ASX whipsaws as US confirms China trade deal still intact

Shares were quick to pare losses on reassurance that the US, China trade deal was still intact, but fell short of mid-morning highs.

David Rogers and Melissa Yeo

32 min read

8:43PMJune 23, 2020

Shares are dropping after White House adviser Peter Navarro said the US, China trade deal was ‘over’.

Trade deal ‘fully intact’: Trump
RBNZ sets conditions for ANZ Life sale
Woolies flags $591m writedown
Imports down 9pc, exports down 4pc

That’s all from the Trading Day blog for Tuesday, June 23. Shares finished higher by 10 points, recovering from a swift 1pc dive lower on comments the US, China trade deal was over, reassured by US President Donald Trump who said the deal was “fully intact”.

Locally, Woolworths warned of a $591m hit to its full year results, while Cromwell told shareholders to take no action on a $518m proportional takeover bid from ARA.

US futures are up after falling 1.6pc in the morning session.

Glenda Korporaal 8.43pm: Virgin home comes at a price

While Virgin Australia administrator Deloitte’s Vaughan Strawbridge is knee-deep in negotiations with rival bidders for the airline, one of the questions to be answered now is what deal the Queensland government has done to keep the airline’s headquarters in Brisbane?

Will the state end up with equity in a Virgin 2.0 and if so how much? And what will it paying for it? While it has not been publicly confirmed by any party, it appears that the Palaszczuk government has fended off a last-minute charge over the weekend from the NSW government to do a deal with the two finalists — New York hedge fund Cyrus Capital and private equity fund Bain Capital — to retain Virgin’s headquarters in its state.

The NSW government said on Tuesday that it was still “engaged with all parties including the administrators and the remaining bidders”, but it appears that Queensland has won the main game.

It was never the intention of the Queensland government to make its own bid for Virgin, which some thought in May when state Treasurer Cameron Dick announced plans for “Project Maroon”, which would see the state commit a possible $200m to a bid that would see Virgin keep its headquarters in the state.

John Durie 8.06pm: Big boost to Qube’s $2bn Moorebank facility

Woolworths’ $1bn decision to base its NSW distribution centre at Qube’s Moorebank centre is a boon to Maurice James’s 16-plus-year plan to develop an intermodal terminal in Sydney’s southwest.

It is the single biggest investment from Woolworths and by a long stretch the biggest boost to James’s $2bn Moorebank facility, being the fish equivalent of a whale.

Given he is still working on plans to monetise the site, the entrant of a top-shelf tenant is timed superbly.

7.51pm: USD ‘stuck between opposing forces’: CBA

Trade headlines generated a brief bout of financial market volatility overnight, according to Commonwealth Bank’s Global Markets Research team. White House trade adviser Peter Navarro was quoted saying that the US‑China phase one trade deal was over. Navarro said his comments were “taken wildly out of context” and the phase one US‑China trade deal remains in place. Indeed, US President Donald Trump quickly tweeted “The China Trade Deal is fully intact.”

USD is stuck between two opposing forces. Concerns over the longer‑term economic scarring from the COVID‑19 crisis and a second wave of infection are USD supportive. But the pick‑up in global economic activity and flush liquidity conditions are drags for USD. Today, the US Markit PMIs (9:45am New York) and Richmond Fed manufacturing index (10:00am New York) are projected to improve further in June.

AUD/USD is trading firmly above 0.6900. Australia’s CBA Flash PMIs indicate that business activity improved over June following the sharp contraction in activity over April and May. The reopening of the economy has taken the PMIs into expansionary territory for the first time since January 2020.

CBA Global Markets Research team

Ben Wilmot 7.27pm: Premiere office towers weather coronavirus

The country’s premiere office towers are weathering the coronavirus crisis storm with sales being struck at levels showing only slight shifts in values ahead of the pandemic hitting.

About a dozen major commercial property deals either collapsed or went into hibernation when the crisis struck in March, but behind the scenes talks could see some of the country’s best buildings change hands.

In one of the latest plays, Darren Steinberg-led property group Dexus is selling a major tower in Sydney’s Clarence Street for about $530m to an Asian investor.

7.11pm: Wirecard’s former CEO arrested

Wirecard’s recently departed chief executive, Markus Braun, has been arrested by police, days after the German payments company revealed a $2 billion hole in its books.

Munich city prosecutors said he was arrested on Monday on suspicion of presenting false information. It was a swift turn of events for Mr Braun, who was Wirecard’s largest shareholder and served as CEO for nearly two decades until he resigned last Friday.

Mr Braun’s arrest is the latest rapid-fire blow for the company at the centre of what appears to be Europe’s largest fraud in years.

The company began to unravel last week when its auditors said that it couldn’t verify the money existed.

In earlier reports, German payments provider Wirecard said more than $US2bn missing from its balance sheet probably doesn’t exist, confirmation that its fast-growing online business was more of a mirage than a miracle.

The company, once considered Germany’s pre-eminent fintech player, has been left fighting for survival. It is now working to retain credit lines with lenders and cut costs or sell business lines to stay afloat.

The Wall Street Journal

Perry Williams 6.38pm: ‘Considerable potential’ in Bass Strait: Seven Group

The Kerry Stokes-controlled Seven Group said it has considered the merits of ExxonMobil’s $US2.5bn sales process for its ageing Bass Strait field after the oil giant put the assets up for sale last year.

Exxon confirmed it was pursuing a sale of its 50 per cent stake in the offshore fields despite uncertainty in the industry after the COVID-19 pandemic and oil price crash earlier in the year.

