ASX gains 1.8pc as economists warn of ‘giant’ GDP drop ahead

Shares jumped 1.8pc to their best levels since early March, marking a 30pc recovery from its coronavirus trough.

David Rogers and Melissa Yeo

38 min read

8:38PMJune 03, 2020

The US stock market is “now no longer a true reflection of the economy”, analysts say. Picture: AP

Annual growth contracts to slowest since GFC
Aussie dollar soars past US69c
Zip hits record as investors cheer US deal
China PMI smashes expectations

That’s all from the Trading Day blog for Wednesday, June 3. Australian stocks added 1.8pc to hit the best level in three months even as GDP data showed economic growth slipped by 0.3pc, the slowest since the GFC. Still, the Aussie dollar is trading near US69.5c, largely unchanged on the news.

Overnight, the Dow gained 1.1 per cent, the S&P 500 rose 0.8 per cent and the Nasdaq climbed 0.6 per cent.

James Glynn 8.37pm: Silver lining for dire economic climate cloud

Australia’s almost three decades of expansion is over, with Josh Frydenberg confirming on Wednesday that the economy is in recession, something virtually nobody in the country under the age of 50 has experienced in their working lives.

The country’s record-breaking run of 28 years without a technical recession — two successive quarters of negative growth — has helped it fend off events such as the collapse of Lehman Brothers in 2008 and the Asian financial crisis in the late 1990s.

That economic success can be attributed to a mix of good management and more than a bit of luck, but the COVID-19 pandemic is proving too big an obstacle to avoid.

Lachlan Moffet Gray 7.30pm: VentureCrowd aiming to raise $50m

Local equity crowd-funding platform VentureCrowd is hoping to raise $50m by the end of 2021 through a new mortgage fund to allow young, retail investors to dip their toes into the post-COVID property market.

VentureCrowd’s completely digital investment platform will allow retail and wholesale investors to tip a minimum of $5000 into the Mortgage Fund V2.0’s secure, registered mortgages from their phones.

The targeted return is 7 per cent a year but investors will also be able to swap their stake for property at the end of development.

Leo Shanahan 6.30pm: Mystery as Seven West Media spikes

Seven West Media has been questioned by the ASX about conspicuous share price and volume spikes that have seen its stock rise by more than 50 per cent in the past three days.

The debt-laden media company has denied any imminent announcement despite a restructure of the network’s debt expected to be finalised soon.

The Kerry Stokes-backed media company has $569.5m in net debt (as of December last year) which, combined with drastic advertising losses and sports cancellations on the back COVID-19, has dragged Seven’s share price to record lows.

Eli Greenblat 6.10pm: Boom in home beauty treatments

The coronavirus pandemic that saw panic-shopping at supermarkets and chemists and forced the closure of beauty salons has triggered a sales boom for home beauty treatments such as hair removal products, baby wipes and in recent weeks pregnancy tests, says Church & Dwight chief executive David Thomas.

The boss of Church & Dwight Australia and New Zealand, an offshoot of the US company that owns consumer brands Curash, First Response pregnancy tests, Nair hair removal and pain relief ointment Dencorub, said some of his leading products had booked 50 per cent sales growth since the coronavirus outbreak in March.

Mr Thomas told The Australian that demand was strong across the supermarket aisles and within pharmacies as consumers filled their pantries with his stable of products, particularly baby wipes and Church & Dwight’s hair removal brands.

Richard Gluyas 5.38pm: Markets: naive or optimistic?

Federal Reserve Board chairman Alan Greenspan called it irrational exuberance when Wall Street used to check in its common sense with the front-door concierge during the dot.com bubble of the 1990s.

The recent recovery in equities from its COVID-19 rout isn’t completely detached from reality - it’s fanned by never-seen-before levels of stimulus and a tentative reopening of economies - but the market is proceeding with one eye shut.

A V-shaped recovery has effectively been priced into stocks on the overriding assumption that a vaccine will be available sooner rather than later, or that loosening the shackles will see a rebound in growth.

It’s true that accelerating the recovery, even by six months, would make a huge difference, but global GDP has jumped off a cliff and is scrambling to locate a toehold.

Locally things aren’t quite as bad.

Josh Frydenberg conceded on Wednesday that the nation is in a recession for the first time since the March and June quarters of 1991, or Paul Keating’s “recession we had to have”.

4.42pm: Afterpay peers join bank rally

Records for the buy now, pay later sector was smashed on Wednesday, alongside a rally in the traditional bank names.

In the four majors – Commonwealth Bank added 3.3 per cent to $66.11 as Westpac rose by 4.4 per cent to $17.95, even after a downgrade from Bell Potter on valuation grounds. ANZ lifted by 5 per cent to $18.92 and NAB rose by 4.6 per cent to $18.70.

Buy now, pay later stocks were a standout after a number of positive catalysts this week – Zip soared by 22.1 per cent at the close to $6.35 after setting new record highs of $6.79 on its deal to buy US rival QuadPay.

Meanwhile Afterpay set a new record of $52.29, up 5.5 per cent and smaller rival Openpay rocketed up by 52.8 per cent to an all -time high of $3.02 on its move into the UK market.

4.11pm: Three-day streak trims YTD loss to 11pc

Australian shares climbed to three month highs in their third day of gains on Wednesday, shrugging off the economy’s slowest growth rate since the GFC.

Offshore gains sent the market higher at the open and built through the day to close just shy of daily highs, up 107 points or 1.83 per cent at 5941.6.

The closing level represents the market’s highest trade since March 6, aa 3.2pc weekly gain and a 30 per cent recovery from its March trough.

Recent gains have also trimmed the market’s year-to-date dip to just 11.1 per cent.

David Ross 3.59pm: Amcor reopens facility after COVID scare

Major packaging company Amcor has kept almost 100 staff at home for three days since a staff member at its Port Melbourne factory tested positive for coronavirus on Sunday.

The factory in Melbourne’s inner-south has been closed for cleaning as it scrambled to test its almost 100 staff.

The company is working with the Victorian Department of Health and Human Services to test its workforce with no further positive results received so far.

Eight staff at the manufacturing facility have been identified as close contacts to the confirmed case and will be required to self isolate for 14 days.

The factory reopened for the Wednesday afternoon shift, with workers who had received a negative result allowed to return to work.

AMC shares last traded at $14.97, down -0.9pc.

