S&P/ASX 200 higher, with GDP data showing economy recovering rapidly

Stocks close higher as latest GDP figures show economy recovering rapidly after COVID, while QBE’s new chief revealed in a London announcement.

David Rogers and Elise Shaw

World markets consolidated after yesterday’s strong global rally. Picture: Jeremy Piper

48 min read

3:30PMMarch 03, 2021.

Updated 6:23PMMarch 03, 2021

Welcome to the Trading Day blog for Wednesday, March 3. Australian stocks closed higher, while world markets consolidated following yesterday’s strong gains. Locally, the latest GDP figures confirmed the economy’s rapid recovery after pandemic lockdowns. Nine has appointed a CEO and Rio Tinto’s chair will not seek re-election.

6.18pm:QBE’s new chief revealed

Andrew Horton , the head of specialist London-listed insurer Beazley, will become the new chief of Australia’s QBE Insurance.

Beazley issued a notice to the London Stock Exchange saying that Mr Horton “has informed the Board of his intention to leave the Company to become the Group Chief Executive Officer (”CEO”) of QBE Insurance Group Limited in Australia”.

“Andrew Horton will remain with Beazley until 31 March 2021 and is not expected to take up his new role until 1 September 2021,” the statement says.

Beazley is a participant in the Lloyd’s insurance market, where QBE also ranks as one of the biggest players.

QBE’s previous chief executive Pat Regan resigned in September following an investigation into an incident that breached the company’s ethics and code of conduct.

At the time QBE said Mr Regan had “exercised poor judgment” relating to workplace communications.

Ben Wilmot6.12pm:AMP backs Ares tie-up

Funds manager AMP Capital says its joint venture with Ares Management Corporation could deliver significant benefits for investors across its $28bn property arm.

The local funds group has gone public after months of speculation about the future of the real estate business, including a potential sale of the management rights of the operation.

This option was shelved last year and AMP has instead unveiled a non-binding agreement to form a 60-40 joint venture with Ares, in which the US giant would take over the management of AMP Capital’s private markets businesses, spanning infrastructure equity and infrastructure debt and real estate.

The partnership has been pitched as a way of accelerating the growth of AMP Capital‘s private markets, while unlocking immediate value for AMP shareholders.

AMP Capital head of real estate Kylie O’Connor told The Australian, that the group was committed to its investors across the platform.

“We work for a great platform; we’re one of the largest in the country, we’ve got $28bn worth of assets, we’ve got some incredible projects and assets that we manage on behalf of our investors and we’ve got a really very supportive investor base,” Ms O’Connor said.

The property boss said that despite the “noise” and COVID-19 hitting last year the funds manager had delivered outstanding performance.

Ms O’Connor said the Ares could bring a number of benefits to the platform, with little crossover as it does not have a local funds business.

“I think what Ares can bring to the real estate platform is stability,” she said. “It’s a global network with access to very strong fundraising capabilities and a network of new offshore capital.”

Bridget Carter5.50pm:Investors warm to Lynch

DataRoom | Prospective investors in flower company Lynch Group will need assurance that the company’s earnings are not vulnerable to China and Australia’s strained relations with the Asian superpower as the group starts promoting the business for its initial public offering.

Advised by Jarden, Citi and Stanton Road Partners, Lynchhas started meetings with investors this week ahead of its float plans.

Picture: Zoe Phillips

The business is a major seller of flowers into supermarkets such as Woolworths, Coles and IGA. Earlier in the week, Jarden analysts released research suggesting that the wholesaler could be worth between $572m and $729m including debt.

So far, prospective investors seem impressed by the company’s Australian business, which accounts for about two-thirds of earnings.

Another plus is that the Lynch chief executive, Hugh Toll, is highly regarded in the market.

The understanding is that Lynch hopes to grow earnings through its Chinese operations, which largely consists of floral farms with some flowers sold locally.

5.20pm: Tokyo stocks close higher

Tokyo stocks closed higher on Wednesday, supported by gains on Asian shares, while traders kept an eye on US jobs data expected to be released later this week.

The benchmark Nikkei 225 index advanced 0.51 per cent or 150.93 points to end at 29,559.10, while the broader Topix index climbed 0.51 per cent or 9.69 points to 1,904.54.

Lachlan Moffet Gray4.40pm: ASX, AUD lift on strong GDP

The local sharemarket lifted on Wednesday to regain the losses of last week following the release of fourth quarter GDP data that showed Australia’s economic recovery is within grasp.

The ASX 200 closed at 6818 points, up 55.7 points or 0.82 per cent.

The Australian dollar also lifted on the news, trading at $US0.7823 cents at the market’s close.

Gold miners helped boost the market today as the gold spot price staged a recovery from Tuesday’ doldrums, with Ramelius Resources lifting by 13.69 per cent.

Westgold Resources was up 6.15 per cent while Gold Road was up 5.99 per cent.

Other miners made gains too: Lynas Rare Earths was up 6.04 per cent, bringing its calendar year gain to 67 per cent.

South 32 was up 4.74 per cent while Rio Tinto lifted 2 per cent after chairman Simon Thompson announced he would not be seeking re-election over the Juukan Gorge controversy.

News Corp was the worst performing stock of the day, down 3.76 per cent while Domain slipped 3.64 per cent.

Nine Entertainment finished the day down just under 1 per cent after it was announced Stan boss Mike Sneesby would be the next CEO of the media company.

Bridget Carter3.59pm:Instaclustr starts IPO ball rolling

DataRoom | Open source software company Instaclustr has kicked off investor education meetings this week ahead of its plans for an initial public offering.

Morgan Stanley is working on the float.

Plans for the float were flagged by DataRoom last year and could see the business list as a company worth about $300m.

Investors are being told that the business is growing its revenue rapidly in a high margin sector and that Instaclustr is a major beneficiary of big data driving demand for technologies to process and store data, applications and databases moving to the cloud and the growing adoption of open source technologies.

Founded in 2013 by Ben Bromhead and Adam Zegelin, Instaclustr provides support for Apache Cassandra, a NoSQL open source database with users including Apple, Netflix, Spotify and Walmart.

It counts Bailador as an investor from 2016, along with Level Equity.

The company has grown at a rate of 70 per cent since launching in 2014.

Annual recurring revenue on Instaclustr’s managed platform is now at about $20m.

It has about 90 per cent of revenue that is generated outside Australia.

Instaclustr also partners with systems integrators such as Accenture and IBM, aiming to address the data management needs of the global enterprise market.

While the company’s technology operations are in Canberra, the global headquarters are in California, where the founders are now based alongside chief executive Peter Lilley.

John Durie 3.28pm: Stock awards spell trouble for Rio

Rio Tinto chair Simon Thompson has now ticked all the boxes in accountability over the Juukan Gorge controversy, except the $49.7 million in Rio shares going to three ousted executives.

Australian shareholders contacted on Wednesday applauded the decisions by Thompson and fellow director Michael L‘Estrange to quit Rio’s board in the wake of the miner’s destruction of ancient rock shelters in the Pilbara, but said the egregious payouts to the accountable executives remains a big worry.

Rio Tinto is due to have its next annual meeting in London in April and Australia in May and, judging by Wednesday’s reaction, the remuneration report will face certain rejection.

Former boss Jean-Sebastien Jacques is due to receive $28 million in stock, which is based on half his allowance in share rights, as that is how Rio tends to account for the likely payout, subject of course to meeting the right hurdles.

Former iron ore boss Chris Salisbury and former corporate affairs boss Simone Niven - also ousted after Juukan Gorge - are due to receive $11.4 million and $9.6 million respectively on the same basis.

