ASX falls into the red as banks reverse

Gains evaporated on Friday as banks and CSL fell, sending the ASX to a 0.2pc weekly loss, while early earnings have been resilient despite the pandemic pessimism.

July retail sales edged up by 3.3pc. Picture: NCA NewsWire / Andrew Henshaw

• 59pc of companies outperform on results: Oliver
• Aussie dollar to hit US80c by 2020: Westpac
• Suncorp cash earnings down 33pc
• A2 Milk bolsters capacity in $NZ270m deal

That’s all from the Trading Day blog for Friday, August 21. The ASX reversed early gains to fall to a 0.2pc weekly loss, dragged down by heavyweight banks and CSL. It comes despite strength on Wall Street overnight, where the S&P and Nasdaq set new records.

Earnings season continued with results from Suncorp, Boral, TPG and Mayne Pharma, among others. Preliminary retail sales for July showed a 3.3pc lift, with gains in all states bar Victoria.

Ticky Fullerton 8.03pm: Tough tasks no problem for Dwyer

As a chairman, Paula Dwyer has pulled off two of the more complex corporate transactions in the last decade in Australia: the merger of Tabcorp and Tatts, and the sale of Healthscope to Brookfield.

In a rare interview, Dwyer speaks frankly about them both and, as she steps down as chair of Tabcorp, the speculation that she just might put her hat in the ring for the chair of ANZ.

“You’ve got to put her at the very highest level of Australian directors and with not more than a handful of female director peers in my opinion,” says Dr Ziggy Switkowski, NBN Co chair who was on both the Tabcorp and Healthscope boards and has seen Dwyer operate up close. “She’s a good chairman, confident enough to surround herself with capable directors, strong willed, held in both high regard and with some affection.”

Read more

Alan Kohler 6.25pm: AMP model ‘still based on deceit’

It’s impossible for a company to have a good internal culture if its business model is based on deceit.

That’s AMP’s problem.

For decades its business has been founded on “advice-based distribution”, and still is — that is, persuading people that they’re getting financial advice when in fact something is being distributed to them.

That “something” is asset management, which is a product, not advice. AMP’s advisers, and in fact most advisers in the country, are mainly “fund-of-fund” asset managers: they choose fund managers for their clients having given them some advice about asset allocation.

Nothing wrong with that; it’s a worthwhile service. The problem lies with presenting it as “advice”. In the “Strategy” section of AMP’s results presentation this month, under the heading “Reinvent advice”, the quality of its adviser network was displayed as AUM (assets under management). The advisers are celebrated as asset managers, not for the quality of their advice.

Trailing commissions aren’t paid any more, but AMP’s advisers know how to get on: by persuading every client to give them their money to manage and grabbing as much AUM as possible.

Read more

4.30pm: 59pc of companies outperform on results: Oliver

Corporate Australia is proving resilient versus overly pessimistic expectations for earnings and dividends following the coronavirus pandemic.

Shares of most reporting companies have outperformed on the day of their results, according to AMP Capital’s head of investment strategy and chief economist, Shane Oliver.

“While it’s clear that company earnings and dividends have been hit hard by the coronavirus shock, the hit has not been as bad as feared,” he says.

“Most companies appear quite resilient and this in turn has enabled 59 per cent of companies share prices to outperform the market on the day they reported and for the market as a whole to rise so far through August.”

It has been a similar story to the recently-concluded June quarter reporting season in the US, where the major indexes rose as the vast majority of companies exceeded overly-pessimistic expectations.

Dr Oliver does note that only 28 per cent of results have exceeded expectations compared to a norm of around 44 per cent but only 27 per cent of reporting companies have missed the consensus estimates.

“Only 33 per cent of results have seen earnings rise from a year earlier – compared to a norm of 66 per cent – and 55 per cent have cut dividends compared to a norm of just 16 per cent. So far consensus earnings expectations for 2019-20 have fallen slightly to minus 21.6 per cent from minus 21 per cent two weeks ago and this will be worst fall since the early 1990s recession.

“Financials are being the hardest hit with the consensus expecting a 29 per cent slump in earnings led by insurers and the banks, followed by industrials with a 15 per cent fall in earnings and resources with minus 12 per cent.”

The June half profit reporting season is now about 70 per cent complete by number and 80 per cent by market capitalisation.

4.15pm: Shares slip to weekly loss

Shares capped out a rollercoaster week slightly lower, its first decline in three weeks, after bank and healthcare gains evaporated on Friday.

Optimism midweek pushed shares to a six-month high but earnings momentum and some likely profit taking pulled the index into the red.

By the close on Friday, the benchmark ASX200 was lower by 9 points or 0.14 per cent to 6111.2 – marking a 0.2 per cent weekly loss.

On the All Ords, shares closed down just one point or 0.02 per cent to $6270.7 – managing to clutch a 0.1 per cent gain for the week.

3.13pm: RBA investigates future of ATMs

The Reserve Bank-backed Payments System Board is looking at the implications of the declining cash use across the economy for the provision of cash distribution services by banks and other market participants.

It noted there has been further rationalisation of ATM fleets by some banks and others during the past year.

However the Payments System Board said it was important the community continues to have good access to cash withdrawal and deposit services, “even as the overall use of cash for transactions declines”.

