SkyCity, Dexus lead as ASX rises 0.8pc

Shares touched 5-day highs but faded at the close, led by outperformance in Dexus on takeover talk, while BHP traded ex-dividend.

SkyCity led the market higher on Thursday as the ASX hit a 5-day high. Picture: Mike Burton.

• WiseTech founder sells down stake
• BHP moves to cut debt balance
• Super not a cyclic policy: Keating
• SkyCity profit dives, no payout

That’s all from the Trading Day blog for Thursday, September 3. Australian stocks rallied to 5-day highs but faded to 0.8pc gain at the close after another record-breaking night on Wall Street, where the Nasdaq (up 1.0pc) and S&P 500 (up 1.5pc) set new highs and the Dow punched above 29,000, adding 1.6 per cent.

Ex-dividend drag from BHP, Altium, NIB and Perpetual took some gloss off the rally, while Xero and WiseTech slipped as their founders sold down their holdings.

Joyce Moullakis 8.31pm: US-China feud must end: John Key

Former New Zealand Prime Minister Sir John Key believes the US and China must stop feuding to ensure the world economy can emerge from the COVID-19 turmoil in good shape.

Sir John said he was worried about a “breakdown” in relations between the US and China and the implications for the global economy’s ability to bounce back from the pandemic. He also expressed concerns about the fallout for smaller markets including NZ and Australia.

“There is a growing anti-Chinese sentiment in the world. It’s not just the United States,” he told a Hamilton Wealth online client event this week.

“Taken to the extreme it could force … countries like Australia and New Zealand to choose.

“That is a very real possibility and I think that would be a pretty negative thing.”

Sir John is adamant a better solution is improved diplomatic relations between the US and China, setting aside some differences and the risk of retaliation over political decisions.

Read more

Ben Wilmot 7.38pm: Mayfair 101 founder claims he has backing

Mayfair 101 founder James Mawhinney claims he has the backing of investors in the $80m IPO Wealth fund for a restructuring, following a court hearing on Thursday that heard concerns about the transfer of funds to companies he controls.

In the Victorian Supreme Court, Justice Ross Robson said investors were “very, very concerned as they stand to lose a great deal of money” following the latest report from provisional liquidator Dye & Co.

Pressure is mounting on the Mayfair 101 empire as the prospects of it getting up a mega-project to turn Dunk Island and Mission Beach into a $1.5bn tourism mecca are receding, with the corporate regulator winning separate interim injunctions against Mr Mawhinney.

That case was in the Federal Court on Wednesday, and the Australian Securities & Investments Commission said it was still investigating after Grant Thornton was last month appointed as provisional liquidators to M101 Nominees Pty Ltd, which had funded the tourism play.

The $80m IPO fund bought interests in tech companies destined for future listings. But when it halted redemptions in April, fund trustee Vasco Trustees called in receivers Dye & Co in late May.

In court on Thursday, the fund’s trustee and the corporate regulator raised issues about Mr Mawhinney promoting a plan to transfer assets into a new vehicle.

Ben Wilmot 7.08pm: CGI Glass Lewis against Cromwell board additions

A move by high-profile corporate raider Gary Weiss and businessman Joe Gersh to be elected to Cromwell Property Group’s board has taken a knock with CGI Glass Lewis recommending against them.

The push for their appointment has been driven by dissident shareholder ARA Asset Management and won backing from rival proxy house Ownership Matters, ahead of a meeting later this month.

But CGI Glass Lewis dismissed the play by ARA, which is also mounting a proportional takeover of Cromwell.

“Taken alongside the third straight nomination of Dr Weiss, we consider ARA’s current effort feels like a somewhat stagnant retread in several key respects,” CGI Glass Lewis said.

“In this regard, we find ARA’s seemingly benign election to nominate only two members to a continuing board of eight in the spirit of “proportional representation” borders on irrelevance. Put directly, if the dissident’s offer is fully successful, ARA would be in a position to effectively remake the board as it sees fit, despite providing investors no meaningful alternative strategies, no acknowledgement of the underperformance of the funds it presently manages and only a fractional exit at a discount to current NTA and substantially all closing prices between February 2013 and February 2020,” it added.

The proxy adviser argued the appointment of Mr Gersh and Dr Weiss — both of whom would represent the interests of ARA — would be “significantly hampered” by the fact that ARA, in the midst of a potentially transformative proportional bid, had offered “substantially no alternative strategies” for the company.

ARA “roundly criticizes” Cromwell’s gearing, but fails to offer even high-level alternatives to the status quo, CGI said. It has also chided Cromwell for backing a Polish fund, but did not spell out what it would do with the assets in Poland if it obtained its preferred ownership position and proposed representation.