In the case of all three having been shown the door for governance failures relating to blowing up 46,000-year-old heritage sites, these payouts are egregious.

2.53pm: Miners moving higher; ASX 200 +0.8pc

The S&P/ASX 200 has made further gains through the afternoon session, currently up 52 points, or 0.8pc, at 6814.60, its highest since February 25.

Miners are having the most impact, with the Materials sector up almost 3pc. Lynas Rare Earths is one of the big movers for the day, up 6pc. Fortescue Metals Group has gained 4.9% and South32 is up 4.4pc.

On the down side, Afterpay has lost 3.3pc, Cochlear is 3.3% lower and Meridian Energy has fallen 3.2pc. The Information Technology sector is 1.5% lower.

2.38pm: Investor interest shifting to beef industry: Rabobank

An injection of new investor interest in the livestock sector – coupled with increasing awareness of the need to improve sustainability – is driving innovation in the global beef industry, agribusiness banking specialist Rabobank says.

In its Beef Quarterly Q1 2021 – New Drivers in Cattle Innovation, Rabobank says increasing investment is starting to flow into animal protein supply chains – including from entrepreneurs, venture capital, and established agri companies.

For Australia, restocking and herd-rebuilding activities continue to dominate the market. Producer demand is expected to remain strong through the first quarter of the year before easing into quarter two.

Picture: Zoe Phillips

“Ongoing favourable seasonal conditions have been supporting strong domestic producer demand and sustained record cattle prices into 2021,” Rabobank senior animal proteins analyst Angus Gidley-Baird said.

Australia’s cattle exports dropped 15 per cent in 2020, compared with the previous year, to 1.04 million metric tonnes swt (shipped weight).

“Volumes to all major markets fell,” Mr Gidley-Baird said, “But with trade tensions and licence suspensions, exports to China experienced one of the largest drops, falling 34 per cent from the previous year.”

Trade volumes were down 16 per cent to the US, 6 per cent to Japan and 1 per cent to South Korea, while live cattle export volumes were down overall by 19 per cent (and to Indonesia by 31 per cent) in 2020,

“High cattle prices, an appreciating Australian dollar and limited cattle supplies will continue to mean lower exports through 2021,” Mr Gidley-Baird said.

2.23pm: Construction hiring activity hits 6-year high

The Australian Industry Group (AiGroup) Performance of Construction Index (PCI) eased from a 3½-year high of 57.6 in January to 57.4 in February. Readings above 50 indicates an expansion of activity.

The Australian Industry Group compile the Performance of Manufacturing Index, the Performance of Services index and the Performance of Construction index each month (the latter with the Housing Industry of Australia).

IHS Markit also compile purchasing manager surveys for manufacturing and services sectors. The surveys are among the timeliest economic indicators released in Australia, notes CommSec senior economist Ryan Felsman.

“The surveys are useful not just in showing how key sectors are performing but also in providing some sense about where they are headed. The key ‘forward looking’ components are orders and employment.”

Overall construction activity rose by 4.0 points to 61.4; new orders were down 8.5 points to 50.1; selling prices rose 6.7 points to 66.3 (record high); average wages lifted 3.3 points to 64.4 (2½-year high); input prices increased 3.8 points to 80.2 (2½-year high); and employment was up 4.7 points to 61.7 (6-year high).

Activity in two out of four construction sectors lifted: Apartment building rose 21.2 points to 66.7 (3½-year high); house building climbed 10.2 points to 75.5 (record high); engineering construction fell 0.5 points to 52.8; commercial construction lost 8.0 points to 54.5.

According to the AiGroup: “Residential builders said customers are still asking for their projects to commence ‘as soon as possible’ due to government grant eligibility. Some of the surge in demand for new houses is now flowing into apartments. Commercial builders noted an increase in demand for alterations from retailers, restaurants, offices and hospitals requiring new fit-outs or modifications in order to meet ‘COVID-19 safe’ operational requirements.”

The ‘final’ IHS Markit services purchasing manager index fell from 55.6 to 53.4 in February. The composite index, which measures combined services and manufacturing output, eased from 55.9 to 53.7 in February. Readings above 50 indicates an expansion of activity.

IHS Markit economists reported: “The outlook for the Australian services economy remains positive, with expectations for an expansion in activity sustained at high levels. Businesses were hopeful that international restrictions would be eased more widely and trigger a wider recovery in activity, with additional support from new product launches.”

Has there been an inflation revival in the real economy? Well in the better performing sectors of the Aussie economy, where demand is strong, business owners would argue there is, says Felsman.

“And look out for rising wage costs in the strongly performing construction and mining industries amid skills shortages,” Felsman adds.

Steve Jackson 2.13pm: Seven Network to leave Sydney’s Martin Place

After broadcasting its flagship programs from Sydney’s Martin Place for almost two decades, the Seven network has revealed it will shutter its operations in the city’s CBD at the end of next year.

In an announcement to staff on Wednesday afternoon, Seven West Media chief James Warburton said the company would be moving its news and current affairs divisions 5km south of the city to Eveleigh.

Mr Warburton said the move would take 18 months as the network refitted and expanded its existing premises in Eveleigh so it could house all of its divisions across seven floors.

The exodus means Seven programs, such as Sunrise and The Morning Show, will no longer be broadcast from Martin Place, in the centre of Sydney’s financial district.

“Marin Place has been the location of our Sydney news and public affairs for almost 17 years,” he told staff in an email.

“It has been a great home for the many incredibly talented people who work on 7NEWS, Sunrise (and) The Morning show ... but the time has come for us to find a new home.

“For the first time in over 40 years, all parts of Seven Sydney will be in one place.

“Our news and public affairs people and programs will leave Martin Place and relocate to the Seven building in Eveleigh.

“At the same time, we will be undertaking a large-scale refurbishment and refitting of Seven in Eveleigh, which - when completed - will see us occupy seven floors in the building.

“We are aiming to complete the new Seven Eveleigh centre by December 2022, which is when our first news and public affair shows will be broadcast from there.”

The move comes after free-to-air rival Nine last year completed its move from its historic home in Artarmon on the city’s north shore to new premises in a commercial hub at North Sydney.

Lachlan Moffet Gray 1.57pm: Macquarie backs iron ore miners on strong demand

Macquarie analysts have restated their positive view of Australia’s listed iron ore miners, saying all the global dynamics in the iron ore market point to continued strong demand.

In a note, the analysts wrote that Brazilian mining giant Vale is still shipping at lower volumes, boosting the global iron ore price, while Chinese demand remains strong and non-Chinese demand strengthens.

The amount of iron ore shipped by the majors in Australia mostly increased last week: although Rio Tinto was flat, BHP volumes lifted 7 per cent to 5.5mT while Fortescue Metal’s volumes climbed 40 per cent to 3.7mT, its highest weekly level since the first week of January.

The analysts said current iron ore spot prices of around $US176.7 a tonne was above their forecasts, providing significant upside to their earnings predictions for the miners.

“The earnings upside into FY21 is 33 per cent for BHP, 36 per cent for RIO, 29 per for FMG (Fortescue Metals),” they wrote.

“We remain positive on stocks with iron-ore exposure due to strong cash flow yields and earnings upgrade momentum.”

Lachlan Moffet Gray 1.35pm: Economists warn recovery could get complicated

Economists are warning the recovery will get more complicated through the year as government stimulus is wound back and macroeconomic policy is refined.

KPMG Australia chief economist Brendan Rynne reiterated that the RBA will most likely have to adjust rates before the predicted date of 2024.

