ASX reverses on Melbourne lockdown as Qantas, NAB slide
Melbourne’s return to a Stage 3 lockdown is expected to shave 1 per cent off Australia’s GDP in the third quarter, says CBA.
- Shutdown to shave 1pc off GDP: CBA
- $A slides as lockdowns threaten growth
- COVID-19 spike a pervasive blow to confidence: ANZ
- Afterpay to raise $1bn
Welcome to the Trading Day blog for Tuesday, July 7. In a yoyo session for shares, the benchmark finished lower by 2 points, any gains slashed in the final hour as Melbourne imposed a six-week lockdown to curb coronavirus, with Qantas and Sydney Airport among the hardest hit.
Iron ore miners led gains, while Afterpay’s $1bn raise is helped e-commerce and BNPL names to gain ground. The RBA kept rates steady, and said there were signs the worst is over for the global economy.
Olivia Caisley 8.36pm: It was getting better: Frydenberg
Asked if the present economic situation was better than the Morrison government had predicted back in April, Josh Frydenberg said that prior to the Victorian spike he had seen a number of improvements in economic data sets.
The Treasurer said consumer and business confidence had improved with manufacturing activity “getting back to where it was pre-COVID-19”.
“We certainly saw a lot more mobility around our cities and, and some of that was generating retail sales, which were up significantly I think by more than 16 per cent,” he said.
“As you know, the ABS has been producing some datasets on jobs and wages using payroll data, which showed consumer confidence had started to lift.
“But we have seen in the last couple of weeks since the Victorian spike consumer confidence shaken up and that’s why we’re all in this together.”
Read more in our live COVID-19 coverage
7.40pm: Europe forecast gets darker
The eurozone economy will plunge 8.7 per cent in 2020 due to the coronavirus crisis, the European Commission said Tuesday in more pessimistic forecasts that do not see a complete rebound next year.
The new forecasts see the eurozone economy bouncing back by 6.1 percent in 2021, still leaving the region worse off than before the countries were forced to implement lockdowns in an attempt to contain the spread of COVID-19.
“The economic impact of the lockdown is more severe than we initially expected,” said Commission Vice President Valdis Dombrovskis in a statement accompanying the release of the updated forecasts.
“Looking forward to this year and next, we can expect a rebound but we will need to be vigilant about the differing pace of the recovery,” he added.
Germany, the EU’s biggest economy, is expected to see a 6.3 percent contraction this year and 5.3 percent growth in 2021.
The economies of France, Italy and Spain will each contract by more than 10 per cent, and then partially recover.
France, the eurozone’s second-largest economy, is expected to contract by 10.6 per cent this year and grow by 7.6 per cent in 2021.
Italy, which should suffer a 11.2-per cent drop this year, is only forecast to rebound by 6.1 per cent in 2021.
Spain’s economy is seen as contracting by 10.9 per cent before bouncing back by 7.1 per cent.
“The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity,” said the EU’s economy commissioner, Paolo Gentiloni.
AFP
6.04pm: UK publisher cuts 500 jobs
Reach, publisher of UK newspapers Daily Mirror and Daily Express, plans to axe about 550 jobs as the coronavirus forces readers online and slashes advertising revenues, it said on Tuesday.
“Structural change in the media sector has accelerated during the pandemic and this has resulted in increased adoption of our digital products,” Reach chief executive Jim Mullen said in a statement.
“However, due to reduced advertising demand, we have not seen commensurate increases in digital revenue.” Reach said the company plans a reduction in headcount of about 550 staff, or 12 per cent of its workforce - as it looks to make annual cost savings of £35 million ($43 million).
The company, which owns also a number of UK regional newspapers, said the restructuring would cost the group £20 million.
“Editorial will move to a more centralised structure bringing together national and regional teams across print and digital to significantly increase efficiency and remove duplication while maintaining the strong editorial identity of our news brands,” Reach said.
The company will also have “fewer locations and a simpler management structure”, the statement said.
Reach added that its revenue slumped 27.5 per cent in the second quarter, “impacted by reductions in circulation and advertising”
AFP
5.57pm: Record drop in card debt
Australians are limiting their credit card spending and paying down debt amid nervousness about the future strength of the economy.
According to the latest RBA data, Australians wiped $1.64bn off their credit card debts in May, bringing the nation’s total credit card debt to its lowest level since 2007.
It was the biggest monthly drop in credit card debt on record.
“People have taken the bull by the horns when it comes to paying off debt and cutting up their credit cards,” said RateCity research director Sally Tindall.
“In April and May, Australians have wiped almost $3.2 billion off the total debt accruing interest on credit cards.”
Consumers spent $5.82 billion less on their credit cards in May 2020 compared with the same month a year ago, while the number of credit card accounts has dropped by 1.22 million year-on-year.
That lower monthly spend figure was partly thanks to young people turning to ‘buy-now, pay-later’ platforms like Afterpay, regulatory changes in credit card approval, as well as people chopping up their credit cards to fulfil home loan serviceability criteria.
“Tough new government regulations have made it harder for people to get credit cards, while some customers are choosing to close their credit card accounts to get their home loan application over the line,” Ms Tindall said.
“The biggest factor, however, is likely to be the shift to buy-now-pay-later services, which are seeing incredible growth and no sign of slowing down.
Read more: Credit card debts tumble amid economic uncertainty
4.50pm: Shutdown to shave 1pc off GDP
Melbourne’s return to a Stage 3 lockdown is expected to shave 1 per cent off Australia’s GDP in the third quarter, so warns the Commonwealth Bank.
In a note this afternooon following the Victorian premiers announcement, economist Gareth Aird does the numbers on the potential hit to the nation’s growth.
Noting Victoria’s economy is worth 24pc of the national economy and Melbourne’s population is around 20pc of the national population, he says Victoria’s gross state product should be 10pc lower than otherwise over the next six weeks.