Beach Energy, 30 per cent owned by Seven Group, had been seen as a potential bidder but the Stokes-controlled conglomerate said it had carefully looked at the assets itself as it considers potential growth opportunities.

“There’s still considerable potential in the Bass Strait,” Seven Group’s head of energy Margaret Hall told the Annual Credit Suisse Australian Energy Conference on Tuesday. “The resources obviously aren’t as easy as they used to be, but within the context of the demand requirements on the east coast with gas replacement and infrastructure in place and the transport network, the opportunity for incremental investment is very good.”

Foreign companies attracted to Australia‘s tight east coast gas market, producers specialising in squeezing the most out of assets late in their life and private equity players could also consider an offer, Credit Suisse has previously said.

Patrick Commins 6.02pm: Moody’s affirms Australia’s AAA debt rating

Moody’s has reconfirmed Australia’s AAA debt rating despite the country suffering through its first recession in nearly 30 years and ballooning debt and deficits as a result of the COVID-19 crisis.

“The rating affirmation and stable outlook reflect Moody’s expectation that Australia’s economic and institutions and governance strengths will continue to support the sovereign’s resilience in the face of shocks including the current coronavirus pandemic,” the global ratings agency said.

Moody’s analysts noted the “significant widening in the fiscal deficits and increase in the government’s debt burden”, but said “that a longstanding consensus on prudent management of public finances will continue to prevail, and as the economy recovers, the sovereign’s fiscal strength will remain broadly resilient”.

Perry Williams 5.23pm: Energy clash over how to cut gas pirces

Big gas users and producers have clashed over the remedy for lowering gas prices on Australia’s east coast with fertiliser and explosives maker Incitec Pivot disputing a claim made by energy major ExxonMobil that increased supply will lower tariffs.

ExxonMobil, one of the biggest gas suppliers to the east coast, pushed back against the prospect of government intervention in the east coast gas market arguing both domestic reservation and a taxpayer-underwritten transcontinental pipeline could see planned investments culled due to artificial market conditions.

Instead, Exxon’s Australian chairman Nathan Fay said the remedy was bringing on new supplies which would ease pressure on demand and reduce pressure on prices.

4.47pm: Banks keep a lid on gains

Weakness in financials was a key drag for the local market at the close. Commonwealth Bank fell 0.6 per cent to $69.03 as Westpac lost 0.7 per cent to $18.14 and NAB slipped 0.6 per cent to $18.66. ANZ was the only to finish in the green, adding a mere cent to $18.98.

Elsewhere in the sector, AMP passed the final hurdle to sell its AMP Life business to Resolution Life, albeit with some conditions imposed by the RBNZ. Its shares jumped 7.9 per cent to $1.91 – the highest level since late February.

Major miners offered some support to the index – as the ABS reported strong exports of iron ore for May. BHP added 0.8 per cent to $35.64 as Rio Tinto rose 1.4 per cent to $98.05 and Fortescue lifted 1.3 per cent to $14.01.

Here’s the biggest movers at the close:

4.16pm: Trade jitters restrain ASX

The possiblity of renewed US-China trade tension prompted a midday plunge, but investors were quick to pile back into the market in afternoon trade, helping the ASX to a slight gain by the close.

Strong offshore gains had set local shares up for a positive session but comments from White House advisor Peter Navarro that a US-China trade deal was “over” sparked a 1.6 per cent intra-day slump and 50-point drop in the Aussie dollar.

The blip was only short lived, as US President Donald Trump tweeting only an hour later that the deal was “fully intact” - fuelling a recovery back into the green but still off the market’s mid-morning highs.

By the close, the benchmark was higher by 10 points or 0.17 per cent to 5954.4, falling short of highs as much as 5999.2.

Bridget Carter 3.52pm: Virgin bond holders could get cut

DataRoom | The Virgin Australia bond holders owed about $2bn could be offered a cut of the airline’s future earnings by the suitors, say sources.

This could be as an alternative to offering cash as a payment and would likely be subject to certain performance hurdles.

Some of the bonds are not due to expire until about 2024.

Another option could be putting forward a payment through equity in the airline or cash and equity.

Advising the bondholders is Lachlan Edwards from Faraday Partners, who acted for Atlas Iron when it was recapitalised by its lenders in 2015.

As part of that deal, Atlas contractors McAleese Transport, Maca and Qube Logistics won the option of forgoing some of their payments in the short-term to ensure that the company did not collapse.

3.31pm: Crown debt sufficient to ride out crisis: S&P

Global ratings agency S&P has affirmed Crown Resorts’ BBB credit rating, saying the casino group has sufficient debt facilities to support its Crown Sydney development and cash outflows associated with coronavirus closures.

S&P said Crown would likely remain within the BBB credit range for the next 18 months, but kept the company at negative for its outlook given downside risks to its earnings recovery “given our expectation of recessionary conditions and the potential for an extension or reinstatement of COVID-19 related restrictions”.

It adds that anticipated “sizeable settlement proceeds” is likely to bolster the group’s cash balance for the year ending June 30, 2021.

“We expect earnings to rebound to more than 75pc of fiscal 2019 levels by fiscal 2022, driven by mass-market gaming and non-gaming volumes. We expect international visitors and VIP segment to recover more slowly.”

CWN last traded up 2pc to $10.21.

