ASX firmly higher after US rally, gold price lifts, Tabcorp soars
Stocks close firmly higher as Joe Biden edges closer to a win, gold miners lifted and Tabcorp jumped on takeover talk.
- Tabcorp shareholder welcomes PE interest
- Junket dealings make Crown ‘unsuitable’
- Vicinity plans distribution, no guidance
- Fed maintains low-rate pledges
That’s all from the Trading Day blog for Friday, November 6. Australian stocks closed firmly higher after global markets rallied on the prospect of a split US Congress frustrating any attempt by Joe Biden to lift taxes. The Dow added 2 per cent, the S&P 500 rose 1.9 per cent and the Nasdaq added 2.6 per cent. Locally, Macquarie posted a 32pc fall in interim profit, the Crown inquiry continued and the RBA delivered its Statement on Monetary Policy.
Follow the US election counting on the Australian’s live blog.
9.23pm: CIMIC appoints CEO/MD Juan Santamaria as executive chairman
CIMIC Group’s Board of Directors today announced the appointment of Chief Executive Officer and Managing Director, Mr Juan Santamaria, as Executive Chairman.
Current Executive Chairman, Mr Marcelino Fernández Verdes, has decided to retire from the Board.
Mr Fernández Verdes said: “It has been a great pleasure to be a part of CIMIC Group during the past eight years, including as a Non-executive Director, Chief Executive Officer and Executive Chairman.
“CIMIC has a stable Board of experienced Directors with diverse skills and, with the ongoing limitations to international travel, now is the right time for me to retire as Executive Chairman.
“I leave CIMIC in good hands, with a well performing Chief Executive Officer and an experienced Board.”
Mr Santamaria said: “I am honoured to be appointed as Executive Chairman and thankful to the Board for their confidence and to Marcelino for his commitment to CIMIC.
“During his tenure Marcelino strategically reshaped our businesses into the market leading operations that we have today in construction, mining and minerals processing, services and PPPs.”
Mr Santamaria will succeed Mr Fernández Verdes effective immediately.
CIMIC Alternate Directors Mr Adolfo Valderas and Mr Ángel Muriel have also retired from their positions. The Board thanked Mr Valderas and Mr Muriel for their service to the company.
John Durie 7.10pm: Good, clear plan for NAB
Ross McEwan has a simple formula for resurrecting National Australia Bank — a good clear plan, strong capital base and focus on staff and customers.
The banking veteran together with his chair Phil Chronican provide NAB with a bit of old-fashioned banking in the COVID era where a sense of certainty is gold.
Nearly a year into his role the bank is starting to show signs of its old life again.
In an interview with The Australian McEwan said while COVID had created chaos ironically it had made the task of moulding the bank to how he wants it a lot easier.
In times of crisis people are open to change and accept a different approach.
It helped that McEwan, having been through the rigours of helping RBS recover in Britain, also created a sense that he knew what he was doing.
Ultimately he will be judged on whether he can revive the bank’s clear leadership of the business banking market.
UBS analyst Jon Mott says this means NAB will have to take more risks, noting back in 1986 the bank earned two-thirds of its money from its business bank and a third from home loans.
Today the position is reversed.
Roger Montgomery 6.09pm: Rising tide of zombie stocks coming
Remember riding the Ghost Train as a child? I feel like that’s the ride today’s investor is aboard: and if you remember when you were on that train, the big scares came from the side.
One of the scares investors anticipate is the growing number of Zombie corporations. Ultimately, zombie businesses are reliant on the altruism of shareholders and lenders to survive, so many will perish when that altruism tires.
According to CreditWatch, the number of Australian businesses falling into administration rose in September. It’s the first time administrations have risen since June. Meanwhile, business defaults also rose for the first time since May.
Those increases immediately follow the reduction of JobSeeker payments to $1200 a fortnight and the introduction of a quarterly turnover eligibility test.
As we see a rising number of businesses falling into the hands of administrators, stockmarket investors are being invited to fund a veritable tidal wave of IPOs. In October (month-to-date), more than $700m has been raised from investors for companies including Cleanspace and Adore Beauty.
To put the quantum of October’s raising in perspective, a total of only $1.2bn has been raised for IPOs this year.
James Gerrard 5.43pm: Beware lender offers on fixed rates
Releasing the NAB results on Thursday, CEO Ross McEwan revealed that one in three home loans going out the door at the bank were fixed — what’s more, McEwan expects the trend to extend in the months ahead.
This is a major change: traditionally, about 90 per cent of loans are structured on variable interest rates.
But times are changing. Under normal circumstances, when banks predict that the RBA is in a cutting cycle, they will offer fixed rate loans at a lower price than variable rate loans.
With the official cash rate at 0.1 per cent, there is not much more downward movement available to the RBA, yet fixed rates are being priced at more than 0.5 per cent cheaper than variable rates. So why is this the case?
Ken Peng, managing director of mortgage broker Vestyn Finance, says: “Banks are not following traditional loan pricing rules on fixed-rate loans due to the large amount of cheap financing that the RBA is providing. Banks can access the $200bn Term Funding Facility with three-year loans provided to them at 0.1 per cent.”
As a result, banks are competing to lock in borrowers on three to five-year terms by offering them cheap fixed rate loans. Even though the rates are attractive to the borrower, don’t worry about the banks, they are still making money, having accessed the funds from the RBA at close to 0.1 per cent interest.
4.35pm: ASX follows Wall St higher
Australia’s sharemarket reacted positively to strong gains on Wall Street as US election results continued to favour a narrow win by Democrats.
The S&P/ASX 200 closed up 50.6 points or 0.8pc at 6190.2 - the highest close in just over two weeks - after rising as much as 1pc to 6202.3 in early trading.
As US stock index futures tumbled intraday, the S&P/ASX 200 dipped to 6158, but jumped almost 20 points in the closing single price auction.
Value stocks in the Materials sector outperformed with BHP up 1.3pc, Newcrest up 3.5pc and Northern Star up 7.2pc.
Financials were also higher, with CBA up 0.2pc while Westpac lifted 0.4pc. Macquarie lifted 2.3 per cent after it declared a $1.35 interim dividend as it unveiled a 32.4pc slump in first-half profit.
Consumer Discretionary stocks also outperformed with Treasury Wine up 9.9pc on ratings upgrades, and Tabcorp up 16pc on speculation that private equity firms were circling the wagering giant.
Friday’s gain rounded out a 4.4pc gain for the week.
The Australian dollar was 0.3pc weaker against the US dollar by the close of the ASX session, trading around US72.61c.
3.07pm: Toyota ramps up full-year forecasts
Toyota on has revised its full-year forecasts upward, saying sales and production were recovering quickly from the coronavirus pandemic, which has shredded the global auto market this year.
Japan’s top car maker now projects net profit of 1.42 trillion yen ($18.9bn) for the fiscal year to March 2021, nearly double an earlier estimate of 730 billion yen.
AFP
Lachlan Moffet Gray 2.51pm: Crown culture ‘facilitated money laundering’: inquiry
The Crown inquiry has resumed, with counsel assisting Scott Aspinall set to outline how Crown’s handling of money laundering risks impacts its suitability in holding a casino licence in NSW.
Mr Aspinall criticised the risk-based model of casino regulation that reigns in NSW and Victoria, saying the regulator does not exert enough authority in as opposed to a more prescriptive system.
Under the risk-based system, Crown was given a “special right and a special trust” to protect the community from the risk of money laundering as a casino licensee - but Mr Aspinall said they failed in this duty.
“What we will see shows a culture within Crown, during a period we look at, which either facilitates money laundering or is recklessly indifferent to whether or not it occurs,” Mr Aspinall said.
“And that in my submission is wholly unsuitable for a person who holds the privileged position of a licensee.”