ARA had also lamented Cromwell’s purportedly languid distribution profile and simultaneously castigates the company for paying distributions in excess of operational cash flow, but CGI said it was doing so without detailing how operational cash flows could be sustainably increased or what distribution growth rate would be appropriate for Cromwell.

“Instead of addressing these issues, based on available information and in the simplest of terms, we consider ARA’s platform seems to be that its representatives will develop a plan to develop a plan,” CGI said.

“While that methodology may have been reasonable if strict proportional representation were the only issue at stake, we believe this approach remains woefully inadequate in the context of an effective control offer from a direct Cromwell competitor with a comparatively weaker record of value creation and a suite of managed funds presently sporting very large discounts to net asset value,” it concluded.

The proxy house said Cromwell had “clear issues” to address over its nebulous strategic review and rising gearing levels, but it did not believe it would be in the interest of unaffiliated investors to support the election of representatives of ARA at this time.

Earlier this week rival proxy advisor Ownership Matters told its clients to back a bid by Dr Weiss and Mr Gersh to be elected to the Cromwell board.

The $2.7bn company, led by Paul Weightman, last week reported an operating profit lift of 27 per cent to $221.2m, even as the coronavirus pandemic crisis struck its investments, including a controversial $1bn Polish shopping centre portfolio.

“OM opines it is reasonable for ARA, as a 26.7 percent Cromwell securityholder, to hold a level of board representation approximate to its equity ownership. If ARA’s board nominees are both appointed, they will have two directors on a board of eight directors, equivalent to 25 per cent of the board,” the proxy advisor said.

6.06pm: Money Cafe: Recession, Future Fund, house prices

Here’s this week’s Money Cafe. Wealth editor James Kirby and InvestSMART’s Alan Kohler discuss recession … or something else entirely? Why the Future Fund is cashing up. Can we believe these house price numbers?

Listen to the podcast for the details.

Don’t forget to send your own questions to James Kirby and Alan Kohler via [e-mail]

5.27pm: Count Financial class action filed

Commonwealth Bank of Australia said it has been notified that class action proceedings have been filed against recently sold financial advisory business ­- Count Financial Limited by Piper Alderman in the Federal Court of Australia.

“The proceedings relate to commissions paid to Count Financial and its authorised representative financial advisers in respect of financial products (including insurance) and certain obligations of its financial advisers to provide ongoing advice in the period 21 August 2014 to 21 August 2020,” CBA said.

CBA said it will continue to support and manage customer remediation matters arising from past issues at Count Financial and has provided an indemnity to CountPlus Limited of $300m.

Count Financial was a wholly owned subsidiary of CBA until 1 October, when it was acquired by CountPlus Limited.

4.11pm: Shares fade from 5-day highs

The local market touched 5-day highs but faded at the close, buoyed by strength in the major banks.

At the close, the benchmark ASX200 was up 50 points or 0.82 per cent to 6113.2.

The banks put on between 0.8pc to 1.6pc, while Magellan jumped 4.1pc and SkyCity soared by 7.4pc to $2.48 on its results.

On the downside, Xero and WiseTech both took a hit as its founders sold down their stakes – Xero shed 2.5pc while WiseTech reversed early losses to finish up 1.1pc to $29.69.

Glenda Korporaal 3.33pm: Crown safety concerns prompted 2012 staff pull

Crown Resorts pulled some staff out of China in 2012 following concerns about their safety, its former international high rollers boss Jason O’Connor has told the NSW Gaming inquiry.

Appearing for the second day at the hearing, Mr O’Connor, who spend 10 months in jail in Shanghai in 2016 and 2017, told the inquiry that “an event” had occurred in 2012 which led to Crown deciding to pull some of its staff out of mainland China.

“An event in China gave rise to us deciding to bring some staff out of China,” he told the inquiry.

Mr O’Connor, who is still an executive with Crown, now working on planning for its new casino at Barangaroo in Sydney, told the inquiry on Wednesday that he had received an email from a staffer in March 2014 containing a warning from a Crown customer in China that Chinese authorities were about to make arrests regarding people involved in gambling and sending money out of the country.

CWN last up 3.7pc to $9.43.

Read more: Crown tells of ‘event’ before China staff pullout

Ben Wilmot 1.48pm: Aussie office stock attractive for PE

The attractiveness of Australian office stocks and the development and funds platforms they offer for expansion have been put on display by a report that private equity giant Blackstone is seeking a large scale target in Dexus.

JPMorgan analyst Ben Brayshaw said in the event of M&A, there would be premiums to current prices of 25-30 per cent for large-cap vehicles with heavy office exposure, reflecting fundamental value and stamp duty efficiencies. “Although near-term uncertainties exist, private equity may be prepared to look through this,” he said.

JPMorgan says office valuations are unduly bearish and he pointed to Mirvac and GPT as other potential stocks that could be rerated.

