ASX slides to 3-week low, ANZ warns on profit hit

ANZ warns on cash profit hit after the ASX slides to 3-week low as surging Covid cases and US stimulus delays threaten the global economy.

David Rogers and Samantha Bailey

46 min read

8:02PMOctober 27, 2020

Markets have been hit by growing coronavirus numbers and fading US stimulus hopes. Picture: AFP

AGMs fuelling upgrades
Gas plan ‘won’t lower prices’
Boral sells USG stake for $1.4bn
Oil lower on Covid, Libya

That’s all from the Trading Day blog for Tuesday, October 27. Australian stocks fell to a three-week low after a selloff on Wall Street prompted by surging coronavirus cases and fading hopes for US stimulus. The Dow lost 2.3 per cent, the S&P 500 dropped 1.9 per cent and the Nasdaq fell 1.6 per cent. Australia’s recession may have ended in the September quarter, Reserve Bank deputy governor Guy Debelle says, while RBA assistant governor Michele Bullock will at 6.30pm deliver a speech on “Financial Stability in Uncertain Times”. After market close, ANZ warned on a likely hit to its cash profit.

Newsletter: Sign up for The Australian’s business diary and top stories and opinion, direct to your inbox.

Joyce Moullakis 8.00pm: TransferWise urges change to stop bank ‘rip-offs’

Global payments group TransferWise says the federal government must take “decisive action” to introduce laws forcing transparent pricing of cross-border money transfers, to ward against big banks overcharging by billions of dollars.

TransferWise Australia boss Tim Cameron said clear disclosure of exchange rate mark-ups and fees, via a total dollar cost to the consumer, was the only way Australians would stop paying up to 10 times too much to send money overseas.

“Asking banks, no matter where they are in the world, to self-regulate just doesn‘t work,” he added. “Australia is no different... Until the government chooses to take decisive action by introducing laws that require transparent pricing, Australians will continue to lose billions of dollars a year to non-transparent and detrimental forms of pricing.”

Mr Cameron’s comments follow Labor’s Andrew Leigh accusing the big banks of misleading consumers and “benefiting from confusion” in the pricing of transferring money overseas.

Dr Leigh, shadow assistant treasury minister, took aim at big bank chief executives over the issue at parliamentary committee hearings last month. He hit out at them for not disclosing the full cost of a transfer upfront.

Jared Lynch 7.36pm: TABs champing at the bit to reopen

More than 2200 TAB retail workers are set to return to their counters in Victoria, just in time to take bets on the Melbourne Cup after Premier Daniel Andrews began easing restrictions on Melbourne’s three-month lockdown.

While Mr Andrews has maintained a 25km travel limit for Melbourne residents, he allowed restaurants, pubs and TAB outlets to reopen, albeit with limits of 20 patrons indoors and 50 outdoors.

The easing comes a week before the Melbourne Cup carnival, which will run without crowds, dashing any hopes the Victorian Racing Club officials may have had of opening Flemington’s gates to between 8000 and 30,000 people.

Adam Rytenskild, Tabcorp’s managing director for wagering and media, welcomed Mr Andrews easing Victoria’s restrictions and said TAB retail staff were ready to return to work after being stood down at the start of the lockdown in July. “We are ready to go. We have been open before and had to close again and so we know exactly what to do. All our procedures are ready to go,” Mr Rytenskild said.

“Social distancing procedures are well understood by the venues — not just the agencies but the pubs who choose to open as well, so we will start opening from tomorrow (Wednesday).”

The Australian understands about 400 TAB agents and their employees will start taking bets over the counter from Wednesday, joined by a further 1840 staff at pub TABs, bringing the total to more than 2200.

Perry Williams 7.08pm: Santos: don’t thwart investment, gas supply

Santos, operator of the GLNG export project in Queensland, has cautioned the Morrison government against creating a domestic gas reservation scheme that thwarts investments or reduces supplies.

“Santos has an open mind on prospective domestic gas reservation policies that don’t discourage investment and reduce supply, which would simply put gas prices up,” a Santos spokesman said. “The government’s issues paper clearly recognises that these are questions that must be addressed and Santos will respond constructively to them as part of the consultation process.”

Santos boss Kevin Gallagher warned the Morrison government earlier in October against threatened intervention in the gas sector, saying investment and new supply may be jeopardised by introducing new measures.

Perry Williams 6.00pm: Qenos backs Morrison gas reservation scheme

Australia’s largest plastics producer Qenos says the Morrison government’s proposed domestic gas reservation scheme could help lower prices and allow it to better compete with overseas rivals.

“Large trade-exposed industrial manufacturers like Qenos that use gas as a feedstock need access

to an abundant supply at internationally competitive prices,” Qenos chief executive Stephen Bell said.

“Our global competitors have access to cheaper cost gas inputs, so we welcome this latest addition to the range of recently announced Government policy measures intended to secure the supply of more gas to the domestic market at internationally competitive prices.”

Resources Minister Keith Pitt on Tuesday kicked off the process of implementing a national gas reservation system, seeking input from state governments, gas companies and energy users before a “final decision is made” by June next year.

Qenos, owned by chemical giant ChemChina, relies on sourcing large supplies of competitively priced gas and ethane for its Altona plant in Victoria and Botany operation in NSW.

5.48pm: ANZ warns on cash profit hit

Two days out from its full year profit result, ANZ has warned its second half 2020 cash profit will be hit by an after tax charge of $528m as a result of large items, including remediation costs and accelerated software amortisation.

The charge impacts statutory profit by a similar amount.

Remediation charges recognised in the second half of 2020 will be $188m (after tax), largely related to an acceleration of remediation programs and product reviews across the bank.

Changes to the application of ANZ’s software amortisation policy resulted in a $138m (after tax) charge being recognised in the second half of 2020.

“These changes were made to reflect the increasingly shorter useful life of various types of software assets caused by rapidly changing technology and business requirements,” ANZ said in a statement.

The remaining charges of $202m (after tax) include the write-down of goodwill in ANZ’s Pacific business, the impact of accounting changes on ANZ’s investment in Indonesian lender PT Panin and restructuring charges.

Shares in ANZ closed down 18c at $19.50. The warning came after the market closed.

5.10pm: CBA backing November RBA rate cut

A November rate cut by the Reserve Bank of Australia now looks all but certain, according to Commonwealth Bank Chief Economist Stephen Halmarick.

Mr Halmarick said the Reserve Bank of Australia (RBA) will likely push further into what he labels “conventional unconventional monetary policy space” at the Board meeting next Tuesday.

In a recent speech, the RBA governor, Philip Lowe, made it clear that while the economic recovery was now underway, further monetary policy easing is coming.

“This easing is expected to involve a cut in the three key interest rates – the cash rate target, the 3 year bond yield target, and the Term Funding Facility target from 0.25 per cent to 0.1 per cent,” Stephen Halmarick said.

“Critically, this easing of monetary policy is expected to be implemented at the same time as the RBA looks set to revise upwards their economic forecasts given the run of better economic data.”

Mr Halmarick said monetary policy has a significant role to play in supporting the Australian economy by continuing to ensure very low borrowing costs, both for Commonwealth and State, are maintained for an extended period of time.

Bridget Carter 4.40pm: Fashion retailer Pas Group snapped up

The private equity interests of Melbourne-based entrepreneur Larry Kestelman have purchased the Australian fashion retailer Pas Group.

A potential deal was flagged by DataRoom on September 22.

The acquisition was made by Queens Lane Capital, the private equity investment arm of the LK Group.

The restructured group will consist of 166 stores in addition to the wholesale design and development businesses.

