ASX falls flat in final match as oil rout shatters sentiment

Shares staged a stunning 3pc reversal intraday but failed to hang on to the rally, falling to a flat close.

David Rogers and Melissa Yeo

33 min read

6:14AMApril 22, 2020.

Updated 5:10PMApril 22, 2020

An oil pump jack in California, Donald Trump has ordered his administration to come up with a plan to aid US oil companies struggling with a massive supply glut and record-low crude prices. Picture: AFP

Ramsay launches $1.4bn raise
Stockpiling boosts A2 Milk revenues
Oil jitters prompt broad risk aversion
WiseTech trading in-line despite virus

That’s it for the Trading Day blog for Wednesday, April 22. The Australian market fell 2.3pc early, came back with a 0.6pc late rally but finished flat at the close in another volatile session. Oil jitters continue to shake sentiment, sending overseas markets into a spin overnight and serving a blow to local energy stocks in today’s session.

Retail sales for March showed an unprecedented surge of 8.2 per cent thanks to panic buying of groceries while in company news, Ramsay Health was halted for a $1.4bn raise and A2 Milk posted a surge in revenue thanks to stockpiling.

4.56pm: Retail names cheer sales boost

A record surge in retail sales provided a slight boost to retail names on Wednesday, even as coronavirus restrictions continue to limit trade at their physical stores.

JB Hi-Fi gained 3.8 per cent to $33.34, Premier Investments lifted by 0.8 per cent to $12.90

and Domino’s edged up by 0.3 per cent to $50.81.

Myer extended its store closures to May 11 but still its shares lifted by 5.6 per cent to 19c.

In the grocery names, Coles added 1.1 per cent to $16.18 and Woolworths added 0.8 per cent to $36.29 while Metcash gave up 3.4 per cent to $2.54.

Kathmandu closed its retail entitlement offer to raise $50m - the retail chain was sold off by 4 per cent to 73c.

Meanwhile, A2 finished higher by 1.7 per cent to $18.62 on reports that panic buying in the March quarter had lifted revenues.

Here’s the biggest movers at the close:

4.16pm: Shares finish flat despite late surge

The market staged a stunning 3 per cent reversal in Wednesday’s trade but fell flat in the final match under the weight of the commodity names.

Continued weakness in oil markets prompted an early 2.3 per cent slide to lows of 5100.7 as jitters spilt into the broader financial markets and while the benchmark ASX200 tried for much of the day to push higher, it wasn’t until the final 30 minutes of the session that the rally picked up to as much as 0.6 per cent.

Despite that, the benchmark fell almost completely flat by the close to finish down 0.1 point at 5221.2.

Meanwhile, the All Ords lost 2.5 points or 0.05 per cent to 5276.1.

3.54pm: Shares surge to daily highs

The local market has found its legs in the final hour of trade, surging to gains as much as 0.6 per cent.

Just before the close, the ASX200 is up by 30 points or 0.57 per cent to 5251.3 - reversing losses as much as 2.3 per cent.

Gerard Cockburn 3.43pm: BHP still a buy: Goldmans

Investment analysts at Goldman Sachs say BHP’s third quarter production report was softer than expected, but retain a Buy rating on the heavyweight miner thanks to its valuation and strong balance sheet.

The brokerage indicated that all BHP’s production divisions were weaker than its estimates, with the exception of iron ore.

Looking ahead, forecasted output for oil and metallurgical coal are expected to be in the lower end of BHP’s financial year guidance, while copper guidance is under review. Iron ore estimates are set to remain in the range of 273-286Mt.

Despite lower than anticipated production, Goldman Sachs keeps BHP at a buy for its strong balance sheet and strong future cash flows of $US9bn, alongside high returning green/brownfield projects and potential asset sales.

BHP last down 3pc to $29.15.

Joyce Moullakis 3.24pm: AMP facing strike vote call

Influential proxy advisory house ISS has urged investors to vote against AMP’s annual pay report, citing a misalignment of executive remuneration with shareholder interests.

In a report issued to investors, and obtained by The Australian, ISS says a vote against the AMP pay report “is warranted”.

