WiseTech, CSL rocket ASX to six-month high
The ASX jumped 0.7pc to its best level since March, as CSL jumped 6.4pc and WiseTech added more than $2bn to its market value.
- Dividends drive positive market momentum
- Pandemic boosts Domino’s sales by 20pc
- CSL profit, payout rises
- A2 Milk shrugs off China wine probe
That’s all from the Trading Day blog for Wednesday, August 19. The ASX jumped 0.7pc to a six-month high as earnings from 29 of the top 200 companies dictated market moves. CSL led the rally with a 6pc lift as Tabcorp, Domino’s and Crown, released earnings and ANZ posted higher third-quarter profit and maintained its interim dividend.
The moves came after Wall Street’s S&P 500 hit a new record to extend a stunning turnaround from sharp falls earlier in the year.
Perry Williams 8.23pm: Origin shelves project expansion
Origin Energy has shelved a proposed expansion of its Shoalhaven-pumped hydro project in NSW with the investment failing to stack up partly due to the impact of the giant government-owned Snowy 2.0 on the electricity market.
Australia’s largest power retailer, which will report its annual results on Thursday, has been studying a potential expansion of Shoalhaven in the state’s Kangaroo Valley to boost national electricity market reliability, and company profitability, as east coast solar and wind power capacity increases this decade.
However, a feasibility study part funded by the government’s Australian Renewable Energy Agency found the project was “not commercially feasible” due to commercial risks including higher costs than originally forecast and a hit to revenue from pumped hydro facilities due to Snowy 2.0 and the growing use of batteries.
Bridget Carter 7.25pm: Will Boral tap the market?
DataRoom | Plenty of eyes will be on Boral next week when it is due to report its results, with some suspecting it could be one of the next major companies to tap the market.
The country’s largest building materials provider has a $4.61bn market value and $2.322bn of net debt as at December.
Its name is the one that is coming up most in conversations when it comes to equity raisings.
James Kirby 6.54pm: Buffett boosts Aussie gold miners
In a market where blue chip companies with the “least worst” results are regarded as winners, investors are switching attention to action among gold mining companies where a convincing rally has just been crowned by the arrival of the world’s greatest living investor, Warren Buffett.
Buffett’s Berkshire Hathaway this week broke its own rules and bought directly into US-listed Barrick Gold, a leading miner that once co-owned the famous “super pit” at Kalgoorlie Western Australia.
In common with Buffett, Australian fund managers have also been sceptical about gold miners, no doubt due to the humiliations of the past when gold stocks that were ostensibly attractive somehow managed to get it all wrong.
Anyone who has been through the wars with Newcrest Mining or St Barbara or many others will understand the caution.
More recently though, the miners have new friends. Just as Buffett’s arrival at the Barrick Gold register heralds a new attitude to the yellow metal, fund managers from WAM leaders to Fidelity International are updating their views.
No wonder. The gold price is already up by about 30 per cent this year, and in fact, it has been rising faster than NASDAQ.
Lachlan Moffet Gray 5.13pm: Coronado raise makes it more attractive: CS
DataRoom | Credit Suisse analysts have praised coal miner Coronado Global Resources’ $250m equity raising, saying it improves the company’s balance sheet and lifts the free float of the stock, increasing its attractiveness for investors.
On Tuesday Dataroom reported that Coronado will raise $250m via an institutional placement and entitlement at 60c per chess depositary interest in order to pay down debt.
Coronado will secure $145m through the placement and $105m through a non-renounceable entitlement offer, where shareholders will secure two new chess depositary interests for every 11 held.
The price of 60c per chess depositary interest was a 27.3 per cent discount to the last closing price of 82.5c. It closed on Wednesday at 68c.
In an research note, Credit Suisse analysts said that although the raising was being conducted at the bottom of the coal price cycle, it was a positive as it removed immediate balance sheet risk.
The raising also increased the free float of Coronado shares to 44 per cent from 20 per cent, making the stock more attractive for investors - but Energy and Minerals Group, who own almost 80 per cent of the stock, will not take part in the raise.
Read more: Coronado raising $250m
5.08pm: Webjet falls to $42m loss
Travel booking site Webjet says it collapsed to a $42.3m loss in the wake of the coronavirus crisis, as earnings fell deep into the red in the second half.
Reporting after the close, Webjet said annual net profit after tax was down 168 per cent to a loss of $43.2m, even after a record first half.
It said earnings for the full year were down 80 per cent to $26.4m, and total transaction value down 21 per cent to $3.02bn.
“We materially reduced our costs and fortified our balance sheet. We are starting FY21 with a strong capital position offering significant financial and strategic flexibility,” said managing director John Guscic.
“On a pro forma basis, we have $320 million in available cash, $420 million in total liquidity and more than two years to refinance the Company’s remaining term debt, leaving us well-equipped to survive an extended period of traveller uncertainty.”
Perry Williams 5.05pm: Iberdrola extends offer deadline... again
Spanish renewables giant Iberdrola has again extended a deadline for its $893m takeover of Infigen Energy as it seeks to hoover up the remaining stock it doesn’t own.
Iberdrola, which owns 68.54 per cent of Infigen, said shareholders will now have until August 26 with the previous deadline of 7pm Thursday deferred by a week.
Rival bidder, the Philippines controlled UAC Energy, owns a 20 per cent stake.
Iberdola said on August 6 it can now nominate a majority of directors to Infigen’s board subject to two independent directors remaining until it acquires all the shares.
Infigen has warned it expects profits to fall in the 2021 financial year and has suspended shareholder distributions indefinitely as sharply lower electricity prices and a fall in demand from Covid-19 eased volatility in the national electricity market.
Read more: Infigen tips profit drop as demand falls
5.02pm: WiseTech leads winners as Treasury falls
CSL’s more than 6pc jump may have accounted for three-quarters of the market’s rally, but it was WiseTech that clocked the biggest gain in Wednesday’s session.
The stock soared by 33.9 per cent to $27.87 as it beat forecasts with a 17pc lift in earnings and dividend of 1.6c.
Pizza chain Domino’s cheered an increase in online sales during the pandemic, helping shares to hit a new record of $85.20 intraday before settling to gains of 8.9 per cent at $83.70.
Milk formula maker A2 reported strong Chinese demand and shrugged off any flow through from China’s anti-dumping probe intoAustralian wine. The stock still slipped by 6.4 per cent to $18.25.
Treasury Wine meanwhile added a further 8.5 per cent to its heavy losses on Tuesday, with shares closing at $9.68 as the PM defended the Australian wine industry, saying there was no basis to China’s claims of dumping.
Corporate Travel rose by 10.6 per cent to $13.43 on better than expected earnings, even as it posted a statutory net loss of $10.6m.
Here’s the biggest movers at the close:
Lachlan Moffet Gray 4.57pm: Plenti increases IPO to $55m
DataRoom | Online peer-to-peer lender Plenti Group has increased the size of its initial public offering by $5m to $55m.
Joint lead managers Bell Potter and Wilsons Corporate Finance will be advising on the listing of the company, which was previously known as RateSetter Australia.
The company will be priced at $1.66 per share, giving Penti a market capitalisation of $280.3m.
Trading is expected to begin on September 23 on a normal settlement basis.
Plenti offers secured and unsecured loans between $2001 and $45,000 in value, with rates that are personalised to every borrower based on their credit history.
The loans are primarily funded by individuals lending their money to the platform’s borrowers, with Plenti offering rates of return between 2.8 and 6.4 per cent before fees.
4.13pm: ASX surges to 6-month high
Corporate earnings were the catalyst for a breakout rally on the ASX on Wednesday, as strength in heavyweights CSL and ANZ lifted the index to a six-month high.
