ASX adds 0.8pc amid bank swings as Qantas outperforms

Qantas’s plans to lift capacity have revived ailing travel names, while retail profit taking kept the ASX from finishing above 6000.

David Rogers and Melissa Yeo

41 min read

8:36PMJune 04, 2020

Global stocks are upbeat about the prospects for a global recovery.

Morgan Stanley raises banks in value shift
No intentional wrongdoing: Westpac
Retail trade drops 17.7pc
Qantas to add 300 flights per week

That’s all from the Trading Day blog for Thursday, June 4. The ASX surged past 6000 to hit its best levels in three months in early trade before falling flat in afternoon trade but ultimately clinched a gain of 0.8pc.

Locally, listed builders cheered a new renovation and building stimulus, while Westpac said it identified no intentional wrongdoing in an internal probe of its Austrac breaches.

US futures suggest a slip to come on markets tonight.

Eli Greenblat 8.33pm: Former Sirtex boss ‘guilty’ of insider trading

The former chief executive and director of cancer treatment biotechnology play Sirtex Medical, Gilman Edwin Wong, has been sentenced in the District Court of NSW having pleaded guilty to an offence of insider trading linked to a $2.1m share deal conducted in 2016.

Appearing before Judge Bennett SC, Mr Wong, of Sydney, was sentenced to one year and six months' imprisonment, but to be immediately released on recognisance of $10,000 and to be of good behaviour for three years.

Flowing from the conviction over the insider trading charge, Mr Wong is also disqualified from managing corporations for a period of five years.

In October 2016 while in possession of inside information concerning Sirtex’s sales, Mr Wong sold 74,968 Sirtex shares for an average price of $28.56 per share, totalling $2.141 million. The shares he sold represented more than one fourth of his total holding. The share sale was later explained as covering tax liabilities from vesting rights on other shares.

Two months later Sirtex released a trading update to investors on the ASX downgrading its growth forecasts for the 2017 financial year in light of sales figures in the year to date period. Following the announcement, Sirtex shares opened almost 50 per cent lower to fall to $13.01, against a price of $25.49 in the previous day.

David Rogers 8.12pm: Bull market rages despite valuations

The fastest-ever bull market in Australian shares shows no sign of ending despite record valuations.

After falling as much as 39 per cent from a record high of 7197.2 points on February 20 to a seven-year low of 4402.5 on March 23, the S&P/ASX 200 has now risen 32 per cent on a daily close basis, driven by unprecedented central bank liquidity and faster-than-expected easing of coronavirus lockdowns.

While some profit-taking emerged on Thursday after the index regained 6000 points for the first time since early March, driven by another exceptionally strong rise in banks, the big four still managed solid gains despite having risen 20 per cent on average over the past two weeks.

Robyn Ironside 7.56pm: Virgin Australia pilots fear job loss

Virgin Australia pilots are frustrated at being kept in the dark during the administration process about what the airline might look like post-sale and how many pilots will be needed.

To date, virtually no details have been provided by the two short-listed bidders, US-based companies Bain and Cyrus Capital, with regards to the size of the fleet and the workforce.

Administrator Deloitte has now given both until June 22 to lodge their final binding bids, with a decision on a sale due by June 30.

The 20-year-old carrier went into administration on April 21 with debts of $6.8bn. Although there has been speculation Virgin Australia could move to one or two aircraft-types to reduce costs, no further information had been shared with pilots.

Australian Federation of Air Pilots’ vice-president George Kailis said there was much anxiety among members about the sale process and their own flying futures. “We are very nervous that there will be pilot redundancies (but) the cards are behind held very close to the chest,” Captain Kailis said.

“A deal like this can fall through at any stage right up to the eleventh hour. There’s a saying in aviation circles: ‘I’ll believe it when I’m kicking the tyres’, and that’s certainly the case here.”

In the meantime, Captain Kailis said it was critical the federal government extended the $1500 a fortnight Jobkeeper allowance beyond September for those industries where demand was expected to return slowly.

Eli Greenblat, Ben Wilmot 7.21pm: Retail recovery shows ‘early signs’

Australia’s $320bn retail sector is showing some early signs of life after three months of home isolation and social distancing that turned many stores and shopping centres into ghost towns, as fresh data flowing from road traffic to restaurant bookings points to the long-awaited recovery.

Citi has compiled a COVID-19 dashboard that uses real-time data to deliver a useful window into the strength of the retail industry at a time when fast changes and economic shocks have rattled the sector, with its analysts claiming that retail sales have now turned positive for the first time in 13 weeks.

Hoovering up data from a range of industries and activities including pedestrian foot traffic, retail traffic, road traffic, restaurant bookings, public transport use and shipping data, Citi argues a recovery is evident, and there are signs of it gaining momentum.

Bridget Carter 6.54pm: Bain bid topped Virgin auction

Stakeholders in the Virgin Australia sales process have been told that Bain Capital offered the most money in the second round of the competition, say sources.

Boston-based Bain and Cyrus Capital Partners have made it through to the final round of the contest to buy the carrier, which collapsed in April with $6.8bn of debt.

They will lob final bids around June 22.

Other groups contending for the operation in the second stage — US-based Indigo Partners with Oaktree Capital Management, and BGH Capital with AustralianSuper — are now out of the competition.

Outlier Brookfield also re-entered the race to make a bid in the second stage after earlier being excluded from the first stage of the process, but did not make it through to the final round.

As revealed by DataRoom earlier this week, knocked-out bidders BGH Capital and AustralianSuper were proposing to inject between $800m and $900m of working capital into Virgin Australia straight after gaining ownership, if they had been successful.

BGH Capital’s consortium was understood to be offering a good deal for employees, but unsecured bond holders would receive no payment.

David Rogers 6.25pm: Value pays off in the long term

A near record gap between the performance of growth and value stocks has raised doubts in the investment community about the continuing existence of the so-called “value premium”.

But one of the world’s leading systematic managers is adamant that value’s time will come again.

It appeared to be happening last week when a range of value stocks in the financials, energy, real estate and consumer discretionary sectors in the sharemarket began to surge, with three of the four major banks enjoying their strongest weekly gains on record.

From the viewpoint of Dimensional Fund Advisors, backed up by its strong ties to academia, the unpredictability of the value premium argues for a disciplined and consistent focus on capturing it.

Dimensional Fund is known in the investment community as the standard bearer for systematic, factor-based investing — a style which targets quantifiable company characteristics, such as size, relative price and profitability — to generate higher returns over time.

Even the world’s greatest value managers have been left behind by the crowding into highly priced growth stocks in recent years and there are some persuasive arguments about why value doesn’t make sense any more — such as near-zero interest rates and unprecedented asset buying by central banks, obsolete accounting methods, and the growing importance of intangibles.

