ASX reverses as oil slips, landlords come under pressure

An oil price rally sparked a jumped in stocks early but weakness in banks and real estate ultimately pulled the market to a 1.7pc loss.

David Rogers and Melissa Yeo

34 min read

6:07AMApril 03, 2020.

Updated 5:19PMApril 03, 2020

Suggestions that Russia and Saudi Arabia were resolving oil tensions sparked a 25pc rally in crude oil overnight. Picture: AFP.

Santos rules out equity raise
Supermarkets to post 25pc profit lift: BofA
Oil rockets on Trump tweet
Banks may cut divs, raise equity: Macq

That’s it for the Trading Day blog for Friday, April 3. Local shares clipped an early 1.7pc rally after the oil price pulled back from last night’s spectacular 25pc surge.

Still, energy names led the best performers – Oil Search and Worley the frontrunners – while consumer discretionary stocks pulled back.

Overnight in the US, the Dow rose 2.2pc, the S&P 500 added 2.3pc and the Nasdaq gained 1.7pc.

4.45pm: Landlords lead ASX sell-off

Listed real estate stocks were sold off on Friday following comments from Prime Minister Scott Morrison that a code of practice between landlords and commercial tenants was soon to be passed – with rental waivers to reflect the reduction in tenant turnover. The sector finished lower by 3.2 per cent.

Stockland fell by 7.4 per cent to $2.39, Westfield owner Scentre fell by 5.6 per cent to $1.61 and Mirvac lost 6.1 per cent to $1.99. Vicinity losses were more subdued, down by 1.4 per cent to $1.08 while GPT Group slipped by 3.6 per cent to $3.51.

Offsetting that, energy stocks managed to cling on to gains, even as crude oil futures turned down 1.5pc at the close, and WTI crude futures down by 6pc.

Oil Search added 4.6 per cent to $2.73 after hitting highs of $3.24 early, Beach Energy finished flat at $1.30 while Santos edged up by 0.5 per cent to $3.99 as it flagged potential delays on approval of its Narrabri gas plans.

Here’s the biggest movers at the close:

4.11pm: Shares slink to 1.7pc loss

Even the strongest offshore lead didn’t bode well for local stocks on Friday, hopes of a rally vanishing after landlords came under further pressure as tenants fight for a fair rent deal on closures due to coronavirus.

A record 25 per cent surge in oil prices overnight had lifted Wall Street, and pointed to a strong gain at the local open, but the ASX200 managed only to eke out a 1.6pc lift – before ultimately sliding 87 points or 1.68 per cent to 5067.5.

That’s as real estate stocks continued their moves lower – following comments from Prime Minister Scott Morrison that a code of practice between landlords and commercial tenants was soon to be passed.

For the week, the benchmark finished higher by 4.6 per cent.

3.59pm: ASX lacks conviction into the close

Once again there’s a complete lack of conviction on the part of sharemarket investors before the weekend.

The S&P/ASX has fallen 2.4pc at a 3-day low of 5022 after reversing more than 4pc from an opening high near 5154.

The index was expected to open up 2.5 per cent after surging crude oil prices pushed the S&P 500 up 2.3pc overnight.

But with month and quarter end rebalancing from asset managers out of the way, the index is now heading for its first two-day fall in two weeks.

The pullback in crude oil (-6.3pc) and S&P 500 futures (-1.3pc) is the main drag on the market today and investors are wary of adverse developments on the coronavirus pandemic over the weekend.

Consumer Discretionary (-5pc) and REITS (-4pc) are among the weakest sectors after shopping centre owners and their tenants couldn’t agree with the government on how to handle the economic impact of the pandemic.

3.29pm: AP Eagers feels sting of car sales slump

AP Eagers is the worst performing stock in the top 200 after the latest car sales data showed an 18 per cent slide.

According to the Federal Chamber of Automotive Industries, 81,690 new vehicles were bought last month, for the 24th consecutive month that sales have dropped on a year prior basis.

Shares in the car retailer are lower by 11.7pc to $3.54 – a 57pc slicing from its trading levels last month and 65pc lower year-to-date.

Meanwhile, tyre retailer National Tyre and Wheel this morning warned less vehicle use as a result of shutdowns across Australia and New Zealand was expected to drag on demand. Still, its shares are up by 2.1pc to 24.5c.

Bridget Carter 2.55pm: Flight Centre raising $500m

DataRoom | Flight Centre is believed to be making efforts to tap the market for about $500m through UBS and Macquarie Capital, with the plan to embark on an equity raising next week.

Working as the company’s adviser is Luminis Partners.

Marking soundings have occurred this week for a potential deal that will see the group raise equity at somewhere between $7.15 and $7.55 per share and it is understood that some investors have been ‘wall crossed’.

On these terms, investors would be offered shares at a discount of more than 30 per cent.

Flight Centre currently has a $1bn market value and $10m of net debt.

2.40pm: Real estate slips on latest virus measures

Real estate stocks are feeling the heat after comments from the Prime Minister regarding help for tenants and landlords affected by coronavirus closures.

Scott Morrison flagged that a code of practice between commercial tenants and landlords was “close”.

That’s spurred fresh selling in REITs – the sector now down by 3.4pc as Stockland loses 8.9pc, Vicinity sheds 4.1pc and Scentre gives up 5.5pc.

Mirvac is lower by 7.1pc while GPT group is off by 3.3pc.

Follow all of the latest at our coronavirus live blog

2.32pm: Another wild swing for the ASX

Big intraday reversals in share markets continue with the S&P/ASX 200 falling 1pc to 5204.4 after opening up 1.6pc at 5240.

The low coincided with PM Scott Morrison flagging rental cuts for retail landlords in proportion to their tenant’s lost income. He also said backpackers wanting agricultural work must first self isolate.

To be fair the Australian sharemarket has retreated since the open. But it’s clear that the economic squeeze from coronavirus is only getting worse.