It also noted there was the first drop off in credit card fraud during 2019. This was the first decline in eight years and occurred even though there was continued strong growth in the use of cards.

Read more: RBA predicts fewer ATMs, warns of end of cheques

2.40pm: RBA calls on states to boost spending

RBA Governor Philip Lowe has called on state and territory leaders to boost their public spending by 2 per cent of GDP, equivalent to $40bn, to support the economy.

In a highly-unusual move, PM Scott Morrison said the RBA Governor had called for the spending boost when he addressed the National Cabinet on Friday.

Mr Morrison said Dr Lowe stressed the need for income support, infrastructure programs and skills training across sectors such as energy, transport, schools, hospitals and housing, and making it easier to do business through reform of taxation and regulation.

Further, he said that any such plans needed to be co-ordinated.

He also indicated that the RBA will ensure states can borrow at low levels to fund spending.

Read more: Economic risks skewed to the downside, says Lowe

2.11pm: iSignthis files $264m suit against ASX

Fintech iSignthis has filed a $264m lawsuit against the market operator, alleging misleading and deceptive conduct in relation to the stock’s suspension for almost 12 months.

In a statement to the market today, alongside its statement of claim, iSignthis chief John Karantzis called for the ASX to pay damages of $264m relating to its suspension, along with a corrective statement and an apology.

“Uniquely, ASX as a market operator may have mislead and deceived the market that it is obligated to maintain on a fair, transparent and orderly basis, throwing doubt on its ability to manage a Tier 1 market,” he said.

“By any measure, the damages claimed and the impact of any adverse finding make this a high stakes and material case for the ASX.”

The materiality of the case was quashed by the ASX, who said it was defending the proceedings but that they warranted no further disclosure to the market given “this matter is not material”.

1.56pm: Westpac tips AUD to hit US75c this year

The case for further upside in the Aussie dollar is strong, says Westpac’s Bill Evans, as the bank lifts its forecasts to as much as US80c.

As AUDUSD trades around US72 in Friday’s trade, Mr Evans notes that the bank’s forecast for year-end 2020 has already been reached.

“The case for this momentum to stall is not convincing so we are obliged to bring forward some of the strength through 2021 into the back end of 2020,” he says.

The bank now sees the Aussie dollar reaching US75c by the end of 2020, and US80c by the end of 2021 – an upgrade of previous estimates of US72c and US76c respectively.

Mr Evans notes strength in iron ore prices is likely to persist given China’s robust demand, while central banks commit to support liquidity and demand and governments continue to pledge stimulus.

1.50pm: Suncorp displays strength amid adversity: S&P

Global ratings agency S&P says Suncorp’s defensive management and conservative balance sheet have helped the insurance and banking group ride out the twin hit from bushfires and the COVID-19 pandemic.

S&P describes the group’s results as “displaying strength in the face of adversity”, noting that its investment performance was ahead of its peers, even though volatility moderated its earnings.

“The group’s provisions and risk overlays against further potential losses related to COVID-19 appear reasonably conservative and we expect Suncorp’s operating performance and capital adequacy will remain resilient in fiscal 2021,” S&P writes.

“We consider Suncorp’s provisioning across its insurance and banking operations to be credit supportive.”

SUN last traded up 9.9pc to $9.55.

Read more: Suncorp slices dividend

1.42pm: Clothing, department stores lagging: CBA

Household goods may have lifted retail spending for July, but clothing, footwear and department store spend remains below pre-pandemic levels, notes CBA economist Kristina Clifton.

After the release of the ABS figures earlier today, Ms Clifton points out that the lift in retail was choppy across sectors, reaffirmed by the bank’s own spending data which shows services spend is still weak.

“While economic and health uncertainty is high we expect that consumers will take a cautious approach to spending. It could take many years for spending to return to where it was before the pandemic came into play,” she notes.

Grocery spending however remains elevated, thanks in part to pantry stocking in Victoria ahead of the stage four restrictions imposed in early August.

MYR shares are flat at 21.5c while Coles trades down 0.8pc to $18.71 and Woolworths is off by 1.3pc to $39.61.

Read more: Retail holds line against VIC slump

1.01pm: Shares reverse early lift

Shares have reversed all of a 0.7pc early gain as banks and health stocks weigh, putting the ASX on track for a weekly slip.

At 1pm, the benchmark ASX200 is off by 15 points or 0.2pc to 6105.1, despite hitting highs of 6166.4 early in the session.

The index needs to close above 6126 to cement a weekly gain.

In stock specific moves, CSL is doing damage with a 1.4pc slip, while CBA and Westpac sheds 0.5pc, ANZ is down 0.4pc and NAB is lower by 0.51pc.

12.14pm: Furniture, whitegoods lead retail lift

Drilling down on the retail sales figures further shows household goods were the key driver of the 3.3pc growth last month.

The sector, which has been strong through the pandemic, grew by 30pc compared to the same time last year, led by increased sales of larger items such as furniture and whitegoods.

That’s music to the ears of Harvey Norman, who lifts to a daily high of $4.36 on the release, while online furniture store Temple & Webster is slipping by 2.5pc to $7.91, with much of the upside already factored in.

JB Hi-Fi is up by 0.4pc to $51.20 while Adairs lifts 2.9pc to $3.52.

12.02pm: ASX falls flat as financials weigh

Australia’s S&P/ASX 200 was flat in late morning trading after rising 0.8pc to 6166.4.

