ASX rallies to 1.9pc weekly gain with mining, industrial boost
Rising virus cases in Melbourne weighed on sentiment for much of the day, but a late boost helped the ASX to clinch a 1.9pc weekly gain.
- 1607 Capital builds stake in VGI
- Rio shipments lift, capex revised
- BlueScope flags earnings slide
- BKI warns of long, slow recovery ahead
That’s all from the Trading Day blog for Friday, July 17. Australian stocks rallied to the close, cementing a 1.9pc weekly jump, despite overnight falls on world markets overnight.
Locally, BlueScope warned of $200m in impairments while Rio flagged improving conditions, stoking hope of a first half payout and Westpac admitted to ‘immature’ risk culture.
US futures suggest gains to come overnight.
8.49pm: Samantha Bailey, Lachlan Moffet Gray Defensive pays off in freefalling markets
High valuations in the domestic equity market had Simon Mather, the chief investment officer of the $5bn BUSSQ Building Super, already concerned about a potential sell-off in equity markets, well before economic uncertainty driven by the coronavirus crisis.
He put in place a defensive strategy and refocused on his fund’s global markets exposure, which he said helped the Brisbane-based industry fund to outperform the super sector in the past financial year.
“We put a protection strategy in place using derivatives and during the end of February through March when the market sold off we were able to actually turn this protectionist strategy into value for our members. We were able to make money as markets fell and offset some of the losses,” Mr Mather told The Weekend Australian.
8.14pm: Damon Kitney Sitting down with Packer, Pratt and Cannon-Brookes
I still remember walking into Anthony Pratt’s Villa Juanita mansion in Atlanta, Georgia, on a cold, wet January afternoon in 2011 and staring, transfixed, at a photograph on the mantelpiece that only a select few in the world had ever seen.
It was a haunting picture of Anthony’s father Richard on his deathbed with the son he had long mercilessly criticised but secretly admired at his side. The Pratt family patriarch, his body racked by cancer, had only hours to live. His face was expressionless.
The image was burnt into my mind as I sat down the next day with Anthony Pratt for the first wide-ranging interview of his life, an at times nerve-racking discussion that was 18 months in the making.
It can take a long time to gain the trust of our top business people but then they can really open up.
7.55pm: Perry Williams BP approved for Carnarvon Basin gas exploration
BP has received Commonwealth approval to explore for gas in Western Australia’s Carnarvon Basin with plans to start drilling the Ironbark project in October, four years after it walked away from the controversial Great Australian Bight oil project off South Australia.
The environmental plan for Ironbark submitted by BP and its partners Cue, Beach Energy and NZ Oil & Gas was approved by the national offshore regulator with the prospect targeting 15 trillion cubic feet of gas.
The exploration permit is just 50km from existing North West Shelf LNG infrastructure in which BP holds a one-sixth interest, potentially offering a route to market should drilling to 5500 metres prove successful.
“BP as operator will work with its Australian and New Zealand joint venture partners to deliver this well with the aim of finding natural gas that can deliver environmental and economic benefits to Australia and the region,” a BP spokesman said.
“BP is working with its partners, regulators and local contractors to be drill-ready from late September 2020, with the exact start date to be determined by rig handover, weather and operational considerations.”
A shake-up of the NW Shelf, which started exporting gas in 1989, is underway with energy giant Chevron planning to sell its 16.7 per cent stake in the project.
The terminal is facing the depletion of its gas reserves in the next few years forcing the facility to move to a new tolling model where it will process gas from third parties for the first time.
BP, which also owns a stake in Woodside Petroleum’s Browse LNG project in Western Australia, plans to hit net zero carbon emissions by 2050, repositioning its business away from fossil fuels to a wider array of energy sources and raising questions over its appetite to proceed with a carbon intensive project like Browse.
7.28pm: John Durie Rio mute on desecration, talks up output
There is something a little incongruous about Rio Tinto’s chief executive, Jean-Sebastien Jacques, to talk about the Juukan Gorge tragedy on the same day as releasing a creditably strong production report.
This is especially, as he says, it is too early to say just what went wrong, why it went wrong and how it will be stopped next time.
It’s a corporate response to the human tragedy of tens of thousands of years of history blown up in search of a workable and efficient mine plan.
Talks now seem just a little late now that 46,000 years of history is being piled on to the Rio iron ore trains ready to be shipped to China.
7.04pm: David Ross Boom time for Digital Wine Ventures
The coronavirus has wrecked a lot of things, but for Digital Wine Ventures the lockdown has proved a boom time for its cellar-door-to-door business model, with sales soaring.
Most customers don’t realise they are dealing with Digital Wine Ventures, but the company’s software powers much of the selling from small wineries across Australia.
Its software plugs into online stores, with the business also holding stock from various wineries in logistics centres around Australia and New Zealand.
Customer orders engage the system that ships wine either from various logistics centres or from Digital Wine Ventures’ Albury-Wodonga distribution centre to ensure two-day delivery on most items.
