ASX, Aussie dollar slip as China trade tensions grow
Investors were risk-off on Tuesday, winding back Monday’s gains on fears of a trade war with China and a second wave of COVID-19.
- Conditions fall as confidence ekes gain
- $A drops on renewed trade jitters
- Premier reopens, online sales surge
- US ‘pantry loading’ lifts Amcor outlook
That’s all from the Trading Day blog for Tuesday, May 12. Australian stocks fell by 1.1 per cent as trade tensions with China flared, following the suspension of meat exports from several Australian abattoirs. The AUDUSD also came under pressure, slipping by 0.4pc at the local close.
US futures have moved positive and the FTSE 100 is trading higher so there’s a chance of gains throughout the overnight session.
Glenda Korporaal 8.38pm: Digging a hole to China
Federal Trade Minister Simon Birmingham may genuinely believe, as he said on Tuesday, that the flare-up on Australia’s barley and meat exports to China this week has nothing to do with his government’s enthusiastic calls for an inquiry into the source of the COVID-19 pandemic.
But given clear evidence that China is deeply unhappy with Australia’s aggressive calls for an inquiry, in a way that it sees as Australia teaming up with the Trump administration to point the blame at China, the foreign exchange markets are making up their own minds on the prospects of Australia being on the brink of a serious deterioration of ties with our largest trading partner.
Birmingham was quick to reject suggestions Australia is entering a trade war with China. But others, who have stood by and watched the political relationship worsen recently, are worried about this.
8.02pm: CBA sees AUD/USD supported
Commonwealth Bank global Markets Research reports that AUD/USD fell to an intra‑day low near 0.6432 during the Asia trading session, noting that the Chinese government announced it will ban imports of beef from four Australian abattoirs because of labelling and health certificate deficiencies.
“These four abattoirs are responsible for less than 10pc of Australia’s beef exports. And Australian beef exports accounts for about 1.5pc of total goods exports. We still expect AUD/USD to resume its uptrend later in the week supported by more evidence of economic recovery in China. China’s April economic activity data are released on Thursday,” CBA said in the markets comments.
John Durie 7.51pm: When can bad be good?
The market was priced for doomsday for CSR, but in the end chief Julie Coates delivered something well short of that with her annual profit at the top end of the forecast range at $134.8m.
This was the number for continuing operations, down some 26 per cent from $181.7m last year, but still CSR’s stock jumped 10 per cent to $3.72.
This, it should be noted, was where the stock was on April 30, compared with more than $5 at the start of the year.
Still, the increase in the share price came despite the fact no second-half dividend was paid as the company bunkers down for a tough year ahead.
Being bad is OK if it’s not as bad as the market was expecting.
Lisa Allen 7.23pm: Hoteliers to race for market share
Corporate Australia can expect deeply discounted hotel rates and strict airline hygiene protocols in the post-COVID-19 environment, while executives will demand private car transfers over public transport or ride sharing.
“There will be an arms race by hoteliers to get market share as people come back to staying in hotels,” Corporate Travel Management managing director Jamie Pherous said on Tuesday.
“There will be hotel loyalty discounts, which is a characteristic with a short-term drop in demand, we saw that with swine flu and SARS.”
Mr Pherous also predicts executives from middle management and above will demand private car transfers and would baulk at using ride sharing or public transport options post coronavirus, citing safety reasons.
Just how much the nation’s travel sector has been impacted by COVID-19 came to light on Tuesday, with the Australian Bureau of Statistics reporting a 60 per cent drop in international arrivals in March compared with the previous year.
Richard Gluyas 7.07pm: Analysts gloomy on Suncorp
Suncorp’s exposure to the difficult banking and general insurance environment would outweigh the prospective gains flagged by the bancassurance group in its trading update, according to analysts.
As investors marked the stock back after a burst of enthusiasm on Monday, the report card on Suncorp Bank’s $133m increase in the collective provision and staff underpayments of up to $70m was gloomy.
Morgans said in a note there were some positive aspects to the update, including natural hazards likely to be inside budget and lower targeted expenses, but they would be easily overshadowed by lower volumes in banking and general insurance.
“Management said they have deliberately tried to be conservative, with the (collective) provision allowing for negative outcomes like an 11.5 per cent unemployment rate and double-digit falls in both gross domestic product and house prices,” the note said.
Against a weaker overall market, shares in Suncorp retreated 45c, or 4.9 per cent, to $8.83.
Joyce Moullakis 6.48pm: Housing crisis? What housing crisis?
Aussie chief executive James Symond is adamant the housing market and prices won’t plunge during the COVID-19 turmoil, as he pushes ahead with new plans to expand the mortgage broking group.
Mr Symond said Aussie was faring well as it was seeing a “significant spike” in activity, largely around refinancing of loans and borrowing for renovations.
He noted Aussie was seeing more overall mortgage business in recent weeks than the same time last year “by a clear margin”, and while he expected a softer housing market he was not anticipating a sharp downturn.
“Do I think real estate will plunge? No chance,” he quipped. “While interest rates are low the sector will remain sound. “I have no doubt the market will come off … but with interest rates so low it’s just as affordable to pay off a mortgage as to pay rent.”
Mr Symond said while lower migration and other factors would weigh on house prices in the near term, a low volume of stock on the market and a shortage of new housing would help prices hold up in the medium term.
The big banks are, however, cautious on credit growth and the outlook for house prices. Westpac has tipped prices will slump 15 per cent during the COVID-19 crisis, while ANZ anticipates prices will decline for three years.
6.14pm: FTSE higher on trading updates
The FTSE 100 gained 0.3pc, with Vodafone and Standard Life Aberdeen the biggest risers following well-received trading updates. Vodafone shares rose 4.1pc after the UK-based telecoms group swung to a 2020 pretax profit. Standard Life Aberdeen advanced 3.3pc after the investment firm said coronavirus has only had a modest impact on the services it provides. WM. Morrison Supermarkets was up 2.2pc after the supermarket chain said its first-quarter sales excluding fuel rose 5.7pc year-on-year, both on a like-for-like and total basis, as customers stockpiled goods for the coronavirus lockdown. Supermarket peers Tesco and J Sainsbury also rallied on a positive read-across from Morrisons’ results.
