Trading Day: ASX dives as US President Trump tests Covid positive
US President Trump tests positive for coronavirus, adding to risk aversion amid a lack of progress on US fiscal talks.
That’s all from the Trading Day blog for October 2. US President Trump tested positive for coronavirus, sparking an afternoon selloff in risk assets, which were already shaky after a lack of progress on US fiscal stimulus talks and news that a Trump aide tested positive.
Eli Greenblat 8.29pm: Lew lobs new grenade at Myer
Solomon Lew’s Premier Investments has stepped up the war of words with department store owner Myer in what could be his next boardroom assault after he requested a copy of the shareholder register, in what promises to be a potentially fiery AGM.
Premier Investments is likely to use its 10.8 per cent stake in Myer as a base to rally support from other shareholders, mainly retail investors, to vote against directors up for re-election at the October 29 meeting.
That is especially the case for chairman Garry Hounsell, with whom Mr Lew had a bitter public exchange two years ago when the billionaire first agitated for the Myer board to be dumped.
Patrick Commins 8.07pm: RBA ‘makes bad decisions’
The Reserve Bank’s “dysfunctional” decision making processes have led to “bad” monetary policy decisions, according to a former senior RBA economist who also accused the central bank of no longer acting in the public interest.
In a bombshell resignation speech emailed to colleagues on August 12 and released under Freedom of Information legislation on Friday, Peter Tulip took his opportunity to vent his “frustrations” at the end of nine years in the RBA’s highly respected economics department
“Like most of you, I want a career where I serve the public interest,” Mr Tulip, now chief economist at the Centre for Independent Studies, wrote in his speech. “My main reason for leaving is that I no longer believe the RBA does that.”
James Kirby 6.11pm: How the federal budget will affect investors
The forthcoming federal budget will be momentous, highly influential and a milestone in the very manner in which we expect to be governed. But what will it mean for investors?
Despite the remarkable level of funding at hand for Treasurer Josh Frydenberg — the consensus is a $210bn deficit, nearly triple what we might have assumed pre-COVID — investors should not expect a silver bullet this time round.
That’s because a lot of money in this budget is going to be soaked up keeping things as they are: cushioning unemployment and underpinning the ability of banks to have up to one in 10 borrowers deferring loan payments.
Similarly, one-off payments to pensioners and low income earners are now baked into expectations. So too are moves such as having a single default scheme to avoid multiple super accounts.
The daily drip feed of budget news from Treasury has already revealed how the government will offer targeted help to manufacturers, airlines and agricultural workers. Such initiatives will be very welcome in those sectors but for investors they are not going to make a big difference any time soon. These are routine budget moves; investors are looking for much bigger fish to fry — they want to see substantial changes in personal tax, super and market access.
So far it looks like such substantial changes are coming down the track — the big question will be just how soon the Morrison government can practically introduce such moves.
5.56pm: Work from home tax tips from The Coach
With many individuals having to work from home as a result of COVID-19, there may be a range of costs associated with creating a home office and working from home that you could be entitled to claim.
Generally speaking, you can claim the full value of small items such as stationery up to $300 as a tax deduction or depreciate the value of higher valued assets over a certain amount of time. This can include items such as desks, chairs, computers and general office equipment. You can also claim back the cost of keeping your workspace clean, repair costs and consumables such as paper and printer ink.
4.37pm: ASX -1.4% as Trump gets Covid
Australia’s share market was hit by risk aversion in global markets amid sharp falls in commodity prices, disappointment over the lack of progress on US fiscal stimulus talks and news that US President Trump caught COVID.
After falling 1.2pc in early trading plunging oil and copper prices hit the resources sector, US futures stumbled and Mesoblast dived 45 per cent on a regulatory snag for its Remestemcel-L drug, the S&P/ASX 200 recovered substantially intraday to be down just 0.3pc after QLD said it will reopen the NSW border on 1 November subject to NSW having 28-days straight on zero community spread of COVID, and PM Scott Morrison said New Zealanders could soon travel to NSW and NT without quarantine.
But after a Trump aide caught coronavirus and Trump entered quarantine, risk assets were hit across the board when it was confirmed that Trump in fact had tested positive.
The ASX 200 closed down on Friday 1.4pc, or 81 points, at 5791.50, dropping in market cap value by $26bn. For the week the market lost 2.9pc, its worst week since a loss of 4.5pc in late April.
The All Ordinaries finished the Friday session 1.4pc lower, or 86.2 points, at 5983.2.
BHP fell 3.2pc, Westpac lost 2.1pc and Woodside fell 4.3pc, while Mesoblast closed down 37pc. Janus Henderson rose 9.4pc after Trian fund bought a 9.9pc stake.
Newcrest Mining rose 0.8pc as gold caught a safe haven bid, rising 0.5pc to $US1916, but crude oil futures fell 2.9pc and copper futures fell 0.8pc after sharp falls overnight.
Focus turns to US non-farm payrolls data overnight while next Tuesday brings the RBA board meeting and federal budget.
4.19pm: Beware overreactions to Trump sickness: BetaShares
Risk aversion and safe haven buying has dominated since it was confirmed today that President Trump has coronavirus.
But investors need to beware of potential silver linings, according to BetaShares chief economist, David Bassanese.
“On balance this perhaps makes it less likely Trump will win the Presidency, which has tended to be viewed as negative for stocks due to the risk of increased corporate taxes under Biden,” Mr Bassanese says.
“That said, the counter to this view is that Trump’s incapacitation may make the result on election night clearer - even if it’s in Biden’s favour - which reduces the chance of a drawn out court challenge.
And there is always the possibility that President Trump could gain the sympathy vote, especially if he makes a valiant effort to fight through this.
In short, the market reaction over the next few days remains uncertain and investors would be wise not to jump to immediate conclusions or react too strongly one way or another.”
4.11pm: Flight to safe havens hits Aussie
The Aussie dollar was jettisoned in favour of safe haven currencies including the Japanese yen, Swiss franc and gold after the US President tested positive for COVID.
AUD/USD fell 0.8pc to a two-day low of 0.7131 and was the second-worst performing G10 currency behind the oil price sensitive Norwegian Krone.
AUD/JPY dropped 1.2pc to JPY74.93 amid a rush for yen.
3.48pm: ASX -1.5% as risk aversion intensifies
Thin trading conditions amid regional holidays are magnifying risk aversion after President Donald Trump tested positive to COVID.
Australia’s S&P/ASX 200 has dived 1.5pc to a 7-day low of 5787.4, near last week’s low at 5763.
