ASX pushes higher as states lay out plan for economic revival

Consumer-linked stocks led the rally on the ASX as states detailed their plans to reopen - led by record-breaking trade in Afterpay.

David Rogers and Melissa Yeo

33 min read

8:43PMMay 11, 2020

The relaxation of some social distancing regulations has been a boon for retailers. Picture: AAP Image/Dan Peled.

Afterpay soars to fresh record high
Incitec Pivot to raise $675m
Scentre cans payout, defers project
Cochlear’s April sales slump 60pc

That’s all from the Trading Day blog for Monday, May 11. Shares added 1.3 per cent at the close to follow a strong lead from Wall Street, as investors focused on Australia’s plan to reopen the economy.

Real estate stocks led the positive momentum as shopping centres were reopened over the weekend, while energy stocks cheered a lift in oil prices.

US futures are pointing to another lift ahead - with S&P futures up 0.2pc.

John Durie 8.43pm: Sage advice on economy restart

The BCA is aiming to help the government on how to get the fastest economic recovery, with the emphasis on business working better with stakeholders and pinpointing potential roadblocks.

Coca-Cola Amatil chief Alison Watkins is the chair of the economic recovery group, comprised of 14 different working groups, looking “first to get quick wins in safely getting the economy to work again, and then actionable plans to sustain the economy in the longer term”.

“Business needs to partner (with) the ACTU in a collaborative process to make industrial relations work more flexibly,” she added.

Domestic tourism accounted for 80 per cent of the travel industry, Watkins said, stressing the need to get skifields open, and Sydney Airport’s Geoff Culpert said: “80 per cent of the freight leaving this country goes in the belly of a commercial aircraft.”

Culpert, who heads the tourism, transport freight and logistics taskforce, stressed the importance of the visitor economy.

Joyce Moullakis 8.33pm: Austrac, Westpac yet to agree breaches

Westpac and Austrac are yet to sign off on a shortened version of agreed facts over the bank’s alleged 23 million breaches of financial crimes law, despite aiming to have a document lodged with the court on Friday.

The parties were asked by the Federal Court to lodge a short-form version of agreed facts on May 8, but instead of it arriving the court was informed of a delay.

The shortform agreement was meant to be followed with a defence by Westpac — lodged on May 15 — on the outstanding points of difference with regulator Austrac.

Sources said while a shortened version of agreed facts was still possible ahead of Friday, there was also a chance the documents may merge.

David Rogers 8.14pm: Coronavirus crisis Pendal’s time to shine

Like most wealth managers, Emilio Gonzalez hasn’t seen anything quite like the uncertainty brought by the COVID-19 pandemic and associated lockdowns, which are slowly being unwound.

But the Pendal Group chief executive has seen enough market cycles to know that this period of heightened uncertainty is exactly the time for active fund managers to shine.

It was true of Pendal’s predecessor BT Investment Management when it launched in 1987 and produced positive returns while most were negative in a difficult time for investors.

Gonzalez now sees a similar opportunity for proven active managers to add value.

Nick Evans 7.55pm: Incitec Pivot halts Moranbah project

Incitec Pivot has cancelled the expansion of its Moranbah explosives facility in Queensland in the face of tumbling coal prices, as the company hit the market for a $675m raising and cancelled its interim dividend payout.

Despite reporting that the coronavirus crisis was having only a minimal impact on its business, Incitec chief executive Jeanne Johns said the raising had been conducted as a “prudent measure” to shore up the company’s balance sheet in an uncertain market.

“If you’re about to cross a desert and you don’t know how wide it is, how much water do you take with you? That’s kind of how I see the times we’re in. We don’t know what’s ahead of us,” she said.

“That’s why one of the mitigations to that, along with all the mitigations we’re taking inside the business, is a strong balance sheet. It would be a shame to get halfway across the desert and realise you’d run out of water.”

John Stensholt 7.35pm: Safety-first strategy benefits Blackburne

Running his business on the assumption that “major shocks or black swan” events are likely every decade has left Perth property developer Paul Blackburne well-placed to ride out the COVID-19 storm.

Blackburne builds upmarket apartment projects in Perth, where he says unique conditions and Western Australia’s isolation make it “the best place in the world to do business right now”.

The global financial crisis in 2008 was a formative experience for Blackburne, who made the basis of his estimated $595m fortune on The List — Australia’s Richest 250 by buying up discounted project sites during the subsequent property downturn.

He has since been able to steadily build projects each year in a market relatively undersupplied for apartment projects compared to other cities around Australia, which has attracted the attention of investors in the eastern states.

Blackburne’s eponymous property group typically launches one project a year — in March alone it sold $26m worth of units at its One Subiaco project, where there are only a handful of off-the-plan apartments left to sell — and spends $50m-$75m annually on new sites around Perth.

Just as crucial, though, is a cautious mindset that focuses on cash flow and liquidity, as well as Perth’s lower construction costs, which have stood Blackburne in relatively good stead during the coronavirus pandemic.

Helen Trinca 7.03pm: Change coming as women make hay

Julie Bartlett used to be the bookkeeper at a Victorian farmers’ co-operative processing hay for export.

But she’s the sort of person Michael Betar says you can find everywhere in country Australia.

“I’ve been travelling in these areas for 20 years and I have seen so many people in agriculture, quite a few women running the show who are doing an incredible job,” says the investor and commodities trader. “They are good operators in a sector that’s considered male dominated.”

Which is why about 18 months ago Betar promoted Bartlett to the role of general manager of Pyrenees Hay Australia — the former co-op based in Avoca, Victoria, which his company Standard Commodities Australia bought into in 2016 and has now been demutualised.

