ASX adds $50bn as shares surge 2.9pc
The local market extended its two-day rally to 5.1pc in its best day since the start of April as financials surged.
- Value stocks lead market surge
- Helloworld surges as tourism stocks lift
- Afterpay hits $50
- Coke sales drop by a third
That’s all from the Trading Day blog for Tuesday, May 26. The ASX hit 11-week highs in a 2.9 per cent rally to add $50bn in market value and take its two-day lift to 5.1 per cent.
Investors looked past a brewing cold war to focus on further reopening of the economy, helping the Aussie dollar higher too. In company news, Afterpay surged to $50 a share early while Coca-Cola felt the sting of weak sales during the pandemic. US stocks return to trade overnight after a holiday, with futures up 1.9pc.
Glenda Korporaal 8.45pm: The casino king of Macau
The death of the 98-year-old gambling entrepreneur Stanley Ho marks the end of an era for Hong Kong and the Macau gambling industry.
One of Asia’s richest men, with an estimated fortune of some $10bn, Ho was the father of James Packer’s former Macau business partner, Lawrence Ho.
But while both were wealthy, the Ho family was unlike the Packer family given that Stanley had 17 children with four different women or “wives” as they were called in Hong Kong, despite their varying legal status.
While James was only one of two children of Kerry Packer, and heir to his father’s fortunes, Lawrence grew up in Canada (his mother was Stanley’s second wife), and was always having to distinguish himself from his father, being one of only many Ho children.
Unlike James, who had to share his father’s fortune with his only sister, Lawrence had to vie for a slice of his father’s wealth, spread among a long list of mainly sisters: Pansy, Daisy, Maisy, Josie, Florinda, Laurinda and Angela.
Damon Kitney 8.11pm: Macau gambling boss, James Packer and success
James Packer will never forget the day in 2006 when Macau gambling king Stanley Ho’s blessing launched the billionaire’s Asian gaming joint venture with the man he came to call his brother, Stanley’s son Lawrence.
Stanley Ho’s flagship SJM Holdings – one of the world’s most lucrative gaming businesses valued at about $US6bn ($9.2bn) – had a contract with his son’s Melco Group to run casinos in Macau, but that day, the Macau gaming magnate simply tore it up and wished his son and his Australian business partner the best of luck in their new adventure.
When they met again later that year in Hong Kong, Ho senior gave Packer a lucky gold coin.
It was the last time Packer saw Stanley Ho, one of Asia’s richest men and the legend of the Macau gaming industry who died on Tuesday in Hong Kong at the age of 98 after years of battling ill-health.
But for Lawrence Ho, the independence from his father was a welcome blessing.
“Getting out of working with my family and my father’s company was worth any price … My father was very legendary. But it was not so much about him. It was the people surrounding him that were very problematic. The management team,’’ Ho junior said in an interview with this author for the biography of Packer’s life, The Price of Fortune that was published in 2018.
John Durie 7.25pm: Morrison answers calls for reform
In backing skills training, Scott Morrison has answered the long-running calls from business for reform and in the process opened a debate in the national cabinet as to just who should run the revamp. The Prime Minister’s National Press Club speech on Tuesday also opened a debate on industrial relations reform — which, importantly, was later backed by the ACTU.
The COVID-19 crisis could open the way for an overhaul of the Federation in terms of reshaping just how power is shared between the states and Canberra thanks to the progress made by the national cabinet process.
Morrison’s obvious strength is in his speeches and he cleverly opened doors to see how the states, business and the unions will respond. And that will in turn dictate whether he can transform the goodwill evident into reform.
Business Council of Australia boss Jennifer Westacott, a long-term advocate, said the changes announced by Morrison should help remove the cultural bias in Australia against VET colleges and set the country up for lifetime skills training.
Centre for Policy Development chair Terry Moran welcomed the move to activity-based funding, which is based on the hospitals model, so an activity like nursing would have common funding.
The next step, Moran said, was for Canberra to take policy control of the system to help drive reform but that is where the states come into the bargain.
6.45pm: Singapore recession fears
Singapore will pump an additional $S33bn ($35.3bn) into relief measures for businesses and workers hurt by the Covid-19 pandemic amid signs that the economy is on pace for its worst annual performance on record.
The fiscal package unveiled Tuesday is aimed at softening the impact on businesses and workers from the government’s ongoing restrictive measures to contain the spread of the coronavirus, Finance Minister Heng Swee Keat said in parliament.
The spending, which brings the total amount the government has allocated to pandemic-related stimulus packages to more than $S96bn, came after government data earlier in the day pointed to a grimmer-than-expected picture for the Singaporean economy this year. Authorities now expect gross domestic product to contract between 4 per cent and 7 per cent, from a decline of 1 per cent to 4 per cent predicted two months ago.
The new forecast, if it materialises, will be the country’s worst contraction since independence in 1965.
Dow Jones Newswires
Read more: Singapore braces for worst-ever recession
Robyn Ironside 6.12pm: Rex domestic route strife
Regional Express airlines’ decision to trumpet its $200m plan to compete with Qantas and Virgin Australia on major domestic routes, could cost the carrier millions of dollars in fines.