“The company has reintroduced STI (short-term incentive) and LTI (long-term incentive) plans to mark the return to a market-accepted incentive structure following the attempted implementation of a misaligned combined incentive plan which removed longer term performance measures,” the report said, noting several aspects and practices that “misaligned with shareholder interests, the company’s performance and accepted market practice”.

AMP last traded down 5.9 per cent to $1.28.

Eli Greenblat 3.07pm: Myer extends store closures

The nation’s biggest department store Myer has decided to keep its stores closed until at least May 11 in the wake of the coronavirus pandemic, leaving its 10,000 staff in limbo along with hundreds of thousands of other retail workers currently sitting at home with no pay to wait out the health crisis.

It follows an announcement by Solomon Lew’s Premier Investments yesterday that it would also keep the doors of its fashion outlets closed until May 11 as the retail sector follows the directives of government and health authorities to limit social interaction and the spread of the coronavirus.

Myer closed its stores late last month for an initial period of four weeks with an opening date slated for April 27.

MYR last traded up 2.8 per cent to 18.5c.

2.44pm: Aussie dollar bounces on retail sales

The Australian dollar bounced from a two-week trough as surprisingly strong retail sales data at home helped offset risk aversion globally and prompted a bout of short-covering.

The Aussie rose by 0.4 per cent to 63.14 US cents, having slipped 0.8 per cent overnight to as low as 62.54 US cents. It briefly reached as high as 63.54 US cents but could sustain the rally.

The New Zealand dollar steadied at 59.73 US cents, after dropping 1.1 per cent overnight to as deep as 59.36 US cents.

Both had been under pressure as a drastic slide in oil prices sparked speculation that some investors, companies and countries might have to dump other assets to cover their losses.

AUDUSD last at US63c.

AAP

Elias Visontay 2.13pm: Gov’t to boost local fuel storage

The government will expand Australia’s local fuel storage capacity, announcing it is taking advantage of historically low fuel prices by amassing a strategic fuel reserve overseas to ultimately ship back to Australia.

Energy Minister Angus Taylor said the government will spend $9m on the strategic fuel reserve, and that the fuel will be initially stored in the United States until Australia has developed further capacity to store its reserves.

“We’ve seen prices go negative in recent hours and are remaining very, very low,” Mr Taylor said on Wednesday afternoon.

“Initially, that reserve will be held in the United States, where there is spare storage. We have full storages here in Australia. But in time, we are exploring opportunities with the industry to establish local storage.

Follow the latest in politics at our COVID-19 Crisis live blog

Gerard Cockburn 2.07pm: RBA bond buying to continue: UBS

UBS economists believe the Reserve Bank will continue buying bonds in an attempt to avoid upward pressure on long-term bond yields.

The brokerage weighed in on comments from RBA Governor Philip Lowe yesterday regarding the central bank’s economic forecasts and tapering of its quantitative easing measures.

The RBA will now scale back its daily bond buying to $750m, with the plan to move bond buying to only Monday, Wednesday and Thursday.

“If the RBA buy only $0.5bn each working day (as they did today), total purchases ‘only’ rise from $47bn now to ~$0.2tn by mid-2021, far less than our projected ~$0.5tn lift in total Government debt by next year to ~$1.5tn. Hence, we expect ongoing buying will be necessary to avoid unwanted upward pressure on long-term bond yields,” UBS economist George Tharenou noted.

He adds the RBA’s 10 per cent unemployment rate predictions falls in line with the brokerage’s estimates, which anticipates peak unemployment to be 10.5 per cent.

UBS also said its inflationary outlook was broadly similar to that of the RBA, predicting a second quarter CPI decline of 1.5 per cent, which would make it the largest quarterly drop since the Great Depression.

Nick Evans 1.46pm: Lithium glut weighs on Orocobre

Lithium producer Orocobre says the price it receives for its lithium products has almost halved since a year ago, as the glut of global production weighs on the market.

ASX-listed Orocobre released its March quarter production report on Wednesday, saying its Argentinian brine operations were forced to halt in the period due to the coronavirus which, along with planned maintenance, cost it 21 days of lost production.

But the report also underlined the savage plunge in lithium prices over the last year, with Orocobre saying received prices for its lithium carbonate have fallen to $US4810 a tonne, almost half of the average $US9451 a tonne it booked in the March 2019 quarter.

