ASX rally clipped as Asian markets falter
Resurgence in the major banks helped the ASX higher as much as 2.4pc but easing oil prices and Asian jitters trimmed gains at the close.
- Major banks surge builds for second day
- Bendigo Bank takes $148m COVID hit
- Atlas Arteria to raise $495m
- Wage subsidies may need to be extended: Lowe
That’s all from the Trading Day blog for Thursday, May 28. The ASX clocked gains as much as 2.4pc after world markets extended a rally fuelled by optimism over the reopening of economies, but Asian weakness trimmed the lift to 1.3pc at the close.
Overnight, the Dow gained 2.2 per cent, the S&P 500 rose 1.5 per cent and the Nasdaq advanced 0.8 per cent. Locally, RBA Governor Philip Lowe told a Senate committee JobKeeper subsidies may need to be extended while Atlas Arteria has launched a $495m equity raise.
Max Maddison 8.35pm: WiseTech shares drop with CargoWise strategy
Shares in software company WiseTech Global fell more than 5 per cent after the company doubled down on its CargoWise strategy, while renegotiating earnout arrangements for a raft of subsidiaries.
The Sydney-based company — which has previously been targeted by short-seller accusations of undermining acquired businesses to push clients onto its flagship CargoWise One platform — said the ongoing priority for its strategic acquisitions was to “accelerate CargoWise platform expansion and development”.
In a statement released on Thursday afternoon, the Sydney-based technology company said the “current environment” had enabled it to renegotiate earnout arrangements with 17 of its subsidiaries, reducing the company’s overall contingent liabilities from $215.5m to $68.5m.
Cash earnouts were terminated for 13 acquired businesses, and for another four — Cypress, Depot Systems, Forward, and SISA — they were replaced with equity deals.
WiseTech said it had issued an equity issuance of $81.4m — $45.7m of which remains escrowed for 12 months.
Earnouts are an incentive structure in mergers and acquisitions where the seller of the business earns additional compensation in the future for reaching specific financial goals.
However, the strategy update and new share issuance triggered a sharemarket sell-off, with WiseTech shares shedding 5.77 per cent of their value on Thursday, wiping around $360m off its market capitalisation.
They closed at $21.06, well above lows of $10.48 hit in mid-March but some way from February’s high of $29.44.
Ben Wilmot 8.14pm: Multiplex grim construction outlook
The grim construction outlook has prompted global construction company Multiplex to make swingeing cuts through its workforce as it deals with fall off in its project pipeline.
Multiplex, one of the country’s most famous builders, was taken over by Canadian group Brookfield more than a decade ago, and operates around the world, with many markets hard-hit by the coronavirus crisis.
Developers are mothballing high profile projects, with GPT Group dumping retail and office redevelopments and Vicinity Centres deferring some projects, including a redevelopment of Sydney’s Chatswood Chase. Some hotel and apartment schemes have also been pushed back.
These moves have hit the forward work available for construction companies, and even top tier firms like Multiplex, that will have less commercial work to tender for once the current round of office towers is completed in Sydney and Melbourne.
Leo Shanahan 7.41pm: NRL broadcast deal with Nine, Fox Sports
Fox Sports and Nine Entertainment have signed a new broadcast with the NRL, with Fox signing up to the code till 2027 but the new deal blows out Nine’s planned savings by $64m.
The announcement comes just before the kick-off of the resumed 2020 season between Parramatta and the Broncos.
Under a discounted deal with the code following the disastrous impact of COVID-19 Fox Sports have extended their deal to secure NRL for another eight years for undisclosed amount, but understood to be worth around $200m a year.
In a statement on Thursday evening ARLC Chairman Peter V’landys thanked both broadcast partners for their co-operation with sport meeting its ambitions May 28 kick off date.
“I want to thank Foxtel CEO Patrick Delany and Nine CEO Hugh Marks for reaching an outcome that puts the fans and the game’s future first,” Mr V’landys said.
“I am delighted to have worked with our longstanding partners Foxtel and Nine to reshape and resume the 2020 NRL Telstra Premiership. It is significant that on one of the most important days in our game’s history, we have finalised the deals to ensure its future.
Foxtel CEO Patrick Delany made the announcement on Fox Sports on Thursday evening.
“It will go out now to 2027. So that is an extraordinary eight years from now. So that anyone who thought that Fox was going away we’re not.
“What an amazing day it is.”
Richard Gluyas 7.33pm: Virus changing banking behaviours
National Australia Bank chief executive Ross McEwan has expressed cautious optimism about the economy, saying there were some early signs of a return in confidence.
“Well I think Australia has done the right things early on, isolated as many people as possible and taken really strong precautions which has kept the infection rates down,” Mr McEwan said in an internal NAB podcast.
“(But) it just takes another outbreak to actually create a problem.
“So I think a little bit of confidence is coming from this infection rate being down.”
Mr McEwan’s relatively upbeat tone preceded another solid performance by the share market, powered by a further rally in major-bank stocks.
Local equities were up 2.4 per cent at their peak, but ran out of puff by the close to register a 1.3 per cent gain.
The banks extended their purple patch, with ANZ Bank lifting 4.5 per cent, Westpac up 4.4 per cent, NAB putting on 4.7 per cent, and Commonwealth Bank up 2.2 per cent.
The two-day rally was sparked by a report on Wednesday from UBS analyst Jon Mott, who pointed out that the major banks had been overlooked in the broader market recovery.
The sector had underperformed by 19 per cent over the past three months.
Max Maddison 7.07pm: $5.2bn bushfire insurance bill
The insurance bill from Australia’s catastrophic summer has reached $5.19bn after a flurry of claims in the past month, the Insurance Council of Australia has revealed.
In a statement released on Thursday afternoon, the ICA said over 15,000 new claims worth $270m had been lodged in the past four weeks, with the devastating summer ranking as one of the most expensive in the nation’s history.
The estimated insurance losses from the bushfires along the east coast, which raged from early November, represented almost half of the total, at $2.32bn across 38,181 claims.
The vast majority of those claims came from NSW, which bore the brunt of the damage, while Victoria and South Australia each accounted for 8 per cent of the claims.
With almost half the 288,100 claims already closed, ICA head of communications Campbell Fuller said it was an “extraordinary result” for households and businesses impacted by disaster.
“Insurers have already paid more than $2.85bn for emergency accommodation, business interruption, repair and rebuilding work, replacement of motor vehicles and goods, services and settlements,” Mr Fuller said.
“This is despite the widespread impact of the natural disaster season and the handbrake effect of COVID-19.”
Richard Gluyas 6.22pm: Market volatility hits AusSuper
Consumer confidence is likely to take a further hit after the nation’s biggest superannuation fund flagged the first negative annual return for its balanced investment option since the financial crisis.
In a letter to AustralianSuper’s two million members, chief executive Ian Silk said the fund had benefited from last month’s “huge” rebound in global markets, with the US registering its biggest monthly increase in 33 years.
Despite this, the balanced option’s investment performance for the year to April was negative 3.3 per cent.
