ASX drops 0.4pc as gold rally stalls
Shares jumped as much as 1.2pc intraday but closed down 0.4pc as gold miners pared gains and Westpac took a hit.
- Gold surge supporting shares
- Temple & Webster revenue up 74pc
- Gold forges record high
- Collary appointed Westpac COO
That’s all from the Trading Day blog for Tuesday, July 28. Australian stocks gave up gains of as much as 1.2pc to finish lower by 0.4pc as gold prices rallied to a new record, but gave up gains in the afternoon session.
Westpac led losses in the major banks after warning of an increase in APRA breaches, while gold miners and the Aussie dollar followed the rollercoaster in commodity prices.
US futures suggest gains to come overnight.
Damon Kitney 8.34pm: Caledonia buys into Warner Music
Caledonia Investments has made its first move into the global music sector by taking a strategic shareholding in Warner Music, the biggest Wall Street float since the onset of COVID-19, but the secretive fund manager remains wary of more market volatility and has increased the short positions of its flagship fund by 20 per cent.
The $10bn Sydney-based Caledonia, which counts the wealthiest people in the nation among its investors and is run by rich-lister Will Vicars and Michael Messara, delivered a 28 per return from its flagship Global Fund in the June quarter, taking its annual return for the financial year to 38 per cent.
Caledonia’s combined strategy performance of its Global Fund and its Global Co-Invest fund was up 38 per cent in the June quarter and up 31 per cent for the financial year, after fees.
Perry Williams 7.52pm: Tension simmers over Gorgon fix
Tensions continue to simmer between Chevron and unions over safety fears on its Gorgon LNG project in Western Australia despite the US giant saying repairs were now under way after cracks were discovered at one of its gas processing trains.
Cracks up to 1m long and 30mm deep on between eight to 11 pressurised propane “kettles”, or heat exchangers, on Train 2 were discovered this month during scheduled maintenance, with the gas processing unit expected to be out of service for a further two months.
Chevron on Tuesday said a routine inspection had discovered problems with welding on the eight propane heat exchangers on Train 2, but that repairs were now being carried out rather than requiring replacements.
“Repairs are under way and we have the necessary personnel with skills and knowledge to conduct the work onsite,” Chevron said in a statement.
“Once repairs are complete, we expect to safely commence LNG Train 2 restart activities around early September.”
The Gorgon facility, which houses three LNG trains with combined capacity of 15.6 million tonnes of LNG, could face an extended shutdown and loss of production if the problems found in Train 2 are replicated in the other two facilities.
David Ross 7.12pm: Stricter protocols for juice maker
ASX-listed The Food Revolution Group has so far dodged the COVID pandemic that is hitting businesses across Melbourne as the packaged juice-maker ramps up safety measures to keep production running.
The manufacturer said it had introduced an “A” and “B” team working policy to crossover and reduce the possibility of a facility-wide shutdown. It comes after several key operators have been slammed by COVID-19 cases across Woolworths’ Mulgrave distribution Centre, Linfox’s warehouse in Truganina, Laverton Cold Storage and smallgoods maker Don in Castlemaine.
The Food Revolution Group, which is behind The Original Juice Co brand, said it continued to enforce modified packaging rosters to limit any risk of COVID-19 infection and ensure full operations. Chief executive Tony Rowlinson told The Australian it had been a challenge keeping the virus out of its Mill Park facility in Melbourne’s northern suburbs.
“Touch wood we’re fully operational at the moment,” he said. “We’ve done a pretty remarkable job to date, we’ve got very strong controls with regards to arrival and departure and restricting numbers of visitors.”
But Mr Rowlinson said the lockdown threatened the capacity of their suppliers to access fruit-pickers in Victoria for the vital orange harvest in the Griffith area in northwestern NSW.
James Kirby 6.32pm: JobKeeper to ‘distort’ earnings season
The government’s shrinking JobKeeper program is set to add another layer of difficulty in the annual earnings season that starts this week.
In the retail sector, support payments have obviously boosted sales through lockdown periods, but the impact will be much wider with JobKeeper payments changing the numbers in multiple categories from hospitality to transport.
Analysts suggest that among big cap stocks such as miners including Rio Tinto - which reports on Wednesday - the issue will be less relevant, but in the mid-to-small cap end of the market the issue is going to be critical.
Local investors got a taste of what might be coming down the line in the earnings guidance issued by trucking conglomerate K&S Corporation, which reported it expects a $15m to $16m profit for the year to June.
But the company then noted it had received $12.4m in JobKeeper subsidies in the last three months of the last financial year.
In itemising its JobKeeper payments, K&S Corporation became one of the first listed stocks to follow a directive from the market regulator, Australian Securities and Investments Commission, that said companies should disclose the level of government grants included in overall results.
Cliona O’Dowd 5.25pm: ‘Door open’ for political payments
The prudential regulator has given the green light for not-for-profit funds to sponsor political events by treating the payments differently to direct political donations, according to Liberal Senator Andrew Bragg, who is calling for legal reform of the sole purpose test to expressly ban any transfer of funds for political purposes.
Speaking to The Australian following correspondence with the Australian Prudential Regulation Authority, in which deputy chair Helen Rowell said payments for events with political affiliations could be justified on the basis of advertising or brand awareness, Mr Bragg argued that it opened up another avenue for funds to make political donations.
“The fact that the regulator has left the door open (for political payments), is quite concerning,” Mr Bragg said.
“I don’t think the sole purpose test is working; I don’t think it’s protecting the members.”
Eli Greenblat 5.09pm: Lockdown sales spike at Temple & Webster
Temple & Webster chief executive Mark Coulter said the online furniture retailer entered COVID-19 “match fit” to cope with an online shopping rush by consumers locked down in their homes that is now placing huge strains on supply chains, logistics and delivery networks.