Follow the latest in coronavirus news at our live blog

Bridget Carter 3.32pm: Key backer may hamper Infigen bid

DataRoom | Market observers have cast doubt over whether UAC Energy is successful in its $777m pursuit of Infigen Energy.

The company that is backed by Ayala Corporation out of the Philippines has amassed an interest of just under 13 per cent in the Australian listed renewable energy business and has made an 80c per share takeover bid for Infigen.

However, the challenge for UAC is that Infigen has been a perennial takeover target by many funds for many years, but none have been able to convince Phil Green, who is a London-based partner of the largest shareholder, the Children’s Investment Fund Foundation, to sell out.

CHIFF holds more than 30 per cent of the company, and earlier, when bidders had offered between 60c and 70c per share, it is understood that his view was that the company was worth closer to $1, or at least 80c.

That was before the company recently embarked on an acquisition of the Smithfield Energy facility in NSW and refinanced debt, so the view is now it would be worth far more.

3.23pm: Recovery may be less painful: KMPG

The slight beat for March GDP suggests there is a cause for optimism on the economy, with June numbers potentially not as grim as feared.

That’s the view of KPMG chief economist Brendan Rynne, who notes that the “path to recovery may be less painful than we all thought only a month ago”.

KPMG is tipping a GDP hit of 3.5pc next quarter, substantially more optimistic than the 6pc hit that other analysts suggest.

“With the government support packages the labour market has stood up better than expected and the stock market has now rebounded 30pc off its lows,” Dr Rynne writes.

“Any forecasts made in a period of such volatility has a wide band of uncertainty – our assessment is that some of the bad news built into our March forecast will be realised in the June quarter.”

Glenda Korporaal 3.07pm: Virgin bidders given 10 days extra

The final two bidders for Virgin Airlines – Bain Capital and New York hedge fund Cyrus Capital Partners have been given an extra 10 days to make their final bids for the airline.

But the final deadline to pick the winner of the bid for the airline, which went into administration on April 21 with debts of almost $7bn, will still remain at June 30.

Administrator for the airline, Deloitte’s Vaughan Strawbridge is understood to have given the two short listed bidders more time to finalise their binding bids which were originally due to be made on June 12.

The bidding process for Virgin was streamlined for four short listed parties this week to two players who have begun serious talks with stakeholders such as unions, aircraft lease holders and state governments following the announcement of the final two short list candidates on Tuesday.

Virgin Australia planes parked on the tarmac at Adelaide Airport. Picture: AAP Image/David Mariuz.

3.00pm: ASX climbs wall to 3-month high

Australia’s sharemarket is climbing a “wall of worry” over US protests and US-China tension.

The S&P/ASX 200 has risen 1.6pc to a 3-month high of 5928.1 today.

The index has bounced 35pc from its March low and is now down just 11pc year to date.

Volume is relatively light but not weak enough to suggest the trend is ending anytime soon.

Gains continued after Treasurer Josh Frydenberg flagged housing construction support soon.

That gave the financial sector a second wind, with the 4-major banks now up 2.8-4.3pc.

Korea’s KOSPI has surged 3pc after the government proposed $US28.9bn of new stimulus.

2.26pm: Records fall for BNPL stocks

The buy now, pay later sector has shrugged off any credit concerns from last month, soaring to new heights in afternoon trading after a string of positive catalysts.

Zip is the latest to lead the rally – adding 20.6pc in Wednesday’s session after inking an all-scrip deal to purchase US rival QuadPay. The stock is up by as much as 81pc in just the past two sessions as investors look to its future in the world’s largest retail market.

Meanwhile, smaller player Openpay is adding 41.7pc in afternoon trade to hit highs of $2.96 as it looks to expand into the UK market.

The group on Monday announced a new £25m funding facility with a local financier Global Growth Capital alongside the launch of its services with JD Sport in the UK. And while shares edged higher at the time, the rally is now hitting its stride – with shares up 129pc since Friday.

The stock that started it all, Afterpay is up 5.4pc today to hit new records of $52.29 while Australia-focused play FlexiGroup is higher by 6pc to $1.41 and still yet to recover fully from its March lows.

2.09pm: More fiscal stimulus on the way: Plank

ANZ head of Australian Economics David Plank says more government spending is on the way as the local economy heads toward its first technical recession since 1991.

The bank notes that government spending was the mainstay of growth in the quarter, with public spending up 1.4pc q/q and driven by strong consumption across both state and federal governments.

But looking ahead, Mr Plank notes that further policy support will be required to reduce the abruptness of the “fiscal cliff” when subsidies come to an end.

“We expect much of the recently announced JobKeeper ‘saving’ to be directed to other programs, such as a targeted extension of JobKeeper and support for residential construction. There could also be funds directed at business investment incentives, among other possible choices,” he writes.

As for monetary support, he tips the RBA to move to a hybrid yield curve control or quantitative easing model, targeting the three year yield at 0.25pc but “also specifying a quantity of longer-dated bonds to buy in order to flatten the yield curve”.

More government spending is definitely on its way. We also think the RBA will do more - with a hybrid YCC/QE our pick. Probably mid next year, unless the rapidly rising AUD forces the RBA's hand sooner. https://t.co/DKhgKp8mEA
— David Plank (@DavidPlank12) June 3, 2020

2.01pm: Seven slapped with speeding ticket

Broadcaster Seven West says it has no explanation for a 24 per cent surge in the media company’s shares, as it answered a probe from the market regulator.

Since the start of the week Seven’s shares are up by 57 per cent, prompting a speeding ticket from the ASX today but the company said it had nothing to disclose.

In a brief response to the ASX, Seven said it was not aware of any information that had not been announced to the market, and could provide no explanation for the recent rally.

SWM last traded up 24 per cent to 13.5c.

Philip King 1.52pm: Car demand in record slump

The car industry is pinning its hopes on an LCV-shaped recovery after May figures showed light commercial vehicles leading the way back from the biggest demand slump on record.

While May – traditionally one of the strongest months – followed April into deep decline with sales down 35 per cent, the industry said there were signs of “green shoots”.

They cannot come quickly enough for car showrooms, which have now experienced more than two years of consecutive month-over-month reverses.

Australia is on track for its worst annual result since the early noughties with the COVID- crisis amplifying the problems caused by droughts, floods, bushfires, tight lending conditions, exchange rates and political uncertainty, the industry said today.

Still, car retailer AP Eagers is trading up by 1.3pc to $6.89.

