ASX helped higher by Macquarie surge as PM unveils path to recovery
Shares capped the week up 2.8 per cent amid optimism the economy was on a path to restart, but Myer outperformed with a 45pc surge.
- Easing restrictions lifts retailers
- AMP gets first strike over pay incentives
- Macquarie slashes payout as profit slips
- Goldmans more upbeat on Aussie GDP
That’s all from the Trading Day blog for Friday, May 8. The ASX gained as much as 1.2pc but settled to a gain of 0.5 per cent after the announcement of plans from the government to restart the economy. That helped retailers especially, with shopping centres given the all clear to restart trade soon.
Elsewhere, Macquarie cut its final dividend as it reported an 8pc drop in profit, but still its shares are headed higher, while the RBA warned of a slow recovery after coronavirus.
US futures are lifting by 1pc, signalling more gains ahead.
Glenda Korporaal 8.44pm: Return to normality will take time
The man behind the plan to progressively open up the economy, COVID-19 Coordination Commission chairman Nev Power, is one of Australia’s most experienced chief executives.
The former chief executive of iron ore giant Fortescue Metals, Power has been based in Canberra for the past five weeks overseeing a commission of business leaders and working with senior public servants to get the economy through the crisis and plan the road map back to work.
Leading a team including former Telstra chief David Thodey, ANZ board member Jane Halton, Toll founder Paul Little, Energy Australia CEO and Reserve Bank board member Catherine Tanna and former ACTU chief Greg Combet, Power has been working with companies and industry groups to limit the economic impact of the virus shutdown and devise plans to safely reopen businesses.
Max Maddison 8.13pm: Top ends backs restart plan
Corporate Australia has praised the Morrison government’s three-stage roadmap to reopen the economy by July, but warned that there’s a long journey still to come.
On Friday afternoon, several corporate heavyweights released statements applauding Prime Minister Scott Morrison’s announcement, which outlined the steps which would see Australia incrementally return to normal.
NAB chief executive Ross McEwan welcomed the National Cabinet’s restart plan, saying it was “heartening” to see Australians doing the right thing.
The Australian Investment Council also lauded the plan, but chief executive Yasser El-Ansary said a “carefully calibrated” economic recovery plan would be required to navigate the period ahead.
While commending the decision, Paul Zahra, chief executive of the Australian Retailers Association said the “overall mood remained cautious” among the $325bn retail sector, and warned consumers that hygiene measures would be a “regular feature for some time”.
Nick Evans 7.52pm: Rio chair backs carbon price call
Rio Tinto chairman Simon Thompson has backed a document calling for a global $US100-a-tonne carbon price, enough to threaten some of Rio’s Australian operations.
The call came in a coronavirus recovery roadmap distributed by the Energy Transitions Commission, a coalition of 40 global businesses including energy majors such as BP and Shell.
Mr Thompson last week put his signature to the document, which mirrors some of the so-called “green new deal” rhetoric from the political left, calling for a “massive” wave of green energy-focused stimulus measures as global governments look to reboot their own economies in the wake of the coronavirus crisis.
John Stensholt 7.07pm: Paradice funds performing well
Moscow, St Petersburg and Mexico were among the exotic destinations David Paradice’s emerging markets team were set to visit, in keeping with the veteran fund manager’s famed strategy of going the extra mile to find information to base his firm’s stock-picking nous on.
But in mid-March COVID-19 hit and threw those travel plans into disarray.
It has left Paradice and his US-based emerging markets portfolio managers relying on dozens of online meetings and analysts’ notes daily, though they are at least operating from what are still exotic locales by Australian standards: New Mexico, Utah and California.
The shutdown also hasn’t stopped a Paradice fund yet again outperforming the market. The Paradice Investment Management’s Global Emerging Markets Fund — the fifth fund at Paradice’s eponymous $16bn boutique firm — will celebrate the one-year anniversary of its inception next week.
It survived a rocky March quarter to post a return well above its benchmark as it tries to prove Paradice’s belief that there’s now more value to be found in smaller unloved stocks than the big blue chips that receive most of the media and market coverage. This time though, it has been in companies in countries like China, Brazil, Russia and Poland rather than the Australian small and mid-cap market where Paradice has made his name and fortune in over the past four decades.
His wealth is now valued at $552m on The List — Australia’s Richest 250.
Will Hamilton 6.49pm: Opportunities loom beyond sharemarket
The dramatic dividend cuts across the market remind us that share investing should be just one part of a diversified portfolio.
Regular readers of this column will know I am not a fan of the overreliance that many self-funded retirees have on fully franked dividends.
Nowhere is the risk of relying on them too much more apparent than in the current times when we have just seen cuts or deferral of dividends by three of the big four banks.
These represent a significant cut in investment income, particularly retiree income. Moreover, the equity raising announced by NAB further dilutes the equity value of those holdings.
What does it mean for self-funded retirees? They have in effect experienced a pay cut, and unfortunately I believe there is more pain to come. When we enter reporting season in August we can expect to see more companies cut or suspend dividends.
Despite the rally in equities during April, the full impact of what we are experiencing in the real economy will take months to play out.
David Ross 6.30pm: Banks defer $20bn in loans
More than $20bn in loans have been deferred by Australian banks in just the past week under coronavirus assistance schemes, bringing total deferred loans to at least $200bn, according to the Australian Banking Association.
New numbers out on Friday showed loans for 100,000 Australians, including 50,000 home loans, have been deferred in the past week.
Australian banks have now deferred at least 643,000 loans and nearly 392,000 home loans during the COVID-19 pandemic.
James Kirby 5.24pm: Residential investment property’s darkest hour
Unlike the sharemarket, where investors are so keen on “bargain hunting” that the market regulator has been prompted to issue a warning, the residential property market is watching investors bolt for the doors.
Sharply lower new investor lending figures are the writing on the wall. Quite simply, many investors have lost heart on residential property.
The heart of the problem is that the numbers on running a residential investment property — which barely stacked up when things were “normal” — are now shattered by the prospect of falling house prices.
There is little point in seeking views from the property industry on the subject — absolutely everyone in the industry is invested in an endlessly rising market.
But the big banks are in an exceptionally useful position to shine a light on the national market. An ANZ report on the sector this week makes for a sobering read.
The bank expects a drop from top to bottom in the national residential market of 10 per cent.
4.38pm: Retail, travel outperform on restart plans
Retail names led the rally on Friday – led by department store Myer with a surge of 45 per cent to 29c. JB Hi-Fi put on 3.7 per cent to $35.26 as Super Retail lifted by 6.6 per cent to $6.66 and Premier Investments added 1.5 per cent to $15.50.
Shopping centre owner Scentre put on 3.8 per cent to $2.20 as Vicinity Centres put on 5.2 per cent to $1.43.
Travel providers were boosted on the prospect of a resumption of instate travel - Flight Centre jumped by 8.1 per cent to $10.76 while Webjet put on 9.3 per cent to $2.93.
Even buy now, pay later providers got in on the action – Zip Co added 14.3 per cent to $3.27, FlexiGroup jumped by 16.8 per cent and Sezzle put on 7.7 per cent to $2.24.