Labor Senator Tony Sheldon has asked the Australian Securities and Investments Commission to investigate whether Rex breached the Corporations Act by failing to inform the ASX of its plans before telling the media.
Under new penalties introduced by the federal government last year, breaches of corporate disclosure requirements carry fines of up to $10.5m, or 10 per cent of annual turnover.
Ben Wilmot 5.29pm: Dexus backs Taronga Ventures
Prop tech company Taronga Ventures has closed the latest investment round of the RealTech Ventures Fund, with the group saying it had received “significant investment” from three strategic global investors, including office landlord Dexus.
The company also won backing from European real estate investment house PATRIZIA AG and real estate agency CBRE.
The fund invests into “globally scalable” companies that can enhance or challenge traditional real estate and infrastructure. It operates in sectors including office, retail, industrial, residential property and new areas like built-to-rent.
It has a portfolio including energy and sustainability, construction technology, mobility technology and is also focused on tenant and customer health and wellbeing.
Dexus chief executive Darren Steinberg said the COVID-19 pandemic had accelerated the demand and need for technology and innovation to deliver enhancements to buildings for the health and wellbeing of occupants in their workplaces.
5.15pm: Bank rally broader than just the big 4
Banks were the key driver of the market strength on Tuesday, but still remain well below their February highs.
Westpac soared 6.3 per cent to $16.30 as ANZ lifted 6 per cent to $16.52 and NAB rose by 5.7 per cent to $16.64. Commonwealth Bank underperformed, adding a more moderate 3.9 per cent to $61.31.
Beyond the majors, Suncorp added 4.5 per cent to $9.05, Bendigo Bank added 6.3 per cent to $5.95 and AMP eked a gain of 2.2 per cent to $1.60.
Bridget Carter 4.31pm: CBA could fund Virgin debt
DataRoom | The Commonwealth Bank of Australia is said to have shown some interest in funding the ongoing operations of Virgin Australia on behalf of the new owner, in the likely event that the successful bidder for the airline wants to refinance the carrier’s debt.
It comes as two bidders are due to be short-listed to buy the airline on Friday by voluntary administrator Deloitte in the contest to secure the airline that has $6.8bn of debts.
Expectations are mounting by some that any suitor wanting to buy the failed carrier will want to make its own arrangements for debt for ongoing funding of the business, paying out the existing creditors and starting afresh.
Debt may also be sought for a bid as part of a proposal that some estimate could fall in the vicinity of about $4bn to take control of Virgin Australia.
The $2bn worth of Virgin bonds have been trading at about 15c in the dollar, so a suitor could pay out the bond holders and refinance the debt elsewhere at a later stage.
Read more: CBA eyes Virgin debt deal
4.12pm: Shares surge 2.9pc
Shares have closed the session at their best level of the day, up 2.9 per cent.
Economic recovery hopes are driving the rally, led by the major banks which clocked gains more than 6 per cent.
By the close on Tuesday, the benchmark ASX200 was up 164 points or 2.9 per cent to 5780.
The lift adds to yesterday’s rally – the benchmark up 5.15pc in just the past two days.
4.02pm: Macau magnate Stanley Ho dies at 98
Macau casino magnate, Stanley Ho, known as the gambling king, has died, aged 98.
Local media in Hong Kong reported his death this afternoon.
Mr Ho is widely regarded as the driving force behind the rise of Macau to rival Las Vegas.
3.45pm: Cann lifts on offshore supply deals
Cann Group shares are lifting by 14 per cent in afternoon trade after inking deals to send its cannabis oils and dried flowers into the UK and Europe.
Cann is Australia’s largest medicinal cannabis company, with a cultivation facility near Mildura in Victoria and the deals are with two offshore players – Austral Health in the UK and German-based iuvo Therapeutics.
Chief Peter Crock said the deals were in line on its strategy to be a “producer of choice” for the domestic market and elsewhere.
“We have been able to demonstrate an ability to supply a broad range of products from specific medicinal cannabis cultivars to unique finished product formulations that meet our customers’ specific end-market requirements,” he said.
CAN shares are up by 14.4pc to $1.19.
Nick Evans 3.29pm: Fortescue plots return to ‘normal’
Fortescue Metals Group has set a date for the return to more normal operations at its Pilbara mines as the immediate threat of the coronavirus in WA recedes, saying it will abandon extended rosters by June 22.
Fortescue, like other major miners, extended the length of time employees worked on site as the coronavirus pandemic hit, doubling so-called mining “swings” from a two week on, one off, patter to four weeks followed by a two-week period of leave.
The company said on Tuesday it will return to shorter shift rosters from June 22, in line with the relaxation of temporary internal movement restrictions in WA.
Fortescue said it will also relax restrictions on non-critical employees working on its sites.
3.24pm: Value stocks leading market surge
Value stocks have led an exceptionally strong rise as much as 2.5pc in the S&P/ASX 200 today with real estate, financials, energy and consumer discretionary firmly in favour.