In Australia, "59,894 vehicles were sold during May 2020. This represents a 35.3 per cent reduction in sales when compared to the May 2019 figure of 92,561 vehicles" - VFACTS. #ausbiz #ausecon #commsec pic.twitter.com/gkbgzNzz4o
— CommSec (@CommSec) June 3, 2020

1.40pm: US military action threatens share rally

Shares are trading up 1.33pc to a four-day high of 5912.5 with financials in the lead but AxiTrader’s chief global markets strategist, Stephen Innes warns that the bullish hypothesis will be put to the test when military Humvees roll into Washington DC.

“I’m not sure how much this will placate fears as its unlikely consumers will feel any safer with military Humvees rolling down Pennsylvania Ave,” he says.

“The economic recovery has been dependent on reducing fear. If anxiety is generated by anarchy in the streets, that will harm the recovery.

“ … As history suggests, when governments put boots on the ground to quell civil unrest, it never ends well.”

But perhaps the sharemarket will keep climbing this “wall of worry”, thanks to unprecedented central bank liquidity and the prospect of more if the economic recovery is threatened by protests.

Eli Greenblat 1.34pm: McDonald’s warns of COVID-19 hit

Fast food giant McDonald’s has warned the value of its intangible assets in Australia could take a cut because of restaurant closures and a downturn in sales during the coronavirus pandemic.

However it says the slump in in-store dining has been partially countered by a “strong” lift in drive-through and deliveries.

McDonald’s Australia has lodged its latest results with the corporate regulator, showing that for the year to December 31, 2019 – before the COVID-19 crisis struck – its revenue weakened to $1.678 billion from $1.7bn in 2018.

The company posted a net profit of $242 million, slightly down from $259.3m in 2018.

1.16pm: GDP dip masks investment drop: NAB

The small slip in first quarter GDP masks a large decline in private-sector investment caused by the pandemic, with a “giant” fall to come in the second quarter, so warns NAB.

Economist Kaixin Owyong notes that today’s data drop shows consumer spending and total private investment both fell by around 1pc, with the drop accelerating into the final two weeks of the quarter.

“Today’s data confirm the pandemic pushed the economy into a deep recession in March, where we expect a massive 8.4pc fall in Q2 GDP,” Ms Owyong writes.

“However, with Australia achieving unexpected success in containing the virus, many government health restrictions have started to be rolled back a couple of months earlier than anticipated.”

The bank notes that the rollback could push the economy to recovery by the third quarter – ahead of earlier forecasts, “however, a full recovery is some time away as there is no timetable for the reopening the border to allow international tourism and foreign students”.

1.01pm: Shares hold higher amid data deluge

Shares are holding steady with gains of 1 per cent at lunch, after a midmorning data deluge.

The GDP print for the first quarter confirmed the Australian economy was on track for a technical recession, while building approvals (a notoriously volatile series) printed well ahead of expectations with a 1.8pc slip.

China’s surge in activity is helping risk appetite in the broader markets and could be helping local shares too.

At 1pm, the ASX200 is up by 53 points or 0.9 per cent to 5887.6, from highs of 5902.2.

The major banks are up by between 2.4pc to 3.9pc while BHP is notching outsized gains of 2.2pc.

Joyce Moullakis 12.45pm: Pandemic speeds up shift from cash: RBA

Changes to payment behaviour linked to the COVID-19 crisis will prompt a significant cut to ATM networks and may sound the final death knell for cheques, Reserve Bank of Australia assistant governor Michelle Bullock says.

Ms Bullock also warned that unless banks stepped up efforts to allow retailers to direct payments to lower-cost EFTPOS networks over those for credit cards, the central bank could force the change.

“So far, the (Reserve) Bank has not mandated that acquirers explicitly offer least-cost routing to all their merchants. But it remains an option that will be considered in the (payment system) Review,” she told a Morgan Stanley webcast on Wednesday titled “The Evolution of Banks and Payments”.

“We are talking with merchants to understand their experience with payment costs through this period. We will also be considering how transparency of the cost of the payment plans offered to merchants could be improved.”

12.43pm: Spending drop drives GDP slip

Westpac senior economist Andrew Hanlan says a sharp 1.1pc fall in consumer spending was the “the key downside surprise” in the national accounts data.

While retail spending rose (due to hoarding during the peak of pandemic panic), spending in other areas was hard hit by the pandemic, Mr Hanlan says.

Across the other areas of the economy, the key expenditure figures were largely as expected – home building down, business investment down as well, but public demand advancing, he says.

“Net exports added to growth – but only because imports fell faster than the decline in exports – hence a bad news story. Inventories were a negative, reflecting an unintended run-down.”

Richard Ferguson 12.37pm: Australia avoids GDP ‘armageddon’: Treasurer

Josh Frydenberg says Australia’s negative March quarter shows the “resilience” of the economy through the coronavirus pandemic, as economists at the time were forecasting “armageddon.”

Australian GDP has contracted by 0.3 per cent, and one more negative quarter will lead Australia to its first technical recession since 1991.

The Treasurer said on Wednesday that the relatively small contraction came after a March quarter with almost no good economic news, and dire predictions for the year beyond.

“Treasury was contemplating a fall in GDP of more than 20pc in the June quarter. This was the economists’ version of Armageddon,” he said in Canberra.

“It was in this quarter – the March quarter – that consumer and business confidence fell to its lowest level on record. That the ASX 200 lost a third of its value.

“ Seen in this context, the fact that the Australian economy only contracted by 0.3pc shows the Australian economy’s remarkable resilience.”

Australian Treasurer Josh Frydenberg. Picture: AAP Image/Lukas Coch.

12.28pm: How does our GDP slip stack up?

The 0.3 per cent slide in first quarter GDP was less than expected and as IFM chief economist Alex Joiner points out, puts Australia well ahead of the rest of the world.

He notes that while lockdowns occurred at different times, the March quarter data drop shows Australia’s decline is relatively modest.

Australia is just behind Sweden and Switzerland as having the strongest growth, ahead of Japan, Finland and Taiwan.

The decline in Australian GDP seems relatively modest compared to most other economies - while lockdowns etc occurred at different times we also had devastating bushfires interrupting activity as well - they are not great numbers but they seemingly could have been worse! #ausbiz pic.twitter.com/1lqZv9qguN
— Alex Joiner (@IFM_Economist) June 3, 2020

11.53am: China PMI smashes expectations

China’s Caixin PMI data have comprehensively beaten expectations for May, signally the first increase in activity for four months as coronavirus lockdowns were eased and the country got back to work.