After doubling its share price in the past month, Afterpay’s lift was more subdued. It added 1 per cent to $39.88.
Here’s the biggest movers at the close:
4.11pm: Shares trim reopening rally
Australian equities cheered the steady easing of coronavirus restrictions on Friday, sending the local market to a 2.8 per cent weekly gain.
Following Wall Street strength overnight, the benchmark ASX200 gained as much as 1.2 per cent but finished the day up 27 points or 0.5 per cent at 5391.1
A late surge in listed retailers helped the All Ordinaries to outperform – finishing higher by 38 points or 0.7 per cent to 5488.
3.55pm: Equities rise as US-China agree on trade
Global equities are rising after China and the US agreed to co-operate on trade, according to China.
“Both sides agreed that good progress is being made on creating the governmental infrastructures necessary to make the agreement a success,” China’s Ministry of Commerce told Bloomberg.
“In spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner.”
That followed a call between China’s Vice Premier Liu He with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin today.
President Donald Trump told reporters Wednesday that he’d be able to report in the next week or two if he’s happy with how the trade deal is progressing.
US stock index futures are soaring, with S&P 500 futures up 1.3pc. In China, the Shanghai Composite is up 1.1pc and Japan’s Nikkei 225 is up 2.4pc.
But Australia’s sharemarket has pared intraday gains before the close. The S&P/ASX 200 share index is up 0.5pc after rising 1.2pc this morning.
Max Maddison 3.33pm: Platinum FUM lifts as markets rebound
Platinum Asset Management increased its funds under management to $210m in April, despite investors pulling almost $300m from the fund.
The Andrew Clifford-led asset manager reported net outflows of $299m for the month, down from net outflows of $426m in the previous month. Of April’s flows, $107m were withdrawn from Platinum Trust Funds.
In an Australian Securities Exchange announcement released on Thursday night, Platinum’s fund performance improved markedly, in part reflecting a steadying of global markets.
Platinum’s flagship international fund grew 1.7 per cent across April to almost $8.55bn. However, it remains down 7.9 per cent across the last three months.
PTM last traded up 4.8pc to $3.62.
Perry Williams 3.16pm: APA ready to pounce on US gas players
Energy giant APA Group may pounce on distressed US assets as gas players buckle under heavy debt loads but warned a Democrat win in November’s election could hobble the development of new pipelines.
APA is conducting due diligence on US targets in a potential $2bn to $4bn deal as it looks to add a higher margin business to its regulated Australian earnings.
The oil market crash has hiked pressure on the midstream sector including pipeline operators, processing facilities, gas gathering systems and LNG terminals which could see companies place assets on the market to raise capital.
The COVID-19 “pandemic and fall in oil prices have caused substantial balance sheet pressure,” APA said in its annual investor presentation on Friday.
Owners of local distribution companies “are looking to take advantage of current valuation levels,” APA said.
3.13pm: Afterpay rivals join retail rally
Buy now, pay later platforms have joined the retail rally, cheering steps to resume shopping centre trade.
FlexiGroup is higher by 17.8 per cent to $1.09 as Zip Co lifts by 15pc to $3.29 and Sezzle puts on 9.6 per cent to $2.28.
Afterpay is seemingly the only provider to be left out of the rally, after already doubling in just the past month. Its shares are up a more moderate 0.9pc to $39.85.
Read more: Retailers rally on reopen plan
Cliona O'Dowd 2.58pm: Bank reform deadline pushed out
The Federal Government will delay implementing the findings of the banking royal commission by six months due to the coronavirus crisis, Treasurer Josh Frydenberg has announced.
The deferral will allow the financial services industry to focus on planning for the recovery from the pandemic, Mr Frydenberg said on Tuesday.
The government had previously committed to introducing legislation on the commitments from the royal commission in two rounds this year, the first by June 30 and the second by December. Both rounds will now be delayed by six months.
“This announcement today balances the need to implement the recommendations of the Royal Commission with the need to ensure our financial institutions are in a position to devote their resources to responding to the significant challenges posed by the coronavirus.
2.47pm: Harvey Norman jumps 9pc on Goldmans upgrade
Retail sales trends and profit conditions are proving more resilient than expected amid the coronavirus shutdowns, according to analysts at Goldmans.
In a note to clients, Andrew McLennan upgrades his rating on listed whitegoods retailer Harvey Norman, noting it had been left behind in the recent retail rebound.
He says the better than expected containment of COVID-19 in Australia was softening the downside to earnings the firm had previously forecast.
“Harvey Norman has not recovered from the March sell off, substantially underperforming the market by 15.5pc since a recent high on February 19,” Mr McLennan writes, estimating the stock is trading at 11.7x FY21 PE – a 50pc discount to the ASX200 Industrials.
He sets a price target of $3.85 with a Buy rating.
HVN last traded up 8.8pc to $3.09.
2.31pm: NAB welcomes restart plans
NAB chief executive Ross McEwan has welcomed the National Cabinet’s plan to gradually restart the economy.
“It’s been heartening to see Australians doing the right thing to help flatten the curve. We should be proud of the effort so far,” Mr McEwan said.
“We’re now ready to take the first steps forward and I fully back the Federal Government’s safe and steady approach to getting jobs and businesses back on track. We look forward to hearing from the State and Territory Governments on the timing of the new measures.
“There’s still a long way to go and we must preserve the gains made on the health front.”
Mr McEwan said support put in place for businesses by the Government, banks and regulators had provided significant relief to help them manage their cashflows.
“The support from the Government and regulators has laid the foundations to keep the economy moving and keep as many people in jobs as possible,” he said.
2.25pm: Get set for horror US payrolls: RBC
April’s US non-farm payroll number will “go down in the record books”, according to RBC.
Ahead of the release of the closely-watched data set tonight, analysts at the bank are tipping a horror drop as much as 20 million jobs.
They note that early indications for the first half of the month had the data in the realm of 10 million, and add that the season hurdle is quite high, even against some lockdown related hiring.
That will take the unemployment to about 17pc but they note that “it could be lower if there is significant exodus from the labour force”.
“Our economists highlight that what will be more critical is tracking how the reopening and the access to PPP lending (small business grants) impact the speed at which the u-rate can come down. They suspect that we will see a quite dramatic decline after the April print.”
2.00pm: SOMP a ‘sobering read’: JPM
JP Morgan chief economist Sally Auld says the RBA’s Statement on Monetary Policy “makes for a sobering read”, with the central case scenario forecasting core inflation only at 1.5pc and the unemployment rate at 6.5pc at June 2022. “These are clearly well away from desired targets of 2.5pc and 4.5pc, respectively and suggest the RBA will be running a large negative output gap well into 2023,” Ms Auld says.
“At a minimum, this should anchor forward rate curves as there is little prospect of policy normalisation even if the central case scenario is realised.”
Read more: RBA warns of slow recovery from virus crisis
By all means call me sceptical, but when I think of the scars that will exist in Australia for a long long time, I find it very hard indeed to imagine that the level of GDP at the end of next year will be back to what we were looking at the very beginning of 2020. #ausbiz pic.twitter.com/tzSJHFBaFk
— Robert Rennie (@Robert__Rennie) May 8, 2020
Joyce Moullakis 1.56pm: NAB’s Cook sees role change
National Australia Bank’s latest restructure has spurred some changes to the responsibilities of chief legal and commercial counsel Sharon Cook.