Bridget Carter 6.41pm: Who wants Nine’s New Zealand assets?

Sydney-based private equity firm Anacacia Capital is believed to have held discussions with Nine Entertainment about acquiring its New Zealand assets, in what would be a joint deal with the National Business Review publication across the Tasman.

The talks came before a private equity firm was understood to be circling the New Zealand publications owned by both Nine Entertainment and NZME about six weeks ago, according to sources.

It also comes as Nine Entertainment announced to the market on Monday that it had called off talks with NZME about a proposed sale of its own business across the Tasman for $1.

James Kirby 6.31pm: Whatever happened to value investing?

The sharemarket’s violent swings this year have cast a harsh light on managed funds, raising serious questions about “investing styles”, especially the notion of value investing.

Value investors, we are told, aim for intrinsic value, which ignores trends and concentrates solely on financial numbers from the bottom up.

We might reasonably expect value funds to be offering consolation this year, but value investment actually underperformed the wider market by almost 3 per cent as it plunged by more than 30 per cent in the very depths of the recent crash.

Worst still, the world’s most famous value investor, Warren Buffett of Berkshire Hathaway, is enduring one his worst years on record after a disastrous foray into the airline sector. Berkshire Hathaway has now underperformed the S&P 500 index for a decade.

David Ross 6.07pm: Hayne RC spotlight lands 10-year ban

A financial adviser whose practices came to national attention during the Hayne royal commission has been banned by corporate regulator ASIC for 10 years.

Financial adviser Chris Harris was banned after ASIC found he had not acted in the best interests of some of his clients and engaged in conduct that was likely to mislead or deceive.

“In statements made on the Money Works website and in correspondence to clients, Mr Harris gave the false impression that he was authorised to provide financial services, ASIC said in a statement issue on Monday. “ASIC found that by doing so, Mr Harris had engaged in conduct that was likely to mislead or deceive.”

Lilly Vitorovich 5.45pm: Ten looks to launch new channel

Amid fierce competition for audiences and advertisers, ViacomCBS’s Network Ten is looking to launch a fourth television channel, aimed at under 50-year olds.

ViacomCBS’s local content boss Beverley McGarvey announced on Monday that it would unveil the fourth channel, understood to feature a broad range of entertainment shows, later this year.

A spokeswoman for Australia’s third-ranked free-to-air TV broadcaster said the new channel will complement its existing line-up of 10, 10 Peach and 10 Bold, and will “appeal to the under 50s audience”.

James Gerrard 5.17pm: Fever-pitch warnings on ‘high-yield’ products

What exactly is a term deposit? It’s time to start distinguishing between government guaranteed bank term deposits and high yield deposits offered over a certain “term” by a range of promoters.

The issue is suddenly on the agenda as the hunt for yield gets ever more desperate after the recent cuts in bank dividends.

Just last week the market regulator, ASIC, went as far issuing a major warning about anything that presents as an “alternative” to bank-based term deposits.

As the regulator explained: “ASIC warns consumers about investment advertising that compares fixed-term investment products to bank term deposits. A surge in such marketing of fixed-term investment products in recent months has prompted ASIC to caution consumers to take care making investment decisions based on such advertising.”

4.45pm: Consumer stocks notch outsized gains

All sectors headed higher on Monday, led by a 2.7 per cent lift in real estate stocks as mall owners reported the slow reopening of centres across the country.

Scentre ruled out paying a first half distribution but said trading was coming back after a rough March - its shares finished up 3.6 per cent to $2.28 while part owner in Melbourne’s flagship Chadstone shopping centre, Vicinity, added 4.6 per cent to $1.50.

Mirvac added 2.3 per cent to $2.24 while Dexus lifted by 4.6 per cent to $9.26 and Stockland put on 1.5 per cent to $2.78.

The news was similarly a catalyst for further gains in the listed retail space. Myer added 8.6 per cent to 31.5c - marking a near 60 per cent surge in just the past two sessions - while womenswear retailer Mosaic Brands soared by 31.9 per cent to 93c.

Super Retail lifted by 3.9 per cent to $6.92 while Kathmandu jumped by 15.4 per cent to $1.01 but Premier Investments gave back 0.5 per cent to $15.42. Online retailer Kogan took a 3.9 per cent hit to $8.36.

Afterpay continued its recent rally to hit new record highs of $43.68, marking a near 400 per cent rally in just the past six weeks. The stock finished higher by 5.7 per cent to $42.17.

Elsewhere in the buy now, pay later space Zip pushed higher by 6.4 per cent to $3.48 while Sezzle put on 2.7 per cent to $2.30 and FlexiGroup put on 5.6 per cent to $1.14.

Here’s the biggest movers at the close:

Perry Williams 4.31pm: Oil price hit jolts APLNG rating

Moody’s said the outlook for Australia Pacific LNG gas export project, part owned by Origin Energy, has been lowered to negative from stable due to lower oil prices.

The credit rating agency affirmed APLNG’s senior secured Baa2 ratings but said the outlook was mixed given the crash in oil prices.

“The negative outlook reflects our expectation that sharply lower oil prices following the coronavirus outbreak are likely to weaken APLNG Processing’s credit metrics and financial flexibility, and potentially for an extended period,” Moody’s vice president Nicholas Chapman said.

APLNG’s debt service coverage ratio may fall to 1.3x in 2020, below the rating tolerance level of 1.5x, from 2.1x in 2019 reflecting lower contracted LNG prices following the crude crash.

