ASX jumps 2.2pc in broad rally as travel names outperform
All sectors finished in the green as the ASX200 lifted 2.2pc to its highest level since mid-March, led by a lift in Webjet and Flight Centre.
- Shares surge to 11-week high
- Early super withdrawals surpass $10bn
- Nine sells Stuff for $NZ1
- JobKeeper error to reduce bond issuance
That’s all from the Trading Day blog for Monday, May 25. The ASX has rebounded from Friday’s weakness to hit its best level since mid-March as travel names looked to the easing of domestic border restrictions. Afterpay set a new high of $49 and helped the technology sector to stand out, while regional markets felt the jitters from rising geopolitical tensions.
US markets are closed overnight for the Memorial Day public holiday.
Richard Gluyas 8.45pm: ANZ flags China pullback
ANZ could reduce the size of its business in China as a result of the nation’s mounting tensions with its most important trading partner, according to chief executive Shayne Elliott.
Mr Elliott said ANZ, which has been in China since 1986, would continue to do business in the world’s second-largest economy.
“Our business in China … is to service the trade and capital flow in and out of China, mostly to Australia and New Zealand but also to other parts of Asia,” he told Melbourne radio station 3AW. “That’ll continue to be a great business and China is still going to buy iron ore and we’re still going to buy lots of stuff from China.
“But the scale and breadth of that operation may well change as a result of this.”
Australia is embroiled in an escalating trade dispute with China, which has been fuelled by its call for an independent investigation into the origins of the coronavirus pandemic. A milder version of the proposal won broad support, including from Beijing, at last week’s World Health Assembly.
In the meantime, China has imposed tariffs of about 80 per cent on barley imports from Australia, suspended beef imports from four abattoirs on technical grounds, and threatened further measures.
Nick Evans 8.20pm: Fortescue loses price data first round
Fortescue Metals Group has lost the first round of its bid to block publication of some of its price data, with the UK High Court of Justice throwing out an interim publication injunction imposed on benchmark pricing providers Platts and Argus.
Fortescue won temporary orders from the British courts on April 24 preventing the pair from publishing “confidential” information about the discount from the benchmark received by Chinese customers for its ore.
While the action is ongoing, the High Court threw out the interim injunction on Friday, with judge Robert Miles ruling Fortescue had not established that it was “more likely than not to obtain a permanent injunction at trial”.
Fortescue had argued the pricing of discounts to the benchmark index in long-term contracts was a “trade secret” and subject to confidentiality provisions with its customers, and that Platts and Argus should be restrained from publishing the details even though the media outlets were not subject to the confidentiality provisions.
The company argued publication of the discounts would hinder its ability to negotiate new long-term contracts “openly and properly” with customers.
But Justice Miles said it appeared Fortescue’s real concern was to keep the extent of its discounting from its competitors.
Leo Shanahan 8.01pm: Binge enters streaming wars
Binge enters the entertainment streaming wars on Monday in one of the most competitive marketplaces in the world, but CEO Julian Ogrin is confident the Foxtel-owned streamer can take on local and international rivals such as Stan and Netflix.
Binge represents a major opportunity but also a challenge to its owner, Foxtel, which has to hope its entertainment streamer doesn’t come at the expense of its own subscription television service with more than 5 million paid subscribers.
Ogrin, who is also CEO of Foxtel sport’s streamer, Kayo, said Binge would pursue the three-quarters of Australian households that do not already subscribe to Foxtel (majority-owned by News Corp, publisher of The Australian).
“What we’re going for is that growth in the streaming market. Now we’ve launched Kayo to actually start that process and that was with over 50 sports in one place. We called it the Netflix of sport and that provides the experience the younger generation of sports fans are looking for in a streaming service.
“What Binge does is … take that exact model and the experiences that the same segment is looking for in streaming. It’s about being in control and watching that specific show you want, whether it’s in drama, comedy, entertainment, etc.”
From Monday viewers can get a free two-week trial at Binge.com.au.
John Durie 7.42pm: Bain shows its cards on Virgin
Bain Capital’s decision to break ranks and spruik its credentials ahead of Friday’s Virgin short-listing is subject to myriad theories, none of which are immediately positive except in supporting the target.
Virgin administrator Vaughan Strawbridge has four potential bidders — BGH with AustralianSuper, Bain, Cyrus Capital led by high-yield debt specialist Stephen Freidheim, and the US budget carrier investor Indigo Partners.
Different arms of insolvency firm KordaMentha from different cities are advising Bain and Indigo, which goes to show the Chinese walls at work in the corporate undertaker world.
At this stage of the game there is one person to impress — Strawbridge — which is why Bain’s Sunday press release took the other bidders by surprise.
If the aim is to lift the profile of Bain’s Mike Murphy, then more press will surely follow, but why?
Strawbridge has sounding boards such as Virgin management and the so-called committee of inspection of creditors, including lease companies, the relevant unions and others, who are there at this stage to keep the bidders honest and provide feedback to the administrator on what is needed.