The Australian understands that as part of changes made by chief executive Ross McEwan this week, he is bringing together marketing and corporate affairs functions and Ms Cook will cede responsibility for the latter.
She gains oversight of all the bank’s customer compensation programs, which have previously sat within different divisions, and for regulatory affairs which was part of the risk unit before the change.
The alternations are viewed as creating more synergies within business divisions at NAB and bolstering the accountability of executives and managers.
The Australian on Thursday revealed Mr McEwan had launched a shake-up of second-tier management, spilling a host of roles and making as many as 50 key appointments.
Cliona O’Dowd 1.43pm: AMP gets first strike over pay incentives
AMP has suffered a first strike on its remuneration report after coming under fire from shareholders and proxy advisers over the “disproportionately large” incentives paid to its executives.
At the company’s virtual annual general meeting on Friday, 67 per cent of proxies voted against the remuneration report. It comes after influential proxy advisers Ownership Matters and ISS recommended shareholders vote against the generous pay packages.
Both proxy advisers last month argued that executive pay was overly generous and performance hurdles not rigorous enough.
AMP last traded up 4.2pc at $1.42.
Read more: AMP dealt first strike
Olivia Caisley 1.15pm: International travel off the cards for now
Scott Morrison has warned that he can’t see Australia “opening up” international travel in the foreseeable future, however the government is considering allowing the arrival of international students.
The Prime Minister told reporters in Canberra that while the government had been speaking to New Zealand about a trans-Tasman bubble, international travel was off the cards for now.
“I can’t see that happening any time soon. There’s nothing on our radar which would see us opening up international travel in the foreseeable future,” he says.
“There are already some very, very minor exceptions, where the Border Force can provide an exemption for outbound travel, but that’s in areas like facilitating development aid in third countries and things like that.”
QAN is trading down 0.72 as travel name Flight Centre pushed up by 6.3pc, Corporate Travel is lower by 0.8pc and Webjet is up by 9.7pc.
Follow all the latest updates at our coronavirus live blog
1.04pm: Easing restrictions lifts retailers
Retailers going for a run on the prospect of the economy reopening by July.
Shares in Myer are up 15 per cent to 23c, Harvey Norman is up 7.8 per cent to $3.06 and Super Retail up 4.6 per cent to $6.54 and even shopping mall owner Scentre up 3.3 per cent to $2.19.
Prime Minister Scott Morrison said earlier Friday he expected the three step process, contingent on health advice, would be fully operational by July.
Step one allows up to five visitors to homes, gatherings of up to 10 outside of home, reopening libraries, community centres, playgrounds and boot camps and increasing shopping, business and retail activity, including restaurants and cafes, home sales and auctions, and local and regional travel.
This will move to step three which will see most Australians back at work, gatherings of up to 100, and consideration of cross-Tasman, Pacific Island and international students travel.
The economic impact of easing restrictions is huge: see 850k jobs reinstated
— Patrick Commins (@ComminsP) May 8, 2020
- Step 1: opens up $3.1bn in economic activity per month, and will reinstate around 250k jobs
- Step 2: $3bn in eco activity per month, and around 275k jobs
- Step 3: $3.3bn and 352k jobs#auspol pic.twitter.com/vAgn0NL1Cr
1.01pm: Health the only detractor as ASX lifts
The local market is holding gains at lunch, as the government unveils its three-step plan to reopen the economy.
At 1pm, the ASX200 is higher by 40 points or 0.74 per cent to 5404, after gains as much as 1pc in earlier trade.
All sectors are higher, led by a jump in REITs while Macquarie is surging by 4.3pc despite cutting its dividend at its full year results.
Here’s the biggest movers at 1pm:
Adam Creighton 12.34pm: Eco damage will take years to reverse
Economic damage from the largest three month fall “in the history of the quarterly national accounts” will take years at best to reverse, the Reserve Bank has estimated in its latest quarterly economic statement.
The Reserve Bank has forecast a 10 per cent drop in economic output in the June quarter and a rise in unemployment to just above 10 per cent in its latest economic update, which predicts deflation in the second quarter of this year.
“The initial contraction in activity has been driven by necessary public health measures rather than the economic and financial developments that are typically involved in sparking economic downturns, so the speed and shape of the recovery could differ from the experience in the past,” the Statement said.
The RBA has modelled three scenarios for the economy in the wake of the coronavirus pandemic, given the high level of uncertainty.
“A stronger economic recovery is possible, however, if further gains in controlling the virus are achieved in the near terms, allowing most containment measures to be phased out over coming months and with more limited damage to business and household confidence and balance sheets,” it said.
“Much of the near-term decline in GDP growth and the rise in the unemployment rate would be reversed over the next few years,” it added.
Another pearl from the RBA's SOMP:
— Patrick Commins (@ComminsP) May 8, 2020
"Thanks to JobKeeper, around one quarter of employees could receive a temporary increase to their earnings if they are covered by the program. "
This chart shows the slowdown in activity.#ausbiz #COVID19 #COVID19Aus #auspol pic.twitter.com/DjGr3clMoq
Lachlan Moffet Gray 12.31pm: Woolies returns to normal trade
Woolworths stores will return to normal trading hours from Monday as coronavirus-led panic buying subsides and restrictions on product categories are lifted.
In an email to customers on Friday, Woolworths Group CEO Brad Banducci the return to normal hours would mean a phase-out of the community hour scheme for senior and vulnerable Australians, which will be replaced by a permanent 10 per cent discount on groceries for people over 60.
“Over the last nine weeks, it has been both interesting and gratifying to see how we, as a community of grocery shoppers, have adapted to this time of dramatic change,” Mr Banducci said.
“We’ll phase out the Community Hour we introduced at Woolworths during the demand surge, but after receiving a lot of constructive feedback, it’s something we wouldn’t hesitate to bring back if required,”
“In parallel, later today we will start offering a permanent 10pc discount on Delivery Unlimited for over-60s.”
WOW last traded lower by 0.3pc to $34.79.
12.28pm: RBA sticks to V-shaped recovery
The RBA has stuck to its previously-outlined V-shaped recovery assumption in the economic forecasts from its “baseline” scenario in the May Statement on Monetary Policy.
GDP is expected to contract 8pc in the year to June and 6pc in the year to December, before rebounding 7pc in the year to June 2021 and 6pc in the year to December 2021.
The unemployment rate is still expected to hit 10pc by June before falling steadily to 6.5pc by June 22, with employment to fall 7pc in the year to June and December before rising 4pc in the year to June 21 and 6pc in the year to December 21.
Headline CPI inflation is expected to fall 1pc in the year to June and 2020 before rising to 2.75pc by June 21, but then stay below the 2-3pc target band through June 22.
However, the RBA warns that the pace of recovery beyond the June quarter is “especially uncertain.”