Dow Jones Newswires
4.45pm: Doubts of retail rebound grow
Those stocks which rallied hard on reopening hopes yesterday were the first to wind back in Tuesday’s trade, as investors had second thoughts on the recent rally.
Webjet, the best performer on Monday, finished the session down 7.4 per cent to $3.24 while fellow travel names Corporate Travel fell by 7.4pc to $11.51 and Flight Centre gave up 6pc to $10.55.
In the listed retail space – Myer wound back its recent rally by 17.5 per cent to 26c while Mosaic Brands dialled back by 7.5 per cent to 86c and Kathmandu finished lower by 5.5 per cent to 95.5c.
Online retailer Kogan added 5.9 per cent to $8.85 as it reported a lift in sales for April, while Premier Investments finished flat at $15.41 as its chief Solomon Lew warned some retailers would likely not return after the crisis.
Here’s the biggest movers at the close:
4.11pm: Trade tensions send ASX down 1.1pc
Australian shares were among the worst performing in the Asia-Pacific on Tuesday, as trade tensions with China flared over the suspension of meat exports from several local abattoirs.
A mixed lead from Wall Street spurred a soft start on the benchmark ASX200 and reports that the Australia and China were entering a new trade war only sent the local market lower.
By lunch shares were trading at lows of 5374, down 1.6 per cent, but by the close trimmed losses to 58 points or 1.07 per cent to 5403.
Meanwhile, the All Ords finished the day down 62 points or 1.1 per cent to 5497.3.
Gerard Cockburn 3.42pm: Super funds brace for further fallout
Superannuation account balances are beginning to stabilise but remain well down following the battering from the coronavirus pandemic, says SuperRatings.
Latest figures released by the research house reveal the average Australian super fund balance is down 8.1 per cent since the beginning of the calendar year, but recovering some of the value lost in March.
SuperRatings executive director Kirby Rappell said it was “pleasing” that signs of an upturn were beginning to appear, but flagged super funds remained on standby for further financial fallout.
“April saw some of March’s losses reversed, and it has been pleasing to see how most funds’ portfolios have responded to this challenging period,” Mr Rappell said.
Read more: Super funds showing signs of recovery
3.22pm: Bupa fined $6m for aged care rort
Bupa has been ordered to pay $6m in penalties for making misleading representations and wrongly accepting payments for extra services at 20 aged care homes.
In a Federal Court case brought by the competition watchdog, Bupa has been ordered to compensate all affected current and past residents within 12 months, expected to total $18.3m.
The court heard that from April 2013 to June 2018, residents at 20 of the group’s homes in NSW, Victoria, Queensland and Tasmania paid thousands of dollars for packages of extra services, of which Bupa admitted it had failed to supply or only partially supplied.
Extra services included specialised gardens or rooms specifically designed for those living with dementia, talking book libraries, hot breakfasts and individually controlled heating and cooling.
“Bupa’s failure to provide services for which it accepted payment is extremely disappointing and likely lessened the quality of life of the aged care residents in Bupa’s care,” ACCC Chair Rod Sims said.
3.20pm: Toyota tips 80pc profit drop
Toyota on Tuesday said it expected a 79.5 per cent drop in its annual operating profit this fiscal year as it suffers “significant” fallout from the coronavirus pandemic.
The Japanese auto giant declined to give a net profit forecast for the fiscal year to March 2021 but noted that the impact of the crisis on its business was “wide-ranging, significant and serious”.
The company now expects an annual operating profit of 500 billion yen ($7.19bn), down 79.5 per cent from the 2.44 trillion yen logged in the past year to March.
Toyota forecast a near-20 per cent drop in annual sales to 24 trillion yen, compared with 29.93 trillion yen achieved in the past fiscal year.
The company’s net profit for the past year to March came to 2.076 trillion yen, up 10.3 per cent on the year.
AFP
2.28pm: Spending spikes as lockdowns ease: ANZ
Retail spending surged at the weekend as some states eased social distancing restrictions, according to the latest data from ANZ.
The bank reported a lift in spending from its cards and merchants last week – up 22pc on the same time last year as consumers emerged from lockdowns.
Economist Adelaide Timbrell writes that the bank expects spending to spike each time lockdown restrictions are eased "but the longer-term trend of retail spending is likely to be weak, reflecting reduced incomes and financial stability for many households”.
She adds that spending in social categories is starting to recover – dining spend down 30pc compared to last year as opposed to a 54pc decline in the week prior.
The trend of spending on fitness equipment and electronics has continued, while hardware, building, garden supplies and office goods has deteriorated, she says.
“We expect elevated demand for groceries to continue far beyond lockdown, as cost-conscious households and immunocompromised people continue to cook more at home,” Ms Timbrell writes.
“A shift towards more working from home will also add demand for groceries. ANZ-observed groceries spending has been hovering around 20-30pc higher than last year for the last few weeks.”
We expect spending to spike each time #lockdown restrictions ease, but the longer trend is likely to be weak, reflecting reduced incomes & financial stability for many households. ANZ-observed retail spend up 21% y/y for the wk to 9 May. #COVID19Aus @ANZ_Research #ausbiz #ausecon pic.twitter.com/zaQImXy044
— Adelaide Timbrell (@Adelaide__T) May 11, 2020
1.30pm: CSR has capacity for payout: Citi
CSR shares are the most improved in the top 200, even after axing its final dividend, as its profit beat market expectations.
The stock is up by 9.5 per cent to $3.70 as the broader market trades off by 1.6pc.
Citi analysts write that while the company elected to not pay a final dividend given the economic environment, “the company’s balance sheet does have capacity to pay dividends”.
“Perhaps M&A opportunities will arise over the next 12 to 18 months,” Citi says, adding that the result to the end of March shows resilience in some of its business lines.