3.23pm: ‘Sombre’ Challenger outlook for FY21: BP

Bell Potter has warned of “sombre” FY21 guidance to come for Challenger, after the annuities group tapped the market in a $270m placement and $30m share purchase plan.

Analyst Lafitani Sotiriou said the raising was evidence of “further contingency planning in case things worsen”.

He said the Life book asset allocation was “set to remain relatively conservative, despite a few tweaks on the fixed income and liquids side” and the cost of equity spread would take a hit in FY21, “up until the company is able to reallocate the book back to a more accretive level”.

The broker estimates FY20 profit before tax of $508m, versus guidance to be at the lower end of the $500m to $550m range. In FY21, Bell Potter predicts profit will step down to $430m - not factoring in any of the equity raising dilution.

Mr Sotiriou rates the stock at a sell, as he raises his price target on the stock to $4.30.

CGF last traded down 10.3pc to $4.77.

Ben Wilmot 3.02pm: HomeCo portfolio value lifts past $1bn

Large format retail owner HomeCo is defying expectations of a retail recession and has reported the value of its shopping centres has risen past $1bn at a time when the value of larger centres is crumbling.

HomeCo completed preliminary unaudited valuations of all 30 properties in its portfolio. This comprised 15 independent valuations representing half of its properties by number and 53 per cent by value, with the remainder internally valued.

The preliminary unaudited portfolio valuation, which remains subject to year end processes including finalisation by external valuers, audit and internal review increased 5.2 per cent by $49m to just over $1bn.

Net of capital expenditure incurred during the period of $22m, this represents a net valuation increase of $27m or 2.8 per cent.

“The preliminary valuation result is positive and reflects the quality and resilience of HomeCo’s hyper-convenience model and the increasing exposure to daily needs and services tenants. Foot traffic trends at the centres have continued to be positive with an increase of 9 per cent and 17 per cent for the months of May and June 20202,” HomeCo executive chairman David Di Pilla said.

2.42pm: ‘Trade tantrum’ to temper bulls: Halley

OANDA’s Jeffrey Halley has described this morning’s whipsaw trade as a “trade tantrum”, noting the swift move lower is likely to have tempered bullish expectations.

US futures dropped 1.6pc after comments from White House Adviser Peter Navarro that the US-China trade deal was “over”, only to regain previous trading levels as Trump reassured markets the deal was still intact.

“The Navarro induced “trade-tantrum” has been reversed as quickly as it arrived, with regional markets now mostly back in the green, aided by President Trump reasserting the US-Chine trade deal remains intact,” Mr Halley says.

“We would expect bullish expectations to be tempered after the short “trade-tantrum” this morning. A bit of two-way trading risk keeping everybody honest.

“However, the overall positive tone will keep Asian equities supported in the near-term, and that should flow into a positive start for European stocks.”

Across the region, China’s Shanghai Composite is higher by 0.2pc as the Hang Seng adds 1.1pc and Japan’s Nikkei is higher by 0.9pc.

1.45pm: Qube jumps on Woolies logistics deal

Logistics group Qube is one of the best performing stocks in the top 200, after inking a deal with Woolworths to develop its new 26-hectare warehouse facility.

The supermarket giant this morning unveiled a $780m plan to build automatic distribution centres at Moorebank Logistics Park, forcing the scrapping of hundreds of jobs.

While its been a drag on Woolworths shares, down 0.5pc to $36.48, Qube investors are cheering the tie-up.

Under two development management agreements, Woolworths will develop the warehouses, and Qube will fund their construction - expected to cost the logistics group between $420m and $460m over the next four years but reap revenue of approximately $30m per year once completely operational.

“Woolworths’ long term commitment will reinforce the commercial appeal of this nationally important infrastructure and freight project,” managing director Maurice James said.

Qube is the developer, manager and operator of the Moorebank park, under a 99-year lease from the Commonwealth.

QUB shares last up 7.4pc to $2.90.

Bridget Carter 1.27pm: Brisbane Airport offers $850m in bonds

DataRoom | Brisbane Airport is tapping the bond market for $850m. On offer is a 6-year and a 10.5-year bond.

The bonds were met with overwhelming demand - there was $1.8bn worth of funds chasing the deals.

As a result, the 10.5-year bond was repriced from between 400 and 415 basis points above the Bank Bill Swap Rate to between 365 and 375, while the 6-year bond was repriced lower to between 265 and 275 basis points above the BBSW from between 300 and 325.

It come after it already raised $840m in bank debt in April.

More to come

1.01pm: Shares hold 0.2pc gain after wild swings

After a wild morning for markets, local shares are holding a slight 0.2 per cent gain at lunch, with trade jitter lingering even after Trump reassured markets the US trade deal with China was “fully intact”.

Shares fell as much as 1pc on comments that the US, China trade deal was “over” but swiftly regained ground as those comments were dismissed, first by top economic adviser Larry Kudlow, then President Donald Trump.

Still, shares are trading more moderately with gains of just 10 points or 0.17pc to 5954.6, after hitting as much as 5999 in morning trade.

AUDUSD has regained most of its ground after dropping to US68.59c - last at US69.23c.

Here’s the biggest movers at 1pm:

Lilly Vitorovich 12.33pm: Nine sets up small parcel sale facility

Nine Entertainment is looking to tidy up its share registry by setting up an opt-out share sale facility for shareholders, who own shares in the media group worth less than $500 and want to sell.

Based on Monday’s share price of $1.415, Nine shareholders with 353 fully paid ordinary shares or less will be eligible. That represents about 956,000 ordinary Nine shares, equivalent of 0.06 per cent of the group’s total issued capital.