ORE last down 2.2pc to $2.02.

1.39pm: ASX spikes briefly into positives

Local shares have fought their way into positive territory, reversing a daily loss as much as 2.3 per cent to trade up by 0.2pc.

Although only brief, the ASX200 popped higher to 5231.8 as all four of the major banks pushed higher.

Commonwealth Bank is higher by 1pc as NAB adds 1.7pc, Westpac gains 0.5pc and ANZ lifts by 0.9pc.

ASX last down 0.16pc to 5212.8.

Perry Williams 1.19pm: Brent may fall below $10: Citi

Brent oil may plunge below $US10 a barrel amid crude storage distress with Oil Search potentially caught up by rising regional tank levels, Citi says.

A prolonged period of regional tanks at capacity would threaten Oil Search’s PNG LNG production given issues storing liquids from its Kutubu and Hides oil and gas fields.

“If Oil Search can’t access buyers then it risks LNG production being shut in because of nowhere to store condensate,” Citi analyst James Byrne says.

The broker says liquids from Kutubu and Hides would have to go into Oil Search’s storage tanks at its central processing facility and Gobe, assuming its Gobe, Moran, Agogo, and Usano oilfields are shut in.

They would provide 10 days of storage cover, potentially extended by reinjecting some liquids back into Oil Search’s oilfields. Still, with Asian customers likely to buy the company’s liquids blends it will take a “prolonged period” of regional crude at capacity to threaten the company’s LNG production.

Brent oil fell a further 4 per cent on Wednesday to $US18 a barrel after sliding 24 per cent in the previous session.

Citi now expects periods of Brent pricing in the single digits and holds a $US17 a barrel forecast for the second quarter.

Oil Search last down 2.8 per cent to $2.43.

Read more: Kathmandu in $NZ207m raising

9.52am: Challenger AUM fall 8pc

Challenger said its assets under management fell by 8pc in its fiscal third quarter, reflecting the market rout in March and superannuation funds making redemptions to improve their liquidity.

Challenger said its assets under management totalled $79bn at the end of March. The annuities provider said Wednesday that its life investments portfolio also fell 4pc to $19bn.

“Following the significant investment market sell-off during March, Challenger has reflected lower carrying values for its fixed income, property, equities and infrastructure investments,” the company said.

Still, Challenger reaffirmed guidance for normalised net profit before tax of between $500m and $550m for the 12 months through June.

“The guidance reflects the impact of changes to Life’s investment portfolio and lower Funds Management earnings from lower funds under management following the equity market sell-off,” Challenger said.

CGF last traded at $4.41.

Dow Jones Newswires

Gerard Cockburn 9.37am: Hub24 takes hit from virus volatility

Hub24 says cash inflows into its investment and superannuation platforms have remained strong, despite negative market movements causing a multi-billion dollar dent in its total funds.

Releasing its March quarter results on Wednesday morning, the fintech noted its funds under administration (FUA) fell by $2.1bn to $15.1bn from December 31, despite inflows of $1.4bn, due to the crippling effects of coronavirus.

HUB24 said FUA movements impact its revenue through its ability to charge administration fees, and consequently flagged a likely hit to its revenue for the full year.

“However, increasing transactional revenue, changes in portfolio asset composition, and the effect of tiered administration fees each act to soften this revenue and earnings impact,” it said.

Quarter net inflows totalled to $1.4bn, up 72 per cent compared the previous corresponding period in 2019. Its FUA position at March 31 was up 32 per cent over the same period.

Hub24 last traded at $9.20 per share.

9.23am: Oil jitters to prompt broad risk aversion

The local market is set to continue its losing run in Wednesday’s session, after US stocks took their biggest drop in three weeks overnight.

Overnight futures relative to fair value suggest a hit of 2.1 per cent at the open – which will take the benchmark ASX200 to two-week lows of 5111.7.

Oil woes continue to dominate, sharply hitting risk sentiment and prompting a dip in bond yields and flight to the US dollar.

Expiring of the May WTC contract triggered a collapse in the June contract overnight, pushing it lower by more than 60pc.

“The oil reality check has triggered a reassessment across risk assets with the global equity board a sea of red,” NAB senior FX strategist Rodrigo Catril says, citing a more than 3pc drop on the S&P 500 overnight.