“Less risk in Australia also implies less outward shift in cap rates, especially for prime assets in Sydney and Melbourne,” JPMorgan said.

The analyst also pointed to a public-to-private disconnect emerging. “We believe Australian large-cap REITs have substantial property platforms with typically above-average asset quality, low to moderate gearing and where applicable material intangible value in funds management and development pipelines,” he said.

Macquarie Equities analysts Darren Leung and Stuart McLean dubbed any deal “non-imminent” but said there were implications for Dexus.

They said unlisted property markets appear to be transacting high quality office assets at book value, as Dexus has pointed out during reporting season.

But it cautioned that office values are likely to decline further which would impact net tangible asset backing. The next data point for asset values will be a sale by Dexus of a stake in Sydney’s Grosvenor Place stake with bidders in the second round.

DXS shares are up 4.4pc to $9.10 in afternoon trading.

Read more: Blackstone eyes Dexus as it searches for takeover

1.42pm: PayPal no competition for Afterpay: BP

Afterpay bull Bell Potter has moved to allay some concern of the entry of PayPal into the buy now, pay later sector, noting the sector pioneer is “uniquely different”.

PayPal’s ‘Pay in 4’ product was unveiled earlier this week and has sparked selling across the sector as investors weigh the threat to sector given its broad customer base.

Despite that, Lafitani Sotirou raises his target price on Afterpay to $99.10, from $96.70 and highlights that the entry of heavyweight payment players such as Mastercard, Visa and AMEX into the sector hasn’t curtailed the company’s growth as yet.

“We do see PayPal as the most credible new entrant of the group, however providing credit isn’t new for PayPal and we see APT’s model as uniquely different – for example APT’s directory generates over 15m referrals back to retailers each month and APT runs marketing campaigns for retailers,” he says.

APT shares are higher by 0.8pc to $83.19 in lunch trade, but remain down 6pc for the week.

Read more: Afterpay halves losses as customer numbers double

1.32pm: China services growing slower: Caixin

A private gauge of China’s services-sector activity expanded last month, but at a slower pace, as domestic demand continued to recover from coronavirus-driven shocks.

The Caixin China services purchasing managers index fell to 54.0 in August from 54.1 in July, Caixin Media and research firm Markit said Thursday. The reading was above the 50 mark that separates expansion from contraction, making it the fourth straight month of expansion in activity.

Higher sales were largely driven by firmer domestic demand, but new export orders fell for the second month in a row, Caixin said.

“The pandemic continued to impact external demand, with the measure for new export business remaining in contractionary territory, dragging down total demand,” said Wang Zhe, senior economist at Caixin Insight Group.

The strong expansion in services activity and sales at home led companies to expand their workforce numbers for the first time in seven months, said Caixin.

Dow Jones Newswires

1.06pm: Mineral Resources rises to another record

Mineral Resources has gone from strength to strength to strength since revealing Andrew ‘Twiggy’ Forrest crept up to 15pc of its share register last Friday.

Shares in the lithium/nickel/iron ore miner are up 5.4pc to a six-year high of 89c in lunch trade.

1.01pm: Shares build to 5-day high

Shares are building to daily five-day highs at lunch amid outperformance in the major banks.

At 1pm, the ASX200 is higher by 64 points or 1.06 per cent to 6127.5.

Commonwealth Bank is higher by 1.1pc as Westpac trades up by 2pc, ANZ lifts by 2.2pc and NAB adds 2pc.

BHP is the biggest drag on the market as it trades ex-dividend, with its shares down 1.7pc.

Elsewhere, Xero is slipping by 3pc after founder Rod Drury sold down his holdings, while SkyCity is leading the market after an earnings beat.

Here’s the biggest movers at 1pm:

12.20pm: Buy QBE, sell ASX: Goldmans

Non-bank financials took a bigger hit in the August reporting season versus the broader benchmark, notes Goldmans, with investors less willing to look through the uncertainty of COVID-19.

The broker notes that results were on-balance negative for the sector, amid a tougher outlook for general insurance and private health insurance, but that current valuation dispersion presents some opportunities.

Analyst Ashley Dalziell highlights QBE as a Buy alongside Suncorp, Computershare and Pendal, noting valuation support alongside underlying momentum, while he is negative on ASX, Platinum Asset Management and Medibank.

“In names where uncertainty around COVID impacts was most acute, post August we feel risks are clearer in QBE (direct costs manageable, underlying momentum in-tact) and Computershare (rate-linked earnings bottoming, +10pc underlying growth into FY21),” Mr Dalziell says.

“Beyond this however, meaningful COVID-related uncertainty remains across much of our coverage in Medibank/NIB (risks around October 1 rate increase), IAG and to lesser extent Suncorp (business interruption test cases), ASX (trajectory of rates volumes), Challenger (investment losses, sales demand) and Link Administration (further revenue weakness plus management changeover).”