It comes after 31 stores were closed and Pas’ loss making JETs business was sold.

Key brands in the portfolio include Review, Black Pepper, Yarra Trail, Marco Polo, andBreakaway.

It has licences for brands including Everlast, Lonsdale, Slazenger and Mooks, Bluey, Disney and Peter Rabbit.

Mr Kestelman. who chairs Queens Lane Capital, said he was excited about the opportunity to re-position the group for growth.

“We are proud to have saved circa 1,000 Australian Jobs and with a turnover of $200 millionthere are tremendous opportunities to further grow the PAS Group,” he said.

4.26pm: ASX slides to 3-week low

The ASX 200 dropped to a three-week low in Tuesday’s session and closed down 104.6 points, or 1.7 per cent, at 6051 points, the lowest close since October 7.

The losses came on the back of falls on Wall Street overnight amid a rise in coronavirus cases and after the White House and the US Congress failed to reach an agreement on a stimulus package.

“In the absence of major event risk and any developing news, Asian markets have traded throughout today’s session in-line with the nasty lead Wall Street handed them,” said IG market analyst Kyle Rodda.

BHP slid 2.2 per cent to $34.94 while Rio Tinto stepped back 2.5 per cent to $92.30.

In financials, Commonwealth Bank fell 1.4 per cent to $68.75 and Westpac backtracked 0.7 per cent to $18.56.

Boral gained 0.2 per cent to $4.74 after the building materials supplier told the market that it would sell its Australian plasterboard venture and announced plans to field offers for its US business, following a portfolio review.

Meanwhile gold miner Evolution Mining dropped 1 per cent to $5.57 after telling investors at its annual general meeting that was tracking within its annual production guidance for the third quarter.

The Australian dollar was 0.21pc stronger against the US dollar by the close of the ASX session, trading around US71.38c.

Bridget Carter 4.07pm: Maas Group to lock in IPO price soon

NSW-based construction materials, equipment and services company Maas Group is expected to lock in a price for its initial public offering in the coming days as it launches cornerstone meetings with investors. It is understood that analyst research offering an indication of the company’s valuation will be released by the end of the week.

Meetings with investors for a cornerstone process started on Monday.

Moelis and Morgans are working on float plan which has been on the agenda since last year.

Earlier expectations were that the company’s market value could be about $500m once listed.

The company has tangible assets worth $340m, including 20 quarries, and a large pipeline of housing lots, which drives demand for services in other parts of its business.

Maas sold one million tonnes of quarry products in the 2020 financial year, which is expected to double or triple in the years ahead.

The Dubbo-based company was founded by Wes Maas in 2003 and had been on track to deliver at least $60m of earnings before interest, tax, depreciation and amortisation for the 2020 financial year, up 13 per cent from the previous corresponding period.

Maas Group has generated annual growth in gross revenue averaging 30 per cent since it began. Other companies heading to the boards that have locked in their pricing details in the past week include Booktopia and Youfoodz.

The fresh meal delivery company Youfoodz, which has advisers Bell Potter and Morgans on board, will sell shares at $1.50 each, with an IPO of $70m and its market value to be $200m.

Pricing equates to 1.1 times the company’s forecasted net revenue.

Booktopia will raise $43m for its IPO, with its shares priced at $2.30 each and its market value to be $315m. The pricing equates to 1.5 times the company’s forecasted revenue on an enterprise value basis.

3.31pm: Mortgage delinquencies tipped to rise

Moody’s Investors Service expects mortgage delinquency rates to continue to rise over the next 12-months, after rates in Victoria grew to their highest level since 2005.

As of May 2020, 30-plus days delinquency rates in New South Wales were at their highest level since 2013, while rates were highest in Western Australia at 3.33 per cent, though down 0.05 per cent on the previous year.

“We expect the economic recovery across Australia will be tenuous over the next year, with labour and housing markets remaining soft and government and lender support measures ending,” said Moody’s vice president and senior credit officer Alena Chen.

“Regions with large economic and labour market dependence on industries such as tourism, hospitality and retail – which have been hit hard by coronavirus disruptions – will see the steepest rise in mortgage delinquencies.”

Moody’s said it forecasts Australia’s GDP to grow 4.3 per cent in 2021 after contracting 5.3 per cent in 2020, however economic recovery will be subject to risks from further coronavirus outbreaks and restrictions until a vaccine is widely available.

Perry Williams 3.10pm: Gas users back reservation scheme

Big east coast gas users have backed the Morrison government’s decision to move ahead with a domestic gas reservation scheme but remain concerned whether any policy will offer short-term relief.

Incitec Pivot, which has been calling for more affordable deals for big gas buyers, said the industry still needed lower prices and more supply in the short-term.

“Gas reservation is a long-term solution, however we will still need short-term actions to ensure domestic consumers and manufacturers get a fair deal on access and globally competitive prices,” Incitec chief executive Jeanne Johns said.

“The privilege of exporting gas should also require meeting domestic needs at a globally competitive price.”

Incitec said a move to replicate West Australia’s reservation scheme could deliver results for east coast users.

“WA has a gas reservation policy. Its policy has continued to support a strong manufacturing industry and WA’s gas prices are a third lower than east coast gas.”

Orica said it wants to see more competition and new entrants in the domestic gas market.

“It’s important to remember why this paper and consultation are so important. Australia is the only major gas-producing country which doesn’t ensure adequate supply at competitive prices for its own domestic market,” Orica chief executive Alberto Calderon said.

“We hope that a reservation measure may also encourage new entrants into the market and improve competition among suppliers, because at present, almost 80 per cent of all existing proved and probable fields are controlled by the LNG exporters.”

Patrick Commins 3pm: RBA expects growth for September quarter

Reserve Bank deputy governor Guy Debelle has said the bank now believes the country’s first recession in three decades ended in the September quarter, saying “as best as we can tell the growth elsewhere in the country was more than the drag from Victoria”.

Ahead of a highly anticipated RBA board meeting next Tuesday - when the cash and three-year rate targets are likely to be cut by a further 0.15 percentage points to 0.1 per cent - Dr Debelle told senate estimates that “our best guess is it looks like the September quarter for the country recorded positive growth rather than slightly negative”.

“And as best as we can tell the growth elsewhere in the country was more than the drag from Victoria, and possibly the drag from Victoria was a little less than what we guessed back in August,” he said.

The RBA will release a new set of forecasts in its quarterly Statement on Monetary Policy (SOMP) next Friday.

The bank’s August SOMP said “the effects of the heightened activity restrictions in Victoria are likely to offset the pick-up in GDP growth in other parts of the economy in the September quarter”.

Bridget Carter 2.56pm: Quadrant poised to launch billion-dollar fund

Quadrant Private Equity is believed to be poised to capitalise on its recent success with the sale of Adore Beauty and Qscan Group by launching a new fund worth about $1 billion.

DataRoom understands that the Australian-based private equity firm is in the process of finalising two acquisitions – one of which is a business services company worth somewhere close to $500m.

Once those transactions have been completed, the buyout fund plans to go to investors to seek around $1bn for its next fund, say sources.

It comes after Quadrant this month floated the online cosmetics business Adore Beauty with a market value of $650m as the COVID-19 pandemic drove demand for online businesses.

It purchased a 60 per cent interest in the online retailer last year in a deal that valued the business at $110m.

Quadrant also reaped a windfall from the sale of its Qscan radiology group at the weekend, offloading the business to a Morrison & Co-led consortium for $735m and more than doubling its money on its original investment.

Quadrant has ownership interests in 22 companies, and Adore Beauty sat within its growth fund.

