Border ban, inflation send ASX backward

Strength in the major banks wasn’t enough to buoy the local market, as a new QLD ban on Sydney visitors weighed on sentiment.

David Rogers and Melissa Yeo

36 min read

8:52PMJuly 29, 2020

A new QLD ban on Sydneysiders entering the state has prompted a reversal of ASX gains. Picture: Nigel Hallett.

First strike for AP Eagers
APRA eases call for dividend freeze
Inflation falls a record 1.9pc
Queensland border closure jolts shares

That’s all from the Trading Day blog for Wednesday, July 29. Australian stocks took a 0.2pc slip, reversing intraday gains as Queensland imposed a new border ban on Sydneysiders, and as inflation fell at the fastest rate on record. APRA gave banks the green light to resume dividend payouts, albeit at a reduced level, helping the major banks higher.

Rio Tinto released its half-year results after the close, declaring a $US1.55 per share interim dividend.

Jared Lynch 8.52pm: Freight body border crossing alarm

Truck drivers entering NSW and South Australia from Victoria must have been tested for coronavirus within seven days before they crossed the borders under tighter restrictions aimed at limiting COVID-19’s southern outbreak.

But the Victorian Transport Association (VTA) has condemned the move, stating it will not only hold up the 650,000 tonnes of freight that crosses the borders each day, given that people must quarantine until they get their test results, which can take up to five days.

VTA chief executive Peter Anderson said the forced testing also contradicts Victorian Department of Health and Human Services guidelines.

“These directives are in direct contravention to health orders in Victoria from the DHHS,” Mr Anderson wrote in a letter to the organisation’s members.

“In Victoria, we are directed to have a COVID-19 test only if we have specific symptoms or feel unwell. We must then quarantine until the results are provided within 3-5 days.

“If we were able to get a COVID-19 test every seven days we would be in breach of Victorian directives if we did not quarantine after testing.”

About 15,000 trucks cross between NSW and South Australian borders each day and night, one way.

Glenda Korporaal 8.20pm: Changing fortunes and China

Behind the results are the stronger-than-expected demand for steel — and thus iron ore — by Australia’s largest trading partner, China, which has also helped to underwrite the strength of the federal budget position as outlined last week by Josh Frydenberg.

While the rest of the world is reporting weak economic growth as a result of the pandemic, China’s economy appears to be recovering stronger than expected, with the world’s second-largest economy becoming a net importer of steel for the first time in more than 11 years this year.

In a commentary released this week, commodities analyst S&P Global notes that the last time this happened was in 2009, during the global financial crisis.

It says this is a sign of the “divergent fate of China versus the rest of the world during COVID”.

“China’s industry recovered much quicker than the rest of the world from COVID,” which it says has been “partly driven by China’s stimulus plans”.

“What is playing out in steel is expressing the broader reality that the Chinese economy seems in much better shape than others at this moment,” S&P Global says.

Peter van Onselen 7.05pm: Westpac spin fails to gain political traction

Before dawn on Wednesday, senior Westpac executives had already dialled into meetings to “crisis manage” the scathing comments reported in this newspaper by Attorney-General Christian Porter.

He didn’t miss when criticising the spin Westpac has engaged in over the Austrac scandal, taking particular aim at the new chairman, John McFarlane, and the culture of arrogance within the bank.

If only Westpac had been so swift responding to the use of its systems by child exploitation rackets in the first place. More than 23 million breaches of anti-money-laundering rules, just for starters. Swifter action back then might have avoided the need for any further action now.

Bridget Carter 6.31pm: Open house on LJ Hooker

Australian-based private equity firm Anchorage Capital Partners is believed to be mulling an acquisition of the collapsed real estate chain LJ Hooker.

It comes after LJ Hooker, one of the most iconic real estate agency brands in Australia, was placed into voluntary administration last month.

LJ Hooker is known to have had challenges for some time before it fell into voluntary administrator KPMG’s hands, with large debt levels and discontent said to have been building among its franchisees.

Perry Williams 5.52pm: $22bn solar farm wins major project status

The world’s biggest solar farm worth $22bn and backed by Mike Cannon-Brookes and Andrew Forrest has won major project status from the Morrison government, fast-tracking approval hurdles as it targets exporting electricity from the Northern Territory to Singapore by a subsea cable.

The tech mogul and iron ore billionaire are joint lead investors for the venture which aims to send 10 gigawatts of power from the world’s largest solar farm near Tennant Creek to Darwin and then Singapore via a 4500km high-voltage direct current cable, creating a $2bn annual renewable export industry.

The project will create 1500 construction jobs and 350 ongoing roles in Australia with $8bn of the $22bn investment to be spent locally.

“It’s a strong statement to all Australians that despite the immediate challenges of the COVID-19 pandemic we will come out the other side stronger and industry is still investing in opportunities that will drive our economic recovery and create much needed jobs,” Minister for Industry, Science and Technology Karen Andrews said.

Jared Lynch 5.16pm: AACo boom as Aussies turn MasterChef

“Pivot” is emerging as one of the buzz words for chief executives in 2020 as they battle the fallout from the COVID-19 pandemic, and Australian Agricultural Company is no exception.

Chairman Donald McGauchie told shareholders at AACo’s annual meeting on Wednesday that while 2020 had been a milestone year for the company, with its branded beef strategy delivering record sales and value, 2021 would generate new challenges.

Mr McGauchie said the pandemic had “decimated the global service and entertainment industries”, key customers for AACo.

“AACo ended the reporting period just gone under the uncertainty of COVID-19. It has effectively shut down restaurants of all types, significantly impacting those who rely on them for employment,” he said.

“This devastating impact demanded swift and decisive action from AACo. I am pleased to report that this was precisely the response your leadership team delivered.”

Chief executive Hugh Killen said the company had been able to divert products destined for the food service sector into retail and direct to consumer channels.

4.51pm: Marley Spoon upgrades guidance

Meal kit distributor Marley Spoon has upgraded its full year guidance, saying a shift to online grocery shopping was driving growth in its customer base.

