acquisition of Xplore Wealth Limited via Scheme of Arrangement for $60m.
As part of the consideration, Hub24 issued 1.4m ordinary shares and paid $29.8m to holders of Xplore shares.
The acquisition brings the company’s FUM to $48bn.
12.51pm:Surprise size of residential building approvals fall: CBA
The number of residential building approvals fell sharply in January 2021, down by 19.4%.
The fact that it was a fall was not surprising, although the magnitude of the fall was a lot larger than expected, notes Commonwealth Bank’s Global Markets Research team.
“The consensus forecast was for a smaller 2% fall. The size of the fall would relate to the large rise in approvals in December 2020 to capture the full $A25k HomeBuilder payment before it fell to $A15k. The extension to the program was only announced on 29 November 2020. Given the time it can take to organise plans and builders, no doubt the strong gains seen in approvals in the last few months of 2020 reflect an expectation the program was ending rather than being extended.
“Very low borrowing costs over 2020 have also enabled households to finance renovations and new builds relatively cheaply. But building approvals have not been the only beneficiary with new lending surging and more recently dwelling prices trending higher.
“We continue to expect strong growth in renovation activity over the first half of 2021. This is being supported by low interest rates, HomeBuilder and the lift in dwelling prices. This month did see a break from this trend with a 12.7% fall in alts & adds approvals.
“Non‑residential approvals continue to be very weak, down by a further 16.3% in January. This takes the annual pace to ‑31.4%.
“Clearly low interest rates have had little bearing on this category and instead heightened uncertainty is likely to be the main factor. Last week’s capex survey did suggest the outlook could be brighter in 2021/22.
“All major categories have seen significant falls in approvals over the past year. The outlier is transport buildings which has recorded a 209.8% lift.”
12.27pm:Is the bond market right or is the RBA: KPMG’s Rynne
“Even with the current surge in house prices, the RBA will not change the cash rate today, given it has been signalling rates could stay at historically low levels until 2024,” says KPMG chief economist, Brendan Rynne.
“But the real story of the past month is the extraordinary activity in the bond market. Is the bond market right or is the RBA?” says Dr Rynne.
“Since the RBA Board met in early February, yields on 5-year and 10-year Commonwealth Government bonds have risen by 100% and 50% respectively, and the spread between the yields on Commonwealth Government and NSW Government 3 year bonds is now close to pre-pandemic levels. Clearly the market doesn’t think the RBA can hold the cash rate ‘lower for longer’.
“Even without a formal adjustment in the cash rate these financial market movements would normally start to put pressure on domestic banks to start lifting their retail lending rates – but these are not normal times.
“Since the acceleration of the pandemic in early 2020 there has been a switching in the funding composition of domestic banks away from more costly shorter term and longer term debt to firstly domestic deposits (as households looks to reduce their capital risk by moving from equities to cash) and secondly through banks taking up the ‘new’ funding made available from the RBA through quantitative easing (QE) - the Term Funding Facility (TFF).
“Simply put, the additional firepower added to the macroeconomic policy response available to the RBA to combat the economic consequences of the coronavirus pandemic means the funding pressure on domestic banks from rising long term yields has been negated.”
So while the long term bond yield is normally a reflection of the expected cash rate profile and a term premium, the RBA’s extraordinarily accommodative stance in setting the policy rate in these extraordinary times means this relationship is being massaged by the suite of policy tools being actively employed by Australia’s Central Bank.
Continuation of the current monetary policy approach suggests our cash rate will stay at 0.1% for the foreseeable future, despite what the markets are pricing in. The question is - whether the bond market is right, in which case the RBA will fall behind the curve and have to scramble to raise rates to validate the bond market, or whether the RBA is right and the bond market retreats.
The current surge in house prices is not abnormal given the circumstances. House prices growth will cycle up because interest rates are very low; the availability of funding is high (through QE expansion); stock levels are weak; and both savings and pent-up demand have built up during the COVID-induced lockdowns of 2020.
Lachlan Moffet Gray 12.20pm:ASX pulls back from early gains
The local sharemarket has pulled back from its opening jump as the day heads towards the RBA board meeting. The ASX 200 is just 33.9 points higher, or 0.5 per cent, at 6823.50 shortly after midday.
Car dealership Eagers Automotive was leading the session, up 7.01 per cent, followed by Sims Ltd at 5.44 per cent and Lynas at 5.11 per cent.
Domain Holdings lifted 4.12 per cent on the back of strong property price news on Monday while Incitec Pivot lifted 3.21 per cent as a block trade of 8 million shares - or 0.4 per cent of the float - was made earlier in the day.
Underperforming stocks included gold miners Gold Road Resources and Northern Star Resources, down 3.39 per cent and 2.21 per cent.
But litigation funder Omni Bridgeway led the decline, down 3.49 per cent.
Retailer Kogan.com fell 2.31 per cent while Mesoblast slipped 2.24 per cent after securing $130m from a US investor through a private placement.
St Barbara Mines was up 1 per cent trading ex dividend, as was Cleanaway Waste Management, which lifted 0.11 per cent.
The 10-year Australian government bond was steady at a 1.671 per cent yield.
Bridget Carter 12.14pm:Blackstone ‘shortlists five’ to buy Milestone Logistics Group
Blackstone is understood to have shortlisted five parties in the contest to buy its Milestone Logistics Group.
Parties that have made it through to the second round include LOGOS property group, the Warburg Pincus-backed ESR, Dexus Property Group, Singapore-based Mapletree and global group Axa Investment Managers.
It sees competition favourites Centuria and GPT Group knocked out of the race, along with Link REIT and its backers.
Charter Hall also did not make the cut, which was largely expected.
Final bids are due some time towards the end of this month or in early April.
Sources say that the expectation was that for parties to make round two, they needed to offer at least $3.5bn for the portfolio.
