ASX clings to gains as AUD holds near four-month high
Shares finished up 0.3pc in rocky trade, helped by a late jump in Boral while the RBA struck an optimistic tone at its June meeting.
- Seven builds ‘friendly’ stake in Boral
- Bain, Cyrus to fight it out for Virgin
- Vicinity raise signals landlord pain: analysts
- ANZ to sell NZ asset finance arm
That’s all from the Trading Day blog for Tuesday, June 2. The ASX finished higher after a choppy day of trade as miners and banks pulled back from their recent rally. ANZ took a hit despite announcing the sale of its NZ asset financing arm while the RBA maintained its cash rate and yield curve control targets at its June meeting, in line with forecasts.
The Aussie dollar traded around US68c for much of the day while US futures point to a slip to come overnight.
John Durie 8.45pm: Let the Virgin games begin
Virgin Australia administrator Vaughan Strawbridge has surprised with his shortlist for the debt-laden airline, but now the game really starts as deals are attempted with the company’s creditors.
Under Strawbridge’s rules, bidders were barred from negotiating with creditors, which is the very process that will determine whether Virgin, its $6.8bn in debt and precious little cash can be revived.
The job is there for Bain and Cyrus Capital to deal with everyone from staff to Boeing to Gate Gourmet to come up with better terms to place a firm offer on the table.
Glenda Korporaal 8.33pm: Branson’s link to Virgin bidders
The emergence of New York-based hedge fund Cyrus as one of two well-funded shortlisted parties in the race for Virgin on Tuesday confirms Virgin founder Richard Branson will play a role sometime in the future of the airline.
Little is known in Australia of Cyrus and its plan for Virgin except for its long-running ties with Branson. Cyrus founder and managing partner is the well connected Stephen Freidheim. A Yale graduate, Freidheim is a board member of the Council on Foreign Relations, chairman of the executive committee of the Peterson Institute for International Economics and a board member of the US Olympic Committee since early 2012.
With offices in New York and London, Cyrus, which was founded in 1999, manages some $US4bn in funds. Cyrus has maintained a low-key profile with regard to its Australian bid, but it seems its large chequebook played a big part in it being shortlisted.
Asked what was the main reason behind Cyrus’s surprise selection, one observer said on Tuesday night: “Money.”
Having made the shortlist, Cyrus will now have to become more public about its plans for Virgin, if not with the media then at least with interested parties such as the unions and possibly state and federal governments.
The other question is its ties with Richard Branson.
Cyrus’s ties with Branson date back to 2005 when it became an investor in Branson’s proposed Virgin America. Branson’s Virgin Group announced plans to launch a US carrier in 2004 but it needed US investors because of US law prohibiting foreigners from controlling more than 25 per cent of an American airline.
7.56pm: Aussie dollar powering forward: CBA
USD remains under downside pressure against most major currencies, writes Commonwealth Bank’s Global Markets Research team. They note there are no important US economic data releases today or FOMC speakers. Ongoing US civil unrest is dominating the news. US President Donald Trump said he would deploy the military “if a city or state refuses to take the actions that are necessary to defend the life and property of their residents”.
“AUD/USD continues to power forward and AUD is outperforming against all major currencies,” CBA Global Markets Research said. “As expected, the RBA made no monetary policy changes. Specifically, the RBA left the cash rate at 0.25pc and the target for the yield on 3‑year Australian Commonwealth Government Bonds (ACGBs) at 0.25pc. The RBA has not purchased Australian Government securities as part of its QE program since 6 May but the RBA reiterated it is prepared to scale up government bond purchases again if necessary to achieve the yield curve target and to assist smooth market functioning.”
The Australian dollar is 1pc stronger against the US dollar on Tuesday evening, trading at US68.66c, according to Bloomberg data.
7.41pm: Stokes’ ACE takes 10pc of Boral
Kerry Stokes’ private vehicle Australian Capital Equity has emerged with a 10 per cent stake in building materials business Boral, according to a substantial shareholder notice lodged with the ASX on Tuesday evening.
Several of Stokes’ private companies led by ACE picked up 94.8m shares on May 29, while a further 16.2m shares were acquired on Tuesday, the filing says.
Damon Kitney 7.25pm: Telstra Ventures game for transition
Telstra’s independent venture capital arm backed by US private equity heavyweight HarbourVest is expanding its investments in “gamification” technologies as the COVID-19 pandemic lockdown across the world has dramatically accelerated the transition of gaming usage into mainstream daily living.
Telstra Ventures, which has been focused on identifying consumer sectors within interactive media that are ripe for disruption, recently led a $US7m ($10.3m) funding round for Toronto-based wellness platform FitOn, which applies the mechanics used in gaming to personal fitness, offering quick workouts from celebrity trainers.
“These guys were thinking like a game studio when we talked about investing in them,’’ Telstra Ventures San-Francisco based general partner Yash Patel said.
“FitOn is all about gamifying digital Fitbits. They wanted to democratise access for everyone and make it fun and social, highly interactive and charge a premium subscription for those who love the product.” Since COVID-19, FitOn has seen a 200 per cent growth in workouts, sign-ups and friends working out together, with 60 million workout minutes taken last month alone.
Early last month the company officially launched a partnership with global dieting giant Weight Watchers, which will promote FitOn across its 5 million subscribers worldwide.
Mr Patel said the FitOn investment was part of Telstra Venture’s wider belief that “gaming is eating the world” and the mechanics and science involved in producing great digital games was expanding into many consumer sectors.
6.46pm: Janus Henderson’s ‘protection strategy’
Portfolio diversification alone doesn’t give investors enough protection from drawdowns in highly correlated markets, says Janus Henderson’s David Elms.
The head of diversified alternatives for the active $US370bn ($554bn) global fund manager says the sharp drawdowns across asset classes that happened during the coronavirus bear market this year showed it’s also important to have an “explicit protection strategy”.