11.41am: Trade balance falls to $4.6bn

Australia’s July trade balance fell to $4.61bn from a downwardly revised $8.15bn in June, undershooting Bloomberg’s consensus estimate of $5.35bn.

Exports fell 4pc versus an expected 3pc fall. Imports rose 7 per cent versus an expected 8pc rise.

Eli Greenblat 11.04pm: Myer inks Amazon parcel collection deal

Myer will turn click & collect counters at its stores across the country into Amazon post offices with a deal struck between the nation’s biggest department store and the world’s biggest retailer to open Amazon Hub locations.

It will mean that shoppers making purchases on Amazon, whether it is something from a rival retailer or any of the other millions of vendors on the site can choose the option of having the package delivered to a Myer store as a click & collect option.

Myer announced the partnership with Amazon Australia on Thursday, with hubs to open across 21 stores from next Wednesday.

MYR shares last traded up 0.9pc at 23.7c.

10.38am: WiseTech founder sells down stake

WiseTech rich-lister Richard White has sold down a $10m stake in the logistics technology developer, citing a need for diversification.

In a filing to the market this morning, WiseTech said the latest sale at $28.50 apiece was a part of a larger trading program by Mr White to “enable some diversification of his assets”, with limits on daily trade volumes to reduce market impact.

Mr White currently holds voting control of 46.67pc of the company’s total issued share capital, with plans to trim that to 45pc under the trading program, but said he was committed to the company and was intent to remain a substantial, long-term shareholder.

“As we continue to execute on our market penetration strategy, it is pleasing to see interest from new, long-term investors wanting to be part of our growth journey. This is why it is important to enhance the liquidity of our stock through an orderly process and in a way that will benefit all of our shareholders,” Mr White said in a statement.

The sale follows a $198m block trade by Xero founder Rod Drury.

WTC last traded down 2.49pc at $28.63.

10.11am: Shares jump to four-day high

Shares jumped to a five-day high early, as offshore optimism spurred all sectors higher.

In opening trade, the ASX200 was higher by 53 points or 0.87 per cent to 6116.2.

CSL and the major banks are driving the rally, while Afterpay bounces back after some weakness yesterday – up 3.5pc.

Gains have been led by coronavirus value trades, with SkyCity Entertainment up 5.6pc, Dexus up 3.8pc, Flight Centre up 3.3pc, Webjet up 2.2pc and Bendigo Bank up 1.4pc.

Dexus is rising 4.6pc on speculation Blackstone may be weighing up a takeover deal, while Xero takes a 1pc hit after a selldown from its founder Rod Drury.

10.07am: Bubs completes $28m placement

Goat milk infant formula maker Bubs will return to trade this morning, after completing a $28.3m raise to accelerate global growth.

The company said its institutional placement was heavily oversubscribed, with shares offered at 80c apiece.

A non-underwritten share purchase plan to raise a further $10m will be launched next week.

“Our first priority will be to progress our announced strategy to accelerate SAMR registration for China manufacture of Bubs Goat Infant Formula made from 100 per cent Australian goat milk,” chief Kristy Carr said.

“This ‘Created by Bubs’ localisation strategy is capable of replication into other markets with similar barriers to entry.”

Read more: Bubs to raise $38m after China manufacturing deal

10.00am: Starpharma wins gov’t COVID-19 grant

Starpharma Holdings says it has won backing from an Australian government medical research fund to expedite development and commercialisation of its patented nasal spray for use in preventing the spread of the coronavirus,

The Australia-listed pharmaceutical firm on Thursday said it had been awarded $1m by the Australian government’s Medical Research Future Fund Biomedical Translation Bridge program.

Starpharma says it was one of five recipients of COVID-19 specific funding, which was allocated to projects capable of achieving a substantial and rapid impact on the pandemic within 12 months.

Starpharma said its SPL7013 nasal spray has potential to prevent acquisition and transmission of the coronavirus. Its broad-spectrum antiviral nature could also play a role for other respiratory viruses and future pandemic preparedness, it said.

The firm said SPL7013 is the active ingredient in Starpharma’s VivaGel antibacterial vaginosis products sold in the UK, Europe, Asia, Canada, Australia, and New Zealand. It is already manufactured at commercial scale, allowing for rapid market entry in other applications, it added.

Starpharma shares last traded at $1.63, up 35pc in 2020.

Dow Jones Newswires

9.51am: ASX to join global rally

Australia’s share market should react positively to strong offshore leads but trading will be cautious ahead of tonight’s US weekly jobless claims data and Friday’s US non-farm payrolls data.

Overnight futures versus fair value suggest the S&P/ASX 200 will open up 0.6pc at a 4-day high of 6100 after value stocks led the S&P 500 up 1.5pc to a record high close of 3508.8.

