ASX shrugs off geopolitics as health drives 0.8pc lift
CSL and Cochlear did the heavy lifting as the ASX rose 0.8pc, while several household names surged to record highs at the close.
- Treasury drops on anti-dumping probe
- Westpac dumps dividend citing uncertainty
- Cochlear falls to loss on legal, Covid
- BHP to exit thermal coal, profit drops
That’s all from the Trading Day blog for Tuesday, August 18. Outperformance in heavyweights Cochlear and CSL helped the market up 0.8pc, while Treasury Wines took as much as a 20pc hit from a new China anti-dumping probe.
The RBA released the minutes of its last meeting reaffirming its outlook for a slow recovery, while results were in focus from BHP, Coles, and Cochlear, among others, and Westpac was the first major bank to not pay an interim dividend.
James Kirby 7.50pm: China raises risk across ASX
The writing is on the wall for investors in companies where China is the key export market: the tide can turn in a moment. Just ask Treasury Wine Estates, where the share price just saw a 20 per cent intraday drop.
Trade Minister Simon Birmingham may describe China’s move to investigate the wine sector for alleged dumping as “perplexing” but to sharemarket investors the abrupt decision, which threatens to widen into a much broader challenge, is entirely predictable.
Against a backdrop of escalating trade tensions investors should be pragmatic and assume that such a “shock” can occur at virtually any listed company where China has the power to drive a better bargain.
Seasoned investors will remember a similar share price rout four years ago after Bellamy’s, the infant formula group, was hit with what seemed like a bolt from the blue. Back then China suspended Bellamy’s import licence and the share price halved in a matter of weeks.
Regulatory risk has been mounting with China-focused companies for months — particularly since the decision to ban the Huawei Telco group from 5G contracts.
The only exception here — and it will not be forever — is mining exports such as iron ore.
On the same day Treasury Wine plunged on the ASX, BHP announced strong profits and outlined how its iron ore division is now responsible for 60 per cent of all profits.
The reality in iron ore is that if China were to threaten imports of Australian products in any way, the price of the commodity would instantly surge as our major miners have that rarest of economic advantages, pricing power.
China simply must continue to import iron ore from BHP, Rio and Fortescue for now, but not so much in five years’ time when the enormous Africa based, China-backed Simandou project in Guinea comes on stream.
Bridget Carter 6.13pm: Kogan selldown through Citi
DataRoom | Kogan founders are selling up to $163m of shares in the online retailer through investment bank Citi.
Shares are being sold at a range of $21.60 to $22.25, with bids accepted in 5c increments.
The sell down represents 6.9 per cent of shares on issue.
The parcel of 7.3 million shares will be worth between $158m and $163m.
It will leave founder Ruslan Kogan with 15.3m shares, or 15 per cent of the company, and chief financial officer and chief operating officer David Shafer with 6.1m shares in the company or a 5.8 per cent stake.
The shares are being sold at a 6.0 per cent discount to the last traded price of $22.99.
The selldown was flagged on Monday by DataRoom.
Damon Kitney 6.12pm: Crown bosses ‘told of China risks’
The then chairman of the James Packer-backed Crown Resorts, Robert Rankin, warned the company’s top executives about the risk of its staff being arrested in China only weeks after two South Korean gaming firms had 13 of their staff detained by Chinese authorities in June 2015, an inquiry has been told.
Only weeks before he formally took on the chairman role, Mr Rankin emailed then Crown chief executive Rowen Craigie and Australian Resorts chief Barry Felstead warning the company to be on “high alert” for “regulatory action” and questioned whether the training of sales staff in China should also be reviewed.
But under examination at a public inquiry on Monday reviewing the events leading up to the arrest of Crown’s staff in China in October 2016, Mr Felstead said he did not think to report Mr Rankin’s concerns to the risk management committee of the Crown Resorts board.
This was despite the risk of company staff being arrested for promoting gambling at Crown’s Australian resorts to mainland Chinese citizens being “at the forefront” of his mind. The board was subsequently briefed in the issue by one of its directors representing Mr Packer, Michael Johnston.
Read more
Perry Williams 6.06pm: ‘Pantry loading’ spurs Amcor
Global packaging giant Amcor delivered an 11 per cent rise in annual profit as consumers stocked up on ready meals, coffee, home cleaning and healthcare needs during COVID-19 with the manufacturer warning of ongoing economic risks due to uncertainty over the depth and duration of the global pandemic.
Amcor, which completed its $US6.8bn ($9.4bn) takeover of US plastic food packaging company Bemis last year, said its 2020 net profit lifted 11 per cent on a constant currency basis to $US1.03bn for the 12 months through June, just beating a consensus estimate from analysts of $US1.02bn. Revenue dipped 1.8 per cent to $US12.47bn after it passed through lower raw material costs to customers.
After stripping out the impact of currency swings, earnings before interest and tax improved by 6.7 per cent to $US1.49bn, in line with a forecast by JPMorgan.
Nick Evans 5.42pm: Super Pit extension ‘at a cost’
The new owners of Kalgoorlie’s Super Pit have given their first glimpse of the future for the iconic gold mine, upping its inventory, lifting its mine life and flagging plans to boost production by 40 per cent.
But the extension of the life of the ageing mine will come at a steep cost, with its operators needing to move about 850 million tonnes of rock – or about the same amount of iron ore exported from the Pilbara each year – to access fresh zones of gold ore.
Saracen Mineral Holdings and Northern Star Resources jointly released the new outlook for the Super Pit on Tuesday, outlining plans to open up new zones at the gold mine, extend its life to 15 years and boost production back to levels around 675,000 ounces a year by 2028, up from 440,000 to 480,000 ounces this financial year.
The plans come as spot gold continues to trade near record levels, after this month breaching the $US2000 an ounce barrier.
Saracen and Northern Star have been working on their plans for the mine since spending about $2.3bn to each buy half of the Super Pit from US gold majors Barrick and Newmont in late 2019, and said their work to date had lifted gold reserves by 54 per cent, to 9.7 million ounces of gold. On paper that translates to a $US19.4bn ($26.8bn) resource at the current spot gold price.
The upgrade includes a reassessment of the gold price needed to successfully mine the deposit economically, and an increase in gold-bearing ore at a new mining area at the southern end of the pit Fimiston South.
5.04pm: Marks and Spencer to cut 7000 jobs
Marks & Spencer Group PLC on Tuesday said it will cut 7,000 jobs in the next three months due to the pandemic and the changes it has brought in the workflow, despite its year-to-date performance beating management views.
“We are today embarking on a multilevel consultation program which we anticipate will result in a reduction of circa 7,000 roles over the next three months. These will include departures in our central support center, in regional management, and in our UK stores, reflecting the fact that the change has been felt throughout the business,” the British retailer said.
This comes after having had a number of employees multitasking and transitioning between the food and clothing and home units, the company said. Furthermore, enhanced store technology allowed it to reduce layers of management and overheads in the support office, it added.
M&S also said 13-week food sales rose 2.5pc on year, or 11pc on a like-for-like basis, boosted by shifts in demand and closure of travel locations at the outset of the crisis.
Dow Jones Newswires
4.53pm: BHP, Westpac dip on results
Earnings were a key focus as 11 of the top 200 stocks handed down results, including BHP, who posted a softer profit on the back of the global coronavirus crisis and confirmed the sale of two of its Queensland metallurgical coal mines. Shares in the miner closed down 0.5 per cent to $39.65.