“Looking at the breakdown of the S&P 500 overnight performance, all sectors have recorded falls for the day, but you may be surprised to learn that yesterday’s underperformers (Energy, Utilities and Real Estate) are the best performers today, while financials and IT are the big underperformers.

“ … Price action overnight does play to the view that the rout in oil prices is triggering a reassessment on the outlook for other sectors.”

Locally, preliminary retail sales for March are released later today, set to show a rise from panic buying.

ASX200 last at 5221.3.

Jared Lynch 9.14am: Ramsay seeking $1.4bn

Australia’s biggest private hospital operator Ramsay Health Care is tapping the market to raise more than $1bn – the biggest capital raising of the year – a day after the Morrison government partially lifted its ban on elective surgery.

Ramsay entered a trading halt on Wednesday pending an announcement regarding an institutional placement and share purchase plan, joining a suite of listed companies seeking to fortify their balance sheets amid the coronavirus pandemic.

The hospital group is seeking to raise $1.4bn, made up of $1.2bn in new equity through an underwritten institutional placement and up to an additional $200m via a non-underwritten retail share purchase plan.

The placement will be at $56.00 per new share, a 12.9 per cent discount to the last closing price on Tuesday. Ramsay says it will temporarily suspend its dividend while continuing to actively focus on limiting or deferring discretionary expenditure and capex

The capital raising comes as the revenue of private operators has shrivelled in the past month after the government banned non-essential surgeries to limit the spread of coronavirus. On Monday, those restrictions will be gradually lifted with the resumption of 25 per cent of elective surgeries from IVF procedures to knee replacements.

9.02am: WiseTech trading in-line despite virus

Global logistics group WiseTech has maintained its earnings and revenue forecasts for the full year, saying growth in new users had offset any demand reduction from COVID-19.

WiseTech said it had factored coronavirus disruptions into its forecasts at its first half results in February, reaffirming its projections for revenue growth of between 21pc and 29pc and earnings growth between 5pc and 22pc.

Despite that, the group said it was prioritising capital flexibility due to uncertainty in the broader logistics industry, even as it expected “demand for global technology, digital transformation and integrated platforms, such as CargoWise, will continue to accelerate”.

It said it was “proactively tightening the focus of investments in new products, reducing discretionary cash expenditure, and deferring execution of our acquisition pipeline appropriately”.

WTC last traded at $13.78

8.58am: United Airlines slashes capacity into June

United Airlines Holdings on Tuesday said it cut about 80pc of its capacity for April, and currently expects to cut 90pc of its capacity for May, as the COVID-19 global pandemic continues to impact travel.

United also said it expects similar cuts for June, adding that it “plans to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand”.

United said it expects to receive about $US5bn from the Treasury Department through its Payroll Support Program under the coronavirus Aid, Relief, and Economic Security Act, with the first instalment coming on or about April 21.

The company also expects to have the ability through September 30 to borrow up to around $US4.5bn from Treasury for a term of up to five years under the CARES Act, it said.

Dow Jones Newswires

8.51am: What’s on the broker radar?

APA Group cut to Hold – Morgans
Adairs cut to Market-weight – Wilsons
Alliance Aviation raised to Overweight – Wilsons
Cooper Energy cut to Hold – Bell Potter
Dexus price target cut 22pc to $10.37 – Credit Suisse
Incitec Pivot raised to Overweight – JP Morgan
Magellan cut to Hold – Ord Minnett
Oil Search raised to Neutral – Credit Suisse
Orica raised to Neutral – JP Morgan
Vocus raised to Buy – Morningstar

Elias Visontay 8.46am: Virgin restructure to take 2,3 months

The administrator leading Virgin’s administration process hopes to achieve a restructuring of the airline within two to three months.

Vaughan Strawbridge, the Deloitte financial advisory partner in charge of the process, said Virgin was in a very different situation to Ansett – which took several years to wind up – because there are several potential buyers with “a good set of knowledge” of Virgin which gives the restructuring “a massive head start”.

“I think it’s important to distinguish, this is not an Ansett. Ansett was a very different set of circumstances so the two are not comparable,” Mr Strawbridge told ABC Radio National.