Flush with an extra $40m from a recent capital raising, the retailer will invest further in its infrastructure to tighten its supply chain and bind its customers closer to its brand at a time when the business believes Australians will increasingly feel not only comfortable but excited about going online for furniture and furnishings.
“What you are starting to see that now everyone is starting to realise that they have to have a digital strategy, all the offline players might have been a little resistant to online but the COVID-19 period has shown them that for customers having a strong online strategy is imperative these days,” Mr Coulter told The Australian after Temple & Webster released unaudited full-year results that showed a 74 per cent leap in sales to $176.3m. It will release its full-year results, including its net profit result, next month.
Shares in Temple & Webster on Tuesday ended up 5.5 per cent, or 43c, at $8.21.
4.37pm: Credit Corp leads, Resolute lags
Better than feared performance by Credit Corp helped the debt collector to take pole position in Tuesday’s trade, finishing up by 8.8pc.
Gold miners had a sharp shift in sentiment, finishing as some of the worst performers of the day despite record highs for gold prices earlier in the session.
Here’s the biggest movers at the close:
4.21pm: ECB asks banks to freeze payouts
The ECB on Tuesday urged banks to refrain from paying dividends or offering bonuses until January 1, 2021, in order to ensure they have sufficient buffers to survive the economic storm unleashed by the coronavirus crisis.
The recommendation extends a previous call to halt such payments until at least October 2020 and “remains temporary and exceptional and is aimed at preserving banks’ capacity to absorb losses and support the economy in this environment of exceptional uncertainty,” said the ECB in a statement.
AFP
4.11pm: Shares fade to daily lows
Shares faded to a 0.4pc loss at the close, despite jumping as much as 1.2pc intraday as the gold rally stalled in afternoon trade.
By the close on Tuesday, the benchmark ASX200 was lower by 24 points or 0.39 per cent at 6020.5.
Gold miners and major banks were the key driver of the afternoon sell-off, Newcrest paring its gains to just 0.1pc as Evolution lost 1pc and Northern Star fell 1.1pc, despite earlier record highs of $16.77.
Westpac was a key drag, down 1.5pc after acknowledging further Austrac breaches.
Bridget Carter 3.59pm: BofA snaps up Bluewaters debt
DataRoom | Bank of America has snapped up debt in the Bluewaters coal fired Power Station.
It comes as German bank Bayern also sells out of the power station’s debt pile, which has a face value of about $369m.
Bank of America’s acquisition of the debt in recent days comes after DataRoom revealed on July 23 that Oaktree Capital Management had snapped up $36m worth of debt for 71c in the dollar.
Other lenders to offload loans in recent days have included the NAB, which has sold down debt with a face value of about $22m, Societe Generale Group, which offloaded about 8 per cent of the loans, Bank of Ireland and Westpac, which sold down about 4 per cent.
More to come
3.49pm: Nufarm jumps as UBS lifts rating
Recent underperformance in Nufarm shares has prompted an upgrade by UBS, who notes the stock’s risk/reward balance is now more favourable.
The broker upgraded Nufarm to a Buy, saying the market’s perceptions of weakness in the European market is overdone.
“We think the European division may be at an earnings trough, with cyclical factors (such as drought and input cost pressures) starting to reverse and the potential for a re-basing of the European cost base, driving a substantial upside opportunity,” analyst Evan Karantzas writes.
The broker has a $5.19 price target on the stock, implying an EV/EBITDA of 6.5x.
NUF last up 7.8pc to $4.28.
3.11pm: ‘Monster bond’ demand tops $36bn
Canberra’s funding arm the AOFM has outlined sale details of its latest “monster bond”.
The issue size for the 30-year bond is $15bn in face value terms.
There was a total of $36.8bn of bids at the final clearing price. The issue by syndication has been priced at a yield to maturity of 1.94 per cent.
ANZ, CBA, Deutsche Bank, JPMorgan Securities Australia, UBS Australia were joint lead managers for the issue.
The AOFM said it will be mindful of the performance of the bond when considering the timing of future issuance.
3.04pm: Temple & Webster customers surge
Results from online retailer Temple & Webster were a small beat, showing no slowdown in momentum into July, says RBC.
After the release of the chain’s FY20 results earlier today, RBC analyst Tim Piper notes that the repeat customer rate improved slightly, while conversion rates continue to be supportive.
He notes the group is trading on a FY21e enterprise value to sales ratio of 3.6x, “however we see upside risk to our forecasts”, and notes five factors for the recent rerating:
- The company was undervalued previously
- Management now has runs on the board after transforming the business
- Business generates strong cash flow
- Market leading position
- Multiple aligned to a number of global e-commerce and marketplace businesses
TPW shares last traded up 5.1pc to $8.18.
2.38pm: ASX dips into the red
Shares took a slight dip into the red in afternoon trade, rewinding all of a 1pc early jump as gold miners reverse.
At 2pm, the ASX200 is up by just 1.7pc to 6045.9, after slipping to 6034.2.
Gold miners had been leading the rally but are unwinding recent gains after futures pared earlier gains - Newcrest is holding higher by 0.1pc while Saracen loses 1.9pc, Northern Star sheds 0.4pc and Evolution drops 0.8pc.
BHP continues to support the market with a 1.9pc lift, while Westpac weighs with a 1pc drop.
2.21pm: Payroll decline ‘worrying’: UBS
Falling weekly payrolls data today were a “worrying sign” given that they only partly capture the initial impact of the recent tightening in mobility restrictions on July 8, says UBS Australian chief economist George Tharenou.