Damon Kitney 7.12pm: From daigou to influencers
Livia Wang calls them “solopreneurs” — the more than 200,000 brand influencers around the world who will help her business double this year despite the COVID-19 pandemic. Once described as daigou — which is Chinese for “buy on behalf of” — these “key opinion consumers” have been transformed by Wang’s company, Access Corporate Group, into a global network that has underpinned Chinese consumer demand for Australian retail beauty, health and lifestyle brands.
“The daigou title has morphed to one of brand ambassador and influencer, and it isn’t just a Chinese thing, it is a global trend,’’ says Wang. “The influencers can have a close connection with their consumers. They can talk to them at any time. It is not offline or online. That is much more powerful in this (lockdown) environment. To be able to share their stories, inspire their consumers, and pick and choose the right products for them.”
Wang says Access — which makes its money distributing the products of its brand partners, earning a margin on every sale — pivoted during the March quarter from online and physical retailing to an online offering using influencers, a change that helped it generate more than $300m in revenue. Access is also selling to customers beyond China, with plans to open offices in North America, and the business will double in size this year after more than doubling last year.
Before the crisis Access had been investing in the development of influencers with education, training and brand experience, while ensuring they complied with tax and business regulations after China dramatically tightened e-commerce regulations last year. This has become even more fundamental during the past two months, not only for its influencers but also for Access’s 1200 staff globally — including 800 in China.
Read more
James Kirby 6.46pm: Auction clearance less than clear signal
Residential auction clearance rates are “back to pre-crisis levels”, according to the real estate industry.
Not really.
In fact, this most unreliable signal of the property market is pretty much close to useless as a guide for investors just now.
Clearance rates across the country might well be touching 70 per cent and if we take the statistics at face value, the numbers are even better than this time last year when they were just 58 per cent.
Except for a few key details. Read more
Wealth Editor James Kirby presents Your Portfolio, a series of Facebook live Q&A sessions each Wednesday evening at 7.30pm.
David Ross 6.10pm: Disclosure exemptions protect top brass
Company directors and management will be insulated from continuous disclosure provisions for the six months, as the COVID-19 downturn plays havoc on earnings guidance and outlook statements.
The move, outlined by Treasurer Josh Frydenberg late on Monday, also protects companies from the prospect of being hit with a class action over earnings guidance.
It comes after hundreds of ASX-listed companies have scrapped or withdrawn their earlier guidance given uncertainty around how COVID-19 lockdowns have impacted their earnings. The changes will be in effect for six months from Tuesday.
David Rogers 5.50pm: Five things COVID-19 will change
AMP Capital’s head of investment strategy and chief economist, Shane Oliver, has come up with a list of medium-to-longer-term implications from the coronavirus pandemic.
These implications include: lower interest rates for even longer, a further blow to globalisation, another leg-up in the US-China “cold war”, bigger government and public debt, higher inflation with money printing, reinforced consumer and investor caution, the faster take-up of technology, lasting damage to airlines, another “test” for the Eurozone, and lower immigration. He says several of these longer-term implications will constrain economic growth and hence potential investor returns – notably the reversal of globalisation, bigger government, consumer caution and lower immigration - but the faster embrace of technology will work in the other direction to boost productivity and lower-for-longer-interest rates are positive for growth assets. But Oliver cautions against being too pessimistic. “Finally, a word of caution - anyone who got too negative for the long term in the last really major pandemic of 1918-19 might have missed out entirely on the ‘Roaring Twenties’,” he says.
Here, in more detail, are five of what Shane Oliver sees as some of the key economic legacies of the coronavirus pandemic.
5.06pm: Travel names outperform
Travel names led the local rally as tourism names cheered the prospect of further government support.
Flight Centresurged 15.2 per cent to $13.01 as Webjetjumped 15.6 per cent to $4.16. Qantasrose 7.2 per cent to $3.86 while Corporate Travelwas up 3.2 per cent to $12.16.
Here’s the biggest movers at the close:
4.31pm: Afterpay surges 511pc from March lows
Tech was a key outperformer as Afterpay surged to new records of $49. That is a comeback from lows of $8.01 in March – a 511 per cent surge. By the finish, the stock was up 9 per cent to $48.50.
Elsewhere in the sector, Appen put on 2.6 per cent to $30.99 while Xero added 2.9 per cent to $82.50 and WiseTech jumped 6.6 per cent to $21.87.
4.14pm: Shares lift to 11-week high
Shares were strong to start the week, closing at a 11 week high as investors looked through rising geopolitical tensions to focus on the local economic recovery.
By the close of trade, the benchmark ASX200 was higher by 119 points or 2.16 per cent to 5615.6, its highest close since March 11.
On the All Ords, stocks added 121 points or 2.16 per cent to 5729.9.
Gerard Cockburn 3.54pm: Early super withdrawals surpass $10bn
The amount Australians have withdrawn early from their super funds has surpassed $10 billion, with major industry funds the most affected by the rising claims.
Figures released by the Australian Prudential Regulatory Authority reveal that as of May 17, $10.6bn of super had been paid to members claiming financial hardship during the coronavirus pandemic.
The banking and superannuation regulator says 1.59 million applications have been lodged with the Australian Taxation Office, with 1.41 million Australian already paid. Nearly 10 per cent of applications have yet to be processed.
The average payment request is for $7510.