Still, on a consolidated basis it will range between 2.2x and 4x over the debt term with the stand-alone ratio averaging between 1.7x and 2.5x.

Moody’s also notes 95 per cent of APLNG’s volumes are sold to Sinopec and Kansai Electric, which provides support.

4.14pm: Broad rally sends ASX up 1.3pc

The Australian market got off to a positive start on Monday as investors focused on the staged restart of the local economy, and as global COVID-19 case numbers continued to ease.

After a strong rally on Wall Street on Friday, the ASX opened sharply higher, hitting as much as 5489.5, before settling to close up 70 points or 1.3 per cent to 5461.2.

Meanwhile the All Ords put on 71 points or 1.3 per cent at 5559.1.

Real estate stocks were the best performing sector - up 2.7 per cent at the close while Energy lifted alongside a rise in crude prices.

Richard Gluyas 4.05pm: Afterpay pounces on Suncorp exec

High-flying buy now, pay later group Afterpay has swooped on Lee Hatton, the recently appointed chief executive of Suncorp’s banking and wealth management unit.

Ms Hatton, who was chief executive of National Australia Bank’s digital bank Ubank from 2015, will leave Suncorp at the end of May after starting in February.

In a Suncorp statement, she said she had reassessed the demands of commuting from her home base in Sydney to Brisbane, and the impact on her family.

“I have reached the conclusion that this will not be sustainable,” she said.

Ms Hatton will be replaced on an acting basis by Bruce Rush, Suncorp’s head of deposits and payments, until the appointment of a permanent replacement.

Afterpay shares are trading at a record of $42.98, up $3.10 or 7.8 per cent, on recent news that Chinese technology giant Tencent had paid $300m for a 5 per cent stake in the group.

Nick Evans 4.03pm: Kalium Lakes launches discounted raise

DataRoom | Would-be WA potash producer Kalium Lakes has hit the market for a deeply discounted raising to finish construction of its sulfate of potash project, offering a 70 per cent discount to its 49c last trading price to get the $60m deal over the line.

Co-managed by Morgans and Foster Stockbroking the raising has an indicative 15c a share pricing - well under Kalium’s 49c trading price in February when the company suspended trading citing cost overruns at its under-construction Pilbara potash project.

The fate of the raising will be of significant interest to the Federal Government’s Northern Australia Infrastructure Project, which has chipped in $74m to help fund a gas pipeline and power station for the troubled project.

Particularly now Kalium is out raising the cash, and naming overruns on the gas pipeline as a significant contributor. Documents associated with the raising suggest the problems run deeper than that, however, suggesting the company failed to take into account the impact of transporting a German-designed processing plant to the very different climate of the Pilbara.

Kalium Lakes also underestimated the flow from the bores that will take brine water from underground to evaporation ponds, and needs to drill additional holes and install more pumping equipment.

3.46pm: Macq primed for post-rout spree: JPM

Despite softer than expected results, Macquarie is performing solidly and has plenty of surplus capital to take advantage of market dislocations, according to analysts at JP Morgan.

In a note to clients, analyst Andrew Triggs retained his outperform rating on the stock, saying even after the recent rally “we still find cause to be optimistic, and we are willing to look through what we expect will be another challenging year for headline earnings”.

He added that the group’s capital surplus had grown to $7.1bn, and put it in a “strong position to consider acquisitions thrown up in the current market environment”.

As Macquarie provided no forward guidance, JPM tips a 10pc slip in net profit growth ahead on higher equity impairments, lower performance fees and gains on sale, but a strong rebound as much as 30pc in the following year.

MQG is higher by 6.5pc to $111.98.

Lilly Vitorovich 3.01pm: Southern Cross to outperform: Macq

Macquarie has upgraded its rating on Southern Cross Media to Outperform from Neutral as the radio group’s operational initiatives are expected to mitigate the downside of COVID-19.

However, the broker has cut its 12-month price target to 18c a share as well as its 2020 EPS forecast by about 35 per cent. For the following two years, Macquarie has slashed its EPS forecasts by 79 per cent.

“SXL has successfully recapitalised the business to navigate a COVID world, with operational initiatives and JobKeeper support to materially offset near term revenue headwinds,” the broker writes.

“With the equity trading at 4.6x EV/EBITDA on depressed earnings (FY21), we believe the risk/reward is attractive, with operating leverage to the upside once ad markets normalise.”

Macquarie’s 18c a share price target includes a 20 per cent discount for COVID-19 uncertainty.

SXL last traded up 16.3pc to 15.7c.

Bridget Carter 2.29pm: Incitec placement covered

DataRoom | Incitec Pivot’s $600m placement handled by Macquarie Capital, JPMorgan and Merrill Lynch equities is covered, say sources.

Shares were being sold on Monday at $2 each, with $600m raised through a placement and $75m through a share purchase plan.

Shares last closed at $2.19 so the raise is an 8.7 per cent discount.

The equity raising comes on the same day as Incitec Pivot’s results and was tipped by DataRoom on Monday.

The funds will be used to pay down debt.

Bridget Carter 2.21pm: Z Energy prices raising at $NZ2.90

DataRoom | Z Energy has priced its equity raising at $NZ2.90 per share on the back of strong demand for shares in the company.

Z Energy announced Monday it was raising $NZ350m of equity through a bookbuild, with a floor price of $NZ2.75 per share.

The raise was handled through investment bank Goldman Sachs, which landed the mandate despite the loss last week of its Australian and New Zealand head of equity capital markets, Sarah Rennie, who is heading to Kiwi banking competitor Jarden.