The group said existing customers had increased their order frequency and average size at the onset of the pandemic at the end of the March quarter and into the June quarter, with orders normalising by the end of June.

As such, it said it expected 70pc year-on-year revenue growth, up from previous guidance of a 30pc lift.

“The new customers acquired during Q2 show equally strong or better retetnion as the company normally experiences for new customer additions,” it said.

“This has allowed the company to continue to build up its back book of recurring revenue bsuiness in Q2, which accounts for the vast majority of Marley Spoon’s revenue.”

Revenue for the quarter was up 129pc versus the previous corresponding period to 73.3 million euros ($120m), while marketing expenses declined, now 13pc of revenue versus 19pc in the pcp.

Lilly Vitorovich 4.47pm: Nine slashes regional news bulletin

Nine Network is looking to sack more than 12 regional journalists following the free-to-air television broadcaster‘s decision to slash its one-hour regional television evening news program by half on its return next month.

The network suspended evening news bulletins in regional Queensland, southern New South Wales and regional Victoria in March at the start of the coronavirus crisis, which were replaced by metropolitan news programs.

Nine’s Queensland and northern NSW managing director Kylie Blucher told staff on Wednesday about the changes.

“Regrettably, this change will have an impact on some of our staff – and in total we expect a little over a dozen roles to be impacted – in these regional markets and we are in the process of pursuing alternate opportunities across the business, where possible, for those individuals impacted,” Ms Blucher said in an email to staff, seen by The Australian.

Ms Blucher blamed the decision on the advertising and economic fallout from COVID-19, with the network’s parent company Nine Entertainment earlier this month forecasting a drop in annual earnings.

“Changes like this are never easy and I am conscious of the impact this restructure will have on individual people. However, the unprecedented advertising and economic downturn has prompted a review of the functional effectiveness while ensuring our bulletins remain commercially sustainable,” she said.

NEC shares finished Wednesday’s session down 1.1pc to $1.40.

4.37pm: AP Eagers defies ASX weakness

Car dealer AP Eagers was the market’s best performing stock at the close, even as shareholders hit the company with a first strike on its remuneration report.

Shares in the group, soon to be renamed as Eagers Automotive, finished higher by 13.3 per cen tto $7.99.

Elsewhere, weak quarterlies from IGO and St Barbara sent their shares lower, while the record run on gold stocks was dialled back as investor scepticism grew.

Here’s the biggest movers at the close:

Nick Evans 4.29pm: Rio pays dividend on iron ore strength

Rio Tinto has delivered a $US1.55 ($2.16) a share interim dividend on the back of strong iron ore prices in the first half of 2020, saying its business is in good shape despite the impact of the global coronavirus pandemic.

Rio Tinto booked a half-year net profit of $US3.3bn after strong iron ore prices pushed earnings before interest, tax, depreciation and amortisation at its flagship iron ore division to $US7.7bn, slightly ahead of last year’s $US7.5bn result.

The interim dividend is in line with analyst consensus expectations, and chief executive Jean Sebastien Jacques said in a statement the company had delivered a “resilient performance” despite the impact of the pandemic.

“Despite the challenging backdrop, we generated underlying EBITDA of $US9.6bn, with a margin of 47 per cent, driven by our strongand stable operations, with all of our assets continuing to operate throughout the first half,” he said.

RIO shares finished Wednesday’s session down 0.7pc to $103.40.

4.13pm: Border blow erases ASX upside

A new border ban on Sydneysiders entering Queensland served a blow to shares on Wednesday, erasing all of an early boost to pull the benchmark firmly lower for a second day.

The state acted swiftly to ban all vistors from greater Sydney in mid-morning trade, after reporting its first two cases in the community since May.

Shares had pushed higher by 0.5pc early but pared gains on the news, with weakness in the market exacerbated by a record drop in inflation for the second quarter.

By the close, the ASX200 was lower by 14 points or 0.23 per cent to 6006.4 as US futures traded slightly weaker, ahead of the US Fed meeting to happen overnight.

AUDUSD last higher by 0.18pc to US71.70c.

3.54pm: Deutsche provisions hit decade-high

Deutsche Bank AG on Wednesday posted a second-quarter loss despite a strong performance of its investment bank pushing quarterly revenue up but its provisions for bad loans hit its highest level in more than a decade.

The German bank set aside 761 million euros ($1.25bn) to cover credit losses, adding to the roughly half a billion euros it stowed away in the first quarter. Like other banks in Europe and the US, the lender is preparing for a potential wave of loan losses brought about by the coronavirus pandemic.

Earlier this month, US banks JPMorgan Chase & Co, Wells Fargo and Citigroup took $US28bn in bad-loan charges.

However, the provisions are lower than the EUR818 million analysts had forecast, according to a consensus forecast provided by the bank.

Deutsche Bank posted a loss attributable to shareholders of EUR77 million compared with a loss of EUR3.27 billion a year earlier, when heavy restructuring charges weighed on the results. It is the fifth consecutive such a quarterly loss in a row for the bank.

Dow Jones Newswires

3.16pm: Core prices to weaken further: ANZ

Inflation will rebound in the next quarter, but trimmed mean, the RBA’s preferred measure of core prices, will continue to slow into early next year, so says ANZ.

Economists Hayden Dimes and David Plank write that the collapse in second quarter inflation revealed today was driven by free childcare, and likely to rebound as that support was winded up.

On the other hand, trimmed mean inflation, which fell to -0.1pc for the quarter, should fall further.

“Eventually, likely by early next year, stubbornly low inflation and elevated unemployment will push the RBA to do more,” they write.

“But for now we think this inflation print will largely be looked through by the RBA, which had anticipated a negative annual headline inflation print for Q2 and weak core inflation (albeit not as weak as transpired).”

3.04pm: Champagne rift erupts among French bottlers

France’s coronavirus crisis has sparked a fierce battle in its hallowed champagne industry over this season’s harvest, with producers and growers at loggerheads over how much bubbly should be put into bottles.

The main production houses are demanding a sharp reduction in harvest yields as sales plunge amid the COVID-19 pandemic. Growers say this would decimate their revenues.