“Value stocks have led for most of this new bull market,” says MST Marquee senior analyst Hasan Tevfik.
Writhing the real estate sector the shopping mall operators are soaring, with Unibail Rodamco Westfield up 13pc, Stockland up 9pc and Scentre, up 5.6pc.
The banks are making a comeback with Westpac up 5.3pc, ANZ up 4.9pc and NAB up 4.4pc.
In the energy sector – which has some of the deepest value – Oil Search is up 4.4pc, Whitehaven is up 5.5pc and Woodside is up 3.1pc.
It’s a similar story in the consumer discretionary sector, where Star Entertainment is up 5.6pc, Flight Centre is up 9.1pc and Webjet is up 5.5pc.
In the growth-rich healthcare sector, CSL is up just 2.1pc, ResMed is up 1pc, and Cochlear is up 1pc.
It comes after value neared its deepest relative performance gap versus growth this month.
“Dividend, value and leverage factors (are) all in the green and growth and momentum (are) in the red,” said MS equity strategist Chris Nicol.
“Banks, energy and real estate all strong within value factors.”
3.12pm: Aristocrat will be stronger post-virus: MS
Poker machine maker Aristocrat is set to emerge from the COVID-19 pandemic a stronger player as its investments in design and development set it apart from its peers, according to Morgan Stanley.
Equity analyst Elise Kennedy writes that the company’s market leadership can be accelerated over the next years thanks to its strong balance sheet, and leverage to digital earnings growth.
While its near term earnings multiple “seems high”, Ms Kennedy writes that the longer-term proposition is compelling.
“Digital growth supports a higher valuation multiple, given its higher growth versus land-based business. ALL has a competitive advantage in Social Casino from its land-based IP that should help it grow above market and take incremental market share,” she writes.
ALL last traded up 2.4pc to $26.48.
2.44pm: Retail growth offsetting travel losses: ANZ
Consumers may be forgoing holidays due to the government’s travel restrictions, but they are still spending money across other categories, according to ANZ.
In its latest survey of observed spending, the bank says personal spending is in positive territory compared to the previous year, continuing to recover from the April low.
“Across categories, very large losses in travel-related and dining/takeaway spending across Australia have been offset by strong growth in services and grocery spending,” economist Adelaide Timbrell writes.
She adds that fashion sales have almost fully recovered while home-related spending still remains strong.
“Strict lockdowns in Victoria continue to dampen spending, as Victoria’s retail spending growth remains below other States and total ANZ-observed personal spending is lower than last year in Victoria. Spending in other States has improved over May,” Ms Timbrell says.
2.34pm: Engineering will have swoosh recovery: Citi
Citi says the engineering and construction sector is gearing up for a deep earnings trough this year, with recovery to be in a “swoosh” shape rather than a rapid spring-back.
In a note on the sector, analyst James Byrne rates key industry players according to his base, bear and bull scenarios – tipping further equity raisings to come from Worley, Downer and NRW Holdings if the worst case plays out.
He rates the stocks based on their exposure to different segments of the market such as US Chemicals (which he sees as a challenged sector), mining metals and gold (predicted to be V-shaped in recovery) and mining bulks (forecast to be stable).
In his base case, he assumes a deep 2H FY20 trough extending into 1H FY21, “relating to deferred discretionary spend by clients, margin impacts from productivity issues, and any contract renegotiations. Corporates begin to allocate capital again from ~FY23, sooner for miners. Some working capital build but not onerous.”
As such, NRW is his top pick for its near pure contract mining exposure, while Worley is also a buy for its exposure to the energy value chain and Monadelphous as a buy for the strength of its balance sheet.
Downer is Neutral for its “deteriorating creditworthiness”, adding he couldn’t rule out an equity raise after its recent debt issue.
2.03pm: Major banks climb
The major banks are driving continued strength on the local market, with Westpac notching gains as much as 4.6pc.
All of the big four are outperforming bar Commonwealth Bank – NAB up by 3.9pc as ANZ trades up 4.4pc and Westpac by 4.6pc.
Commonwealth is a more moderate 1.7pc higher.
That’s helping the ASX200 to new daily highs of 5731.9 – a 2.1pc gain for the day.
If the benchmark can hold these gains it will be the best closing level since 5939.6 on March 10.
1.25pm: PBoC to provide targeted support
China’s central bank will provide more targeted financial support for companies grappling with the coronavirus pandemic, People’s Bank of China Governor Yi Gang said.
Those measures include extending the deadlines for small companies to repay loans, enhancing government guarantees for small businesses and helping them issue more bonds, Mr Yi said in an interview with state media released by the PBoC on Tuesday.
When asked about Beijing’s financial-relief efforts compared with those of other major economies, Mr Yi said that since February, Chinese authorities have implemented relief policies worth 4.9 trillion yuan ($US686.6bn) by injecting extra funds into the financial system and encouraging banks to extend cheaper loans.
Chinese banks have rolled over more than CNY1.2 trillion worth of loans for small firms, he said.