The scalable business model has allowed sales at the company to increase 40 per cent in June and rise 93 per cent on the previous quarter while only directly employing 14 people.
Digital Wine Ventures CEO Dean Taylor said the business, his eighth start-up in the wine space, was entirely equity-funded.
6.30pm: Eli Greenblat Kogan ‘misled shoppers’ in promo
Shares in online marketplace Kogan.com fell almost 10 per cent on Friday and the company is up for a substantial financial penalty, possibly in the millions of dollars, after the Federal Court ruled that the retailer breached consumer law over a special “tax time” promotion that actually raised prices by about 10 per cent before offering a discount to shoppers.
In more than 10 million targeted emails and almost 1 million text messages to its customer base, Kogan was found to have conveyed false or misleading representations around the size of the product discounts offered in the promotion in June 2018.
Kogan ran the online promotion from June 27 to 30, telling consumers they could use the code ‘TAXTIME’ to reduce prices by 10 per cent at checkout. The promotion was advertised on Kogan’s website, in emails and text messages.
Towards the end of the promotion, Kogan’s email ads included statements like “48 hours left!” and “Ends midnight tonight!” to entice consumers to make a purchase during the sale.
What was not known by shoppers was that many of the products offered in the sale had had their sticker price raised before discounts were then advertised.
“The court found that the ads conveyed false or misleading representations because Kogan had increased the prices of more than 600 of its products immediately before the promotion,” the Australian Competition & Consumer Commission said in a statement following the court’s decision that went against Kogan.
Kogan said in a statement that the profit derived from the promotion was immaterial and the ruling would not have any adverse effect on its promotional activities.
Kogan said it was reviewing the court ruling. A penalty is yet to be decided.
6.03pm: Lilly Vitorovich Seven boss savages film assistance
Seven Network’s boss James Warburton has hit out at the Morrison government over its $400m package to attract international filmmakers, calling for urgent changes to the “broken regulatory regime” that is hurting the commercial television industry.
Prime Minister Scott Morrison on Friday unveiled a $400m location offset package, which gives tax breaks for productions to film in Australia. It is expected to create 8000 jobs across the country over the next seven years.
“While we support increasing the location offset for foreign productions it is frustrating and disappointing to see this seemingly given higher priority than fixing the broken regulatory regime for Australian content,” Mr Warburton said.
5.24pm: Eli Greenblat JobKeeper ‘must be fine-tuned’
Businessman and billionaire investor Robert Millner has called for a more nuanced and better targeted JobKeeper package that supports Australians in need, citing examples of part-time hotel staff who might have worked only one or two shifts a week but were now getting paid $1500 a fortnight under the government program.
Mr Millner, who is chairman of listed fund manager BKI Investment, which posted its full-year results on Friday, also expressed concern over the global economy and the rush by many central banks to print money as the mountain of public and private debt grows steadily higher.
BKI is wearing the bruises of a tough market in the wake of the coronavirus pandemic that has seen the Australian companies it invests in cut dividend payments or cancel them, while low interest rates have slashed the income it earns from its cash holdings.
4.34pm: Weekly jump only after previous slip
This week’s gain cements the recent trend of one week forward, the next week back - dating back to early June.
While the weekly 1.9pc is a positive for the market, it comes after a 2.3pc drop in the previous week.
Strength in the market came thanks to a lift in the major miners as iron ore prices move higher - BHP added 0.4pc, Rio Tinto gained 0.61pc and Fortescue set a new record of $16.66 before finishing up 1.7pc to $16.39.
Here’s the biggest movers at the close:
4.11pm: Shares rally 0.4pc in final hour
A rally in the final hour has helped the ASX200 to clinch a gain for the session, extending its weekly lift to 1.9 per cent.
Shares hovered around a flat range for much of the day, but a late boost sent the benchmark up 23 points or 0.38 per cent to 6033.6.
By the close all sectors bar tech were higher – led by lift in industrials and materials stocks.
A surge saw the #ASX 200 close higher for the day by 22.7pts or 0.38% to 6,033.6. Nearly every sector finished with advances with the IT sector the lone decliner #ausbiz Source: Iress pic.twitter.com/mKJK6Nc1m1
— CommSec (@CommSec) July 17, 2020
Bridget Carter 4.06pm: 1607 Capital builds stake in VGI
DataRoom | Deep discount investor 1607 Capital has amassed a stake in VGI Partners’ listed investment company, VGI Partners Global Investments, in what some describe as a move that is highly ironic.
The strategy of the Virginia-based 1607 Capital is to unlock value in discounted closed end funds – a similar strategy to VGI itself.
VGI is headed by activist investor Rob Luciano, and while Doug Tynan was also an executive director, he recently stepped into a non-executive role.
The LIC made its debut on the market in 2017, but after its shares hit almost $2.50 in 2018, they are now trading at about $1.79, taking its market value to about $728.39m.
Apparently, VGI has known about the company being on its register for some time.
A substantial shareholder notice was filed on Friday showing that the American fund had a 5.01 per cent stake.