“The critical issue here is that in normal environments it’s relatively easy to achieve diversification and anybody can take risk and produce returns in normal environments,” says Elms ahead of the Australian launch of Janus Henderson’s Global Multi-Strategy Fund via a unit trust.
Bridget Carter 6.10pm: Infigen Energy’s share register raided
Infigen Energy’s share register was raided Tuesday night by UAC Energy, which was acquiring up to 17.1 per cent of the $582m company with a view to launch a takeover of the business.
UAC Energy, an Australian renewable energy investor, revealed after the market closed that it was buying shares at 80c each, which is a 35.6 per cent premium to the company’s last closing share price of 59c.
Working on the transaction is Credit Suisse.
UAC and its backers already have a stake below 5 per cent in renewable energy investor Infigen, according to a term sheet sent to investors.
It said that the acquirer’s intention was to secure ownership of 9.9 per cent of the group and an economic interest of up to 7.2 per cent through a Credit Suisse Total Return Swap derivative.
Should it secure at least 10 per cent of the stock, UAC’s board will decide whether or not to propose a control transaction involving Infigen.
UAC is an Australian company that is 75 per cent owned by AC Energy Group and 25 per cent owned by UPC Renewables Australia. It trades as UPC\AC Renewables Australia.
AC Energy is a wholly owned subsidiary of Ayala Corporation, listed on the Philippines Stock Exchange with a market capitalisation of approximately $13.8bn.
David Swan 5.50pm: Restaurants to deploy COVID tech
Australian start-up Kounta is aiming to help Australia’s hospitality industry prepare for its new set of guidelines and re-open for hungry diners, launching a new contact tracing feature this week.
Sydney tech company Kounta, which has about 7000 locations using its cloud-based Point of Sale systems Australia-wide, has announced ‘Safe Check-In’, in which business owners print out a unique QR code, linking to a digital form for customers to fill in their contact details.
Kounta founder and chief executive Nick Cloete said the feature will not only save restaurant owners from using pen and paper, but would also ensure the privacy of customer data and allow venues to stay compliant and keep a secure, digital, timestamped record of all visits.
Mackenzie Scott 5.36pm: May home sale listings rise
The current weak and patchy selling market caused the total number of residential properties up for sale to rise through May, according to data firm SQM Research.
National listings numbers rose by 3.9 per cent last month to total 304,137 properties, with the number of available homes more than 10 per cent lower than the same time last year. The rise was largely due to older stock on the market failing to entice buyers and, while sellers were untempted to test the uncertain market.
Sydney and Melbourne each recorded marginally higher levels of new listings month-on-month. Properties listed for over 60 days rose 12 per cent compared to the previous month.
SQM Research managing director Louis Christopher said the lifting of bans on public auctions and open homes last month will inevitably aid seller confidence, but that has yet to take effect.
“Overall, it is a pretty patchy and weak market. When you look at the breakdown of the listing counts, you can see that the rise was predominantly driven by older stock staying on the market longer. There was a rise in the listings of course, but they are only marginal increases,” Mr Christopher said.
“Clearly, it’s not a market on fire and there are not a lot of new sellers coming into the market. So, not a happy time for real estate agents who would be seeing fairly low sales activity, but it is not a market that is collapsing by any means.”
5.01pm: Westfield optimism lifts mall owners
Unibail Rodamco’s positive trading update provided a catalyst for a late rally in mall owners, helping the ASX to cement its second day of gains.
The shopping centre giant said that 65 of its 90 shopping centres had reopened after the easing of restrictions imposed because of the COVID-19 crisis.
The company is already back operating centres in France and Los Angeles and says the remaining centres in Spain and in London are due to open this month.
Shares in the group were boosted by 8.3 per cent at the close to $4.44 and helped rival Scentre to put on 5.5 per cent to $2.31.
Here’s the biggest movers at the close:
4.14pm: Shares eke gain in late sprint
After a late turnaround the local market finished the session up 16 points or 0.27 per cent to 5835.1.
That’s after initial weakness pushed the index to lows of 5800.
By the close, all sectors bar health and materials finished in the green – with a 6pc boost in Boral helping to drive home the positive finish.
4.12pm: Bain, Cyrus to fight for Virgin
Virgin has confirmed Bain Capital and Cyrus Capital Partners as the final two bidders for the company’s recapitalisation.
In a statement to the market, Virgin administrator Vaughan Strawbridge said both firms were well-funded, had deep aviation experience and “see real value in the business and its future”.
“The strong interest coming from all parties has generated the competitive tension we have sought that is important in a process such as this, and we are in a strong place when it comes to delivering the best possible commercial outcome for all creditors, and to see a strong and sustainable Virgin Australia emerge from this process,” he said in statement.
“It is still the intention to have a binding agreement in place by 30 June, which remains unchanged.”
Read more: Cyrus makes Virgin final round with Bain
Ben Wilmot 4.05pm: Offshore Westfield recovery ‘encouraging’
Owner of offshore Westfield shopping centres Unibail-Rodamco Westfield says a majority of its centres will be open by June 15, with recovery tracking ahead of expectations.
In a note to the market, the mall owner said its tenants had been reporting higher customer conversion rates and larger basket sales than expected “with visitors returning for specific shopping objectives, resulting in a better anticipated sales impact relative to footfall”.
The group said it expected to have 87pc of its centres (approximately 80pc by book value) open by June 15, with the number likely to increase as further US states confirm the end of their restrictions.
“The recovery in footfall in markets such as Austria, Germany and the Czech Republic to now around 80pc of pre-crisis levels, as well as the good initial performance of the recently re-opened large French assets, provides strong reassurance, especially considering that significant restrictions still apply on major footfall drivers such as restaurants and cinemas, and that most governments have encouraged companies and employees to continue to favour homeworking,” chief Christophe Cuvillier says.
In Germany and Austria, the Group’s centres have reopened since late April and early May. Footfall there has grown to at or above 80 per cent of the prior year level.
In France, the centres which re-opened on May 11 are now seeing footfall above 60 per cent of the prior year level, with Rennes Alma reaching 90 per cent.
