Trading Day: Banks weigh on ASX, $A up on RBA
Australia’s S&P/ASX 200 share index slipped 0.1pc by the close in quiet trading, while the Aussie dollar was stronger after the release of RBA minutes.
That’s all from the Trading Day blog for Tuesday, September 15. Australia’s S&P/ASX 200 share index slipped 0.1pc to 5894.80 in quiet trading by the close of trading, while the Aussie dollar was stronger after the release of RBA minutes. It followed gains on Wall Street, where the Dow was 1.2 per cent higher, the Nasdaq added 1.9 per cent and the S&P 500 gained 1.3 per cent. Banks did most of the damage with CBA down 1.7pc, ANZ down 1.9pc, Westpac down 1.5pc and NAB down 1.4pc amid increasing jitters about the economic outlook. Gold miners surged with Evolution up 3.9pc as spot gold rose, though this was offset by a 0.6pc rise in the Australian dollar as RBA minutes didn’t take a hard line against the dollar.
8.20pm: $A to move toward US75c in Q4: CBA
USD continues to trade on the defensive against most major currencies, says CBA’s Global Markets Research. “Today’s US economic highlights are the September Empire manufacturing survey (8.30am New York) and August industrial production (9.15am New York). Signs of improving US economic activity can offer USD some intra‑day support ahead of tomorrow’s FOMC meeting.
“AUD/USD rallied above 0.7300 supported by the RBA September meeting Minutes and improving Chinese economic activity. The RBA Minutes shed no new information on what else could be done to ease monetary policy. This suggests that further easing measures are not imminent. It would require a shift in the economic outlook, or lack of further fiscal support for more monetary policy stimulus to be taken in the near term. CBA Economics expect additional fiscal support to be forthcoming particularly around infrastructure spending and bringing forward personal income tax cuts. The Federal Budget is due on 6 October.
“Moreover, the Minutes show the RBA is not concerned with the appreciation of the Australian dollar, noting it “was broadly aligned with its fundamental determinants” and consistent with the recent increase in iron ore prices.
“Indeed, AUD/USD is currently trading within our estimated fair value range of 0.7100‑0.8200, centred on 0.7700. We forecast AUD/USD to trade closer to 0.7500 in Q4 2020 and 0.7800 in Q3 2021.”
Lachlan Moffet Gray 5.54pm: KPMG finds surprising business confidence
Medium-sized businesses across Australia are surprisingly upbeat about their future, but are concerned about the withdrawal of government COVID support packages and growing government debt, favouring a GST increase as the best way to reduce it, a KPMG survey found.
KPMG Enterprise’s annual pre-budget survey of its privately-owned, mid-size client base found that 52 per cent of respondents were optimistic about their prospects over the next five years while only 11 per cent were pessimistic – down from the 17 per cent who had a negative outlook this time last year, before the pandemic.
Less than half of the respondents said the pandemic had a negative impact on their business, while 37 per cent said the impact was neutral and 21 per cent said it had been positive.
More than half of the respondents said the most significant impacts were costs and margin pressures, lower demand and revenue, and shifting consumer spending patterns.
Less than 40 per cent of businesses said they could fully recover within three months of the global pandemic ending and around 30 per cent said it would take more than a year.
The biggest factor impacting businesses confidence was the withdrawal of government support measures for the economy.
4.26pm: ASX slips, $A stronger by the close
Australia’s S&P/ASX 200 share index slipped 0.1pc to 5894 in quiet trading.
While 6 of 12 market sectors rose, it was a disappointing performance considering S&P 500 futures rose 0.5pc after strong gains on Wall Street overnight.
Falls the Energy, Financials, Communications, Utilities and Consumer Staples sectors outweighed gains in Real Estate, Tech, Health Care, Materials and Industrials sectors.
Banks did most of the damage with CBA down 1.7pc, ANZ down 1.9pc, Westpac down 1.5pc and NAB down 1.4pc amid increasing jitters about the economic outlook.
Other economic reopening trades fell back with SkyCity Entertainment down 5pc, Flight Centre down 2.8pc, Bendigo Bank down 2.4pc and Webjet down 2.3pc.
Gold miners surged with Evolution up 3.9pc as spot gold rose though this was offset by a 0.6pc rise in the Australian dollar as RBA minutes didn’t take a hard line against the dollar.
China’s monthly economic activity data for August beat estimates but while the Australian dollar rose, Iron ore miners faded with Rio Tinto down 1.5pc.
“The ASX 200 opened with a bang...but it became obvious very early that institutions are still not chasing the market and as a result we saw subdued trading gain, with ASX 200 closing down,” said Bell Potter’s head of institutional sales and trading, Richard Coppleson.
“Yesterday the value and re-opening trades were strong, but today it went very quiet, with banks and energy stocks weaker.”
The Australian dollar was 0.54 per cent stronger against the US dollar by the close of the ASX session.
4.13pm: ASX Ltd revises capital raising measures
ASX Limited has revised its temporary emergency capital raising measures introduced on 31 March to help listed entities affected by the COVID-19 pandemic.
“From 15 September 2020, any entity wishing to rely on the measures must satisfy ASX that it is raising capital predominantly for the purpose of addressing the existing or potential future financial effect on the entity from the COVID-19 health crisis, and/or its economic impact,” ASX said in a statement. “ASX considers it prudent and timely to revise the settings given the stabilisation in market conditions.”
The measures were introduced on 31 March 2020 and are due to expire on 30 November 2020.
4.10pm: CBA Klarna stake value jumps
Commonwealth Bank’s 5.5 per cent holding in buy now, pay later firm Klarna has jumped to $US585.8m ($800m) from an initial investment of $US300m finalised in January.
A group led by US private equity firm Silver Lake overnight made a $US650m investment in Klarna.
The investment values the Swedish payments company, which provides consumers with the ability to pay in installments across a variety of retailers, at $US10.65bn, according to a statement by Klarna.
The fintech has a presence in markets throughout Australia, Canada, Europe, the UK and the US, plans to use the funds to continue its global expansion. Sebastian Siemiatkowski, co-founder and CEO of Klarna said: “We are at a true infection point in both retail and finance”.