2.12pm: Downturn ‘considerably worse’ than ’08: BofA

Bank of America has revised its global GDP forecasts for 2020 and they’re not pretty.

“The lack of an effective policy response to control the spread of the virus in developed markets and some emerging markets has led us to take down 2020 global growth from 0.3 per cent to minus 2.7 per cent,” says BofA Global chief economist, Ethan Harris. “This is considerably worse than the 2008-09 recession.”

Eurozone GDP is now expected to fall 7.6 per cent from minus 1.7pc previously forecast and US GDP is expected to be minus 6 per cent from minus 0.8 per cent previously forecast.

Mr Harris warns that policymakers and the public in many economies have not learned the lesson from China – the most effective policy is a quick and strict lockdown.

“Even these forecasts are at risk if either region fails to follow through on a strong, national policy of social distancing,” he says.

“The only upside risk, in our view, is either a medical breakthrough or that the disease slows in warmer weather. Neither seems likely in the near term.”

Delaying these policies not only affects the quarter in which the economy is shut down, but also means a deeper confidence shock and an even weaker post-shutdown recovery, he says.

David Swan 2.08pm: eBay adds Afterpay as dumbbell sales jump

Shoppers on online retail destination eBay can ‘buy now, pay later’ for the first time, thanks to a new deal with Afterpay.

The deal, announced Friday, marks Afterpay’s largest online arrangement to date, with 40,000 Australian small and medium businesses now gaining access to the Afterpay platform.

Afterpay co-founder Nick Molnar got his start on eBay, through his online jewellery business Ice Jewellery, which is still run by his family on eBay today.

eBay Australia managing director Tim MacKinnon said that in recent weeks his company had experienced a surge in demand for retail categories such as technology and home office supply, as well as entertainment and fitness equipment as COVID-19 continues to keep people at home.

He said computer monitor sales are up 182 per cent, dumbbell sales are up 854 per cent while paint by numbers activities are up a whopping 3,746 per cent.

APT shares last lower by 0.2pc to $20.11.

2.01pm: Arrears rising at Thorn Group

A day after the Thorn Group closed all of its Radio Rentals stores, the group has revealed an additional $12.8m in bad debts, to be written off in the group’s financial year to March 31 report.

Thorn said today the level of arrears in its business finance division had prompted the addition to debts written off or fully provided for in the year just passed.

“This, along with the impact of the Loss Given Default percentage in the provisioning model from the write offs, will incur an additional profit and loss expense of $ (7.5 million) after tax. This additional profit and loss expense will increase Thorn’s loss for the financial year,” the company said in a statement.

It reiterated that it had withdrawn previous earnings guidance and was not in a position to provide any further guidance.

John Durie 1.42pm: Offshore fundie snaps up solid Cochlear stake

Veritas, an offshore fund manager has snapped up an extraordinary 34.6 per cent of Cochlear’s $880m placement, underlining the massive dilution for retail shareholders.

In an ASX filing on Thursday the fund manager said it acquired $304.48m worth of stock.

JP Morgan pocketed $20 million for its work in the deeply discounted issue.

Veritas which previously had 540,000 shares also spent another $100m boosting its stake, to take the UK and Hong based manager’s holdings to 2.2 million shares.

It has increased its holding by four times while retail shareholders stake in the company was diluted.

Cochlear is chaired by Rick Holiday Smith who also chairs the ASX. This week the ASX loosened its rules on capital raising to make it easier for companies to raise capital without seeking prior shareholder support.

1.21pm: Worse to come for retail data: ARA

Australia’s peak body for retailers has warned there was “far worse to come” for retail sales data, after February’s read showed slight growth of 1.82pc.

Executive director Russell Zimmerman said the data was a “mild preview” of the impact of the coronavirus pandemic – predating any restrictions on movement and trade.

“Remembering the impact of coronavirus and government responses to it were in their infancy in the last week or two of February, today’s numbers are a pretty mild preview of far worse to come moving forward,” he said.

Pharmacies were they outperformer, with sales jumping 6.6pc while supermarket sales added 3.57pc and Takeaway grew by 5.05pc.

“Given we’re moving into recession – with reputable forecasts suggesting it could rival the great depression – there’s no point sugar coating the fact that as poor as these data are, we expect to see much worse, and we call on consumers and the government to support our industry in whatever way they can,” Mr Zimmerman added.

1.17pm: Chinese services PMI jumps

China’s Caixin services PMI for March has printed higher than expected, though still in contraction territory.

The measure of private service activity came in at 43, versus 39 expected and up from 26.5 last month.

That’s after the measure of manufacturing activity released earlier this week showed a surprise lift to 50.1, what some tipped as a signal businesses were getting back to normal after widescale lockdowns.

Perry Williams 1.10pm: Santos rules out equity raise

Santos says the coronavirus pandemic may delay the approvals process for its $3.6bn Narrabri gas project and has ruled out considering an equity raising to boost its balance sheet amid volatile oil market conditions.

The South Australian energy producer said an assessment report from the NSW Department of Planning had yet to be handed to the Independent Planning Commission due to the current public health crisis and social distancing requirements.

The process for holding public hearings is also “still being settled”, Santos chairman Keith Spence told the company’s annual general meeting on Friday. Once the report is received, the IPC has 12 weeks to make a determination.

Santos, which hoped to gain long awaited planning approvals for Narrabri by June, said a decision can now “reasonably be expected in 2020” suggesting a delay from the mid-year target.

An environmental impact statement for Narrabri was first submitted in February 2017 to the NSW Department of Planning. Still, Santos said it expects the project to win approval.

STO shares last up 6.3pc to $4.22.

1.01pm: Energy buoys index as gains erased

Shares have erased early gains as much as 1.7pc to trade flat at lunch – as oil futures point to a winding back of their spectacular 25pc rally overnight.