At centres in the Paris region which only re-opened on May 29 or 30, footfall on Saturday May 30 was about 65 per cent of last year.
Bridget Carter 3.58pm: Seven builds ‘friendly’ stake in Boral
DataRoom | Seven Group Holdings has emerged with a stake in Boral Group amid talk that the company remains a takeover target.
It comes after Seven was understood to have been buying up shares through the UBS equities desk.
It is understood that Seven is buying only a “friendly” stake in the company and is not looking to launch a takeover of the business.
BLD shares were last up 6.9pc ahead of the close at $3.55 after hitting highs of $3.73 in late trade.
Damon Kitney 3.46pm: BGH cut from Virgin race
Sources say BGH Capital has missed out on making the final shortlist for a tilt at Virgin Australia.
The four bidders for the airline, BGH Capital, Bain, Indigo Partners and Cyrus Capital are expected to be whittled down to just two this afternoon.
More to come
Read more: BGH bolsters Virgin bid team with UBS
3.36pm: Dollar expensive above 66c: Westpac
Westpac’s head of financial market strategy Robert Rennie argues that the Aussie dollar is expensive above US66c, even as the currency holds above US68c in afternoon trade.
He notes the upbeat tone of the RBA board in today’s statement and the absence of any mention of recent Aussie dollar strength.
But he says the bank’s fair value methodology argues the dollar is expensive above US66c.
“However, recent strength in iron ore prices improving risk sentiment and signs of waning demand for the $US suggests that we may yet see some further upside towards 0.6825/50, though we would caution the 5.6pc rise since the last RBA meeting leaves the currency increasingly overbought from a technical perspective,” Mr Rennie writes.
3.30pm: Zip buy has large offshore upside: RBC
Zip’s move to take full control of US buy now, pay later player QuadPay presents large upside for the group’s offshore growth, according to RBC.
In a note following the group’s announcement this afternoon, analyst Tim Piper writes that the move is better than if Zip had attempted an organic entry to the US.
“The funding structure is very complicated, however at face value it provides flexibility and upside for both ZIP and CVI, incentivises and locks in management, and funds further growth in the QuadPay business,” Mr Piper writes.
He adds that the shift to online spending spurred by coronavirus has benefited the sector as a whole.
“ZIP looks well placed given its relatively diversified end market exposure across discretionary, essential and everyday categories. In ZIP’s case, commentary indicates this momentum has extended into May so far,” he adds.
Z1P last up 42pc to $5.32.
Read more: Zip targets US with QuadPay buy
3.09pm: Shares turn higher
Shares are pushing higher to their best levels of the day as all sectors bar real estate push higher.
The market has been directionless for most of the session, but with less than an hour to go is higher by 22.4 points or 0.4 per cent at 5841.6.
Zip is outperforming, up by 39 per cent with $127m of stock traded after inking a deal to buy a US competitor while the major miners have trimmed earlier losses.
2.54pm: ANZ lowers GDP forecasts
ANZ has lowered its first quarter GDP forecasts off the back of weaker than expected inventories and wages data released today.
The bank now sees quarter-on-quarter GDP growth declining by 0.2pc, marginally lower than initial forecasts of a 0.1pc slip, and taking annual growth to 1.5pc.
It notes a high degree of uncertainty in forecasts given the significant drop off in activity toward the end of the quarter, the impact of bushfires on the hospitality sector and measures designed to support employment during the pandemic.
“Added to this is the question of household consumption and how much of the strength in pandemic stockpiling will offset weakness in services spending,” ANZ says.
2.31pm: No change from RBA
The Reserve Bank has maintained its cash rate and yield curve control target at today’s meeting, as it said it was prepared to increase its bond purchases again if necessary.
The board said it “is possible that the depth of the downturn will be less than earlier expected” as the rate of new coronavirus infections declines significantly and some restrictions are eased earlier than previously thought.
“However, the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy,” the board said in their statement.
“In the period immediately ahead, much will depend on the confidence that people and businesses have about the health situation and their own finances.”
AUDUSD last at US67.92c.
At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points - https://t.co/xV1urr8dQt
— RBA (@RBAInfo) June 2, 2020
2.03pm: NAB flags ‘massive’ GDP drop in Q2
Second quarter GDP will capture the peak impact of the pandemic, with only a flat read to come in tomorrow’s data drop, so says NAB.
Economist Kaixin Owyong notes that today’s partials were mixed – net exports and public demand marginally stronger while inventories were marginally weaker than expected.
The bank maintains its forecast of a 0.1pc GDP slip tomorrow – ahead of consensus of a 0.4pc decline.
“Q2 GDP will capture the peak impact of the pandemic, with recovery starting as health restrictions are unwound,” Ms Owyong says.
“We expect a large 8.4pc fall in Q2 GDP, before the beginnings of recovery in Q3 as health containment measures are unwound.
“Leading indicators suggest a reasonable bounce in activity is occurring alongside the easing of restrictions. However, a full recovery will require confidence in health and economic outcomes to be restored, where households are likely to remain cautious for some time and with the government yet to announce a timetable for the reopening of the border to allow international tourism and foreign students.”
1.53pm: Don’t rule out positive GDP print: RBC
The final partial GDP data released today has prompted RBC to revise higher its estimates of tomorrow’s GDP print, going so far as to say “a small positive print cannot be ruled out”.
Still, RBC’s Su-Lin Ong notes any avoidance of a technical recession is “irrelevant” given the sharp and deep shock to the economy.
RBC now expects first quarter GDP to slip by 0.3pc, from earlier estimates of a 0.5pc dip.
“Whether Q1 GDP prints slightly positive or modestly negative, is not particularly material and we have noted that most measures of Q1 GDP that have been released globally have surprised somewhat to the upside,” Ms Ong writes.
“The key message in tomorrow’s accounts will be an AU economy that entered 2020 on a subdued note, hit by bushfire disaster, with numerous underlying structural challenges even before COVID-19.”
