ASX closes firmly higher

The ASX closed up 1pc, clocking its best seven-day winning streak since 2009.

Australian stocks have been on a winning streak. Picture: AAP

• CBA narrowly avoids first strike
• Coal shares hit by China ban reports
• BGH’s Village offer ‘fair’

That’s all from the Trading Day blog for Tuesday, October 13. Australian stocks closed 1pc higher, after Wall Street surged on tech strength, optimism about the upcoming earnings season and hopes for a new US stimulus package. The Dow added 0.9 per cent, the S&P 500 rose 1.6 per cent and the Nasdaq jumped 2.6 per cent. Locally, Commonwealth Bank and Telstra both held their AGMs.

Perry Williams 5.32pm: Coal exports forecast to fall

Australian coal exports are forecast to fall this decade should there be prolonged delays in the global economy recovering from Covid-19 with world demand for the fossil fuel never returning to pre-pandemic levels under current policy targets, the International Energy Agency said.

Global trade for combined thermal and metallurgical coal volumes will fall 15 per cent in the decade through 2030 under existing policies with substantial declines in imports from three of Australia’s biggest coal buyers: China, Japan and South Korea.

Coal exporters should expect “significant swings” in the sector given heightened uncertainty over the direction of the economy and government policies amid the health pandemic.

Australian coal producers were hammered on Tuesday after a move by China to restrict coal imports back to 2017 levels with Australian suppliers forced to sell distressed shipments to other countries.

The level and trajectory of China’s imports “remain extremely difficult to predict,” the IEA said in its World Energy Outlook on Tuesday. “The government has made frequent market interventions, and quality tests, import quotas and other policy changes have shaken international markets in recent years.”

Japan and South Korea, two of the biggest buyers of Australian coal, are also transitioning their economies to cleaner fuels including renewable energy posing an additional threat over the next decade.

“Both Korea and Japan have policy aims to reduce reliance on coal, which pose a significant downside risk for imports in the coming years. This is one manifestation of the broader risk for coal trade that stems from the increasing pressure from a variety of stakeholders to curb fossil fuels in general and coal-fired power generation in particular.”

Under a delayed recovery from Covid where the economy only returns to its pre-crisis size in 2023, coal demand in China will fall 10 per cent by 2030 from 2019 levels.

“Consequently, even an export-oriented producer like Australia, one of the few countries whose coal exports are relatively resilient in the stated policies scenario, does not bring back exports to the pre-crisis levels.”

Coal use will decrease by 8 per cent this year, the biggest tumble since World War 2, while coal-fired power generation was set to fall by more than 10 per cent.

Longer-term, coal’s share in the 2040 global energy mix will fall below 20 per cent for the first time since the Industrial Revolution.

The IEA paints a downbeat picture for the broader energy sector with global demand set to drop by five per cent in 2020.

Critical shifts in the generation mix will also flow through in the next decade with renewables meeting 80 per cent of global electricity demand growth over the next decade with solar “the new king” of world power markets.

Oil also faces further ructions after a crash in demand earlier this year from Covid with the IEA predicting an end to growth for crude by 2030.

“The era of global oil demand growth will come to an end in the next decade,” IEA executive director Fatih Birol said. “But without a large shift in government policies, there is no sign of a rapid decline. Based on today’s policy settings, a global economic rebound would soon push oil demand back to pre-crisis levels.”

Gas demand in advanced economies will also go into slight decline by 2040 with no change in policies, the first projected fall forecast by the IEA in a finding that will raise questions for Australia as the world’s largest LNG exporter.

“This is the first World Energy Outlook in which the stated policy projections show gas demand in advanced economies going into slight decline by 2040,” Mr Birol said. “An uncertain economic recovery also raises questions about the future prospects of the record amount of new liquefied natural gas export facilities approved in 2019.”

4.30pm: ASX clocks best winning streak since 2009

Australia’s S&P/ASX 200 share index rose for a 7th consecutive day, ending up 1pc at a 7-week high of 6195.7 on a daily close basis. A 7.1pc rise in the past 7 days - due to a stimulatory budget and a strong win by Democrats in the US election yielding large scale stimulus - was the best 7-day winning streak since July 2009.

After strong gains on Wall Street, the S&P/ASX 20 rose as much as 1.3pc to a 7-month intraday high of 6214.7. But buyers were finally overwhelmed by profit taking in the final 20 minutes, the index dropping 12 points in the closing match.

The Materials sector fell with iron ore miners including BHP, Rio Tinto and Fortescue down 0.1-1.4pc after the spot price fell. But coal miners mostly recovered from reports China banned Australian coal, with Whitehaven finishing up 0.5pc after falling 6pc intraday.

And a majority of sectors outperformed, with the major banks up 1.1-2.7pc, Telstra up 4pc and Goodman Group up 2.8pc.

S&P 500 futures slipped 0.3pc, suggesting Wall Street might be due for a pullback.

4pm: China’s export growth may be short-lived

Commonwealth Bank’s Kevin Xie says China’s stronger trade data for September reflects the continued economic recovery in China and offshore, but growth could ease in coming months.

Export growth lifted 9.9 per cent in September, slightly above consensus estimates, while imports surged 13.2 per cent for the period, firmly higher on the 0.4 per cent rise analysts had expected.

“The near‑term outlook for Chinese exports is supported by the continued global recovery,” Mr Xie said.

“However, growth in Chinese exports may start to ease because the path of the future recovery is likely to be gradual.

“The initial release of pent‑up demand following the loosening of restrictions is fading.

“Governments need to maintain a delicate balance between keeping the recovery on track and limiting the virus’s spread.

“Furthermore, the recovery in other emerging markets means Chinese exports will face growing competition.”

3.19pm: Trade Minister seeks clarification on coal ban

Australia on Tuesday called for China to clarify whether restrictions have been placed on the import of Australian coal, a move that would deal a serious blow to the country’s already struggling economy.

Trade Minister Simon Birmingham said he had asked via diplomatic channels whether China had instructed its companies to stop buying Australian coal -- a business worth around US$10 billion a year -- as political punishment with relations between the two increasingly souring.

“I’ve had discussions with the Australian industry, and we are making approaches to Chinese authorities in relation to that speculation,” he told Sky News.

Mr Birmingham stopped short of confirming that an unofficial coal embargo had been introduced, but his comments give credence to rumours that have swirled in the sector for weeks.

“I don’t want us to get ahead of ourselves in terms of the speculation there, but we are working with industry and taking action and having discussions there with China,” he said.

Several trade publications including S&P Global Platts have reported that Chinese state-controlled energy providers and steel mills had received a “verbal notice” from Beijing to stop buying the commodity from Australia.

Relations between the two countries have been peppered by trade rows and spy scandals in recent months.

A ban on Australian coal could have serious implications for the country’s resource-dependent economy, which is already in its first recession in almost 30 years.

It would also be a blow to Australia’s conservative government, which has swatted aside environmental concerns to heavily promote the faltering coal industry in order to safeguard political support in key parts of the country.

AFP

Perry Williams 2.46pm: Woodside slashes 300 jobs

Woodside Petroleum has cut 300 jobs or 8 per cent of its workforce after the oil rout forced it to delay projects and trim spending.

The bulk of the roles are understood to be office-based positions in the company’s Perth headquarters.

“Woodside has undertaken an organisational review to identify the company’s workforce needs going forward in this challenging business environment, resulting in the difficult decision to reduce the size of the workforce by around 300 positions,” a Woodside spokeswoman said.

“The organisational review follows decisions in March to cut spending and delay growth projects in response to the global COVID-19 pandemic and lower oil prices. This is a reduction in Woodside’s direct employee workforce.”

Woodside in March delayed its major LNG projects Scarborough and Browse worth a combined $US32bn ($44bn) and slashed its 2020 spending in half to protect the company against a savage fall in oil prices and fallout from the coronavirus pandemic.

“This decision allows the Company to manage through these challenging times while continuing to maintain safe and reliable operations,” the Woodside spokeswoman said.

The LNG giant also stood down 500 contractors from its North West Shelf and Pluto LNG plants in WA in March, unions claimed, although Woodside would not confirm how many workers had been lost and said jobs had not been cut at Pluto. Some of those contractors have since been re-hired.

