ASX winds back from two-week high as miners drag

Shares hit a two-week high early but gains evaporated at the close to cement a 21 per cent drop for the month.

David Rogers and Melissa Yeo

39 min read

5:59AMMarch 31, 2020.

Updated 5:19PMMarch 31, 2020

The market’s 21pc monthly loss is the worst since October 1987. Pictured here is the floor for the Melbourne Stock Exchange during that drop.

Shares cement worst month since Oct ’87
Consumer confidence tanks to record low
Shares rally to two-week high
Bunnings acquisition gets ACCC tick
ASX headed for worst month since ’87

That’s it for the Trading Day blog for Tuesday, March 31. Australian stocks hit two-week highs early following yesterday’s record 7pc rebound, but those gains were wiped in afternoon trade as miners pulled back, sending the benchmark to a 21pc monthly loss.

Coles was a clear underperformer after Wesfarmers announced it was selling down its stake in the group, while energy names shrugged off a drop in oil prices to an 18-year low. Virgin soared after confirming reports it was asking the government for a $1.4bn bailout, news that sparked outcry from rival Qantas.

4.45pm: Who made the biggest moves today?

The wave of companies withdrawing guidance slowed somewhat in Tuesday’s session, but the pace of capital raisings moved up a gear.

Kathmandu halted trade in its shares at 98c, believed to be in relation to a capital raise, while Webjet reportedly was making progress on its own lifeline – rumoured to be supported by private equity outfit Bain Capital. Its shares last traded at $3.76.

By far the most high profile was Virgin Australia though, the airline confirming it was in talks with the government for a $1.4bn bailout package – that sent shares soaring by 19 per cent to 9.5c. But rival Qantas was quick to chime in – saying it would expect $4.2bn as an equivalent bailout. Its shares finished the session up 0.9 per cent to $3.23.

Across the rest of the beleaguered travel sector – Flight Centre remained halted amid crisis talks – its shares last traded at $9.91 while Corporate Travel Group finished higher by 5.3 per cent to $8.72.

Here’s the biggest movers at the close:

4.16pm: Shares clock 21pc monthly drop

A rocky session for Australian shares has cemented the market’s worst month since October 1987, down 21 per cent amid coronavirus panic and fear of a widescale global recession.

In another seesawing session, what has become the new normal for the benchmark ASX200, shares got off to a strong start, soaring as much as 3.6 per cent to two-week highs of 5366.4 but those gains evaporated at lunch. By the close, the market was lower by 104 points or 2.02 per cent to 5076.8, giving up some of yesterday’s record 7 per cent rally.

Meanwhile, the All Ords followed a similar trajectory to close down 84 points or 1.61 per cent to 5110.6.

Robyn Ironside 3.41pm: Equitable Qantas bailout only ‘fair’

Qantas would expect to get government assistance in the vicinity of $4.2bn if Virgin Australia’s request for a $1.4bn bailout was granted.

A senior Qantas source said that based on the fact the Qantas Group was three times the size of Virgin Australia, in revenue and workforce, the company should be able to any assistance to be of a comparable ratio.

Although The Australian understands Qantas is not seeking further government help to see it through the coronavirus crisis, CEO Alan Joyce has previously demanded airlines be treated equally in any financial assistance packages.

QAN last traded up 1.1pc to $3.24.

3.38pm: Sell-off extends as US futures turn

It looks like a very ugly close is in store for Australian shares.

The S&P/ASX 200 has tumbled 112 points or 2.2pc to 5075.3 points after rising 3.6pc this morning.

A massive 5.5pc intraday sell-off from the high is almost as bad as the 7.5pc intraday fall on Friday.

It looks like some persistent selling is hitting the bids in illiquid trading.

It comes as S&P 500 futures turn down 0.3pc after rising 0.8pc.

3.08pm: No sign of month-end buying

What happened to all the month-end buying of equities and selling of bonds?

Analysts recently tipped massive equities buying today – as much as $US255bn ($425bn) globally – for month and quarter-end rebalancing by balanced funds who have become underweight equities versus fixed income.

Maybe it will come through at the close, but with an hour to go the S&P/ASX 200 is currently down 0.7pc at 5151 after rising 3.6pc earlier today. Certainly there’s been no sign of large scale volume despite the volatility today.

In any case, this was only ever going to be a reason for short covering and the global sharemarket has certainly done that in the past week, though that’s arguable more to do with extreme fiscal and monetary stimulus.

The MSCI World index up 17pc from an almost 4-year low last Monday week. Given the prospect of a massive recession, perhaps the focus should be on selling into any additional strength caused by rebalancing flows.

Eli Greenblat 3.01pm: Pacific Brands to close all stores

Pacific Brands, the giant Australian retailer whose outlets include Bonds, Bras N Things and Sheridan, will close all its stores by the end of Tuesday and stand down more than 3000 workers.

The latest store closures comes after a raft of retailers closed in the wake of the coronavirus pandemic, standing down or laying off thousands of staff.

Pacific Brands, bought by US group HanesBrands for $1.1 billion four years ago, will close until further notice all stores by the end of business hours on Tuesday.

The company has around 450 stores in Australia, including Bonds, Bras N Things, Champion and Sheridan full-price and outlet stores, as well as roughly 40 Sheridan concessions in David Jones.

2.51pm: EML leads after deal rejig

EML Payments is the best performer on the top 200 after renegotiating terms in its buyout of Irish fintech Prepaid Financial Services.

The payments provider said the upfront enterprise value of the target had been trimmed by $252.3m from the original deal announced in November, with an upfront cash payment of 85m pounds ($159m).

“The Board of EML was committed to seeking a conclusion to the transaction, but on improved terms reflecting the economic reality of COVID-19 and the need to have a strong balance sheet with significant cash on hand and nil net debt,” the company said.

The target said its results for the 2019 calendar year were ahead of expectations, while the first two months of the year, before COVID-19, were also in line with EML’s initial acquisition case.

“The current trading environment is uncertain with two major programs in Spain and France negatively impacted by strict government lock down measures as a result of COVID-19. While it is difficult to quantify the immediate impact over the next three months, EML is confident in the long term prospects of this business including exposure to Government, Local Authority and NGO welfare.”

EML last up 26pc to $2.35 after hitting as much as $3.20.

2.49pm: Oil prices rebound from 18yr lows

Oil prices rebounded strongly in Asian trade Tuesday a day after falling to 18-year lows, as investors took heart from moves by policymakers to support the coronavirus-hit global economy.