Run by Fred Tattersall, 1607 Capital Partners describes itself as a company with a focus of investing in closed-end funds and similar vehicles and “other discounted assets”.
For the year to June, VGI Partners Global Investments generated a net return of negative 4.3 per cent after all fees and its post-tax net tangible assets per share stood at $2.27 at June 30.
3.20pm: Zip offers cheapest BNPL exposure: Shaw
Zip Co is the clear number two BNPL player to Afterpay, says Shaw and Partners as it tips the group’s US investment QuadPay to accelerate its growth in the year ahead.
While the year just passed has been massive for the sector, analyst Jonathon Higgins forecasts FY21 to be even stronger.
“We see the Zip share price as having reduced on Quad’s relative transaction value underperformance between other BNPL companies in Q4-20 on Q3-20,” he writes.
“This is to be expected however with Quad unlisted, with lesser access to capital, COVID generating conservatism and in the midst of acquisition by Zip.
He notes that app download data for the service is 40pc above COVID-19 lows in June, and the group is likely to accelerate customer acquisitions and volumes under Zips ownership.
The broker expects Quad to end the current year with 3.4 million customers, delivering $19bn in sales volumes and annualising $160m in revenue.
“We expect Zip to advise of aspirational goals at the results in late August a potential catalyst alongside further Quad data and acceleration in a COVID world, with the company regularly beating expectations and in the midst of one of the greatest structural changes in
financial services,” Mr Higgins says.
“We upgrade our PT from $6.25 to $7.03, with Zip representing the cheapest sector exposure and being a clear number 2 with the USA coming and Quad growing faster than APT and Z1P at comparable periods.”
Z1P shares last down 1.7pc to $5.84 – a 19.3pc loss for the week.
2.55pm: Cathay Pacific warns of $1.9bn loss
Hong Kong carrier Cathay Pacific issued a profit warning on Friday estimating it has haemorrhaged $HK9.9bn ($1.86bn) in the first half of the year as it reels from the coronavirus pandemic.
“The Group will record a net loss attributable to shareholders of approximately $HK9.9bn, which compares to a net profit to shareholders of $HK1.3bn for the same period in 2019,” the airline said in a statement.
AFP
1.47pm: Travel stocks take fresh hit
Fear of further coronavirus restrictions has served a new blow to travel stocks in Friday’s trade.
As Victoria recorded 428 new cases, and NSW lifted its restrictions on group gatherings, hope of domestic mobility faded further.
Travel agent Flight Centre is lower by 3.8pc to $10.35, as peer Corporate Travel slips 3.5 per cent to $8.57 and Webjet trades flat.
Qantas shares are down 2.8pc to $3.60 while Sydney Airport trades lower by 0.4pc to $5.40.
1.41pm: Asian markets edge up
Asian markets edged up Friday following an across-the-board sell-off the previous day, but disappointing recent data has jolted optimism over the economic recovery that has helped drive gains in for the past few months.
Traders have for weeks been able to look past fresh spikes in infections around the world thanks to trillions of dollars in government support and as they focus on the easing of lockdown measures.
But with new containment measures being reintroduced in parts of the world that had been thought to have controlled the outbreak – including Hong Kong and Japan – confidence has taken a hit.
Data out of China Thursday showed that while the economy grew more than expected, the crucial reading on retail sales was below forecasts, indicating consumers – who are key to reigniting growth – were still reluctant to go out and spend.
Later, a report showed US retail sales continued to rise in June, but at a slower pace than May.
“Data released over the last 24 hours seriously questions the speed of any post-COVID-19 economic recovery,” said Michael McCarthy, at CMC Markets. “The numbers illustrate the economic challenges posed by secondary infection outbreaks.”
Hong Kong added 1 per cent and Shanghai climbed a similar amount a day after collapsing 4.5 per cent, while Seoul and Taipei climbed 0.7 per cent. Singapore and Wellington also edged up but there were losses in Manila and Jakarta.
AFP
1.10pm: Palmer faces fraud, director breach charges
Billionaire Clive Palmer has been charged and could face up to 20 years in jail for alleged fraud and breaching of directors duties.
In a statement today, the corporate regulator ASIC alleges Mr Palmer contravened the Corporations Act. It alleges a further two counts of Criminal Code breaches – which could result in imprisonment for up to 20 years and fines of more than $600,000.
ASIC alleges Mr Palmer dishonestly obtained a benefit or advantage for Cosmo Developments and/or the Palmer United Party and others by authorising a transfer of $10m in 2013, contrary to the purpose for which the funds were being held, using his position on the board of his mining company Mineralogy.
In addition, the regulator’s investigation also alleges Mr Palmer obtained a benefit for Media Circus by authorising the transfer of $2.167m.
The maximum penalty for the breach of directors duties is $340,000, five years in prison or both, while each of the criminal charges face a maximum penalty of five years.
Read more: Palmer derides ASIC’s charges as ‘kowtowing to Chinese’
1.01pm: Shares bounce from intraday lows
Shares have clawed back ground to trade slightly positive at half time, after a knock from Victoria’s rising virus tally earlier in the session.