“When we look at the timetable, we want to achieve a restructuring of this business within the next two to three months. Now, why can we do that so much quicker?

“We have a group of parties who have been looking at this at this business from an interim funding perspective and also around raising debt in the past. So there’s a lot of people who have got a good set of knowledge around this business, which gives us a massive head start,” he said.

Baggage handlers prepare to unload freight from a Virgin Australia aircraft on the tarmac at Brisbane International airport on April 21. Picture: Patrick Hamilton/AFP.

8.42am: Ramsay Health halted for raise

The nation’s largest private hospital operator, Ramsay Health, has been halted ahead of the open pending details of a capital raising, tipped to be in excess of $1bn.

In a notice to the market this morning, Ramsay said it was soon to launch an institutional placement and share purchase plan.

It requested the halt until Friday, or until the completion of the placement was announcement.

The move comes as the Morrison government has outlined a plan for a staged reopening of elective surgery, which is key for Ramsay.

Billions of dollars has been raised across corporate Australia in recent weeks as companies attempt to bolster their balance sheet in the face of the COVID-19 downturn.

RHC last traded at $64.29.

8.05am: Snap revenue soars in pandemic

Snap reported a surge in growth in users and revenue in the first quarter, as homebound users turned to its chat app for connection with friends amid the pandemic.

The results mark a surprise as many analysts estimate sharp decreases in digital ad spending in the quarter, the first to show the impact of the coronavirus crisis.

As Snap is the first social media company to report results for the quarter, its performance could bode well for heavyweights Facebook and Alphabet, which deliver earnings next week.

Communication with friends on the company’s Snapchat app increased by more than 30 per cent in the last week of March compared with the last week of January, the company said. In areas hardest hit by the pandemic, communication with friends on Snapchat increased more than 50 per cent.

Dow Jones

7.45am: A2 Milk beats expectations

Dairy group A2 Milk says its third quarter revenue came in above expectations thanks to strong sales of its infant formula products in both Australia and China.

“This primarily reflected the impact of changes in consumer purchase behaviour arising from the COVID-19 situation and included an increase in pantry stocking of our products particularly via online and reseller channels,” the company said in a statement to the ASX on Wednesday.

But A2 said it didn’t know how long the sales bonanza would last. “We are unable to estimate the timing and extent to which pantry stocking may unwind,” its statement said.

The quarterly result was also boosted by the drop in the New Zealand dollar against the greenback during the period, the company said.

“Overhead costs are now tracking lower than previously expected due to travel restrictions and some planned recruitment, particularly in China, being temporarily delayed,” A2 said.

Despite the healthy third quarter, A2 said the outlook for its full year result remained uncertain, with the availability of supply chains and state of consumer demand difficult to predict.

“Overall for FY20, we anticipate ongoing revenue growth across our key regions supported by increased levels of marketing investment in China and the USA as well as, to the extent practicable in the current circumstances, the ongoing development of our organisational capability to support the execution of our strategy,” it said in its statement.

Revenue for the full year would be in the range of $1.7bn to $1.75bn, it predicted. Assuming that $200m in marketing can be deployed as planned, full year EBITDA margin would be in the range of 31 per cent to 32 to per cent and higher than advised at half year results in February, A2 said.

A donated package of A2 Milk from Waywise Logistics headed to Wuhan, China earlier this year. Picture: Jane Dempster/The Australian.

7.20am: ASX tipped to fall

Trade on the Australian share market is likely to be marred after more losses in oil prices, as demand plunges due to the coronavirus pandemic.

At 7am (AEST) the SPI 200 futures contract was down 109 points, or 2.1 per cent, at 5,090.0, following heavy losses overnight on Wall Street.

The cost for a barrel of US oil to be delivered in June plunged 43 per cent to $US11.57 dollars.

A day earlier, oil futures fell below zero for the first time.

The S&P/ASX200 benchmark index finished Tuesday trade down 131.7 points, or 2.46 per cent, to 5,221.3 points.

The All Ordinaries index ended the day lower by 134.5 points, or 2.45 per cent, to 5,353.0 points.