“It is quite plausible that the current economic disruption will have some long-lasting effects, not only because it will take some time to restore workforces and re-establish businesses but also because it could also affect mindsets and the behaviours of consumers and businesses,” the RBA says.
“This could result in structural change in the economy. Changes in the financial position of households and businesses could also have long-lasting effects.”
Ben Wilmot 12.18pm: REA higher despite property warning
Property listings company REA Group is one of the best performers in the top 200 after it flagged cost savings measures and warned the real estate market was being hit by social distancing measures as well as business closures and economic uncertainty.
The company said weakness in new listing volumes and moves to support customers would adversely impact revenues as residential listings fell by a third in April.
Sydney listings were down 18 per cent and in Melbourne they fell 27 per cent but the company said it was working to offset a portion of anticipated revenue losses by implementing cost-savings which should lower operating expenses by about 20 per cent on last year.
REA emphasised it had a strong balance sheet, low debt levels and cash of $135m and it has an additional $149m loan facility with its banking syndicate that matures in December 2021.
REA last traded up 8.4pc to $85.76.
12.11pm: Fidelity tips U-shaped recovery
Fidelity has outlined its expectation of a U-shaped global economic recovery and the new long-term trends that will set the world on a unique course post COVID-19.
Global CIO Andrew McCaffery, says government intervention, fiscal activism, corporate governance and sustainability, and continued Asian economic strength will become permanent features of the investment landscape.
“Investors will have to reconcile themselves with an environment of continued low and negative interest rates, debt overhang, unconventional monetary policy tools such as yield curve control, and fiscal spending on a scale we have never seen before,” he says.
Mr McCaffery expects opportunities from dislocation leading to new forms of globalisation, including building resilience around supply chains especially where their importance veers into national security, regional disparities in a return to ‘normal’ after the virus, and differences in demographic profiles.
He also says the virus is accelerating the move to online consumption, while valuation disparities have unlocked rare opportunities to buy quality companies. Low rates and central bank corporate bond purchase programs are also a “boon to risk assets”.
“For investors, our previous macro assumptions must undergo a major update and finding flexible ways to navigate these changes will be crucial to generating robust, risk-adjusted returns over the longer term,” he says.
11.50am: SOMP lifts Aussie dollar
The Aussie dollar is lifting after the release of the RBA’s statement on monetary policy, as the bank said unemployment was likely to peak at 10pc.
“In Australia, output is expected to contract significantly over the first half of 2020, mostly in the June quarter. While the exact size of the contraction is still uncertain, a decline in GDP of around 10 per cent from peak to trough is expected,” the board said.
AUDUSD is trading up 0.72pc to US65.41c as the ASX trims early gains to 0.64pc.
RBA baseline forecasts#ausbiz #ausecon pic.twitter.com/WWgZsM0gqW
— CommSec (@CommSec) May 8, 2020
Gerard Cockburn 11.38am: Everyday spending boosts Zip
Buy now, pay later provider Zip says sales have been strong during the coronavirus shutdown, with stronger transaction volumes recorded in everyday spending categories.
The rival to Afterpay has experienced a share price surge of more than 14 per cent in morning trade after reporting revenue of $15.1m for April, an 81 per cent increase compared to the same period in 2019.
Further, chief executive Larry Diamond said May performance looked to be “considerably stronger”, as physical retailers begin to reopen.
Zip reported monthly transaction volume of $181.6m, a year-on-year rise of 86 per cent.
Analysts at the Royal Bank of Canada (RBC) flag that the group’s net bad debts have picked up to 1.99 per cent, but all other metrics remain within its consensus.
RBC says the company is well placed to benefit from the growing shift to online spending during the forced shutdown caused by the pandemic.
“While the top-line performance is pleasing, the fact that arrears rates have remained stable to date and hardship claims have peaked in late March … highlights the advantage the BNPL players have with low account balances, dynamic credit-decisioning, and high receivable book turnover,” analyst Tim Piper writes.
Z1P last traded up 14pc to $3.26.
11.21am: Macquarie surges while Citi says Sell
Citi analyst Brendan Sproules says Macquarie’s result “likely offers something for everyone” – bulls and bears alike.
Bears can point to a material fall in performance fees and investment income in FY21 prompting a lack of guidance, while bulls may be prepared to look through the volatility in earnings and focus on opportunities to deploy record surplus capital of $7.1bn in volatile markets.
He notes that FY20 NPAT of $2.731bn was about 5pc below consensus, the final dividend of $1.80 was well below consensus of $2.73, and FY20 impairments almost doubled to $1.040bn.
Revenue missed his estimate by 1pc, driven by higher impairments, while costs were in-line, but underlying revenue (ex-impairments) beat expectations in MacCap and MAM.
The lack of group guidance was a “sensible move in the current environment”, given wide-ranging uncertainty around COVID-19 and global growth.
He notes uncertainty around key “volatile” line items, with MAM – including performance fees – expected to be “significantly down”, MacCap investment income to be down and a mix of subdued customer activity and volatility benefits to be weighed up elsewhere.
Citi has a Sell rating on Macquarie Group but it’s price target is 20pc higher at $123.50.
Macquarie shares are surging by 4pc to $103.56 after initially falling 1.6pc to $98.00.
Read more: Macquarie cuts payout as profit slides
11.10am: Top picks for easing restrictions: UBS
UBS equity strategist Pieter Stoltz says stocks exposed to essential services or domestic travel are best poised to benefit from any relaxation of government restrictions.
In a note to clients, Mr Stoltz notes that while any relaxation of restrictions is positive, he remains cautious on the pace that the economy and EPS recovers.
Further to that, he says industries exposed to international travel will also likely remain in hibernation until early 2021.
Given a weak macro outlook – with unemployment set to rise at least 10 per cent and property prices to fall at least 10pc – he says investors interested in positioning for the reopening should consider essential service or retail stocks, stocks exposed to domestic travel and other stocks with significant direct benefits from relaxed restrictions.
Some of the larger names in those groups listed by UBS include Premier Investments, Cleanaway, Transurban, IDP Education, Qantas, Crown Resorts, REA Group, Scentre, Stockland and Tabcorp.
Follow the latest coronavirus news at our live blog
Perry Williams 10.55am: Orora halves special dividend
Packaging company Orora will only return half of a $1.2bn windfall to shareholders, keeping $600m for growth deals, as it flags lower annual profit due to tough market conditions.
Shareholders will receive $600m following the sale of its fibre division to Japan’s Nippon Paper in October for $1.7bn, but Orica had originally promised investors a $1.2bn capital return.
Orora said the board’s preference was to “pursue potential growth investment opportunities” and if deals are not struck then the return of the $600m balance would be considered in due course.
Paying just half the return was appropriate given COVID-19 uncertainty, tightening liquidity in debt markets and the terms of Orora’s debt facilities, retaining a strong balance sheet and its growth plans.
A special dividend of $450m will be paid, worth 37.3c a share, along with a $150m capital return at 12.4c a share. A share consolidation of 0.8 of a share for every share held will be undertaken to adjust for the cash return.
Orora will take a $25m hit in the second half from the pandemic due to weakness in its North American business and more broadly said operating earnings before interest and tax will decline in the 2020 financial year due to challenging market conditions.