At 1pm, the benchmark ASX200 is higher by just 1.2 points to 6012.4 – after hitting 5999.4 at 11am.
Health and industrial stocks are supporting the index, as financials and energy stocks drag.
CSL is doing a lot of the heavy lifting with a 0.6pc gain, while dividend prospects help Rio Tinto to stay in the positive too.
Here’s the biggest movers at 1pm:
Ewin Hannan 12.46pm: Business urges PM to extend IR changes
Business has urged Scott Morrison to extend industrial relations exemptions to employers who will no longer use JobKeeper until at least the end of 2020.
The Prime Minister on Thursday flagged extending the exemptions which allow employers to cut employee hours and change their duties.
Australian Industry Group chief executive Innes Willox said on Friday that the short-term changes made to the Fair Work Act were playing a vital role in preserving jobs and the viability of businesses.
“It is in no-one’s interests for those measures to be discontinued at the end of September as that would be a certain way to extinguish the jobs of a very large number of employees,” Mr Willox said. “Clearly the COVID-19 crisis is continuing.
“If a business is currently eligible to access the measures in the Fair Work Act then they should continue to have access beyond the end of September, regardless of whether they lose access to JobKeeper payments. At the very least, the measures should be continued until the end of this year.”
12.01pm: BWX jumps after $40m raising
Beauty brand owner BWX is higher by 11pc in lunch trade after raising $40m in an oversubscribed placement.
The group returned to trade this morning with a spike in shares to $4.08, after raising money to lift its manufacturing capability and “future proof” its supply chain.
Shares in the placement were offered at $3.40 apiece, and received strong interest from existing Australian and offshore investors, BWX says.
A retail placement to raise a further $10m will open next week.
BWX last traded up 11.5pc to $4.08.
11.29am: ASX slides into negative
Shares are pulling further into the red ahead of an update on Victorian cases from Premier Dan Andrews.
After lifting 0.5pc early, the benchmark ASX200 is lower by 9 points or 0.16 per cent to 6001.5.
Losses in tech are leading the fall, as only telcos and utilities hold on to positive momentum.
Westpac is the only big four bank to see any lift, up 0.2pc, while NAB and ANZ lose 0.2pc and Commonwealth slips by 0.1pc.
11.00am: COVID-exposed stocks taking new hit
Vaccine news helped yesterday, but COVID-19 sensitive stocks are falling back today, particularly those exposed to Melbourne.
Premier Investments is down 3.3pc, Flight Centre is down 3pc, Qantas is down 1.6pc, GPT is down 1pc, Dexus is down 0.9pc and Crown is down 0.7pc.
It comes ahead of an expected large rise in COVID-19 cases in Victoria, with 428 new cases expected to be reported Friday, The Australian understands.
The S&P/ASX 200 was up 0.2pc at 6022 after rising 0.5pc in early trading.
Follow the latest coronavirus updates at our live blog
Eli Greenblat 10.55am: Kogan loses coupon case
Online marketplace Kogan.com says the Federal Court has upheld allegations made by the competition regulator that Kogan breached the Consumer Law in respect of a four-day promotion in June 2018.
The promotion involved Kogan advertising a coupon code by which consumers could achieve a 10 per cent price reduction at checkout.
Kogan said the profit derived by the company from the promotion was immaterial and the ruling will not have any adverse impact on the company’s promotional activities.
“The promotion was not intended to mislead any shoppers, and was implemented in order to allow customers access to lower prices than the prices that applied without the coupon or promotion,’’ Kogan said in its ASX statement.
Kogan said it is currently reviewing the ruling of the Federal Court and may provide a further update once its review is complete
A statement from the regulator welcomed the decision, noting that Kogan had used phrases such as “48 hours left!” and “Ends midnight tonight” to entice consumers into making a purchase.
“The Court found that the advertisements conveyed false or misleading representations because Kogan had increased the prices of more than 600 of its products immediately before the promotion,” the ACCC said.
“In most cases the prices of these products had been increased by at least 10 per cent. Kogan had also reduced the prices of these products shortly after the promotion ended, many back to their pre-promotion prices.
“We brought this case because we were concerned that the advertised price reductions were not genuine savings.”
KGN last traded down 3.2pc to $17.26.
10.38am: ASX reverses as COVID cases blow out
Shares have retraced early gains ahead of what is set to be a more than 400 case blow out in Melbourne.
After early gains as much as 0.5pc, the benchmark ASX is just 7 points or 0.1pc higher at 6017.4.
Victoria has recorded 428 cases of coronavirus on Friday, The Australian understands.
Still, the Aussie dollar is headed higher, last up 0.2pc to US69.84c.
Follow the latest updates at our live blog
10.11am: Shares bounce back
Shares have bounced back from yesterday’s selling, with gains across all sectors in early trade.
At the open, the benchmark ASX200 is higher by 28 points or 0.5 per cent to 6038.9.
That’s largely fuelled by a lift in tech stocks (up 1.1pc) along with outperformance in miners and consumer discretionary shares.