Traditionally, both sides negotiate how many grapes are harvested by the hundreds of champagne growers each year, many of whom sell to merchants including big-name brands like Veuve Clicquot or Pommery.

The goal is to limit the risks from poor harvests and drastic price swings that could put many players out of business.

But merchants say they are already loaded with stocks and with revenues hit hard by the crisis they cannot afford to produce more bottles than they can sell.

AFP

2.30pm: The new leaders in Aussie retail

A surge in online spending has sparked a shake-up of the local retail landscape, with online-focused retailers now trumping established retail names by market value.

Kogan, which has notched a stunning 440pc jump from its March lows, now has a market capitalisation of $1.75bn - a joint third with Super Retail group behind only Harvey Norman ($4.46bn) and Premier Investments ($2.72bn) in local retailer valuation.

Furniture and homewares retailer Temple & Webster is fast approaching a valuation of $1bn as its shares today hit a new high of $8.47, giving it a market cap of $991m.

Yesterday, the group completed a $40m capital raising and said it was investing further in infrastructure to tighten its supply chain and bind its customers closer to its brand.

Well at the bottom on the rankings, department store Myer has a market cap of just $164m.

Furniture reatiler Temple & Webster is approaching a $1bn valuation. Picture: Supplied.

Lachlan Moffet Gray 2.00pm: UK bidders eager for ‘monster bond’

The Australian government’s latest bond offering was eagerly snatched up by offshore fundies led by the UK who bought more than 22pc of the issue.

On Wednesday the government finalised the issuance of a $15bn 30-year “monster bond” which attracted more than twice that amount in bids as investors seek a safe place to park their money in an uncertain, low-yielding global economy.

A total of $38.6bn of bids were received for the June 25 2051 bond up to Tuesday morning, with the security priced at a 1.94 per cent yield, making it the third-largest Australian government debt issue ever and longest outstanding government debt liability.

There was strong international interest in the bond, with 66.86 per cent of purchases being based overseas, making the security the most internationally popular Australian government bond in the last nine years.

Of the international purchasers, the strongest interest came from investors based in the UK, who represented 22.85 per cent of overall purchasers - a level of interest from the UK not seen since 2013.

The second most interested region was North America, representing 17.63pc of purchasers, followed by Asia excluding Japan, which accounted for 12.67pc.

On a sectoral level, fund managers represented the overwhelming majority of purchasers at 68.66 per cent.

1.36pm: Bank payout limit ‘some relief’: Plato

Bank regulator’s APRA move to limit bank payout ratios to 50 per cent is “somewhat of a relief” for retirees who rely on bank dividends to make ends meet, according to Don Hamson, managing director of fund manager Plato Investment Management.

However, he says that a 50 per cent payout ratio is substantially lower than the normal bank payout ratio, and with bank profits likely to fall due to bad debt provisions, investors will probably still need to look outside the banks for income.

His comments follow APRA this morning issuing guidance urging banks and insurers to cap dividends at 50 per cent of earnings. This reverses its April position where APRA discouraged banks and insurers from paying dividends. This caused ANZ, Bank of Queensland and Westpac to defer their interim dividends with NAB cutting its dividend by 64pc.

“I now encourage the banks to listen to the regulator’s latest guidance and resume paying out a level of dividends that won’t leave investors in the lurch,” Dr Hamson said.

Plato estimates that last year the big four banks paid 30 per cent of gross dividends, including cash dividends plus franking, of the entire S&P/ASX 200.

Read more: Banks ordered to cap dividends

Eli Greenblat 1.30pm: First strike for AP Eagers

AP Eagers has received a “first strike” on the adoption of its remuneration report amid investor anger over almost $250m in impairments in 2019 that forced the company to post a $80.5m loss.

Some directors up for re-election at the meeting were also hit with strong ‘no’ votes.

In results posted to the ASX from the AGM, AP Eagers reported that the non-binding vote on the adoption of its remuneration report had a no vote of 30.58 per cent and support of 69.42 per cent.

Any ‘no’ vote more than 25pc constitutes a first strike, with potential for a full spill of the board at next year’s AGM if it receives a second strike.

High no votes were also received against the re-election of Sophie Moore (18.56 per cent against), Michelle Prater (15.32 per cent against) and Marcus Birrell (9.51 per cent against).

Last year AP Eagers, the nation’s biggest car dealer, slumped to a full-year net loss of $80.5 m, a reversal from the $97.5m profit booked for calendar 2018 as impairments, acquisition and integration costs, along with back payments of wages, drenched the company’s accounts in red ink.

It booked $244.9m in total impairments for the year. The dip into the red also came at a time of difficult trading conditions for the car market, combined with more stringent credit conditions and subdued consumer confidence.

1.23pm: IGO outlook prompts 13pc share dive

Diversified miner IGO is dragging in afternoon trade, after flagging a softer than expected outlook for the year ahead.

Shares are down by 13.2pc to $4.80 - as RBC notes the miner’s cost outlook was higher than tipped, even as fourth quarter production met its estimates.

IGO said it was bringing forward mine development at its Nova project to FY21, with added costs from sustaining capital that was deferred from the previous year.

“We are constructive on IGO on the balance of its twin operations in Nova and Tropicana, providing solid exposure to both nickel and gold markets,” analyst Alexander Hisop says.

“Tropicana, itself, provides a natural gold hedge – particularly relevant with spot prices ~A$2,800/oz. Whilst FY21 guidance is softer, the company is still likely to generate healthy FCF yield across the outlook with both operations at steady state.”

1.01pm: Shares test 6000 level

Shares are testing the key 6000 level at lunch, reversing earlier gains as much as 0.2pc after Queensland’s new border ban and a record drop in inflation shook sentiment.

At 1pm, the benchmark ASX200 is lower by 14 points or 0.23 per cent to 6006.8, after slipping to 6000.9.

Banks are fighting to hold the market higher, up by between 1.3pc and 2.3pc, but not enough to offset losses in the major miners and CSL.

Gold miners too are giving back gains, Newcrest down 0.7pc, Nrothern Star by 2.5pc and Saracen Minerals by 1.3pc.