“While history tells us we can expect a negative annual return about once in every four to five years, the financial year is likely to be the first negative return for the balanced option in the last 11 years — since the global financial crisis period,” Mr Silk said.
The $2.8 trillion super system produced its best return last year since 2013, but the advent of COVID-19 smashed hopes for anything like a repeat performance.
From their peak on February 20 to their trough on March 23, local equities plunged 36.2 per cent, or 23.4 per cent for the March quarter.
The gain in April was 9 per cent — the highest single-month return since 1987.
James Kirby 5.28pm: Listen to the latest Money Cafe podcast
Here’s this week’s episode of The Money Cafe, in which Stephen Mayne fills in for Alan Kohler for a long chat with Wealth editor James Kirby about the recent spate of capital raisings.
Have retail investors been dudded? Why have some big names from the rich list not opted into their own company’s offerings?
Discussion topics this week include:
- Capital raisings bonanza – did you get a fair share?
- Why tech titans will now extend their dominance.
- Inflation or deflation – which is the worry?
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.
5.02pm: Nearmap leads winners with 17pc jump
Nearmap was the most improved on the market after a positive trading update and as it launched a new artificial intelligence offering. Shares in the aerial mapping group finished up 16.7 per cent to $2.24.
But the day wasn’t so rosy for lottery operator Jumbo Interactive – falling 7.2 per cent to $11.25 on a broker downgrade.
Across the rest of the tech sector, Appen lost 2.2 per cent to $30.70 as Afterpay rose 1.9 per cent to $46.09 and Xero ticked higher by 0.4 per cent to $85.
Here’s the biggest movers at the close:
4.11pm: Rally fades to 1.3pc
At its best, the market had been up by 2.4 per cent, but the index lost momentum by the close to settle with a more moderate gain of 1.3 per cent.
A late slip in US futures and weakness in Asian markets sent the market to close up 76 points or 1.32 per cent at 5851.1 – from heights of 5922.
As has been the theme this week, banks did most of the heavy lifting – ANZ put on 4.5pc as Westpac added 4.4pc, NAB rose 4.7pc and Commonwealth Bank gained 2.2pc.
4.08pm: Austal halted for improved guidance
Boat maker Austal has been halted pending “an announcement in relation to improved earnings guidance for FY20”.
The company requested a halt until the release of a relevant announcement, expected by the commencement of trade tomorrow.
Shares in the company were paused at 3pm, with the trading halt effective from the last hour of trade.
ASB last traded at $3.03.
Bridget Carter 3.41pm: Crescent closing in on PRP Diagnostic
DataRoom | Australian-based private equity firm Crescent Capital is believed to be closing in on PRP Diagnostic Imaging, with a deal said to be not far off.
The company is one of few in the healthcare space that is believed to be forging ahead with sales plans, despite challenges related to COVID-19.
Medical Director had been on offer before the onset of the COVID-19 crisis but had paused its sale plans, yet expectations are it could be back on the market by private equity owners in the second half of this year.
With respect to PRP, former Macquarie Group and CLSA investment banker Mark Dorney has been running a sales process for the business that has about 30 radiology clinics in NSW and has been put up for sale twice over the past two years.
While it is unclear what Crescent may be paying for PRP, the earlier thinking had been that it could sell for about $300m, or a price equating to 12 or 13 times its earnings.
Bridget Carter 3.23pm: Aspen taps Moelis for $20m raise
DataRoom | Aspen Group has tapped Moelis to raise $20m through a placement and share purchase plan.
The accommodation real estate provider will secure $17m by way of a placement.
Shares are being sold at $1.10, a 7.9 per cent discount to the last closing price of $1.195.
The funds are being used to strengthen Aspen’s balance sheet after two recent opportunistic acquisitions, including a build-to-rent property at Burleigh Heads and the Cooks Hill Co-Living Community at Newcastle.
They will also provide funding flexibility to deliver on its key strategic priorities of gaining scale and dominance in the affordable accommodation sector.
3.02pm: New Hope issues warning on coal
Miner New Hope Corp says a sudden drop in thermal coal prices and lower output from its Queensland operations will hurt its financial performance in the second half of the year.
“As a result of reduced electricity demand across most global markets, thermal coal demand and price has declined sharply since the beginning of April 2020,” it said in a quarterly update.
High levels of coal stocks in India, the uncertain pace of Japan’s recovery and low coal imports from Europe were all posing negatives for the thermal coal market, the miner said.
New Hope, however, said a pick-up in Chinese industrial activity and power consumption in recent weeks, along with firm demand from Vietnam, Taiwan and Korea had supported a recovery in prices.
New Hope also said it had been informed by the High Court that special leave applications had been submitted by Wiggins Island Coal Export Terminal (WICET) and liquidators regarding debts owed by its two units, Northern Energy Corporation and Colton Coal, which are under liquidation.
AAP
2.41pm: ASX fading to 1.3pc gain
Shares are fading in afternoon trade, now up just 1.3 per cent from earlier 2.4pc.
With just over an hour left of trade, the ASX200 is up 76 points or 1.3 per cent to 5850.
Energy and real estate stocks have slipped into the red, while financials have given up some of their earlier surge.
2.02pm: 2020 insurance bill climbs past $5.2bn
The succession of natural disasters earlier this year has seen insurance claims balloon to more than $5.19bn, according to the latest estimates from the Insurance Council of Australia.
Bushfires have resulted in the greatest number of claims at 38,181 with estimates insurance losses at $2.32bn.
“Thousands of new claims and property loss assessments have pushed total claims to more than 288,100 and the estimated damage bill to more than $5.19 billion,” ICA head of communications Campbell Fuller said.
“Insurers have already paid more than $2.85 billion for emergency accommodation, business interruption, repair and rebuilding work, replacement of motor vehicles and goods, services and settlements. This is despite the widespread impact of the natural disaster season and the handbrake effect of COVID-19.”
1.54pm: Upside risk to GDP forecasts: NAB
Capital expenditure cuts were not as bad as feared for the first quarter, what could provide some upside risk to GDP, according to NAB.
Real capex fell by 1.6pc in the first quarter, ahead of NAB’s forecast of 3pc, while equipment investment fell by 2.6pc.
NAB economist Kaixin Owyong notes that the decline points to a 0.1pp subtraction from next week’s GDP release, and combined with yesterday’s construction input could provide “a smaller drag than we had expected”.
“With housing construction also making no contribution to growth in Q1, the investment partials suggest there is a slight upside risk to our forecast for a small fall in Q1 GDP of 0.2pc (market: -0.6pc),” she says.
Forward looking capex plans provide a bleaker picture however, showing firms were revising lower their capex by 4pc in 2019-20 and by 9pc in 2020-21.
Ms Owyong adds that “the downgrade to next year was the first downgrade at this early stage of the planning cycle since the 1990s recession and the largest downgrade since at least the mid 1970s”.