“The shift to online retail is now truly supercharged and there is a very tangible change in the behaviour of consumers who are now actively seeking services which offer convenience flexibility and control in how they pay and an overall superior shopping experience”.
Bridget Carter 4.08pm: TPG fancies RMWilliams purchase
TPG Capital has entered exclusive talks to buy RMWilliams for about $200m, say sources.
It comes after the owners of the iconic Australian boots and outback apparel retailer had aspirations to sell RMWilliams for about $500m last year, as it launched a sale campaign through Goldman Sachs.
DataRoom revealed in December that TPG and Bain Capital were thought to be in the final stages to buy the business.
RM Williams is owned by L. Catterton and generates $23m in earnings before interest, tax, depreciation and amortisation.
There were suggestions in its sales promotional material that it would triple its earnings to $83m by 2024.
L. Catterton amassed a 49.9 per cent stake in RM Williams during 2013, buying the interest from former News Corp boss Ken Cowley, before buying an additional interest, taking its ownership to 82 per cent.
The business is backed by the French multinational luxury goods conglomerate LVMH Moet Hennesy Louis Vuitton which recently abandoned plans for a deal to buy the iconic jewellery company Tiffany & Co for $US16.2bn.
It consists of Catterton’s existing North American and Latin American private equity operations and LVMH and Groupe Arnault’s pre-existing European and Asian private equity and real estate operations.
Other minority owners include IFM Investors and Australian actor Hugh Jackman.
RM Williams was founded in 1932 by Australian businessman and entrepreneur Reginald Murray Williams, who rose from swagman to millionaire after he started making bush wear.
He sold the business in 1988 to South Australian stock and station agents Bennett & Fisher before it wound up in the hands of Mr Cowley.
According to IBISWorld, RM Williams is the major industry player in the Australian footwear manufacturing industry, holding 14.5 per cent of the market. It says the brand has strong customer recognition, with an established reputation for quality. The company’s premium-priced footwear has traditionally been targeted at rural Australians.
The transaction was spearheaded by Australian TPG Capital head Joel Thickins.
Ben Wilmot 3.56pm: Scentre hybrid issue planned
Scentre Group, which owns the local Westfield mall empire, is planning a major hybrid issue in a move that would alleviate pressure on its balance sheet as shopping centre values plunge.
The company has tapped investment bank UBS to advise on the hybrid issue with suggestions it could be one of the largest offers in the sector, which has remained open through the crisis as investors chase yield products.
The raising could hit about $US1.5bn and could attract more than a dozen banks that would assist with the raising, sources said.
The shopping centre giant had been tipped to raise equity, with a $1.8bn equity issue said to have been in the wings, in recent weeks. While this may also be an option for the company, issuing hybrids would help cut its gearing and support its credit rating.
Scentre mandated UBS as sole structuring adviser and ANZ Securities, BNP PARIBAS, Commonwealth Bank of Australia, Citi, HSBC and UBS Investment Bank as joint bookrunners.
The vehicle would not be listed but rather for wholesale funds and a series of fixed income investor calls would kick off on September 14.
Bridget Carter 3:40pm: HomeCo plans REIT listing
The David Di Pilla-backed HomeCo is poised to hire Macquarie Capital and Goldman Sachs for the listing of its ‘Daily Needs’ REIT, which consists of a $900m real estate portfolio.
The company announced the plans for the float when it delivered its results last month and expectations are it will be worth somewhere around $500m.
When delivering its results last month, the company said it would establish the ASX-listed Daily Needs REIT through an in-specie distribution to security holders, with HomeCo to be a partial owner. The float will involve property assets leased to groups such as KFC, McDonalds, Woolworths, Chemist Warehouse, Aldi, Bakers Delight, Coles, Woolworths, Liquorland and Dan Murphy’s.
The transaction is expected to happen late this year or early next year.
HomeCo listed last October and the backers of the company include Mr Di Pilla’s Aurrum Group of investors. Others include former UBS banker Matthew Grounds, the founders of Spotlight, Chemist Warehouse, and the Besen family. The Oatley family and Aussie Home Loans founder John Symond also backed the HomeCo float.
3.05pm: Banks down on outlook worry
Bank shares are falling for the fourth day in the last five amid jitters about the outlook.
The outlook for property prices, loan growth and bad debts is weighing on market sentiment amid Victoria’s extremely-slow roadmap out of lockdown and well as plans to wind bank JobKeeper and JobSeeker stimulus looks set to cause a further deferral of loan repayments.
Meanwhile the buy-now-pay-later phenomenon will add to downward pressure on margins.
And the high level of the Australian dollar is possibly discouraging offshore buyers.
No wonder short selling has picked up from multiyear lows.
The S&P/ASX 200 Banks index is hitting 3.5-month lows today.
ANZ is down 2pc at $17.33, while CBA, NAB and Westpac are down 1.4pc.
2.15pm: ASX -0.2%; bank selloff weighs
Australia’s share market has gone from +0.3% to -0.2% in disappointing fashion today.
Falls in banks are doing most of the damage, and top-20 stocks including Rio Tinto, Macquarie, Telstra, Woolworths, Aristocrat, Coles are also in the red.
A new 3.5-month low in the S&P/ASX 200 Banks index today is a bad sign for the market.
It is not fueling a switch to resources, with iron ore miners retreating intraday.
S&P/ASX 200 last down 0.2pc at 5890.
Bridget Carter 2.10pm: OptiComm in First State’s sights
First State Super is expected to storm back into the competition to buy OptiComm after Uniti Group upped its offer for the telecommunication services provider.
Uniti said increased its cash and scrip bid to a price equating to $5.85 per share, comprising $4.835 per share cash and 0.80537 Uniti shares for each OptiComm share.
The OptiComm board is recommending the latest offer that matches the value of the earlier offer from First State. Uniti has also secured a 19.5 per cent interest in OptiComm shares through commitments from a number of OptiComm institutional shareholders, comprising call option agreements and share purchase agreements.