Here’s the biggest movers at lunch:

Ben Wilmot 12.50pm: Cromwell to launch $800m Euro fund

The embattled Cromwell Property Group will launch a new $800m European property fund specialising in logistics real estate as it seeks to shrug off attacks by its dissident major shareholder.

The listed company is under attack from Singapore’s ARA Asset Management, but said it had teamed with Korean real estate investment manager, IGIS Asset Management to buy seven DHL logistics assets in Italy for $85.7m.

The assets will form the seed portfolio for a new Cromwell European Logistics Fund that is to buy property in Belgium, France, Germany and Italy, with a target total gross asset value of $650m to $800m.

“Logistics is a high conviction sector that we believe will prove resilient in these difficult times and provide our capital partners with strong potential for outperformance over the medium term,” Cromwell’s chief investment officer Rob Percy said.

CMW last traded down 0.34pc to 88.7c.

12.35pm: Listed aged care providers slipping

Concerns on the safety of aged care homes, especially in Melbourne, have jolted the trade of key listed players in Wednesday trade.

Health authorities were keeping a careful watch on 13 nursing homes across Melbourne with a significant number of COVID-positive residents but overall the aged care sector has performed well in keeping those in their care safe, the Prime Minister said in a briefing earlier today.

The Federal health secretary said there are currently 456 aged care residents who are COVID-positive, along with 381 staff in aged care who have contracted the virus.

Estia Health owns 69 centres, 27 of which are in Victoria, is trading lower by 1.6pc to $1.46, while Regis Health is losing 1.4pc to $1.39 and Japara is off by 3pc to 48c.

Eli Greenblat 12.02pm: AP Eagers jumps on resilent result

The nation’s largest car dealer, AP Eagers, is the best performing stock at midday, even as it warned of a 23.6 per cent decline in first half underlying profit.

The result, flagged at its virtual AGM, was viewed as a resilient performance given the huge volatility and crushing impact of the coronavirus pandemic.

Addressing shareholders at the company’s AGM, where shareholders will also vote on changing the company’s name to Eagers Automotive, chief executive Martin Ward said the implementation of a number of operational initiatives and other cash management strategies had helped to fortify liquidity and further strengthen the group’s balance sheet position through COVID-19.

It was also focused on its cost cutting and operational transformation as set out in its recent Next100 strategy.

“Notwithstanding the external environment, the group remains firmly focused on our Next100 strategy which is aimed at delivering a superior customer experience from a more sustainable and productive cost base,” Mr Ward said.

“In fact, the optimisation of our existing business has accelerated out of necessity due to the impacts of COVID-19 with the team working hard to deliver a significant permanent cost reduction of approximately $78m per annum, all achieved within the last three months.”

APE last traded up 7.7pc to $7.59.

11.50am: Shares erase intraday gains

Shares have swiftly given up intraday gains as much as 0.4pc, as inflation fell 1.9pc and Queensland banned Sydneysiders from entering the state from Saturday.

The benchmark ASX200 had been pushing higher on the back of bank strength, but fell down as much as 0.24pc and was last trading slightly lower at 6017.7.

Banks are still buoying the market, up around 1.6pc while major miners and energy stocks feel the sting of new restrictions and health stocks slip 0.5pc.

11.31am: Inflation falls a record 1.9pc

Quarterly inflation data has printed 1.9pc lower for the second quarter, the largest drop on record and the first negative read since 1998.

Still, the reading is better than the -2pc consensus. For the year, inflation was down 0.3pc.

The latest figures from the ABS were largely a result of the free child care provided at the onset of the coronavirus pandemic, along with a significant fall in the price of fuel, and pre-school and primary eduction.

Chief economist Bruce Hockman noted that without the three above factors, CPI would have risen by 0.1pc in the June quarter.

“Some CPI components recorded notable price rises on the back of increased spending: cleaning and maintenance products (+6.2 per cent); other non-durable household products, which includes toilet paper (+4.5 per cent); furniture (+3.8 per cent); major household appliances (+3.0 per cent); and audio, visual and computing equipment (+1.8 per cent).”

The inflationary impact of COVID-19 was similar for both tradables and non-tradables. Both fell by around 2% in the June quarter. pic.twitter.com/dS0jPNSLYw
— Callam Pickering (@CallamPickering) July 29, 2020

Michael McKenna 11.19am: QLD shuts border to Sydney residents

Queensland has shut the border to residents of Sydney.

Queensland premier Annastacia Palaszczuk announced the new restrictions after two teenagers – who returned to the state on July 21 from Melbourne, via Sydney – became the first people with COVID-19 to be in the community since May.

In a tweet, Ms Palaszczuk confirmed the existing entry ban on Victorians would now be extended to those coming from greater Sydney.

“Queensland will close its borders to all of Greater Sydney. From 1am Saturday, more hot spots will be declared and no one from Sydney will be allowed into Queensland. #COVID19au,” she said in the tweet.

The move has knocked the benchmark off its highs – last up 0.2pc at 6033 after hitting 6051.1 while the Aussie dollar is down 6 points from its earlier high of US71.72c.

Read more: QLD shuts border to greater Sydney

BREAKING: Queensland will close its borders to all of Greater Sydney. From 1am Saturday, more hotspots will be declared and no one from Sydney will be allowed into Queensland. #COVID19au pic.twitter.com/044iZeTZ1g
— Annastacia Palaszczuk (@AnnastaciaMP) July 29, 2020

11.09am: What to watch in inflation data

Ahead of the release of second quarter inflation data at 11.30am, economists are tipping the worst negative quarterly rate on record.

Bloomberg consensus is for a 2pc quarterly drop and 0.5pc fall for the year.

ANZ meanwhile tips the headline figure to be a more moderate -1.8pc, with the annual rate also going negative. They expect trimmed mean inflation to come in at a subdued 0.2pc for the quarter too.

“This would be the largest negative quarterly inflation rate recorded. Though the combination of free child care and a sharp decline in petrol prices explains the deflation, inflation pressures are expected to be very subdued generally, with headline inflation excluding these two items expected to be up just a touch,” ANZ says.