Nine will pay all brokerage and handling costs of the sale for holders of a small parcel who use the facility, excluding tax consequences, which will remain the shareholder’s responsibility. The shares will then be sold on the ASX.

Investors that want to hold onto their Nine shares have until August 14 to provide the company written notice about their continued investment.

12.24pm: Trade deal ‘fully intact’: Trump

US futures are back to their midmorning levels after US President Donald Trump confirmed talks with China were in fact still on, disregarding earlier comments from White House adviser Peter Navarro.

Taking to twitter, Mr Trump said the deal was “fully intact”, adding “hopefully they will continue to live up to the terms of the Agreement”.

S&P 500 futures now up 0.13pc, helping the ASX200 to add 0.3pc.

The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!
— Donald J. Trump (@realDonaldTrump) June 23, 2020

12.07pm: Navarro back-pedals, shares rebound

After comments from Peter Navarro spurred a drop on global markets, the US Trade adviser now says his comments were “taken wildly out of context”.

Earlier today, Mr Navarro said the US, China trade deal was “over” - sparking a 1.6pc drop in US futures and subsequent reversal in our own ASX200.

Just an hour later, Mr Navarro is reported to have told the Wall Street Journal he was just trying to make a point on “trust”.

Top US economic adviser Larry Kudlow has also disputed the claims, saying claims talks are off are false.

Local shares have bounced back to flat trade at midday, as US futures pare losses to just 0.26pc.

11.58am: Imports, exports drop for May

Australian imports and exports both declined in May, with car imports now the lowest since April 2011.

In the latest preliminary trade data from the ABS, the value of imports fell $2.2bn or 9pc from the revised April figure of $24.1bn, down 18pc from the same time last year.

The ABS said the decline was driven by a drop in car and petrol imports.

Exports were down 4pc from April’s revised figure of $31.1bn to $29.7bn - a 13pc drop from the same time last year.

“The decline was due to significant declines in exports of non-monetary gold, coal, and gas,” the ABS said.

“The declines in the exports of coal and gas are off the back of reduced demand from some of Australia’s key trading partners.”

Still, iron ore exports were still strong amid supply issues in key rival Brazil.

Australian international trade data for May (prelim) shows exports weakening a little further 4%mth (-13%yr). Imports falling at a faster pace down by 9%mth (-18%yr). (ABS chart) #ausbiz pic.twitter.com/YMcNkybOL1
— James Foster (@JFosterFM) June 23, 2020

Bridget Carter 11.52am: Myer cuts 90 staff

DataRoom | Myer is understood to have cut about 90 staff as it looks to curb costs amid the coronavirus pandemic.

It is understood that Joanne Mercer, who is the general manager of footwear and accessories, is to be among those to go, while Sue Price, who is head of beauty and lingerie, is also departing.

Ms Mercer has worked at Myer for almost 20 years, holding her current role since October 2008. Before that, her title was Founder Director Head of Merchandise and in the earlier years she was a category buyer.

Tara Broomfield, who ran menswear and womenswear has also departed, say sources.

It comes with suggestions that Myer is embarking on a refinancing, with advisory firm KPMG in its corner.

Sources close to the department store maintain that KPMG is currently assisting with its supply chain, as well as examining working capital and refinancing solutions.

MYR shares last off by 2.1pc to 23c.

With Eli Greenblat

11.42am: $A drops 50 points on trade jitters

The Aussie dollar has taken a swift near 70 point plunge on news the US, China trade deal was off.

AUDUSD had been trading at US69.23 ahead of the news, and dropped to as much as US68.58c.

It comes as the US dollar index adds 0.17pc.

The Aussie dollar is seen as a proxy for China-related sentiment, and so has been hard hit on the news.

China’s Shanghai Composite meanwhile is trading down by 0.5pc, as the Hang Seng trades off by 1.4pc - both taking sharp losses on the news.

ASX200 last down 1pc.

11.26am: US, China trade deal ‘over’

Shares have sharply given up any gains for the session, after White House adviser Peter Navarro said the US, China trade deal was ‘over’.

Speaking to Fox News, Mr Navarro said the move was linked to the breakdown in relations between the two powerhouse nations spurred by the coronavirus pandemic.

He said the “turning point” had been learning above the spread of coronavirus only after a Chinese delegation left Washington after signing a Phase 1 deal on January 15.

US futures are shedding 1.2pc, pulling the local market down by 0.7pc. AUDUSD is lower by 0.5pc to US68.73 - taking a 50 point drop on the news.

That’s after a 0.6pc gain in the first hour of trade.

ASX200 last at 5903.5.

[CHART] ASX 200 retreats - follows US futures lower on reports that US White House adviser Navarro comments that China trade deal is 'over' #ausbiz Iress pic.twitter.com/nvv00G1O9g
— CommSec (@CommSec) June 23, 2020

Eli Greenblat 10.58am: Harvey Norman tips 20pc profit lift

Harvey Norman says booming sales across its stores will deliver a 20 per cent leap in pre-tax profits for fiscal 2020.

The electronics and homegoods retailer issued the profit upgrade today following a recent sales update which showed that Harvey Norman stores were witnessing a rush in key product categories such as freezers and kitchen appliances, as many households bunkered down for home isolation.

Harvey Norman said unaudited preliminary accounts for the period July 1, 2019 to May 31, 2020 indicated profit before tax and non-controlling interests, but excluding leases net impact and net property revaluation adjustments, had increased 20 per cent compared to the prior corresponding period.