Read more: GDP partials to have mixed effect
Australian economic growth, released tomorrow, could quite conceivably be positive. Somebody, somewhere - probably politicians - will then try to argue that Australia avoided a recession. Speaks to how silly Australia's definition of recession is.
— Callam Pickering (@CallamPickering) June 2, 2020
1.36pm: Zip to enter US market with QuadPay
Buy now, pay later platform Zip has inked a deal to acquire New York based QuadPay, marking its first move in to the lucrative US market.
Zip had been halted pending further detail on the deal, and as the group finalised a $200m raise but returned to trade today with a 39 per cent surge.
Shares last traded at $5.20 apiece.
The all-scrip deal gives QuadPay shareholders a maximum of 23.3pc of Zip, implying an enterprise value of approximately $403m.
“We have been impressed by QuadPay’s continued innovation. They were first to market with a virtual card solution in the BNPL space and have continued to evolve and innovate their offering. We look forward to this exciting new chapter in the Zip journey,” chief Larry Diamond said.
Z1P last up 39pc to $5.20 after hitting $5.40.
1.21pm: BlueScope left out of cyclical rally: Ords
As cyclicals lead the market rally of the past few weeks, Ord Minnett notes that BlueScope has been left behind, tipping the steel producer as a tactical trade amid the COVID-19 recovery.
In a note to clients, the broker writes that while steel market conditions were challenged during the worst of the virus, hot-rolled coil steel prices have risen about 10pc since the start of May.
They say “the worst is behind BlueScope in terms of steel pricing, adding that volumes too were holding up well.
“The stock is one of the few cyclicals in our coverage that are trading near 2020 lows and, for this reason, we believe it is starting to stand out for a tactical trade into the COVID-19 recovery,” the broker writes, noting a huge spread in Bloomberg earnings consensus forecasts from $258m to $674m.
Ords has an Accumulate rating on the stock with a $11 target price.
BSL last traded up 3.7pc to $11.63.
1.01pm: ASX swings to flat
After a choppy morning session the ASX is trading flat at lunch, with a slip in the major banks offsetting strength in tech and industrial stocks.
At 1pm, the benchmark ASX200 is lower by just 1 point to 5818.5 – after hitting as much as 5842.1.
Shopping centre owners Vicnity and GPT Group are dragging on the real estate sector, while the major miners are pulling back slightly after the recent iron ore rally reversed.
AUDUSD is pulling back from morning highs of US68.14c – last at US67.82c.
Here are the biggest movers at 1pm:
12.47pm: Upside risk for consumer stocks: UBS
UBS has upgraded its consumption forecasts, noting a ‘less bad’ labour market, as it tips Woolworths and Harvey Norman among its preferred exposures.
In a note to clients, analyst Ben Gilbert writes that spending has picked up materially into May with channel checks and industry data suggesting double digit top-line growth in household goods and leisure.
While some share prices have responded accordingly, he notes that trading levels for Domino’s, Kogan, Wesfarmers and JB Hi-Fi are “pricing in larger consensus EPS upgrades and factoring in little macro risk versus pre-COVID”.
On the flip side, he says the market is factoring in larger than warranted consensus EPS downgrades for Treasury Wines and Woolworths, and painting a poor relative performance for Harvey Norman.
12.26pm: Macquarie raises $641m in note offer
Macquarie has raised $641m in a capital notes offer, with applications scaled back due to strong demand.
In a filing to the ASX this afternoon, Macquarie said it would issue 6,410,270 bank capital notes 2 (BCN2) at an issue price of $100 apiece.
Applications under securityholder offer amounted to more than $420m, prompting the bank to scale back applications by roughly a third.
Cliona O’Dowd 12.16pm: Auld swaps JP Morgan for JBWere
JBWere has named JP Morgan economist Sally Auld as its new chief investment officer, two months after former CIO James Wright walked away from the wealth manager.
Ms Auld will join JBWere on September 7, staff were told in an email on Monday.
Chief executive Justin Greiner said the appointment was “a real coup” for the wealth manager and its clients.
“It reinforces our focus on delivering market leading insights and broadening our proprietary investment capability,” he said.
Ms Auld said JBWere’s client-first culture was one of the reasons she chose to take on the role.
“I am thrilled to be joining JBWere, the leading private wealth management firm in Australia and New Zealand,” she said.
“One of the key things that attracted me to JBWere was its “client first” culture. I am also looking forward to the opportunity to work closely with the JBWere investment team and making a significant contribution to the firm and its clients.”
Ms Auld was with JP Morgan for close to 12 years, first as head of Australian fixed income and foreign exchange strategy, before taking on the role as its chief economist in 2016.
11.44am: Evolution evaluates Cracow divestment
Gold miner Evolution says it is weighing the potential divestment of its Cracow gold mine, confirming reports from The Australian’s DataRoom.
In a filing to the market regulator this morning, Evolution says a sale of Cracow, its site 500km northwest of Brisbane, would be in line with its strategy to improve the quality of its asset portfolio over time.
“No agreement has been entered into at this stage regarding divestment of this asset,” the company states.
Last month, The Australian’s DataRoom flagged the potential sale, saying Evolution was understood to have hired an adviser to test interest in the asset.
EVN last traded down 2.3pc to $6.16.
Read more: Evolution tests buyer interest in Cracow
11.39am: GDP partials to have mixed effect
Partial national accounts data for the March quarter will have a mixed impact on GDP.
A 1.2pc fall in Inventories was twice the expected 0.6pc decline, and net exports will contribute just 0.1 percentage point to GDP versus 0.3 points expected.
Still, a 1.1pc rise in company profits was more than twice the 0.5pc rise expected by economists surveyed by Bloomberg.
AUD/USD is steady around 0.6800 after shaking off early news that the US will use the army to restore order.