Read more: Early super withdrawals pass $10bn
3.34pm: Gold to test $US2000/ounce: Van Eck
Macroeconomic concerns could send gold prices to $US2000 an ounce, according to Van Eck.
Gold portfolio manager Joe Foster notes that huge debt burdens and bankruptcies have the potential to overwhelm economies, forcing more capital into the “safe havens” of gold and gold stocks.
“This is a crisis on a magnitude that you rarely see historically. Global debt to GDP is now over 300pc,” he notes, adding the bailouts are creating “an incredible amount of systemic risk”.
He layouts deflation, debt, inflation and loss of confidence as the key drivers of gold’s likely lift.
“Gold carries no counterparty risk, its supply is limited, it exists outside of the mainstream financial system, and is universally seen as a store of value. These attributes make it a unique safe-haven investment,” Mr Foster says.
“Gold is also a portfolio diversifier – because of the low correlation with stocks and bonds, if you add a little bit of gold, or gold stocks to your portfolio, it can give your portfolio better risk adjusted returns over time.”
He favours mid-tier gold plays Saracen, Northern Star and Evolution Mining.
3.05pm: JobKeeper error to reduce bond issuance
The $60bn reduction in JobKeeper costs is likely to lower the additional bond issuance from $310bn to $250bn, according to Westpac.
Chief economist Bill Evans describes the revision lower as “indeed breathtaking albeit extremely welcome”.
As a result, Mr Evans adjusted his budget and debt estimates – now expecting a budget deficit of $80bn in the current year, including about $40bn in stimulus policies and a $40bn cyclical deficit. In 2020/21 he expects the deficit to widen to $170bn.
“This will see an additional $250bn in bond issuance – lifting bonds on issue from $542bn (27.8pc of GDP) at June 2019 to around $820bn (40pc of GDP) at June 2021,” he says.
Mr Evans adds that he expects there will be considerable “slack” available in the package to support businesses under pressure past the September cut off date.
“The faster than expected reopening of the economy is a welcome development but I expect there will be many previously profitable businesses that will have a genuine case for an extension of the Payment scheme,” he adds.
“This development also provides further support for a positive stimulatory Commonwealth Budget, which will be delivered in October.”
Read more: Treasury’s JobKeeper forecasts were rational: Hunt
2.49pm: Car use recovery is V-shaped: Macq
Macquarie equity strategist Matthew Brooks says the recovery in car use will be V-shaped as commuters avoid bus, train and plane trips.
He notes that Google Searches for new and used cars have risen rapidly in recent weeks and could signal material pent-up demand for new and used car dealers while toll road operators may recover faster than public transport.
For exposure to the “Road to Recovery” theme he favours Transurban, Atlas Arteria, Bapcor and Carsales.com, while SmartGroup and Downer may also benefit from increased car use.
Read more: Are car sales next in the fast lane?
2.06pm: AMP lays out long-term virus impact
AMP Capital’s head of investment strategy and chief economist, Shane Oliver says the coronavirus pandemic will have implications on global markets well after the health threat has subsided.
He lists 10 medium-to-long term implications from the pandemic including:
- lower interest rates for even longer
- a further blow to globalisation
- another leg-up in the US-China “cold war”
- bigger government and public debt
- higher inflation with money printing
- reinforced consumer and investor caution
- the faster take-up of technology
- lasting damage to airlines
- another “test” for the Eurozone
- lower immigration.
He says several of these longer-term implications will constrain economic growth and hence potential investor returns – notably the reversal of globalisation, bigger government, consumer caution and lower immigration – but the faster embrace of technology will work in the other direction though to boost productivity and lower-for-longer-interest rates are positive for growth assets.
“Finally, a word of caution – anyone who got too negative for the long term in the last really major pandemic of 1918-19 might have missed out entirely on the ‘Roaring Twenties’,” Dr Oliver adds.
1.43pm: How InteliCare marked its IPO virtually
AI-based aged care company InteliCare made its ASX-debt at midday, but with a very different listing ceremony.
In a first for the local bourse, the company rang the ASX bell virtually – with company supporters joining a Zoom call to mark the event.
The stock lifted on its debut – jumping as much as 95 per cent in its first hours of trade to 39c apiece, from an initial offer price of 20c.
“At times it felt like we were in a cyclone, but it’s turned out to be a strong tailwind,” chief Jason Waller said of listing during the pandemic.
“The problems in aged care aren’t going away any time soon, this is just the tip of the iceberg. My focus is now on meeting our new shareholder’s expectations by delivering on sales growth and further product development.”
Alongside its debut, the company said its core application InteliLiving was available on Microsoft’s Azure Marketplace and a stage 1 order had been placed by the WA Department of Communities.
ICR last traded at 29.5c.
Read more: InteliCare braves COVID-19 to list AI-based tech
1.02pm: Tourism stocks lead bounce
Tourism stocks are leading a rebound on the local bourse, as investors look ahead to easing of domestic travel restrictions.
At 1pm, the ASX200 is up by 73 points or 1.3 per cent to 5569.8, after hitting as much as 5596.2.
Webjet and Flight Centre are the most improved while Afterpay has set new record highs of $49.
