Trading Day: ASX slips from record as CIMIC, Downer tumble
Shares clocked their worst session for the year after a surprise lift in employment numbers, as economists pushed back their rate cut calls.
- Downer cuts guidance on ECM hit
- CIMIC to exit Middle East
- Westpac names new chair
- CBA hit with super class action
That’s it for the Trading Day blog for Thursday, January 23. Australian stocks eased from yesterday’s records as bets of a February rate cut were trimmed. Better-than-expected unemployment data for December have pulled odds of a cut next month to 29 per cent from 62 per cent this morning. In company news, Industrials took a hit after profit warnings from CIMIC and Downer while Westpac confirmed its new chairman.
4.29pm: Energy, industrial sell-off weighs on ASX
The market’s worst session for the year was led by a decline in energy stocks, down 1.6 per cent for the session after a 3 per cent slip in oil prices overnight.
Beach Energy was the worst performing with a 6 per cent slip to $2.66 while Woodside gave back 1.6 per cent to $35.25, Origin slipped 1.5 per cent to $8.59 and Santos lost 1.45 per cent to $8.82.
But the biggest single falls were within Industrials, after profit downgrades from two key engineering firms.
CIMIC announced a writedown of $1.8bn as it pulled out of the Middle East, and suspended its dividend, pulling shares lower by 19.9 per cent to $28.03.
Meanwhile, Downer cut its annual earnings guidance after rising costs on some of its loss-marking contracts. Shares in the group lost 18 per cent to $7.17.
A pull back in miners was led by Fortescue after its recent rally. Shares closed lower by 1.3 per cent to $12.53, BHP lost 0.3 per cent to $41.08 and Rio Tinto gave back 1.1 per cent to $106.19.
Check the biggest movers here:
4.12pm: Jobs jump dents record run
Better than expected employment data put a dent in the market’s record run, prompting a trim of economists’ rate cut expectations and consequent pull back in the Australian market.
Shares slipped early after a dip in global markets on fears of the spread of the potentially deadly coronavirus out of China but the decline picked up speed after the release of a surprise decline in unemployment for December.
The ASX200 hit a low of 7068.8 in afternoon trading and by the close was down 45 points or 0.63 per cent to 7088.
Meanwhile, the All Ords lost 50 points or 0.69 per cent to 7199.
Gerard Cockburn 3.48pm: New virus a threat to Qantas: Citi
The threat of Coronavirus could spark a potential downturn in Qantas similar to that experienced in the 2002 SARS outbreak, according to Citi.
The broker flags the uncertainty of the disease and its potential to hit Qantas’ second half earnings as it weighs on the airline’s revenue-per-available-seat-kilometres growth (RASK) and available-seat-kilometres (ASK) growth.
Qantas’ RASK rate sits approximately at 10 to 11 per cent and its ASK growth figure at 4 to 5 per cent. However, given a decent multiple rerating for Qantas and the Australian market, there is limited scope for any earnings weakness in 2020 financial year estimates, Citi says.
A potential pandemic would implicate Qantas’ Asia Pacific flights, which account for around 20 per cent of Global Airline profitability at $6bn or roughly 40 per cent of its Group International EBITDAR.
Flights to Hong Kong and China equate to two per cent to three per cent of Qantas’ total flights, with the large Asian economy representing almost 14 per cent of two way air traffic in Australia.
During the 2002 SARS outbreak, Qantas bookings for Hong Kong slowed down by 64 per cent, which sparked a profit downgrade in FY03.
QAN last down 2.7 per cent to $6.67.
Eli Greenblat 2.56pm: Jeanswest to close 37 stores
The failed retailer Jeanswest has begun its restructure under the guidance of its voluntary administrators, today announcing that 37 stores will be shuttered and 263 employees who to be made redundant.
The job losses amount to one quarter of its Australian workforce and a large component of its 146 stores across Australia.
KPMG voluntary administrators Peter Gothard and James Stewart confirmed Wednesday they had commenced the restructure of the Jeanswest business.
Mr Stewart said the decision to restructure the business was a difficult but necessary one taken in order to provide the business with the best possible chance of attracting a new owner.
2.31pm: Morgan Stanley tips these for earnings miss
Analysts at Morgan Stanley have tipped SG Fleet and The Reject Shop as two key stocks to disappoint in the upcoming earnings season.
Both were called out as “tactical” sells by the broker, with shares to decline in absolute terms over the next 45 days.
Analyst James Bales says he sees softness in SG Fleets auto sales, softness at peers and deferral of revenue as headwinds while similarly he says for Reject Shop that a “material improvement priced in despite a sluggish retail environment.”
Both are tipped as highly likely to disappoint.