March quarter seas adj
— CommSec (@CommSec) June 2, 2020
Inventories -1.2% (real)
Company gross operating profits rose 1.1% (nominal)
Wages and salaries unchanged 1.0% (nominal)#ausbiz #ausecon #markets #auspol #aud #audusd #usdaud
Eli Greenblat 11.32am: Online index shows record boom
The massive shift by consumers to shopping online during the coronavirus pandemic has seen the biggest ever monthly gain on the NAB Online Retail Sales Index since the internet shopping barometer began almost a decade ago, with takeaway food, games and toys leading the online shopping surge.
The index showed a 16.2 per cent gain in April on a month-on-month basis – the biggest jump in online sales growth over a month since the index began in 2012.
In year-on-year terms, the growth in the NAB Online Retail Sales Index accelerated by 58.5 per cent year on year in April, the highest year-on-year growth rate comparison in the series history.
Cliona O’Dowd 11.18am: Coombe appointed to lead MLC Wealth
NAB has named former Westpac banker Robert Coombe as the new chairman of MLC Wealth ahead of the separation of the bank’s 130-year-old wealth arm from the business.
Mr Coombe will serve as the non-executive Chairman of National Wealth Management Services Limited (NWMSL), the head company of MLC Wealth, and will take on the role from July 1
Announcing the appointment, NAB chief executive Phil Chronican said the move was an important next step in the path to establishing MLC as a stand-alone business.
“Rob has the right leadership skills and experience for MLC as it separates from NAB at a critical time for the wealth management sector and its clients,” Mr Chronican said.
NAB last traded up 0.9pc to $18.11.
11.07am: amaysim weighs options for energy arm
Junior telco amaysim has admitted it has a data room open to consider options for its energy business, but could not be drawn on the progress of any sales process.
In a brief statement to the market, the mobile and energy subscription provider said it was aware of media speculation regarding potential interest in its energy business, but that it was its policy not to “comment on, or engage with, market or media speculation”.
Still, it said it had tapped corporate advisory group Luminis Partners “some time ago” to assist the board in considering options “to unlock shareholder value, including in respect of the energy business”.
“A data room is maintained for the purpose of facilitating discussions with interested parties,” amaysim said.
AYS last traded up 10.9pc to 35.5c.
Eli Greenblat 11.02am: Woolies dishes out 100k staff bonuses
Woolworths will reward more than 100,000 of its staff, around half its total workforce, with a mix of shares and credit to spend at its stores as a “thank you” payment for their work during the coronavirus pandemic that has seen them at the frontline of angry shoppers, panic buying and fights in the supermarket aisles.
At Woolworths third quarter result in April chief executive Brad Banducci signalled the retailer was investigating a special bonus for its workers in the wake of the health crisis which could include bonus payments.
On Tuesday, Mr Banducci wrote to workers to inform them that more than 100,000 Woolworths Group team members in Australia and New Zealand would be given an ownership stake in the company as recognition for what he described as “their extraordinary efforts and contribution during a year of unprecedented challenges.”
WOW last traded down 0.7pc to $35.02.
Read more: Woolies rewards staff in ‘extraordinary’ year
10.34am: Shares reverse early dip
Shares are making a comeback for a second day, the ASX200 turning up 0.2pc after an early dip of 0.3pc.
Financials are again doing the heavy lifting with Macquarie up 1.2pc and ANZ up 0.8pc.
Stockland is up 2.4pc after Macquarie upgraded to Outperform amid expectations of housing stimulus.
Clearly the index remains very well supported on dips, pointing to a higher equilibrium, other things equal.
10.11am: ASX dips as AUD hits US68c
Local shares are dipping in early trade as weak US futures weigh on trade.
At the open, the benchmark ASX200 is lower by 7 points or 0.12 per cent to 5812.5.
A pullback in materials stock is doing the most damage – down by 1.1 per cent after iron ore prices capped their recent rally overnight. BHP fell 1.7pc, Fortescue lost 2.1pc and Rio Tinto slipped 1pc.
Vicinity is taking a 5pc hit on its return to trade after warning of pressure from tenancy relief in the wake of coronavirus restrictions while the major banks are edging mildly higher.
ANZ is the biggest points contributor, up 0.9pc, after flagging the $NZ762m sale of UDC Finance.
AUDUSD meanwhile has just broken through US68c.
Ben Wilmot 10.03am: Vicinity raise signals landlord pain
The $1.4bn raising by shopping mall owner Vicinity Centres has received a cool response from market analysts worried that it signals worse is to come for retail landlords.
Vicinity undertook the raising to restore its hard hit balance sheet and give it some flexibility as it deals with the fallout from the coronavirus crisis.
But Jefferies analysts Andrew Dodds and Sholto Maconochie warned about the longer term impacts of the dramatic fall in shopping centre values.
“Vicinity’s $1.4bn capital raise is hardly surprising, but the biggest surprise was its pro-forma gearing prior to its raise from the double hit of asset value declines and lower cash flow, coupled with other capital expenditure and spend,” they wrote.
“The raise brings Vicinity back to its former gearing level but with further downside to net tangible assets and gearing before funding developments which further increase gearing,” they wrote.
They warned there could be further asset valuation downside of $1.3-2.1bn in the case of Vicinity and gearing could rise back above 35 per cent if negative conditions prevailed.
Read more: Vicinity Centres to raise up to $1.4bn
9.56am: Mortgage arrears to rise: S&P
S&P Global Ratings have issued a warning on Australian mortgage arrears, noting a significant increase in unemployment will trigger a jump in arrears.
Its latest performance index for nonconforming mortgages rose to 4.38pc in March, from 3.96pc a month earlier, with most of the increase from loans 31 to 60 days in arrears.
The agency notes that government-mandated mortgage relief periods will keep reporting on the issue under the surface, but increases in arrears will materialise by quarter four.
“While we do not expect all borrowers under COVID-19 support arrangements to move into formal arrears management and foreclosure processes in the next 12 months, some will. The path to economic recovery will influence the proportion of borrowers who can resume their normal monthly repayments after the relief periods end,” S&P says.
The agency adds that arrears are more likely in areas where tourism is a major employer and could remain elevated for longer.