Rival gas producers have also axed staff with Chevron cutting up to 600 roles in May and Oil Search slashing nearly a third of its workforce in July.

Read more: Woodside delays Scarborough, Browes LNG projects in $50bn move | Woodside cuts 500 jobs at WA gas plants, Chevron considers cuts | ’Perfect storm’ hits up to 600 Chevron jobs | Oil Search slashes jobs in crude crunch

Ben Wilmot 2.45pm: Commerical vaccancies surge

The devastating impact of the coronavirus crisis on Australia’s office leasing markets is playing out with a jump in vacancy levels in most capital cities.

The dramatic downturn in business confidence and the trend towards working from home has driven a jump in the amount of space being offered by shrinking companies for sublease to other tenants.

JLL Research’s third quarter statistics on national office markets showed negative net absorption of -193,700sq m over the September quarter and the national CBD office market vacancy rate rose by 2 percentage points from 10.2 per cent to 12.2 per cent.

JLL head of research, Australia, Andrew Ballantyne said the economic crisis had negatively impacted business confidence, with a number of companies assessing headcount expectations for the next 12-18 months and releasing unwanted office space.

“Corporate Australia is the new landlord in town with a sharp increase in sublease availability across the Sydney CBD and Melbourne CBD. The observation in Australia is replicated across developed economies with US sublease availability surpassing the levels recorded in the financial crisis and tech wreck,” Mr Ballantyne said.

JLL head of leasing, Australia, Tim O’Connor said a number of large companies were uncertain about their revenue and profitability outlook and were delaying decision-making.

“However, we are starting to see improved enquiry and deal activity across the country in the sub-500sq m cohort of the market,” he said. By contrast, larger occupiers were putting on hold their office space decisions based on the short term conditions.

The Sydney CBD recorded 94,500sq m fall in net absorption over the quarter and vacancy increased to 10.2 per cent and sydney sublease availability in the CBD hit 130,000sq m or 2.6 per cent of total stock.

Perry Williams 2.34pm: China restricts coal imports to ‘2017 levels’

China has restricted coal imports back to 2017 levels with Australian producers forced to sell distressed shipments to other countries, consultancy Wood Mackenzie said.

“We understand that the previous bans on utility purchases of Australian coal have been extended to steel mills and the bans for utilities reaffirmed. As of yesterday, almost all major steel mills had been informed of the ban on Australia coal, including coal waiting to offload and sitting on port stockpiles,” WoodMac analyst Rory Simington said.

“We believe the Chinese government is trying to restrict overall coal imports to 2017 levels. This would mean around 270 million tonnes of imports of all coal types and sources.”

Both thermal and metallurgical coal prices will take a hit with Australian producers having to find new buyers for their shipments.

“While coking coal prices have not really been impacted to date we expect there will be significant short-term weakness due to distressed cargoes that will be redirected to other markets. For thermal coal, high ash prices are down $US5/t since mid last week and are likely to be pushed back to the distressed levels we saw in the third quarter. Benchmark quality thermal coal prices will also inevitably be impacted,” Mr Simington said.

Confusion over quota levels continues to create ructions in the market with many utilities and steel mills already using up their annual limits.

“For much of this year there has been a complete lack of clarity, even amongst Chinese port authorities, about how much quota is actually still available and when and whether additional quota will be released. This is generating huge uncertainty and consequently since May when import controls were tightened and large utilities instructed not to buy Australian coal, many Chinese buyers switched away from imported thermal coal,” Mr Simington said.

“However at the same time Chinese thermal coal prices have been increasing strongly as concerns about the ability of domestic supply to keep up with strong demand. During September there was an expectation that additional quota would be released and this led to a surge in buying activity for Australian high ash coal – prices increased by $US8/t to $US44/t. However as we understand it, probably due to political tensions this has not eventuated.”

2.20pm: China’s imports surge in September

In what may be a positive sign for the global growth outlook, China’s imports surged in September. Imports rose 13.2pc year on year in yuan terms, which was much stronger than Bloomberg’s consensus estimate of a 0.4pc rise. Exports rose 9.9pc in line with expectations.

The trade balance consequently shrank to US$247.68bn vs US$419.5bn expected.

This fits with OECD leading indicators showing China’s economy is in expansion.

1.28pm: ASX poised to extend winning streak

Australia’s sharemarket is on course to its best seven-day winning streak in more than 11 years.

The S&P/ASX 200 is currently up 1.1pc at 6199 after hitting a seven-month high of 6208 in early afternoon trading.

If it ends the day above 6186.48 points the index will have exceeded its 6.82pc rise during a similar seven-day winning streak which ended on June 10.

It would make this the best seven-day winning streak since the seven days to July 22, 2009, when it rose 8.5pc.

The July 2009 rise came a few months after the start of an almost seven-year bull market in Australian shares after the GFC.

Adam Creighton 1.15pm: People are ‘over’ lockdowns: Aitken

High-profile stockbroker Angus Aitken has suggested people are “completely over lockdowns, work from home, border closures and everything else” in a strongly worded email highly critical of ongoing coronavirus restrictions.

As pressure mounts on Victoria to ease restrictions ahead of achieving its target of fewer than five new coronavirus cases a day on average over 14 days, Mr Aitken, partner at Aitken Murray Capital Partners, said it was “hard to believe in a city of 5 million people we are worried about 10 to 15 cases of this thing”.

“ICUs are empty not full what are these Premiers waiting for: no economy to come back to?” he added.

Victoria’s Andrews government has come under pressure this week to jettison its “roadmap” after the daily case count average over two weeks rose above 10, making it difficult to achieve an average of five by 19th October, when some lifting of restrictions had been planned.

Mr Aitken, who left Bell Potter in 2016 after critical comments about ANZ that resulted in a confidential settlement, said private equity would be “picking off” listed companies at “nice premiums” as part of “one of the great M&A booms”

He also questioned productivity gains from working from home.

“What a load of absolute rubbish that is, you need proper interaction between people to have a genuine team in any organisation no zoom meeting can ever replace that,” he said in an email to clients and colleagues.

Melbourne-based stockbroker Bell Potter has also been highly critical of Victoria’s stage 4 lockdown, suggesting in a note to its clients last month that the “5 new cases” target “placed Victoria at risk of permanent lockdown, or yo-yoing in and out of lockdowns as cases likely rise once restrictions are loosened”.

12.34pm: Australian stocks hit seven-month high

Australia’s share market has risen 1.2 per cent in early afternoon trade to hit a seven-month high.

The S&P/ASX 200 rose 76 points or 1.2pc to 6208 - the highest highest point since March 9.

The rise has put the ASX 200 on course for its best seven-day winning streak since 2009.

Eli Greenblat 12.28pm: Maggie Beer gains on Marley Spoon tie-up

Shares in Maggie Beer Holdings, the business formerly known as Longtable, rose more than 13 per cent on Tuesday after it released strong online sales in a trading update and inked a deal with meals delivery service Marley Spoon.

Maggie Beer, and which sells the Maggie Beer range of packaged foods, told the ASX that following on from the 220 per cent growth in e-commerce sales achieved in the fourth quarter, its products had achieved 237 per cent growth in its e-commerce sales in the first quarter of 2021, over the same prior year period.

The food seller said although e-commerce sales currently make up less than 5 per cent of the Maggie Beer Products total net sales, the e-commerce channel has become a key strategic focus for the business.

“Growth is being driven by an improved digital marketing plan, better engagement with its 55,000 Food Club members and an increased social media presence from the “Cooking with Maggie” series that has now achieved over 5.25m views across social media platforms,’’ the company said.

It said Maggie Beer Products is on track to launch its new e-commerce platform in November 2020, in time for its busy Christmas trading period.

It also announced a new partnership with meal delivery provider Marley Spoon, which will enable Marley Spoon customers to purchase a specially curated Maggie Beer cheese board pack with their weekly orders from November 23, through to Christmas.

Maggie Beer Holdings chief executive Chantale Millard, said the group was excited to be working with the Marley Spoon team and to give Marley Spoon customers the ability to access a specially curated Maggie Beer Products cheese and preserves pack.