Mr Aspinall said that there are “various pieces of evidence” that show money was laundered through Crown casinos, and that Crown failed to identify or act on these incidents.
The Sun City private junket room at Crown Melbourne was raised by Mr Aspinall, who played footage of individuals depositing “large bricks of cash” at a cash desk within the room.
The security footage was labelled as recording the Sun City buy in desk, and Mr Aspinall noted that Crown’s CLO previously told the inquiry that footage from this camera was not recorded and saved by Crown.
“Ultimately a whistleblower has to record from the screen to make a permanent record of what has occurred,” Mr Aspinall said.
“Witnesses who gave oral activity conceded the activity was suspicious and could be indicative of money laundering,” he said.
Mr Aspinall said this was evidence Crown was not enforcing its anti money laundering controls and that Sun City was running an informal cash cage in the room, in violation of Crown Melbourne’s internal control statement and an issue considering there was no requirement to report transactions to Austrac.
He also mentioned that Crown had arrangements with casinos in Macau and Manilla where customers could deposit and transfer money to the Australian casinos without having to verify their identities.
Commissioner Patricia Bergin noted that a third alternative finding she could land on aside from Crown not knowing or not caring about money laundering risks was that their systems were “so shocking” that individuals could walk into a casino with hundreds of thousands of dollars in a shopping bag.
She said that Crown had not put forward to her how they could continue to accept large amounts of cash and be satisfied that it was “legitimate” money.
2.32pm: Asian markets mixed after week-long rally
Most Asian markets were mixed Friday after the week’s strong gains but traders remained upbeat as the chances of Joe Biden winning the US election increased and after the Federal Reserve indicated it could provide further economic support.
While Donald Trump again accused Democrats of committing voter fraud and his team launched a series of legal actions in various states, hopes a new stimulus package will eventually be passed were supporting sentiment.
Analysts said Tuesday’s election was good for equities as the expected Democratic sweep of Congress failed to materialise while Biden looked set to take the White House.
“The market reaction to the unfolding election news suggests that financial markets would prefer to see a constrained Biden presidency,” Paul O’Connor, at Janus Henderson Investors, said.
However, he added: “The economic backdrop to this election is one of an incomplete global recovery that remains threatened by the continued spread of Covid-19 in many major economies as well as fast-fading fiscal support measures.”
Wall Street’s three main indexes rallied again, extending gains to a fourth straight day, with the Dow, S&P 500 and Nasdaq all gaining at least two percent.
But Asia’s surge petered out as profit-takers set in ahead of the weekend. Tokyo and Wellington rose more than one percent while there were also gains in Sydney, Taipei and Jakarta.
But Hong Kong, Shanghai, Singapore, Seoul and Manila were all slightly lower.
Still, Axi strategist Stephen Innes said the mood remained buoyant. “Equity markets’ impressive ability to switch narratives and stay optimistic, almost regardless of the outcome, suggests continued high resilience,” he said in a note.
AFP
1.48pm: HSBC leaves variable rates unchanged
HSBC has lowered its fixed interest rates but left it variable unchanged after the Reserve Bank cut the official cash rate by 15 basis points this week.
The bank is now offering owner occupiers paying principal and interest a fixed rate of 1.88 per cent per annum on a two-year term.
“We want to support the economic recovery by reducing our fixed interest rates for both owner occupiers and investors,” said HSBC Australia’s wealth and personal banking head Jessica Power.
“The move will assist the increasing number of customers who are seeking the certainty of low fixed interest rates to help manage the ongoing challenges posed by the pandemic.”
Lachlan Moffet Gray 12.40pm: Junkets should sink Crown licence: inquiry
Crown Resorts dealings with controversial gambling promoters - or “junkets” - make it unsuitable to operate the Barangaroo Casino in Sydney and attempts to fix problems arising from the dealings are “too little, too late,” a NSW inquiry has heard.
Addressing the commissioner of the NSW Independent Liquor and Gaming Authority, counsel assisting Naomi Sharp SC said Crown’s numerous failures to conduct proper due diligence on the identities behind these “junkets” with alleged links to organised crime represented a failure of its obligations under Australia’s gambling regulatory regimes.
“It’s our submission that Crown Resorts’ dealing with junket operators have rendered it and the licensee unsuitable, and that the limited suite of proposals that Crown Resorts has to date put forward to address the junket problems do not convert it into a position of suitability,” Ms Sharp said, referring to the operators who try to lure VIP gamblers to casinos.
Crown Resorts earlier this year suspended dealings with junkets pending numerous reviews until at least June next year, and is developing a new financial crimes department.
But Ms Sharp said that this did not address more “fundamental problems” within Crown.
“We submit that it follows from the submissions that Crown Resorts conduct has allowed or facilitated individuals of questionable repute with probable links to organised crime entering into bus relationships with it, and we say this has heightened the risk of Crown Resorts being drawn into money laundering,” Ms Sharp said.
“This means that Crown Resorts has breached a core obligation under the regulatory regime.
“The causes of the specific failings...are failures in risk management, failures in governance and failures in culture, and these are not areas where there can be a quick fix.
“It’s really only since August of this year that there has been explicit recognition by Crown Resorts that there have been shortcomings in their junket relationships.
“The evidence has not disclosed that Crown Resorts has not remediated these specific problems.”
Ms Sharp said Crown’s efforts thus far have been “a case of too little, too late.”
“The gestures are largely tokenistic and cannot be expected to address the more fundamental problems of governance, risk management and culture,” she said, saying one external study by Deloitte on junkets did not address root causes of problems arising from dealing with junkets.
Ms Sharp said that the issue of junkets “are but one case study” which highlight these failures - the others being Crown’s anti-money-laundering regime and the 2016 arrest of staff in China. “Common themes emerge from these specific case studies.”
12.30pm: Tokyo stocks wobble
Tokyo stocks were flat in early trade on Friday, wobbling between positive and negative territory, with a stronger yen weighing on the market, along with continued uncertainty about the US presidential race.
The benchmark Nikkei 225 index opened down 0.19 per cent or 46.61 points at 24,058.67, while the broader Topix index was off 0.18 per cent or 2.94 points at 1,647.00
But both indexes rebounded to positive territory shortly after, despite US President Donald Trump’s making a brief speech to claim without evidence that Democrats were trying to “steal” the US election with illegal votes.
“The yen’s appreciation against the dollar could cap the upside” of the Tokyo market, said senior market analyst Toshiyuki Kanayama of Monex, adding that rallies on Wall Street are giving some support to investor sentiment.
Investors were closely watching Toyota’s earnings report due during Tokyo trading hours, analysts said.
AFP
12.20pm: UBank passes on full rate cut
UBank has passed on the RBA’s 0.15 per cent rate cut in full to variable mortgage holders and cut its fixed rate by more than the official rate cut.
The lender said its 3-year fixed rate will be reduced by 0.19 per cent to 1.95 per cent for owner occupiers paying principal and interest, for all new and existing customers.
“We are pleased to be offering these rate cuts to both our fixed and variable home loan customers at a time when Australians need some extra financial assurance,” chief executive Philippa Watson said.
“This is an historic announcement for UBank, as it is the first time in our bank’s history that we’ve announced a home loan rate that begins with a one, and we want our customers to know we will continue to find ways to support them through these challenging times.
“We encourage all Aussies with a home loan to take a look at their rate and make sure they’re getting the best deal.”
Lachlan Moffet Gray 12.15pm: Inquiry details Crown’s due diligence ‘failures’
Counsel assisting the Crown inquiry, Naomi Sharp, has gone on to detail junket operators, financers and representatives that Crown has dealt with over the years, and their alleged links to organised crime, money laundering and prostitution.
Ms Sharp characterised the dealings as “obvious due diligence failures” on the part of Crown, and said it was not acceptable that Crown continued to deal with junket figures on the basis that alleged criminal activity was just allegations.