Read more: Business investment falls in March quarter
Australia's non-mining firms intend to reduce #capex by 8% in 2019-20 and 17% in 2020-21. Before the pandemic we saw #capital shallowing. Such a large contraction will restrain the economic recovery and undermine #productivity for a long time. #ausecon #auspol @cfbirch pic.twitter.com/9okGBzK9hF
— ANZ_Research (@ANZ_Research) May 28, 2020
1.38pm: Blackmores lifts after successful placement
Blackmores shares are headed higher in line with the broader market, after completing a $92m placement.
The group said this morning it had been pleased with the support of its institutional shareholders and that the funds raised would put it in a position to return to “sustainable, profitable growth”.
A share purchase plan to raise a further $25m has also been launched, offering shares at the lower of the $72.50 placement price, a 2.5pc discount to the 5-day volume weighted average price or a 2.5pc discount to its last close when the offer closes, expected to be on July 3.
BKL last traded up 2.2pc to $80.59.
Read more: Blackmore sits out of $117m raise
1.29pm: APRA shuts down super scam
A tool used by Australians to consolidate their superannuation accounts has been shut down after fake accounts were set up.
The fraud was detected through the federal government’s early access to super scheme, which many people have been using to financially survive the coronavirus crisis.
Australian Prudential Regulation Authority deputy chair Helen Rowell has told a Senate inquiry the Australian Taxation Office’s SuperMatch tool has been suspended.
The tool helps people find all of their super accounts so they can be merged into one.
Fraudsters were using the tool to see what other accounts people had. “We made the decision (with the ATO) to close the system down in order to engage with industry to tighten up the requirements around member account creation,” Ms Rowell said.
AAP
1.21pm: Asian markets mixed as world rallies
Optimism over the reopening of major economies across the planet continued to push equities higher Thursday, as investors looked past building China-US tensions for now, though there remain worries about the uncertain global outlook.
Even Hong Kong managed to limit losses despite a US decision to revoke its special status that could see it lose key privileges, bringing into doubt its future as a global financial hub.
The move is the latest volley in an increasingly acrimonious row between the world’s two economic superpowers, with Donald Trump’s accusations over Beijing’s part in the coronavirus outbreak, Huawei and trade also causing friction.
Still, despite the threat of another trade war, investors are focusing on the easing of lockdowns around the world, with people from Asia to Europe to the US slowly coming out of hibernation.
Ahead of the break, the Hang Seng was trading lower by 0.7 per cent, while China’s Shanghai Composite was slipping 0.2 per cent and Japan’s Nikkei was surging by 1.9 per cent.
AFP
1.01pm: Nearmap leads, Jumbo lags
All sectors are flashing green at lunch as the ASX trades at its best levels in 11-weeks, building to its biggest weekly gain since 2011.
At 1pm, the ASX200 is up by 118 points or 2 per cent at 5893.2 after hitting 5922.
Shares sold off during the height of the pandemic are leading the charge now – Credit Corp is up by 10.5pc while Nearmap is rising by 18, aided by the launch of its new AI capabilities and a strong trading update.
Here’s the biggest movers at 1pm:
12.58pm: Reliance shares turn down
Reliance Worldwide shares have turned down 1pc to $3.11 after an amazing 9-day rise.
A block trade of 7.39m shares or 0.9pc of the company went through at $3.17 after it rose 5.7pc to a 3-month high of $3.32 today. That seems to have capped it near the 100-day moving average and 50pc Fibonacci retracement of the Feb-March fall.
Some long-suffering shareholders may be lightening up after shares doubled in two months.
12.48pm: Santos completes ConocoPhillips buy
Santos said it has completed the purchase of ConocoPhillips’s assets in Northern Australia for a reduced upfront purchase price of $US1.265bn ($1.91bn).
Santos has acquired the US company’s operations in Northern Australia and East Timor, including a controlling stake in the Darwin liquefied-natural-gas export project. It had originally agreed to pay $US1.39bn upfront for the assets.
Santos said Thursday the restructured deal involves a contingent payment $US200m that will be due when the company makes a final investment decision on its Barossa natural-gas project, up from $US75m when the transaction was originally agreed.
“At completion, the net settlement amount was $US655m, lower than the previously forecast amount of $US800m,” Santos said in a regulatory filing.
The purchase price at completion was fully funded from cash and $US750m of new two-year acquisition debt, Santos said.
STO last down 1.4pc to $5.54 after oil prices fell overnight.
Dow Jones Newswires
Gerard Cockburn 12.29pm: KKR appoints Hyde as new MD
Private equity giant KKR has appointed Nicholas Hyde as managing director of its Australia and New Zealand division.
Mr Hyde will take helm of the group’s regional headquarters based in Sydney, and will be responsible for expanding KKR’s client relationships within the region.
His appointment coincides with KKR’s recent announcement that it will purchase 55 per cent of Commonwealth Bank’s wealth arm, Colonial First State.
Mr Hyde has previously held senior positions at IFM Investors, Deutsche Bank, Citi and JP Morgan.
“Nic’s appointment reinforces our long-term commitment to the Australian market and he will play an important role in our continued efforts to build a multi-product, world-class platform across a diverse range of strategies in the region,” KKR partner Scott Bookmyer, said.
12.18pm: ASX has best week since 2011
Australia’s sharemarket is having its best week since 2011 as banks lead broadbased gains.
The S&P/ASX 200 rose 2.5pc to an 11-week high of 5917.9. At that point it was up 7.5pc for the week to date.
Currently, the ASX is recording its best weekly gain since February 2011.
It came as S&P 500 futures rose 0.5pc in early Asian trading.
That suggests the US benchmark will push on above 3000 points.
The S&P 500 closed above its 200-day moving average at that point on Wednesday.
Both markets are now relying heavily on expectation of an economic rebound, sustained low interest rates and central bank asset buying.
The 12-month forward PE ratio of the Australian market hit a more than two-decade high around 19.5 times today.
There could also be some heavy selling at month-end to rebalance portfolios as shares have surged relative to bonds this month.
The S&P/ASX 200 was last up 2.4pc at 5911.
James Glynn 12.14pm: RBA less downbeat on economy
Reserve Bank of Australia Governor Philip Lowe told a parliamentary committee on COVID-19 that he is now less downbeat on the outlook for the economy.
He said the economy is now tracking somewhere between the RBA’s earlier published central economic scenario and an upside scenario.
The number of virus cases has been less than expected and restrictions are being lifted earlier than initially thought, Dr Lowe noted. He said fiscal policy will need to be relied upon if further support to the economy is needed, again downplaying the chance of a move to negative interest rates.
While it is too early to say if the government’s wage-subsidy scheme will be needed beyond September, Dr Lowe said it might have to extend if the job market remains weak.
Dow Jones Newswires
Patrick Commins 11.54am: 70pc of businesses changed by pandemic
The health crisis has forced seven in every ten firms to change the way they operate, according to the latest special business survey from the ABS.
In the week starting May 13, 70 per cent of companies also told the Australian Bureau of Statistics that they had suffered a decrease in revenue as a result of COVID-19.
ABS head of industry statistics John Shepherd said “businesses that had changed the way they operate were more than twice as likely to report a decrease in revenue compared with those that were trading normally, 83 per cent against 37 per cent”.