Eli Greenblat 12.47pm: Ex-Bellamy’s boss joins whiskey distiller
The former chief executive of infant milk formula maker Bellamy’s, Laura McBain, has joined the board of Tasmanian whiskey distiller Lark Distilling.
Ms McBain led Bellamy’s from small beginnings to a multi billion dollar company that struck huge booming business in China but was later turfed out in a messy shareholder revolt.
Following that she then led Longtable, an ASX-listed food business specialising in Tasmanian produce that also bought celebrity cook Maggie Beer’s food business.
Lark Distilling Co announced the appointment of Ms McBain as a Non-Executive Director to the Board effective June 1. She is currently a director of Export Finance Australia, a role held since 2014. Prior to joining Bellamy’s, Ms McBain practised as an accountant in both Sydney and Tasmania.
Lark Chairman David Dearie said: “I am delighted that Laura has agreed to join the board at Lark, her experience, energy and knowledge will enhance the leadership of the company. The fact that Laura is based in Tasmania is an added bonus that will greatly assist Lark Distilling to further integrate with the local community.”
Ms McBain said Lark is an iconic premium Tasmanian business with significant growth opportunities in Australia and export markets.
LRK last traded up 2.3pc to 90c.
12.36pm: Cash Converters hires Pioneer exec
Cash Converters has tapped former Pioneer Credit exec Leslie Crockett as its new CFO.
In a notice to the market, Cash Converters aid Mr Crockett would join in June 2020, after 8 years with Pioneer as its CFO, including during the company’s IPO in 2014.
“We are very pleased to appoint an executive of Leslie’s calibre and sector experience. He will be an invaluable addition to our leadership team as we continue to seek better outcomes for our customers and shareholders,” chief Sam Budiselik said.
Patrick Commins 12.27pm: Exports retreat from record high
Australia’s international goods exports in April retreated from the record highs of the previous month, although demand for our natural resources remained strong.
Merchandise exports fell by $4bn to $34.4bn, or by 4 per cent, versus the previous month, preliminary trade data for April from the Australian Bureau of Statistics showed.
Year-on-year, exports increased $301m (or 1 per cent) when compared to April 2019.
Driving the drop in exports in April was a $2.3bn, or 8 per cent, drop in non-rural goods exports, including “significant” falls in iron ore exports – down $456 million, or 4 per cent – and coal, which dropped 8 per cent, or $412 million.
Chinese demand for iron ore jumped last month as the country reopened its economy following the February shutdown.
Petroleum exports also dropped by close to a third to $292m.
12.11pm: Travel names lift on tourism support
Listed travel agents are leading the market lift after the government flagged potential for further support of the industry.
Earlier today, treasurer Josh Frydenberg said the JobKeeper scheme could be expanded to the struggling tourism industry which was feeling the brunt of the coronavirus restrictions.
“The tourism sector could be one sector in need of further support. That’s what we’ll look at in the context of the economic situation at the time,” he said.
“You’ll continue to see our international borders closed for some time.”
Webjet is up 13.2pc on the news to $4.08 as Flight Centre adds 13.3pc to $12.79.
Corporate Travel meanwhile is up just 2.5pc to $12.08.
Follow the latest updates at our coronavirus live blog
11.58am: Afterpay sales don’t support valuation: UBS
Afterpay shares are surging to new record highs to start the week, even as UBS says the company’s underlying sales doesn’t support its current valuation.
In a note to clients, analyst Tom Beadle says Afterpay’s US growth was better than expected and notes that coronavirus could accelerate positive structural changes for the buy now pay later group.
He increases his target price on the stock to $14, with a base case of underlying sales of $42bn by FY25 but notes that the stock would have to achieve sales of $130bn by FY25 to justify its current trading levels.
“Given the impressive US customer growth, we assume that APT’s credit decisioning system is performing well; we therefore lower the magnitude of our bad debt forecasts for FY21,” Mr Beadle writes.
“We now forecast 9.7m active subscribers by the end of June (higher than APT’s previously withdrawn guidance of 9.5m).”
APT last up 6.8pc to a record high of $47.56.
Read more: Afterpay appoints permanent chairman
Lilly Vitorovich 11.45am: Nine to take $45m hit for Stuff
Nine Entertainment’s 18-month foray in the New Zealand media market following its $4bn merger with Fairfax Media has been rough, with the group finally selling its NZ print and digital assets to local chief executive Sinead Boucher for just $NZ1 (93c).
The Sydney-based media company expects to book costs of up to $45m related to Stuff, which Fairfax bought for more than $1bn-plus nearly two decades ago during CEO Fred Hilmer’s reign.
That’s on top of specific items totalling $22.6m after tax relating to discontinued Stuff operations for the six months to December that Nine booked in February.
Read more: Nine sells Stuff for $1
Bridget Carter 11.41am: Western Areas taps GS, Rothschild
DataRoom | Western Areas has tapped Goldman Sachs and Rothschild as part of its efforts to secure a strategic stake in Panoramic Resources.
Panoramic Resources announced Monday it is raising $90m at 7c per share.
The raise involves a strategic investment by Western Areas worth up to $29m, securing 19.9 per cent of the company through participation in a placement, says a term sheet to investors.
Western Areas also has priority sub-underwriting to the retail portion of the entitlement offer.