“It is worth noting however that the RBA yesterday said monetary policy had to be extraordinarily accommodative in order to achieve ‘significant gains in employment and a return to a tight labour market’ – conditions that the RBA did not expect to be met until 2024 at the earliest,” he said.

“Yet today’s GDP results suggest the Australian economy is likely to be in a stronger position before that time.”

But he also said that the GDP result - heavily underpinned by consumer spending - could be influenced by rising house prices, meaning the RBA would be remiss to raise rates before it is necessary.

“Confidence is returning and it seems the ‘wealth effect’ too is playing its part, which may be why the RBA is unconcerned about the surge in house prices.

“When people feel more confident about the value of their assets, they tend to spend more.”

Dr Rynne said Australia’s trade surplus could flip to a deficit for several years.

“Several factors are influencing this outcome, including the escalating trade dispute with China, a rising Australian dollar, and an increase in investment activity (which requires the importation of specialist goods manufactured overseas),” he said

CommSec chief economist Craig James said Australia was clearly in a “V shape recovery” but warned risk abounds and that there was going to be plenty of spare capacity in the economy yet.

“The vaccine roll-out is in the infancy. And then there is the risk posed by mutant strains of the virus,” he said.

“Stimulus and support measures are still very much required, and any scale-back needs to be carefully managed.

“The all-important jobless rate is expected to ease from 6.4 per cent currently to 5.7 per cent by the end of 2021. While still high, clearly it is moving in the right direction. But spare capacity will remain in the job market for a few more years, keeping the cash rate anchored at 0.1 per cent.”

Deloitte Access Economics principal economist Doug Ross said more attention should be focused on national income, which is now 2.1 per cent above its pre-pandemic levels.

“The recovery to date has been equally gobsmacking,” he said.

“The good news is that Australia’s living standards are linked to our real national income, rather than to the real economy.

“The real national income measure is the one deserving of attention today. And it is showing two extra pieces of good news not in the more widely quoted real economy measure – the strength in Australian export prices, and the benefit to incomes from lower interest rates.”

1.02pm: Lock in incentives to drive investment: BCA

Australia is on the right path to recovery but we will need to lock-in this positive result with permanent changes to boost business investment and job creation in long term, Business Council chief executive Jennifer Westacott said.

“This solid result is built on unprecedented government support that has kept people in jobs. Now, it is time for the private sector to take over the heavy lifting.

“Investment is moving in the right direction thanks to sensible short-term incentives to get projects off the ground but it remains below pre-Covid levels.

“This shows that these things work, the challenge is now locking them in across the whole economy to drive investment, become a global magnet for new capital and create new jobs.

“Global boards are making decisions now with investment horizons that are decades in the future, so we will need to send a clear signal that Australia is open for businesses and new jobs.

“The economy is 1.1 per cent smaller today than before the pandemic. We’ll need to grow more than 4 per cent each year until 2024 just to get back to our pre-Covid trajectory.

“We can start unleashing the job creating power of businesses with a vaccination roll-out linked with sensible action to unlock the economy.

“We’ll also need make ourselves a more dynamic and modern economy, taking advantage of the growing regional economies and innovative companies that are powering up on our doorstep.

“We need to lift our global competitiveness and make ourselves and attractive location for investment, building on our success in traditional areas while also creating new and lucrative industries.

“We must also continue to drive new investment across the economy with the right tax incentives, a workplace relations system that encourages job creation and by axing the red-tape that acts as a roadblock to investment.

“It is business that will need to create the jobs and make the necessary investments. Business is up to the challenge.“

Lilly Vitorovich 12.50pm: Big shoes to fill at Nine

Mike Sneesby has big shoes to fill when he takes the reins from outgoing Nine Entertainment boss Hugh Marks on April Fool’s Day.

Nine’s board, chaired by former federal treasurer Peter Costello, has entrusted the 46 year-old boss of its streaming business Stan to lead its broadcasting and print operations as advertising spending slowly rebounds following the coronavirus crisis.

It was a three-horse race for the top job, with Nine’s publishing and digital boss Chris Janz and outsider Carl Fennessy, who ran production company Endemol Shine Australia, making the short-list.

There has been concern that Mr Sneesby would quit if he didn’t get the top job.

Morningstar analyst Brian Han says it’s a “sensible, well-credential appointment given Nine’s long-stated strategy to be a more digital-centric media company”.

Mr Sneesby, who hails from Shoalhaven on the south coast of New South Wales and is a qualified engineer, has run Stan for seven years with the group recently delving into sport with its $100m Rugby Australia rights deal, plus rights to Wimbledon and the French Open.

He takes over from Mr Marks, who has been instrumental in running the group for more than five years, including its $4bn merger with Fairfax Media in 2018.

The merger brought together Nine and Fairfax’s streaming joint venture Stan under one roof, and Fairfax’s near 60 per cent stake in online property listing group Domain. The company has also taken full ownership of radio broadcaster Macquarie Media which controls a talk network including Sydney’s 2GB and Melbourne’s 3AW.

Mr Marks, 54, has also sold some assets inherited from Fairfax, including its regional and rural newspaper group Australian Community Media, a handful of events businesses and most recently its New Zealand print and digital media business.

Prior to Stan, Mr Sneesby was CEO of online voucher retailer Cudo for 19 months until 2013 and director of strategy and business development at ninemsn, which Nine took full control of in 2013 and subsequently shut.

Mr Sneesby also led the rollout of telecom group Optus‘s national ADSL broadband network, and set up Invision IPTV in Dubai for Saudi Telecom and Astra Malaysia’s joint venture Intigral.

He has worked in leadership and consulting positions across digital media, technology and telecommunications in Australia, Asia and the US. He holds an honours degree in electrical engineering from the University of Wollongong and a masters of business administration from the Macquarie Graduate School of Management.

Lachlan Moffet Gray 12.33pm: BofA warns US bourse entering sell territory

Wall Street could be approaching a sell-off, according to Bank of America analysts, as the average recommended equity allocation by sell-side strategists reaches its highest level since the eve of the global financial crisis.

The analysts said the bank’s Sell Side Indicator, which tracks average equity allocation by Wall Street strategists ticked up by 1 percentage point in February to 59.2 per cent, just 1.1 points shy of a “sell” signal.

“The last time the indicator was this close to sell was June 2007, after which we generally saw 12 month returns of -13 per cent,” the analysts said.

At the indicator’s current level, returns are forecast to be 7 per cent over the next 12 months.

The analysts said the US 10-year bond rate was also pointing to lower returns over the next year.

“History suggests that 1.75 per cent on the 10-yr (the house forecast - and 25 basis points above current levels) is the tipping point at which asset allocators begin to shift back to bonds,” they said.

Lachlan Moffet Gray 12.20pm: ASX 200 higher at midday

The news that Australia’s economy grew 3.1 per cent in the December quarter slightly lifted the local market, showing investors were already anticipating a rate of growth above the RBA’s 2.2 per cent estimate.

The ASX 200 rose just over 10 points to 6806 following the GDP announcement at 11.30am, and was at 6806.7 at noon, up 44.4 points, or 0.65 per cent.

The GDP data boosted the Australian dollar, which shot up 0.17 per cent to US78.34c, in line with expectations that the local currency is likely to continue its rise towards US80c.

The Australian Government 10-year bond yield was higher, although still down one basis point for the day at 1.712 per cent.

Gold miners rose, with Ramelius Resources up 11.41 per cent and Westgold Resources up 5.88 per cent.

Nufarm lifted 6.67 per cent while Fortescue Metals Group and Lynas Rare Earths lifted 3.93 per cent and 3.82 per cent respectively.

Among the underperformers, News Corp was down 3.90 per cent and Afterpay has dropped 3.73 per cent.