Annual rent collected is thought to be about $150m, and with a price tag of $4bn, it would put a sale at a yield of about 3.75 per cent.
Some have thought that the business would sell at a yield of between 4 and 4.5 per cent.
Parties were shortlisted Monday after first round bids went in last Wednesday.
The 45 Australian industrial properties on offer are being sold through JLL and Eastdil Secured while Blackstone is also considering an initial public offering of Milestone Logistics Group through Morgan Stanley and JPMorgan.
However, market experts say that a recent lift in ten-year bond yields makes floating the business for top dollar more difficult.
Lachlan Moffet Gray 12.00pm:JobKeeper, tax revenue boost for governments: ABS
Australian governments more than halved their combined operating deficit in the December quarter, falling from more than $90bn to $39.75bn as taxation revenue lifted 16 per cent to $147.5bn, according to the ABS.
The improvement in the total government financial position was driven mostly by the federal government’s JobKeeper scheme moving to a reduced rate in its second phase, alongside an $18.7bn increase in taxation revenue.
But total state and local general government net operating balance was -$9.9bn, a decrease of approximately 30 per cent from the September quarter’s $6.3bn.
All states recorded a decline due to in part to payroll tax relief measures, with the exception of WA.
“Western Australia was the only state to record a positive net operating balance due to continued strength in revenues from royalties and stamp duties on conveyances,” the ABS said.
Lachlan Moffet Gray 11.45am:Current account surplus up 7th consecutive quarter: ABS
Australia’s current account surplus has lifted for the seventh consecutive quarter, rising by $3.8bn to $14.5bn in the December quarter, according to ABS statistics.
The increase was broadly attributable to an increase in the goods and services surplus, which lifted $4.4bn to $18.1bn.
Goods and services exports lifted 8 per cent to $7.9bn while imports lifted 4 per cent to $3.5bn.
Rural goods grew 22.1 per cent to form $2.03bn of the total exports, with cereal and grain exports more than doubling.
The export of metals, ores and minerals lifted 10 per cent to $40.3bn as commodity prices continued to rise.
The fast growing imports category was non-industrial transport equipment, up 33 per cent to $6.4bn, indicating an ongoing recovery in the new car market.
Capital goods imported lifted 9 per cent to $20.1bn, which the ABS attributed to the government’s instant asset write off scheme.
The financial account deficit nearly doubled to $9.8bn in the December 2020 quarter as Australians ramped up overseas investments following a widespread sell-off mid year to enhance liquidity in the face of the COVID-19 crisis.
David Ross 11.40am:Housing market running hot, despite building approvals drop
Building approvals in January collapsed, down 19.4 per cent for the month in a seasonally adjusted measure from their highs in December.
But the January figures have come in well ahead of where they were in 2020, up 19 per cent on the same time last year in a sign of how hot the housing market is running.
Private sector houses supported the numbers, only falling 12.2 per cent for the month.
Private sector houses are up well on where they were in January 2020, 38 per cent above their level last year.
In Western Australia, house approvals declined 0.9 per cent, while in NSW and Queensland they dropped 19 per cent.
Dwellings excluding houses plummeted 39.5 per cent in seasonally adjusted terms from December and remain well down on where they were last year, pointing to a continued challenge for the apartments market.
The seasonally adjusted estimate for non residential building also fell 16.3 per cent, as the broader high rise market remains challenged.
ABS director of construction statistics Daniel Rossi said the surge of HomeBuilder applications at the end of 2020 helped drive the figures in December, but that the continuation of the program into March would continue to support the private house market in the coming months.
“Approvals for private houses fell 12.2 per cent in January, following the all-time high recorded in December. Despite the fall, private house approvals remain 38 per cent higher than in January 2020,” Mr Rossi said.
Lachlan Moffet Gray 11.32am:BoQ ME Bank buy makes ‘strategic sense’: UBS
Analysts at UBS say the Bank of Queensland’s $1.325bn purchase of industry super fund owned ME Bank makes “strategic sense” as it increases BoQ’s loan book by 57 per cent while diversifying its presence into Victoria.
The analysts also think that the $70m-$80m in cost synergies outlined by BoQ management looks “conservative” and believe the true figure may be just under 10 per cent higher.
Given the move will bring BoQ’s market share to 2.5 per cent - broadly in line with Bendigo, ING and Suncorp, the analysts lifted the company’s target price from $7.50 to $8.50, with net profit after tax lifting 23.5 per cent $374m.
Ellie Dudley 11.19am:Pandemic won’t end in 2020: WHO
A World Health Organisation Official has said it would be “premature” and “unrealistic” to think the COVID-19 pandemic would be over this year.
Michael Ryan, director of WHO’s emergencies program, told a briefing today that the virus is “very much in control”.
This comes alongside news that the number of new coronavirus infections globally last week rose for the first time in seven weeks.
“If we’re smart, we can finish with the hospitalisations and the deaths and the tragedy associated with this pandemic [by the end of 2020],” Dr Ryan said.
“If the vaccines begin to impact not only on death and not only on hospitalisation, but have a significant impact on transmission dynamics and transmission risk, then I believe we will accelerate toward controlling this pandemic.”
WHO Director-General Tedros Adhanom Ghebreyesus said the rise in case numbers this week was “disappointing, but not surprising.”
He said that if countries rely solely on vaccines “they are making a mistake”, pleading with people to continue to implement public health measures.
Glenda Korporaal 11.16am:Covid chief Power backs return to office for workers
The chair of the federal government’s Covid Commission, Nev Power, has urged businesses across Australia to bring their employees back into the office.
“It’s time to return to the CBDs as much as we can with COVID safe practices,” he said in a speech to the Australian Institute of Company Directors governance summit on Tuesday morning.