The survey showed that three quarters of firms have accessed some form of emergency government support to help them through the health shock. More than half had made use of wage subsidies under the Morrison government’s JobKeeper program, while nearly 40 per cent had accessed other support.
The findings come as Reserve Bank governor Philip Lowe warned against a “premature” withdrawal of fiscal stimulus which would risk “damaging” the economy were it not robust enough come September 30 when the emergency support measures are due to expire.
Read more at our coronavirus live blog
Latest ABS Biz Survey shows 3/4 businesses have have accessed support measures; 19% have renegotiated rent/lease; 16% have deferred loans and 11% have sought additional funds. Lots of interesting insights, many by sector, in this release. https://t.co/PnL485ZsqU pic.twitter.com/N1kEkK0o1P
— Jo Masters (@masters_joanne) May 28, 2020
11.33am: Nearmap soars on strong sales update
Nearmap is the most improved on the ASX200 early, adding 18pc after narrowing its guidance and launching its artificial intelligence content.
The aerial mapping company said it was launching its new AI dataset packages in Australia and the US, focusing initially on insurance, utility and local government clients.
Alongside that, it added that its annualised contract value had surpassed $102m, helping it to narrow guidance to between $103m and $107m for the year.
“While trading conditions in the global economy have become more challenging since the outbreak of COVID-19, Nearmap has performed well and continued to grow its portfolio month-on-month across its key industry segments,” it said.
It said its platforms made it easy for clients to access data from home, and that twelve month rolling customer churn was now down below 10pc, from 11.5pc in December.
NEA last up 17.7pc to $2.26.
11.30am: Admin worst hit in spending cuts: NAB
Australia’s spending is improving from the worst of the coronavirus drop off but is still down almost 8 per cent from the same time last year, according to the latest data from NAB.
The bank’s study of consumption-based spending and business payment inflows shows the overall trend in 4-week moving average terms is down 7.8 per cent year-on-year and 5.8pc lower since the start of 2020.
By industry, administration and support services are taking the biggest hit, down 86 per cent since the start of the year, while accommodation and food services spend has been halved. In contrast, spending is up 29pc in professional, scientific and technical services and construction since the start of the year, but up only 1pc and 7.4pc respectively from the same time last year.
Retail spend is 10pc higher since the start of 2020 and from the same time last year.
In-demand industries such as gambling and internet publishing are leading spending growth, up 71.5pc and 44.2pc respectively as roughly 40pc of sub-industries increase their spend.
“But 13 sectors are now reporting falls of over 50pc (12 in our previous report), ranging from -95.3pc for motion picture and sound recording activities to -55.4pc for building construction,” NAB says.
Perry Williams 11.23am: Energy stress testing will be greater: CS
Banks will likely impose stricter stress testing on investment hurdles for energy projects post COVID-19, Credit Suisse says, raising questions over the viability of high cost developments by Australian producers.
“We expect investment hurdle metrics to be stricter post COVID-19, with companies stress testing investment cases down to ~$US40/bbl, and banks perhaps even lower than that for project finance purposes,” the broker said.
Santos and Beach Energy’s projects will hold up at $US40 oil but Woodside Petroleum’s Scarborough may make more sense as backfill for Pluto at an estimated $US30 break-even price compared with the current Pluto expansion plan at $US42 a barrel.
The long-delayed Browse project wasn’t seen as a near-term growth candidate even before the pandemic.
Oil Search’s Papua New Guinea expansion remains competitive at just under $US40 a barrel but its Alaska oil project “may come into increased question” by joint venture partners given its $US40-$US45 break-even cost.
Woodside and Beach may also pounce on a once in a generation chance to conduct M&A from the second half of 2020 with Santos also potentially looking at all-share bids from 2021.
“Companies may also use M&A as an occasion to tap equity markets simultaneously, in our view – the market may be better disposed toward tipping in equity to capture well-articulated opportunities rather than to survive distress.”
Brent oil currently trading at $US34 a barrel.
11.11am: Bank surge ‘well overdue’: JPM
JP Morgan financial sector analyst Andrew Triggs says the impressive surge in Australian bank share prices this week is “long overdue”, with the sector having underperformed the S&P/ASX 200 by 19 per cent from February 21 to May 25.
After a further rise of between 3.8pc and 6.1pc today, the four majors are currently up almost 20pc this week, so it could be said that its underperformance versus the index has been broadly corrected.
Mr Triggs says reasons for the recent strength include: reduced tail risk on the domestic economy; positioning is light, with domestic institutional investors net sellers of the banks in the three months to March 31 and heavily underweight financials; valuations are “undemanding” with unprecedented discounts to book value; and Quant fund rotation (from Growth to Value).
“Whether the recovery continues remains to be seen but 1x price-to-book value may be a “ceiling” in the short-term (ex-CBA) given ongoing uncertainty and structural headwinds the sector faces,” Mr Triggs says.
In his view NAB is best positioned to benefit from a “less bad” domestic economy, he has an overweight rating on the stock. Westpac is preferred over ANZ in his major bank pecking order, with CBA the bottom pick at Underweight.
10.49am: Scarring could lift jobless rate: Lowe
Asked about his estimate of the full employment rate of unemployment, RBA Governor Philip Lowe says that in February he thought it was 4.5 per cent, but it could rise to 5 per cent because of economic scarring.
“We know from past economic downturns that there is scarring in the labour market,” Dr Lowe said.
“So I think it’s quite possible that the estimate of full employment rate of unemployment starts rising again to 5 per cent. If we don’t get a decent recovery soon we will see scarring and the full-employment rate of unemployment will rise.”
Read more: RBA chief warns JobKeeper may need extension
10.46am: Lowe warns of COVID-19 shadows
RBA Governor Philip Lowe Senate grilling continues, where he says he fears one of the “shadows” of the coronavirus is the possibility of an “even less dynamic economy”.
He adds that he can “see a real benefit” in increasing a sense of dynamism in the economy. “We want firms that are prepared to grow and invest and develop new ways of doing things,” he says in regard to the need to increase economic dynamism or productivity.
“It’s about providing a better standard of living for our kids. We have the capability as a nation to do this. Our fundamentals are fantastic.”
#RBA Gov Lowe comments today similar to recent comments:
— Shane Oliver (@ShaneOliverAMP) May 28, 2020
RBA support measures working as expected
Earlier reopening makes it possible downturn will not be as severe
But there will be a long shadow
A reform agenda will help [Gov starting to implement]
Maintains dovish guidance pic.twitter.com/oK01VJ9PM1
10.43am: Shares closing in on March 10 highs
Shares are swiftly gaining ground in early trade, extending the early lift to 2.1 per cent.
The benchmark is up 122 points or 2.12 per cent at 5897.6 and could soon test the March 10 highs of 5939.6.
Energy continues to lag the market, down 0.2pc while Banks add 4.3pc and Industrials jump 1.9pc.
10.28am: JobKeeper may need extending: Lowe
RBA Governor Philip Lowe has warned against withdrawing government support early, saying there are “certain risks” for the economy if the timing is off.