Payrolls fell 1.4pc in the week to Jul 11, the third-consecutive weekly fall.
Mr Tharenou notes that the data are also skewed to larger businesses which are likely performing better than SMEs and also includes workers retained via JobKeeper.
“Hence, this is a worrying sign given the next print to July 25 will be further negatively impacted,” he says.
“If payrolls then fail to subsequently rebound sharply, it would be a very negative sign for the economy, especially given the $80bn fiscal policy cliff in the December quarter.”
While noting that the weekly payrolls series can be subject to large revisions, he says they imply that the household labour force measure of employment will fall by about 60,000 in July.
Today’s weekly payrolls data came as ANZ’s weekly consumer sentiment fell for a fifth-straight week, to 89 points for the week of July 20, to be back below the GFC trough, albeit above its March low.
Overall, while Q2 GDP and early July spending were likely materially better than initially expected, if mobility restrictions are extended or broadened, there is material downside risk to the outlook,” Mr Tharenou warns
Read more: Jobs recovery unwinds in Melbourne
1.53pm: Job losses not confined to Vic: NAB
Today’s weekly payrolls data shows a fall in all states bar WA, with the hit from new lockdowns not confined to Victoria.
In comments after the release of today’s print from the ABS, NAB economist Kaixin Owyong notes a 6.5pc monthly fall in agriculture jobs, and 4pc slip in construction, “suggesting second-round job losses are occurring”.
She adds that alongside a similar 1.6pc monthly fall in yesterday’s household survey, “these data suggest employment fell in July, despite the general reopening of the economy.
Victorian jobs fell by 2.2pc for the month, while NSW was down 1pc, ACT by 1.9pc and WA edged higher by 0.3pc.
Read more: Jobs recovery unwinds in Melbourne
1.31pm: $A drops 20 points
The Aussie dollar has dropped sharply in afternoon trade, following a reversal in the gold price rally.
AUDUSD spiked to US71.72c just after 12pm, before a steep drop to US71.39c.
It comes as the rally in gold prices stopped short of $US2000/oz
A$ rolls over in sympathy with gold, perhaps some disappointment as spot surge falls short of $2000/oz. US$ now up slightly against all G10 FX on the day #ausbiz pic.twitter.com/fHBSIZ32qo
— Sean Callow (@seandcallow) July 28, 2020
1.14pm: Malaysian PM found guilty in 1MDB trial
Former Malaysian prime minister Najib Razak has been found guilty on one charge of abuse of power, in the first verdict to come in a series of trials linked to the 1MDB scandal.
Najib and his inner circle are accused of plundering sovereign wealth fund 1Malaysia Development Berhad in a fraud that stretched around the world.
Stolen cash was used to buy high-end real estate, pricey art and fund a Hollywood blockbuster, while investment titan Goldman Sachs also became embroiled in the controversy.
Anger at the looting played a large part in the shock loss of Najib’s long-ruling coalition in elections two years ago, and he was arrested and hit with dozens of charges following his defeat.
AFP
1.01pm: Shares fade as banks, energy reverse
Shares are fading from daily highs at half time, with strength in mining stocks not enough to offset a decline in banks and energy stocks.
At 1pm, the ASX200 is higher by 24 points or 0.39 per cent to 6067.9, from earlier highs of 6113.8.
Gold miners continue to outperform as prices set record highs for a second day - Newcrest is up 2.7pc and Northern Star higher by 0.9pc.
Elsewhere, Rio and BHP are up by 2pc and 2.4pc respectively while Westpac is the biggest drag with a 1pc drop - hitting a 4-week low of $17.48 after admitting that its reporting of transactions to AUSTRAC was incomplete.
Apart from banks, some domestic COVID-exposed stocks are also coming off.
Qantas is down 1.6pc, Scentre is down 2.1pc. Dexus is down 2pc, Flight Centre is down 3.4pc and Crown is down 1.5pc
Here are the biggest movers at 1pm:
David Ross 12.50pm: Credit Corp soars 11pc
Debt Collector Credit Corp Group is the best performer in the top 200 at lunch, as it announced $15.5m net profit after tax for the full year, slightly above the target it warned it faced in mid-July.
Credit Corp said profits had been slashed after accounting for the impairment of purchased debt ledger assets and additional provisioning arising from the impact of COVID-19.
Before these adjustments, CCG said it expected to book a net profit after tax of $79.6m, up 13 per cent versus last year.
Credit Corp will pay no final dividend for 2020 but said it expected to resume dividends in 2021, subject to assessments of its capital position.
In mid-July the company said it expected to incur a 13.5 per cent reduction in the carrying value of existing purchased debt ledgers as many debtees now found themselves unable to pay collectors after coronavirus-caused economic strife.
CCP shares last up 10.9pc to $18.74.
12.34pm: Charter Hall selldown hurts Waypoint
Charter Hall has sold down its 10pc stake in Waypoint just six months after building the holding in February.
The Australian’s DataRoom revealed yesterday that Charter Hall was selling down $203m of shares through JP Morgan and UBS at $2.73 apiece.
Waypoint was previously called Viva Energy REIT and owns Australian service stations.
Charter Hall confirmed the move this morning, saying its Long Wale Retail REIT and Charter Hall fund had both sold 5pc each, providing a positive total return on its entry price.
WPR shares last down 3.7pc to $2.63.
Read more: Charter Hall sells 10pc Waypoint stake
Patrick Commins 12.28pm: Vic lockdown a blow for jobs recovery
Australia’s jobs recovery has stalled and gone backwards, the latest payroll data shows, with Victoria shedding workers at twice the national rate over the week to July as Melbourne entered lockdown.