At 1pm, the benchmark is trading at 5154.3 – equalling yesterday’s close – after hitting as much as 5246.8 early on.

Still, energy names are outperforming – Oil Search up by 8pc but a marked decline from its early jump as much as 20pc.

Banking names remain under pressure on fear of cuts to dividends.

Here’s the biggest movers at 1pm:

12.44pm: Oil pact will be ‘challenging’: RBC

As the crude oil market starts to doubt a potential supply pact touted by US President Trump, RBC’s head of global commodity strategy Helima Croft says any agreement will be “challenging”.

“President Trump’s dramatic announcement stoked immediate expectations of an oil ceasefire between Saudi Arabia and Russia, however assembling the ‘coalition of the willing’ to do a cut in the 10 mb/d range will still be challenging,” she says.

“We continue to contend that the Saudi leadership is prepared to adopt the 2008-09 playbook and orchestrate a series of deep production cuts, but only if the Russians join the agreement and the United States also scales back output.”

In her view, the Kingdom could be prepared to drop output to 8.5mbd (from about 12mbd), while Moscow will likely look for some measure of sanctions relief from Washington.

Both parties will also be looking for participation from US producers, and this may prove now to be the biggest obstacle to an agreement, according to Ms Croft.

“It is our understanding the proposal put forward by Texas Railroad Commission to cut output in the state by potentially 10 per cent would be welcomed by Riyadh,” she says.

She also sees “growing market scepticism” on whether an agreement at this stage would even matter “given the degree of demand destruction” from the pandemic.

12.31pm: $100 note circulation rises to record

The amount of $100 notes in circulation rose by 3.4% to a record $39 billion in March - the biggest monthly rise since October 2008#ausbiz #ausecon #markets #auspol #commsec #Coronavirus pic.twitter.com/KZvscMNIAe
— CommSec (@CommSec) April 3, 2020

12.12pm: Bank dividend cuts to come in May: Citi

Brokerage Citi says Australian banks are likely to outline dividend cuts from May to coincide with first half results rather than the second half.

The comments by Citi analysts Brendan Sproules and Thomas Strong, follow the Reserve Bank of New Zealand this week suspending dividend payments and capital instrument redemptions, which impact the Australian major banks.

“Despite limited credit quality issues to be evident by early May, as well as the ability to absorb the NZ dividend suspension through their existing level 1 capital ratios, we believe the major banks will likely bring forward dividend cuts to May, knowing that these dividends were likely to be cut in 2H20 on higher (bad and doubtful debts),” the Citi analysts say.

They also note a decision to freeze dividends would be an “unpalatable” decision for Australian regulators to make given the reliance of many retirees on dividends for income.

Meanwhile they describe the Reserve Bank of New Zealand suspension as a “surprising, but in retrospect, one of the easier decisions for the RBNZ to make”.

“Almost all of the capital supporting the NZ Financial system is provided by offshore investors leaving ordinary NZ citizens unaffected,” the Citi analysts say.

12.08pm: ASX dips 0.5pc

It’s “risk-off” before the weekend as Australia’s sharemarket suffers another vicious intraday reversal.

The S&P/ASX 200 has steadied around the unchanged mark after turning down 0.5pc following a 1.5pc intraday rise.

As of Tuesday, the index had bounced as much as 22pc after falling 39pc to a seven-year low of 4402.5 last month.

End-of-month and quarter rebalancing by asset managers was clearly a factor, but that was only ever going to be a trading opportunity and another chance to get out.

With month end rebalancing out of the way, retail investors shocked by lockdowns and major US companies suspending buybacks, the global bounce may be running out of steam.

12.07pm: Retail sales boost ignored by ASX

Australia’s retail sales rose 0.5pc in February versus Bloomberg’s consensus estimate of 0.4pc.

The data predate the coronavirus lockdowns, so will be largely ignored by financial markets.

Still, it was good to see a solid rebound after a 0.3pc fall in January due to the bushfire crisis.

12.04pm: Crown dips on dividend delays

Shares in Crown Resorts down 1.7 per cent after it told investors on Thursday night that it needs to delay payment of its interim dividend for two weeks while it gets financing in place for the broader business.

The casino operator cautioned it may need longer if financing arrangements are not finalised.

“Given the impact of the COVID-19 pandemic on Crown’s business operations, Crown is in the process of finalising a number of new financing arrangements,” Crown said in a statement.

“On this basis, the Board has determined to defer the payment date of the FY20 interim dividend from 3 April 2020 to 17 April 2020 subject to further deferral if necessary while these financing arrangements are finalised,” the casino operator said.

Crown last traded at $7.65, down 13c.

Patrick Commins 12.02pm: Virus crushes new car sales

The coronavirus crisis crushed new car sales in March, with purchases tracking 18 per cent below the same month in 2019 despite many dealerships staying open through the health scare.

There were 81,690 new vehicles bought last month, data from the Federal Chamber of Automotive Industries showed. That was 2 per cent above the February result, but almost a fifth lower than in the same period a year before.

It was the 24th consecutive month that sales have dropped on a year prior basis, speaking to a lengthy slump for the industry which has only intensified as the epidemic triggers a sudden drop-off in economic activity.

FCAI chief executive Tony Weber said that “many dealerships have opted to remain open to maintain support for customers, particularly from a service perspective, during this difficult period”.

John Durie 11.45am: Supermarkets to post 25pc profit lift: BofA

The major supermarkets will post a 25 per cent boost in profits in the second half of this calendar year on a 13 per cent increase in sales, according to Bank America.

In a research note out today BofA analyst David Errington said Coles earnings would hit $1.8bn this year, up from $1.3bn. Woolworths earnings will hit $3.5bn.

While costs have increased they have been dwarfed from booming sales according to BofA.

Woolworths will be held back by slower Big W sales while Coles is penalised by slower convenience store sales. But both are doing well on liquor with Coles up 28 per cent in supermarket sales and 25 per cent in liquor.