Services PMI rose to 55 vs 47.3 expected and 44.4 in April.

That’s the highest in records going back to mid-2017.

Composite PMI rose to 54.5 vs 47.6 in April – also the highest on record.

“Notably, both business activity and new orders expanded at the quickest rates since late 2010. However, the pandemic continued to have a detrimental impact on new export work, which fell sharply,” Caixin senior economist Wang Zhe writes.

Caixin #China #PMI data signalled the first increase in services activity for four months in May amid an easing of #COVID-19 measures. Both business activity and new orders expanded at the quickest rates since late 2010. Read more: https://t.co/39hPcFViiz pic.twitter.com/f72qkwPBhv
— IHS Markit PMIâ„¢ (@IHSMarkitPMI) June 3, 2020

Bridget Carter 11.47am: BGH, AusSuper’s failed plan for Virgin

DataRoom | BGH Capital and Australian Super were proposing to inject between $800m and $900m of working capital into Virgin Australia straight after they gained ownership of the carrier, should they have been successful in its pursuit of the airline.

It is understood that its bid would have added up to more than $4bn, where employees would be given priority over bondholders, owed $2bn.

The bond holders would have had their investments wiped out, under the BGH Capital plan.

However, many say that the valuation of Virgin Australia bids could be difficult to interpret because of a wide range of factors, including the value of the liabilities that are reinstated.

It comes after BGH Capital and Australian Super were knocked out of the contest on Tuesday to buy Virgin Australia, which collapsed into voluntary administration with debts worth $6.8bn.

David Ross 11.42am: Building approvals better than feared

The number of buildings approved in April fell by 1.8 per cent in seasonally adjusted terms to 15,294 new dwellings according to data released by the Australian Bureau of Statistics.

The drop was significantly off a 10.7 per cent fall as tipped by consensus estimates, and could be helping to sustain the Aussie dollar at its US69.5c heights.

Driving the fall in building approvals was a continued decline in private sector dwellings excluding houses which contracted a further 8.9 per cent over March to April.

There were 6079 new dwellings, excluding houses, in seasonally adjusted terms approved in the month, up 4 per cent on last year but still well down from the peak several years ago.

Patrick Commins 11.31am: Annual growth slowest since 2009

The Australian economy shrunk by 0.3 per cent over the first three months of the year, the first quarterly contraction since 2011 as the Black Summer bushfires and the early impact of the COVID-19 crisis weighed on activity.

National accounts figures from the Australian Bureau of Statistics showed annual GDP growth slowed from 2.2 per cent to 1.4 per cent, the slowest year-on-year growth since the GFC. The economy grew by 0.5 per cent over the December quarter, the seasonally adjusted figures showed.

The narrow contraction comes ahead of what economists expect will be the sharpest quarterly contraction on record in the three months to June, as strict social distancing measures sparked mass lay-offs and shuttered businesses.

Experts predict GDP will fall by 8.5 per cent, before rebounding in the September quarter.

AUDUSD last up 0.5pc to US69.28c.

The main story from these national accounts is that precautionary behaviour and the early stages of social distancing prompted a very sharp reversal in consumer spending. #ausbiz pic.twitter.com/Btuvlo0FeO
— James Foster (@JFosterFM) June 3, 2020

Nick Evans 11.28am: Vale to increase ore shipments amid pandemic

Vale says it expects to increase iron ore shipments into the Chinese markets in 2020 despite the coronavirus threat overhanging its Brazilian mines, as its other markets struggle to recover from the coronavirus crisis.

According to the China Iron and Steel Association, Vale believes it will top 2019’s 190 million tonnes worth of shipments to customers in China in 2020, taking advantage of robust demand in the world’s biggest steelmaker as mills in other countries remain idle or produce at reduced rates.

Despite growing concerns about the spread of COVID-19 around its mines – Vale was last week forced to go to court to prevent Brazilian authorities from ordering its Itabira mine closed – the iron ore major has not shifted its current annual production guidance since it was last cut in April, to 310 to 330mt.

Iron ore prices pushed through the $US100/t mark on the weekend on fears of a threat to Vale’s mines.

Fortescue Metals Group shares were up 10.5c to $14.835 in early trading, with BHP up 86c to $36.27 and Rio up 50c to $97.47.

11.15am: Take no action on UAC bid: Infigen

Infigen has broken its silence on a takeover bid from UAC Energy, advising shareholders to take no action in relation to the offer.

After raiding the group’s register yesterday and taking a 17pc stake in Infigen, UAC is now offering 80c per security for all the shares it does not own.

Infigen’s board noted the proposal was subject to “very detailed conditions” and said it was considering its response.

Goldman Sachs and Lazard are acting as Infigen’s advisers while Gilbert and Tobin are acting as its legal adviser.

IFN shares are higher by 33pc to 79c.

11.08am: What to watch ahead of GDP

Australia’s March quarter national accounts are due at 11.30am and consensus estimates are for a 0.4pc fall on quarter and a 1.4pc rise on year, according to Bloomberg.

A 0.4pc Q/Q fall would be the worst since the December quarter of 2008 and the first negative print since the March quarter of 2011.

A negative quarter would “lock-in” a technical recession – since the June quarter is sure to be negative because of coronavirus lockdowns.

But a positive quarter could see Australia extend its three-decade run of no technical recession, since September quarter growth is expected to rise amid easing restrictions.

A 1.4pc Y/Y rise would be the worst since the September quarter of 2008, during the Global Financial Crisis.

Lachlan Moffet Gray 10.59am: Air NZ passengers collapse by 99pc

Air New Zealand has detailed the extent of the hit from coronavirus restrictions, with passenger numbers collapsing by 98.9 per cent in the worst of the downturn in April.

For the month of April, the airline carried 15,000 passengers, compared to 1,431,000 passengers a year prior.

Revenue passenger kilometres – the number of kilometres travelled by paying passengers – declined from more than three million to just 60,000, a 98 per cent decline.

The flight category with the single biggest decline was the Tasman and Pacific services, which saw 99.5 per cent year-to-year reduction from 315,000 passengers to just 2000.

The flight operator last month announced that despite a severe drop in passenger numbers, the business remains flexible, with $640 million in short-term liquidity not including a $900 million loan facility provided by the New Zealand government.

Perry Williams 10.55am: Oil Search paused in PNG

Trading in Oil Search’s shares on the Papua New Guinea stock exchange has been suspended after a spat with the nation’s securities regulator.