James Kirby, Alan Kohler 6.02pm: Listen to Money cafe podcast

Wealth editor James Kirby and InvestSMART’s Alan Kohler give you this week’s Money Cafe in which they discuss why a GDP recession matters, will rioting bring markets back to reality and learning from a tale of ETF woe.

Listen to the podcast to find out:

What matters and what doesn’t in a GDP recession announcement
Financial advisers finally ask for some accountability
Will riots enforce some reality on world markets?
Wall Street’s unconvincing rally
Learning from an ETF tale of woe

Don’t forget to send your own questions to James Kirby and Alan Kohler via moneycafe@theaustralian.com.au

Find all episodes of The Money Cafe and subscription links here.

David Swan 5.23pm: Appen execs offload shares

Executives of AI training specialist Appen have offloaded shares in the company, with its chairman, one director, and Appen CEO Mark Brayan all selling signifcant chunks of their stakes in the Sydney tech outfit.

In an announcement to the market after it closed, Appen said its non-executive chairman Chris Vonwiller had sold two million shares for “a number of personal reasons”, including philanthropic endeavours. He still owns about 4.5 per cent of the company, worth around $272m, and the company said he intends to remain a long-term shareholder.

Chief executive Mr Brayan sold 95,535 of his shares “to satisfy tax obligations and diversify personal investments”, and retains over 400,000 shares.

And Bill Pulver, a non-executive director, sold 275,000 of his shares to “diversify personal investments”, and retains 332,384 shares.

Shares in Appen were down 2 per cent at market close to $30.48.

5.10pm: Travel names buoyed by Qantas lift

Qantas’ plans to triple its domestic flight capacity sparked a lift in airline’s shares, and helped the rest of the embattled sector higher too.

By the close, Qantas jumped by 7.2 per cent to $4.49 per cent – marking a 13pc lift over the past three days.

The news also spurred a 8.8 per cent lift in Corporate Travel to $13.35 and a 8.4 per cent lift in Flight Centre to $14.93.

Here’s the biggest movers at the close:

5.06pm: Profit taking trims ASX rally: nabtrade

The midday share dive was likely a product of profit taking as retail investors second-guess the market’s strength, so says nabtrade director of investor behaviour Gemma Dale.

“After the ASX200 cleared 6,000 in morning trade, profit-taking temporarily halted the rally before investors again hunted opportunities late in the day,” she said, adding that investors “don’t necessarily trust the rally”.

“It’s notable that large rallies in specific stocks are often quickly followed by profit-taking. While there’s some buying in stocks for the long-term, it’s also been clear that investors are happy to take quick wins in the current environment.”

David Ross 5.00pm: Speeding ticket for Fast Brick Robotics

Fast Brick Robotics has soared on the ASX up 106.8pc at the close, despite earlier receiving a speeding ticket from the ASX after unusual trading activity on opening.

The company closed at $0.06 a share, up from its opening of $0.029 after releasing a market update on Wednesday on the success of its Hadrian X bricklaying robot and Thursday’s announcement from the federal government of a renovation scheme.

The rise was so dramatic that the company was issued with a price and volume query from the ASX.

In a response, FBR said there was no information which had not been announced to the market that might explain the recent trading in its securities but noted the media coverage following the success of its trials for the Hadrian X might be behind the recent price rise.

“The release of the announcement resulted in an increase in share price of 32 per cent yesterday, and FBR believes that the increased media attention subsequently has contributed to the trading activities today.

“FBR also notes that the federal government has released its HomeBuilder residential construction stimulus package prior to the market open this morning which may also have contributed to the trading activities.”

In recent weeks, FBR has traded as low as $0.01 a share, with today’s moves returning it to levels it traded around in October 2019.

The bricklaying robot business has been troubled in recent years, after Caterpillar pulled the plug in 2018 on the memorandum of understanding the two signed.

4.13pm: Shares fight back to 0.8pc lift

In a seesaw session for the local market, shares burst through the 6000 level, fell into the red in afternoon trade but regained momentum to close 0.8 per cent higher.

It’s the fourth consecutive positive session for the ASX – with the ASX200 adding 50 points or 0.84 per cent at 5991.8.

Major banks were the key driver of the choppy trade – falling well into negative territory at one point, only to finish up by between 1.2pc and 2.3pc.

The Aussie dollar wound back after its recent rally, slipping by 0.3 per cent at the local close to US68.99c.

3.53pm: Morgan Stanley raises banks in value shift

Morgan Stanley has raised banks to Equalweight from Underweight in its model portfolio, while also adding some Energy and Consumer Discretionary stocks in a rotation to Value.

“Faster reopening of the economy and continued control of virus risks have reduced certain macro tail risks that were in focus at the height of the crisis,” say MS analysts led by Chris Nicol.

He favours ANZ, NAB and WBC over CBA while maintaining an overall Equalweight Banks sector weight.

“Recovery is in focus for markets and a V shaped recovery is important for Value,” Mr Nicol says.

“Over the last two months Value has shown a brief cameo of outperformance and combined with the extreme gap relative to growth is sending warning signals regarding the potential for a more sustained rotation event.

“Our view was to initially risk mitigate against this and we take this more formally by moving Model Portfolio positioning away from Staples and Healthcare and embracing a larger Value bias through the additions of Ampol, Santos, Super Retail and Viva Energy in addition to our current active Overweight positions in ANZ, BHP, NAB, QBE Insurance, Rio Tinto, Stockland and Tabcorp and Equalweight positions in Qantas, Telstra and Westpac”

3.39pm: Bank rebound recoups losses

Banks are driving a strong intraday bounce in shares, recouping some of the bank’s earlier rally.

With less than half an hour left of the session, the S&P/ASX 200 is up 1pc at 6003, still shy of the earlier 3-month high of 6040.2.

The four major banks are up 1.8pc to 2.8pc after earlier retreating from intraday gains of 3.9pc to 5.3pc but it’s also worth noting that some defensive growth stocks have turned up strongly after lagging earlier today.

CSL is up 3.6pc, Coles is up 2.6pc, A2 Milk is up 2.8pc, APA Group is up 2.4pc and AGL is up 1.9pc.

Strong support on dips suggests “equilibrium” will be found at higher levels, amid unprecedented central bank asset purchases.

3.29pm: Openpay joins BNPL rally

The rally in buy now, pay later stocks has a new addition in afternoon trade, Openpay joining the fold with a 17pc jump.

It comes as the more junior player emerged from a trading halt this afternoon, following a successful $34m institutional placement to accelerate its Australian and UK businesses.

Earlier this week, the company also announced up to £25m in UK debt funding – making it now fully funded to supercharge its growth plans.