“It’s our submission that it follows as a necessary interpretation from the stat framework that the casino operator must deal only with those that they are satisfied are of good repute,” she told the inquiry today.
“If the operator cannot satisfy itself of that matter it should not deal with those persons.
“So when you have a number of due diligence providers singing from the same samebook of the alleged criminal history of somebody... once that information comes to the operator’s attention, it becomes a matter for the casino operator to actively include the veracity of that information.”
However, Ms Sharp that since the inquiry began there had been a “distinct change in Crown Resort’s tone on that point”, citing evidence given by directors where they accepted there were deficiencies in a less than robust junket vetting process.
Ms Sharp said that Crown’s temporary suspension of junket dealings should be taken “as an admission” that its vetting processes were not sufficient, after the company released a statement to the ASX last year asserting that its vetting process was robust.
“At no point has Crown Resorts had a robust procedure, though it is a procedure that has exhibited some improvements over time,” Ms Sharp said, adding that the process never could have “quipped Crown Resorts to satisfy itself that the junket operators were of good repute”.
12.01pm: ASX firmly higher at noon
Stocks were up strongly at lunch on broad-based gains, following leads from Wall Street overnight. At around midday tThe ASX was up 0.74 per cent at 6185.0.
Materials is the best performing sector, despite a drop in the iron ore price overnight, with BHP up 1.5 per cent.
Gold miners are among the best performing stocks on a 2.8 per cent lift in the gold spot price, after Federal Reserve chair Jerome Powell struck a dovish tone during a press conference overnight, signalling that US interest rates would be kept near zero and that bond buying would continue at the current price. Northern Star was 6.1 per cent higher at lunch while Newcrest is up 3.6 per cent.
Financials are also higher, with CBA up 0.2 per cent and Westpac 0.7 per cent higher. Macquarie is up 1.4 per cent after it declared a $1.35 interim dividend as it unveiled a 32.4 per cent slump in first-half profit.
Treasury Wine Estates is 8.7 per cent higher on upgrades by analysts at UBS and Citi, who said the possible China tariffs had already been priced in.
Real estate stocks are mostly lower with Goodman Group down 0.1 per cent, somewhat reversing a 3.7 per cent list yesterday, after the company reaffirmed its earnings and dividend guidance.
The Australian dollar is down 0.28 per cent at US72.60c.
11.50am: RBA says rate cuts are over
The Reserve Bank has maintained a cautiously optimistic outlook for the economy but is prepared to ease monetary policy further by increasing its quantitative easing program if the circumstances require, as it monitors the recovery from the pandemic and the outlook for jobs and inflation.
In its quarterly statement on monetary policy for November, released on Friday, the central bank said its policy easing - including interest rate cuts and bond buying - announced after its meeting on Tuesday will support economic activity and job creation by boosting cash flows, making the dollar lower than it would otherwise have been and helping strengthen balancing sheets via making some asset prices higher than they would be otherwise, and also be supporting the supply of credit.
But after slashing key interest rates including the official cash rate target, the three-year bond yield to a record low of 0.1 per cent and also lowering the rate on exchange settlement balances to zero on Tuesday, the RBA says it’s not contemplating a further reduction in interest rates.
“With the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances at zero, interest rates have been lowered as far as it makes sense to do so in the current environment,” the statement said.
“The board considers that there is little to be gained from short-term interest rates moving into negative territory and continues to view a negative policy rate as extraordinarily unlikely.”
But as outlined in its policy announcement, the RBA noted that it has committed not to increase the cash rate target until actual (rather than forecast) inflation is sustainably within the target range of 2–3 per cent - requiring a period of strong employment growth and a return to a tight labour market – and that the three-year yield target will be removed prior to an increase in the cash rate.
John Stensholt 11.16am: Tabcorp shareholder welcomes PE interest
Tabcorp shareholder Anton Tagliaferro has welcomed news of a potential private equity bid for the wagering giant, saying the prospect should at least accelerate much-needed change that could include a spin-off of Tabcorp’s lotteries business.
Mr Tagliaferro, the investment director of Investors Mutual, controls about 3 per cent of Tabcorp’s shares, and wrote to its board earlier this year agitating for board room change.
He told The Australian on Friday morning that he was keen for Tabcorp to get moving on finding a new chief executive to replace David Attenborough, who is slated to leave in early 2021, act on a mooted cost-saving program and investigate spinning its strong-performing lotteries business.
“I would expect these private equity rumours to accelerate some of those moves,” Mr Tagliaferro said.
“Given the Tabcorp share price, we think the lotteries business is undervalued if you compare to the levels of similar businesses trading overseas. So I think shareholders have been pushing for a while for [a spin-off] to happen”.
Tabcorp shares surged by as much as 14 pr cent during Friday morning’s trade after The Australian revealed private equity firms were circling it and plan to enlist Matthew Tripp, the former boss of Sportsbet and BetEasy, to run its wagering division should a bid eventuate.
Responding to the report, Tabcorp said “it is not aware of, and has not received, any proposal in respect of the company or its businesses”.
11.13am: Trump claims win unless Democrats ‘steal’ election
President Donald Trump claimed without evidence that Democrats were trying to “steal” the US election with illegal votes, saying he would “easily win” the race against Joe Biden without the alleged interference.
“If you count the legal votes, I easily win. If you count the illegal votes, they can try to steal the election from us,” said the president as his reelection hopes hung by a thread.
Trump said his team had launched a “tremendous amount of litigation” to counter what he called the “corruption” of Democrats, even as several officials in battleground states where the vote remains undecided have defended the integrity of the vote.
AFP
11.09am: Amcor shares jump on outlook
Shares in Amcor have lifted nearly 5 per cent in early trade after the packaging company raised its full-year outlook and increased its quarterly dividend payout to US11.75c a share, or 16.55c per share unfranked for Australian shareholders.
The company touted a strong start to the new financial year, and said it expects earnings per share growth for the full-year to be between 7 per cent and 12 per cent, up from its previous guidance of between 5 per cent and 10 per cent.
“Amcor’s 2021 fiscal year is off to a strong start with outstanding first quarter financial results ahead of our expectations,” chief executive Ron Delia said.
“Demand for our products remains resilient and our teams continue to stay focused and to deliver excellent operational performance.”
For quarter through September, Amcor said net sales grew 2 per cent on a net currency basis, while earnings before interest, tax, depreciation and amortisation lifted 6 per cent on a constant currency basis to $US460m.
Lachlan Moffet Gray 11.01am: Crown’s ‘lack of care’ over probity
Crown Resorts was aware of money-laundering risks when it continued to deal with a Macau gambling identity, a NSW casino inquiry heard.
Counsel assisting Naomi Sharp was detailing Crown’s relationship with the Sun City junket, which was once headed up by Alvin Chau, a Macau identity with links to organised crime.
The inquiry is assessing Crown’s suitability to hold a NSW casino licemce.
Ms Sharp has continued to go over evidence earlier discussed in the inquiry that shows Crown deciding that Mr Chau was a person with whom they should continue dealing, despite knowing of his alleged links to organised crime.
Ms Sharp did note that Crown did tighten their scrutiny on Sun City’s private room at Crown Melbourne, tightening the amount of cash they could hold to $100,000 - although $5.6m was found in the room subsequently.
“Instead of all of these controls would a better solution would have been to consider whether there was too great a risk here?” Ms Sharp said.
“Crown was very aware there were money laundering risks but never got to the point of thinking it’s time to pull up stumps and stop dealing with Alvin Chau.”
Crown Resorts has suspended dealings with junkets until June next year but have not made a determination on whether they would continue to deal with Mr Chau.
“There still appear to be a range of views among the current directors,” Ms Sharp said.