Westpac was the biggest detractor for the market, falling by 2.3 per cent to $17.18 after scrapping its interim dividend. The move prompted a 1 per cent drop in ANZ, who reports on Wednesday, to $18.07, while NAB lost 0.8 per cent to $17.61. Commonwealth Bank, who last week reported a profit drop but maintained a smaller dividend, lost a more moderate 0.4 per cent to $70.48.
Bendigo and Adelaide Bank also felt the sting of broker downgrades after its results, shares falling 2.5 per cent to $6.38.
Elsewhere for reporting companies, Cochlear suspended its dividend as it fell to a full year loss of $238m but more upbeat commentary on its recovery helped shares to lift to six-month highs of $220.70 before settling to a gain of 9.8 per cent or $217.74 at the close.
Fellow health heavyweight CSL added 4.4 per cent by the close to $293.29 as it revealed a partnership with UK biotech giant AstraZeneca.
Here’s the biggest movers at the close:
Perry Williams 4.44pm: AGL setback on LNG plant
AGL Energy has suffered a setback over its plans to develop Australia’s first LNG import plant in Victoria after the local council rejected the project saying it posed an unacceptable environmental risk and was out of step with the transition to renewable energy.
AGL’s environmental effects statement for the proposed Crib Point facility on Victoria’s Mornington Peninsula “falls short of demonstrating that potentially significant environmental impacts of the project can be acceptably managed,” the Mornington Peninsula Shire Council said in a statement on Tuesday.
“The EES also fails to make a strong case for the need to import gas over the medium to longer term, as Australia transitions towards renewable energy.”
AGL had originally targeted imports from its planned $250m LNG import terminal in the first half of 2020 as part of plans to help ease a domestic supply crunch in the state and meet a gas shortfall in its own portfolio.
However, opposition from local groups and a decision by the Victorian government to conduct a full environmental assessment on the facility slowed momentum with first gas now likely in 2023 at the earliest.
The Mornington Peninsula Shire Council, which has committed to zero emissions, voted to oppose the project on Monday night and will hold a meeting with the community on Wednesday to discuss the development.
“It is a weak analysis and gives us no confidence that the environmental impacts of this project can be acceptably managed,” Mornington Peninsula Mayor Sam Hearn said.
“Mornington Peninsula has committed to zero emissions by 2040, with clear staged targets along the way. If the State Government supports this project, it will be displaying a lack of genuine commitment to be truly visionary and take real action in transforming our energy sector and protecting the future of our nation and the world.”
AGL in February conceded it underestimated the challenge of developing Australia’s first gas import plant but AGL boss Brett Redman said in March the facility was still needed to help ease a looming supply shortfall.
4.13pm: Healthy push for shares, up 0.8pc
There was little that could dull the market’s optimism on Tuesday, not geopolitical tensions, dividend warnings or weak earnings, with shares rising rallying by as much as 1 per cent in the afternoon session.
The risk-on mood came after the S&P500 came within an inch of record highs overnight, and further outperformance in the Nasdaq.
Still, opening trade on the ASX was skittish, as bank payout fears prompted heavy losses in three of the four major banks.
The benchmark ASX200 built to gains of 1.03 per cent in late afternoon trade, but tapered off to a 47 point or 0.77 per cent gain to 6123.4 at the close.
On the All Ords, shares added 50 points or 0.81 per cent to 6268.7.
Samantha Bailey 3.58pm: Big tech earnings drive super boost
A lift in equity markets on the back of unprecedented support from central banks and strong tech earnings sent superannuation funds into positive territory for July.
The median growth fund – which is made up of between 61 per cent and 80 per cent in growth assets – gained 1 per cent in July, according to the latest figures released by superannuation researcher Chant West. That compared to a negative return of 0.6 per cent in the 2020 financial year.
“The healthy return in July was largely on the back of international shares which advanced 4 per cent in hedged terms, mainly driven by the US market,” said Chant West senior investment research manager Mano Mohankumar.
“Despite US economic data confirming the severity of the downturn, a strong wave of new COVID-19 infections and ongoing trade tensions between the US and China, the US share market powered ahead.
“This was mainly driven by strong earnings announcements from major technology companies such as Amazon, Apple and Facebook, which saw the tech-centric NASDAQ index reach a record high.”
Still Mr Mohankumar cautioned that while super funds were off to a good start to the new financial year, there are some major hurdles ahead.
“For a start, we still have no idea how long and deep the current global recession will be,” he said.
3.37pm: These stocks are setting records
Shares are pushing higher to 1pc gains in the afternoon session, undeterred by bank weakness or fear of rising geopolitical tensions.
Today’s rally has put the benchmark within 14 per cent of February’s record high, while a few household names have set their own records.
Bunnings and Officeworks owner Wesfarmers set a high of $48.36, up 1.4pc while Afterpay is on track for its another record close as it trades up 2.4pc to $76, the intraday record of $76.62 still elusive.
Elsewhere in the tech space, Appen is up 3.8 per cent to $39.21 to set a new record while Carsales is surging ahead of its results release tomorrow – up 3.2 per cent to $19.47 and lining up for a record close if it holds.
Mineral Resources in the only miner to make the list, up 2.7pc to $28.88 after hitting $29.02.
Earnings releases were a positive for Netwealth – sending shares up 8.6 per cent to a record of $14.67 while car accessory retailer ARB has set a new record of $23.81, up 7pc.
In retailers – Baby Bunting set a high of $4.57, Adairs hit $3.39 and Nick Scali is tracking toward its first close above $9.
3.05pm: Hard for Westpac to re-rate: Macq
Trends from Westpac’s third quarter results look challenged, says Macquarie, noting the bank has few drivers for any re-rate.
The bank has taken an as much as 3.5pc hit on the release of quarterly earnings this morning, along with the scrapping of its interim dividend.
Macquarie notes that while Westpac looks worse than peers, its partly attributable to timing differences “suggesting peers may face similar headwinds in the upcoming periods, leaving the sector in a difficult place”.
“WBC remains relatively cheap, trading at a ~10pc discount to peers and ~28pc discount to CBA. However, given ongoing challenges we see limited scope for near-term rerating and maintain our Neutral recommendation,” the broker says.
“We retain our preference for ANZ/WBC over CBA/NAB on valuation grounds.”
WBC last traded down 2.5pc to $17.16.
Read more: Westpac dumps dividend
2.37pm: S&P rally to ‘stair-step higher’: Canaccord
Canaccord’s head of US equity strategy, Michael Dwyer, notes that the S&P 500’s rise “continues to rhyme with the 2009 market recovery”, and his tactical indicators “suggest a good possibility of a similar stair-step higher in coming months”.
“We have no idea how high the multiple should be with an unlimited level of monetary stimulus and backstop of credit from the Fed,” Mr Dywer says.
“The combination of excess liquidity, monetary and fiscal policy, and global economic turn off the bottom reinforce adding risk exposure on any meaningful pullbacks despite the proximity of our target.”
He argues that the fear of another COVID-19 panic and subsequent credit risk has “caused investors to underappreciate the potential for a synchronised global recovery in 2021 that should benefit the economically sensitive areas that are struggling to gain traction given the success of the ‘stay-at-home’ mega-cap stocks.”
“Indeed, it is very possible to see the major indices see temporary pullbacks along the way as the largest cap stocks take a breather and economically sensitive areas rally.”
Ben Wilmot 1.57pm: Dexus unveils new opportunity funds
Office group Dexus is emerging as one of the most active players in the property market, with the company looking for new opportunities despite the coronavirus crisis.
While the landlord has trimmed the value of its towers, it is selling others at book value and also setting up new funds management vehicles.