The benchmark added as much as 1.2per cent through the session to hit 6196.6, and finished up by 44 points or 0.72 per cent to 6167.6, its best closing level since March 6.
Still, the market is 14 per cent off its record highs of 7162.5 hit in February.
On the All Ords shares added 45 points or 0.72 per cent to 6314.1
Bridget Carter 4.08pm: Dusk makes first steps toward IPO
DataRoom | The Brett Blundy-backed retailer Dusk is planning to launch a process after reporting season to secure cornerstone investors for its initial public offering.
It comes after DataRoom revealed in February that the company had plans to head to the boards through Canaccord Genuity and Shaw and Partners.
Dusk has about 100 stores nationally and its market value is expected to be about $100m when listed.
The company was originally part of the homewares business Adairs, which is already listed, but was spun out as a separate retailer.
It is owned by Brett Blundy and the private equity firm Catalyst, with the business in a fund nearing the end of its life.
Dusk generates about $10m a year in annual earnings before interest, tax, depreciation and amortisation and its revenue is about $86m.
The company describes itself as Australia’s premium retailer of candles.
Eli Greenblat 3.02pm: Treasury Wines in 22pc two-day drop
Shares in Treasury Wine Estates are down by 9pc in afternoon trade, taking its two-day drop to more than 22pc, after China announced it would investigate anti-dumping allegations against the Australian wine industry.
The second day of large share price falls has seen more than $1.8bn stripped from the value of Treasury Wine Estates shares.
Shares touched lows of $9.57 in morning trade and last were down 8.6pc to $9.67.
The Chinese government said it would begin an investigation of Australian wine imported into the country on concerns it was being dumped at uneconomic prices.
Read more: Should WTO address anti-dumping measures?
Perry Williams 2.45pm: Chile LNG shipment suggests Asian glut
Australia has exported its first LNG to Chile after a 24-day voyage of 13,500 nautical miles from Queensland with the shipment underlining the supply glut in Asia, consultancy EnergyQuest said.
Shell shipped a gas cargo from its QCLNG project in Queensland to Quintero in Chile, which normally relies on the Atlantic Basin for its LNG imports.
“Quintero mostly imports LNG cargoes from the Atlantic Basin. In 2019, it imported cargoes from the US, Trinidad Tobago and Equatorial Guinea so a cargo from Australia is unusual and shows the degree of oversupply in Asia,” EnergyQuest chief executive Graeme Bethune said.
Asian spot LNG prices have recovered from COVID-lows to trade around $US3.70 per million British thermal units, encouraging utilities to buy gas on the spot market rather than more costly contract deals.
Read more: LNG producers write off $20bn
2.09pm: Resolute dives after Mali coup
Gold miner Resolute is taking a hit in Wednesday’s trade as the government in its key mining territory of Mali faces a military coup.
Mali president Ibrahim Boubacar Keita stepped down this morning after being detained by mutinous troops, prompting the dissolution of the government.
In a brief statement to the market, Resolute said it was closely monitoring developments following actions by the military to resolve the political crisis.
“Operations at the Company’s Syama Gold Mine, located in the south of Mali on the border with Côte d’Ivoire, are continuing as normal with no impact to production or the safety and security of employees and contractors,” it said.
“Resolute has operated Syama since 2003 under the well-established mining laws of Mali.”
RSG last traded down 18.2pc to $1.10.
Eli Greenblat 1.58pm: Woolies buys into PFD for $302m
Woolworths will deepen its reach into people’s pantries, offices and social venues with a decision to buy an initial 65 per cent stake in the privately owned food service company PFD Food Service for $302m.
In a deal unveiled on Wednesday, Woolworths will also acquire 100 per cent of PFD’s freehold properties which primarily comprise 26 distribution centres. PFD is owned by the Rich List Smith family and is one of the largest food service providers in Australia.
In a highly fragmented market PFD Food Service is the number 2 player with around 11 per cent.
It is a new space for Woolworths although the supermarket group worked with the company to deliver food during the peak of the COVID-19 crisis in March and in particular serving other food businesses.
Woolworths chief executive Brad Banducci said the supermarket group was excited by the opportunity to invest alongside the Smith family in PFD Food Services.
WOW last traded up 1.1pc to $40.65.
Read more: Woolies pays $302m for a slice of PFD
1.37pm: Retail seafood demand lifts Tassal profit
Seafood producer Tassal says its adapted to the COVID-19 crisis by offering more of its salmon and prawn products through retail lines as consumers increasingly eat at home.
Handing down its full year results this afternoon, Tassal said its sales volume grew 13.4pc in the fourth quarter, with particular strength in retail sales, helping the group to net statutory profit of $69.1m for the year, up 18.3pc.
Earnings were up 23pc to $138.6m and the group delivered a flat dividend of 9cps, taking the total dividend for the year to 18c.
“While COVID-19 has impacted the operating environment and created much uncertainty, some positive consumer trends have emerged that should gain momentum in FY21 and support further growth in Tassal’s salmon and prawn sales volumes,” chief Mark Ryan said.
Tassal said it was focused on growing the prevalence of the Tassal salmon brand, and reducing its cost per kilo through improvements in its farming operations, while its goal of 20,000 tonne annual prawn production was progressing thanks to infrastructure improvements.
TGR shares are trading up 5.7pc to $3.88.
Bridget Carter 1.29pm: First bidders for NW Shelf emerge
DataRoom | The Canadian Pension Plan Investment Board and Global Infrastructure Partners have emerged as parties that are believed to be preparing to lob a first round bid for Chevron’s $5.8bn stake in the North West Shelf project.
Also believed to be in the mix for Australia’s largest producing oil and gas project is Australia’s IFM Investors.
The CPPIB has $C409.6bn worth of assets under management and the US-based GIP controls investments worth about $US48bn, while IFM has $156.1bn of funds under its control and
all three groups are well known investors in Australian infrastructure.
Parties are preparing to lob indicative bids for the 16.67 per cent stake in the energy producing operation, 135km northwest of Karratha in Western Australia, next month.
On offer is a stake in a project that involves the extraction of petroleum at offshore production platforms, onshore processing and export of liquefied natural gas and production of natural gas for industrial, commercial and domestic use within the state.
1.16pm: Lockdown eroding Crown’s credit rating
Protracted shutdowns are beginning to erode Crown Resort’s substantial rating headroom, according to ratings agency S&P.
In a note following Crown’s full year results release, S&P notes that the economic recession, magnified by the Stage Four lockdown in Victoria, could “complicate the company’s ability to return its adjusted debt-to-earnings ratio below 2.5x in 2022”.
S&P notes the company’s decision to suspend its dividend, saying it supports the view that it will take all reasonable actions to protect its solid investment-grade rating – currently at BBB Negative.
While Crown’s Melbourne casino has been shut since March 23, its Perth site is back up and running, showing early signs of recovery on its gaming floors, S&P says.
“There remains some uncertainty regarding the timing and quantum of apartment settlements at Crown Sydney, which is due to open progressively from December 2020.
“We anticipate settlement proceeds of between $300m and $650m for fiscal 2021. We will monitor progress against the backdrop of international and domestic travel restrictions and our expectation of recessionary economic conditions.
“The negative outlook reflects an elevated risk that Crown’s adjusted debt-to-EBITDA ratio could remain materially above 2.5x in 2022, should earnings remain below our base-case operating scenario or apartment sales fall materially short of our expectations.”
CWN last trade dup 2.2pc to $9.70.
Read more: Crown scraps dividend after profit plunge
1.02pm: Shares hold 0.8pc gain
The local market is holding higher by 0.8 per cent at half time, as outperformance in CSL and WiseTech drives positivity.