2.08pm: Jefferies pledges $4m for bushfires
Jefferies Group has pledged $4m to the bushfire relief effort, including $1.6m collected through donated trading commissions yesterday.
The investment firm today said announced the donation, to be spread across various state and federal charities helping the relief effort.
“We greatly appreciate our clients globally, who directed their trading business to Jefferies as well as the voluntary donations from our employees,” chief Rich Handler said.
“We are honoured to assist in the recovery, and our hearts go out to those affected by these wildfires. We also thank all the dedicated disaster relief professionals who are working tirelessly to help those in need — they are the true heroes.”
1.53am: Domino’s a sell as rollout stalls: Citi
Citi has downgraded its rating for Domino’s Pizza shares to “sell” due to soft growth in store openings.
The brokerage has reduced earnings per share forecasts by 5 per cent following expectations the pizza chain is likely to not meet its 176 planned store openings for the financial year.
“Domino’s shares have outperformed the Australian market by 6 per cent over the past three months,” Citi analysts said.
“However, its progress on store openings in the 2020 financial year has been weak.”
Concerns surround the company’s goal of opening 2,850 stores by 2030 in the European region – a goal Citi says its currently behind by 25 per cent.
They estimate Domino’s would need to open 160 stores in Europe annually to meet targets.
Company data obtained by Citi indicates it has opened 75 stores in the first half of the financial year.
DMP shares last down 1.1pc to $55.30.
1.27pm: National Storage leads top performers
National Storage REIT is leading the market’s best performers after unveiling it was in takeover talks with private equity outfit Gaw Capital.
Responding to speculation from The Australian’s DataRoom, the company said it was in negotiations with Gaw Capital.
NSR shares last up 7.3 per cent to $2.21, after touching a record high of $2.34.
1.21pm: Nomura tips June rate move
Nomura’s Andrew Ticehurst has pushed back his RBA rate cut predictions after strong jobs data.
He now expects the RBA to cut in the June and September quarters, whereas he previously expected a February cut.
“Certainly there’s no smoking gun here demanding an imminent rate cut,” he says.
“Given market pricing leading into today’s report, we believe today’s data could elicit a sustained reaction in local markets over coming days, sending Australian interest rates and dollar higher for a time.”
1.10pm: Banks dial back RBA easing bets
A number of economists are pushing out their rate cut calls after a surprise lift in employment data for December.
Major banks Commonwealth and ANZ have scrapped their forecasts of a February cut, today’s data drop would “extend the RBA pause” on easing.
“The labour market continues to defy the activity data. And the unemployment rate is now on a very gentle downward trend despite GDP growth running well below trend,” Commonwealth Bank economist Gareth Aird says.
The bank now sees a cut in April instead.
Meanwhile, ANZ said it was reviewing its timing for the next cut.
RBC on the other hand, has maintained its call for a February cut, but said risk was rising that cuts were made earlier. The bank said it was prudent to wait until fourth quarter CPI, due next Wednesday, until it made its final assessment.
1.02pm: Shares slip as rate cut calls delayed
The local market is pulling back in midday trading, as several of the major banks dial back their rate cut forecasts.
After stronger-than-tipped employment figures, Commonwealth Bank and ANZ, among others, have shifted their forecasts, saying any rate cut would be delayed from its previous February call.
The market rally had been fuelled by expectations of cuts from the RBA, so any winding back of expectations will take some wind out of the rally.
ASX200 is trading lower by 41 points or 0.57 per cent at 7092.
Energy and industrials remain the worst performers – as CIMIC and Downer retain their 20 per cent falls.
Here’s the biggest movers at 1pm:
12.52pm: NAB keeps Feb, June cut call
NAB has stuck to its call for RBA cuts in February and June despite surprisingly-strong December labour force data.
While noting “greater uncertainty” over the chance of a February rate cut, NAB economist Kaixin Owyong argues that the RBA’s estimate of the “full-employment” rate of unemployment is still “some distance away” at 4.5pc.
“While the timing of those cuts are a little less certain given this print, we still expect the RBA to cut rates as it downgrades its growth outlook on soft consumption growth, amid ongoing labour market spare capacity and little inflationary pressure.”
However, the market disagrees. The implied chance of a February has sunk to 24 per cent from 62 per cent after the jobs data.
A full 25 basis point cut in the cash rate to a new record low of 0.5pc, isn’t fully priced until August. Previously is was expected by May.
12.38pm: HSBC names new chief
HSBC Australia has named Kaber Mclean as its new chief executive, replacing interim chief Noel McNamara.
Mr Mclean has worked with the bank since 1996 and has held senior leadership roles across the Asia-Pacific, North American and European regions, with extensive experience in its Global Banking and Markets business
“In his new role, Kaber will have responsibility for leading HSBC’s next phase of growth in Australia as it seeks to continue expanding market share and revenues across Retail Banking and Wealth Management, Commercial Banking and Global Banking and Markets,” the bank says.