It comes after the $90bn superannuation fund made a $609m takeover bid for the group a week ago, trumping Uniti’s earlier offer.
https://www.theaustralian.com.au/business/dataroom/race-on-for-first-state-super-to-complete-opticomm-takeover/news-story/80d48e3757ddcdb8710c7baeab0235b5
First State’s $5.85 per share bid is not yet binding and subject to due diligence.
Shares in OptiComm were up almost 5 per cent in afternoon trade to about $5.97 as investors bet a bidding war will emerge.
Perry Williams 1.06pm: Gas move may backfire: energy industry
The energy industry has hit back at the federal government’s plan for potential intervention in the power sector, claiming the move may derail the investment it is seeking to shore up supply.
The Australian Energy Council, which represents the industry’s biggest operators including AGL Energy and Origin Energy, said the move may end up being counter-productive.
It noted statements from the Commonwealth’s own Energy Security Board that government interventions or even discussions and “threats” of intervention act as a deterrent.
“The sector is struggling to make final investment decisions in an environment of ongoing policy uncertainty,” AEC chief executive Sarah McNamara said.
“The government’s earlier plan to underwrite new generation projects in the market also remains under consideration, and this too contributes to the ongoing uncertainty, together with various and competing state-based renewable energy targets. There are no material reliability concerns that would warrant this kind of interventionist approach, and there are already mechanisms in place to address any shortfall identified.”
The government-owned Snowy Hydro is already moving ahead with a plan to build a gas generator in the Hunter Valley at Kurri Kurri.
A proposal to develop new pipelines to boost the flow of gas in the east coast market may hold merit but should not be underwritten by the government, the AEC said. As with the electricity sector, the government wants private industry to build new pipelines to open up supply but said it will step in should the market fail to act.
“We understand and support the federal government’s desire to facilitate competitive access to gas, but planning should be done independently of government through Australian Energy Market Operator advice, followed by private investment in infrastructure that is not underwritten by government.”
Patrick Commins 12.33pm: RBA comfortable with dollar
The Reserve Bank of Australia says it remains comfortable that the Australian dollar is trading in line “with its fundamental determinants”, even as the currency hit multi-year highs this month, triggering warnings that the booming currency will drag on the nation’s post-COVID economic recovery.
The RBA’s sanguine attitude towards the strengthening Aussie, despite what it termed “the biggest shock to economic activity since the 1930s”, was revealed in board meeting minutes released this morning.
After hitting a 17.5-year low of US55.10 cents in March as the pandemic triggered near panic selling in global financial markets, the Aussie has staged a stunning recovery to hit a two-year high of US74.14 cents this month.
Monetary policymakers have signalled they would be prepared to intervene in foreign exchange markets if there were evidence the currency was not priced rationally.
But the RBA minutes revealed that “the appreciation of the Australian dollar had been consistent with the increase in commodity prices, particularly iron ore prices, over recent months”.
Still: “While members noted that the Australian dollar was broadly aligned with its fundamental determinants, a lower exchange rate would provide more assistance to the Australian economy in its recovery.”
12.30pm: Battery metals positives building
Positives around battery metals including lithium, nickel, cobalt and graphite continue to build ahead of Tesla’s “Battery Day” next Tuesday, where CEO Elon Musk has said will be “one of the most exciting days in Tesla’s history”. Global commodities consultancy Wood Mackenzie said last week that nearly 800 kilotones of extra lithium supply would need to come online in the next five years to meet the needs from the battery sector, based on its accelerated energy transition scenario, where global warming is limited to 2.5 degrees celsius. It also sees battery demand for nickel going from 5pc of supply now to 20pc in 2025 and 30pc by 2030, meaning an extra 1.3 million tonnes of nickel suitable for the battery sector would be required by then. The cobalt market would need to double by 2025, with an additional 8 mines the size of Glencore’s Katanga needed, while battery demand for graphite will be more than 35pc by 2030, implying an extra 1.6m tonnes needed by then.
Meanwhile Morgan Stanley notes that the price of Lithium hexafluorophosphate (LiPf6) rose about 10 per cent recently, according to Baiinfo.
Galaxy Resources is up 3pc at $1.39 today after hitting a 27-month high of $1.485 last week.
12.26pm: Ai-Media rises on debut
Access Innovation shares are trading higher at $1.47 today on the company’s market debut, up from its IPO price of $1.23 a share.
Access Innovation Holdings – or Ai-Media – is a provider of technology-driven live and recorded captioning, transcription and translation services.
“We are delighted with the outcome of the IPO and by the strong support shown by both institutional and retail investors,” the company’s chairwoman Deanne Weir said in a statement this morning.
“Our listing today on the ASX marks an important milestone for Ai-Media, supporting our global growth strategy along with our continued investment in product innovation and our technology platform.
“We want to help build an inclusive world by making all content accessible to all people everywhere.”
12.09pm: China recovery gathers pace
China’s monthly economic activity data for August have comprehensively beaten Bloomberg’s consensus estimates, helping the Australian dollar reach a three-day high of 0.7312.
It also appears to be lending support to iron ore miners after their intraday retreat.
Industrial production year-on-year rose 5.6pc year versus 5.1pc expected.
Retail sales year-on-year rose 0.5pc versus expectations of no change.
Fixed assets ex-rural investment year-on-year fell 0.3pc versus -0.4pc expected.
Property investment year-on-year rose 4.6pc versus 4.1pc expected.
12.03pm: ASX fades to flat at noon
Australia’s share market pared a 0.3pc intraday rise to be flat at 5900 near midday.
Falls in the financials, energy, communications, consumer staples, utilities and industrials sectors offset gains in technology, health care, real estate, materials and consumer discretionary stocks.
CBA was the biggest drag with a 0.8pc fall while the other major banks were down about 1pc and Tesltra was off 1.6pc.
CSL was the biggest positive influence with a flat 0.9pc rise. Afterpay remained strong after bouncing back with a 4pc intraday rise, but BHP halved its intraday rise to be up 0.7pc.