China’s economy shrank 6.8pc in the first quarter, the first year-over-year contraction in decades.
Dow Jones Newswires
1.02pm: Shares rally past 5700
The local share rally is picking up ground at lunch, as traders watch developments from the Prime Minister’s speech to the National Press Club.
At 1pm, the ASX200 is higher by 1.8 per cent or 102 points to 5717.7, just shy of highs of 5726.7.
All sectors are higher, led by a 4.3pc jump in real estate stocks, while energy and financials lift by 2.5pc.
The major banks are leading the rally – Westpac is up by 4.4pc, NAB by 3.8pc, ANZ by 4.4pc and Commonwealth a more moderate 1.7pc.
Here are the biggest movers at 1pm:
12.40pm: Aussie dollar spikes ahead of PM speech
The Aussie dollar is in focus as Prime Minister Scott Morrison begins his speech to the National Press Club.
Ahead of the speech, AUDUSD was heading higher to asmmmuch as US65.72c but as he begins, the dollar is slipping, now up a more moderate 0.2pc to US65.58c.
Mr Morrison says the problem with the budget is not the economy but the health crisis, reinforcing that jobs had been on a solid path before the pandemic hit.
12.25pm: Fitch downgrades Macquarie
Ratings agency Fitch has downgraded its outlook for Macquarie Bank to negative from stable, saying its earnings will come under pressure from the coronavirus- related economic downturn.
Fitch expects the bank’s business customers to have trouble repaying loans amid weak conditions from the coronavirus pandemic. High unemployment will add to the impact.
Bad loans may take six to 12 months to emerge, according to Fitch. The risk of bad loans, coupled with low interest rates, would put pressure on earnings during the next two years, the agency said on Tuesday. The downgrade does not affect Macquarie’s covered bonds.
Macquarie shares were last trading up 1.3pc to $107.52. The bank’s share price has dipped by 22.13 per cent since January 1 amid a wider market downturn.
AAP
11.54am: Investors flock to Aussie shares
Investors are flocking back to Australian shares, with shares up 1.7pc to highs of 5713.2.
It’s now up 3.7pc in the past two days, on track for its best 2-day gain in almost 4 weeks.
It comes as S&P 500 futures rise 1.4pc versus 1.2pc as of the Australian open today and 0.5pc at the Australian close on Monday.
The US index is now within reach of a key 3000 mark, which could serve to fuel a further rally.
“If traders can put some headroom above that level, the view that this rally is only a bounce from oversold will most certainly give way to the wall of money argument triggering another considerable round of bear market capitulation,” AxiCorp strategist Stephen Innes says.
The sector leads are much the same as earlier today, with real estate, consumer discretionary, energy, communications, industrials, financials and tech outperforming.
11.25am: Helloworld surges 20pc as tourism lifts
Travel agent Helloworld is on a tear in morning trade, as tourism names cheer the prospect of further government support and easing restrictions.
The group is up 23 per cent in morning trade to hit as much as $2.10 – a 213pc turnaround from its 67c lows in late March.
Still, the stock is just half that of its trading price from the start of the year.
Across the rest of the sector, Flight Centre is up 9.3 per cent as Corporate Travel is adding 5.6pc and Webjet is lifting by 8.2pc.
Qantas is also joining the rally – last up 4.9pc to $4.05, its highest level since early March.
11.10am: Reopening optimism trumps geopolitics
The local bourse is extending gains to 1.3pc, at 5686.7 – up 3.3pc this week and 29pc above the March 23rd trough of 4402.5, while the S&P 500 has bounced 35pc.
Perpetual’s head of investment strategy Matt Sherwood says investors remain more optimistic about economic reopening than they’re concerned about geopolitical tensions and elevated valuations.
But he warns that current US sharemarket valuations are now at levels which have historically culminated in real total returns of around 2 per cent per annum for the next five years.
Bridget Carter 10.57am: Nine’s NZ exit a positive: MS
DataRoom | Analysts at Morgan Stanley have backed the move by Nine Entertainment to sell its New Zealand media business that was bought for $1.1bn in 2003, despite only reaping $1 from the divestment.
“At this point in time, we view Nine’s exit from New Zealand as an incremental positive.”
Fairfax Media, which is now owned by Nine Entertainment, purchased the business for a price that equated to ten times its earnings before interest, tax, depreciation and amortisation.
Morgan Stanley said at that time, the bank’s view from analysts was that the logic was questionable. But, in defending the move, the operations exceeded its forecasts for the first few years.
Read more: Nine had too much Stuff: MS
10.51am: Miners left out as ASX adds 1.1pc
Australia’s S&P/ASX 200 is rallying by 1.1 per cent to 11-week highs of 5678.9 in the first hour of trade, consistent with further offshore gains while Singapore, the UK and US were closed.
The sector breakdown is mostly risk-on today, with the energy, consumer discretionary, industrials and tech sectors outperforming, along with shopping mall operators and banks.