McLean starts the new role in March, subject to regulatory and immigration approval.
12.10pm: RBA cut still more likely than not: EY
An RBA rate cut this year “remains more likely than not” according to EY chief economist Jo Masters.
“While there has been some better than expected data over the summer break – retail trade and labour force data – there continues to be headwinds for the economy,” she says.
“In particular, the consumer remains cautious and business investment disappointing. On balance, another rate cut this year remains more likely than not.”
Ms Masters adds that while the RBA will be encouraged by the fall in the unemployment rate, it remains well above “full employment” – estimated at 4.5 per cent – and the underemployment rate – those with a job who would like to work more hours – remains “elevated” at 8.3 per cent.
She also notes that leading indicators of the labour market continue to point to a further slowing in job creation.
“With the economy already growing below potential, it remains likely that the unemployment rate will drift higher in coming months, which would present another headwind to household spending,” she says.
“Moreover, wage growth is likely to remain anaemic given ongoing spare capacity in the labour market with the under-utilisation rate at 13.4 per cent.”
12.04pm: Hailstorm claims continue to climb
In its latest update after the damaging hailstorms earlier this week, the Insurance Council of Australia says insurers have received more than 55,560 claims and claims will continue to rise.
The bulk, or 53 per cent, of those are from ACT, while Victoria’s tally is rising to 30 per cent of claims with NSW representing 17pc.
Losses are estimated at $514m.
11.55am: RBA stimulus working: Capital Eco
RBA policy stimulus is starting to work according to Capital Economics.
“The fall in the unemployment rate to a nine-month low in December underlines that monetary and fiscal stimulus are starting to work and reduces the pressure on the RBA to cut interest rates next month,” says senior economist Marcel Thieliant.
“Admittedly those job gains were entirely due to higher part-time employment whereas full-time employment dipped slightly, but that didn’t prevent the underutilisation rate to fall from 13.5 per cent to 13.4 per cent.
Mr Thieliant now says his prior view that the unemployment rate will climb to 5.5pc by mid-2020 is “becoming increasingly unlikely”.
He notes that business surveys point to a rebound in employment growth from 2.1pc year on year in December to 2.5pc over the next few months.
And while our composite measure of job vacancies still points to a higher unemployment rate, two out of three of its components rebounded in the latest observation.
“The RBA may still decide to cut interest rates in February because the current rate of wage growth isn’t enough to meet its inflation target,” he says.
“But with spare capacity in the labour market starting to diminish, there is now less urgency to do so.”
11.37am: $A jumps as rate cut bets trimmed
The Aussie dollar has jumped to trade higher by 0.4 per cent as better-than-tipped employment data cuts expectations of a February rate cut.
The market implied chance of a February rate cut has plunged to 29 per cent, from 62 per cent before the data. But the market is still fully pricing a cut by June.
AUDUSD jumped 34 basis points to trade at US68.72c.
The 3-year bond yield rose 6 basis points to 0.74 per cent.
The 10-year bond yield rose 3 basis points to almost 1.12 per cent.
11.32am: Jobs lift prompts ASX sell-off
Local employment data has printed higher than anticipated, prompting a pull lower on the Australian market as rate cut expectations are trimmed.
Data showed 28,900 jobs were added over December, beating expectations of 12,000 while unemployment was 5.1 per cent versus consensus of 5.2pc.
The jobless rate is the lowest in 10 months but the jobs growth was entirely part-time, with full-time jobs down 300 and part-time up 29,200.
The participation rate was unchanged at 66pc as expected.
The ASX is now lower by 0.68 per cent to 7083.9.
Heavily stacked toward part-time jobs, so from a monetary policy perspective, it's hard to see this shifting the needle too much for the #RBA. In any sense, short term yields jumping as markets see less impetus for Feb cut.
— Kyle Rodda (@KyleR_IG) January 23, 2020
11.25am: ASX200 down 0.5pc before jobs data
The ASX200 hit a new intraday low of 7098.2 to be down as much as 0.5pc before jobs data at 1130am.
With valuations near records, stronger data would be bearish and weaker data would be bullish due to the interest rate implications.
11.12am: What to watch in labour force data
Australia’s labour force data for December are due for release at 1130am.
Bloomberg’s consensus estimate is for an unchanged unemployment rate of 5.2pc.
Employment is expected to be up 10,000 and the participation rate is assumed to be unchanged at 66pc.
It’s worth noting that while there are quite a few estimates at 5.3pc, there are none at 5.1pc.
So while there may be upside risk to the unemployment rate, a below-consensus number would have more impact on markets.