The number of Victorian payroll jobs fell by 1.4 per cent over the week to July 11, and by 2.2 per cent over the month, the latest Australian Bureau of Statistics report reveals.
This compares with a 0.6 per cent drop in jobs nationally for the week, and a 1.1 per cent drop over the four weeks.
The figures confirm the southern state as the hardest hit through the crisis, which before the second wave of infections had already been slower than other states to lift restrictions.
Since the country recorded its 100th COVID-19 case on March 14, there are 7.3 per cent fewer jobs in Victoria, against 5.6 fewer for the country as a whole.
Read more: After horror high, Victoria cases drop to 384
The ABS' new payrolls data have a tendency to be revised upwards. For example, the level reported 2-weeks ago was revised up by 1.3% and the level reported 4-weeks ago has now increased by 1.9%. Worth remembering as we try to interpret today's data #ausbiz #jobs pic.twitter.com/HXu3fhdGQ0
— Callam Pickering (@CallamPickering) July 28, 2020
11.59am: Gold surge supporting shares
Australia’s share market has extended early gains amid surging gold prices and a further rise in US share index futures ahead of what could be another dovish FOMC statement on Thursday.
The ASX200 is up 0.9pc at 6098 after rising as much as 1.1pc to a 4-day high of 6113.8.
It came as spot gold rose as much as 2pc to a new record high of $US1981.27 on top of a 2.1pc rise overnight, keeping gold miners buoyant with Newcrest up 3pc. But iron ore miners drove the additional rise in the index after the open, with BHP, Fortescue and Rio Tinto up 2.7pc to 4.0pc.
Dalian iron ore futures jump 0.8pc in early trading. S&P 500 futures rose 0.4pc and Nasdaq futures gained 0.7pc, pointing to another strong night on Wall Street.
Credit Corp is up 12pc after its results and Nufarm is up 7pc after UBS upgraded.
Westpac and Macquarie are large cap laggards, down 0.3pc and 0.5pc respectively.
Ben Wilmot 11.52am: Village jumps as takeover talks extended
Theme park operator Village Roadshow has given private equity company BGH Capital another week of exclusivity to conduct due diligence for its $468m takeover.
The transaction process deed with BGH had been amended, with a one-week extension to July 28, Village said, amid expectations a deal is close to being struck.
Village shares jumped by 12 per cent to $2.19 on the news.
It was another extension for BGH to undertake due diligence, with the initial four-week period extended by two weeks to June 30, and a further two-week available extension if the parties continued to actively pursue the potential transaction.
The time extensions for BGH have been put down partly to the delays that are still affecting takeovers as lawyers and accountants gradually return to work.
The time extension could also provide a window into how cinemas will fare in the wake of the virus as operators, including Village and rival Event Entertainment and Hospitality, mainly reopened in July.
If the deal goes ahead the theme park and cinema operator is set to become one of the highest-profile corporate takeovers in the wake of the coronavirus crisis.
The Ben Gray-backed proposal values Village at up to $2.40 per share — a relative bargain, as the company had been in play for $4 per share before the virus struck, throwing the leisure sector into chaos and shutting down theme parks and cinemas.
BGH’s offer could also be sweetened from its base $2.20 per share, with another 20c per share to be paid if Warner Bros Movie World, Wet ‘n’ Wild, Sea World and most cinemas have reopened three business days ahead of the deal being voted upon.
Read more: Village Roadshow extends BGH due diligence
11.44am: New CommSec accounts up by 2.5x
More than 400,000 users joined the Commonwealth Bank’s investing platform CommSec over the past year, a more than 250pc increase from a usual year.
In a digital update, CBA said FY20 was a record year for retail investor activity, with 49 of 50 of the platforms largest trading days happening in the period.
It comes amid warnings from APRA against daytrading by inexperienced investors, with many using super draw downs to play the market during the pandemic downturn.
The bank also said more than 6.1 million customers were using its banking app, while its instalment payment investment Klarna had been downloaded by 270,000 customers.
It said global revenue for Klarna has grown to $750m for the first half, and Klarna has seen volume growth of up to 50pc year-on-year during the coronavirus period.
Read more: Retail investors warn of daytrading danger
11.28am: Downside risk to earnings: Citi
Citi equity strategist Liz Dinh sees downside risk to consensus estimates for Australian corporate earnings for FY20 and FY21.
She cautions that “consensus may be somewhat less useful as a guide for investors this reporting season” because of coronavirus impacts.
Whereas the consensus expects a 15.5 per cent fall in FY20 EPS, Citi’s “top-down” or macro-based estimate is for a fall of 20 per cent.
And whereas Citi’s estimate for FY21 is in line with the consensus estimate of no change, Ms Dinh warns that the risk is for a worse outcome.
“The recent resurgence in COVID-19 cases in VIC and NSW does make us concerned over the outlook for FY21 earnings per share,” she says.
“At this early stage, we have yet to try and estimate its impact.”
11.06am: Helloworld backer sells down stake
The Alysandratos family, prominent in the travel space, has sold down its stake in travel agency group Helloworld by roughly $1.5m.
In a filing to the market this morning, Helloworld said Irene and Spyros Alysandratos had reduced their stake from 17.13pc to 13.76pc, after the sale of more than 900,000 shares.
Between May 21 to May 25, the family sold 708,806 shares at $1.56 apiece, and a further 200,000 at $2.34 apiece in early July.
Adding to that, the group’s holding has been diluted by the issue of new shares in Helloworld’s $50m capital raising
Read more: Helloworld shuts stores, raises capital to ride out COVID
10.39am: Confidence down 10pc from May: ANZ
Consumer confidence has declined for the fifth week in a row, as growing COVID-19 outbreaks and new lockdowns weighed.