US benchmark West Texas Intermediate jumped 7.3 per cent to $21.5 a barrel while Brent crude, the international benchmark, was up 3.3 per cent at $23.5 a barrel.

In New York on Monday, prices struck their lowest levels since 2002, with WTI briefly falling below $20.

Oil markets have plunged as governments across the planet introduce lockdowns to stem the spread of the virus, hammering demand for the commodity.

About two-fifths of the globe’s population have now been confined to their homes, while the death toll has soared over 37,000, with the US suffering a serious and escalating outbreak.

The crisis has been worsened after top producers Saudi Arabia and Russia launched a price war following a row about reducing output to support virus-hit energy markets.

In its latest move to win market share, Riyadh announced Monday it would raise exports by 600,000 barrels per day to a record 10.6 million barrels per day in May.

Dow Jones Newswires

2.15pm: Market reverses as miners pull back

The local market has wiped as much as a 3.6pc gain intraday – now squarely trading in the red.

At 2pm, the ASX200 dropped to 5113.9 – a 1.3pc slip – marking a 4.7pc intraday swing.

It comes as miners reverse earlier gains and as heavyweights Commonwealth Bank and Telstra pull lower.

It may be the second part of a “buy-the-rumour, sell-the-fact” reaction to the JobKeeper policy.

In any case, the kind of extreme price action is very unhealthy and was last seen during the global financial crisis.

This still looks like the “demoralisation” phase of the bear market – where people say “I will never invest again” – is yet to come.

Despite unprecedented fiscal and monetary stimulus and slowing infection rates, the coronavirus lockdowns are still ramping up.

The index has bounced slightly off the low to be flat at 5183.7.

1.52pm: Chant West passes sale as suitor walks

Investors in superannuation research and consultancy group Chant West have overwhelmingly voted in favour of its sale, even as suitor Bidco, a wholly owned subsidiary of Zenith Investments, attempts to pull out.

At an extraordinary general meeting today, more than 99 per cent of investors voted in favour of the sale of the business and the change of the company name.

That’s despite Bidco attempting to terminate the sale, citing volatility in the current market.

“The Company, having regard to the financial condition and performance of the Business in the current financial year, and specifically the period between the signing of the business sale agreement and the date the Letter was received, rejects the allegations made by CW Bidco that a material adverse change in the Business has occurred,” the Chant West said in a statement.

“Chant West Pty Limited delivered a positive EBITDA in for the first half of FY2020 and we remain confident it will continue this trend in the second half of the year.”

1.47pm: ASX halves intraday gain

One thing for sure, the Australian sharemarket remains super-volatile.

The S&P/ASX has more than halved a 3.6pc intraday rise today as materials and communications slip into the red.

The index was last up 1.4pc at 5255.9.

Bridget Carter 1.44pm: Bain behind Webjet lifeline

DataRoom | Bain Capital has emerged as the private equity firm looking to embark on a rescue of the struggling online travel website Webjet.

It is understood that Webjet is now working towards a debt and equity solution that involves Bain Capital and may also see some capital being raised.

It comes as Kohlberg Kravis Roberts is understood to have waved the white flag on its efforts to buy into Webjet.

DataRoom understands that Webjet knocked back a proposal by KKR to secure a small equity stake in the business because it came with warrants attached with debt that were problematic for the company.

It is understood that of the $250m that Webjet was trying to raise last week, $150m was for working capital to pay back clients and $150m was to keep the company operational in a difficult environment.

Read more: KKR walks away from Webjet

Paul Garvey 1.33pm: Woodside a standout amid oil plunge: UBS

Woodside Petroleum’s balance sheet strength makes it the standout in Australia’s beleaguered oil and gas sector, according to the latest analysis from UBS.

The investment bank has slashed its oil price forecasts for the next few years following the twin shocks of the COVID-19 outbreak and the breakdown of OPEC, with the price now expected to remain below $US60 a barrel until 2024.

The oil price downgrade means UBS analyst Glynn Lawcock now expects Oil Search to record a loss in 2020, while Woodside and Santos’ earnings are tipped to fall as much as 70 per cent.

UBS has lowered its target price for all three companies to reflect the value of their base businesses “as we don’t expect investors to pay for growth in this environment”. Amid the cuts, the analysts have upgraded Woodside to a “buy” recommendation given it is trading at a 21 per cent discount to NPV and has the strongest balance sheet.

Woodside’s surprise decision in early 2018 to raise $2.5 billion in fresh equity at $27 a share now looks particularly prescient. “We have the least concern for Woodside given its now fortuitous raising back in early 2018. At 29 Feb 20, Woodside had $US4.9bn of cash, $US3.0bn of undrawn debt (2022-24 maturities) and $US800m in debt to be repaid over the next 2 years,” Mr Lawcock wrote.

“Santos has gearing at ~30pc but fortunately $US1bn of cash and $US1.9bn of undrawn debt with no major repayments till 2024.

“Oil Search is of most concern if oil prices were to stay at current levels through to year end as this would consume most of their undrawn facilities. Refinancing and terming out of existing facilities is an option for Oil Search, as is equity. We would expect a combination of all three if the oil price were to remain low.”

Elias Visontay 1.28pm: Gov’t taps private hospital beds for virus

More than 100,000 health professionals and 34,000 beds from private hospitals will be integrated into the public system as part of a “reconstruction” of the Australian medical system.

Health Minister Greg Hunt announced the deal on Tuesday, whereby private hospitals will deliver additional capacity for the public health system, and in return, the government will ensure the “viability of the private hospital sector throughout the course of the COVID-19 pandemic”.

“In terms of the capacity, it means over 34,000 beds and chairs that will be made available to the public hospital system,” Mr Hunt said.

“A third of intensive care units are within the private hospital system and will be made available.

“Over 105,000 full-time and part-time staff, including over 57,000 full-time and part-time nursing staff.”

Follow our coronavirus blog for the latest updates

Eli Greenblat 1.26pm: AusPost execs take 20pc pay cut

Senior Australia Post executives including CEO Christine Holgate will take 20 per cent pay cuts and forgo bonuses as the national mail service slashes its costs amid the coronavirus pandemic.

It comes as the virus crisis causes a dramatic drop in sales in traditional Australia Post services such as passports, which has slumped by half, as well as a shrinkage of international revenues as it becomes harder to secure planes to ship inbound parcels.