A break of that point could test the June low at 5720 assuming a bad night on Wall Street.
S&P 500 futures fell as much as 2pc, suggesting it might be about to embark on a retest of last week’s low at 3209, which is 5pc below the current level.
Of course such an extreme reaction to Trump’s positive test result could qualify as something that could prompt the Fed to increase its bond purchases, even if it risks criticism for doing so this close to an election.
S&P 500 futures have since pared their decline to 1.5pc, but Australian shares remain weak, with WTI crude oil futures down 2.9pc at $US37.59 a barrel and Comex copper down 1.1pc.
3.40pm: Seeking safe havens, gold catches fire
Gold has caught a safe-haven bid after President Trump caught COVID and entered a two week quarantine period.
After initially extending its intraday fall to 0.9pc as the US dollar rose against risk currencies and commodities. spot gold bounced from $US1889.93 to $US1905 in the space of 20 minutes.
While the US dollar index (DXY) remains relatively buoyant near 94.00, the combination of economic risk from a lack of agreement on new US fiscal stimulus and geopolitical risk from the incapacitation of Mr Trump could now see gold extend its recent bounce off the 100-day moving average at $US1854.
The immediate target for this bounce is the 50-day moving average at $US1945, which is also near the apex of a former symmetrical triangle pattern from which the metal recently broke down after hitting a record high of $US2075.47.
Lachlan Moffet Gray 3.30 ANZ hit with a $10m fine
ANZ has been hit with a $10m fine for unconscionable conduct on more than 300,000 occasions by the Australian Securities and Investments Commission.
The corporate regulator on Friday said that ANZ breached the obligations of its financial services licence between 2003 and 2015 when it charged customers fees when periodic payments could not be made due to insufficient funds, and when they were successful.
However, under ANZ’s terms and conditions, it was not permitted to charge these fees when the payments occurred between two accounts held by the same person or entity.
ANZ realised it was at risk of contravening these conditions in 2011, but the bank did not investigate whether it was acting incorrectly until December 2013 and did not cease charging same-name fees until 2015.
ASIC said that by charging same-name fees between July 26 2013 and September 24 2015, when the bank knew it had no contractual obligation to do so, it engaged in unconscionable conduct on 327,895 occasions and breached its obligation to comply with financial services laws.
Approximately 69,000 customers were wrongly charged $3.1m.
ANZ has admitted to both this and the fact that by not making remediation payments to certain customers charged same-name fees between 2005 and 2007, it contravened the corporations act on two occasions and engaged in unconscionable conduct a further two times.
In recognition of the breaches and instances of unconscionable conduct, the court fined ANZ $10m, with the bank to pay $1m of costs towards ASIC.
ASIC Deputy Chair Daniel Crennan said the fine stood as a strong deterrent against unconscionable behaviour.
“The outcome and penalty imposed by the Court is a strong deterrent message and reflects ASIC’s position that ANZ lacked contractual entitlement to charge these particular fees. ASIC, through its Office of Enforcement, has held ANZ to account for this conduct,” he said.
“ASIC acknowledges the cooperative approach taken by ANZ to this litigation, which allowed the matter to be efficiently resolved by the Court. It is in the public interest that parties to regulatory litigation co-operate where possible.”
In a statement, ANZ acknowledged the outcome of the case and said it was engaged in remediation measures.
“ANZ has previously conducted a remediation program in relation to periodical payment fees charged over the period since 1 January 2008 and, since 2016, has made or will make payments totalling over $49 million,” the bank said.
“Certain periodical payment fees were also the subject of a class action which was settled in December 2018, with ANZ paying approximately $760,000.”
3.00pm: Trump tests +ve; risk assets dive
US President Trump has tested positive for coronavirus, sending risk assets into a spin.
AUD/USD fell 0.7pc to 0.7136, the S&P/ASX 200 fell 1.1pc to 5813, S&P 500 futures fell 1.2pc to 3327, WTI crude oil fell 1.9pc to $US33.98. The US dollar index extended its rise, pushing spot gold down 0.7pc to $US1889.93. This could make for an ugly night on Wall St.
Perry Williams 2.56pm: Energy producers expect tough third quarter
Australian energy producers face a tough third quarter with a lag from lower LNG prices to flow through and damage revenues, Macquarie said.
LNG prices typically have a three month lag before reflecting changes to crude oil in contracts meaning record low prices earlier this year will be felt during third quarter results in October.
It expects realised LNG prices of $US4-5 per million British thermal units for producers in the three months ending September 30.
“Given the 3-4 month lag in mid-long term LNG sales agreements, LNG exporters will be cycling trough oil prices from 2Q (US$33.50/bbl Brent); with wider JCC-Brent discounts adding to the downward pressure,” Macquarie said.
Still, a pushback by buyers in the second quarter who limited their LNG purchases to reflect tepid demand may ease as economic sentiment picks up.
More broadly, the growth outlook for Australian LNG also looks downbeat.
No LNG projects in Australia or Papua New Guinea are expected to be signed off in either 2020 or 2021, the broker noted.
“Given the delayed demand recovery (lower oil prices), rapidly accelerating Energy Transition plans globally and intense LNG supply competition (Qatar, Russia, US), we have deferred several growth projects,” Macquarie said, in reference to Santos’ Barossa project and Oil Search’s PNG expansion. “We don’t expect any major LNG growth capex in Australia to reach commitment in 2020E/21.”
Energy stocks tumbled on Friday amid fears a second Covid-19 wave will further damage demand for oil.
Brent oil fell to $US40 a barrel. Beach Energy fell 4.7 per cent to $1.27, Santos was off 3.3 per cent to $4.78 and Woodside Petroleum shed 2.5 per cent to $17.11 while Oil Search declined 2.8 per cent to $2.60.
2.10pm: Asia markets slip as Tokyo reopens
Japanese stocks edged up as they reopened after being shut down all the previous day by a technical fault, though markets across Asia were mixed in holiday-thinned trade with investors keeping an eye on stimulus talks in Washington.
Most Asian markets were in the red, with Sydney losing one percent, while Singapore, Manila, Jakarta and Wellington all retreated.
Hong Kong, Shanghai, Mumbai, Seoul and Taipei were all closed for holidays. However, Tokyo edged up 0.2 percent by lunch as investors returned to their stations following Thursday’s blackout, which Tokyo Stock Exchange said was down to a hardware failure.
Officials said there was no indication of a cyberattack and the problem had been traced to a memory breakdown that failed to properly trigger a switch to a back-up system.