Ms Sharp also said that when Crown was in a joint venture with Melco in Macau, they dealt with a junket group called the “Neptune Group,” headed by Cheung Chi-tai, who she submitted was known not to be a person of good repute, with media reports linking Chi-tai to the triad going back to 2010.
Many other junket operators linked to Neptune continued to operate at Crown despite internal due diligence reports raising a number of questions about their integrity - one noted a junket operator was known as “the king of gambling on the high seas,” but Crown only ever cancelled their credit limit and did not terminate their dealings with him.
Ms Sharp said this was “typical of the lack of care that senior executives did give to the questions of the probity of the junket operators with whom they dealt.”
10.40am: Treasury Wine upgraded
Treasury Wine shares are up more than 5 per cent after UBS and Citi upgraded their recommendations on the stock to buy, both investment banks saying that recent shareprice falls now makes the stock look appealing.
Treasury shares fell 8.2 per cent yesterday following news of potential China tariffs, and amid reports of wine dumping there.
But Citi analysts said that most of the downside has now been largely factored into the shareprice.
“While the situation is political, we believe there is no evidence of dumping in China of premium wines and Treasury may be in a better position than most if tariffs are targeted towards lower priced wines,” they said.
Lowering their target price on the stock to $8.80 from $12.50 a share, UBS analysts said they see value in Treasury Wine stock, despite the risks risk of China tariffs and speculation of a wine import suspension.
“With TWE’s share price factoring a $4.40 a share valuation impact from tariffs, we believe risk, reward is now favourable,” UBS said.
“Despite this, we appreciate there are a wide range of outcomes, with near-term catalysts limited as high tariffs look increasingly likely.”
Treasury last up 5 per cent at $8.36.
David Swan 10.30am: ACCC mulls more moves against big tech
Competition tsar Rod Sims is closely watching anti-trust efforts against the tech giants in the US and Europe, and has revealed he’s mulling further changes to Australia’s merger laws to protect against big tech monopolies.
In a speech to the Law Council of Australia Mr Sims said the ACCC was actively working on changes to Australian merger laws, expected in 2021, to further the regulator’s tech agenda.
“The ACCC is focusing on the media bargaining code, our ad tech inquiry and our study examining app stores, and we have noted the Epic Games proceedings against Apple and Google in the US in regards to the latter,” he said.
“These are complex issues, but they matter enormously and, in different ways, they are being considered all over the world.
“The international focus is encouraged by the many acquisitions by the main digital platforms. While the platforms have grown through amazing and beneficial innovation, they are cementing their position through frequent acquisitions.”
Mr Sims did not provide an update on the mandatory media bargaining code, which is expected to be finalised before the end of the year. Mr Sims has previously flagged the code will change from its draft form, and made a final submission to government last month.
In his speech the regulator also called on Australia to stop viewing its infrastructure as ‘cash cows’ and suggested a new ‘Part IIIB’ regime to regulate specific infrastructure assets could be helpful to prevent undue privitisation of assets.
“When the economic historians look back on the past 20 years they will marvel at how we often privatised so many vital assets to raise money at the clear cost to future users of the relevant assets,” Mr Sims said.
“The community does not, by a large majority, approve of the privatisation of government assets. They are not luddites. They have simply observed the higher prices that have often been the result.”
10.23am: ASX opens higher, Tabcorp jumps
Australia’s S&P/ASX 200 share index jumped 1pc to a 9-day high of 6202.3 in early trading.
While getting a substantial boost from bigger-than-expected gains and a shift back to value stocks on Wall Street, the index exceeded a 0.6pc rise implied by overnight futures.
The Materials sector was strongest as the case on Wall Street, with BHP up 1.3pc and Northern Star up 5.2pc after spot gold rose 2.5pc.
And the Consumer Discretionary and Financials also matched outperformance in those sectors overnight.
But gains in those sectors were helped by an 11pc rise in Tabcorp amid takeover talk, and as Australia recorded its seventh-consecutive day of no new locally-acquired COVID-19 cases.
And a 2.6pc rise in Macquarie Group after its results buoyed the Financial sector.
News Corp also stood out with an 8pc rise after its 1Q revenue beat estimates.
Amcor rose 4.8pc after increasing its dividend and its outlook for FY21 earnings.
Lachlan Moffet Gray 10.19am: What must Crown do to get licence?
The NSW Inquiry into Crown’s suitability to hold a casino licence has entered its third day of oral submissions from the counsel assisting.
We already know that the counsel assisting believes Crown Resorts and its largest shareholder James Packer are not suitable licensees for the Barangaroo Casino, due to open December 14.
However, the counsel assisting is still detailing specific recommendations that the inquiry could recommend the NSW gaming authority make to improve the chance of Crown becoming suitable.
Yesterday it was submitted that Mr Packer’s holding company, CPH, not exercise any more voting power beyond 10 per cent of its 36.7 per cent stake in the company.
The counsel assisting also suggested that CPH have just one nominee director on the board, not three, and that any flow of financial information between the two companies cease.
If the recommendations are adopted by Commissioner Patricia Bergin, it means that James Packer and Crown will emerge from the debacle comparatively unscathed.
However, submissions still have to be made on how Crown’s dealings with junkets and neglect of money laundering risks prove the company’s unsuitability. It is likely that the counsel assisting will make recommendations about Crown’s future use of junkets, impacting the foreign VIP business that Barangaroo was built to capture.
Today counsel assisting Naomi Sharp is detailing Crown’s relationship with the Sun City junket, which was once headed up by Alvin Chau, a Macau identity with links to organised crime.
A number of internal Crown due diligence reports noted that Mr Chau had links to triad groups, but Ms Sharp submitted that this matter was never escalated to the Crown’s CLO and former chief anti money laundering officer, Joshua Preston.
Ms Sharp said that NSW and Victoria’s “risk-based” regulatory approach is “one which requires the casino operator to conduct the due diligence” on junkets, thereby limiting the government’s knowledge of the integrity of junket operators.
“The casino operator has more intelligence about the junket representative and to that extent the regulator is dependent on the transparency of the operator,” Ms Sharp said.
Ms Sharp has also mentioned that AUSTRAC had emailed Crown Resorts in regards to the appropriateness of dealing with Sun City’s Alvin Chau.
“And yet still Crown Resorts did not form the view that Mr Chau was not a person of good repute,” Ms Sharp said.
Eli Greenblat 10.06am: News Corp in first quarter earnings boost
News Corp posted a 10 per cent decline in revenue during the September quarter, primarily driven by the sale of its News America Marketing division, although revenue for many other of its operational segments were higher in the quarter as customers turned to its news sources at a time of political and economic upheaval triggered by the COVID-19 pandemic.
Underlining the thirst for news in an environment shaped by the global pandemic, News Corp’s Dow Jones arm, which houses The Wall Street Journal, unveiled a record first quarter in terms of profit and revenue, with further potential for an expansion of its audience.
News Corp, which owns mastheads including The Australian, The Daily Telegraph, Herald Sun and international titles The Times and The New York Post, booked revenue of $US2.12 billion ($2.9 billion) for the first quarter ended September 30, down from $US2.34 billion a year earlier.
Net income of $US47m compared to a loss of $US211m a year earlier, with the previous result weighed down by non-cash impairment charges of $US273m.
10.05am: Ex-Macquarie adviser charged
Former Macquarie financial adviser Warren Acworth will face court in January charged with dishonesty offences.
Following an ASIC investigation, Mr Acworth was charged with 27 offences, 16 counts of making false or misleading statements contrary to sections two sections of the Corporations Act, each carrying a maximum penalty of 10 years’ imprisonment and/or a fine of between $810,000 and $945,000.
He was also charged with six counts of making a statement that was false contrary to section 64 of the ASIC Act, with each offence carrying a maximum penalty of two years’ imprisonment and/or a fine of $21,000.
