ASX swings to lowest since 2016 as financials tumble
The local market has closed sub-5000 at its lowest levels since 2016 as heavyweight financials were sold off.
- ASX sinks to lowest since 2016
- Afterpay valuation drops by a third
- Westpac tips 7pc unemployment by Oct
- Virgin to suspend international flights
- Aussie dollar hits 17-year low
That’s it for the Trading Day blog for Wednesday, March 18. Australian shares finished at their lowest levels since 2016, a 6.4pc daily drop, as new restrictions on travel and public gatherings stoked fears of a recession.
Tourism names took another hit from the government’s ban on international travel, and despite concessions for the nation’s airlines.
The local sell-down came after Wall Street jumped overnight following the White House’s plans for $1.2 trillion of stimulus.
Meanwhile, the Aussie dollar is trading near 17-year lows - last at US60.06c.
5.15pm: UK futures signal decline ahead
UK futures are pointing to an early drop near 5 per cent after another red session on our local market.
The FTSE 100 overnight finished higher by 2.8 per cent - helped higher by stimulus efforts by the UK and US governments.
Meanwhile, US futures were halted earlier today as their hit their downside limit.
David Swan 5.02pm: Afterpay valuation drops by a third
Shares in pioneering buy now, pay later provider Afterpay crashed by more than 30 per cent on Wednesday, a mammoth drop for a stock once considered a market darling and the hottest tech stock on the bourse.
As the coronavirus epidemic continues to plague the retail sector ‘buy now, pay later’ providers are some of the hardest hit, with Afterpay shares falling 33 per cent on Wednesday to $12.76. It dragged with it the tech sector as a whole, which closed down around 10 per cent.
The fall means Afterpay has plummeted 68 per cent in the last 30 days, with ASX-listed rival Zip down 66 per cent and Sezzle down 61 per cent.
Priot to the COVID-19 threat, Afterpay’s share price was as high as $41.14, which gave the company a valuation of more than $10bn.
4.52pm: Major banks lead ASX sell-off
Recession fears continued to hit the major banks on Wednesday, sending the sector lower by 7.6 per cent by the close.
Commonwealth shed 5.5 per cent to $63.95, Westpac took a 7.8 per cent hit to $15.90, NAB wound back by 7 per cent to $16.01 and ANZ lost 9.7 per cent to $16.62. Macquarie dropped 12.8 per cent to $91.05.
Similarly, heavyweight miners were sold off - BHP lost 3.8 per cent to $27.14, Rio Tinto ticked lower by 3.7 per cent to $79.91 and Fortescue gave up 3.2 per cent to $10.35.
Gold miners were the key standout, as a weak Aussie dollar sent the local gold price soaring to new records of $2650 an ounce.
St Barbara put on 9 per cent to $2.13, Evolution lifted by 8.8 per cent to $3.95, Northern Star added 7.8 per cent to $11.86 and Newcrest put on a more moderate 1.6 per cent to $24.39.
Here’s the biggest movers at the close:
4.16pm: ASX drops to lowest close since 2016
A broad market drop erased all off the previous day’s gains to send the ASX to its lowest closing levels since 2016.
That’s despite a rally on Wall Street, as fears of a local recession were stoked by further restrictions on travel and a rising local coronavirus case count.
The latest measures to curb the coronavirus outbreak have fed recession fears, sparking the unwinding of yesterday’s 5.9 per cent lift - the market’s biggest since 1997.
By the close on Wednesday, shares were down 340.2 points or 6.43 per cent to 4953.2.
Richard Gluyas 3.55pm: Morrison readies to go big
Scott Morrison is preparing to unleash a huge fiscal and monetary policy package designed to deal with the coronavirus, in moves that will largely mirror the “wartime” initiatives unveiled overnight by Boris Johnson’s government in Britain.
The federal Government is understood to be applying the finishing touches to a series of far-reaching announcements scheduled to be made on Thursday and designed to cushion the impact of the virus.
Financial regulators including the Reserve Bank of Australia and the Australian Prudential Regulation Authority are also likely to play a role in seeking to reassure businesses and consumers that the economy will continue to function.
That could be helping the local market, with shares trimming their earlier loss to 4.75pc from 7pc earlier this afternoon.
Read more: Morrison readies to go big with rescue package
Bridget Carter 3.35pm: MUFG offloads $US80m Wiggins stake
DataRoom | MUFG Bank has offloaded $US80m in the Wiggins Island Coal Export Terminal.
The trade was understood to have occurred on Wednesday and it is believed to be on the back of a decision by MUFG eager to exit various investments around the market.
WICET, located in Queensland, underwent a recapitalisation in 2017 that staved off a collapse of the coal infrastructure asset constructed amid boomtime conditions.
It was funded by more than $4bn of debt, to be paid for by miners incurring charges to ship coal out of the terminal over time through take-or-pay contracts.
Various lenders to the asset sold their debt before the restructure, but this is the first trade for some time.
3.30pm: National Storage hammered as bidder walks
National Storage has taken a 29 per cent blow after suitor Public Storage abandoned its $1.9bn takeover bid.
The company cited the current market volatility as the driving force.
“Whilst we spent some time pursuing three unsolicited indicative offers that may have been attractive opportunities to maximise value for our securityholders we remained focussed on our core business throughout those discussions. NSR will continue to focus on its strategy of maximising returns via our diversified revenue streams as outlined in our 1H FY20 results discussion with our securityholders.”
NSR last traded down 29pc to $1.28.
Read more: Public Storage suspends National Storage bid
Bridget Carter 3.28pm: Ticketek credit rating downgraded
DataRoom | Ticketek owner TEG has had its ratings downgraded to Negative on the back of the on-mass gathering restrictions related to the coronavirus outbreak.
S&P affirmed its ‘B’ rating and said the group’s revenue and earnings would be significantly impacted by sports and artist events that would continue to be suspended and postponed.
Earlier, S&P issued a ‘B’ rating on the group’s US$285m first-line term loan B, consisting of a $US205m tranche and an $118.2m tranche and at the same time, affirmed its CCC+ issue rating on TEG’s $US100m second-line term loan B.
3.13pm: Afterpay decline triggers circuit breaker
A 34 per cent decline in Afterpay has triggered a circuit breaker response from the local bourse - with trade halted temporarily.
The stock has taken a 34 per cent or $1.73bn decline to $12.56 apiece.
The bourse pauses trading in individual stocks for two minutes if the price triggers its Extreme Trade Range mechanism, unique for every stock.
Michael Roddan 3.07pm: RBA to make policy announcement tomorrow
The Reserve Bank has added a 2.30pm “Monetary Policy Announcement” in its schedule tomorrow before a 4pm phone conference chair by governor Philip Lowe
A monetary policy announcement will be released on the wires and our website tomorrow at 2.30 pm. This will be followed by the Governor's speech at 4.00 pm - https://t.co/Pa7z5f34FJ pic.twitter.com/xJw30fJR0U
— RBA (@RBAInfo) March 18, 2020
2.52pm: Auckland Airport traffic dives
Auckland Airport says its international traveller numbers had dropped off by 44 per cent on Monday alone - after the country enacted some of the most stringent travel restrictions to curb the spread of coronavirus within its borders.