The New Zealand fuel retailer, which is listed in Australia, will secure $NZ290m through a placement and $NZ60m through a share purchase plan.

The funds will be used to prevent any debt covenant breach amid COVID-19. It also comes as the company slashes about $NZ80m of costs.

Read more: Z Energy raising $NZ350m

1.48pm: ASX headed for 2-week high

The ASX200 has taken off after breaking above the 50-day moving average at 5394 this morning.

The index is heading for its best daily close in almost two weeks after rising as much as 1.6pc at 5475.0.

It comes as S&P 500 futures rise 0.5pc, suggesting the US benchmark could hit a 2-month high on a daily close basis.

Such a rise on the US market would indicate that last month’s brief close above the 61.8pc Fibonacci retracement at 2935 wasn’t a “false break” after all.

If the US market does close firmly tonight, then April highs around 5550 on the ASX200 could well be tested early this week.

1.42pm: Clime in talks to buy Madison Group

Clime Investment Management has today confirmed its in talks to acquire Madison Financial Group, currently offered up for sale by OneVue as it grapples with the fallout of the Sargon Capital collapse.

In a statement to the market, Clime said it was in discussions to purchase the wealth management group, but “there was no certainty that the discussions will result in any definitive transaction”.

“Clime will continue to ensure that it complies with its continuous disclosure obligations, and should a transaction arise which is sufficiently complete or definite to warrant disclosure, it will inform the market as appropriate,” it said.

OneVue has previously noted that the sale of Madison group was expected to complete in May.

CAM shares last down 2pc to 74.5c.

Perry Williams 1.14pm: CSR to face protracted downturn: Citi

Construction supplier CSR has likely suffered steeper earnings declines from its building products unit as the housing downturn hits, Citi has warned, downgrading the company to neutral.

Ahead of its annual results on Tuesday, CSR’s building product earnings before interest and tax are forecast by the broker to have fallen 44 per cent in the second half following a 17 per cent decline in sales.

Overall net profit is tipped to fall 40 per cent to $111.1m for the 2020 financial year and compared with Citi’s previous $124m estimate.

Citi also slashed its 2021 and 2022 net profit forecasts on CSR by 45 per cent to $87m and 39 per cent to $103m respectively, reflecting a protracted downturn in residential construction.

While CSR has a strong balance sheet and no debt, it holds one of the highest exposures among listed stocks to new residential housing and a challenging outlook with headwinds in construction and its aluminium businesses.

CSR downgraded to Neutral from Buy with its target price slashed 38 per cent to $3.45.

CSR last down 4 per cent at $3.38.

1.01pm: Webjet outperforms as ASX adds 1.3pc

Local shares are trading at daily highs at lunch, as state governments set out their plans to ease coronavirus restrictions.

At 1pm, the benchmark ASX200 is higher by 67 points or 1.3 per cent at 5458.5, just shy of daily highs of 5461.5.

Retailers and shopping centre owners are leading the march higher while travel names too are getting a boost as they look ahead to the resumption of domestic travel.

Webjet is leading the best performers with a 22pc lift while GrainCorp is slipping by 3.9pc.

Here’s the biggest movers at 1pm:

Ben Wilmot 12.54pm: Mall owners lift as stores reopen

A busy weekend of trading in shopping centres in most parts of Australia has helped lift shopping centre owners in early trade on Monday.

Vicinity Centres, part owner of Melbourne’s Chadstone was up by 6.5c to $1.495 and Scentre Group, owner of the local Westfield malls, lifted 7c to $2.27.

Scentre gave an operational update at which it said it would not pay a first half distribution but indicated that trading was coming back after a soft March.

Scentre Group chief executive Peter Allen said all Westfield centres remained open during the pandemic and malls in major cities were busy last weekend.

In Australia, 57 per cent of retailers representing 70 per cent of gross lettable area opened in Westfield centres, with more retailers scheduled to reopen in coming weeks.

12.48pm: Afterpay sets new record high

Afterpay shares have soared past their February records to set new record highs in lunch trade.

The stock took a substantial hit from the market rout in March – but set a new high of $43.68 in morning trade, representing an almost 400 per cent surge from March 23 lows of $8.90.

Last week Chinese tech giant Tencent joined the share register, providing a substantial market catalyst.

APT last up 5.8pc at $42.20.

Bridget Carter 12.32pm: Quadrant to sell tourism arm

DataRoom | Quadrant Private Equity is said to have been in recent talks with a party to sell its tourism business Journey Beyond, according to sources.

Discussions with a group are said to have been ongoing with a group for some time, sources have said.

However, Quadrant said that no current sales talks were taking place amid the currently challenging environment.

The suitor involved is understood to be a strategic player, rather than a private equity fund, leaving some to question whether the National Roads and Motorists Association is closing in on the business that owns the luxury passenger train service The Ghan.

Last year, Jefferies was hired to sell the tourism operator, but that was well before the COVID-19 crisis.

Since then, the global pandemic has hit the tourism industry the hardest of all, with travel suspended to curb the spread of the virus.

Expectations are that international travel will not return for some time, although domestic travel could resume in weeks, with some expecting a boom on the local tourism scene in about a year.

Journey Beyond was formed when Quadrant purchased Great Southern Rail and later the Cruise Whitsundays and Rottnest Express marine tourism businesses.

12.23pm: TNT trebles on uranium buy

TNT Mining is the best performing stock on the market on Monday, after announcing the acquisition of strategic US high-grade uranium and vanadium project.

The junior miner has trebled its market value in just a matter of hours after it said it had secured the exclusive right to acquire the East Canyon Uranium-Vanadium project in Utah, which comprises of 200 highly strategic and prospective claims.