BlueScope is higher by 2.5pc to $11.67 even after issuing an earnings warning this morning, while Westpac is higher too – up 0.5pc – after vowing to defend a new class action.
Lilly Vitorovich 9.43am: Bauer completes sale to Mercury
Bauer Media’s disastrous eight years in Australia is over, with the German family-owned media group completing the sale of its local publishing business to private equity group Mercury Capital.
The deal, which was announced last month, has received the approval of the relevant regulatory authorities.
“All of Bauer Media Australia’s employees, the ownership of its print and digital assets, including those brands recently acquired by Bauer from Pacific Magazines, and Bauer’s New Zealand mastheads have now transferred to Mercury Capital,” Bauer said in a brief statement on Friday morning.
Bauer entered the Australian media market in 2012 by acquiring the Packer family’s ACP Magazines for $500m, a deal described by the then Bauer chief executive Matthew Stanton as a “long-term commitment” for the brands and people.
Read more: Bauer out of the money in mag sale
9.32am: Shares to slip
Australia’s S&P/ASX 200 share index is likely to fall slightly after offshore declines.
Overnight futures relative to fair value pointed to a 0.7pc fall to 5968 points after a 0.3pc fall in the S&P 500.
Still, S&P 500 futures are up 0.3pc in after-hours trading, even with Netflix down 8.5pc as it reported after the close.
Overnight falls followed a hefty 4.5pc fall in the Shanghai Composite after retail sales missed estimates – the third fall in a row for China’s sharemarket after it surged to 18-month highs last week.
US jobless claims data also disappointed but retail sales beat estimates, as did the Philadelphia Fed survey and US homebuilder sentiment. Meanwhile US coronavirus cases showed signs of stabilising, even as new cases jumped in VIC and NSW.
Interestingly, Technology was the weakest US share market sector overnight. Energy sagged with WTI crude down 1.1pc, while Materials rose despite mostly-weaker commodity prices.
9.21am: What’s on the broker radar?
- Alumina raised to Outperform – Credit Suisse
- Alumina raised to Overweight – JP Morgan
- Helloworld cut to Hold – Bell Potter
- National Storage REIT raised to Overweight – JP Morgan
- Oceana Gold raised to Overweight – JP Morgan
- Perpetual raised to Neutral, target raised 23pc to $32 – Citi
- Qube raised to Accumulate – Ord Minnett
- Senex cut to Equal-weight – Morgan Stanley
- Whispir rated new Buy – Canaccord
9.11am: BKI warns of long, slow road ahead
Listed investment fund BKI has warned of a long, slow road out of the coronavirus, as it handed down a 35pc drop in profit for the full year.
“We believe that every Australian company has been impacted by the COVID-19 economic crisis, and as we’ve already seen, it has had a direct negative impact on earnings, balance sheet strength and dividend distributions on many companies within our market,” co-portfolio manager Tom Milner says.
“Unfortunately, the way we are viewing the broader economy suggests that the current situation may deteriorate over the next 6-12 months.”
He warns that the global economic and social shutdown will cause some “long-lasting negative impacts on businesses across our market”.
Moreover “there may actually only be a small number of companies that could escape with earnings unharmed, benefiting over the short-term from a change in consumer behaviour or through significant government stimulus packages”.
“These companies could come out of this situation quicker and better than others, however, for the most part we believe that it will be a long and slow road ahead.”
Mr Milner expects many companies will have difficulty maintaining their dividends and anticipates “many organisation restructures, cost out programs and the possibility of further capital raisings to strengthen balance sheets”.
BKI reported a 35pc fall in net profit to $48.6m, and a 29pc fall in total dividends to 6.945c per share, mainly due to the large number of special dividends received in the previous period.
9.04am: Helloworld raises $41.6m
Travel agent group Helloworld says its raised $41.6m in its institutional offer, with strong demand from several new investors.
Shares were offered at $1.65 apiece – a 16pc discount to its last trading price of $1.97.
The group said its $14.5m entitlement offer had a 97pc take up rate from eligible investors.
A further retail entitlement offer to raise $8.4m will open next week.
“The fact the Placement attracted strong demand, with several new institutional investors introduced to the Helloworld register, demonstrates the market’s positive view on the long-term viability of the travel industry and their confidence in Helloworld Travel’s capacity to manage its way through the next 12-24 months as the world learns to cope with and eventually eliminate COVID-19,” chief Andrew Burnes says.
Read more: Helloworld shuts stores, raises capital
8.52am: Rio shipments lift, capex revised
Rio Tinto PLC said its iron-ore shipments rose by 1pc in the three months through June as it capitalised on strong prices of the steelmaking ingredient, although production of other key commodities was mixed.
The miner said it shipped 86.7 million tonnes of iron ore in its fiscal second quarter. Half-year shipments were 3pc higher than a year earlier at 159.6 million tonnes and were achieved despite damage to infrastructure such as access roads, accommodation and power lines caused by Tropical Cyclone Damien in February.