Read more: Western Areas comes to Panoramic’s rescue
11.17am: Oliver’s inks revised deal with EG Group
The takeover deal for healthy fast food group Oliver’s Real Food has been scrapped by UK suitor EG Group, and instead replaced with a long term supply agreement for EG’s local service stations.
EG Group had lobbed a $27m takeover deal in March, but the coronavirus shutdowns prompted a rethink on the terms as Oliver’s debt levels breached the initial conditions.
After a prolonged negotiation process both parties have today agreed to a supply agreement where Olivers supplies its “Oliver’s Food to Go” offering to EG’s 540 fuel convenience sites.
EG will pay an upfront one-off licence fee of $500,00 and the agreement has an initial term of 10 years, with a minimum performance requirement to open a minimum of 100 outlets within 12 months.
Olivers shares have jumped on the news, last up 66pc to 6.8c.
Read more: Oliver’s Real Food temps EG Group
Eli Greenblat 11.04am: Lion to bring White Claw seltzer to Aus
Lion, the drinks giant that owns beer brands in Australia such as Tooheys and XXXX, is leaping into the fast-growing alcoholic seltzer category after entering a partnership with Mark Anthony Brands International, the makers of White Claw Hard Seltzer.
White Claw is a highly popular US alcohol brand and Lion has agreed to import, market and exclusively distribute the beverage in Australia from October.
Alcoholic seltzer, also known as ‘hard seltzer’, is sparkling water with alcohol and a hint of fruit flavour. The market is worth more than $2bn a year in the US.
Launched in 2016, White Claw dominates the seltzer category with close to 60 per cent market share, almost three times the size of its nearest competitor.
Initially Lion will import and distribute three leading variants – White Claw Mango, White Claw Natural Lime, and White Claw Ruby Grapefruit.
Davin Nugent, CEO of Mark Anthony Brands International said: “We are thrilled to be working with Lion and excited to take the first steps with them into the emerging seltzer category in Australia. Lion has an outstanding track record of nurturing international brands to success in Australia and we look forward to working with them to introduce local consumers to White Claw Hard Seltzer.”
James Brindley, managing director of Lion Australia said he was looking forward to seeing Australia’s response to the seltzer that has taken North America by storm.
Perry Williams 10.45am: LNG exports facing Asian slowdown
US LNG exporters face a bleak short-term outlook with Asian buyers scrapping up to half of monthly shipments for July delivery due to a supply glut.
The economic slowdown and dwindling storage capacity means customers have cancelled up to 45 LNG cargoes for July, RBC noted, out of 70 cargoes it would normally ship.
The US Henry Hub benchmark price is now above European hub prices and near Asian market prices, making US LNG exports on the spot market marginal.
The US is the world’s third biggest LNG exporter behind leaders Australia and Qatar which both ship about 77m tonnes of LNG a year.
10.43am: Shares on track for three month high
Australia’s S&P/ASX 200 jumped as much as 1.6pc to 5587.7 in early trading, and if it can hold these levels to the close it will be the markets best levels in almost three months.
The index is also just 30 points away from three month high on an intraday basis.
A 1.4pc rise projected by Friday night futures has been bolstered by a 0.4pc rise in S&P 500 futures this morning.
ASX200 last up 1.54pc to 5581.4.
Eli Greenblat 10.34am: Kresta auditors raise reporting concerns
Auditors for curtains, blinds and shutters retailer Kresta Holdings have expressed their material uncertainty related to the company’s going concern.
In the independent auditor’s report issued in Kresta’s annual report for 2019, auditor firm Bentleys drew shareholders’ attention to the financial report which indicated the group incurred a net loss of $7.54 million for the year ended December 31, 2019.
“ … A material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern. Our option is not modified in respect of this matter.’’
The auditor also detailed some of the constraints on the ability of the previous auditor to the retailer to discover key financial details related to “inventory, provision for onerous leases and property, plant and equipment impairment”.
Without comprehensive reports from the previous year, the auditor said “we are unable to determine the impacts, if any, on the consolidated statement of financial position, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended 31 December 2019.”
Kresta temporary closed all its stores at the end of March due to the coronavirus pandemic but has since reopened them
10.22am: IOOF class action discontinued
IOOF says it is “very pleased” a class action alleging breaches of its disclosure obligations has been discontinued.
The action was launched in the aftermath of the financial services royal commission, alleging the wealth manager failed to tell shareholders about APRA’s concern over possible breaches of superannuation laws.
In a note this morning, the financial services provider said it had reached agreement for the action, to be discontinued with no order as to costs.
“The settlement requires Court approval and the plaintiff has agreed to seek this approval at the earliest opportunity. IOOF is making no payment to the plaintiff, its lawyers (Quinn Emanuel), its funder (Regency) or any other class member as part of this settlement,” IOOF said.
Read more: IOOF facing shareholder class action
10.12am: Shares rebound by 1.5pc
Shares are jumping by 1.5pc in early trade, all sectors bouncing back after a weak finish on Friday.
At the open, the benchmark ASX200 is up by 78 points or 1.4 per cent to 5575.3.
Energy stocks are leading the charge, up by 2.2pc while tech and industrials too are up around 2pc.