Chief Michael Eidel said the combination of the platform’s service and broader macro drivers had “enabled us to take the business to new heights” during the COVID-19 pandemic.

Shares were offered at $2.40 per placement share, representing a 9.8pc premium to the stock’s 5-day volume weighted average price, but a 20.5pc discount to Wednesday’s closing price after a strong rally earlier this week.

OPY last traded up 16.9pc to $3.53 as rivals Splitit adds 23pc but Zip slips by 5.8pc.

Read more: We’re shopping like its 1995

3.14pm: Stimulus to lift Stockland settlements: MS

HomeBuilder stimulus and stamp duty restructure have been identified as tailwinds for property developer Stockland, with Morgan Stanley lifting its rating on the stock to Overweight.

Equity analyst Lauren Berry notes that Stockland’s land lot pricing sits in the sweet spot for eligibility for any government stimulus, which could spur a lift in settlements.

She upgrades her estimates for FY21/22 settlements to 5k/5.4k from 4.5k/4.7k previously, while estimates of its retail rebase have been trimmed to -10pc from -20pc after “less severe” lockdowns.

“Based on our forecasts, SGP is currently trading at c.11.5x FY21e PE, which is a c.50pc discount to ASX Industrials ex Banks versus a 10-year average discount of 20pc, and 5-year discount of 29pc,” Ms Berry writes, noting too that while residential makes up just 40pc of the company’s earnings, a lift in the broader market generally prompts a share re-rate.

SGP shares last traded up 3.8pc to $3.84.

Other stocks feeling the lift from the stimulus today include Adelaide Brighton – up 2.4pc, while Boral and CSR are both edging lower today but are well higher over the week.

Harvey Norman is up 5.3pc and Wesfarmers, owner of Bunnings, is up 2.2pc too.

2.45pm: Qantas approaching 3-month highs

Qantas shares are nudging three month highs in afternoon trade, as the airline bolsters domestic capacity.

The national carrier today announced it would triple its domestic flight offerings by the end of June as virus restrictions ease, news that is sending its shares up by 7.3 per cent to $4.50 apiece.

Over the past three days the stock has lifted by 13pc, now just shy of its pre-COVID trading levels of $4.61.

2.35pm: Iron ore to average $US86/t: UBS

Elevated iron ore prices are set to be brought back down to size as Brazilian supply remains undeterred by coronavirus risk, according to UBS.

The investment bank today noted current spot prices above $US100/t, but stood firm on its CY20 forecast of $US86/t given a strong recovery in Vale production and the easing of mobility restrictions in South Africa and India.

Analysts led by Dim Ariyasinghe write that China’s quick recovery from COVID-19 has boosted demand, while demand from the rest of the world is expected to recovery modestly, with pre-COVID levels unlikely in the short-run.

“Australian exports are up 4.5pc YTD May but increasing tensions between Australia & China are concerning and add additional geopolitical risk,” Mr Ariyasinghe says.

He tips Australian miners as the best positioned to take advantage of the current market and prefers BHP over Rio out of the diversified miners.

UBS says the iron ore price is set to slip as Brazilian supply ramps up. Picture: Waldo Swiegers/Bloomberg.

2.13pm: Westpac, NAB rewind gains

Westpac and NAB shares have turned in afternoon trade, despite rising 4.2pc to 5.3pc intraday, and the other two majors aren’t far behind.

This reversal has seen the S&P/ASX 200 erase a 1.7pc intraday rise, but it is now up 0.7pc at 5984.

Traders say clients are wondering if someone has downgraded the sector but there has been no such indication so far from the rumour mill.

It could be some profit taking as the banks neared their 100-day moving averages. After all, the sector had surged 20pc in about a week.

Such a strong rise could easily trigger downgrades which could push banks lower tomorrow.

Bell Potter’s TS Lim was the first cab off the rank, cutting Westpac to Hold on Tuesday.

Gerard Cockburn 1.59pm: Splitit adds 22pc as sales treble

Buy now, pay later provider Splitit is leaving the rest of the sector in its dust with a 22pc jump on Thursday, after trebling its sales volumes for the month.

The ASX-listed but New York-based company reported May merchant sales volume of $US25.8m, an increase of 321 per cent compared to the same time last year and 39pc compared to April.

Splitit’s North American sales grew by 336 per cent for the month, while its European sales grew by 548 per cent.

The company’s total number of shoppers has now surpassed 290,000, and the numbers are helping shares to surge by 22.4pc to 82c, its best levels all year.

Sector heavyweight Afterpay is higher by just 0.34pc to $52.44 after setting new record highs of $53.81 in early trade, while Zip is pulling back after a strong rally this week – last lower by 5.5 per cent to $6.

While its rivals have set new records in the past week – Splitit is yet to test its $1.12 record high from November last year.

Lachlan Moffet Gray 1.48pm: West-east gas pipeline not recommended: Power

COVID-19 Commission head Nev Power says he has discussed the idea of a west-to-east natural gas pipeline with other members of the commission “various times,” but says the project is not a recommendation to the government.

Mr Power has in the past publicly endorsed the idea of a pipeline linking the western and eastern natural gas markets to resolve price disparities that exist between the two.

However, an independent review commissioned by the federal government in 2018 said the idea was not “the best or most economical” solution to solving gas supply problems on the east coast.

Senator Murray Watt asked Mr Power whether the project has been discussed with his NCCC counterparts at the Senate’s COVID-19 committee, but Mr Power said the pipeline was only ever “considered.”

“Yes, I am sure it would have been discussed at various times however I would hasten to add that it is not a recommendation of the commission … it was one of many options that was considered, Mr Power said.

1.45pm: HomeBuilder plugs construction hole: ANZ

ANZ senior economist, Felicity Emmett, says the federal government’s $680m HomeBuilder plan will help “plug the emerging hole” in residential construction activity.

“At $25,000 (per eligible home builder or renovator) this is a substantial grant, and will provide some support to the residential construction sector,” she says.

“The dollar spend is quite low by fiscal package standards, but it is the limited time frame of the program will act to bring forward some additional private spending on residential construction in the short term, and go some way to plugging the emerging hole in residential construction activity.”

The program is due to run until December 31.

1.23pm: Unibail extends rally as gold lags

Shopping centre landlord Unibail Rodamco Westfield continues to outperform after a strong trading update earlier this week – adding 11pc in lunch trade to take its week-to-date gain to more than 30pc.

The owner of offshore Westfield centres said on Monday that 87pc of its portfolio would be open by the middle of June.

On the negative side, gold miners are feeling the sting of rising risk sentiment – while Nufarm takes a hit on broker downgrades.

Here’s the biggest movers at lunch:

Cliona O’Dowd 1.09pm: Magellan cheers active ETF ‘evolution’

Magellan has heralded the launch of its Airlie Australian Share Fund as “an evolution of active ETFs”.