If the economy is in need of greater support when the JobKeeper wages subsidy is due to expire in September, then policy makers “should be looking at an extension of that scheme or a modification”, Dr Lowe says.
He adds it is “too early” to say if the economy will need more support in four months when the JobKeeper program is due to expire. But if it hasn’t come out of the current trough, there “should be a discussion” about how the JobKeeper wage subside “transitions into something else or is tapered”.
10.21am: Economy a little better than forecast: RBA
RBA governor Lowe says the Australian economy has “tracked no worse than the baseline and perhaps a little better than the baseline” since the central bank finalised its economic scenarios in its Statement on Monetary Policy on May 7th.
In questioning from a senate inquiry, Dr Lowe said Australia’s recovery largely depended on when the public regains its confidence in their health and finances.
“With the national health outcomes better than earlier feared, it’s entirely possible the economic downturn will not be severe as earlier thought,” he said.
Dr Lowe adds that the bank’s main focus is to keep funding costs low and make credit available, and that a 25 basis point cash rate is effectively as low as it can go.
with AAP
10.11am: Bank surge won’t let up
The local market has added more than 100 points in early trade as offshore optimism feed further gains.
At the open, the ASX200 is up 105 points or 1.82 per cent to 5880 – marking a 7 per cent surge from Friday’s close.
Banks are again the key driver – ANZ is up 6pc as Westpac adds 6.2pc, NAB is lifting by 5.9pc while Commonwealth Bank is rising by 3.2pc.
Energy is the only sector going backward.
10.09am: Optus revenue slips as sentiment dives
Australia’s number two telco Optus says weaker consumer sentiment from both natural disasters and the early impact of coronavirus has dented its revenue for the fourth quarter, sending annual earnings down 2 per cent.
As parent company Singtel reported its annual results, Optus said phone sales were being most hit from the slide in sentiment, with equipment sales dropping by 22 per cent over the quarter to March 31 as customers hold their handsets for longer, along with the removal of handset subsidies and some delivery disruptions from a major supplier.
Revenue for the fourth quarter dipped 9 per cent to $2.104bn, pulling annual revenue down 2 per cent to $8.954bn and while annual earnings slipped 2pc to $2.652bn the company still clocked a profit of $402m.
“It has been a challenging year for our industry as consumer demand has slowed compared with the previous year, and these challenges have intensified in the last quarter as Australia managed through natural disasters and COVID-19 impacted the economy,” chief Kelly Bayer Rosmarin said.
The transition of 45,000 new customers to the NBN saw retail fixed revenues slip by 7 per cent for the quarter. The telco now has 848,000 transitioned to the NBN.
9.51am: What’s on the broker radar?
- Brickworks raised to Outperform – Macquarie
- Beach Energy cut to Neutral – Macquarie
- CSL raised to Buy – Citi
- Cromwell Property cut to Hold – Morningstar
- Domino’s Pizza cut to Sell – Morningstar
- Jumbo Interactive cut to Negative – Evans and Partners
- Magellan Financial cut to Sell – Morningstar
- Metcash raised to Buy – Jefferies
- National Tyre and Wheel raised to Add – Morgans
- Origin Energy cut to Hold – Morningstar
- Tabcorp cut to Neural – Evans and Partners
- Technology One raised to Hold – Morningstar
9.41am: Stretched valuations could restrain trade
Australia’s sharemarket should open higher after strong gains on Wall Street however, stretched valuations in both markets make them vulnerable to pullbacks.
Overnight futures relative to fair value suggest the S&P/ASX 200 will open up 0.8pc at 5820 points.
BHP ADR’s equivalent close at $34.89 suggests the resources-sector heavyweight will open up about 1.2pc. That follows a surprising 1.5pc rise in the S&P 500 to an almost 3-month high of 3036.1 points, breaking above its downsloping 200-DMA at 3000.
The recent rotation from Growth to Value is likely to continue after banks outperformed on Wall Street while Technology lagged behind.
A $495m capital raising announcement from Atlas Arteria may weigh on other infrastructure stocks as investors fund their participation in the raising.
On the charts, the S&P/ASX 200 is yet to close above the 50pc Fibonacci retracement of its Feb-Mar decline, at 5800. In the bigger picture, a symmetrical triangle pattern may drive the S&P/ASX 200 up to 6000 while support near 5600 holds.
But the market may want to see if the S&P 500 can hold above 3000 points for more than a day before pushing much higher.
With the 12-month forward PE ratio of the index now at record high near 19 times and its dividend yield at a record low near 3.5 times, it needs earnings and dividend estimates to pick up.
Attention turns to RBA Governor Lowe’s Senate testimony at 10am and 1Q Capex data at 1130 AEST.
Bridget Carter 9.35am: Atlas Arteria raising $495m
DataRoom | Atlas Arteria has tapped Macquarie Capital and UBS to raise $495m.
The toll road operator will raise $420m through a placement and it will also raise up to $75m by way of a share purchase plan.
Shares are being sold at $6.20 each, a 7.5 per cent discount to their last closing price of $6.70.
The proceeds will be used to pay EUR350m of debt as part of its MIBL facility. This is despite its lenders waiving debt covenant breaches.
Proceeds raised under the share purchase plan will be used to provide funding flexibility for growth opportunities.
The group has suspended its distribution and says it may establish a more flexible corporate debt facility with terms that better meet the needs of its growing business.
9.24am: Bendigo Bank takes $148m COVID hit
Bendigo and Adelaide Bank has set aside $148.3m for possible future impacts of the coronavirus pandemic, based on the assumption that any economic recovery will be slow.
The regional bank on Thursday said the overlay would increase its collective provision and fiscal 2020 credit expense by $127.7m and the general reserve for credit losses by $20.6m.
“The bank has not assumed a sharp recovery in the adopted economic outlook, but rather a slower recovery with probabilities biased to the downside,” said Bendigo. “The increase in the collective provisions are based on the bank’s view of the impacts of COVID-19 and do not reflect any deterioration in observed credit quality.”
The COVID-19 overlay will reduce Bendigo’s Common Equity Tier 1 (CET1) capital ratio by 40 basis points, leading to a proforma CET1 of 9.3pc as at the end of March.
Dow Jones Newswires
Gerard Cockburn 9.22am: Carlton United delivers free beer
Carlton United Breweries is giving free beer to pubs and clubs to help the country’s hospitality sector survive the coronavirus pandemic.
The brewing giant will hand out 2,000 barrels across the country, representing close to a 100,000 litres of beer.
The beer has been donated through the For the Love of Your Local campaign. CUB says it intends to raise $2m through the program to assist the industry.
CUB chief executive Peter Filipovic said the free booze will assist venues with the ongoing operating challenges that will persist well after the shutdown.
“The ongoing restrictions will continue to significantly limit trade and, for some venues, reopening will have to wait until restrictions are further lifted,” Mr Filipovic said.
“New South Wales pubs and clubs have already been shut for two months and the fact is many of these beloved venues won’t make it through this crisis without extra help.”
Gerard Cockburn 9.09am: Mesoblast revenue surges as trials continue
Mesoblast has more than doubled its revenue over the first nine months of the financial year, noting its medicines are assisting in the respiratory recovery of COVID-19 patients.