“We are very pleased to have identified an asset with the quality of East Canyon from our strategy of securing a strategic mineral project in North America, and we look forward to working towards completing the acquisition,” director Brett Mitchell said.

“The current outlook for the US uranium sector is extremely positive, driven by forecast trends in power generation and strong support from the federal government.”

TNT last up 247pc to 16c.

Richard Ferguson 12.14pm: PM quells barley tariff concerns

Scott Morrison has moved to quell concerns China’s threats to slap tariffs on Australian barley are politically motivated, saying the Chinese leadership have not raised concerns over coronavirus investigations or other matters when it comes to their 18-month-long anti-dumping review.

Trade Minister Simon Birmingham on Sunday said he was prepared to take China to the World Trade Organisation if the communist regime introduced barley tariffs from May 17.

On Monday, the Prime Minister said he would be “extremely disappointed” if political motivations had coloured the Chinese Ministry of Commerce’s review into anti-dumping.

He also mentioned that China had been displeased by Australia’s own anti-dumping measures when its review began.

“This review has been a subject raised at various meetings with the Chinese leadership, including Premier last year. It’s been an ongoing issue between our two countries,” he said in Canberra.

“They certainly haven’t raised it as connected to other issues. I would be extremely disappointed if it was.”

Follow the latest updates at our coronavirus live blog

12.07pm: JP Morgan tips best recovery stocks

JP Morgan has laid out its recovery ‘trades’ and ‘fades’ as the country emerges from lockdown – tipping materials stocks to be the best performers in the short term.

Equity strategist Jason Steeds writes that Materials have been the only sector to outperform on the way down from the peak in February, as well as through the recovery.

“The bulk miners remain attractively positioned given the considerable level of infrastructure stimulus being deployed in China. Financials sit at the other end of the spectrum, underperforming through both phases,” Mr Steed writes.

“In terms of reopening trades, the market appears to be already discounting an element of recovery in Discretionary and REITs.”

He tips Aristocrat, GPT Group, Independence Group, James Hardie, Nine Entertainment, Pendal, Santos and Vicinity as his key reopening trade.

Reopening fades are Staples and Healthcare.

11.54am: CTD’s domestic trade a saving grace: BP

Corporate Travel’s majority exposure to the domestic travel market should help it operate profitably in the short term as coronavirus restrictions ease, according Bell Potter.

In a note to clients, analyst Alex McLean writes that the pure play corporate travel operator has a “lean operating model and superior value proposition driven by automation”.

Following the firm’s latest update, Bell Potter keeps its FY20 and FY21 forecasts unchanged, but says its FY22 earnings forecast has been lifted by 18pc reflecting a revenue lift and stronger margins.

“We expect monthly cash outflows of c.$8m until the operating environment improves with the easing of travel restrictions (Aug/Sept),” Mr McLean writes.

“Management also reinforced CTD’s domestic travel focus (60pc of total transaction volume), highlighting their ability to operate profitably without international travel which is not expected to return in a meaningful way until 2021.”

The broker has a Buy rating on the stock with a $13.75 price target.

CTD last traded up 3pc at $12.30.

11.46am: ASX200 moves above 50-DMA

Most interesting on the charts today is the fact that the ASX200 is now likely to close above its 50-day moving average for the first time since February 24.

This will add to recent pressure on bears to stop-loss on simple trend following systems after the recent bear wedge pattern failed to deliver.

Apart from moving averages, some other trend following systems like MACD and parabolic have been positive for some time.

No doubt a sustained break above the April peak will see traders jump in as other trend following systems like DMI turn positive.

But if the index fails at the April peak at 5563.6 again, it could well track sideways for 4 to 6 weeks and form an ascending triangle pattern that eventually breaks higher.

Index last up 1.2pc at a 6-day high of 5455.

11.42am: Hong Kong stocks climb

Hong Kong stocks climbed at the open on Monday morning, in line with gains across Asia, as some badly hit countries reported a further slowdown in the number of coronavirus deaths.

The Hang Seng index rallied 0.99 per cent, or 240.01 points, to 24,470.18.

The benchmark Shanghai Composite Index added 0.22 per cent, or 6.23 points, to 2,901.57, while the Shenzhen Composite Index on China’s second exchange rose 0.43 per cent, or 7.82 points, to 1,816.99.

AFP

11.15am: Store re-openings spur retail rally

Listed retailers have continued Friday’s rally in early trade, as shopping centres and malls slowly reopen for business across the country.

The Prime Minister announced a three-step plan to restart the economy on Friday afternoon, sparking a rally in listed retailers, and the strength continues to build on Monday.

Womenswear retailer Mosaic Brands is leading the charge, up by 33 per cent to 93.5c while Myer is adding 18 per cent to 34.2c – that's after a 45pc rally on Friday.

Across the rest of the sector – Super Retail is higher by 1.8pc as Kathmandu jumps 8.6pc and Premier Investments is up by a more moderate 0.7pc.

Rhiann Mulquiney gets some shopping done at Pacific Fair. Shopping Centres are coming back to life with crowds starting to return. Picture: Glenn Hampson.

Nick Evans 10.45am: CIMIC financing arrangements under review

Construction giant CIMIC says it has put its supply chain financing arrangements under review after months of pressure over the controversial practice.

The nation’s biggest construction company said on Monday it had dramatically reduced the balance of its supply chain financing arrangements over the March quarter, with the balance of the arrangements falling almost 30 per cent from $851m at the end of December to $598m on March 31.