The ANZ-Roy Morgan confidence survey printed down 1.9pc for the week, its biggest weekly drop in a month, with weakness in all subindices.
Views of future finances fell by 1.9pc, while the current economic conditions sub index fell 2.4pc.
“Sentiment has dropped almost 10pc from its high at the end of May,” head of Australian economics, David Plank says.
“The rise in pandemic related deaths in Victoria and new case numbers rising in Sydney seem to be sapping confidence.
“The reductions in the Jobkeeper and Jobseeker payments from the end of September may have also weighed, with ‘Current economic conditions’ falling sharply and the improvement in ‘Current finances’ stalling at a low level.”
ANZ-Roy Morgan Aus Consumer Confidence: fell for the 5th week straight. #Sentiment is down ~10% from its end-of-May high. Case numbers in Vic and NSW seem to be sapping #confidence, as is Sept's reductions in the Jobkeeper and Jobseeker. #ausecon @roymorganonline @DavidPlank12 pic.twitter.com/gamUCmfWGS
— ANZ_Research (@ANZ_Research) July 27, 2020
Samantha Bailey 10.30am: COVID shadow to linger ’til 2025: Fitch
GDP levels in the world’s largest advanced economies are expected to remain subdued for at least the next five years following the impact of the 2020 coronavirus recession.
According to ratings agency Fitch, these GDP levels could remain around three-to-four per cent below their pre-virus trend path but the middle of this decade.
“There will be lasting damage to supply-side productive potential from the coronavirus shock as long-term unemployment rises, working hours fall and investment and capital accumulation slow,” said Fitch director Maxime Darmet.
Fitch said it expects a rise in long-term unemployment in the aftermath of the shock, with many workers in COVID-affected industries to struggle to find re-employment quickly.
The ratings agency also said it expects a lack of business investment to lead to lower growth in the capital stock.
“The level of supply-side productive capacity by 2025 will be around 3 per cent to 4 per cent below that implied by our pre-virus projections of potential GDP,” said Fitch chief economist, Brian Coulton
10.14am: Rio leads as miners rally
Shares are firmly higher to start Tuesday’s session, with a jump in miners leading the benchmark higher.
At the open, shares are up 45 points or 0.74 per cent to 6088.8.
BHP and Rio are leading the rally, up 2.1pc and 4.4pc respectively while gold miners soar to follow the rising gold price.
Newcrest is higher by 4.3pc, Evolution by 2.7pc and Northern Star by 3pc.
Read more: Rio unveils first Winu copper resource
Eli Greenblat 10.02am: GUD posts profit drop
Automotive and water equipment company GUD Holdings has posted a 22.1 per cent fall in full-year net profit to $43.7m as the coronavirus pandemic in the second half crunched automotive sales volumes.
The downturn forced GUD to slash its final dividend by more than 60 per cent.
Releasing its statutory accounts this morning, GUD said it was a tale of two halves as the first half was very strong but COVID-19 then impacted second half trading. Full year revenue was ultimately flat and ended up 0.9 per cent at $438m.
Underlying EBIT was down 10 per cent to $88.9m, reflecting lower end-user demand from partial or total lockdowns coupled with reseller destocking that drove negative operating leverage.
The company declared a final dividend of 12 cents per share, down from the 31 cents paid in 2019, and payable on August 28.
Managing Director, Graeme Whickman said: “fiscal 2020 was certainly a year of two parts and the result demonstrated the relative resilience of the GUD businesses. After a solid first half, in February we began to see impacts from COVID‐19 at the supplier level.
“Pleasingly, we successfully navigated these first challenges, but from late March we saw revenue impacts from partial or full lock downs in Australia, New Zealand and Europe impact on underlying demand exacerbated by resellers reducing inventory levels as they sought to preserve their balance sheets.”
9.39am: Offshore gains to lift ASX
Australia’s share market is set for a solid rise on the back of offshore gains.
Overnight futures relative to estimated fair value suggest the ASX200 will open up 0.9pc at a two-day high of 6098, with the Technology and Materials sectors likely to outperform based on US leads.
The Nasdaq surged 1.7pc before earnings reports from Apple, Amazon, Facebook and Alphabet this week. Spot gold closed up 2.1pc at a record high close of $US1941.90, which should keep the gold sector in focus even as the Aussie dollar creeps up.
Westpac may be set to underperform today as AUSTRAC issues resurface, but the overall market may have upside before the FOMC statement early Thursday and the next round of US fiscal stimulus, with investors likely to expect a dovish Fed and well over the $US1 trillion ($1.4 trillion) starting point for the phase 4 stimulus to be passed in the US as COVID remains out of control and the economy threatens to falter.
Global risk assets have displayed remarkable resilience in the face of bad news on COVID, US-China tensions, and the US economic outlook in the past week.
On the charts, the ASX200 has established support at the 6000 pivot level as the S&P 500 has found support around previous resistance from the June peak at 3233.
The VIX volatility index seems to have broken sustainably below its 200-day moving average at 26.82pc, with potential to test its June low. A further fall in volatility would have bullish implications for risk assets.
9.26am: What’s on the broker radar?
- Adbri raised to Outperform – Taylor Collison
- Bubs cut to Speculative Hold – Bell Potter
- Bubs cut to Neutral – Citi
- Healius cut to Neutral – Citi
- Nufarm raised to Buy – UBS
- Orbital cut to Accumulate – Hartleys
- Panoramic Resources raised to Speculative Buy – Hartleys
- Perpetual raised to Add – Morgans
- ResMed GDRs raised to Neutral – Evans and Partners
Samantha Bailey 9.06am: Credit Corp tips return of payouts
Debt collection agency Credit Corp has flagged a solid result and reinstatement of its final dividend in fiscal year 2021.