Cliona O’Dowd 11.02am: AMP faces financial planner class action

A class action has been filed in the Federal Court against AMP on behalf of a number of its financial planners, the embattled wealth manager has confirmed.

AMP on Wednesday said the action had been filed against its AMP Financial Planning unit in the Federal Court in Melbourne and was related to changes it made to its buyer of last resort policy last year.

“The proceeding is brought on behalf of certain financial advisers who are or have been authorised by AMPFP”, the wealth manager said.

“AMP is confident in the actions it took in 2019 and will defend the proceeding accordingly.”

The action has been brought by legal firm Corrs Chambers Wesgarth.

AMP last year abruptly changed the terms of its buyer of last resort agreements, slashing the value it would pay for its planners’ advice businesses from four times annual revenue to 2.5 times.

John Stensholt 10.56am: Ecofibre jumps on US deal, profit lift

Shares in the country’s biggest listed medicinal cannabis company Ecofibre rose as much as 8pc in early trading after the company announced a big US acquisition and a doubling of annual profit.

Ecofibre is backed by members of The List – Australia’s Richest 250 such as Barry Lambert, the company’s chairman, and Sydney investor Will Vicars of Caledonia Partners.

The firm makes hemp industrial products and its Ananda products are supplied as a “superfood” in thousands of US pharmacies.

Ecofibre announced on Wednesday morning that it was buying its North Carolina manufacturing partner TexInnovate in a $US42m cash and scrip deal. The deal includes $10.5m in both cash and Ecofibre shares, and another $US21m earnout payable in three tranches in the next five years. Ecofibre will also pay about $US7m for property as part of the deal.

The cash and property components will be funded by a $29.5m capital raising from existing institutional shareholders at an issue price of $2.50 per share.

Completion of the transaction is subject to due diligence and is planned to occur by September 1.

Ecofibre also announced a net profit of $13.2m from $50.7m revenue for the 2020 financial year, up 119pc and 42pc respectively from the previous year.

The company’s shares were up 12c or about 4.8pc to $2.62 after hitting $2.70 earlier on Wednesday morning, giving it a market capitalisation of about $842m.

10.38am: Ardent pleads guilty to Dreamworld charges

Ardent Leisure, the operator of Dreamworld, has pleaded guilty to three charges relating to the deaths of four people in an incident involving the theme park’s Thunder River Rapids Ride in 2016.

The pleas came at the Southport Magistrates Court in Queensland.

Ardent is accused of failing to comply with its health and safety duty, exposing individuals to a risk of serious injury or death.

The maximum penalty for each breach is $1.5 million, or $4.5 million in total.

ALG shares last up 1.4pc to 36c.

10.10am: Bank boost offset by tech drag

Shares are off to a lacklustre start, edging mildly higher as traders tread cautiously after a rocky night on Wall Street.

At the open, the benchmark ASX200 is higher by just 1 point to 6021.

Tech is the biggest drag, following the Nasdaq lower, with Afterpay down 1.8pc and Xero lower by 1pc.

Financials are providing some support after APRA gave them the all clear to resume paying dividends – Westpac is rebounding by 1.3pc after yesterday’s weakness while CBA adds 0.7pc, ANZ adds 1.6pc and NAB rises by 1.6pc.

10.01am: Air NZ suspends bookings to Australia

Air New Zealand said it has suspended bookings for its limited number of flights to Australia until late August.

Australia’s ban on international arrivals into Melbourne until August 8, and restrictions on the number of arrivals at Sydney and Brisbane, could be extended, the airline said Wednesday.

Pandemic restrictions were reimposed in Melbourne earlier this month after a significant increase in coronavirus cases.

“The airline is placing a hold on future bookings to help prevent disruptions to customer journeys should these restrictions be extended,” it said.

Dow Jones Newswires

9.55am: Westpac brings call centres onshore

Westpac will bring 1000 of its call centre roles back to Australia, after issues with its processing times were highlighted at the onset of the COVID-19 pandemic.

The bank this morning said it would bring back all dedicated voice roles to Australia, and grow the capacity of its existing call centres so “when a customer calls us, it will be answered by someone in Australia”.

Changes will result in an extra $45m in costs for the full year 2021.

“While we have added additional resourcing to support unprecedented demand following COVID-19, and I thank our teams who have worked tirelessly helping customers, at times our response rates have been too slow,” chief Peter King said.

“Bringing jobs back to Australia has been made possible with the changing work patterns in response to the COVID-19 pandemic, as well as the upgrade to our technology infrastructure over recent years. Together these have enabled our teams to operate effectively at home or in other locations when needed.”

"We are bringing back around 1000 jobs to Australia from overseas, marking a further step in transforming our business for the better," says Westpac chief executive Peter King. Full story: https://t.co/wNtF6uAy5X #jobs #economy pic.twitter.com/1Vbhps2M8s
— Westpac Wire (@WestpacWire) July 28, 2020

9.42am: What’s on the broker radar?

Charter Hall Retail REIT raised to Buy – Jefferies
Corporate Travel Group raised to Buy – Ord Minnett
Elders reinstated Buy – Goldman
GPT raised to Buy – Jefferies
Mineral Resources cut to Neutral – Credit Suisse
Saturn Metals rated new Buy – Sprott Capital

9.34am: UAC lifts Infigen stake

Iberdrola may have won the bidding war for Infigen, but that’s not stopping rival suitor UAC from lifting its stake in the group.

UAC this morning lodged a notice to the market showing it had raised its holding to 19.94pc from 13.4pc, the majority of which had been purchased on market for more than $55.7m.

As of last Friday, the Iberdrola offer was the only one on the table, with UAC conceding that they would not lift their offer price.

Under ASX takeover rules, UAC now cannot increase their holding in Infigen for the next six months and they are not allowed to pursue a fresh take-over offer for at least four months.

9.19am: AP Eagers merger ‘seamless’ despite COVID

AP Eagers shareholders will today vote to change the company’s name to Eagers Automotive, as the group cements it merger with Automotive Holdings Group completed in October and says its ready to take advantage of any further market opportunities.