2.49pm: Suncorp shares drop amid online outage

Suncorp shares are trading down 2.5 per cent at $8.45 each as the Queensland-based banking and insurance group says its online banking and App are experiencing problems due to an outage.

We are currently experiencing an outage which is impacting our online banking and App, and we apologise for any inconvenience this has caused. We are working to restore services as quickly as possible.
— Suncorp (@Suncorp) October 27, 2020

2.43pm: ASX headed for worst day in a month

Australia’s share market is having its worst day in a month after steep falls in offshore equities and crude oil prices.

It came as a resurgence of coronavirus in the US and Europe and a lack of fresh US fiscal stimulus before the Presidential election threatened the global growth outlook.

The S&P/ASX 200 was down 1.7pc at 6048.9, on track its biggest one-day fall since a 2.3pc fall on September 30th.

It fell throughout the day to be down as much as 2pc to 6033.8, its lowest point since October 7th, before recovering slightly from mid-afternoon.

The Energy, IT, Materials and Consumer Discretionary sectors continued to lead broad-based falls, with Woodside down 3.9pc, Afterpay down 4.2pc, BHP down 2.3pc and Aristocrat down 4.1pc.

2.32pm: Nick Scali rebounds following AGM

Shares in furniture retailer Nick Scali are trading up 5.5 per cent at $8.80 each after the company told the market yesterday that online orders had increased by 47 per cent for the first quarter of the new financial year, compared to the prior period.

The company’s shareprice closed down 5.9 per cent on Monday, ahead of its annual general meeting today.

“With the reopening of Melbourne and given the continued strong sales order activity in Australia & New Zealand, we are confident our profit growth for the third quarter and for the second half of the 2021 financial year will be in line with the first half of FY21,” managing director Anthony Scali told investors at the company’s AGM.

“The last nine months have seen the company navigate an exceptionally turbulent environment, and I would like to take this opportunity to thank all my colleagues for their hard work and loyalty to the company.”

1.38pm: Credit Clear gains on debut

Shares in debt collection firm Credit Clear are trading at 46.3c after the company listed on the ASX today following a $15m IPO at 35c a share.

“Prior to the listing on the ASX, Credit Clear was funded by some of Australia’s most successful technology investors, including Thorney, Ellerston Capital, Little Group and Regal, with these shareholders participating also in the IPO,” chairman Gerd Schenkel said in a statement today.

“We thank all of our existing shareholders and are pleased to welcome new shareholders on the Credit Clear journey.”

Ben Wilmot 1.33pm: 360 Capital makes takeover bid for Evans Dixon

Acquisitive funds manager 360 Capital Group has made a takeover proposal for beaten down financial services house Evans Dixon.

Under the off market takeover it would offer 40c per share plus one of its shares

for every four Evans Dixon shares.

360 Capital already owns about 19.55 per cent of Evans Dixon and said its offer price is valued at 61c per share.

360 Capital said its offer price represents compelling value at a 142 per cent premium to the company’s net tangible assets and a 35 per cent premium to the average price in which the bidder purchased its last portion of its stake.

The price is also a 54 per cent premium to the trading price shortly after the company disclosed ASIC was taking corporate action against Dixon Advisory and Superannuation Services Limited, a subsidiary of the company.

360 Capital also lashed the performance of Evans Dixon saying its trading price had decreased 79 per cent since the Company’s IPO in May 2018.

360 Capital believes that the offer represents a compelling opportunity for the Evans Dixon shareholders to exit their investment before any further value destruction, including arising as a result of the ongoing ASIC proceedings against Dixon Advisory.

12.44pm: Australian sharemarket extends falls

Australia’s S&P/ASX 200 share index extended its fall to be down 1.5pc at 6063.3 points at a three-week low of 6063.3 in early afternoon trading.

It came as China’s industrial profits growth year on year slowed to a 4-month low of 10.1pc in September from 19.1pc in August, but the Australian share market was already near its intraday low.

The Energy, IT, Consumer Discretionary and Materials sectors continue to lead broad-based falls.

Strong support should be located at the former double-bottom resistance at 6000 points.

That point also marks the confluence of 50, 100 and 200 day moving average lines.

The moving average system has been in “buy” mode since October 20th.

Perry Williams 12.24pm: Govt gas plan ‘won’t lower prices’

The Morrison government’s planned gas reservation scheme will not lead to materially lower prices in the next decade, while energy producers look to have dodged the risk of the policy affecting existing production with the scheme to only apply to future supplies, Credit Suisse says.

The reservation scheme is likely to proceed but will not materially lower prices, the broker said.

“A prospective reservation policy is unlikely to impact pricing materially for at least the next 5-10 years in our view,” Credit Suisse analyst Saul Kavonic said. “Every new molecule supplied to the market under reservation would simply be swapping out another molecule from existing fields that can instead go to export (the latter not being subject to reservation).”

Gas producers have dodged the real risk of a retrospective reservation policy although the issue of transport costs may prove a headache.

“The main market risk posed by the prospective reservation policy, if implemented poorly, is it could result in inefficient transport costs (new reserved supply may not be near local demand centres),” Mr Kavonic said. “So we suspect any policy may need to have flexibility to accommodate efficient allocation of gas possibly via swap arrangements.”

Queensland’s Curtis Liquefied Natural Gas (QCLNG) project. Picture: Bloomberg

12.03pm: ASX down 1.2pc at lunch after US rout

Australia’s sharemarket is having its worst day in almost four weeks after offshore markets dived as record coronavirus cases and delays in US fiscal stimulus threatened the global economy.

The S&P/ASX 200 was down 1.2pc at 6080 after falling as much as 1.4pc to a three-week low of 6068.3 after the S&P 500 fell 1.9pc and the Euro Stoxx 50 fell 2.9pc overnight.

If the index ends down more than 0.72pc today it will be the biggest since a 1.39pc fall on October 2.

All sectors were in the red, with the Energy, IT, Consumer Discretionary, Materials and Communications sectors underperforming.

Woodside fell 1.1pc, Afterpay lost 3.4pc, Aristocrat declined 4pc, Fortescue fell 2.2pc and Telstra lost 1.3pc.

Boral rose 4.1pc after agreeing to sell its 50pc stake in USG Boral for $US1.02bn ($1.4bn) and flagging potential divestment of its North American business.

China’s industrial profits are due at 12.30pm (AEDT) and RBA Deputy Governor Debelle and Assistant Governor Bullock appear before the Senate Economics Legislation Committee at 1.30 pm.

12.01pm: Consumer confidence lifts for 8 straight weeks

The weekly ANZ-Roy Morgan consumer confidence index rose 1.6 per cent to a six-month high of 99.7 points for the week ending October 25. The index is now up 52.7 per cent since hitting a record low of 65.3 in March.

“Amidst falling active COVID-19 case numbers and hopes of a further easing of restrictions, confidence gained for the eighth straight week,” said ANZ Australian economics head David Plank.

“Overall sentiment is just below the neutral level and at a six-month high.

“It remains well below the long run average, however.

“People remain cautious about the current economic outlook and, consistent with this, are also cautious about their current financial circumstances.

“This may constrain spending in the near-term.”

Still, Mr Plank said that confidence in future economic and financial conditions remained positive, with the ‘Economic Conditions in the Next 5 Years’ subindex lifting 1.2 per cent to 105.4 points.

Bridget Carter 11.51am: Goldmans advising Coke Europe on takeover deal

The $9.3 billion takeover play by Coca-Cola European Partners for Coca-Cola Amatil has proved to be a lucrative deal not only for UBS, Rothschild and Credit Suisse, but Goldman Sachs as well.