“A key part of our strategy is to form partnerships with great businesses and brands and Marley Spoon is a great fit. We believe our Maggie Beer cheese packs will complement the Marley Spoon meal kits and enhance the overall value proposition to their customers.”

Maggie Beer shares last up 13 per cent at 31c.

12.13pm: Johnson & Johnson vaccine trial paused

Johnson & Johnson has temporarily paused its COVID-19 vaccine trial due to an unexplained illness in a study participant.

The phase three trials have been suspended as the participant’s illness is reviewed by the independent Data Safety Monitoring Board and Johnson & Johnson’s own clinical and safety physicians.

“At Johnson & Johnson, there is no greater priority than the safety and well-being of the people we serve every day around the world,” the company said in a statement.

“We are committed to providing transparent updates throughout the clinical development process of our vaccine candidate, in compliance with regulatory standards and our own high ethical and scientific principles.”

A coronavirus vaccine trial. AFP

It comes after AstraZeneca temporarily stopped tests of its vaccine after a trial participant fell ill. That study has since resumed in a number of countries but remains halted in the US, where the Food & Drug Administration typically sets a higher standard for such trials than many other countries.

Johnson & Johnson said that adverse events are expected in any large clinical study, and said that as many trials are placebo-controlled, it is not always immediately apparent whether a participant received a study treatment or a placebo.

12.05pm: ASX still firmly higher at noon

Australia’s share market faded slightly after a strong intraday rise but remained firmly higher at midday.

The S&P/ASX 200 was up 0.9pc at 6189 after rising 1pc to a seven-week high of 6195.2 after strong gains on Wall Street.

S&P 500 futures have turned down 0.4pc and the Australian dollar suddenly fell 0.4pc from 11am, though these moves haven’t really affected local shares.

Banks drove much of the early strength with ANZ and NAB rising more than 3.5pc in early trading.

They have since pared some of their gains with ANZ now up 2.8pc, NAB up 1.6pc, Westpac up 2pc and CBA up 1.3pc.

But gains elsewhere in the market have broadened with the Real Estate, Communications, Financials, IT and Utilities sectors outperforming.

Energy and Materials remain the laggards after crude oil and iron ore prices fell, and amid reports that China has banned Australian coal imports.

Lachlan Moffet Gray 11.48am: Questions on ‘special treatment’ for Packer

Crown director Andrew Demetriou has been quizzed on why he didn’t interject when questions were asked at an AGM over James Packer’s role in the company.

Counsel assisting Mr Aspinall played a recording of a Crown AGM where activist investor Stephen Mayne asked the Crown independent directors whether the company was giving special treatment to James Packer.

Former CFO Ken Barton disclosed the service agreement Crown had with Mr Packer’s CPH but did not mention the shareholder protocol that allowed Mr Packer to request information ahead of other shareholders.

Mr Aspinall asked why Mr Demetriou did not interject, given the question was directed at the independent board members, and the full truth was not given.

“I’m not sure why I didn’t but I accept that Mr Barton should have mentioned the controlling shareholder protocol,” Mr Demetriou said.

Commissioner Patricia Bergin said Mr Demetriou, being a “robust” individual, probably would have interjected if he really wanted to.

Mr Aspinall stated he had no further questions.

Crown’s QC Neil Young has raised the earlier issue of the memorandum on bank accounts linked to Southbank and Riverbank, which Mr Aspinall earlier said Mr Demetriou did not understand properly.

Mr Young said Mr Aspinall’s description of the instances relating to the Southbank account in 2016 as being more than three was potentially misleading, and that the report may be correct.

Mr Demetriou agreed that this may be the case, but Commissioner Bergin interjected:

“But how can that be Mr Demetriou, really, you’ve been shown transaction after transaction and if there’s been two in 72 hours, there must be more than three,” she exclaimed.

Mr Young then proceeded to ask Mr Demetriou a number of questions such as whether Crown has retained consultants since 2017, and about his answers to questions Mr Demetriou gave on Monday.

Mr Demetriou has been dismissed and the inquiry has been adjourned.

Current Crown board member Antonia Korsanos was next to appear.

Prior to the adjournment, Neil Young requested that former Crown director Geoff Dixon’s appearance to give evidence be moved to next Wednesday.

Lachlan Moffet Gray 11.27am: Demetriou quizzed on Acquire

Mr Aspinall is now playing a recording of Mr Demetriou from Monday giving his definition of culture within a corporate governance setting, where he appears to glance at some notes while giving his answer.

Mr Aspinall asked whether it proved he was reading from notes, which Mr Demetriou denied.

“That’s not true Mr Demetriou, and you know it’s not true,” Mr Aspinall replied.

Commissioner Bergin said that it very much appeared he was reading and asked the recording to be played again.

“I was looking at the notes relating to culture, Madame Commissioner,” Mr Demetriou conceded after Ms Bergin asked him what he was looking down at.

Mr Aspinall has displayed an ABC article from February of 2019 relating to Mr Demetriou giving evidence in the liquidator’s hearing of Acquire Learning, of which Mr Demetriou was a chairman of an advisory board advising the company.

The article states that Mr Demetriou asked for a $150,000 bonus payment from the company on top of his $75,000 monthly salary, which Mr Demetriou confirmed to the inquiry as true, although he can’t remember if he was ever paid the bonus and for what reason he asked for the bonus.

“I couldn’t recall if it was related to the performance of the business, or if was related to qualitative aspects,” Mr Demetriou said.

A subsequent article displayed from May 13 of this year states Mr Demetriou’s family trust was facing court action over his role in the collapse of Acquire by the liquidators, relating to preferential payments.

Mr Aspinall asked Mr Demetriou if he informed the NSW and Victorian gambling regulators of the motion.

Mr Demetriou said he informed Crown’s company secretary, who in turn would have notified the regulators.

Mr Aspinall is now playing a recording of a Crown AGM where activist investor Stephen Mayne asked the Crown independent directors whether the company was giving special treatment to James Packer.

Former CFO Ken Barton disclosed the service agreement Crown had with Mr Packer’s CPH but did not mention the shareholder protocol that allowed Mr Packer to request information ahead of other shareholders.

Mr Aspinall asked why Mr Demetriou did not interject, given the question was directed at the independent board members, and the full truth was not given.

“I’m not sure why I didn’t but I accept that Mr Barton should have mentioned the controlling shareholder protocol,” Mr Demetriou said.

Commissioner Patricia Bergin said Mr Demetriou, being a “robust” individual, probably would have interjected if he really wanted to.

Mr Aspinall stated he had no further question.

Crown’s QC Neil Young has raised the earlier issue of the memorandum on bank accounts linked to Southbank and Riverbank, which Mr Aspinall earlier said Mr Demetriou did not understand properly.

Mr Young said Mr Aspinall’s description of the instances relating to the Southbank account in 2016 as being more than three was potentially misleading, and that the report may be correct.

Mr Demetriou agreed that this may be the case, but Commissioner Bergin interjected:

“But how can that be Mr Demetriou, really, you’ve been shown transaction after transaction and if there’s been two in 72 hours, there must be more than three,” she exclaimed.

Mr Young then proceeded to ask Mr Demetriou a number of questions such as whether Crown has retained consultants since 2017, and about his answers to questions Mr Demetriou gave on Monday.

Mr Demetriou has been dismissed at the inquiry has been adjourned.

Current Crown board member Antonia Korsanos is set to appear in the witness box yet.

Bridget Carter 11.25am: Rival bid for Link ‘unlikely’: Ord Minnett

Analysts from Ord Minnett have played down the likelihood of a rival bid for Link Administration Holdings after The Carlyle Group and Pacific Equity Partners put forward a $2.8 billion offer for the company.

“In Ord Minnett’s view, a higher rival bid is less rather than more likely,” the analysts said in a research note.

The analysts said that the reason they believed another bid was unlikely was because of the disparate nature of the Link assets, which include funds administration, registry, loan servicing, fund solutions and IT across three continents.

“It may be hard to find another bidder operating in all of those business segments to achieve synergies,” the analysts said.

The analysts say that the $5.20 per share offer by the private equity groups comes at a time that debt is cheap.