Coles was trading at $16.10 in morning trade and Errington has left his price target on the stock at $18 a share.

A woman picks up a packet of toilet paper in a Woolworths Supermarket in Marrickville. Picture: AAP/ James Gourley.

11.33am: Oil rally losing steam

Well that escalated quickly – the Australian sharemarket erased almost all of a 1.6pc intraday gain amid a renewed plunge in crude oil.

The S&P/ASX 200 is currently up 0.1pc at 5154 after an early rise to 5240. Volume is 36pc below the 20-day average, so it’s more a case of buyers retracting.

The sharp intraday pullback came as WTI crude dives 7pc to $US23.58 a barrel. That follows a record 25pc rise to $US25.32 in New York trade after WTI hit a 2-week high of $US27.39 on talk of a supply windback and strategic purchases from China.

S&P 500 futures are going along for the ride, currently down about 0.8pc after an early gain.

11.22am: NextDC raise cause for upgrade: RBC

RBC has reiterated its outperform rating on data centre operator NextDC after its latest raise, tipping potential contract catalysts ahead across Melbourne and Sydney.

The group this morning confirmed it had raised $672m at $7.80 per share to accelerate growth projects, the placement said to have been covered before it was even announced to the market on Thursday.

RBC analyst Jonathan Atkin cites management indications of increased traffic as a result of COVID-19 related events as key behind his rating.

“We’ve raised FY22E/FY23E EBITDA by+12pc/+13pc, to reflect the flowthrough impact of revenue ramping in Melbourne from the 6 MW commitments contracted earlier in March

2020, and revenue billings from initial capacity at S3,” he said in a note.

RBC has an outperform rating and $10 target price on the stock.

NXT last traded at $9.48.

11.01am: ASX fades with oil, US futures

Crude oil looks to be showing its true colours now with WTI falling as much as 2.7pc at $24.65, pushing S&P 500 futures down 0.6pc and knocking the S&P/ASX 200 back to a 0.7pc intraday gain after an initial rise of 1.5pc.

There’s obviously a lot of scepticism about the Saudi-Russian 10-15mbd supply pact supposedly brokered by the US President. And it could easily be overwhelmed by the potential demand shock from the coronavirus shutdowns, given estimates of a 20mbd drop in demand.

WTI falling back below $22.91 argues against a more durable “double bottom” bounce off the matching lows near $US19.50.

There’s also important resistance on WTI crude near the overnight high of $US17.39.

With a single tweet Thursday, President Trump accomplished what decades of wars, coups, terrorist attacks and OPEC meetings hadnâ€™t. https://t.co/NZy7qEs9WZ
— WSJ Markets (@WSJmarkets) April 2, 2020

10.58am: US keeps AA+ credit rating: S&P

S&P Global has affirmed its AA+ rating for the US, with a stable outlook. The rating firm said government debt and fiscal deficits are “likely to worsen this year following the economic shock caused by the coronavirus pandemic”.

S&P expects “unprecedented fiscal and monetary stimulus will limit the economic downturn and set the stage for recovery in 2021.” S&P said it expects the US economy to contract by about 1.3pc this year before recovering by 3.2pc in 2021.

The firm said “the rapid economic policy response to the coronavirus pandemic illustrates the ability of the US’s governing institutions and political leadership to undertake timely and forceful measures during a crisis”.

Dow Jones Newswires

10.47am: Banks may cut divs, raise equity: Macq

Macquarie’s Victor German warns that in a “worst-case” scenario, Australian banks would need to “aggressively” cut dividends and raise equity capital.

“While in the previous cycle – the global financial crisis – bank losses peaked at about 82bps, we see significant downside risk in the current downturn,” he says.

Mr German has used APRA’s stress test to estimate that the “worst-case” scenario could result in about $137bn of credit losses across the majors.

“In this scenario, we estimate that banks would need to aggressively cut dividends and potentially raise $5-10bn of new equity each.”

10.11am: Oil sparks 1.7pc ASX jump

Energy stocks are surging after a record crude oil rally overnight, helping the ASX to a 1.7pc lift at the open.

Shares had been tipped to put on 2.5pc as projected by overnight futures, but caution is keeping a lid on the rally so far – at the open the benchmark ASX200 is up by 87 points or 1.7pc to 5240.8.

The energy sector is the driving force, up 9.7pc after crude oil jumped 24.7pc overnight for its biggest jump on record. Among the large energy stocks, Santos is up 13pc, Oil Search is up 20pc, Woodside is up 9pc, Beach up 8pc and Origin up 7pc.

But WTI crude futures have subsequently dropped 1.8pc to $US24.87, trimming an early rise in S&P 500 futures and restraining the S&P/ASX 200.

Financials are underperforming with the major banks up just 0.5pc-1.3pc amid expectations of dividend cuts.

10.06am: Macmahon maintains guidance

Macmahon Holdings has stood by its fiscal 2020 guidance and has experienced no material impact from the coronavirus impact.

The mining and engineering services firm said on Friday it had initiated screening protocols for employees, extended rosters to reduce the frequency of workforce changeovers, and accommodated fly-in-fly-out workers within the states in which they work due to travel restrictions in all jurisdictions in which Macmahon operates.

“There has not been a material impact on the company’s overall financial performance or on the assumptions which underpin its FY20 guidance,” Macmahon said in a filing to the ASX.

However, the firm said it will delay some previously planned capital expenditure and implement what it called cash preservation measures to retain a liquidity buffer. It said it had cash and unutilised working capital facilities of $155m at December 31.

Macmahon shares last traded at 20c apiece, 30pc down so far in 2020.

Dow Jones Newswires

9.59am: PolyNovo halted for trading update

Burns care biotech PolyNovo has requested a trading halt this morning, pending a trading update and funding.