The New York-based Goldman Sachs has emerged as the adviser to The Coca-Cola Company, based in Atlanta, for the transaction.

Working as a defence adviser for Coca-Cola Amatil has been investment bank UBS, while Rothschild is lead financial adviser to Coca-Cola European Partners.

Credit Suisse has a long-term relationship with Coca-Cola European Partners and provided a ‘highly confident’ letter of funding assurance for the transaction to Coca-Cola Amatil.

It also acted as a financial adviser to Coca-Cola European Partners’ Affiliated Transaction Committee comprising company board members.

Coca-Cola Amatil announced on Monday that it had recommended a $12.75 per share offer from the world’s largest bottling company, Coca-Cola European Partners.

The Coca-Cola Company owns a 30.4 per cent stake in Coca-Cola Amatil and also a 19.3 per cent interest in Coca-Cola European Partners.

11.38am: Tokyo stocks open lower

Tokyo stocks opened lower following a selloff on Wall Street due to fading hopes for economic stimulus and mounting worries over the coronavirus.

The benchmark Nikkei 225 index was down 0.72 per cent or 170.04 points at 23,324.30 in early trade, while the broader Topix index lost 0.98 per cent or 15.93 points to 1,603.05.

AFP

Eli Greenblat 11.32am: Europe Coke boss talks up Amatil takeover deal

Coca-Cola European Partners chief executive Damian Gammell has told his investors its $9.3 billion swoop on Coca-Cola Amatil is timed to reap the rewards from years of investment by the Australian bottler in its key markets of Australia, New Zealand and Indonesia that will pay dividends in the future for the combined group.

Talking up the benefits and compelling value to be created by Coca-Cola European Partners announced all-cash takeover of CC Amatil, unveiled on Monday, Mr Gammell said he was also highly attracted to the growth market of Indonesia that CC Amatil had poured fresh investment into recently and that Coca-Cola European Partners would now benefit from.

Mr Gammell delivered an upbeat assessment overnight of the future earnings prospects delivered to the group by absorbing CC Amatil and building on the more than six years of work and strategy of its chief executive Alison Watkins.

There were also rich opportunities to build on the recent work by Ms Watkins and her management team in Australia and New Zealand that has seen a resetting of the market and more investment in CC Amatil sales staff working customers better, or what Ms Watkins has called ‘feet in the street’.

“But I think the playbook we’ve talked about coupled with the work that’s already being done by Amatil in the last couple of years to in some ways reset that market, you know they‘ve put more feet in the street, they’ve talked about a more focused alignment with the Coke Company.

“We believe that will start to pay dividends and we can add to that trajectory,’’ Mr Gammell said.

Cliona O’Dowd 11.29am: Bendigo slashes CEO, director salaries

Bendigo and Adelaide Bank managing director Marnie Baker will take a 10 per cent salary cut for the next six months and the bank’s board will slash director fees by 10 per cent as the lender looks to “share the burden” of the challenges facing its customers and shareholders.

Announcing the pay cut at the bank’s annual general meeting on Tuesday, chair Jacqueline Hey warned that market conditions would remain challenging this year and said it would wait to review its final dividend decision - which it deferred in August at its full-year results -- until it reports its first-half numbers in February.

“(The dividend deferral) was not made lightly and needed to take into consideration the continuing market and economic uncertainty and APRA’s industry guidance on capital management. While we were pleased to be able to pay out 31c per share in March this year, we do recognise the difficulty the final dividend deferral may have caused to some of our shareholders,” Ms Hey said.

Bendigo and Adelaide shares last up 1.3 per cent at $6.76.

11.10am: Sharemarket falls further

Australia’s share market has fallen further than indicated by overnight futures.

The S&P/ASX 200 fell 1.4pc to a three-week low of 6077.3 after breaking last week’s low at 6100.6.

On top of steep falls in offshore markets, the local bourse has been hit by sharp falls in heavyweight stocks in the IT, Energy, Consumer Discretionary, Communications, Health Care, Real Estate, Materials and Financials sectors.

Within those sectors, Afterpay is down 4pc, Woodside is down 2.6pc, Aristocrat is off 3.9pc, Wesfarmers is down 1.7pc, CSL is down 1.7pc, BHP is down 1.4pc, Fortescue is down 2.1 and QBE is down 2.9pc.

10.52am: AGMs fuelling upgrades: Maquarie

Macquarie Equities notes that AGM season is delivering a positive surprise in terms of share price performance and earnings per share upgrades.

Of 40 AGMs for stocks covered by Macquarie, 10 have outperformed and just 3 have underperformed on the day of their AGM.

There have also been 11 upgrades and just 2 and downgrades to 2021 EPS estimates.

Healius, Orora, Baby Bunty, Cochlear and Qantas outperformed on the day of the AGM and saw EPS upgrades.

At the same time, the US reporting season is delivering a record level of positive EPS surprise.

“At a market level, expectations may be too conservative given the V-shaped recovery in the cycle,” says Macquarie’s Australian equity strategist, Matt Brooks.

“Given the strength in the cycle, we could see a rise in Australia’s FY21 and FY22 estimates in the lead up to February results.

“Australia’s fiscal stimulus is more supportive for earnings than it has been in many years.”

But the US election remains the number one issue for the near term, with a Democrat clean sweep is still the most likely outcome according to aggregate polls and prediction markets.

“As highlighted last week, we think a Democrat sweep is positive for value, and negative for US exposures,” he says.

“The key pushback is that US polls are wrong, and that Trump can still win. If the polls are wrong, growth stocks with high US exposure will be the likely winners, as this may mean less stimulus, but also no corporate tax hike.”

Bridget Carter 10.50am: Investment banks circle Boral ahead of US sale

US-based investment banks are expected to be jostling for a role to represent the interests of Boral after the country’s largest building materials provider on Tuesday confirmed that it would explore a sale of its US assets.

During a press conference on Tuesday, recently appointed chief executive, Zlatko Todorcevski, said that Boral was yet to appoint an investment bank for any sale of US assets and that all of the work that had been conducted on its portfolio review was carried out internally.

Earlier, the understanding had been that Macquarie Capital and Flagstaff Partners had been working with Boral.

Macquarie has been the company’s long-time adviser.

But Mr Todorcevski said that the banks were not working on the review.

He said that no advisers had been appointed.

“If we do complete any portfolio actions, we will work out who the right advisers for that are.”

Banks likely to be lobbying for a role include major financial giants based in the United States, including Goldman Sachs, JPMorgan, Morgan Stanley and Citi.

Boral told the market on Tuesday that it would sell its Australian plasterboard venture to Germany’s Knauf for $US1.02bn ($1.43bn) and field offers for its larger US building products business after concluding a portfolio review.

Boral shareholders including the Kerry Stokes-controlled Seven Group have been pushing for it to offload its underperforming US division and Boral said it would consider offers for its building products arm and also look at new supply option for its flyash business.

He said that the company was planning to explore third party interest in its North American building products businesses to assess if there were enhanced value creation opportunities.

Parties expected to show an interest in Boral’s North American assets, should they come up for sale, include numerous private equity firms, including Clayton, Dubilier & Rice.

CD&R is a US private equity firm that manages $US30bn invested in 90 businesses, and has a strong track record of investing in the building products industry.

With Perry Williams

10.36am: AIG names new CEO, breaks up its insurance business

Global insurer AIG has announced a multi-part shake up, naming a new CEO and splitting its business in two.

Once the world’s largest insurer, which needed a US government bailout to survive the 2008 global financial crisis, named Peter S. Zaffino to lead AIG starting March 1, 2021, in addition to his current role as the company’s president.