The company will be reporting its full year results on August 28.

HVN last traded up 4.6pc to $3.61.

Joyce Moullakis 10.53am: RBNZ sets conditions for AMP Life sale

New Zealand’s central bank has imposed a number of conditions as part of approving AMP’s revised $2.5bn life insurance division sale to Sir Clive Cowdery’s Resolution Life.

The Reserve Bank of New Zealand on Tuesday said it was green lighting the transaction, alongside conditions “to protect policyholders”.

AMP’s shares surged 11 per cent to $1.97 in early trading on Tuesday, as shareholders cheered the news.

The approval is the last remaining sign off required for the transaction after regulators in China, the Foreign Investment Review Board and the Australian Prudential Regulation Authority cleared the deal. Prior to the COVID-19 crisis, battered AMP investors were hoping the sale would lead to a capital return by the wealth group.

Deputy RBNZ governor Geoff Bascand said the central bank had been reviewing the proposed transaction and consulting with the parties involved over 18 months to ensure the deal met its requirements.

“Because AMP Life is a branch of an Australian business and intended to be in ‘run-off’ and not write new business, special arrangements were needed for the security of New Zealand policyholders,” he added.

“A bespoke trust model has been established that ensures supervisory objectives are better met, future industry dynamics are generally more positive, and there is additional protection in the event of insolvency - one of the key risk considerations that we have been seeking to mitigate.”

An initial $3.3bn deal to sell AMP’s life unit was blocked by the RBNZ last year because the transaction didn’t protect and ring-fence policy holders across the Tasman.

AMP last traded up 10.8pc to $1.96.

British philanthropist Sir Clive Cowdery at AMP's headquarters in Sydney. Picture: James Croucher.

10.38am: Banks dull early 1pc boost

Australia’s S&P/ASX 200 share index rose as much as 1pc to 5999.2 as expected after offshore gains, but pullback in the major banks is restraining trade.

S&P 500 futures are up 0.2pc after an early gain of 0.5pc, helping the risk-on mood as tech, industrials, consumer discretionary and real estate stocks outperform.

Weak performance from financials is restraining the market now - the sector trading down by 0.2pc as the 4 major banks are down 0.2-0.4pc and Challenger is down 6pc on a bearish note from Bell Potter.

10.34am: AMP lifts 10pc as life sale approved

AMP shares have jumped 11pc in early trade, after its $2.5bn life insurance sale to Resolution Life passed all regulatory approvals.

In a brief notice this morning, AMP said it expected the transaction to complete after the market close on June 30.

It said it would provide an update to the market on July 1.

AMP shares last up 10.5pc to $1.95 after hitting $. 197.

Lilly Vitorovich 10.26am: Local ad spend tipped for solid rebound

Australia‘s advertising spending has been battered by the coronavirus, but is expected to rebound the strongest within the top 10 ad markets next year.

Local ad spending is forecast to drop 19 per cent this year, as companies, led by the travel and tourism industry, slash spending during the health and economic crisis, according to a new report by media investment group GroupM about the global ad industry.

Brazil and Japan are forecast to record the biggest drops in ad spending, down 29 and 20 per cent, respectively. France and the UK are set to see a drop of 15 and 12.5 per cent, respectively.

Ad spending in the US and China is forecast to fall 7.5 and 2.8 per cent, respectively. Collectively, the two superpowers account for more than half of the world’s total ad spending.

10.11am: Shares jump 0.6pc

Local shares have jumped by 0.6 per cent at the open, following a strong Wall Street lead, with tech stocks leading the lift.

At the open, the benchmark ASX200 is adding 38 points or 0.64 per cent to 5982.6.

Tech shares are adding 1.8pc after the sector buoyed US shares overnight - with outperformance in Afterpay, up 2.3pc, and fellow buy now, pay later rival FlexiGroup - up 21pc.

Challenger shares are lagging after completing its $270m placement yesterday. The stock is down 6.6pc.

10.07am: Take no action: Cromwell

Cromwell has told its shareholders to hold fire on the ARA Asset Management bid for its shares, describing the offer as opportunistic.

Earlier today, ARA lobbed a proportional takeover offer for a 29pc stake in the property group at 90c per share.

“Cromwell notes the unsolicited and opportunistic nature of the Proportional Offer and that the

Proportional Offer is not an offer to acquire all securities held by securityholders in Cromwell,” it said.

“Cromwell will provide a further announcement in due course when it has evaluated and assessed the terms of the Proportional Offer.”

CMW shares are up 2.3pc at the open to 87c.

Read more: ARA to take $518m tilt at Cromwell

Nick Evans 10.03am: China steel makers defy global plunge

Chinese steel production lifted 4.2 per cent in May, according to the World Steel Association, as the country’s industrial heartland powered out of the coronavirus crisis, but output in Japan, India and South Korea plunged compared to the same time in 2019.

While the World Steel Association warned its ability to collect information had also been affected by COVID-19, flagging potential revision to the figures as better data comes to hand, it said global steel production had fallen 8.7 per cent in May compared to the same month in 2019.

Of the major steelmaking nations, only Chinese production was up for the month, the industry body said, lifting 4.2 per cent to 92.3 million tonnes.

Japanese production plunged 31.8 per cent to 5.9mt, with Indian output down 39.1 per cent to 5.8mt. While South Korean mills produced only 14.1 per cent fewer tonnes than May 2019, at 5.4mt, production in Europe was down 26.8 per cent to 10.5mt and US output was down 36.6 per cent to 4.8mt.