Fixing it would have required a system restart that “would have created confusion among investors and market participants”, said TSE president Koichiro Miyahara at a Thursday news conference.
“After discussing with market participants, we decided to stop the market for the whole day.”
1.50pm: NSW, NT reopen to NZ
PM Scott Morrison has just announced quarantine-free travel will be allowed from New Zealand to NSW and the Northern Territory within two weeks.
This is the first time that such travel has been allowed since coronavirus restrictions were imposed in March. Australian’s still won’t be able to go to NZ, but it highlights the improving domestic trends in coronavirus and economic reopening versus Europe and the US.
The other positive news was that the NSW/QLD border will reopen from 1st November, subject to NSW having 28 consecutive days of no community spread of COVID. NSW has had 7 straight days so far. The news seems to be helping Australian shares, with the S&P/ASX 200 continuing to recover from a sharp intraday fall. Travel stocks are reacting positively, with Webjet up 2.8pc, Flight Centre up 1.4pc and Qantas up 1pc.
The S&P/ASX 200 was last down 0.5pc at an intraday high of 5843.9.
1.30pm: ASX halves intraday fall
Australia’s share market has continued to recover from a sharp intraday fall.
The S&P/ASX 200 was down 0.6pc at 5837 after falling 1.2pc to a 7-day low of 5804.8 as resources reacted negatively to commodity falls and Mesoblast was hit by a regulatory snag.
There was also some disappointment with the lack of progress in US fiscal talks and concern that US President Trump will enter quarantine for two weeks after an aid caught coronavirus.
The S&P 500 remains near its intraday low after falling as much as 0.4pc, perhaps making it hard for the Australian market to keep recovering this afternoon.
However, while Australia has much better trends in coronavirus and expectations of immediate fiscal stimulus, the Australian market has underperformed this week.
The S&P/ASX 20 was down 2.2pc week to date, while the S&P 500 was up 2.5pc.
Patrick Commins 12.40pm: Retail spending sinks in Vic
Victorian retail spending plunged 13 per cent in August as Melbourne’s lockdown forced businesses to close and shoppers to stay at home.
The state’s heightened restrictions, which included curfews in the state’s capital and limits to how far residents could move from their homes, helped end a three-month retail recovery as national turnover dropped by 4 per cent in the month, according to seasonally adjusted figures from the Australian Bureau of Statistics.
While Victoria recorded the largest falls, the lull in spending growth also affected the two other big east coast states, with turnover falling by 2 per cent in New South Wales, and by 1.1 per cent in Queensland.
All industries recorded losses – once again led by Victoria, the ABS said. Spending on clothing and footwear declined 10.5 per cent in the month, and by 8.9 per cent in department stores. Turnover at cafes and restaurants dropped 6.6 per cent.
Even household goods retailing – a booming segment through the pandemic as Australians have been forced to spend more time working and playing at home – fell by 6 per cent.
Food retailing contracted by a smaller 0.2 per cent in the month.
Bridget Carter 12.30pm: Qube eyes Moorebank logistics asset
Qube Holdings has confirmed that it has entered into exclusive due diligence with Logos Property Group for its Moorebank logistics asset that is estimated to be worth about $2bn.
The statement to the market on Friday about the development comes after Logos was named as the party in exclusive due diligence for the asset by The Australian’s DataRoom column in what is shaping up to be the largest real estate mergers and acquisitions deal of the year.
Logos fended off competition from others in the race, including Dexus Property Group, Charter Hall and Blackstone.
Logos, which is working with advisory firm Grant Samuel, has $13.8bn of assets under management.
Qube said that the transaction was still at the status of a non-binding indicative proposal and remained subject to a number of conditions, including the agreement of the precise details and scope of the monetisation structure, completion of due diligence and documentation.
12.17pm: Budget could boost shares: UBS
An expansionary federal budget next Tuesday could boost equities, according to UBS.
“We expect significant spending increases and tax cuts, which is likely to be well received by equities, particularly cyclicals,” says UBS equity strategist, Pieter Stoltz.
UBS economists see a further stimulus of at least $50bn concentrated in this budget which is likely more than the market is pricing in, Mr Stolz adds.
Key fiscal policies expected by UBS include an $10bn extension of the JobKeeper wages subsidy and JobSeeker unemployment benefits to June from March, a $13bn acceleration of Phase 2 tax cuts which have already been legislated, a $10bn business investment allowance, including for large business, a $40bn Infrastructure spending boost spread over several years, an extension of Home Builder and other grants and a possible expansion of the First Home Loan Deposit Scheme.
Details of the recently announced deregulation of lending rules via the repeal of responsible lending legislation could also be positively received by Banks and the market.
“We think housing will be a key focus of stimulus measures and will have important implications for Banks, Discretionary Retail, Building Materials and REITs,” Mr Stoltz says.
“Housing support should aid the economic recovery and reduce bad debts (while) residential REITs and building materials should benefit from higher building activity.”
If a business investment allowance also applies to buildings, it should be another positive for building materials companies.
Mr Stoltz also notes that history has shown rising house prices is positive for Discretionary Retail via a wealth effect and renovations.
While UBS neutralised its overweight rating on Discretionary Retail stocks, given downside risk to stimulus on the back of a strong jobs print, Mr Stoltz says this sector could continue to outperform if stimulus from JobKeeper or a similar program is greater than the expected $10bn.
And a pull forward of tax cuts could see demand for high-value discretionary consumption of vehicles, furniture, large appliances and the like.
Of the banks, UBS prefers ANZ as it’s trading below book value, while Mirvac is prefered among REITs for its residential building exposure.
Bingo Industries is seen as a potential beneficiary of more building waste as building activity rises.
Top picks in the building materials sector are James Hardie and CSR, while ADBRI Mirvac and Stockland may also benefit.
Brickworks and CSR could also benefit directly from rising values on their Western Sydney land.
In Discretionary Retail, UBS’s stop picks are Bapcor and Harvey Norman.
And infrastructure spending could boost CIMIC, Downer and Seven Group.
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Bridget Carter 11.58am: Adore Beauty to raise $269.5m
Online cosmetics retailer Adore Beauty will raise $269.5m for its initial public offering.
The company, owned by founder Kate Morris and Quadrant Private Equity, will head to the boards on October 23 on a conditional basis through advisers Morgan Stanley and UBS.
As reported by DataRoom on Thursday, shares will be priced at $6.75 each, with the IPO comprising a $229.5m selldown by investors and a $40m primary issuance.
Once listed, the company will have 94.1m securities and a market value of $635.3m and an enterprise value of $614.8m.