Suncorp remains up 7.6pc after its earnings beat expectations, but reversals of strength elsewhere in the financial sector weighed on the market with CBA down 0.6pc, Macquarie down 1.3pc, ASX down 1.8pc and QBE down 2.2pc.

Profit taking in the health care sector has continued, with CSL down 1.3pc, ResMed down 1.1pc and Cochlear down 1.5pc.

Materials are in the red with BHP down 0.6pc, Amcor down 2pc and Rio Tinto down 0.5pc, while in the utilities sector, APA Group is down 2pc.

Patrick Commins 11.46am: COVID-19 adds $800m to debt burden

Australia’s net debt burden by the end of the decade will be up to $800bn higher than would have been the case without the COVID-19 crisis, while the budget will remain tens of billions of dollars in the red, new estimates from parliament’s independent budget watchdog reveal.

The worst-case figure – based on the most pessimistic of the Reserve Bank’s downside, base-case and upside economic outlook scenarios revealed earlier this month – is $180bn worse than the Parliamentary Budget Office estimated in June in its first medium-term fiscal analysis of the impact of COVID-19.

That’s mainly due to lower population growth assumptions drawn from Treasury’s July economic and fiscal update, the PBO said.

The ranges for additional net debt as a result of the pandemic by 2029-30 lie between 14 per cent and 24 per cent of GDP, versus the 1.8 per cent projected by Treasury before the COVID-19 recession.

Similarly, the budget underlying cash position will deteriorate by between $31bn and $48bn in 2029–30 under the three RBA scenarios, the PBO said, compared with the December mid-year budget forecasts which, before the pandemic struck, had expected the budget to be broadly balance or in surplus in coming years.

11.35am: Retail sales lift 3.3pc

Preliminary retail sales for July show a 3.3 per cent monthly lift, as all states bar Victoria progressed towards recovery.

The latest figures from the ABS show a 12.2pc lift compared to the same time last year, but 3.3pc gain from June – but Victoria sales contracted by 2pc.

“The rise across the rest of the country was driven by continued strength in household goods retailing, and the recovery in cafes, restaurants and takeaway food services, and clothing, footwear and personal accessory retailing” said director of quarterly economy-wide surveys Ben James said.

“Victoria’s decline in retail turnover coincided with increasing numbers of COVID-19 cases, and the reintroduction of Stage 3 stay-at-home restrictions in July, impacting turnover.”

Flash ABS retail sales for July. Picture: Supplied.

11.30am: Bank pain not over yet: MS

Major bank provisions increased by $900m in the June quarter, but Morgan Stanley warns the lion’s share is still to come with banks only a third through their loan loss cycle.

Crunching the numbers after each of the big four handed down results in the past two weeks, Morgan Stanley’s Richard Wiles notes that collective provisions increased by $896m, with the largest increase at Westpac, and a reduction at Commonwealth Bank, while underlying loss rates averages 19 basis points of loans.

Non-performing loans increased by 18pc in the June quarter, from 65bp of total exposures to 76bp, but bank disclosure suggests their internal models are lagging trends in the real economy, Mr Wiles notes.

“We expect uncertainty on the severity of the loan loss cycle to continue into the start of 2021 when Job Keeper and loan repayment deferral programs run off,” he writes.

“Our forecasts for the major banks’ cumulative loan losses from FY20-FY22E are largely unchanged. Based on our estimates, the majors are about one-third of the way through the loan loss cycle.

Across the big four he tips cumulative loan losses of 103bps at ANZ, 85bps at Commonwealth, 122bp at NAB and 103bp at Westpac.

Eli Greenblat 11.23am: Scentre locks out Mosaic Brands over rent

Shares in fashion retailer Mosaic Brands are down more than 6 per cent in morning trade after overnight one of its landlords locked it out of 129 stores following a protracted battle over rent payments.

Scentre Group, the landlord that owns local shopping centres Westfield, late on Thursday decided to lock out Mosaic Brands, owner of the Noni B, Millers, Rivers, Katies, Crossroads and EziBuy brands, from its stores.

The dispute is over the rent payments to be made during the COVID-19 pandemic which has seen customer traffic at shopping centres tumble and many centres resemble ghost towns.

Mosaic Brands are down 4.5 cents, or 6.2 per cent, at 68 cents as Scentre trades up 2.8pc to $2.05.

Read more: Leasing code warning as Scentre boards up Mosaic

11.16am: Santos may need to raise: Macq

Macquarie Equities’ Mark Wiseman says Santos has realistic, attractive growth options, but needs time to regain the balance sheet strength to fund them.

A 10pc dividend payout was a “red flag” for an equity raising to fund its Dorado, Barossa and Narrabri projects is “now looking more likely, in our view.”

“In the current oil market, we expect asset selldowns and an equity raising may be required,” Mr Wiseman says.

He stays Neutral with a $5.80 price target.

Santos shares fell 5.3pc to $5.57 after its results on Thursday and last traded up 3.2pc to $5.75.

Read more: Santos fights back as gas spat escalates

David Ross 10.40am: Mystate ekes slim profit

Hobart-based Mystate has squeaked in a slim increase to profits to $30.1m after provisions of $4.9m were made for possible credit loss.

Net profits before provisions and tax increased 12.9 per cent to $47.9m.