Rio Tinto was up 1.67 per cent after its chairman Simon Thompson announced he would not seek re-election.

Nine Entertainment Company was steady, following the announcement Stan boss Mike Sneesby would be new CEO.

Glenda Korporaal 12.15pm: Sneesby’s appointment a sign of the media times

The appointment of Stan founder Mike Sneesby to run the Nine Entertainment group is a sign of the times for the media industry.

The future is visual and digital driven by subscription revenues.

Sneesby’s success in founding streaming service Stan seven years ago, now worth more than $1 billion with more than 2.3 million subscribers, has clearly propelled him to the top of the company which owns more traditional media of Nine free to air television and the former Fairfax media newspaper titles.

His background is in IT engineering, not in the traditional areas of print or free to air television.

Mike Sneesby. Picture: Hollie Adams/The Australian

With his down to earth open neck style, Sneesby is a far from the more traditional free to air former Packer television executive the late Sam Chisholm whose success was driven by his ability to manage and promote television stars.

When it came to the press conference to announce his appointment on Wednesday there was little mention of Nine’s traditional print business with titles including the Australian Financial Review, The Sydney Morning Herald and The Age, and its free to air television business.

While chairman Peter Costello continued to stress the Nine board was not split between directors supporting the traditional print business and the television side, Sneesby’s appointment is very much a sign that the television side of the business is dominant- and seen as the future of the media conglomerate.

Lachlan Moffet Gray 12.00pm: New car sales booming

New car sales in Australia have grown for their fourth consecutive month after two and a half years of decline, highlighting the strength of Australia’s economic recovery.

It comes as national account figures confirm Australia’s economy grew by 3.1 per cent in the December quarter.

Figures from the Federal Chamber of Automotive Industries show a total of 83,977 new vehicles were sold across the country in February, up 5.1 per cent on a year on year basis.

It brings the total number of cars sold in the 2021 calendar year to 163,643 - 7.9 per cent higher than the number of cars sold in the same period last year, before Covid-19 plunged the country into lockdown last March.

All jurisdictions except for Victoria, Tasmania and the ACT recorded an increase over the month, said FCAI president Tony Weber, who attributed the Victorian decline to snap Covid-19 restrictions.

“During the past four months we have seen an increase of 10.6 per cent in new vehicles and this has been reflected with strong growth in NSW, Queensland, Western Australia, South Australia and the Northern Territory in February 2021,” he said.

“The sales reduction in Victoria can be attributed to the Covid-19 restrictions that were put in place during the month.

“We remain confident that this trend of growth will continue in an environment where business operating conditions continue to normalise,” he said.

SUVs remained the most popular type of vehicle, representing 50.8 per cent of the market, while light commercial vehicle sales represented 23 per cent.

Toyota was the most popular brand, selling 22 per cent of all new vehicles - followed by Mazda with 9.9 per cent and Hyundai with 7.4 per cent.

The Toyota HiLux remained the most popular vehicle in the country with 4808 unit sales, while the Ford Ranger was second, with 2900 sales.

Ford Ranger, Toyota HiLux and Isuzu D-Max.

Patrick Commins 11.30am: GDP data confirms economy’s rapid recovery

Australia’s rapid recovery from the worst downturn in nearly a century has been confirmed by national accounts figures which showed the economy expanded by 3.1 per cent in the December quarter.

The lifting of harsh restrictions in Victoria underpinned the stronger than anticipated lift in economic activity through the quarter, the ABS said. The September quarter growth figure was also revised higher, to 3.4 per cent from 3.3 per cent.

It was the first time in the over 60-year history of the national accounts that GDP has grown by more than 3 per cent in two consecutive quarters, the ABS said.

The progressive rollout of vaccines over coming months should underpin a sustained recovery by limiting the frequency and severity of COVID-19 outbreaks.

With consumer confidence riding high and a booming property market, economists are hopeful that the economy will grow at an above-trend pace in this year and the next. That, in turn, will help create jobs and push the unemployment rate back towards its pre-COVID levels of 5.1 per cent, against 6.4 per cent now.

Reserve Bank governor Philip Lowe yesterday said that “while the path ahead is likely to remain bumpy and uneven, there are better prospects for a sustained recovery than there were a few months ago”.

Restrictions associated with the COVID-19 pandemic sent output plunging by 7 per cent in the June quarter, before GDP rebounded by 3.4 per cent in the September quarter as the national lockdown ended and Australian households and businesses outside were able to resume some semblance of normal life.

Lachlan Moffet Gray 11.14am: Zip Co target price upgraded: RBC

RBC Capital Markets lifted its price target for Zip Co from $7 to $9, saying momentum looks “solid” heading in to the second half of the year with “new products and regions ramping up.”

The analysts also noted that Zip Co seems undervalued when compared to its buy now pay later peers - trading at an enterprise value-sales multiple of 12.2x compared to Afterpay’s 26x and Sezzle’s 11x.

But they noted one factor influencing this could be Zip Co’s Australian business producing a gross profit yield of 8 per cent versus Afterpay’s, which is in excess of 30 per cent - although they predicted yields would soon grow, while offshore opportunities increase.

“Zip has presence in New Zealand, UK and South Africa via partnerships and is expected to take on full control of US-based BNPL, QuadPay in 1Q21,” they said.

“Zip has re-positioned as a larger global player with presence in 5 countries that have large addressable markets and see strong growth in the BNPL sector.”

Zip Co was trading at $10.21 a share, down 1.16 per cent, on Wednesday morning but remains the best performing member of the ASX 200 for the calendar year, up 92.8 per cent.

11.01am: BoQ, ME Bank merger to bring a million customers together

Data from Roy Morgan shows over 1 million Australians are customers of either Bank of Queensland or ME Bank. Bank of Queensland announced its intention to purchase 100% of ME Bank for $1.3bn last week.

Bank of Queensland’s (BOQ) $1.3bn purchase of ME Bank is the biggest merger of two local banks for over a decade and with over 1 million customers between them the bank will be behind only the four major banks and Bendigo Bank (the largest second-tier bank) for total customers.

A look at the customer profiles for the two banks shows significant geographical complementarity. While both banks have a significant footprint in NSW, BOQ’s strength is in Queensland and Western Australia while over a third of ME Bank’s customers are from its home base of Victoria.

Over 80% of Bank of Queensland’s customers are in Queensland, New South Wales or Western Australia including nearly half in Queensland, while almost 80% of ME Bank’s customers are in Victoria, NSW or Queensland, including over a third in Victoria.

Bank of Queensland’s customers are older than ME Bank’s with over fifth, 21.5pc, aged 65+ compared to only 13.9% for ME Bank. In contrast, ME Bank’s customers are of a slightly younger profile with around 60% aged from 35-64 compared to under 50% of Bank of Queensland’s customers.

Socio-economically the two banks’ customers are also quite different with Bank of Queensland’s customers spread fairly evenly across all five socio-economic quintiles while over half of ME Bank’s customers are in the top two quintiles – either the highest AB quintile (almost a third) or C quintile (about a quarter).

Employment is also a significant point of differentiation between the two customer bases with nearly three-quarters of ME Bank’s customers currently employed compared to only two-thirds (66pc) of Bank of Queensland’s customers.

This difference is also evident about the types of jobs the two banks’ customers have with small business owners significantly over-represented among Bank of Queensland’s customers while Professionals, Managers and Semi-Professionals are the most over-represented among ME Bank’s customers.

Reflecting the bank’s focus on providing home loans, nearly half of ME Bank’s customers are currently paying off their home compared to just over a quarter who own their own home. In contrast, a slightly larger share of Bank of Queensland’s customers own their own home (36pc) than are paying off their home (35pc).