Perry Williams 11.59am: AGL defends investment record
AGL Energy has defended its investment record after the Morrison government accused the private sector of only committing to a single 100 megawatt expansion of dispatchable generation since April 2015 when the power giant gave notice of plans to close its Liddell coal plant in NSW.
Energy Minister Angus Taylor said the private sector had until April to commit to build 1000MW of new power capacity to ensure there was a like-for-like replacement for Liddell which will close down in the 2022-23 summer. Only a 100MW expansion of AGL’s Bayswater coal plant had been undertaken in the last five years, according to Mr Taylor.
“AGL has led investment in Australia’s energy market, including the building of the only new gas generation on the east coast in the last seven years at Barker Inlet, the investment in a 100MW efficiency upgrade at our Bayswater power station and the development of other firming and storage technology to support the use of renewables as part of the energy mix,” AGL chief executive Brett Redman said. “Only last month we announced our plans to develop 850MW of battery storage capacity across the eastern states by 2024.”
One near-term investment which remains in the mix for AGL is its proposed 250MW Newcastle gas-fired power plant at Tomago.
“We’ve made good progress on this proposed development at Newcastle with the environment approval process underway and a final investment decision expected by early 2021,” Mr Redman said.
The government has been considering extending the life of Liddell or replacing the baseload station which supplies more than 10 per cent of the state’s power needs. Its Liddell Taskforce found closing the AGL plant without the required dispatchable replacement capacity risks prices rising by around 30 per cent over two years, or $20 per megawatt hour to $80 in 2024 and up to $105 per MWH by 2030.
Mr Taylor on Tuesday concluded the government will not fund an extension of all or part of Liddell but has kept the door ajar to private investors to extend the life of the coal plant to ensure low cost generation remains in the electricity system. Power baron Trevor St Baker has previously signalled his interest along with Alinta Energy which runs Victoria’s Loy Yang B coal plant.
AGL said there would be no change to its timeline for closing Liddell.
“With today’s announcement we will continue our closure and transition plans for Liddell with certainty, while at the same time progressing our investments in projects that transition our energy portfolio, with a focus on dispatchable and firming technology that deliver on our customers’ needs,” Mr Redman said.
11.47am: Aussie higher after RBA minutes
AUD/USD bounced about 30 points to be up 0.2pc at an intraday high of 0.7302 following the release of minutes from the RBA’s August board meeting.
While noting that “a lower exchange rate would provide more assistance to the Australian economy in its recovery”, the minutes said “members noted that the Australian dollar was broadly aligned with its fundamental determinants”.
While repeating that the board “considered it likely that fiscal and monetary support would be required for some time given the outlook for the economy and the labour market” and “agreed to maintain highly accommodative settings as long as required and to continue to consider how further monetary measures could support the recovery”, there were no new hints that the RBA was poised to take additional policy stimulus.
11.30am: Tokyo opens lower on profit-taking
Tokyo stocks opened lower as investors locked in profits after three days of rallies, with investors digesting the new government to be formed later this week.
The benchmark Nikkei 225 index was down 0.44 per cent or 103.06 points at 23,456.24 in early trade, while the broader Topix index edged down 0.41 per cent or 6.85 points to 1,644.25.
Early trade in Tokyo “is seen dominated by profit-taking sales, but expectations for the new government are unexpectedly high, contributing to a sound atmosphere in the market,” Okasan Online Securities said in a commentary.
Hong Kong shares opened slightly lower after putting on more than one percent over the previous two sessions.
The Hang Sang Index eased 0.08 per cent, or 18.63 points, to 24,621.65. The benchmark Shanghai Composite Index edged down 0.05 per cent, or 1.69 points, to 3,277.13, while the Shenzhen Composite Index on China’s second exchange ticked up 0.10 per cent, or 2.26 points, to 2,191.36.
AFP
Perry Williams 11.25am: Gas hub plan questioned
The Morrison government’s plan to boost a national gas trading hub will struggle to achieve any benefits for the market while a bid to trigger spending on new supply may result in investors waiting on the sidelines until Canberra intervenes, Credit Suisse has warned.
The Commonwealth has introduced a raft of measures aimed at resetting the gas market after big manufacturers complained they were unable to secure long-term supplies at affordable prices, putting them at a disadvantage to international rivals.
A proposal to emulate the US Henry Hub gas facility by expanding the existing Wallumbilla facility in Queensland faces a raft of hurdles given Australia’s smaller market and may little in added benefits, the broker said.
“We doubt a Henry Hub-like hub can be achieved in Australia absent a government mandate, given market depth and structural constraints,” Credit Suisse analyst Saul Kavonic said. “We also doubt a hub would achieve any material benefit for market participants beyond price transparency - which isn’t really the core issue for manufacturing. A more liquid hub could be mandated by government via various means, but the unintended risks this could pose for long term supply security could easily outweigh the modest benefits a hub may present in a market the size of eastern Australia.”
The centralised gas hub concept has been touted for some time by former Dow boss Andrew Liveris, who advised the government’s National Covid Coordination Commission on how manufacturing could help boost the economy out of the pandemic.
The government has also warned it will build new gas and power generation itself unless companies commit to invest by April. However, the prospect of federal funds for new supply if the private sector fails to step up could see the move backfire.
“The government message appears to threaten industry to invest in what the government wants to see, otherwise the government will do so itself. This could become a self-fulfilling prophecy for the gas infrastructure sector, as industry may now sit back and wait to receive government funds to do what they might have done anyway,” Mr Kavonic said.
11.12am: Montem rises on ASX debut
Shares in steel maker Montem Resources are trading up at 32c today on the company’s ASX debut, up from 25c a share at its IPO.
Montem owns steelmaking coal properties in southern Alberta and British Columbia, Canada.
10.42am: APRA, ACCC deepen ties
The Australian Prudential Regulation Authority and the Australian Competition and Consumer Commission have signed an updated memorandum of understanding aimed at achieving closer collaboration between the two regulators.