In recognition of the serious damage inflicted by the COVID-19 pandemic a final dividend will be withheld, leaving only the interim dividend of 14.25c per share.

Mystate CEO Melos Sulichich said the pandemic had presented challenges for the business, but the result demonstrated the success of the bank’s strategy.

“While COVID-19 is uncharted territory in terms of credit and liquidity challenges, we are extremely well placed for the future. We are ready to compete for market share, grow our mortgage book and secure a greater number of deposit customers across Australia,” he said.

“TPT wealth is also well placed to win market share in eastern states and grow its business.”

MYS last traded down 3.7pc to $3.70.

Samantha Bailey 10.34am: Inghams lifts despite profit drop

Inghams has posted a drop in full-year net profit on the back of a weak demand for poultry through the COVID-19 restrictions, especially the lockdown in New Zealand.

Net profit for the year sank 68.2 per cent to $40.1m for the full-year through June, as Australian volumes grew by 4.3pc but were offset by a 2pc fall in NZ.

Still, the company declared a final dividend of 6.7 cents per share fully-franked, down from 10.5c a share the prior year.

Shares in the group were higher by 5.2pc to $3.46 in early trade.

Inghams said that the poultry demand continues to show resilience as a preferred protein, with consistency of supply and attractive pricing, though government restrictions in Australia and New Zealand continued to impact consumption.

The group said net debt had increased by $50.9m to $314.7m for the year, due to higher inventory, mainly due to COVID-19.

Looking ahead, market supply may be impacted by restrictions resulting in reduced capacity or the closure of processing plants such as its Thomastown facility which was closed for 10 days due to an outbreak, while its workforce in Melbourne has been reduced in line with Victorian restrictions.

10.24am: Pfizer/Biontech vaccine optimism lifts futures

Positive news on the Pfizer/Biontech vaccine is helping US stock index futures.

S&P 500 futures are up 0.33pc after the BNT162 MRNA-based vaccine advanced to phase 2 and the companies said they were on track for regulatory approval as early as October.

They say 11,000 people were dosed with BNT162B2 and it was “well tolerated across all populations.”

Pfizer says it will share T-cell immune response data in the near future.

ASX last up 0.6pc to 6157.1.

10.13am: Shares bounce by 0.7pc

Shares are bouncing back in early trade after more record highs on Wall Street overnight, thanks to a rebound in the major banks and miners.

At the open, the benchmark ASX200 is higher by 45 points or 0.74 per cent to 6165.4.

The banks are doing the heavy lifting – Westpac up 2pc as Commonwealth Bank adds 1.1pc, ANZ rises by 1.9pc and NAB puts on 1.6pc.

Suncorp is up 6.8pc after its results, while A2 Milk is up 2.5pc to $18.61 after revealing its acquisition plans.

CSL is down 0.8pc but Transurban, South32, Wesfarmers, Goodman, Aristocrat and IAG are contributing more than 1 point each to the index.

10.10am: Austal grows Alabama footprint

Listed ship builder Austal has inked a deal to increase the size of its US manufacturing capabilities in Alabama, including a dry dock to take larger steel ships in future.

The group previously flagged intentions to increase its US operations, in conjunction with $US100m in funding from the US government, with today’s deal the first land deal.

Austal will acquire over 15 acres of waterfront land, building and assets in Mobile, Alabama opposite its current facility from Modern American Recycling and Repair Services of Alabama for under $10m, to be funded by cash holdings – though the specific conditions are confidential.

“The acquisition would support Austal USA’s new construction and service strategy by securing launch and deep water berthing capability in support of future new construction efforts including steel ships, while also giving Austal USA increased service and repair capacity in Mobile,” the company said.

ASB last traded up 2.9pc to $3.51.

Read more: Austal shipyards sail through coronavirus crisis

Austal’s plant in WA. Picture: Colin Murty/ The Australian.

10.00am: ASIC launches IOOF cybersecurity proceedings

IOOF says the securities regulator has commenced proceedings against its RI Advice Group, relating to alleged cybersecurity and cyber resilience breaches.

In a note to the market, IOOF said ASIC’s allegations were “very general” but appeared to be related to a number of cyberattacks on a small number of authorised representatives of RI Advice.

“In most instances, no client data would appear to have been compromised,” it said, adding that the complaints relate to events from 2016.

“RI Advice has worked, for some time, with its Authorised Representatives and third party

experts to improve its cyber security and resilience. RI Advice has indicated to ASIC its

willingness to work cooperatively in respect of these matters.”

David Swan 9.52am: TPG falls to $117m loss

The company formerly known as Vodafone Hutchinson Australia, TPG, has posted its first half results for FY20, with the newly combined telco copping a hefty COVID-19-related hit.

The company’s stand-alone revenues, excluding TPG’s contribution, were down 12pc year on year to $1.513bn, and it recorded a net loss after tax of $117m for the year ending June 30.

Reported earnings before interest, taxation, depreciation and amortisation (EBITDA) were down 8 per cent to $546m, with the company impacted by an 80 per cent decrease in margin from international roaming, and a 30 per cent decline in prepaid connections.

The companies merged just four days before the end of the financial year, in a blockbuster $15bn tie-up.