Mr Acworth, who worked as an adviser with Macquarie Equities between December 2015 and May 2018, was also charged with five counts of fraud, with maximum penalties of between 14 and 20 years imprisonment.
The matter will return to the Brisbane Magistrates Court on 29 January 2021.
Mr Acworth has been placed on bail with condition that he does not leave Australia.
The matter is being prosecuted by the Commonwealth Director of Public Prosecutions following a referral from ASIC.
10.00am: What’s impressing analysts?
NAB raised to Buy: Jefferies
NAB cut to Hold: Morgans Financial
Treasury Wine raised to Buy: Citi
Treasury Wine raised to Buy: UBS
Deterra Royalties started at Buy: UBS
Genworth Australia raised to Positive: Evans & Partners
Inghams raised to Positive: Evans & Partners
Inghams raised to Add: Morgans Financial
Inghams cut to Hold: Morningstar
SmartGroup raised to Add: Morgans Financial
Vicinity Centres cut to Hold: Morningstar
Virtus Health cut to Hold: Jefferies
Zebit started at Buy: Shaw & Partners
9.51am: US Senate control hinges on Georgia
The fight for control of the US Senate now is centered on Georgia, where the state’s close election has pushed at least one, and possibly two, of its Senate races to January 5 runoffs.
The outcome of those two races could shift the balance of power in the Senate, as Democrat Jon Ossoff tries to unseat Republican Senator David Perdue, and Democrat Raphael Warnock faces off against Republican Senator Kelly Loeffler. Messrs Ossoff and Warnock have been critical of Mr. Trump, while Mr. Perdue and Ms. Loeffler have allied themselves with the president.
Under Georgia law, if no candidate gets more than 50pc, the two top vote-getters, regardless of party, compete in a runoff to be held on January 5, 2021.
Coming into election day, the Republicans had a 53-47 majority in the Senate. Based on results so far nationwide, Republicans will control 48 seats next year, and they lead in two other states -- North Carolina and Alaska. Democrats so far have locked down 48 seats, leaving the two Georgia races as their best hopes to reach 50.
If Democratic candidate Joe Biden wins the White House, vice-presidential nominee Kamala Harris would cast a tiebreaking vote when needed.
Dow Jones
9.45am: ASX rally may broaden
Australia’s sharemarket rally is set to continue and potentially broaden on Friday.
Overnight futures suggest the S&P/ASX 200 will open up 0.6pc at 6176.
That would be the highest point in almost two weeks and only 1.2pc from the October peak at 6248.3.
Overnight gains on Wall Street were about twice as much as indicated by futures yesterday, with the S&P 500 up 2pc and the Nasdaq up 2.6pc.
Value heavy sectors including Materials and Financials sectors outperformed.
Small caps also outperformed with the Russell 2000 up 2.7pc.
The improvement in value came as US bond yields stabilised although the Energy sector remained weak as WTI crude fell 1.6pc after new COVID cases in the US hit a record high.
Focus turns to the RBA’s statement on monetary policy at 11.30am (AEDT), although the market already knows the RBA has a bias to ease more because the unsatisfactory headline forecasts for economic growth, inflation and unemployment already incorporate the policy easing announced on Tuesday.
Overall it should be a quiet day before US non-farm payrolls data and US election updates.
9.35am: Vicinity plans distribution, no guidance
Mall owner Vicinity Centres said it intends to pay a distribution to shareholders for its fiscal first half, as rent collection improves in areas that haven’t faced second lockdowns to combat the coronavirus pandemic.
Still, Vicinity Centres said the outlook remained so uncertain that it wasn’t able to provide earnings guidance for the year through June.
Vicinity said the collection of gross rental billings was 76pc in the first quarter when malls in Victoria or city centres are excluded. Including those areas, cash collection was stable at 56pc compared to the final quarter of fiscal 2020.
Vicinity said moving annual turnover--a key metric of performance--fell by 1.7pc when malls in Victoria or city centres are excluded. Including those areas, moving annual turnover dropped by 15.2pc.
“For Vicinity excluding Victorian and CBD centers, during the September 2020 quarter, centre visitation averaged 94pc of the prior year level, while sales were up 1.1pc versus the corresponding quarter for the prior year,” chief executive Grant Kelley said.
Dow Jones Newswires
9.08am: Suncorp counts hailstorm claims
Insurer Suncorp said it has so far seen around 6400 claims mostly made up of car damage from the hailstorm that hit southern Queensland and parts of NSW on October 31.
The insurer expects total payouts for natural hazards in the four months to end-October to hit as much as $408 million. In total Suncorp’s natural hazard allowance is $950 million. The allowance is divided equally between the first and second halves of the financial year, Suncorp said.
“As of November 6, Suncorp had received around 6400 claims related to the QLD NSW hail event, comprising approximately 3300 motor claims, 2800 home claims and 300 commercial claims,” Suncorp said in a statement. “Claims numbers are expected to increase, as customers continue to lodge their claims”.
The insurer noted it had a comprehensive reinsurance program in place.
9.02am: Magellan funds inflow continues
Magellan shares should do well today after the further rally in global markets overnight, particularly after the fund manager reported a net inflow of $601 million to funds under management in October. Net retail inflows were $188 million and net institutional inflows were $413 million
Joyce Moullakis 8.50am: Macquarie interim profit down 32pc
Macquarie Group has warned of an “uncertain speed” for a global economic recovery from COVID-19, as it shied away from providing earnings guidance and reported a 32.4 per cent slump in first-half profit.
Net profit dropped to $985m for the six months ended September 30, from $1.46bn in the same period a year earlier, the company said in an ASX statement on Friday.
The result exceeded the asset management giant and investment bank’s guidance and the average of four analysts polled by The Australian had Macquarie reporting interim profit of $957.2m.
But Macquarie chief executive Shemara Wikramanayake is cautious on the outlook for the remainder of its financial year, which it rules off on March 31.
“Recent months have been overshadowed by the profound human impact of the COVID-19 global health crisis and its economic consequences,” she said.
“Those impacts are reflected in our result, notably in credit and other impairment charges in relation to the ongoing impact of COVID-19 on our clients and customers and in delays to realising assets from our balance sheet and our funds.”
Macquarie declared a $1.35 interim dividend. That compares to a first-half dividend of $2.50 per share a year ago, and a $2.50 payment declared in the second half of Macquarie’s 2020 year.
Macquarie had provided guidance in September that interim profit would be 35 per cent lower than a year ago, and 25 per cent down the second half result. That suggested an interim result of between $947.1m and $955.5m.
Read more: Macquarie Group first-half profit falls 32% amid uncertain recovery
Ben Wilmot 8.45am: REA sees property recovery
Online property classified business REA Group has turned in a resilient quarter and is seeing an uptick in listings as residential markets pick up pace.
The company generated $195.7m in revenue from its core operations for the September quarter and earnings before interest, taxes, depreciation, and amortisation of $123.8m.
It warned about the ongoing impacts of COVID-19 on property markets, saying there were diverging impacts due to different restrictions on residential listings across Australia, with overall national residential listings declining 2 per cent.
The second wave of COVID-19 restrictions in Melbourne, which banned physical property inspections, caused significant short-term listing weakness with volumes declining 44 per cent for the quarter.
By contrast, NSW showed signs of a continued market recovery as restrictions eased with a 23 per cent increase in listings for the quarter in Sydney.
REA has kept a tight rein on costs with an 18 per cent reduction in core operating expenditure for the quarter, partly as some spending was pushed back.
The company said there had been “positive signs” of a real estate market recovery in all markets following the lifting of restrictions, the COVID-19 crisis continued to create market volatility.
Read more: REA Group cautious, but sees recovery
Cameron Stewart 8.35am: ‘No doubt’ we’ll win: Biden
Joe Biden has called on Americans to keep calm and be patient while the vote count continues, saying “‘the process if working”.