Dexus has just unveiled a new series of closed end opportunity funds that could take advantage of the market dislocation thrown up by the crisis.
The Dexus Real Estate Partnership 1 will give superannuation funds and offshore investors exposure to value-add, development and special situation opportunities.
Dexus will co-invest up to $100m in the fund, providing an alignment of interest and an opportunity to benefit directly from the vehicle’s performance.
“Our new unlisted fund will capitalise on emerging pockets of opportunities where we can leverage Dexus’s large-scale platform of transactions expertise, active asset management and development capability to deliver enhanced returns to the fund’s investors,” Dexus executive general manager, funds management, Deborah Coakley said.
Property veteran Jason Howes, who was at Lone Star Funds and prior to that Fortress Investment Group, has been appointed as fund manager. He brings experience in special situations investing.
Dexus claims a strong track record of delivering enhanced returns via its trading business, with $369m of realised trading profits pre-tax since fiscal 2012.
Geoff Chambers 1.54pm: Trade Minister slams China wine probe
Trade Minister Simon Birmingham slammed China’s anti-dumping investigation into Australian wine imports as “very disappointing”.
“They have also advised Australia that they are considering a request to launch a countervailing duties investigation,” Senator Birmingham said.
“This is a very disappointing and perplexing development. Our wine industry has worked incredibly hard to establish itself as a world-leading producer and export powerhouse.
“Australian wine is highly sought after in China because of its quality. Australian wine is not sold at below market prices and exports are not subsidised.”
The countervailing duties investigation involves a probe into whether Australian wine exports are receiving and benefiting from government subsidies. The anti-dumping investigation is expected to be completed by August 18 next year but could be extended until February, 2022.
Senator Birmingham said Australia would “engage fully with the Chinese processes to strongly argue the case that there are no grounds to uphold the claims being made”.
“Our government will stand with the Australian wine industry to uphold their integrity and hard earned reputation for producing wines in high demand throughout the world.”
TWE last trading down 13.7pc to $10.65.
Read more: China takes aim at Aussie wine
1.45pm: Shares shrug geopolitics, add 0.7pc
Australia’s sharemarket is bucked China’s anti-dumping probe into Australian wine, with the S&P/ASX 200 surging 0.7pc to an intraday high of 6119.5 amid big gains in CSL and Cochlear.
CSL is rising 3.9pc at a 4-week high of $292.02 – accounting for almost half the rise in the index – after The Australian said CSL is in talks with AstraZeneca on vaccine production.
Cochlear meanwhile is up 10pc to a 6-month high of $218.67 – accounting for almost a quarter of the rise in the index – after the hearing implant maker flagged an improving trend in surgeries in most markets since May.
1.38pm: BHP dividend disappointing: RBC
BHP had scope to deliver a higher final dividend as earnings per share came in ahead of estimates, according to RBC.
Mining analyst Tyler Broda notes that the miners results were largely in line – with earnings per share at $1.79 ahead of his expected $1.71.
“Considering the cash flow was almost exactly in-line with our outlook and net debt at $12bn is at the bottom end of the range, the final dividend of $0.55 per share (including a $0.17 per share additional dividend) was disappointing vs. our expectations of $0.72,” he writes.
BHP tone is “decidedly conservative” he adds, with the company continuing to expect volatility and variance in commodity markets in the short term.
Still, the broker continues to see upside for BHP shares on a 12 month view.
BHP last traded flat at $39.88.
Read more: BHP examines coal mining spin-off
1.19pm: Plant-based meat maker surges
Wide Open Agriculture (WOA) is exploding higher again, marking a 144pc surge over just the past week.
Shares in the plant-based protein maker surged as much as 39pc intraday to a record high of $1.85 after a similar 40pc surge yesterday.
The $142m company has added an incredible 335 per cent or 4.2 times its value in just 13 trading days this month.
“It seems to be getting around chat sites and forums and young traders are going whoosh,” says a trader. “It’s dangerous stuff of course and a clear sign of what authorities are warning about robinhood-style investment.”
WOA last traded up 24.8pc to $1.66.
1.01pm: Shares rebound to daily highs
Shares are trading near daily highs at lunch as most sectors take optimism from US strength overnight, even amid a drop in the major banks.
At 1pm, the benchmark ASX200 is higher by 23 points or 0.38 per cent to 6099.6.
A 3.1pc jump in CSL is doing a lot of the heavy lifting, alongside further strength in Mesoblast and an 8.9pc lift in Cochlear after its results.
That’s offsetting a 3.3pc drop in Westpac after it scrapped its dividend, while ANZ is down 1.9pc ahead of its results tomorrow.
Here’s the biggest movers at 1pm:
12.52pm: NZ rates will go negative by April: ANZ
ANZ has updated its NZ rate cut call, tipping the weight of the lockdown to send rates negative by April 2021.
NZ chief economist Sharon Zollner writes that the economy was still only at the beginning of the economic impact from its long lockdown, made worse by the latest round of restrictions.
The bank is tipping the RBNZ to cut rates by 50 basis points to -0.25pc in April next year, with further easing possible.
“The RBNZ has ruled out changing the OCR before March 2021, but expressed a preference for a package of a lower OCR and a bank ‘funding for lending’ program, should they conclude that further stimulus is required at that point. We think they will,” Ms Zollner writes.
“We see a further increase in the large-scale asset purchase (LSAP) program in November as likely, perhaps to $120bn. The program in its current form will have largely done its dash by that point.”
She adds that with slow global growth, demand for New Zealands premium products will come under pressure, made worse by a strong Kiwi dollar.
Lachlan Moffet Gray 12.38pm: GM brings Chevrolet, Corvette to Aus
General Motors is set to launch a new car business in Australia and New Zealand offering “hand-picked” GM vehicles to consumers less than a year after the automotive giant announced the retirement of the Holden brand.
The new business, called GM Specialty Vehicles, will compete in the luxury full-size ute and sports car segment and will launch with the Chevrolet Silverado 1500 LTZ ute, followed by the RHD Corvette.
The company said the American Silverado would be remanufactured into right-hand-drives out of the Walkinshaw Group’s Melbourne facility where high-performance cars are remodelled for road use.
The Walkinshaw site was previously involved in the manufacture of Holden Special Vehicle cars.
General Motors Holden interim chairman and managing director Kristian Aquilina said the launch of GMSV would create jobs within GM’s ranks in Australia and support 150 jobs at the Walkinshaw facility.
“I am proud to be announcing GM Specialty Vehicles which represents an important new investment by GM in Australia,” Mr Aquilina said.
“This new venture directly adds sales, marketing and aftersales roles to GM’s 200-strong presence in Australia, and indirectly supports over 150 skilled engineering and manufacturing jobs at our partner in Victoria.”
12.36pm: Monadelphous a standout on results
Monadelphous looks to be one of the standouts of reporting season so far.
After hitting a 3-year low of $7.77 – almost matching its March low at $8.00 – three weeks ago, its shares have surged 16pc to a 3-week high of $9.81.
Results and outlook from the resources industry contractor were impressive on a number of fronts.
While normalised net profit missed its estimate by almost 10pc, Ord Minnet notes that revenue beat expectations with a stronger than expected contribution from the construction segment.
And with 10pc of FY20 revenue was deferred into subsequent periods due to COVID-19 with the company said it’s going into FY21 with a solid forward workload.
Cash conversion was 137pc of earnings and with a payout ratio of 90pc from 80pc in the past two years, the final dividend was 13cps vs. 6cps expected.
Management is expecting the resources sector to provide a steady flow of opportunities over the coming years, Ord Minnett notes.