“This increases the appeal for private equity to pursue leveraged deals that perhaps non-private-equity players are not able to do.”

Joyce Moullakis 11.22am: CBA narrowly avoids first strike on exec pay

Commonwealth Bank has received a large 21 per cent protest vote against its pay report on shareholder proxy votes received, narrowly missing a strike.

Proxy votes at the virtual annual general meeting on Tuesday showed 78.7 per cent were cast in favour of the remuneration report, reflecting a protest vote of about 21 per cent. That is just shy of the 25 per cent vote against that would cause a strike.

CBA was also hit with a meaningful protest vote on a controversial $1.6m equity grant to chief executive Matt Comyn. About 78.5 per cent of proxy votes were lodged in favour of the grant of restricted share units.

The final AGM vote outcomes will be lodged with the ASX later on Tuesday.

11.14am: Tokyo stocks open higher

Tokyo stocks opened higher, extending rallies on Wall Street, where high-tech shares led the gains.

The benchmark Nikkei 225 index was up 0.34 percent or 81.01 points at 23,639.70 in early trade, while the broader Topix index edged up 0.39 percent or 6.49 points to 1,649.84.

AFP

Joyce Moullakis 11.07am: Whitfield re-elected to CBA board

Commonwealth Bank non-executive director Rob Whitfield has overwhelmingly been re-elected to the board, despite concerns about his prior executive role at Westpac.

Proxy votes already cast showed 98.4 per cent of CBA shareholders voted in favour of Mr Whitfield’s re-election to the board at the bank’s online annual general meeting on Tuesday.

The $US415bn ($553bn) California Public Employees’ Retirement System, or Calpers, the biggest pension fund in the US, voted against Mr Whitfield’s re-election, given he presided over Westpac’s institutional bank in part of the period that saw the bank agree to pay Austrac a $1.3bn penalty last month.

“As Chairman of the Board Risk & Compliance Committee, Rob has played a particularly important role this year, given the impact of the coronavirus pandemic,” Ms Livingstone said in her AGM speech.

In response to a question on Mr Whitfield’s former Westpac executive role and whether he should resign from CBA’s board, Ms Livingstone said she had “full confidence” in his ability.

She also noted that Mr Whitfield had given her an assurance he had no knowledge of Westpac’s failings in its anti-money laundering compliance. He left Westpac more than five years ago.

11.04am: Coal shares hit by China ban reports

Shares in Australia’s major listed coal miners have lost ground in morning trade after China’s customs authorities reportedly told steel mills and power plants to stop buying Australian coal.

Treasurer Josh Frydenberg responded to the reports this morning, saying the nation would work through any issues with China.

Whitehaven was last down 5pc at 94c while South32 was 1.8pc lower at $2.15 and New Hope had fallen 4.2pc to $1.25.

It comes after Whitehaven shares fell 5.7pc on Monday and New Hope lost 0.8pc.

Both hit their lowest points in almost three weeks, while the S&P/ASX 200 index rose as much as 1pc to a seven-week high of 6195.2.

Stanmore Coal fell more than 4.5pc hitting a 2-day low of 74c, while Coronado fell nearly 9 pc, las down 8.4 pc at 82c.

Among more diversified miners of coal, South32 is down 1.6pc, Rio Tinto is down 0.3pc and BHP is down 0.2pc.

Lachlan Moffet Gray 11.02am: Demetriou denies putting Packer first

Mr Aspinall has turned to a speech Mr Demetriou gave at the Crown Resorts 2015 AGM which was also displayed on Monday.

Within it Mr Demetriou speaks to the importance of independent directors of public companies and their fiduciary responsibilities, having been appointed as a Crown independent director in January of that year.

Mr Aspinall asked Mr Demetriou what he considered those responsibilities to be.

“To act ethically, honestly at all times, discharge my duties to the best of my ability, keep matters of the board confidential, keep myself informed at all times...” Mr Demetriou said.

Mr Aspinall asked if they also included putting the interest of the company ahead of the interest of others, to which Mr Demetriou agreed.

Mr Aspinall then displayed emails Mr Demetriou sent to James Packer in April of 2019, wherein Mr Packer suggests the company through which he owns Crown shares, Consolidated Press Holdings, will support a potential takeover of Crown by US giant Wynn.

Mr Packer also suggested that then Crown director John Alexander could be removed.

In a response, Mr Demetriou says that “we” rejected Wynn’s first offer.

Mr Aspinall asked who “we” were, and Mr Demetriou said he was referring to the Crown board, who were also looking forward to discussing with CPH executive Guy Jalland about Packer’s view of the takeovers.

At the end of the email, Mr Demetriou said he looked forward to “serving the best interests of Crown, and most importantly, you.”

Mr Aspinall asked if that meant he placed Mr Packer’s interest above Crown’s.

Mr Demetriou denied this, but conceded to Commissioner Bergin that it could reasonably be perceived that he placed Mr Packer’s interest first and foremost.

Lachlan Moffet Gray 10.50am: ‘Oh Mr Demetriou, why did you do it?’

Mr Aspinall has returned to scrutinising Mr Demetiou’s notes that he read from in the witness box without tabling them prior to the hearing on Monday.

Now in possession of the notes, Mr Aspinall raised a Crown memorandum on the bank accounts of Crown subsidiaries Southbank and Riverbank investments, which have been linked to potential money laundering activity.

Using the memorandum on Monday, Mr Demetriou asserted that just 102 transactions were identified by Crown as problematic.

But reading from the memorandum today, Mr Aspinall said that “transactions” was wrong and “instances” was used in the report with “instances” being defined as two transactions, meaning that 204 transactions were potentially problematic.

“If Mr Aspinall had not identified that you were reading the documents...I would have been left in the belief that the evidence you had given me was truthful,” Commissioner Bergin said.

“Oh Mr Demetriou, why did you do it?”

All Mr Demetriou could do was apologise.

Andrew Demetriou gives evidence.

Mr Aspinall is now displaying statements from bank accounts linked to Southbank from 2016, which the memorandum report said contained three instances of suspect transactions.

Pointing to a series of cash deposits under $10,000 - the AUSTRAC reporting threshold - made at Commonwealth Bank branches around Sydney, Mr Aspinall noted that none of the deposits had a Crown patron number associated with them.

Mr Aspinall asked if these transactions were included in the “instances” from the Crown memorandum report, but Mr Demetriou said he didn’t know.

Mr Aspinall suggested that suspicious transactions were not a “minor” problem, as Mr Demetriou implied on Monday with the aid of the Crown report.

Continuing to show other potentially suspicious deposits from other accounts associated with Southbank, Mr Aspinall suggested that there were more than three “instances” of suspicious transactions.

“Based on what you show me, it (the report) appears to be wrong,” Mr Demetriou said.

Mr Aspinall showed transaction data containing “quick cash” deposits of $30,000 - $35,000 in Perth, noting there were many more instances.

At that time, deposits at Commonwealth Bank “quick cash” machines could be made anonymously with only an account number.

According to the definition of an “instance” in the Crown memorandum report, these quick cash deposits wouldn’t be recorded.

Mr Aspinall asked if the situation was perhaps more serious than the report indicated, to which Mr Demetriou agreed.

Commonwealth Bank closed the accounts in question in 2019.

Imogen Reid 10.43am: ‘We’ll work through coal issues’

Josh Frydenberg has addressed reports that Chinese power stations and state-owned steel mills have been directed to stop importing Australian coal, saying the nation will work to resolve any issues it has with China.

“There have been, in the past, issues around in relation to coal, and we’ve worked through those,” the Treasurer said.

“And we’ll continue to work through these and in the future there will be other issues and we’ll continue to work through those as well and we’ll do so in a constructive way.”

10.42am: Building materials lifted in UBS model

UBS has added CSR and Brickworks to its “20/20” model share portfolio, alongside James Hardie, as it significantly increases its exposure to building materials stocks.

“Equities were supported by stimulus-driven economic outcomes in the September quarter,” says UBS equity strategist, Pieter Stoltz.

“This trend looks set to continue with a very expansionary Federal Budget on 6th October.

We continue to watch economic signposts to inform positioning.”

The model portfolio remains overweight cyclical sectors including Gaming, Banks and Other Materials including Building Materials.