Speaking in Wilmington, Delaware, the former vice president said he still felt good about where things stand and he was confident that he would win the election.
“In America the vote is sacred - it is how people in this nation express their will’ he said. “Each ballot must be counted and that’s what we are going to see, and that’s how it should be. Democracy is sometimes messy and it sometimes requires a little patience as well,” he said.
“We continue to feel very good about where things stand - we have no doubt that when the count is finished Senator Harris and I will be declared the winners.’
“So I ask everyone to stay calm, the process is working, the count is being completed and we will know very soon,” he said.
Mr Biden was speaking as votes continue to be tallied in the key undeclared states of Pennsylvania, Nevada, Georgia and North Carolina.
8.30am: Uber reports $US1.1bn loss
Uber reported that it lost $US1.1 billion in the recently ended quarter as the pandemic walloped its ride-share business, but boosted its food delivery service.
Revenue in Uber’s mobility unit was down 53 per cent from the same quarter last year, while money taken in from drivers delivering restaurant meals or other orders more than doubled, according to the San Francisco based company.
“Despite an uneven pandemic response and broader economic uncertainty, our global scope, diversification, and the team’s tireless execution delivered steadily improving results,” chief executive Dara Khosrowshahi said in an earnings release.
Uber shares that had been buoyed by the triumph of an initiative that lets drivers remain classified as independent contractors in California sank nearly 3 percent in after market trades.
AFP
8.15am: ASX to open higher after global rally
Australian stocks are set for a positive start as US stocks surged because investors saw the potential for US tax hikes fade following the election.
Around 7am (AEDT) the SPI futures index was up 42 points, or 0.7 per cent.
Yesterday, Australian stocks closed firmly higher.
Brent oil fell 0.7 per cent to $US40.93.
The Australian dollar is at US72.6.
8.02am: US stocks close higher as Biden nears win
US stocks jumped, on track for their sharpest weekly gains since April, as investors cheered the diminished prospects of higher corporate taxes under a split Congress.
The benchmark S&P 500 rose 1.9pc, a day after it logged its biggest one-day advance since June. The index has climbed 7.4pc so far this week. The Dow Jones Industrial Average rose 543 points, or 2pc, paring an earlier gain of nearly 650 points.
Technology shares led the charge for a second day: The Nasdaq Composite jumped 2.6pc. All three indexes are on course for their best week since the period ended April 9.
Democratic candidate Joe Biden is within striking distance of the presidency, potentially bringing to an end weeks of uncertainty about the U.S. election that has weighed on markets. Republicans have won enough seats to potentially retain control of the Senate, while Democrats appear poised to hold on to the House.
Investors’ anticipation of a divided government -- which could make it more difficult to accomplish major legislative overhauls, including raising corporate taxes and regulating technology companies -- has fueled sustained optimism on Wall Street this week.
The S&P 500 and Dow are both on pace for their fourth consecutive gain of 1%, the longest such streak for both indexes since October 1982. The S&P 500 and Nasdaq were within 4% of their early September records as of Wednesday’s close, while the Dow was nearly 6% below its February high.
“I’ve been speaking to investors for months and all the concerns about the Green New Deal, higher taxes, expansion of the Affordable Care Act -- all of these things that you’ve heard -- that now dissipates,” said Brian Levitt, global market strategist at Invesco. And even as votes are still being tallied, he added, “the uncertainty of the election is behind us, there is hope about medical breakthroughs and we know the [Federal Reserve] is going to be supportive.”
“Markets are forecasting an improving environment,” he added.
One of the big unknowns in the weeks ahead will be the size of a fiscal stimulus package -- the subject of much wrangling between both parties in Washington leading up to the election. Before Tuesday, many traders had betting on a blue wave that would have likely created an easier path for robust stimulus to aid the country’s wounded economy. Now, however, it is unclear how large or broad that might be.
“What I’ve been asking myself in my own head -- a question to which I don’t have an answer -- is whether, assuming a divided government, there is less likely to be a larger-in-size fiscal relief package because we know the two sides were quite different on the details,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “What I wonder is how much of the negotiating and the digging the heels in was a function of the election...And I don’t know in which direction that moves the needle.”
While the election remained top of mind for many investors Thursday -- especially as vote-counting continued in a handful of swing states -- traders were on the lookout for any kind of sentiment change from the Fed after officials concluded their November meeting.
Ultimately, the central bank made no changes to its commitment to provide sustained stimulus and said the coronavirus pandemic continues to pose significant risks for the U.S. economy.
Meanwhile, new applications for unemployment benefits held largely steady in the week ending Oct. 31, the Labor Department said. About 751,000 Americans applied for unemployment benefits, the data showed, a level slightly lower from the week before but still considerably higher than before the pandemic.
Overseas, optimism was also high in the equity markets. The pan-continental Stoxx Europe 600 rose 1pc. And in Asia, Hong Kong led regional gains. The Hang Seng Index advanced 3.3pc. South Korea’s Kospi Composite gained 2.4pc, while China’s Shanghai Composite traded 1.3pc higher.
Dow Jones Newswires
7.54am: AMP appoints Kate McKenzie to board
AMP says Kathryn (Kate) McKenzie will bring “extensive experience” to the board when her appointment takes effect on November 18.
The former CEO of New Zealeand telco Chorus is currently a non-executive director of NBN Co and Stockland. She also held executive roles at Telstra.
Angelica Snowden 7.23am: AstraZeneca phase 3 trials ‘this year’
AstraZeneca is on track to deliver the results from it’s stage three COVID-19 vaccine trial “later this year”.
The pharmaceutical company made the announcement in their third-quarter results report after vaccine trials were temporarily paused in September after a patient fell ill.
“Results from late-stage trials are anticipated later this year,” the report read.
“Data readouts will be submitted to regulators and published in peer-reviewed scientific journals.”
The company reported in partnership with the University of Oxford that it continued to recruit participants into the global clinical trials of the vaccine with 23,000 participants across trials in the UK, Brazil, South Africa and the US.
6.51am: Fed says Covid rise ‘particularly concerning’
The recent spike in COVID-19 cases is “particularly concerning” for the US economy, and more stimulus may be needed to support the recovery, Federal Reserve Chair Jerome Powell said.
The “outlook for the economy is extraordinarily uncertain,” Mr Powell said, warning that: “A full economic recovery is unlikely until people are confident that it’s safe to re-engage in a broad range of activities.”
Previous spending measures from Congress were “essential (in) supporting the recovery that we’ve seen so far,” he told reporters in a press conference, but “further support is likely to be needed.”
AFP
6.45am: Michigan judge rejects vote halt
A Michigan judge denied a legal effort by the Trump campaign to halt the counting of absentee ballots in the state, in part on the grounds that the lawsuit was brought against the wrong defendant and was filed too late since all the state’s votes have been counted.
During an hour-long court hearing--conducted over Zoom and aired on the Michigan court system’s YouTube channel--Judge Cynthia D. Stephens in the Michigan Court of Claims also questioned the lack of specificity in the Trump campaign’s lawsuit, which was filed late Wednesday afternoon (US time). The lawsuit sought to stop the counting of ballots on the grounds that partisan challengers had been denied the right to take part in the review process.
Dow Jones
6.40am: Stocks hold gains after Fed
US stock indexes held their gains after the Federal Reserve’s Open Markets Committee signalled that it would keep interest rates near zero and continue to buy bonds at its current pace.
The S&P 500 was up around 2 per cent after the Fed’s 6am (AEDT) policy statement, which was little changed from the statement it published following its October meeting.
Earlier this year, the central bank scaled up its purchases of Treasuries and mortgage-backed securities in response to the coronavirus pandemic. It also cut rates near zero and introduced several new programs to buy or help banks finance holdings of corporate bonds, commercial paper, municipal bonds, asset-backed securities and other debt.