Mr Power, a Perth-based company director who is chairman of Perth Airport, said international companies operating in Australia should consider bringing their staff back to work even if they had global stay at home policies.
“The Australian offices of some multinational companies are following policies set by their head offices,” he said.
But he said they should be tailoring their policies “to reflect the lower risks in Australia, not what might be needed in New York or London.”
Mr Power, a former chief executive of Fortescue Metals Group, said getting employees back into offices was an important part of Australia’s economic recovery.
“There is a wide range of businesses whose jobs depend on office workers,” he said.
“Going back to the CBD is an important step in underpinning economic activity.”
Lachlan Moffet Gray 11.03am:Lenders slashing home loan and savings rates: Canstar
Data from Canstar shows that lenders are continuing to slash home loan and savings rate, lowering the cost of debt and interest income on savings.
Among home loans over February 15 lenders cut 53 variable rates by an average of -0.25 per cent and 15 lenders cut 235 fixed rates by an average of -0.13 per cent.
The lowest 3-year fixed rate for owner occupiers paying principal and interest is 1.75 per cent and the average is 2.29 per cent.
19 providers cut savings rates in February 2021: Bonus savings accounts have been cut by an average of -0.13 per cent, while regular savings rates came down by an average of -0.16 per cent.
Canstar’s Group Executive, Financial Services, Steve Mickenbecker said this would further charge the property market which recorded national price growth of 2.1 per cent last month, and that the RBA would have to lift rates sooner than expected.
“The Reserve Bank doesn’t expect to raise the cash rate for three years or more, but unless property prices can be slowed it will have to start looking for some way to apply the brakes,” he said.
“First home buyers and new construction are leading the charge for property buying rather than investors, so the Reserve Bank can’t enlist APRA to target investors with lending caps as it has done previously.”
David Ross 10.53am:Superannuation assets top $3trn for first time
Australia’s total superannuation assets have now passed $3-trillion, as the nation’s giant pool of savings grows steadily despite a wave of withdrawals throughout 2020.
Data from the prudential regulator show the 2.2 per cent climb in national savings between December 2019 and 2020 took total superannuation assets to $3.04tn by year’s end.
Almost $12bn was added in MySuper products total assets, on the back of increased scrutiny in the space by the Australian Prudential Regulatory Authority.
APRA’s MySuper heatmaps have been used to name and shame poor performers, while also lauding those who meet and beat benchmarks set by the regulator.
But overall growth in super was not reflected in the self managed fund space, which fell flat despite growth across other funds.
A large proportion of self managed super funds is held in which, which was hard hit by the ultra low interest rates imposed by central banks in the wake of the COVID-19 pandemic.
Despite the unprecedented conditions in superannuation markets SuperRatings has shown a rapid resurgence in fund performance thanks to massive market support from central banks.
By February super funds had notched up 11 months straight of gains, bouncing back from the bottom of the pandemic.
Research organisation SuperRatings said current trends indicated the superannuation market was well positioned for 2021.
Lachlan Moffet Gray 10.49am:Aristocrat Leisure settles two class action lawsuits
Aristocrat Leisure has settled two class action lawsuits in Washington state in the US for $US31m ($39.9m), the company told the ASX on Tuesday.
The lawsuits were brought by Cheryl Kater, Suzie Kelly and Manasa Thimmegowda relating to the online social gaming platforms Big Fish Casino, Jackpot Magic Slots and Epic Diamond Slots, offered by subsidiary Big Fish Games.
The games allowed the purchase of virtual gambling chips for real money, which the US Court of Appeals determined constituted illegal gambling in the state of Washington.
Lachlan Moffet Gray 10.22am:ASX 200 jumps higher at the open ahead of RBA meet
The local market has shot up by almost 1 per cent on opening, with the benchmark S&P/ASX 200 index gaining 65 points to reach 6856.20, fully reversing last Friday’s drop caused by surging bond yields.
The market lift comes ahead of an RBA meeting this afternoon, where it is expected the central bank will reaffirm its commitments to low rates and outline a more flexible approach to QE and yield curve control bond purchases, improving market stability.
The technology index was leading the way, up 1.94 per cent, followed by materials up 1.24 per cent.
The Real Estate Index was mostly stable at 0.06 per cent growth after jumping more than 3 per cent during Monday’s session after news of record property price growth in February broke.
The market was being pushed upwards by strong trading volumes for Afterpay and Zip Co, which both lifted more than 3 per cent, although Incitec Pivot and BlueScope Steel rose the most, with both up by more than 4.3 per cent.
Gold miners continued to underperform after declining on Monday, with Westgold Resources falling 2.76 per cent.
Corporate Travel Management fell 1.60 per cent.
Australian bond yields changed little, although the three year yield rose 0.8 basis points to a 0.144 per cent yield.
The Australian dollar was steady against the US dollar, trading at US77.67c.
Ben Wilmot 10.17am:Monthly capital city price growth outpaces regional
Monthly capital city price growth outpaced regional price growth for only the second time in 12 months, according to the REA Insights Home Price Index.
REA Group director of economic research Cameron Kusher said surging buyer demand had resulted in hot market conditions and climbing house prices.
“Rising consumer confidence in Australia on the back of open interstate borders and the rollout of a COVID-19 vaccine has buoyed the market. The record search activity on realestate.com.au that we have been monitoring over the last six months is now flowing through to pricing,” Mr Kusher said.
Perry Williams 10.08am:Macquarie-backed Griddy shut down, facing legal action
The Macquarie Group-backed Texas power supplier Griddy has been shut down and faces legal action in a stark setback after the bank has earlier profited from a massive windfall following the state-wide blackout.
The Texas grid operator ERCOT “took our members and effectively shut down Griddy,” the electricity company said in a statement on its website.
“On the same day when ERCOT announced that it had a $US2.1bn ($2.7bn) shortfall, it decided to take this action against only one company that represents a tiny fraction of the market and that shortfall.”