The price equates to 3.9 times its 2020 revenue.
Once listed, Quadrant, which currently owns 57.8 per cent of the business, will own 32.5 per cent. Kate Morris, who owns 19.3 per cent, will have 10.8 per cent and James Height, who is also a founder and owns 19.3 per cent, will own 10.8 per cent.
Other shareholders will hold a small interest, while new investors will have 42.4 per cent of the company.
An institutional bookbuild will open on October 6, with the final version of the prospectus expected to be lodged with ASIC around October 7.
11.57am: Local market pares losses
Australia’s sharemarket recovered slightly before lunch after an early tumble.
The S&P/ASX 200 index was down 0.9pc at 58200 after falling 1.2pc to a 7-day low of 5804.8.
A lack of progress in US fiscal talks disappointed the market, with S&P 500 futures down 0.2pc.
But the local bourse saw a bigger fall as sharp falls in oil and copper prices hit the Energy and Materials sectors and a plunge in Mesoblast shares hit the Health Care sector.
BHP fell 2.5pc after LME copper fell 4.4pc to $US6382.5 and Woodside Petroleum lost 2.7pc after WTI crude dived 3.5pc to $US40.81 a barrel.
Mesoblast was down 35pc after falling as much as 45pc to a 5-month low of $2.81 a share after a regulatory setback for its Remestemsel-L drug.
Banks mostly underperformed with three of the four majors down 1.5-1.6pc.
Janus Henderson surged 10pc after Trian fund took a 9.9pc stake.
Technology was strongest with Afterpay, Zip Co and EML Payments up 3.3-4.2pc.
Bridget Carter 11.46am: Adore Beauty IPO priced
Adore Beauty will raise $269.5m for its initial public offering.
Joyce Moullakis 11.15am: ANZ, NAB face bigger loan losses: MS
There is a risk ANZ and National Australia Bank will both have to increase the amounts set aside for COVID-19 related loan losses by $200m, analysts at Morgan Stanley warn.
In a report on Friday, analysts led by Richard Wiles said industry feedback suggested only a modest deterioration in credit quality so far during the pandemic. But that was largely due to JobKeeper, loan repayment deferrals and temporary amendments to insolvency laws.
“There is ‘no real precedent’ for the potential impact of COVID-19 on businesses, but the magnitude is unlikely to be clear until mid 2021. In our view, this means banks’ decisions on provision coverage will be key drivers of near-term loan loss trends, while the status of loan repayment deferrals should be closely scrutinized,” the report said.
Data from the Australian Prudential Regulation Authority this week showed a fall in total loans on repayment pauses to $229 billion as at August 31, reflecting about 8.5 per cent of the nation’s total loan pool.
Morgan Stanley said given the amounts set aside by the big banks so far for COVID-19 related losses, there was scope for “larger-than-forecast overlays and higher loan loss charges at NAB and ANZ”.
Mr Wiles pointed out that Westpac had provisioned $1.9bn and Commonwealth Bank $1.5bn for loan losses linked to the pandemic, while ANZ stood at $1bn and NAB at just $800m.
Across the banks, Morgan Stanley estimates impairment charges of about $2.5bn in the September quarter.
“We forecast major bank impairment charges of circa $2.5bn or about 36bp of loans on an annualised basis in the September quarter,up from $2.2bn or 32bp in the June quarter,” the report said.
It estimates ANZ and NAB will raise its COVID-19 loan loss charge by $200m, while Westpac could increase by $136m. CBA won’t need to lift its provision, Morgan Stanley said.
Ben Wilmot 10.58am: Bunnings boost to Melbourne
Home improvement giant Bunnings Group has provided a major boost to Melbourne’s suburban office market, shifting into a vacant building in the inner city market of Cremorne.
The company has struck terms with listed developer Growthpoint Properties Australia and will shift from its main Hawthorn digs into a new A-grade building in a deal brokered by JLL’s Joshua Tebbs.
Developers have kept up the pace of suburban projects despite warnings that the office market, particularly in pockets of Melbourne, is headed for oversupply.
The deal will cut vacancies in the precinct but more offices are being speculatively built, including by private developer Alfasi which is also undertaking a 20,000 sq m office tower in Cremorne.
Growthpoint said its recently completed A-grade building at 570 Swan Street, known as Botanicca 3, would have Bunnings as a key tenant for about 71 per cent of the building.
The Wesfarmers-owned Bunnings has signed a lease for ten years and seven months, commencing this month, across 13,886 sq m. The agreed rent and incentive are in line with the market but terms were not disclosed.
The lease will enable Bunnings to consolidate its Victorian and national store support teams now accommodated across six Melbourne offices into the one location. Bunnings will become one of the group’s top ten tenants by income.
The new lease will extend Growthpoint’s pro-forma portfolio weighted average lease expiry to 6.5 years as at June 30. Growthpoint’s portfolio occupancy will also increase to 96 per cent.
Growthpoint managing director Timothy Collyer said the company would seek additional tenants for the building. The deal will boost funds from operations and Growthpoint reaffirmed its distribution guidance of 20 cents per security.
Ben Wilmot 10.56am: Melbourne the weakest property link
The small dip in September home prices nationally and bounce in smaller capitals had shown Melbourne was clearly the weakest city, according to UBS economists.
They said the national auction clearance rate was holding around the mid-60s, historically consistent with modestly positive price growth, albeit actual prices have kept falling and the Melbourne market has been effectively closed through September.
“Clearance rates are now consistent with modest 3-5 per cent price growth in Sydney, but continued 5 per cent plus falls in Melbourne,” UBS economists George Tharenou and Carlos Cacho said.
They said despite a rebound from the April lows, new listings remain weak, with Sydney around 2019 levels and Melbourne at record lows. This combination of resilient clearance rates and limited supply remains supportive of housing in the near term.
APRA data on deferrals for August showed a further modest improvement with total deferrals down $11bn to $229bn, from a peak of $274bn in June. Housing loan deferrals decreased to $160bn, down from a peak of $195bn. Meanwhile small and medium business deferrals remain “stubbornly high” only down to $53bn, from a peak of $55bn.
The pair said the moderation in price falls, surprising resilience of clearance rates, the lack of new supply, and additional fiscal and monetary stimulus suggest upside risk to their long held 5-10 per cent decline in house prices.
“We still see the end of extended mortgage deferrals in March 2021, coupled with government comments indicating no migration in both fiscal 2021 and fiscal 2022, as a key test for the housing market potentially seeing a period of renewed house price weakness,” they said.