The Australian dollar was buying US62.80 cents, down from US63.22 cents at Tuesday’s close,

AAP

6.30am: Netflix adds 16m new subscribers

Netflix beat its forecast for subscriber growth in the first quarter as consumers in many countries stayed at home due to the coronavirus pandemic and hunted for ways to entertain themselves.

The streaming giant said Tuesday it added 15.8 million new paid subscribers around the world in the quarter, more than double the 7 million new subscribers it had predicted for the period. In the first quarter a year ago, Netflix added 9.6 million new subscribers globally.

“Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth. In our case, this is offset by a sharply stronger US dollar, depressing our international revenue, resulting in revenue-as-forecast. We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon,” Netflix said in its letter to shareholders.

Shares were up 6pc in after-hours trading. The stock is up 34pc year to date, making the streaming service one of the few companies to see its shares appreciate since the coronavirus crisis started.

Dow Jones

6.10am: US stocks end lower

The Dow Jones Industrial Average dropped more than 600 points, battered by plunging oil prices, in the latest bout of market turbulence sparked by the coronavirus pandemic.

Major indexes opened sharply lower and continued tumbling in afternoon trading as the sell-off in oil accelerated. The stock market’s losses were broad: 29 of the 30 stocks in the blue-chip index declined, as did all 11 sectors in the S&P 500. Both indexes suffered their first back-to-back sessions of losses since April 1.

The Dow industrials fell 631 points, or 2.7 per cent, while the S&P 500 dropped 3.1 per cent and technology-laden Nasdaq Composite dropped 3.5 per cent.

The declines mark a setback after stocks finished their biggest two-week rally in decades on Friday. The Dow and S&P 500 remain down more than 15 per cent for the year, while the Nasdaq is off 8 per cent.

After yesterday plunging 2.5 per cent, Australian stocks are set for another steep fall at the open. At 6am (AEST) the SPI futures index was down 101 points, or 2.0 per cent.

The rout in the oil market continued, a day after US crude-oil futures dropped below zero for the first time ever, as a sharp drop in global economic activity erases demand for energy.

“The oil industry’s got a huge challenge. There’s just too much supply and an anticipation that storage will reach capacity,” said Justin Onuekwusi, head of retail multiasset funds at Legal & General Investment Management. “What’s clear is you’re going to see increased volatility in the oil price going forward.”

Brent crude plummeted 24 per cent to $US19.33 a barrel, its lowest level since 2002, while barrels of West Texas Intermediate crude to be delivered in June plunged 43 per cent to $US11.57 a barrel. Prices are about $US30 for contracts that end in December, suggesting that investors expect oil demand to rebound by then.

Refineries, storage facilities, pipelines and ocean tankers have filled up rapidly as oil producers failed to drop output fast enough, while investors bet that an economic rebound later in the year could drive a rebound in crude prices.

The price of a barrel of WTI crude to be delivered in May settled at $US10.01 a barrel, recovering after earlier dipping into in negative territory. Tuesday is the contract’s expiration day, which can lead to unusual trading as physical oil traders jockey over delivery of barrels of oil into storage. The contract dropped to minus $US37.63 Monday.

In the wake of the declines, Saudi Arabia and other members of the Organisation of the Petroleum Exporting Countries are considering cutting their oil output as soon as possible, The Wall Street Journal reported. Under the group’s recent production agreement with the U.S. and Russia, the cuts were set to begin next month.

Yields on the 10-year Treasury note fell to 0.571pc, from 0.625pc Monday, reflecting investors’ waning risk appetite as they move funds into the perceived safety of US government bonds.

In Europe, investors remained nervous about the prospects for aid from across the region for debt-laden countries in the south. The yields on Greek and Italian bonds ticked up. Investors are betting that eurozone ministers will fail to agree on a common debt-issuance program at a meeting later this week. Such a program would share the financial burden of shielding economies among the member nations as a recession looms.

The pan-continental Stoxx Europe 600 declined 3.4 per cent, led lower by Germany and France. In Asia, Hong Kong’s Hang Seng index fell 2.2 per cent. South Korea’s Kospi Composite dropped 1 per cent and Japan’s Nikkei 225 fell 2 per cent.

Dow Jones

5.42am: US oil futures recover

A day after its historic slide into negative territory amid a supply glut, US oil futures finished in positive territory although the market remained under heavy pressure.