Chief executive Iñaki Berroeta said TPG had been hit by retail store closures and reduced contact centre operations, as well as customer support measures including free unlimited calls and SMS, and bonus data. He said he anticipated some of the challenges to continue for the rest of the year.

Vodafone CEO Iñaki Berroeta ringing the ASX bell, signalling Vodafones' $15bn merger with TPG. Picture: Jane Dempster/The Australian.

9.44am: Services weakness weighs on PMI

Commonwealth Bank’s ‘flash’ PMI shows a contraction in business activity in August as Victorian lockdowns dented the services sector.

The early composite PMI read for August fell to 48.8 – with any number under 50 signalling contraction – but services PMI fell to 48.1 while manufacturing PMI signals expansion at 53.9.

“Looking at the broader trends in the PMIs it is clear that Australia’s services sector has been far more negatively impacted from the COVID‑19 pandemic than the much smaller manufacturing sector,” CBA’s Gareth Aird says.

“Lockdowns, in particular, weigh heavily on services sector output as a large number of businesses are not able to trade or can only trade in a limited capacity.”

Still, despite the top-line data, firms retain an optimistic view on the outlook, buoyed somewhat by ongoing fiscal support.

9.42am: Upside risk for shares amid results

Australia’s share market is expected to open relatively flat with upside risk after gains on Wall Street.

Overnight futures relative to fair value imply the S&P/ASX 200 will open up 0.1pc after falling 0.8pc to 6120 on Thursday.

The Nasdaq 100 rose 1.1pc to a record high close of 11264.95 and the S&P 500 rose 0.3pc to 3385.5 despite falls in Asia and Europe and higher-than-expected US jobless claims data.

Intel rose 1.7pc on a $US10bn share buyback plan, while Microsoft rose 2.3pc, Apple rose 1.5pc, Facebook rose 1.8pc and Telsa surged 6.5pc.

But local investors will be mainly focused on results again with reporting season now more than 80pc complete by market cap.

Improving domestic coronavirus trends may help also, with Victoria recording 179 new cases, the lowest in more than 5 weeks.

Newcrest, Lendlease and Ingenia Communities trade ex-dividend.

9.29am: Mask boom lifts Redbubble revenue

Online marketplace Redbubble says its well positioned to capitalise on the shift to online shopping accelerated by the COVID-19 pandemic, while its quick turnaround allows it to capitalise on consumer demand for products such as face masks.

Handing down $134m in gross profit the group said top-line momentum from April to June had continued in July across all geographies and product categories.

While printed T-shirts were still the greatest driver of revenue for the full year, at 38pc of marketplace revenue, the group said its mask offerings were launched in record time and with rapid financial impact.

It said from late April to the end of June it had sold 741,000 masks, generating $12.1m in marketplace revenue. In June, face masks contributed 18pc to marketplace revenue.

The group said it grew customers by 74pc in the fourth quarter compared to the same time last year, while its manufacturing on demand model removed overstock and inventory risk for suppliers.

Samantha Bailey 9.17am: BWX flags 10pc earnings lift

Skin and hair care company BWX has flagged a 10 per cent lift in earnings for the year ahead as it delivered a net profit up nearly 60 per cent on the prior year.

Net profit after tax for the full-year through June lifted 59 per cent to $15.2m.

The company, which produces products under the Sukin, Mineral Fusion and Andalou brands, said it remained well positioned for long-term, sustainable growth after fiscal year 2020 provided a stable revenue base.

Subject to market conditions BWX expects to achieve ongoing growth in revenue and earnings before interest, tax, depreciation and amortisation of at least 10 per cent in fiscal year 2021.

“The board is very pleased by this performance when considering the significant economic disruption faced by the business during the second half, and believe it reflects the strong underlying connection our brands have with consumers all over the world,” chairman Ian Campbell said.

“As part of the early response to the global COVID-19 pandemic, the BWX team were quick to design, manufacture and launch a range of hand sanitiser products with 70 per cent ethanol for the domestic market.”

BWX last traded at $4.27.

9.07am: What’s on the broker radar?

• ASX raised to Neutral – Evans and Partners
• Charter Hall Group cut to Neutral – Credit Suisse
• Charter Hall Group cut to Neutral, price target raised 25pc to $12.25 – UBS
• Coca-Cola Amatil raised to Outperform – Credit Suisse
• Codan cut to Hold – Canaccord
• Domain cut to Neutral – JP Morgan
• Domain cut to Neutral – UBS
• Growthpoint cut to Neutral – JP Morgan
• HT&E raised to Outperform – Credit Suisse
• IDP Education cut to Negative – Evans and Partners
• IDP Education cut to Hold – Blue Ocean
• McMillan Shakespeare raised to Outperform – Credit Suisse
• Nine Entertainment cut to Hold – Morningstar
• Northern Star raised to Outperform – Credit Suisse
• Origin Energy cut to Neutral – Macquarie
• Orora raised to Buy – Jefferies
• Pro Medicus raised to Buy – Bell Potter
• Pro Medicus raised to Buy – UBS
• Sonic Healthcare cut to Neutral – Citi
• Star Entertainment raised to Outperform – Credit Suisse

8.56am: Healius dividend ‘inappropriate’ in tough half

Healius reported an annual loss after taking an impairment charge against the medical centres that it has agreed to sell, but said the 2021 fiscal year has begun strongly.