The new MoU commits both agencies to a “broader model of engagement, with a greater emphasis on proactive information sharing and collaboration”. To increase transparency, it has also been written in simpler language.
“The updated document will further strengthen the relationship between the two agencies, who have worked closely together during the COVID-19 pandemic on issues including resolution planning and authorisations on anti-competitive arrangements in the financial system,” a statement said.
Chris Griffith 10.29am: We don’t oppose a code: Google
Google today has published a fresh open letter where it is suggesting it is more amenable to paying news media for content that it uses. The letter again is linked to Google’s home page, where previously it ran a scare campaign with a letter that suggested the searching capabilities of Australians are at risk on Google and YouTube.
While not conceding ground, the new letter takes on a more conciliatory tone.
“Over the past few weeks, we’ve been really clear that we do not oppose a code of conduct governing the relationship between news media and digital platforms like Google,” the new letter says.
10.25am: Banks slip in early trade
The major banks are under pressure in early trading.
CBA fell 0.6pc and the other major banks fell at least 1pc.
Combined with a pullback in consumer staples, energy and industrials, the fall in banks has trimmed an early rise in the S&P/ASX 200.
The S&P/ASX 200 was flat at 5899.5 after initially rising 0.3pc to 5919.2.
10.15am: ASX edges higher at open after US gains
Australia’s share market rose slightly in early trading following strong offshore gains.
The S&P/ASX 200 rose 0.3pc to 5919 despite a slight fall in overnight futures.
The tech sector led gains with Afterpay up 3.4pc after recent underperformance.
Healthcare was also strong, with CSL up 1.3pc.
BHP jumped 1.3pc after Goldman Sachs upgraded its rating to buy.
Robyn Ironside 10.14am: Qantas may move HQ from Sydney
Qantas is looking at a possible interstate move in an effort to reduce the $40m cost of leased office space.
Despite being established in Queensland as the Queensland and Northern Territory Aerial Service, the airline has called Sydney home since 1938.
The group relocated to its current offices at Mascot in the 1990s, where it has 49,000 sqm of space.
Jetstar has its own head office in Collingwood, Melbourne and chief financial officer Vanessa Hudson said they would consider co-locating the Qantas and Jetstar officers rather than splitting them across the cities.
More to come..
Ben Wilmot 10.10am: Mirvac launch to test Sydney unit market
Sydney’s apartment market will be tested when listed property developer Mirvac launches the next phase of its massive Green Square precinct.
The company launched its Portman apartment project at Green Square on the weekend and the first phase will have 119 units for sale.
Morgan Stanley said the offer was Mirvac’s first apartment release in Sydney since 2017. “We’d be keen to follow what Mirvac does with subsequent launches (how fast to market pre-sales) as it sounds like construction of all four buildings would be starting soon,” the analysts said.
About 400 parties booked an appointment to see the display suite, a mix of local buyers and investors, and existing Green Square residents.
The sale date is October 17 and interested parties must pay a $5,000 refundable deposit if they wish to secure a slot to buy a property.
Overall, the project will have four buildings with 323 lots and construction will start in October and the buildings will be completed in 2024.
10.06am: Macquarie target price raised
UBS analyst Jonathan Mott has raised his target price on Macquarie shares by 19 per cent after the investment bank flagged a 35 per cent hit to first-half earnings amid challenging market conditions stemming from the coronavirus crisis.
Mr Mott lifted the target price on Macquarie stock from $105 to $125 given the lower cost of capital and higher peer multiples.
“We have a positive medium term view on MQG as conditions recover,” Mr Mott said.
“However near term it is likely to be highly correlated with markets.”
David Swan 9.57am: Ai-Media to list today
Technology-driven captioning outfit Ai-Media will ring the ASX bell today, listing under the ticker code AIM following a $65.5m initial public offering.
The company, which offers live and recorded captioning, transcription and translation services, will land on the bourse at $1.23 per share and CEO Tony Abrahams said the company had received strong demand from domestic and international institutions and retail investors.
He said Ai-Media would be ramping up its offshore presence. The IPO values the tech company at $177.4m.
“I am incredibly proud of the business and the team that we have built at Ai-Media over the past 17 years and the global impact we have made,” he said.
“We’re all excited by the opportunities ahead of us in a growing global market, by harnessing the power of our high-quality, security-accredited and scalable proprietary technology to deliver great outcomes for our customers and our shareholders.”
The company will begin trading at midday.
9.45am: What’s impressing analysts?
BHP raised to Buy: GS
Macquarie Group price target raised 19pc to $125: UBS
Macquarie Group price target raised 11pc to $133: MS
Citadel Group cut to SectorPerform: RBC
Harvey Norman raised to Outperform: CS
Wesfarmers raised to Outperform: CS
Xero price target raised 23pc to $72: UBS
Credit Corp cut to Neutral: Macquarie
9.30am: Markets await RBA minutes, China data
Australia’s share market is expected to weaken slightly before key events today.
Overnight futures versus fair value suggest the S&P/ASX 200 will open down 0.1pc at 5893.
Focus then turns to RBA minutes at 1130am and China’s monthly activity data at 1200pm.
It’s a big week for central banks, with Fed, BOE and BoJ meeting outcomes due Thursday.
Despite worsening second waves of coronavirus in the UK, Europe, India and Israel, the global risk appetite improved as Astrazeneca-Oxford trials resumed and Pfizer said it could deploy a COVID vaccine by year end. Investors were also encouraged by corporate deals between Tik Tok and Oracle, Softbank and Nvidia, and Verizon and TracFone Wireless.
Volatility continued to fall, with the VIX back to 25.85 per cent.
But the S&P 500 pared a 1.9pc intraday gain to close up 1.3pc at 3383.54.
Still, S&P 500 futures are up about 0.2pc in early trading, suggesting mood remains positive.
9.08am: Pandemic weighs on BHP CEO bonus
BHP Group said the coronavirus pandemic, which pushed up costs at key mines and disrupted production, had weighed on its chief executive’s annual bonus.