Bridget Carter 9.48am: Morgan Stanley’s Peck jumps to APA
DataRoom | Fresh changes at the top of the Australian investment banking scene have once again emerged, with Julian Peck leaving Morgan Stanley as the Australian Co-head of investment banking.
Mr Peck has joined APA Group as its group executive for Strategy and Commercial.
Mr Peck has spent much of his career in investment banking, specialising in the infrastructure, utility and power sectors.
Based in Melbourne, he has been at Morgan Stanley for 14 years, working as head of infrastructure and utilities in Australia until 2017.
APA said Mr Peck would provide the leadership and direction that will ensure APA has a portfolio of assets and growth opportunities aligned to its strategy.
He starts in the job around September 1.
9.40am: ANZ to sell NZ asset finance arm
ANZ has signed a deal to sell its asset finance business in New Zealand, UDC Finance, for $NZ762 million to Japan’s Shinsei Bank.
The sale follows a strategic review of UDC Finance previously announced by ANZ Bank New Zealand, and is in line with ANZ’s strategy to simplify its business, the Melbourne-based lender said.
The purchase price represents a price-to-book ratio of 1.2x net tangible assets of $NZ637m as at 31 March 2020.
The sale provides around $439m of Level 2 Group CET1 capital at settlement. The sale will also release more than $NZ2bn of funding provided by ANZ New Zealand, further strengthening its balance sheet position, ANZ said.
ANZ announces sale of UDC Financehttps://t.co/GGdE5jrBwt pic.twitter.com/RLvrpfFeyc
— ANZ Newsroom (@ANZ_Newsroom) June 1, 2020
9.38am: Vicinity completes $1.2bn placement
Shopping centre owner Vicinity will return to trade this morning after completing a $1.2bn placement.
The company said it had received strong support from existing and new investors, with funds raised to strengthen its balance sheet and provide flexibility to respond to uncertainty from COVID-19 and “the evolving retail landscape”.
A share purchase plan to raise a further $200m will open from June 9.
9.30am: US riots to weigh on ASX
Australia’s sharemarket looks set to dip again as US President Trump says he will use the army to restore law and order.
Overnight futures were pointing to a 0.3pc rise in the S&P/ASX 200 after the US market rose 0.3pc as Fed liquidity and recovery hopes trumped protests and China’s pause of US agricultural imports.
But with S&P 500 futures down 0.5pc this morning, the S&P/ASX 200 may revisit Monday’s low at 5705.4, though it was well supported on dips yesterday.
On the charts, an ascending triangle pattern continues to target a move to 6030, with strong support likely in the 5500-5600 area. Potential uptrend support lies at 5680.
Monday’s 2pc rise in the Australian dollar may crimp offshore income earners, with BHP’s ADR’s equivalent close at $35.54 suggesting BHP will open down 0.5pc.
A 2.2pc fall in Dalian iron ore futures may also weigh on iron ore miners after strong gains last month as the spot price rose from $US82 to US$99 as the pandemic hit Brazil.
In a positive sign for the domestic economy, ANZ’s weekly consumer confidence index has jumped to 98.3 from 92.7.
Focus turns to March quarter, inventories, balance of payments and company profits data at 11.30am AEST, ahead of GDP data on Wednesday. The outcome of the RBA’s board meeting is due at 2pm AEST, but Governor Lowe outlined his views in senate testimony last week.
Perry Williams 9.13am: Brickworks flags potential riots disruption
The US riots have been flagged as a potential trading hit for Australia’s largest brickmaker on top of ongoing disruption from COVID-19.
Brickworks’ new design studio in Philadelphia is in “close proximity” to the riots and adds to uncertainty over its US business after already suffering negative earnings in recent months from the pandemic shutting down business.
“The ongoing riots across the US have now emerged as another potential disruption,” Brickworks said in a market update on Tuesday. “We don’t expect trading conditions to normalise in the United States until civil order is re-established and all pandemic related restrictions are eased.”
The company said it had still recorded a positive overall contribution from its North America building products division for the financial year to date, but notes sales activity in April and May was down over 30 per cent on pre COVID-19 levels.
Sales revenue in Australia fell 10 per cent for the four months to May 2020 on the prior year with plant closures boosting its cash generation.
9.08am: Newcrest upsizes share purchase plan
Newcrest has doubled the size of its share purchase plan citing strong support from eligible shareholders.
In a filing lodged after market close yesterday, Newcrest said it had raised $200m from its SPP at $25.60 a share, from initial estimates of $100m and on top of $1bn raised through a placement to institutional investors.
“These funds, together with the $1.0bn raised in the recent institutional placement and our free cash flow generation, ensures Newcrest’s balance sheet remains strong and positions us well to fund our future growth options,” chairman Peter Hay said.
The gold miner said it had received valid applications up to $300m, from 15,574 shareholders, representing a participation rate of 23pc and an average application amount of $19,200.
9.02am: What’s on the broker radar?
- Adbri raised to Overweight – Morgan Stanley
- Ansell cut to Sell – Morningstar
- Atlas Arteria cut to Hold – Morgans
- Iress cut to Accumulate – Ord Minnett
- OneVue cut to Hold – Bell Potter
- Pro Medicus cut to Neutral – UBS
- Scentre raised to Buy – Morningstar
- Star Entertainment cut to Neutral – Citi
- Star Entertainment target price raised 20pc to $3.60 – UBS
- Steadfast initiated at Buy, price target $3.90 – UBS
- Stockland raised to Outperform – Macquarie
- Super Retail cut to Sell – Morningstar
- Super Retail cut to Neutral, price target cut 16pc to $8.70 – UBS
- Vicnity Centres cut to Neutral – JP Morgan
- Vicinity Centres price target raised 32pc to $1.65 – Morgan Stanley
- Vicinity Centres price target raised 20pc to $1.46 – UBS
Bridget Carter 8.57am: Countdown on to final Virgin shortlist
DataRoom | The four bidders left in the competition for Virgin Australia are expected to learn Tuesday afternoon if they have been short-listed for the final phase of the sales process.