Oil Search is alleged to have breached the PNG Capital Market Act by failing to obtain approval from the Securities Commission for the PNG retail component of its recent capital raising.

“Oil Search disputes the validity of the orders issued by the Acting Chairman and will vigorously defend its position by challenging the lawfulness of the orders in the National Court of Papua New Guinea,” the company said in a statement. “Oil Search remains confident that the approvals that it received are valid.”

The average daily trading volume on the PNG exchange was 148 shares compared with 22.3m shares on the ASX, Oil Search noted. Trading on the ASX continues as normal.

Oil Search last up 2.9 per cent to $3.54.

Perry Williams 10.53am: Boral extends rally on Stokes’ buy-in

Boral shares rose as much as 4.8 per cent in early trade Wednesday after the arrival of billionaire Kerry Stokes’ Seven Group as a major shareholder.

The building materials giant has now jumped 17 per cent in the last three trading sessions after Stokes’ Seven emerged with a 10 per cent stake in the company.

Boral shares last up 3.7 per cent to $3.66.

Boral Asphalt Plant in Alstonville. Picture: Supplied.

Gerard Cockburn 10.44am: Zip hits record high

Zip shares have rallied to an all-time high in morning trade as investors welcome its move to acquire US fintech Quadpay and raise an additional $200m in capital.

The Sydney-based buy now, pay later provider has seen its stock rise by more than 27 per cent at the open to heights of $6.74, coming off the back of a major acquisition deal to help it into the US market.

Zip on Tuesday afternoon said it would absorb New York-based QuadPay in an all-scrip purchase for $403m. It simultaneously announced that it had received a $200m capital injection from US equity group CVI investments.

Zip chief executive Larry Diamond previously told The Australian that the rise in buy now, pay later services would be the “slow death” of credit cards.

UBS analysts say the acquisition is a positive step and will further expose the company to the North American retail market which estimated to be worth $US5 trillion.

Z1P shares last traded up 28pc to $6.65 and have rallied as much as 80pc over the past two days.

10.40am: BHP bumps ASX to four-day high

Local shares hit a four-day high of 5898.1 in early trading as materials outperformed and crude oil futures jumped higher.

A 2.8pc jump in BHP is helping the mining sector to outperform while a 1.3pc rise in WTI crude oil futures is lifting energy.

Shopping mall REITs are strong again with Unibail-Rodamco up 8pc and Scentre up 3pc after a late update on Unibail’s offshore Westfield sites yesterday.

Boral has added another 4pc after Seven Group confirmed it bought a “friendly” 10pc stake.

Focus turns to domestic GDP data at 11.30am AEST and China’s Caixin PMIs at 11.45am AEST.

10.26am: Aussie dollar soars past US69c

A weak US dollar is again boosting the local currency – sending the Aussie dollar to levels not seen since early January.

At the local stockmarket open, AUDUSD is up 0.6 per cent to US69.39c, while the US dollar index trades down by 0.12pc.

The Aussie dollar is a key ‘risk on’ barometer, pushed higher as countries continue to recover from COVID-19 and also from RBA commentary yesterday, or in fact the lack there of.

The RBA did not make any mention of the dollar in its monthly board meeting statement, where it left its policy unchanged.

Nick Evans 10.19am: Perseus makes $64m tilt for Exore

Africa-focused gold miner Perseus Mining has launched a friendly takeover for near neighbour Exore Resources, valuing the explorer at $64m.

Exore, worth $36.5m at the close of trading on Tuesday, controls an extensive land package in Côte d’Ivoire, within trucking district of Perseus Sissingué gold mine in the west African nation, which has a mine life of only three years remaining.

The all-scrip bid from Perseus, of one of its shares for every 12.79 Exore shares on issue, values the explorer at $64m based on Perseus’ $1.34 closing price on Tuesday, or 10.5c a share – a healthy premium on its 6.2c closing price.

Exore directors recommended in favour of the deal on Wednesday, with managing director Justin Tremain saying the share transaction gave shareholders the opportunity to benefit from Perseus’ cash flow from operations as well as maintain an interest in the exploration upside from Exore’s own tenements.

Perseus boss Jeff Quartermaine said the acquisition offered the company the opportunity to extend the life of the infrastructure at Sissingué.

10.11am: Shares lift for third day

Shares are headed higher for a third consecutive day and within in an inch of a three-month high in early trade.

At the open, the ASX200 is higher by 57 points or 0.97 per cent to 5891.7 – after hitting as much as 5898.1.

All sectors are in the green, while Infigen in a standout with a 35.6pc gain after UAC Energy joined its register and Zip continues to surge, up by 16pc after its deal to buy QuadPay announced yesterday.

Banks are broadly higher too while gold miners are pulling back in a sign of rising risk sentiment.

10.05am: UK lawsuit, US hurricanes to rattle QBE

Bell Potter’s TS Lim has cut QBE Insurance to Hold from Buy after a 7pc rise in its share price left his expected 12-month return below his required 15pc threshold for a Buy rating, with a view to revisit his valuation when QBE reports in August.

Mr Lim also says a Hold rating is “appropriate” given the looming business interruption insurance test case in the UK and the approaching hurricane season in the US.

He notes that the UK’s Financial Conduct Authority (FCA) released a statement on May 1, 2020 that it intends to obtain court declarations aimed at resolving contractual uncertainty and a lack of clarity in selected business interruption insurance policies.

Meanwhile, the US National Oceanic and Atmospheric Administration currently predicts a 60pc chance of an above-normal 2020 Atlantic hurricane season (with 13-19 named storms of which 6-10 could become hurricanes and 3-6 would be major).

QBE last traded at $8.70.

9.55am: Bell Potter downgrades Westpac

Bell Potter’s TS Lim has downgraded Westpac to Hold from Buy noting the bank’s recent rally.

Westpac has risen more than 16pc since his timely upgrade to Buy on April 28.

Mr Lim has therefore downgraded Westpac since his expected total return in the next year is below his 15pc threshold to keep the Buy rating, even as he lifts his target 6pc to $8.30 due to a lower discount rate of 11pc and a roll forward of his discounted cashflow valuation.

WBC last traded at $17.20.

9.45am: Shares to test three-month high

Australia’s sharemarket may hit a 3-month high today after a similar move in the US.