Afterpay has hit a new high of $46.44 early, up 4pc, while heavyweight banks are up around 1.5pc.
Nick Evans 10.09am: Western Areas comes to Panoramic’s rescue
Nickel producer Western Areas is set to ride to the rescue of its troubled WA peer, with the miner set to emerge with a cornerstone 20 per cent stake in Panoramic Resources after the company’s latest capital raising.
Western Areas will pump up to $29m into Panoramic in a 7c a share offer, taking shares in a placement and offering to sub-underwrite an entitlement issue to existing Panoramic holders.
Panoramic launched a $90m raising on Monday, including a $29m institutional placement and a 1.15 for one accelerated entitlement offer. Working on the transaction is Canaccord Genuity and Morgans, which are the joint lead managers and Hartleys as co-lead manager.
Panoramic’s current major shareholder, Zeta Resources, will be diluted down as part of the raising. It will take up about $4.5m of its entitlements as repayment of Panoramic’s debt, but will emerge with a 20.1 per cent stake in the recapitalised nickel company, down from 35 per cent previously.
Panoramic shares last traded at 12c
9.51am: City Chic reopens with reduced rent
Womenswear retailer City Chic says it has agreed to reduced rents with many of its landlords as it reopens most of its store network following the coronavirus lockdowns.
The company says its online sales have boomed during the lockdown, up 57pc on the same time last year, though its margins were trimmed due to greater promotional activity.
Chief Phil Ryan said the group’s recent US acquisition Avenue had traded resiliently and had exceeded expectations, while he outlined the company’s debt position.
“City Chic has driven working capital efficiencies, deferred on-essential capital expenditure and reduced costs across head office and in relation to store-driven activity. City Chic has agreed reduced rents with a large majority of landlords, as well as market appropriate go-forward rents while uncertainty relating to COVID-19 remains,” he said.
9.41am: UK, US holidays to damp trade
Long weekend holidays in the US and the UK should keep financial markets quiet early this week, though the Australian market is still set for a positive start after the US S&P 500 closed up 0.2pc at 2955.5 after falling 0.5pc intraday.
Friday night futures relative to fair value suggest the S&P/ASX 200 will open up 1.4pc at 5574.
If it closes the day above 5563.04, it will be the highest close since March 12.
S&P 500 gains were led by the Real Estate, Utilities, Communications and Tech sectors. Energy, Materials and Consumer Discretionary stocks underperformed on Wall Street. But BHP ADR’s equivalent close at $34.83 was a 1.5pc premium to BHP’s local close.
Regionally, Hong Kong is the main focus as China’s proposed HK national security law has sparks protests and US condemnation.
Elsewhere, the worsening coronavirus pandemic in Brazil may help support iron ore prices.
David Ross 9.35am: QBE to cap UK business claims at $115m
International Insurer QBE group will cap any business interruption insurance claims arising from COVID-19 in the United Kingdom at $US75m ($114.7m).
While the insurer does not typically cover business interruption insurance claims arising from COVID-19 today’s announcement suggests the insurer believes some claims may arise.
In its update to the market, QBE said that they were “working closely with broker partners and agents to support our customers during this uncertain period”.
Today’s announcement comes as some businesses in Australia have begun challenging business interruption insurance policies.
It is unclear what exposure QBE has to Australia for business interruption insurance claims arising from the COVID-19 shutdown.
Casino operator Star Entertainment launched a claim for business interruption insurance in mid-April in what is being seen as a major test for the policies in Australia.
QBE last traded at $7.72.
Read more: Coronavirus business insurance tested by Star
9.14am: Estia warns of rising staff costs
Aged care provider Estia says its occupancy has fallen only marginally as a result of the coronavirus threat, as it warned of higher staff costs to deal with the pandemic.
Before the pandemic, occupancy was at 93.8pc, but at April 26 it had fallen to 91.7pc, representing a reduction of 125 residents – 80 respite residents and 45 from the permanent population.
The group said none of its residents across the country had tested positive for the virus, but three staff had contracted the virus and had quarantined accordingly.
As a result of the pandemic, staffing and medical supply costs have increased and were expected to stay elevated, including staffing increases to support residents and family interaction during the period of reduced access, as well as paid quarantine leave for those required to self-isolate.
“The future level and duration of this increase in costs is highly dependent on uncertain future events, including potential COVID-19 infections,” it said, adding that its St Ives development was on hold until economic conditions improved.
Government support has provided some relief for the company, but it said it was still in compliance with its debt covenants and has not sought relief to date.
9.04am: Bell Potter tips NAB as a buy
Bell Potter’s TS Lim has raised NAB to Buy from Hold on a valuation basis, saying the bank’s expected 12-month total return has crossed above his 15pc threshold.
Mr Lim has also reduced forecast costs by 5pc until FY23, more so customer remediation costs following more clarity over the AUSTRAC and ASIC matters.
While NAB had previously targeted “broadly flat” expenses of about $8.1bn in FY20 – he says this is more than achievable given recent cancellations of non-essential projects, with more cost savings ahead.
“Looking past the COVID-19 noise, NAB exhibited good operational resilience in 1H20,” he adds. “Business and Private Banking cash earnings were stable due to solid lending volumes, steady net interest margins, cost discipline, better impairment outcomes and higher asset productivity.”
