Trading Day: ASX surges to 11-month high, Afterpay stars
Stocks close higher, with Afterpay hitting another record after Wall Street rose on stimulus hopes. Regis down after takeover dumped.
- Regis slides after takeover dumped
- Best S&P 500 post-election rise since 1928
- BHP slashes coal values
That’s all from the Trading Day blog for Wednesday, January 20. Australia’s sharemarket rose for a second-day running, hitting 11-month highs amid positive leads from Wall Street before Joe Biden’s inauguration early on Thursday. The Dow added 0.4 per cent, the S&P 500 rose 0.8 per cent and the Nasdaq jumped 1.5 per cent.
James Kirby 8.20pm: Missing dividends start to hurt
The dividend wipe-out among many of Australia’s biggest stocks in the depths of the Covid-19 crisis last year will still be hurting many retail investors.
The damage inflicted from missing dividends is there for all to see in the latest accounts from the Australian Foundation Investment Company.
As the best known of the nation’s listed investment companies, AFIC’s approach to the market is often a mirror to the wider fortunes of active independent investors. The Melbourne-based fund recorded a 42 per cent drop in net profits in the six months to the end of December.
6.28pm: Tokyo stocks close down
Tokyo stocks closed down Wednesday as profit-taking wiped out earlier gains, with investors taking a wait-and-see stance ahead of Joe Biden’s inauguration.
The benchmark Nikkei 225 index fell 0.38 percent or 110.20 points to 28,523.26, while the broader Topix index declined 0.34 percent or 6.26 points to 1,849.58.
The market opened on a strong footing, following overnight gains on Wall Street as investors hoped for aggressive stimulus spending by the Biden administration in the United States.
After reaching the day’s high shortly after the opening bell, the Tokyo market came under selling pressure as investors locked in profit.
“As we waited for the inauguration ceremony of incoming President Biden, investors refrained from making active moves,” SMBC Nikko Securities said.
Players also wanted to see decisions later this week by major central banks, including the Bank of Japan and European Central Bank.
Still, the market saw both bargain-hunting as well as profit-taking, analysts said.
“The market fell... but it seems the market is seeming rather more resilient than expected,” Okasan Online Securities said.
The dollar stood at 103.73 yen, slightly off from 103.90 yen in New York late Tuesday.
Among major shares, logistics and transport shares fell. Japan Airlines lost 1.77 percent to 1,888 while rival ANA Holdings dropped 3.35 percent to 2,232.5.
Major logistics firm Yamato Holdings fell 1.66 percent to 2,550. Nintendo gave up 1.73 percent to 64,720. Sony lost 0.14 percent to 10,590. Textiles firms gained with Toray surging 5.45 percent to 704.9 yen, as did chipmakers like Rohm, which added 1.02 percent to 11,940
AFP
4.39pm: ASX ends +0.4%; Afterpay hits record
Australia’s sharemarket rose for a second-day running, hitting 11-month highs amid positive leads from Wall Street before Joe Biden’s inauguration early on Thursday.
The S&P/ASX 200 index closed up 0.4pc at 6770.4 points - an 11-month high on a daily closing basis - after rising as much as 0.7pc to 6788.1.
Outperforming sectors included Tech, Industrials, Energy, Materials and Consumer Discretionary.
Among standouts, PolyNovo rose 7.3pc after entering new markets and Afterpay rose 5.2pc to a record-high close of $141 after Jefferies initiated with a Buy rating and $152 target price and as Affirm’s recent IPO highlighted potential growth.
Other big gainers included a 4.2pc rise in Transurban, a 4pc jump in Stockland after UBS upgraded and a 3.6pc rise in Ansell after it said its earnings would beat previous guidance.
4.11pm: Alibaba surges in HK after Jack Ma video: BBG
Alibaba shares in HK surged 10pc to a two-month high.
Jack Ma, the billionaire founder of China’s Alibaba Group Holding Ltd. and controlling shareholder of financial affiliate Ant Group, made a public appearance on Wednesday, speaking by video at a philanthropic event.
The appearance was Mr. Ma’s first since regulators began clamping down on his business empire following a critical speech he gave in late October.
Dow Jones Newswires and Bloomberg
David Swan 3.36pm: Life360 shares surge more than 11pc
Shares in ASX-listed family safety tech company Life360 have surged by more than 11 per cent, after the company announced early Facebook executive Randi Zuckerberg as a non-executive director.
Ms Zuckerberg, who created the Facebook Live streaming platform before becoming a children’s author, said she saw the San Francisco-based tech company as similar to Facebook, in that it helps connect people with ‘a more intimate group.’
Life360 has more than 250 million active users using its mobile app, which features location sharing and child safety.
“It’s exciting to see its success in the family safety space, and I can’t wait to use my experience as a product marketer, content creator and a mother to help the company reach its full potential,” Ms Zuckerberg said in a statement.
Life360 chairman John Coghlan said, “Randi’s deep experience with product marketing and scaling social networks, coupled with her content around digital safety for families, will be invaluable to Life360 as we continue to build the first-ever family safety membership. We are thrilled to have her and her fresh perspectives on board.”