Overnight futures versus fair value suggest the S&P/ASX 200 will open up 0.4pc at 5859 but the S&P 500 rose 0.8pc to a 3-month high of 3080.8, giving the possibility of a “catch-up” move by the ASX200.

The US market is down less than 5pc year to date while the Australian market is currently down 13pc.US index futures are trading positively with gains of 0.2-0.3pc early Wednesday.

BHP ADR’s equivalent close at $36.09 implies a 1.9pc rise in the resources heavyweight despite a 1.5pc rise in AUD/USD.

Crude oil prices are surging before next week’s OPEC meeting, making energy the strongest US sector overnight. WTI crude rose 3.9pc overnight and a further 1.3pc to $US37.27 a barrel early Wednesday.

Domestic GDP data may be viewed as a hurdle for the local market given expectations of -0.4pc quarterly growth. That would lock-in a technical recession, given that the June quarter will certainty be negative.

The GDP data is very much backward-looking and “old news”. The risk is for a positive print that avoids a technical recession and could be enough to see a 3-month high above the May peak at 5922.

In any case the Australian and US markets have been well supported on dips amid US protests and US-China trade tension this week, pointing to higher equilibrium prices.

On the charts, an ascending triangle pattern continues to target 6030, with support from a minor uptrend coming in today at 5718. The 100-day moving average may offer some resistance at 5980, but the S&P 500 is already trading well above its 200-DMA.

9.37am: Vicinity credit rating boosted after raise

Australia’s second-largest retail landlord Vicinity Centres has had it's A credit rating affirmed and outlook revised to stable by S&P Global after completing its $1.2bn placement earlier this week.

In a note this morning, the global ratings agency said the company’s capital raising measures would bolster the company’s credit metrics, allowing it a “substantial buffer to withstand the economic and credit implications from the COVID-19 outbreak”.

S&P forecasts a “sizeable decline in earnings” of around 20pc to 30pc for Vicinity in the current year and the following, as a result of rental deferrals, as well as lower occupancy and renewal rates on current leases.

“The outlook also reflects our view that the quality and diversity of Vicinity’s portfolio will reduce earnings volatility through the economic cycle,” S&P adds.

VCX last traded at $1.60.

9.23am: Pokies bounce back as SkyCity returns

Casino operator SkyCity says its NZ venue has resumed trade with better than expected results, including a rebound in pokies revenue to 80pc of pre-COVID-19 levels.

While its Adelaide casino remains closed, SkyCity said its trading in Auckland and Hamilton had been ahead of expectations, even with limited capacity and restrictions around physical distancing.

It said electronic gaming machines were delivery revenue 80pc of the average daily revenue in the eight months to February 29, while table revenues have been improving from a slow start but that the focus on the domestic market while borders were closed would prompt a restructuring of its workforce.

The company previously flagged it is looking to reduce its NZ staff by around 700 rostered employees, to be completed by mid-June.

As for Adelaide, SkyCity said it would re-open some food and beverage outlets from next week and the casino in late June or early July pending government directives.

9.06am: What’s on the broker radar?

Aurizon cut to Sell – Morningstar
BHP price target raised 3pc to $37.80 – Goldman Sachs
Bingo Industries cut to Hold – Morningstar
Carsales price target raised 28pc to $16 – UBS
Evolution cut to Sell – UBS
JB Hi-Fi raised to Outperform, price target raised 15pc to $41 – Macquarie
Nearmap price target raised 37pc to $2.47 – Macquarie
Newcrest raised to Buy – UBS
Northern Star cut to Sell – UBS
Orora cut to Hold – Morningstar
QBE cut to Hold – Bell Potter
Treasury Wine price target cut 14pc to $9.35 – Credit Suisse
Westpac cut to Hold – Bell Potter

Eli Greenblat 9.04am: Woolworths brings back paper bags

It’s back to the future for shopping, with the return of the old fashioned paper bag at Woolworths as an alternative to plastic bags.

Woolworths said from today its customers nationwide will have the option of purchasing paper shopping bags to carry their shopping home in.

The new carry bags, which were trialled successfully at a number of Woolworths stores last year, have been introduced to meet growing customer demand for alternatives which can be easily recycled in household kerbside collection.

Woolworths said the bags are made from 70 per cent recycled paper, and will be sold at cost for 20 cents, in addition to the supermarket’s existing reusable plastic bags and Bag for Good options.

WOW last traded at $35.55.

8.42am: Austal announces new chief

Shipbuilder Austal has promoted its chief operating officer Patrick Gregg to the top job, set to take the position from January 1.

The company said the lead time will allow for a six month transition from current managing director and chief David Singleton.

Chairman John Rothwell said the path had been set for the new chief from when he was appointed as COO more than three years ago.

“Our shipyards in Australia, the Philippines, Vietnam and China are working incredibly efficiently while producing quality defence and commercial vessels,” Mr Rothwell said.

“That is a reflection of Paddy’s drive, commitment and ability to engender similar characteristics from his employees. Those skills and personal qualities made him an ideal choice to take over from David at the end of the year.”

Mr Singleton held the role of chief for the past five years.

ASB last traded at $3.53.

Outgoing Austal chief David Singleton. Picture: Sean Middleton.

8.30am: Aurizon in $1.3bn debt refinancing

Aurizon says it has refinanced its bank facilities, with aggregate commitments at $1.3bn, an increase of $420m. It says it will now have more than $1.1bn of available liquidity.

Aurizon also reiterated its underlying EBIT guidance of $880-$930 million for FY2020.

CEO Andrew Harding said operations had continued with minimal interruption during the COVID-19 pandemic.

“While the COVID-19 pandemic has had some impact to coal demand in Asia and on the Indian subcontinent, it has not been material to date to volumes and the company’s earnings.”

8.15am: Oil up more than 3pc

Oil prices climbed by more than $US1 a barrel overnight on hopes that major crude producers will agree to extend output cuts during a video conference expected to be held this week and as countries begin to reopen after coronavirus lockdowns.

Brent crude settled at $US39.57 a barrel, rising $US1.25, or 3.3 per cent. US West Texas Intermediate crude (WTI) settled at $US36.81 a barrel, jumping $US1.37, or 3.9 per cent.

Both benchmarks neared three-week highs.

Reuters

7.50am: SkyCity plans Adelaide casino reopening

SkyCity says it expects to start reopening its Adelaide Casino from next week, as coronavirus restrictions ease.