“Given the shutdown is expected to last six weeks it could be expected to shave 1.0pc off Q3 20 GDP,” Mr Aird says.
“It’s a significant hit. It’s a setback in Australia’s economic recovery and it’s going to have a negative impact on Victorian businesses and workers.”
AUDUSD continues to dive on the news - down 31 points from pre-announcement levels to US69.44c.
Follow the latest at our coronavirus live blog
4.35pm: Chadstone owner drops 5pc
Shopping centre owners took another hit in Tuesday’s trade, with Stage 3 restrictions across Melbourne threatening their trade once again.
The lockdown measures across Melbourne require retail shops to allow just one person per four square metres, while cafes, restaurants and pubs will be takeaway only.
The owner of Melbourne’s largest shopping mall Chadstone, Vicinity Centres, was one of the worst hit in afternoon trade - falling from early positive trade to lose 4.9 per cent by the close at $1.37.
Similarly, Charter Hall Retail REIT, which owns a portfolio of centres including Cambellfield Plaza and Rosebud Plaza, dropped 5 per cent to $3.24.
Here’s the biggest movers at the close:
4.27pm: Travel stocks take fresh beating
A new six-week lockdown in Melbourne has served a blow to already battered travel names, including the national carrier.
With borders between Victoria and NSW closed the airlines most frequent route has now been cancelled, and countless others into the state now called off also.
Shares in the airline fell 3.4 per cent in Tuesday’s session to $3.66 while Sydney Airport fell 2.8 per cent to $5.49.
Flight Centre lost 4pc to $10.98 while Corporate Travel lost 4.7pc to $9.83 and Webjet reversed by 3.2 per cent to $3.30.
Read more: Melbourne returns to six-week lockdown
4.11pm: Shares fall into negative
Shares were rocked by the announcement of a wide-scale lockdown in Melbourne, falling to a loss of 2 points at the local close.
The benchmark ASX200 had gained as much as 1.04pc intraday, following a strong offshore lead and maintained positive trade for much of the day, but the announcement of a Melbourne lockdown at 3.15pm served a brutal blow.
By the close, the index was lower by 2 points or 0.03 per cent at 6012.9.
Bridget Carter 3.57pm: Afterpay raise covered across range
DataRoom | Afterpay has received strong support for its equity raising, with the book now covered throughout the range.
Earlier on Tuesday, the deal was covered at $62.50 per share.
The indications of strong demand were sent in messages to fund managers Tuesday.
The buy now pay later service provider has been raising $650m by way of a placement and $150m through a Share Purchase Plan.
Afterpay has launched a book build for the raise, with the floor price for shares being sold at $61.75, a 9.2 per cent discount to their last close of $68, and the top of the range being $66, with bids received in 25c increments.
Read more: Afterpay founders take cash while they can
3.53pm: $A slides as lockdowns threaten growth
The Aussie dollar is taking a hit as Victorian premier Dan Andrews continues to address the press on the new lockdowns across Melbourne.
AUDUSD had spiked to a three-week high of US69.95c in morning trade, but slid 21 points to US69.54c as details of the lockdown were revealed this afternoon.
Read more at our live coronavirus blog
3.40pm: Melbourne-exposed stocks take new hit
Melbourne-exposed stocks are getting hit again - on the news of a six-week Melbourne-wide lockdown.
Crown is down 2.7pc, Vicinity Centres is down 2.8pc, NAB is down 1.3pc, ANZ is down 1pc and Westpac is off 0.8pc.
Qantas is down 2.6pc to daily lows of $3.69 as Sydney Airport drops 2.7pc to $5.50.
Would note that Victoria is 23% of the Australian economy and the Melbourne metropolitan accounts for a fair bit of that, if prolonged these restrictions will drag on the overall recovery as we move into H2 #ausbiz https://t.co/G5rUVLRPYh
— Alex Joiner (@IFM_Economist) July 7, 2020
3.28pm: Shares fade on Melbourne lockdown
The local market is pulling lower on the news of a six-week lockdown of Melbourne’s metropolitan area.
The market had regained as much as 0.9pc, but has faded to 0.45 per cent to 6041.9.
Victorian Premier Dan Andrews said stage three stay-at-home orders would be imposed across the whole of metro Melbourne and the Mitchell shire, immediately north of Melbourne from 11.59pm on Wednesday.
Read more: New Melbourne lockdowns amid record spike
3.10pm: Firms reconsider models amid COVID
The RBA’s monthly policy statement has reinforced expectations of a long period of record-low interest rates and reiterated its preparedness to increase its bond buying if needed, while pressuring the government to lengthen its fiscal stimulus.
While noting that the “downturn has been less severe than earlier expected” with a considerably smaller than expected fall in hours worked and a pick-up in retail spending after an easing of restrictions in most of Australia, RBA Governor Lowe stressed that the economic outlook remains “highly uncertain”.
Together with the health situation, the uncertain economic outlook is “making many households and businesses cautious”.
More worryingly, it is “prompting many firms to reconsider their business models”.
Read more: RBA says worst passing as rates held
2.38pm: Signs of economic recovery: RBA
The RBA board has struck a rather optimistic tone at its July meeting, noting that leading indicators suggest “the worst of the global economic contraction has now passed”.
Still, it said the outlook remains uncertain and the recovery was expected to be “bumpy”.
The bank made no explicit reference to the rising coronavirus case count in Melbourne, but noted that as a whole, global cases were declining, “but are still very high and rising in others (countries)”.
“Globally, conditions in financial markets have improved. Volatility has declined and there have been large raisings of both debt and equity,” it said.
“The prices of many assets have risen substantially despite the high level of uncertainty about the economic outlook. Bond yields remain at historically low levels.”
2.32pm: RBA keeps policy settings unchanged
The Reserve Bank has kept its policy settings, including the cash rate, unchanged at its July meeting.
It said the bank was continuing to support a high level of liquidity in the Australian financial system, with banks drawing on the Term Funding Facility by $15bn to date.