“This simplification eliminates the need to have two separate funds, one for investors who prefer using unlisted funds and another for those who prefer funds quoted on a stock exchange,” chief Brett Cairns said.

“Instead, investors, advisers and brokers will now be able to invest in a single, open-ended fund using the access point they prefer. Magellan has always focused on simplifying the investment process for our investors and reducing unnecessary frictions and costs.”

The Airlie Australian Share Fund, managed by Perpetual’s former head of equities Matt Williams, has returned 2.7 per cent per year since inception in June 2018 and has outperformed the Australian market by 0.9 per cent per year over that period.

Still, investors seem more focused on the fund’s first month of outflows in two years, with shares down 0.3pc to $58.83 in afternoon trade.

Hamish Douglass, Magellan Chairman and co-founder. Picture: Britta Campion / The Australian.

Lilly Vitorovich 12.41pm: oOh! touts savings amid crisis

Outdoor advertising company oOh!media is set to deliver bigger-than-expected cost savings following a major drop in ad bookings during the coronavirus crisis.

The group, which raised $167m at the end of March to shore up its balance sheet during the economic downturn, has saved more than $20m in fixed rent costs, ahead of its forecast of $10m to $15m.

Chief executive Brendon Cook said the company expects to hit the higher end of its operating expenditure savings target, with all discretionary expenditure suspended. Staff have also agreed to a 20 per cent reduction in hours and pay for three months.

The federal government’s $130bn JobKeeper payment scheme will deliver a further $7m a quarter, Mr Cook told shareholders during its annual general meeting, which was held on Thursday via webcast.

OML last traded down 2.5pc to $1.10.

Bridget Carter 12.26pm: Trio circling Bain’s distressed investments

DataRoom | Major secondary debt investors such as Oaktree Capital Management, The Carlyle Group and Apollo Global Management are believed to be circling distressed loans in two Australian-based companies owned by Bain Capital.

Cerberus Capital Management, Varde Partners and Fortress are also potentially exploring an acquisition of the debt.

It is understood that offshore lenders to Bain’s Australian childcare provider Camp Australia are considering a move to offload debt, while there is also thought to be some upcoming movement within the lending syndicate of Bain’s other childcare provider, Only About Children.

Any trading of distressed loans in its Australian investments will likely be unwelcomed by Bain right now, as it closes in on Virgin Australia and no doubt remains keen to keep challenges relating to other Australian investments out of the public eye while the competition for the carrier unfolds.

12.18pm: ASX pares gain as valuation tops 20x

Australian shares have sharply pared most of their intraday rise as US futures tick lower.

The S&P/ASX 200 is up 0.5pc at 5971 after rising 1.7pc to a 3-month high of 6040.2.

Sector leads are much the same as this morning with value leading growth but the major banks are up 1.3-2.4pc after rising 3.8-5.4pc earlier today.

It came as S&P 500 futures turned down 0.2pc but profit taking and overvaluation could be the real drivers after the forward PE ratio hit over 20x.

It’s also worth noting that AUD/USD is up 25pc from the low and the S&P/ASX 20 up 37pc. Thus offshore investors have potentially made 62pc on the Australian sharemarket in under 3 months.

But whether stretched valuations and profit taking can overwhelm massive Fed and ECB liquidity remains to be seen.

Ben Wilmot 12.14pm: Victory Office raising $15.3m

Victory Offices has launched a $15.3m equity raising via a one for one fully underwritten pro rata non-renounceable entitlement offer as it looks to strengthen its balance sheet to manage the ongoing impact of COVID-19.

In a sign of the pressure on the co-working industry, the company said almost half of its landlords had agreed to reduce or defer lease obligations.

Negotiations with its other landlords are continuing under the Morrison government’s code supporting commercial landlord negotiations to ensure rents reductions are commensurate with reductions in revenue.

Victory Offices said the liquidity pressures of COVID-19 would create significant headwinds for a large portion of co-working offerings due to their inability to access additional funding, resulting in reduced margin pressure and competition post virus.

The company said capital expenditure had been deferred on five of the ten locations that were scheduled to open in this half.

VOL shares last traded down 9.8pc to 46c.

Lachlan Moffet Gray 12.07pm: Power sets out manufacturing priorities

The National COVID-19 Coordination Commission has detailed priority manufacturing sectors it would like to see developed and expanded without government assistance to the Senate’s COVID-19 Committee.

NCCC chair Nev Power said the commission’s manufacturing task force wants to enhance energy intensive manufacturing, high-value manufacturing like 3D printing, foodstuff value-add manufacturing, defence and sovereign capability manufacturing, medtech and minerals processing with a focus on the “battery minerals area”.

The NCCC was briefed to look at ways to establish these sectors “without government assistance and support” to create an internationally competitive manufacturing sector that will see trade arrangements vulnerable to disruption from COVID-19 – like the widespread export of raw food products to be finished and then reimported – cease.

The other working groups attached to the commission will also seek to rectify problems caused by COVID-19 in their areas. The not for profit working group led by UNICEF Australia boss Tony Stuart will examine ways the pandemic has affected gift giving and volunteer staffing levels.

The industrial relations working group, chaired by former ACTU secretary Greg Combet, will continue to resolve the disruption of the transport of materials through ports.

12.00pm: Shares pullback on data drop

Shares are pulling back, along with the Aussie dollar, after the latest data drop.

At midday, the ASX200 has trimmed its gains to 46 points or 0.78 per cent at 5987.8 – from earlier highs of 6040.2.

Energy stocks are leading the slip, last down 0.7pc.

It comes as US futures turn down by 0.2pc.

Meanwhile, AUDUSD is trading down 0.26pc to US69.01c.

11.34am: Retail trade drops 17.7pc

April’s retail trade has collapsed by 17.7 per cent, after the record 8.5 per cent rise in March.

Both months represent the largest single-month decline and increase on record.

“COVID-19 continued to affect retail trade in April with many retail businesses closing their physical stores during April due to restrictions relating to social distancing” said Ben James, director of quarterly economy wide surveys.

“There were record falls in cafes, restaurants and takeaway food services (-35.4 per cent), and clothing, footwear and personal accessory retailing (-53.6 per cent), as well as a large fall in department stores (-14.9 per cent).”

Retail trade by industry and subgroup#ausbiz #ausecon #markets #auspol #commsec @CommSec pic.twitter.com/hanumwdwwR
— CommSec (@CommSec) June 4, 2020

11.31am: Trade surplus bigger than tipped

Australia’s trade surplus for April has printed better than expected at $8.8bn from consensus of $7.5bn.

Exports slipped by 11pc while imports fell by 10pc.

April’s read follows a downwardly revised $10.4bn in March.