Woodside is up 2.5pc, Aristocrat is up 2.8pc, Transurban is up 1.1pc and Stockland is up 3.4pc. Afterpay rose 3pc, briefly hitting a record high of $50.01, and NAB is up 1.7pc.
Miners are the odd ones out with BHP up 0.3pc, Rio Tinto up 0.3pc and Fortescue down 0.7pc.
Bridget Carter 10.39am: Western Areas content with Panoramic stake
DataRoom | Western Areas’ acquisition of a 19.9 per cent stake in Panoramic Resources is an investment rather than a precursor to an acquisition for the time being, according to Citi analysts.
As Panoramic Resources carried out an equity raising worth about $90m on Monday and revealed Western Areas took part in the raise, paying $29m to gain 19.9 per cent through a placement.
The analysts say that the stake is not without risk, buying Western Areas an option for less than 5 per cent of its market value and essentially precluding another holder coming on board.
“For now, we see this as an investment for Western Areas, rather than a precursor for an acquisition,” say analysts.
Read more: Western Areas takes Panoramic stake
10.27am: Value signals flashing: MS
Morgan Stanley equity strategist Chris Nicol says while it’s too early to bet on a rotation to value stocks, there are several signals that warrant close attention.
Eurozone tail risks have diminished because of the French-German proposal for a EUR500bn recovery fund financed by joint debt issuance and distributed as grants, a “bold move bigger and more powerful than expected”.
China now has a “significant (budget) deficit” narrative, which will support cyclical exposures particularly in the materials and resources sectors which also feature heavily in the value cohort, and the US economy is reopening after lockdowns.
Mr Nicol notes that Value is nearing its deepest-ever relative performance gap to growth, and while “more assured signs of a robust recovery will be needed to see sustained value outperformance … given the extent of underperformance, we think some value exposure is
warranted from a risk mitigation perspective”.
Morgan Stanley’s pick of stocks for both Value and Quality includes Fortescue, CC-Amatil, BHP, Harvey Norman, Rio Tinto, Ansell, Sandfire Resources, Super Retail Group, SmartGroup and AGL.
10.22am: Afterpay hits $50
Afterpay shares jumped 3.1pc to a record high of $50 a share in early trading.
The buy-now-pay-later darling has had an incredible run up after losing 80c of its value in the coronavirus wipe-out.
Since then, it has risen 525pc or by 6.25 times in just over two months.
While boosted substantially by the buy-in from Chinese heavyweight Tencent, the stock continues to enjoy incrementally positive newsflow.
It is now trading 56pc above Bloomberg’s consensus price target of $32.25 a share.
Read more: Rally makes Afterpay founders billionaires
10.11am: Shares lift to 11-week highs
Shares are headed higher to set to a new 11-week high, even without direction from US trade overnight.
At the open, the benchmark ASX200 is up by 27 points or 0.48 per cent at 5642.6.
A 1pc lift in US futures seems to be helping somewhat, even after US and UK markets were closed overnight for bank holidays.
Locally, all sectors are headed higher aside for a slight dip in Utilities. Energy is outperforming as oil prices lifted while tech is again outperforming thanks to continued strength in Afterpay.
9.59am: Confidence rebound continues
ANZ’s weekly consumer confidence read has edged higher for an eighth consecutive week, described as “the long climb from the bottom”.
For the week, confidence edged up by 0.4 per cent, now up 42pc from its low point in March, when fears of the pandemic were the most extreme.
The measure is now 15pc below the level at the end of February.
In its release this morning, the bank said confidence continued to recover, with people more optimistic about future finances but sentiment was still below average.
ANZ Roy-Morgan Australian Consumer Confidence continues to recover, with people more optimistic about their future finances. Sentiment is still below average, however. #ausecon #ausretail @roymorganonline @DavidPlank12 pic.twitter.com/ZparEwjomj
— ANZ_Research (@ANZ_Research) May 25, 2020
9.41am: What’s on the broker radar?
- Infomedia raised to Buy – Bell Potter
- Insurance Australia raised to Outperform – Credit Suisse
- Macquarie Telecom rated new Positive – Evans and Partners
- Smartgroup raised to Add – Morgans
9.35am: Offshore gains to help ASX higher
Australia’s sharemarket is poised to hit a fresh 11-week high after strong gains in offshore markets.
Overnight futures relative to fair value suggest the S&P/ASX 200 will open up about 1pc at near 5672 points.
While Singapore, London and US markets remained closed for holidays, S&P 500 futures are up 1.1pc versus a 0.5pc rise when the Australian market closed on Monday.
The Euro Stoxx 50 rose 2.3pc with Germany’s DAX up 2.9pc after Germany’s IFO survey showed business expectations rose to 80.1 vs 75 expected.
Fuelling expectations of further easing by the ECB when it meets next week, Bank of France Governor Villeroy de Galhau said that with inflation low there is room to innovate and act “rapidly and powerfully”.
Brent crude oil rose 1.1pc to $US35.53 a barrel after Russia said it had cut production by 2mbd as per its recent supply commitment in the OPEC+ deal.