Healius reported a net loss of $70.5m for the 12 months through June, compared to a $55.3m profit a year earlier. The result was dragged down by a loss on sale of $142.5m on the medical centres unit.

Directors of the company said they didn’t “consider it appropriate to pay a final dividend for fiscal 2020 because it has received the benefit of assistance and, in some cases, personal sacrifices from its stakeholders including its people, landlords and government throughout a challenging second half of fiscal 2020”.

Still, they expected to resume regular dividends in the first half of the current fiscal year.

Healius has agreed to the sale of its medical centres to private-equity firm BGH Capital for an enterprise value of $500m, while retaining ownership its day hospitals and IVF clinics. The company’s existing pathology collection centres and imaging clinics located within the medical centres will continue to run under long-term leases at similar rents to current levels.

Healius expects to receive $470m proceeds when the deal completes and said Friday that it “intends to review its capital structure including consideration of an out-of-cycle dividend and other capital uses”.

It plans to provide an update on the capital management review at its annual meeting of shareholders on October 22.

Dow Jones Newswires

Samantha Bailey 8.35am: Westpac sells Vendor Finance

Westpac has entered into an agreement to sell its Vendor Finance business to Angle Finance, which will result in the transfer of about $500 million in customer loans.

Vendor Finance supports third parties to fund small ticket equipment finance loans to around 42,000 businesses.

“The sale represents the first transaction of the group’s simplification initiatives and brings certainty for Vendor Finance customers and new opportunities for our people,” said Westpac specialist businesses chief executive Jason Yetton.

Westpac said the sale was not expected to have an impact on Westpac’s balance sheet.

However it would result in a small accounting loss due to the transaction being structure with an initial payment on completion and deferred consideration payable over the following two-year period.

The deal is expected to be completed in April next year.

Joyce Moullakis 8.10am: Suncorp cash earnings down 33pc

Suncorp has warned of “long lasting” COVID-19 economic disruption, as it reported a 33 per cent drop in full-year cash earnings as extreme weather events and the pandemic hit income and boosted expected loan losses.

Cash profit fell to $749m for the 12 months ended June 30, from $1.12bn in the year earlier period, the insurance and banking group said in an ASX statement on Friday.

Annual statutory profit jumped to $913m from $175m in the prior financial year, as it booked proceeds from the sale of the Capital SMART and ACM Parts businesses, and a $89m non-cash impairment charge relating to the core banking platform.

Suncorp declared a final dividend of 10c per share, taking the year’s payments to 36c and reflecting a 48.6 per cent slump on 2019 as the impact of COVID-19 crimped distributions to investors.

“It has been a challenging 12 months for Suncorp and for the customers and communities we support: first a season of extreme weather conditions, and then the global COVID-19 pandemic which will result in long lasting economic disruption and fundamentally change the way we live,” Suncorp chief executive Steve Johnston said in the statement.

The group’s natural hazard costs remained in line with the year’s allowance of $820m, following a period marred by horrific bushfires and other extreme weather events. But Suncorp raised its natural hazard allowance for this financial year by $130m to $950m, in anticipation of another challenging year of natural hazards.

Analysts had expected Suncorp to report an annual profit of $718.13m.

Suncorp Bank has warned of ‘long lasting’ disruption from COVID-19.

8.00am: Ex-Uber chief charged over hack

Uber Technologies’ former chief security officer, Joe Sullivan, was charged Thursday for allegedly concealing from federal authorities details about the massive data breach the ride-hailing giant suffered in 2016.

Mr Sullivan, a former federal prosecutor who is now chief security officer at internet services company Cloudflare Inc., was fired by Uber in 2017 for his role in the data breach, which affected 57 million accounts.

At the time, Uber said Mr. Sullivan paid $US100,000 to hackers via the company’s bug-bounty program, in an effort to conceal the breach.

Prosecutors say Mr. Sullivan concealed the breach even as the Federal Trade Commission was investigating a 2014 data breach at Uber. “We expect prompt reporting of criminal conduct,” U.S. Attorney David L. Anderson said in a statement, adding that “we will not tolerate corporate cover-ups. We will not tolerate illegal hush-money payments.”

Mr. Sullivan was charged in San Francisco on charges of obstruction of justice and failing to report a crime, the Department of Justice said in a press release. Mr. Sullivan faces up to five years in prison if found guilty of obstructing justice.

Dow Jones

Damon Kitney 6.40am: A2 Milk in $NZ270m deal

The a2 Milk Company has taken an significant step to bolster the manufacturing capacity of its infant nutrition business by striking a deal to pay $NZ270m for a 75 per cent stake in a New Zealand group backed by heavyweight Chinese investors.

Only days after A2 Milk opened its $NZ854.2m cashbox to invest in manufacturing with the proposed acquisition of a milk processing facility on the Murray River in Victoria, a2 announced on Friday it had entered into exclusive due diligence on Mataura Valley Milk.

A2 is proposing to pay $NZ270 million for a 75 per cent interest in MVM, based on an enterprise value for the group of $NZ385 million. MVM’s major asset is a manufacturing facility in Southland, New Zealand.

The deal will be funded by a2’s cash reserves.

The proposed deal has the support of MVM’s current majority shareholder, China Animal Husbandry Group (CAHG), which would retain a 24.9 per cent interest in MVM.