BHP said its financial performance fell short of a target laid out its remuneration policy, partly due to the impact of the pandemic. The world’s largest-listed mining company also said production missed expectations at several operations, including its Australian iron-ore and coal businesses and some of its petroleum assets.
BHP said Chief Executive Mike Henry’s bonus totalled $US1.96 million for the 12 months through June, 2020. That was on top of his base salary and benefits, including pension contributions, of $US941,000. In addition, Mr. Henry received $US3.17 million under the company’s long-term incentive plan for an award set in 2015 when he headed up the coal business.
Last month, BHP said the impact of the Covid-19 pandemic on its operations totaled $US348 million before tax. That figure included an exceptional charge of $US183 million reflecting the cost of moving key staff closer to operations, implementing new screening measures and strengthening hygiene.
BHP’s remuneration committee concluded that “while this was outside the control of management, the direct costs and volume impacts of Covid-19 should flow through” to its assessment of return on capital employed, a key benchmark of financial performance.
Dow Jones Newswires
9.05am: Omni scores licence first
Omni Bridgeway has become the first legal funding firm to be awarded an Australian Financial Services Licence by ASIC.
The firm, a wholly-owned subsidiary of Omni Bridgeway Investment Management, is now authorised to fund class actions under the recently revised regulatory landscape, which requires class action funders to hold an AFSL.
“Omni Bridgeway is pleased with the speed and efficiency with which its licence application was handled by ASIC and believes it is the first dispute financing company to be issued with a licence under the new regime,” the firm said in a statement this morning.
9.03am: Telstra forecasts ahead of shareholder meeting
Telstra has provided investors with a full-year guidance update ahead of its virtual annual general meeting today.
The telco said it expects to book an underlying earnings before interest, tax, depreciation and amortisation of between $6.5bn and $7b, down from $7.4bn in FY20.
That guidance assumed an estimated negative impact from the COVID-19 pandemic in fiscal year 2021 of $400m, about $200m more than the estimated negative impact of the pandemic on earnings the prior year.
9.00am: Catapult wins French rugby contract
Australian player-tracking technology company Catapult was won a four year preferred supplier deal with French rugby.
Catapult says the agreement with French Ligue Nationale de Rugby means it will supply all teams in France’s Top 14 and Pro D2 professional rugby competitions for the next four years.
8.30am: Google sued over kids’ privacy
Alphabet’s Google faces a $US3.2 billion lawsuit on behalf of more than five million British children under 13 and their parents over claims that YouTube routinely breaks privacy laws by tracking children online.
The complaint, brought to the UK’s High Court by researcher and privacy advocate Duncan McCann, is backed by tech advocacy group Foxglove. It alleges YouTube systematically breaks underage user privacy regulations and data rules in both the UK Data Protection Act and Europe’s General Data Protection Regulation by unlawfully harvesting the data of “millions of children” to target advertisements.
“We think its unlawful because YouTube processes the data of every child who uses the service -- including kids under 13,” Foxglove said. “They profit from this data, as they are paid by advertisers to place targeted advertising on their YouTube website. They do all this without getting explicit consent from the children’s parents.”
A YouTube spokesperson declined comment, but said the video-sharing platform isn’t meant for users under 13 years old.
Dow Jones
8.00am: NZ to require climate risk reporting
Climate risk reporting will be mandatory for dozens of New Zealand companies and financial institutions, starting 2023, the government said, announcing a light-handed regulatory regime without penalties for non-compliance.
The new requirements will apply to banks with assets greater than $NZ1 billion, insurers and investment managers with more than $NZ1 billion under management, and companies listed on New Zealand’s stock market.
Many of New Zealand’s biggest banks are Australian-owned.
Companies that don’t disclose their exposure to climate-change risks would only be required to explain why they hadn’t complied.
Other countries and jurisdictions including the European Union, Japan and Australia are also planning climate-related financial disclosure regimes.
The approximately 200 state and privately owned organisations covered by the requirements in New Zealand will have to make yearly disclosures, covering governance, risk management and strategies for mitigating any climate change impacts.
The government said the disclosures “will bring climate risks and resilience into the heart of financial and business decision making.”
The Financial Markets Authority would be responsible for monitoring the climate-risk reporting system.
Dow Jones Newswires
David Ross 7.30am: Gas plan critical: Taylor
Energy Minister Angus Taylor has spruiked the government’s new gas policy, saying its plan is critical for driving investment and bringing down emissions.
“We need to make sure customers have the power they need,” he said, speaking on the AM program on ABC.
“This is all about making sure Australian gas is working for Australians.”
The Morrison government has announced its intention to back a new Hunter Valley gas power plant to replace the aging Liddell coal-fired station if the private sector fails to lock in a replacement by April next year.
The government will also look to expand Queensland’s Wallumbilla site as Australia’s major new gas hub,and spend $28.3m on five strategic plans covering the Beetaloo, North Bowen and Galilee basins.
Mr Taylor said the move offered Australia “great potential for manufacturing and other for energy intensive business”.
“Getting those prices to a level for longer term contracts to invest and grow is critical,” he said.
7.19am: NZ confidence lowest since 2008
New Zealand consumer confidence fell to its lowest since 2008 in September after renewed pandemic restrictions curtailed economic activity in the largest city, a quarterly survey showed.
The Westpac McDermott Miller consumer confidence index dropped 2.1 points to 95.1, indicating that pessimism about future economic prospects outweighs optimism.
The index has fallen 14.8 points over three quarters, Westpac said.
For New Zealand’s largest city, Auckland, the index dropped 3.9 points from the previous survey in June to 90.0 and has fallen 23.4 points over three quarters.
“Low levels of consumer confidence are weighing on spending appetites, making it likely that consumer spending will remain sluggish through the final months of the year,” Westpac said.
New Zealand reimposed some pandemic restrictions in August after a coronavirus outbreak in Auckland ended three months of no apparent community transmission of the virus.
Dow Jones Newswires
David Ross 7.12am: Europe facing second wave
A second wave of cases appears to be sweeping Europe as many countries re-enter lockdowns ahead of the cooler months which experts predict would worsen the spread of the coronavirus.