The company has been under pressure to dump the scheme, in which payment terms are pushed out beyond 30 days and suppliers are asked to take a discount on invoices to get paid quicker, after Rio Tinto and Telstra ditched similar arrangements following revelations in The Australian about their use.

CIM last up 1pc to $23.26.

10.32am: Mesoblast halted for equity financing

Shares in Mesoblast were halted ahead of the open, pending a “proposed equity financing”.

The health care stock has soared in the past few weeks, after reporting breakthrough progress in its treatment of ventilated COVID-19 patients in the US.

The filing to the market this morning provided scant detail, but said the company was working on equity financing and was requesting a halt in its shares until Wednesday.

MSB last traded at $3.44 after a 90pc jump in the past month.

10.11am: REITs lift as ASX adds 1pc

Local shares have followed a strong US lead, adding 1pc early after states announced key steps to reopen the economy at the weekend.

At the open, the ASX200 is higher by 61 points or 1.13 per cent to 5451.9 – with gains across all sectors bar consumer staples.

That’s as US futures push higher by 0.4pc.

Energy stocks are outperforming after a lift in oil prices, while REITs are cheering the reopening of shopping centres across much of the country.

Scentre group is higher by 3.9pc after canning its interim dividend and putting off a NSW project to preserve capital.

9.54am: Charter Hall WALE valuation steady

Charter Hall has reported little change to the valuation of its WALE trust, even amid tenancy concerns spurred by coronavirus restrictions.

In an update to the market, Charter Hall said 45pc of its WALE (weighted average lease expiry) fund had been independently valued, including the office properties such as ATO Adelaide, Westpac Kogarah and Coles logistics facility in Perth.

“CLW recorded a flat net valuation movement across the properties revalued and there was no change in capitalisation rate for those properties valued. This reflects the resilience of long WALE properties leased to strong corporate and government tenant customers.”

Charter Hall said the funds weighted average capitalisation rate was unchanged at 5.5pc.

9.41am: Scentre cans payout, defers project

Scentre Group said it won’t pay a half-year distribution and it would defer at least one development as management responds to the coronavirus pandemic that led to widespread store closures in its malls.

“The group believes that retaining this capital will further strengthen its financial position and ability to continue to deliver long term returns to its securityholders,” Scentre said in a statement to the ASX.

Scentre said it had agreed with joint venture partner, Dexus Wholesale Property Fund, to defer the construction of a rooftop entertainment, leisure and dining precinct at the Westfield Mt Druitt mall. Management is also reviewing the timeline of planned redevelopments and pledged to update investors later this year.

Scentre, which kept all 42 of its malls open during the pandemic, said around 57pc of retailers are now open and trading. It expects more to reopen over coming weeks.

“We are in discussions with our retail partners, on a case-by-case basis, to determine appropriate ways we can assist with their potential cashflow issues, while recognising that their contractual lease obligations remain in place,” Scentre said, without elaborating.

In the three months through March, Scentre’s comparable specialty in-store sales fell by 7.1pc while comparable majors in-store sales were up 0.7pc.

Dow Jones Newswires

Scentre’s Westfield Garden City was deserted during the coronavirus lockdowns. Picture: AAP Image/Richard Gosling.

9.39am: ASX likely supported after US rise

Australia’s sharemarket should stay supported amid rising global markets.

Friday night futures relative to fair value suggested the S&P/ASX 200 will open up 0.3pc near 5410 points. That follows a 1.7pc rise in the S&P 500 to 2929.8 points, just below the 61.8pc Fibonacci retracement at 2935 where it struggled last month.

S&P 500 futures dipped as much as 0.5pc this morning but have since recovered to the unchanged mark.

US Energy and Materials stocks outperformed on Friday with WTI crude oil up 5pc, LME copper up 1pc and spot iron ore up 3pc to $86.50.

BHP ADR’s equivalent close at $31.73 suggests BHP should open up about 1.1pc.

Focus is otherwise on updates from CIMIC, Pendal, Suncorp, Cochlear and Incitec-Pivot, with IPL also halted for capital raising.

On the charts, the index is pushing up against its 50-day moving average at 5417 but trend studies are mostly positive.

The S&P/ASX 200 rose 0.5pc to 5391.1 on Friday.

9.27am: What’s impressing analysts, what’s not

APA Group raised to Buy – Citi
Appen rated new Overweight – JP Morgan
CSR raised to Buy – Citi
Home Consortium raised to Outperform – Credit Suisse
Macquarie Group cut to Neutral – Credit Suisse
Macquarie Group target price raised 4.4pc to $120 – Morgan Stanley
Monadelphous cut to Hold – Morningstar
REA Group cut to Neutral – Credit Suisse
REA Group cut to Neutral – Macquarie

Jared Lynch 9.21am: Cochlear’s April sales slump 60pc

Hearing implant giant Cochlear is lining up for the government’s $130bn JobKeeper wage subsidy as it says it has suffered a 60 per cent revenue wipe out from elective surgery delays in force across the globe to limit the spread of coronavirus.

Cochlear and acoustic implants have been the hardest hit, with unit sales nosediving 80 per cent in April compared to the same month in 2019.

The $11.9bn company, which has tapped the market to raise $1.1bn more, says it now hopes to access the Morrison government’s $1500 a fortnight JobKeeper wage subsidy.

“Cochlear expects to be able to participate in various government subsidies, including JobKeeper in Australia, with similar subsidies available in a number of Western European countries,” chief executive Dig Howitt said.