Macquarie provided financing to Griddy which left scores of customers with $US5000 electricity bills for five days of power in mid February after customers were exposed to massive swings in wholesale prices.
Griddy ties customers to the spot price of power on the grid rather than fixed tariffs, saving money when plenty of supply is available but creating mayhem and sky-high prices when conditions are tight.
Griddy also faces legal action with a law-suit from Texas Attorney General Ken Paxton, accusing the power upstart of contradicting its promise of cheap wholesale prices for Texans “as it auto-debited hundreds of dollars from Texans’ checking accounts daily. Griddy was fully aware of the reality of the risk in its pricing scheme -- sky-high energy rates at a time when consumers are the most vulnerable,” the law-suit states.
The frozen Texas power grid had delivered a massive windfall for Macquarie Group with its giant US gas trading unit cashing in on the polar vortex and putting the bank on track for a record 2021 profit.
Macquarie may reap up to $270m in profits after gas briefly soared 300-fold to $US1,250 per million British thermal units while electricity in Texas hit a $US9,000 per megawatt hour price cap.
However, the Griddy debacle leaves a blemish on its exposure to the blackout amid broader financial fallout from the power crisis.
Macquarie entered into a deal with Griddy on December 7 where it provided a wholesale supply facility and an undisclosed amount of investment capital to support the power company’s growth and market expansion.
Lachlan Moffet Gray 9.59am:Mesoblast raises $US110m to save itself
Mesoblast has raised US$110m ($138m) through a private placement led by US investor Group SurgCentre Development just days after the biotech’s auditor PwC warned a failure to do so would result in the company no longer being a going concern.
60 million shares were offered at $2.30 a share, a 6.5 per cent discount to the close of trading price on February 25.
“Based on the $US110m private placement ($138m), pro-forma cash-on-hand at December 31, 2020 would be approximately $US187.5m,” the company said in a statement.
“The investors also received warrants to acquire a further 15 million shares at a price of $2.88 per share, a 25% premium to the placement price, which may raise up to a further $43.2 million... on or before 15 March 2028.
Mesoblast chief executive Dr Silviu Itescu said “We are pleased to receive a strategic investment from the principals of SurgCenter Development, one of the largest private operators of ambulatory surgical centres in the US specialising in spine, orthopaedic and total joint procedures.”
Lachlan Moffet Gray 9.46am:RBNZ flags raising bond purchases
The Reserve Bank of New Zealand has flagged a willingness to up its weekly bond purchases after global yields spiked towards the end of last week, prompting a flurry of bond purchases by central banks.
Assistant Governor Christian Hawkesby on Tuesday said that the bank was willing to “adjust the size of our large scale asset purchase operations from week to week,” according to Bloomberg.
The RBNZ has committed to buy NZ$100bn of bonds by June 2022.
The RBA of Australia has recently strayed from its typical purchasing patterns, doubling its quantitative easing spend from $2bn to $4bn on Monday.
It is expected that RBA governor Philip Lowe will host a post board meeting press conference this afternoon to outline a similar flexible attitude towards QE and yield curve control purchases
9.44am:China’s manufacturing PMIs fall in February
China’s official manufacturing PMI measure, which is oriented to larger companies, fell from 51.3 in January to 50.6 in February – the lowest level since May 2020, notes Commonwealth Bank’s Global Markets Research team.
“The reading was below forecasts of 51. Meanwhile, the smaller company and export‑oriented Caixin‑Markit survey measure declined from 51.5 in January to 50.9 in February, below forecasts of 51.4.
“A reading above 50 indicates an expansion. Markets generally place greater weight on the Caixin PMI compared to the NBS measure because it is generated outside of official statistical processes. The Caixin PMI also captures broader cyclical trends in economic activity better than the official measure.
“While both PMIs remain expansionary, the decline in both PMIs, especially the Caixin PMI, indicate that demand is slowing in China’s commodity intensive economy.
“Weaker overseas demand was the key takeout of the Caixin manufacturing PMI. New export orders have eased relative to the rapid pace of expansion towards the end of 2020. The official manufacturing PMI also saw new export orders drop last month.
“Foreign demand for Chinese manufactured goods was prone to downside risks given lockdowns in Europe and increased restrictions in the US.
“The reason that it’s held up so well to date likely reflects that lockdowns and restrictions have been more targeted, meaning that foreign manufacturers have been allowed to keep operating. For that reason, we think overseas demand will likely recover in coming months.
“Demand conditions in China have proven very resilient since March, despite both PMIs showing a drop off in new orders. The decline in domestic demand last month likely reflects setbacks from COVID‑19 and containment measures as well as the impact of the Lunar New Year holiday period (11‑17 February). The construction subcomponent of the non‑manufacturing PMI slowed sharply to 54.7 last month, down from 60 in January.
Base metals and iron ore are the most leveraged to an industrial‑led recovery in China, the team said.
“We expect China’s commodity demand growth to eventually ease, but that looks likely later this year. Infrastructure spending will likely remain elevated in coming months and mostly reflects China’s infrastructure‑led stimulus plans from last year.
“Elevated infrastructure spending should see China’s construction and manufacturing activity remain in expansion territory.”
China Caixin Feb manufacturing PMI -0.6pts to 50.9...consistent with decline in official manufacturing PMI (-0.7pts to 50.6).
— Shane Oliver (@ShaneOliverAMP) March 1, 2021
(Goldman Sachs chart) pic.twitter.com/KkIoYzA1rY
Lachlan Moffet Gray 9.32am:Ares AMP buy gets a tick: Morgans
Analysts at Morgans have given the green tick to Ares’ purchase of 60 per cent of AMP Capital’s private markets business, saying the sale price of $1.35bn allows for the realisation of value despite being based on a “fairer” rather than a “fuller” earnings multiple of 20.