The medical manufacturer says its trimmed its losses by 34 per cent from the same time last year thanks to a 113pc lift in revenue to $US31.5m, largely from an increase in royalty revenues from sales of its TEMCELL product.
The US Food and Drug Administration earlier this year cleared Mesoblast to use its remestemcel-L treatment, to assist COVID-19 patients with moderate to severe respiratory issues.
Mesoblast chief executive Dr Silviu Itescu said promising results are emerging from the use of the drug.
“A Phase 3 randomised controlled trial in the United States is underway to confirm the remarkable pilot data from compassionate use of remestemcel-L in COVID-19 infected patients with moderate to severe acute respiratory distress syndrome,” Mr Itescu said.
8.51am: Atlas Arteria halted for raise
Toll road operator Atlas Arteria has been halted ahead of the open pending detail on a capital raise.
Requesting the halt, the company said it was completing a placement and share purchase plan, and expected to resume trade on Friday.
“ALX expects that the trading halt will be ended by it making an announcement to the ASX in relation to the completion of the placement component of the offer,” it said in a filing to the market.
ALX last traded at $6.70 after hitting lows of $3.51 during the worst of the coronavirus sell-off.
Leo Shanahan 8.40am: News Corp axes print titles
News Corp is set to permanently cease the printing of 76 community and regional titles in a large scale restructure of the company’s mastheads that will result in job losses.
News Corp executive chairman Australasia Michael Miller announced in a note to staff that the bulk of the regional and community newspapers that had stopped printing due to COVID-19 would continue to be published digital only, with others also moving to non-print editions.
“COVID-19 has impacted the sustainability of community and regional publishing. Despite the audiences of News Corp’s digital mastheads growing more than 60 per cent as Australians turned to trusted media sources during the peak of the recent COVID-19 lockdowns, print advertising spending which contributes the majority of our revenues, has accelerated its decline,” Mr Miller said.
“Consequently, to meet these changing trends, we are reshaping News Corp Australia to focus on where consumers and businesses are moving and to strengthen our position as Australia’s leading digital news media company. This will involve employing more digital only journalists and making investments in digital advertising and marketing solutions for our partners.”
The portfolio changes mean that from Monday June 29 the bulk of News Corp’s regional and community titles would move to purely digital publishing.
News Corp will now publish a total of 92 digital-only mastheads, with 16 pure digital titles launched in the last 18 months.
Mr Miller said that News Corp’s major mastheads The Courier-Mail, The Daily Telegraph, The Herald Sun and The Advertiser, will now become more state focused with increased regional content and partnerships with local titles.
8.15am: Icahn loses nearly $US2bn on Hertz
US businessman Carl Icahn sold his entire stake in Hertz Global Holdings the first business day after the embattled car-rental firm said late Friday that it would file for bankruptcy.
Entities controlled by Icahn sold 55.3 million Hertz shares on the open market Tuesday for $US39.8 million, an average per-share price of 72 cents. Icahn disclosed the transaction in a form he filed with the Securities and Exchange Commission. He had been the company’s top shareholder, as the shares sold represented a 39pc stake in the company.
Icahn has apparently lost more than $US1.8 billion in the transaction. He had bought the stock for an aggregate amount of about $US1.88 billion, according to a form he filed in March.
In the latest filing, lIcahn noted he had sold “at a significant loss,” but the sale “does not mean that I don’t continue to have faith in the future of Hertz.”
Dow Jones
8.10am: US coronavirus toll tops 100,000
More than 100,000 people in the US have died from the new coronavirus, as reopenings across the country accelerated and rising infections in Brazil, Peru and Chile placed the Americas firmly at the centre of the pandemic.
The milestone comes four months after the contagion was first reported in the US and six weeks after the country passed Italy as the country with the highest reported death toll. US fatalities, which appear to be slowing, represent around 28 per cent of the 352,789 confirmed deaths globally, according to data compiled by Johns Hopkins University.
Experts say official totals likely understate the extent of the pandemic, in part because of limited and differing testing capabilities in the U.S. and around the world.
Dow Jones
7.44am: Oil slides
Oil futures tumbled overnight after US President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong and as some traders doubted Russia’s commitment to deep production cuts.
Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed during a telephone call on further “close co-ordination” on oil output restrictions, the Kremlin said.
Still, many felt Russia was sending mixed signals ahead of the meeting in less than two weeks between the Organisation of the Petroleum Exporting Countries and its allies.
The group known as OPEC+ is cutting output by nearly 10 million barrels per day (bpd) in May and June.
“It sounds great on paper, but the market is holding back excitement until we get a few more details about whether there will be cuts, how many barrels will be cut, and the length of the cuts,” said Phil Flynn, senior analyst at Price Futures Group.
Brent crude futures fell $US1.65 to $US34.52 a barrel, a 4.6 per cent loss. US West Texas Intermediate (WTI) crude was down $US1.54, or 4.5 per cent, at $US32.81.
Reuters
7.40am: GE switches off light bulbs
General Electric is getting out of the business of making light bulbs, selling a unit that defined the company for nearly a century and was its last direct link to consumers.
GE said it would sell its lighting business to Savant Systems, a seller of home-automation technology. Terms of the deal weren’t disclosed, but the transaction valued the unit at around $US250 million, including assumed liabilities, according to a person familiar with the matter. The deal had an equity value of less than $US100 million, this person said.
GE had been looking to sell the business for several years. The conglomerate once made refrigerators and microwaves as well as bulbs but has exited those consumer businesses as part of a yearslong restructuring. It has shifted its focus to making heavy equipment, like power turbines, aircraft engines and hospital machines.
Dow Jones
7.35am: Boeing to resume 737 MAX production
Boeing said Wednesday that it has resumed production of its 737 MAX jetliner at its Renton, Washington, factory.
The company will begin production “at a low rate” as it focuses on workplace safety and product quality.
“The steps we’ve taken in the factory will help drive our goal of 100 per cent quality for our customers while supporting our ongoing commitment to workplace safety,” said Scott Stocker, vice president of 737 MAX manufacturing, in prepared remarks.
Boeing halted 737 MAX assembly in January as it awaited regulatory clearance for the plane to fly again following two fatal crashes, which it hopes to secure in the third quarter.
Dow Jones Newswires
7.20am: ASX set to gain early
The Australian share market is poised to rise in early trade after US investors were buoyed by the continued easing of lockdowns.
At 7am (AEST) the SPI 200 futures contract was higher by 50 points, or 0.87 per cent, to 5,823.0, indicating gains in early trade. Bank stocks powered the US markets’ advance, with the S&P 500 financial index leading gains among major sectors.
More notable businesses said they would reopen amid the coronavirus pandemic. Walt Disney announced plans to reopen its Walt Disney World resort in Florida, the world’s largest theme park, in phases beginning July 11. MGM Resorts said it would reopen its four Las Vegas casinos on June 4.