The 200-day moving average at 6130.2 is an obvious intraday target with S&P 500 futures up 0.2pc this morning, but the S&P/ASX 200 may fade after testing that level.

US President Trump’s order to review federal funding to NYC, Washington DC and Portland is a potential concern but it hasn’t affected US futures so far.

A bigger concern is the closeness of the US election race, based on averages of betting odds, though so far the US market has reacted positively to stronger betting on Trump.

Domestically, Victoria looks to be at risk of extending its current stage four lockdowns, which would be bad for the economy and coronavirus value trades.

Also, a steady stream of insiders continue to sell down shares in their companies, the latest being Xero and WiseTech.

9.26am: Services PMI falls back to contraction

Services activity took a hit in August, largely due to lockdown measures being reimposed in Victoria, as demand contracted from any previous recovery.

The latest Commonwealth Bank purchasing managers index (PMI) report for August fell back into contraction levels at 49, from July’s expansionary read of 58.2, the first decrease in three months.

“The implementation of new social distancing measures in Victoria was a principal factor weighing on Australian service sector activity in August. Following two months of solid growth, services activity fell modestly,” the bank said.

“The hit to sales was more apparent, with total new business inflows declining at one of the fastest rates since the survey started over four years ago, though not as severe as seen during the initial impact of the pandemic.”

It adds that external demand continued to deteriorate, with foreign orders falling at the quickest rate since May.

#PMI data showed #Australian services business activity returning to a decline in Aug amid lockdown measures reimposed in #Victoria. Demand was adversely impacted, with new business inflows falling after two months of growth. More here https://t.co/2ekilMDv0a pic.twitter.com/gzHStZn7JB

— IHS Markit PMIâ„¢ (@IHSMarkitPMI) September 3, 2020

9.22am: Evolution upgraded, Pointsbet cut

• Costa cut to Sell – Morningstar
• IOOF raised to Overweight – JP Morgan
• Evolution raised to Neutral – Macquarie
• Nufarm raised to Hold – Jefferies
• Nufarm raised to Neutral – Macquarie
• Pointsbet cut to Hold – Ord Minnett
• Reliance Worldwide cut to Hold – Morningstar
• South32 raised to Buy – HSBC

9.14am: Waislitz buildings Thorney holdings

Billionaire Alex Waislitz has boosted his stake in his Thorney Technologies fund with an on-market purchase worth $25,500.

In a filing to the market this morning, Thorney said Mr Waislitz had bought 85,000 shares at 30c apiece, taking his total holdings to more than 62.4 million.

Shares in the fund last traded at 30c, but recently touched 12-month highs of 33.5c after outling strength from exposure in buy now, pay later stocks in the past three months.

Thorney Technologies posted a $200,000 net profit on Tuesday morning, compared with a $22.5m result a year earlier, though Mr Waislitz said the company’s net tangible assets had increased markedly in value since the beginning of the new financial year.

Thorney chairman Alex Waislitz. Picture: David Geraghty, The Australian.

David Ross 9.06am: Super not a cyclic policy: Keating

Former prime minister Paul Keating has blasted suggestions that the rise in the superannuation guarantee be delayed, saying the Liberal party has “put a cleaver” through the savings program.

The architect of the superannuation program, introduced to Australia in the wake of the 1991 recession, said now was not the time to be delaying an increase to super.

“In an economy like this you want everyone pulling along. You want everyone trying and having a go, the last thing you want is some bitchy performance from the Liberal party,” he said in an interview with ABC’s Radio National.

“Superannuation is a structural change not a cyclic policy, you don’t take it down when things are bad and lift it up when things are good. You want superannuation tugging away at this economy now.”

Mr Keating said it was all the more important to ensure a growth in the rate of superannuation given how 600,000 Australians had drained their long term savings in recent months.

“What the Libs are up to is to pull the plug out of the bath and turn the tap off at the top of it. We’ve got the fourth biggest group savings in the world the best personal savings scheme and these monkeys want to destroy it,” he said.

8.57am: Eclipx firms focus on leasing

Fleet leasing group Eclipx says it has completed its simplification plan and is solely focused on its core fleet business, after the divestment of its GraysOnline and Right2Drive businesses last year.

In a business update ahead this morning, the group said it had divested all non-core businesses and had reduced operating expenses by its $15m target, with corporate debt below $170m.

It said new business writings in corporate operating leasing continue to track at between 70pc and 80pc of average pre-COVID-19 levels, “reflecting the desire of some clients to seek lease extensions as a substitute for renewals or new business writings”.

Meanwhile novated monthly volumes were above 80pc of pre-COVID-19 levels.

Read more: Eclipx may be takeover target after selling Right2Drive

8.25am: BHP move to cut debt balance

BHP says its board has approved a global multi-currency subordinated note repurchase plan, targeting US dollar and euro subordinated notes issued in 2015 and subject to an aggregate cash spend cap of $$US1.9 billion.