Sentiment is largely risk on after Wall Street strode to records overnight, but mostly thanks to the barrage of results handed down this morning.
The ASX200 is up by 48 points or 0.79 per cent to 6171.7.
CSL is higher by 7.2pc to $314.46, ANZ lifting by 3.2pc to $18.65 while the rest of the major banks add between 0.5pc and 1.3pc.
Here’s the biggest movers at 1pm:
12.27pm: Vocus flag small business uncertainty
Telco Vocus is one of only a few companies to set out guidance for the year ahead as it posted a 4pc slip in underlying net profit and wrote down its retail business segment.
The company, which was the subject of two takeover offers last year, this morning posted underlying net profit after tax of $101.1m, while underlying earnings slipped 7.6pc to $189.6m.
Vocus said the pandemic had reinforced the essential nature of the telco industry, with resilient revenue and cash collections, but that it would take a $202m writedown of its retail business unit amid uncertainty for small and medium businesses.
It set out guidance of underlying earnings between $382m to $397m, with capex between $160m and $180m while it reduced its net leverage ratio.
Vocus said its network services arm was its “core growth engine” and was well-positioned to capitalise on the demand for bandwidth and diversity during the pandemic after posting record sales in the fourth quarter.
VOC last traded up 9.4pc to $3.21.
12.13pm: ASX lifts 1pc to test key chart pattern
Australia’s S&P/ASX 200 share index rose 59 points or 1pc to a 10-week high of 6182.7 in early afternoon trading, breaching its 200-day moving average – now at 6162 – for the second time this month.
It hasn’t closed above its 200-DMA since February.
Strength comes amid strong gains for many companies that have reported today.
CSL is up an amazing 7.8pc and ANZ is up 3.2pc, together accounting for 47 points of the rise. A 29c rise in WiseTech accounts for another 4 points of the gain in the index.
Other standouts include Corporate Travel up 10pc, Vocus up 9pc, Domino’s Pizza up 7.5pc, Bapcor up 6.9pc, NRW Holdings up 5.7pc, OZ Minerals up 3.5pc, Carsales.com up 3.4pc, Megaport up 3.3pc. Webjet up 5pc and Flight Centre have jumped 4pc.
11.58am: Reject Shop boast return to profit
Discount chain The Reject Shop has lauded its return to profitability under its new leadership as customers appetite for bargains increases during the pandemic.
The group reported profit of $2.7m for the year, up from a $16.9m loss in FY19, as sales for the year jumped by 3.4pc to $820.6m.
It said it was able to pivot to the supply of essential products such as toiletries and cleaning during the pandemic, while its typically strong products such as luggage and party supplies were much weaker.
Still, the chain said comparable store sales growth for the first seven weeks of FY21 were down 2.4pc on the same time last year, pulled lower by lockdowns in Melbourne. Victorian stores aside, the chain was down just 0.5pc.
“The discount variety sector is currently under-represented in the Australian retail landscape relative to major comparable overseas markets. This imbalance suggests that significant latent opportunity exists for the Australian discount variety sector to achieve material sales growth over the medium to long term,” chief Andre Reich said.
TRS shares last down 9.5pc to $7.03.
11.25am: Domino’s surges to record high
Domino’s Pizza shares surged 7.6pc to a record high of $82.69 – exceeding its 2016 peak of $80.69 – after a solid dividend and stronger-than-expected start to 2020-21.
Same store sales growth of 11pc and 24 store openings in the first seven weeks compares with 2020-21 consensus of 4pc same store sales growth and 167 net store openings, according to Citi’s Craig Woolford.
“While a clear beneficiary of demand as COVID-19 triggered lockdowns, the overall benefit once costs are considered is much smaller,” he says.
“We expect support for the share price near-term given same store sales growth, but clarity about the drivers of same store sales growth will be important.”
Network sales of $3.27bn for 2019-20 was near consensus and a $119.3 cents a share dividend was a 65pc payout was a “signal of confidence in the year ahead.”
Read more: Online boom delivers for Domino’s
11.04am: Dividend payers drive positive momentum
In the busiest day of reporting season so far, 29 of the top 200 companies have handed down their results, with outperformance in those companies paying dividends.
After the first hour, the overwhelming direction is positive, with strong moves from CSL (who lifted its full year dividend by 11pc to $2.95), and ANZ who maintained a dividend, albeit smaller than previous.
Carsales is set to pay a 25c final dividend, Mineral Resources will dish out a 77c interim dividend and InvoCare will pay its 23.5c deferred dividend and a new interim payout of 5.5c.
Here’s the score at 11am, with asterisks denoting those who have delivered payouts:
| COMPANY | % CHANGE | LAST TRADED |
| WiseTech* | 20.14 | $25.00 |
| Corporate Travel | 10.38 | $13.40 |
| NRW Holdings* | 8.25 | $2.10 |
| Domino’s Pizza* | 6.74 | $82.05 |
| Vocus | 6.49 | $3.12 |
| CSL* | 5.57 | $309.63 |
| Bapcor* | 5.16 | $6.73 |
| Carsales.com* | 2.94 | $19.97 |
| OZ Minerals* | 2.34 | $14.43 |
| ANZ | 1.72 | $18.38 |
| ServiceStream | 1.65 | $1.85 |
| InvoCare* | 1.3 | $10.13 |
| Dexus* | 0.71 | $8.47 |
| EML Payments | 0.31 | $3.28 |
| Tabcorp | shares halted | $3.67 |
| Crown | -0.42 | $9.45 |
| Mineral Resources* | -1.49 | $28.40 |
| Vicinity Centres | -2.23 | $1.32 |
| Fletcher Building | -2.88 | $3.04 |
| A2 Milk | -5.9 | $18.34 |
| McMillan Shakespeare | -6.11 | $8.76 |
| Nearmap | -7.84 | $2.47 |
10.43am: McMillan Shakespeare profit wiped out
Car leasing group McMillan Shakespeare has reporting a 98 per cent profit plunge for the full year, as it described the impact from COVID-19 as “sharp and severe”.
The group posted net profit after tax of just $1.3m, down from $63.7m last year and held off any final dividend, but said it planned to resume dividends in FY21.
The group said it had retained 100pc of its workforce during COVID, aided by the JobKeeper scheme, and many had resumed work as business improved.
Looking ahead, MMS said it was redesigning its future ways of working, with focus on a rapid digital transformation and remote and flexible working arrangements.
It added that there was some early encouraging signs for the first quarter.
The group had a net cash position of $66.7m at 30 June 2020 excluding fleet funded debt.
MMS shares last down 7pc to $8.68.
10.33am: Nearmap shares hit as loss blows out
Aerial mapping group Nearmap has grown its annualised contract revenue by 18 per cent for the full year, as it says its significant investments through the year have set it up for a global market opportunity.
Handing down its full year results this morning, Nearmap said its statutory loss had more than doubled to $36.7m following a period of investment across all areas of the business, but annualised contract value was now at $106.4m.
COVID-19 disruptions increased the group’s churn rate to 9.9pc, but overall statutory revenue was up by 25pc to $96.7m.
Chief Rob Newman said the group had strengthened its “unique value proposition” during the pandemic, especially with the launch of its “transformative” AI functionalities.
“The resilience of our business model and the value customers derived from our content as they adapted their business models to remote working has never been stronger,” he said.
NEA last traded down 10.5pc to $2.40.
10.28am: ASX extends gains to 0.3pc
Australia’s share market is extending early gains to 0.3pc at 6140 after initially struggling amid falls in most sectors.
Early weakness may have been due to a large transition portfolio in value stocks in the past three trading days. This capitulation in value stocks may have given some buying opportunities.