Current CEO Brian Duperreault will become executive chairman of the board, the company said in a statement.

“Peter has been instrumental in the significant turnaround and transformation at AIG and his vision, determination and pursuit of excellence will help ensure the company’s future success,” Duperreault said.

AIG also announced plan to separate the Life & Retirement business from the General Insurance unit, simplifying the corporate structure to allow each to become more profitable.

AFP

Lilly Vitorovich 10.33am: Isentia services hit in cyber attack

Media monitoring group Isentia has been hit by a cyber security attack, which has hit its services.

In a brief statement to the ASX, Isentia says it is “urgently investigating a cyber security incident which is disrupting services within its SaasS platform Mediaportal”.

“Isentia is working closely with leading external cyber security specialists to assess the extent of the incident and the impact on its systems.”

Isentia boss Ed Harrison says it’s taking “urgent steps to contain the incident and conduct a full investigation” into the incident and how to avoid it happening again.

“Our priority is to restore full service as soon as possible but until that occurs, we have put processes in place to support our customers,” Mr Harrison said

Isentia, which has more than 3,000 clients in 11 markets, has also notified the Australian Cyber Security Centre.

Isentia shares last down 2.7 per cent at 18c.

10.23am: ASX opens lower after Wall Street selloff

Australia’s share market is succumbing to a pullback on Wall Street although it continues to do better than offshore markets.

The S&P/ASX 200 was down 0.8pc at 6102.3 after falling as much as 1pc to a two-week low of 6096.4 with all sectors in the red, after the S&P 500 lost 1.9pc as fiscal stimulus continued to be delayed by the US election and European markets dived on record COVID numbers and a slump in SAP.

The IT sector was weakest with Afterpay down 4pc as shares of US-based buy-now-pay-later company Zebit fell 8pc after losing 34pc in their ASX debut on Monday.

Energy is also underperforming the broader market with Santos down 2.5pc after WTI crude oil fell 3.2pc overnight.

The major banks are mostly outperforming although NAB is down 1pc.

Iron ore miners remain weak with Fortescue down 1.3pc.

Ben Wilmot 10.15am: SCA enjoys malls recovery

Supermarket and small shopping centre owner the SCA Property Group has experienced generally improving trading conditions in the first quarter of the fiscal 2021 financial year, in a sign of a broader recovery outside of Victoria.

The company is landlord to Coles and Woolworths-anchored centres and said sales were ahead of the June quarter, with momentum in its favour.

“Excluding Victoria, tenant sales are growing strongly in most categories and rent collection rates are improving. Our balance sheet has been strengthened further, and we are well positioned to take advantage of acquisition opportunities over coming months,” SCA said.

SCA which owns about $3.2bn worth of convenience-based shopping centres across Australia and has become the first major retail landlord to give earnings guidance.

The trust warned that considerable uncertainty remained in relation to the COVID-19 pandemic but said with the re-opening of Victoria it could give some “indicative guidance” for fiscal 2021 earnings and distributions.

SCA malls host Coles supermarkets.

Assuming that there are no further outbreaks of COVID-19 in Australia and no further government interventions in response to the COVID-19 pandemic, SCA forecast that adjusted funds from operations will be in a range of 5.5c to 5.7c per unit. AFFO for the second half will be “greater than the first half” and distributions will follow suit.

The sales performance of SCA’s tenants has continued to improve over recent months in the September quarter the portfolio generated strong sales growth of 9 per cent compared to last year.

Victorian tenant sales growth was impacted by government restrictions and many tenants were forced to close, resulting in sales declines in the discount department store, mini-major and specialty categories. Victoria represents about 18 per cent of the fund’s rental income.

Outside Victoria, sales growth continued to strengthen as government restrictions eased and the trend toward customers shopping locally continued. There were only three specialty tenant categories experiencing sales declines compared to the same period last year - apparel, cafes and restaurants and hairdressing and beauty.

9.55am: What’s impressing analysts?

CC-Amatil cut to Neutral: Citi

CC-Amatil cut to Hold: Morgans Financial

CC-Amatil cut to Neutral: JPMorgan

CC-Amatil raised to Hold: Morningstar

CSR raised to Equal-Weight: MS

Laybuy Group started at Speculative Buy: Canaccord

Mineral Resources raised to Neutral: JPMorgan

Perry Williams 9.51am: Energy players hit back on govt gas plan

Australia’s big oil and gas producers have immediately hit out at the Morrison government’s plan for a domestic gas reservation scheme saying there is no domestic supply shortage and warning the move may hurt investment.

Resources Minister Keith Pitt will begin the process of implementing a national gas reservation system on Tuesday, seeking input from state governments, gas companies and energy users before a “final decision is made” by June next year.

However, Australia’s first ever national reservation scheme is likely to meet stiff resistance from the energy industry given LNG exporters have already committed to supply domestic users through the Australian Domestic Gas Security Mechanism.

“While sensible reforms can improve the efficiency of the domestic gas market and its operation, unnecessary market interventions can affect confidence in the sector and discourage investment,” said Andrew McConville, chief executive of the Australian Petroleum Production and Exploration Association which represents the energy industry.

“Rather than generating more gas or driving down prices, intervention may impede the very investment needed to bring on new, or cheaper, supplies. So, a more sustainable solution is to support investment that can increase supply.”

Appea also said the competition regulator had concluded there was no shortfall in the domestic gas market with LNG producers adding supplies to the market.

Appea said the Productivity Commission found domestic gas reservation schemes can reduce returns to investors and discourage investment in gas exploration and extraction, leading to higher prices in the longer run and imposing net costs on the community.

“Intervention into a market by government is a blunt tool which can have unintended economic consequences and should generally only be considered in situations of genuine market failure,” Mr McConville said.

Nick Evans 9.47am: Evolution’s September production ‘on track’

Evolution Mining says its mines tracked within annual production guidance in the September quarter as the company improved its cash position despite paying $153.8m in dividends in the period.

Evolution said the gold stream from the Glencore-operated Ernest Henry mine, and its own gold operations in WA both generated record cash flows in the period, as Evolution finished September with net-debt of $180.3m, down $16.1m from the end of June.

Evolution’s mines in Australia and Canada produced 170,021 ounces of gold in the period, or an annualised rate of about 680,000 ounces, towards the lower end of its 670,000 to 730,000 ounce annual production guidance for the financial year.

But the cash kept pouring in for the gold miner, with Evolution saying it booked net mine cash flow of $183.4m for the period, and total group cash flow of $118.9m after corporate, exploration and interest expenses.

It also received $55.8m for the sale of its Cracow mine, sold to Aeris Resources in July.

Evolution said it received an average $2534 an ounce for the 172,759 ounces of gold it sold in the period, with 121,706 ounce sold at an average spot price of $2659/oz. Another 25,000 ounces were sold into its out-of-the-money hedge book at $1811/oz.

Evolution said that, at September 30, it had 275,000oz still due to be delivered into its Australian hedge book at an average $1877/oz. It will deliver 25,000oz a quarter into that position until June 2023.

It has another 110,000oz to be delivered from its Red Lake mine in Canada at 10,000oz a quarter, at $C2272/oz, until June 2023.

Evolution shares closed Monday at $5.63.

Evolution Mining’s gold mine at Lake Cowal, near West Wyalong, NSW.

9.43am: Futures point to 0.8pc fall on ASX

The Australian share market is set to fall but its recent outperformance should continue amid vastly better trends in coronavirus and mobility restrictions as well as domestic fiscal and monetary stimulus.

Overnight futures relative to fair value suggest the S&P/ASX 200 will open down 0.8pc at 6106.6 points after steep falls in European and US markets.