In an update to the market, after its national carrier already warned off the substantial hit to its earnings, the dual listed Auckland Airport said its international passenger numbers had dropped 25 per cent in the seven days to March 16, compared with the same week last year.
On Monday alone, it reported a 44pc fall versus the same day of the week in 2019.
“Auckland Airport will continue to keep the market updated as significant new information emerges,” it said.
AIA last traded up 1.98pc to $5.15.
Read more: New Zealand announces toughest border restrictions
2.42pm: ASX dives 6.4pc
Australia’s S&P/ASX 200 has dived 6.4pc to 4956.1, more than erasing Tuesday’s 5.8pc rise.
A daily close below 5002 would mark the lowest daily close in at least four years.
Afterpay is still melting down, plunging 32pc to $12.99 on recession fear, while Macquarie is down 13pc.
One theory is that the smart money got wind of Trump’s $US1.2 ($2tn) spending plan yesterday, then “sold the fact” amid no sign of a peak in the virus.
2.02pm: Worley delays, cuts coming: JPM
The outlook for contractor Worley has changed materially with lower oil prices and stunted global growth likely to mean cuts to spending and delays to projects among its energy clients, JP Morgan said.
Worley was hit by a big sell-off Wednesday with its shares tumbling 17 per cent to $5.96 as Brent crude trades under $US29 a barrel, off by more than half since the start of the year.
While Worley’s $4.6bn takeover of Jacobs last year eased its dependence on oil and gas by adding more chemicals exposure, the contractor is still subject to big swings in the commodity cycle as energy companies urgently work to cut discretionary spending.
Oil and gas now accounts for about 47 per cent of its earnings with chemicals at 43 per cent.
JP Morgan cut Worley’s 2020 net profit forecast by up to 25 per cent reflecting market uncertainty and downgraded the company to a neutral rating.
“Our previous investment case has been significantly challenged and we do not necessarily believe there is strong near-term growth anymore.”
1.51pm: Virus downgrades dent these companies
The widening impact of coronavirus and consequent government restrictions is rippling through the local market, with many locally-listed companies forced to abandon their previous outlook statements.
In trade today, the following companies have provided updates on their trade:
- Aristocrat today said social distancing was softening demand, its shares are off 7.7 per cent to $19.69
- SkyCity, the owner of Adelaide casino, has warned it may shut casinos – its shares are lower by 10.8 per cent to $1.95
- Kathmandu warned the clampdown on travel was denting performance of its Rip Curl stores, many of which are in Europe - its shares are lower by 17.4 per cent to $1.41
- Flight Centre has said its accelerating its business review as its shares trade lower by 3.5 per cent to $15
- Ramsay Health says its trade was impacted by use of its European facilities to treat coronavirus patients, as non-urgent surgeries were put off. Its shares are down by 4.2 per cent to $57.05
Bridget Carter 1.46pm: US suitor drops National Storage bid
DataRoom | Public Storage has suspended its plans to embark on a $1.9bn takeover of the National Storage REIT.
The US-based rival had offered $2.40 per share for the Australian company that was halted from trade on Wednesday. Its market value is currently $1.43bn.
It comes after the group came close to finalising due diligence on the target.
However, the Public Storage board is understood to have made the call to suspend the takeover plans.
1.34pm: Flight Centre in crisis talks
Flight Centre says its accelerating its “urgent business review” to identify more cost and cash saving initiatives after the government today urged all Australians not to travel abroad.
Just a week after announcing the closure of 100 stores, the travel agent said further job losses were “inevitable” as it holds talks with its landlords, suppliers, vendors, insurers and banks to manage the impact of “a precipitous drop in travel activity in the near term”.
“FLT is in active discussions with its people at all levels. Within this challenging trading cycle, the company will seek to preserve as many roles as possible but job losses across the
industry and within the company are inevitable,” it said.
FLT last traded down 4.8 per cent to $14.79.
Read more: Flight Centre drops guidance, to close 100 stores
1.15pm: Stressed loans rising: S&P
The number of stressed housing loans rose in January, according ratings agency Standard & Poor’s.
While the figures don’t take in the escalation of the coronavirus crisis, the trend is worrying for banks and other lenders.
The Standard & Poor’s Performance Index, which measures missed payments for Australian prime mortgages, increased to 1.36 per cent in January from 1.28 per cent a month earlier.
Arrears typically rise in January, reflecting the end of the Christmas season and peak of summer holidays. Non-conforming arrears (which usually covers low documentation loans) continued to increase in January, rising to 3.61 per cent from 3.47 per cent a month earlier.
However S&P says it expects arrears to rise in coming months as the transmission effects of COVID-19 ripple through the broader economy.
“Pressure on employment is likely to surface in many sectors, particularly tourism and the broader services sector. Across Australian RMBS portfolios, we believe self-employed borrowers are most exposed to the deterioration in economic conditions,” the agency said.
“Cash-flow pressures are likely to surface in the coming weeks for many self-employed borrowers as reduced demand for services and delays in receiving supplies take effect. Targeted fiscal measures to help businesses will help, but we expect debt-serviceability pressures to surface for many self-employed borrowers, particularly those who operate in the tourism, leisure, and hospitality sectors.”
Banks and financials are leading share market losses down today. CBA down 5.8 per cent, ANZ down 7.8 per cent and NAB down 5.5 per cent. Westpac is down 5.9 per cent.
1.02pm: Afterpay slides as ASX extends sell-off
Australian shares continue to slide, the ASX200 tumbling 5.1pc to 5022 points.
Financials have been smashed, with Macquarie down12pc, Suncorp down 11pc and the major banks down 5.3-5.9pc.
Scentre has dived 10pc - prompting a statement that all Australian Westfield shopping centres remain open and Westfield has sufficient liquidity to cover all 2020 debt maturities.
Afterpay has been partly vaporised - down 27pc to a 52-week low of $13.87.
12.39pm: National Storage halted as deal in doubt
Takeover target National Storage has entered a trading halt pending an announcement from the group, with doubt its $1.9bn deal with US group Public Storage will go ahead amid the market volatility.
Its private equity suitors walked away from the deal earlier this month, but Public Storage had been the last man standing, despite a significant de-rating of National Storage shares.
In a filing to the market on Wednesday, the company said it was requesting a halt until March 20.
NSR last traded at $1.46.
12.31pm: Supermarkets drive ‘modest’ retail sales
Preliminary figures from the ABS for February show a modest rise in retail sales for the month, driven largely by panic buying of groceries.
The early data released today by the ABS showed a 0.4 per cent lift – the first rise since November.
NAB points out that supermarket sales were the key drivers as clothing sales fell and a drop-off in international visitors dented duty-free stores and luxury goods retailing.
“March sales will capture the surge in virus-driven buying of household essentials at supermarkets, where supermarkets account for 35pc of total retail trade,” economist Kaixin Owyong says.