Orora last up 3.7 per cent to $2.52.
Read more: Orora to sell fibre business to Nippon Paper for $1.7bn
Joyce Moullakis 10.51am: How much is Macquarie’s CEO making?
Macquarie Group will not fork out lucrative short-term bonuses for its key executives in 2020, heeding to advice from the banking regulator during the COVID-19 crisis.
But the total pay balances for Macquarie’s executives still highlighted why the company is dubbed the Millionaire’s Factory.
The asset manager and investment bank’s annual report showed the total 2020 pay of chief executive Shemara Wikramanayake fell to $14.9m from $18m a year earlier.
This year’s pay includes salary of $795,470, long-term benefits of $4.87m, and equity awards including shares of $6.9m.
The reduction in Ms Wikramanayake’s overall remuneration was due to the absence of a short-term cash bonus, which in 2019 amounted to $4.28m.
MQG last trading up 3.8pc to $103.38.
Read more: Macquarie cuts payout as profit slides
10.24am: Macquarie makes swift reversal
So much for the dip in Macquarie shares after its results today.
Amazingly, Macquarie shares have turned up 1.5pc to $101.13 after falling 1.6pc to $98.00 in early trade.
That’s despite the bank missing earnings estimates and slashing its final dividend.
The bank has evidently been well supported on dips.
UBS analyst Jon Mott says Macquarie’s FY result was “broadly in line with downgraded consensus” and Shemara Wikramanayake’s decision to not give any FY21 guidance “seems appropriate given the environment”.
Overall he doesn’t seem too worried at first glance.
Read more: Macquarie cuts payout as profit slides
10.13am: ASX higher in broad lift
The local market is pushing higher with gains across all sectors bar health care as investors look ahead to the likely easing of some coronavirus restrictions.
In opening trade, the benchmark ASX200 is higher by 42 points or 0.8pc at 5406.9.
Macquarie is slipping by 0.8pc after slashing its final dividend but is largely offset by 1pc to 1.2pc lifts in the major banks.
The Real Estate, Energy, Materials, Communications, Consumer Discretionary, Financials and IT sectors are leading broadbased gains while defensives like Health Care, Consumer Staples and Utilities are underperforming.
Interestingly, Bloomberg points out that the US futures market points to a negative Fed policy rate by early 2021.
Any more easing or quantitative easing by the Fed would presumably be good for stock valuations.
Nick Evans 10.05am: Investors push for Rio carbon targets
Rio Tinto’s resistance to setting carbon emission targets for buyers of its products has been met with a substantial backlash from institutional investors.
Almost 37 per cent of votes at its annual shareholder meeting on Thursday backed a resolution calling on the company to match promises made by its major competitors.
The shareholder resolution, lodged by activist shareholder group Market Forces, failed to meet the heights of support achieved for a motion calling on Woodside to set greenhouse gas emission targets in line with the Paris climate change agreement, which won a majority of proxy votes at Woodside’s annual meeting on April 30, or the 43 per cent support for a similar motion from Santos shareholders earlier in April.
But it won far more support than even its backers hoped, after only 6 per cent cent of shares supported a similar resolution at Rio’s 2019 shareholder meeting.
Read more: Energy ‘key to recovery’, says Rio
John Durie 9.58am: Virgin IM to be circulated today
Virgin Airlines Administrator Vaughan Strawbridge is today due to circulate the lengthy information memorandum for the proposed sale of the company.
Expressions of interest are due to be lodged next Friday.
At this stage the documents are being sent to just a handful of prospective buyers as consortiums are still working together on just who will be bidding next week.
The intended buyers will also be keen to have full due diligence to help assess the assets.
Consortiums include one led by Brookfield with Macquarie Bank, Wesfarmers and QIC, another led by Bain and Co and by BGH which is said to include Lindsay Fox and perhaps Melbourne Airport.
9.44am: Shares awaiting US payrolls data
The Australian sharemarket should be fairly quiet before US non-farm payrolls data for April tonight.
US futures relative to fair value were pointing to a 0.3pc rise and S&P 500 futures are up about 0.2pc this morning.
But Macquarie Group has missed earnings estimates, slashed its dividend and declined to provide FY21 earnings guidance while Telstra has announced a $300m writedown of the value of its Foxtel stake.
Also today the RBA’s statement on monetary policy is due at 11.30am AEST, but it has already flagged “a range of scenarios” on the economy.
Perhaps more important for sentiment will be the outcome of a federal cabinet meeting where PM Scott Morrison has said he will outline a plan to reopen the economy.
ASX200 last at 5364.2.
Nick Evans 9.36am: Orica reports limited virus impact
Orica boss Alberto Calderon says the mining services company’s operations revenue is holding up strongly despite the impact of the coronavirus, with the company posting an improved half-year earnings result and declaring a 16.5c a share interim dividend.
Orica booked earnings before interest and tax of $308.6m, up 2 per cent on the same period a year ago before, and net profit of $165.2m.
Mr Calderon said Orica’s key markets in Australia and the US were performing well despite the coronavirus.
“As a result of mining activities being confirmed as essential services in most countries, over 90 per cent of our volumes have remained intact following COVID-19, with limited impact in Australia and the USA which are two of our major regions,” he said.
9.26am: What’s on the broker radar?
- Alumina cut to Neutral – Credit Suisse
- Beacon Lighting raised to Add – Morgans
- Cleanaway raised to Add – Morgans
- Goodman Group cut to Sell – Morningstar
- Harvey Norman raised to Buy – Goldmans
- Insurance Australia Group raised to Buy – Morningstar
- People Infra Group raised to Add – Morgans
- South32 cut to Hold – Renaissance Capital
9.24am: Macquarie misses consensus
Macquarie’s Group’s FY net profit fell 8.4pc to $2.73bn, missing the consensus estimate by 4.2pc according to Bloomberg’s estimates.
More significantly, the final dividend was cut to $1.80 from $3.60 a year ago and Macquarie was “unable to provide meaningful guidance” for $2.85bn for FY21.
The earnings uncertainty may weigh on the share price today but could provide a buying opportunity.
Morgan Stanley’s Andrei Stadnik had predicted a 15pc fall in FY20 earnings and no FY21 guidance.
But he has kept an Overweight rating to date, given that Macquarie is the leading alternative asset manager franchise, with renewables growth, strong capital, a track record of resilient earnings, and has opportunities to deploy dry powder in dislocated markets.
Chart support in the $93.60-$95.00 area may be tested, but the 38.2pc retracement at $91.96 may hold.
Read more: Macquarie cuts payout as profit slides
9.20am: Early super access paused
The tax office is pausing applications for early access to superannuation after instances of identity fraud were detected.
More than 1.2 million Australians have applied to withdraw nearly $10 billion from their super accounts during the coronavirus pandemic.
But federal police fear up to 150 people have lost $120,000 due to identity theft.
Assistant Treasurer Michael Sukkar said claims to early super would be frozen while the alleged frauds were investigated.
“Today we will undertake that process just to make sure there is nothing more that the ATO could do,” he told Sky News on Friday.