Lachlan Moffet Gray 10.36am: ASX opens higher with focus on GDP data ahead

The S&P/ASX 200 is up 42 points, or 0.63 per cent, at the open, erasing the losses of Tuesday’s afternoon session following the monthly RBA meeting.

The materials index was leading the charge, up 2.40 per cent as the gold miners rebounded from two consecutive days of losses: Ramelius Resources lifted 8.71 per cent, Westgold Resources was up 5.35 per cent.

Rio Tinto shares lifted 1.63 per cent following the news chairman Simon Thompson would not seek re-election.

The technology index was underperforming, slipping 1.31 per cent as Afterpay fell a further 2.51 per cent following its US rival Klarna’s successful raising on Tuesday.

Xero fell 1.81 per cent while car accessory manufacturer and retailer ARB Corp fell 2.42 per cent

News Corporation shares were down 3.21 per cent while Nine Entertainment shares fell 1.3 per cent following the announcement Stan boss Mike Sneesby would become the next CEO.

The benchmark 10-year Australian Government Bond Yield fell four basis points to 1.682 per cent.

Lachlan Moffet Gray 10.27am: Macroprudential restrictions coming: ANZ

ANZ senior economist Felicity Emmett says a rapidly heating housing market will result in macroprudential restrictions being implemented later this year, although regulators will take a slow and steady approach.

It comes as the Council of Financial Regulators on Wednesday declared it was ready to act if lending standards began to deteriorate.

Ms Emmett says that although Australia’s housing market is not running as hot as its trans-Tasman counterpart, it will still likely rise 10 per cent over the course of the year, prompting Australian regulators to act as New Zealand regulators currently are.

But it won’t happen as quickly. Separating the Australian and New Zealand housing markets is comparative growth over the last four years (30 per cent in NZ, -0.1 per cent in Australia at the end of January) and percentage of investors entering the market.

Investors as a percentage of credit growth in the year to December hit 89 per cent in New Zealand compared with Australia’s 11 per cent.

But the rapid pace of price growth is starting to impact lending standards in Australia: In the September quarter, mortgages with LVRs above 90 per cent account for 10.6 per cent of the total, up from 9.5 per cent a year earlier.

“A further deterioration seems inevitable in the current climate,” Ms Emmett said.

“As in past episodes, the regulators are likely to respond to accelerating credit growth and easier lending standards.

“The first step will be a persuasive approach with APRA suggesting some tightening lending standards.

“Over time it seems inevitable, given an extended period of very low rates, that hard macroprudential restrictions will be announced.”

10.18am: 7000 Australian jobs ‘at risk’ if Greensill Capital collapses

More than 7000 Australian jobs are at risk if Greensill Capital goes to the wall, the company has warned, as financier Lex Greensill scrambles to save his corporate empire.

Greensill confirmed overnight it is deep in talks with a potential buyer of the bulk of its business, believed to be private-equity giant Apollo Global Management, which would allow it to continue to offer working capital to its supply-chain finance clients if a deal is closed.

But court documents filed as Greensill fought on Monday to force insurers to renew policies backing the company’s global business say the consequences could be dire if negotiations break down.

Lawyers for the Bundaberg-born financier told the Supreme Court of NSW the loss of $US4.6bn worth of credit insurance, which expired on Monday, could cause a wave of insolvencies that could put many Greensill clients under, risking more than 50,000 jobs across the world including 7000 in Australia.

“if the policies are not renewed, Greensill Bank will be unable to provide further funding for working capital of Greensill’s clients. In the absence of that funding, some of Greensill’s clients are likely to become insolvent, defaulting on their existing facilities,” the court documents say.

“That, in turn, may trigger further adverse consequences on third parties, including the employees of Greensill’s clients. Greensill estimates that over 50,000 jobs including over 7,000 in Australia may be at risk. The working capital facilities involved total some USD 4.6 billion to approximately 40 different Greensill clients.”

A spokesman for Greensill confirmed the company had entered a “period of exclusivity with a leading global financial institution with a view to concluding a transaction with them this week”.

Patrick Commins 10.12am: Financial regulators to move on any signs of bad lending

The nation’s key financial regulators have declared they are ready to step in and curb any signs of bad lending, as evidence grows that low rates and a robust economic recovery from the COVID recession have reignited a property market boom.

In a quarterly statement released this morning, the powerful Council of Financial of Regulators, which is chaired by RBA governor Philip Lowe and includes APRA chairman Wayne Byres, ASIC chair James Shipton, and Treasury secretary Steven Kennedy, said it was “closely monitoring developments” in the housing market.

As new borrowing surged to record highs in January amid the fastest house price growth in 17 years, the co-ordinating body for Australia’s main financial regulatory authorities said it would “consider possible responses should lending standards deteriorate and financial risks increase”.

The strong signal of intent comes after Dr Lowe inserted a comment into yesterday’s board meeting statement that “lending standards remain sound and it is important that they remain so in an environment of rising housing prices and low interest rates”.

The CFR statement this morning, which followed a meeting on Friday, said “commitments for new owner-occupier housing loans have increased strongly in recent months, consistent with most other indicators of housing market activity”.

“There has been some increased availability of mortgage finance recently, though lending standards are generally being maintained at this stage.”

The CFR members said regulators will need to remain “vigilant” to risks associated with the end of JobKeeper at the end of March, although they noted that households and businesses had “strengthened financial buffers over the past year”.

9.47am: Nine Entertainment promotes Stan’s Mike Sneesby to CEO

Nine Entertainment has promoted Mike Sneesby, who runs its streaming business Stan, as its new chief executive, amid board in-fighting over the media group’s rival broadcasting and print operations.

Chairman Peter Costello is set to announce Mr Sneesby’s appointment at Nine’s new headquarters in Sydney at 10am.

Lachlan Moffet Gray 9.37am: Rio Tinto chairman: “ultimately accountable” for Juukan Gorge destruction

The Juukan Gorge controversy has claimed the scalp of Rio Tinto chairman Simon Thompson, who will not seek re-election as a director of the company at the 2022 AGM.

Sam Laidlaw, senior independent director of Rio Tinto plc, and Simon McKeon, senior independent director of Rio Tinto Limited, will lead the search for a new chair.

Mr Thompson said he was ultimately responsible for the destruction of the important Aboriginal Australian heritage site.

“I am proud of Rio Tinto’s achievements in 2020, including our outstanding response to the COVID-19 pandemic, a second successive fatality-free year, significant progress with our climate change strategy, and strong shareholder returns.,” he said.

“However, these successes were overshadowed by the destruction of the Juukan Gorge rock shelters at the Brockman 4 operations in Australia and, as Chairman, I am ultimately accountable for the failings that led to this tragic event.”

Mr Thompson said the company has engaged with traditional owners to improve risk management and governance.

“We have taken decisive action to address the weaknesses identified in our risk management and governance, while also acknowledging the need to improve our work culture and to rebuild relationships,” he said.

“In January, we appointed a new chief executive, Jakob Stausholm, who has moved swiftly to appoint his new executive team and has identified his key priorities to rebuild the trust that we have lost.

“Throughout my seven years on the Rio Tinto Board, I have endeavoured to promote a progressive environmental, social and governance agenda. While I am pleased with the progress we have made in many areas, the tragic events at Juukan Gorge are a source of personal sadness and deep regret, as well as being a clear breach of our values as a company.”

Michael L’Estrange, a non-executive director, will also retire from the Board at the conclusion of the 2021 AGMs.