“This could well overwhelm weakness in spending elsewhere, but NAB will get a better sense of the figures in its cashless retail index.”
12.23pm: BofA survey suggests ‘buy signal’
Bank of America sees a contrarian “buy signal” from its Global Fund Manager Survey after a historic collapse in sentiment this month.
Fund manager sentiment is close to GFC lows in terms of cash and corporate leverage amid the biggest drop in global growth expectations since the survey began in 1994.
“Investor sentiment has collapsed on the back of the coronavirus, oil shock, recession, and surging debt default risk,” says BofA chief investment strategist, Michael Hartnett.
BofA’s flagship sentiment index, the BofA Bull & Bear Indicator fell from 2.5 to 1.7, triggering its first contrarian “buy signal” for risk assets since August 2009.
12.14pm: $A weakness helping gold miners
Gold miners are dominating as the market’s best performers in midday trade, as investors flock to perceived “safe havens”.
Gold Road Resources are leading the run, up 19.5 percent while Saracen Minerals is higher by 14.5pc and St Barbara by 12.5pc.
Silver Lake Resources is higher by 11.5pc while Evolution adds 10.5pc.
Weakness in the Aussie dollar is pushing the local gold price to new highs – last at $2556.65 an ounce.
Read more: Australia to overtake China as world’s biggest gold producer
12.05pm: Qantas could survive a year without flying: Citi
In another blow for local airlines, Scott Morrison today advised all Australians not to travel abroad as a means of stemming the spread of coronavirus.
The move is sending Qantas shares further into freefall – now down more than 63 per cent year to date. But Citi analyst Jakob Cakarnis notes that the airline “could survive a complete flying shutdown for almost a year”.
If all planes were grounded, he says the airline would have to rely on its Frequent Flyer business to cover fixed costs of $465m, resulting in a cash burn of $330m a month.
“With available liquidity of ~$2.2bn (or $3.5bn including aircraft sale and leaseback) we estimate that Qantas could withstand 6 – 11 months of no flying before having to reduce its cost base further, increase gearing or raise equity (unlikely),” he says.
Citi estimates FY20 profit before tax of $229m, implying a second half loss of $542m and lifts its rating on the stock to a Buy with a target price of $3.70.
“We model a U-shaped recovery, with demand and operating conditions recovering through 1H21e to 2H21e. We expect that the company will suspend its dividend from 2H20e, in order to preserve its balance sheet.”
Read more: Qantas slashes international flights by 90pc
Damon Kitney 11.45am: Carbon Rev cuts guidance after raise
Carbon Revolution has downgraded its earnings and sales guidance after successfully raising $25m to bolster its balance sheet amid an unprecedented slowdown in the global automotive industry.
The company told the ASX on Wednesday that, after deciding not to take on new employees due to the coronavirus induced slowdown, total revenue for the financial year ended 30 June 2020 would now be approximately 87pc of the FY20 prospectus forecast, or approximately $54m. This is a significant reduction but remains a 260pc increase on the prior year.
The Company also now does not expect to become EBITDA positive during FY20 and now forecasts EBIT for FY20 to reduce by approximately $5m compared to the FY20 prospectus forecast. These forecasts assume customers continue to purchase to plan; no negative impacts on supply chain continuity and production does not need to stop or be further constrained.
Chairman James Douglas said “The capital raising has been well supported by existing institutional shareholders whose participation has validated the Board and management team’s prudent and measured response to the current environment. Our primary objective is to keep our workforce safe and to ensure that Carbon Revolution is well positioned to deal with the impacts of the COVID-19 virus. We feel that this approach will give us the best chance of still meeting the needs of Carbon Revolution’s customers while we carefully manage the risks that this virus poses to our team and operations. The Board and management team will continue to monitor the situation closely and act on new information as it comes to hand.”
Subject to the assumptions noted above, the Company expects the wheel production rate for June 2020 to remain broadly in line with the prospectus forecast.
Carbon Revolution said the decision to cease recruitment activity should not impact the Company’s ability to deliver on contracted minimum capacity obligations to its OEM customers.
The company also intends to undertake a non-underwritten share purchase plan capped at A$3m.
Joyce Moullakis 11.09am: GFC-like crisis to hit banks by 20pc: MS
A “mild recession” in Australia would see Morgan Stanley downgrade its major bank earnings estimates by a further 10 per cent, jumping to 20 per cent if conditions mirroring the global financial crisis emerge.
In a note to clients on Wednesday, analysts led by Richard Wiles said Morgan Stanley’s estimates already factored in a 10 per cent earnings headwind from worsening credit quality over two years.
“We assume that financial year 2021 estimated loss rates reach an average of about 75 basis points of non-housing loans, which is in-line with the long run average,” they said.
“This means that further downgrades to our forecasts would average circa 10 per cent in the ‘mild recession’ scenario and circa 20 per cent in the 2009 scenario. In 2009, the major banks’ loss rates ranged from 155 basis points to 183 basis points.”
The analysis comes after S&P on Tuesday warned that the impact of COVID-19 on the economy would see banks’ credit losses nearly double in 2020 — to about 30 basis points of gross loans and advances — up from historic lows in 2019.
10.56am: Qantas leads declines on travel warning
Qantas shares are the worst performing in the top 200 this morning, after Scott Morrison urged Australians not to travel abroad.
Qantas shares are lower by 13.3 per cent to $2.48.
Across the rest of the travel names, Webjet is lower by 5.3pc, Flight Centre by 5.4pc, and Corporate Travel by 6.6pc.
Read more: PM warns all Aussies: don’t travel abroad
10.51am: RBA adds $10bn in liquidity
The RBA looks to have added record $10bn of net liquidity to the Australian financial system today via its daily repurchase operations.
An almost as large liquidity add last Friday (alongside huge liquidity plans from the Fed) helped spark an amazing 13pc intraday bounce in Australian shares.
Today’s addition has helping narrow repo spreads, but hasn’t stopped the S&P/ASX 200 dropping 4.2pc to 5065 after bouncing 5.8pc yesterday.
In today’s offering the RBA offered four tranches of repos for a total of $10.714bn.
“Of note the spread against OIS was narrower at 20bp - a long way from the 30-40bp over OIS (overnight index swap rate) we have seen recently,” says a trader.
Perry Williams 10.44am: Oil Search slashes spending, slows work
Oil Search has slashed spending, suspended its Alaskan sale and slowed work on a $20bn LNG expansion in Papua New Guinea in response to the plunge in crude prices.
Spending for 2020 has been cut to a range of $US440m ($735m) to $US530m from $US710m to $US845m previously while investment from April will fall to between $US200m to $US300m from $US400m to $US500m.
Further cuts could be put in place for 2021 if lower oil prices persist. Oil has fallen to a four-year low below $US30 a barrel, piling pressure on energy companies.
“While it is premature to forecast budgets for 2021, if lower oil prices persist, Oil Search will focus on protecting the value of our core assets and limiting any other activities. We are also well advanced in preparations to rapidly reduce our operating and corporate costs, for immediate implementation,” managing director Keiran Wulff said.