Read more: A2 Milk in NZ infant nutrition deal

6.15am: ASX set for positive start

Australian stocks are poised to open higher after Wall Street shrugged off weak employment data to close higher, led by another Nasdaq record.

Around 6am (AEST) the SPI futures index was up 10 points, or 0.2 per cent.

The ASX yesterday fell 0.8pc from the previous day’s six-month high as CSL reversed and the major banks weighed.

The Australian dollar was higher at US71.93c.

Iron ore fell by US40 cents or 0.3 per cent to $US128.40 a tonne as exports from Port Hedland expanded to 18 million tonnes last week.

Oil also fell, with Brent crude price down US47 cents or 1pc to $US44.90 a barrel.

Gold futures were down 1.2 per cent to $US1946.50 an ounce.

6.10am: Tech shares lead as Wall St turns higher

Technology stocks pulled major US indexes higher, as a handful of companies continued to power the newly minted bull market.

Shares of Apple, Facebook and Microsoft all rose at least 1.5 per cent. The gains pulled the S&P 500 out of the red as of the 4pm close of trading in New York, leaving the broad index up 0.3 per cent.

The Dow Jones Industrial Average rose, adding 47 points, or 0.2 per cent, to 27740. The tech-heavy Nasdaq Composite rose 1.1 per cent.

The advance helped recover some of the stock market’s losses from a day earlier. Stocks turned lower Wednesday after the Federal Reserve released minutes of last month’s meeting showing officials believe further government intervention is needed to help the economy fully recovery from the pandemic.

The news somewhat dashed investors hopes that the US economy could recover quickly from the damage wrought by the coronavirus pandemic, and put additional pressure on politicians to reach a deal on a new round of fiscal stimulus.

Not helping matters was an uptick in jobless claims back above more than 1 million last week, according to Labor Department data.

In response, investors stuck with a trade that has worked throughout the crisis, buying shares of high-flying technology companies that have benefited from statewide lockdown measures that have accelerated the adoption of online shopping, digital communication and other services. The S&P 500’s tech and communications sectors have risen more than 60 per cent and 40 per cent, respectively, from the lows of March, helping to drive the broad index toward its first record in about six months earlier this week.

The new milestone solidified stocks’ transformation into a bull market from a bear.

Apple shares added 1.5 per cent, extending their gain this month to more than 10 per cent since the tech giant disclosed solid earnings and a plan to split its shares later this month. The run helped make Apple the first company in the US to surpass $US2 trillion in market value.

Microsoft and Facebook also rose 2.1 per cent and 1.8 per cent, respectively, while Amazon.com and Google parent Alphabet added 1.3 per cent.

Those five companies make up a quarter of the S&P 500, giving them considerable sway over the market.

Overseas, the pan-continental Stoxx Europe 600 declined 1.1 per cent.

Dow Jones Newswires

5.50am: Uber-Lyft reprieve

Rideshare service rivals Uber and Lyft were given a temporary reprieve from having to reclassify drivers as employees in their home state of California by Friday.

And appeals court granted their request to put a hold on a judge’s order that Uber and Lyft comply with a new labour law, on the condition they agree to speeding up procedures in a legal case to resolve the matter.

“The petitions are granted and the preliminary injunction is stayed pending resolution of Lyft and Uber appeals,” an appeals court said in its ruling.

AFP

5.46am: Estée Lauder disappoints

Estée Lauder stock fell sharply following the beauty company’s larger-than-expected quarterly loss as the coronavirus pandemic hurts demand.

CEO Fabrizio Freda says that the crisis has changed retail forever, but in a way in which the company is still prepared to thrive.

Estée Lauder reported a loss of $US1.28 a share on revenue that fell 32 per cent, to $US2.43 billion, in its fiscal fourth-quarter. On an adjusted basis, the company logged a loss of 50 cents a share. Analysts were looking for a 19-cent loss on revenue of $US2.45 billion. For the current quarter, Estée Lauder expects to earn between 80 cents and 85 cents a share, below the $US1.11 consensus estimate.

Its shares were down 7pc, to $US197.68, in trading Thursday afternoon. The stock is down 4pc so far this year.

Dow Jones

5.45am: Bayer settles over birth control device

Pharmaceutical giant Bayer has agreed to pay $US1.6 billion to settle nearly all claims filed in the United States over controversial birth control implant Essure.

“The company will pay approximately $US1.6 billion to resolve these claims, including an allowance for outstanding claims, and is in resolution discussions with counsel for the remaining plaintiffs,” the German company said in a statement.

“There is no admission of wrongdoing or liability by Bayer in the settlement agreements,” the statement said.

The non-hormonal contraceptive was discontinued in 2018 amid reports some women who used it suffered chronic pain and injury.

The logo of German chemicals and pharmaceuticals giant Bayer. Picture: AFP

AFP

5.40am: Stocks slide after US jobless data

Stock markets were in the red as worse-than-expected US jobless data underlined concerns about the outlook for the world’s biggest economy.

Stocks fell on the news that just over 1.1 million people in the US filed new claims for jobless benefits last week, a much steeper rise than expected.

The news came a day after the US Federal Reserve underlined the vulnerability of the economy while the coronavirus pandemic rages on.

European stock prices ended the session lower, pulled down by the losses on Wall Street.

The US Fed had offered a sobering assessment of the US economic outlook, souring market sentiment across the globe, traders said.