In comments lodged to the ASX ahead of the virtual AGM, chairman Tim Crommelin says the integration of the two companies had been “seamless”, and a particular feat considering the strained financial environment.

He notes the board and managements actions to free up cash through pay cuts, and says the balance sheet is “in good shape”.

Chief Martin Ward adds that he expects to report a profit of $40.3m at the full year results, a 23.6pc decline from the previous year after the blow from COVID-19.

“The Board believes this to be a resilient operating performance particularly as the first quarter was tracking above last year and all of the decline was experienced during April and May – the peak impact of COVID-19 restrictions up to this point,” Mr Ward says. “Importantly those challenging months were followed by a rebound in June, supported by an opening of the economy and confidence in the Government stimulus measures.”

He adds that the company is in a strong financial position, with $633.9m of available liquidity as at June 30, which “provides us with the flexibility to pursue new opportunities that we expect to arise in a challenging market”.

AP Eagers chief Martin Ward in the showroom. Picture: Mark Cranitch.

9.03am: APRA eases call for dividend freeze

APRA has eased its call for a freeze on bank and insurer dividends, but told companies to retain at least half of their earnings when it comes to making decisions on any payouts.

After the regulator in April made the recommendation that banks and insurers consider deferring dividends, it today said uncertainty had eased, but companies should still maintain caution.

They set out three points of guidance, saying firms should retain half of their earnings, conduct regular stress testing and make use of capital buffers to absorb the impacts of stress.

“Although the environment remains one of heightened risk, we now have a stronger sense of how Australia’s economy and financial institutions are being impacted by COVID-19,” chairman Wayne Byres said.

“On that basis, APRA believes that banks and insurers do not need to continue to defer capital distributions, provided they moderate payments to sustainable levels based on robust stress testing, and continue to prioritise supporting their customers and the economy.”

8.18am: CIMIC may sell Thiess stake

CIMIC Group says it is in advanced talks to sell a 50pc stake in mining services provider Thiess to funds advised by Elliott Advisors, without saying what a deal might be worth.

CIMIC said a completed deal would see it jointly control the business with Elliott. It hopes to conclude talks within weeks.

“The introduction of an equity partner into Thiess would capitalise on the robust outlook for the mining sector and provide capital for Thiess’ continued growth, while enabling CIMIC to maintain its strong balance sheet,” Cimic told the ASX.

Dow Jones Newswires

7.05am: Movies to go faster to video

Movies will play in theatres for much less time before moving to home video under a new agreement between theatre chain AMC Entertainment Holdings and Universal Pictures, up-ending the way Hollywood has done business for decades.

Under the deal, the “theatrical window” will shorten to 17 days, from the current 75, at least when it comes to movies made by Comcast Corp’s Universal that play at AMC theatres, the world’s biggest movie theatre chain. That means that instead of waiting two and a half months to watch a new movie at home, viewers will be able to see at least some titles just two and a half weeks after they premiere in theatres.

The deal settles a public spat between the two companies over how soon new films should be allowed to appear on digital platforms; AMC said it wouldn’t play any Universal releases after the studio said it would continue experimenting with putting movies online while they were still in theatres.

The argument was essentially academic since most theatres have been closed since mid-March due to the coronavirus pandemic. Amid those closures, Universal made “Trolls World Tour” available as a $US20 online rental on April 10, the day it had been scheduled to open in theatres.

Dow Jones Newswires

7.00am: Starbucks takes another virus hit

The coronavirus is still weighing on Starbucks Corp.

The coffee giant reported its steepest earnings per share losses in more than a decade as a result of lower sales and higher costs stemming from the pandemic.

Global same-store sales plunged by 40 per cent in the quarter ending in June, and the Seattle-based chain reported a loss of $US704 million, down around 17pc from a year earlier.

But that was better than many analysts expected given the severity of the blow the pandemic has dealt to the Starbucks, first in China, then across Asia, Europe and the US. The chain said it expects the worst effects of the virus to moderate in its current quarter.

Dow Jones

6.20am: ASX to open lower

Australian stocks are tipped for a weaker start as the global share rally faltered.

At about 6am (AEST) the SPI futures index was down 22 points, or 0.4 per cent.

Yesterday, Australian stocks gave up gains of as much as 1.2pc to finish lower by 0.4pc as gold prices rallied to a new record, but gave up gains in the afternoon.

The Australian dollar was this morning at US71.55c, up from US71.38c at yesterday’s 4pm close.

6.10am: Wall St weaker on earnings

US stocks slipped after some large American companies reported weaker-than-expected earnings, raising new concerns about the fallout from the coronavirus pandemic.

The Dow Jones Industrial Average fell around 205 points, or 0.8 per cent, to 26379 at the close of trading in New York. The S&P 500 lost 0.6 per cent, while the Nasdaq Composite index declined 1.3 per cent.

Shares of manufacturing conglomerate 3M, fast-food giant McDonald’s and motorcycle maker Harley-Davidson were among those that declined after earnings reports. Investors are watching this earnings season closely, both to gauge the impact of the coronavirus crisis on profits and for a sense of what companies are expecting in the months ahead.

Stocks have rebounded from their pandemic-crisis lows, supported by aggressive monetary policies and economic stimulus. Now investors must balance dismal headline earnings with more optimistic projections for coming quarters.

“I don’t think the market really cares about second-quarter earnings,” Bob Doll, chief equity strategist and senior portfolio manager at Nuveen. “I think it really cares about what the future looks like. How will the third quarter compare to the second and what about 2021?”

Still, 3M shares slid 4.9pc after the manufacturer reported a sharp drop in sales in the second quarter, driven by weakness in its transportation and health care segments as businesses made fewer cars and planes and hospitals performed fewer elective procedures.

McDonald’s fell 2.8pc after the burger chain reported a deeper-than-expected drop in profit, as fewer people ate at restaurants and the company spent millions of dollars to help keep its franchises operating. Harley-Davidson shares dropped 1pc after the company said motorcycle sales fell by more than a quarter.