“Conditions have, however, stabilised recently and the downturn has been less severe than earlier expected. While total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely,” the board said.
“There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country.”
AUDUSD last at US69.69c, down 0.05pc.
Bridget Carter 2.15pm: CleanSpace plots path to IPO
DataRoom | The coronavirus may have brought a number of companies to their knees, but one that is benefiting from the COVID-19 environment is CleanSpace, which now has plans for a listing on the Australian Securities Exchange.
The group is estimated to have a value of about $500m and is planning an initial public offering, likely to happen this year.
CleanSpace describes itself as a specialist in innovative and quality respirator design and manufacturing.
It was established in 2009 by a medical device engineering team with the hope of making respirators safe and reliable and its respirators are now sold in over 20 countries.
Advisors recently pitched for a role on the float of the company, and it is understood that Wilsons and Bell Potter were well placed to have won the mandates.
2.07pm: Asian markets extend bull market rally
Both the Chinese and Hong Kong markets are back in bull market territory and gaining further ground on Tuesday, after strength across the region yesterday.
The benchmark Shanghai Composite is higher by 1.3pc to new 2-year highs, extending its surge off the back of expectations of more monetary stimulus.
On the Hang Seng, shares are up by a more moderate 0.1pc, after gaining more than six per cent over the previous four trading days. The index is now more than 21pc higher than its March 19, putting it squarely in bull territory.
1.53pm: Consumers paying down debt: RBA
The coronavirus downturn and weak economic outlook has prompted consumers to pay down debt, according to the latest retail payments data from the RBA.
The May data drop shows total balances outstanding on credit and charge cards was down 26.1pc in the year-ended May 2020 to $40.2bn, of which the balance accruing interest was down by 19.7pc.
Total purchases on credit cards was down by 20.7pc over the same period, with consumers seemingly preferring to use debit cards, which notched growth of 9.9 per cent.
ATM withdrawals were down by 30 per cent by value, and more than 46pc by number.
The growth of new entrants in the banking system spurred a 166pc jump in value of transactions on new payment platforms to $41.6bn.
1.39pm: ASX bounces to 0.8pc gain
Australia’s share market has bounced strongly from intraday lows in choppy trading, recovering to a 0.8pc gain in mid afternoon trade.
The benchmark ASX200 is at 6061 despite news of a record 191 coronavirus cases in Victoria yesterday, with some traders noting the case tally was the driver of the earlier drop.
Shares did fall down to a 3-day low of 6007.7 after initially rising 1pc to $6077.7.
Gold miners are surging in defensive trade, with Newcrest rising 2.9pc to a 9-month high of $33.21. St Barbara is up 10pc to an 11-month high of $3.62 as it posted its best quarterly production for two years.
Iron ore miners remain firm with Fortescue up 6pc. BHP is up 1.7pc despite a downgrade from Credit Suisse.
Magellan is up 4pc after reporting solid performance-fee income. Major banks are mixed with CBA up 0.8pc and NAB down 0.8pc.
Read more: Vic outbreak will recalibrate recovery
1.23pm: Iberdrola ahead in Infigen battle
Infigen’s Spanish suitor Iberdrola has been given the green light from the Foreign Investment Review Board, putting it ahead of rival bidder UAC Energy in its takeover battle for the renewables group.
Iberdrola, listed on the Spanish exchange with a market capitalisation of roughly $105bn, last week upped its bid to 89c apiece trumping a revised 86c per share offer from UAC.
Following approval from FIRB today, Infigen urged shareholders to accept the Iberdrola offer, with the deal now subject to only the minimum acceptance condition of 50 per cent.
Iberdrola said it had reached conditional agreement with Infigen’s largest shareholders, the Children’s Investment master Fund and CIFF Capital, who together own 33.1pc of shares.
“As opposed to the UAC offer, Iberdrola Australia’s Offer has been agreed in a friendly and collaborative manner with the Infigen board following 12 months of engagement,” the Spanish group said.
The offer price is a 50.8pc premium to the group’s pre-takeover trading price on June 2.
IFN last traded up 0.22pc to 92.2c.
Read more: Battle for Infigen heats up
1.10pm: ASIC’s warning ahead of results season
Ahead of reporting season, the corporate regulator has stressed companies should focus on asset values and financial position, warning against assumptions that were “overly optimistic or pessimistic”.
ASIC said its focus areas would be on asset values, provisions, events occurring after year end and before completing the financial report, disclosures and solvency and going concern assessments.
Chair James Shipton noted that the quality of financial reports was more important than ever as investors grapple with the coronavirus pandemic and the hit to company balance sheets.
“Entities with businesses adversely affected by the COVID-19 pandemic should focus on the reporting of asset values and financial position,” he said.
“Investors will expect clear disclosure about the impacts on an entity’s businesses, any risks and uncertainties, key assumptions, management strategies and future prospects.”
He added that “useful and meaningful disclosures about the business impact and potential uncertainties will be vital”.
ASIC has extended the deadline for listed and unlisted companies to lodge their annual reports by one month.
1.02pm: Shares cling on to 4-point gain
Local shares are fighting to hold gains at lunch, as fear of a new four-week lockdown in Melbourne shakes consumer sentiment.
At 1pm, the benchmark ASX200 is higher by just 4 points or 0.08 per cent to 6019.3 - that’s despite earlier gaining 1.04pc.
Energy stocks are doing the most damage - down 1.3pc - while reversal in the major banks is adding to the weak momentum.
Fortescue is one of the market’s best performers, up 5.6pc after strength in iron ore overnight, alongside a 1.2pc jump in BHP and 0.6pc lift in Rio.
Here’s the biggest movers at 1pm:
David Ross 12.55pm: Woolworths Melbourne orders cancelled again
Woolworths customers in Melbourne have once again had orders cancelled after a supervisor at its West Footscray customer fulfilment centre tested positive to coronavirus over the weekend.