In an email to Australia Post staff, obtained by The Australian, Ms Holgate reports a boom in parcel deliveries, the group’s key source of profit growth as the traditional letters business continues to fade, as people stuck at home shop more online.

1.04pm: Bank’s loan losses as bad as GFC: MS

As Australia facing recession, Morgan Stanley says that banks will suffer loan losses similar to the global financial crisis, their regulatory capital ratios will fall to about 10 per cent and their dividends to be cut by an average of more than 30 per cent.

“We think there is medium-term valuation support, but it should be some time before investors can rule out the bear case,” says Morgan Stanley analyst Richard Wiles.

He argues that the banks will want to avoid large capital raisings at deep discounts to book value should a more bearish scenario play out.

“This suggests larger and earlier dividend cuts than we previously expected,” Mr Wiles says.

“It also points to lower medium-term payout ratios as banks would need to rebuild CET1 ratios above 10.5 per cent once earnings start to recover.”

1.02pm: Virgin soars as ASX strides higher

Shares have continued their solid momentum to notch 2.4 per cent gains at lunch, as Virgin strides higher on hopes of a government bailout.

The benchmark ASX200 is higher by 123 points to 5304.8, after setting new two-week highs of 5366.4.

All sectors bar consumer staples are trading in the green, led by a boost in health care heavyweights CSL and Cochlear while banks also rebound.

Here’s the biggest movers at 1pm:

12.57pm: Bull market within reach

The Dow Jones Industrial Average its back in a bull market and Australia’s S&P/ASX 200 isn’t far behind.

The DJIA bounced 21.3pc from its low on a daily close basis last week, ending its shortest bear market in history.

Australia’s S&P/ASX 200 has already bounced 17.6pc in the last six days on a close to close basis.

A daily close above 5455 would achieve the 20pc gain needed to officially end the bear market and put in into a bull market.

While it’s currently 130 points below that point, the volatility of late means that’s well within reach today. S&P/ASX 200 last up 2.5pc at 5311.2.

Bridget Carter 12.44pm: Caltex deal announcement imminent

DataRoom | Caltex could be set to make an announcement next week as to whether its suitor, Alimentation Couche-Tard, remains in pursuit of the business.

The Canadian fuel retailer that had offered $8.8bn for Caltex before the coronavirus crisis is understood to have had finalised its due diligence on the ground in Australia before the travel restrictions were in place due to the COVID-19 outbreak.

Due diligence is expected to be finished next week, which will likely see Couche-Tard provide more clarity to Caltex as to how it wants to proceed with its pursuit of the company.

Couche-Tard offered $35.25 per share for Caltex and its shares are now at about $23.45.

The thinking is that Couche-Tard would struggle to obtain debt in the current environment for an acquisition and would need to lower the price of its offer should it proceed, given the target’s price has fallen so substantially and the market conditions have changed.

Caltex suitor Couche-Tard is set to conclude due diligence on the service station operation next week. Picture: Dean Asher.

Eli Greenblat 12.41pm: Woolies shortens supplier payment terms

Woolworths has shortened the payments terms for its small suppliers as it shifts its position on the time it takes to pay off grocery suppliers at a time when many businesses are struggling with cashflow problems during the coronavirus pandemic.

Woolworths said in recognition of the economic uncertainty many of its small business supplier partners are facing, it would temporarily change its payment policy to pay small suppliers faster for their goods and services.

Currently small trade suppliers in Woolworths’ Supermarkets business are paid within 14 days, while across the rest of the Group, payment terms for small suppliers do not exceed 30 days from receipt of a correct invoice or receipt of goods.

Bridget Carter 12.31pm: KKR bows out of Webjet proposal

DataRoom | Kohlberg Kravis Roberts is understood to have waved the white flag on its efforts to buy into Webjet, but another major buyout fund is believed to be embarking on due diligence on the business.

It is understood that the other major fund involved engaged with the business is believed to be either Apollo Global Management, Bain Capital or Affinity Equity Partners.

DataRoom understands that Webjet knocked back a proposal by KKR to secure a small equity stake in the business because it came with warrants attached with debt that were problematic for the company.

Shares in the company, which on Monday again requested further time before it resumed trading, last traded at $3.76.

It is understood that the company was hoping to secure equity from investors at $2 per share.

12.23pm: Virgin confirms $1.4bn bailout talks

Virgin Australia has confirmed a $1.4bn bailout package is on the table in its discussions with the Federal Government as it grapples with its response to coronavirus restrictions.

The Australian’s Simon Benson and Geoff Chambers this morning reported that the airline was pushing for the government lifeline as broad ranging restrictions caused the carrier to halt all of its flights.

In a brief statement to the market this afternoon, Virgin said it had requested financial support from the government “as part of a broader industry support package to prepare for a prolonged crisis”.

“It is a preliminary proposal and remains subject to approval by the Virgin Australia Holdings Board and the Australian Government and may or may not include conversion to equity in certain circumstances.”

The company said while it was taking measures to respond to the crisis, support was necessary for the industry “if the crisis continues indefinitely, to protect jobs and ensure retains a strong, competitive aviation and tourism sector once this crisis is over”.
VAH have recommenced trading, up 8.8pc to 8.7c.

12.05pm: $A dips as China PMI surges

China’s official manufacturing PMI has printed higher than expected, surging back into expansionary territory after a drop to 35.7 last month – jolting trade in the Aussie dollar.

The read on the country’s manufacturing activity for March came in at 52, versus 42.5 expected – where any read above 50 marks expansion.

Non-manufacturing PMI printed at 52.3 versus estimates of 42, and a previous read of 29.6, while composite PMI came in at 53 versus a previous read of 28.9.

The move spurred a sharp sell off in the Aussie dollar from US61.91c to US60.79c but also a quick rebound.

While positive reads, NAB’s head of FX strategy Ray Attrill notes that the data should be read with some caution “ … given the way a PMI is constructed as a net balance of expansion/contraction (the actual magnitude of any such expansion or contraction is not measured)”.

“Thus assuming the majority of firms restarted operations, that would be counted as an expansion relative to last month … we wouldn’t be surprised by much stronger readings than consensus but don’t be fooled by what that would mean.”

AUDUSD last at US61.64c.