NAB last traded at $15.34.
Bridget Carter 8.58am: Perenti’s tractor sale slow going
DataRoom | The wheels appear to be turning slowly for the sale of Perenti’s Best Tractor Parts division, and some are wondering whether Emeco will emerge as an interested contender for part of the business down the track.
Bank of America is running a sales process for the business that sells earthmoving parts, and estimates suggest it is worth between $100m and $200m.
So far, Seven Group Holdings has been mentioned as a possible contender.
Market analysts believe the attraction for Seven would be the used parts and maintenance component of the operation for its WesTrac business, the sole authorised Caterpillar dealer in Western Australia, NSW and the ACT.
Read more: Perenti’s tractor sale slow going
8.56am: What’s on the broker radar?
- NAB raised to Buy – Bell Potter
- oOh!media raised to Buy – Morningstar
- QBE target price cut 33pc to $10 – JP Morgan
- Ramelius raised to Add – Morgans
- Tabcorp rated new Sell – Citi
- TPG raised to Add – Morgans
- Wesfarmers target price raised 18pc to $36.60 – Citi
8.27am: Nine selling Stuff for $NZ1
Nine Entertainment says it is selling its New Zealand business, Stuff, to its local management.
Nine says direct proceeds from the sale – a management buyout by Stuff CEO Sinead Boucher – will be $NZ1. However it will retain ownership of the Petone print plant site in Wellington, which will be leased back to Stuff.
In addition, as a result of the successful completion of the Stuff Fibre sale on May 20, Nine will receive 25pc of those proceeds before completion of the Stuff sale, plus up to a further 75pc over the subsequent 36 months, depending on the Stuff business’s ability to raise funding.
Nine says it expects to log a cost in its full year results of around $40-$45m.
Stuff is the country’s most popular news website and its biggest employer of journalists, publishing Wellington’s Dominion Post and Christchurch’s The Press, among other titles.
The sale comes after Nine rejected a $NZ1 offer by media group NZME.
7.50am: Oil down on China-US tensions
Oil prices have tumbled about 2 per cent on rising US-China tensions and doubts about how quickly fuel demand would recover from the coronavirus crisis.
Fuel demand plummeted in recent months as the pandemic caused governments to impose restrictions on movement and businesses closed their doors. Oil has rallied in recent days as activity started to resume.
But prices dropped after China said on Friday it would not publish an annual growth target for the first time. Beijing also pledged more government spending as the pandemic kept hammering the economy.
“The coronavirus has nullified a decade of global oil demand growth and the recovery will be slow,” said Stephen Brennock of broker PVM.
Brent crude futures fell 93 cents, or 2.6 per cent, to settle at $US35.13 a barrel. US West Texas Intermediate (WTI) crude ended 67 cents, or 2 per cent, lower at $US33.25 a barrel.
Reuters
Cliona O’Dowd 5.50am: ASX tipped for early rise
The Australian sharemarket is expected to open in positive territory, clawing back losses from the end of last week as traders eye positive overseas leads despite rising geopolitical tensions.
ASX futures are pointing to a gain of 65 points, or 1.2 per cent, at the open, which would more than reverse Friday’s 1 per cent fall. It follows US sharemarkets holding up during Friday’s session despite ongoing US-China trade tensions.
The local sharemarket will start the week playing catch-up, AMP head of investment strategy and chief economist Shane Oliver said.
“The ASX 200 fell 1 per cent on Friday and that was in response to a few things, but particularly the perception that tensions between the US and China were escalating,” Dr Oliver said. “It may have also been impacted by the Chinese government ditching its growth forecasts for the year.”
Beijing last week said it would not set a target for its economic growth for 2020 due to uncertainties about COVID-19’s impact.
“There was anticipation that the US sharemarket would fall on Friday night, but in the end that didn’t happen. The US sharemarket was a bit wobbly at the start but managed to close flat on the Dow and up 0.2 per cent on the S&P,” Dr Oliver said.
CommSec chief economist Craig James is expecting a quiet day of trade to start the week due to the Monday Memorial Day holiday in the US, but said local data out later in the week, such as consumer confidence, construction data and capital expenditure figures, would be closely watched.
Tensions in Hong Kong were also sitting in the background, he cautioned. Around the region, Hong Kong’s sharemarket will be closely watched after the Hang Seng index fell 5.6 per cent on Friday.
Dr Oliver also expects the dollar to gradually strengthen as economies re-open. “Providing major economies continue to re-open, the Aussie dollar will probably drift higher,” he said.
“Tensions around trade with China and the US-China relationship may cause bits of volatility with the Aussie dollar but the major picture is one of recovery.”
The dollar was last buying US65.3c.
5.40am: Nissan, Renault prepare cuts
The alliance of Renault SA and Nissan Motor Co. is set to disclose billions of dollars in cost cuts this week and Nissan is looking to slash capacity by an additional million vehicles, according to people familiar with the plans.
The moves will complete the undoing of the growth strategy pushed by Carlos Ghosn, former leader of both companies.
The companies had planned to sell around 14 million cars by 2022, a target set by Mr. Ghosn, who envisioned a world-leading behemoth with a major presence in every market.