Revised guidance on operating costs will be issued once the deferral of capital projects and restructuring costs has been quantified. The planned sale of a 15 per cent stake in its Alaskan assets has been suspended although talks continue with several parties.
All work on developing an early production system for its Pikka oil unit in Alaska has also been placed on hold. Dialogue is continuing on the company’s planned PNG expansion, which still requires a P’nyang pact to be agreed with the government, although work on the development will slow.
“At present, we have assumed that activities on LNG expansion are minimal. If agreement on P’nyang terms is reached and the joint ventures move into the FEED phase in 2020, it is anticipated that spend on the projects would be modest over the balance of the year,” it said.
10.43am: Global recession is here: S&P
S&P Global Ratings is forecasting a global recession this year, as the spread of coronavirus accelerates and its economic effect worsens.
In a report, S&P economists say they now estimate GDP growth in 2020 at just 1.0pc to 1.5pc with “risks remaining firmly on the downside”.
“The initial data from China suggests that its economy was hit far harder than projected, though a tentative stabilisation has begun,” says S&P Global’s Chief Economist Paul Gruenwald.
“Europe and the US are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year.”
He adds that downside risks include how growing restrictions on person-to-person contact will affect economic activity, policymaker decisions and the likelihood that restrictions will be lifted more slowly than thought, similar to the current Chinese experience.
10.35am: Travel bans prompt Air NZ suspension
Air New Zealand has requested a suspension from quotation from the local bourse, after stringent travel bans were imposed by the New Zealand government to stop the spread of coronavirus.
In a filing to the market today, Air NZ said the degree of the NZ restrictions “was unexpected and will have a significant impact on the Issuer’s business”.
Adding to that, further bans in Australia and further abroad, were set to dent its earnings.
The airline requested a halt until Friday March 20.
AIZ last traded at $1.57.
10.28am: ASX smashed by 3.3pc
Shares remain super volatile with the Australian market smashed in early trading.
Australia’s S&P/ASX 200 dropped 3.3pc to 5117.7 points while S&P 500 futures are down 2pc.
Yesterday’s massive gains of about 6 per cent in both markets haven’t been immediately sustainable. A sharp rise in bond yields in response to increasing fiscal stimulus is a potential concern for equities.
It’s likely that the money coming out of bonds will go to cash rather than shares at this point.
Rumors of that Australia will be in lockdown by Monday may be driving the sharp selloff in Australia.
There’s also an increasing number of Australian companies withdrawing their earnings guidance. REA Group is the latest to do so, while Oil Search has slashed capex and suspended its Alaska project selldown.
Big falls in Tech, Energy, Consumer Discretionary, Health Care, Financials, Industrials and Communications are being partly offset by gains in Utilities, Consumer Staples and Materials.
Banks are back down 2-4pc after double-digit gains yesterday,
Michael Roddan 10.26am: OzForex takeover dumped amid volatility
Australian currency transfer business OzForex has been dumped at the altar for a second time since 2015, as wild market fluctuations amid the coronavirus pandemic killed off an “unsolicited” takeover approach.
OzForex shares have fallen about 30 per cent from their February peak, and are down about 45 per cent over the last 12 months.
However, the company said it had seen strong turnover in February and March as a result of the market volatility, which would boost its earnings this year to between $36.8 and $38.3m.
“OFX also advises that having recently received an unsolicited approach, the company entered into discussions about potential M&A activity, the details of which remain confidential. However, in light of uncertain equity markets, these discussions have been discontinued. The FY20 results will include some corporate action costs resulting from these discussions,” OzForex said in a statement on Wednesday.
10.15am: Shares slip early
The local market is lower by 1.9 per cent early, giving back some of yesterday’s 5.9pc lift, after Prime Minister Scott Morrison called for all citizens to return home and extended restrictions on public gatherings to any more than 100 people.
The benchmark ASX200 is trading lower by 100 points or 1.89 per cent to 5193.5.
10.03am: Westpac tips 7pc unemployment by Oct
Australia’s unemployment rate will hit 7pc by October, according to Westpac chief economist Bill Evans.
Mr Evans has revised his unemployment forecast up from a previous estimate of 5.8pc to 6.0pc after slashing his economic growth forecasts amid mandatory quarantine requirements for international travellers, restrictions on large public gatherings, a brutal sell off in the global equity markets, and reports of limited liquidity in government and corporate debt markets. “Not surprisingly, as these events have moved quickly, we have made some major changes to our estimates of the impact of COVID-19 in both the March quarter and the June quarter,” Mr Evans says. Growth through 2020 is now estimated at 1.5pc with minus 1pc in the first half and 2.5pc in the second half.
Mr Evans sees larger negative shocks to the labour intensive sectors such as recreation; tourism; education; renovations and additions; and dwelling construction.
The rise in unemployment is expected despite anticipating a significant “discouraged worker effect” lowering the participation rate.
9.53am: Aussie dollar hits 17-year low
The Aussie dollar dropped to new 17-year lows overnight as US strimulus lifted the dollar.
AUDUSD hit US59.59c, and last traded at US59.96c.
The Australian Dollar is extremely close to parity against the New Zealand Dollar pic.twitter.com/GbBBIvbH4c
— David Ingles (@DavidInglesTV) March 17, 2020
9.49am: ASX vulnerable to pull back
Australia’s sharemarket should trade mostly weaker today after surging on Tuesday.
Charts now favour a 5000-5300 range for the S&P/ASX 200, implying potential dips of 5.5pc today.
The index rose 6pc to 5293.4 points on Tuesday, its best day since 1997, as investors anticipated further monetary and fiscal stimulus globally. But may now be vulnerable to pullbacks after such a strong rise, particularly amid a sharp rise in bond yields, although 5000 has attracted strong buying to date.
Australian 10-year yields jumped 15bpts to a 4-week high of 1.21pc - despite looming QE - as the US 10-year surged 36bps to 1.08pc on looming “helicopter money” of about $1000 per head.
An RBA rate cut, QE and related measures may start Thursday when RBA Governor Lowe is due to speak at 4pm, but these measures are now well anticipated.
The federal government has announced a $715m funding package for airlines and more stimulus is expected this week. But increasingly harsh social distancing measures will worsen the coming recession, albeit they will slow the spread of the virus.
9.35am: Ramsay withdraws guidance
Private health care provider Ramsay says its hospitals around the world were stepping in to provide capacity assistance to foreign governments as the coronavirus outbreak widens.
In a statement to the market, the company withdrew its FY20 earnings guidance, citing uncertainty surrounding the spread, duration and impact of the virus.
At its European hospitals, some surgery had been deferred to allow for use of its facilities amid a squeeze on public health operations.
“The French government has cancelled all non-urgent surgery while our hospitals are providing much needed capacity and services as required by the French ministry of health. In the United Kingdom, elective surgery has not been cancelled but we are in discussions with the NHS to provide services and capacity to help deal with the impact of COVID-19,” managing director Craig McNally said.
“As the number of COVID-19 cases continues to escalate, we will see an impact on private volumes for the short term. However, in some cases, we are seeing decisions to fast-track elective surgery in order to minimise any future potential disruption.”