Australian PM Scott Morrison’s National Press Club speech on industrial relations will be in focus today.
On the charts, the index may keep rising rapidly to 6000 points, based on an ascending triangle pattern. However the recent break of resistance near 5550 has not been confirmed by an increase in volume.
If the index turns down at all today, traders may become concerned about a loss of momentum.
9.21am: Kyckr to raise $10m
Regulatory tech developer Kyckr has announced its intention to raise $10m to support its growth during the pandemic, including support from rich-lister and cornerstone investor Richard White.
The company said it was raising $8m in a placement to new and existing investors, alongside a share purchase plan to existing shareholders to raise $2m.
It said the coronavirus pandemic had accelerated the adoption of online financial services, “which has heightened the need for robust digital customer verification solutions”.
“The new funds will be used to build on Kyckr’s recent international sales growth as digitised customer verification products are proving to be a critical solution for financial services providers in light of tightening regulations globally relating to Anti-Money Laundering and Countering Terrorist Finance,” it said.
9.09am: Bligh lifts stake in Medibank
Medibank director and former Queensland Premier Anna Bligh has lifted her stake in the health insurer by almost $15,000 as it takes a hit from recent volatility.
In a filing to the market, Medibank said Ms Bligh, now also the chief executive of the Australian Banking Association had bought 5300 shares in the group on market last week at an average price of $2.80.
The purchase takes her holdings to 44,623 ordinary shares.
MPL shares hit a 12-month low of $2.45 in late March, and last traded at $2.81.
8.54am: Coke sales drop by a third
Australian bottler Coca-Cola Amatil said Tuesday that volumes declined sharply in April and the first three weeks of May due to coronavirus lockdowns.
The company didn’t offer specific guidance for the rest of the financial year, but said it anticipates having a clearer view at its half-year result in August.
The company said group volume declined by 33pc in April and 26pc in the first three weeks of May. Margin declines were more pronounced given shifts in channel and portfolio mix, particularly in its main market in Australia, Amatil said.
It expects tight cost management and reduced capital expenditure to partially mitigate the earnings impact.
“While it is encouraging to see lockdown restrictions gradually being eased and some green shoots of improvement in trading conditions emerge, the reality is that economic recovery will take time and uncertainty remains,” managing director Alison Watkins said.
She added that December quarter trading will be imperative to the company’s full fiscal-year performance.
Dow Jones Newswires
8.35am: Coronado restarts US mines
Coronado Global Resources said it will restart its two biggest US mines by the start of June, after running down stockpiles to maintain contracts with customers during restrictions to slow the spread of the coronavirus.
Coronado said it would produce enough metallurgical coal from the Buchanan and Logan mines to fulfil domestic contracts and limit exposure to volatile European and Brazilian markets.
“Buchanan will continue to export hard coking coal to the Asian markets and will identify new opportunities across Coronado’s diverse global customer base,” Coronado said. “Thermal coal will no longer be produced at these mines.”
The Buchanan and Logan mines account for more than 90pc of Coronado’s US saleable output. Management said the Greenbrier mine won’t restart production at this time but will be assessed regularly in line with market demand.
Dow Jones Newswires
8.05am: Oil steadies
Oil prices edged up overnight in sluggish trading with holidays in Singapore, London and New York, as rising concerns over demand recovery offset supply cuts.
Brent rose to $US35.81 a barrel, while US oil was flat at $US33.74 a barrel. Both are down around 45 per cent so far this year.
There is no US settlement because of the Memorial Day holiday.
Reuters
7.22am: ASX tipped to rise
Shares appear set to rise in early trade on the ASX after business confidence improved in Europe and restrictions eased in Japan and Spain.
At 7am (AEST) the SPI 200 futures contract was higher by 47 points, or 0.84 per cent, to 5,673.0, indicating a gain in early trade.
While financial markets were closed overnight in Singapore, Britain and the United States for public holidays, investors found hope elsewhere. Germany’s Ifo institute survey for May showed business morale rebounded in May after its worst decline on record in April.
More optimism came from Japan and Spain. Prime Minister Shinzo Abe lifted the state of emergency for Tokyo and four remaining areas while the government is also considering fresh stimulus worth 100 trillion yen ($US930 billion). Spain announced it will lift a quarantine requirement on overseas visitors from July 1, which may help its tourism sector.
Meanwhile, in Australia, Prime Minister Scott Morrison will appear at the National Press Club in Canberra. Coca Cola Amatil will have its annual general meeting.
The Australian dollar was buying US65.46 cents at 7am (AEST), up from US65.24 cents.
AAP
7.04am: Air NZ bracing for loss
Air New Zealand said it expects to suffer an underlying loss for its 2020 financial year because of the pandemic, but continued to withhold a specific forecast.
The airline will book a non-cash impairment charge of $NZ350 million to $NZ450 million that stems from the grounding of Boeing 777 aircraft, it said on Tuesday.
Losses on hedges due to reduced fuel consumption will total between $NZ85 million and $NZ105 million, the airline said. Redundancies of about 4000 employees will cost $NZ140 million to $NZ160 million.