“Cochlear has significantly reduced non-essential spending and capital expenditure until there is a sustained increase in surgeries. The business has also implemented a hiring freeze, with temporary pay reductions for the board and senior management across the business”

9.12am: Pendal FUM takes hit from volatility

Investment manager Pendal has reported a 21 per cent slip in half year profit and slashed its interim payout by 25pc as its seed investments were hit by volatility in the March quarter.

The group this morning reported statutory net profit of $54.8m, down from $69.6m, but cash profit higher by 2pc to $86.6m.

It said FUM at the end of March was $86bn, down 14pc from the prior corresponding period, and its interim dividend lower by 25pc to 15c per share.

“ Fee margins remained steady, and there was a significant favourable currency contribution, however, performance fees were lower compared to the pcp,” the group said.

“FUM was impacted by the unprecedented COVID-19 pandemic which has affected client

sentiment, economies, flows and markets in the March quarter, and saw the most severe market falls since the December 2008 quarter.”

PDL last traded at $5.75.

Bridget Carter 9.04am: Elmo to raise $70m

DataRoom | Elmo Software is raising $70m through a placement overseen by Canaccord and UBS.

Shares are being sold at $7 each which is an 11.5 per cent discount to

their last closing price of $7.91.

Funds are being used to accelerate growth.

8.57am: Nine walks away from NZME deal

Nine Entertainment says its terminated its discussions with New Zealand media group NZME to sell its NZ business, Stuff, even as the potential suitor lobbies for government assistance on the deal.

In a notice to the market this morning, the dual-listed NZME said it had written to the local government “seeking urgent legislation” authorising NZME to acquire the shares in Stuff by the end of the month.

The two parties had been in negotiation for the deal but it had been held up by the New Zealand regulators.

“NZME believes that the New Zealand media sector is too small for the current number of quality participants and consolidation is urgent in the face of dramatically declining advertising revenue and current general economic conditions,” it said in a statement.

“NZME continues to believe that it is the best owner for Stuff as it is best placed to preserve mastheads, newsrooms and jobs.”

But just minutes later, Nine issued a statement saying it had ceased discussions with the group: “while Nine confirms that it has had discussions with NZME regarding the acquisition of Stuff, Nine has notified NZME that it has terminated further engagement with NZME.”

Bridget Carter 8.46am: Incitec Pivot to raise $675m

DataRoom | Macquarie Capital, JPMorgan and Merrill Lynch equities have landed the role to raise $675m for Incitec Pivot.

Shares are being sold at $2 each, with $600m raised through a placement and $75m through a share purchase plan. Shares last closed at $2.19 so the raise is an 8.7 per cent discount.

The equity raising was tipped by The Australian’s DataRoom on Monday.

The funds will be used to bolster its balance sheet amid the coronavirus pandemic after recently ditching plans to sell its fertilisers business.

8.27am: Suncorp finds errors in staff payments

Insurer Suncorp says a review of pay and entitlements has “identified potential incorrect payments to some employees” which will cost between about $40m – $70m to remediate.

In an update which also identifies the impact of COVID-19 on the business, it says full-year group costs will be slightly above $2.7 billion, including pay and leave entitlements remediation.

It has also announced a non-cash impairment charge of about $90m, after tax, for “the deposit and transaction modules of the core banking platform”.

Suncorp says it will consider whether to pay a final dividend through the normal process of preparing year-end accounts.

Bridget Carter 7.14am: Z Energy announces raising

DataRoom | Z Energy is raising $NZ350m of equity at a floor price of $NZ2.75 per share through Goldman Sachs.

The New Zealand fuel retailer, listed in Australia, will secure $NZ290m through a placement and $NZ60m through a share purchase plan.

The funds will be used to prevent any debt covenant breach amid COVID-19.

It also comes as the company slashed about $NZ80m of costs.

In a book message sent out Monday, investors were told indications of demand from a limited number of wall-crossed investors exceed the placement at the underwritten floor price.

Bids are being accepted at three price points: $NZ2.75, $NZ2.80 and $NZ2.85.

The company has a $1.19bn market value.

7.10am: CBA signs with digital receipt fintech

Commonwealth Bank says a partnership with Australian fintech provider Slyp will allow customers to automatically receive an itemised digital receipt in their banking app when they pay with their card or digital wallet at participating retailers.

Slyp’s digital receipt application can be embedded into existing banking apps.

CBA says it will make it easier for customers to manage returns, warranties and financial management.

Richard Gluyas 5.45am: ASX set to edge higher

Local equities are likely to open slightly higher after a strong lead from Wall Street, as investors focus on Australia’s plan to reopen its economy with a three-stage easing of restrictions.

Benchmark indexes in the US shrugged off terrible jobs news on Friday, with 20.5 million positions lost as the country’s unemployment rate surged from 4.4 per cent in March to 14.7 per cent — the worst since the Great Depression.

Counterintuitively, the S&P 500 kicked up 1.7 per cent because the figures were not as bad as expected, and amid hopes of easing trade tensions between the US and China.

Also, the sharemarket continued its habit of anticipating better times, as Australia and New Zealand, and select parts of the US and Europe, said they would gradually restart their economies.

Local futures were on Monday morning up only 3 points, or 0.1 per cent, in response to the stronger US market.

AMP Capital head of investment strategy and chief economist Shane Oliver said the muted response suggested investors had factored in the 0.5 per cent advance in local shares on Friday that snapped a two-day losing streak, and the 2.8 per cent gain for the week.

“We’re looking at a flat to slightly positive opening on Monday,” Dr Oliver said.

The spotlight this week will predominantly be on the retail sector, following strong gains last week after Prime Minister Scott Morrison announced a staged easing of coronavirus restrictions.