The company, whose stock has rallied earlier this year as its treatment was used for victims of the White Island Volcano and local bushfire tragedies, said its shares would remain halted until April 7 as it finalised “an announcement on a clinical trial result, trading update and funding”.

PNV last traded at $1.67.

Gerard Cockburn 9.39am: Radio operators still making virus plan

Radio groups Southern Cross Media and Pacific Star Network have extended the suspension of their shares as they continue to assess the hit from coronavirus.

Southern Cross had initially requested the voluntary suspension on March 25 due to the pandemic, but says it is still not in a position to inform the market of its actions.

It comes after The Australian’s DataRoom on Thursday noted, Southern Cross had rebuffed private equity approaches seeking avenues to recapitalise the business.

The owner of Triple M and Hit Network radio stations said it had advanced plans to address the virus impacts and would inform the market before April 8.

Meanwhile, uncertainty surrounding the AFL and NRL seasons has prompted Pacific Star to request an extension of its shares suspension for a further two weeks.

The Melbourne-based media company has also withdrawn its earnings guidance due to COVID-19, saying it was currently reviewing staffing structures and working with stakeholders to determine its response. Following its initial request to suspend from trading on March 20, chief executive Craig Hutchison told staff to “not be alarmed” by the decision and that “many other Australian companies have been doing the same thing”.

PNW is set to resume trading on April 17.

9.30am: Oil jump set to fuel ASX rally

Australia’s sharemarket is set to jump after surging crude oil prices boosted the US sharemarket.

The S&P/ASX 20 is expected to open up 2.5pc at a 2-day high of 5285 based on overnight futures relative to fair value. That follows a 2.3pc rise in the S&P 500 as the Energy sector rose 9.1pc on a 25pc surge in WTI crude to $US24.76 after surging 35pc intraday while Brent closed up 15pc at $US29.94 after rising 40pc intraday.

The spectacular rise in oil came after US President Trump tweeted that he spoke to Saudi Arabia and Russia and that he expects them to cut production by about 10mbd or as much as 15mbd. Saudi Arabia later said it had called a meeting of the OPEC+ alliance to discuss a “fair agreement”. But the Kremlin said the conversation didn’t happen and that no production cut had been agreed with the Saudis.

WTI crude futures are up about 0.8pc and S&P 500 futures are up 0.2pc this morning, potentially helping the Australian sharemarket achieve the expected strong open. But the recent pattern of risk aversion before the weekend combined with scepticism about an oil supply pact could see the Australian sharemarket give up its gains today.

Five of the past six Fridays have been down days in the US sharemarket (the up day was due to the second US fiscal stimulus being signed) and four of the past six Friday’s have been down days in Australia.

Domestic retail sales data for February are due a 11.30am AEDT but will be largely irrelevant as they predate lockdowns, as will US non-farm payrolls data tonight.

Eli Greenblat 9.24pm: Harvey Norman in focus as payout cut

Harvey Norman shares will be in focus at the open on Friday, after the longstanding retail chain yesterday announced it was canning its planned interim dividend to save itself almost $150m as the coronavirus pandemic threatens to push the retail sector into a recession.

Chairman Gerry Harvey and chief executive Katie Page, along with the rest of its top executives, will also take a salary cut.

“In the present environment, the board believes that preserving cash is the most prudent course of action to protect shareholder value,’’ the company said.

HVN shares last traded at $2.76.

Perry Williams 9.21am: Flight restrictions hold up Wagners

Queensland construction group Wagners has joined a swag of Australian corporates withdrawing earnings guidance due to coronavirus volatility.

The company controlled by Toowoomba’s Wagner brothers said while it’s experienced minimal disruption to its Australian business, it’s struggled to sell building materials into the US, UK, Europe and New Zealand due to travel restrictions and shutdowns.

“Directions made by governments and consequential responses by clients to COVID-19, together with the duration of restrictions that may impact operations, are increasingly uncertain”, Wagners said.

“Given this and the inability to forecast earnings with any degree of certainty, the Board has decided to withdraw the earnings guidance previously issued for FY2020.”

Annual earnings before interest and tax had been guided between $12.5m and $17.5m at its half-year results on February 25.

9.13am: NextDC cheers $672m placement

Data centre operator NextDC has confirmed the success of its $672m placement, said to have received strong support.

The completion of the deal was tipped in The Australian’s DataRoom, with the deal reportedly covered before it was announced on Thursday.

In confirmation this morning, NextDC said it was issuing 86.1 million new shares at $7.80 apiece, representing a 9.4pc discount to its 5-day volume weighted average price and a 15pc discount to the stock’s last closing price.

“Achieving such a comprehensive take-up of the Placement in the current market environment again serves to reinforce the strength of investor support for NEXTDC, chief Craig Scroggie said.

“We continue to see significant growth in underlying demand for cloud services, with the success of this Placement ensuring NEXTDC does not lose critical momentum in pursuing growth opportunities.”

Mr Scroggie and all eligible directors have also committed to participate for the full entitlement in the group’s uncapped share purchase plan, where eligible shareholders can apply for up to $30,000 of new shares.

NextDC’s Brisbane head office. Picture: Supplied.

9.05am: What’s on the broker radar?