Unveiling its full year results this morning, the company said its collections experience had returned to pre-COVID expectations, with an uncharacteristically high incidence of one-off payments.
That wasn’t expected to continue as government support measures are temporary, but the company said that its loan book would further stabilise as lending demand increases and government stimulus was winded down over the coming months.
For the 2020 financial year, Credit Corp said net profit after tax was up 13 per cent on the prior year at $79.6m.
The company’s net profit after tax was $15.5m after taking into account the impairment of purchased debt leger assets and provisions due to the COVID-19 outbreak.
9.03am: Rio declares maiden resource at Winu
Rio Tinto PLC declared a maiden resource at its Winu copper discovery in Western Australia, and said early study work points to a possible shallow open-pit mine development.
Rio Tinto said it had also made another discovery little more than a mile east of the Winu deposit. That prospect, called Ngapakarra, also contains gold and is encouraging company officials that there are multiple ore bodies across the broader area.
Rio Tinto reported an inferred mineral resource for Winu of 503 million tonnes of ore grading at 0.45pc copper equivalent. The resource includes a higher-grade component of 188 million tonnes of ore with a 0.68pc copper grade.
Rio Tinto is targeting first production from Winu in 2023.
Dow Jones Newswires
Read more: Rio files environmental approval request
8.57am: Iluka output, sales slip
Iluka Resources said its first-half output and sales of key mineral sands fell on year, as it responded to uncertainty created by the coronavirus pandemic.
Iluka said production of zircon, rutile and synthetic rutile totalled 287,800 tonnes in the six months through June, down 11pc on a year earlier. First-half sales of the same basket of commodities dropped by 20pc to 241,600 tonnes.
Iluka said it has implemented several production changes in response to market uncertainty and in an effort to preserve cash during this period.
“These include altered production settings at the Narngulu mineral separation plant, which were in effect during 2Q, as well as the return of mining to Jacinth from Ambrosia, with work progressing during the quarter for a return to the Jacinth deposit in August,” Iluka said.
Iluka said the planned demerger of its iron-ore royalty stream is on track to happen by the end of December.
Dow Jones Newswires
Samantha Bailey 8.54am: Collary appointed Westpac COO
Westpac has appointed former Bank of Montreal executive Scott Collary to lead its new Group Operating Office, which will bring together Group Operations and Group Technology.
“I’m delighted to welcome an executive of Scott’s calibre to the Westpac team,” chief executive Peter King said.
“Scott has extensive experience working in senior financial services roles leading large global teams. He has a proven track record of delivering large-scale transformation programs at major international banks that improve operating and technology performance.”
Mr Collary, who has previously held senior roles at ANZ and Citigroup, joins Westpac from Bank of Montreal in Canada where was chief information and operations officer for the bank’s North American Personal and Business Banking, Private Wealth and Global Asset Management divisions.
Mr Collary is due to start in the role later this year, subject to regulatory approvals.
Westpac also announced this morning that group executive Gary Thursby and chief information officer Craig Bright would both be leaving the bank in the coming months.
Mr Thursby, who had recently been acting CFO, will finish with Westpac early next year, Westpac said.
8.27am: Temple & Webster revenue up 74pc
Online homewares retailer Temple & Webster says revenue soared 74 per cent to $176.3m, as it announced unaudited full-year results.
It reported EBITDA of $8.5m, compared to $1.5m in the prior corresponding period.
The number of active customers was up 77 per cent year-on-year, as the company joined other online retailers in benefiting from coronavirus lockdowns.
The e-commerce retailer said the year was cash flow positive, ending with cash of $38.1m and no debt.
Temple & Webster CEO Mark Coulter said: “I am pleased to report a great set of numbers in the face of some very tough retail conditions.”
The retailer said the new year had started strongly, with July’s revenue growth rates in line with those experienced throughout the fourth quarter.
7.35am: Westpac Austrac report breaches rise
Westpac has sharply increased the number of admitted breaches of reporting to the regulator Austrac.
The issue of threshold transaction report breaches comes as Westpac prepares to pay a penalty for alleged contraventions of financial crimes law.
In May, Westpac revealed it had been late in reporting almost 18,000 threshold transaction reports (TTR) to Austrac. The bank warned then that that figure could rise to between 60,000 and 90,000 unreported threshold transaction reports to the regulator.
On Tuesday, Westpac said that following further investigations, it had told Austrac that about
175,000 transactions had not been reported, and that approximately 365,000 TTRs that were reported to Austrac may have contained incomplete or inaccurate information.
Westpac told the ASX: “A significant proportion of the potential reporting issues relate to a range of complex scenarios where the legislation requires Westpac to exercise judgment on how multiple transactions may be aggregated and whether a threshold transaction has actually occurred.
“Accordingly, not all of the above numbers may be breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Westpac continues to engage with Austrac in relation to these TTR issues, and notes that the numbers above may change.”
Austrac classifies a “threshold transaction” as the transfer of funds of $10,000 or more. It specifies that reporting entities must report these transfers to Austrac in a threshold transaction report within 10 business days.
6.15am: ASX set to open higher
Australian stocks are poised for positive start, adding to yesterday’s gains, after rises on Wall Street.
At about 6am (AEST) the SPI futures index was up 29 points, or 0.5 per cent.
Yesterday the rising gold price lifted miners, helping the S&P/ASX 200 to end 0.34 per cent higher.
The Aussie dollar was this morning higher at US71.44c.
6.10am: Wall Street lifted by tech giants
US stocks rose as investors bet that the largest technology firms will power ahead in an uncertain economic environment.