Air New Zealand said its cash reserves have fallen to $NZ640 million from $NZ1 billion before the outbreak of COVID-19.
It said it hasn’t yet drawn from a $NZ900 million government loan and monthly cash outflows will be reduced by $NZ50 million to $NZ60 million in the 2021 financial year.
Dow Jones Newswires
6.40am: Branson’s Virgin Orbit fails
Richard Branson’s Virgin Orbit failed on its first attempt to launch a test satellite into space aboard a rocket carried aloft by a Boeing 747 and released over the Pacific Ocean off the coast of Southern California.
The inaugural launch had appeared to be going well until moments after the rocket was dropped from beneath the left wing of the jumbo jet dubbed Cosmic Girl.
“We’ve confirmed a clean release from the aircraft. However, the mission terminated shortly into the flight. Cosmic Girl and our flight crew are safe and returning to base,” Virgin Orbit said in its official Twitter commentary on the launch.
There was no immediate word on what went wrong.
The highly modified jumbo jet took off from Mojave Air and Space Por t in the desert north of Los Angeles and flew out just beyond the Channel Islands, where the drop occurred.
The rocket was supposed to fall for a few seconds before the first of its two stages ignited and hurtled it down the coast toward the South Pole for insertion of its demonstration payload into a low Earth orbit.
The purpose of the flight was to gather data on every step of the launch process rather than to have a useful satellite in orbit; the demonstration payload was described as an inert mass and the intended orbit was very low to avoid contributing to the problem of space junk.
Virgin Orbit, headquartered in Long Beach, California, is a sister company of Virgin Galactic, the company Branson founded to carry passengers on suborbital flights into the lower reaches of space. Virgin Galactic is preparing to begin operations in southern New Mexico.
AP
5.50am: Mining explorers ‘to struggle for funding’
Australian firms exploring for minerals and not yet involved in production are likely to struggle to raise financing for most of this year, after funding in the March quarter hit a four-year low, BDO says.
The advisory firm’s report, which analyses regulatory filings, covers early- stage miners seeking to raise capital to develop their assets. It showed that, amid uncertainty linked to the coronavirus epidemic, financing cash inflows for the three months to March plunged 48 per cent to $834 million from December, and 8.0 per cent from March 2019.
About 43 per cent of the 650 companies surveyed had less than $1 million in cash at the end of the quarter.
“The thing for exploration companies is that they don’t generally have revenue … It’s almost saying they have lost 48 per cent of their income,” said Sherif Andrawes, BDO’s Global Head of Natural Resources.
“It’s not as bad now as it’s going to be. When we get to the June quarter, I expect we will see less cash, less being spent on administration, less being spent on exploration,” he said. A revival could come as the global economy steadies near year-end.
Reuters
5.45am: Sanofi to sell stake in Regeneron
French pharmaceutical giant Sanofi said it planned to divest its stake in US biotech firm Regeneron which is valued at around $US13 billion.
Sanofi, which holds around 20.6 per cent in Regeneron, however insisted it had no intention of halting its partnership with the American firm.
The sale will see a repurchase by Regeneron of $US5 billion of its stock from Sanofi, the French company said in a statement.
“Sanofi remains committed to continuing our collaboration with Regeneron which remains an integral part of our overall strategy, and this decision was fully aligned with Regeneron,” said Paul Hudson, the chief executive Officer of Sanofi.
He said the proceeds from the transaction would be used to further expand Sanofi.
“We believe the proceeds from this transaction will help further our ability to execute on our strategy to drive innovation and growth,” he said.
According to Sanofi, the companies have had a successful and longstanding clinical and commercial collaboration dating back to 2003 “that has resulted in five approved treatments to date with additional candidates currently in clinical development.” Hudson earlier this month caused a stir when he said that Americans would have priority to any coronavirus vaccine developed by Sanofi.
AFP
5.40am: Markets climb on lockdown easing hopes
Global stock markets climbed, buoyed by the prospect of further easing of coronavirus lockdowns despite sharp increases in case rates in some countries such as Brazil.
On the downside, an upsurge in Sino-US tensions, especially over Chinese plans to introduce a national security law in Hong Kong, made for some caution.
Over the weekend, US President Donald Trump imposed travel limits on Brazil, now the second worst affected country after the United States, reminding markets that while the coronavirus outlook is better, the crisis is far from over.
Japan meanwhile lifted a state of emergency in Tokyo, while Spain and Italy are preparing to reopen their borders to kickstart their crucial tourism sectors.
Greece, Germany and the Czech Republic are also on course to allow bars and restaurants to resume service, while primary schools in parts of England are due to restart from next month.
“Global investors are continuing to map the reopening of global economies to the overall risk narrative,” said Stephen Innes of AxiCorp.
“The global stock markets are moving higher with positive changes in mobility data. According to recent mobility data, the global economy has taken a giant step toward normality in the last week.”
In European trade Monday, Paris rose 2.2 per cent and Frankfurt jumped 2.9 per cent, helped by a more positive German business confidence report for May compared with a disastrous showing in April.