Germany’s DAX fell 3.7pc with SAP down 22pc after cutting its sales forecast and warning the pandemic will hurt its sales through mid-2021.

The Euro Stoxx 50 fell 2.9pc on the SAP news plus record COVID cases across multiple European countries and new restrictions in Spain and Italy over the weekend.

The S&P 500 fell 1.9pc to 3400.97 via 3364.9, with the Energy sector down 3.5pc as WTI crude fell 3.2pc to a 3-week low of $US38.56 and Industrials down 2.5pc as China planned to sanction Boeing, Lockheed Martin and Raytheon over arms sales to Taiwan.

But the S&P 500 looks OK on the chart after tentatively forming an uptrend line from the March low while also bouncing off a channel support line which could form part of a bullish pennant pattern.

Thus the S&P/ASX 200 should stay above last week’s low at 6100.6 unless the US market falls further, in which case the S&P/ASX 200 may test strong support from the former resistance around 6000 in coming weeks.

Boral may jump after agreeing to sell its 50pc stake in USG Boral for $US1.02bn ($1.4bn) and flagging potential divestment of its North American business, but it said 1Q Group revenue fell 9pc and EBIT fell 5pc.

BHP ADR’s equivalent close at $34.34 points to a 1.1pc fall in the resources sector heavyweight, with LME copper down 1.3pc to $6761 and spot iron ore down 0.5pc to $US116 a tonne.

The consumer discretionary sector may be vulnerable to a switch to travel stocks as retail spending is likely to switch to travel once domestic borders reopen.

China’s industrial profits data are due at 12.30pm and RBA Deputy Governor Debelle and Assistant Governor Bullock appear before the Senate Economics Legislation Committee at 1.30 pm.

Ben Wilmot 9.40am: Elanor Investments snaps up health centre

Listed real estate fund manager Elanor Investors Group has become the latest property group to bulk up in health and has snapped up the Woolloongabba Community Health Centre for $37m to put in its Elanor Healthcare Real Estate Fund.

The deal was the third acquisition for the healthcare fund, with the property portfolio now valued at more than $161m, and it also grows Elanor’s funds towards $2bn.

The Woolloongabba Community Health Centre is in a prime health precinct in Brisbane close to the Princess Alexandra Hospital. This acquisition further enhances the healthcare fund’s portfolio with the property being fully leased to the Queensland government’s Metro South Health Department.

A 27-chair dental surgery and mental health administration services occupy the 4,966sq m of net lettable area, providing a weighted average lease expiry of 5.4 years. The property has 134 car bays and is situated on a substantial 4,150sq m site with favourable zoning.

Elanor co-head of real estate David Burgess said the fund delivers superior risk-adjusted returns by investing in commercial healthcare properties where tenants provide vital “out-of-public hospital” services.

“This strategy capitalises on the growing cost pressures on the healthcare system, and combined with advances in health technology, is driving the delivery of healthcare services to lower-cost day surgeries and medical centres,” he said.

Nick Evans 9.22am: Listed lithium producer collapses

Lithium producer Altura Mining has collapsed after failing to land a $150m recapitalisation to bring down the company’s debts.

The company’s lenders appointed KordaMentha’s Richard Tucker and John Bumbak as receivers late on Monday, after giving up on the prospects of a company-saving capital raising.

The decision comes just ahead of the expiry of an agreement with its lenders to waive payments and covenants on its estimated $200m worth of debt, agreed in August and due to expire at the end of October.

Altura said in late September it had shipped about 51,217 tonnes of lithium concentrate in the September period, but did not provide an update on its financial position.

KordaMentha said in a statement it would immediately launch a process to sell or recapitalise its Pilbara lithium assets.

Altura last traded at 7c when its shares were suspended from trading in August.

8.45am: Bendigo and Adelaide lending grows

Bendigo and Adelaide Bank said lending grew in its fiscal first quarter and that the number and balances of COVID-19 support packages for its customers had significantly reduced.

Ahead of its AGM, the bank said its total lending in the fiscal first quarter was tracking 11 per cent higher on an annual basis, and that its residential lending was tracking 16 per cent higher on an annual basis. Its net interest margin increased one basis point compared to the fiscal second half, to 2.30 per cent in the fiscal first quarter.

The bank also said that the number of customer accounts on deferral is down 69 per cent from the peak in May. The number of residential and consumer accounts on support packages are down 74 per cent from the May peak, while commercial support packages are down 49 per cent on the peak in that category since July.

“In line with our strategy, we are focused on driving sustainable growth through active cost management, and we continue to target income growth to exceed cost growth this financial year,” said managing director Marnie Baker. “Our sights are firmly fixed on achieving outcomes for all stakeholders and we are adequately provisioned to manage through the pandemic.”

The bank, however, said the economic and health outlook remains uncertain despite the ongoing improvement of accounts transitioning from repayment deferral arrangements. The bank said it is maintaining its approach to credit provisioning adopted for COVID-19 and announced back in May.

The bank is holding its annual shareholder meeting on Tuesday.

Marnie Baker, managing director of the Bendigo and Adelaide Bank

Dow Jones Newswires

8.38am: Ebeid steps down at Telstra

Telstra has promoted David Burns, who currently leads Telstra Global Business Services, to group executive for the enterprise business, as Michael Ebeid steps down from the role after two years in the role.

Mr Ebeid, a former SBS chief executive, is leaving Telstra “to pursue other business interests”.

Jetstar chief operating officer Dean Salter has been appointed global business services executive, replacing Mr Burns.

“I wish Michael well and thank him for the contribution he has made, and I congratulate both David and Dean on their appointments,” chief executive Andy Penn said in a statement to the ASX.

“David is known for his strong customer focus and results orientation and this combined with his deep understanding of the enterprise business from his time at Telstra and many years at IBM, will enable him to step into the role and build momentum on the significant transformation already underway.”

8.30am: Northern Star sales at top end of guidance

Northern Star Resources said its first-quarter gold sales were close to the top end of guidance as it advances plans to combine with Australian peer Saracen Mineral Holdings.

Northern Star reported sales of 227,532 troy ounces of gold in the three months through September, compared to prior guidance for between 207,000 and 233,000 ounces. Management said the outcome was driven by strong performances at its Yandal operations in Australia and at the Pogo mine in Alaska.

Northern Star said its unaudited quarterly net profit totaled $100 million, with operating mine cash flow of $254 million.

The miner’s all-in sustaining cost averaged $1,752 per ounce in the first quarter.

Dow Jones Newswires

Perry Williams 8.25am: Boral sells plasterboard business

Boral will sell its Australian plasterboard venture to Germany’s Knauf for $US1.015bn ($1.43bn) and field offers for its larger US building products business, after concluding a portfolio review.

Its sale of a 50 per cent stake in USG Boral will deliver Boral a profit before tax of $540m and was struck at 15.1 times FY2020 normalised EBITDA1 and 11.3 times FY2019 EBITDA.

Boral in April canned its original plasterboard venture with Knauf and slashed up to 20 per cent of planned spending this year as construction demand tanks due to the COVID-19 pandemic.

“We have been working with Knauf for some time to find the best path forward for the business following Knauf’s acquisition of our joint venture partner, US Gypsum (USG). We recognise that it makes sense for Knauf – being the world’s largest plasterboard player – to have 100 per cent ownership of the business,” Boral chief executive Zlatko Todorcevski said.

Shareholders including the Kerry Stokes-controlled Seven Group have also been pushing for it to offload its under-performing US division and Boral said it would consider offers for its building products arm and also look at new supply option for its flyash business.