Among gainers, shares of Pfizer rose 3.9pc after the company’s results beat expectations and it raised its full-year outlook. The US has agreed to pay Pfizer and BioNTech nearly $US2 billion to secure 100 million doses of their experimental COVID-19 vaccine.

Apart from earnings, broad market moves were once again heavily influenced by large technology companies, which were mostly lower after posting gains on Monday. Apple was recently down 0.8pc on the session while Google parent Alphabet had also slipped 0.8pc, though both were still up for the week.

Investors also are watching for progress on a coronavirus-relief bill.

Overseas, the Stoxx Europe 600 ticked up 0.4pc. The Shanghai Composite Index rose 0.7pc and South Korea’s Kospi climbed 1.8pc. Japan’s Nikkei 225 fell 0.3pc.

Gold prices rose 0.7pc to $US1944.90. The precious metal has soared in recent months, driven higher by the drop in inflation-adjusted interest rates caused by central banks’ efforts to bolster economic activity during the pandemic. Gold pays no income, so becomes more attractive to investors when yields on other assets decline.

Traders could gain more insight into the Federal Reserve’s plans when it concludes a two-day policy meeting tonight (AEST).

Dow Jones Newswires

6.00am: Big tech to face Congress

Big Tech will come under the glare of a national spotlight tonight (AEST), as four of its leaders face questions from members of Congress aiming to rein in what they believe is excessive power in the hands of a few giant companies.

The chief executives — Amazon.com’s Jeff Bezos, Apple’s Tim Cook, Facebook’s Mark Zuckerberg and Google’s Sundar Pichai — are set to appear before the House Antitrust Subcommittee investigating the market dominance of online platforms.

Their testimony could help build public pressure for government action, especially if the back-and-forth with lawmakers raises new concerns about the way the big technology companies operate.

“These platforms have been allowed to run wild and free from really any constraints,” Democract David Cicilline, the subcommittee chairman, said in an interview. “The responsibility we have is to make clear what the impacts are of the lack of competition in the digital marketplace.”

For the CEOs, it is a chance to make the case that their success derives not from monopoly power, but from their ability to meet consumer needs.

Dow Jones

5.55am: Gucci sales fell 34pc

Gucci’s sales and operating profit fell sharply in the first half, hit hard by lockdowns imposed worldwide to fight the coronavirus pandemic.

The Italian fashion house appeared to lose market share against two of its main rivals, Louis Vuitton and Dior, the French luxury brands owned by LVMH Moët Hennessy Louis Vuitton. Gucci’s revenue fell 34pc to EUR3.1 billion ($US3.6 billion) in the half, its parent company, the Paris-based Kering SA, reported. Sales at LVMH’s fashion and leather goods division — the bulk of which is Louis Vuitton and Dior — were down just 23pc in the half.

Gucci’s operating profit slid 51pc to EUR929 million.

Gucci has been struggling over the past year with slowing momentum, after three years of breakneck growth under its creative director Alessandro Michele. Mr Michele’s more recent fashion shows have displayed a less eclectic aesthetic than the one that propelled the brand in years past, when he mixed professional-sports logos with Renaissance-era silhouettes and sent models down the runway carrying replicas of their own heads.

Dow Jones

5.50am: Goldman CEO concert slammed

David Solomon’s side gig as a DJ generated unwanted attention when New York Governor Andrew Cuomo slammed a concert where the Goldman Sachs CEO performed as “illegal and reckless.”

Cuomo took to Twitter to express his displeasure with the “Safe & Sound” fundraiser, held over the weekend in the swanky beach town of Southampton.

Cuomo posted a video of participants — some having paid as much as $US25,000 — dancing in crowds and seeming to ignore social distancing rules meant to counter the coronavirus.

“Videos from a concert held in Southampton on Saturday show egregious social distancing violations. I am appalled,” said Cuomo.

“The Department of Health will conduct an investigation. We have no tolerance for the illegal & reckless endangerment of public health.”

Goldman Sachs CEO David Michael Solomon. Picture: AFP

Cuomo’s tweet did not mention Solomon, who was the opening act for the Chainsmokers, with proceeds set to go to No Kid Hungry, a child hunger charity, and other groups.

Solomon, who performs as DJ D-Sol, had said on Instagram that he was “excited” to be part of the event, which was a billed as a “drive-in fundraiser experience.” Solomon “performed early and left before the show ended,” a Goldman Sachs spokesman said.

“David agreed to participate in an event for charity in which the organisers worked closely with the local government and put strict health protocols in place,” the spokesman said.

“The vast majority of the audience appeared to follow the rules, but he’s troubled that some violated them and put themselves and others at risk.”

AFP

5.45am: Kodak turns to drugs

Erstwhile photo giant Eastman Kodak will launch a new business manufacturing pharmaceuticals amid the coronavirus pandemic, using a $US765 million government loan, the company announced.

The loan from the US International Development Finance Corporation (DFC) will fund the creation of Kodak Pharmaceuticals, which “will produce critical pharmaceutical components that have been identified as essential but have lapsed into chronic national shortage,” the agency said in a statement.

The firm, which signed a “letter of interest” with the DFC on Tuesday, will produce “up to 25 per cent of active pharmaceutical ingredients used in non-biologic, non-antibacterial, generic pharmaceuticals.” Kodak, once a giant in the world of photography whose business has struggled in recent years as cell phones have replaced cameras and film, will expand its existing facilities in Rochester, New York and St. Paul, Minnesota.

A once familiar sight – Kodak film. Picture: AFP

AFP

5.42am: Gold at new high, shares struggle

Gold chalked up another record peak before pulling lower as the US dollar clawed back earlier losses, while equity markets struggled with mounting coronavirus fears, dealers said.

With fresh infection spikes in Asia and Europe — on top of the already high number of new cases in the US — and new containment measures, the global economic outlook remains clouded.

Virus uncertainty combined with China-US tensions sent gold soaring nearly 30 per cent this year — and on Tuesday it struck another record pinnacle at $US1981.27 per ounce in Asian trade.

That smashed the previous day’s peak, but the precious metal later pared its gains.