12.24pm: RBA minutes reinforce slow recovery: CBA
Minutes from the RBA’s latest meeting show the board is expecting a slower recovery than first tipped, pushed back by lockdowns in Melbourne.
Analysing the latest release, CBA economist Belinda Allen notes the RBA’s continued emphasis on consumer confidence and its ties to the health situation.
“The RBA Minutes released today continued to reiterate that the focus was on any spillovers from lockdowns in Victoria to other states. The Minutes note that mobility indicators had suggested that “the previous recovery in activity had slowed across the country, including beyond Melbourne”,” Ms Allen writes.
She notes that Governor Lowe did not rule out a separate bond buying program at its parliamentary committee appearance last week, nor other adjustments to the mid-March program.
11.58am: Treasury drops 15pc, ‘committed’ to Chinese market
Treasury Wine says it is committed to building its brands in China, even as the country initiates an anti-dumping probe into Australian wine exports.
After shares were halted this morning, Treasury said it would co-operate with any requests for information from Chinese or Australian authorities.
“As an importer of high-quality, premium Australian wine, including brands such as Penfolds, TWE remains committed to China as a priority market and will continue to invest in its Chinese business and its relationships with customers and consumers,” it said.
“TWE’s focus will remain on building premium and luxury brands, investing in the local operating model and team, and working with partners to enhance the wine category and grow our contribution to China.”
TWE down 15pc on its return to traded at $10.49.
Read more: China takes aim at Australian wine
11.42am: Treasury Wine trade halted
Shares in Treasury Wine have been paused, pending further detail after share dived by 14pc.
It comes as China’s commerce ministry announces an anti-dumping probe into Australian wine.
TWE last traded at $10.60 – down 13.3pc for the day.
11.33am: Upgrades to come for Coles: Citi
Citi’s Bryan Raymond flags small consensus upgrades for Coles as better like-for-like sales growth offsets COVID-19 costs into 2020-21.
While FY20 Underlying NEAT of $951m was 4pc below his forecast, the final dividend of 27.5 cps was in line with consensus.
Q420 Supermarket LFL sales growth of 7.1pc beat his estimate of 6.4pc, underpinned by underlying inflation picking up from 1.8pc in 3Q20 to 3.3pc in 4Q20 and a strong June exit run-rate.
“Price realisation has improved across the market, which remains rational, with moderating promotional activity,” Mr Raymond says.
2H20 supermarket gross margins rose 27 bps, offsetting higher operating costs, driven by private label, mix and promotional intensity.
On the downside were higher COVID-19 and one-off supermarket costs, with Coles announcing $100m of COVID-19 fixed costs and a further $70m of one-off costs, including bonus payments.
That drove a 11pc rise in the cost of doing business, which also includes ~$16m from the salaried team member review taken above the line.
Online growth was likely below peers with 30pc growth in May and June following supply chain disruption in 3Q20, but has picked up to 60pc in July and August.
Citi has a Buy rating with a $21.40 target price. COL last down 1.22pc to $18.70.
11.26am: Treasury drops on China anti-dumping probe
China’s ministry of commerce says its starting an anti-dumping probe into Australian wine, in the latest ratcheting up of trade tensions after its barley tariffs earlier this year.
According to a ministry statement seen by Bloomberg, the probe will start Tuesday into wines in containers holding 2 litres or less from Australia and will end within one year, and may be extended by a further six months if needed.
TWE is down 12.4pc on the news.
11.02am: Early reactions to today’s results
Shares are holding gains of 0.3pc after the first hour, trimmed substantially by weakness in banks after Westpac’s third quarter update.
Here’s how markets are reacting to earnings releases:
| COMPANY | % CHANGE | LAST TRADED |
| Monadelphous | 14.91 | $9.71 |
| Netwealth | 9.08 | $14.18 |
| Cochlear | 7.17 | $212.52 |
| ARB | 6.12 | $23.23 |
| Ingenia | 0.96 | $4.72 |
| BHP | 0.25 | $39.96 |
| Sims Metal Management | 0.24 | $8.29 |
| Coles | 0.16 | $18.96 |
| Abacus Property | -0.38 | $2.62 |
| Westpac | -3.3 | $17.01 |
Bridget Carter 11.06am: BHP taps Goldmans for Coal spin-off
DataRoom | BHP is understood to have called on Goldman Sachs to work on a $2bn-plus demerger of its coal mining assets.
It comes as the Australian-listed mining giant confirmed Tuesday that a divestment of its metallurgical mines in Queensland is on the agenda, as well as its thermal coal mining interests.
Goldman Sachs worked with BHP on the demerger of its South32 spin-off in 2015 and is currently assisting BHP on its oil and gas joint venture in the Gippsland Basin, estimated to be worth at least $US2bn, as revealed by DataRoom on July 8.
BHP confirmed in its results on Tuesday that a sale of its 50 per cent interest in the Gippsland Basin oil and gas development in Bass Strait was also on the agenda.
The Bass Strait fields have provided up to 40 per cent of east coast gas production but are now in decline and its joint venture partner, Exxon is already working with JPMorgan to sell its interest.
Read more: BHP takes profit hit, confirms coal exit
Eli Greenblat 10.52am: Three more Big W stores to close
Woolworths has announced the closure of three more of its Big W stores as part of a plan it first unveiled last year to radically shrink its network of general merchandise stores by as many as 30 outlets and two distribution centres to return the business to profitability.
The supermarket chain said on Tuesday that BIG W had made the “difficult decision” to announce the closure of three stores at the end of January 2021: Box Hill and Broadmeadows in Victoria, and Armidale in NSW.
“The purpose of this review is to build a strong and more sustainable store and distribution centre network that reflect our customers’ needs and the rapidly changing retail environment,’’ Woolworths said in a statement.
David Walker, managing director of BIG W said: “The decision to close any store is difficult, particularly now that communities are being challenged during COVID-19.
“Supporting our team remains our priority and we are committed to doing the right thing by them. Over the next five months, we will explore every redeployment opportunity available with team members who choose to continue their career at BIG W or with other Woolworths Group brands.
“We will continue to work with landlords as part of the network review. We remain committed to building a strong and sustainable BIG W that meets the needs of Australian families.”
10.42am: Ingenia poised for acquisition spree
Holiday park and retirement village developer Ingenia says its poised to jump on acquisitions in both sectors arising from COVID-19 stress, as it reports a 25pc jump in annual profit.
Handing down its full year results, Ingenia said it had notched profit of $59.1m, with record earnings of $71.9m driven by an increase in rental sites and higher average new home sale prices – even with a heavy hit from holiday park closures and reduced settlements due to COVID-19.
The group declared a 4.4c per share dividend, taking the full year dividend to 10c, down from 11.2c last year.
Chief Simon Owen said acquisition opportunities were emerging, and the group was “well capitalised and ideally positioned to benefit from any market dislocation”, with proceeds from the group’s $178m equity raise to be progressively deployed over the next 12 to 18 months.
He added that the second half of the year was marred by bushfires and COVID-19 restrictions, but that the bounce back better than expected.
“What was particularly encouraging was the way Australians responded to domestic holidays when restrictions were lifted, with an uptick in forward bookings. Due to the nature of the pandemic, there remains uncertainty over further COVID-19 disruptions,” he said.
INA last traded up 1pc to $4.72.
Ben Wilmot 10.31am: Abacus rules out National Storage bid
The listed Abacus Property Group has called out its position in rival company National Storage REIT but says it will sit tight after a frenzied period before the pandemic struck when a takeover of the storage company by a US group appeared likely.