Moreover, results from a majority of companies that have reported today have positive share price reactions.
Among heavyweights, CSL rose another 4pc after handing down its results, noting that it expected a COVID-19 vaccine in the “near future” while ANZ is up 2pc after paying a dividend.
Elsewhere, WiseTech and Corporate Travel have seen double-digit percentage gains after their results, while Domino’s Pizza and NRW Holdings are up about 7pc.
Treasury Wine dived 6pc after Macquarie downgraded the stock to Neutral on China’s anti-dumping probe of Australian wine.
McMillan Shakespeare is down 9pc, Nearmap is down 6pc and A2 Milk is down 4.2pc after their results.
Ben Wilmot 10.25am: Lockdowns crimp Vicinity profit
Shopping centre giant Vicinity Centres has fallen to a $1.8bn loss on the back of falling mall values with the impact of the latest lockdowns to hit in future.
Vicinity said its second half had been materially impacted by COVID-19 and said the current lockdown in Victoria was affecting about half its assets.
Vicinity has flagged longer term plans to convert some centres into mixed use developments but has pushed back immediate centre overhauls.
While the company has not given guidance and said it had agreed lease deals with a majority of tenants in the wake of the coronavirus pandemic.
Vicinity said it was not resetting lease parameters for most tenants despite attempts by some larger chains to switch to percentage-based deals.
Lisa Allen 10.22am: Corporate Travel showing signs of recovery
Corporate Travel Management said it fared better than most of its competitor travel companies during COVID-19 reporting that its European, Australian and New Zealand operations broke even in July.
Reporting its full year results this morning, the globally diversified travel company said throughout the pandemic its main business has been corporate charters, car hire and government work with the bulk of global business, some 80 per cent, transacting in Europe, the UK and North America.
Corporate Travel Management reported an underlying Net profit of $32m, but taking into account COVID related costs the company posted a statutory net loss of $10.6m down 112 per cent on the previous corresponding period. It did not declare a dividend for the full year.
Globally, total transaction values declined 29 per cent but CTM managing director Jamie Pherous said industry consolidation is likely in the present environment and said the company remains open to considering potential acquisitions.
Mr Pherous said that despite more than 1000 staff redundancies costing $15.1m in redundancy payments the company said it had retained 97 per cent of its corporate travel clients since the start of the pandemic.
The company reported zero debt and has an undrawn facility of $180m. It will focus more on domestic travel, meaning intra country travel, for the rest of the year.
CTD last traded up 8.7pc to $13.20.
10.16am: Shares cling to 0.1pc gain
Shares are holding on to a 0.1 per cent gain at the open thanks to strength in heavyweights CSL and ANZ.
The benchmark ASX200 is up just 6 points or 0.1pc to 6129.3, defying expectations of an opening slip.
Strong results from CSL have prompted the health group to jump by 3.1pc, while ANZ lifts 1.8pc after maintaining an interim dividend.
Perry Williams 10.08am: Pact reinstates payouts amid earnings boost
Pact Group, the packaging company controlled by Melbourne billionaire Raphael Geminder, has reinstated its dividend — with COVID-19 panic buying offsetting weakness in the fashion retail sector — as the manufacturer rebooted plans to sell its contract manufacturing business.
Pact, the nation’s largest manufacturer of rigid plastic packaging, delivered a 1.3 per cent rise in full-year 2020 earnings before interest, tax, depreciation and amortisation of $233m, up slightly from last year’s $231m, and meeting guidance issued in February for its performance to be on par with 2019.
Its underlying net profit increased 4.5 per cent to $80.8m, from $77.3m, while earnings at its packaging unit fell 10.9 per cent to $137.8m. But it recorded gains in its materials handling and contract manufacturing divisions.
Dividend payouts will be resumed after a two-year hiatus, with a final return of 3c per share.
The sale of its contract manufacturing business, which had been put on ice due to COVID-19, will also be restarted.
Nick Evans 10.05am: MinRes posts record profit
Chris Ellison’s Mineral Resources will pay a 77c per share final dividend, after booking a record $1bn net profit on the back of strong iron ore prices and the sale of a lithium project.
The 77c final dividend takes MinRes’ total shareholder payout for the financial year to $1 a share, with the company saying its underlying mining and services businesses also performed well through the year despite the challenges posed by the coronavirus.
It more than doubled annual payouts from the prior year’s 13c interim and 31c final dividends.
The statutory result was driven by the company’s exquisitely timed sale of the Wodgina lithium project in the Pilbara to Albemarle — for $US820m in cash and 40 per cent share of an under-construction lithium hydroxide plant in WA — which delivered a $1.3bn boost to MinRes’ bottom line as the floor fell out from the market for the battery making material.
Including the transaction, MinRes booked earnings before interest, tax, depreciation and amortisation of $2bn, and a statutoryprofit of $1bn.
Damon Kitney 10.01am: Crown profit plunges 80pc
The James Packer-backed Crown Resorts has scrapped its final dividend and secured a wavier of its banking covenants after its net profit plunged 80 per cent to $79.5m following the closure of its casinos in Melbourne and Perth.
VIP program play turnover fell 46.5 per cent in the half to $20.4bn, while Crown incurred closure costs of $81.6m, which included costs incurred during the mandated closure of Crown’s properties and investments, and significant items of $78.7m, relating to the impairment of its Crown Aspinalls and Nobu restaurant chain investments.
Crown’s dividend policy is to pay 60 cents per share on a full year basis but the company said on Wednesday that having regard to the impact on its businesses from the mandatory closures flowing from the COVID-19 pandemic and the uncertainty surrounding the resumption of trading at Crown Melbourne, the Board had determined not to declare a final dividend.
Crown also said future dividends will be subject to the Board’s assessment of Crown’s financial position at the appropriate time.
The latest move comes after the company surprised many earlier this year when it declared its interim dividend despite being hit hard by the pandemic.
Given the uncertainty surrounding the ongoing closure of Crown Melbourne, Crown also revealed on Wednesday that it had secured agreement from its lenders for a waiver of banking covenants in relation to the 31 December 2020 testing date. No waiver was required for the 30 June 2020 testing date.
At 30 June 2020, the company’s total liquidity was $639.8 million, represented by $238.5 million in available cash and $401.3 million in committed undrawn facilities.
9.48am: Treasury a pawn in a larger game: Macq
Macquarie’s Ross Curran has cut Treasury Wine to Neutral from Buy and slashed his price target by 29pc to $10.60 on geopolitical risk from China’s anti-dumping probe on Australian wine.
“We see Treasury Wine as a pawn in a larger game, but its key Asian division may be an unwitting casualty as tension escalates,” Mr Curran says.
“Following this material additional layer of risk clouding the outlook for Asia, we cannot justify the risk/reward profile and so we downgrade to Neutral.
“We still view China as a valuable long-term opportunity, but the relationship between Australia and China is currently erratic and the short-term outlook for the Asia business is now uncertain … risks are to the downside if imports are restricted or inventory spoils.”
TWE shares fell 14pc to $10.58 on Tuesday.