National Australia Bank will on Tuesday release the results of its business confidence survey for April, following a record low in March. Consumer confidence for May will also be released by Westpac later in the week. After a fall of 17.7 per cent in April, Dr Oliver said he expected a small increase this month.

“There has been a bit of a return to confidence from very, very low levels,” he said, adding while it was good news for retailers, large numbers returning to shops could pose issues for social distancing.

“I think both surveys will show some improvement but they’re still going to be pretty weak,” he said.

Australia’s market could also be impacted by the release of the monthly labour force figures on Thursday.

“Those numbers are going to be bad,” he said. “We’ll probably see a loss of about 750,000 jobs.” But Dr Oliver said while they would be watched closely, the market shouldn’t be too impacted by the figures, unless they fell or rose beyond expectations. “They’ve been talked about for a long time now so it should already be factored into the share market thinking,” he said.

Australia’s benchmark S&P/ASX200 index finished Friday up 26.9 points, or 0.5 per cent higher, at 5,391.1 points, while the All Ordinaries index closed up 38.1 points, or 0.7 per cent, at 5,488.

The market finished last week up 145.2 points, or 2.77 per cent, while one Australian dollar is buying 65.23 US cents and 52.68 British pence.

5.30am: Fed unlikely to consider negative rates

Federal Reserve officials are unlikely to consider using negative interest rates to stimulate economic growth in the current coronavirus-induced downturn after concluding the tool’s clear costs outweigh its uncertain benefits.

The topic resurfaced Thursday after investors in futures markets began betting the Fed’s benchmark federal-funds rate would go below zero by year-end, which sent yields on two-year Treasury securities to an all-time low. Rates rose slightly on Friday, and futures contracts implied investors expected the fed-funds rate would be negative in June 2021.

Fed leaders see negative rates as a very last resort – and a remote one, still – worrying they would have harmful effects on financial markets and the banking industry. More broadly, there is little political support for the policy in the U.S.

Central-bank officials have said they prefer to stimulate growth with tools used after the 2008 financial crisis, including purchases of long-term securities and explicit guidance about how long they plan to buy assets and keep rates low. During a policy review last year, officials also discussed combining these policies with a new one that would peg yields on Treasury securities.

Dow Jones

5.25am: EU threatens action against Germany

European Commission chief Ursula von der Leyen has raised the spectre of legal action against Germany after the country’s highest court issued harsh criticism of the bloc’s top court.

The unprecedented spat threatens to undermine the authority of the European Court of Justice, giving ammunition to countries like Poland and Hungary in their battle with EU institutions.

“I take this matter very seriously,” von der Leyen said in a written response to a question from Greens MEP Sven Giegold, which he shared on Twitter on Sunday.

“The Commission is now in the process of analysing in detail the more than 100-page judgment of the German Constitutional Court,” von der Leyen wrote.

“On the basis of these findings, we are considering possible next steps, including infringement proceedings.” In a bombshell ruling on Tuesday, Germany’s Constitutional Court questioned the ECB’s bond-buying scheme, which has been credited with powering eurozone growth after the financial crisis.

The judges in Karlsruhe gave the ECB three months to justify the stimulus and show that the benefits of mass government debt purchases outweigh the side effects.

Otherwise, the judges said they will ban Germany’s powerful Bundesbank central bank from participating in the two-trillion-euro scheme.

The court also slammed the Luxembourg-based ECJ for rubberstamping the asset purchases in an earlier ruling, and said Germany was not bound by the ECJ decision.

European Commission President Ursula von der Leyen. Picture: AP

AFP

5.20am: Wall St recap

Wall Street stocks rallied Friday as investors shrugged off historically bad jobs data in anticipation of better times as the economy relaunches from coronavirus shutdowns.

The Dow Jones Industrial Average piled on more than 450 points, or 1.9 per cent, to finish at 24,331.32.

The broadbased S&P 500 rose 1.7 per cent to 2,929.80, while the tech-rich Nasdaq Composite Index jumped 1.6 per cent to 9,121.32.

The US lost an unprecedented 20.5 million jobs last month, pushing the unemployment rate to 14.7 per cent from 4.4 per cent in March – the highest since the Great Depression of the last century – according to Labor Department data.

As terrible as it was, the figures were not quite as bad as expected. Analysts also pointed to conciliatory statements from Chinese and US officials following talks, which lessened fears of a revived trade war.

The stock gains were the latest instance of markets looking at economic reports that are bad, but not significantly different than expected, and instead focusing on positive news such as the gradual restart of economic activity in some parts of the United States and Europe.

Art Hogan, chief market strategist at National Securities, said investors believe the economy will bottom out in the second quarter and improve after that.

“People are anticipating less bad data in the third quarter and good data in the fourth quarter,” Hogan said, adding that investors do not expect a second wave of coronavirus cases bad enough to lead to widespread US lockdowns.

The market is thinking “it’s got to get better and there’s lot of liquidity,” he said.

Among individual companies, Uber Technologies jumped 6.0 per cent despite reporting a $2.9 billion loss, nearly triple the level of a year earlier.

A bright spot was a 53 per cent rise in Eats restaurant takeaway delivery service.

Norwegian Cruise Lines gained 3.6 per cent after announcing it secured over $2 billion in a variety of transactions that included common equity and debt, enough funds to enable it to withstand over 12 months of voyage suspensions.

But online travel firm Booking Holdings shed 0.9 per cent as it reported a $699 million loss in the first quarter amid a surge in travel cancellations due to COVID-19.

AFP

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