Big swing in #AUDUSD just before and in response to Chinese PMI data. Fell to 60.8 US cents just before the release then rebounded & is now buying 61.7 US cents #ausbiz #fx pic.twitter.com/HKQPCwaOsn
— CommSec (@CommSec) March 31, 2020

Bridget Carter 11.53am: Wesfarmers sale not for war chest: CS

DataRoom | Analysts at Credit Suisse believe that Wesfarmers’ move to sell its $1.06bn stake in Coles Group is more about building a cash buffer than amassing an acquisition war chest.

The Perth-based conglomerate confirmed on Tuesday that it sold down 5.2 per cent in the supermarket giant at $15.39 per share, which was an 8.5 per cent discount to its last closing price.

Wesfarmers demerged Coles out of its portfolio in 2018.

The latest sell down will see Wesfarmers net a $130m pre-tax profit on the sale and with an interest of 4.9 per cent left in Coles, it no longer has an entitlement to a director on the board.

The analysts believe that the cash buffer will be needed as it remains in a position of needing to meet considerable financial obligations, with a potential scenario of enforced retail closure and reduced demand.

“ An issue facing Wesfarmers and all retailers under conditions of significantly reduced demand is creditor payments,” the analysts said in a research note.

WES last traded higher by 2.9pc to $36.93.

11.41am: Grocery surge has peaked: ANZ

Panic buying looks to have subsided, as grocery shopping spend winds back but ANZ says purchases of electronics to work from home and recreation goods are still on the up.

Analysis of internal data from the bank shows grocery shopping spend peaked at an 80pc year-on-year jump in the week to March 20, now at a more moderate 45pc year-on-year lift last week.

“Precautionary buying has shifted to a broader preparation for lockdown, as households stockpile work-from-home equipment, entertainment and DIY projects,” ANZ says.

Steep increases are now shifting to electronics – up 59pc for the week – while recreation spend lifts by 26pc and hardware, garden and building supplies grows by 29pc.

As cities shut down, ANZ has observed a drop in dining out by 38pc for the week to March 26, while clothing spend fell by 38pc and footwear and accessories by 28pc.

Ben Wilmot 11.29am: Mall rent reductions will last: UBS

The coronavirus has ripped through the shopping centre sector and there will be permanently lower rents even after a recovery occurs, according to UBS property analysts.

With the virus undermining the viability of retailers worldwide, landlords have crumbled and agreed to “share the pain” of their tenants and most mall companies have pulled their guidance.

In the short term, they are providing rental abatements to preserve retailers’ businesses but longer term UBS expects a rebasing of specialty retailer rents 20 per cent lower.

This will carve into the earnings for major landlords like Scentre, owner of Westfield centres, and Vicinity Centres, that owns half of Chadstone and other malls.

UBS slashed its forecast of Scentre’s Fund From Operations by 29 per cent this year and by 13-18 per over 2021-23. Capital preservation will become critical and lower development spending and a drop in the payout ratio is also expected.

The current share price implies a 40 per cent decline in asset pricing despite a balance sheet that can withstand the expected future volatility, UBS said.

The analyst said Scentre’s gearing is elevated at 33 per cent but said its capital position was sound.

UBS has put a $1.53 price target and the stock and said valuation risks were skewed to the upside as the balance sheet can withstand short term volatility.

Leo Shanahan 11.22am: Virus forces Nine newspaper cuts

Nine Entertainment has been forced to make severe cuts to its newspaper publishing as result of COVID-19 which includes suspending a range of sections, magazines, forcing staff to take leave, reducing newspaper editions and suspending all bonuses.

In an email to staff today Chris Janz, Nine’s managing director of publishing, told staff at newspapers including The Sydney Morning Herald, The Age and The Australian Financial Review, that there had been “significant” advertising cancellations that will force sections and magazines to be suspended “to secure the future of our business”.

“Unfortunately we are not immune from the unprecedented economic and advertising downturn caused by the crisis. While subscriber numbers are building, the growth does not offset the significant number of advertisers cancelling or reducing spend,” Mr Janz wrote.

NEC last traded higher by 21 per cent to $1.27.

Joyce Moullakis 11.17am: Macq slump presents opportunity: JPM

The more than 40 per cent slump in Macquarie Group’s share price since its February peak represents a “strong buying opportunity”, according to JP Morgan analysts.

They upgrade Macquarie to a “buy” rating on Tuesday, from “hold”, despite cutting their price target to $112 from $132.

“The market was slow to factor downside risks from the coronavirus into the share price of Macquarie Group, but the stock has recently come under considerable pressure and arguably has now overshot the fundamentals,” the JPMorgan note to its and Ord Minnett clients said.

“We cannot dismiss further risks, eg a market double-dip, damage to corporate activity or commodity prices remaining depressed, but the extraordinary support being offered by governments should ensure the coming recession is short and sharp.”

The research said Macquarie’s key infrastructure business was likely to “soldier on” providing an “attractive risk-reward equation”.

Macquarie manages a stable of funds that invest in infrastructure assets across the world, which sit within its asset management division.

The group rules off its financial year on Tuesday.

MQG shares last traded higher by 5.3pc to $90.18.

10.55am: Consumer confidence falls to record low

Further coronavirus restrictions and rocketing unemployment are weighed on consumer confidence for the week, sending ANZ’s read to the lowest level in the survey’s almost 50-year history.

The data released this morning showed a 9.8 per cent decline in consumer confidence for the past week to 65.3.

The weakest component of the survey was ‘current economic conditions’, falling by 9.5 per cent following the previous week’s 37pc decline.

“Current economic conditions’ fell more than 9pc and are down close to 50pc over two weeks, to the lowest ever level,” ANZ head of Australian economics David Plank says.

“And most other aspects of the survey are exceptionally weak. The announcement of the largest fiscal package yet may stabilise confidence, but much will depend on the how the pandemic evolves.”

Weakest consumer confidence survey in its close to 50 year history. We are hoping for a boost next weekend after the unprecedented fiscal support provided through the wage subsidy announced yesterday. https://t.co/PwNd44rxPL
— David Plank (@DavidPlank12) March 30, 2020

10.47am: Shares rally early to two-week high

Australia’s S&P/ASX 200 surged as much as 3.5 per cent to a two-week high of 5364.7 in early trade after strong offshore gains and a further positive reaction to the $130bn wage subsidy announced yesterday.

Strength across most sectors is outweighing falls in materials and consumer staples – largely due to an outsized 7pc fall in Coles.