Read more: China wine move widens risk across ASX
9.41am: Broker rating changes
- Altium raised to Hold – Ord Minnett
- ARB Corp price target raised 23pc to $23.45 – Citi
- Beach Energy price target raised 10pc to $1.94 – Citi
- BHP cut to Neutral – Goldman
- BWP Trust cut to Sell – Morningstar
- Cochlear cut to Sell; price target cut 9.4pc to $184 – Citi
- Cochlear price target raised 9pc to $175 – UBS
- Coles cut to Neutral – JP Morgan
- GUD Holdings cut to Sell – Morningstar
- Monadelphous price target cut 12pc to $12.63 – Citi
- Monadelphous raised to Outperform – Macquarie
- Monadelphous raised to Neutral – JP Morgan
- Monadelphous cut to Hold – Morningstar
- Netwealth raised to Neutral – Credit Suisse
- Saracen Minerals raised to Buy – UBS
- SG Fleet raised to Outperform – Macquarie
- Sims Metal Management cut to Underperform – Jefferies
- Sims Metal Management raised to Outperform – Macquarie
- Treasury Wine cut to Neutral – Macquarie
Ben Wilmot 9.34am: Office property plunge hits Dexus
Office property giant Dexus has been hit by falling office property values as its profits fell 23.3 per cent to $983m but it says its towers are full and it kept underlying earnings in line with 2019.
The company generated a distribution of 50.3 cents per security for fiscal 2020 and said it intended to deliver a distribution in line with free cash flow this financial year but it said that taking into account continued uncertainty it was not providing distribution per security guidance.
The dip in net profit came as the company was hit by industry-wide falls in office values but it said rent collections for the Dexus portfolio were strong at 98 per cent for fiscal 2020.
The company’s gearing remains conservative at 24.3 per cent and it has $1.6bn of cash and undrawn debt facilities. There is high occupancy of 96.5 per cent for the office portfolio and 95.6 per cent for the industrial portfolio.
The company is taking offers on some major office assets and has received bids at book value giving it confidence in the office market and it called out its $10.6bn development pipeline.
9.31am: Barrage of results to steer ASX
Results from 29 of the S&P/ASX 200 companies plus ANZ’s trading update are in focus after mixed leads from offshore markets left overnight futures pointing to an opening fall of 0.3pc to 6105 points for the index.
But offshore developments were encouraging as the S&P 500 and Nasdaq hit record highs, spot iron ore surged 4.7pc to a 6.5-year high of $US127.60 a tonne, LME copper rose 1.9pc to $US6568 a tonne and spot gold rose 0.9pc to $US2002 per ounce.
Stronger-than-expected housing starts helped the US share market, as did Nancy Pelosi’s indication that Democrats might lower their stimulus proposal to reach a deal with Republicans on the next round of coronavirus support.
Earnings season will be 45pc complete by number and 64 per cent by market capitalisation today as heavyweights including CSL and Brambles report.
ANZ’s decision to pay a dividend, albeit at just 31pc of the normal rate, will go some way to shoring up sentiment in the banking sector after Bendigo and Westpac scrapped dividends earlier this week.
CSL’s results met expectations and it confirmed last night it is in talks with AstraZeneca and the government to assess whether it could provide manufacturing support for a COVID-19 vaccine if successful.
CBA and ResMed will trade ex-dividend today. Focus turns to FOMC minutes early Thursday, with economists tipping a dovish leaning.
David Swan 9.29am: WiseTech beats forecasts with 17pc earnings lift
Logistics software maker WiseTech has weathered COVID-19, with its full-year revenue up 23 per cent and EBITDA up 17 per cent, in line with guidance and ahead of analyst consensus.
Chief Richard White said the company was buoyed by strong performance from its CargoWise platform, which posted revenue of $263m, up 20 per cent, with a number of new clients recently signing up.
WiseTech, which is a member of the so-called ‘WAAAX’ tech stocks along with Altium, Appen, Afterpay and Xero, posted total revenue of $429.4m for the financial year, with EBITDA up to $126.7m and underlying statutory profit flat at $52.6m.
The company has slashed its dividend by 18 per cent however, from 1.95c to 1.6c per share, while underlying earnings per share was down 4 per cent to 16.4 cents per share, from 17.2 cents per share a year earlier.
“Notwithstanding the unprecedented challenges of COVID-19, our business has remained resilient, delivering solid revenue and EBITDA growth in FY20, in line with our guidance,” Mr White, who owns about 46.9 of the company, said in a statement.
“COVID-19 market disruptions have provided a long-term tailwind for growing our market share as the need for digitisation across the global logistics execution market accelerates and significantly increases the value and demand for CargoWise.”
Shares in WiseTech were in initially smashed at the beginning of the pandemic, falling as low as $9.97 per share in March, but the company bounced back and now sits at $20.81.
Short-seller J Capital Research savaged its core software, CargoWiseOne, in reports that claimed WiseTech had been making acquisitions to inflate its growth, claims the company denies.
John Stensholt 9.27am: Tabcorp posts $870m loss
Battered by COVID-19, wagering giant Tabcorp today announced a $600m pro-rata accelerated renounceable entitlement offer to pay down debt and strengthen its balance sheet.
Tabcorp placed its shares in a trading halt on Wednesday morning and said the offer would be priced at $3.25 per share, an 11.4pc discount to its closing price of $3.67 at the end of trading on Tuesday.
Chief executive David Attenborough said Tabcorp would also revise its capital management targets, including reducing its target gearing range to 2.5-3 times gross debt/EBITDA from 3-3.5 times previously, and a reduction of its target dividend ratio to 70-80pc of net profit after tax when it resumes paying dividends.
Tabcorp previously announced it would not pay a final dividend for the 2020 financial year.
“The continued significant uncertainty regarding the severity and duration of the COVID-19 impact has led Tabcorp to reconsider its previous capital management targets in order to improve its credit metrics and conserve more capital over time,” Mr Attenborough said.
The move came as Tabcorp announced a statutory net loss after tax of $870m after on cash goodwill impairment charges of about $1.09bn, related to the wagering and media and gaming services that have suffered from pub, club and wagering outlet closures during COVID-19.
Revenue fell 4.8pc for the full 2020 financial year to $5.22bn and EBITDA before significant items dropped 11.5pc to $995m, in line with guidance given by the company earlier this month.
Earnings before interest and tax rose 3.8pc for the lotteries business to $442m and Tabcorp said like for like sales of lotteries tickets was up 15-30pc during COVID-19 restrictions.
Jared Lynch 9.23am: A2 shrugs off China wine probe
A2 Milk has posted net profit for the year to June 30 up 34.1 per cent to $NZ385.8m, as total revenue surged 32.8 per cent to $NZ1.73bn.
The boost was largely driven by Chinese parents, who continued their seemingly insatiable demand for the company’s infant formula despite growing trade tensions with Australia.
A2 shrugged off a fresh anti-dumping probe from China into another Australian product, wine. Beijing imposed a punitive 80 per cent tariff on Australian barley earlier this year amid a threat to boycott Australian products after Prime Minister Scott Morrison spearheaded a push for an inquiry into the origins of coronavirus.
But A2 said although it was ASX-listed it was a New Zealand-headquartered company with the bulk of its China bound products produced across the Tasman.
“A vast and significant majority of the A2 Milk Company’s exports come from New Zealand.
While it’s evident there are geopolitical tensions, we remain focused on building our unique brand proposition and developing our mutually respectful trading relationships,” the company said.
Read more: A2 Milk buys Victorian dairy, profit surges
Lachlan Moffet Gray 9.16am: Expansion provides buffer for Bapcor profits
Auto parts and services group Bapcor is set to pay shareholders a full year dividend slightly higher than last year’s, despite net profit taking a 5 per cent hit during “a year unlike any other”.
Bapcor, which owns and operates retail brands like Midas, Autobarn and Burson, saw its revenue increase 12.8 per cent on 2019 to $1.462bn, even as net profit after tax fell 5.5 per cent to $89.1m.
Bapcor CEO and managing director Darryl Abotomey said the impacts of the summer bushfires and COVID-19 contributed to the hit to net profit, although it was offset by record revenue growth through expansion, the company’s Burson trade and retail businesses and the addition of the newly-acquired Truckline automotive parts business.