“We anticipate the economy will have added 5k jobs in December, against market expectations of more than 10k. The unemployment rate is expected to remain at 5.2pc, which is in line with the market,” ANZ said this morning.
Bridget Carter 11.09am: Gaw Capital enlists Goldmans for bid
DataRoom | Gaw Capital is understood `to be taking advice from Goldman Sachs on its bid for National Storage REIT.
11.03am: Housing retailers poised for reversal: Citi
Now is the time to buy housing exposed retailers says Citi, noting that the rebound in the Australian housing cycle was soon to reach the small cap retail sector.
In a note to clients, Sam Teeger notes that Nick Scali and Beacon were his top picks even after poor first half performance.
“We see both businesses achieving easier and lower risk medium term earnings growth supported by the housing cycle, opposed to other retailers reliant on rollout, turnarounds or supply chain investments,” Mr Teeger said.
Myer is the bank’s worst pick, rated at a Sell as “current strategies are unlikely to reverse the ongoing decline in LFL sales”.
10.43am: New Westpac chair sends shares lower
Westpac’s appointment of John McFarlane as its new chair has sent the banks shares backward in morning trading, underperforming the rest of its major bank peers.
The former ANZ chief and banking veteran, Mr McFarlane will succeed outgoing chairman Lindsay Maxsted on April 2 and oversee the search for a new chief executive.
Mr Maxsted said: “Mr McFarlane is not only well known in Australia and New Zealand, but is a respected banking leader globally who brings to our organisation more than 44 years’ experience in financial services”.
Westpac shares are lower by 0.46 per cent to $25.02 while Commonwealth, NAB and ANZ lift by between 0.2pc and 0.4pc.
Bridget Carter 10.27am: National Storage reveals suitor
DataRoom | National Storage REIT has received a takeover bid from Gaw Capital Partners.
The company has confirmed the approach to the market on Thursday.
It comes after The Australian’s DataRoom revealed on Wednesday that the company was believed to be in the crosshairs of a suitor.
“The board wishes to advise security holders that it has received a confidential non-binding indicative proposal from Gaw Capital Partners for 100 per cent of the issued stapled securities in National Storage REIT,” the company said in a statement to the market.
“Discussions are at this stage preliminary and subject to a number of conditions and there is no certainty that the discussions will lead to a final recommended offer.”
Working for National Storage REIT is JPMorgan.
10.20am: Shares wind back on contractor hit
Australia’s S&P/ASX 200 share index fell 0.3pc to 7108.7 in early trading amid profit warnings and renewed concern about the coronavirus outbreak.
Downer dropped 26pc to a 13-month low of $6.45 after cutting its FY20 profit target due to loss-making contracts.
Cimic fell 17pc to a 4-month low of $29.10 after flagging a $1.8bn post-tax charge which saw it scrap its final dividend.
CSL and Cochlear fell at least 1pc after downgrades from Jefferies after record highs in recent days. Beach Energy fell 4pc and Santos was down 2.4pc after Brent crude fell 2.1pc amid concern that the virus will hit economic growth.
But Qantas, Crown, Webjet and Flight Centre shares were flat to higher after falling yesterday amid concern about the virus.
Focus now turns to employment data due at 11.30am.
Eli Greenblat 10.09am: Kaufland exit to lift Coles, Metcash
German supermarket discounter Kaufland’s shock decision to abandon the Australian market after devoting almost $500 million to the launch is a positive for the grocery sector with Coles and Metcash to be the biggest winners.
JP Morgan analyst Shaun Cousins in a note to clients said Kaufland’s exit was a surprise given the size of its investment. However he added the gap in the market that Kaufland would be filling was never obvious and the planned rollout deferred and spread wide.
Mr Cousins said Kaufland’s exit was a significant positive for the industry as barriers to entry increased, and food inflation was more likely to persist.
Woolworths was least likely to lose share to Kaufland, Mr Cousins argues, whereas Coles and the Metcash-supplied independents were vulnerable; hence Coles and Metcash are likely the biggest beneficiaries.
Gerard Cockburn 9.45am: CBA hit with super class action
Shine Lawyers has launched a class action against Commonwealth Bank’s superannuation provider Colonial First State Investments after it reportedly slugged customers with excessive insurance premiums.
Lodged in the Federal Court in Victoria, the plaintiff firm alleges CBA’s insurance arm tipped members into high cost CommInsure products, when there were clear and identifiable cheaper options available.
The latest legal battle comes after Maurice Blackburn on Wednesday launched a class action against NAB group entities for alleged breaches in superannuation trustee obligations.
Class actions practice leader, Rebecca Jancauskas said Colonial and CommInsure were motivated by “self-interest”.
9.37am: ASX set for flat start
Australia’s sharemarket should be fairly flat before employment data at 1130am.