CSR last down 0.9pc at $4.62. BKW last up 0.2pc at $20.04.

Lachlan Moffet Gray 10.35am: Demetriou ‘not across’ junket arrangements

The Crown casino inquiry has resumed, with counsel assisting Scott Mr Aspinall continuing to scrutinise the notes director and former AFL boss Andrew Demetriou was referring to yesterday without the knowledge of the inquiry.

Mr Aspinall is asking why Mr Demetriou wrote down a definition of a “business partnership” and asked why this was done.

Mr Demetriou replied it was to be used in response to a claim on 60 Minutes that Crown Resorts “partnered” with junkets in order to prove that Crown did not “partner” with the gambling promoters.

Mr Aspinall displayed a Crown document advertising a VIP clients workshop that had a subheading that referred to working with “key junket partners.”

“Crown itself in this document is using the language of partnering with junkets,” Mr Aspinall said.

“In those circumstances, what is your definition of what a business partnership is?”

Mr Demetriou replied: “First of all I don’t know why they are using that language...I’ve always viewed partners as something where you are involved with the other business, the entity”.

He explained that during his time at the AFL broadcasters were called “partners” even though the AFL did not share in the upsides or the downsides of the businesses.

Mr Aspinall asked if this document, put before the inquiry before, had been reviewed by Mr Demetriou.

Mr Demetriou said he hadn’t reviewed the document.

Mr Aspinall then showed a document where Crown executive Ishan Ratnam is discussing a revenue sharing arrangement with junket operator Meg Star, implying it belied a partnership.

Mr Demetriou said he couldn’t say a partnership was formed as he wasn’t familiar with the details of the arrangement and whether it was consummated.

Mr Aspinall pointed out that the document was a Crown document and had been seen at the inquiry before.

“All of this evidence has been put before the inquiry already and you’re a director, the chair of Crown Melbourne and you don’t know about it,” Mr Aspinall said.

Mr Demetriou said he hadn’t seen the document but had received documents relating to the issues of junkets after the 60 Minutes program on Crown.

Patricia Bergin interjected again, asking:

“You are not across the details of the arrangement Crown Melbourne has entered into with junket operators, is that right?

“That is correct, Madame Commissioner,” Mr Demetriou said, after which the stream again cut out.

10.20am: ASX jumps at open to 7-week high

Australia’s S&P/ASX 200 share index jumped 1pc to a seven-week high of 6195.2 early Tuesday after strong gains on Wall Street.

A break above 6199.6 would set a seven-month high on an intraday basis and a daily close above 6167.6 would set a seven-month high on a daily close basis.

The financials sector led as banks surged with NAB up 3.7pc, ANZ up 3.5pc, Westpac up 2.5pc and CBA up 2.4pc after last week’s budget lessened economic risk for banks.

Tech was also strong, as it was in the US market, with Afterpay and NextDC up 2.5pc and Zip Co up 3.6pc.

Energy and materials lagged after oil and iron ore prices fell and China reportedly told its steel mills and power plants to stop buying Australian coal.

Whitehaven and South32 were worst off with falls of 4.6pc and 2.7pc respectively, while among the iron ore miners, BHP , Rio Tinto and Fortescue fell 0.3-0.8pc.

David Swan 9.55am: Telstra cuts exec pay over misconduct

Three Telstra executives including chief executive Andy Penn have been hit with a 10 per cent pay cut, as a result of misconduct involving some of the telco’s partner stores.

“There is one key area this year where the Board did exercise its discretion and three executives including Andy had a 10 per cent reduction in their individual outcomes, reducing payments to these executives collectively by $758,000 as a result of an issue relating to sales practices in a small number of our partner stores,” chairman John Mullen said at the company’s AGM.

“To his great credit, this is an issue that Andy has spoken about publicly and at length over the past year.

“In summary, some years ago we became aware of an issue where a small number of our partner stores, those operated by third parties under a licence agreement, sold mobile devices and plans to a number of Indigenous customers that ultimately they could not afford or may not have been appropriate for their needs.

Telstra CEO Andy Penn. Picture: Aaron Francis

“When we investigated, we found that there had been some cases of serious misconduct. To provide context, however, this represented some 100 customers out of nearly 10 million, and 100 or so devices out of the approximately 2 million that we sell each year.

“Furthermore, all resultant debts have since been waived or refunded, or are in the process of being waived or refunded, and in almost all cases the individuals kept the equipment, but even one example of bad practice is too many and we acknowledge and accept full responsibility for these failures.

“We have been progressively implementing a comprehensive program to ensure that such an issue does not occur again, and we are also cooperating with the Australian Competition and Consumer Commission investigation into the issue.

“Our view in these matters is that the responsibility ultimately stops with the company’s leadership and the board’s decision on remuneration outcomes for Andy and two of his executive team reflected that while there was no specific adverse conduct by them personally, they were ultimately accountable.”

9.53am: What’s impressing analysts

BHP raised to Positive: Evans & Partners

Clinuvel started at Buy: Jefferies

Coca-Cola Amatil cut to Sell: Morningstar

Link Administration raised to Equal-Weight: Morgan Stanley

Lachlan Moffet Gray 9.48am: Demetriou back for Crown inquiry

The NSW independent liquor and gaming authority’s inquiry into the suitability for Crown Resorts to hold a casino licence in the state continues today, with independent board member Andrew Demetriou returning to the witness box for a second day.

Yesterday inquiry commissioner Patricia Bergin and Counsel assisting Scott Aspinall heard Mr Demetriou’s explanations for Crown’s questionable practices over the years such as doing business with gambling promoters - or “junket” heads - linked to organised crime, failing to report indications of money laundering activity to upper management and exposing staff in China to risk which culminated in their ultimate arrest.

Mr Demetriou attributed these practices to “deficiencies” in Crown’s risk management processes and a “failure of culture,” but strongly defended the company, the board and major shareholder James Packer.

There was also an mmbarrassing moment when the inquiry was forced to take an adjournment to table the numerous notes Mr Demetriou had taken into the virtual witness box with him, in violation of court procedure.

The inquiry resumes at around 10am AEST.

9.47am: ASX set for solid opening rise

Australia’s share market looks set to rise again after strong gains on Wall Street.

Overnight futures suggest the S&P/ASX 200 index will open up 0.7pc at a 7-week high of 6175.

A rise today would mark the first 7-day gain since early June and a daily close above 6167.6 would be the highest in more than 7 months.

Charts also suggest resistance from June, July and August highs in the 6160-6199 area will be tested, with a double-bottom pattern targeting 6220 in the short term.

Overnight the S&P 500 surged 1.6pc to a 6-week high of 3434.2, now only 1.5pc from a record high.

The tech sector led gains with the Nasdaq up 2.6pc - its best rise since April - with Apple up 6.4pc, Amazon up 4.8pc, Facebook up 4.3pc and Google up 3.6pc.

But value stocks lagged despite the increasing prospect of clear election win for Democrats leading to major fiscal stimulus, with the Dow Jones index up 0.9pc and the Russell 2000 small caps up 0.7pc.

Financials, Materials and Energy stocks also underperformed. In commodities, iron ore fell 1.6pc to $US123.85 a tonne, WTI crude fell 2.6pc to $US39.55 a barrel copper fell 0.5pc and gold was about flat at $US1923.

Also, while reports since the weekend of China’s suspension of purchases of Australian coal haven’t hit the Australian dollar or the share market yet this week, they may check the share market’s advance.

Focus turns to Westpac’s consumer confidence index at 1030 AEDT.

Joyce Moullakis 9.44am: CBA balance sheet ‘resilient’

Commonwealth Bank chairman Catherine Livingstone says the nation’s largest home lender is in a strong position and has a “resilient balance sheet” to face into the COVID-19 turmoil.

But her comments, in a speech to the bank’s online annual general meeting on Tuesday, come as the bank braces for a protest vote against a controversial, $1.6m equity grant to chief executive Matt Comyn. The measure is expected to be passed by investors.

Ms Livingstone used her speech to say the bank was making good progress on improving governance, after paying a $700m penalty to Austrac in 2018 and enduring issues raised in the Hayne royal commission.