The figures come as spot iron ore prices remain strong, hovering just over $US100/t.

A steel factory in Chengde, China's northern Hebei province. Picture: Fred Dufour / AFP.

10.02am: Aussie dollar hits 5-day high

AUD/USD rose 0.4pc to a 5-day high of 6935 as S&P 500 futures rose 0.5pc.

Despite a lack of positive news today this additional “risk-on” suggests Australia’s S&P/ASX 200 will rise more than the 1pc projected by overnight futures.

9.52am: Regional bank merger a ‘sensible’ move

Bell Potter’s TS Lim reiterates his view that the creation of a super-regional bank to rival the majors would be “sensible”.

Even excluding the COVID-19 impact, he notes that market conditions for the regionals “remain challenging” with “a lack of scale being their key stumbling block”.

He advocates for a merger between Bendigo Bank and Suncorp Bank, noting also the suggestion that the owners of ME Bank are exploring a potential sale.

“Given SUN’s desire to retain its bank in the meantime, there is perhaps another way for BEN or BOQ to play the regional consolidation game,” Mr Lim says.

He says an acquisition of ME Bank would provide much-needed scale for Bendigo Bank or Bank of Queensland.

“Merger benefits - funding and cost synergies - should then go a long way towards mitigating a number of sector headwinds.”

9.45am: What’s on the broker radar?

ANZ raised to Add, price target lifted 24pc to $21 - Morgans
Challenger cut to Sell - Bell Potter
Commonwealth Bank price target raised 11pc to $67.50 - Morgans
NAB price target raised 21pc to $20 - Morgans
James Hardie GDRs raised to Hold - Jefferies
Stockland raised to Buy - Jefferies
Treasury Wine raised to Buy - Morningstar
Westpac price target raised 18pc to $22.50 - Morgans

9.35am: Zip boss cashes in on stock surge

Zip chief executive Larry Diamond has cashed in on the recent record trade in the stock, pocketing more than $33m as he sold down his stake in the group.

In a filing to the market this morning, Zip said Mr Diamond had sold down roughly 5.5 million shares in the group, owned between his Diamond Venture Holdings and joint SMSF with wife Ashlyn.

Sales over June 18 and June 19 netted Mr Diamond $33.71m, with shares sold at an average price of $6.12 apiece.

Zip shares hit a record of $6.97 intraday on June 11, after earlier in the month announcing a move into the US and successful $200m capital raise to fund the deal.

9.24am: Shares headed for 2-week high

Australia’s share market may hit a 2-week high today based on offshore leads.

Overnight futures relative to fair value suggest the index will open up 1pc at 6004 points, and a daily close above 5991.8 would mark a 2-week high on a daily close basis.

Whether or not it closes above 6000 points could affect market sentiment in the short term but the index would need to break the June peak near 6200 to put a major squeeze on bears.

While the index closed flat at 5944.5 points on Monday, it was narrowly led by gains in the Materials, Financials and Health Care sectors.

A large majority (78 per cent) of stocks in the index actually fell, and the tourism, entertainment and travel industries hurt by worsening news on the pandemic.

Thus a rise in shares today would need to be somewhat broader in order to look sustainable.

Tuesday will be mostly about purchasing managers’ index for June, starting with CBA’s Australia PMI data.

The market may need to see significant improvement in PMI’s globally and potentially more stimulus to keep offsetting a worsening pandemic, particularly in the US.

9.05am: Woolworths flags $591m writedowns

Woolworths has flagged a hit of $591m at its upcoming full year results, as it set out plans to develop two new automated distribution centres and guided to full year earnings of $3.2bn.

The group said fourth quarter sales in its Australian food division were up 8.6pc from the same time last year, but sales growth for its Endeavour Drinks business were soaring by 21.4pc - lifted by increasing alcohol sales while pubs were closed during coronavirus lockdowns.

As such, Woolworths guided to full year earnings between $3.2bn and $3.25bn before $591m in significant items from the transformation of its Endeavour Group and remediation for its salaried staff members. Hotel earnings were tipped to be roughly half of the previous year, between $160m and $170m from FY19’s $355m.

“Hotels have begun to reopen but around two thirds of our venues are in Victoria and Queensland where operating conditions remain more restricted, particularly for gaming,” chief Brad Banducci said.

“As a result, sales remain materially below prior year levels and the Hotels business is expected to continue to be loss-making until more venues operate with a full service offer.

“Given the continued uncertainty around Hotels operating at ‘normal’ levels, it appears unlikely that a separation could take place before the second half of the 2021 calendar year”, he said.

WOW last traded at $36.66.

Woolworths reported a 21.4pc jump in Endeavour drinks sales for the fourth quarter to date. Picture: John Gass.

8.56am: United Malt increases SPP to $31m

GrainCorp spin-off United Malt has raised an upsized $30.6m from retail shareholders in its share purchase plan, following a $140m placement completed last month.

The group said today it had received applications totalling $62.9m, representing a participation rate of 25pc and an average application amount of $19,000, prompting the group to increase the offer from the initial $25m to $30.6m.

“The funds raised will ensure United Malt’s balance sheet remains strong and positions us well to execute our strategy,” chief Mark Palmquist said.

Bridget Carter 8.50am: ARA lobs proportional takeover bid for Cromwell

DataRoom | ARA Asset Management is to launch a proportional takeover bid of Cromwell Property Group.