Global sharemarket gains faded with the S&P 500 giving up an 0.5pc intraday rise as the spread of coronavirus accelerated.
The number of reported deaths from the virus almost doubled from 9 to 17 and the number of reported cases rose by more than 200 to 547, including cases in the US, Japan, South Korea, Thailand, Taiwan. Meanwhile, China said it will lockdown all transport links in Wuhan from 10am Thursday local time, China’s National Health Commission advised people not to travel to or from Wuhan and Taiwan banned visitors from Wuhan.
The World Health Authority delayed until Thursday a decision on whether the outbreak constitutes a public health emergency and how to manage the spread of the virus.
In Davos, US President Trump said that he hopes to strike a trade deal with the EU before the US election in November, but reiterated the option to impose tariffs on EU cars and parts if negotiations stall. He also announced a new plan to reform the World Trade Organisation and confirm a deal with France on digital taxation.
US Treasury Secretary Steven Mnuchin said the US could use tariffs on car imports against countries that impose their own taxes on tech. “If people want to just arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies,” he said.
Local December employment data are expected to show a 10,000 rise in jobs and a 5.2pc unemployment rate. The sharemarket should react positively to weaker jobs data and vice versa, given the interest rate implications.
The S&P/ASX 200 rose 0.9pc to a record high close of 7132.77 on Wednesday.
9.31am: CIMIC to exit Middle East
Engineering group CIMIC has announced its intention to exit the Middle East region as the market deterioration picks up speed, a move set to hit its full year result by $1.8bn.
CIMIC had been reviewing its non-controlling 45 per cent stake in the BIC Consulting business and this morning said it was in discussions with a shortlist of potential suitors for all or part of the company.
“In the context of an accelerated deterioration of local market conditions, BICC is engaging in confidential discussions with its lenders, creditors, clients and other stakeholders,” it said.
CIMIC will recognise a one-off impact of $1.8bn in its Fy19 financial statements, representing all of its exposure to the business.
Excluding that impact, CIMIC expects to report net profit of $800m for 2019, with results to be handed down on February 4, and will not declare a final dividend.
The move was flagged by The Australian’s DataRoom in December.
Bridget Carter 9.17am: Suitors circling National Storage
National Storage REIT is back in the M&A spotlight, with a suitor thought to be moving towards a potential takeover.
It is understood that a party has locked in offshore funding for a bid, with some predicting the prospective buyer is likely to be either an offshore trade group or a private equity firm.
Some question whether a bid is imminent because the share price of National Storage REIT has rallied from where it was trading late last year. The market value is currently about $1.6bn and its share price is now over $2, after trading around $1.90.
9.15am: What’s impressing analysts, what’s not
- 3P Learning new tactical Sell – Morgan Stanley
- Ansell cut to Hold – Morningstar
- CSL cut to Hold – Jefferies
- Cochlear cut to Underperform – Jefferies
- Domino’s Pizza cut to Sell – Citi
- Gold Road Resources raised to Hold – Haywood
- Healius raised to Buy – Jefferies
- Link Administration rated new Neutral – Goldman
- Mach7 Technologies rated new Add – Morgans
- Pacific Smiles new tactical Buy – Morgan Stanley
- Regis Healthcare raised to Hold – Jefferies
- Regis Resources cut to Underperform – Macquarie
- Reject Shop new tactical Sell – Morgan Stanley
- Seven Group cut to Sell – Morningstar
- SG Fleet new tactical Sell – Morgan Stanley
- Sigma Healthcare raised to Hold – Jefferies
- St Barbara cut to Underperform – Macquarie
8.47am: Downer cuts guidance on ECM hit
Lower revenue and underperformance of Downer’s engineering and construction arm has forced the group to trim its earnings guidance for the half.
The company this morning revised lower its net profit guidance for the full year to $300, from earlier estimates of $365m.
Its Engineering, Construction and Maintenance arm was the key drag on its books, serving a $43m blow as costs for December and January blew out.
“We are particularly disappointed with the deterioration of these projects at such a late stage of their delivery. We do not expect any further increase in costs above our revised estimate,” chief Grant Fenn said.
Adding to that, the company forecast a hit of $20m for lower win rates and expected delays in the resources-based construction market, and significant issues in the Renewables sector.
DOW shares last at $8.75.
8.30am: Stocks poised to open lower
Australian stocks are poised to open lower despite a rebound on US markets as health authorities around the world took steps to monitor and contain a deadly virus outbreak in China.
At 8am (AEDT) the SPI200 futures contract was down 15 points, or 0.21 per cent, at 7,061.