Fed officials have already assured investors that it will keep interest rates near zero through 2023.
So investors’ remaining questions concern the bond-buying programs: Namely, they want to know whether the Fed will extend the maturities of bonds it’s buying or further increase its pace of purchases. They also want to know whether it will make its newer programs more accommodative, or whether it will extend its Municipal Liquidity Facility past the end of this year.
Wall Street strategists predicted that Fed officials would keep policy steady this month, to avoid the spotlight the week of the presidential election. The lack of a decisive “Blue Wave,” or Democratic sweep, has prompted markets to price in a lower probability of large fiscal stimulus in coming months.
“We don’t expect any announcements to come out of this week’s FOMC meeting,” wrote TD Securities strategists in a recent note, “in part because officials will likely want to avoid the spotlight in the middle of the ongoing election drama.”
Dow Jones
6.03am: Fed maintains low-rate pledges
The Federal Reserve said the coronavirus pandemic poses considerable risks for the US economy despite recent gains, and officials made no changes to their commitment to provide sustained stimulus.
“The ongoing public health crisis will continue to weigh on economic activity, employment and inflation,” the central bank said in a policy statement after concluding a two-day meeting.
In September, Fed officials pledged to support the recovery by setting a higher bar to raise interest rates and by signaling it expected to hold rates near zero for at least three more years.
At that meeting, the Fed laid out three thresholds for raising rates, including evidence of a tight labor market, annual inflation of at least 2pc, and forecasts that inflation would run moderately above 2pc.
Officials didn’t make any changes to that policy on Friday (AEDT), leaving a press conference by Chairman Jerome Powell at 6.30am (AEDT) as the main focus for investors.
Fed officials likely continued discussions this week over how to provide more support to the economy should the recent rebound fizzle. They have had their eye on two prominent risks since the summer: that growth would falter amid rising virus infections and that Congress would fail to deliver additional spending to support unemployed workers, hard-hit businesses and state and local governments.
The policy makers have been surprised through the late summer and early fall by the degree to which economic activity held up despite higher infection counts.
On the other hand, negotiations between Republicans and Democrats over how much more to spend on pandemic relief measures have stalled. Several Fed officials have said their forecasts for continued growth are premised on additional government spending; they met this week without knowing the outcome of Tuesday’s elections, which will shape the contours and timing of any fiscal package.
“The elephant in the room is the fiscal outlook,” said James Sweeney, chief economist at Credit Suisse.
One reason Fed officials have been so outspoken about the need for additional government spending is because their stimulus tools are reaching the limits of what they can provide and because those tools are poorly suited to addressing the fallout from the pandemic, economists said.
“Central banks are impotent in this. The only thing you can do from a governmental standpoint is transfer income,” said Steven Blitz, chief U.S. economist at research firm TS Lombard.
Mr. Blitz said he worries about new weakness as state and local governments address large revenue declines by laying off workers. He also fears business failures will result in more defaults on commercial property debts held by small and midsize banks. “Fiscal failure at this juncture will lay bare the weakness in monetary policy, and with that will come bank failures -- on Main Street, first,” said Mr. Blitz.
Dow Jones Newswires
5.15am: US stocks extend rally amid vote uncertainty
US stocks surged, on track to extend their sharpest weekly rally since April, as investors cheered the prospect of curbs on new regulations and diminished chances of higher taxes under a split Congress.
The benchmark index rose 2.2 per cent in lunchtime trade, a day after it logged its biggest one-day advance since June. The index has climbed 7.7 per cent so far this week. Technology shares are leading the charge for a second day: The Nasdaq Composite jumped 2.4 per cent.
The Dow Jones Industrial Average surged 1.9 per cent. All three indexes are poised for their best week since April.
Democratic candidate Joe Biden is within striking distance of the presidency, potentially bringing to an end weeks of uncertainty about the US election that has weighed on markets. Republicans have won enough seats to potentially retain control of the Senate, while Democrats appear poised to hold on to the House.
Investors are betting that with a divided government, Mr Biden would have difficulty passing legislation aimed at regulating technology companies and raising corporate taxes. There is also speculation that there will be additional coronavirus-relief spending from the government to help bolster the economy, albeit a smaller package than a Democratic-sweep would have enabled.
A Biden administration “cannot enact major tax changes -- there will be gridlock -- but you still get fiscal spending and a stimulus package on the table again,” said Mona Mahajan, U.S. investment strategist at Allianz Global Investors. “Gridlocks tend to be more market friendly because you don’t have one side enacting their entire policy agenda, and you get more checks and balances on it.”
If control of the Senate remains in Republican hands, that would especially help curtail any efforts to introduce fresh regulations on the technology industry, investors said. While both Democrats and Republicans have said tech companies have too much power and antitrust authorities should move to curb it, they disagree on how to rein in the companies.
“The big concern was that there was going to be regulations,” said Patrick Spencer, managing director at US investment firm Baird. “It’s less likely that now you’re going to get tax increases and regulations on big tech.”
Megacap technology stocks were among those to jump Thursday, with Apple rising 2.4pc and Microsoft gaining 2.9pc. Qualcomm rallied 13pc after the mobile-phone chip-making giant said it expects a surge in smartphone sales next year as consumers flock to 5G-capable devices.
But the rally was also broad, with all of the S&P 500’s 11 sectors rising -- a contrast from Wednesday, when investors unwound some of their bets on more cyclical and economically sensitive sectors.
Investors will be watching today for election results from a handful of swing states, where counting continues. They will also get a view on the Federal Reserve’s outlook for the U.S. economy amid the coronavirus pandemic when policy makers conclude their November meeting and issue a statement at 6am (AEDT). There are also likely to be questions about the need for additional fiscal and monetary stimulus during Chairman Jerome Powell’s press conference.
Earlier in the day, U.S. jobless claims data showed that about 751,000 Americans applied for unemployment benefits for the first time in the week ended Oct. 31, down from a revised 758,000 in the week prior. US jobless claims have been trending lower in recent weeks but remain at historically high levels.
In bond markets, the yield on the 10-year Treasury note jumped to 0.773%, up from 0.768% Wednesday.
Overseas, the pan-continental Stoxx Europe 600 rose 1.1 per cent.
Dow Jones Newswires
All of the recent Biden claimed States will be legally challenged by us for Voter Fraud and State Election Fraud. Plenty of proof - just check out the Media. WE WILL WIN! America First!
— Donald J. Trump (@realDonaldTrump) November 5, 2020
5.15am: Biden ‘absolutely confident’ of winning
Joe Biden’s presidential campaign projected confidence Thursday that the former vice president would soon cross the necessary 270 electoral votes needed to win the presidency.
The campaign expressed optimism that it would win several close states, including in Nevada, Georgia and Pennsylvania, where ballot counting continues and the Associated Press hasn’t called a winner.
“We are absolutely confident that Joe Biden will be the next president of the United States,” said campaign manager Jen O’Malley Dillon during a briefing for reporters.
AFP
STOP THE FRAUD!
— Donald J. Trump (@realDonaldTrump) November 5, 2020
5.10am: EasyJet in talks with German govt for virus aid
British budget carrier EasyJet is in talks with the German government for aid to manage the fallout from the coronavirus pandemic, its CEO said in an interview with a German business magazine.
“Negotiations are proceeding constructively,” Johan Lundgren told the business weekly Wirtschaftswoche.
“We have a large presence in Germany, created healthy competition before the crisis and invested a lot of money in it. This should be reflected in the scope of the aid,” he added.
Questioned by AFP, an EasyJet spokeswoman said: “As a pan-European airline, as you would expect, we have regular contact with all governments in the countries where we operate and employ people around the support measures available to all eligible companies.” “No formal request for funding been made. We continue to talk to all of these governments on an ongoing basis,” the spokeswoman said.