The company plans to buy 29 per cent of Cromwell for 90c per share, slightly higher than the last trading price of 87c per share.

ARA currently holds 24 per cent of Cromwell. The offer values the company at $2.345bn.

Working on the bid for ARA are Moelis, Credit Suisse and law firm Arnold Bloch Leibler.

ARA currently has clearance from the Foreign Investment Review Board. Private equity firm Warburg Pincus is now the largest shareholder in ARA with a 48 per cent stake.

7.50am: Gold hits one-month high

Gold prices climbed 1 per cent overnight to hit the highest level in more than a month, as investors took refuge in the safe-haven metal after an uptick in coronavirus cases dampened hopes for a quick economic recovery.

Spot gold was up 0.7 per cent to $US1,755.58 per ounce at 1841 GMT. The session high was 1,762.84, the highest since May 18.

Prices were $US8.97 shy of a 7-1/2 year high of $US1,764.55, hit last month. US gold futures settled 0.8 per cent higher at $US1,766.40.

“There is some flight to safety in gold,” said Bob Haberkorn, senior market strategist at RJO Futures.

The rise in coronavirus cases globally has led gold to break the $US1,750 level, he said. “If we close above $US1,765 today, the $US1,800 level is not very far.”

Reuters

7.45am: Oil prices rise 2pc

Oil was up 2 per cent overnight on tighter crude supplies from major producers and as coronavirus lockdowns kept easing despite a record rise in cases globally.

Brent crude settled at $US43.08 a barrel, up 89 US cents, or 2.1 per cent. The West Texas Intermediate (WTI) crude contract for August, the day’s more-active contract, settled at $US40.73 a barrel, rising 90 US cents, or 2.3 per cent.

Prices got a boost from a plummeting US and Canadian oil rig count, an indicator of future supply, which fell to a new low last week, said Andy Lipow, president of consultants Lipow Oil Associates.

Reuters

7.35am: AMP Life sale cleared to go

AMP says the sale of AMP Life to Resolution Life has received all regulatory approvals and is expected to be complete after the market closes on June 30.

AMP agreed to sell its life business to resolution for $2.5bn deal but the deal has been awaiting regulatory approval.

Initially, AMP was to sell the life insurance business for $3.3bn but agreed to new terms following regulatory resistance from New Zealand.

AMP will provide an update to the market on 1 July 2020.

7.25am: ASX set for early rise

Local shares are set for opening gains after US investors focused on economic optimism rather than increasing coronavirus infections.

At 7am (AEST) the Australian SPI 200 futures contract was higher by 34.0 points, or 0.58 per cent, to 5,935.0.

Wall Street investors have given a good lead for their peers down under after the Dow rose 0.59 per cent, the S&P 500 gained 0.65 per cent and the Nasdaq climbed 1.11 per cent.

Market watchers were also clinging to hopes for more government stimulus after US House of Representatives Democrats on Thursday unveiled a $US1.5 trillion infrastructure bill in the same week that reports emerged of preparations by the Trump administration for an infrastructure stimulus plan.

The virus remains prevalent. A dozen states in the US reported record increases in new cases.

In Australia, traders will be watching for international trade figures from May to assess how the economy is faring during turbulent times.

The share market closed flat for the second consecutive day on Monday. The S&P/ASX200 benchmark index finished up just 1.9 points, or 0.03 per cent, at 5,944 points.

The Australian dollar was buying US69.08 cents at 7am (AEST), up from US68.58 cents at the close of trade on Monday.

AAP

6.10am: Tech stocks leads Wall St higher

US stocks rallied after a choppy morning session as investors continued to put faith in signs of a nascent economic recovery, despite a rise in coronavirus-infection rates in some states.

All three major indexes traded solidly higher in the afternoon after wavering throughout the morning. The Dow Jones Industrial Average rose 152 points, or 0.6 per cent. The S&P 500 added 0.7 per cent, while the Nasdaq Composite rallied 1.1 per cent to a fresh record, driven by gains among large-cap technology stocks, including after new announcements by Apple.

After closing flat yesterday, the ASX is tipped to open higher. At 6am (AEST) the SPI futures index was up 37 points, or 0.6 per cent.

US stocks are attempting to extend last week’s rally, during which all three indexes ended the week up 1 per cent or more. However, looming uncertainties surrounding the coronavirus pandemic, relations between US and China and the November election have begun to weigh more heavily on investors.

Nevertheless, indexes have been moving in more of a narrow pattern in recent days as investors try to determine what may happen in the coming month. Monday’s gains, however, could help stocks break out of the range.

“I would say we’re in no man’s land right now,” said Nate Fischer, chief investment strategist at Strategic Wealth Partners. “I think to consolidate and move sideways is the best thing for the market. To have it take its breath and digest market events that really matter.”

Economic indicators have been mixed. A strong pick-up in retail sales, as well as signs that jobless claims are easing, have offered traders confidence that economic activity is picking up after weeks of widespread shutdowns.

Yet there are still signs that the recovery has a long way to go, and on Monday, fresh data showed that sales of previously owned homes dropped 9.7% in May from the prior month, as the coronavirus pandemic prevented shoppers from taking advantage of the typically busy spring homebuying season. Economists surveyed by The Wall Street Journal expected an 8.8pc decline.

Some of Monday’s gains were driven by a continued rally in big technology stocks, which have largely led the markets off their March lows. Utilities stocks also rallied, as did shares of some retailers and restaurants. Microsoft gained 2.4pc, and Dominion Energy rose 2pc.