“The company seems well prepared to manage a downturn and will look for supply chain and footprint cost reductions to support earnings.”
The broker has a Neutral rating on the stock.
Read more: CSR axes dividend as annual profit tumbles
1.26pm: Oil rebounds as Saudis cut output
Oil rebounded in Asian trade Tuesday, buoyed by Saudi Arabia’s decision to cut output more than it had pledged as the virus-hit world economy cautiously emerges from lockdown.
US benchmark West Texas Intermediate for June delivery was up 1.37 per cent at $US24.47 a barrel in morning trade.
Global benchmark Brent for July was trading 0.71 per cent higher at $US29.84 a barrel.
Both contracts settled lower Monday after big week-on-week gains Friday. “Oil prices drew some relief overnight after Saudi Arabia announced they would cut a further 1 million barrels per day in June, bringing their daily production to just under 7.5 million barrels per day,” AxiCorp global market strategist Stephen Innes.
“This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act,” he said, referring to the Organisation of Petroleum Exporting Countries and their partners.
AFP
Bridget Carter 1.14pm: Indian billionaire sizing up Virgin
DataRoom | Indian billionaire Rahul Bhatia is understood to have hired advisory firm Investec to compete for Virgin Australia ahead of expressions of interest due for the collapsed carrier on Friday.
It is understood that Mr Bhatia is pursuing Virgin Australia through his company InterGlobe enterprises, with numerous Australian tourism and aviation experts in tow.
He is the founder and largest shareholder of the Indian budget carrier IndiGo, although it is his company rather than the airline that is putting forward the Virgin Australia proposal.
Other firms assisting his bid include law firm Corrs Chambers Westgarth and accounting firm PwC.
Virgin Australia, founded by British tycoon Richard Branson, entered voluntary administration last month and owes $6.8bn of debt.
Involved in a sale process being run for the airline is administrator Deloitte, restructuring firm Houlihan Lokey and investment bank Morgan Stanley.
Read more: Virgin sale by the end of June ‘achievable’
1.01pm: Heavyweight drag sends ASX down 1.3pc
Local shares have bounced off daily lows but remain firmly lower in lunch trade, still the worst performing market in the region.
At 1pm, the ASX200 is lower by 1.4 per cent or 74 points to 5386.8.
Defensive trade continues to buoy staples and health stocks, while materials trade down 2.4pc and tech by 1.2pc. Macquarie and BHP are both down more than 3pc – doing most of the damage – while the major banks are all down by between 1pc and 2pc.
Here’s the biggest movers at lunch:
Patrick Commins 12.37pm: Australia ‘at war with faceless enemy’: Treasurer
Treasurer Josh Frydenberg is up and opens with a dramatic military analogy: “Australia finds itself at war with a faceless and flagless enemy”. The coronavirus has triggered a “health and economic shock the likes of which the world has never seen”.
“Through strong and decisive action Australia has avoided the fate of many other nations,” he says.
Already $25bn has flowed to households and businesses over the past month and there’s another $30bn on the way in the month ahead.
This is the “largest and fastest injection of economic support Australia has ever seen”.
Still, the economic data is “sobering”, he says, and runs through a laundry list of bad news, including the dour predictions for job losses and lost GDP.
Maybe halfway through, and the Treasurer is having a bit of a coughing attack – or maybe something stuck in his throat – which requires a pause and multiple drinks of water.
“Too long a speech,” he quips.
He’s back up and running again.
12.36pm: ASX gives up yesterday’s gain
Australia’s S&P/ASX 200 share index extended its fall to a 2-day low of 5374, to be down as much as 1.6pc in early afternoon trading.
The index continued to fall after Federal Treasurer Josh Frydenberg said in his economic update that GDP will fall by over 10pc in the June half year
But the additional fall in the local bourse seems more to do with a 0.9pc fall in S&P 500 futures so far today.
Still, the Australian sharemarket remains the weakest in the Asia-Pacific region, suggesting earlier news of China’s ban on some Australian meat imports affected sentiment.
12.22pm: Elders, AACo feel sting of export hit
The suspension of some beef exports to China has sparked jitters in the listed agriculture space.
Trade minister Scott Birmingham has so far expressed the government’s “concern” by China’s actions after it suspended four Australian meatworks operations but the meat industry has vowed to continue working with China.
Still, that’s shaken shares in agriculture group Elders – the stock fell as much as 6.9pc and last traded down 4.5pc while Australian Agricultural Co (AACo) trades down 3.7pc.
Follow the latest at our coronavirus live blog
12.17pm: Regional Express halted
Regional airline Regional Express is halted from trade pending an announcement after reports it was set to start capital city services to compete with Qantas, Jetstar and Virgin.
In a brief filing to the market, Rex requested a halt “pending the ASX announcement in relation to a news article published today”.
Rex advised it would likely be halted until the commencement of trade on Thursday.
REX last traded at 90c.
Eli Greenblat 12.04pm: Retail recovery not easy: Lew
Billionaire retail mogul Solomon Lew has warned many stores will never reopen as the government tries to revive the nation’s economy out of its forced hibernation caused by the coronavirus pandemic, with banks ultimately unable to financially support struggling shops in the current economic climate.
Mr Lew, one of Australia’s most successful and canny retailers said a lot would depend on the attitude of shopping centre landlords who must now come to the party and offer significant rent reductions to retailers.
“Without a doubt, there will be retailers who will not be able to recover from this and they were on the brink anyhow, when I talk to the bankers they will tell you that it is a sector they are watching very closely and as much as they want to support they can’t support,’’ Mr Lew told The Australian Tuesday morning.
Mr Lew’s Premier Investments which owns popular fashion stores such as Portmans, Just Jeans, Peter Alexander and stationery store Smiggle, is looking to reopen this week much of its stores and to re-employ a large proportion of its 9000-strong workforce but he remains fearful about the pace of the recovery for the nation’s $320bn retail sector.