Furthermore, they say the deal will only be “mildly dilutive” if AMP uses $1bn of the proceeds for a buyback.
“We think the transaction is a positive outcome for AMP, allowing it to realise value in its Private Markets business, while also retaining a sizeable stake in the operation and its improved growth prospects from here,” the analysts said.
9.28am:Car of The Year revealed
The Kia Sorento has taken out top gong in Carsales’ Car of the Year awards, with the South Korean-made SUV beating out the Porsche Taycan and Land Rover Defender.
Each car in the awards series was scored using expert opinion and data generated by automotive data specialist RedBook.com.au.
Finalists and winners were decided by a combination of RedBook data and safety system bonus points as well as judges’ scores.
Judges evaluated the cars across categories including safety, technology, design, innovation, dynamics, comfort, practicality, quality and presentation.
The seven-seat Kia Sorento, geared for families, won Car of the Year due to its stylish design, generous features and safety.
9.28am:Tin prices plunge on LME, oil falls
Tin prices plunged overnight on easing shortage concerns after LME tin stockpiles lifted, notes Commonwealth Bank’s Global Markets Research team.
“LME stockpiles have more than doubled from lows of 775t reached on 9 February 2021. Tin surged to the highest level since 2011 on 15 February on stronger demand and weaker supply.
“Demand is being driven by home electronics, which has increased on the back of more home working and schooling as a result of the pandemic. Supply has also had setbacks in Indonesia and Bolivia. Shipping delays have also kept markets tighter than expected.”
Oil prices fell as the US dollar strengthened and as OPEC+ are expected to agree to add more supply to the market in a meeting on March 4, the team said.
9.16am:Aussies open to carrying digital health information to travel
More than half (57%) of Australian survey participants said they would be happy to carry digital health information, including testing results and vaccine information, if it allowed them to travel, a Skyscanner survey has found.
Skyscanner and OnePoll surveyed 1000 Australian respondents respectively (aged +18) between 20th – 23rd February 2021 and found nearly a third (29%) said they would be happy to do so in order to avoid quarantine restrictions.
Over a third (35%) of travellers said they would feel more confident booking a flight that had a health pass in scheme place, requiring passengers to carry test results.
Only 9% said they wouldn’t want to carry digital health information in order to travel.
Being vaccinated was the most popular option for travellers surveyed when asked about what would give them confidence to take an international trip (49%).
A third of participants (35%) would be more confident about travel if their destination required all travellers and or guests to be vaccinated.
A third of participants (35%) stated they’d feel more confident about travel if their airline had a health pass scheme in place and required passengers to prove they meet negative testing requirements.
Paul Whiteway, Regional Director at Skyscanner said: “With news of vaccine roll-outs and renewed hopes of international travelling returning later this year, the question is how Australians can return to travel safely, when it’s possible to do so.
“While it’s too early to say whether digital health passes will become the global norm, some airlines and providers have already started to introduce apps which allow travellers to upload and store their COVID-19 test results.
“We know from our data and speaking to our travellers that there’s a lot of pent-up wanderlust following a year spent exploring their own backyard, and Australians are dreaming of getting out to explore international destinations again.
“We would expect to see travellers approach new health and safety measures much the same way as they have in the past, embracing any new technology and reasonable protocols that make easy, safe, seamless travel possible.”
Lachlan Moffet Gray 9.07am:How to stop the market from overheating: UBS
Brace for speed limits on housing lending – that’s the view from brokerage UBS, that has tipped the brakes could be put on bank lending by regulators.
The comments follow the January home loans boom where lending was up 10.5 per cent month on month, well ahead of expectations. UBS also notes lending is up 76 per cent from the trough in May.
Economists at UBS are flagging macroprudential tightening in response to rapid property price and residential lending growth to stop the market overheating, but don’t believe it will come in the form of major intervention by the RBA,
In a note, the economists said that the announcement of macroprudential tightening could be flagged as early as tomorrow, when the Council of Financial Regulators is due to meet, and would include “speed limits on housing credit growth, especially for investors” and “caps on ‘higher risk’ loans.”
However, they said any implementation of a policy change “is more likely to be only made effective several months from now, after the end of tapering of fiscal stimulus policies” and it would likely not include an interest rate change.
“Indeed, we don’t see a major and broader policy tightening by the RBA.
“We still expect the cash rate to remain unchanged over our forecast profile (i.e. to at least the end of 2022).”
The economists also said the RBA would continue its QE and Yield Curve Control programs unless housing remains hot and the economy and labour market improves.
“Then the RBA could consider signalling a taper in several months, but that is still some way off,” the said.
9.03am:What’s impressing analysts today?
Atomo Diagnostics: Rated new speculative buy at Bell Potter
Austal Target Price Cut 1.7% to $4.03/Share by Goldman Sachs
Blackmores Target Price Raised 29% to A$86.00/Share by Morgans
BWX: Cut to neutral at E&P
Coronado Global: GDRs reinstated hold at Benchmark
Huon Aquaculture Target Price Raised 4.1% to $2.55/Share by Goldman Sachs
Huon Aquaculture Price Target Cut 12% to $2.55/Share by Bell Potter
Medlab Clinical Target Price Raised 22% to $0.39/Share by Morgans
Mosaic Brands Target Price Cut 17% to $0.99/Share by Morgans
Northern Star Resources Price Target Cut 6.9% to $13.50/Share by Citi
Orocobre: Rated new hold at Barclay Pearce Capital
Over the Wire: Raised to buy at Bell Potter
Perseus Mining Price Target Cut 3.2% to $1.50/Share by Citi
Red 5 Target Price Cut 20% to $0.33/Share by Morgans
Regis Resources Price Target Cut 8.3% to $3.85/Share by Citi
Resolute Mining Price Target Cut 10% to $0.90/Share by Citi
Spark Infrastructure Price Target Cut 2.6% to $2.22/Share by Citi
St Barbara Price Target Cut 15% to $2.30/Share by Citi
Waypoint REIT: Raised to buy at Moelis & Company
Dow Jones Newswires; Lachlan Moffet Gray
8.56am:Zoom Video zooms higher as earnings again top estimates
Video Communications posted better-than-expected results for its fiscal fourth quarter, ended Jan. 31, driving the stock sharply higher in after-hours trading.