Adelaide Casino remains closed. “However, based on the South Australian government’s current three-stage approach to easing the COVID-19 restrictions, SkyCity expects to be able to re-open some food and beverage outlets from next week and Adelaide Casino in late June or early July 2020,” it told the ASX.

Development works continue on the Adelaide Casino expansion project.

SkyCity reported “encouraging” trading at its New Zealand casinos and hotels, which reopened on May 14.

7.25am: ASX to open higher before GDP

Investors appear set to push the ASX higher in early trade before the release of GDP figures which could all but confirm Australia’s first recession in almost 30 years.

At 7am (AEST) the SPI 200 futures contract was higher by 31 points, or 0.53 per cent, to 5,861.0, indicating an early gain. A late-session rally has pushed Wall Street to solid gains as traders looked past race riots and pandemic worries to focus instead on easing lockdown restrictions and signs of economic recovery.

Tech shares, along with cyclical stocks like industrials and financials, gave the biggest lift to all three major stock indexes.

Most of the attention in Australia will be on economic growth figures for the March quarter, following the devastating impact of the coronavirus pandemic.

Economists predict the Australian Bureau of Statistics’ estimate of gross domestic product (GDP) will be a loss of between 0.1 per cent and 0.5 per cent. A negative figure will almost certainly mean a recession, given the much deeper impact expected in the June quarter from travel bans and social distancing.

A technical recession is defined as two quarters of declining economic activity.

There was plenty of preliminary data on Tuesday for investors to consider and the benchmark S&P/ASX200 index closed up 15.9 points, or 0.27 per cent, at 5,835.1 points.

The All Ordinaries also closed up 21.7 points, or 0.37 per cent, at 5,960.1 points. The Australian dollar continues to gain momentum from iron ore prices. Concerns about supply from Brazil, which is struggling to stop the spread of COVID-19, has meant more demand for producers in Australia.

One Australian dollar was buying US68.97 cents, up from US68.02 cents at the close of trade on Tuesday.

AAP

7.03am: Zoom booms

Zoom Video Communications is rapidly emerging as the latest internet gold mine as millions of people flock to its conferencing service to see colleagues, friends and family while tethered to their homes during the pandemic.

The release of the once-obscure company’s financial results for the February-April period provided a window into the astronomical growth that has turned it into a Wall Street star.

Zoom’s revenue for its fiscal first-quarter more than doubled from the same time last year to $US328 million, resulting a profit of $US27 million – up from just $US198,000 a year ago.

The numbers exceeded analysts’ already heightened expectations, providing another lift to a rocketing stock that has more than tripled in price so far this year.

After a big run-up leading up to the highly anticipated announcement, Zoom’s stock edged up another 3.5 per cent in extended trading. The surge has left Zoom with a market value of about $US59 billion – greater than the combined market values of four largest US airlines, which have seen their businesses hammered by the coronavirus outbreak that has dramatically curtailed travel.

6.10am: US stocks close higher

US stocks drifted higher even as investors weighed the prospects of a protracted economic recovery following the coronavirus lockdowns, outbreaks of violence across American cities and tensions with China.

The Dow Jones Industrial Average climbed 1 per cent. The S&P 500 rose 0.8 per cent and the Nasdaq Composite added 0.6 per cent.

After yesterday finishing higher, Australian stocks are set to post modest gains at the open. At 6am (AEST) the SPI futures index was up 30 points, or 0.5 per cent.

The Aussie dollar continued its rise, to US68.93c from US67.89c yesterday.

The S&P 500 has been boosted in recent sessions by data suggesting the downturn in the US economy has bottomed and hopes that the coronavirus will be brought under control.

The index is up more than 35 per cent from its March low, a rebound many analysts attribute to an unprecedented level of stimulus offered by the Federal Reserve and Congress.

“There’s just so much stimulus, it’s propping up the market,” said OANDA analyst Edward Moya. “The stock market is now no longer a true reflection of the economy, and you’re going to see that remain the case for several years.”

The US economy could take the better part of a decade to fully recover from the pandemic and related shutdowns, a US budget agency said Monday. Output isn’t expected to catch up to a previously forecast level until the fourth quarter of 2029, the nonpartisan Congressional Budget Office said.

“It’s clear that we’re not going to go back to the levels [of economic activity] we saw pre-COVID-19,” said Sophie Huynh, a strategist at Société Générale. “It’s impossible: we’re living in a self-inflicted recession. We’re going to start the post-COVID- 19 world at the start of a new economic cycle.”

Cities across the US faced another night of protests sparked by the death of George Floyd in Minneapolis last week. Some major metropolitan areas, including New York and Los Angeles, either issued or extended night-time curfews. President Trump called for a tougher government response to the violent unrest and said he is ordering thousands of armed soldiers and law enforcement officers to the nation’s capital.

The unrest has added to challenges faced by businesses seeking to get back up and running following lockdowns designed to stem the coronavirus pandemic.

‘The stock market is now no longer a true reflection of the economy’

The US will be dealing with the effects of the pandemic, economic recession, riots and even excessive government spending for years, while the market is betting it’s all just a short-term blip, said Lindsey Piegza, chief economist at Stifel Financial.

“That’s a really bold assumption by investors,” she said.

Investors also continued to monitor tensions between the U.S. and China, which have feuded in recent weeks over Beijing’s handling of the coronavirus and its crackdown on Hong Kong.

US crude futures rose 3.6 per cent to $US36.69. An alliance of oil-producing nations, led by Saudi Arabia and Russia, is close to a deal that would extend output cuts through Sept. 1, according to delegates. The Organisation of the Petroleum Exporting Countries has agreed to move a planned conference call to discuss future output curbs to Thursday, they said.

International stocks gained ground, extending a recent rally fuelled by hopes of a rebound in the global economy. The Stoxx Europe 600 advanced 1.6 per cent, led by shares of auto and auto-parts makers.

Dow Jones Newswires

Adam Creighton 6.00am: Depth of downturn ‘less than expected’

The Reserve Bank has held out hope the economic downturn might not be as severe as feared ahead of the release of official figures expected to confirm the economy is in the first recession since the early 1990s.

Leaving the cash rate on hold at 0.25 per cent as expected, governor Philip Lowe said consumer spending had picked up amid evidence hours worked, which plunged 9 per cent in April as economic restrictions took hold, had stabilised.

“It is possible the depth of the downturn will be less than earlier expected,” he said in a statement that ignored calls from some economists to move to negative interest rates or an expansion of quantitative easing to weaken the Australian dollar and boost economic growth.