Amazon.com, Google parent Alphabet and Apple led the major indexes higher, extending a rise that has helped make the tech sector the best performing in the S&P 500 index so far this year.
The broad stock market index rose 0.7 per cent at the close of trading in New York, while the Dow Jones Industrial Average climbed 0.4 per cent. The technology-focused Nasdaq Composite Index was up 1.7 per cent.
The big technology companies are due to report quarterly earnings later this week. The firms have weathered the recent recession better than many other sectors of the economy, and some investors say they believe their stocks are poised to outperform after a retreat in recent days.
“The set up is better than it would have been if all these tech stocks were sitting at record highs going into earnings,” said Jason Ware, partner and chief investment officer at Albion Financial Group in Salt Lake City, Utah.
Amazon shares ticked up 1.5 per cent, extending their gains for the year to 65 per cent. Alphabet rose 1.4 per cent, and Apple added 2.4 per cent.
Rising coronavirus infections around the world tempered the gains in the stock market and helped push gold prices to a fresh record. Futures contracts for delivering gold in August shot up 1.8 per cent to $US1931 a troy ounce, topping the previous intraday high of $US1923.70 in September 2011.
The advance extends a summer surge for the precious metal, which has benefited from a cautious outlook for the global economy, a broad decline in interest rates and the weakening dollar. Silver jumped 7.3 per cent.
The U.S. dollar fell as investors bet that the Federal Reserve will continue to keep the spigot turned on for cheap money and backstop the US economy.
Shares of Moderna rose 9.9 per cent after the company said it had received additional funding from the federal government’s effort to accelerate development of a vaccine for COVID-19.
In commodities markets, the US crude oil benchmark rose 0.8pc.
Overseas, stocks were mixed. The pan-continental Stoxx Europe 600 benchmark dropped 0.3pc as worries about recent outbreaks of the virus in Spain and the implications for the travel industry weighed on sentiment, analysts said.
China’s main stocks benchmark, the Shanghai Composite Index, closed up 0.3pc. The equity gauge in Hong Kong ticked down 0.4pc, while Japan’s Nikkei 225 eased 0.2pc lower.
Dow Jones Newswires
5.50am: Gold hits record as dollar drops
Gold prices zoomed to a record, as a weakening dollar injected new momentum into a rally driven by uncertainty about the world economy.
Futures contracts for delivering gold in August shot up as much as 2.2pc to $US1940.10 a troy ounce, topping the previous intraday peak of $US1923.70 from September 2011. They ended the day up 1.8pc at $1931, a second consecutive closing record. Gold futures reached an all-time closing high for the first time in nearly nine years Friday, but remained short of the intraday record.
Monday’s record marked a milestone in gold’s bull run, which many traders rank alongside those of 2008-11 and the late 1970s. The gloomy outlook for the world economy, a decline in interest rates, rising tensions between the U.S. and China, and the dollar’s depreciation have fuelled the surge as investors have bought assets they perceive to be havens.
“There are still a lot of things to be worried about, which is why gold is attracting all this attention and all this money,” said David Govett, head of precious metals at commodities brokerage Marex Spectron.
“You’re seeing money slipping out of the stock market or out of other assets and just eking into gold,” Mr. Govett added. “Gold, as a small market, is moving a long way as a result.”
The advance marked gold’s seventh consecutive daily advance, the metal’s longest winning streak since February. Gold prices have gained nearly 9pc over the past month and about 27pc this year, making the metal one of the strongest-performing major assets in 2020.
The price of silver, seen as a store of value by investors as well as having widespread industrial uses, rose even more sharply than gold Monday. Futures for September delivery, the most widely owned contracts, jumped 7.2pc to $US24.501 an ounce, the highest level in almost seven years.
Dow Jones
5.45am: Oil futures finish higher
Oil futures gave up early losses to finish higher, with prices propped up by a drop in the US dollar, which saw its benchmark ICE U.S. Dollar Index fall to 93.62, down 0.9pc.
“Recent weakness in the dollar has been “beneficial to dollar-denominated commodities in general and to oil in particular,” said Marshall Steeves, energy markets analyst at IHS Markit. Still, gains for oil were modest against a backdrop of ongoing demand worries tied to the pandemic and US-China tensions.
September West Texas Intermediate oil rose 31 cents, or nearly 0.8pc, to settle at $US41.60 a barrel on the New York Mercantile Exchange.
Dow Jones
5.42am: Garmin hit by cyber attack
Computer networks of the smartwatch and electronics firm Garmin were coming back online, the company said, after an outage widely believed to have been due to a ransomware attack.
The company acknowledged it was the victim of a “cyber attack that encrypted some of our systems,” without offering details.
The comments suggest a ransomware attack which would have required a payment to hackers in order to get a decryption key.
“We are happy to report that many of the systems and services affected by the recent outage, including Garmin Connect, are returning to operation,” Garmin said in an online post.
“Some features still have temporary limitations while all of the data is being processed.” The attack on July 23 disrupted Garmin’s website; company communications, and customer-facing services, according to the Kansas-based company.
AFP
5.37am: LVMH reports China rebound
LVMH, the world’s biggest luxury group, reported signs of a recovery in its businesses after a sharp downturn due to the coronavirus, including a strong rebound in key market China.
Sales for the French conglomerate fell 38 per cent overall in the second quarter of the year while net profit for the six months to June came in a staggering 84 per cent lower as a result of the closure of many stores and manufacturing sites.
But the group still “showed exceptional resilience to the serious health crisis the world experienced in the first half of 2020”, CEO Bernard Arnault said in a statement.
While there had been “encouraging signs” of recovery during the month of June, in the second quarter as a whole revenue was down notably in Europe and the US, he said.