Some observers still predict $US2000 could be broken as early as this week. In the meantime, the focus is on the US Federal Reserve’s policy meeting this week, which is tipped to result in more easing measures to support the world’s top economy.

US second-quarter economic growth data are also due this week, and any disappointing reading could fuel further dollar weakness — and as a side effect, the surge in the gold price.

“There seems to be enough momentum in the US money supply to actually push gold higher,” Fat Prophets analyst David Lennox said.

London closed up 0.4 per cent, Frankfurt was flat and Paris lost 0.2 per cent.

Most Asian stock markets had earlier made gains after overnight strength on Wall Street.

AFP

5.40am: US consumer confidence dims

US consumer confidence deteriorated in July as the coronavirus pandemic intensified, with the short-term outlook for business conditions, earnings and employment all worsening, according to a key survey.

The Conference Board research firm said its consumer confidence index fell to 92.6 from 98.3 in June, worse than analysts expected amid a surge in coronavirus cases nationwide that has hampered the tentative economic recovery.

“Looking ahead, consumers have grown less optimistic about the short-term outlook for the economy and labour market and remain subdued about their financial prospects,” said Lynn Franco, The Conference Board’s senior director for economic indicators.

“Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending.” The index shot up more than 12 points in June as states lifted lockdowns meant to stop COVID-19 from spreading.

AFP

5.35am: Air traffic ‘not back before 2024’

Global air traffic will not return to levels seen before the coronavirus pandemic until at least 2024, the International Air Transport Association said.

Uncertainty about the timing of border reopenings is the main factor, IATA’s chief economist Brian Pearce told a news conference.

“We now are expecting 2019 levels not to be reached until 2024 which is a year later that what we had previously expected,” he said.

The outlook depends on how countries manage “to control the virus”, he said. “What we haven’t seen is a wide spread of reopening, particularly for long haul, particularly for inter-Atlantic travel,” he said.

Any recovery in the second half of the year would be “slower than we hoped” after a weaker-than-forecast rebound in May and June.

Because of rising COVID numbers in some countries, the reopening of international borders would take longer than previously forecast, he said.

For 2020 as a whole, IATA now expects a 63-per cent drop in air traffic, worse than its previous forecast of 55 per cent, Pearce said. IATA, which groups 290 airlines, projects their income to be amputated by half this year compared to 2019.

Idle planes sit on Hong Kong's Chek Lap Kok International Airport. Picture: AFP

AFP

5.32am: African Development Bank chief cleared

An independent panel of experts, headed by former Irish president Mary Robinson, has cleared the beleaguered leader of the African Bank of Development (AfDB) of corruption, according to a report obtained by AFP.

Akinwumi Adesina, 60, a charismatic speaker known for his elegant suits and bow ties, became the first Nigerian to helm the AfDB in 2015 — but a 15-page report earlier this year claimed that under his watch the bank had been tarred by poor governance, impunity, personal enrichment and favouritism.

The panel of three experts, led by Robinson alongside Gambia’s Chief Justice Hassan Jallow and the World Bank’s former integrity vice president Leonard McCarthy, cleared Adesina of all charges alleged by whistleblowers.

AFP

5.30am: Pfizer lifts forecast

Pfizer reported a drop in second-quarter profits, but lifted its full-year forecast on expectations that medical activities curtailed by coronavirus will return in the second half of 2020.

The drugmaker, which is working on a vaccine for COVID-19, said it temporarily suspended clinical trials during the second quarter and halted marketing meetings with medical professionals, with the latter impacting new prescriptions in the United States and other markets.

The company also suffered a hit of around $US500 million from reduced visits to doctors by patients in the US due to the outbreak.

But these trends were partially offset by higher sales for some items that have been used to treat COVID-19, such as sterile injectable products.

The drugmaker reported profits of $US3.4 billion, down 32 per cent from the year-ago period. Revenues fell 11 per cent to $US11.8 billion.

Pfizer boosted its full-year adjusted earnings targets by three cents to $2.85 to $2.95 a share.

AFP

5.27am: McDonald’s profits tumble

McDonald’s reported a steep drop in second-quarter profits on much lower sales due to coronavirus closures that affected most of the chain’s worldwide network.

The fast-food company suffered a 68 per cent drop in profits to $US483.8 million, following a 30 per cent decline in revenues to $US3.8 billion.

Comparable sales tumbled throughout major markets for the food giant, but the US outperformed other regions because of drive-through and takeaway service that continued even where in restaurant dining service was stopped.

Sales improved throughout the quarter in the US and in some international markets as governments lifted lockdown restrictions and more activity resumed.

“Our strong drive-through presence and the investments we’ve made in delivery and digital over the past few years have served us well through these uncertain times,” said Chief Executive Chris Kempczinksi. “We saw continued improvement in our results throughout the second quarter as markets reopened around the world.”

McDonald’s last week announced it would begin requiring customers to wear face masks in US restaurants on August 1 because of coronavirus and would pause its plan to reopen more US dining rooms while the country battles the outbreak.

McDonald’s said about 2,000 US restaurant dining rooms have reopened with reduced seating capacity, almost 15 per cent of its total number of restaurants in the company’s home market.

McDonald's reported a steep drop in second-quarter profits. Picture: AFP

AFP

5.20am: Nissan flags $US6.4bn loss

Crisis-hit Japanese automaker Nissan warned of a massive $US6.4 billion net loss for the current fiscal year as it reels from the impact of the coronavirus pandemic.

Nissan, which had delayed an annual forecast because of ongoing uncertainty, issued the warning as it reported a first-quarter net loss of 285.6 billion yen ($US2.7 billion) on plunging sales.

“These results … reflect a full quarter of COVID-19 disruption that we knew would undermine our performance in key markets,” chief operating officer Ashwani Gupta said announcing the results.

“As you can see, the pandemic had a severe impact on our operations,” he added. Nissan said the value of global sales plunged 50.5 per cent, with falls across markets including Japan, China and the United States.

And it warned the woes would continue, forecasting annual sales will plunge 21 per cent to 7.8 trillion yen following a 15 per cent drop the previous year.

AFP

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