RHC last traded at $59.57.
Gerard Cockburn 9.28am: Aristocrat warns distancing hitting demand
Pokies maker Aristocrat Leisure has withdrawn its full year earnings guidance saying the coronavirus has created softer demand within the gaming industry.
The global provider of gaming machines noted social distancing measures implemented by governments is materially decreasing the demand for gaming venues.
“In global land-based markets, softer demand is becoming evident as a number of customers initiate temporary venue closures and adopt a more cautious approach to capital expenditure,” the company said in a statement to the ASX.
The group said it began monitoring the outbreak when its Macau and Asia Pacific operations started feeling the impacts of China’s shutdown in late January.
Aristocrat said its online digital booking remain unaffected at this time.
Bridget Carter 9.24am: AMP suspends corporate activity
The $4.5bn financial services provider AMP is understood to have suspended all corporate activity, including plans to sell down an interest in AMP Capital and offload its New Zealand wealth operations.
Shares are down from about $2 last month to about $1.445, as the panic selling across the market creates more pain for the wealth manager that has already faced a harrowing two years on the back of a fees-for-no-service scandal that emerged from the royal commission.
With its adviser UBS, AMP was understood to have been weighing options for its highly valuable AMP Capital, which has $200bn worth of assets under management, since November.
9.15am: WNB launches hand sanitiser range
Wellness and Beauty Solution is the latest ASX-listed company to pivot into the emerging industry of hand santiser as demand booms, with its first order from Chemist Warehouse.
In an update to the market, the group said its new MICRO19 antibacterial product range had already received orders of $400,000 from the chemist chain, with negotiations in play for further retail partners in Asia.
“In response to the evolving situation, we spent the last six weeks accelerating the development of our anti-bacterial products, which are now ready for launch with our first customer order. Our ability to be nimble has allowed us to move quickly on this opportunity,” managing director Christine Parkes said.
9.07am: What’s on the broker radar?
- Austal raised to Buy - Goldman Sachs
- Beach Energy raised to Overweight - JP Morgan
- Carnarvon cut to Neutral - JP Morgan
- Crown Resorts raised to Outperform - Credit Suisse
- IOOF raised to Hold - Bell POtter
- James Hardie GDRs raised to Sector Perform - RBC
- Kogan raised to Outperform - RBC
- Oil Search cut to Neutral - JP Morgan
- SCA Property raised to Buy - Jefferies
- Woodside cut to Neutral - JP Morgan
- Worley Parsons cut to Neutral - JP Morgan
Gerard Cockburn 9.04am: Mirvac withdraws guidance
Property developer Mirvac has withdrawn its 2020 financial year earnings guidance as the coronavirus pandemic continues to cast uncertainty over the company’s performance.
The commercial and residential developer has also withdrawn its distribution guidance and any additional forward looking statements, including comments about active and passive earnings.
Chief executive Susan Lloyd-Hurwitz said its priority remains keeping its sites safe for employees, customers and communities.
“As the effects of the COVID-19 outbreak impact Australia and our business, we are taking swift and prudent measures across the business, to not only protect our employees and stakeholders, but also provide transparency in what is an ever-changing environment,” she said.
Mirvac said its balance and debt position remains “robust” with a $944m in cash and gearing levels of 20.8 per cent as at December 31, 2019.
The group has a $200m of debt maturing in the next 12 months, which it says can be paid from existing facilities.
Its shares last traded at $2.44 each.
John Durie 8.59am: Ardent to shut US centres for two weeks
Theme park owner Ardent leisure will shut its Main Event operations in the US for two weeks in accordance with US regulations in the wake of the coronavirus.
The company went into a trading halt yesterday pending the news.
The Main Event division is a group of restaurants and entertainment centres in the US which is being effectively shut down temporarily by the Government.
Last half the division accounted for $154m of the group’s $263m in revenues and $36.1m of its $44m in earnings before interest tax depreciation and amortisation.
Read more: Coronavirus restrictions hit theme park owners
Perry Williams 8.55am: Oil Search spending cuts ahead
Oil Search is expected to issue an update to the market on Wednesday potentially detailing spending cuts amid a further plunge in oil to under $US30 a barrel.
The Papua New Guinea and Alaska-focused oil and gas supplier has been among the hardest hit energy stocks among Australian producers with its shares shedding 63 per cent of their value so far this year.
Oil Search’s $20bn PNG expansion being pursued with energy giants ExxonMobil and Total may be among those either delayed or on the chopping block. It could also look to cut capex in Alaska and questions remain over the timeline for a 15 per cent selldown of its interests in North America.
Crude plummeted 4 per cent to $US28.78 a barrel overnight putting the energy sector at crisis levels and marking a shift back to “survival mode”, consultancy Wood Mackenzie said.
“The biggest blow will be felt in Australia where companies are aiming to sanction large, strategically important backfill LNG investments in 2020. Significant projects in Southeast Asia will also be pushed back,” WoodMac’s Gavin Thompson said.
It sees $US35bn of spending at risk across Asia Pacific in the 2020 to 2022 period.
Jared Lynch 8.41am: Fonterra abandons dividend
Fonterra, the world’s biggest dairy exporter, will not pay an half-year dividend despite quadrupling its net profit to $NZ293m ($290m), saying the coronavirus pandemic has created too much uncertainty for it to payout shareholders.
The New Zealand company maintained its full year earnings forecast at 15-25 cents a share, saying it had already contracted most of its milk supply.
But chief executive Miles Hurrell said while earnings had been “tracking well”, it was not immune from the uncertainty which has infected the rest of the world as it battles the COVID-19 pandemic, fuelling market turmoil.
“There is no doubt that we have a number of risks that are outside our control in the second half – in particular, the potential impact of COVID-19 on global demand, geo-political risks in key markets such as Hong Kong and Chile, and ongoing dry weather conditions here in New Zealand which could impact collections and potentially input costs,” Mr Hurrell said.
“As a result, we have held our forecast earnings range at 15-25 cents per share.”
8.27am: Virgin to suspend international flights
Virgin says it will suspend all international flights from March 30 to June 14 as the coronavirus crisis hammers airline travel.
It also says it will also reduce group domestic capacity by 50 per cent until June 14.
Virgin told the ASX it will temporarily ground the equivalent of 53 aircraft from its fleet.
Virgin Australia CEO Paul Scurrah said: “We have entered an unprecedented time in the global aviation industry, which has required us to take significant action to responsibly manage our business while balancing traveller demands and supporting the wellbeing of Australians.
“We have responded by making tough decisions which include reducing our domestic capacity and phasing in the temporary suspension of international flying for a period of two and a half months.
“We are committed to supporting our guests during this period and have set up a dedicated customer care hub to manage the surge of customer queries and travel changes.
We are also acutely aware of the important role airlines play in supporting connectivity, tourism and the nation’s economy, and are maintaining most of our domestic routes, and
instead reducing frequencies in our schedule.”