“I wish Jakob and the new executive well for the future as they build on Rio Tinto’s many strengths and continue to implement the critical changes aimed at ensuring that an occurrence such as the destruction of the Juukan Gorge rock shelters never happens again,” he said.

Lachlan Moffet Gray 9.22am: BWX becoming ‘platinum’ supplier to Chemist Warehouse

Skin care company BWX has transferred 881,613 shares worth around $38m and representing 0.6 per cent of share capital to Chemist Warehouse as part of a deal that will see BWX become a platinum supplier to the Chemist chain.

The five-year partnership will see BWX’s products available on the Chemist Warehouse online store and an increased in store presence.

The amount of equity issued to Chemist Warehouse can increase over the next 33 months to 2.4 per cent of the issued share capital, based on performance targets, in four tranches at the same issue price.

Lachlan Moffet Gray 9.15am: Freedom Foods Arnotts deal well underway

Freedom Foods has completed the first stage of its $20m sale of its cereals and snack division to Arnotts.

The company, which is currently undergoing recapitalisation efforts while battling two shareholder class actions, has received $16.1m - or $8.04m net after discharging equipment leases - as part of the first stage of the sale.

“As announced on 17 December 2020, the Company expects that the total consideration for the sale will remain at approximately $20 million with net proceeds of approximately $11 million subject to adjustment for transaction costs and the agreed inventory balance at the final completion date,” the company said in a statement to the ASX.

Freedom Foods will continue to operate the division until the sale is finalised at the end of the month.

Lachlan Moffet Gray 9.08am: Medicare data suggests lockdown baby boom: Jarden

Medicare benefit data for early stage pregnancies is pointing to a mini Covid baby boom, according to analysts at Jarden.

Data from Medicare for early stage pregnancy ultrasounds of 16 weeks or less shows “a notable rise in the number of scans since April 20,” that points to a rise in births in the first half of the 2021 calendar year.

This is despite scans falling from a peak in July of 2020.

“While the peak in Jul-20 was likely elevated due to catchup from earlier Covid-19 delays, the fact that ultrasounds have averaged 12 per cent year on year since then suggests it is more than a blip,” the analysts said.

“The material rise in ultrasounds over the last six months should flow through to higher births from Feb-21 onwards.”

However, the baby boom will not be sufficient to counter the impact of falling migration on the economy.

“Indeed, even assuming a 10 per cent year on year rise in births over 2021 (which fades by end-22), population growth is still likely to be just 0.5 per cent year on year in 2021 and 0.7 per cent over 2022,” the analysts said.

“This compares to FY21 budget forecasts of 0.3 per cent / 0.6 per cent, down from 1.5 per cent pre-Covid.

However, the analysts said private hospital operators such as Ramsay Healthcare and infant-focused retailers including Baby Bunting could be boosted by the higher birth rate.

9.04am: What’s impressing analysts today?

Infomedia raised to Outperform: RBC
JB Hi-Fi raised to Buy; price target $54: Jefferies
Mitchell Services reinstated Speculative Buy: Morgans
Zip Co price target raised 29% to $9.00: RBC Capital Markets

Lachlan Moffet Gray, Dow Jones Newswires

Robyn Ironside 9.00am: Qantas to revive ‘mystery flights’

Qantas has gone back to the 1990s with the relaunch of mystery flights for passengers, to stimulate domestic travel and combat “border blues”.

The mystery flights of the last century involved simply turning up at a capital city airport and being allocated a seat on a scheduled flight to any of Qantas’s destinations.

The 2021 version will be slightly different, in that the mystery flight will be undertaken by a dedicated 737 and involve a whole day of activities in the surprise destination.

All destinations will be outside the capital cities, maximising the use of Qantas’s recently expanded regional network.

An economy seat will cost $737, including return flights and activities on the ground, and a business class seat $1579.

Qantas chief customer officer Stephanie Tully said the flights were about providing memorable travel experiences and promoting domestic tourism.

Lachlan Moffet Gray 8.52am: St Barbara plugs Macmahon into Gwalia

Gold miner St Barbara has appointed listed civil engineering company Macmahon as the underground mining contractor at the Gwalia mine at Lenora Operations in Western Australia.

Macmahon will replace current contractor Byrnecut on a five-year term with the option for St Barbara to extend for another three year period.

St Barbara managing director and CEO Craig Jetson said: “St Barbara is delighted to appoint Macmahon as a key partner in our commitment to instil a performance-led-culture at Gwalia.”

“This change is indicative of St Barbara’s determination to enliven Gwalia’s future, to safely and sustainably rebuild operational performance and to secure future investment by delivering predictable and strong financial returns.”

St Barbara shares closed at $1.98 on Tuesday.

Lachlan Moffet Gray 8.45am: GDP data could push $A higher

Australia’s fourth quarter GDP figures will be released at 11.30am (AEDT) after strong property prices and export growth and government spending figures pushed estimates up to a 2.5 per cent quarter on quarter growth rate.

It means GDP will be just 1.9 per cent behind where it was a year prior, compared to a 3.8 per cent difference in the September Quarter.

UBS economic analysts this morning reiterated a conservative fourth quarter estimate of 2.2 per cent, in line with the Reserve Bank of Australia.

Analysts at Citi upgraded their bullish 2.7 per cent forecast to 2.9 per cent.

Citi expects GDP data should show growth of 2.9%.

“This is an upgrade of 0.2pp following yesterday’s partial data,” they said on Tuesday evening.

“New today was information on public sector demand that will add around 0.3pp to growth (in-line with our working estimate) and net exports that will subtract 0.1pp from growth (a smaller detraction than we were expecting).

“So on-balance we’ve pushed up our Q4 growth estimate slightly from 2.7 per cent to 2.9 per cent.

IG market analyst Kyle Rodda said that if the data meets or exceeds expectations it could encourage further testing of the Australian dollar or 10-year bond yield by the market.

“The growth data, though backward looking, will be a gauge on whether fundamentals can justify another push in the AUD/USD back to 80 cents, and the 10-year yield towards 2 per cent, in time, once again,” he said.

Cliona ODowd 8.41am: No margin for error: Magellan’s Douglass

Magellan’s Hamish Douglass has warned on the “speculative frenzy” taking place in some shares and other assets and says now is a time for caution, with no margin for error as the investment community ignores looming risks.

“This is the time to be cautious when others are greedy. I don’t think it’s a time to be fearful, but cautious,” Mr Douglass told an online forum on Tuesday.

“Until we have some clearer scientific evidence around the mutation risk (of the coronavirus), there is no margin for error at the moment in markets. We have no idea if an escape mutant is going to emerge but the risk is foreseeable and there are clear warning signs at the moment.”

Hamish Douglass. Picture: Britta Campion / The Australian

Lisa Allen 8.28am: Domestic cruise push as ban frustrates industry

The local cruise industry, now estimates $5bn has been lost to the Australian economy since it stopped operating 12 months ago, will continue to push for a return to domestic cruising following the federal government’s decision to extend its 12 month long ban.

Federal Health Minister Greg Hunt added an extra three months to border closures last night extending the biosecurity emergency period until June 17. The three month extension will push out the emergency declaration to 15 months, since the ban was first imposed in March, 2020.

In a statement this morning the cruise industry said it supports 18,000 full time jobs including travel agents, entertainers, farmers, ports and marine logistics staff, which have been hard hit by the moratorium.

“We are naturally disappointed that the government has extended the ban without finalising a pathway for the return of cruising given the work that has taken place over many months, but we remain committed to working with agencies at a federal and state level,” said the Cruise Lines International Association in a statement this morning.

CLIA represents the major cruise lines including Carnival, Norwegian and Royal Caribbean.