It comes after a record-breaking run for the Australian share market, which smashed through the 7100 mark on Wednesday on broadbased gains. The benchmark S&P/ASX200 index finished up 66.4 points, or 0.94 per cent, at 7,132.7 while the broader All Ordinaries index closed up 68.5 points, or 0.95 per cent, at 7,249.
IG market analyst Kyle Rodd says that despite a strong Wall Street lead overnight, local futures are pointing to fall for the ASX200 when trade opens. “This comes a day after the index tore its own record highs, rallying just shy of 1 per cent, during what was a robust day’s trade,” he said.
Consumer staples stocks were the biggest performers after it was reported German retailer Kaufland would be abandoning its entry into the Australian market. Traders will be looking to see Thursday’s major Australian employment data print, he said.
The Australian dollar was buying US68.43 cents.
AAP
8.25am: US stocks end near flat
Early gains among US stocks faded in late trade, leaving major indexes little changed from the prior day.
A rally in shares of fast-growing, technology-driven companies helped lead the market higher shortly after the opening bell.
As the afternoon progressed, though, the market’s momentum faded — leaving the Dow Jones Industrial Average down 9.77 points, or less than 0.1pc, to 29186.27.
The S&P 500 advanced 0.96 point, or less than 0.1pc, to 3321.75 and the Nasdaq Composite inched up 12.96 points, or 0.1pc, to 9383.77 — ending just shy of a record set Friday.
Earnings drove some of the bigger moves in the market.
International Business Machines shares rose $US4.72, or 3.4pc, to $US143.89 after the company unexpectedly reported a slight gain in fourth-quarter revenue and ended a streak of declining sales.
Tesla shares advanced $US22.36, or 4.1pc, to $US569.56 after a Wedbush analyst boosted his price target for the stock, citing expectations for strong demand for Tesla products in Europe and China. Shares of the electric-car maker have risen 36pc this year, well outpacing the broader market.
Apple added $1.13, or 0.4pc, to $US317.70 following a report that it would take steps to begin assembling a new low-cost iPhone later this year.
Elsewhere, the Stoxx Europe 600 edged down 0.1pc after drifting around the flatline for much of the session.
Dow Jones Newswires
7.47am: McFarlane confirmed as Westpac chair
Westpac has announced the appointment of John McFarlane as chair of Westpac, succeeding Lindsay Maxsted.
The appointment as chair, foreshadowed by The Australian, will take effect on April 2.
Mr McFarlane will commence his role as non-executive director in February, subject to regulatory approvals.
Mr McFarlane is a former CEO of ANZ and most recently, chairman at Barclays in London.
Mr Maxsted said: “Mr McFarlane is not only well known in Australia and New Zealand, but is a respected banking leader globally who brings to our organisation more than 44 years’ experience in financial services.
“He has worked across retail and wholesale banking and markets, as well as in life and general insurance, and has board and public service experience in this and other fields.”
Mr McFarlane was “passionate” about driving progress in the banking industry, and had a “deep understanding” of the Australian banking sector, Mr Maxsted said.
This experience would be invaluable as Westpac executed its strategy and responded to Austrac’s accusations of breaches of financial crime laws, he said.
Mr McFarlane said his focus would initially be on resolving the bank’s current issues, but also to position it quickly as possible for long-term success.
7.45am: Oil prices fall on virus fears
Crude prices fell to seven-week lows, weighed down by concerns that a deadly strain of coronavirus that originated in China could dent demand for oil and jet fuel.
US crude futures fell 2.8pc to $US56.74 a barrel, while Brent, the global gauge of prices, slid 2.1pc to $US63.21 a barrel.
The pneumonia-causing virus has spread across China and, as of Tuesday, into the US, sparking a flurry of travel cancellations and hitting shares of airline operators.
Dow Jones
7.20am: Stocks are poised to open lower
Australian stocks are poised to open lower despite a rebound on US markets as health authorities around the world took steps to monitor and contain a deadly virus outbreak in China.
At 7am (AEDT) the SPI200 futures contract was down 20 points, or 0.28 per cent, at 7,056.
It comes after a record breaking run for the Australian share market, which smashed through the 7100 mark on Wednesday.
The benchmark S&P/ASX200 index finished Wednesday up 66.4 points, or 0.94 per cent, at 7,132.7.
The broader All Ordinaries index closed up 68.5 points, or 0.95 per cent, at 7,249.
The Australian dollar was buying 68.43 cents at 7am (AEDT).
AAP
7.00am: Tech rally lifts US stocks
US stocks climbed toward records in afternoon trade, boosted by a rally in shares of technology companies.
The Dow Jones Industrial Average advanced 88 points, or 0.3pc, to 29281. The S&P 500 added 0.3pc and the Nasdaq Composite rose 0.6pc, with both indexes on track to close at fresh highs.
After surging to new highs yesterday, the ASX is poised to open lower. At 6.50am (AEDT the SPI futures index was down 20 points.