8.22am: ASX poised for flat open
Local investors could see the Australian market open flat for a change despite a huge surge on Wall Street on US President Donald Trump’s big economic stimulus plans.
The SPI200 futures contract was down just seven points, or 0.13 per cent, at 5275 points at 8am (AEDT), suggesting Australia’s volatile market might open flat.
However the futures market has not been a reliable indicator during the past few turbulent weeks of mostly panic selling.
The highly volatile local market had its best day ever on Tuesday, gaining 5.8 per cent, after its worst day ever on Monday, falling 9.7 per cent.
Massive government stimulus plans helped lift sentiment in European and US equity markets overnight, which could spur more buying on the ASX. Local investors are also waiting to hear about Australian measures to ease economic pain from the coronavirus.
Prime Minister Scott Morrison led a meeting of national cabinet on Tuesday evening, with a number of announcements set for mid-morning on Wednesday.
Australia’s ailing airlines will be handed a $715 million federal government lifeline to help the sector through the coronavirus pandemic. Regional carrier Rex has been urging government action, warning it could go under unless given help during the tumultuous period.
Its shares entered a trading halt on Tuesday pending an announcement to the market.
Ardent Leisure is also in a trading halt pending an announcement.
Also on Wednesday data will be released giving a preliminary estimate for Australian retail turnover for February.
The Reserve Bank of Australia is expected to take further measures to protect the economy on Thursday.
The Aussie dollar meanwhile was buying US59.98 cents at 8am (AEDT) from US60.86 cents as the market closed on Tuesday
AAP
Eli Greenblat 8.10am: KFC halts in-store dining
Fast food chain KFC will suspend dining in its restaurants and shift all customers to drive-through and deliveries as it limits personal contact to help slow the spread of the coronavirus pandemic.
It will also trial a service where food is delivered to customers in its carpark to maintain “social distancing”.
The company said in light of COVID-19 initiatives introduced across the country, KFC Australia will voluntarily suspend in-restaurant dining facilities in Australia and only offer drive-through, pickup and delivery.
“KFC has proactively made this decision to support social distancing in the community,” it said.
KFC said all team members will undergo compulsory COVID-19 training on increased safety measures and hygiene standards so we can continue to serve customers safely.
7.47am: Wall St rallies on stimulus plans
Wall Street stocks rallied on expectations for massive federal stimulus to address the economic hit from the coronavirus, partially recovering some of their losses from the prior session.
The Dow Jones Industrial Average finished up 5.2 per cent or around 1,050 points at 21,237.38, a day after shedding almost 3000 points.
The broad-based S&P 500 gained 6.0 per cent to 2,529.19 while the tech-rich Nasdaq Composite Index jumped 6.2 per cent to 7,334.78.
US Treasury Secretary Steven Mnuchin said the White House is focused on a stimulus that would include sending checks to Americans within the next two weeks.
The White House is targeting an $US850 billion package, the Washington Post reported.
The efforts aim to lift the economy at a time when more and more areas of the United States are shutting down economic activity to combat the spread of the virus.
Karl Haeling of LBBW said the stimulus announcements boosted sentiment somewhat, but that there was still a lot of uncertainty.
“We have no idea what is going to happen over the short term,” Haeling said. “In general, the lack of any real good idea about what earnings are going to be is just keeping people out of the market.” Stocks also got a boost from the latest emergency effort by the Federal Reserve, which unveiled a new credit facility aimed at the commercial paper market, which finances things like auto loans and home mortgages.
AFP
7.45am: Rivals slam open NYSE
The New York Stock Exchange is taking heat over its decision to keep its trading floor open despite widening measures to block public gatherings to prevent the spread of coronavirus.
“We believe all exchanges should be able to run electronically in this day and age, thereby not unnecessarily putting people at risk in this environment,” Tal Cohen, head of US markets at Nasdaq, told The Wall Street Journal in an interview Tuesday.
Nasdaq, a crosstown rival of the NYSE that competes with the Big Board for initial public offerings, this week closed a small options trading floor that it runs in Philadelphia to protect traders there and limit the spread of coronavirus.
“I find it kind of amazing that the NYSE trading floor is still open,” Terrence Duffy, chief executive of Chicago futures-exchange giant CME Group, said in a separate interview Tuesday. “I thought we were not supposed to have 50 people or more in one location.”
CME said last week it was shutting its trading floor in Chicago as a precautionary measure, as did Cboe Global Markets, which runs an options trading floor in Chicago.
Dow Jones
7.40am: Mnuchin rules out market closure
The Great Depression closed Wall Street and so did 9/11, but as the coronavirus hammers the global economy and likely sends the United States into recession, Treasury Secretary Steven Mnuchin ruled out a temporary closure of the stock markets.
“We absolutely believe in keeping the markets open,” Mnuchin said at the White House. “Americans need to know they have access to their money.” As businesses have slowed or shuttered operations globally, the benchmark Dow Jones Industrial Average has lost more than 25 percent of its value since mid-February, while the “circuit breakers” that temporarily halt trading when the S&P 500 falls by more than seven percent have activated three times in the last six sessions.
That has raised the question whether it may be necessary to treat the coronavirus pandemic as a true calamity and halt trading for several days, but many analysts believe that would be a bad idea and could worsen the panic.
AFP
Eli Greenblat 7.35am: Kathmandu scraps forecasts
Outdoor adventurewear retailer Kathmandu has followed the lead of dozens of other companies by withdrawing its earnings outlook in the face of the coronavirus pandemic.
It’s warned the clampdown on travel has dented the performance of its Rip Curl stores, many of which are in European cities under lockdown.
It is warning of a “material” impact to its earnings.
Kathmandu said in a statement this morning travel and movement restrictions now in place across many countries globally have impacted the group’s European operations, where the majority of Rip Curl stores and wholesale customers are now in enforced closures.
This impact of the coronavirus pandemic was also now being felt in Australia and New Zealand, where the bulk of its Kathmandu stores are and which have suffered from a fall in store traffic.
It meant that Kathmandu could not provide a financial forecast for the second half.
Kathmandu will release its results for the half year ended January on March 30.
7.28am: ASX set for slight fall
Local investors could see the Australian market open flat, or only slightly lower, for a change despite a huge surge on Wall Street due to US President Donald Trump’s economic stimulus plans.
At 7am (AEDT) the SPI200 futures contract was down just seven points, or 0.13 per cent, at 5275 points.
The highly volatile local market had its best day ever on Tuesday, after its worst day ever on Monday.
Massive government stimulus plans helped lift sentiment in European and US equity markets overnight, which could spur more buying on the ASX.
Local investors are also waiting to hear about Australian measures to ease economic pain from the coronavirus.
Prime Minister Scott Morrison led a meeting of national cabinet on Tuesday evening, with a number of announcements set for mid-morning Wednesday. He is tipped to announced more measures to limit the spread of coronavirus, including an assistance package for airlines.
The Reserve Bank is expected to make an announcement on Thursday.