Commonwealth Bank Chairman Catherine Livingstone.

She also said CBA was well positioned to navigate the economic downturn.

“Although the year ahead will involve challenges and uncertainty, the bank faces this environment in a strong position. Our business is performing strongly, and we have a resilient balance sheet, which means we are well placed to continue delivering on our purpose,” Ms Livingstone added.

Her speech included a defence of board director and former Westpac institutional bank boss Rob Whitfield who is standing for re-election.

Read more

Ben Wilmot 9.42am: BGH’s Village offer ‘fair and reasonable’

The prospect of private equity firm BGH Capital bringing down the curtain on Village Roadshow’s life as a public company has been bolstered as independent expert Grant Samuel said its takeover schemes are fair and reasonable.

The Melbourne-based private equity firm has proposed two schemes that will head to a meeting of shareholders next month to decide the fate of the private equity firm schemes to take over the cinema and leisure park company in a deal valuing it at up to $468.5m.

BGH Capital has teamed with the founding Kirby family and former chief executive Graham Burke, who together control about 42 per cent of the register, to propose a privatisation. They can vote on a second scheme proposed by BGH by not a first, higher priced scheme.

Grant Samuel concluded that each alternative scheme was “fair and reasonable” and in the best interests of Village shareholders, in the absence of a superior proposal.

It valued Village at $2.03 to $2.80 per share and said the first scheme proposed by BGH was worth $2.32 and the second scheme’s price was worth $2.22.

The independent expert did not offer any recommendation for investors who want to keep invested in the company by taking shares in the new privatised company.

The company had been under fire from dissident shareholder Mittleman Investment Management, which is trying to scuttle the schemes of arrangement proposed by BGH Capital.

The US-based investor has argued the schemes are unfairly structured and dramatically undervalue the company, particularly as the coronavirus crisis lifts and border openings loom, with some cinemas already back running.

Mittleman last week upped its stake to about 10.1 per cent of the target company and called for the corporate regulator to look into the deal but it did not formally intervene in a court hearing on Friday.

Without a direct move, the federal court cleared the way for a meeting on November 26 to decide the fate of the company. The meetings which will be chaired by lead independent director, former media executive Peter Tonagh.

9.40am: OceanaGold lays off 496 workers

OceanaGold has laid-off 496 workers in the Philippines as a local government blockade on a public road pending the renewal of its mining rights agreement with the Philippine government, continues to constrain operations at its Didipio Mine.

About 400 people working with contracted are also impacted by the layoffs, and OceanaGold may be required to implement a second round of lay-offs in November. The laid-off workers are predominantly from local communities.

“Today is a sad day for the company and for the many hundreds of workers and their families whose livelihoods have been impacted by the local government blockade of the public road pending the FTAA renewal, which has constrained our ability to continue operations over the past 15 months,” chief executive Michael Homes said.

“The company has actively participated in community-led dialogue supported by the majority of village and municipal governments along with the majority of local residents in Didipio.

“Despite these efforts, a small group of local leaders have refused to consider access arrangements that would have preserved these jobs.”

The company said the financial or technical assistance agreement renewal remains with the Office of the President for decision.

“We continue to engage with the national government who express their support and endorsement of the renewal,” Mr Homes said.

“We will work as quickly and safely as we can to rehire hundreds of workers and restart operations should the FTAA be renewed or the blockade lifted.

“The Didipio operation looks forward to contributing to the Philippines post-COVID economic recovery. We’re ready and waiting for that opportunity.”

David Swan 9.35am: Telstra earnings ‘disappointing’: AGM

Telstra has kicked off its first ever virtual AGM, with chairman John Mullen acknowledging the telco’s earnings, dividend and share price had been ‘disappointing’, due to the impact of the NBN and other headwinds.

Australia’s biggest telco in August revealed it was facing a $600m hit over two years and a challenge to maintain its 16 cent per share annual dividend.

“The board of Telstra is acutely aware that the level of earnings being delivered by Telstra, the dividend and the share price are a disappointment to many investors, as indeed they are to us as well,” Mullen will say shortly in his chairman’s address.

“It is easy to just say management has to do better, but for the board to objectively judge the

performance of the management team we need to look at why earnings and the dividend are where they are, management’s performance against the objectives that have been set, the performance of industry peers around the world, and performance against our competition in Australia.

“The reality is that Telstra has lost over $6 billion of profit in the last decade or so, predominantly from the impact of the NBN but also the loss of voice revenues, SMS revenues, global roaming and other pressures, and this has had an inevitable impact on earnings, dividends and our share price.

“There are few precedents in corporate Australia for an impact or a challenge of this magnitude.

“Against its domestic and global peers, although tough for everyone, Telstra’s performance stands up well across most metrics including earnings, ROIC, margins and revenue per user.”

He will add he remains positive about Telstra’s future.

“The NBN is finally almost behind us, our underlying EBITDA excluding the NBN headwind has started to grow again, and new opportunities are opening up every day.”

New board members Bridget Loudon and Elana Rubin are also set to speak shortly.

9.23am: iSelect posts earnings bump, appoints new CEO

Comparison website iSelect has posted a bumper first quarter earnings figure and announced the promotion of its chief marketing and commercial officer Warren Hebard to chief executive.

The company unveiled a first quarter earnings before interest, tax, depreciation and amortisation of $8.1m, compared to $1.7m in the first quarter the previous year, on an uptick in demand and after it received $3.4m in JobKeeper payments.

Recent changes to its operating model had continued to show positive signs, the company said.

Mr Hebard replaces Brodie Arnhold who was appointed interim CEO in April 2018, following the resignation of Scott Wilson, who stood down on the back of a shock profit warning. Mr Wilson had overseen a change in the company’s marketing direction that had failed to translate to an increase in new leads.

“I am very excited and energised to take on the CEO role at iSelect and would like to sincerely thank the Board for this opportunity,” Mr Hebard said.

“Having worked closely with the entire executive team on the development of the fiscal year 2021 strategy I am confident that the plan we have in place is the right one.

“Brodie hands over a business that is on track to deliver significantly improved profitability in FY21 and is well placed to return to growth in FY22.”

Nick Evans 9.08am: Coal shares face hit from reported China bans

Australian coal exporters could again be the target of Chinese coal bans, according to international media reports, which suggest China will slow or restrict the import of Australian shipments amid ongoing political tensions between Beijing and Canberra.

Reports suggest the import restrictions on Australian coal could extend to metallurgical product used in China’s steel mills, with Bloomberg reporting Chinese power stations and state-owned steel mills have been verbally told to stop using Australian coal.

Thermal coal import restrictions were last put in place in May, as China looked to support its domestic mining sector amid tumbling global prices and many Chinese ports are also believed to be closing on import caps in coal products.

Shares in coal exporters such as BHP, Whitehaven Coal and Yancoal are likely to take a hit on the back of the speculation on Tuesday, irrespective of their exposure to the Chinese market, as uncertainty around the potential price impact on one of Australia’s biggest export earners hits the Australian market.

Bridget Carter 9.04am: Challenger raising $250m

Australian-listed investment manager Challenger is raising $250m through the bond market.

Challenger will issue subordinated convertible notes that are unsecured, priced at $4.24 each.

9.00am: Trump tests negative: doctor

President Trump tested negative for COVID-19 on consecutive days, White House physician Sean Conley said in a memo, as Mr Trump travelled to Florida for his first formal campaign rally since being treated for the virus.

Dr Conley said tests and other measurements “have informed our medical team’s assessment that the president is not infectious to others.”

The memo didn’t specify when Mr. Trump was tested.

Dow Jones Newswires

8.57am: Orora names new CFO

Packaging company Orora has appointed EBOS chief financial officer Shaun Hughes as its new CFO, replacing Stuart Hutton, who will leave the company in November after a more than seven years in the role.

Mr Hughes has previously held senior roles with Telstra, Elders and IBM.

“Shaun’s broad ranging commercial and financial experience will bring a fresh lens and complementary skillset to Orora at a time where we are commencing our next phase of growth,” chief executive Brian Lowe said.

“Stuart has been an outstanding member of the global management team at Orora, having played an integral role in the company’s evolution since listing.”