Shares of fast-growing technology-driven companies have led the US market higher this year, extending a powerful run that lifted many stocks to records in 2019.
The trend showed no sign of abating overnight. International Business Machines rose 3.2% after unexpectedly reporting a slight gain in fourth-quarter revenue, ending a streak of declining sales.
Tesla shares advanced 7.1pc after a Wedbush analyst boosted his price target for the stock, citing expectations for strong demand for Tesla products in Europe and China. Shares of the electric-car maker have risen 40pc this year, lifting the firm’s market capitalisation above $US100 billion.
Apple added 1pc following a report that it would take steps to begin assembling a new low-cost iPhone later this year.
Elsewhere, the Stoxx Europe 600 edged down 0.1pc after drifting around the flatline for much of the session. Yields on Italian government bonds rose, though, after reports suggested a key member of the country’s ruling coalition might step down.
In Asia, stock indexes chipped away at the prior day’s losses after Chinese authorities said hospitals were taking measures to contain the outbreak of a potentially deadly virus.
Authorities are recommending that people not go into or out of Wuhan, the central Chinese city where the virus originated. Ministries and local governments are also arranging refunds on plane and train tickets, banning tourist groups from Wuhan and organising coverage of medical expenses, analysts at Everbright Sun Hung Kai said in a note.
Investors have a high degree of confidence in the Chinese government’s ability to contain the virus, said James Athey, senior investment manager at Aberdeen Standard Investments.
Hong Kong’s Hang Seng index ended the day 1.3pc higher. Japan’s Nikkei Stock Average advanced 0.7pc, and the Shanghai Composite rose 0.3pc.
Dow Jones Newswires
6.50am: Boeing upbeat on MAX production
Boeing’s new CEO said production of the 737 MAX will resume this (northern) spring, months before the company expects federal regulators to certify the grounded plane to fly again.
David Calhoun also said he believes passengers will fly on the Max when federal regulators say it is safe and they see airline pilots getting on the plane. Calhoun dismissed the idea that Boeing’s best-selling jet might never fly again or that the company should change the plane’s name.
“I’m all in on it, the company is all in on it, and I believe the FAA is all in on it,” he said, referring to the Federal Aviation Administration, which is reviewing changes that Boeing is making to the Max after two crashes that killed 346 people.
An FAA spokesman said in a statement that the agency is being thorough and deliberate as it checks Boeing’s proposed changes to the Max, and the agency has no timetable for finishing that review.
AP
6.45am: Boeing urged to ditch MAX name
Boeing should abandon the MAX name for its latest Boeing 737, the head of the world’s top aircraft leasing firm said as the plane remains grounded pending recertification after two fatal accidents.
“We’ve asked Boeing to get rid of that word MAX,” said Air Lease Corporation (ALC) head Steven Udvar-Hazy at an industry conference that wrapped up in Dublin.
“The MAX brand is damaged,” he said, adding that airlines are trying to work out how long customers will be reluctant to fly on the aircraft once it re-enters service.
Boeing on Tuesday officially pushed back the time frame for the 737 MAX to return to the skies to mid-2020, but US air safety regulators have not indicated when they expect to recertify the plane.
The aircraft was grounded last March after two crashes that claimed 346 lives raised questions about the plane’s automated flight control system.
AFP
6.40am: European stocks hit by US tariff threat
European stocks were hit by US President Donald Trump’s threat to slap auto tariffs on EU-built cars and a gloomy auto sales forecast.
Markets in London, Frankfurt and Paris closed lower after Trump said he would order a 25-percent surcharge on European cars if the EU did not agree to a trade deal.
Analysts at Charles Schwab brokerage described traders as fairly cautious as the region mulled “the possibility of a showdown between Europe and the US”.
As trading wound down in Europe, the auto sector association ACEA contributed to the wary mood with a forecast that European new car sales would fall by two per cent this year, their first decline in seven years.
Shares in carmakers Volkswagen slid by 1.2 per cent and Daimler lost more than two per cent, with Mercedes-parent Daimler also warning that its 2019 earnings could fall short of expectations owing to massive new charges related to diesel emissions cheating.
Before Trump issued his latest trade threats, Frankfurt’s DAX 30 index had hit a record high at 13,640.06 points, with dealers hailing a recent China-US trade deal. It closed down 0.3pc, while Paris ended 0.6pc lower. London fell 0.5pc.
Earlier in the day, Asian markets had bounced back on bargain-buying following sharp losses on Tuesday that were triggered by fears over the spread of the deadly coronavirus.
“Fears of the spreading coronavirus appear to be easing a bit after China said it is taking steps to contain the virus,” Schwab analysts said.