The videoconferencing company, a prime beneficiary of the Covid-19 pandemic as many workers and students stayed at home for the last year, reported revenue for the quarter of $882.5 million, up 369% from a year earlier, with adjusted profits of $365.4 million, or $1.22 a share. Under generally accepted accounting principles, the company earned $256.1 million, or 87 cents a share.
Zoom shares, which had rallied 9.7% to $409.66 in Monday’s regular session, gained another 10% in late trading to $451.99.
For the full year, Zoom had revenue of $2.65 billion, up 326%, with non-GAAP profits of $995.7 million, or $3.34 a share.
Zoom had projected revenue for the quarter of $806 million to $811 million, with non-GAAP profits of 77 to 79 cents a share. Management has predicted full-year revenue of between $2.575 billion and $2.58 billion, with non-GAAP profits of $2.85 to $2.87 a share.
The consensus call on Wall Street was for January quarter revenue of $811.8 million, with non-GAAP profits of 79 cents a share.
The company’s financial guidance was higher than Wall Street expected, but still underlines the fact that growth will slow considerably from here as the world begins to get past the pandemic.
For the April quarter, Zoom is projecting revenue of $900 million to $905 million, with non-GAAP profits of 95 to 97 cents a share. The Street had been projecting revenue of $804.8 billion and profits of 72 cents a share.
For the full year ending in January 2022, the company expects revenue of $3.76 billion to $3.78 billion, up 42% from the previous year at the midpoint of the range, with non-GAAP profits of $3.59 to $3.65 a share.
The Street previously had been projecting fiscal year January 2022 revenue of $3.52 billion with non-GAAP profits of $2.96 a share.
“The fourth quarter marked a strong finish to an unprecedented year for Zoom,” CEO and founder Eric Yuan said in a statement.
“As we enter [fiscal year] 2022, we believe we are well positioned for strong growth with our innovative video communications platform, on which our customers can build, run, and grow their businesses; our globally recognised brand; and a team ever focused on delivering happiness to our customers.”
Barrons.com via Dow Jones Newswires
8.47am:Nike North America boss to leave after 25 years
Nike Inc said on Monday that Vice President and General Manager, North America Geography Ann Hebert has left the company.
The retailer said it plans to announce a new North American head shortly. Ms. Hebert leaves Nike after more than 25 years with the brand, the company said.
Dow Jones Newswires
Lachlan Moffet Gray 8.26am:Ansell to consider buying back shares
Personal and medical protective equipment manufacturer Ansell says it might consider buying back shares from March 5 as part of its share buyback program.
“As discussed at the 2020 Annual General Meeting and confirmed by the Appendix 3D lodged on 5 November 2020, Ansell’s share buyback program was extended for 12 months commencing from 13 November 2020,” the company told the market on Tuesday.
“While Ansell has not recently bought back any shares, Ansell advises that it may recommence buying back its shares under the buy-back program from 5 March 2021, after the conclusion of the DRP Pricing Period on 4 March 2021.”
8.09am:US stocks surge, S&P 500 has best day since June
US stocks surged on Monday, giving the S&P 500 its best day in nearly nine months, as a weekslong advance in government-bond yields stalled, easing investors’ jitters over rising interest rates.
The broad stock market index soared 2.4%, its biggest one-session rise since June. The Dow Jones Industrial Average climbed nearly 2%, while the technology-heavy Nasdaq Composite jumped 3%.
The gains marked a strong rebound after all three indexes declined last week, weighed down by losses among tech stocks. Monday’s advance came as the yield on 10-year Treasury notes, the benchmark borrowing cost in U.S. debt markets, slipped to 1.444% from 1.459% Friday. Yields fall when bond prices rise.
Stocks, and particularly shares of tech companies, have been buffeted by sharp moves in government-bond markets in recent trading sessions. Rising long-term interest rates brought by an improving economy tend to make tech and other growth stocks less attractive to investors.
The Nasdaq Composite had fallen 6.4% from its record close on Feb. 12 through Friday’s close. The slump in tech stocks has pulled Apple shares down 4% this year, while Amazon.com is off 3.5%. Tesla, meanwhile, is up just 1.3%.
Shares of Apple and Tesla rose more than 5% Monday, while Amazon added nearly 2%.
Exxon Mobil shares advanced 3.8% after the oil major, which has been under pressure from activist investors, added two new board members.
Boeing shares rallied 5.9% after United Airlines said it was buying 25 new 737 MAX jets, a boost for the aircraft maker that is still trying to recover from the jet’s nearly two-year grounding.
Class B shares of Warren Buffett’s Berkshire Hathaway climbed 3.6% after the conglomerate on Saturday posted an increased fourth-quarter profit and reported that it had bought back nearly $25 billion in shares last year, a larger-than-usual buyback for Berkshire.
Shares of Johnson & Johnson added 0.6% after the U.S. over the weekend authorised its single-shot coronavirus vaccine.
Several top Fed officials are scheduled to make public appearances later this week, and investors will be monitoring them closely to see they voice any concerns about bond yields.
In commodities, futures on benchmark Brent crude oil fell 1.1% to settle at $63.69 a barrel, ahead of a planned Thursday meeting of the Organization of the Petroleum Exporting Countries and its partners. Analysts say it is likely that the cartel will announce some type of production increase, or at least a further retreat from previously agreed-upon production cuts. Oil prices have been steadily recovering in recent months as vaccinations have raised hopes of a post-pandemic revival of travel.