CLIA managing director Joel Katz said the industry had been working with the federal government for the resumption of cruising for more than six months and would continue to advocate strongly for a phased and controlled return to domestic cruising.

—

“Australia has done a remarkable job in managing COVID-19, and we respect the Government’s decision to extend the Biosecurity Determination affecting the border and international travel,” Mr Katz said.

“However, we believe there is a pathway for the phased and tightly controlled return of domestic cruising for the benefit of those regional communities and industries that rely on a healthy cruise sector.

Mr Katz said cruise lines had committed to extensive new health protocols including 100 per cent testing of all passengers and crew before boarding, forming some of the most extensive Covid-19 measures of any industry worldwide.

8.05am: S&P 500 slips after logging best day since June

US stocks dropped on Tuesday, halting Monday’s blockbuster rally as investors continued to grapple with volatility in both shares and bonds.

The S&P 500 was down 0.8% as of the 4pm close in New York, pulling back after it surged 2.4% Monday to log its best day since June. The broad benchmark index was weighed down, in part, by a continued decline in technology stocks, which also sent the Nasdaq Composite tumbling 1.7%.

The Dow Jones Industrial Average lost about 143 points, or 0.5%, after swinging between gains and losses throughout the day. The blue-chip index lost more than 150 points in intraday trading before reversing course.

Investors say their focus is squarely on central bank officials for cues on how monetary policy may shift down the road. That will determine their appetite for government bonds and for inflation-adjusted returns. A flood of easy money by the Federal Reserve since the pandemic hit last spring has helped subdue returns on bonds and fuelled a rally in stock markets for much of the past year.

This phenomenon seemed to halt in recent weeks: money managers adjusted their portfolios in anticipation of an economic rebound and a potential increase in inflation, prompting a sell-off in government bonds. Yields jumped last week as bond prices fell, leading to jitters in stocks. Bond markets have since stabilised, and stocks surged higher Monday.

“We’re just taking a breather after yesterday,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.

“The state of the bond market is driving everything,” he added. “The central banks continue to be the real pivot in markets right now: as long as they continue to buy enormous amounts of bonds in the market, the upside move [in yields] is capped.”

The yield on the 10-year US Treasury bonds fell to 1.421%, from 1.444% on Monday. Still, that is sharply higher from this year’s closing low on Jan. 4 of 0.915%.

The recent volatility in markets “shows how hostage we are to policy remaining exactly where it is,” said Georgina Taylor, a multiasset fund manager at Invesco. “There is no real room for policy tightening to take hold: we still need that to be supportive of the economic recovery.”

Fed officials have so far suggested the climb in yields reflects expectations for an economic recovery. And Fed Chairman Jerome Powell told members of Congress last week that the central bank will continue to maintain low interest rates and continue asset purchases until more progress has been made on its employment and inflation goals.

“We think that the coming days and weeks will likely be pivotal,” and could see central banks taking steps beyond their verbal interventions, said Peter Schaffrik, a global macro strategist at RBC Capital Markets.

Overseas, the pan-continental Stoxx Europe 600 added 0.2%.

In Asia, most major benchmarks finished the day down. China’s Shanghai Composite Index and Hong Kong’s Hang Seng both fell 1.2%. South Korea’s Kospi Index rose 1%, buoyed by the prospect of a new pandemic relief spending package.

7.26am: Greensill looks to offload part of business

Australian billionaire Lex Greensill is in talks to sell a large part of Greensill Capital, amid threats the finance company could be forced into insolvency.

The supply chain finance company’s business model has been up-ended after Credit Suisse suspended $US10 billion in investment funds that contain securities created by the financial start-up.

Pressure on Greensill Capital mounted overnight when a second fund manager, GAM Holding, froze an investment fund connected to the embattled finance firm, the Wall Street Journal reported.

Greensill founder Lex Greensill told employees on a conference call that he is focusing on keeping the business operating and said there would be new owners by next week, according to people familiar with the matter.

In a statement, a Greensill spokesperson confirmed that the company was in talks to sell a large part of its business. “While the structure of the new business is still being determined, we expect the transaction will ensure the majority of Greensill clients will continue to be funded in the same way as they currently are.”

The Wall Street Journal reported that Greensill had hired restructuring advisers and could file for insolvency, the UK equivalent of bankruptcy, within days, a move that was sparked by the closure of the funds.

Lex Greensill. Picture By Annabel Moeller

7.05am:ASX to edge higher at the open

Australian stocks are set for a small gain at the open, as Wall Street wavered after yesterday’s strong rally.

At around 7am (AEDT) the SPI futures index was up 22 points, or 0.3 per cent.

Yesterday, the ASX 200 closed just over 1 per cent lower after early gains faded.

Iron ore is up by 0.7 per cent at $US175.55 a tonne, Brent oil is down 1.6 per cent at $US62.70 a barrel, while gold futures are up 0.6 per cent at $US1733.60 an ounce.

The Australian dollar is higher at US78.21c.

6.30am:Wall Street slips after logging best day since June

US stocks wobbled, halting yesterday’s blockbuster rally as investors continued to grapple with volatility in both shares and bonds.

The S&P 500 lost 0.3 in afternoon trading, pulling back after it surged 2.4 per cent Monday to log its best day since June. The broad benchmark index was weighed down, in part, by a continued decline in technology stocks, which also sent the Nasdaq Composite tumbling 1.0 per cent.

The Dow Jones Industrial Average also faded to be down 0.08 per cent, after swinging between gains and losses throughout the day. The blue-chip index lost more than 150 points in intraday trading before reversing course.

“We’re just taking a breather after yesterday,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Overseas, the pan-continental Stoxx Europe 600 added 0.4 per cent.

In Asia, most major benchmarks finished the day down. China’s Shanghai Composite Index and Hong Kong’s Hang Seng both fell 1.2 per cent. South Korea’s Kospi Index rose 1 per cent, buoyed by the prospect of a new pandemic relief spending package.

Dow Jones Newswires

6.05am:US economy ‘far from Fed goals’

Federal Reserve Governor. Lael Brainard said the US economic outlook looks strong as vaccines roll out to end the coronavirus pandemic, but she indicated the central bank isn’t rushing to pull back on its support.

“The economy remains far from our goals in terms of both employment and inflation, and it will take some time to achieve substantial further progress” in moving those two measures back toward where Fed officials want them, Ms. Brainard said in the text of a speech. “We will need to be patient to achieve the outcomes set out in our guidance,” she said.

Ms Brainard also said that even when the day does arrive and the Fed can raise rates, “changes in the policy rate are likely to be only gradual.” When it comes to the Fed’s bond buying, the purchases “are expected to continue at least at their current pace until substantial further progress has been made toward our goals.”

The official said that even though it is likely to take time for the economy to recover to where the Fed can dial back its support, the outlook is increasingly bright.

“Increasing vaccinations, along with enacted and expected fiscal measures and accommodative monetary policy, point to a strong modal outlook for 2021, although considerable uncertainty remains,” Ms. Brainard said. How well the economy does depends on vaccinations and issues there, or variants in the coronavirus itself could alter the path of the recovery in unexpected ways.

Ms Brainard spoke amid unsettled financial markets. Over recent days, Treasury bond yields have risen sharply and many market participants have questioned the outlook for monetary policy and wondered if rate rises will arrive sooner than expected. When the Fed last offered rate forecasts in December, it suggested it could be several years before it boosted rates. The Fed is also buying $US120 billion a month in Treasury and mortgage bonds.

Dow Jones

5.10am:Wall Street takes a breather, mostly slips

US stocks mostly fell, halting yesterday’s blockbuster rally as investors continued to grapple with volatility in both shares and bonds.