Encouragingly, the mass withdrawal of earnings guidance seems to have lulled today, but dividend deferrals and capital raisings may be ramping up.

10.26am: Star casino group scraps dividend

Star Entertainment Group revoked its dividend payment policy for an indefinite period as it responds to the coronavirus pandemic that has closed casinos across Australia.

Star said it wouldn’t pay a final dividend for the year through June while also deferring its announced interim dividend by three months with a new planned payment date of July 2.

“To further demonstrate The Star’s commitment to maintaining a balance sheet that positions the company for a post COVID-19 recovery, The Star Board has also resolved to revoke its dividend payment policy of paying out a minimum of 70pc of normalised profits after tax until further notice,” the company said.

Dow Jones Newswires

Star Entertainment’s Queen’s Wharf development in Brisbane CBD. Picture: AAP / David Clark.

10.12am: ASX edges higher in cautious open

Shares are adding to yesterday’s record rally – edging higher by 1.1 per cent in opening trade.

The ASX200 is up 59 points to 5240.2 – a new two-week high – but still, that’s less than a 2.1 per cent gain as tipped by overnight futures.

Consumer Staples is the only sector in the red, dragged lower by a 2.3 per cent decline in Woolworths while Coles has been sold off by 6.9 per cent after Wesfarmers trimmed its stake in the grocery giant.

10.07am: Virgin enters trading halt

Virgin enters into a trading halt ahead of the market opening.

“Trading in the securities of the entity will be temporarily paused pending a further announcement,” according to a note released over the ASX platform.

It come amid reports the airline is seeking a $1.4bn bailout to keep flying, including the government taking an ownership stake in the company if it was unable to repay the loan within two to three years.

VAH last traded at 8c apiece.

Bridget Carter 10.04am: Is Kathmandu the next to raise equity?

DataRoom | Kathmandu has entered a trading halt Tuesday, with speculation that it is raising equity.

It is understood that New Zealand broker Forsyth Barr is working on the transaction, while Credit Suisse and its local affiliate Jarden may also be close to the action.

Sources said investors in the stock had been ‘war crossed’, where they have been offered information about the pending raising, although some believe that the pricing and the size of the raise are yet to be determined.

It comes as the Christchurch-based business that is listed in Australia wrestles with the suspension of trade in its business across the Tasman due to New Zealand’s coronavirus lock down.

Kathmandu announced last week that it has also closed stores in Australia.

Gerard Cockburn 9.57am: How does yesterday’s record stack up?

A 7pc surge on the ASX200 yesterday was the market’s best rise on record – made even more stunning given its clear beat of the previous record.

Data from the ASX shows the new record yesterday, a 7pc or 339 point gain, was well ahead of previous records in both percentage and points terms.

The next best day on the ASX200 was earlier this month on March 17 – where the market jumped 5.83pc or 291.4 points but before that the record goes back to November 2008, where stocks lifted by 5.79pc or on January 25 in that same year when the index added 279 points.

On the All Ords, yesterdays record of 6.56pc beat out a previous record of 5.91pc on October 29, 1997.

Eli Greenblat 9.44am: Bunnings acquisition gets ACCC tick

The competition regulator has cleared the proposed acquisition of 70-year old family firm Adelaide Tools and Oaklands Mower Centre by Bunnings Group, as it decided the transaction isn’t likely to substantially lessen competition.

The ACCC said it carefully assessed the acquisition’s impact in the Adelaide metropolitan area, given the competition between Bunnings and Adelaide Tools for retail supply of tools and equipment in Adelaide.

“It should come as no surprise that we would conduct a close review when Bunnings acquires a competitor, given that it has a very dominant position in the one-stop-shop warehouse format in Australia. Although Bunnings has a clear overall focus on the DIY segment, it does market heavily to attract trade customers and is focused on growing its tool sales to tradespeople.” ACCC chairman Rod Sims said.

“Although Bunnings closely competes with the trade-focused tool and equipment specialists, the differences between Bunnings and the Adelaide Tools businesses and the existence of large expanding specialist tool retailers, such as Total Tools (with six stores in Adelaide) and Sydney Tools (which intends to open stores in every state and territory), meant that we didn’t consider the threshold of a substantial lessening of competition was reached.”

Adam Peach poses for a picture at Adelaide Tools in Mile End South. Pictures: Matt Loxton.

9.41am: ASX to benefit from offshore gains

Australia’s sharemarket should benefit from offshore gains and month-end rebalancing today, following a 3.4 per cent lift on the S&P500 overnight amid progress toward rapid testing and vaccine development for coronavirus.

Overnight futures relative to fair value suggest Australia’s S&P/ASX 200 will open up 2.1pc at 5290.

The index surged 7pc to 5181 points on Monday – its best one-day percentage gain – helped by the $130bn wage subsidy announced just before the close. But much of the announcement effect of the wage subsidy has probably been seen already after such a strong rise.

Wesfarmers’ well-timed sale of a 5.2pc stake in Coles last night argues for caution about a near-term peak.

A wave of capital raisings is expected to follow the mass withdrawal of earnings guidance this month.

The energy sector should lag as it did in the US after WTI crude dived 6.5pc to $US20.09 a barrel, though its up 1.3pc this morning.

Overall positive sentiment could see the index test initial chart resistance at 5300 today as ANZ’s weekly consumer confidence data are likely to show another sharp fall.

China PMI data at 1200 AEDT have “large upside risk” as companies return to work, could mislead in terms of the magnitude of expansion, according to NAB.

Month, quarter and in some cases financial year end rebalancing could additional volatility and potentially a large need to buy equities.

Gerard Cockburn 9.34am: Rex to ground last flights

Regional Express will ground all its Queensland flights saying it is no longer financially viable to operate during the country’s coronavirus shutdowns.

Twenty-five flights stretching from Cairns to Birdsville will be shut down, following the decision by the Queensland government to close the state’s borders last Wednesday.

In a statement to the ASX this morning, Rex said it has continued to experience a sharp fall in its financial and cash position due to a significant drop in passengers and flights being limited to essential travel only.

The ceasing of services within the state also includes five regulated routes under contract with the Queensland government.

Rex also noted it has not yet received any financial assistance packages that were announced by the federal government.

“With cash fast running out and no immediate prospect of a workable solution from the Queensland State Government, Rex has no choice but to declare a force majeure event for the contract and suspend all services on Queensland regulated routes indefinitely until it has the ability to service the contract in a commercially viable manner,” the company said.