Four bidders were short-listed last month after the first phase of the competition run by Deloitte, Morgan Stanley and Houlihan Lokey.
These included BGH Capital, which is working with Australian Super and advised by Moelis and UBS, Bain Capital, which is advised by Korda Mentha and Goldman Sachs, US-based Indigo Partners with Oaktree Capital Management, also advised by Korda Mentha, and Cyrus Capital Partners.
However, in a twist to the contest, Brookfield, which was knocked out in the first round, also came from left field to submit a proposal on Friday.
Read more: BGH bolsters Virgin bid team, adding UBS
Bridget Carter 8.25am: Arena REIT raises
DataRoom | Arena REIT is raising $50m through Morgan Stanley and E+P Advisory.
Shares are being sold at $2.28 each, a 5 per cent discount to close.
The funds for the company, which owns child care and health care real estate and social infrastructure, will be used to fund ongoing growth.
The raise is the second for a real estate group this week after Vicinity Centres on Monday tapped the market for $1.4bn.
8.19am: Copper at 3-month highs
Copper prices climbed to three-month highs overnight as stronger manufacturing data from top consumer China and the loosening of lockdowns imposed to contain the coronavirus stoked expectations of healthier demand.
Benchmark copper on the London Metal Exchange (LME) was up 1.9 per cent at $US5,480 a tonne at 1605 GMT.
Prices of the metal, used widely in power and construction, earlier touched $US5,488 a tonne, the highest since March 13.
“Barring the tail risks of a second wave (of the virus), we seem to be past the trough, but it is a gradual grind upwards...and we expect metal prices to end the year below where we started,” said Capital Economics analyst Kieran Clancy.
A private business survey showed China’s factory activity unexpectedly returned to growth in May, while a similar survey for larger Chinese companies showed rising activity in the services and construction sectors. However, both surveys showed export orders shrank.
Reuters
8.17am: Oil steady
Oil futures steadied overnight as rising US-China tensions weighed on sentiment, but prices drew support from reports that OPEC and Russia were close to a deal extending output cuts.
Brent futures rose 48 US cents, or 1.3 per cent, to settle at $US38.32 a barrel. US crude fell 5 US cents, or 0.1 per cent, to settle at $US35.44 a barrel.
Prices found support after news that the Organisation of the Petroleum Exporting Countries and Russia, known as OPEC+, were moving closer to a compromise on extending oil output cuts and were discussing rolling over the curbs one to two months.
Reuters
7.50am: RBA ‘should consider negative rates’
The Reserve Bank of Australia should drop interest rates into negative territory to encourage local businesses to invest, says Westpac chief economist Bill Evans.
In addition to pumping business savings into investment, Mr Evans said negative interest rates would push down the Australian dollar, making our exports more competitive in global markets.
While RBA governor Phillip Lowe has reiterated that negative rates are “highly unlikely”, several central banks across the world have already moved into uncharted territory in a bid to fuel economic growth.
“A serious case can be made for the RBA to consider further cuts and entering negative territory for the cash rate if it becomes apparent that the economy is deteriorating even more than is currently expected,” Mr Evans told The Sydney Morning Herald.
7.28am: ASX to edge higher, dollar surges
Australia’s sharemarket is poised to edge higher at the open, although investors may be encouraged by their US counterparts’ belief in economic recovery, and downplaying the race riots.
At 7am (AEST) the SPI 200 futures contract was higher by 9 points, or 0.15 per cent, to 5,837.0.
The Dow Jones, Nasdaq and S&P 500 in the US all finished higher by less than 1.0 per cent overnight after a strong May rally.
The White House called for “law and order” after six nights of widespread, violent demonstrations triggered by the death of civilian George Floyd at the hands of police, even as the country reels from the economic effects of coronavirus pandemic-related lockdowns.
Kingsview Asset Management portfolio manager Paul Nolte said: “Most investors are saying (the protests) aren’t going to destroy the economy. It’s a roadblock but it’s not as big as a pandemic”.
Meanwhile in Australia, the Reserve Bank board will meet to consider the cash rate, although economists do not expect change to the official rate.
The benchmark S&P/ASX200 index closed Monday up 63.5 points, or 1.1 per cent, at 5,819.2 points.
The All Ordinaries closed up 66.2 points, or 1.13 per cent, at 5,938.4 points.
The Aussie dollar has surged this week following a rise in iron ore prices and the release of better-than-expected Chinese manufacturing data.
At 7am (AEST) one Australian dollar was buying US67.98 cents, up from US67.46 cents at the close of trade on Monday.
AAP
6.10am: Stocks close with modest gains
Wall Street rose as investors embraced signs that global factory activity was on a path toward recovery and largely shrugged off the violent clashes in US cities.
The Dow Jones Industrial Average climbed 91 points, or 0.4 per cent. The S&P 500 was also up 0.4 per cent, while the Nasdaq Composite gained 0.7 per cent. Overseas, major European and Asian indexes posted gains.
Australian stocks are set to edge higher at the open. At about 6am (AEST) the SPI futures index was up 13 points, or 0.2 per cent. The Australian dollar surged higher to US67.96c, from US67.23c yesterday.
Data from surveys of purchasing manufacturers indicated that factories in the US and abroad continued to reduce output last month, but the pace of deterioration slowed as governments eased coronavirus-related restrictions. In China – the first country to impose sweeping lockdowns to combat the virus – factories reported an increase of activity, offering investors hope that other countries would follow.
In the US, the Institute for Supply Management’s manufacturing index for May rose to 43.1 from an 11-year low of 41.5 in April. A reading above 50.0 indicates an increase in activity, while a reading below that level indicates a decrease.
“The hope is that what we’ve seen with China is playing out in Europe, and there will eventually be follow-through in the U.S. once the virus is under containment,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.
Investors largely seemed to discount the clashes between police and civilians in the U.S. as he worst civil unrest in decades erupted in American cities this weekend.