“However the repeal of responsible ending at the same time could potentially offset any weakness driven by forced sales. On balance, it now appears that national house prices are stabilising, with falls of just 1.5 per cent. Meanwhile, further modest falls in Sydney and particularly Melbourne still appear likely, particularly given their exposure to migration and higher density units.”
10.51am: US futures add to ASX fall
A downturn in US stock index futures has added to the fall in Australian shares.
The S&P/ASX 200 fell 1.2pc to a seven-day low of 5804.8.
The index extended its intraday fall as S&P 500 futures fell 0.3pc after US fiscal talks stalled.
10.26am: ASX opens firmly lower
A collapse in Mesoblast shares added to a pullback in the Australian share market early Friday.
The S&P/ASX 200 index was down 0.5pc at 5844 after falling as much as 0.7pc to 5832.2, with Mesoblast among the biggest drags on the index.
Mesoblast shares were down 35pc at $3.29 after plunging 44pc to a six-month low of $2.81 on a regulatory setback for its Remestemcel-L treatment of pediatric steroid-refractory acute graft versus host disease.
The FDA recommended additional study of its Remestemcel-L, sending Mesoblast ADR’s down 37pc overnight.
But all sectors are down apart from the Tech and Real Estate sectors which also outperformed on the US market.
The Health Care sector is underperforming because of the collapse in Mesoblast.
Other underperforming sectors include Energy and Materials, with BHP down 2.3pc and Woodside down 1.8pc after copper and oil prices fell.
Three of the four major banks are also underperforming with falls of 0.6-0.9pc though CBA is up 0.2pc.
10.10am: Tokyo reopens after glitch halts trade
Tokyo stock markets successfully reopened on Friday, a day after a hardware failure caused an unprecedented all-day halt to trade on one of the world’s biggest exchanges.
The benchmark Nikkei 225 index was up 0.52 percent or 121.63 points at 23,306.75 in early trade while the broader Topix index was up 0.49 percent or 7.93 points at 1,633.42.
AFP
9.55am: Time to update growth forecasts: Citi
Citi Australia chief economist Josh Williamson says better-than-expected labour market outcomes and a pick-up in activity outside Victoria warrant an upward revision to growth forecasts.
This is ahead of potentially significant fiscal stimulus announcements in the federal budget next Tuesday.
He says September quarter GDP will likely recover by 0.1pc QoQ with “risks to the upside” and has revised up his calendar year 2020 GDP forecast to -4.4pc from a previous forecast of -4.9pc.
Moreover, he says economic growth is unlikely to be derailed in the planned tapering of fiscal stimulus - the dreaded “fiscal cliff” - in the December quarter.
That’s based on his assumption that Victoria and interstate borders will reopen this quarter, unleashing a wave of demand.
Pent-up demand from high savings in the six months is expected to smooth consumption as fiscal stimulus measures are wound back.
Consequently, he expects Q4 GDP to expand by 1.2pc QoQ, albeit he acknowledges there are “risks to the downside”.
The peak in the unemployment rate is expected to be 7.4pc the December quarter, well below the RBA’s forecast peak of 10pc.
However, the labour market recovery is expected to slow as the participation rate increases, keeping the unemployment rate “elevated” in 2021.
And the house price cycle is still likely to be “less scary than people fear,” Mr Williamson says.
“Consistent with our long-held view, there isn’t a precipitous decline in house prices.”
He forecasts a peak to trough decline in the median national house price of 4.9pc in early to mid-2021.
But despite his upward revision to growth, Citi’s Mr Williamson cautions that the outlook suggests a “slow grind back towards trend”, with GDP growth not returning to pre-covid levels until mid-2022.
9.47am: Mesoblast US shares slump after regulatory setback
Mesoblast’s American depositary receipts were down 37pc to $US11.79 after hours on a regulatory setback for remestemcel-L for treatment of pediatric steroid-refractory acute graft versus host disease.
The Australian company said the US Food and Drug Administration issued a Complete Response Letter. The agency recommended that Mesoblast conduct at least one additional study in adults and/or children to provide further evidence of effectiveness, Mesoblast said.
“As there are currently no approved treatments for this life-threatening condition in children under 12, Mesoblast will urgently request a Type A meeting with the FDA, expected within 30 days, to discuss a potential accelerated approval with a post-approval condition for an additional study,” the company said.
ADRs and the company’s Australia-listed shares had been halted due to pending news.
Dow Jones Newswires
9.30am: What’s impressing analysts?
Alumina raised to Buy: Citi
Corporate Travel cut to Accumulate: Ord Minnett;
Reliance Worldwide cut to Neutral: JPMorgan
Reliance Worldwide price target raised 16pc to $4.60; Outperform rating kept: Macquarie
Fletcher Building raised to Overweight: JPMorgan
SeaLink Travel cut to Neutral: Macquarie
9.20am: ASX to slip in quiet trading
Australia’s share market may drift lower after overnight futures fell 0.5pc as US fiscal stimulus talks wavered and commodities mostly fell.
But it should be very quiet as investors await Friday’s release of US non-farm payrolls data. The ASX will be open on Monday but many will take a long weekend around Labour Day and NSW school holidays. There are also market holidays in China, Hong Kong, South Korea and India on Friday.
Sharply weaker oil and copper prices may weigh on the resources sector, with WTI down 3.7pc to $US38.61 and LME copper down 4.4pc to $US6382.5 a tonne.
BHP ADR’s equivalent close at $35.73 suggests the resources-sector heavyweight will open down 1.5pc. However, spot gold rose 1pc to $US1905.36, while spot iron ore was unchanged due to China’s national day holidays which continue through next Thursday.
The S&P 500 Energy, Materials, Health Care and Industrials sectors rose overnight.
But the Real Estate, Consumer Discretionary, Communications, Utilities, Technology, Consumer Staples and Financials sectors rose.
Aside from the weakness in commodity prices, the Australian share market should be outperforming US and European markets due to Australia’s relatively better coronavirus and reopening trends and the prospect of major domestic fiscal stimulus in next Tuesday’s budget.
The key chart levels are last week’s low at 5763.2 and the 100-day moving average at 5939.
The S&P/ASX 200 rose 1pc to 5872.9 on Thursday.
Eli Greenblat 9.06am: Premier ramps up pressure on Myer
Solomon Lew’s Premier Investments has stepped up his war of words with department store owner Myer, requesting a copy of the retailer’s shareholder register before a potentially fiery AGM.
Premier, which is Myer’s biggest shareholder with a stake of 10.8 per cent, said it had requested a copy of the document.