Rio Tinto $RIO 2Q20 production numbers saw a lift in #ironore & bauxite but declines for aluminium & copper. Some operations were hampered by #COVID19 restrictions to the movement of goods or people #ausbiz #mining pic.twitter.com/ZLqg00IGiC
— CommSec (@CommSec) July 17, 2020
Rio Tinto said it continued to expect annual iron-ore shipments of between 324 million tonnes and 334 million tonnes.
Management said it now expected capital expenditure of around $US6bn this year, narrowing an earlier forecast of between $US5bn and $US6bn. That reflected “an appreciation in our major operating currencies against the US dollar since the first quarter and a reduced impact of COVID-19 on both sustaining and development expenditure,” the company said.
Dow Jones Newswires
Read more: Upbeat Rio on track for strong dividend
8.43am: BlueScope flags earnings drop
BlueScope has flagged impairments of $200m at its upcoming results, as it set out earnings expectations of $560m for the full year, and warned weaker steel spreads could do more damage in the year ahead.
Releasing a business update today, BlueScope set out expectations of earnings around $560m, with an expected contribution of $260m from the June half. That’s down from $1.35bn last year.
While the group said it had fared better than expected during the pandemic, a review of the carrying value of its New Zealand and Pacific steel asset was expected to result in a $200m impairment, it said.
Samantha Bailey 8.41am: Westpac to defend auto dealer action
Westpac says it has been served with a class action filed by Maurice Blackburn lawyers on behalf of certain plaintiffs and group members in relation to the payment of “flex commissions” to auto dealers during over a period of five years until October 2018.
In a statement to the ASX, Westpac says the claim “seeks to recover damages of an unspecified amount”.
Westpac adds “it will be defending the claim” and notes other similar claims may be filed.
7.02am: Fonterra lowers farmgate forecast
Milk giant Fonterra Co-operative Group said it has lowered its forecast payment to dairy farmers because of a stronger New Zealand dollar in the past two months.
The farmgate milk price forecast for the 2019-2020 production season was cut to $NZ7.15 per kilogram of milk solids from $NZ7.20, the farmer-owned company said Friday.
Fonterra, the world’s largest exporter of butter and whole milk powder, is also expecting a lower payout to farmers for the coming production year, but the outlook has improved from a few months ago due to recovering demand in China.
It raised its farmgate forecast for the 2020-2021 production year to $NZ6.40 per kilogram of milk solids from $NZ6.15.
“After an initial shock due to COVID-19, dairy consumption in China is recovering with more people spending on food,” the company said.
Dow Jones Newswires
6.29am: Netflix Adds 10.1m subscribers
Netflix continued to be a beneficiary of the shelter-in-place world with the streaming giant beat its forecast for new subscribers as it named programming chief Ted Sarandos co-chief executive.
Netflix said Mr Sarandos has also been elected to the board of directors. The move puts Mr. Sarandos in the pole position to eventually succeed Netflix Chairman and Chief Executive Reed Hastings.
The company on Thursday reported 10.1 million in global net new subscribers, a gain that surpassed the 7.5 million Netflix had projected for the second quarter earlier this year. The increase is less than the company’s gain for the first quarter, when it added about 16 million customers at a time when economies and people began locking down amid the spread of the coronavirus.
The company reported second-quarter revenue of $US6.15 billion, up from $US4.92 billion a year earlier. Analysts expected Netflix to generate $US6.08 billion in revenue for the latest quarter.
Profit rose to $US720 million, or $1.59 a share, from $US271 million, or 60 cents a share, the year earlier. Earnings for the second quarter were short of the consensus estimate of $1.82 a share, according to FactSet.
Dow Jones Newswires
6.20am: ASX set to open higher
Australian stocks are set to edge higher at the open, despite falls on world markets.
At 6am (AEST) the SPI futures index was up 12 points, or 0.2 per cent.
On Thursday, the ASX200 hit eight-day highs early but finished down 0.69pc after weakness in tech and health stocks.
The Australian dollar was at US69.71c, down from US69.92c at 4pm yesterday.
6.10am: US stocks end lower
US stocks pared losses late in Thursday’s session, while Chinese stocks suffered their biggest drop in more than five months, on fresh concerns about rising coronavirus infections and the global economy’s faltering recovery from the pandemic.
The Dow Jones Industrial Average fell 0.3 per cent, the S&P 500 dropped 0.5 per cent, and the Nasdaq Composite lost 0.7 per cent.
After surging in April and May, the stock market’s rally has slowed in recent weeks. The Nasdaq has hit new records, but the S&P 500 has been moving sideways as signs of a nascent economic recovery have been undercut by the expansion of the pandemic in the US.
“It’s just a tug of war,” said Esty Dwek, a strategist at Natixis Investment Managers. “None of these risks look like they will entirely derail the recovery or rally, but you have to get over these hurdles to get the next leg up, and right now we still have a few of these hurdles to pass.”
Unless the pandemic forces a renewed total lockdown, Ms. Dwek expects the markets and economy will keep moving forward. “We’re on our way to recovery,” she said, “it’s just not a straight line up.”