This comes after assurances that operations would resume after 20 per cent of orders in Melbourne were cancelled on Monday.
Woolworth’s fulfilment centre had been disrupted after a staff member had tested positive to COVID-19 and the facility was deep cleaned and several staff ordered to self isolate.
“For our team’s safety we have closed the customer fulfilment centre for a clean and to allow for all relevant team members to be tested,” a statement from the supermarket sent to customers said.
“You can be assured we are following public health advice and taking all necessary steps to ensure ongoing safety in our stores and online centres. This includes the attendance of registered nurses on site and compulsory temperature checks for our team.”
More than 800 staff work at the Fulfilment Centre and efforts are underway to test many for COVID-19.
Read more: Woolworths in COVID-19 backflip on Vic orders
12.44pm: Citi lifts target for US stocks
Citi’s chief US equities strategist, Tobias Levkovich has raised his year-end target for the US share market but has kept his bearish view.
“We are raising our year-end 2020 S&P 500 objective from 2,700 to 2,900, reflecting our sense that a higher multiple on 2021 EPS forecasts is likely given the Fed’s aggressive policy to support risk assets,” he says.
“While our fundamental assessment still implies downside from current levels, it is more probable that the trading range for the market should be 2,700-3,200 given powerful fiscal and monetary stimuli, with more likely from the government next month.
“We envision volatility for equities as good news is being priced in and problems are being overlooked.”
Mr Levkovich admits he’s been “too cautious” but argues that the market has ignored and rationalised what would have been disruptive in the past, including virus resurgences or China-India hostilities.
“While we can arrive at a higher S&P 500 objective and still envision a 3,160 level next year at this time, the S&P 500 looks to be ahead of itself, in our opinion, given so many unknowns.”
The S&P 500 rose 1.6pc to a 3-week high of 3179.5 on Monday.
Rachel Baxendale 12.33pm: Virus case tally pulls ASX lower
Victoria has recorded 191 new cases of COVID-19 on Tuesday - swamping Monday’s record daily increase of 127.
Well-placed sources say the Andrews government is preparing to announce a four-week statewide lockdown from this afternoon.
The news has rattled the local market, sending the benchmark ASX200 to daily lows of 6009.9, while the Aussie dollar reverses early gains of 0.3pc to trade lower by 0.06pc to US69.68c.
Read more: Four-week lockdown looms for Victoria
12.27pm: Freedom Furniture fined for ‘no returns’
The owners of Freedom Furniture have paid $25,200 in penalties for holding an illegal ‘no returns’ policy.
Australia’s competition watchdog issued parent company Steinhoff Asia Pacific, now known as Greenlit Brands, with two infringement notices for declaring on the Freedom website that “furniture items cannot be returned or exchanged, except at Freedom’s absolute discretion” in August and September of last year.
According to the Australian Consumer and Competition Commission, that policy was a breach to consumer rights, and having it on the Freedom’s website gave the ACCC “reasonable grounds” to believe the company had contravened the Australian Consumer Law.
“Under the Australian Consumer Law consumers have the right to ask for their choice of a repair, replacement or refund when they have purchased a product that has a fault which amounts to a major failure,” ACCC Commissioner Sarah Court said in a statement.
“Retailers must not misrepresent consumer guarantee rights to their customers.”
The company, which is a wholly-owned subsidiary of Europe-listed Steinhoff International, operates furniture and bedding brands Fantastic Furniture, Plush, Snooze and Freedom Furniture in Australia, as well as Freedom in New Zealand.
Read more: Fantastic float takes next step in IPO
Bridget Carter 12.04pm: Afterpay’s $800m raising covered
DataRoom | Afterpay has received strong support for its equity raising, with the book covered at $62.50 per share.
Bids have been received through the range, according to a message update sent to fund managers Tuesday.
The company has been raising $650m by way of a placement and $150m through a Share Purchase Plan.
The company has launched a book build for the raise, with the floor price for shares being sold at $61.75, a 9 per cent discount to their last close of $68.
Read more: Afterpay raising $800m, founders sell down
11.46am: COVID-19 spike dents confidence
The escalation in Melbourne’s COVID-19 crisis served a blow to consumer confidence last week, sending the ANZ index down to an eight-week low.
The ANZ-Roy Morgan weekly confidence read fell 1 per cent last week, following a 4.6pc fall the week prior, to 92.1.
Head of Australian economics Catherine Birch said the deterioration in confidence was not surprising given the rise of coronavirus in Melbourne.
“While the return to lockdown has so far been localised to 12 postcodes, the confidence effect is more pervasive,” she writes.
“The uncertainty also appears to be discouraging households from committing to large purchases, with ‘time to buy a major household item’ falling heavily for a second week.”
‘Time to buy a household item’ fell by 3.1pc, following a 4.9pc decrease in the previous week.
Perception of economic conditions weakened further, with ‘current economic conditions’ declining 2.2pc and ‘future economic conditions’ falling 2.7pc.
Read more: New lockdowns sap confidence
Australian consumer confidence fell to an 8-week low, as confidence in economic conditions deteriorated. While the return to lockdown has so far been localised to 12 Melbourne postcodes, the confidence effect is more pervasive.#ausecon #ausretail @cfbirch @roymorganonline pic.twitter.com/ZxGc2W8311
— ANZ_Research (@ANZ_Research) July 6, 2020
11.43am: Downer wins $420m SA contract
Downer EDI said it was awarded road maintenance contracts in South Australia state that are worth $420m over 13 years.
The state government contracts begin on November 2, with an initial seven-year term and two extension options of three years each, the company said Tuesday.
Downer, which has been involved in road maintenance in the state since 2003, said the new contracts expand its role.
DOW last down 0.9pc to $4.40.
Dow Jones Newswires
11.28am: BlackRock downgrades US equities
The world’s biggest fund manager - BlackRock - has just cut its rating on US equities.