“The fallout from the Fed minutes continues across markets, with European indices in the red and US futures pointing to a weaker open after days of gains,” noted Chris Beauchamp, analyst at IG trading group.

With the coronavirus continuing to ravage the country and containment measures keeping businesses closed, minutes from the Fed’s July meeting showed it was concerned about the recovery, as help for small businesses, extra money for the jobless and direct payments to all Americans come to an end.

Federal Reserve chief Jerome Powell has led repeated calls for more government support for the economy.

The “minutes are casting a shadow over markets and underline that any recovery is not going to be a straight line of advances”, said Neil Wilson of Markets.com.

“The Fed layered on the risks and caution thick, but didn’t come up with any sweeteners for the market in the shape of more easing.” “There is a big risk the economy may not recover as strongly or as quickly as had been priced in by US markets,” said ThinkMarkets analyst Fawad Razaqzada.

Adding to the downward pressure were ongoing trade tensions between the US and China.

London closed down 1.6 per cent, Frankfurt lost 1.1 per cent and Paris shed 1.3 per cent.

AFP

5.35am: Airbnb bans parties

Citing public health concerns amid the coronavirus, homesharing company Airbnb imposed a worldwide party ban at its rental properties and capped occupancy at larger homes to 16.

The ban on parties and events will be “in effect indefinitely until further notice,” the company said on its website, adding that guests “may be legally pursued by Airbnb if they violate our policy.” Airbnb began cracking down last year as rowdy parties were causing problems with neighbours in some communities.

In November, the company banned “party houses” after a deadly shooting at a Halloween party with more than 100 guests at a California rental.

Airbnb said that 73 per cent of its global listings already banned parties and unauthorised festivities were always prohibited. The company has historically allowed hosts to permit guests to host smaller gatherings such as birthday parties.

Airbnb has imposed a worldwide party ban at its rental properties. Picture: AFP

AFP

5.30am: US jobless claims rise more than expected

Just over 1.1 million people filed new claims for jobless benefits in the week ended August 15, the US Labor Department said, defying expectations for a more moderate rise.

That was an increase of 135,000 from the week prior and brought new claims back above the one million mark, only the third time new applications have increased since early April at the start of the coronavirus pandemic.

The insured unemployment rate indicating the share of people approved for benefits continued ticking down, hitting 10.2 per cent in the week ended August 8.

AFP

5.25am: Alibaba revenue up 34pc

Chinese e-commerce leader Alibaba reported solid 34 per cent growth in revenue for the April-June quarter in the latest sign that the coronavirus, rather than hurting the company, had actually helped.

Hangzhou-based Alibaba said revenue — a key measure of the internet giant’s business health as well as overall Chinese consumer spending — rose to 153 billion yuan ($US22 billion), slightly exceeding a Bloomberg analyst poll.

The coronavirus, which emerged in China late last year, hammered the Chinese economy, causing a historic 6.8 per cent contraction in the first quarter of 2020.

But Alibaba and other Chinese tech titans have largely shrugged off the impact, and Chairman Daniel Zhang made clear the pandemic and its associated lockdowns and social distancing were fuelling turnover by consumers opting for the safety of online shopping.

“We were well-positioned to capture growth from the ongoing digital transformation, which has been accelerated by the pandemic, in both consumption and enterprise operations,” he said in a statement accompanying Alibaba’s earnings announcement.

Profit jumped 124 per cent in the quarter to $US6.7 billion, due mainly to gains in equity investments, it said.

Daniel Zhang, CEO of Alibaba. Picture: Bloomberg

AFP

5.22am: Kazia Therapeutics shares rise 15pc

Australian biotech Kazia Therapeutics’ US shares were up 15pc to $US7 after the company said the U.S. Food and Drug Administration has granted Fast Track Designation to Kazia’s paxalisib for the treatment of glioblastoma, the most common form of primary brain cancer.

The biotechnology company said the fast track designation allows for rolling review, whereby Kazia may submit completed sections of the paxalisib NDA as they become available, rather than at the end of development.

Kazia said it is planning to begin initial preparatory activities for a NDA filing for paxalisib in 2021.

The specific indication for which the designation has been approved is “for the treatment of patients with newly diagnosed glioblastoma with unmethylated O6-Methylguaninemethyltransferase promoter status who have completed initial radiation with concomitant temozolomide.”

Dow Jones Newswires

5.20am: Probe dropped probe into senior VW figures

German prosecutors dropped their investigation against the former chief of Volkswagen and the head of Porsche for suspected market manipulation in relation to the long-running “dieselgate” scandal.

Investigators in the southwestern city of Stuttgart have been looking into whether Porsche SE, the holding company that controls Volkswagen, informed investors too late about the emissions cheating affair, in which manipulating software was installed in millions of engines worldwide.

Porsche SE chief Hans Dieter Poetsch and former VW chief executive Matthias Mueller were both under investigation.

But prosecutors called off proceedings against Poetsch, the chairman of VW’s supervisory board, in exchange for a payment of 1.5 million euros ($US1.8 million), while for Mueller, who led VW from 2015 until 2018, investigations have been called off without conditions.

However, a probe continues in Stuttgart into Mueller’s predecessor at VW, Martin Winterkorn, a spokeswoman told news agency DPA.

AFP