“And there will be lots of empty spaces (in malls) and the fact that the public will be concerned about food halls, mingling in the food halls, where in the past it was an outing, a family outing, to go to a mall, it’s a long way off and that means the foot traffic is going to subside dramatically,’’ Mr Lew said.
Read more: Retail heavyweight ready to reopen
11.52am: Headwinds to persist for Altium: RBC
Short-term headwinds are likely to persist into the next half for Altium as its small and mid market customers preserve cash, according to RBC.
Analyst Garry Sherriff says he had already tipped the group wouldn’t meet its previous revenue target of $US200m, now confirmed by the company.
Mr Sherriff writes that the tech group’s front book is under the most pressure, but that its back book could also be at risk of either lower subscriptions or lower pricing, especially if existing customers reduce headcount.
“We believe lower subscriptions per existing customer or lower pricing could be a factor over coming months given the likelihood of materially higher unemployment rates over the next 12 months,” he says.
Still, the broker has a Sector Perform rating on the stock, saying they “await a more attractive entry point” after rallying almost 50pc from its March lows.
ALU last down 4.6pc to $35.10.
11.42am: Overseas arrivals drop largest on record
Overseas arrivals recorded their largest monthly drop on record in March as coronavirus prompted severe restrictions on travel.
The latest data from the ABS shows visitor arrivals fell by 60 per cent over the month, while visitors arriving home from short-term trips fell by 29pc to 538,400.
“The steep fall in visitor arrivals to Australia in March was from all regions around the world. Even our largest source country New Zealand, recorded a 56 per cent drop,” director of migration stats Jenny Dobak said.
“Of the top 10 source countries, China recorded the largest decrease of 78 per cent followed closely by Japan with a decrease of 75 per cent.”
NSW had the largest volume of international arrivals with 114,500 visitors but that was still down 64pc compared to last year.
In March, overseas arrivals fell to their lowest level since June 1995. Departures lowest since since October 2003 #ausbiz #auspol pic.twitter.com/w6JyEkcrSJ
— Callam Pickering (@CallamPickering) May 12, 2020
Geoff Chambers 11.34am: China meat suspension ‘concerning’ for gov’t
Trade Minister Simon Birmingham says the Morrison government is “concerned” by China’s actions after it suspended four Australian meatworks operations.
Senator Birmingham said the government was notified late on Monday that the meat facilities had been suspended by Chinese officials over issues related to “labelling and health certificate requirements”.
The action came after China over the weekend threatened to slap tariffs on Australian barley exports.
“We are concerned that the suspensions appear to be based on highly technical issues, which in some cases date back more than a year.
Senator Birmingham began talks with industry leaders, colleagues and key departments overnight to “formulate a comprehensive response”.
“We will work with industry and authorities in both Australia and China to seek to find a solution that allows these businesses to resume their normal operations as soon as possible,” he said.
11.30am: Conditions fall as confidences ekes gain
NAB’s monthly business survey for April remained gloomy despite a bounce in confidence.
Business conditions fell to -34 points from -22 points, to be well below GFC levels while business confidence rose to -46 points from -65 points, but remained well below the trough of the 1990s recession.
Conditions fell across almost all non-mining industries, including a sharp fall in wholesale after a surprise increase last month.
“Overall conditions are now deeply negative in all industries outside of mining,” said NAB chief economist Alan Oster “The improvement in confidence was broadbased but, like conditions, it remains deeply negative across all industries and states.”
Forward orders continued to fall, suggesting that activity is likely to weaken further in the near term – in line with still weak confidence.
“Interestingly, both the proportion of respondents needing to borrow and the relative difficulty in borrowing has remained relatively unchanged,” Mr Oster added.
“That said, capex has also fallen sharply – and is at a very low level – suggesting that firms are pulling back on outlays where possible.”
Leo Shanahan 11.22am: News Corp to keep community papers
News Corp Australia will not proceed with a sale of its portfolio of over one hundred regional and community newspapers to Antony Catalano’s Australian Community Media after the two companies could not agree on terms for a deal.
In a note to staff on Tuesday morning News Corp Australasia Executive Chairman Michael Miller told staff that the talks with ACM had not resulted in a transaction, with the company now focused on “alternative structures” to focus the company on its digital growth strategy.
“In recent weeks we have been undertaking a review of our Australian portfolio and structures and have had discussions with the most logical acquirer of our regional and community titles.
“Those discussions have not resulted in a transaction and we are now considering alternative structures to best focus News Corp Australia on maximising digital and growth opportunities.
As The Australian reported on Monday, talks between the two companies had been accelerating in recent weeks with ACM following News Corp decision to suspend printing of 60 community titles on April 1 following the damage caused to the advertising market during the COVID-19 outbreak.
Eli Greenblat 10.53am: Kogan execs to reap $50m in options
The board of online shopping company Kogan.com plans to issue $50m worth of immediately in-the-money options to its chief executive and founder Ruslan Kogan and chief financial officer David Shafer, using the sharemarket rout of recent months as a pricing point.
In a trading update, in which Kogan.com also revealed unaudited gross sales up 100 per cent and gross profit up 150 per cent for April, the company disclosed that its remuneration committee had devised new long-term incentive plans for Mr Kogan and Mr Shafer.
These newly-minted bonuses would deliver 3.6 million options to Mr Kogan and 2.4 million options to Mr Shafer. On the current share price for Kogan.com, Mr Kogan’s options are worth $30m and Mr Shafer’s options $20 million.
KGN last traded up 6.3pc to $8.89.
Read more: Kogan bosses awarded $50m in options
10.37am: $A drops on renewed trade jitters
Australia’s S&P/ASX 200 share index has fallen 1pc to 5406.9 on trade jitters.
China’s suspension of meat imports from four Australian abattoirs looks to be affecting market sentiment, and is likely behind a 0.8pc drop in AUD/USD to US64.34c.