“We have downgraded US equities to neutral on a tactical basis, after a strong run of outperformance versus global equities since the March trough,” say BlackRock strategists led by global chief investment strategist, Mike Pyle.
“We see a surge in COVID-19 cases in the US potentially slowing the activity restart at a time when fiscal stimulus is at risk of waning. Yet the quality bias of the US market lends some support and keeps us from turning negative.”
11.20am: ASX falls to flat, gives up 60 points
The ASX200 has pared all of its daily gains in a swift market reversal - falling from heights of 6077.3 to flat trade in the second hour.
Shares are holding gains of just 3.5 points to 6018.1, thanks in large part to a reversal in the major banks, and weakness in CSL.
Major miners are holding higher, but even a 5pc jump in Fortescue isn’t enough to offset the rest of the market.
10.58am: Iron ore lifts amid China surge
Iron ore miners are rallying in morning trade, after prices of the steelmaking metal joined the Asian rally overnight.
“The exuberance of the Chinese stock market and rally in industrial metals prices revived market sentiment for iron ore. Prices clawed back some losses following the biggest weekly decline in last three months,” ANZ senior economist Felicity Emmett says.
“This was despite the increase in Chinese port inventories, which rose by 1.3pc to 100.66mt.”
She adds that major Brazilian producer Vale has also confirmed it will bring back most of the production lost to COVID-19 in the coming months.
Still, BHP is higher by 1.7 per cent to $36.24 as Fortescue soars by 5.7pc to $14.72 and Rio Tinto gains 0.9pc to $96.32.
10.52am: $A spikes to three-week high
The Australian dollar is within reach of the elusive US70c level in early trade, up 0.29 per cent to US69.95c.
It comes after strength overnight alongside the rally in Asian markets, and ahead of the RBA meeting this afternoon.
Current levels are the best since mid June.
“No change to policy is expected among market participants, with rates practically certain to stay on hold, and the central bank’s broader suite of tools to remain untouched,” says IG Market Analyst Kyle Rodda.
“Attention will be on the RBA’s commentary for an updated view on the outlook for the Australian economy and potential further policy support – especially as it relates to the risk of second wave of COVID-19 infections both domestically and abroad.”
10.32am: BNPL rallies amid Afterpay focus
Even as Afterpay is halted for its $1bn raise, there’s still plenty of action in the buy now, pay later sector this morning.
The market darling boasted a record June quarter, highlighting the accelerating shift to e-commerce spurred by coronavirus lockdowns, and the sentiment seems to have rubbed off on its competitors at the open.
US focused rival Splitit jumped 5pc higher in early trade while Sezzle surged 16.7pc after reporting a 28pc jump in active users over the past quarter
FlexiGroup is higher by 1.6pc to $1.29 while OpenPay is higher by 2.6pc to $2.39.
More broadly, online retailer Kogan is higher by 4.4pc to $16.24, while JB HiFi is higher by 2.7pc.
Read more: Afterpay raising $800m, founders cash out
10.17am: Coles to hold November AGM online
Supermarket giant Coles says it will hold its annual general meeting virtually in November, as Melbourne’s COVID-19 case count continues to rise.
The meeting, held last year at Melbourne’s Convention and Exhibition Centre, is still four months away but the supermarket chain today said it had scheduled the meeting virtually “in light of evolving circumstances relating to the COVID-19 pandemic”.
It said there would be no physical meeting but shareholders could submit questions online ahead of time.
Coles is set to release its full year results on August 18.
COL last traded up 0.7pc to $17.34.
10.11am: Shares surge 1pc
Shares have made back all of yesterday’s losses and more in an early jump, fuelled by a lift across all sectors.
At the open, the benchmark ASX200 is higher by 57 points or 0.95 per cent to 6071.9.
Tech stocks are adding 1.2pc after the Nasdaq set new records overnight, while Materials are soaring by 1.5pc thanks to a 1.4pc lift in BHP and 3.8pc jump in Fortescue - likely a flow on from Chinese strength yesterday.
CSL is the biggest drag, down 0.14pc.
9.42am: Afterpay post record quarterly sales
In a trading update alongside its $1bn raising, Afterpay says it has experienced strong performance across the business with underlying sales of $11.1bn in the year to end-June, up 112 per cent on the previous year.
The payments operator said its June quarter sales performance “represented the highest quarterly performance ever, reflecting the accelerating shift to e-commerce spending since the impacts of COVID-19 emerged globally”.
Afterpay expects to deliver pre-tax earnings excluding significant items for financial year 2020 to be between $20m to $25m
Active customers of 9.9m for financial 2020, is 116 per cent above financial 2019, which reflects “the flight to online spending and the attractiveness of our budget-focused business model in the current environment,” the company said.
Afterpay said the coming year is expected to be a year of increased investment as it “maintains the strong momentum in the business and capitalises the opportunity to scale globally”.
Read more: Afterpay raising $1.05bn in fresh equity
9.38am: ASX bounce may falter
An expected bounce in Australian shares may falter Tuesday amid upside risk for volatility in global markets after recent gains.
Enthusiastic commentary from China’s state media pushed the Shanghai Composite up 5.7pc and global markets followed, with help from above-consensus US ISM Services PMI.
Unusually though, the VIX volatility index rose slightly even as the S&P 500 rose 1.6pc to a 3-week high of 3179.7 and the Nasdaq rose 2.2pc to a record high close of 10433.65.
The same thing happened on June 8, when the VIX bounced off its 200-day moving average, sparking an 8.3 per cent dip in the S&P 500 and a 7.7pc dip in the S&P/ASX 200.
What’s worse this time, is that Citi’s US Economic Surprise index is at a record high and perhaps unlikely to go much higher.
Do you like surprises?
— Matthew Miskin (@matthew_miskin) July 6, 2020
The #StockMarket likes when #economic data surprises to the upside. The @Citi econ surprise index tracks how data has been coming in vs. consensus estimates. Above 0% beating, below 0% missing.