REX last traded at 66c.

Eli Greenblat 9.27am: Wesfarmers flush with $1.06bn

Wesfarmers has confirmed it has raised pre-tax proceeds of $1.06bn from the decision to sell a 5.2 per cent stake in the supermarket group Coles.

The Perth-based conglomerate said this morning that the sale will proceed at $15.39 per share with settlement expected on April 2. Wesfarmers expects to recognise a pre-tax profit on sale of approximately $130m. Coles shares closed on Monday at $16.82.

Following the sale, Wesfarmers retains a 4.9 per cent interest in Coles and has agreed to retain its remaining shares in Coles for 60 days from completion of the sale, subject to customary exceptions.

In February, Wesfarmers sold down its 15 per cent stake in Coles to 10 per cent to raise $1.1bn. Wesfarmers is now flush with cash and is seeking to strengthen its balance sheet in the face of global economic turmoil caused by the coronavirus pandemic.

Jenny Dunworth is one of 7000 new recruits at Coles supermarkets. Picture: Supplied.

Eli Greenblat 9.24am: Kathmandu halted for material news

Shares in outdoor adventurewear and equipment retailer Kathmandu have been placed in a trading halt pending a material announcement by the company.

Kathmandu, which last year bought iconic surfwear brand Rip Curl for $350 million, recently announced it would close its stores and stand down the majority of its staff in the wake of the coronavirus pandemic.

Lawyers acting for the retailer said in a letter to the New Zealand stock exchange the trading halt was needed as it believed certain information related to the coronavirus outbreak and the company’s response was circulating in the market.

“Kathmandu understands that certain information regarding Kathmandu and its further response to COVID-19 is circulating among market participants which may soon become material information, requiring disclosure. Kathmandu therefore requests that a trading halt be applied until such time as it is able to make an announcement in respect of the same.”

KMD shares last traded at 98c.

9.09am: Wesfarmers could see value elsewhere: Jefferies

Wesfarmers’ $1.2bn selldown of its stake in Coles is “clearly opportunistic” according to Jefferies, who notes the investment group could be eyeing other acquisition opportunities.

In a note cited by Bloomberg, analysts led by Michael Simotas write that the selldown as Coles trades within 2pc of its record high in a bear market is opportunistic.

“We believe management could be looking to take advantage of Coles’ strong share price and the broader market weakness to pursue listed acquisition opportunities,” Mr Simotas said.

Wesfarmers will be left with a 4.9pc stake in Coles, and lose its right to nominate a director on the board.

9.03am: What’s impressing analysts, what’s not

AGL raised to Neutral – Macquarie
Ansell raised to Outperform – Credit Suisse
Ansell raised to Neutral – JP Morgan
Ansell raised to Buy – Citi
Brambles raised to Overweight – Morgan Stanley
Challenger raised to Neutral – JP Morgan
Crown Resorts raised to Buy – UBS
Insurance Australia Group raised to Hold – Shaw and Partners
Macquarie Group raised to Overweight – JP Morgan
Resapp raised to Speculative Buy – Morgans
Scentre raised to Neutral – UBS
Star Entertainment raised to Buy – UBS
Stockland raised to Positive – Evans and Partners
WiseTech cut to Sell – Bell Potter
Woodside Petroleum raised to Buy – UBS

8.50am: ASX headed for worst month since ’87

The benchmark ASX200 is headed for a more than 20 per cent drop for the month of March, its worst since October 1987.

Already this month, we’ve seen the benchmark’s fastest fall into a bear market, and just yesterday its largest leap on record.

In October 1987, the index dropped 42 per cent – including a 25pc decline on what is now known as Black Tuesday.

8.47am: Domino’s US withdraws guidance

The US-listed parent of Domino’s Pizza has called off financial guidance for the year, citing disruption from the coronavirus pandemic that’s kept stores in 14 international markets closed and 23 more with partial store closures.

On Monday, the company said most locations in the US remained open, and that it expected to report a 4.4pc sales increase in the first quarter, or 5.9pc increase adjusted for currency fluctuations.

The company is scheduled to report first-quarter results on April 23.

“Shelter in place directives, pantry loading, university and school closures, event cancellations, and the lack of live televised sports have all impacted our business in ways that we cannot yet fully quantify,” Chief Executive Ritch Allison said in a statement.

To date, the locally listed Domino’s (ASX: DMP) has not withdrawn guidance.

Dow Jones Newswires

Chris Jenkins 8.10am: Air NZ to cut 3500 jobs

Air New Zealand has announced plans to cut 3500 jobs and says it will probably emerge from the COVID-19 pandemic crisis a 30 per cent smaller business.

The news came in a letter to Air New Zealand staff from CEO Greg Foran. The letter was also shared with investors in announcements to stock exchanges in Australia and New Zealand.

“It is shaping up that the size of the Air New Zealand workforce will reduce by up to 3,500 roles in coming months,” Mr Foran said.

“No areas will be immune whether it is our most senior leaders through to new joiners. The situation we find ourselves in is nobody’s fault. And I am acutely conscious that a smaller Air New Zealand also comes with a significant impact on many of our suppliers, some of whom will probably have to reduce the size of their workforces,” he said.

Elias Visontay 7.38am: Business Council hails wage subsidy

Business Council of Australia CEO Jennifer Westacott has heralded the government’s $130 billion wage subsidy as “an absolute hope giver to all of Australia”.

Ms Westacott said she thinks the package “will save many many many businesses” that would have otherwise gone under, and said it would help many larger businesses “get the economy going again” after the coronavirus crisis.

“Six million people getting paid, six million people getting a decent standard of living, being able to stay attached to their employer, together with their employer rebuilding their businesses. This is the hope and confidence that we needed to get through this,” Ms Westacott told ABC Radio National.

Ms Westacott said the requirement for larger businesses with a pre-pandemic turnover of $1 billion to demonstrate a 50 per cent reduction in revenue was fair, and said it was important for these businesses to be around after the crisis “to get the economy going again”.

“Overwhelmingly this will save many many many businesses, many that would have gone under.”

She also said it wasn’t in businesses interests now to sack their employers or take unfair advantage of the scheme, but warned some businesses might still reduce the amount of hours or days they employ their staff for.

7.28am: ASX set to rise again

The Australian share market is set to open higher, having just recorded its best ever day following the announcement of $130 billion in government stimulus measures.