“The group added 45 new company locations throughout our network which was fabulous work from our team members,” Mr Abotomey said.
“Our business now has over 1000 locations throughout Australia, New Zealand and Thailand.”
The company will pay a final dividend of 9.5 cents a share, bringing the full year dividend to 17.5 cents a share – half a cent higher than the last full-year payout.
Bapcor did not provide official guidance, citing current economic uncertainties.
Samantha Bailey 9.13am: Funeral restrictions weigh on InvoCare
Funeral home operator InvoCare swung to a first-half loss as coronavirus restrictions forced customers to opt for simpler funerals which limited the number of funeral attendees.
The company booked a net after tax loss of $18m for the 6 months through June 30, compared to a net profit after tax of $41.1m the prior year.
InvoCare declared an interim dividend of 5.5 cents per share, down from 17.5c the prior period.
Still, the company said that since funeral attendance restrictions had been lifted, it had seen a return to pre-COVID behaviours from its customers.
“I am proud of how the InvoCare team has responded to the COVID pandemic,” chief executive Martin Earp said.
“They have demonstrated ongoing passion and commitment in meeting the needs of all stakeholders which is reflected in the improvement to our net promoter score during this challenging period.”
Ben Wilmot 9.02am: Unibail may raise more than €3bn: Macq
Shares in Unibail-Rodamco-Westfield, the owner of Westfield shopping centres, have continued to fall in the wake of reports it is considering raising up to €3bn ($4.94bn) rights issue.
The company’s secondary units listed on the ASX were off by 7.67 per cent to $3.37 and have been sliding since the report last week. Unibail has said it had not made a decision on deleveraging options above the current divestment program.
But Macquarie analysts warn that if asset values fall a further 20 per cent, gearing rises to 51 per cent. On their reckoning a €3bn rights issue and €4bn of divestments brings gearing down to 40 per cent.
Macquarie said that execution on asset sales was likely to be difficult, and even if successful gearing would remain elevated. As a result, it predicted a raising could be larger than €3bn as this sum may not be enough to deal with falling mall values.
“Unibail is likely to use a combination of measures to reduce leverage, including asset sales, equity, and a lower payout ratio. The amount of equity required will to be dependent on extent of devaluations and short-term progress on asset sales.
“With continued uncertainty around the balance sheet as well as the earnings and valuation implications of a raise it is difficult to be more positive,” Macquarie said as it kept a neutral rating.
Read more: Mall owner Unibail hit by 27pc plunge in income
David Ross 8.56am: Weak demand weighs on Carsales
A crash in the number of cars being bought during the pandemic caused Carsales.com (CAR) profit to slip by 9 per cent to $120m for the year.
Private sales recorded a 5 per cent fall in revenue as people held onto their cars longer, especially in the second half where revenue fell by 17pc.
Still, there were some positives in the last two months, with a surge of new buyers causing inventory across the site to slip – driven by an increase in first time used car buyers and people adding additional cars to the households.
Declines in the domestic and private media business were large, with revenue down 20 per cent in the second half.
In response to the challenges, the axe was swung across the company, with a 20 per cent cut in board and executive salaries and other costs.
Revenue through the site’s dealer networks grew 10 per cent for the year, but that didn’t stop the company having to tip in $28m in relief measures.
The dividend remains unchanged at 25c per share.
Samantha Bailey 8.53am: Michael Hill closures dent profit
Jewellery chain Michael Hill has delivered a slump in full-year net profit on the back of store closures as a result of the COVID-19 restrictions.
Unveiling a net profit after tax of $3.1m for the 12 months through June, down from $16.5m a year ago, the company said that sales had begun to recover as stores reopened, despite lower foot traffic.
“As we complete what can only be described as an extraordinary year, we have emerged as a stronger, leaner and more professional business,” chief executive Daniel Bracken said.
“The strategic progress we have made across loyalty, digital, retail fundamentals and company culture, have Michael Hill well positioned to navigate both the opportunities, and the potential market disruptions ahead.”
The company received $17.7m in government grants, which included wage subsidies in Australia, New Zealand and Canada.
Michael Hill directors did not declare a final dividend.
Jared Lynch 8.47am: CSL profit, payout rises
Australia’s biggest company CSL is optimistic an effective vaccine and treatment for COVID-19 will be developed “in the near future”, as it steps up its efforts to quash the pandemic.
Chief executive Paul Perreault said no single vaccine or therapy will defeat COVID-19, which is while it has deployed its substantial resources across three main fronts of combating the highly infectious virus.
“We remain optimistic that the extraordinary amount of scientific collaboration happening across industry, academia and government, including many initiatives we are proud to be a part of, will lead to effective treatments and vaccines in the near future,” Mr Perreault said.
His comments come as CSL’s net profit rose 9.6 per cent to $US2.102bn ($2.9bn) in the year to June 30. Meanwhile revenue leapt 7.2 per cent to $US8.797bn, with the company citing “solid growth” in its immunoglobulin portfolio and its Seqirus influenza vaccine business.
“I am pleased to report an exceptional result against a backdrop of complex and unexpected challenges brought about by the COVID-19 pandemic,” Mr Perreault said.
Read more: CSL expects COVID-19 vaccine in ‘near future’
Eli Greenblat 8.44am: Domino’s online sales boost profit
Domino’s Pizza, the nation’s largest pizza operator, has benefited from a boom in its online sales through the COVID-19 pandemic, with sales up 21.4 per cent to $2.36bn for fiscal 2020.
But financial support for franchisees impacted by COVID-19 from France to Australia and New Zealand hit pre-tax earnings, with Domino’s paying a slightly smaller interim dividend.
But for the full year Domino’s lifted its total dividend by 3.3 per cent, helped by a stronger interim dividend.
The popularity of its digital platforms, which now serve 72.1 per cent of total sales, helped the company post a 32.7pc increase in full-year sales to $1.905bn as profit rose 19.4pc to $138.4 million. Network sales for all its stores rose 12.8 per cent to $3.27bn for the year.
The company said that pre-tax earnings rose 3.6 per cent to $228.7m with free cash flow better by 90.7 per cent to $161.9m.
In Japan it achieved a record performance with sales up 25.9 per cent to Y59.2bn and earnings up 29.9 per cent to Y7.5bn. In Europe short term closure of stores in France required more support for franchisees which reduced earnings by 1.5 per cent to 50.6m euros.
At its flagship Australian and New Zealand operations there was reduced earnings, which fell 5.8 per cent to $129.4m as the costs of COVID-19 and financial support for franchisees dented profitability.
Sales for the region grew 4.1 per cent to $1.217bn, with a marked lift towards the end of the second half.
Read more: Online boom delivers for Domino’s
8.28am: Rio cuts copper output guidance
Rio Tinto downgraded its guidance for annual production of refined copper following setbacks at its Kennecott mine in Utah.
Rio Tinto said it now expects to produce between 135,000 and 175,000 tonnes of copper in the 12 months through December, down from an earlier forecast of 165,000-205,000 tonnes.
Rio Tinto said it has experienced delays to the restart of the smelter at the Kennecott operation, citing “unexpected issues that appeared following planned maintenance.”
“We are working closely with our customers to limit any disruptions and expect to have the smelter fully operational in two months,” Rio Tinto said.
Dow Jones Newswires
8.10:am: This is our moment: ANZ CEO
ANZ chief executive Shayne Elliott says while the trading environment is still difficult “this is our moment” for the banking system to step up and show its true worth during tough times.
His comments come as ANZ posts a higher, unaudited third quarter cash profit of $1.5bn compared to a first half quarterly average of $707m.
ANZ will pay an interim dividend of 25c per share after skipping its final dividend in May, albeit the dividend is well down on 80 cents per share paid in recent half years.