8.50am: HUB24 claims record inflows

Investment and superannuation platform provider HUB24 has touted record inflows for the September quarter, with funds under administration at $19bn as at September 30, up 32 per cent on the same date a year ago.

The company unveiled a net inflows figure of $1.36bn for the September quarter, up 10 per cent on the previous corresponding period.

“Momentum has continued from the June quarter with strong flows driven from both new and existing licensee channels across self-licensed and boutique advisers, brokers and large national accounts,” the company said in a statement to the ASX this morning.

“HUB24 is confident that the new business pipeline will continue to grow as additional opportunities emerge given adviser movement from institutional licensees and further industry consolidation.

“Given market dynamics, HUB24 continues to be a platform of choice as advisers look for stability, delivering innovative product solutions that provide their clients with choice and customer service excellence.”

8.28am: PC demand surges in pandemic

A rise in remote work, study and home entertainment during the coronavirus pandemic boosted personal computer sales in the third quarter and drove the strongest growth in a decade in the US, according to industry data.

Much of the growth came from Chromebooks, with a roughly 90 per cent surge in the third quarter driven by distance learning, especially in the U.S., according to preliminary data from Gartner Inc., one of the firms that tracks PC shipments.

While Gartner doesn’t include Chromebooks in its traditional PC market results, on Monday it said that including Chromebooks, world-wide PC shipments rose around 9 per cent year over year in the quarter, with Chromebooks representing about 11 per cent% of the combined PC/Chromebook market.

Data from research firm Canalys showed notebook and mobile workstation shipments also driving growth in the quarter, while sales of desktops and desktop workstations declined 26 per cent.

International Data Corp. recorded growth in notebook shipments, driven by consumer sales and education, but the desktop segment saw a year-over-year decline with gaming offering some respite.

The pandemic, the data show, has put PCs back in the spotlight.

“It used to be the case that smartphones were king,” said Jitesh Ubrani, IDC’s research manager for Mobile Device Trackers.

A Google Chromebook laptop computer. Picture: Bloomberg

Dow Jones

7.55am: Quiksilver owner sued over rescue deal

Investors sued Boardriders, the company behind the Australian-founded Quiksilver and Billabong brands, over a $US431 million rescue financing package they said elevated the interests of a select group of lenders and private-equity backer Oaktree Capital Management.

Intermediate Capital Group, York Capital Management and other lenders filed a lawsuit in the Supreme Court of New York on Friday, challenging an August financing deal that supplied the surfwear-inspired apparel company with $US110 million in fresh capital from a group of lenders.

Quiksilver logo.

In return for the infusion, Boardriders gave those parties top-ranking collateral rights on $US321 million of loans they already held, pushing other lenders that didn’t participate down in the payment line, according to the complaint.

The lenders that filed the suit are seeking a judgment invalidating and unwinding the transaction.

Dow Jones

7.43am: Low rates boost NZ house prices

House prices and sales volumes in New Zealand raced higher in September as record-low mortgage rates continued to boost demand despite an uncertain economic outlook stemming from the coronavirus pandemic.

The Real Estate Institute of New Zealand on Tuesday said its house price index jumped 11.1 pe rcent from a year earlier in September.

New Zealand’s central bank cut its cash rate to a record low 0.25 per cent in the first quarter and removed restrictions on mortgage lending. It has signaled that more measures are in the pipeline to further push down wholesale and retail interest rates.

The median sale price in September of $NZ685,000 was up 14.7 per cent from a year earlier and 1.5 per cent higher than August. The number of residential properties sold in September increased by 37.1 per cent from the year before and was the highest number of sales in 42 months, the institute said.

Dow Jones

7.24am: Disney shakeup prioritises streaming

Walt Disney said it is reorganizing its operations to give priority to its streaming video businesses, creating new units that will produce content for digital and traditional platforms, in a shift that echoes similar moves by other entertainment giants.

Under the new structure, Disney is creating content groups for its major film franchises, general entertainment and sports, as well as a distribution arm that will determine the best platform for a movie or television show.

“Our creative teams will concentrate on what they do best -- making world-class, franchise-based content -- while our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms, Disney Chief Executive Bob Chapek said in a statement.

The Disney+ logo. Picture: AFP

The new alignment pushes Disney’s streaming platforms, including Disney+ and Hulu, even closer to the centre of the company. The various programming arms, including movie and television studios, will be focusing their efforts on feeding those streaming services, not just movie theaters and TV networks.

Disney is the latest entertainment giant to attempt to reorient its businesses to separate decisions about what content is being made from which platform is best suited to run them. Dow Jones Newswires

7.14am: ASX poised to open higher

Australian stocks look set to continue their winning streak after a tech surge on Wall Street, and amid US market optimism about the upcoming earnings season, the prospects for US stimulus and the presidential election.

Around 7am (AEDT) the SPI futures index was up 48 points, or 0.8 per cent.

On Monday, the ASX 200 rose 0.5 per cent to a seven-week high of 6132. As of yesterday, a six-day winning streak has seen the S&P/ASX 200 rise 5.9 per cent thanks to Australia’s world-leading fiscal stimulus and renewed strength in the US sharemarket.

The Australian dollar was down at US72.14.

Brent crude, the international oil benchmark, fell 2.6 per cent to $US41.72 a barrel.

Spot iron ore is down 1.6 per cent to $US123.85 a tonne.

7.10am: Tech stocks power Wall Street

US stocks jumped sharply, propelled higher by a surge in technology stocks.

The S&P 500 and the Dow Jones Industrial Average climbed for the fourth consecutive session. The S&P 500 rose 1.6 per cent, while Dow rallied 0.9 per cent.

Meanwhile, the Nasdaq Composite surged 2.6 per cent, a move up that is expected to be enough to push the tech-heavy index out of correction territory, which it entered in early September. The tech-heavy index is also on track for its third-highest close in history.

Megacap companies including Apple and Amazon.com were among the strongest performers, jumping 6.4 per cent and 4.8 per cent, respectively. Apple is set tomorrow to unveil a 5G-enabled iPhone, which some investors hope could create growth similar to the kind seen in the iPhone’s earliest days. Amazon also is kicking off its Prime Day event of shopping deals Tuesday.

The robust gains build on last week’s advances, during which U.S. stocks rallied on signs that next month’s presidential election could have more of a decisive result than originally expected. National polls have showed a growing lead for former Vice President Joe Biden over President Trump.

This week, election expectations are likely to remain a focus among traders, though many will also be parsing the beginning of third-quarter earnings season. Investors are betting that the results will show corporate performance has turned a corner. With the economy continuing to slowly reopen, profits of large companies in the S&P 500 are now projected to record a drop of 20 pe rcent from a year earlier, an improvement from the 25 per cent decline anticipated at the end of June.

Other technology companies including Twitter and Facebook also jumped, with both growing more than 4 per cent.

“The last two weeks were about improving market [participation]...but today it’s a day focused on technology,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory. “With so much uncertainty about fiscal stimulus out there, it’s natural to see rotation back into the secular growth stories.

“If you don’t get stimulus, those companies’ growth is likely to sustain, “ Mr. Lerner continued.

This week, investors will be looking for signs from companies that cost cuts, including layoffs, are behind them, and that business leaders are confident about the quarters ahead, said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. He said that traders also will be looking for any signs that “precautionary cash hoards may turn into dividends next year.”

“It isn’t so much about the numbers and the degree to which companies beat estimates,” Mr. Kleintop said. “It’s those words that matter more and the tone and confidence from business leaders.”

In addition to earnings, traders also will be focused this week on any signs of progress on stimulus talks. The latest White House offer on a new coronavirus package hit resistance from both Democrats and Republicans over the weekend, deflating hopes that an agreement would be struck before Nov. 3.

In commodities, Brent crude, the international oil benchmark, fell 2.6 per cent to $US41.72 a barrel.

Dow Jones

5.30am: ASX poised to open higher

Australian stocks look set to continue their winning streak amid US market optimism about the upcoming earnings season, the prospects for US stimulus and the presidential election.

Around 5am (AEDT) the SPI futures index was up 47 points.