“The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely.”

Most economists expect the economy contracted in the first three months of the year, dragged down first by bushfires and then the coronavirus, which would pave the way for two consecutive quarters of economic contraction — a widely used definition of recession.

While the June quarter’s growth rate won’t be known until September, the severe impact of lockdown restrictions will see a large decline.

5.55am: Zuckerberg defends stand on Trump posts

Facebook Chief Executive Mark Zuckerberg, addressing employees in a highly charged town hall meeting Tuesday, defended his decision to preserve posts on the platform by President Donald Trump despite mounting outrage from insiders and civil rights activists that one of his messages last week was tantamount to a call for violence and therefore a violation of the company’s rules.

The employee meeting, initially scheduled for Thursday, came a day after hundreds of employees participated in a “virtual walkout” opposing the policy decision, with several airing their grievances with the company publicly on Twitter. Two software engineers publicly said on Monday they quit the company, in part due to Facebook’s failure to enforce its own rules when it comes to Mr. Trump.

The meeting wasn’t streamed publicly, as some internal Facebook events have been recently, but employees said Mr. Zuckerberg didn’t give ground on the issue. He has said he doesn’t believe private companies should regulate political speech and that while he personally found Mr. Trump’s posts “deeply offensive,” he thinks it is better for the debate over his comments to be held publicly than suppressed.

Facebook CEO Mark Zuckerberg is under fire from his own staff over the decision to leave up posts by Donald Trump. Picture: AP

Dow Jones

5.50am: US oil at 3-month high

US oil futures climbed to settle at their highest since early March, buoyed by reports that major oil producers plan to extend their current production cuts beyond the end of June.

The Organisation of the Petroleum Exporting Countries and its allies were nearing an agreement to extend collective production cuts through Sept. 1, and planned to discuss output curbs during a meeting via conference call on Thursday, The Wall Street Journal reported.

Thursday’s call would bring forward a meeting that the OPEC website still has scheduled for June 9-10.

July West Texas Intermediate oil rose $US1.37, or 3.9pc, to settle at $US36.81 a barrel on the New York Mercantile Exchange. That was the highest finish for a front-month contract since March 6, according to Dow Jones Market Data.

Dow Jones

5.40am: US to probe digital services taxes

US President Donald Trump’s administration announced investigations into foreign digital services taxes it says are aimed squarely at American tech firms.

Following a similar trade investigation against France last year, the US Trade Representative office now is looking into taxes in Britain and the European Union, as well as Indonesia, Turkey and India.

“President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,” USTR Robert Lighthizer said in a statement.

“We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.” Washington opposes the efforts to tax revenues from online sales and advertising, saying they single out US tech giants like Google, Apple, Facebook, Amazon and Netflix.

AFP

5.35am: Markets gain as lockdowns relaxed

World stock markets rose as coronavirus lockdowns were relaxed and China-US tensions appeared to be easing, dealers said.

In Europe, Frankfurt was the star performer, up 3.8 per cent, as German investors played catch-up after a long holiday weekend and eyed hopes for a new COVID-19 domestic stimulus package.

Lufthansa shares soared after the airline’s supervisory board approved a nine-billion-euro ($10-billion) bailout from the German government.

Paris equities, also solidly higher, ignored the French government’s dire prediction that the economy will shrink 11 per cent this year. London closed up 0.9 per cent.

“Stock markets in Europe are showing decent gains as there is continued optimism in relation to the reopening of economies,” said analyst David Madden at trading firm CMC Markets UK.

“Governments have been taking steps to loosen their lockdown restrictions, so there is a growing feeling that things are slowly going back to normal,” he added.

The euro forged another two-month peak.

Oil marched higher on hopes of recovering demand, and amid speculation that key producers including Saudi Arabia and Russia will extend massive output cuts that have helped support the virus-plagued market.

Traders were still tracking China-US tensions – as well as anti-racism protests in several large American cities, and internationally.

“The absence of a serious trade rift between the US and China is helping sentiment,” said Madden. “Dealers on this side of the Atlantic have watched in horror at the scenes of rioting and looting in the US,” he said.

AFP

5.27am: Greece suspends Qatar flights

Greece said it was suspending flights to and from Qatar until June 15 after multiple coronavirus cases on a flight from Doha to Athens.

The Greek civil protection authority said 12 out of 91 people on a Qatar Airways flight that arrived on Monday had tested positive for COVID-19.

Among those that tested positive on Monday’s flight were nine Pakistani nationals legally resident in Greece, two Greeks from Australia and a member of a Greek-Japanese family, the statement added.

AFP

5.25am: France slams Ryanair ‘blackmail’

France denounced as “blackmail” an ultimatum from low-cost carrier Ryanair for its French employees to choose between a five-year pay cut or a number of redundancies in an escalating labour dispute.

The offer from the Dublin-based no-frills carrier, long accused by critics of abrasive labour tactics, comes as the aviation industry grapples with an unprecedented crisis after the collapse in global demand for air travel due to the coronavirus.

“Blackmail is never an option,” Finance Minister Bruno Le Maire told RTL radio. “Jobs will be protected by imaginative solutions, but definitely not through blackmail,” he said.

The aviation industry is facing drastic losses due to the coronavirus pandemic, which has closed borders across the world and paralysed air transport.

Ryanair has already announced plans to axe 3,000 pilot and cabin crew jobs, or 15 per cent of staff across its European network.

In France, Ryanair operates from hubs including the Marseilles, Toulouse and Bordeaux airports.

The Irish company has told French unions to accept plans to cut wages by 20 per cent for pilots and 10 per cent for stewards and air hostesses from July 2020, or face the redundancy of 23 pilots and 27 cabin crew staff.

Ryanair planes sit idle. Picture: Getty Images

AFP

5.20am: France approves Renault loan

The French government said it had signed off on a state-backed loan of five billion euros ($5.6 billion) for carmaker Renault, where the coronavirus crisis has compounded months of management turbulence and prompted the company to lay off nearly 15,000 people worldwide.

Finance Minister Bruno Le Maire approved the loan after a meeting with executives, labour representatives and local officials concerned by a sweeping overhaul unveiled by Renault last week, the finance ministry said.

The government announced the loan last month, but said it was conditional on a commitment from Renault to maintain jobs and core operations in France.

The company has said four production sites in France could be closed or restructured, including the Maubeuge site in northern France, from where production of electric Kangoo utility vans is being transferred to nearby Douai.

AFP

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