In a Q&A released by the bank Mr Elliott says an increase in provisions for bad debts means ANZ is “prepared”.
“We’re in reasonably good shape. That does not mean it will be easy, but I’m feeling really confident about our ability to flex and change and roll with the times,” he says.
“But the trading environment’s clearly going to be difficult. That’s OK, that’s what banks are for, to see customers through difficult times. In many ways this is our moment. This is our moment to actually show our true worth to the broader community, to the economy, to our customers in particular.”
Read more: ANZ pays dividend, says ‘this is our moment’
8.01am: Share sentiment not excessive: BofA
BofA’s Global Fund Manager Survey for August found sentiment is the most bullish since February 2020 but “far from dangerously bullish”, according to chief investment strategists Michael Hartnett.
Cash levels fell to 4.6pc but remained in a “neutral range” and BofA’s Bull & Bear indicator rose to 3.7pc which is “far from excess bullish”.
“A disorderly stock drop needs a disorderly rise in (interest) rates,” Mr Harnett says.
It came as the S&P 500 hit a record highs after the fastest-ever recovery.
7.37am: ANZ posts $1.5bn profit, to pay dividend
ANZ has posted a higher, unaudited third quarter cash profit of $1.5bn and said it will pay an interim dividend of 25c per share.
The cash profit compared to a first half quarterly average of $707m.
In an update, ANZ said unaudited cash profit for the quarter was $1.33bn.
ANZ’s decision to pay a dividend, after deferring a decision in April, comes after Westpac yesterday axed a payout because of an uncertain outlook.
ANZ’s interim dividend represents 46 per cent of statutory first-half profit, after regulators imposed a 50 per cent limit on bank payouts.
ANZ Chairman David Gonski said: “We know many of our shareholders rely on dividends. We’ve been able to build on our strong capital position this quarter, and this has enabled us to pay a dividend that balances the needs of our shareholders with the uncertain economic environment. We agree with APRA’s view that all ADIs should be prudent in considering dividends. We arrived at our decision independently and it sits comfortably within APRA’s
guidance.”
ANZ chief executive Shayne Elliott said: “Our performance during these difficult times demonstrates the strength of our portfolio as we balance the need to support customers and our staff through this global pandemic while also providing a fair return for shareholders.”
Read more: ANZ to pay dividend, posts $1.5bn profit
7.05am: ASX to slip at open
Australian stocks are set for a slightly weaker start after a mixed session on Wall Street, where the S&P 500 set a new record but the Dow slipped.
At about 7am (AEST) the SPI futures index was down six points.
Yesterday, outperformance in heavyweights Cochlear and CSL helped the Australian market up 0.8pc, while Treasury Wines took as much as a 20pc hit from a new China anti-dumping probe.
The Aussie dollar was stronger at US72.41c, up from US72.23c.
Spot iron ore jumped 4.7 per cent to US127.60.
7.00am: A2 Milk annual profit jumps
Infant formula and fresh milk marketing company A2 Milk Company Ltd. said its full-year earnings increased by more than a third due to strong demand in China.
Net profit for the 12 months ended June 30 was $NZ385.8 million, up 34.1 per cent from the previous year, A2 Milk Company said. Revenue rose 32.8 per cent to $NZ1.73 billion.
The company said its profit margin for the year was 31.7 per cent. It had forecast revenue of $NZ1.7 billion to $NZ1.75 billion and a profit margin of 31 per cent to 32 per cent.
Dow Jones Newswires
6.55am: Materials down after BHP doubts
Producers of metals and other raw materials ticked down amid doubts about the outlook for coal sales.
Shares of BHP Group, the world’s largest publicly traded miner, fell slightly after it left its production targets unchanged for all commodities and said it sought to exit its thermal coal business to focus more on higher-quality coking coal, which is used in steelmaking.
Coal has rapidly fallen out of favour as a feedstock for power plants worldwide, diminishing the value of a market for which BHP once produced coal in the tens of millions of tonnes.
Gold futures rose $US14.40, or 0.7 per cent, to settle at $US2,012.10 an ounce, as Warren Buffett’s surprising purchase of a stake in Barrick Gold helped the precious metal recoup the bulk of recent losses.
Dow Jones Newswires
6.20am: ASX set to open flat
Australian stocks are set for a flat, or slightly weaker, steady start after a mixed session on Wall Street, where the S&P 500 set a new record but the Dow slipped.
At about 6am (AEST) the SPI futures index was down three points.
Yesterday, outperformance in heavyweights Cochlear and CSL helped the Australian market up 0.8pc, while Treasury Wines took as much as a 20pc hit from a new China anti-dumping probe.
The Aussie dollar was stronger at US72.41c, up from US72.23c.
Spot iron ore jumped 4.7 per cent to US127.60.
6.10am: S&P 500 climbs to record close
The S&P 500 closed at a record as US stocks extended their remarkable rebound from their sharp declines earlier in the year.
The broad stockmarket index finished up 0.2 per cent at 3389.77. The index has risen for three consecutive weeks, but its momentum has slowed in recent sessions, as it struggled to finish above its record closing high of 3386.15 from February.
The S&P 500 bounced back from a bear market over 126 trading days, its fastest recovery ever.
The Dow Jones Industrial Average dropped 0.2 per cent, while the Nasdaq Composite was up 0.7 per cent.
Although recent economic data has been largely encouraging, traders have been held back by uncertainty over a new economic relief package in Congress, fresh US-China tensions and some unease about how high stock prices are relative to earnings.
With the onset of summer vacation season, the number of shares changing hands has fallen sharply. Trading volume in New York Stock Exchange-listed stocks totalled just 3.52 billion shares Monday, around one-third lower than the average daily level so far this year, according to Dow Jones Market Data.
“It’s a situation where we have earnings kind of winding down and there’s not a whole lot of catalysts to take us to the next level,” said Craig Hodges, portfolio manager for Hodges Funds in Dallas. There is usually “some resistance to break into new territory,” he added.
Stocks got an early boost Tuesday after the Commerce Department said that housing starts jumped 22.6 per cent in July from the previous month, handily beating forecasts. Indexes also were lifted by the continued strong performance of tech stocks, with software giant Oracle and Netflix among the day’s biggest gainers.
Investors remained concerned about the prospects a new spending bill from Congress. Senate Majority Leader Mitch McConnell’s comments that discussions may not definitely lead to a deal, combined with media reports that Republicans are weighing further reducing the proposed stimulus amount, have sapped some optimism, Deutsche Bank analysts said in a note.
Investors also are wary that the rift between Washington and Beijing may deepen after the US Commerce Department issued new rules curbing Huawei Technologies’s access to foreign-made chips Monday.
The recovery in major stock benchmarks in recent months has been mirrored by improved credit conditions, both fuelled by central banks’ steps to ease borrowing conditions. Still, investors and analysts remain wary of how sustained the rallies will prove to be.
“It’s extraordinary when you think second-quarter 2020 was the deepest quarterly contraction we’ve seen” in the U.S. and European economies, said Tomas Hirst, European credit strategist at CreditSights. The rate of economic recovery is likely to slow later in the year, he said. “As we get into September, it may make sense to reduce risk so you’re not rushing for the doors if sentiment changes in the fourth quarter.”
In commodities, gold for August delivery rose 0.7 per cent to $US1999.40 a troy ounce. Silver for August delivery gained 1.5 per cent to $US28.05 a troy ounce. The move higher in precious metals comes as money managers look at commodities as an alternative to pricey stocks and bonds and as a hedge against inflation.
Overseas, the Stoxx Europe 600 fell 0.6 per cent, while most major equity benchmarks in Asia ended on a muted note.