At 7am (AEDT) the SPI200 futures contract was up 66 points, or 1.27 per cent, at 5,257.0 points, suggesting solid early gains for local stocks.

The S&P/ASX200 benchmark index finished Monday up 399 points – a record 7.0 per cent – after the government announced new stimulus to help businesses through the coronavirus pandemic.

In an unprecedented move, employees will receive a flat-rate payment of $1500 per fortnight through their employers in a bid to lessen the economic blow caused by COVID-19.

Within an hour of Prime Minister Scott Morrison’s announcement on Monday nearly 8000 businesses had signed up for the scheme on the tax office website.

Wall Street also rose overnight after US President Donald Trump followed his own stimulus measures by extending stay-at-home guidelines.

The Australian dollar was buying US61.68 cents at 7am (AEDT), up from US61.47 cents as the market closed on Monday.

AAP

7.16am: Iron ore slips

The spot price of iron ore is down 3.9 per cent at $US82.55, according to CommSec.

7.10am: Wall St up 3pc as oil hits 18-year low

US stocks rose and oil prices approached $US20 a barrel after US government officials signalled that measures to contain the coronavirus pandemic are likely to remain in place for an extended time.

The Dow Jones Industrial Average rose 3.2pc, or 688 points, to 22325 finishing the session near its high for the day, while the S&P 500 added 3.4pc. The Nasdaq advanced 3.6 per cent.

Australian stocks were tipped to open higher, with the SPI futures index up 54 points shortly after 7am (AEDT).

Both indexes have rallied more than 15pc since bottoming a week ago but remain down more than 20pc from their February records as the pandemic has closed businesses, reduced air travel and pushed millions of people to work from home.

The White House on Sunday extended its social-distancing guidelines through the end of April. The move marks a shift in stance for President Trump, who had said that he hoped to ease some restrictions by Easter to limit the economic damage.

US crude-oil futures hit their lowest level in more than 18 years, as analysts forecast that quarantine measures are leading to the biggest decline in oil demand in history. Oil settled down 6.6pc to $US 20.09 a barrel, a level last seen in February 2002.

What is becoming clear is the pandemic is going to force a “very deep recession,” said Nariman Behravesh, chief economist at research firm IHS Markit. The firm expects second-quarter gross domestic product to contract 20pc to 25pc, and the third quarter to decline as well.

Traders, meanwhile, are bracing for fresh constraints on liquidity in some financial markets as investors take stock of portfolios and banks assess their balance sheets at the end of March.

Oil prices came under renewed pressure as the restrictions on business activity in most economies — combined with the threat of elevated production levels from Saudi Arabia and Russia — raised the prospect of a longer downturn in fuel markets.

Global oil demand is set to drop by 12 million barrels a day in the second quarter in the steepest decline on record, according to analysts at Bank of America. With production also set to pick up, the bank forecasts that both US and global crude futures will fall below $US20 a barrel in the coming months and the world may run out of storage space for oil.

The price of oil is the market other traders are watching today, said Art Cashin, the head of UBS’ floor operations at the NYSE, in a morning note. Traders are guessing there may be a “major test” at the $US17-$US18 level, he said.

That level was the bottom of the late 2001-early 2002 trading range — U.S. crude closed at $US17.45 on November 15, 2001.

Among stock movers, Abbott Laboratories jumped 6pc after the drugmaker said the U.S. Food and Drug Administration had approved an emergency-use coronavirus test. Johnson & Johnson rose 7.2pc after the company said it had made progress on a vaccine to prevent COVID-19 and that the product could be ready in early 2021.

In Europe, the pan-continental Stoxx Europe 600 index rose 1.3pc.

In Asia, Japan’s Nikkei 225 index, which logged its best week in its history last week, pulled back 1.6pc. Hong Kong’s Hang Seng index and the Shanghai Composite in mainland China also retreated.

In another sign of investor caution, the yield on the 10-year U.S. Treasury note, a security that is seen as a haven, fell to 0.687pc from 0.744pc Friday.

Dow Jones

5.50am: Wall St pushes higher

Stocks pushed higher on Wall Street, led by big gains for health care companies announcing developments that could aid in the coronavirus outbreak.

The rally tacked more gains onto a recent upswing for the market, which is coming off the best week for the S&P 500 since hitting bottom after the financial crisis 11 years ago.

Nascent optimism is budding on Wall Street that the worst of the selling may be over, but markets around the world remain tentative amid uncertainty about whether global authorities can nurse the economy through the pandemic. The S&P 500 remains about 23 per cent below its record set last month, and oil tumbled to an 18-year low.

In early afternoon trading, The S&P 500 was up 2.3 per cent, The Dow Jones Industrial Average gained 403 points, or 1.9 per cent, to 22,116, and the Nasdaq was up 3 per cent.

After Monday’s stunning 7 per cent rebound, Australian stocks are set for a small opening rise. At 5.45am (AEDT) the SPI futures index was up 18 points.

The Australian dollar was at US61.59c.

European indexes rose modestly after erasing earlier losses. Asian markets were down, but by much milder degrees than the huge swings that have rocked investors over the last month.

A surge for health care stocks led the way at the week’s open. Abbott Laboratories jumped 8.2pc after saying it has a test that can detect the new coronavirus in as little as five minutes. Johnson & Johnson leapt 8.8pc after it said it expects to begin human clinical studies on a vaccine candidate for COVID-19 by September.

Stocks jumped last week as the Federal Reserve promised to buy as many Treasurys as it takes to get lending markets running smoothly and Capitol Hill agreed on a $US2.2 trillion rescue package for the economy. .

“The market wants to see everything line up, and last week everything lined up,” said Nela Richardson, investment strategist at Edward Jones, referring to the unprecedented aid from the Fed and Congress.

Now, she said, President Donald Trump also appears to be in synch with health experts about the need to restrict the economy to slow the spread of the virus. Trump on Sunday extended social-distancing guidelines, which recommend against group gatherings larger than 10, through the end of April after earlier saying he wanted the economy open by Easter.

Monday’s sharpest action was in the oil market, where benchmark U.S. crude fell more than 5pc and touched below $US20 per barrel for the first time since early 2002. Oil started the year above $60, and prices have plunged on expectations that a weakened global economy will burn less fuel. The world is awash in oil, meanwhile, as producers continue to pull more of it out of the ground.

5.35am: European shares rise

Oil prices plunged to an 18-year low as the number of novel coronavirus cases worldwide surged past 700,000, reinforcing worries about the impact of the pandemic on the global economy.