AAP
Read more: Super release frozen on fraud fears
9.15am: Telstra writes down Foxtel value
Telstra says it will take a write down of $300m for its 35 per cent stake in Foxtel, following a warning for majority owner News Corp this morning.
The telco said it expected the value of its share in Foxtel would be trimmed from $750m to $450m but said it would not affect its broader FY20 guidance.
“Foxtel has been facing industry disruption for several years and the COVID pandemic is obviously having an impact as global sports are put on hold, pubs are temporarily closed, and advertisers are forced to carefully reconsider their investments,” chief Andy Penn said.
“Following News Corp’s decision to reassess the carrying value of Foxtel, Telstra is likely to make a noncash adjustment consistent with this valuation at our annual results announcement in August.”
Joyce Moullakis 9.06am: Macquarie slashes payout as profit slips
Macquarie Group has sharply cut its final dividend amid the COVID-19 turmoil and posted a decline in annual profit to $2.73bn, as the asset manager and investment bank also shied away from providing 2021 guidance.
Macquarie’s profit fell 8.4 per cent to $2.73bn for the 12 months ended March 31, compared to a record $2.98bn in the same period a year earlier, the company said in an ASX statement on Friday.
The result missed expectations as analysts were expecting Macquarie to deliver a profit of $2.87bn.
The final dividend fell to $1.80 per share, taking the full year payment to $4.30, which is down 25 per cent on 2019 dividends.
The dividend cut comes after the banking regulator called on banks and financial companies to seriously consider deferring dividend payments during the COVID-19 crisis, or to materially reduce the payments to conserve capital.
Today Macquarie Group released its 2020 full-year result. “The final weeks of the financial year were overshadowed by the profound human impact of the COVID-19 global health crisis and its economic consequences,†said Macquarie CEO Shemara Wikramanayake. https://t.co/QV0DDf7POL pic.twitter.com/xtlpSqRbO8
— Macquarie Group (@Macquarie) May 7, 2020
8.55am: Goldmans lifts local GDP outlook
Goldman Sachs Australia chief economist Andrew Boak has revised up his Australian GDP forecast for 2020, ahead of a likely accelerated timetable for reopening the economy.
Mr Boak now expects a consumer-led economic recovery to start one quarter earlier in the September quarter, with 4.5pc Q/Q growth.
He has revised up his 2020 GDP forecast to -4.5pc from -6pc, while lowering his 2021 forecast to 6pc from 10pc, given more of the growth normalisation will have been realised in 2H20, and also to incorporate a materially weaker outlook for migration and population growth.
“Australia’s macro outlook remains highly uncertain; however, the combination of successful COVID-19 containment and strong policy support puts Australia in a relatively favourable position,” he says.
“A key risk is that the scheduled removal of fiscal support causes a ‘double dip’ decline in employment and consumption in late 2020.
“We expect a surge in household savings through the lockdown will support consumption through this period, but still see the risks as skewed towards some policy support being extended.”
Leo Shanahan 8.47am: News Corp revenue slips 8pc
News Corp has reported an 8 per cent decline in revenue compared to the same quarter last year on the back of a difficult advertising market and negative impact from currency fluctuations showing the early impacts of the COVID-19 outbreak on the global media company.
In a conference call from New York on Friday morning News Corp chief executive Robert Thomson reported third quarter total segment EBITDA of $US242 million, a 2 per cent decline compared to $247 million in the prior year
Mr Thomson foreshadowed a “fundamental reset” of sports rights in the longer term following the COVID-19 outbreak which has had a material impact on subscribers to the company’s sports streaming service Kayo.
News Corp is publisher of The Australian.
Net loss for the company was $US1 billion due to write downs in the former News America Marketing business, whose sale was finalised last month, and a writedown of goodwill and intangible assets at Foxtel.
8.10am: REA revenue falls
Online real-estate classifieds company REA Group said its revenue and earnings dropped in the nine months through March, and it is cutting expenses and boosting liquidity to navigate the impact of the coronavirus pandemic.
On Friday, REA said its revenue after broker commissions totalled $640.2 million in the nine months through March, down 4 per cent on the corresponding period a year earlier. Earnings before interest, tax, depreciation and amortisation declined by 3 per cent to $390.8 million in the same period.
Both REA and rival Domain Holdings Australia have experienced steep falls in listings of properties after the federal government and state leaders imposed restrictions to slow the spread of the new coronavirus. Those restrictions included a temporary halt to open houses and on-site auctions of properties.
REA said national residential listings were down 33 per cent in April. Among major markets, listings in Sydney dropped by 18 per cent and Melbourne declined 27 per cent that month.
REA said it was taking action to offset a portion of anticipated revenue losses through cost cuts. “These include workforce planning measures, reduced marketing expenditure and a review of all supplier arrangements,” the company said.
Dow Jones Newswires
7.46am: AMP drops NZ sale plan
AMP says it has abandoned plans to divest its New Zealand wealth management business,
following disruption caused by the COVID-19 pandemic.
New Zealand wealth management will be retained by AMP and will now focus on plans to develop and grow the business in its existing markets, AMP told the ASX.
AMP says it held discussions with a number of interested parties regarding the divestment, but the offers received did not meet the company’s expectations.
7.40am: Oil slips
Oil prices slipped overnight as global supply and demand worries erased earlier gains seen from an increase in Saudi Arabia’s official crude selling price and a surprise rise in Chinese exports last month.
Brent futures fell 26 cents, or 0.9 per cent, to settle at $US29.46 a barrel, while US West Texas Intermediate (WTI) crude lost 44 cents, or 1.8 per cent, to settle at $US23.55.
Earlier in the day, Brent was up over 5 per cent and WTI up over 10 per cent. For the week, Brent was still up about 11 per cent and WTI up about 18 per cent. Both benchmarks have rallied sharply this week as countries have eased coronavirus-related lockdowns and fuel demand has rebounded modestly. Oil production worldwide is also declining to reduce a growing supply glut.
Reuters
7.32am: Facebook extends work from home
Facebook says it will allow its staff to work from home through the end of the year, according to reports.
Facebook will open most of its office on July 6, according to CNBC, and the company is still in the process of determining which employees will be asked to return to the office.
Like many Silicon Valley technology companies, Facebook was among the first businesses to adopt work-from-home initiatives as the coronavirus spread across the globe. Facebook has given staff $US1000 bonuses for work-from-home expenses, among other things.
Dow Jones
7.25am: ASX set to edge higher
Shares appear set for a flat or slightly higher start to ASX trading after stronger than expected Chinese exports data offset US unemployment figures overnight.
At 7am (AEST) the benchmark SPI 200 futures contract was up 5 points, or 0.09 per cent, to 5,373.0.
Stocks globally were bolstered after Beijing reported a 3.5 per cent rise in exports in April from a year earlier, confounding expectations of a 15.7 per cent fall and outweighing a 14.2 per cent drop in imports.
The data mitigated the impact of the weekly US unemployment report. Claims for unemployment benefits totalled a seasonally adjusted 3.169 million for the week ended May 2, down from a revised 3.846 million in the prior week.