Fresh figures on US jobless claims showed that 1.3 million Americans filed for unemployment in the week ended July 11. The weekly tally of new unemployment claims by laid-off workers has slowly trended downward in recent weeks, but remain at historically high levels.
U.S. retail sales for June rose 7.5pc, more than economists expected, but investors are growing increasingly concerned that further recovery could be stymied by the surge in infections. Some states are closing restaurants, bars and stores to slow its spread, and that’s likely to dampen consumer spending, a crucial driver of the U.S. economy.
In bond markets, the yield on the 10-year Treasury fell to 0.614pc, from 0.629pc Wednesday.
Across Asia, most major equity benchmarks ended the day down. Hong Kong’s Hang Seng index retreated 2pc, while Japan’s Nikkei 225 lost about 0.8pc.
The Shanghai Composite Index retreated 4.5pc in its steepest drop since February. Data on Thursday showed pockets of weakness, especially in China’s retail sector, even as the world’s second-largest economy returned to growth. Meanwhile, the pan-continental Stoxx Europe 600 declined 0.5pc.
Dow Jones
5.56am: Tesla tries to assure on virus
Tesla is trying to assure its 55,000 employees that there hasn’t been a big coronavirus outbreak at company facilities worldwide, despite a report by an electric vehicle industry website that over 130 Tesla employees or contractors have tested positive.
In an email to workers, the company said that since January it has had fewer than 10 cases of the virus that causes COVID-19 that were transmitted in the workplace.
But the email from Laurie Shelby, Tesla’s vice president of environmental, safety and health, also confirmed reports that Tesla is looking into more than 130 positive tests among employees, including those who contracted the virus outside of Tesla facilities. She said less than 0.25pc of employees worldwide have tested positive for the novel coronavirus, which equals just over 137 workers.
Her message came in response to a report by Electrek.co that over 130 Tesla employees or contractors have tested positive, and hundreds more are waiting for test results. The website said it based the report on internal company data.
AP
5.55am: US ‘overly reliant’ on China
The United States has become overly reliant on Chinese goods and services, including face masks, medical gowns and other protective equipment designed to curb the spread of the coronavirus, Attorney-General William Barr said.
He also accused hackers linked to the Chinese government of targeting American universities and businesses to steal research related to vaccine development, levelling the allegation against Beijing hours after Western agencies made similar claims against Russia.
Barr’s address at the Gerald R. Ford Presidential Museum in Grand Rapids, Michigan, is part of a full-court press by the Trump administration to denounce China. President Donald Trump is trying to fend off criticism of his handling of the coronavirus and the U.S. economic downturn and to shift the blame back onto Beijing, and assert that he is tougher on China than Democratic rival Joe Biden.
“The People’s Republic of China is now engaged in an economic blitzkrieg — an aggressive, orchestrated, whole-of-government (indeed, whole-of-society) campaign to seize the commanding heights of the global economy and to surpass the United States as the world’s pre-eminent superpower,” Barr said.
AP
5.50am: Oil futures end lower
Oil futures ended lower, with losses in global stock markets and uncertainty continuing to surround the demand outlook putting pressure on prices.
The move lower marked the first loss in three sessions for US and global benchmark oil prices, and followed the OPEC+ Joint Ministerial Monitoring Committee’s move to taper production cuts starting next month.
The August West Texas Intermediate oil contract fell 45 cents, or 1.1pc, to settle at $US40.75 a barrel on the New York Mercantile Exchange.
Dow Jones
5.40am: Global markets weaker
Stock markets pulled back as investors, weighing hopes for a coronavirus vaccine against fears of new waves of infections, consolidated recent gains.
US and European markets were all weaker, but limiting their downside to about half a per cent, with “spiking new COVID-19 cases appearing to continue to foster some uneasiness, along with escalating US and China tensions”, said analysts at Charles Schwab.
London closed down 0.7 per cent, Frankfurt shed 0.4 per cent and Paris lost 0.5 per cent.
Some upbeat US data helped limit losses, they said, pointing to stronger-than-forecast retail sales numbers published just before Wall Street’s opening bell.
The euro recovered against the dollar after the European Central Bank presented no surprises at a policy meeting.
But ECB chief Christine Lagarde leaned on EU governments, who have in the past left much of the heavy lifting to the central bank, to do more to kickstart their economies suffering from the pandemic.
The ECB meeting came on the eve of an European Union summit in Brussels where leaders will wrangle over a proposed 750-billion-euro ($US847-billion) recovery fund.
Earlier Thursday, Asian equities dropped as investors fretted over fresh spikes in virus infections around the world and the reimposition of lockdowns.
Forecast-busting economic growth data out of China were unable to break through the unease on trading floors.
Geopolitical tensions, particularly between China and the United States, were also fanning uncertainty.
Beijing said the world’s second biggest economy expanded 3.2 per cent in the second quarter, much better than the 1.3 per cent tipped in an AFP poll of economists, indicating China is well on the road to recovery.