US and European stock markets moved higher despite the prospect of much of the world remaining in confinement for weeks to come.

Crude oil struck the lowest levels since 2002, with Brent North Sea tumbling to $21.65 per barrel at one point. The benchmark US contract, WTI, briefly fell below $20.00.

“Estimates for the (oil) demand side are being revised downwards on an almost daily basis, while on the supply side there is still no sign of any reconciliation between Saudi Arabia and Russia” regarding their price war, Commerzbank said in a client note.

There are warnings that oil could sink even further as storage tanks around the world approach full capacity.

Saudi Arabia, meanwhile, announced it would raise exports by 600,000 barrels per day to a record 10.6 million barrels per day in May.

However US President Donald Trump held a phone call with his Russian counterpart Vladimir Putin where they discussed oil prices as US producers are reeling.

“If nothing comes out of Trump’s call to Putin, oil prices could easily drop a couple dollars,” said OANDA market analyst Edward Moya.

European stocks spent much of the day in the red on indications of the economic cost of the crisis.

The EU’s economic confidence index suffered its sharpest monthly fall ever in March, while experts said Germany’s economy could contract by over five per cent.

However European stocks rose into positive territory as Wall Street pushed higher, even though jubilation over last week’s enormous US stimulus package has largely faded.

London closed up 1.0 per cent, Frankfurt rose 1.9 per cent and Paris climbed 0.6 per cent.

In Asia, stock markets mostly fell following the steep drop on Wall Street and in Europe on Friday. Australia was out on its own — its stock market surging 7.0 per cent as the country’s virus infections slowed, while after the close of trade in Sydney, the government unveiled an income-support plan worth $US80 billion.

US President Donald Trump on Friday signed off Washington’s stimulus measures worth more than $2 trillion.

AFP

5.32am: Oil prices slide

Oil prices plunged Monday as the number of novel coronavirus cases worldwide surged past 700,000, reinforcing worries about the impact of the pandemic on the global economy.

Stock markets reacted differently to the prospect of much of the world remaining in confinement for weeks to come, with some moving higher as officials moved to deal with the crisis, while others slid further.

Crude oil struck the lowest levels in more than 17 years on Monday, with Brent North Sea tumbling to $US22.58 per barrel at one point.

There are warnings that oil could sink even further as storage tanks around the world approach full capacity.

Saudi Arabia, meanwhile, announced it would raise exports by 600,000 barrels per day to a record 10.6 million barrels per day in May.

AFP

5.29am: Ritz Hotel sold to Qatari investor

Luxury London hotel The Ritz, currently shut owing to the coronavirus outbreak, has been sold to a Qatari buyer, lawyers overseeing the deal have confirmed, for reportedly just under $US1.0 billion.

“It is a privilege to become the owner of the iconic Ritz Hotel and have the opportunity to build on its innate style and grand traditions,” the unnamed buyer said a statement issued by law firm Macfarlanes.

“During this COVID-19 crisis, our first priority is towards the staff of The Ritz, who together are the essence of The Ritz’s 115-year-old reputation.

“Once this pandemic has passed, we look forward to reopening the hotel and to sharing our longer-term plans,” the statement added.

The hotel had been owned by billionaire brothers Frederick and David Barclay since 1995.

The 18th century hotel overlooks Green Park in central London close to Buckingham Palace, home to Queen Elizabeth II.

The Ritz hotel in central London. Picture: AFP

AFP

5.27am: Saudis to lift oil exports

Saudi Arabia said it will raise its oil exports to a record 10.6 million barrels per day starting from May amid an escalating price war with Russia.

“The kingdom plans to raise its petroleum exports by 600,000 bpd from May, so total exports will increase to 10.6 million bpd,” said an official at the energy ministry, cited by the state-run SPA agency.

This means the world’s top exporter, which already announced a sharp increase for April, will add at least 3.6 million bpd of additional supplies to the global market amid a production glut and low oil prices.

AFP

5.25am: Freeport miner shot dead

Gunmen shot to death a New Zealand miner and wounded six others on Monday near the world’s largest gold mine in Indonesia’s easternmost Papua region, police and company officials said.

The seven employees of PT Freeport Indonesia were hit by a group of eight gunmen when they were in a parking area in restive Papua province where a clash between security forces and a rebel group is ongoing, said local police chief Gusti Gde Era Adhinata.

The clashes, which began late last month near the Grasberg copper and gold mine in Papua province, earlier killed two security personnel and four Papuan independence fighters, and injured several others.

Police believe the attackers are members of the West Papua Liberation Army, the military wing of the Free Papua Organisation. Adhinata said a 57-year-old New Zealand man, Graeme Thomas Wall, from Ngaruawahia, was shot in his chest and died while being taken to a hospital. Two Indonesian miners were in critical condition after being shot, while four others suffered minor injuries.

Attacks by rebels near the Grasberg mine have spiked in the past year. The mine, which is nearly half owned by U.S.-based Freeport-McMoRan and is run by PT Freeport Indonesia, is seen by separatists as a symbol of Indonesian rule and has been a frequent target for rebels.

The Freeport mine. Picture” REUTERS

5.20am: Scrap dividends, France urges

France stepped up its calls for firms using state aid to keep afloat during the coronavirus crisis to not pay out dividends to shareholders this year.

“I call on all companies who are putting staff on partial unemployment, that is having their wages paid by the state, to show the greatest restraint possible in terms of paying dividends,” Finance Minister Bruno Le Maire said on BFMTV.

“Even better to set an example and not pay dividends,” he added. “We also won’t tolerate companies buying back shares … share buybacks are not compatible with support from the state treasury,” said Le Maire.

Companies that make a profit usually return part of that to their shareholders in the form of a dividend.

A firm buying back its shares is another way of returning profits to shareholders.

AFP

5.15am: Renault restarts plants

French automaker Renault said it was resuming production at two factories in China and South Korea after they were shut down as authorities tried to limit the coronavirus outbreak.

“All of the group’s factories are currently shut down, except for the factories in China and South Korea, which have resumed operations or are in the process of doing so,” the company said in a statement.

Renault’s site in Wuhan, the epicentre of the outbreak, was taken offline in late January. It has an annual production capacity of 150,000 vehicles.

The Busan factory in South Korea, which turns out 216,000 cars a year, was stopped on February 7.

AFP