Currently at 180%, at least a 15 yr. high, per Yardini. pic.twitter.com/rixezxZ9bj
Offsetting that is evidence that the US is learning to live with coronavirus as daily deaths are the lowest in more than three months even as daily cases hit records.
Still, the world is hardly back to normal, valuations are stretched and US Fed liquidity is much less than it was a few months ago, although it stands ready to do more.
In Australia, Melbourne’s worsening coronavirus pandemic and today’s NSW-VIC border closure is a new threat to consumer and business confidence.
The RBA’s interest rate decision is due at 2.30pm AEST and while no change is expected, its assessment of Australia’s economic outlook in light of events in Melbourne and the looming fiscal cliff will be key.
Nick Evans 9.33am: St Barbara output recovers as prices lift
Gold miner St Barbara says it has recorded its best quarterly production figures for two years as output at its Gwalia mine ticked up and its Canadian operations delivered another solid period.
St Barbara released an early look at its quarterly production figures on Tuesday, saying its mines had produced more than 100,000oz of gold in a quarter for the first time since the June quarter of 2018 - although that period was before its $770m acquisition of Canada’s Atlantic Gold in May 2019.
The company said it produced 108,612oz for the period, up from 91,547 in the March quarter, with 29,209oz coming from its Canadian mines. The company’s mines in WA, Papua New Guinea and Canada produced 381,887oz for the financial year, firmly within guidance of 370,000 to 400,000oz, but more than 16 per cent on the previous year’s 454,985oz.
But St Barbara’s flagship Gwalia mine in WA looks to be back on track after a torrid year, producing 51,297oz as the gold price soared in the June quarter, up from 39,684oz in the March quarter.
St Barbara said it finished the period in a net cash position, holding $406m in cash and equivalents, with total debt of $316m.
The company closed Monday night at $3.29.
Read more: Gwalia ventilation issues stifle St Barbara
9.26am: Aus Ethical’s emerging fund outperforms
Australia’s leading ethical investment manager has reported a 13.9 per cent annual return on its Emerging Companies Fund, substantially outperforming its benchmark who recorded a negative 7.4pc return over the same period.
In an earnings update this morning, Australian Ethical Investments it would net a performance fee of $3.64m thanks to the fund’s outperformance, calculated as 20pc of the fund’s one year outperformance over the benchmark.
Underlying profit after tax is now expected between $9m and $9.5m - a midpoint increase of 41pc on the previous year.
The emerging companies fund invests in a portfolio of small capitalisation companies that align with their values and provide competitive returns. It is benchmarked against the S&P Small Industrials index.
Samantha Bailey 9.20am: Sezzle customers surge in US lockdown
Buy-now, pay-later platform Sezzle says it’s poised to capitalise from a pivot to e-commerce in North America as the shutdown resulting from the COVID-19 pandemic continues.
Active consumers using the platform jumped 28 per cent to 1.48 million for the quarter to June 30, while active merchants jumped 27 per cent compared to the prior quarter, Sezzle said in a quarterly update to the ASX on Tuesday morning.
The Afterpay competitor said it now expects underlying merchant sales to reach an annualised pace of $US1bn ($1.43bn) by the end of 2020.
“In these uncertain times, we are fortunate to announce record quarter two results across a number of our key metrics,” executive chairman and chief executive Charlie Youakim said.
“Our performance reaffirms our product’s utility to consumers looking for a smarter way to budget their personal finances and the overall market shift to eCommerce.”
9.13am: What’s on the broker radar?
- ASX cut to Sell - UBS
- BHP cut to Neutral - Credit Suisse
- Hub24 target price raised 15pc - Citi
- Lendlease cut to Neutral - JP Morgan
- Mirvac Group raised to Buy - Jefferies
- Netwealth price target raised 21pc - Citi
- Reject Shop rated new Buy - Ord Minnett
9.06am: FlexiGroup taps NAB exec for CFO
Buy now, pay later player FlexiGroup has tapped NAB private exec Jason Murray as its new chief financial officer, touting his expertise in mergers and acquisitions and passion for fintech disrupters.
Mr Murray was previously customer executive at NAB Private, leading its strategic and digital transformation, and before that chief financial officer for Sirius Minerals in the UK.
His appointment comes as incumbent CFO Ross Aucutt plots his exit in October, to stay in an advisory capacity until that time.
“I’m delighted that Jason has agreed to take on the role of CFO at FlexiGroup. Jason brings with him deep experience in the financial services industry including M&A and capital raising for ASX 200 companies and international businesses,” chief Rebecca James says.
“His passion for fintech disrupters and track record in simplifying systems, uplifting customer experience and building digital engagement is a perfect fit with FlexiGroup.”
8.44am: Magellan rakes in $81m performance fee
Magellan’s funds under management has dipped in June, as the group posts annual performance fees of $81m.
The Hamish Douglass-led fund posted total funds under management of $97.184bn as at June 30, down 1.3 per cent from the previous month, largely thanks to a dip in its global equities holdings.
The month-end figure included $173m in net retail inflows, and $76m of net institutional inflows.
Magellan said it was entitled to $81m in performance fees for the year to June, split roughly 50:50 across both halves.
Investors in the fund will receive distributions of approximately $650m in July, which is set to weigh on its FUM next month.
Bridget Carter 8.30am: Afterpay to raise $1bn
DataRoom | Afterpay is raising $1bn of fresh equity as it looks to fund its expansion into Canada.
The buy now, pay later service provider will raise $650m through a placement and $150m through a share purchase plan. Founders Anthony Eisen and Nick Molnar are also selling shares worth $250m.
Shares are being sold at $61.75 each, a discount of about 9.2 per cent discount to their last close of $68.
Working on the underwritten raise is Goldman Sachs and Citi.
The move comes as Afterpay shares on Monday closed at near record highs at $68. This is a 440 per cent rise from the depths of the coronavirus sell down in March when shares traded at just $12.44.