The heavyweight Financials, Materials, Real Estate, Industrials and Energy sectors are under pressure with Macquarie down 3.4pc, BHP down 1.7pc and Scentre Group down 4.6pc.
Partly offsetting those falls are gains in the Health Care and Consumer Staples sectors, with CSL up 1.6pc, ResMed up 5.2pc, A2 Milk up 2.5pc and Woolworths up 1pc.
CSR rose 11pc after its FY net profit beat market expectations by about 13pc, while and Amcor rose as much as 4.8pc after revising up its FY20 EPS guidance.
Richard Ferguson 10.23am: China suspends some meat exports
China has suspended meat exports from at least four Australian abattoirs overnight, as trade tensions between Australia and the communist nation rise.
The Australian understands the Kilcoy plant, Beef City in Toowoomba, the Dinmore meatworks in Brisbane and the Northern Co-operative Meat Company at Casino in NSW have been suspended by Chinese authorities.
It has been confirmed that those four plants have not been officially delisted, and the four have not yet lost their licenses in China.
The Beef City and Dinmore plants are both owned by JBS Australia. The Australian has contacted Kilcoy, the Northern Co-operative Meat Company and JBS for comment.
The meat bans come as China prepares to slap large tariffs on Australian barley as early as this Sunday.
Industry sources have told The Australian that it is possible a technical matter is behind the four suspensions.
Read more: China bans 4 abattoirs as trade tension rises
10.12am: Risk off mood sends ASX lower
Local shares are pulling back in early trade on fear of a second wave of coronavirus
At the open, the benchmark ASX200 is lower by 36 points or 0.66 per cent to 5425 – after a 1.3 per cent jump yesterday.
All sectors bar health care and staples are trading in the red – with the biggest drag from real estate and tech stocks.
Heavyweights Macquarie and BHP are both lower – by 2pc and 1.6pc respectively but there’s no stopping Afterpay, its shares up 0.6pc.
Bridget Carter 10.05am: Atomos to raise $12m
DataRoom | Atomos is raising $10m through a placement and $2m through a share purchase plan.
Shares are being sold at 45c each, a 34.3 per cent discount to the last closing share price of 68.5c.
The funds will be used for the company to expand into the streaming market and offer a buffer against further COVID-19 shocks.
Morgans is working on the raise.
Perry Williams 10.02am: CSR axes payout as profit tumbles
Construction supplier CSR has axed its final dividend due to economic volatility with annual net profit tumbling 26 per cent due to the weak Australian residential housing market.
After delivering a special dividend of 4c a share in addition to an interim payout of 10c a share in November, CSR said it had made the prudent decision to withhold any return for the full-year due to the uncertain economic environment.
A $100m share buyback has been paused with $69m so far purchased while it secured an extra $200m facility to boost its liquidity position. It holds no debt and $95m in cash.
Annual net profit fell 26 per cent to $134m from $181m with building products earnings falling 17 per cent to $170m from weak residential building activity.
“The residential market has slowed after a period of very high activity over the last few years,” chairman John Gillam said.
While CSR said COVID-19 had minimal impact on the result, it opted to withhold earnings guidance for the 2021 financial year due to uncertainty from the pandemic.
Building products revenue fell 3 per cent in the first six weeks of this financial year on the same period a year ago.
CSR last traded at $3.38.
9.53am: Blundy resigns from Accent, Aventus board
Billionaire Brett Blundy has taken a step back from two of his listed retail investments – Aventus and Accent Group, announcing this morning he had resigned from both boards.
While Mr Blundy will no longer take a board seat, his BBRC Group will continue to be drafted as an adviser.
BBRC owns 18.2 per cent of Accent Group’s shares and about 29 per cent of Aventus.
“Brett has been a highly contributing director of Accent Group since December 2017. Our new agreement enables Accent Group to maintain a strategically valuable connection with
Brett and with the entire BBRC Group globally,” Accent chairman David Gordon said.
Read more: Retail billionaire Blundy ‘cautious’ on coronavirus
9.36am: What’s on the broker radar?
- Appen cut to Hold – Bell Potter
- Pendal Group cut to Hold – Morgans
- Scentre cut to Underperform – Jefferies
- Soul Pattinson reinstated Hold – Morgans
- Suncorp raised to Add – Morgans
9.28am: Shares set for choppy start
Australian shares may trade in line with a mixed night on Wall Street, amid focus on company updates and NAB’s monthly business survey today.
Overnight ASX200 futures relative to fair value were little changed but the S&P 500 was flat versus the 0.5pc rise that was expected based on futures.
While the S&P 500 was underpinned by gains in Health Care and Tech stocks, Financials, Energy, Materials, Industrials, Real Estate, Utilities and Consumer Staples fell.
BHP ADR’s equivalent close at $31.06 suggests the resources-sector heavyweight will open down about 1.6pc.
Brent crude fell 4.3pc to $US29.63 despite Saudi Arabia’s plan to cut an additional 1mbd of oil production on top of the OPEC+ agreement.
Still, the ASX200 could rise again today due to a lack of strong selling ahead of chart resistance from April highs around 5450. Yesterday’s break above the 50-day moving average on the index and breakouts in leading stocks like Afterpay and Macquarie was also a positive.
NAB’s monthly business survey for April is due at 11.30am AEST and may reflect some of the recent optimism in markets about earlier-than-expected easing of coronavirus restrictions.
9.21am: Shareholders snap up Incitec placement
Incitec Pivot has successfully completed its $600m placement, the overwhelming majority of which was issued to existing shareholders.
The fertiliser group yesterday halted shares, saying it was raising funds to weather the coronavirus downturn and strengthen its balance sheet.
In a note to the market this morning, Incitec said it had “received significant interest from both domestic and offshore institutional and professional investors” for the placement at $2 apiece, and 98pc of the placement had been allocated to existing shareholders.
“The success of the equity raising is a clear endorsement of IPL’s businesses and its long-term strategy,” chief Jeanne Johns said.
“This pre-emptive action will strengthen our balance sheet and increase our resilience in the current environment and provide financial flexibility to support the delivery of our strategy to drive long term shareholder value.”