Dow Jones Newswires
5.50am: Citi wins loan payment freeze
A federal judge granted Citigroup’s request to freeze roughly $US175 million the bank said it paid hedge-fund manager Brigade Capital Management by mistake on a loan owed by troubled cosmetics company Revlon.
Brigade has taken the position it isn’t obligated to return the money it received last week, its share of a nearly $US900 million loan payment owed by Revlon.
The ruling by Manhattan U.S. District Judge Jesse Furman marks an initial victory for Citi before the judge fully evaluates the dispute over whether Brigade can keep the money. Another court hearing was scheduled for late August, when Brigade must explain why it shouldn’t have to give the money back, according to the order.
Until then, Brigade can’t withdraw, transfer or otherwise dispose of the money, the judge said.
Brigade declined to comment.
Citi, the administrative agent on a loan issued by Revlon in 2016, said the payment was made in error out of the bank’s own funds. The $US175 million sent to Brigade was part of almost $US900 million that Citi wired to various lenders that have been locked in a feud with Revlon over the company’s debt-restructuring tactics.
When Citi asked for the money back, Brigade refused, questioning whether the payments were really a mistake. Some other investors have also kept the money, reasoning it was theirs to begin with and they aren’t required to lend to Revlon again after being repaid, according to people familiar with the matter.
Dow Jones
5.40am: Gold back above $US2000
Gold prices extended their rally, with the precious metal regaining traction to settle above the psychologically significant level at $US2000 for the first time in about a week amid persistent weakness in the US dollar and slack in government bond yields.
December gold settled up $US14.40, or 0.7 per cent, at $US2013.10 an ounce.
The 10-year Treasury note yield was trading around 0.66 per cent, around its weakest level since last week, while the dollar was at its lowest since 2018, trading 0.6 per cent lower at 92.29, as gauged by a gauge of the buck, the ICE Dollar Index, against a half-dozen rival currencies. A weaker dollar can boost the appeal of gold because it is priced in the currency while receding yields can lower the opportunity cost of favouring bullion, which doesn’t offer a yield, over Treasurys.
Dow Jones Newswires
5.38am: Boeing seeks more lay-offs
Boeing is launching a second round of voluntary lay-offs to trim its workforce, the company said, as it navigates a brutal commercial aviation market and seeks to return the 737 MAX to service.
The move comes on top of a 10 per cent staff cuts earlier this year as commercial airline customers defer deliveries and cancel orders, hitting Boeing’s profits.
“While we have seen signs of recovery from the pandemic, our industry and our customers continue to face significant challenges,” the aerospace giant said.
“We have taken proactive steps to adjust to the market realities and position our company for the recovery. As we continue to assess our workforce and in response to employee feedback, we will be offering a second voluntary lay-off opportunity for employees to depart the company voluntarily with a pay and benefits package.” Boeing did not provide an estimate of the potential size of the job cuts in this round.
AFP
5.35am: Dollar falls, stocks slide, techs lead
Global financial markets traded in a narrow range, with the US dollar under pressure on concerns over the US economic outlook while tech stocks continued higher on the belief they will fare best in the new coronavirus era.
Strong US building start data for July provided some support but on its own was not enough to ease worries about the economy as US-Chinese tensions spike and Democrats and Republicans are deadlocked over a new virus recovery package.
The US dollar tested two-year lows as a result, with sentiment on the currency hit by fears the US snapback from the pandemic is already running out of steam.
Additionally, markets are anxious because the US central bank is committed to providing as much cheap money as needed to bolster the economy absent another stimulus package.
“The dollar continues to fall with investors expecting the Fed to maintain its expansionary monetary policy for a long time owing to concerns the persistence of COVID-19 will weigh on the economic recovery,” noted Fawad Razaqzada, market analyst with ThinkMarkets.
“The greenback is also suppressed because of the lack of (safe) haven demand for the reserve currency, with investors evidently favouring foreign currencies, gold and bitcoin,” he added.
Washington-Beijing tensions took a new twist with the US expanding sanctions on Chinese telecoms giant Huawei to further limit its access to computer chips and other US-made products.
London closed down 0.8 per cent, Frankfurt lost 0.3 per cent and Paris ended 0.7 per cent lower.
AFP
5.32am: Norway wealth fund yoyos in first half
Norway’s sovereign wealth fund, the world’s biggest, posted both record quarterly gains and losses in the first half, yo-yoing on market volatility during the COVID-19 pandemic.
After haemorrhaging 1.35 trillion kroner (117 billion euros) in the first quarter of the year when the pandemic put the brakes on the world economy, the fund saw its value soar by 1.10 trillion kroner in the second quarter as markets recovered, boosted by budgetary and monetary policies.
“The first quarter was historically the fund’s worst quarter in terms of returns” in Norwegian kroner, the deputy chief executive of the fund, Trond Grande, said as he presented first half results.
“Meanwhile the second quarter was the most robust quarter ever,” he added. The fund, created in the 1990s to help grow the state’s oil revenues, nonetheless lost 188 billion kroner (18 billion euros, $US21 billion) in the first half of the year.
AFP
5.30am: US housing starts surge
US home construction started in July surged 22.6 per cent compared to June, the Commerce Department said Tuesday, as the sector continued to expand at a frenzied pace despite the coronavirus pandemic.
The vast majority of the increase came in apartment buildings which exploded by nearly 57 per cent, with the South and Northeast showing the largest gains, according to the report.
Single family homes started in the month rose just 8.2 per cent, the report said. The increase put housing starts at a 1.5 million annual rate, seasonally adjusted, far higher than the modest gain economists had been expecting, as builders take advantage of extremely low interest rates and the pent-up demand for homes.
The dramatic gain last month came on top of the surge in June to a 1.22 million annual rate, revised up from the 1.19 million initially reported.
And more construction is in the pipeline, as building permits issued jumped another 18.8 per cent compared to the prior month, the report said, with double-digit increases in permits for single-family and multi-unit homes.
AFP
5.25am: Only ‘good’ debt can save Europe: Draghi
Former European Central Bank chief, Mario Draghi, called on European governments on Tuesday to ensure the colossal amounts of debt countries are running up in the wake of the coronavirus pandemic are invested in upgrading their economies so that future generations can benefit.
“The debt created by the pandemic is unprecedented and will have to be repaid mainly by those who are young today,” Draghi warned at the opening of the “Meeting 2020” in Rimini, an annual international Catholic festival of reflection.
Europe is running up vast amounts of new borrowing because of the huge government subsidies needed to keep businesses and households afloat during the worst of the pandemic.
But such debt was only sustainable if it is used for productive purposes, such as investment in youth, infrastructure for production, or research, Draghi said.
“In that case, it will be seen as ‘good’ debt,” he said.
“If, however, debt is used for unproductive purposes, it will be seen as ‘bad’ debt and its sustainability will be eroded.” The eurozone has taken an economic unprecedented hit as a result of months of coronavirus-related lockdowns.
AFP
5.20am: Walmart profits jump
Walmart reported a jump in second-quarter profits due to surging e-commerce sales during the coronavirus pandemic and US stimulus payments that propelled consumer spending.
Net income was $US6.5 billion, up nearly 80 per cent from the year-ago period, boosted also by a large gain based on its investment in Chinese company JD.com.
Revenues rose 5.6 per cent to $US137.7 billion and included a lift from a 97 per cent increase in Walmart US e-commerce sales.
The world’s biggest retailer cited robust demand for groceries and heavy use of e-commerce from home-bound consumers. Sales were strong for electronics, outdoor living items and other goods with higher profit margins, the company said.
Walmart did not provide full-year profit targets.
AFP
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