“Boral has not yet unlocked the full value of these businesses and we strongly believe that they have the potential to earn improved returns through the cycle. As a result, we are taking steps to strengthen returns through operational improvements, product innovation and enhanced go-to-market strategies, and to better position the businesses to leverage the cyclical recovery in US markets,” Boral said.

“We plan to explore third party interest in our North American building products businesses to assess if there are enhanced value creation opportunities beyond the prospects we see for business improvement outcomes. We will fully assess divestment opportunities but will only consider third-party interests where a superior value outcome is achievable for shareholders.”

7.15am: ASX to sink after Wall Street sell-off

Australian stocks are set to open firmly lower after sharp falls on Wall Street prompted by coronavirus concerns and fading hopes for US stimulus.

Shortly after 7am, the SPI futures index was down 55 points, or 0.9 per cent.

Yesterday, Australian stocks closed 0.2pc lower despite rising as much as 0.6pc during the session on takeover activity.

The Australian dollar is lower at US71.24.

Oil prices slipped. US crude oil futures fell 3.1 per cent to $US38.62 a barrel.

7.08am: US stocks slide on virus surges, stimulus

Wall Street dropped sharply as coronavirus cases surged in the US and Europe, adding to worries about the economic outlook after Congress and the White House failed to agree on a much-anticipated fiscal stimulus deal.

Major indexes opened lower, and the declines accelerated into the afternoon.

The Dow industrials fell 650 points, or 2.3 per cent, the worst day for the blue chips since September 3. The S&P 500 dropped 1.9 per cent, and the Nasdaq Composite fell 1.6 per cent.

Among the biggest decliners were the travel and leisure stocks, like Royal Caribbean Group, United Airlines Holdings and Marriott International, that have come under the most pressure this year during the pandemic.

“The ability to fight the virus further right now is very much in question, and it’s a political question,” said Steven Wieting, chief strategist at Citi Private Bank. It could be months before anything gets done in Washington, and that’s got investors tentative, he said.

The US reported 60,789 new cases Sunday, down from recent record-setting levels, but up from a week earlier. Scientists had been expecting cooler weather to lead to a second wave of the disease, but it is coming earlier than many had anticipated. That is prompting fresh concerns about tighter lockdown restrictions and the effect on the economy.

House Speaker Nancy Pelosi told CNN on Sunday that she was expecting more answers regarding an aid package on Monday and that an agreement could be reached this week among lawmakers. But Democrats and White House officials are blaming each other for the lack of progress after the two sides went into the weekend without a deal, dimming hopes for an agreement before November 3.

A selloff here isn’t surprising, said Esty Dwek, head of global market strategy at Natixis Investment Managers. Last week the market was optimistic about stimulus aid, and this week those hopes have been leveled somewhat. “It’s just one of those mornings where we’re looking at the glass as half empty,” she said.

Elsewhere on Monday, the pan-continental Stoxx Europe 600 retreated 1.8 per cent, led by a decline in German stocks.

Coronavirus cases are accelerating in Europe. France reported more than 52,000 new infections Sunday, a daily high. Italy is trying to rein in the spread with new rules, such as the mandatory closure of restaurants and bars at 6pm. Spain declared a state of emergency, as it did in March.

Dow Jones Newswires

6.50am: Oil lower on Covid, Libyan crude

Oil prices fell after new coronavirus restrictions in Europe and the speedy return of production in Libya threatened to undermine efforts to chip away at a global glut of crude.

Futures for Brent crude, the benchmark in international energy markets, fell 3.1 per cent to $US40.46 a barrel in London. Contracts tied to West Texas Intermediate, the main grade of US crude oil, slipped 3.2 per cent to $US38.56 a barrel in New York.

Struggling with an explosive rise in infections, governments in Europe are clamping down on travel and leisure. Over the weekend, Italy and Spain introduced some of the strictest curbs since the two countries exited from their initial lockdowns, including early closures of bars and restaurants and a nighttime curfew.

The measures are set to crimp demand for gasoline and other fuels, analysts said, slowing a recovery that had already started to falter. The resurgence of the coronavirus in the US -- which reported more than 60,000 new cases Sunday -- also has the potential to squeeze oil consumption.

“The recent demand data has pretty much universally been in one direction, which is disappointing,” said Emily Ashford, energy analyst at Standard Chartered Bank. The world will consume 9.6 million fewer barrels of oil a day in 2020 than in 2019, Ms. Ashford said, a decline of about 10 per cent. Europe’s economic slowdown is hampering sales of industrial fuels such as diesel, she said.

The return of Libyan crude is also adding pressure to oil prices. The country’s central government agreed with rebel commander Khalifa Haftar to lift a nine-month oil blockade last month, after the two sides resolved a dispute over oil-revenue distribution.

Since then, production has picked up quickly. Libya’s National Oil Corp. said Monday it had instructed the operator of the el-Feel oil field to resume output. That followed Friday’s statement that Libyan output would rise to 800,000 barrels a day within two weeks, and a million barrels in four weeks.

A Libya oil refinery. Picture: AFP

Dow Jones

6.15am: ASX to sink after Wall Street sell-off

Australian stocks are set to open firmly weaker after sharp falls on Wall Street prompted by coronavirus concerns and fading hopes for US stimulus.

Shortly after 6am, the SPI futures index was down 60 points.

Yesterday, Australian stocks closed 0.2pc lower despite rising as much as 0.6pc during the session on takeover activity.

The Australian dollar is lower at US71.24.

Oil prices slipped. US crude oil futures fell 3.1 per cent to $US38.62 a barrel.

6.10am: Stocks slide on virus, fading stimulus hopes

US stocks dropped sharply as coronavirus cases surged in the US and Europe, adding to worries about the economic outlook after Congress and the White House failed to agree on a much-anticipated fiscal stimulus deal.

Major indexes opened lower, and the declines accelerated into the afternoon. All 30 components of the Dow Jones Industrial Average were lower, as were all 11 sectors of the S&P 500.

In afternoon trade the Dow industrials fell 760 points, or 2.7 per cent, putting the blue chips on track for their worst day since September 3. The S&P 500 dropped 2.1 per cent, and the Nasdaq Composite fell 2 per cent.

“The ability to fight the virus further right now is very much in question, and it’s a political question,” said Steven Wieting. chief strategist at Citi Private Bank. It could be months before anything gets done in Washington, and that’s got investors tentative, he said.

The US reported 60,789 new cases, down from recent record-setting levels, but up from a week earlier. Scientists had been expecting cooler weather to lead to a second wave of the disease, but it is coming earlier than many had anticipated. That is prompting fresh concerns about tighter lockdown restrictions and the effect on the economy.

“It’s a worrying picture for sure. You may have to account for the possibility that by midwinter, there might be circuit breakers implemented,” including stringent short-term shutdowns, said David Stubbs, head of investment strategy at J.P. Morgan Private Bank. “But we always knew this recovery would be stop-start: We won’t be truly moving into the main part of a new cycle until the health care issue itself is dealt with.”

House Speaker Nancy Pelosi told CNN that she was expecting more answers regarding an aid package on Monday and that an agreement could be reached this week among lawmakers. But Democrats and White House officials are blaming each other for the lack of progress after the two sides went into the weekend without a deal, dimming hopes for an agreement before November 3.

A sell-off here isn’t surprising, said Esty Dwek, head of global market strategy at Natixis Investment Managers. Last week the market was optimistic about stimulus aid, and this week those hopes have been levelled somewhat. “It’s just one of those mornings where we’re looking at the glass as half empty,” she said.

Elsewhere, the pan-continental Stoxx Europe 600 retreated 1.8 per cent, led by a decline in German stocks.