Abacus Property raised to Overweight – JP Morgan
ANZ price target cut 12pc to $20 – Bell Potter
Arena REIT cut to Equal-weight – Morgan Stanley
ALE Property raised to Neutral – JP Morgan
Charter Hall Long WALE raised to Outperform – Macquarie
Charter Hall Long WALE cut to Neutral – JP Morgan
Charter Hall Retail cut to Underweight – JP Morgan
Commonwealth Bank target price cut 7.4pc to $75 – Bell Potter
Dexus cut to Neutral – JP Morgan
GPT Group raised to Overweight – JP Morgan
Growthpoint raised to Overweight – JP Morgan
IDP Education raised to Buy – Ord Minnett
IDP Education raised to Buy – UBS
IOOF raised to Neutral – JP Morgan
Mirvac raised to Overweight – JP Morgan
NextDC cut to Neutral – Macquarie
SCA Property raised to Overweight – Morgan Stanley
Saracen Minerals rated new Equal-weight – Morgan Stanley
Scentre Group cut to Neutral – JP Morgan
Scentre Group raised to Overweight – Morgan Stanley
St Barbara rated new Overweight – Morgan Stanley
Stanmore Coal cut to Hold – Bell Potter
Stockland cut to Equal-weight – Morgan Stanley
Stockland raised to Overweight – JP Morgan
Vicinity Centres raised to Overweight – JP Morgan
Webjet raised to Outperform – Credit Suisse
Westpac target price cut 9.7pc to $17.60 – Bell Potter

8.54am: Unibail-Rodamco prices EU1.4bn in bonds

Unibail-Rodamco-Westfield, owner of the international Westfield empire, this morning announced the successful placement of EU1.4bn in bonds to strengthen its liquidity position, amid uncertainty in their centres from COVID-19 restrictions.

The group said it had priced a EU600m bond with a 5-year maturity and a 2.125pc fixed coupon, and a EU800m bond with a 10-year maturity and 2.625pc fixed coupon.

“The net proceeds from this issuance will be used for general corporate purposes, including the refinancing of debt maturing in 2020 and extending the Group’s debt maturity,” it said in a statement to the market today.

Unibail said it had raised a total of EU1.9bn this week, and that after paying its interim dividend on March 26, the group will have EU11bn in cash on hand and undrawn credit lines.

Eli Greenblat 8.35am: Treasury denies illegal conduct

Treasury Wine Estates says it has been served with a class action filed in the Supreme Court of Victoria over recent profit warnings that saw its share price tumble.

The legal action has been filed by Slater and Gordon on behalf of the plaintiff, who brings the claim on behalf of shareholders who acquired an interest in Treasury Wine shares between 14 February 2019 and 28 January 2020.

The statement of claim includes allegations of contraventions of the Corporations Act in relation to continuous disclosure and the Corporations Act and ASIC Act in relation to misleading or deceptive conduct, the winemaker said.

“TWE strongly denies any and all allegations of wrongdoing and intends to vigorously defend the proceeding.”

8.18am: Warning on super advice

The Australian Securities and Investments Commission has “significant concerns” that some real estate agents are advising tenants who can’t pay their rent to apply for an early release of their superannuation.

ASIC has written to the real estate industry warning that such advice could breach Corporations Law and attract up to five years in prison or penalties of up to $1.3 million.

The government’s coronavirus rescue package allows people to access up to $20,000 of their super early.

ASIC says financial advice must only be provided by qualified and licenced financial advisers,

or financial counsellors, not by real estate agents.

“ASIC intends to monitor this situation closely, and if contraventions of the licensing

requirements of the Corporations Act are found, ASIC will not hesitate to act swiftly to

protect vulnerable consumers.”

8.13am: Lululemon stores to stay shut

Lululemon Athletica senior leadership will cut their salaries by 20pc for the next three months as the athletic apparel company pushes the reopening dates of its stores across North America, Europe, Asia and Australia back further.

The money from the pay cuts will go toward a fund that will help pay employees facing hardships related to the COVID-19 pandemic. The activewear maker said it will keep paying employees through June 1 regardless of whether stores reopen or remain closed.

Lululemon planned to keep its US and European stores closed through April 5, but the company said stores, including those in Australia, will remain closed “until they can safely reopen.”

Dow Jones Newswires

8.05am: Iron ore stays strong

The spot price of iron ore has risen 1.8pc to $US83.50, according to CommSec.

7.40am: Skycity Sees 900 NZ job losses

Casino operator Skycity Entertainment Group says 900 of its New Zealand employees will lose their jobs if the pandemic keeps its properties closed over the next three months.

The company, which employs about 5000 people, on Friday said it is laying off 200 salaried employees and asking hourly-rate employees to take a 20pc pay cut.

Government wage subsidies in New Zealand are allowing the company to hold onto hourly-wage workers. But Skycity said it would have to lay off 700 waged employees if the dim outlook for the business doesn’t change over the next three months.

The company, which has casinos in New Zealand and in Adelaide, said it is facing a revenue loss of $NZ90 million a month.

In Australia, about 90pc of Skycity’s employees have been stood down and the company is planning to tap the Australian government’s wage subsidy program.

Skycity operates the Adelaide casino.

Dow Jones Newswires

7.25am: ASX set for early gains

A wild week for the Australian share market is set to continue with the local bourse tipped to copy Wall Street’s overnight gains in early trade.

At 7am (AEDT) the SPI200 futures contract was up 114 points, or 2.22 per cent, at 5,250.0 points, suggesting strong gains for local stocks at the market open.

Wall Street’s major indices all closed higher as an oil price surge offset a coronavirus-driven rise in US unemployment claims.

European stocks also had a strong session.

The S&P/ASX200 benchmark index finished Thursday down 104.3 points, or 1.98 per cent, at 5,154.3, while the All Ordinaries index dropped 102 points, or 1.93 per cent, to 5,188.7.

The Australian dollar is buying US60.53 cents, down from US61.84 cents as the market closed on Thursday.

AAP

7.10am: Oil fuels Wall St gains

US stocks rose Thursday on signs of potential easing in the oil price war between Saudi Arabia and Russia, raising hopes for the battered energy sector.

Major indexes pushed higher midmorning after President Trump suggested on Twitter that talks between the two feuding nations could lead to a cut in oil production. Saudi Arabia is willing to consider massive oil-supply curbs as long as other nations join the effort, The Wall Street Journal reported.

The signs that oil prices could recover some of their recent losses bolstered energy shares and the stock market more broadly, after weeks of punishing losses as the coronavirus pandemic slows economic activity.