The Aussie dollar meanwhile was buying US59.88 cents at 7am (AEDT) from US60.86 cents as the market closed on Tuesday
AAP
7.20am: Wall St rises on huge stimulus plan
Wall Street stocks rallied on expectations for massive federal stimulus to address the economic hit from the coronavirus, partially recovering some of their losses from the prior session.
The Dow Jones Industrial Average finished up 5.2 per cent or around 1,050 points at 21,237.31, a day after shedding almost 3,000 points.
The broad-based S&P 500 gained 6.0 per cent to 21,237.31 while the tech-rich Nasdaq Composite Index jumped 6.2 per cent to 7,334.78.
AFP
7.19am: Fonterra scraps dividend
Dairy exporter Fonterra Cooperative Group says it won’t pay an interim dividend due to uncertainty about the financial impact of the coronavirus pandemic.
The company, which is owned by New Zealand dairy farmers, said Wednesday its first-half net profit rose to $NZ501 million from $NZ72 million the year before when it had substantial restructuring costs.
“Earnings are tracking well at the half year, but there is no doubt that we have a number of risks that are outside our control in the second half,” the company said, including drought in New Zealand and the pandemic.
Fonterra maintained its farmgate milk price forecast at $N$7.00 to $NZ7.60 per kilogram of milk solids.
Dow Jones Newswires
7.04am: Oil sinks again
Crude oil prices settled below $US30 a barrel as the coronavirus pandemic slowed economic growth and oil demand overnight while Saudi Arabia and Russia kept up their battle for market share.
Countries including the United States and Canada, along with nations in Europe and Asia, are taking unprecedented steps to contain the virus, which has already killed 7,500 people. Numerous governments have told residents to restrict their movements while businesses shutter, curbing demand for fuels.
Brent crude futures fell $US1.32 to settle at $US28.73, the first time that benchmark has settled below $US30 per barrel since 2016. It then fell further in post-settlement trade.
West Texas Intermediate (WTI) crude futures fell $US1.75, or 6.1 per cent, to settle at $US26.95 a barrel.
Reuters
6.50am: Aussie slides below US60c
The Australian dollar has again fallen sharply and this morning was trading at US59.80c.
6.25am: US stocks push higher
US stocks jumped higher after a punishing selloff yesterday as the Federal Reserve and White House moved to soften the economic blow of the coronavirus pandemic.
The S&P 500 climbed 4pc, and the Nasdaq Composite advanced 4.2pc. The Dow Jones Industrial Average rose 2.9pc in afternoon trade, after it dipped below the 20,000 mark at one point in the morning.
Yesterday, the blue-chip gauge recorded its second-worst percentage drop ever, behind only the Black Monday crash of 1987, amid fears the pandemic was disrupting supply chains and sidelining workers after infecting tens of thousands of people.
Even with Tuesday’s gains, major indexes remain deep in the red over the past month, with the S&P 500 down 27pc in that time.
Australian stocks are set to open lower, with futures at 6.30am pointing to a fall at the open of 26 points.
The US market’s gains solidified after the Federal Reserve said it would launch a lending facility to support short-term commercial debt markets. The move is aimed at reassuring companies that they will have access to short-term funds, which could help banks to lend longer-term.
“The story of the day is the Fed responding to the funding tightness in the credit markets and restarting their commercial paper facility,” said David Joy, chief market strategist at Ameriprise Financial. “That really has seemed to alleviate a lot of the pressure in the markets, both in the funding markets, short term credit, as well as equities.”
US Treasury Secretary Steven Mnuchin also pitched Senate Republicans on a stimulus package that would include writing cheques to Americans, giving hope to investors watching for government action to help soften the economic blow of the virus. The proposal is estimated at $US1 trillion, including roughly $US250 billion in direct payments.
The latest move by the Fed comes after it slashed its benchmark interest rate to near zero on Sunday and announced purchases of Treasury and mortgage-backed securities.
“The reason why we’re seeing volatility is because we do need the double-barrel shotgun here,” said Diane Jaffee, senior portfolio manager at TCW for the relative value equities team. “We need not just monetary policy but we need fiscal response.”
“No one’s sure that this is going to get through,” she said of the fiscal relief plan. “But at least the numbers are along the right lines.”
A closely watched measure of turbulence in U.S. stocks, the Cboe Volatility Index, edged down from Monday’s high but remained sharply elevated.
Dow Jones
6.15am: HSBC confirms new CEO
Asia-focused banking giant HSBC appointed Noel Quinn as its chief executive Tuesday, ending months of speculation as the coronavirus crisis causes global upheaval and hits banks hard.
Mr Quinn had been serving as interim CEO and has already launched a broad restructuring plan for the troubled bank.
He took over as acting CEO after the shock ousting in August of John Flint, and was tasked with initiating a transformation of the sprawling international bank, which spans more than 50 countries but makes the vast majority of its profit in Asia.
In February he unveiled a radical reorganisation plan that would see the bank reduce its operations in the US and Europe, cutting 35,000 jobs or nearly 15 percent of the total workforce over three years as it seeks to recentre itself towards profitable activities.
Quinn was quoted in the statement as saying that “there is much that remains to be done and I am confident that we will rise to the challenge...”
AFP
5.55am: Fed moves to backstop firms’ funding
The US Federal Reserve has acted to ensure companies can continue paying workers and buying supplies through the coronavirus epidemic, restarting a program it used to backstop a key financial market during the 2007 to 2009 crisis.
As the Fed and other US officials continued fine-tuning their crisis response and debating further steps to support the economy, the central bank said it would reopen the so-called Commercial Paper Funding Facility to underwrite the short-term loans that companies often use to pay for their operations.
While highly technical, the program was a critical piece of the Fed’s response to the financial crisis a decade ago, at its peak in January 2009 providing $US350 billion ($A581 billion) to firms from banks and insurance companies to the financing arms of car makers and other manufacturers.
Reuters
5.40am: Wall St jumps on stimulus plan
US stocks jumped as President Donald Trump promised he’s “going big” with plans to blunt the economic pain caused by the coronavirus outbreak.
Markets around the world remain highly volatile as traders see a recession growing more likely, if it hasn’t begun already.
The overnight’s 6.3pc gain for the S&P 500 meant it clawed back less than a third of its loss from a day before, its biggest in more than three decades.
The Dow Jones Industrial Average seesawed through the day. It went from up 600 points to down 300 to up 1190 and then pulled back again. It was up 5.4pc, in afternoon trading. A day earlier, it lost nearly 3000 after Trump said a recession may be on the way.
The Dow Jones was up 5.4pc and the Nasdaq 6.2pc higher.
The S&P 500, which dictates the movements of workers’ 401(k) accounts much more than the Dow, is still roughly 26pc below its record set last month and is close to where it was in late 2018, erasing most of the best year for stocks in decades.
Despite the US gains, Australian stocks look set to open lower, following yesterday’s local rebound. At 5.30am (AEDT) the SPI futures index was down 44 points.
The Aussie dollar slumped again and this morning was at US59.83c.
Trump wants the government to send cheques to Americans in the next two weeks to help support them while chunks of the economy come closer to shutting down, Treasury Secretary Steven Mnuchin said.