“Premier Investments Limited wishes to advise that it has requested under sections 173(3) and 672DA(8) of the Corporations Act 2001 (Cth) (Act) from Myer Holdings Limited (Myer) a copy of both Myer’s register of members and the register maintained by Myer in accordance with section 672DA(1) of the Act,” it’s ASX statement said.
Premier says it has requested these registers in order to consider writing to Myer’s members in relation to any resolutions proposed at Myer’s AGM.
Myer will hold its AGM on October 29.
After around 18 months of silence, Mr Lew renewed his attack on the Myer board following the release of its 2020 results, calling on the board and chief executive John King to resign.
8.44am: Sizzler brand fizzles out in Australia
Collins Foods says it will close its nine remaining Sizzler restaurants in Australia by November 15, 2020, with 600 jobs to be hit.
Collins says the Sizzler restaurants’ financial performance has been under constant review since 2015, when they were declared no longer core to its strategic growth.
“Since then and until this year, trading continued in stores with forward lease obligations and cash-flow positive earnings, while 19 Sizzler restaurants have been closed along the way.”
Of the three restaurant brands that Collins Foods operates, Sizzler has been hardest hit during
the COVID-19 pandemic, it said.
“Based around a casual dining concept, and unlike Collins Foods’ KFC and Taco Bell restaurants, Sizzler revenues and earnings have been slow to recover from peak COVID-19
impacts, and the overall Sizzler business has continued to operate at a loss since the onset of the crisis.”
The Sizzler restaurants closing are located in Queensland at Mermaid Beach, Loganholme,
Toowoomba, Maroochydore and Caboolture; in Western Australia in Innaloo, Kelmscott and Morley; and in New South Wales in Campbelltown.
Sizzler’s approximately 600 employees have been offered appropriate redundancy packages and access to outplacement support, though Collins Foods is looking to redeploy as many
affected Sizzler employees as possible to its KFC and Taco Bell network.
Collins Foods will continue to licence the Sizzler brand in Asia as it has done for the past 29 years.
8.39am: Serko upsizes placement
Online business travel operator Serko says its share placement was oversubscribed at the price determined in the bookbuild of $NZ4.55 per share, resulting in it increasing the total size of the placement to $NZ47.5 million.
The issue price represents a 0.9pc premium to the closing price on NZX on September 30 of $NZ4.51.
Serko said the placement was well supported, attracting bids well in excess of the upsized NZ$47.5 million total offer amount.
8.30am: Over 19,000 Amazon workers test positive
Amazon.com said more than 19,000 of its workers have tested positive for the novel coronavirus, the first time the tech giant has revealed such detailed data.
The company said the number of positive cases is below what it expected. Amazon, which months ago began to build its own testing labs, has been testing thousands of employees since March and said it would be testing 50,000 employees a day by November.
Based on the infection rate of the general population, Amazon said it expected to have had 33,952 positive cases among a workforce of more than 1.3 million in the US. Instead, it said 19,816 employees have tested positive or been presumed positive. The number includes employees from Whole Foods Market, which Amazon owns.
Amazon has faced criticism from employees about its response to the virus. Early in the pandemic, employees at several facilities staged walkouts demanding that Amazon shut down facilities with positive cases. Workers said Amazon was slow to communicate positive cases among its employees, and the company until now had not disclosed the rate at which employees were testing positive.
Dow Jones Newswires
6.45am: Oil’s recovery to drag out
Oil prices won’t recover to pre-coronavirus levels by the end of next year, investment banks say.
A group of 10 investment banks polled by The Wall Street Journal forecast that futures for Brent crude oil, the global benchmark, will average $US53.50 a barrel in 2021’s fourth quarter. U.S. benchmark West Texas Intermediate futures will average $US50.31 a barrel in the same quarter, they estimated.
While that means those institutions expect both benchmarks to rally $US10 a barrel from their average forecasts for 2020’s final quarter, they forecast that Brent prices will remain well short of the $US60-a-barrel pre-lockdown levels.
Oil prices sharply dropped on Thursday, with Brent crude down 3.2pc at $US40.93 a barrel and U.S. crude futures 3.7pc lower at $US38.72 a barrel.
Gentle early losses accelerated after the release of a raft of US economic data that signaled a stalling economic recovery in the US, according to Giovanni Staunovo, commodity analyst at UBS Wealth Management. Uncertainty around bipartisan negotiations over a coronavirus relief package was also worrying investors, he added.
Even if the oil market isn’t roiled by the same lockdowns that crashed prices earlier in 2020, investment banks forecast that the effects of Covid-19 will linger next year.
Dow Jones
6.20am: ASX to fall despite Wall Street gains
Australian stocks are set open lower even after Wall Street posted gains, as US stimulus talks continued and oil prices slumped.
Around 6am (AEST) the SPI futures index was down 26 points, or 0.4 per cent.
Australian stocks yesterday closed up 1pc amid US stimulus hopes.
The Australian dollar was lower at US71.89.
Brent oil slumped 3.2 per cent to $40.93 a barrel, after earlier being down over 5 per cent, as conflicting signals over the prospect of US fiscal relief added to concerns over rising supply from major OPEC producers.
6.10am: US stocks close higher
U.S. stocks edged slightly higher as investors tried to gauge the prospects of Washington passing an additional stimulus package to bolster the economy before next month’s election.
The S&P 500 rose 0.5 per cent, following its best six-month performance since 2009. Despite a decline in September, the benchmark is up more than 35 per cent over the past six months. The Dow Jones Industrial Average wavered between losses and gains and closed up 0.1pc. Both indexes pared earlier gains.
The technology heavy Nasdaq Composite advanced 1.4pc.
“The market is grappling with which way to go given how important fiscal stimulus is to the sustainability of the economic recovery,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
A renewed burst of optimism this week -- prompted by talks between Republican and Democratic leaders -- began to fade Wednesday after the House postponed a vote on a $US2.2 trillion package. Democrats are trying to find common ground with the White House on a bipartisan agreement, though they remain far apart on key issues.
“The big wildcard in the US is whether we get more fiscal spending or not,” said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham. “The political backdrop is just so toxic.”
The prospects of bipartisan agreement between lawmakers and the Trump administration on Thursday afternoon remained dim.
The lead-up to the presidential election -- and the prospect of a contested outcome -- is keeping a lid on the rally and creating turbulence in markets, traders said.
Overseas, the pan-continental Stoxx Europe 600 rose 0.2pc. In Asia, the Tokyo Stock Exchange halted all stock trading for Thursday due to a system problem and said it expects to resume normal trading Friday. Markets in China, Hong Kong and South Korea were closed for a holiday.