But as with the better than expected Caixin China PMI data yesterday, stronger-than-expected domestic trade data isn’t helping the Aussie dollar, probably because it has already recovered 25pc from the March low.

AUDUSD last down 0.1pc to US69.12c.

Anatomy of the mother of all trade balances, a massive surplus amidst the economic turmoil, exports fall less than collapsing imports #ausbiz pic.twitter.com/i3HVuDJj17
— Alex Joiner (@IFM_Economist) June 4, 2020

11.28am: Citi’s retail index bucks 12-week slump

Citi’s real time data show Australian retail sales turned up last week, the first rise in the past 13 weeks, according to analyst Edward McKinnon.

It comes ahead of final Australian retail sales data for April, expected to be down 17.9pc.

Citi’s “COVID-19 dashboard” tracks 10 different data sets including pedestrian foot traffic, retail traffic, road traffic, store closures, restaurant bookings, mobility by venue, public transport use, fuel prices, air traffic volumes and shipping data.

“Retail activity continues to be the most improved data point, with retail sales turning positive for the first time since pre-COVID-19 levels,” Mr McKinnon says.

“This has coincided with a continuation of stores reopening (80 per cent at the end of May) and increased levels of foot traffic. General mobility stabilised in the last week, while Australian restaurant bookings have shown green shoots. Flight traffic remains very subdued, while job vacancies have dried up, but have improved from April lows.”

Lachlan Moffet Gray 11.21am: Power mulls industries for new jobs

The National COVID-19 Coordination Commission is not solely focused on a “gas-led” economic recovery, chair Nev Power has assured the Senate’s COVID-19 Committee.

Mr Power said that commissions musing on the increased role of natural gas mainly relates to the manufacturing of fertiliser and chemicals in Australia.

“The discussion around gas in the task force was around, predominantly, the provision of a feed stock for manufacturing of fertilisers and chemicals in Australia,” Mr Power told the Committee.

“Currently we import most of those products and therefore we don’t have the luxury of having those jobs here in Australia.”

Mr Power said that consultation has taken place with the renewables sector, adding that “detailed analysis has not been completed” relating to the efficiency of natural gas in reducing manufacturing cost structures at this stage.

Greens Senator Peter Whish-Wilson asked why conflict of interests for members of the manufacturing task force have not been collected when at least five members of the task force have financial interests in the oil and gas industries.

A conflict of interest disclosure had been delivered to the PMCC from the task force’s chair, former Dow Chemicals CEO Andrew Liveris.

11.15am: What to watch in trade data

Australia’s international trade and retail trade data for April are due at 11.30am AEST.

Bloomberg’s consensus estimate has a trade balance of $7.5bn from a record $10.6bn in March. Final retail trade is expected to be down 17.9pc after rising 8.5pc in April.

“Our economists reckon this implies a $1.6bn fall in the trade surplus,” says NAB senior FX strategist Rodrigo Catril.

“With travel-related services effectively stopping in April as the government closed the international border, this takes a further $1.2bn off the trade surplus, which should shrink to $7.8bn.”

10.52am: Week-to-date gain best in two months

Australia’s S&P/ASX 200 share index has hit a 3-month high of 6040.2, a 1.7pc lift for the day.

At that point it was up 4.8pc for the week, tracking its best week in two months, but gains have faded to be up 1.5pc at 6030 as S&P 500 futures turn down 0.2pc.

It will be very interesting to see if the index can close above 6000 points today.

That would be a big achievement, particularly in light of the fact that it has now hit the target of an ascending triangle pattern at 6030.

Such a strong close would see traders thinking it can test to 200-day moving average at 6330, which seems justifiable on a “catch-up” to the US.

However, it remains to be seen if the flood of US Fed liquidity can push the S&P 500 straight through the March peak at 3136 as RSI goes overbought.

Bridget Carter 10.49am: Viva Leisure raising $25m

DataRoom | Gym operator Viva Leisure is tapping the market for $25m through Ord Minnett.

Shares are being sold at $2.20 each, a 15.4 per cent discount to the company’s last closing price of $2.60 per share.

In a term sheet, investors have been told that the funds are being used to strengthen the company’s balance sheet to pursue strategic acquisitions, accelerate refurbishment of existing locations and for new site rollouts.

The raise will include a $2.9m placement and a 1 for 6 pro-rata accelerated non-renounceable entitlement offer to secure $22.1m.

Lachlan Moffet Gray 10.37am: Gas supply a focus for COVID-19 commission

Competitive gas supply has been earmarked as a key issue for the government’s COVID-19 commission, as part of advocacy to lead to “the fastest possible recovery” of the economy.

Questioned by the Senate’s COVID-19 Committee, National COVID-19 Coordination Commission chair Nev Power said that since the commission first met on March 27 it had helped the government resolve issues relating to PPE distribution and cross-border supply chains, before moving to helping business establish COVIDsafe plans for reopening.

The commission will now focus on economic recovery and improving productivity, a key part of which should be the increased use of natural gas to assist manufacturing, he said.

“We should be looking at competitive gas supply for its potential as a raw material for both existing and new manufacturing industries,” Mr Power said in his opening statement, adding that he agreed with chief scientist Dr Alan Finkel’s views on the utility of natural gas in helping Australia transition to lower-emission energy sources.

National COVID-19 Coordination Commission head Nev Power. Picture: Rohan Thomson/Getty Images.

10.32am: Qantas to increase domestic capacity

Qantas and Jetstar have flagged a lift in domestic and regional flying for June and July, with more than 300 flights to be added per week.

The increase will see capacity lifted from 5pc of pre-COVID-19 levels to 15pc.

“Additional flights will likely operate during July depending on travel demand and further relaxation of state borders, with the ability to increase to up to 40 per cent of the Group’s pre-crisis domestic capacity by the end of July,” Qantas said today.

QAN shares are higher by 6.4pc to $4.46 on the news.

10.22am: Consider value for risk mitigation: MS

Morgan Stanley quantitative analyst Antony Conte continues to recommend investors “at least consider some risk mitigation” against large positioning away from value stocks.

Investors should “closely monitor the evolving recovery growth path that could lead to more discernible regime change” from growth to value stocks.

“With the gap to growth at heightened levels, valuation looking increasingly attractive and factor volatility increasing, consider some risk mitigation,” he says.

Mr Conte today added Adelaide Brighton and Pendal Group, while removing Cochlear and Independence Group from his “most preferred” list.

He also added Westpac, Star City Entertainment, AusNet Services and Bendigo and Adelaide Bank to his “least preferred” list, while removing Computershare, Magellan, A2 Milk and Platinum Asset Management.

10.11am: Major banks fuel 1pc lift

The major banks are spurring a lift in the local market, as the index breaks past 6000 for the first time since early March.