The WHO recorded 267,257 cases and 4771 deaths across the world yesterday, but the true of the extent of the pandemic is muddied by uneven testing rates across the world.
Case numbers across India are now rapidly accelerating with the country already surpassing Brazil in case numbers to become the second worst hit country in the world.
6.20am: ASX set to edge lower
Australian stocks are poised to slip at the open despite a rebound on Wall Street following last week’s US losses.
Around 6am (AEST) the SPI futures index was down nine points, or 0.2 per cent.
Yesterday, Australia’s S&P/ASX 200 share index finished up 0.7pc at 5899.5 after hitting a two-day high of 5903.2 in early trading.
The Australian dollar was higher at US72.91.
Spot iron ore gained 1.1 per cent to $US130.50 a tonne.
6.10am: Tech rebound lifts Wall Street
A rebound in technology shares lifted US stocks, helping major indexes recover after last week’s pullback.
The tech-heavy Nasdaq Composite jumped 1.9 per cent after last week suffering its biggest one-week decline since the March market crisis. The Dow Jones Industrial Average climbed 327 points, or 1.2 per cent, and the S&P 500 advanced 1.3 per cent.
Oracle was among the strongest performers in the S&P 500, with shares climbing 4.3 per cent after the tech company won the bidding for the US operations of video-sharing app TikTok, according to people with knowledge of the matter. Chip-maker Nvidia rallied 5.8 per cent after it agreed to buy British chip-designer Arm Holdings for more than $US40 billion from SoftBank Group Corp.
Monday’s advance extends a spell of outsize moves in both directions for US stock indexes, much of it driven by shares of large technology companies that have powered the market’s recovery since the spring.
Mike Dowdall, a portfolio manager at BMO Global Asset Management, said he was being cautious on tech stocks because of their lofty valuations. “Even though the economic story is really strong, it’s hard to step into that trade at the moment,” he said.
Stocks have been also buffeted this month by uncertainty about the U.S. presidential election and worries that the economic recovery, which appeared vigorous earlier this summer, could be slowing.
Investor sentiment was boosted by the resumption of clinical trials of AstraZeneca’s experimental coronavirus vaccine in the UK. Studies were put on pause globally after a person who received the vaccine had an unexplained illness. Trials in other countries, including the US, remain on hold.
“There’s a bit more positivity as regards vaccines,” said Robert Carnell, head of research for Asia-Pacific at ING Groep. “The resumption of AstraZeneca trials will be seen in that light.”
Gains were broad Monday, with all 11 of the S&P 500’s sectors advancing. The tech sector was among the biggest gainers with a 1.7 per cent climb.
International stock markets were broadly higher. The Stoxx Europe 600 rose 0.1 per cent. In Asia, China’s Shanghai Composite Index gained 0.6 per cent and Japan’s Nikkei 225 advanced 0.7 per cent.
Dow Jones Newswires
5.42am: Citigroup faces reprimand
US federal regulators are preparing to reprimand Citigroup Inc. for failing to improve its risk-management systems -- an expansive set of technology and procedures designed to detect problematic transactions, risky trades and anything else that could harm the bank.
The expected rebuke from the Office of the Comptroller of the Currency and the Federal Reserve accelerated planning for Chief Executive Michael Corbat’s retirement, according to people familiar with the matter. Regulators didn’t ask Mr. Corbat to step down, the people said. Rather, he came to believe that an expensive, multiyear systems overhaul designed to address regulators’ concerns was best left in the hands of his successor, Jane Fraser, they said.
Citigroup on Thursday said Mr. Corbat will retire in February, surprising analysts and investors who expected him to remain in the job for a few more years.
A consent order likely will require Citigroup to develop and execute a plan to fix its risk systems, the people said. Such formal regulatory actions sometimes come with fines or stricter oversight, but it isn’t clear what, if any, punishment would be imposed, they said.
Dow Jones
5.40am: OPEC extends forecast for decline in oil demand
The economic hit from the coronavirus pandemic will hurt global energy demand harder and for longer than previously feared, the Organization of the Petroleum Exporting Countries said.
In its monthly report, OPEC said it expects the pandemic to reduce demand by 9.5 million barrels a day, forecasting a fall in demand of 9.5pc from last year.
In further signals of the gloom, the cartel softened the amount by which it expects non-OPEC oil supply to fall this year -- in part because of a recovery in US output -- and blunted its demand recovery forecast for next year. That was accompanied by a sharper forecast hit to the global economy: OPEC now expects a 4.1pc contraction in activity.
Oil prices slipped Monday, with Brent crude oil, the global benchmark, falling 0.6pc at $US39.61 a barrel. West Texas Intermediate futures, the U.S. benchmark, ended the day down 0.2pc at $US37.26 a barrel, with investors concerned about reports that Libyan supply may soon return to the market and that Emirati compliance with production cuts has dropped, said Eugen Weinberg, head of commodities research at Commerzbank.
The price of crude has fallen by double-digit percentages in September, with weaker-than-expected demand metrics, price cuts from major producers and economic jitters combining to shock prices out of their summer torpor.
AFP
5.35am: Oil demand may have peaked: BP
Global oil demand might have already peaked and will likely not stop falling for the next 30 years, hit by virus fallout and moves towards greener energy, Britain’s BP predicted.
At the same time, the oil cartel OPEC has revised its forecast for global demand lower this year and next for essentially the same reasons.
London-listed oil giant BP, which is seeking to achieve net zero carbon emissions by 2050, has issued three new forecast scenarios -- under which the industry would embrace green energy to varying degrees -- in its Energy Outlook 2020 report.
Under BP’s two most optimistic scenarios, oil demand has already passed its peak and may never recover from the long-lasting coronavirus-induced collapse.
However, if the industry’s transition to greener energy continues at the current sluggish pace, then oil demand will peak in the coming years, according to BP.
AFP
5.30am: Vaccine hopes, deals buoy markets
European stock markets were close to flat but Wall Street enjoyed positive midday trading, buoyed by coronavirus vaccine hopes and big-ticket deals.