On Monday, the ASX 200 rose 0.5 per cent to a seven-week high of 6132. As of yesterday, a six-day winning streak has seen the S&P/ASX 200 rise 5.9 per cent thanks to Australia’s world-leading fiscal stimulus and renewed strength in the US sharemarket.

The Australian dollar was down at US72.14.

Brent crude, the international oil benchmark, fell 2.6 per cent to $US41.72 a barrel.

5.20am: US stocks rise on earnings optimism

US stocks climbed, continuing last week’s gains as investors look ahead to the start of corporate earnings season.

In US afternoon trade the S&P 500 rose 2 per cent, on pace to extend its gains for a fourth consecutive trading day. Technology shares drove stocks higher, sending the Nasdaq Composite surging 3.2 per cent. The Dow Jones Industrial Average also jumped, gaining 1.1 per cent, or about 310 points.

The gains are on track to extend last week’s advances, during which the S&P 500 logged its biggest weekly gain in three months. Driving part of that rally, some investors said, were signs that the November presidential election could have more of a decisive result than originally expected. National polls have showed a growing lead for former Vice President Joe Biden over President Trump.

This week, traders’ focus is likely to shift to the third-quarter earnings season. Investors are betting that the results will show corporate performance has turned a corner. With the economy continuing to slowly reopen, profits of large companies in the S&P 500 are now projected to drop 20 per cent from a year earlier, an improvement from the 25 per cent decline anticipated at the end of June.

“There is a big sense that [the third quarter] was a big quarter for growth in the U.S.,” said Kit Juckes, macro strategist at Société Générale. “It’s economically not as bad as our worst nightmare.”

JPMorgan Chase is set to report Tuesday, followed by Bank of America and Wells Fargo Wednesday. Other companies reporting this week include Delta Air Lines and Johnson & Johnson.

Big technology shares, in particular, led the march higher. Twitter jumped 5.6 per cent, Amazon grew 5.3 per cent and Apple rose 5.6 per cent.

Apple is set on Wednesday morning (AEDT) to unveil a 5G-enabled iPhone, which some investors hope could create the kind of sizeable growth seen in the iPhone’s earliest days. Amazon is also kicking off its Prime Day event of shopping deals Tuesday.

Overseas, shares also climbed. The Stoxx Europe 600 gained 0.7 per cent. China’s Shanghai Composite Index closed up 2.6 per cent and Hong Kong’s Hang Seng Index advanced 2.2 per cent.

In commodities, Brent crude, the international oil benchmark, fell 3.1 per cent to $US41.54 a barrel.

Dow Jones Newswires

5.10am: Debt of poorest countries hit record $US744bn

The debt of the world’s poorest countries hit a record $US744 billion in 2019 prior to the coronavirus pandemic but debt relief is lagging, the World Bank said in a report that singles out China.

The Washington-based development lender’s data show debt for the 73 poorest nations grew 9.5 per cent year-on-year, which shows “an urgent need for creditors and borrowers alike to collaborate to stave off the growing risk of sovereign-debt crises triggered by the COVID-19 pandemic.” Business shutdowns and border closures to stop the spread of COVID-19 beginning in March have devastated economies worldwide, and in April, the G20 group of large economies endorsed a debt suspension for the world’s poorest countries.

AFP

5.00am: Markets firmer on US stimulus hopes

Optimism that US lawmakers will eventually pass a new stimulus package lifted most global markets, with the White House ramping up its offer and President Donald Trump insisting Republicans want to get a deal done.

Wall Street’s main indices opened higher, and Europe’s top markets were mostly firmer in afternoon trading after a strong session in most of Asia.

“The gains come amid hopes that lawmakers can hammer out a new fiscal relief package as stimulus negotiations continue,” said analysts at Charles Schwab brokerage.

However London faltered as additional coronavirus restrictions for specific areas in northern England were unveiled, closing down 0.3 per cent. Frankfurt and Paris both rose 0.7 per cent.

There was another strong lead before the weekend on Wall Street, with hopes for a fresh injection of cash into the world’s top economy overshadowing a surge in virus infections that have forced some governments to reimpose containment measures and targeted lockdowns.

Investors were sent on a rollercoaster ride last week when Trump first called off talks before doing a U-turn to say they were back on and progressing well.

On Friday, Trump increased his offer, proposing a $US1.8 trillion package and saying he favoured an even larger package.

The move has instilled optimism that an agreement can be reached, even though the White House plan is $US400 billion short of the one put forward by the Democrats, and both Democrats and Republicans dismissed it over the weekend.

But the stock market still feels broad confidence that Congress will continue to support the US economy with fiscal spending. While enacting a package looks challenging before the November 3 election, one could come soon after, analysts say.

Meanwhile in Asia, Hong Kong and Shanghai led markets higher, both piling on more than two per cent with support also coming from hopes President Xi Jinping will use a speech in Shenzhen later this week to announce a further opening up of China’s economy.

Sydney, Seoul, Singapore, Jakarta and Wellington also enjoyed healthy gains but Tokyo ended down.

But oil prices slumped on the prospect of more lockdowns in many nations. “More lockdowns around the globe could also hit economic growth, and oil prices have been weakening today as a result of this,” said Chris Beauchamp, chief market analyst at online trading firm IG.

AFP

4.58am: Lagarde warns against virus support ‘cliff edge’

European Central Bank president Christine Lagarde warned governments against pulling pandemic support schemes too quickly as eurozone economies struggle to recover from the coronavirus crisis.

Speaking at a virtual International Monetary Fund conference, Lagarde said her greatest concern was that fiscal policies put in place during the pandemic, including furlough or short-time work schemes, be “stopped suddenly”.

Instead, government policies should be “tailored in such a way that we can avoid the cliff effect”.

Economic support must be “continued for a period of time... even as the pandemic gradually fazes out so that there is a smooth transition into a full-fledged recovery,” argued former IMF chief Lagarde.

New measures will also have to be put in place as new companies set up and the job market rebounds, she said.

Christine Lagarde, President of the European Central Bank. Picture: AFP

AFP

4.56am: Apple climbs on 5G iPhone expectations

Apple’s stock was up significantly in US trading ahead of a much-anticipated event where the tech giant is expected to unveil its 5G-capable iPhone 12 line-up.

The company is the most expensive on Wall Street with a value of $US2.03 billion as of the close of Friday trading, and its share value on Monday was up 4.8 per cent at $122.59 around 1550 GMT.

Analysts expect Apple to introduce a selection of iPhone 12 models in multiple sizes, with some shipping earlier than others due to the toll the pandemic has taken on the company’s supply chain.

AFP

4.55am: British Airways announces shock CEO departure

British Airways, which is slashing thousands of jobs as coronavirus decimates demand for air travel, announced that CEO Alex Cruz is stepping down “with immediate effect” but gave no reason for his unexpected departure.

Parent group IAG added in a statement that the Spanish businessman, who had been BA chief executive for four and half years, will be replaced by its Aer Lingus boss Sean Doyle.

New IAG chief executive Luis Gallego, a fellow Spaniard who took the reins from Willie Walsh just last month, said the company’s management reshuffle was aimed at emerging stronger from the health crisis.

“We’re navigating the worst crisis faced in our industry and I’m confident ... IAG is well placed to emerge in a strong position,” Gallego said.

Investors fretted over the news, sending IAG shares down two per cent to 101.45 pence in late Monday morning deals.

Faced with the global travel crisis, the stock has plummeted by a staggering 75 per cent since the start of the year -- making it the worst performer listed on London’s FTSE 100 index.

Gone: British Airways CEO Alex Cruz. Picture: AFP

AFP

4.50am: Americans win Nobel Economics Prize

US economists Paul Milgrom and Robert Wilson won the Nobel Economics Prize for work on commercial auctions, including for goods and services difficult to sell in traditional ways such as radio frequencies, the Nobel Committee said.

The duo was honoured “for improvements to auction theory and inventions of new auction formats,” the jury said.

The Royal Swedish Academy of Sciences noted that the discoveries by Milgrom, 72, and Wilson, 83, “have benefited sellers, buyers and taxpayers around the world,” it said in a statement.

The winners will share the prize sum of 10 million Swedish kronor (about $US1.1 million, 950,000 euros).

AFP