The Dow Jones Industrial Average rose 211.25 points, or 0.89 per cent, to 23,875.89, the S&P 500 gained 32.77 points, or 1.15 per cent, to 2,881.19, and the Nasdaq Composite added 125.27 points, or 1.41 per cent, to 8,979.66.
Meanwhile the Reserve Bank is due to give its Statement on Monetary Policy later this morning, after it left the cash rate at 0.25 per cent on Tuesday. Elsewhere, Macquarie Bank will issue its full year results, Orica will publish its half year results, and AMP and funerals provider Invocare will host annual general meetings.
The S&P/ASX200 benchmark index finished Thursday down 20.4 points, or 0.38 per cent, to 5,364.2, while the All Ordinaries index was down 14.9 points, or 0.27 per cent, at 5,449.9.
One Australian dollar was buying US64.95 cents at 7am, up from US64.54 cents at Thursday’s close.
AAP
6.50am: Nasdaq erases 2020 losses
The Nasdaq Composite index closed in positive territory for 2020 for the first time in two months, clawing back much of its losses since the coronavirus pandemic began rattling the US stock market.
Investors have continued to prize the big tech companies that drove much of the recent decade-long bull market and which make up a heavy share of the Nasdaq. With a daily advance of 1.4pc, the index ended the day in the green year-to-date for the first time since March 4. It remains down 8.5pc from its February high.
While the Nasdaq has gained 0.1pc for the year, the S&P 500 has fallen 11pc and the Dow Jones Industrial Average has dropped 16pc.
The big tech companies that dominate the Nasdaq Composite have outperformed the market in 2020, with Microsoft rising 16pc, Apple gaining 3.4pc and Amazon.com surging 28pc. Some investors believe the abrupt transition for many people and companies to working and staying at home will hasten increased reliance on technology.
“We expect demand for technology products to accelerate on the back of this, and I think that’s clearly the view in the market as well,” said Timothy Skiendzielewski, portfolio manager for US equities at Aberdeen Standard Investments.
Dow Jones
6.30am: Uber loses $US2.9 billion
Uber lost $US2.9 billion in the first quarter as its overseas investments were hammered by the coronavirus pandemic.
In an effort to stop the bleeding, the ride-hailing giant said it is offloading Jump, its bike and scooter business, to Lime, a company in which it is investing $US85 million.
Uber brought in $US3.54 billion in revenue in the first quarter, up 14pc from the same time last year.
Revenue in its Eats meal delivery business grew 53pc as customers shuttered at home ramped up demand.
But its bottom line was hurt when the value of Uber’s investment in Chinese ride-hailing giant Didi, Singapore-based Grab and others plummeted by $US2.1 billion as demand collapsed in those regions.
AP
6.10am: Wall St rallies after jobless data
US stocks rose as the number of new applicants for unemployment benefits continued to decline.
The S&P 500 rose 1.2pc, and the Dow Jones Industrial Average added 0.9pc. The tech-heavy Nasdaq Composite advanced 1.4pc. At the end of the trading session, the tech-heavy Nasdaq index had recovered enough from its recent lows to be essentially flat for 2020 year-to-date.
After falling yesterday, the ASX is set to edge higher at the open. At 6am (AEST) the SPI futures index was up eight points, or 0.1 per cent, after earlier being negative.
Initial US jobless claims for the week ended May 2 came in at 3.2 million, with total applications since mid-March surpassing 33 million. Some fund managers have taken heart as the number of new claims each week has steadily fallen since surpassing 6 million in the last week of March.
“Although the US jobless claims number is a very large number, I think people, investors, were relieved to see it wasn’t even larger,” said John Conlon, director of equity strategies at People’s United Advisors.
Despite the positive trend, the monthly jobs report to be released Friday night (AEST) is expected to show the coronavirus pandemic inflicted the largest one-month blow on record to the US labour market.
President Trump’s pledge on Wednesday to shift resources to reopening the economy and developing a vaccine have also buoyed optimism. Health authorities are cautioning against moving too quickly, in case the number of infections and fatalities climbs again, but some business owners have pressed for easing of restrictions to bolster the economy.
At the same time, fresh signs of a deterioration in relations between the U.S. and China weighed on sentiment, with the two governments exchanging barbs as the coronavirus pandemic deepens the rancour. Mr Trump has said he is considering using tariffs and other ways to collect compensation from Beijing.
“The mood of the market so far has been grasping for positives,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “If the trade war restarts again or if we see a rebound of cases, that could see the market move toward a much more pessimistic worldview.”
In Europe, the pan-continental Stoxx Europe 600 rose 1.1pc. Asian markets were mixed by the close, with benchmark indexes in China and Hong Kong edging lower while the Japanese gauge ticked higher.
Dow Jones Newswires
5.48am: Zoom buys Keybase
Zoom Video Communications is buying security firm Keybase in an effort to shore up security for its video meetings.
Terms of the deal were undisclosed. Zoom has been working to improve the security of its video meetings after some lapses in privacy and security as Zoom meetings grew more popular during the pandemic.
Keybase is Zoom’s first acquisition. The company will help Zoom implement end- to-end encryption, a type of security which means Zoom has no access to the contents of encrypted data.
AP
5.45am: Futuristic neighbourhood plan axed
A Google affiliate abandoned plans to build a futuristic neighbourhood on Toronto’s lakefront that was to include robots for delivering mail and collecting garbage, citing economic uncertainty.
Sidewalk Labs, a subsidiary of Google’s parent Alphabet, had proposed building a carbon-neutral community “from the internet up,” where tall buildings would be made of timber and technology would be geared to catering to every aspect of modern living.
A provisional green light to build on the 12-acre site was granted in October 2019. A final say was expected later this month.
But Sidewalk Labs CEO Dan Doctoroff said in a statement that “as unprecedented economic uncertainty has set in around the world and in the Toronto real estate market, it has become too difficult to make the 12-acre project financially viable without sacrificing core parts of the plan.”
AFP
5.40am: Markets rise on easing lockdowns, China exports
Stock markets rose as investors looked beyond grim economic news to focus on easing coronavirus lockdown measures, with surprisingly strong Chinese export data adding to the positive vibe.
Wall Street was up around 1.5 per cent in the late New York morning, a rise comparable to the advances seen across Europe at the closing bell.
London stocks were also underpinned by a weaker pound after the Bank of England held rates and kept its stimulus package unchanged, even as it predicted more gloom for the British economy.
Asian stock markets closed mixed, while oil prices rallied.
China’s exports saw a surprise 3.5 per cent rise in April, official figures showed Thursday.
“Market participants are hoping to see a similar bounce in data for other major economies once lockdown measures are eased,” said Fawad Razaqzada at ThinkMarkets.
He cautioned, however, that the economic damage from the virus could already be too deep to allow for a quick rebound.
But the overall mood was upbeat, particularly in Europe, where several countries are beginning to relax confinement measures.
“Continued optimism about the easing of lockdowns has boosted European stock markets,” said CMC Markets analyst David Madden.
Germany and France reported slumps in industrial production and Britain said its total economic output would plummet by 14 per cent this year. The UK forecast came a day after the European Union warned of a 7.7-per cent eurozone contraction in 2020.