“Asia, however, has seen a marked improvement in trends, with a strong rebound in China in particular,” Arnault said.
He said LVMH was “in an excellent position to take advantage of the recovery, which we hope will be confirmed in the second half of the year”.
LVMH’s dozens of brands include Kenzo and Marc Jacobs fashion, Guerlain perfume and Tag Heuer watches.
AFP
5.35am: Gold forges record high
Gold soared to a record high as investors rushed into the safe-haven commodity on concerns about heightened China-US tensions, spiking virus infections and a lack of progress on a new stimulus bill in Washington.
“Always a sign of trouble, gold continued its red hot streak on Monday, the safe haven commodity looking mighty attractive after another troubling weekend of COVID-19 and US-China headlines,” said Spreadex analyst Connor Campbell.
US dollar weakness was a big factor behind gold’s takeoff, analysts said, after vast monetary easing by the US Federal Reserve undermined confidence in the greenback without reassuring investors about the outlook for any fast US recovery.
“A further escalation of tensions between China and the US, with the tit-for-tat embassy closure, was the most obvious reason for the change in market tone,” said Rupert Thompson, chief investment officer at Kingswood.
“But the continuing uncertainties over the prospects for the economic recovery may also have contributed,” he said.
The gold price hit an all-time high of $US1945.72 per ounce, well above its previous record of $US1921.18 in 2011. It later pulled back somewhat.
Relations between the world’s two superpowers took another negative turn when a US mission in Chengdu was ordered to shut in retaliation for the forced shutdown of the Chinese consulate in Houston, Texas.
As gold rose, stock markets — a riskier investment — wobbled with investors fretting over the impact of the virus on the economy.
In Europe, only Frankfurt held steady at the close after a key survey showed that German business confidence rose for the third month in a row in July. London (down 0.2 per cent) and Paris (down 0.3 per cent) both ended lower.
AFP
5.32am: Big Tech CEOs set to testify
Antitrust fever hits a peak in Washington this week with politicians set to grill top executives of four of the biggest US technology firms in what promises to be a rare political spectacle for the digital era.
The showdown on Wednesday (US time) in the House of Representatives comes amid rising concerns over Big Tech dominance, which has become even more pronounced during the coronavirus pandemic.
The unprecedented joint appearance in the House Judiciary Committee will include chief executives Tim Cook of Apple, Jeff Bezos of Amazon, Mark Zuckerberg of Facebook and Sundar Pichai of Google and its parent firm Alphabet. All will testify remotely.
The hearing is part of a probe into “online platforms and market power,” taking place as US federal agencies and states conduct their own investigations.
AFP
5.30am: US growth ahead of Fed, GDP data
The Federal Reserve is set to meet this week ahead of a key GDP estimate as new data shows recovery in US manufacturing, although surging coronavirus cases threatens the economy’s gains.
The jam-packed week of economic news comes as politicians in Washington are debating provisions of another stimulus package to follow up on the $US2.2 trillion CARES Act passed in March as COVID-19 hit.
The business shutdowns caused by the pandemic are expected to see the US economy shrink an unprecedented 35 per cent in the April-June quarter when the Commerce Department releases its advance GDP estimate on Thursday (Friday AEST).
However some sectors of the economy have begun bouncing back, with retail and new home sales recovering from the coronavirus hit and data from the Commerce Department released Monday showing durable goods orders rising 7.3 per cent on demand for transportation equipment.
But in a note, Oxford Economics warned that the prevalence of coronavirus in the US, where more than 55,000 new cases were reported in the 24 hours to Sunday, threatens the gains.
The Fed will likely take indicators into account as it begins its two-day Federal Open Market Committee (FOMC) meeting on Tuesday (Wednesday AEST), but few big moves are expected since the committee had already slashed its benchmark lending rate to zero in mid-March.
If Fed Chair Jerome Powell addresses the surge in COVID-19 cases, he will likely reiterate “that the Fed is prepared if necessary to provide more support to the economy,” said Mickey Levy of Berenberg Capital Markets.
Another possibility is that the Fed might link their movement of the lending rate to inflation, Oxford said.
AFP
5.25am: BMW to tie pay to climate
German giant BMW said executive pay would in future be tied to meeting strict targets aimed at lowering the luxury carmaker’s carbon emissions.
Speaking to reporters in Munich, chief executive Oliver Zipse said BMW wanted to reduce CO2 emissions by millions of tonnes a year by 2030 as part of its “very clear commitment” to the Paris climate agreement.
“We will report on our progress every year and measure ourselves against these targets,” Zipse said.
“The compensation of our board of management and executive management will also be tied to this.” He did not go into details about how the climate goals would affect pay, saying only that they would have a noticeable impact.
AFP
5.20am: US durable good orders continue recovery
US durable good orders in June continued their recovery from the COVID-19 hit, with new orders rising 7.3 per cent on demand for transportation equipment, the Commerce Department said.
The $US206.9 billion in business done last month followed a surge in new orders in May by a downwardly revised 15.1 per cent, after the Detroit automakers and plane maker Boeing restarted production.
As in May, the better-than-expected growth in demand for manufactured goods after coronavirus-driven plunges in March and April was fuelled by transportation orders, which grew 20 per cent or $US9.2 billion.
Motor vehicles and parts formed the backbone of the growth, with new orders up 85.7 per cent and shipments growing 83.1 per cent.
However in a sign of Boeing’s continued struggles, new orders for non-defence aircraft slumped -462.3 per cent as customers cancelled orders with the plane maker.
Excluding transport, new orders rose 3.3 per cent, in line with analysts’ forecasts.
AFP
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