At the open, shares are up by 74 points or 1.25 per cent to 6015.9 – a three month high.

Westpac has shrugged off the findings of its internal probe, adding 3.7pc while NAB is higher by 3.6pc, ANZ by 3.5pc and Commonwealth Bank higher by 3pc.

Gold stocks and other defensives are on the backfoot.

10.01am: Evolution to sell Cracow mine for $125m

Evolution Mining has inked a deal to sell its Cracow mine in Queensland for $125m to listed junior Aeris Resources.

Total consideration for the mine consists of $60m cash payable upon completion, $15m cash payable on June 30, 2022 and up to $50m contingent in the form of a 10pc net value royalty for gold produced for the next five years.

The sale is expected to settle at the end of this month.

Evolution said the sale was in line with its strategy to upgrade its portfolio, noting “Cracow has more value in the hands of Aeris than in Evolutions’s portfolio”.

EVN last traded at $5.82.

9.56am: Pioneer nearing refinancing deal

Pioneer Credit’s feud with financier and former takeover bidder Carlyle Group could be nearing a close as the debt collector negotiates a new deal with a third unrelated party.

The company requested a halt ahead of the open, saying it was “in advanced by incomplete discussions in relation to the refinancing of its existing senior debt facilities by securing a replacement senior funding package”.

As part of the deal, Pioneer is proposing amendments to terms of its secured and subordinated medium term notes, which will have to be put forward to note holders for approval.

Pioneer requested its shares be halted until July 17.

PNC last traded at 28.5c.

Ben Wilmot 9.46am: Charter Hall snaps up $648m Aldi portfolio

The strength of the logistics property market has been put on display with Charter Hall swooping on a $648m portfolio of distribution centres sold off by German retailer Aldi.

The deal is the largest direct transaction to be struck in commercial property in the wake of the coronavirus crisis and was flagged by The Australian back in April.

The transaction also shows the sharp split between logistics property, and some prime office towers, against the troubled shopping centre sector.

Charter Hall-managed CPIF bought the four-strong portfolio with institutional investor Allianz Real Estate, acting on behalf of several Allianz group companies.

The Aldi logistics assets are located in Sydney, Melbourne and Brisbane and were designed and built by the German supermarket chain to a high-quality specification and sold with seven-year lease back initial terms plus multiple seven-year options.

The $6bn wholesale fund CPIF will split the deal with Allianz Real Estate as a 50/50 joint venture partner.

9.38am: Banks to lead ASX higher, again

Banks look set to lead another jump in the Australian sharemarket on Thursday, to follow a 5pc jump in US banks in a switch to value and after a much-smaller-than-expected fall in private payrolls.

Australian share market strength, particularly for domestic cyclicals, will be bolstered by confirmation of a $688m home building package.

With the S&P 500 rising 1.4pc to 3122.9, overnight futures relative to fair value were suggesting the S&P/ASX 200 would open up 1pc at 6000 points.

But the home building package – including $25,000 cash grants until year end – should give an added boost to banks, home builders and discretionary retail and could push the S&P/ASX 200 to hit the target of an ascending triangle pattern today at 6030.

The extent of any pullback from there will depend how the S&P 500 reacts to the March peak at 3136. US index futures are so far holding up with Dow futures up 0.3pc and S&P 500 futures up 0.1pc.

International trade data for April are due at 11.30am AEST along with final retail trade data. Focus tonight will be on whether the ECB boosts its Pandemic Emergency Purchase Programme.

9.17am: Vocus refinances, tightens guidance

Vocus has announced a new syndicated debt facility worth more than $1.3bn as it tightened its earnings guidance for the full year.

The refinancing, as flagged by The Australian’s DataRoom, was described by the company as a means for greater financial stability and flexibility for its next phase of the company’s growth.

The company has taken out a new syndicated debt facility worth $1.255bn, and $NZ135m, with a weighted average term of 3.5 years, while its current debt facilities have also been extended.

“The refinancing was undertaken as part of our long-term funding strategy and commenced prior to the significant disruption in the global lending markets caused by COVID-19. It is a show of confidence that the syndication was oversubscribed during this period,” chief Kevin Russell says.

Vocus said it expected group earnings between $359m and $369m, in line with guidance first provided last July.

“The quality of earnings continues to improve strongly, with EBITDA growth of approximately 10pc expected in our core Vocus Network Services business. In addition, our portfolio of strong Retail brands has supported our customers’ needs for increasing connectivity during the crisis and has maintained strong cash collections,” Mr Russell adds.

VOC last traded at $3.12.

Vocus chief Kevin Russell. Picture: Hollie Adams/The Australian.

9.08am: What’s on the broker radar?

Alumina raised to Buy – UBS
GWA Group raised to Neutral, price target raised 43pc to $3.15 – Credit Suisse
Iluka raised to Buy – Goldman
Magellan target price lifted 26pc to $51.69 – Goldmans
Medibank Private cut to Hold – Morningstar
Metcash cut to Sell – Morningstar
Nufarm cut to Reduce – Morgans
Oz Minerals cut to Hold – Morningstar
Stockland raised to Overweight – Morgan Stanley
Super Retail Group price target raised 28pc to $9.97 – Credit Suisse

8.53am: Magellan hit by outflows

Magellan Financial Group’s May institutional outflows swamped retail inflows, pulling the fund’s flows lower for the month.

In a filing to the market this morning, Magellan reported net institutional outflow of $516m, more than offsetting a net retail inflow of $228m, to give a total net outflow of $288m.

But funds under management rose 1.5pc to $98.45bn as share prices rose.

Still, the institutional outflow may raise some eyebrows among MFG investors today.

MFG last traded at $59.03.

8.43am: Viva Leisure halted for raise

Gym operator Viva Leisure has been halted ahead of the open, pending detail of a capital raising.

The group owns more than 50 health clubs across the ACT, Victoria, Queensland and NSW and last week said it had locked in opening dates for 70 per cent of its locations.

In a notice to the market today, Viva requested a halt until June 9, or when the announcement is released as to the outcome of the raise.

VVA last traded at $2.60, a comeback from lows of 66c during the peak of the pandemic.

7.55am: No intentional wrongdoing: Westpac

Westpac said millions of breaches anti-money-laundering finance laws were caused by technology shortcomings and human mistakes, but an internal investigation had not found intentional wrongdoing by any of its staff.

Westpac has been accused by Australia’s financial-intelligence agency of the biggest breach of the country’s money-laundering and terrorism financing laws in history, with more than 23 million breaches that include failing to detect transfers that may have been used to facilitate child exploitation in Asia and failing to report in a timely way about $7.5 billion in international transfers.