IPL last traded at $2.19.
Perry Williams 9.14am: US ‘pantry loading’ lifts Amcor outlook
Packaging giant Amcor says “pantry loading” from US consumers during COVID-19 has helped lift its annual earnings guidance with strong demand for healthcare, food and drink staples and its 250 plants all running through the pandemic.
Amcor, dual-listed in Australia and New York following the $9bn takeover of American-based food packaging firm Bemis last year, said US people in particular flocked to staples as lockdown measures took hold.
“It’s what you’ve seen all over the TV and the media. The US consumer tends to pantry load like no one else, so sales were particularly strong in March,” Amcor chief executive Ron Delia said.
Amcor lifted its 2020 earnings per share growth forecast to 11-12 per cent from a prior 7-10 per cent range, implying a constant currency EPS range of US64.6c to US65.2c per share.
9.07am: Cost cutting squeezes Altium sales
Altium said it began to see start-ups and smaller companies in distress in April, prompting the printed circuit-board company to warn it is unlikely to meet its $US200m fiscal 2020 sales target.
The Australia-listed firm on Tuesday said cash preservation by small- and medium-sized enterprises during the coronavirus pandemic would probably affect the timing of sales during May and June, which are typically its strongest months.
Altium last month withdrew its fiscal 2020 revenue and earnings guidance due to uncertainty over the impact of coronavirus, but reaffirmed its so-called aspirational revenue target of $US200m.
Chief financial officer Joe Bedewi on Tuesday said there was now a low probability of the company meeting that $US200 million target in fiscal 2020.
Some analysts had previously suggested Altium could still make the lower end of its withdrawn guidance for revenue of $US205m-$US215m and an earnings margin of 39pc-40pc.
Chief executive Aram Mirkazemi said Altium had rolled out attractive pricing and extended payment terms to drive sales volumes, and accelerated the introduction of a new digital online sales capability. He warned the digital sales model will take some time to fully ramp up.
Dow Jones Newswires
9.00am: New Hope chief to retire
New Hope chief executive Shane Stephan has this morning announced his retirement from the coal miner, after 11 years with the company.
Mr Stephan served in the top job since February 2014, led the company through the process of approvals for the New Acland Stage 3, and will serve his last day as chief on August 31.
The board of the miner is now conducting a search for his replacement from a pool of both internal and external candidates.
“Shane has led the Company through a period of growth, with the acquisition of the Company’s 80pc interest in the Bengalla Mine. Sales tonnages have more than doubled during his tenure as CEO, while the Company has maintained its record of tight cost control,” chairman Robert Miller said.
8.35am: Premier reopens, online sales surge
Premier Investments says it plans to reopen all its Australian retail stores from May 15, as coronavirus restrictions ease, and as online sales surge.
The reopenings in NSW, Victoria, Western Australia, South Australia, the ACT and Tasmania come after the retailer had reopened its stores in Queensland and Northern Territory.
Premier said store closures had significantly impacted Premier’s sales, with total sales down 74 per cent for the six weeks to May 6, 2020 versus the prior year. Global retail store network sales were down 99 per cent.
However Premier said online sales had surged by 99 per cent.
It said its largest online brand in Australia, Peter Alexander, has posted a rise in online sales of 295 per cent.
“Incredibly, during the week ended 2 May 2020, Peter Alexander Australia’s online sales alone were up 18pc on last year’s total sales across both online and our entire 122 store and concession network in Australia.”
New Zealand stores will reopen on May 14. However, Smiggle stationery stores in the UK will be closed until at least June 1, and stores in Ireland will be closed until at least June 29. In Malaysia, 16 Smiggle stores have reopened, and in Hong Kong, all stores are open. But Singapore stores will also be closed until at least June 1.
Richard Ferguson 8.30am: Alan Jones quitting radio
Sydney radio star Alan Jones is quitting his 2GB breakfast show after more than 35 years on air. He will be replaced by Ben Fordham.
Mr Jones – who has suffered health problems for several years and turned 79 this year – says he has to listen to his doctors and reduce his workload. He will retire at the end of the month.
“The experts are telling me in no uncertain times … Alan, continuing with the present workload is pretty detrimental to your health,” he told his listeners today.
“I’ve listened to the experts and I’ve taken to indicate to my radio family that I will be retiring from radio at the end of this month.”
Mr Jones will continue to appear on Sky News.
7.57am: Defiant Musk ‘restarting’ Tesla factory
Tesla chief Elon Musk said he is resuming production at the company’s California auto assembly plant, defying authorities and escalating a feud over the Pacific state’s pandemic shutdown.
Musk made the announcement on Twitter after several days of raging online and a lawsuit seeking to resume operations at the factory.
“Tesla is restarting production today against Alameda County rules,” Musk said in a tweet.
“I will be on the line with everyone else. If anyone is arrested, I ask that it only be me.” Musk said, moments later, that state officials had approved the reopening but that the move had been blocked by local authorities.
“California approved, but an unelected county official illegally overrode,” he said. “Also, all other auto companies in US are approved to resume. Only Tesla has been singled out. This is super messed up!”
Tesla is restarting production today against Alameda County rules. I will be on the line with everyone else. If anyone is arrested, I ask that it only be me.
— Elon Musk (@elonmusk) May 11, 2020
Musk’s move comes amid rising disputes over the pace of easing the lockdowns imposed by states to contain the deadly coronavirus outbreak.
Over the weekend, Musk threatened to move Tesla’s headquarters and factory out of California as a result of the standoff.
AFP
7.50am: ASX likely to open lower
The Australian share market is poised to open lower after mixed results across US markets overnight.
At 7am (AEST) the SPI 200 futures contract was down 19 points, or 0.35 per cent, to 5,459.0, indicating losses in early trade.
Wall Street was mixed overnight as continued gains for technology and health care stocks helped cover more prevalent losses elsewhere. The S&P 500 had 69 per cent of stocks fall.