Improving investor sentiment buoyed overseas stock markets. The Stoxx Europe 600 gained 1.8%, boosted by shares of travel-and-leisure companies, whose fortunes hinge on the reopening of economic activity.
In Asia, Japan’s Nikkei 225 rose 2.4%, while China’s Shanghai Composite Index added 1.2%.
7.10am:ASX to open firmly higher as world markets surge
Australian stocks are set for more gains, as global markets soared amid an easing of investor jitters over rising interest rates.
At about 7am (AEDT) the SPI futures index was up 68 points, or one per cent.
Yesterday, Australian stocks closed higher.
Brent oil is down 1.1 per cent to $US63.69 a barrel.
Spot iron ore is 1.3 per cent lower at $US174.35 a tonne.
The Australian dollar is higher at US77.70c.
6.50am:Dow on track for best day since November
US stocks surged as a weekslong advance in government bond yields stalled, easing investors’ jitters over rising interest rates.
The Dow Jones Industrial Average soared 720 points, or 2.3 per cent, in afternoon trading, putting the index on track for its biggest one-day increase since November. The S&P 500 climbed 2.7 per cent, while the technology-heavy Nasdaq Composite was up 3.00 per cent.
The gains marked a robust rebound after all three indexes declined last week, weighed down by losses among tech stocks.
The advance came as the yield on 10-year Treasury notes, the benchmark borrowing cost in U.S. debt markets, slipped to 1.446% from 1.459% Friday. Yields fall when bond prices rise.
Stocks, and particularly shares of tech companies, have been buffeted by volatile moves in government-bond markets in recent trading sessions. A long period of low interest rates underpinned the stock market’s boom over the past year, by making it less attractive for investors to put money in bonds. Last week’s climb in yields called that into question.
It also raised the spectre that the U.S. Federal Reserve might put an end to easy-money policies to combat inflation -- even though the Fed itself has played down such concerns.
“Today is kind of a reckoning with the reality that the Fed’s not moving anytime soon,” said Mike Dowdall, a portfolio manager at BMO Global Asset Management.
Dow Jones
6.00am:Gold futures in 5th straight session loss
Gold futures turned lower by the end of today’s session to tally a fifth straight session loss. Prices for the precious metal had been trading higher in early dealings, but the day’s pause in the U.S. Treasury bond market sell off “hasn’t yet changed the narrative,” said Adrian Ash, director of research at BullionVault.
Consensus says the COVID recovery is already here, even before the next round of stimulus checks arrive, and gold continues to price that in, reversing last year’s big gains, he said. April gold fell $US5.80, or 0.3pc, to settle at $US1,723 an ounce. Prices marked another settlement at their lowest since June 2020.
Dow Jones Newswires
5.30am:US stocks climb as bond markets calm
US stocks surged as a weekslong advance in government bond yields stalled, easing investors’ jitters over rising interest rates.
The Dow Jones Industrial Average soared 1.9 per cent in early afternoon trading, while the S&P 500 climbed 2.2 per cent. Both indexes were on track for their biggest one-day gains since November. The technology-heavy Nasdaq Composite was up 2.5 per cent.
The gains marked a robust rebound after all three indexes declined last week, weighed down by losses among tech stocks.
The advance came as the yield on 10-year Treasury notes, the benchmark borrowing cost in U.S. debt markets, slipped to 1.431 per cent from 1.459 per cent Friday. Yields fall when bond prices rise.
Stocks, and particularly shares of tech companies, have been buffeted by volatile moves in government-bond markets in recent trading sessions. A long period of low interest rates underpinned the stock market’s boom over the past year, by making it less attractive for investors to put money in bonds. Last week’s climb in yields called that into question. It also raised the spectre that the U.S. Federal Reserve might put an end to easy-money policies to combat inflation.
“You can see a lot of sensitivities in the market to inflation pressures, “ said Christopher Smart, chief global strategist at Barings.
Gains were broad, with all 11 sectors of the S&P 500 rising at least 1 per cent. Tech stocks rebounded after last week’s bruising sell-off, with Apple climbing 4 per cent and Tesla up 5.4 per cent.
In corporate news, Exxon Mobil shares advanced 5.8 per cent after the oil major, which has been under pressure from activist investors, added two new board members.
Shares of Johnson & Johnson gained 1 per cent. The company’s COVID-19 vaccine received a green light from the Centers for Disease Control and Prevention Sunday. The U.S. Food and Drug Administration authorised use of the single-dose shot on Saturday.
Commodity prices have also fuelled inflation concerns. Futures on Brent crude oil, the international energy benchmark, rose 0.8 per cent on Monday to $US64.93 a barrel.
The gains came as the Organization of the Petroleum Exporting Countries and its partners are set to meet Thursday. Analysts expect the cartel, which has held back millions of barrels of crude oil a day since last spring to bolster prices, to agree to boost production in April.
Dow Jones Newswires
5.30am: Greensill Capital unravelling
Australian billionaire Lex Greensill’s Greensill Capital is headed toward a rapid unravelling after Credit Suisse Group suspended $US10 billion of investment funds that fuelled the SoftBank Group Corp-backed finance start-up.
UK-based Greensill has appointed Grant Thornton to guide it through a possible restructuring and it could file for insolvency, the UK equivalent of bankruptcy within days, according to people familiar with the company.
Greensill is simultaneously in talks with private-equity giant Apollo Global Management to sell its operating business for around $US100 million, according to people familiar with the talks.
Credit Suisse’s asset-management arm said it would stop allowing investors to buy into or sell out of the Greensill funds immediately. Credit Suisse manages four private investment funds that rely exclusively on debtlike securities created by Greensill.