The multi-currency plan, which will be funded from surplus cash, aims to reduce the group’s gross debt balance, reduce associated interest costs and enhance its capital structure.

7.50am: Recovering greenback dents gold price

A rebound in the US dollar drove a slide in gold and silver prices, highlighting a risk to this year’s booming rally in precious metals.

Most actively traded gold futures for December delivery slid 1.7 per cent to $US1,944.70 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have wobbled since hitting a record near $US2,070 early last month, though they are still up about 28 per cent for the year.

Gold’s precious-metal peer silver, meanwhile, slid 4.4 per cent to $US27.395, extending a recent period of outsized volatility.

The haven metals are among the market’s best-performing assets in 2020, lifted by the economic uncertainty caused by the coronavirus and the historic monetary support from global central banks in response to the pandemic. Investors tend to buy precious metals when they are nervous about the economic outlook, believe interest rates will stay low or are bracing for a rise in inflation that makes paper money less valuable.

Dow Jones

7.35am: Air NZ commercial officer quits

Air New Zealand said its executive in charge of revenue has resigned and the role will be filled by the airline’s CEO for an interim period.

The airline said Cam Wallace, its chief commercial and customer officer, would leave on September 30 but continue in a consulting role until the end of the year.

Air New Zealand would not be immediately moving to replace Mr Wallace under a “changing strategy” that it will outline later this month, it said.

Chief executive Greg Foran said the pandemic has made Air New Zealand a largely domestic airline for the foreseeable future and Mr Wallace had resigned to pursue “global career ambitions” after 19 years with the national carrier.

Dow Jones Newswires

7.20am: SkyCity profit dives, no payout

Adelaide casino operator SkyCity Entertainment said it expects New Zealand’s border will remain closed throughout its current financial year, which will keep earnings below pre-pandemic levels.

The company said net profit for the financial year ended June 30 dropped 59.7 per cent from a year earlier to $NZ66.3 million when one-time items were excluded.

SkyCity, which has casinos in New Zealand and Adelaide, said it couldn’t give specific earnings forecasts because of uncertainty stemming from the pandemic.

But the company said it expects New Zealand’s border to remain closed throughout its current financial year ending June 2021, and international business including high-rollers to be negligible.

Skycity’s casinos in Auckland, Queenstown and Hamilton were shuttered by the pandemic lockdown from late March to early May. A renewed lockdown in New Zealand’s largest city, Auckland, that was imposed last month was a new blow for the company.

Operating earnings would improve from the past year but remain below levels that prevailed before the coronavirus pandemic, SkyCity said.

The company didn’t declare a final dividend and said it won’t pay an interim dividend in the current financial year.

However it expects to pay a final dividend in the 2021 financial year “assuming no meaningful further COVID-19 disruptions.”

Dow Jones Newswires

6.20am: ASX set to open higher

Australian stocks are set to follow Wall Street higher, building on yesterday’s strong gains.

At about 6am (AEST) the SPI futures index was up 37 points, or 0.6 per cent.

On Wednesday, Australian stocks rebounded by 1.8 per cent, with gains across all sectors.

The Australian dollar was this morning lower at US73.32.

Among commodities, gold edged down 1.4 per cent. Brent crude, the international energy benchmark, dropped 2 per cent.

Spot iron ore is up 2.1 per cent to $US128.05 a tonne.

6.10am: More records as Wall St rallies

US stocks extended their rally, giving the S&P 500 its 22nd record close of 2020 and pushing the Dow industrials above 29,000 for the first time since February.

The S&P gained 1.5 per cent to 3580, and the Dow Jones Industrial Average rose 1.6 per cent, or 453 points, to 29,099. The tech-heavy Nasdaq Composite picked up 1 per cent and notched its 43rd record of the year.

New data suggested a recovery is underway in the labour market, though a slow one. The American private sector added 428,000 jobs in August, according to payroll processor Automatic Data Processing. The figure came in well below the expected 1.17 million jobs.

If the S&P 500 holds the day’s gains, it will have closed higher in nine of the past 10 trading days.

“It just feels like the market’s grinding higher every single day, regardless of the news,” said Charles Day, managing director and private wealth Adviser at UBS.

Investors this month are looking to assess the timing and size of the next instalment of US stimulus spending to offer relief to American consumers and businesses. Treasury Secretary Steven Mnuchin on Tuesday urged Congress to appropriate more money to combat the effects of the coronavirus pandemic and said he was ready to sit down with Democratic leaders to resume negotiations.

Stocks in recent months have been driven by a pent-up demand among consumers for goods and services after lockdowns were eased, as well as the flood of stimulus measures from central banks and governments.