Futures of US benchmark contract West Texas Intermediate for delivery in May ended at $US10.01 a barrel after finishing Monday’s session at -$US37.63 a barrel.

But WTI futures for delivery in June plunged 43 per cent to $US11.57 a barrel, the lowest ever since the contract was established in 1983.

Brent crude oil, the international standard, fell $us6.24, or 24.4PC, $US19.33 a barrel.

AFP

5.40am: OPEC discusses ‘dramatic’ oil situation

The OPEC alliance of oil producers said “several” member states, and some of its allies in the OPEC+ grouping, held a teleconference to discuss the plunge in oil prices caused by the coronavirus pandemic.

The organisation tweeted that ministers held an “informal teleconference to brainstorm the current dramatic oil market situation” but it was not clear whether Saudi Arabia, OPEC’s largest producer, took part.

A photo tweeted by the organisation appeared to show representatives from countries including Nigeria, Iraq and Venezuela taking part but there was no confirmation of which countries joined the meeting.

OPEC said the teleconference was held at the initiative of Mohamed Arkab, energy minister of Algeria, which currently holds OPEC’s presidency.

A spokeswoman for Russian Energy Minister Alexander Novak said Russia — viewed as the leader of the OPEC+ grouping — did not take part.

AFP

5.35am: Oil market in turmoil

Oil-price turmoil gripped traders once more, a day after US crude futures crashed below zero for the first time as the coronavirus crisis crippled global energy demand and worsened a supply glut.

The commodity rout also sent world equity markets spiralling lower, as investors fretted it could compound an expected deep global economic downturn.

WTI on Monday collapsed to an unprecedented intraday low of minus $US40.32. Negative prices mean traders must pay to find buyers to take physical possession of the oil — a job made difficult with the world’s storage capacity at bursting point.

Storage is a particularly big problem in the US where WTI oil is delivered at a single, inland point. In Europe, where Brent is the benchmark, there are several such points and their proximity to the sea allows some of it to be stored on tankers.

This week’s massive sell-off came ahead of Tuesday’s expiry of the May contract. Most trading has now moved to the June contract, and May WTI was back in positive territory by the late European afternoon.

European benchmark Brent North Sea oil for June delivery tumbled to an 18-year low, before coming off worst levels in volatile deals.

“Players are now paying buyers to take oil volumes away as the physical storage limit will be reached. And they are paying top dollar,” said Rystad Energy analyst Louise Dickson.

Oil markets have been ravaged this year after the pandemic was compounded by a price war between Saudi Arabia and Russia.

While the two big oil producing nations have drawn a line under the dispute and agreed with other countries to slash output by almost 10 million barrels a day, that is not enough to offset the lack of demand.

Equity markets were meanwhile also deep in the red on Tuesday, having enjoyed a healthy couple of weeks thanks to massive stimulus measures and signs of an easing in the rate of new infections globally.

Key eurozone stocks markets closed with declines of up to four per cent, while London did a little better thanks to a weaker pound.

AFP

5.32am: Credit Suisse protest

Shareholders should oppose the re-election of Swiss banking giant Credit Suisse’s chairman Urs Rohner following a massive spying scandal, the powerful Ethos shareholder organisation, representing 225 Swiss pension funds, recommended.

Ahead of the Credit Suisse Group’s annual general meeting on April 30, Ethos also recommended that shareholders oppose the bank’s board and executive remuneration in light of the negative impact that the “surveillance case” had had on the bank’s reputation.

The scandal broke last September, with the discovery that surveillance had been ordered on Iqbal Khan, a star banker and former wealth management chief.

Khan was tailed after he jumped ship to competitor UBS amid concerns he was preparing to poach employees and clients.

Subsequent revelations showed the bank had also spied on another employee, and it has also been accused of surveillance of members of the environmental campaign group Greenpeace.

AFP

5.30am: Surge in UK benefits applications

The number of people seeking benefits in the UK is rising at the fastest pace on record and reinforcing fears that the country could see a surge in unemployment from its near 45-year low as a result of the lockdown measures put in place to contain the coronavirus pandemic.