A nine-billion-euro rescue package for Lufthansa helped shares in the airline take off by 7.5 per cent, while shares in Bayer jumped 7.8 per cent after reports it was close to a mass deal with American plaintiffs who say their cancers were caused by unit Monsanto’s Roundup weedkiller.
Public holidays in Britain and the US meant trade was relatively low key however.
After yesterday’s sharp gains, the Australian stock market is tipped to open higher. At 6am (AEST) the SPI futures index was up 47 points, or 0.8 per cent.
In Asia, Tokyo ended 1.7 per cent higher, Sydney added more than two per cent, Shanghai put on 0.2 per cent. Hong Kong recovered from a morning drop to edge up 0.1 per cent, after losses of more than five per cent Friday and despite violent weekend protests at China’s plan to impose a security law that would effectively suppress the former British colony’s pro-democracy movement.
AFP
5.34am: Lufthansa bailout approved
Berlin will climb aboard airline giant Lufthansa as a shareholder in a nine-billion-euro ($US9.8 billion) rescue if investors and competition authorities agree, as the coronavirus-stricken carrier faces an arduous years-long recovery from the pandemic.
Following the broad strokes of a scheme dangled last week, the economy ministry and Lufthansa said the German government would offer a three-billion-euro loan and 5.7 billion of “silent” capital, as well as buying 20 per cent of the company for 300 million euros.
If Lufthansa faces a hostile takeover, “the economic stabilisation fund (WSF) may also increase its stake to 25 per cent plus one share,” the company said, which would offer Berlin a blocking minority.
The final deal reflects concerns within the group and among conservative members of Chancellor Angela Merkel’s coalition government about excessive, enduring government influence over the former flag carrier.
Lufthansa will commit to repay the state’s “silent” capital injection, plus interest, in exchange for the WSF selling its stake on the market by December 31 2023.
“Before the coronavirus pandemic, the company was operatively healthy and profitable and had good prospects for the future,” the economy ministry said in a statement justifying the massive support.
If Lufthansa fails to pay interest on the state’s capital, Berlin would also be entitled to claim five per cent of its shares.
AFP
5.32am: EU banks ‘can weather crisis’
An EU banking regulator said a preliminary assessment of the coronavirus’ impact shows that overall, lenders should successfully withstand an expected jump in bad loans.
In the wake of the global financial crisis in 2008-2009, regulators required increases in the amount of capital banks hold to survive severe economic downturns.
The European Banking Authority (EBA) said the region’s banks “entered the health crisis with strong capital and liquidity buffers” and that “this capital buffer should allow banks to withstand the potential credit risk losses …” The EBA, which carries out annual “stress tests” to see how banks would fare during different types of crisis, said its assessment was based on last year’s exercise.
It said that between the funds amassed during previous years and regulatory changes adopted during the crisis, the capital buffers of European banks was on average around five percentage points above the required level.
AFP
5.30am: Vespa wins copycat case
Rome Piaggio, the Italian company that makes the world-famous Vespa scooter, says it has won a legal case against a Chinese copycat design.
“A design registered by a Chinese party (... has) been declared invalid by the invalidity division of the European Union Intellectual Property Office (EUIPO),” Piaggio said in a statement.
The Chinese design was presented at last year’s edition of Milan’s motorcycle fair EICMA, and removed after a complaint from Piaggio, the company said. In its decision, EUIPO found that the Chinese design “closely reproduces features” of the original Vespa Primavera model and “lacks individual character”.
Therefore it “must be invalidated,” the EU body said.
The Chinese design was registered in the name of Chen Huang, the EUIPO decision showed.
DPA
5.20am: Ruling clears way for VW settlement
A German court has ruled that Volkswagen must buy back cars from owners of its diesel cars equipped with software that evaded emissions testing – but consumers must accept the current value of the car based on the mileage they drove since buying it, not the purchase price.
Volkswagen said the decision would clear the way for settlement of remaining consumer claims in Germany. The decision affects some 60,000 individual claims brought by car owners there; around 262,000 others have already been covered by an 830 million euro ($US904 million) class-action settlement.
“For the majority of the 60,000 pending cases, this ruling provides clarity,” the company said in a statement. “Volkswagen is now seeking to bring these proceedings to a prompt conclusion in agreement with the plaintiffs. We will therefore approach the plaintiffs with the adequate settlement proposals. The aim is to relieve the burden on the judiciary as quickly as possible.” The case that was decided Monday involved a plaintiff who bought a Volkswagen Sharan model in 2014 that was equipped with the software that turned off emissions controls during testing. He had sought the full purchase price but the court ruled he must accept less due to depreciation related to the distance he drove. The individual case is expected to serve as a guideline for others. Volkswagen was caught cheating by U.S. authorities in September 2015 and has since paid more than 33 billion euros in fines and settlements worldwide. Two executives went to prison in the United States and more are facing criminal proceedings and investigations in Germany.
Volkswagen still faces lawsuits from investors.
AP
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