“Markets are assuming it won’t last. We’ve seen this all before, going back to the civil protests in the 1960s,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Investors 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. Bloomberg News reported Monday that China has ordered companies to temporarily halt imports of some U.S. farm goods including soybeans.
Such a move could add to the friction between the world’s two largest economies. A U.S.-China trade war roiled markets for much of 2019 and ended only after both sides agreed to a Phase One trade deal.
In Europe, the pan-continental Stoxx Europe 600 climbed 1.1 per cent.
Dow Jones Newswires
5.45am: Gun stocks surge
US shares of gun manufacturers soared, continuing this year’s winning streak.
Smith & Wesson Brands jumped 16pc to $US13.66. Sturm, Ruger & Co. advanced 9.5pc to $US68.24. Shares of both companies outpaced the broader market, with the S&P 500 rising 0.3pc in midday trading.
“People are watching the news,” said Steve Sosnick, chief strategist at Interactive Brokers. “The market is anticipating that there will be increased interest and demand for firearms as a result of what’s going on in the world right now.”
Protests have spread through the US in recent days, stemming from outrage after the death of George Floyd in Minneapolis police custody last week. The protests have ranged from peaceful to violent, with some including looting and destruction in cities nationwide.
Some of the headwinds dragging on the broader market this year, like the coronavirus pandemic, appear to have been a boon to shares of gun manufacturers. Smith & Wesson and Sturm, Ruger have both gained at least 45pc in 2020, though they have lagged behind the S&P 500 over the past five years.
Dow Jones
5.40am: Gilead says drug helped coronavirus patients
A California biotech company says its experimental drug remdesivir improved symptoms when given for five days to moderately ill, hospitalised patients with COVID-19.
Gilead Sciences gave few details on Monday but said full results would soon be published in a medical journal.
Remdesivir is the only treatment that’s been shown in a rigorous experiment to help fight the coronavirus. A large study led by the National Institutes of Health recently found it could shorten average recovery time from 15 days to 11 days in hospitalised patients with severe disease.
The drug is given through an IV and is designed to interfere with an enzyme the virus uses to copy its genetic material. It’s approved for treating COVID-19 in Japan and is authorised for emergency use in the United States for certain patients.
AP
5.35am: Facebook protest over Trump posts
The clash between Twitter and Donald Trump has thrust rival Facebook into turmoil, with employees rebelling against CEO Mark Zuckerberg’s refusal to sanction false or inflammatory posts by the US president.
Some Facebook employees put out word of a “virtual walkout” to take place Monday to protest the social network’s stance and show support for the black community, according to tweeted messages.
“As allies we must stand in the way of danger, not behind. I will be participating in today’s virtual walkout in solidarity with the black community,” tweeted Sara Zhang, one of the Facebook employees in the action.
Nearly all Facebook employees are working remotely due to the pandemic. “Mark is wrong, and I will endeavour in the loudest possible way to change his mind,” Ryan Freitas, the design director of Facebook’s News Feed, tweeted Sunday, adding that he was organising about 50 other employees who share his view.
At the root of the discord is Twitter’s unprecedented intervention last week when it tagged two Trump tweets about mail-in ballots with messages urging people to “get the facts.” Zuckerberg reacted by telling Fox News that private social media platforms “shouldn’t be the arbiter of truth of everything that people say online.” Trump retweeted the interview.
On Friday, Twitter responded once again to a Trump tweet, this time after he used the platform to warn protesters outraged by the death at police hands of an unarmed black man that “when the looting starts, the shooting starts.” Twitter covered up the tweet with a message warning it “violated Twitter Rules about glorifying violence.” Viewers had to click on the message to see the underlying tweet.
The message also was posted on Facebook, but Zuckerberg decided to let it stand unchallenged.
AFP
5.30am: Markets higher as restrictions lift
Global stock markets were firmer, with Wall Street reversing opening losses on concerns over violent anti-racism protests across the country to focus on the continued easing of coronavirus restrictions.
Investors were also having to cope with simmering tensions with China over Hong Kong but hopes for some return to a semblance of normality was enough to allow the markets to move forward.
Despite the protests, “history shows markets look through many sorts of tumultuous events and have done so for decades,” Nicholas Colas of Datatrek Research said in a note.
“History shows there is simply no correlation between social/political turmoil and US stock market returns.”
In Europe, London added 1.5 per cent by the close, Madrid gained 1.8 per cent, Milan rose 1.8 per cent and Paris added 1.4 per cent, while Frankfurt was shut for a holiday.
The euro was stronger against the dollar, extending gains as the lockdown easing gathered pace across the continent, hitting a two-month high of $1.1154 at one stage.
Beijing warned Washington on Monday of retaliation after US President Donald Trump announced restrictions on Chinese students in the United States in protest against a new national security law in Hong Kong.
However, Hong Kong led gains in Asia after Trump stopped short of imposing specific strict measures against China, suggesting the US prefers to avoid a confrontation at this point.
Violent anti-racism protests across the US meanwhile fuelled worries of a pick-up in virus infections, with some states making progress and others still seeing an increase in cases.
AFP
5.20am: US factories sink in May
American factories contracted for the third straight month in May as they continued to sustain economic damage from the coronavirus pandemic.
The Institute for Supply Management, an association of purchasing managers, said Monday that its manufacturing index came in at 43.1 last month after registering 41.5 in April. Anything below 50 signals that U.S. manufacturers are in retreat. New orders, production, hiring and new export orders all fell in May but at a slower pace than they did in April.
The results were about what economists expected.
AP
ASX 200 falls on China update; BHP leads mining reversal
Iron ore, copper futures, AUD down after China's underwhelming economic update. RBA's 'step down' in hawkishness evident in September minutes, but deputy governor Andrew Hauser says inflation job's not done yet.
ASX 200 rises on banks; Arcadium top gainer
Rio Tinto's takeover approach lifts Arcadium Lithium appeal. West African Resources drops on Burkina Faso mining concerns. Qantas may avoid second strike after proxy backing.