Much of the surge in Afterpay has been since the start of May when it emerged that Chinese tech giant Tencent acquired a 5 per cent stake in the Australian buy now pay later company.
The move will see Afterpay push into China’s $US2 trillion ($3.1 trillion) e-commerce market on the back of a partnership with Tencent.
Read more: Afterpay raising $1.05bn in fresh equity
7.20am: Musk mocks short-sellers
Tesla founder Elon Musk is ruthlessly mocking the carmaker’s doubters who sell the company short by selling short shorts with the company logo.
Musk followed through on a threat made last week by offering red satin shorts for sale on the company website – which promptly crashed from the volume of orders, or perhaps mere curiosity.
“This item is out of stock,” the Tesla site says, above the description of the athletic wear priced at $US69.420.
The irascible Musk, a frequent Twitter user, has regularly battled with sceptical investors who believe the company is overpriced and short Tesla stock, placing bets that the shares will fall.
AFP
7.00am: Air NZ suspends inbound bookings
Air New Zealand has temporarily suspended ticket sales for flights to New Zealand to avoid overwhelming the hotels used to quarantine returning citizens, the government and the airline said.
Megan Woods, the minister overseeing the 14-day quarantine system, said there has been a rapid increase in the numbers of returning New Zealanders as the coronavirus pandemic worsens in some countries. About 26,400 people have returned since late March, when the border was closed to most foreigners.
Currently there are nearly 5700 people in managed isolation at 28 hotels around the country. The government plans to add 750 hotel rooms to the quarantine system in coming weeks.
“The pause on new bookings will be short term, and allows us to increase supply to match forecasted demand over the coming weeks,” Ms Woods said in a statement.
New Zealand’s last known case of local transmission of COVID-19 was 67 days ago. Its current cases are people who tested positive while in quarantine.
Air New Zealand said its limited number of outbound flights to overseas destinations are not affected.
Dow Jones Newswires
6.15am: ASX set to rise at open
Australian stocks are tipped to edge higher in early trade amid global optimism that saw rises in US and European markets.
Shanghai stocks also soared to a two-year high yesterday.
After ending a four-day streak on Monday with a 0.7 per cent, ASX futures at around 6am (AEST) pointed to a rise of 27 points, or 0.4 per cent, at the open.
ON Wall Street, the Dow gained 1.8 per cent, the S&P 500 added 1.6 per cent and the Nasdaq advanced 2.2 per cent.
The Australian dollar was higher at US69.75c, up from US69.60c at 4pm yesterday.
Today’s local highlight will be the board meeting of the Reserve Bank of Australia, which is set to hold rates at a record low 0.25pc.
6.10am: US stocks close higher
US stocks jumped following the holiday weekend, lifted by shares of everything from medical technology companies to banks.
Global stocks have rallied to start the week, with China’s Shanghai Composite Index soaring 5.7 per cent to its highest level since early 2018. That was even as data continued to point to a rise in coronavirus cases in the US, which some investors have worried might force officials to further delay reopening plans across the country.
At least part of stocks’ recent gains appear to stem from bets that the US will be able to avoid having to reinstate widespread restrictions on business.
“Very few people think that there will be as draconian lockdowns again,” said James Athey, a senior investment manager at Aberdeen Standard Investments. Mr. Athey added that investors are also keeping hopes pinned on news related to vaccine and treatment developments.
The Dow Jones Industrial Average climbed 459.67 points, or 1.8 per cent, to 26287.03. The S&P 500 added 49.71 points, or 1.6 per cent, to 3179.72 and the Nasdaq Composite advanced 226.02 points, or 2.2 per cent, to 10433.65.
Some analysts cautioned that the market’s recent surge could run out of momentum in the coming months, given the potential for economic data to disappoint at a time when stocks look expensive relative to expected earnings. Although reports have shown swathes of the economy rebounding, many measures of consumer spending remain far below pre-pandemic levels.
“Quite frankly, we’re not that optimistic about markets for the second half of the year,” said John Vail, chief global strategist at Nikko Asset Management, who added that the firm is expecting middling returns for US stocks for the year.
Elsewhere, the Stoxx Europe 600 rose 1.1 per cent after data showed German factory orders rebounded 10.4 per cent in May after falling sharply during the lockdown in April. The increase was driven by both domestic and foreign orders, as economies around the world began to reopen. Data also showed eurozone retail sales were stronger than expected in May.
China market analysts said it was hard to pinpoint a single clear driver for Monday’s surge in Shanghai, though some pointed to a front-page editorial in state-owned China Securities Journal. It said fostering a “healthy bull market” was important, given China’s increasingly complicated international relations, intense financial and technological competition, and the challenge of controlling internal financial risks.
Investors compared the leap in Chinese financial markets to a wave of optimism that drove a historic bull run in 2014 and 2015 that eventually ended in a ruinous market crash.
“The article was a clear indication that China’s government is determined to support the rally in local stocks. They’re capable of doing that. They’ve proved that in the past by using state-owned entities to purchase local stocks,” said Piotr Matys, foreign exchange strategist at Rabobank.
Dow Jones Newswires
5.50am: Miner’s $US2bn spill bill
Russia’s state environmental watchdog said that metals giant Norilsk Nickel should pay an unprecedented $US2 billion in damages over a huge Arctic fuel spill.
Rosprirodnadzor said it had sent a request for “voluntary compensation” to a subsidiary of Norilsk Nickel, NTEK, estimating the damage to Arctic subsoil and water resources at 147.8 billion roubles ($US2.05 billion).
Norilsk Nickel’s Moscow-listed shares fell by nearly 5 per cent Monday evening. Controlled by Russia’s richest man Vladimir Potanin, the company is the world’s largest producer of nickel and palladium.
The amount of the fine is equal to a third of its net profit in 2019. A Norilsk Nickel spokeswoman said the company had not yet received the papers from Rosprirodnadzor.