AFP
6.38am: EU car sales drop forecast
European new car sales are expected to fall by two per cent in 2020, their first decline in seven years, the industry trade association said as it urged governments to aid a transition to greener vehicles.
With the EU launching its “Green Deal” to make the bloc’s economy carbon neutral, the European car Manufacturers’ Association (ACEA) said it hopes the plan will strengthen the industry’s ability to compete and boost the uptake of zero-emission vehicles.
“This is all the more important as we are about to face a shrinking market,” said Michael Manley, who is the head of FCA Chrysler and leads the ACEA.
The ACEA forecasts that, after six consecutive years of growth, EU passenger car sales will drop by two per cent in 2020.
AFP
6.36am: Turkey may have stolen drill data
Turkey may have stolen technical data that enabled it to send a drill ship to a specific location south of Cyprus that energy companies Eni and Total had preselected to carry out their own exploratory drilling, a Cypriot official said.
Government spokesman Kyriakos Koushos said that although Cypriot authorities don’t have definitive proof, it’s believed that Turkey got its hands on data that helped guide its drill ship to the specific target.
The location is in an area, or block, where Cyprus has licensed Italy’s Eni and Total of France to carry out a hydrocarbons search. The two companies are licensed to conduct exploratory drilling in seven of Cyprus’ 13 blocks that make up its exclusive economic zone.
AP
6.35am: Toyota adds 361K vehicles to recall
Toyota is recalling 361,000 more vehicles worldwide to replace Takata airbag inflators that could explode and hurl shrapnel. The vehicles date to 1997 and have older inflators that are different from Takata products that use volatile ammonium nitrate to fill airbags in a crash. Those are the devices that led to numerous deaths. But the inflators in this recall can also explode with too much force and spew metal fragments that can endanger people.
The recall covers gas and electric versions of the RAV4 SUV and the Celica sports car from 1997 to 1999. Also included are the 1997 through 1998 Supra sports car.
About 139,000 vehicles in the US are covered.
Toyota will notify owners by mail starting in mid-March. The company doesn’t have a fix yet but will tell owners when one is ready.
AP
6.30am: Tesla market value tops $US100bn
Tesla’s market value hit $US100 billion for the first time, triggering a payout plan that could be worth billions for Elon Musk, founder and chief of the electric carmaker.
Shares in Tesla rose some 4.8 per cent in opening trade to extend the gains in the value of the fast-growing maker of electric vehicles.
Under a compensation plan approved by Telsa’s board in 2018, Musk is to be paid in stock awards based on the value of the company, which could be worth as much as $US50 billion if Tesla reaches $US650 billion. He agreed to the plan, which would pay him nothing until Tesla’s value reached $US100 billion.
AFP
6.25am: ‘Dieselgate’ chokes Daimler
German auto giant Daimler warned that its 2019 earnings could fall short of expectations due to massive new charges over diesel emissions cheating, further clouding the outlook for the vital car sector as a whole.
The group, which owns Mercedes-Benz, said its full-year earnings will be hit by between 1.1 and 1.5 billion euros ($US1.2-1.7 billion) in provisions.
According to its preliminary financial results for last year, operating profit not including the “anticipated additional expenses for ongoing governmental and court proceedings and measures relating to Mercedes-Benz diesel vehicles” amounted to 5.6 billion euros.
That was “significantly below” the year-earlier level of 11.1 billion euros and “below earnings expectations,” Daimler said.
“After two profit warnings, new Daimler boss Ola Kallenius is horrifying investors with catastrophic preliminary figures for 2019,” judged industry analyst Frank Schwope of Nord/LB bank.
AFP
6.20am: Talks on WTO reform
US President Donald Trump said talks were going on aimed at overhauling the World Trade Organisation, the arbitrator of global commerce that the US leader accuses of treating Washington unfairly.
“I’ve had a dispute running with them for quite a while because our country hasn’t been treated fairly,” Trump said at the World Economic Forum in Davos, speaking alongside WTO chief Roberto Azevedo.
“We’re talking about a whole new structure for the deal … We’ll have to do something,” Trump told reporters.
AFP
ASX tracks record; Bunnings underestimated: UBS
Local market gains strongly, led by consumer stocks. REA shares dip after boss sets end date, posts strong half-year results. Beach Energy logs earnings jump, but shares slump. Wesfarmers rises as UBS says the Bunnings outlook is positive.
ASX ends up 0.5pc; Brookfield enters Insignia battle; former Star CEO cops ban
ASX 200 gains 0.5 per cent, led by resources, tech, property, industrials and communications. Macquarie weighs on financial sector. Google owner Alphabet's earnings disappoint. Brookfield lobs new offer to takeover target Insignia. Amcor lifts on reaffirmed guidance, estimates win. Former Star CFO cops ban.