After big losses Wednesday, stock indexes remain in the red for the new quarter.

The Dow Jones Industrial Average gained 2.2pc, about 470 points, after declining more than 900 points on Wednesday. The S&P 500 added 2.3pc, and the Nasdaq Composite was up 1.7pc.

Australian stocks are set to follow suit, with SPI futures at 7am (AEDT) pointing to an opening rise of 114 points, or 2.2 per cent.

A nearly empty Wall Street in New York. Picture: AFP

Crude prices leapt on hopes for a truce in the dispute. Brent crude oil, the global benchmark, surged 21 per cent in its largest one-day per cent gain on record, based on data going back to June 1988.

The energy sector led the S&P 500’s gains, climbing 9pc. Exxon Mobil shares rose 7.9pc, and Chevron shares gained 11pc.

Mr. Trump is meeting with the heads of some of the largest U.S. oil companies on Friday to discuss measures to help the industry, The Wall Street Journal reported. Market sentiment was also buoyed by a report that China plans to buy crude for its strategic reserves, analysts said.

The rise in stocks came even after new data showed a surge in the number of Americans applying for unemployment benefits, a sign of the deepening impact of the coronavirus pandemic on the US economy.

A record 6.6 million workers filed jobless claims last week, roughly double the number from two weeks ago. The American labour market has been hit hard as measures to contain the outbreak have sharply restricted business activity in large parts of the economy.

“The jobless numbers are certainly bad, but everyone already expected that,” said Bill Callahan, investment strategist at Schroders. “At this point there’s a lot of bad news already priced into many of the stocks, so the news flow from here will have to get much worse to see significant selling going forward.”

Overseas, the Stoxx Europe 600 index edged up 0.4pc. Asian stock markets ended the day mixed. The benchmark in Japan lost 1.4pc, while China’s Shanghai Composite rose 1.7pc.

Dow Jones Newswires

5.50am: Wall St higher as oil revives

Wall Street pushed higher after a surge in oil prices helped resuscitate beaten-down energy stocks.

The gains helped overshadow another report showing the coronavirus outbreak is forcing millions of Americans into the unemployment queue by the week.

The S&P 500 was up about 0.4pc in afternoon trading after flipping between small gains and losses shortly after the opening bell.

The Dow Jones Industrial Average rose 60 points, or 0.3pc, to 21,019, and the Nasdaq was down 0.14pc.

After yesterday’s local 2pc fall, Australian stocks are tipped to open higher. At 5.50am (AEDT) the SPI futures index was up 37 points.

Stocks took off with the price of oil, which surged more than 30pc after President Donald Trump said he expects Saudi Arabia and Russia to back away from their price war. But like oil, stocks gave up a good chunk of their initial jumps as markets weighed how definitive Trump’s comments were. He tweeted only that he expects and hopes for upcoming production cuts after talking with Saudi Crown Prince Mohammed bin Salman.

Oil producers have been continuing to pull oil from the ground to maintain their market share, even as demand for energy cratered because of widespread stay-at- home orders and other economy-damaging restrictions caused by the coronavirus outbreak. The resulting build-up of oil supplies sent crude’s price spiralling by roughly two thirds in the first three months of the year.

Benchmark US crude oil was up 22pc at $US24.71 per barrel, as of 1,30pm US eastern time. It’s rallying back after dropping below $US20 earlier this week to its lowest price since 2002. At the year’s start, it was above $US60. That helped energy stocks in the S&P 500 rally 6.3pc, by far the biggest gain among the 11 sectors that make up the index.

The S&P 500 had been down as much as 0.6pc earlier after the US government reported that more than 6.6 million Americans applied for unemployment benefits last week. That’s double the prior week’s number, which itself was nearly five times the prior record set in 1982.

The S&P 500 is still down more than 22pc for 2020 so far, and investors are preparing for companies to soon begin reporting weaker profits from year-ago levels. Earnings reporting season for the first quarter kicks off in earnest in two weeks.

5.38am: Oil rockets on Trump tweet

Oil prices rocketed after US President Donald Trump said Russia and Saudi Arabia planned to end their price war by slashing output.

But gains for Brent North Sea crude of nearly 46 per cent cooled to around 20 per cent as Russia denied it had spoken with Saudi Arabia, the world’s biggest exporter of crude.

After Trump tweeted that Saudi and Russia could slash production by up to 15 million barrels, Brent hit $US36.29 per barrel, up almost 46 per cent.

West Texas Intermediate soared around 35 per cent to $US27.39.

Gains were trimmed soon after, with Brent up 20.25 per cent at $US29.75 per barrel and WTI showing a gain of 23 per cent to $US24.98.

With gains remaining substantial over Wednesday’s closing levels, “traders are taking the view the two feuding nations … will come to some agreement in term of lowering output”, said David Madden, analyst at trading group CMC Markets UK.

Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!
— Donald J. Trump (@realDonaldTrump) April 2, 2020

Trump tweeted that he had spoken to Crown Prince Mohammed bin Salman, who he claimed had spoken with Russian President Vladimir Putin.

“I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” said Trump.

“Could be as high as 15 Million Barrels,” he added in a subsequent post. But the Kremlin denied Putin had spoken to the crown prince. “No, there was no conversation,” Putin’s spokesman Dmitry Peskov told Interfax news agency, adding that “so far” there were no plans for such talks.

5.37am: Markets in wild ride

Global stock markets went on a rollercoaster ride as investors were caught between fresh tremors on the economic front and a sudden surge in oil prices, analysts said.

A tentative rebound in European stocks seen early in the day came to an abrupt end when US jobless data fuelled fears that no amount of government efforts can shield the economy from coronavirus.

News that another 6.65 million US workers filed for unemployment benefits last week, the most ever recorded and nearly twice as many as market economists had forecast, initially also depressed Wall Street.