Gains for stocks accelerated temporarily as Trump and Mnuchin spoke at a briefing, but neither gave details about how big the stimulus could be. Mnuchin is pitching Senate Republicans on a roughly $US850 billion stimulus plan to help the economy, including relief for small businesses and the airline industry. The travel industry has been among the industries hardest hit by the outbreak. Planes sit grounded and hotels and casinos shut their doors. Investors have been waiting for Washington to offer more aid for the economy. After flipping between gains and losses Tuesday morning, stocks turned decisively higher after the Federal Reserve revived a program first used in the 2008 financial crisis to help companies get access to cash for very short-term needs. It’s the latest in a string of big, emergency moves by the Fed and other central banks around the world to support the economy and smooth operations in markets.
No one expects such moves to fix the health crisis, but investors hope they can help blunt the economic blow.
“Government tends to show up late to the party with a bazooka,” said Barry Bannister, head of institutional equity strategy at Stifel. “It’s a bit of an over-reaction, but that’s to be understood as normal for policy makers.” “There are still a lot of questions in the mind of the market as to what will be enough,” said Robert Haworth, senior investment strategist at U.S. Bank Wealth Management. “It’s a start, but there’s still a lot to be determined.”
Ultimately, investors say they need to see the number of infections slow before markets can find a bottom. Worldwide cases now exceed 185,000.
South Korean stocks fell to their fifth straight loss of 2.5pc, but Japanese stocks shook off an early loss to edge higher.
AP
Jacquelin Magnay 5.38am: UK plots stimulus
Boris Johnson said his British government was preparing like a ‘’wartime government’’ unleashing a minimum £330bn stimulus and support package to keep the economy going during the coronavirus crisis, which has already claimed 71 lives across the country.
Chancellor Rishi Sunak announced £330bn of loans to businesses - at attractive but indeterminate rates - a scale of support unimaginable only days ago.
To reassure companies that they haven’t done anything wrong yet their revenues go off a cliff, Mr Sunak unveiled the unprecedented economic plan and said ‘’we are all in this together’’.
The bailout represents 15 percent of GDP and dwarfs the £135bn handed out during the 2008 global financial crisis.
The British measures are similar in scale to the 300bn euro French stimulus package and the 200bn euro injection in the Spanish economy, both announced in the past 24 hours.
‘This is not a time for ideology or orthodoxy,’’ said Mr Sunak, who is a former hedge fund trader. He added: ‘’This is a time to be bold’’.
5.35am: European markets close higher
European bourses closd higher after governments offered hundreds of billions of euros (dollars) worth of financial support to the global economy.
Germany’s DAX closed the day 2.3pc higher at 8,939.10, France’s CAC 40 gained 2.8pc to 3,991.78, and Britain’s FTSE 100 rose 2.8pc as well, to 5,294.90.
Italy’s FTSE MIB logged a 2.2pc gain to 15,314.77. All remain in a bear market, however. The euro was down 1.8pc to $1.0978 and 10-year bond yields in major economies were slightly higher.
5.33am: Fed to ease credit flow
In its latest emergency action, the Federal Reserve is establishing a lending facility to try to ease the flow of short-term credit to banks and businesses as the economy grinds to a halt from the viral outbreak.
The Fed announced Tuesday that it’s reviving a program it first used during the 2008 financial crisis to unclog a short-term lending market for what is known as “commercial paper.” Large businesses issue commercial paper, which is essentially IOUs, to raise cash to meet payrolls and cover other short-term costs.
“An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak,” the Fed said in a statement.
Borrowing rates in the commercial paper market have been spiking as more companies have sought to raise cash in the expectation that their revenue will plunge.
At the same time, money market funds, among the largest buyers of the short-term loans, are seeking to sell commercial paper themselves. They need to raise money because they expect large institutional investors to withdraw funds, and they need cash to cover those withdrawals.
All that activity has made it harder for banks and other companies to raise the cash they need.
AP
5.30am: Saudis to boost oil exports
Saudi Arabia said it plans to boost oil exports to more than 10 million barrels per day as the OPEC kingpin escalates a price war with Russia.
The world’s biggest crude exporter said it would free up an additional 250,000 bpd of oil for exports by using gas for domestic consumption.
“Saudi Arabia will utilise the gas produced by the Fadhili gas plant to compensate for around 250,000 bpd of domestic oil consumption,” a spokesman for the Saudi energy ministry said in a statement without detailing how one would replace the other.
AFP
5.25am: Global recession ahead: S&P
The sudden economic stop caused by coronavirus containment measures will cause a global recession this year and could result in US corporate default rates spiking above 10 per cent in the next 12 months, ratings agency S&P Global says. “The sudden economic stop caused by COVID-19 containment measures will lead to a global recession this year,” S&P said in a report.
A cash flow slump and much tighter financing conditions as well as the simultaneous oil price shock will hurt creditworthiness, it added. “These factors will likely result in a surge in defaults, with a default rate on non-financial corporates in the US that may rise above 10 per cent and into the high single digits in Europe over the next 12 months.”
Reuters
5.20am: US plots $US850bn stimulus
The White House is proposing a roughly $US850 billion emergency stimulus to address the economic cost of the new coronavirus. The request will be outlined to Senate Republicans Tuesday and will aim to provide relief for small businesses and the airline industry and include a massive tax cut for wage-earners.
Two people familiar with the request described it to The Associated Press on the condition of anonymity because they weren’t authorised to speak publicly. The White House hopes the measure will pass this week, as the administration scrambled to contain the economic fallout of the severe disruptions to American life from the outbreak.
AP
5.17am: German confidence slumps
Investor confidence in Germany has plummeted to its lowest level since 2011 over the coronavirus crisis, a closely-watched survey said.
The ZEW institute’s monthly indicator brings together the sentiments of around 350 economists and analysts to provide a picture of the economic outlook over the next six months.
The overall economic sentiment indicator fell by 58.2 points in March to -49.5 points, the largest drop since the survey was set up in 1991.
The reading was also worse than predictions of Factset analysts, who had feared a 33-point drop.
“The economy is on red alert,” ZEW chief Achim Wambach said in a statement.
AFP
5.15am: Volkswagen to close plants
Volkswagen said it would close most of its European plants for two weeks due to uncertainty about demand for cars and supplies of parts amid the virus outbreak and said it wasn’t possible to give a reliable outlook for this year’s profits.
The company said, however, that its China business was coming back as the number of new cases lessens there and that its ambitious plans to scale up production of electric cars remained on track.
AP
5.10am: France weighs nationalisation
France’s finance minister said Tuesday that he was willing to nationalise large companies to protect them from bankruptcy, while warning that the country faces recession this year as the coronavirus epidemic sinks the economy.
Bruno Le Maire announced a 45 billion euro ($US50 billion) aid package to help businesses and employees cope with the escalating health crisis.
“I will not hesitate to use any means at my disposal to protect large French enterprises,” the minister said during a conference call with journalists.
“This can be through capital injections or stake purchases. I can even use the term nationalisation if necessary,” he said.
AFP
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