The Dow Jones Industrial Average rose 553.16 points, or 2.21 per cent, to 25,548.27, the S&P 500 gained 44.36 points, or 1.48 per cent, to 3,036.13, and the Nasdaq Composite added 72.14 points, or 0.77 per cent, to 9,412.36.
In Australia today, investors will be monitoring Reserve Bank Governor Philip Lowe’s appearance before the Senate Select Committee on COVID-19. Mr Lowe will discuss the economic implications of the restrictions to slow the spread of the virus.
The benchmark S&P/ASX200 index closed Wednesday down five points, or 0.09 per cent, at 5,775 points. The All Ordinaries also closed down five points, or 0.08 per cent, at 5,884.9 points.
One Australian dollar was buying US66.21 cents at 7am (AEST), down from US66.44 cents at the close of trade on Thursday.
AAP
7.15am: US businesses less optimistic about economy
Businesses across the US surveyed by the Federal Reserve don’t appear to share the Trump administration’s optimism about a rapid economic recovery starting this summer.
The Federal Reserve released a report that draws on business contacts from the central bank’s 12 regions and details the economic damage in April and May, as measures to combat the spread of the coronavirus outbreak took hold. The report, know as the beige book, cited business contacts who were less sanguine about the economy’s outlook than the administration.
President Donald Trump has forecast “some great numbers” in the final three months of the year and a strong recovery in 2021.
“Although many contacts expressed hope that overall activity would pick up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery,” the Fed said. Even with the assistance from the Fed and nearly $US3 trillion in support from Congress, the economy has absorbed a major blow, with unemployment jumping to 14.7pc in April, the highest since the Great Depression of the 1930s.
The overall economy, as measured by the gross domestic product, shrank at an annual rate of 4.8pc in the January-March quarter. Economists are forecasting that the second quarter decline could be a record-breaking drop of 40pc.
AP
6.25am: SpaceX launch delayed
Bad weather has postponed the first launch of NASA astronauts from Florida in nine years.
The countdown was halted less than 17 minutes before the SpaceX Falcon 9 rocket was due to lift off from the Kennedy Space Center in Florida. The next attempt by Elon Musk’s rocket is scheduled for Saturday.
AP
6.10am: Wall St gains as optimism builds
The Dow Jones Industrial Average climbed on optimism that economic activity is gathering steam and authorities may offer more stimulus to bolster the recovery.
The blue-chip index was up 550 points, or 2.2pc, as of the close of trading in New York putting it above the 25,000 mark for the first time since early March. The index was powered by gains in American Express, Goldman Sachs and JPMorgan Chase, all of which climbed more than 5pc.
The S&P 500 was up 1.5 per cent to 3,036. The tech-heavy Nasdaq Composite index was up about 0.8 per cent.
After slipping despite a banking sector charge yesterday, the ASX is set for early gains. Shortly before 6am (AEST) the SPI futures index was up 49 points, or 0.8 per cent.
Economically sensitive cyclical stocks, including those in the financials and industrials sectors, have been staging a comeback over the past week, erasing some of the punishing losses they suffered for much of the coronavirus pandemic.
Optimism has been building in recent days that the White House and Congress are considering more measures to blunt the impact of historic levels of unemployment on the economy. The Trump administration is examining proposals to provide cash incentives to encourage unemployed Americans to return to work, a top economic adviser said in an interview on Fox News.
Stocks were also buoyed by signs that consumers are beginning to venture out into communities and spend again. Restaurant bookings and spending on hotels and airlines appear to be picking up. The Conference Board’s consumer confidence index also stabilised in May.
As investors rotated back into cyclical shares, the long-running rally in big tech stocks has paused. Netflix dropped early before rising 1.2 per cent, while Amazon fell 0.5 per cent.
Netflix and Amazon, along with Apple, Google parent Alphabet, Facebook and Microsoft together account for almost 20 per cent of the value of the S&P 500, giving them significant sway over the direction of the benchmark index.
All six stocks have posted big gains for the year, while the S&P is still off more than 7 per cent, despite a furious rally since late March.
The economic pain from the coronavirus pandemic has still been deep, with more than 38 million Americans seeking unemployment benefits since mid-March. It remains unclear how long it will take people to get back to work, or whether consumer behaviour will fully return to pre-virus levels.
Outside the US, the pan-continental Stoxx Europe 600 edged up 0.2 per cent after the European Union set out a $US2 trillion coronavirus response plan. The proposal includes a EUR750 billion ($US824 billion) recovery plan and EUR1.1 trillion budget over the next seven years.
Meanwhile, Brent crude, the global benchmark for oil, slipped 2.2 per cent to $US35.94. Russian government officials have signalled that the country may hold off on committing to any extended production cuts ahead of a June meeting among major oil exporters, strategists at ING wrote in a note to clients.
Dow Jones
5.55am: Huawei fraud case to proceed
A Canadian judge ruled the US extradition case against a senior Huawei executive can proceed to the next stage, a decision that is expected to further harm relations between China and Canada.
Canada arrested China’s Meng Wanzhou, the daughter of Huawei’s founder and chief financial officer of the company, at Vancouver’s airport in late 2018. The U.S. wants her extradited to face fraud charges. Her arrest infuriated Beijing, which sees her case as a political move designed to prevent China’s rise. Associate Chief Justice Heather Holmes said in her decision the allegations against Meng could constitute a crime in Canada as well and the extradition could therefore proceed.
The U.S. accuses Huawei of using a Hong Kong shell company to sell equipment to Iran in violation of U.S. sanctions. It says Meng, 48, committed fraud by misleading the HSBC bank about the company’s business dealings in Iran.
AP
5.50am: US shale investment to halve
Investment in the US shale sector will drop by half this year, the International Energy Agency said, predicting a period of pain for producers, even as oil prices rally.
The forecast body blow to the availability of capital for U.S. producers comes as part of an expected worldwide decline in broader energy investment during 2020. The Paris-based organisation expects global investment in oil and gas to decrease by one-third and the financing of all energy projects to decline by 20pc.
“We see a historic fall in global energy investment, but the biggest hit is to the shale industry,” said the agency’s executive director, Fatih Birol. “It has always been under pressure, but now access to capital and investment confidence is drying up.”
American shale drillers helped the U.S. produce more than 13 million barrels of oil a day earlier in 2020 – before the coronavirus pandemic forced governments worldwide to impose lockdowns and travel bans on their citizens. The pandemic has prompted the largest drop in global energy investment in history, the IEA said in its report.
Dow Jones
5.48am: US outlook highly uncertain: Fed
After weeks of economic shutdowns, the outlook for a rebound remains “highly uncertain” and businesses nationwide are gloomy about how quickly things can return to normal, the Federal Reserve said.
The Fed’s beige book survey of economic conditions showed US economic activity continued to fall sharply in recent weeks in all regions, with auto sales falling sharply and tenants unable to pay rent.
“Although many contacts expressed hope that overall activity would pick-up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery,” the Fed said.
AFP
5.43am: Global stocks rise
Stock markets rose as more easing of coronavirus lockdowns created a positive buzz on trading floors, analysts said.
Investors on both sides of the Atlantic mostly brushed aside deteriorating China-US relations and the impact of Hong Kong protests, the analysts said.