The index ended the day at a virtual standstill, up just 0.39 points at 2,930.19.
In Australia, Treasurer Josh Frydenberg is expected to give an update on the economy. This will include an estimate of the federal budget balance, which will be greatly revised due to the economic impact of the coronavirus.
The S&P/ASX200 benchmark index finished Monday up 70.1 points, or 1.3 per cent, at 5,461.2 points, while the All Ordinaries index gained 71.1 points or 1.3 per cent, to 5,559.1.
One Australian dollar was buying US64.90 cents, down from US65.40 cents at the close of trade on Monday.
Gold is trading at $US1697.41 an ounce.
AAP
7.48am: First State buys NZ network
Electricity distributors WEL Networks Ltd. and Waipa Networks said they sold a jointly-owned broadband business to Australia’s First State Investments for $NZ854 million.
First State Investments, which manages about $US148 billion of assets globally, said the acquisition of Ultrafast Fibre adds to its presence in New Zealand following a 2016 investment in a gas network.
Ultrafast Fibre was established in 2010 and operates a fibre network in eight North Island towns and cities.
WEL Networks owned 85 per cent of Ultrafast Fibre and Waipa Networks the remaining 15 per cent.
Dow Jones Newswires
7.35am: SkyCity to reopen NZ casinos
SkyCity Entertainment says it is reopening its accommodation and casino facilities in Auckland, Hamilton and Queenstown from May 14, as New Zealand eases its coronavirus restrictions.
It says the reopening will be staged, with reduced opening times at first.
SkyCity says its Adelaide Casino remains closed
7.15am: Trump rules out renegotiating China deal
US President Donald Trump has ruled out renegotiating the trade agreement signed with China.
“I’m not interested in that,” Trump told reporters when asked about reports that China was looking to reopen talks about the trade deal signed in January.
“Not even a little bit,” Trump said. “Let’s see if they live up to the deal that they signed.”
AFP
Damon Kitney 7.09am: Etihad resumes London link
Etihad Airways is resuming flights between Melbourne and London via its Abu Dhabi hub from this Friday, with strict hygiene protocols.
In a statement the airline also said it will offer London to Melbourne flights via Abu Dhabi from May 21.
Etihad plans to maintain this link until it fully resumes its previous double daily connection between the two cities.
The flights feature business and economy cabins.
Etihad is a shareholder in the collapsed Virgin Australia and has reportedly been in talks with Oaktree Capital Management about making a bid for the Australian carrier.
First round indicative bids are due to Virgin’s receiver Deloitte by Friday.
6.05am: Wall St mixed amid second wave fears
US stocks swung between small gains and losses as investors weighed the benefits of reopening the economy against concerns that such steps could lead to fresh waves of coronavirus infections and renewed lockdowns.
The Dow pulled into the closing bell 109 points, or 0.5 per cent, lower, after dropping as much as 261 points earlier. The S&P though ticked up less than 0.1 per cent, while the Nasdaq Composite climbed 0.8 per cent, with technology and heath-care stocks powering much of the gains.
After closing 1.3 per cent higher on Monday, Australian stocks are set to open lower. At 6am (AEST) the SPI futures index was down 18 points, or 0.3 per cent.
States including California, New York and Ohio have moved to restart commerce in recent days, with encouragement from the White House, as have some European and Asian countries. The reopenings are being watched closely by investors, with worries that they could spark new flare-ups and ultimately offer limited economic benefits.
South Korea is serving as a cautionary tale after the biggest one-day increase in new infections in a month prompted the government to warn that the nation must brace for a second wave.
US stocks are likely to be volatile as investors monitor the reopenings for signs of which states and cities are making progress in returning to normal, and market sentiment will be sensitive to any signs of fresh outbreaks, said Christopher Smart, chief global strategist at Barings.
“The next few weeks are going to be very bumpy and very important in parsing out what the recovery is going to look like,” Mr. Smart said. “We’re going to have to live with the uncertainty of that two-steps-forward, one-step-back news flow.”
In a sign that the economic damage may be more extensive than the recent rebound in stock markets suggest, factory furloughs across the US are becoming permanent closings. Those factory shutdowns are likely to further erode an industrial workforce that has been shrinking as a share of the overall US economy for decades.
It is unclear whether reopening closed businesses will spark the revival of economic activity that policy makers hope for. In the UK, authorities could reverse any decision to reopen businesses if cases tick up, and the public could be unwilling to visit shops and restaurants even when the government allows them to reopen, Richard McGuire, head of rates strategy at Rabobank, cautioned.
Stocks have rallied sharply since bottoming in late March, a sign many investors are betting on a relatively quick recovery. And a key measure of stockmarket volatility, the Cboe Volatility Index, is hovering near its lowest level since February.
Much of the recent market rebound has been driven by tech stocks. The Nasdaq Composite was on course for its sixth consecutive day of gains, its longest winning streak since December. Investors hunting for winning bets have lifted tech giants like Apple, which was up 1.6pc Monday, and Amazon.com, up 1.3pc.
Elsewhere, China’s central bank said it would roll out more measures to support the world’s second-largest economy and keep monetary policy flexible. The People’s Bank of China said Sunday that it would focus more on maintaining economic growth and jobs, while ensuring poverty elimination by the end of the year.
U.S.-China tensions have ratcheted up again in recent days. President Trump said Friday that he hasn’t decided whether to cancel the January trade deal between the two countries.
In other markets, the benchmark Stoxx Europe 600 index fell 0.4 per cent. In Asia, Hong Kong’s Hang Seng index closed 1.5 per cent higher, while Japan’s Nikkei 225 advanced 1.1 per cent.
Dow Jones Newswires
5.55am: Branson to cash in part of Galactic stake
Richard Branson’s Virgin Group said it plans to sell as much as 12pc of Virgin Galactic Holdings. — the space-tourism venture that made its initial public offering in New York — to shore up its other travel and tourism businesses.