AFP
5.05am: Stocks rally as US tax hike threat fades
Stock markets rallied as investors saw the potential for US tax hikes fade while the dollar slid ahead of a key Federal Reserve update.
The knife-edge US presidential race has tilted toward Joe Biden, with Democrat wins in Michigan and Wisconsin bringing him close to a majority.
But President Donald Trump claimed that he was being cheated -- an unprecedented complaint unsupported by any evidence -- and has gone to court to try and stop vote counting.
Even if the outcome of the White House race is still uncertain, investors see greater certainty of continued divided government with Republicans holding control of the US Senate, which would frustrate any effort by a Biden administration to raise taxes.
“Likely Republican control of the Senate should put paid to increased corporate regulation and taxation while a new administration in the White House may well dial down tensions with other global superpowers on issues like trade,” noted AJ Bell investment director Russ Mould.
“This certainly seemed to be the thinking in Asia overnight as Japanese and Chinese equities staged substantial rallies.”
Europe picked up the baton by extending strong gains won Wednesday and Wall Street also built upon the previous days gains.
London closed up 0.4 per cent, Frankfurt rose 2.0 per cent and Paris added 1.2 per cent.
“Political uncertainty and a rally in equities do not normally go together but some people are taking the view that Mr Biden might not be able to do a whole lot should he trump the Donald in the race to the White House, as the Senate will probably remain under Republican control,” said market analyst David Madden at CMC Markets UK.
Hopes for a new economic rescue package out of Washington also provided support to equities, even though any spending bill will not be as big as previously thought under a Democrat-run Congress.
Dealers were also keeping tabs on coronavirus developments with England going into lockdown for a second time, joining France and other key European economies, though observers said they had largely been priced into markets now.
AFP
5.00am: ‘Sorry Amazon’: French supermarket steps up for booksellers
A leading French supermarket chain announced that it would share its online retailing network with shuttered bookstores and other local businesses, tapping into resentment over Amazon’s predominance in the new Covid lockdown.
With full-page newspaper ads saying “Sorry Amazon,” the Intermarche group said local businesses -- bookstores first of all -- would be allowed to sell their products on its online “click and collect” marketplace.
Lit lovers have been fuming over the decision to shut bookstores as “non-essential” in the lockdown -- to which the government responded by also banning book sales at supermarkets in a bid to alleviate unfair competition concerns.
Other retailers have also complained about having to close again in a lockdown that effectively turns Amazon and other e-commerce sites into the only shopping option for millions of people.
Anger against Amazon has long been fuelled by its exploitation of EU tax rules, which critics say lets the US giant avoid paying taxes in France despite raking in colossal profits.
Intermarche’s cheeky ad campaign even calls out Amazon’s chief Jeff Bezos: “And sorry Jeff, but we’re already working on rolling this out to other struggling businesses.” “We heard the anger, the distress of small businesses and bookstores in particular,” Intermarche’s president Thierry Cotillard told AFP.
The French government has promised billions of euros in aid for businesses forced to close in the second lockdown since the coronavirus crisis erupted in March.
On Thursday, it said mail costs would be waived for independent bookstores so they could ship directly to clients -- only the legal minimum mail rate of one cent will be applied during the lockdown.
AFP
4.59am: GM says earnings jump 72pc
America’s love of big autos translated into blowout results for General Motors, which also benefited from recovering sales in China following a big hit amid the coronavirus pandemic.
The US auto giant, which recently launched new sport utility vehicles to accompany its fleet of revamped pick-up trucks, enjoyed lofty profit margins in North America, fuelled by strong vehicle pricing and tight auto inventory.
Executives spoke of “pricing power” in the US, partly in the aftermath of US auto plant closures for about two months this spring due to COVID-19. Production resumed in May under strict safety protocols.
“You really have this demand out there that we haven’t seen in a long time, especially for full sized pick-ups,” Chief Executive Mary Barra said on CNBC. “We just keep seeing demand for trucks continuing to grow.” Barra said in an earlier briefing with reporters that she was confident that GM would be able to maintain auto production despite rising COVID-19 cases in the US.
“When the protocols are followed, we don’t have facilities spread,” she said, adding that the company has brought on temporary workers at times in recent months.
GM scored a 72 per cent increase in third-quarter profit to $US4.0 billion from the year-ago period. That translated into earnings of $US2.78 per share, more than twice the expected level.
Revenues of $US35.5 billion were roughly flat compared with last year’s level. Profit margins were “so great” during the period, that they could prompt analysts to boost long-term forecasts for the auto giant, said a note from JPMorgan Chase.
AFP
4.58am: Petronas aims for ‘net zero’ emissions by 2050
Malaysian state energy giant Petronas set a target of “net zero” carbon emissions by 2050, the latest major oil company to step up efforts to combat climate change.
The firm, a significant contributor to Malaysian government revenues, said it would aim to slash emissions by steps such as improving the energy efficiency of its operations and focusing more on renewables.
The energy industry has long been criticised for inaction on climate change but several companies have responded to the growing pressure in recent times.
Petronas -- Malaysia’s only Fortune 500 company -- has set a target that is in line with commitments by British energy company BP and Anglo-Dutch giant Royal Dutch Shell.
AFP
4.55am: EU warns no return to pre-crisis economy before 2023
A second wave of the coronavirus pandemic has stalled a nascent recovery in Europe, the EU said, warning the economy would not return to pre-virus normality before 2023.
In its latest forecast, the European Commission said the eurozone economy would expand by just 4.2 per cent next year, much lower than the 6.1 per cent it predicted in July.
The EU executive said that the loss of steam in the economy came despite a better-than-expected recovery in the middle of 2020 which limited the depth of this year’s historic recession.
The economy in the 19 countries that use the single currency would crash by minus 7.8 per cent in 2020, instead of the minus 8.7 predicted earlier, the EU said.
“This forecast comes as a second wave of the pandemic is unleashing yet more uncertainty and dashing our hopes for a quick rebound,” commission Vice President Valdis Dombrovskis said in a statement.
“EU economic output will not return to pre-pandemic levels by 2022,” he warned.
AFP
4.50am: BoE announces extra cash stimulus
The Bank of England unveiled an extra £150 billion in cash stimulus as it forecast a deeper coronavirus-induced recession for the UK and England began a second lockdown.
The BoE, which held its benchmark interest rate at a record-low 0.1 per cent, lifted its quantitative easing (QE) stimulus by the equivalent of $US195 billion as it seeks to boost lending by retail banks and consequently economic growth.
The bank’s monetary policy committee voted “for the Bank of England to increase the target stock of purchased UK government bonds by an additional £150 billion, financed by the issuance of central bank reserves”, it said in a statement.
The statement made no reference to the possibility of negative interest rates, as some had speculated could be used as an additional stimulus tool.
The news came ahead of a statement from British finance minister Rishi Sunak who is reportedly set to announce another multi-billion-pound coronavirus support package, including another extension of his government’s furlough jobs scheme.
AFP
4.45am: ING to cut jobs, shut offices
Dutch bank ING said it will shed 1000 jobs by the end of 2021 and close offices in South America and Asia as the coronavirus pandemic hits the global economy.
The job losses come despite “resilient” third quarter results, with profits down 41.4 per cent to 788 millions euros on turnover of 4.28 billion euros, down 7.3 per cent, the bank said in a statement.
“The pandemic continues to have a significant impact everywhere, with the second wave in Europe and the US putting further pressure on consumers and businesses,” ING chief executive Steven van Rijswijk said.
The “challenging external environment” meant ING was “refocusing” its wholesale and retail activities, with a “headcount reduction” of around 1,000 full-time jobs, the bank said.
ING is the Netherlands’ number one bank, employing 53,000 people in more than 40 countries.
The bank was to shut its offices in South America, and some in Asia, to “concentrate even more on core clients and simplify our geographical footprint”, van Rijswijk said.
AFP
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