Dow Jones Newswires
5.55am: Major US firms roll out lay-offs
Hit hard by the coronavirus crisis and with new government stimulus funding in limbo, Disney, American Airlines and United Airlines announced 60,000 lay-offs in just 24 hours -- leading a barrage of job losses a month before US elections.
Insurance firm Allstate warned Wednesday that it would have to cut 3,800 jobs, and Marathon Petroleum is slashing more than 2,000 jobs -- 12 per cent of its workforce.
No sector is expected to be spared in the wave of lay-offs and furloughs. Financial giant Goldman Sachs is cutting what it called a “modest” total of about 400 people, ending a moratorium on job reductions that it imposed as the pandemic took hold.
New jobless claims data from the Labor Department did not brighten the picture, with 837,000 new filings last week -- down 36,000 from the week prior but still well above the single worst week of the 2008-2010 global financial crisis.
AFP
5.50am: Pfizer assurance over vaccine
Pfizer Inc’s chief executive sought to assure the drugmaker’s employees that their experimental COVID-19 vaccine wouldn’t be influenced by politics, two days after President Trump mentioned the company during the debate.
Chief Executive Albert Bourla sent a letter to all employees saying Pfizer “would never succumb to political pressure” as it develops a COVID-19 vaccine.
“The only pressure we feel -- and it weighs heavy -- are the billions of people, millions of businesses and hundreds of government officials that are depending on us,” he wrote in the letter, which was reviewed by The Wall Street Journal.
President Trump said in the presidential debate Tuesday that he had spoken to Pfizer and a COVID-19 vaccine would be generally available sooner than next summer, as suggested by federal health officials. Mr. Trump said he disagreed with them.
Dow Jones
5.49am: US incomes pose hurdle for recovery
US household income fell sharply in late summer while worker lay-offs remained high, developments that could weigh on an already-slowing recovery from the coronavirus pandemic.
Personal income -- what households received from salaries, investments and government aid -- fell 2.7pc in August as enhanced unemployment checks shrank, the Commerce Department said Thursday. Meanwhile, another 837,000 workers filed for unemployment compensation last week after being recently laid off, the Labor Department said. In total, nearly 12 million workers are receiving unemployment compensation through regular state programs.
The economy up to now has rebounded more quickly than many economists thought. But with federal aid fading and job growth slowing, consumer spending -- the key driver of economic activity in the U.S. -- could weaken. Economists believe the recovery is entering into a modest and more grinding phase.
“There’s clear evidence that growth is decelerating,” said Michael Gapen, chief U.S. economist at Barclays. He said, however, that the risk of a double-dip recession is low, in large part because households have built up their savings during the pandemic. “There’s still quite a bit of saving and liquidity out there. It’s likely to support spending for another few months.”
Despite the drop in August, household income was 2pc above its level in February, the month before the pandemic hit the U.S. Income has been boosted by one-time federal stimulus checks, stockmarket gains, and weekly unemployment insurance payments.
Dow Jones
5.47am: UK business group calls for diverse boards
Britain’s leading business trade organisation announced it was to launch a campaign calling for each large firm to have at least one person from an ethnic minority on its board.
The CBI (Confederation of British Industry) will launch the “Change the Race Ratio” campaign alongside large companies such as the insurer Aviva, the audit firm Deloitte and tech giant Microsoft at the end of the month, according to CBI President Karan Bilimoria.
“We believe that the time for change is now: business needs to take urgent action on black and ethnic minority participation at senior leadership levels,” he said in a statement posted on CBI’s website.
The campaign urges all businesses to set targets for greater racial and ethnic diversity at senior leadership levels.
Its ambition is to have at least one “racially and ethnically diverse” board member at each of the top 100 firms listed on the London Stock Exchange by the end of 2021, and one at each of the top 250 by 2024.
AFP
5.45am: Hope for new US aid fades
Downbeat statements by US lawmakers dampened expectations for the passage of more fiscal stimulus as government data showed continuing strain on consumers impacted by the coronavirus downturn.
Democratic House Speaker Nancy Pelosi was due to speak again with Treasury Secretary Steven Mnuchin, aiming to break a weeks-long deadlock on passing more stimulus for the world’s largest economy, which has seen massive lay-offs and a sharp contraction in annualised GDP due to business shutdowns to stop COVID-19.
Talks that had petered out with Democrats and Republicans unable to agree on how much to spend resumed this week, again creating expectations that a follow-up bill for to the $2.2 trillion CARES Act could be passed.
However Pelosi said the two sides were “way off” on certain issues though she was still optimistic a deal could be done. She said the House would be voting on a $US2.2 trillion Democratic aid proposal on Thursday.
AFP
5.40am: Stocks rise on US stimulus hopes
Most major stock markets around the world rose on growing hope of a coronavirus economic stimulus package in the United States after months of deadlock, while oil prices tumbled.
Wall Street’s three main indices were all higher in late morning trading, with the Dow up 0.5 per cent.
In Europe, both London and Paris moved modestly higher, up 0.2 per cent and 0.4 per cent respectively, while Frankfurt was dragged down 0.2 per cent by a sell-off in Bayer shares after the company announced more cost-cutting measures.
Asia began the new trading quarter on a quiet note, with Tokyo closed by a computer glitch and several others including Hong Kong and Shanghai shut for holidays, though there were healthy gains elsewhere.
Conciliatory remarks this week from Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have revived hopes for a stimulus deal to boost the pandemic-hit US economy.
That boosted stocks again early Thursday, even though sealing a deal still looked challenging in light of criticism of spending measures from Senate Republicans.
Reports out of Washington said the two sides were looking at an “escalator” compromise in which the new stimulus starts at $US1.5 trillion -- around what Republicans are open to -- and rises closer to the Democrats’ $US2.2-trillion plan if the pandemic persists.
“Hopes that a US fiscal stimulus package could be just around the corner, in addition to upbeat US data, is driving demand for riskier assets,” said City Index analyst Fiona Cincotta.
Data out Thursday showed new jobless claims dipped to 837,000 last week. Early polls meanwhile showed increasing expectations Democrat Joe Biden would win November’s election against the pro-business, anti-regulation Republican Donald Trump, after Tuesday’s chaotic debate saw the two trade personal barbs and shout over each other.
World oil prices fell sharply amid ample supplies and timid demand, with the benchmark US crude oil contract WTI down over 6 per cent and the main international contract Brent was down over 5 per cent.