Abacus, led by Steven Sewell, says that it “has no present intention in respect of its position in a listed self storage REIT other than as a long term hold in a key sector”.
Delivering the trust’s results Abacus managing director Steven Sewell acknowledged the uncertainty caused by the COVID-19 pandemic, but said the company was positive on its differentiated AREIT positioning in the office and self storage sectors.
In an active year, the company said it had made $190m of acquisitions and an additional $117m investment into the listed self storage A-REIT, that it did not name, at attractive pricing.
Abacus did not provide guidance but expects the fiscal 2021 distribution to reflect a payout ratio of 85-95 per cent of Funds From Operations.
Over the last financial year, Abacus has deployed $820m of capital into offices and self storage while trimming its exposure to its non-core legacy investments, particularly in the residential land and mortgages sector.
ABP last traded up 0.4pc to $2.64.
Read more: Abacus stake lift adds up to takeover play
10.16am: Major banks trim ASX lift
Dividend disappointment is weighing on the major banks in opening trade, after Westpac cut its interim payout citing a “highly uncertain” outlook.
The overall market is still higher however, up 15 points or 0.24pc to 6091.
That’s despite a 3.1pc drop in Westpac, while ANZ trades off by 1.6pc and NAB loses 1.2pc. Commonwealth Bank is holding on to minor gains of 0.1pc.
Unibail-Rodamco dropped 6.6pc after admitting that it’s mulling a possible EUR3bn equity capital raising. BHP fell as much as 1.3pc after its FY20 underlying net profit missed expectations due to weaker than expected earnings from copper and oil.
But positive share price reactions to results are dominating today, with Monadelphous up 7.9pc, Cochlear up 3.5pc, Sims up 4.7pc and ARB up as much as 4.6pc after their results.
CSL rose 2.4pc after The Australian said CSL is in talks with AstraZeneca on vaccine production.
10.05am: Spirit doubles revenue in acquisition spree
Junior telco Spirit has doubled annual revenue in what it described as a ‘transformative year’, with further acquisitions in the works.
The group said this morning it had posted FY20 revenue of $34.9m, up 100pc on last year, while underlying earnings was up 88pc to $3.73m, at the upper end of its guidance range.
Still, the group’s seven acquisitions through the year weighed on its bottom line, pulling it to a net loss of $1.5m.
In the current year, July new sales were up 165pc from the previous year, with $2.3m new sales added in July, bolstered by its recent VPD acquisition, with a strong pipeline of new acquisitions in negotiation and due diligence stages.
“In FY21 our priority is to bring our entire Cloud and IT offering onto our digital sales platform, Spirit X, and expand our wholesale dealer network – creating an even stronger engine for organic growth,” managing director Sol Lukatsky said.
“We’ll continue with our disciplined M&A strategy, to find right-price, right-fit businesses that support the expansion strategy, as well as continuing to focus on integration and optimising growth synergies.”
9.52am: Commodities in supercycle shift: Janus
Janus Henderson’s head of global natural resources, Daniel Sullivan, sees a multi-year shift to a “supercycle” for commodities buoying the resources sector where “valuations are attractive and earnings momentum is positive”.
He identifies six major commodity peaks in the past 227 years, the most recent in June 2008. His analysis shows the current supercycle is following the average path of these historic supercycles, pointing to an upturn in commodities through the 2020s.
Mr Sullivan argues that China’s rising infrastructure spending, rate cuts, more delegation to local governments to support the auto industry and some relaxation of housing policies are positive for metals demand.
And the copper price – often seen as a bellwether for global economic growth, has gained a massive 50pc to $US3/lb since March 2020, while gold has set a new record high above $US2,000/oz, and silver, rare earths and uranium are also turning up and he thinks other commodities are likely to follow.
“Unless we see subsequent widespread lockdowns around the world in response to COVID-19, the strength of the iron ore, copper and gold prices point to double-digit earnings upgrades for the mining sector,” Mr Sullivan says.
9.48am: ANZ confidence breaks 7-week losing streak
ANZ’s weekly read of consumer confidence has edged higher for the first time in 8 weeks, with all subindices lifting besides “current finances”.
In the latest release, ANZ said confidence had strengthened by 2.4pc to 88.6 points off the back of a slowdown in new virus cases in Sydney and Melbourne.
Perceptions of future finances gained 4.2pc while current economic conditions rose a massive 10.6pc – albeit after a cumulative fall of 30pc over the prior 8 weeks.
“Confidence of Melbourne consumers lifted the most, but is still the lowest of the major capital cities,” head of Australian economics David Plank said.
“The move higher follows seven straight weeks of falls, so a tick up was due; and with confidence remaining at a level that is well below average we aren’t getting too carried away by the positive result. Consumers are still very cautious about the outlook.”
ANZ-Roy Morgan Aus Consumer Confidence lifted after seven weeks of falls. With #confidence still well below average we aren’t getting too carried away by the positive result. #Consumers are still very cautious about the outlook. #ausecon #ausretail @DavidPlank12 @roymorganonline pic.twitter.com/3ofKtRKpRg
— ANZ_Research (@ANZ_Research) August 17, 2020
Samantha Bailey 9.42am: Tyro widens loss as COVID closures weigh
Tyro Payments has widened its full-year loss, booking a loss attributable to shareholders of $38 million, compared to an $18.4m loss a year ago.
Meanwhile transaction value lifted 15 per cent to $20.1bn for the full-year through June.
Chief executive Robbie Cooke said that COVID-19 restrictions had weighed on transaction values since March, with many merchants forced to close.
“Despite this severity of the decline, we exited fiscal year 2020 with overall transaction value growth at 15 per cent, which demonstrates the strength and robustness of our business model,” he said.
Tyro, which counts Atlassian co-founder Mike Cannon-Brookes among its investors, listed on the ASX in December last year.
The company was founded in 2003 and was the first new entrant into the Australian eftpos business since the 1990s.
The company did not declare a final dividend.
Bridget Carter 9.36am: Coronado Global raising $250m
DataRoom | Coronado Global Resources is raising $250m in an institutional placement and entitlement offer through Credit Suisse, Goldman Sachs, Citi and Bell Potter at 60c per chess depositary interest.
The company will use the proceeds 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.
There will be 175.7m new CDIs issued under the entitlement offer and 241.6m under the placement, equating to a quarter of the existing shares on issue.
The price of 60c per chess depositary interest is a 27.3 per cent discount to the last closing price of 82.5c.
Read more: Coronado raising $250m
John Stensholt 9.28am: Record inflows lift Netwealth profit
Superannuation and wealth management firm Netwealth has recorded a 21pc increase in net profit to $43.8m and a 25.5pc rise in total revenue thanks to record inflows flowing its way from rich clients and financial advisers.
Headed by billionaire Michael Heine and son Matt, Netwealth’s funds under administration hit a record $31.5bn as of June 30, an increase of $8.2bn or 35pc compared to a year earlier. It also has $7.3bn funds under management, which grew $3.3bn during the 2020 financial year.
The firm said its previously announced price cuts for its wealth platform products would be applied to all its clients by the end of the calendar year, but it had still been able to maintain a high EBITDA margin of 52.3pc.
Netwealth’s total operating expenses reached $59.1m, a 26.2pc increase from last year, though the company said the rise was due to IT infrastructure and software spending, and the hiring of more staff, to support its increasing client numbers.
It said it had been able to transition all its staff to working from home arrangements without a net increase to its operating costs.
Netwealth declared a fully franked dividend of 7.8c per share, payable on September 24.