Meanwhile, cautious optimism about central banks’ stimulus measures – alongside hopes for a coronavirus vaccine – continue to help drive a rally in stocks. Signals from central banks that interest rates will stay low for a protracted period, and the cash that has already been pumped into financial markets and into consumers’ hands, have fed investors’ appetite for riskier assets such as equities.

Overseas, the Stoxx Europe 600 climbed 1.7 per cent. Japan’s Nikkei 225 index rose 0.5 per cent, while the Shanghai Composite slipped 0.2 per cent.

Among commodities, gold edged down 1.4 per cent. Brent crude, the international energy benchmark, dropped 2 per cent.

Dow Jones Newswires

5.55am: Robinhood faces SEC probe

Robinhood Markets faces a civil fraud investigation over its early failure to fully disclose its practice of selling clients’ orders to high-speed trading firms, people familiar with the matter said.

The investigation is at an advanced stage and the company could have to pay a fine exceeding $US10 million if it agrees to settle the Securities and Exchange Commission probe, one of the people said. A deal, however, is unlikely to be announced this month, the people said, and the two sides haven’t formally negotiated a proposed fine, the person said.

A Robinhood spokeswoman declined to comment on the investigation or any talks with regulators, but said: “We strive to maintain constructive relationships with our regulators and to co-operate fully with them.”

The Robinhood trading app. Picture: AFP)

Dow Jones Newswires

5.50am: Sonic Healthcare to expand Covid testing capacity

Sonic Healthcare USA said it would expand its COVID-19 testing capacity in the U.S. after receiving a contract from the National Institutes of Health.

Sonic Healthcare USA is a subsidiary of Australia’s Sonic Healthcare.

The company said the contract was awarded under the NIH’s Rapid Acceleration of Diagnostics Advanced Technology Platforms initiative.

Under the terms of the contract, Sonic will receive funding to increase COVID-19 testing to 166,000 tests per day at nine of its high-throughput laboratory testing locations, the company said.

“In response to the urgent pandemic demands, the partnership with the NIH and HHS, provides us access to technologies, instrumentation and resources necessary to rapidly increase the scope and expedite the timeline of our current capacity expansion plans,” said Dr. Jerry Hussong, chief executive of Sonic Healthcare USA.

“The new testing capacity will increase patient access to COVID-19 diagnostic testing across the country with timely result delivery.”

Dow Jones Newswires

5.45am: US debt to pass 100pc of GDP

The mountain of US government debt, swelled by rising deficit spending to deal with the coronavirus pandemic, will surpass the size of the American economy next year, according to new estimates.

The deficit will increase to 107 per cent of GDP by 2023, “the highest in the nation’s history,” surpassing the previous peak in 1946 after World War II, according to the Congressional Budget Office (CBO).

The nonpartisan CBO said its updated forecasts project that by 2030, the debt would equal 109 per cent of GDP.

The budget deficit this year is expected to triple to $3.3 trillion, or 16 per cent of GDP – the largest since 1945.

AFP

5.40am: US growth slowing: Fed

Economic growth and job gains continued in most of the US, but the pace has slowed in many areas while spending remains far below pre-pandemic levels, the US Federal Reserve said.

The Fed noted “rising instances of furloughed workers being laid off permanently as demand remained soft,” especially in the hard-hit services industries.

Home and vehicle sales were strong but “many districts noted a slowing pace of growth in these areas, and total spending was still far below pre-pandemic levels,” the Fed said in its beige book survey of economic conditions.

As monetary policymakers prepare for their next meeting later this month, the report shows the economy has not seen the sharp bounce-back some had predicted and President Donald Trump has been betting on as the November presidential elections approach.

Based on data through August 24, the Fed’s beige book showed a mixed picture and lingering uncertainty as the coronavirus continues to impact the world’s largest economy, where it has also killed more than 185,000 people.

While the report showed economic growth continued in much of the country, “Gains were generally modest and activity remained well below levels prior to the COVID-19 pandemic.” “Employment increased overall among districts, with gains in manufacturing cited most often. However, some districts also reported slowing job growth and increased hiring volatility,” the survey said.

And companies reported that they “continued to experience difficulty finding necessary labour, a matter compounded by daycare availability, as well as uncertainty over the coming school year and jobless benefits,” the Fed said.

AFP

5.37am: Germany’s ‘green’ bonds attract strong demand

Germany launched its first “green” bond offering to finance environmental initiatives as it pivots towards a sustainable economy, and could become a benchmark issuer in the booming field.

The government raised 6.5 billion euros ($US7.7 billion), in the offering for the 10-year 0pc bond, with investors placing orders of more than 33 billion euros, according to German finance agency.

Even at this early stage, “Germany is well on the way to becoming a benchmark issuer in the field of sustainability bonds,” according to German public bank LBBW analyst Elmar Voelker.

A further bond issue is planned before the end of the year.