Markets.com analyst Neil Wilson told AFP it “seems to be a general sentiment-driven sell-off based on demand/supply imbalances.” The stuttering economic recovery from coronavirus lockdown in many countries has complicated efforts by oil producers to ensure the market is not oversupplied.
CMC Markets analyst David Madden pointed to OPEC confirming a rise in production in September. “To make matters worse for the oil market, health concerns are persistent, so that has chipped away at traders’ perception of demand,” he said.
AFP
5.35am: Oil prices tumble 5pc
World oil prices fell sharply, dropping around 5 per cent, amid ample supplies and timid demand.
At 1435 GMT, the benchmark US crude oil contract WTI was down 5.5 per cent to $US38.00, while the main international contract Brent was down 4.9 per cent to $US40.25.
AFP
5.34am: Germany plans inquiry on Wirecard collapse
Germany will hold a full parliamentary inquiry on October 8 into the stunning collapse of payments provider Wirecard, a fraud which has been described as “unparalleled”.
“The biggest scandal in the history of post-war Germany must be clarified,” said Fabio De Masi, deputy chief of the far-left Linke party.
Digital payments provider Wirecard, once a rising star in the booming fintech sector, collapsed spectacularly in June after the company was forced to admit to a 1.9-billion-euro ($2.3 billion) hole in its balance sheet.
The company’s former CEO Markus Braun and several other top executives have since been arrested on fraud charges.
AFP
5.31am: Will chocolate prices rise?
Ivory Coast, the world’s biggest cacao exporter, said it would hike the guaranteed minimum price for farmers by 21 per cent for the 2020-2021 growing season.
The announcement was made by President Alassane Ouattara at the start of an annual trade fair for the cacao industry, the West African country’s biggest economic sector.
“We have decided to increase the price from 825 to 1,000 CFA francs (from $1.48 to $1.79) a kilo,” he said to applause from cacao farmers in the capital Yamoussoukro.
The price floor is set once a year.
Cacao accounts for between 10 and 15 per cent of the country’s gross domestic product (GDP) and nearly 40 per cent of its export revenue, according to the World Bank.
AFP
5.32am: New US jobless claims fall
New jobless claim filings in the United States fell to 837,000 last week, the Labor Department said, resuming their downward trajectory after increasing slightly earlier in the month.
Claims fell by 36,000 over the previous week’s level. However the data is complicated by most-populous state California’s decision to pause processing claims for the two weeks to October 3 to address a backlog, meaning the level it reported Thursday was the same as the previous week -- subject to revision.
AFP
5.30am: H&M to close stores
Swedish clothing retail giant Hennes and Mauritz (H&M) reported a better than expected third quarter profit, but said it was closing stores as COVID-19 was pushing more shoppers online.
The company said it was planning on shutting 350 out of its around 5,000 stores worldwide in 2021, while only opening 100 new ones.
“The rapid changes in customer behaviour have been accelerated by COVID-19. The H&M group is therefore now stepping up the pace of its transformation,” the company said in its quarterly report.
Net profit for the period from June to August came in at 1.8 billion Swedish kronor ($US201 million, 172 million euros), compared to 3.9 billion kronor for the same period a year earlier.
Revenue fell 18.7 per cent to 51 billion kronor.
At the same time online sales, which currently only represent a quarter of total sales, grew by 28 per cent during the third quarter in local currencies.
Pre-tax profit came in at 2.4 billion kronor, an improvement over the 2.0 billion kronor reported in preliminary results published in mid-September.
“Our recovery is going better than expected... With more full-price sales than expected and strict cost control, we returned to profit already in the third quarter,” CEO Helena Helmersson said in a statement.
AFP
5.26am: Microsoft email service crashes
Microsoft’s Outlook email service suffered major problems that saw people around the world encounter difficulties accessing their accounts via the web and mobile devices.
According to US tech website The Verge, the breakdown began around 0600 GMT. “We’ve determined that a recent configuration update to components that route user requests was the cause,” Microsoft said in a tweet.
A Microsoft spokesman told AFP its engineers had resolved the issue and services were returning to normal.
Microsoft provide email and office software services to businesses.
AFP
5.24am: Bayer savings plan alarms investors
Shares in German pharmaceutical and agrochemicals giant Bayer plunged after the company announced huge writedowns over a demand slump and a new savings plan partly to alleviate the impact of the coronavirus.
At 1055 GMT, shares were down 10.0 per cent to 47.98 euros ($US56.36) on Frankfurt’s DAX blue-chip index, having fallen as much as 12.7 per cent in morning trading. Shares are down 34.5 per cent in the year to date.
The slump came hours after the group said it would have to take an impairment charge in the “mid-to high single-digit billion euros range” because of poorer than expected demand in its crop science division.
It would also accelerate a cost-cutting program that may lead to further job cuts, it said, without revealing how many posts would be affected.
The company expects to save 1.5 billion euros by 2024, on top of the 2.6 billion euros of annual savings it expects to make from 2022, Bayer said in a press release.
AFP
5.20am: Google to invest $US1bn in news deals
Google plans to invest $US1 billion on partnerships with news publishers worldwide to develop a “Showcase” app to highlight their reporting packages, CEO Sundar Pichai said in a statement.
“This financial commitment -- our biggest to date -- will pay publishers to create and curate high-quality content for a different kind of online news experience,” Pichai said.
Google has locked horns with publishers repeatedly in recent years over its reluctance to pay for displaying articles, videos and other content in its search results, which has become a vital path for reaching viewers as print subscriptions fade.
It is currently in a standoff with several European media groups, including Agence France-Presse, over its refusal to comply with a new EU law governing digital copyrights.
The US giant says it should not have to pay to display pictures, videos or text snippets alongside search results, saying it drives hundreds of millions of visits to publishers’ websites each month.
It also points to millions of euros invested to support media groups in other ways, including emergency funding during the COVID-19 crisis.
Pichai said Google had already signed up almost 200 publications in several countries, including Der Spiegel in Germany and Brazil’s Folha de S. Paulo, but the list lacked any from the United States or France.
Google News Showcase, he said, will highlight “the editorial curation of award-winning newsrooms to give readers more insight on the stories that matter, and in the process, helps publishers develop deeper relationships with their audiences.”
The new product would be available first on Google News via its Android platform and later on Apple’s iOS, and eventually be added to search results and Google’s Discover feed of tailored content for users.
“It will start rolling out today to readers in Brazil and Germany, and will expand to other countries in the coming months where local frameworks support these partnerships,” Pichai said.
AFP
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