It has market capitalisation of more than $3bn after hitting an all-time record share price high last week.
NWL last traded at $13.00.
Read more: Platform performs through the crisis
9.23am: ARB struggles to ramp up production
Auto parts manufacturer and distributor ARB 4X4 says it is finding it challenging to fulfil customer orders which have rebounded since May as well as bringing its manufacturing operations up to full capacity.
“The rapid return of customer orders in May 2020 following the removal of shut downs was unexpected and reversed the declines in orders that occurred in March and April 2020,” the Melbourne-based ARB said in a company filing.
The comments come as ARB delivers a profit of $57.3m for the year to end-June, steady on the same time a year earlier. ARB declared a full year dividend of 39.5c, also flat on the year.
“Unfortunately, ARB has been unable to fill many customer orders received due to the deliberate de-stocking that occurred as a result of scaling back manufacturing and deferring third party purchases in anticipation of a prolonged downturn,” it said.
“It has been challenging for ARB to reinstate its manufacturing operations in Australia and Thailand”.
ARB said it had $9.5m in terms of wage subsidies in Australia (JobKeeper) and New Zealand (Wage Subsidy Scheme).
“The JobKeeper subsidy provided certainty and facilitated the reinstatement of employees and the continuation of important Company projects. This included engineering research and development activities and operational improvement projects that without JobKeeper would not have progressed,” ARB said.
9.15am: Broker ratings changes
- Altium raised to Hold – Ord Minnett
- Bendigo Bank cut to Neutral – Citi
- Bendigo Bank cut to Neutral – JP Morgan
- BlueScope raised to Equal-weight – Morgan Stanley
- JB Hi-Fi cut to Sell – Bell Potter
- Viva Energy cut to Hold – Jefferies
9.05am: Results to sway market moves
The Australian sharemarket will be digesting results from 11 of the top 200 including BHP, Coles, Cochlear and Amcor, as well as Westpac’s trading update today.
Westpac’s decision not to pay an interim dividend could further drag on the banking sector, with the sector hit yesterday after Bendigo Bank made a similar decision.
Cochlear has also scrapped its final dividend and declined to give any earnings guidance. BHP’s final dividend met expectations but its underlying profit was a touch below the consensus.
Overall the market may reflect some disappointment, notwithstanding expectations of a 0.4pc opening rise to 6100 based on overnight futures relative to estimated fair value.
Still, the global mood remains positive with the S&P 500 up 0.3pc to 3381.99, the VIX index down 0.7 points to a 6-month low close of 21.35pc, the Nasdaq up 1pc to a record high close of 11129.72.
In commodities, spot iron ore closed up 2.5pc to $US118.78, Brent crude oil was up 1.1pc to $US45.31, and LME copper up 1.2pc to $US6,450.
9.02am: COVID-19 writedowns send Estia to a loss
Aged care home operator, Estia Health says nine of its 27 homes in Victoria have COVID-19 positive cases in residents or staff, but says no homes in other states had active COVID-19 positive cases.
Comments come as Estia takes a non-cash impairment charge, primarily to goodwill, of $144.6m in the June half as a result of the COVID-19 pandemic. The writedown saw Estia sink to a $116.9m loss for the year to end June, compared to $41.3m a year earlier.
Estia also scrapped its dividend for the June half (compared to a 7.8c a share dividend for the same time a year earlier).
The Group’s homes at Ardeer and Heidelberg West in Victoria experienced high COVID-19 positive test rates among residents and staff. At Ardeer, as of 14 August 2020, a total of 49 residents and 61 staff had tested positive for COVID-19 since the first confirmed case on 9 July 2020.
A total of 29 residents and 54 staff at Heidelberg West had tested positive for COVID-19 since the first confirmed case on July 12.
Some residents were transferred to hospitals from each home and have subsequently returned to their Estia home.
“The ongoing uncertainty of future sector funding and financing, exacerbated by the future uncertainty and impacts of COVID-19 is expected to have a detrimental effect on future operating cashflows for some time,” Estia said in a filing with the ASX.
“As a result of these impacts, the review of the carrying value of the Group’s assets identified a non-cash impairment charge, primarily to goodwill, of $144.6m in the period”.
EHE last traded at $1.43.
Read more: Estia risks funding cuts over COVID-19 outbreaks
Lachlan Moffet Gray 8.58am: Panic buying a boost for Asaleo
Paper towel, tissue and hygiene product manufacturer Asaleo Care has recorded strong annual performance on the back of increased demand for cleaning products, with net profit more than doubling to $18.8m from $7.3m last year – but have decided against declaring an interim dividend.
The result was driven by strong sales of their in-demand products like Sorbent tissues and toilet paper, Handee paper towels and Libra pads through retail channels, with segment revenue up 15.6 per cent to $103.6m.
The $521m company said the businesses benefited from the panic buying phenomenon in Australia and New Zealand early in the pandemic and was able to keep pace with increasing demand by ramping up production at their domestic manufacturing facilities, although the benefits of the pandemic “began to unwind in the second half”.
Also contributing to the strong result was the direct sale of products to businesses and aged care homes attempting to become COVID safe, with revenue for the sector growing 4.6 per cent to $111.3m.
The company forecasted that the benefits seen during the panic buying and lockdown phase will continue to “unwind” over the rest of the year and forecast a full year underlying EBITDA of $84m-$87m.
The decision not to declare an interim dividend was done to reduce net debt, it said, which currently sits at $118.9 million.
Asaleo Care shares last traded at 96 cents on Monday.
Eli Greenblat 8.50am: Coles supermarket sales up but profit dented
Coles has reported a 31.8 per cent drop in full-year statutory net profit to $978m as the supermarket giant accounts for the earnings lost when it was demerged from Wesfarmers in late 2018.
The company’s actual underlying retail performance is much healthier, showing a 5.7 per cent rise.
Shareholders will also be rewarded with a larger final dividend of 27.5c per share as its supermarkets ratcheted up their revenue and earnings, up 14.6 per cent on last year’s final dividend. The final dividend will be paid on September 29.
The supermarket group said underlying earnings were better by 5.7 per cent to $951m for fiscal 2020, up from $900m in 2019, as total revenue for the company fell 1.8 per cent to $37.78 billion.
But the retailer’s supermarket sales continued to gain as shoppers stripped products from the shelves in the wake of COVID-19 – fourth quarter same store sales improved by 7.1 per cent, beating many analyst expectations, to record Coles’ 51st consecutive quarter of supermarket sales growth.
The slide in full-year statutory profit reflects the group’s demerger in late 2018 which removed Kmart, Target and Officeworks from the Coles accounts with 2019 still including five months of profits from the Wesfarmers businesses.
The subsequent hotels joint venture and restructuring of its fuel wholesale arrangement also means Coles no longer receives revenue from either of those two businesses.
Coles said its retail sales excluding these one-off events rose 6.9 per cent to $37.4bn.
Jared Lynch 8.47am: Cochlear falls to loss on legal, Covid
Cochlear has reiterated its dividend suspension after posting a full year loss of $238.3m – a 186 per cent turnaround on 2019, with the hearing implant maker blaming the coronavirus pandemic and the loss of a patent infringement lawsuit in the US.
Cochlear – which revealed on Tuesday it has received $23.6m in government assistance via the Morrison government’s JobKeeper wage subsidy and other taxpayer-funded programs in the US, Europe and Asia – recorded a 6 per cent slump in sales to $1.352bn in the year to June 30.
Widespread elective surgery bans halted the uptake of Cochlear implants – fuelling a revenue fall of 60 per cent in April – the month it applied for JobKeeper.