The S&P 500 dropped 0.13 per cent in early afternoon trading, pulling back after it surged 2.4 per cent yesterday to log its best day since June. The Dow Jones Industrial Average added 0.09 per cent.

Meanwhile, last week’s sell-off of technology stocks continued, with the Nasdaq Composite losing 0.7 per cent.

“We’re just taking a breather after yesterday,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.

The yield on the 10-year U.S. Treasury bonds ticked down to 1.427pc, from 1.444% yesterday. Still, that is sharply higher from this year’s closing low on Jan. 4 of 0.915pc.

Shares of technology companies were among those that fell. Apple lost 1.3 per cent, Twitter fell 1.7 per cent and Microsoft slid 1.2 per cent.

Overseas, the pan-continental Stoxx Europe 600 added 0.4 per cent.

Dow Jones Newswires

5.05am:Greensill faces another fund freeze

Pressure mounted on SoftBank Group Corp.-backed start-up Greensill Capital after a second fund manager, GAM Holding AG, froze an investment fund connected to the embattled finance firm.

Switzerland’s GAM said it had barred investors from trading in and out of the fund “as a result of recent market developments” and media coverage related to them. It plans to wind down the fund and return the money to investors.

Greensill’s business model was up-ended yesterday after Credit Suisse Group AG suspended $10 billion in investment funds that contain securities created by the financial start-up.

The Wall Street Journal reported that Greensill had hired restructuring advisers and could file for insolvency, the U.K. equivalent of bankruptcy, within days, a move that was sparked by the closure of the funds.

UK-based Greensill was founded in 2011 by Australian former Citigroup Inc. and Morgan Stanley financier Lex Greensill. It specialises in an area known as supply-chain finance, a form of short-term cash advance that lets companies stretch out the time they have to pay their bills.

Australian billionaire Lex Greensill. Picture: Annabel Moeller

Dow Jones

5.00am: US oil lobby moves towards supporting carbon tax

The American Petroleum Institute (API) confirmed it is considering supporting a carbon tax, a sign of the shifting politics of climate change in the United States.

API has been working with scientists, geologists and others throughout the industry “to meet the world’s energy demands and drive down US emissions, and our efforts are focused on supporting a new US contribution to the global Paris Agreement,” a spokeswoman for the institute, whose 60 members include ExxonMobil and Chevron, told AFP.

The move comes as newly inaugurated President Joe Biden shifts environmental policy, making aggressive climate mitigation a priority and rejoining the Paris Agreement after former president Donald Trump exited the pact.

AFP

4.55am:European stocks push higher

European stock markets extended gains despite Asian and US losses as investors assessed the outlook for global interest rates, dealers said.

Equities rebounded yesterday from last week’s heavy sell-off on easing US money market rates as inflation fears faded and investors were encouraged by progress on coronavirus vaccine rollouts and President Joe Biden’s $US1.9-trillion stimulus package advanced towards passage.

London closed up 0.4 per cent, Frankfurt added 0.2 per cent and Paris rose 0.3 per cent.

But the rally didn’t carry over into Asian trading, and Wall Street also fell prey to profit-taking soon after the opening bell.

“Today’s session has far been mixed for risk assets, as investors try to weigh the impact of rising yields against the prospects of a strong economic rebound with the ongoing Covid vaccine rollouts,” said market analyst Fawad Razaqzada at ThinkMarkets.

The rise in yields on government bonds in the US and other key economies last week sparked a market meltdown which was exacerbated by profit-taking.

Higher yields had prompted worries about a sudden shift in monetary policy toward higher interest rates.

However, a stabilisation in the bond market on Friday and Monday appears to have staunched the bleeding for now and analysts said worries over a surge in inflation and rate hikes have been overdone.

News Tuesday of steady eurozone inflation sent the European single currency briefly below $1.20 for the first time in three weeks as it too dampened speculation about higher interest rates. The Eurostat agency said inflation in the 19 countries that use the euro ran at 0.9 per cent last month, the same as in January.

In Asia Tuesday, equities sank after a top Chinese regulator raised concerns that bubbles were forming in the financial markets.

US and European markets were not reflective of their underlying economies and would face corrections “sooner or later”, said China Banking and Insurance Regulatory Commission chairman and central bank member Guo Shuqing.

Guo’s comments come after a number of observers warned equities were due a retreat following a year-long advance from their March 2020 nadir.

In commodities, oil prices wobbled ahead of a key OPEC+ producer meeting on Thursday, with the markets watching by how much it will step up output as the global economy appears set to shift up a gear as vaccination campaigns roll out.

AFP

4.50am:Hertz proposes sale to investors to exit bankruptcy

American rental car company Hertz proposed exiting bankruptcy by selling shares to two investments firms in a deal valued at up to $US4.2 billion.

Under the plan filed in US bankruptcy court, Knighthead Capital Management and Certares Opportunities would buy at least 50 per cent of the company’s shares, and could buy up to 100 per cent depending on the participation of current creditors.

Together with other sources of cash, the money would be used to finance Hertz’s fleet of vehicles in the United States and reduce its debt, the company said.

“The support of the plan sponsors demonstrates their confidence in Hertz’s growth potential,” Hertz President and Chief Executive Paul Stone said in a statement, adding the deal would allow Hertz to complete its restructuring by “early to mid summer.” The company filed for bankruptcy protection in the United States last May after the COVID-19 pandemic began. The decision allowed the company to temporarily continue its operations without pressure from creditors.

AFP

4.45am:Volvo goes all-in on electric cars, online sales

Chinese-owned Swedish automaker Volvo said it will produce only electric vehicles by 2030 and sell them all exclusively online.

Volvo is among a growing crop of companies planning to ditch fossil fuel vehicles in the next few years, as demand for zero-emission cars rises and governments put pressure on firms to cut pollution.

Indian-owned Jaguar said last month it would produce only electric vehicles from 2025, while US auto giant Ford said it would aim to have an all-electric fleet in Europe by 2030.

“The company intends to only sell fully electric cars and phase out any car in its global portfolio with an internal combustion engine, including hybrids,” Volvo said in a statement.

The company said half of its cars should be electric in 2025, with online sales accounting for half of its volume.

China’s Geely Holding bought a struggling Volvo Cars in 2010 from Ford and has since helped it enjoy a renaissance as a maker of high quality vehicles.

However, last month Geely Auto said it would not go ahead with a planned merger with Volvo but the two companies would instead reinforce their collaboration on electric vehicles.

Volvo Cars presents the company's new electric car model, Volvo C40 Recharge, in Stockholm. Picture: AFP

AFP

4.40am:Eurozone inflation steady as energy prices recover

The rise in eurozone consumer prices steadied in February, official data showed, as the slump in energy prices sharply slowed despite the enduring pandemic.

The Eurostat agency said inflation in the 19 countries that use the euro ran at 0.9 per cent last month, the same as in January.

January’s rate marked a big leap after several months of negative inflation due to the slumping consumer demand caused by the coronavirus and restrictions to the economy across Europe.

The rise in prices in 2021 has stoked talk that the European Central Bank should consider reining in its massive stimulus program, even if inflation remains below the ECB’s near two per cent target.

A global debate over the resurgence of inflation has heated up as the US sets out to rollout a $US1.9 trillion stimulus plan to reboot the economy.

Europe’s spending stimulus has been less ambitious, but markets have signalled expectations that inflation will rise in the coming months, with borrowing prices for EU governments increasing.

Eurostat said that energy prices fell by 1.7 per cent in February compared to a year ago, instead of the negative 4.2 per cent seen in January and the even deeper drops seen last year.

AFP