Trials on one of the most advanced vaccines resumed at the weekend after pausing when a volunteer fell ill.
British regulators gave AstraZeneca and the University of Oxford the go-ahead to push on following an investigation, while the drug group said it remained hopeful the vaccine would still be available “by the end of this year, early next year”.
Meanwhile pharma giant Gilead said it would buy breast cancer drug maker Immunomedics for $US21 billion.
And in tech, Japan’s SoftBank group announced the sale of British chip designer Arm to US-based NVIDIA for $US40 billion, while the US Treasury said it had received a bid involving Oracle for video-sharing app TikTok’s American operations.
“US stocks are rebounding noticeably from a two-week pullback from record high territory, with a flood of M&A activity and a host of news on the COVID-19 vaccine/treatment front fostering the recovery,” Charles Schwab analysts wrote.
Europe was weighed down as countries reported rising coronavirus infections and some issued new measures to control the spread of COVID-19.
The World Health Organization’s European chief Hans Kluge told AFP that the autumn will be “tougher” with “more mortality” from COVID-19.
And Britain’s parliament found itself arguing about Brexit again, with threats of rebellion and resignations over Prime Minister Boris Johnson’s plan for a new law that would break his EU divorce treaty.
Sterling was up slightly against both the dollar and the euro, although it was far from making up the 3.6 per cent it shed last week on Brexit concerns.
London and Frankfurt both ended down 0.1 per cent - No Washington deal in sight -
While major deals like Oracle’s proposal to serve as , while Paris closed up 0.4 per cent.
AFP
5.25am: SoftBank selling Arm to NVIDIA
Japan’s SoftBank Group said it is selling British chip designer Arm to US firm NVIDIA for up to $US40 billion, potentially creating a new giant in the industry but sparking an investigation by UK regulators and fears about the impact on jobs.
If approved, the deal will be one of the largest acquisitions anywhere in the world this year and propel NVIDIA to the forefront of the semiconductor sector.
The announcement also renewed speculation about SoftBank Group’s future, with Bloomberg News reporting it is set to revive talks about going private via a management buyout plan.
AFP
5.20am: Oracle bid for TikTok confirmed
The US government has received a bid from Oracle for TikTok’s American operations after the video sharing app’s parent ByteDance rejected a proposal from Microsoft, Treasury Secretary Steven Mnuchin said.
Mnuchin told CNBC his office received the proposal involving Oracle over the weekend and said the bid would be handled by a government panel that reviews foreign transactions for national security concerns.
Oracle confirmed the submission, saying the company “is part of the proposal by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider.” President Donald Trump’s administration has sought the sale of TikTok from ByteDance, citing concerns about US data security.
The transaction is being structured as a partnership and probably won’t be an outright sale, The Wall Street Journal reported, citing unnamed sources.
AFP
5.15am: Thai Airways restructuring approved
A Thailand court has approved the restructuring of Thai Airways, which is billions of dollars in debt and struggling to survive the coronavirus tourism crash.
The global aviation sector was plunged into crisis by the pandemic as countries severely restricted travel, forcing airlines to ground vast numbers of planes and seek government help as they haemorrhaged cash.
The kingdom, once a majority shareholder in Thai, reduced its stake in May and went to the insolvency court to resolve the airline’s debt -- which totalled 332.2 billion baht ($US10.6 billion) by the end of June, according to local media.
“The problem that caused debtor’s financial situation is not from its business but from the rapid change in aviation, particularly the impact from COVID-19,” Bangkok’s Central Bankruptcy Court said.
It approved Thai’s request for a rehabilitation plan, which would see its debt and company organisation restructured.
Thai said after the ruling that it would propose that plan by the end of the year.
Shares in the airline rallied more than 7 per cent on Thailand’s Stock Exchange Monday.
AFP
5.12am: Bid to buy Milan bourse
Pan-European stock market operator Euronext announced it has submitted an offer to buy Milan’s Borsa Italiana from the London Stock Exchange Group in partnership with Italy’s CDP Equity and Intesa Sanpaolo.
Euronext, which is competing against Germany’s Deutsche Boerse and Switzerland’s SIX for the Italian stock exchange operator, said there is no certainty that the “non-binding” bid will lead to a transaction.
The potential for a bidding war for Milan’s stock exchange was opened after its current owner, the London Stock Exchange Group (LSEG), said in July it was prepared to sell the subsidiary to win approval by the EU Commission of its planned purchase of US financial data provider Refinitiv.
According to sources familiar with the negotiations, Swiss stock exchange operator SIX has also made an offer that would give Borsa Italiana lots of autonomy and a considerable amount of investment, including in technology.
No financial information on the offers has been released, but, according to a financial news agency, Borsa Italiana could fetch between 3.5 and 4.0 billion euros ($4.2-4.8 billion).
AFP
5.10am: French GDP slump less than feared
The French economy will contract by 8.7 per cent this year owing to the COVID-19 pandemic, the central bank estimated less than originally forecast due to consumer spending.
The Bank of France had previously expected a 10.3-per cent slump as companies reel from the impact of coronavirus restrictions that have prompted hundreds of thousands of lay-offs.
However “the second-quarter shock was less significant than expected,” the bank said, adding that “the rebound suggested by business surveys in recent months has been stronger.”
As a result, the French economy could return to its pre-crisis levels by early 2022, instead of later that year as the bank had expected.
AFP
ASX 200 falls; MinRes, Nuix tank as CBA slips
Embattled MinRes' decision to stop Bald Hill mining operations to impact 300 jobs. Nuix down despite CEO assurance. Magellan top executive exits. CBA results meets expectations. Aristocrat lifts dividends. James Hardie outlook better. WiseTech hit with class action.
ASX 200 down; Paladin smashed; Platinum cops second strike
Paladin sinks 20pc-plus on mine challenges. Platinum Asset investors vote against pay plan. New intraday records for Aristocrat, CBA. ACCC says airfares up since 'Rexit', but Qantas has a different view. Business, consumer confidence up.