It has declined to give any profit guidance for FY21 and reiterated its statement from March that it would suspend its dividend until “trading conditions improve”.
“The board expects to resume payment of a dividend once a clear and sustained improvement in sales revenue has been established and cash flow generation is sufficient to support its resumption,” the company said in a statement to the ASX.
8.06am: BHP to exit thermal coal, profit drops
BHP Group reported a 4pc drop in annual net profit and said it wanted to stop mining thermal coal, and would seek buyers for some older oil and gas assets.
BHP, the world’s largest listed miner by market value, reported a net profit of $US7.96 billion for the 12 months through June, down from $US8.31 billion a year earlier. The result was dragged down by $U1.1 billion in one-off charges, including costs tied to its pandemic response.
The company said its annual underlying profit fell by 1pc to $US9.06 billion, missing the $US9.33 billion median forecast of eleven analysts compiled by FactSet.
Directors declared a final dividend of 55 US cents a share. That brought the full-year ordinary dividends to $US1.20 a share, down 10pc on 12 months earlier.
Chief Executive Mike Henry said most major economies will likely suffer deep recessions this year, with the exception of China.
“Recovery will vary considerably by country,” he said. “Our diversified portfolio and high-quality assets position us to continue to generate returns in the face of near-term uncertainty.”
Net debt rose to $US12.04 billion at the end of June to be at the bottom end of the company’s stated $US12 billion-$US17 billion target range.
Dow Jones Newswires
Joyce Moullakis 7.40am: Westpac to scrap first half dividend
Westpac has opted not to pay an interim dividend as it warned of a “highly uncertain” outlook, even as third-quarter earnings rose due to lower impairment charges.
The board had decided not to pay a first-half dividend and would next consider a payment after ruling off its financial year on September 30, Westpac said in an ASX statement on Tuesday.
Unaudited cash earnings rose to $1.32bn for the three months ended June 30, compared to a quarterly average in the first-half of $497m. The earnings result was up 19 per cent when “notable items” such as customer refunds and costs linked to legal action by financial crimes regulator Austrac were taken into account.
Westpac reported a third-quarter unaudited net profit of $1.12 billion, also higher than the quarterly average of $595 million.
Westpac in May deferred making a decision on its first-half dividend, after the banking regulator issued a warning about COVID-19 and said financial institutions should “seriously consider” putting off dividend deliberations.
Chief executive Peter King said the improved result mostly reflected lower impairment charges. “Nevertheless, the impact of the COVID-19 pandemic is clear as activity fell and margins declined,” he said.
Westpac, which reported a net interest margin of 2.05 per cent for the third quarter, said it would next consider dividends when finalising its annual result.
7.00am: Buffett’s Berkshire buys Barrick stake
Warren Buffett’s Berkshire Hathaway has put its gilded name behind one of the largest goldmining firms, adding to the list of big-name investors making wagers tied to the precious metal at a time of significant economic uncertainty.
Berkshire late Friday disclosed that it held a $US565 million stake in Barrick Gold Corp, the world’s second-largest gold miner, at the end of the second quarter. The stake makes Berkshire the 11th-largest shareholder in Toronto-based Barrick, according to FactSet.
The move is striking because Mr Buffett has in the past said he doesn’t like investing in gold. Unlike dividend-paying stocks or high-quality bonds, buying and holding the metal in an investment portfolio generates no income. The Barrick stake is made up of common shares that pay a dividend.
New York-listed shares of Barrick surged nearly 12 per cent on Monday following the news of Berkshire’s stake, hitting their highest level since February 2013 and bringing their advance in 2020 to more than 60 per cent. Shares of other gold firms rose as well, while Berkshire’s Class B shares dropped nearly 2 per cent on a mixed day for major US stock indexes.
The news “is earth-shaking in the gold market,” said Bob Haberkorn, senior market strategist at RJO Futures, adding that Berkshire taking the stake in Barrick at the same time that it unloaded billions of dollars in bank stocks such as Wells Fargo & Co and JPMorgan Chase & Co. was instilling more faith in the bullion rally.
Read more
Dow Jones
6.15am: ASX to open higher
Australian stocks are poised to open higher, after US markets mostly rose, boosted by technology stocks.
Shortly before 6am the SPI futures index was up 33 points, or 0.5 per cent.
The Australian dollar was higher at US72.18c.
Gold prices surged 2.5 per cent.
On Monday, Australian stocks fell 0.8 per cent by the close of trade, led by more than 2pc losses in the major banks,
6.10am: S&P 500 ends just short of record
The S&P 500 ticked higher, extending a gradual August rally that has pushed the benchmark to the cusp of a new high.
The broadbased index rose 0.3 per cent to 3382, just a few points below its record closing high from February, before the coronavirus pandemic ravaged financial markets. In recent days, the S&P 500 has repeatedly approached the record but stopped short of notching a new close.
Meanwhile, the Dow Jones Industrial Average fell 0.3 per cent, while the technology-heavy Nasdaq Composite gained 1 per cent.
The stock market has staged an extraordinary recovery from its March lows, driven by emergency stimulus efforts from Washington, a surge in big tech stocks and a torrent of individual investors piling into stocks.
Still, the pace of the advance has slowed in recent weeks as investors take stock of hurdles facing the economic recovery, stalled negotiations over a new stimulus package in Washington and tensions with China.
“We had this vibe that the bottom of the economic slump wasn’t quite as bad as people’s baseline forecast,” said Lyn Graham-Taylor, senior rates strategist at Rabobank. “But there’s also a feeling right now that the recovery is not going to be a quick ‘V’ shape. It’s going to be slower.”
Exceptionally thin holiday trading has also contributed to listless moves in stocks and bond yields, Mr. Graham-Taylor added. “It will get busy in a few weeks or so,” he added, citing the US presidential election as one factor that will drive markets during the fall.
The S&P 500’s record closing level of 3386.15 from February 19 has acted as a ceiling on the market in recent trading sessions, but it is only a matter of time before that record is broken, said Michael Mullaney, director of global markets research at Boston Partners.
“Many people have been caught off guard by the strength of this market, and they’re still trying to play catch up,” Mr. Mullaney said. “There is still tons of cash on the sidelines waiting to go somewhere.”
Shares of Tesla surged 11.2 per cent, putting them on track for a new record close, after analysts at Wedbush Securities raised their price target for the electric-car maker. Tesla shares have more than quadrupled in value this year, making them one of the market’s biggest success stories in 2020.
In overseas stocks, the Stoxx Europe 600 gauge edged up 0.3 per cent as an advance in shares of basic-resource companies balanced a decline in travel and banking stocks.
Shares in Asia were broadly higher. The Shanghai Composite Index advanced 2.3 per cent after the People’s Bank of China injected 700 billion yuan ($US101 billion) into the banking system via its medium-term lending facility. The move could pave the way for lower benchmark lending rates.
But Japan’s Nikkei 225 fell 0.8 per cent after data showed the Japanese economy endured its worst contraction on record in the second quarter. Gross domestic product fell 7.8 per cent in the three months through June compared with the previous quarter, the biggest decline since at least 1980.
Futures on Brent crude, the global oil benchmark, climbed 1.3 per cent to settle at $US45.37 a barrel. Later this week, ministers from the Organisation of the Petroleum Exporting Countries and its allies are set to review compliance with production cuts.
Dow Jones Newswires
6.00am: Citi sues, seeks return of ‘mistaken’ payment
Citigroup has filed a lawsuit against Brigade Capital Management LP, seeking the return of the hedge-fund manager’s share of nearly $US900 million payment that Citi said it paid by mistake to Revlon lenders.