AFP
5.35am: Amcor unveils packaging research
Amcor has released results from its latest research “into consumer perceptions of sustainability and packaging.”
Amcor said the survey of more than 4000 participants showed overall “consumers are increasingly aware of the impact of their choices,” although results varied by country. “Across the countries surveyed, 83pc say they check on-pack instructions to know how to dispose of packaging,” Amcor said.
Michael Zacka, the company’s chief commercial officer, said “consumers are increasingly making buying decisions that factor in environmental considerations and expect brands to provide more responsible packaging options.”
He also said, “Sustainability is our most exciting growth opportunity and we continue investing in highly sophisticated R&D capabilities.”
Amcor provides packaging for a variety of consumer and other products.
Dow Jones Newswires
5.30am: Markets rally on recovery hopes
Stock markets rallied, with fresh signs of economic recovery resonating with investors more than a surge in coronavirus infections worldwide.
The easing of lockdowns is providing hope the global economy will bounce back from an expected recession this year, with England’s pubs reopening at the weekend and tourist attractions around Europe now either open or planning to.
Better-than-forecast data on US jobs creation and factory activity have also provided a boost to confidence, as have hopes for a vaccine, which observers say is key to kickstarting any recovery.
The US services sector grew in June after the coronavirus pandemic caused its steepest-ever contraction the month prior, an industry survey said on Monday.
On Wall Street, the Dow Jones was more than 350 points higher in the late New York morning, while key European markets posted gains of 1.5 per cent or more at the close.
London closed up 2.1 per cent, Frankfurt rose 1.6 per cent and Paris gained 1.5 per cent.
Investors on both sides of the Atlantic took their cue from equities in China, “with the world’s second largest economy seeing a huge uptick” which saw its main stocks index closing up nearly six per cent, noted Joshua Mahony, senior market analyst at IG trading group.
Traders have piled back into stocks in recent months – with the help of vast government and central bank support – and analysts have suggested the gains are also being helped by a fear of missing out on the rally.
Shanghai soared to its highest level in more than two years, while Hong Kong finished at levels not seen since early March.
But there remains trepidation on trading floors as new infections spike around the world.
AFP
5.28am: US service sector rebound
Activity in the US services sector rebounded strongly last month, but those gains are now being threatened by the resurgence of coronavirus cases in many parts of the country.
The Institute for Supply Management said Monday that its service sector index rose to 57.1 in June, up from a reading of 45.4 in May. Any reading above 50 means that the service sector, where the majority of Americans work, is expanding.
The June advance was 11.5-percentage points higher than the May reading. It was the largest percentage point gain in the history of the services index which goes back to 1997. The April decline in the index had been the biggest point-drop on record. Before the April and May setbacks, the index had been in expansion territory for 122 months.
Last week, ISM reported that its manufacturing index rebounded to a reading of 52.6 after registering big declines in the two previous months.
The reading for services index was better-than-expected but did still left concerns about what rising virus cases could do to efforts by restaurants, bars and other service businesses to stay open.
AP
5.25am: Uber eats up Postmates
Uber said it was buying delivery start-up Postmates for $US2.65 billion in stock, in a move shaking up the sector which has seen surging growth during the coronavirus pandemic.
The acquisition steps up the effort by Uber to diversify its business to meet growing delivery demands after failing to win a battle for US meal delivery giant GrubHub.
“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery – they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19,” Uber chief executive Dara Khosrowshahi said in a statement.
Postmates, a start-up specialising in delivery of food, groceries and other goods, will be integrated into Uber Eats, which has seen its business double during the global health crisis.
Analyst Daniel Ives of Wedbush Securities said the deal for Postmates, the number four delivery operator in the US, is “both a defensive and offensive acquisition in the food delivery space for Uber at a time with its core ridesharing business seeing massive headwinds in this COVID-19 pandemic.”
AFP
5.20am: France restricts Huawei
China urged France to guarantee a “fair and just” environment for its companies after Paris decided to restrict licenses for telecom operators using 5G technology from Huawei.
The United States and Australia have banned Huawei from their 5G networks and the Financial Times reported that Britain could decide this month to phase out the company’s equipment from its system.
France’s National Agency for Security of Computer Systems said Monday, however, that local operators SFR and Bouygues Telecom – which already use Huawei equipment – will be issued eight-year licenses to operate 5G technology.
China’s foreign ministry spokesman Zhao Lijian told a regular briefing Monday that Beijing hoped France “can uphold an objective and fair attitude” and allow the market and enterprises to “make a choice in their own interests”.
AFP
5.15am: Shanghai stocks soar
Shanghai stocks surged on Monday to a more than two-year high as investors piled in following a combination of rosy predictions for the market and strong economic data.
The benchmark Shanghai Composite Index gained 5.71 per cent, or 180.07 points, to 3,332.88, its best close since March 2018, while the Shenzhen Composite Index, which tracks shares on China’s second exchange, gained 3.90 per cent, or 79.70 points, to 2,121.59.
The Hang Seng index in Hong Kong rose 3.81 per cent, or 966.04 points, to 26,339.16.
Mainland Chinese shares have languished for much of the year because of economic shutdowns caused by the coronavirus, but have been on a spurt lately, rising more than 12 per cent over the past week.
Investors have grown increasingly optimistic, helped by data last week showing that factory activity picked up pace in June.
Zhang Gang, a strategist with Central China Securities, said that and other signs had raised expectations of stronger-than-expected second-quarter economic growth. Figures are due for release next week.
He added that recent new policies aimed at boosting the securities sector had also lifted sentiment, and he expected the rally to continue.
AFP
ASX treads water before US jobs data; CBA and Westpac hit highs
ASX ends flat as markets await key US jobs numbers. CBA and Westpac hit record highs and NAB an 18-year high. Domino's jumps 21 per cent, as Collins Foods and Nick Scali also gain. Amazon falls after earnings disappoint.
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.