Now, the target is closer to 10 million, according to the people familiar with the plans. Even before the coronavirus pandemic, the boom in demand the companies anticipated wasn’t materialising, leaving plants underused.
“The situation has become untenable,” said a person close to Renault.
The entire car industry has been challenged by the coronavirus, but some are better-equipped to ride out the downturn in demand. Cash-rich Toyota Motor Corp., which unlike Nissan has avoided worker furloughs, said this month it expected a return to normal by the end of the year.
In a series of announcements on Wednesday, Thursday and Friday, Renault and Nissan are set to lay out their planned cuts and describe plans for closer co-operation. Renault owns 43.4pc of Nissan.
Nissan is planning to add around $US3 billion in cost savings to $US3 billion in cuts announced in July 2019 that have been largely carried out, said people familiar with the plans. Since the July 2019 announcement, Nissan has eliminated nearly 15,000 jobs, and further job reductions are planned along with budget cuts in every department from engineering to event planning, they said.
The new plan also calls for cutting capacity by an additional million units beyond the cuts announced last year, bringing Nissan’s annual production capacity to around 5.5 million vehicles, they said. That is still well above current demand in a pandemic-hit global market.
Dow Jones
5.30am: US jobless forecast
US unemployment is likely to remain in double digits as Americans go to the polls in November, a top White House economic adviser said.
Kevin Hassett predicted that US economic growth will “skyrocket” in the third quarter but could fall short of a full recovery from the coronavirus pandemic.
Some 38.6 million people have lost their jobs since the US economy went into lockdown mode in March to prevent the spread of the virus, according to the latest US Department of Labor statistics released on Thursday.
Hassett, chairman of the council of economic advisers, warned Friday that the unemployment rate, which hit 14.7 per cent in April, may rise to 22 to 23 per cent in May and edge up a bit in June before falling back down.
Asked on CNN’s “State of the Union” whether it was possible unemployment would be in double digits in November when US presidential elections are held, Hassett replied, “Yes, I do.” “Unemployment will be something that moves back slower,” he said. “You’re going to be starting at a number in the 20s and working your way down.” “But I think that all signs of economic recovery are going to be raging everywhere,” Hassett added. “And the only thing we’re going to really be debating as economists is are we going to get back to where we were or will it be a long haul to get there.”
AFP
5.25am: Virus forces mine’s suspension
South Africa’s AngloGold Ashanti said Sunday it had suspended operations at its Mponeng mine after at least 164 employees at the site tested positive for coronavirus.
AngloGold Ashanti said it had tested 650 employees at the site in Merafong, Gauteng province, after a first case was detected last week.
“This process has indicated 164 positive cases with only a handful of tests left to process,” the company said in a statement, adding that the “vast majority” of cases were asymptomatic.
Operations at Mponeng mine have been “temporarily halted” to complete contact tracing and “sanitise the workplace”.
The world’s deepest gold mine resumed operations at 50 per cent at the start of this month after it was shuttered by a nationwide anti-coronavirus lockdown on March 27.
AFP
5.20am: Wall St recap
Wall Street stocks finished mostly higher Friday, concluding a positive week amid optimism about the reopening of the US economy and progress on a coronavirus vaccine.
The tech-rich Nasdaq Composite Index led the market, gaining 0.4 per cent to finish at 9,324.59, an increase of more than 3.4 per cent for the week.
The Dow Jones Industrial Average shed less than 0.1 per cent to 24,465.16, while the broadbased S&P 500 added 0.2 per cent at 2,955.45.
Analysts pointed to a number of major announcements on investments and early research that has built confidence that the virus can be countered with a vaccine, even though the time frame for getting one is not clear.
Investors have also greeted gradual steps by states to reopen their economies. On Friday, Texas expanded capacity at restaurants to 50 per cent from 25 per cent and opened bowling alleys, bingo halls and other venues.
Investors largely shrugged off escalating rhetoric between Beijing and Washington.
The US announced sanctions against a Chinese government institute and eight companies for human rights violations following China’s move to impose a national security law to quash the pro-democracy movement in Hong Kong.
While market watchers expect US President Donald Trump to continue to attack China as his re-election campaign heats up, investors are sceptical he will take action that threatens the trade détente with Beijing.
Adding tariffs on Chinese goods would hit US consumers and “the market is sceptical Trump will risk that before November,” said Gregori Volokhine of Meeschaert Financial Services.
US markets will be closed Monday for the Memorial Day holiday.
AFP
ASX treads water before US jobs data; CBA and Westpac hit highs
ASX ends flat as markets await key US jobs numbers. CBA and Westpac hit record highs and NAB an 18-year high. Domino's jumps 21 per cent, as Collins Foods and Nick Scali also gain. Amazon falls after earnings disappoint.
ASX ends up 0.5pc; Brookfield enters Insignia battle; former Star CEO cops ban
ASX 200 gains 0.5 per cent, led by resources, tech, property, industrials and communications. Macquarie weighs on financial sector. Google owner Alphabet's earnings disappoint. Brookfield lobs new offer to takeover target Insignia. Amcor lifts on reaffirmed guidance, estimates win. Former Star CFO cops ban.