Westpac has laid out the results of its investigation into those compliance issues, which last year led to the departure of the company’s chief executive, Brian Hartzer, and resulted in chairman Lindsay Maxsted taking early retirement.

“We completely accept that some important aspects of Westpac’s financial crime risk culture were immature and reactive, and we failed to build sufficient capacity and experience in some important areas,” said Peter King, who became Westpac’s chief executive in April.

The bank’s report blames the failures on a mix of technology and human error dating back to 2009.

Failures to adhere to Austrac guidance on child exploitation risk “occurred due to deficient financial crime processes, compounded by poor individual judgments,” Westpac said.

Westpac CEO Peter King. Picture: Nikki Short

7.35am: Oil higher but doubts on cuts

Oil ended slightly higher overnight but remained below the session’s early highs of above $US40 a barrel, the highest since March, retreating as doubts emerged about the timing and scale of a potential extension to the pact between OPEC and its allies to cut crude supplies.

Oil prices were supported by a drawdown in US crude inventories in the latest week, but came under pressure as US refined product inventories surged on tepid demand.

“As product demand remains subdued, gasoline inventories showed a solid build, while distillates showed a mammoth one – despite refinery runs being over 3.6 million barrels per day below year-ago levels,” said Matt Smith, director of commodity research at ClipperData.

Saudi Arabia and Russia have a deal to extend oil output cuts by a month, but a policy meeting on Thursday rather than later in June is unlikely, sources said. Early in the session, oil fell when Bloomberg reported the Thursday meeting was in doubt.

“Prices were firm so far this week on the news that the meeting was earlier,” said Olivier Jakob, oil analyst at Petromatrix. “The retracement today is definitely due to the latest headlines on OPEC.”

Brent crude futures for August settled up 22 US cents, or 0.6 per cent, at $US39.79 a barrel. The session high of $US40.53 was the highest since March 6. West Texas Intermediate (WTI) crude for July rose 48 US cents, to $US37.29 a barrel.

Reuters

7.20am: Early gains tipped for ASX

Traders can look forward to good early gains on the Australian share market after a broad rally on Wall Street overnight.

At 7am (AEST) the SPI 200 futures contract was higher by 73 points, or 1.23 per cent, to 5,999.0, indicating a strong start.

In the US, a spate of grim economic data was not as bad as economists feared, and recovery continues from the coronavirus pandemic. A survey from payroll processor ADP said that private employers cut nearly 2.8 million jobs last month, but that was much milder than the 9.3 million that economists told investors to expect. That raises optimism that Friday’s more comprehensive jobs report from the US government may also not be as bad as feared. Financials, industrials and tech pushed the three major US stock indexes well into the black. The S&P 500 rose 42.05 points to 3,122.87. The Dow Jones Industrial Average gained 527.24 points, or 2 per cent, to 26,269.89, and the Nasdaq composite rose 74.54, or 0.8 per cent, to 9.682.91.

In Australia, international and retail trade figures for April are due to be released.

The S&P/ASX200 benchmark index finished Wednesday close to the highs of the day, up 106.5 points, or 1.83 per cent, at 5,941.6 points, while the All Ordinaries index gained 104.8 points, or 1.76 per cent, at 6,064.9.

One Australian dollar was buying US69.21 cents at 7am (AEST), down from US69.37 cents at the close of trade on Wednesday.

AAP

6.40am: Warner Music surges on debut

Warner Music Group, one of the globe’s “big three” recording companies, jumped in its market debut after raising more than $US1.9 billion in an initial public offering that underscores how streaming has reinvigorated the industry.

Trading under the “WMG” ticker on the Nasdaq, Warner Music finished with a gain of 20.5 per cent at $US30.12, up from its $US25 IPO price.

The company increased the offering to 77 million shares from the 70 million initially envisioned, making it the biggest IPO of 2020.

The Wall Street unveiling represents yet another chapter for a company with a storied history in the recording industry, a sector that has taken its knocks, most recently from the coronavirus, which has obliterated live entertainment.

The outbreak also delayed the company’s IPO, which originally was scheduled for February.

However, Tuesday’s offering – the biggest of the year, according to Renaissance Capital – reflects how streaming music has revived an industry and also comes amid a decisive upswing in the broader stock market.

Access Industries, a group of investors headed by billionaire Len Blavatnik, which acquired Warner Music for $US3.3 billion in 2011, will retain its majority stake in the company.

Warner is the home of artists such as Cardi B and Ed Sheeran, and holds the lucrative back catalogues from the likes of Madonna.

6.05am: Wall St lifted by stimulus hopes

US stocks rose as social unrest across the US showed signs of calming and investors bet economic activity will improve with the ebbing of coronavirus infections and additional government stimulus.

The S&P 500 advanced 1.4 per cent as of the close of trading in New York. The Dow Jones Industrial Average added about 527 points, or 2.1 per cent. The technology-heavy Nasdaq Composite gained 0.8 per cent, climbing to within 2 per cent of February’s all-time high.

After rising to a three-month high yesterday, the ASX is tipped to open firmly higher. Around 6am (AEST) the SPI futures index was up 69 points, or 1.2 per cent.

“Investors are continuing to ignore the three P’s – pandemic, protests and politics – and are instead focused on what increasingly is being interpreted as a quicker and better than expected recovery in the economy and the idea that that may portend a quicker recovery for earnings as well,” said David Donabedian, chief investment officer of CIBC Private Wealth Management.

Markets have continued to rally over the past week despite the social unrest in the US as investors bet that the protests sparked by the killing of George Floyd wouldn’t curtail business activity or have a sustained impact on the economy.

Stimulus measures from governments and central banks in recent weeks have also opened the floodgates on cheap money, which is making its way into financial markets and boosting asset prices, investors say. President Trump plans to meet with senior advisers as soon as this week to discuss policy options for the next coronavirus relief package as the administration prepares for negotiations with Congress, according to a senior administration official.

Investors are looking ahead to the US jobs report Friday for insight into the state of the labour market. In a potential bright sign Wednesday, the ADP National Employment Report showed non-farm private sector employment in the US decreased by 2.76 million jobs in May, a smaller loss than economists expected.

The gradual easing of lockdown measures around the world has also failed to trigger a second wave of infections so far, fuelling optimism in markets, said Patrick Spencer, managing director of US investment firm Baird. Daily reported infections in the 10 most-affected countries have continued to decline, according to data compiled by Johns Hopkins University.

“There’s little evidence of a resurgence in the virus, and that’s really bolstered investor confidence,” Mr Spencer said. “If basically the fundamentals aren’t as bad as the market discounts, then markets will always improve and the news is getting less bad.”

Overseas, the Stoxx Europe 600 gained 2.5 per cent. South Korea’s Kospi Composite led gains in the Asia-Pacific region, adding 2.9 per cent after the government proposed an extra budget worth $US28.9 billion, the third this year, to ease the economic impact of the coronavirus pandemic.