Outside of the stock market, gold prices rallied, with front-month gold futures hitting their highest close since October 2012, according to Dow Jones Market Data.

In Europe, oil-and-gas companies and travel and leisure stocks were among the worst performers. The pan-continental Stoxx Europe 600 lost 0.8 per cent.

Dow Jones

5.50am: Avita’s US move approved

Avita Medical said the Federal Court of Australia approved its plan to redomicile the company and its subsidiaries to the U.S.

Under the terms of the plan, Avita Therapeutics, which is incorporated in Delaware, will become the parent company of the Avita Group, the company said.

Avita Medical said it intends to lodge a copy of the court order with the Australian Securities and Investments Commission on June 23, adding “Once the orders are registered with ASIC, the scheme will become effective.”

Avita said its shares should be suspended from trading on the ASX as of the close of trade on June 23.

Under the company’s timetable, shares of Avita U.S. will be listed on the ASX on June 24 and the company’s American depository receipts will cease trading on the Nasdaq on June 29.

The company also said the listing of its shares on the Nasdaq would take place “promptly following the implementation date.”

Dow Jones Newswires

5.45am: Poll reveals US divisions

Americans’ outlook on the national economy has improved somewhat from its lowest points during the early weeks of the coronavirus pandemic, but a new poll suggests Democrats and Republicans are living in alternate economic realities amid the sharpest recession in the nation’s history.

Eighty-five per cent of Democrats call economic conditions “poor,” while 65 per cent of Republicans describe them as “good” in a new survey conducted by The Associated Press-NORC Center for Public Affairs Research.

This divide reflects the deep polarisation ahead of the 2020 presidential election, as well as a series of indicators that point toward a weakened but recovering US economy.

Overall, 63pc of the country says the economy is in poor shape, down somewhat from the 70pc who felt that way in May. The change was driven by increasingly optimistic Republicans, only 43pc of whom described the economy as good a month ago. Two-thirds of Republicans, but just 29pc of Democrats, expect improvement over the next year.

5.40am: Stocks fall amid virus fears

Markets lost ground as a spike in coronavirus infections around the world worried investors just as Europe was easing lockdown measures further.

While a wall of cash from governments and central banks has been providing support, observers say an equities rally since March may have been overcooked.

Key European markets were down more than half a per cent at the closing bell. On Wall Street, the Dow posted was just a touch lower in the late New York morning trading, having gained back much of the ground lost at the opening.

London closed down 0.7 per cent while Frankfurt and Paris both lost 0.6 per cent.

After the past week’s broadly positive showing for stocks, traders had turned cautious on news of a jump in fresh virus cases across US states including California, Texas and Florida.

China, Australia, Germany and Japan are also battling new outbreaks with some reintroducing containment measures.

European countries are slowly emerging from their economy-sapping lockdowns, with Spain opening its borders and welcoming flights, while schools, cinemas and theatres reopened in France.

Oil prices rebounded as output cuts by major producers and hopes for rising demand outweighed worries over new infections.

AFP

5.30am: Germany moves to rescue Lufthansa bailout

The German government leapt into action to rescue a proposed nine-billion-euro ($US10.1 billion) coronavirus bailout for Lufthansa that has run into resistance from a billionaire shareholder.

Economy Minister Peter Altmaier and Finance Minister Olaf Scholz met for crunch talks with Lufthansa representatives and rail industry tycoon Heinz Hermann Thiele, the company’s top shareholder whose scepticism could torpedo the deal.

The clock is ticking as Lufthansa shareholders are voting Thursday on the rescue plan, which would see Berlin take a 20-percent stake in the company.

Like rival airlines, Lufthansa was plunged into crisis after efforts to contain the coronavirus pandemic brought air travel to a near standstill for several months, with the recovery expected to be slow.

The group is fast running out of cash and has grown increasingly nervous as the extraordinary general meeting draws closer.

With shareholders representing just 38 per cent of Lufthansa’s capital registered to participate in the meeting, two-thirds backing will be needed to approve the plan rather than a simple majority if turnout were higher.

Grounded Lufthansa aircraft. Picture: AP

AFP

5.25am: US home sales drop 9.7pc

Battered by the coronavirus, US existing home sales posted their third straight monthly decline in May, falling 9.7 per cent compared to April, the National Association of Realtors (NAR) said.

With the sales pace hitting a seasonally adjusted annual rate of 3.91 million properties in the month, the data was worse than analysts expected and down more than a quarter from the same month in 2019.

The decline was felt in all regions on both a monthly and yearly basis, the NAR said.

However, a fall in supply and an uptick in prices points to a tightening market, and realtors and analysts expect a return of buyers as states loosen lockdowns imposed to contain the pandemic.

AFP

5.20am: Wirecard’s missing 1.9bn euros

In what could be one of the biggest financial frauds of recent years, German payments provider Wirecard admitted 1.9 billion euros that auditors say are missing from its accounts likely “do not exist”.

The scandal has already claimed the scalp of founder and chief executive Markus Braun, and adds to a series of recent German upsets.

Over the past decade, business headlines have been dominated by repeated financial infractions at Deutsche Bank and the “dieselgate” emissions fraud that has cost Volkswagen more than 30 billion euros.

In Wirecard’s case, 1.9 billion euros ($US2.1 billion) supposedly sitting in trust accounts in the Philippines made up a quarter of the company’s balance sheet.

But “on the basis of further examination … there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist,” Wirecard said.

AFP

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