In a regulatory filing Monday, Virgin said it would sell as many as 25 million shares in the company, to raise funds to support its portfolio of global leisure, holiday and travel businesses. Those businesses, including a cruise line and two airlines, have been hit hard by a drop in demand amid the coronavirus pandemic.
Virgin owns 80pc of a subsidiary called Vieco 10, which owns roughly 69pc of Virgin Galactic. After the planned sale, Vieco’s stake would drop to about 42pc. Based on Friday’s closing price, the shares Virgin said it plans to shed would be valued at roughly $US500 million. Shares in Virgin Galactic were down 2.9pc late Monday in New York.
Last Month, Virgin Australia, 10pc-owned by Virgin, filed for bankruptcy. Another, UK-based Virgin Atlantic, a trans-Atlantic shuttle, is asking for financial assistance from the UK government. Other businesses, such as a new cruise-line venture, and a US hotel group have also been hit hard.
Virgin Galactic, which plans to take passengers to the edge of space to experience several minutes of weightlessness, has been a relative bright spot. Despite a big drop with the rest of the stock market, shares in the company are up 68pc this year to date.
Mr. Branson is in talks with about 14 private investors, including private-equity funds Cerberus Capital Management and Greybull Capital, about raising a further $US500 million to put into Virgin Atlantic, according to a person familiar with the matter. The two funds didn’t immediately reply to requests for comment.
Dow Jones Newswires
5.45am: Oil slides
Oil prices closed lower after a volatile session, pausing a recent rebound even after Saudi Arabia and other producers said they would deepen supply cuts to support beleaguered energy markets.
U.S. crude futures for delivery in June ended the day down 2.4pc at $US24.14 a barrel. Prices have risen recently with parts of the world lifting lockdown measures and fuel consumption slowly climbing. At the same time, global production cuts are driving bets on long-term supply shortages after the world reopens for business.
Brent crude futures for July delivery, the global gauge of oil prices, slid 4.3pc to $US29.63 a barrel.
Despite recent supply cuts, many investors remain concerned that fuel demand will remain low. While consumption has started increasing, analysts are worried that a second spike in global coronavirus cases later in the year could again dent demand.
Dow Jones
5.40am: Twitter to label disputed COVID-19 tweets
Twitter announced it will warn users when a tweet contains disputed or misleading information about the coronavirus.
The new rule is the latest in a wave of stricter policies that tech companies across are rolling out to confront an outbreak of virus-related misinformation on their sites.
Twitter will take a case-by-case approach to how it decides which tweets are labelled and will only remove posts that are harmful, company leaders said.
Some tweets will run with a label underneath that directs users to a link with additional information about COVID-19. Other tweets might be covered entirely by a warning label alerting users that “some or all of the content shared in this tweet conflict with guidance from public health experts regarding COVID-19.” The new labels will be available in roughly 40 languages and should begin appearing on tweets as soon as today. The warning could apply retroactively to past tweets.
AP
5.35am: Stocks slide on second wave fears
Stock markets sank as fears of a second wave of coronavirus infections took their toll in volatile trading.
Key eurozone markets were down at the close, having given up early gains, while London managed to edge into positive territory in the final minutes of trading as the pound weakened.
London closed up 0.1pc, Frankfurt lost 0.7pc and Paris tumbled 1.3pc.
“Fears of a second wave are already emerging in South Korea, China and maybe even Germany which should be a lesson to those countries preparing for looser restrictions,” said Craig Erlam, an analyst at OANDA.
Dollar strength, meanwhile, “pointed to a slight risk-off tone”, said Fawad Razaqzada at ThinkMarkets, adding however that there had been no massive purchases of other traditional havens, such as gold or the yen.
Gold was up less than one per cent on the day, while the yen weakened against the dollar.
Earlier, several markets in Asia had closed higher, but Shanghai gave up early gains to end marginally lower despite a pledge by the People’s Bank of China to deliver “more powerful” policies to support the world’s number two economy.
Observers warned that the global outlook remains murky amid concerns of a second virus wave hitting South Korea and China which have slowly reopened their economies.
AFP
5.28am: Saudi to cut oil output
Saudi Arabia said it had asked oil giant Aramco to cut an additional one million barrels per day from June, to support prices that have crashed during the coronavirus crisis.
The move will reduce the production of the world’s biggest crude exporter to 7.5 million barrels per day, the energy ministry said in a statement cited by the official Saudi Press Agency.
OPEC and its allies in the so-called OPEC+ grouping agreed last month to cut production by a record 9.7 million bpd while other producers pledged to reduce their output by around 3.7 million bpd.
Under the deal, Saudi Arabia’s daily production was cut to 8.5 million bpd, the lowest in more than a decade.
“The kingdom aims from this additional cut to stimulate countries in the OPEC+ and other producing nations to comply with committed production cuts and make additional reductions in a bid to support the stability of the global oil market,” the energy ministry said.
AP
5.25am: Indonesia eyes Garuda rescue
Indonesia is drawing up a $US1.0 billion rescue plan for struggling national airline Garuda after the coronavirus forced the company to ground most of its planes, Bloomberg News reported.
Under the plan, some $US500 million in Garuda debt would be restructured with another $US500 million in new loans to help the airline meet operational needs for the next six months, the report said, citing Deputy State-Owned Enterprises Minister Kartika Wirjoatmodjo.
The company was facing the prospect of defaulting on Islamic bonds known as sukuk due next month, the report said, adding that investors would be offered the option of extending maturities on their investment by three years or a staggered repayment scheme.
AFP
ASX 200 falls on China update; BHP leads mining reversal
Iron ore, copper futures, AUD down after China's underwhelming economic update. RBA's 'step down' in hawkishness evident in September minutes, but deputy governor Andrew Hauser says inflation job's not done yet.
ASX 200 rises on banks; Arcadium top gainer
Rio Tinto's takeover approach lifts Arcadium Lithium appeal. West African Resources drops on Burkina Faso mining concerns. Qantas may avoid second strike after proxy backing.