Government figures released Tuesday showed that the number of people seeking to tap the country’s main benefit – Universal Credit – has soared in the weeks since the curbs on everyday life were implemented.

Following an analysis of the government figures, the independent Resolution Foundation economic think tank, says that 1.77 million individuals made a declaration for Universal Credit in the four weeks since the government advised against non-essential contact and travel on March 16. At their peak, in the week after the restrictions were tightened on March 23, the daily number of new applications was running at eight times the normal rate.

5.28am: Saudi monitoring oil markets

OPEC kingpin Saudi Arabia said it was closely monitoring oil markets and stood ready to take further measures after crude prices plunged to historic lows.

“The kingdom continues to closely monitor the situation in the oil markets and is prepared to take any additional measures in co-operation with OPEC+ and other producers,” the cabinet said in a statement cited by the official Saudi Press Agency.

It said cabinet reiterated that the kingdom is constantly working to achieve stability in the oil market, reaffirming a commitment along with Russia to implement agreed output cuts over the next two years.

Under the deal, which ended a bitter price war amid a supply glut with the coronavirus pandemic battering global demand, Riyadh and Moscow will cut 2.5 million barrels per day each.

AFP

5.27am: Trump orders oil aid

President Donald Trump ordered his administration to come up with a plan to aid US oil companies struggling with a massive supply glut and record low crude prices.

“We will never let the great U.S. Oil & Gas Industry down,” Trump tweeted. “I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!”

We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!
— Donald J. Trump (@realDonaldTrump) April 21, 2020

Trump’s tweet came a day after the price of the benchmark US crude crashed to its lowest level ever in New York trading, falling to -$US37.63 a barrel.

The culprit was slowing demand for oil as the coronavirus pandemic hammers global economic growth, along with a supply glut fuelled by a price war between Saudi Arabia and Russia that’s caused crude storage in the US to grow scarce.

An agreement struck last week between OPEC and other major oil producers to cut just under 10 million barrels per day of production seemed unable to reassure traders.

The squeeze was also fuelled by Tuesday’s expiration of May futures contracts — meaning traders who buy and sell the commodity for profit were suddenly scrambling to offload the contract, or else they would have to take physical delivery of the commodity despite having no place to store it.

That sent share prices of US oil companies plunging.

AFP

5.25am: US home sales plummet

US sales of existing homes cratered 8.5pc in March with real estate activity stalled by the coronavirus outbreak.

The National Association of Realtors said Tuesday that 5.27 million homes sold last month, down from 5.76 million in February. The decrease was the steepest since November 2015.

Home-buying had been steady for the first half of March because of low mortgage rates and the finalisation of contracts signed in prior months, only to collapse in response to COVID-19 burying the economy in a recession.

Sales in March were still 0.8pc higher from a year ago, when mortgage rates were higher than now. The number of homes for sale in March plunged 10.2pc from a year ago to 1.5 million properties.

The national median sales price jumped 8pc over 12 months to $US280,600.

5.20am: Coke volume plunges 25pc

Coca-Cola’s global volume has tumbled 25pc in April as the coronavirus pandemic gripped large swathes of the world population.

The year began strongly at Coke, with volumes up 3pc through February excluding China, where the outbreak had locked down major cities, and the company was on track to reach its financial targets.

The deterioration, however, was rapid. Within a month the Tokyo Olympics, of which Coke is a major sponsor, were off. Theatres and restaurants closed from Europe to America and people sheltered in place.

Almost half of Coke’s sales come from theatres, vending machines, shows, musical and other events. Almost all of the volume decline to-date in April came from sales at such events.

As the virus spread, the behaviour of consumers shifted radically. The Atlanta company saw sales spike as people loaded up pantries, though those sales have since levelled off.

Global unit case volumes rose 7pc in China in January, then it began to slide.

The same pattern was repeated first in Europe, then in North America. Sales of soft drinks, juice, dairy, coffee and tea fell during the quarter, though water and sport drinks rose 2pc in the Americas.

First-quarter net income jumped 65pc to $US2.8 billion, or 64 cents per share. Adjusted for one-time items, the company earned 51 cents per share, easily beating Wall Street projections of 44 cents per share, according to FactSet. Coke’s adjusted revenue of $US8.6 billion also edged out analyst projections.