Oil markets dropped after rallying more than two per cent Wednesday as investors were looking to an expected pick-up in output from major producers who embarked on massive cuts this year to fight a global glut.
AFP
5.35am: EU urged on virus package
ECB chief Christine Lagarde urged EU leaders to do their bit and “quickly” agree on a huge recovery plan, as governors of the central bank held back from topping up their vast pandemic stimulus to the eurozone economy.
Lagarde said that although economic activity in the eurozone had picked up in recent weeks as lockdowns eased, “uncertainty about the overall speed and scale of the rebound remains high”.
The ECB has launched extraordinary measures to cushion the economic blow from the pandemic, but Lagarde reiterated that governments needed to share the load with fiscal policy efforts.
“It is important for the European leaders to quickly agree on an ambitious package,” she told an online press conference in Frankfurt.
European Union leaders are meeting in Brussels on July 17-18 to wrangle over a 750-billion-euro fund to help the hardest-hit member states weather the coronavirus crisis.
The fund would be financed through joint EU borrowing and consist mainly of grants.
But the proposal is fiercely opposed by Denmark, Sweden, the Netherlands and Austria who want to rein in the spending and insist on loans rather than grants, making agreement this week uncertain.
Lagarde said however that the volume of the fund should not be cut, and she expects grants to make up “a larger proportion” compared to loans.
On the eve of the EU’s crunch summit, ECB governors decided to leave key interest rates unchanged.
They also made no tweaks to their virus-fighting bond-buying schemes worth over 1.3 trillion euros ($US1.5 trillion) and left massive cheap loans to banks in place.
AFP
5.32am: Social distancing unrealistic: Emirates
Emirates airline said it was unrealistic to establish social distancing on aircraft by leaving seats empty to curb the spread of coronavirus, as the cost would be too high to bear.
The Middle East’s largest carrier, which operates a fleet of 270 wide-bodied aircraft, halted operations in late March as part of global shutdowns to help contain the virus.
Emirates resumed operations two weeks later on a limited network and plans to fly to 58 cities by mid-August, down from about 157 before the crisis.
“All this talk about social distancing inside the aircraft is nice,” Boutros Boutros, Emirates’ head of corporate communications, told a business conference in Dubai. “But … we would like to go back to normal.” “The economy of the aircraft is built on filling it, filling the seats,” he said. “Having the space (empty) I don’t think is going to be an option unless the passenger is willing to pay.” “What we wish for is one thing, but the reality is another.”
AFP
5.30am: US retail sales gain slows
US retail sales continued to rise in June but at a much slower pace, gaining 7.5 per cent compared to May, according to government data.
The increase was better than economists were expecting, but far slower than the 18.2 per cent surge in May, the Commerce Department reported. The June increase amounted to over $US524 billion.
Sales of vehicles and parts gained 8.2 per cent, while clothing sales surged 105 per cent, and restaurants and bars jumped 20 per cent.
Home furnishing and electronics stores saw gains of 32.5 per cent, and 37.4 per cent, respectively, while online sales actually fell 2.4 per cent.
AFP
5.25am: Heineken profits tank
Dutch brewing giant Heineken said the impact of coronavirus containment measures had “deepened” in the second quarter, seeing net profit crash by more than 75 per cent in the first half of the year.
The world’s second-largest brewer after Anheuser-Busch InBev said it expected a net loss of 300 million euros ($342 million) for the January- June period as it released preliminary figures.
“As expected, the impact of the COVID-19 crisis deepened in the second quarter of 2020,” the Amsterdam-based brewer said in a statement.
Heineken remained optimistic however, saying that after a low mark in April, volumes have picked up as countries slowly emerged from lockdown around the world and customers restored depleted inventories.
AFP
5.20am: Bank of America profits fall
Bank of America reported a big drop in second-quarter profits due to large provisions set aside for potential loan defaults amid the downturn in the wake of the coronavirus.
Results for BofA, the second biggest US bank by assets after JPMorgan Chase, followed a similar template as that of rivals from earlier in the week in which the effects of a likely hit from loan non-payments from households and businesses were offset somewhat by strong performance in financial trading.
Net income fell 54 per cent to $US3.3 billion as revenues dipped 3.3 per cent to $US22.3 billion.
Profits were hit by $US5.1 billion in credit losses, including $US4.0 billion added to reserves for bad loans.
Chief Executive Brian Moynihan described the stretch just after much of the US economy shut down due to the coronavirus as “the most tumultuous period since the Great Depression,” according to a statement.
AFP
Miners lead as ASX rises; Web Travel sinks 36pc on weak update
ASX 200 ends up 0.5 per cent amid gains in the US and China. TPG sells fibre, EGW assets to Vocus in blockbuster deal. Web Travel dives on update. New bosses at Lendlease, Pacific Smiles. BCA puts councils performing poorly on housing on chopping block.
ASX 200 flat; energy stocks strongest
Appen in $50m cap raise. US inflation stickier than expected, jobless claims jump. Oil, gold prices push higher. Richard White keeps selling down WiseTech stock amid court stoush. Macquarie downgrades Woodside.