Global equity markets are being fuelled by an improvement in business sentiment, gradual reopenings, subsiding concerns about an oversupply of oil, and additional stimulus measures, according to Kerry Craig, global market strategist for J.P. Morgan Asset Management. However, the abundance of risks calls for a cautious approach to investing, he said.

“It’s difficult to say what factors could impede the performance in equities, but we have tensions rising between the U.S. and China, a U.S. election coming up, and there is a politically charged environment in the U.S. right now, so there are enough risks out there,” Mr. Craig said. “We’d rather be more balanced right now than rotate into cheaper parts of the market.”

Dow Jones Newswires

5.50am: Snap won’t promote Trump account

Social-media company Snap said it would no longer promote the Snapchat account of President Trump on its home page after finding that his public remarks could incite racial violence, a spokeswoman said.

Snap, which runs the popular video and photo chat app Snapchat, said it had determined that Mr. Trump’s public comments could lead to violence. The company made the decision this weekend and noted several tweets on Saturday related to protests about the killing of George Floyd while in police custody in Minneapolis.

In the tweets, Mr. Trump praised the U.S. Secret Service for keeping protesters from “breaching the fence” at the White House. “If they had they would have been greeted with the most vicious dogs,” the president wrote in the tweets.

The company said Mr. Trump’s account would remain on the app but wouldn’t be featured prominently on its Discover page, where it has usually been placed highly among celebrities and other popular public figures.

“We will not amplify voices who incite racial violence and injustice by giving them free promotion on Discover,” a Snap spokeswoman said Wednesday. “Racial violence and injustice have no place in our society.”

Dow Jones

5.47am: Key US jobs figures loom

The epic damage to America’s job market from the viral outbreak will come into sharper focus Friday when the government releases the May employment report: Eight million more jobs are estimated to have been lost. Unemployment could near 20pc. And potentially fewer than half of all adults may be working.

Beneath the dismal figures will be signs that job cuts, severe as they are, are slowing as more businesses gradually or partially reopen. Still, the economy is mired in a recession, and any rebound in hiring will likely be painfully slow. Economists foresee unemployment remaining in double-digits through the November elections and into 2021.

If their forecast of 8 million jobs lost in May proves correct, it would come on top of April’s loss of 20.5 million jobs – the worst monthly loss on record – and bring total job cuts in the three months since the viral outbreak intensified to nearly 30 million. That’s more than three times the jobs lost in the 2008-2009 Great Recession. And if the jobless rate does reach 20pc for May, it would be double the worst level during that previous recession.

5.45am: Putin fury over Siberian fuel spill

Russian President Vladimir Putin ordered a state of emergency and criticised a subsidiary of metals giant Norilsk Nickel after a massive diesel spill into a Siberian river.

The spill of over 20,000 tonnes of diesel fuel took place on Friday. A fuel reservoir collapsed at a power plant near the city of Norilsk, located above the Arctic Circle, and leaked into a nearby river.

During a video conference, Putin lambasted the head of the Norilsk Nickel subsidiary that owns the power plant, NTEK, after officials said the company failed to report the incident.

“Why did government agencies only find out about this two days after the fact? Are we going to learn about emergency situations from social media? Are you quite healthy over there?” Putin told NTEK chief Sergei Lipin in an unusually stern dressing-down aired on television.

Russian President Vladimir Putin. Picture: AP

AFP

5.32am: Markets surge on swift recovery hopes

Growing optimism about a swift global economic recovery pushed equity markets sharply higher, as investors took heart from further easing of lockdowns while looking past China-US tensions and civil unrest across America.

The upbeat mood – and hopes for an extension to a massive oil output cut agreement – resulted in Brent crude futures breaking the $US40-mark for the first time in nearly three months, before profit-taking kicked in.

Governments in Europe and Asia have become confident enough to lift containment measures that have likely pushed the world economy into recession and destroyed tens of millions of jobs.

“The lifting of lockdown restrictions combined with enormous central bank support means investors are shrugging off little things like collapsing GDP and worsening US-China tension,” said Neil Wilson at trading site Markets.com.

In Europe, the London, Frankfurt and Paris indices were all solidly higher at the closing bell.

Earlier, Tokyo and Hong Kong stock markets closed up more than one per cent, while Sydney put on 1.8 per cent after data showed the Australian economy contracted at a slower rate than feared in the first quarter – though it remains on course for its first recession in nearly 30 years.

“For now the good virus news … (is) more than outweighing the bad,” National Australia Bank said in a client note.

Oil prices rose in Asian trading on hopes that major producers will extend their output cuts, while investors were also cheered by signs of a further drop in US stockpiles indicating demand is improving.

AFP

5.30am: Doubts grow over Tiffany-LVMH deal

Shares of Tiffany were under pressure for a second straight session following a report that its deal to be acquired by LVMH may be coming apart.

Tiffany’s stock was down 0.6 per cent in midmorning trading at $116.32 after shares dropped nine per cent Tuesday.

Fashion publication Women’s Wear Daily reported that the French luxury giant was re-evaluating the $US16.2 billion Tiffany acquisition previously seen as worthy investment to bolster the company’s US presence.

The French company is rethinking the deal out of concerns about Tiffany in the wake of the coronavirus outbreak and the mass demonstrations in the United States following the police killing of an unarmed black man, George Floyd, WWD reported, citing people familiar with the matter.

LVMH, which owns Louis Vuitton, Bulgari and Dior, also has concerns about Tiffany’s debt level.

A Tiffany store in New York. Picture: AFP

AFP

5.25am: More US job losses

US businesses shed 2.76 million jobs in May as the economic damage from the coronavirus outbreak stretched into a third month.

The payroll company ADP reported that businesses have let go of a combined 22.6 million jobs since March.

The virus forced employers to shutter offices, factories, gyms and schools, while demand for gasoline, clothing, airline tickets, hotel rooms and restaurant meals quickly vanished.

The damage was concentrated in two sectors. Manufacturers cut 719,000 jobs in May. The trade, transportation and utilities sector let go of 826,000.

The private industry report comes two days ahead of the official monthly job figures from the U.S. Labor Department. Economists expect the Friday report will show 8 million job losses in May as the unemployment rate approaches 20pc.

5.20am: BoE warns banks on Brexit

The Bank of England urged Britain’s retail lenders to prepare for the potential failure of EU-UK negotiations on agreeing a post-Brexit trade deal.

“The possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months,” the central bank said in a statement.

Sky News had earlier reported that BoE governor Andrew Bailey had approached several banking executives to request that they accelerate their no-deal preparations.

“It is fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face,” the BoE added.

AFP

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