A part of the funds is “currently subject to considerable uncertainties with respect to their accurate valuation,” according to a notice the bank sent to investors. The Wall Street Journal reported that the bank was concerned about Greensill’s exposure to a single client, UK-based steel magnate Sanjeev Gupta, according to people familiar with the matter.
A Greensill spokesperson said the company acknowledged Credit Suisse’s decision, and that Greensill remains in advanced talks with potential outside investors.
UK-based Greensill is the brainchild of former Citigroup and Morgan Stanley financier Lex Greensill. Founded in 2011, Greensill specialises in an area known as supply-chain finance, a form of short-term cash advance that lets companies stretch out the time they have to pay their bills.
5.25am:Hedge fund boss takes home UK record pay
Hedge fund boss Christopher Hohn set a UK record in 2020 for the biggest ever annual paycheck after he paid himself almost half a billion dollars, according to documents filed on Monday.
The billionaire boss, who owns 100 per cent of the Children’s Investment (TCI) fund which he runs, paid the £343 million ($US479 million) sum into his personal company TCI Fund Management, documents at Companies House showed.
The amount paid in dividends for the fiscal year ending in March is the highest ever paid to an individual in the Britain, The Guardian newspaper reported.
The figure is 9000 times the average annual salary in Britain. Hohn broke the record previously held by Denise Coates, the founder of the British online betting site Bet365, who in 2018 pocketed £323 million in salaries and dividends.
The previous year, the TCI boss received a sum of $US261 million but he gave himself a pay rise after his fund’s pre-tax profit rose from $US420 million in 2018-2019 to $US695 million in 2019-2020.
TCI, which was founded in 2003, has made a name for itself by taking minority stakes in numerous multinationals with the aim of influencing their strategies.
In 2019, the fund managed $US30 billion in assets.
The hedge fund has used its shareholder leverage with several firms, including Airbus, saying it would punish directors who did not go far enough in reducing C02 emissions.
The fund is based in London’s fashionable Mayfair district, but its controlling company, owned by Hohn, is registered in the Cayman Islands, a British territory and tax haven criticised by campaigners for facilitating tax evasion and money laundering.
Hohn has also gained a reputation as a prominent philanthropist. In 2019 he gave away $US386 million through his personal charity, the Children’s Investment Fund Foundation and donated £50,000 ($US69,000) to the Extinction Rebellion climate change campaign.
AFP
5.20am:Global markets rebound as rate hike worries fade
World stock markets shot higher, bouncing back from last week’s heavy sell-off as worries about early interest rate hikes faded and US Treasury yields dropped, dealers said.
Wall Street stocks snapped higher at the open and kept pushing up further, recovering much of the ground they lost at the end of last week.
In Europe, London, Frankfurt and Paris all closed the day 1.6 per cent higher. Asian stocks rose strongly on bargain-buying as the passage of President Joe Biden’s $US1.9-trillion Covid relief stimulus through the US House of Representatives provided additional cheer.
Oil prices climbed before this week’s output meeting of the OPEC group of oil producers and their allies, while the dollar advanced versus the euro and yen.
“Equity markets have shaken off the negative sentiment that was doing the rounds last week as the pullback in government bond yields has seen buyers step into the fold,” said analyst David Madden at online trading firm CMC Markets UK.
Stocks took a beating last week as government bond yields spiked higher, with investors worried that too much stimulus will spark inflation and push central banks into raising interest rates earlier than expected.
In a bid to calm markets, several central banks -- including in Japan, South Korea and the European Union -- sought over the weekend to reiterate their pledges to maintain their ultra-loose monetary policies for as long as needed.
Australia led the way by ramping up its asset purchases to keep rates low. “Traders feel more confident about snapping up relatively cheap stocks as they are less fearful that central banks will look to tighten their policy anytime soon,” said Madden.
News that Johnson & Johnson’s one-shot vaccine had been given the green light by US regulators -- paving the way for a quicker rollout of vaccinations -- added to the positive sentiment on Monday.
Oil prices also rebounded with focus on the key meeting of the OPEC+ group of major producers on Thursday, when they will discuss the huge output cuts that have provided much-needed support to prices.
Russia is said to be keen to turn on the taps again but Saudi Arabia prefers to keep the status quo.
AFP
5.05am:US manufacturing expands in February
Manufacturing continues to be a bright spot in the pandemic-ravaged US economy, adapting and responding to higher demand in February, according to an industry survey.
The Institute for Supply Management’s (ISM) manufacturing index hit its highest point since February 2018 -- rising 2.1 percentage points to 60.8 per cent, a level not exceeded since May 2004.
It was the ninth consecutive month of growth -- with the index above the 50-percent threshold indicating expansion -- and came on a big jump in new orders and output, the survey showed.
Only two of the 18 manufacturing industries showed signs of slowing, including petroleum and coal, the same as in January.
AFP
5.00am:German consumer prices accelerate rise in February
Consumer prices in Germany rose at a faster pace in February, preliminary official data showed, as fears grow that a return of inflation could hamper a post-pandemic economic recovery.
Inflation reached 1.3 per cent year-on-year, its steepest rise since March 2020, when borders were first slammed shut across the world as countries battled to halt contagion of the coronavirus.
Analysts had projected inflation to reach 1.4 per cent for the month. Consumer prices were pulled up in February by rising energy prices after months of slumps.
A growth in food prices has meanwhile slowed down to 1.4 per cent compared to 2.2 per cent a month ago, according to the preliminary data from federal statistics agency Destatis.
After having slowed considerably in 2020, inflation is expected to rise this year in Europe as the economy picks up following the relaxation of measures to slow the spread of the COVID-19 pandemic.
With the European Central Bank poised to hold its regular monetary policy setting meeting next week, voices warning against its ultra expansionary stance are growing louder.
AFP
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