London closed up 1.4 per cent, Frankfurt rose 1.4 per cent and Paris gained up 1.5 per cent.
AFP
5.37am: Neiman Marcus bankrupt
Neiman Marcus has filed for Chapter 11 bankruptcy protection, the first department store chain to do so and the second major retailer to be toppled by the coronavirus pandemic.
The move by the 112-year-old storeyed luxury department store chain was announced Thursday and follows the bankruptcy filing by J.Crew on Monday.
Experts believe there will be more to come even as there are moves to reopen businesses in parts of the country like Texas and Florida.
AP
5.35am: Uber deepens ties with Lime
Uber is leading a $US170 million investment in scooter- and bike-sharing start-up Lime, in a move that deepens the ties between the two “sharing economy” platforms, the companies said Thursday.
Under the deal, Uber will transfer its Jump electric bike and scooter operations to Lime while keeping the “micromobility” services on its mobile application.
“Today’s announcement means that riders around the world will have even more integrated micromobility options at their fingertips, making car-free travel easier than ever before,” the two firms said in a joint statement.
“In almost all markets where Lime and Uber operate, users will be able to turn to both the Lime and Uber app to unlock world-class products and services.” The two firms previously had an agreement allowing users to find and rent bikes and scooters with either of the applications.
AFP
5.34am: US productivity slumps
US productivity fell a sharp 2.5pc in the first three months of this year as labour costs jumped 4.8pc.
The Labor Department reported Thursday that the decline in productivity, the amount of output per hour of work, followed a 1.2pc gain in the fourth quarter of last year.
The 4.8% increase in labour costs followed a tiny 0.9pc gain in the fourth quarter and was the largest quarterly gain since a 5.7pc rise in the first quarter of 2019.
AP
5.32am: 33m have sought US jobless aid
Nearly 3.2 million laid-off workers applied for unemployment benefits last week as the business shutdowns caused by the viral outbreak deepened the worst U.S. economic catastrophe in decades.
Roughly 33.5 million people have now filed for jobless aid in the seven weeks since the coronavirus began forcing millions of companies to close their doors and slash their workforces. That is the equivalent of one in five Americans who had been employed back in February, when the unemployment rate had reached a 50-year low of just 3.5pc.
On Friday night (AEST), the government will issue the April jobs report, and it’s likely to be the worst since modern record-keeping began after World War II. The unemployment rate is forecast to reach at least 16pc, the highest rate since the Great Depression, and economists estimate that 21 million jobs were lost last month. If so, it would mean that nearly all the job growth in the 11 years since the Great Recession ended has vanished in a single month.
AP
5.31am: International tourism to plunge up to 80pc
The number of international tourist arrivals could plunge by 60 to 80 per cent in 2020 owing to the coronavirus, the World Tourism Organisation said Thursday, revising its previous forecast sharply lower.
Widespread travel restrictions and the closure of airports and national borders to curb the spread of the virus had plunged international tourism into its worst crisis since records began in 1950, the UN body said in a statement.
Tourist arrivals fell by 22 per cent in the first three months of the year, and by 57 per cent in March alone, with Asia and Europe suffering the biggest declines, according to the Madrid-based organisation.
AFP
5.28am: O2, Virgin Media to merge
Telefonica and Liberty Global on Thursday said they would merge their UK units O2 and Virgin Media to create a £38-billion telecoms giant that could shake up the British market.
The mega-deal is the biggest tie-up to be unveiled since the coronavirus pandemic hit home in March, sending most of the planet into lockdown and dealing a major blow to the global economy.
Until now, O2, which is owned by Spain’s Telefonica, and Virgin Media, which is owned by US cable giant Liberty Global, have been rivals.
The merger values O2 at £12.7 billion and Virgin Media at £18.7 billion, and is expected to deliver synergies worth £6.2 billion, pushing the total value of the operation close to £38 billion (43 billion euros, $46.6 billion).
The deal, which is expected to close in mid-2021, will pile pressure on BT, the highly-indebted British operator that owns the EE mobile network.
“Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK,” said Telefonica chief executive Jose Maria Alvarez-Pallete.
5.26am: Viacom profit slumps
ViacomCBS says first-quarter profit tumbled as the company suffered a 19 per cent decline in advertising revenue due in part to the cancellation of the NCAA “March Madness” men’s basketball championship this year.
The New York owner of the CBS television network, MTV and the Paramount movie studio said overall revenue fell 6 per cent, to nearly $US6.67 billion, compared with $US7.1 billion in the year-earlier period.
The company posted net income of $US508 million, or 82 cents a share, compared with $US1.946 billion, or $US3.15 a share, in the year-earlier period. ViacomCBS said ad revenue overall would have increased 2 per cent if the company had not faced comparisons to a 2019 first quarter that included last year’s NCAA event as well as the broadcast of Super Bowl LIII.
Reuters
5.22am: InterContinental Hotels sales collapse
InterContinental Hotels Group expects sales to have plunged by a record 80 per cent in April as the coronavirus outbreak shuts its chains, including Crowne Plaza and Holiday Inn.
IHG, the world’s largest hotel operator by number of rooms, added that global revenue per available room – a key industry measure – tanked 55 per cent in March, when the world implemented mass lockdowns to contain the deadly COVID-19 outbreak.
RevPAR slumped 25 per cent over the first quarter from a year earlier, it added in a results statement.
“COVID-19 represents the most significant challenge both IHG and our industry have ever faced,” said chief executive Keith Barr.
With around 15 per cent of its hotels currently shut, including InterContinental sites, London-listed IHG has offered facilities to frontline health workers and the homeless.
AFP
5.20am: UK ‘to shrink by most since 1706’
The Bank of England warned Thursday that the British economy could suffer its deepest annual contraction in more than three centuries as a result of the coronavirus pandemic, before bouncing back next year. In what it describes as a “plausible” scenario, the bank said the British economy will be 30pc smaller at the end of the first half of the year than it was at the start of it, with the second quarter seeing a 25pc slump alone following a 3pc decline in the first.
Unemployment is projected to more than double to around 9pc, but that figure does not include the 6 million workers who have been retained by firms as part of a scheme that sees the government pay up to 80pc of salaries.
The central bank said the economy should start to recover during the second half of the year as the lockdown restrictions start to be lifted and “materially so” in the latter part of the period. It noted that the timeliest indicators of U.K. demand have stabilised in recent weeks, albeit at very low levels, after unprecedented falls during late March and early April.
As a result, it anticipates that the economy will end up 2020 with a 14pc contraction. According to bank statistics, that would be the biggest annual rate of decline since 1706, and markedly more than anything seen in the aftermath of World War I when the economy was also laid low by the Spanish flu pandemic. The projected fall is also three times more than the recession of 2008-9 during the global financial crisis.
Over the longer term, the bank thinks that the British economy could revive quickly if the pandemic comes under control globally. It thinks that the economy could pick up by 15pc next year, which would be the biggest annual increase since 1704. In fact, the bank expects the economy to be more or less back to where it was before the outbreak within three years, with the financial sector helping the corporate sector get through the strain.
AP
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