In Asia, most major equity benchmarks closed lower. China’s Shanghai Composite Index fell 0.8 per cent. Markets in Hong Kong were closed for a public holiday.

Oil prices slipped. US crude oil futures fell 3.1 per cent to $US38.62 a barrel. A ceasefire in Libya has led analysts to project the country’s output will reach 1 million barrels a day in the next four weeks, up from about half a million a day, according to Bjarne Schieldrop, chief commodities analyst at SEB. The rise in coronavirus infections is also muting prospects for the economic recovery and damping demand, he said.

“We have oil being hit from both sides of the equation. Libya supply is seeing a rapid increase,” Mr. Schieldrop said. “At the same time, demand is being hit by a wave of new COVID-19 cases and with new lockdowns.”

Dow Jones Newswires

5.15am: Libya’s NOC says all oilfields reopen

Libya’s National Oil Corporation said it lifted the last remaining force majeure on an oil facility in the war-torn country, three days after rival factions struck a ceasefire deal.

The state-run NOC said in a statement on Facebook that it was declaring “the ending of the blockades in the entire Libyan fields and ports as of today”.

“Instructions have been given to the operator, Mellitah Oil & Gas BV, to resume production in Al-Feel oilfield and the gradual return of Mellitah crude to its normal level in the next few days,” it added.

Force majeure refers to external unforeseen elements that prevent a party from fulfilling a contract.

AFP

5.10am: Stocks stumble on virus surge

Stocks fell with traders increasingly pessimistic that US lawmakers will pass a new stimulus package before next week’s election, while spiking virus cases fanned worries about the economic impact of new containment measures.

Despite months of arduous talks, there appears to be little chance Republicans and Democrats will hammer out a rescue deal to help cash-strapped Americans, with both sides blaming each other for the impasse.

Analysts said investors had essentially given up hope of an agreement and were now betting on Joe Biden and a Democratic sweep of Congress that would open the way for an even bigger spending package in the new year.

Adding to the negative sentiment is a surge of coronavirus cases across the United States and Europe, with the World Health Organization on Sunday reporting a third straight day of record new infections globally.

“Rising Covid cases, no US stimulus and an election next week isn’t exactly the recipe for a strong week for equity markets,” said Craig Erlam, senior market analyst at Oanda trading group.

In Europe, Frankfurt’s DAX 30 tumbled 3.7 per cent, weighed down by a 22-percent drop in the share price of SAP.

The German software giant on Sunday downgraded its outlook for 2020, saying a resurgence in coronavirus cases would weigh on demand from “hard hit” customers.

London ended the day 1.2 per cent lower and Paris fell 1.9 per cent. Oil prices slumped around 3 per cent.

“The oil market is sensitive to the perceptions about global demand, and the sharp rise in COVID-19 cases in Europe and the US has spooked traders” as further lockdowns will reduce consumption, said analyst David Madden at CMC Markets UK.

AFP

5.05am: US new home sales slow

The torrid pace of US new home sales slowed in September much more than expected, but remains 32.1 per cent above the rate seen in 2019, according to government data.

The housing market has been a bright spot in the pandemic-ravaged US economy with buyers enticed by record low borrowing rates, but a shortage of supply has sent prices steadily higher.

New home sales dipped 3.5 per cent compared to August with just 959,000 units sold, seasonally adjusted. That was well below the consensus forecast among economists, who had projected well over a million, the Commerce Department reported.

Sales in August were revised lower to 994,000 from just over a million originally reported. However, the data are volatile and subject to changes month to month.

AFP

5.00am: Dunkin’ Brands in talks to go private

Shares of Dunkin rocketed higher after the US donut giant confirmed it was in talks on a deal to be acquired by Inspire Brands and go private.

The transaction being discussed would value Dunkin, which also owns ice cream chain Baskin-Robbins, at $US8.8 billion, according to the New York Times.

A Dunkin Brands statement confirmed “preliminary discussions” with Inspire on a transaction, but did not offer details.

“There is no certainty that any agreement will be reached,” Dunkin said. “The company will not comment further unless and until a transaction is agreed or discussion are terminated.” Founded in the Northeastern state of Massachusetts, Dunkin and Baskin-Robbins have more than 21,000 points of distribution in 60 countries worldwide. The company went public in 2011.

Inspire Brands, which is financed by American private equity firm Roark Capital Group, already manages several food chains, including Arby’s, Buffalo Wild Wings and Jimmy Johns.

Shares of Dunkin were up 15.3 per cent at $US102.36 in early trading.

A Dunkin' storefront in New York. Picture: AFP

AFP

4.55am: Stimulus talks ‘slow but continue’

US policymakers continue to hold talks on a new spending package to aid the virus-hit economy, but the negotiations have lost momentum amid division, a White House adviser said.

“The talks have certainly slowed down, but they’re not ending,” economic adviser Larry Kudlow said on CNBC.

After months of negotiations between Treasury Secretary Steven Mnuchin and Democratic House Speaker Nancy Pelosi, time has nearly run out to get stimulus approved before the November 3 election.

Whether it can be approved in the “lame duck” session before the new Congress is seated in January is unclear.

“We’re close, but there are still important policy issues that separate us and our team believes there have to be more compromises on the House side for us to get there,” Kudlow said.

He continues to tout a solid economic recovery from the damage inflicted by the coronavirus pandemic and widespread business shutdowns, which he said will be “self-sustaining” even without a new stimulus package.

AFP

4.50am: China’s Ant Group to raise $US34bn

Ant Group, the financial arm of Chinese e-commerce titan Alibaba, said it plans to raise $US34 billion in a joint Asian listing, making it the biggest IPO in history.

The cash raised from the split float between Hong Kong and Shanghai would be far more than the $US29 billion chalked up by Saudi Aramco in December.

Ant Group company runs Alipay, the dominant online payment system in China, where cash, cheques and credit cards have long been eclipsed by e-payment devices and apps.

According to statements released by Ant Group, the e-payments behemoth aims to sell 1.67 billion shares each at $HK$80 ($US10.30) in Hong Kong from Tuesday.

A further 1.67 billion shares will be sold in Shanghai at 68.80 yuan ($US10.30).

The total sale would therefore exceed $US34bn and could be close to $US40bn if over-allotment options are taken up.

The securities will begin trading on November 5.

AFP

4.45am: Lufthansa says 30,000 jobs at risk

Germany’s Lufthansa has warned that 30,000 jobs are under threat as it scaled down its winter schedule to levels not seen since the 1970s as demand for travel collapses because of the coronavirus pandemic.

The executive board of Europe’s largest airline said in a letter to employees that it was now “harder than ever” to predict how the aviation industry will develop, given there is little clarity over how long travel warnings would be applied or how quickly any recovery could come.

The use of video conferences may have also changed attitudes to travel against the backdrop of environmental prerogatives, while pressures on income could also weigh on tourism, the board wrote in the letter seen by AFP.

“No one can reliably predict these effects. We are determined nevertheless to preserve at least 100,000 of the Lufthansa Group’s 130,000 current jobs. Even if we do not currently have nearly enough jobs for a workforce of this size,” it added.

Lufthansa in September said more jobs would go beyond the 22,000 previously announced but did not give a clear figure then.

The German state in June stepped in to take a 25 per cent stake in the airline, pumping nine billion euros of liquidity to prop up one of the nation’s most internationally visible companies.

The carrier -- including its subsidiaries Swiss, Austrian, Brussels Airlines and Eurowings -- said it would ground 125 more planes than planned in the winter, offering a maximum of a quarter of 2019’s capacity as it anticipates “less than a fifth” of the previous year’s passengers.