But just as stock markets investors seemed to be throwing in the towel for the day, US President Donald Trump engineered a dizzying recovery in oil prices that rose by more than 30 per cent after he said he expected Russia and Saudi Arabia to end a price war by slashing crude output.

There was some confusion as to who had been talking with whom — especially after the Kremlin denied that President Vladimir Putin had spoken to Saudi Crown Prince Mohammed bin Salman — but oil market enthusiasm still spilt over into equities.

“Stocks are showing some resiliency as the energy sector is rallying amid a surge in crude oil prices off a near two-decade low,” said analysts at the Charles Schwab brokerage, adding that equity trading remained “choppy”.

Thursday’s stock market recovery followed a global rout Wednesday as the human and economic toll from the coronavirus rose.

London closed up 0.5 per cent, while Frankfurt and Paris both rose 0.3pc.

Asia earlier saw a mixed session, with Tokyo down 1.4 per cent, while Sydney and Kuala Lumpur shed two per cent apiece and Singapore dropped 0.2 per cent. There were also losses in Wellington and Manila.

But Hong Kong rose 0.8 per cent and Shanghai rallied 1.7 per cent, with Seoul and Bangkok up more than two per cent. Jakarta put on more than one per cent.

Investors are now a “bundle of nerves”, said AxiCorp’s Stephen Innes.

AFP

5.32am: Saudis seek urgent OPEC+ meeting

Leading world crude exporter Saudi Arabia made a surprise call for a meeting of the OPEC+ oil producers to “stabilise the oil market” amid a price war.

“The kingdom calls for an urgent meeting of OPEC+ and a group of other countries with the aim to try and reach a fair deal to restore balance to the oil market,” said a statement carried by the Saudi Press Agency.

The move followed a phone call between US President Donald Trump and Saudi Crown Prince and de facto leader Mohammed bin Salman.

“This call comes in the framework of the kingdom’s continued support for the global economy under these exceptional circumstances and in estimation of a call by US President Donald Trump and US friends,” the statement said.

Saudi Arabia had blamed Russia for refusing to agree to an additional output cut of 1.5 million barrels per day on top of reduction already in place of 1.7 million bpd.

As a result, the kingdom opened its crude oil taps, deciding to raise its production to a record 12.3 per cent from April 1.

It later said it will export at least 10 million bpd in April, which will be raised to a record high 10.6 million bpd to flood the global markets.

The price war sent prices crashing to 18-year lows, putting a tremendous pressure on US shale oil, which is expensive to produce.

AFP

5.30am: Oil rockets over 30pc

Oil futures rocketed over 30 per cent after US President Donald Trump tweeted that he expected Russia and Saudi Arabia to end a price war by slashing crude output.

Brent North Sea crude soared as high as $US36.29 per barrel before pairing gains to stand up almost 25 per cent at $US30.82. WTI surged to $US27.39 per barrel and shortly after was 25.4 per cent higher at $US25.47.

Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!
— Donald J. Trump (@realDonaldTrump) April 2, 2020

Vladimir Putin spokesman’s Dmitry Peskov later told Interfax news agency the Russian leader and the Saudi crown prince did not talk.

But the hint of good news send benchmark Brent North Sea and West Texas Intermediate crude prices soaring more than 30 per cent after Trump’s tweet.

AFP

5.25am: Boeing in voluntary lay-off plan

Boeing unveiled a voluntary worker lay-off program, telling employees that it hoped to avoid “other workforce actions” as the aviation industry reels from the coronavirus crisis.

The initiative was announced by Boeing Chief Executive David Calhoun, who said such belt-tightening was needed amid the hit to the industry caused by the pandemic.

“It’s important that we start adjusting to our new reality now,” he said. Boeing’s financial picture was already a bit cloudy prior to the coronavirus outbreak because of the crisis surrounding the 737 MAX, which has been grounded for more than a year following two fatal crashes.

But the COVID-19 crisis has made Boeing’s situation significantly worse, grounding most commercial airline travel and putting major carriers in a life-and-death fight to go forward.

A Boeing official said the company expects “several thousand employees to take the voluntary lay-off package or retire,” adding that the company would continue to recruit in some targeted areas, including for defence and space programs

A Boeing factory in Washington. Picture: AFP

AFP

5.18am: US trade gap falls

The US trade deficit tumbled in February to the lowest level since 2016 as exports fell and imports fell more. The politically sensitive gap in the trade of goods with China narrowed in February when the world’s No. 2 economy was locked down to combat the coronavirus outbreak.

The Commerce Department said the gap between what the U.S. buys and what it sells abroad dropped 12.2pc to $US39.9 billion in February, the lowest since September 2016. Exports fell 0.4pc to $US207.5 billion. Imports skidded 2.5pc to $US247.5 billion.

The goods gap with China fell 17pc to $US19.7 billion on a 13pc drop in imports. In February, the United States ran a $US61.2 billion deficit in the trade of goods such as aircraft and appliances. But it ran a $US21.3 billion surplus in services such as education and tourism.

5.15am: Record 6.6m seek US jobless aid

More than 6.6 million Americans applied for unemployment benefits last week, far exceeding a record high set just last week, a sign that lay-offs are accelerating in the midst of the coronavirus.

The job cuts are mounting against the backdrop of economies in the United States and abroad that have almost certainly sunk into a severe recession as businesses close across the world.

The figure for last week is much higher than the previous record of 3.3 million reported for the previous week. The surging lay-offs have led many economists to envision as many as 20 million lost jobs by the end of April. The unemployment rate could spike to as high as 15pc this month, above the previous record of 10.8pc set during a deep recession in 1982.

Many employers are slashing their payrolls to try to stay afloat because their revenue has collapsed, especially at restaurants, hotels, gyms, movie theatres and other venues that depend on face-to-face interaction. Auto sales have sunk, and factories have closed.

Stay-at-home orders, imposed by most US states, have intensified pressure on businesses, most of which face rent, loans and other bills that must be paid.