In August, the finance ministry said it would raise up to 11 billion euros in 2020 to support climate-related projects.

The green bonds are “twin bonds”, issued alongside conventional federal bonds with a similar maturity and rate of return.

Moody’s analyst Matthew Kuchtyak said the approach is “innovative” and “should help alleviate investor concerns around the liquidity of the green offerings.” Germany is looking to become a key player in eco-friendly finance and last year announced it would launch the bonds in the second half of 2020 as part of its efforts to combat climate change.

Berlin has earmarked spending of 54 billion euros to 2023 as part of a climate package that includes introducing a carbon tax to cut greenhouse gases by 55 per cent by 2030 compared with 1990 levels.

AFP

5.35am: Markets rally on death rates, outlook

Stock prices in Europe and in the US climbed, as investors welcomed falling coronavirus death rates and improved global economic data, analysts said.

“Global stocks have been rising on the back of the steadily improving sentiment on Wall Street and elsewhere over the past few weeks amid falling COVID-19 death rates, falling new cases in the United States, and hopes that an effective vaccine will soon be approved,” said Fawad Razaqzada at ThinkMarkets.

“Meanwhile, improving manufacturing activity in China, the US and eurozone has fuelled hopes that the recovery is well under way across the world’s key economic regions.”

In midday New York trading, the Dow Jones index had risen by 0.7 per cent. Investors were encouraged the US Institute for Supply Management’s manufacturing index, which rose more than expected in August, but disappointing jobs numbers later in the day capped gains.

London stocks rose by almost 1.4 per cent while Frankfurt and Paris closed with gains of 2.1 per cent and 1.9 per cent respectively.

AFP

5.32am: United Airlines to lay off 16,000

United Airlines said it plans to lay off up to 16,000 workers starting in October amid a prolonged industry downturn due to the coronavirus.

The big US carrier, which had previously said as many as 36,000 workers could be terminated, said early retirement and other programs had lessened the need for even deeper cuts, but that the “devastating” impact of COVID-19 on airline travel still required lay-offs.

Even with those voluntary programs and other cost-cutting, the savings “have not been enough to avoid involuntary furloughs entirely,” the company said.

AFP

5.30am: US private jobs numbers disappoint

The US private sector created 428,000 new jobs in August, payroll services firm ADP said, far less than analysts expected as the economy attempts to rebound from COVID-19.

Large businesses with more than 1,000 employees made up more than half of the gains, and the bulk of the new jobs were in services firms, which were hard-hit by shutdowns to stop the virus’s spread.

Manufacturing added just 9,000 jobs last month and has recouped less than half the positions lost in March and April when the pandemic struck.

“Job gains are minimal, and businesses across all sizes and sectors have yet to come close to their pre-COVID-19 employment levels,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

AFP

5.27am: Norway posts rare public deficit

Norway posted its first public deficit in 25 years in the second quarter, its finances weighed down by the effects of the coronavirus pandemic, Statistics Norway said.

The Scandinavian country, which is the biggest oil and gas producer in western Europe, saw its accounts fall into the red in the April-June period, to -83 billion kroner (almost -8 billion euros, -$US9.46 billion), after registering a 22 billion kroner surplus in the first quarter.

The fall was attributed to dropping oil revenues as well as lower dividends and tax revenues, while spending increased to mitigate the economic effects of the pandemic and because of higher unemployment benefits, Statistics Norway said.

AFP

5.25am: Virgin Atlantic rescue cleared

Britain’s High Court has cleared a £1.2-billion rescue of struggling airline Virgin Atlantic, part-owned by British tycoon Richard Branson and which has been hit badly by the coronavirus pandemic.

The private recapitalisation, worth $1.6 billion or 1.3 billion euros, was approved by the carrier’s creditors last week.

The Virgin Atlantic rescue deal was launched in July following a drastic jobs-slashing overhaul as the pandemic decimated travel demand and grounded most passenger jets worldwide.

Judge Richard Snowden said Wednesday he sanctioned the plan, a key step in its implementation.

The rescue cash, including £200 million from Branson’s Virgin Group, will be delivered over the next 18 months.

Branson had previously warned that Virgin Atlantic would collapse unless it received financial aid from the UK government to help weather the crisis.

Virgin Atlantic planes at Manchester Airport. Picture: AFP

AFP

5.20am: China to resume some international flights

China is poised to resume direct international flights to Beijing from several countries with low rates of the deadly coronavirus, aviation authorities said, after a freeze of more than five months.

The new rules will apply from Thursday to flights from Thailand, Cambodia, Pakistan, Greece, Denmark, Austria, Sweden and Canada, all with low numbers of imported cases of the virus which has hammered global travel.

But travellers would be subject to centralised quarantine on arrival for 14 days and have to take two COVID-19 tests, a Beijing city official told reporters.

AFP