“The market is reacting positively to coronavirus lockdowns being eased across the globe,” said Stephen Innes, chief global markets strategist at AxiCorp.
Adding to optimism was a proposal by European Union chief Ursula von der Leyen for a 750-billion-euro ($US825-billion) post-virus recovery fund for Europe.
If she can win over sceptical member states to push it through, the stimulus package will be the biggest in EU history, adding to already mind-boggling amounts of stimulus and central bank pledges of support across the planet.
“The announcement gave European shares another lift earlier with the number being proposed larger than what Germany and France previously agreed,” OANDA analyst Craig Erlam said.
German Chancellor Angela Merkel warned, however, that the package may only come into force in January 2021. Austria and Sweden were already pushing back on the project Wednesday.
Europe’s key markets were up by well over one per cent by the close of trade. A warning from French statistics bureau INSEE that France’s economy could contract 20 per cent in the second quarter on the virus lockdown had little impact.
London and Frankfurt both closed up 1.3pc, while Paris gained 1.8 per cent.
Tokyo posted gains earlier, while other Asian stocks mostly slid – Hong Kong falling the hardest as police fired pepper-ball rounds on anti-China protesters, with investors fearing the demonstrations could erupt into the worst unrest since last summer.
AFP
5.40am: Air corridors to kickstart tourism
So-called air corridors allowing tourists to travel between countries at low risk of coronavirus contagion could help to restart the global tourism industry, a UN agency said.
The corridors would represent the “first steps” towards re-establishing international links, said Zurab Pololikashvili, secretary-general of the World Tourism Organisation (UNWTO).
The idea has already gained traction in parts of Europe – officials in Spain’s tourism-reliant Balearic Islands have suggested German travellers should be allowed to fly back as soon as possible.
The number of tourists worldwide could fall by between 60 and 80 per cent in 2020 as a result of the pandemic, according to UNWTO forecasts published in early May.
AFP
5.36am: US CEO pay tops $US12.3m
The typical pay package for CEOs at the biggest U.S. companies topped $US12.3 million last year, and the gap between the boss and their workforces widened further, according to AP’s annual survey of executive compensation.
Median pay for CEOs in the survey climbed 4.1pc last year. For the typical worker at their companies, it rose 3.2pc. It would take two lifetimes for the typical employee at most S&P 500 companies to make what their CEO did, or 169 years, according to data analysed by Equilar for The AP.
For the first time since the AP’s annual pay survey began in 2011, a woman is at the top of the list: Lisa Su of Advanced Micro Devices. She had compensation valued at $US58.5 million after guiding her company’s stock to the best performance in the S&P 500 for two straight years.
AP
5.35am: Boeing cutting more than 12,000 jobs
Boeing is cutting more than 12,000 jobs through lay-offs and buyouts as it suffers from a sharp drop in air travel due to the coronavirus pandemic, and more cuts are coming.
The company said that it will lay off 6770 US employees this week, and another 5520 workers are taking buyout offers to leave voluntarily in the coming weeks.
Boeing previously said it would cut 10pc of a work force that numbered about 160,000. A Boeing spokesman said the actions represent the largest number of job cuts, but several thousand additional jobs will be eliminated in the next few months.
The lay-offs are expected to be concentrated in the Seattle area, home to Boeing’s commercial-aeroplanes business.
AP
5.32am: EU unveils recovery plan
European Union chief Ursula von der Leyen proposed a 750-billion-euro post-virus recovery fund for Europe and urged sceptical member states to back it.
The global coronavirus outbreak has already thrust the EU into its deepest ever recession, and Von der Leyen’s proposal would help the worst affected countries.
But the path ahead will be long, with cost-cutting member states promising fierce opposition and Germany warning that the plan would only come into effect next year.
If passed, the proposal would be the biggest EU stimulus package in history and could see Europe-wide taxes on plastics, carbon emissions and big tech – a major power boost for Brussels.
“This is Europe’s moment,” Von der Leyen told a session of the European parliament as she announced the plan.
“We either all go it alone; leaving countries, regions and people behind … or we walk that road together,” she said. “Let us put aside the old prejudices,” she urged.
AFP
5.30am: Lufthansa rescue hits turbulence
Coronavirus-stricken airline group Lufthansa said its supervisory board was “unable to approve” a nine-billion-euro ($US9.9 billion) German state rescue over fears of over-harsh conditions from Brussels.
“Conditions currently indicated by the EU Commission … would lead to a weakening of the hub function at Lufthansa’s home airports in Frankfurt and Munich” and must be “analysed intensively,” the company said in a statement.
“Against this background, the Supervisory Board was unable to approve the stabilisation package in connection with the EU conditions.”
AFP
5.25am: Air France to cut 40pc of domestic flights
Air France-KLM will slash 40 per cent of its French domestic flights by next year in exchange for receiving seven billion euros ($US7.7 billion) in emergency coronavirus funding backed by the French state, the company’s chief executive said.
“Capacity will be reduced by 40 per cent between now and 2021, with some destinations dropped,” Benjamin Smith told shareholders at the airline’s annual general meeting in Paris.
The French government has made any bailout contingent on profitability improvements at the airline and a reduction in its carbon emissions, which have become a key target of environmental advocates.
AFP
5.20am: Trump threatens social media
President Donald Trump threatened social media companies with new regulation or even shuttering after Twitter moved a day earlier to add fact checks to two of his tweets.
Claiming tech giants “silence conservative voices,” Trump said, “We will strongly regulate, or close them down, before we can ever allow this to happen.”
And he repeated his unsubstantiated claim – which sparked his latest showdown with Silicon Valley – that expanding mail-in voting “would be a free for all on cheating, forgery and the theft of Ballots.”
The president can’t unilaterally regulate or close social media companies, as such moves would require action by Congress or the Federal Communications Commission.
Trump and his campaign angrily lashed out Tuesday after Twitter added a warning phrase to two Trump tweets that called mail-in ballots “fraudulent” and predicted that “mailboxes will be robbed,” among other things.
Under the tweets, there is now a link reading “Get the facts about mail-in ballots” that guides users to a Twitter “moments” page with fact checks and news stories about Trump’s unsubstantiated claims.
Trump replied on Twitter, accusing the platform of “interfering in the 2020 Presidential Election” and insisting that “as president, I will not allow this to happen.”
AP
ASX 200 rises 0.5pc to record close; Origin down
A strong day for Aussie shares as the ASX 200 rises 0.5 per cent to a record high close at 8532.3. Origin cuts APLNG guidance. Citi upgrades BlueScope. Rinehart lifts Lynas stake. Broker upgrade for Zip. Lendlease selling Capella. US probing if DeepSeek used Nvidia chips. Trump advisors hunt for deals as Canada, Mexico tariffs loom.
ASX soars to record high on tech, rate cut hopes
The sharemarket has jumped to a record high of 8515.7 points, amid positive leads from Wall Street after big tech reports and Reserve Bank rate cut hopes. DeepSeek will not derail Microsoft’s $US80bn AI investment this year. Zip and MinRes drop.