Brigade “has unlawfully attempted to capitalise on the mistaken payment, “ Citi said in the complaint, filed in New York federal court on Monday. Brigade and other lenders have taken the position that they aren’t obligated to return the money, The Wall Street Journal reported Friday.
Revlon has said it didn’t pay the money itself. In the lawsuit, Citi said the payment came from the bank’s own funds.
Dow Jones Newswires
5.45am: McDonald’s ex-CEO fights severance clawback
Former McDonald’s Corp. chief executive Steve Easterbrook said in a court filing that the company had information about his relationships with other employees when it negotiated his multimillion-dollar severance package.
In his first response to the suit McDonald’s filed seeking to recoup that severance, Mr. Easterbrook’s lawyer said the company admitted it had his email account stored on company servers when it first investigated his conduct last October. The company said last week that McDonald’s investigators unearthed email messages with attachments that contained dozens of nude and sexually explicit photos and videos of Mr. Easterbrook with company employees and other women between late 2018 and early 2019.
“Based on the very same information McDonald’s has today, it negotiated a separation agreement,” Mr. Easterbrook’s lawyer wrote in a filing in Delaware on Friday afternoon. “But McDonald’s admits that the ‘new’ information it now relies upon is not new at all.”
McDonald’s expects to respond to Mr. Easterbrook’s filing in court, according to a person familiar with the litigation.
“McDonald’s stands by its complaint, both the factual assertions and the court in which it was filed,” a McDonald’s spokesman said.
McDonald’s has taken the unusual move of seeking to claw back Mr. Easterbrook’s severance in court, exposing the company and its board to a rare public fight over compensation awarded to a former executive.
McDonald’s fired Mr. Easterbrook without cause in November after he acknowledged having a consensual relationship with an employee. The fast-food giant said in the lawsuit last week that it has since concluded that Mr. Easterbrook lied to investigators and its board to cover up relationships with employees to secure a multimillion-dollar severance package.
Dow Jones
5.40am: Gold surges 2.5pc
Gold prices rallied Monday, with the gain helping the precious commodity put in the best one-day gain in about four months on the back of a slide in government bond yields and the U.S. dollar, which were raising the appeal of the precious commodity.
The yellow metal also may have drawn additional interest after a public filing that offered a peek of holdings of Warren Buffett’s Berkshire Hathaway revealed that the conglomerate had taken a new stake last quarter in the world’s second-largest gold miner, Barrick Gold Corp.
December gold rose $US48.90, or 2.5pc, to settle at $US1998.70 an ounce.
On a dollar and percentage basis that marks the best day for gold since April 22, FactSet data show.
Last week, gold came under pressure as US Treasurys climbed to an eight-week high, detracting from the appeal of bullion. However, gold enthusiasts insists that uncertainty about the economic landscape fostered by the COVID-19 pandemic make bullion a solid long-term bet, particularly as countries spend trillions to support their economies.
Dow Jones
5.35am: France’s Sanofi to buy Principia
French pharma giant Sanofi said it will buy US group Principia Biopharma for $US3.7 billion in a deal that will boost its research and development into auto-immune and allergic diseases.
Sanofi boss Paul Hudson said the deal was an “important step” and would help the company’s development of the most promising medical treatments.
The deal, expected to be completed later this year, will see Sanofi “acquire all of the outstanding shares of Principia for $US100 per share in cash, which represents an aggregate equity value of approximately $US3.68 billion”, Sanofi said in a statement.
Sanofi has been co-operating with San Francisco-based Principia since 2017, securing an exclusive global licence to develop and market its BTK’168 drug for treating multiple sclerosis and other central nervous system illnesses.
AFP
5.30am: European stocks close firmer
European stock markets closed firmer but Wall Street was mixed as investors kept a wary eye on simmering US-China tensions and continued Democrat-Republican wrangling over a US coronavirus stimulus package.
Wall Street opened slightly higher after positive housing data and as the tech-rich Nasdaq – up 0.8 per cent – continued to lead the market but the Dow then slipped back.
Record figures for new-build single-family homes helped sentiment but were not enough to sustain the modest opening gains on the Dow, with investors unsettled by continued US-China tensions and the apparent impasse over a new coronavirus economic support package.
Concerns were stoked again after high-level talks between Washington and Beijing on the status of their “phase one” trade agreement did not take place as planned Saturday, with no new date set.
US President Donald Trump has continued to ratchet up tensions with Beijing ahead of the November election in the face of opinion polls showing him trailing Democrat Joe Biden in key battleground states.
China on Monday slammed Washington for using “digital gunboat diplomacy” after Trump ordered TikTok’s Chinese owner ByteDance to sell its interest in the Musical.ly app it bought and merged with TikTok.
Uncertainty over the status of the trade talks “has added to the frosty situation,” noted David Madden, analyst at CMC Markets UK.
London closed up 0.75 per cent, Frankfurt gained 0.15 per cent and Paris added 0.2 per cent.
In Asia, Tokyo’s main stocks index closed down 0.8 per cent Monday after data showed a record contraction of the Japanese economy in the second quarter.
AFP
5.25am: Ryanair cuts Sept, Oct flights
Ryanair will cut its September and October timetable by “20 per cent” on weaker-than-expected demand following renewed virus-linked travel restrictions in some European countries, the Irish airline said.
“These capacity cuts and frequency reductions for the months of September and October are unavoidable given the recent weakness in forward bookings due to COVID restrictions in a number of EU countries,” the no-frills carrier said in a statement.
Ryanair said the cuts to flights “will be heavily focused on those countries such as Spain, France and Sweden, where rising recent COVID case rates have led to increased travel restrictions”.
The reduction will also hit Ireland, as the country has imposed 14-day quarantines on visitors from most other EU countries, notably Germany and the UK, Ryanair added.
AFP
5.20am: China blasts US over TikTok
China has slammed Washington for using “digital gunboat diplomacy” after US President Donald Trump ordered TikTok’s Chinese owner ByteDance to sell its interest in the Musical.ly app it bought and merged with TikTok.
As tensions soar between the world’s two biggest economies, Trump has claimed TikTok could be used by China to track the locations of federal employees, build dossiers on people for blackmail, and conduct corporate espionage.
The order issued late Friday builds on sweeping restrictions issued last week by Trump that TikTok and WeChat end all operations in the US.
Chinese foreign ministry spokesman Zhao Lijian on Monday said “freedom and security are merely excuses for some US politicians to pursue digital gunboat diplomacy” – referring to vessels used by Western imperial powers during the nineteenth century, which China considers a deeply humiliating period in its history.
TikTok – which is not available in China – has sought to distance itself from its Chinese owners.
Zhao said TikTok had done everything required by the US, including hiring only Americans as its top executives, hosting its servers in the US and making public its source code.
But the app has been “unable to escape the robbery through trickery undertaken by some people in the US based on bandit logic and political self-interest”, Zhao said at a regular press conference.
AFP
ASX 200 rises on record day for CBA; Block down
Super fund HESTA demands early exit for MinRes CEO Chris Ellison as partner Albemarle ramps up pressure. Scandal-hit ANZ's cash profit drops. Cuscal kicks off $336.8m IPO roadshow. Block down on revenue miss.
ASX 200 jumps late in seesaw session; Sigma top gainer
ACCC gives nod for Sigma's multibillion dollar union with Chemist Warehouse. Regis launches legal action against Plibersek mine decision. Kerry Stokes starts swinging at AGM. Business leaders warn of Trump trade implications.