Life360 shares are up 11.63 per cent to $4.030 at 3PM AEDT.
Elise Shaw 3.08pm: BetMakers completes SPP
BetMakers Technology Group Limited (“BetMakers” or “the Company”) (ASX:BET) announces the completion of its Share Purchase Plan (“SPP”) which closed at 5:00pm (AEDT) on 15 January 2021. In accordance with the SPP Offer Booklet, the SPP provided Eligible Shareholders with the opportunity to subscribe for up to A$30,000 of new fully paid ordinary shares (“SPP Shares”) in the Company at the Issue Price of A$0.60 per SPP Share, subject to scale back. Under the SPP, the Company will raise A$10 million.
The Company will issue approximately 16.66 million SPP Shares on 27 January 2021, with quotation on 27 January 2021. The SPP Shares will rank equally with existing Shares in the Company from their Issue Date.
BetMakers CEO and Managing Director, Todd Buckingham, said: “It is extremely pleasing to see the overwhelming support from shareholders for our SPP and we thank them for their confidence in the Company.” “Through organic growth and acquisitions, we have rapidly added significant shareholder value which now positions BetMakers as a truly global supplier to the international wagering industry. The Board and management are committed to continue adding value for shareholders and we’re looking forward to updating the market with our progress throughout 2021.”
Ben Wilmot 12.30pm: Mall occupancy to fall: UBS
The sight of busier shopping centres has prompted optimism among some mall owners but there are doubts that occupancy can be maintained in the face of harder economic conditions.
Mall REIT performance will depend on harder-edged factors including retailer bankruptcies and vacancies, rising e-commerce penetration rates in the wake of the pandemic period and tough lease negotiations.
A UBS analysis of centre directories for a large proportion of Scentre malls indicates store numbers are down by a net 4 per cent over 12 months with gross turnover of retailers running at more than 20 per cent. “We forecast a rebasing of rents down 15-20 per cent reflecting online penetration increasing to 26 per cent by fiscal 2025 and a more sustainable mid-teens occupancy cost ratio,” UBS said,
The broker is recommending large format retail like Aventus Group and supermarket anchored shopping centre owners like SCA Property Group and Charter Hall Retail REIT over mall owners Scentre and Vicinity.
UBS says CBD office markets will make some steps back to normal in 2021 but warned that lower grade offices could come under pressure.
“We expect utilization to increases but a structural increase in vacancy for secondary assets will highlight the new norm. A vaccine-led recovery bodes well for CBDs, albeit leasing markets are likely to remain subdued as large corporates reevaluate real estate needs,” UBS said.
Ben Wilmot 12.20pm: Bingo ‘should attract higher bid’
The $2.3bn takeover proposal for waste management company Bingo Industries by CPE Capital and its consortium partner MIRA should be priced at more than $4 per share, according to Credit Suisse analysts.
Bingo Industries has granted the bidding consortium access to a formal due diligence process and its shares have traded up towards the $3.50 per share indicative price.
The suitors are also offering a lower-priced bid for investors who want to roll over their holdings into an unlisted company that would be bulked up.
Credit Suisse said “fundamental value” could be over $4 per share and the pre-bid share price was based on depressed earnings due to COVID and a cyclical decline in building construction.
“We think any bid for Bingo needs to factor in the medium‐term earnings recovery potential, and that means bids starting with a four, in our view,” Credit Suisse said.
CPE Capital is already an experienced operator in the waste and recycling industry and previously bought the Banksmeadow Recycling facility from Bingo, when Bingo was forced to sell it to alleviate competition issues around its Dial‐a‐dump acquisition.
Bingo’s existing asset base has potential to generate $250m in earnings and Credit Suisse is forecasting a $231m earnings in fiscal 2023, up over 60 per cent compared to this year, driven by a post‐COVID economic recovery and a cyclical recovery of building construction.
12.04pm: ASX firmer after getting near 11-month high
Australia’s share market remained firm at midday after surging to an almost 11-month high on positive signs for Wall Street and strong gains in a number of market sectors.
The S&P/ASX 200 was up 0.5pc at 6680 after rising as much as 0.7pc to 6788.1 - its highest since February 26, 2020 - in a convincing break above its December and January peaks around 6750.
A 13pc jump in Netflix shares in after-hours trading after its results sent Nasdaq futures up 0.4pc and S&P 500 futures were 0.2pc higher, pointing to a positive start to the US market on Joe Biden’s inauguration day.
The local bourse was propelled by outperformance from the Tech, Industrials, Energy, Utilities and Materials sectors, with Afterpay up 4.3pc after Jefferies gave it a $153 target price, Transurban was up 4.4pc, Woodside up 1.9pc after Brent crude rose 2pc and BHP rose 0.9pc.
PolyNovo surged 7.3pc on offshore expansion plans, WiseTech jumped 5.8pc, Aristocrat rose 4.6pc before it reports next week and Stockland rose 4.5pc after getting upgraded by UBS.
JB Hi-Fi slipped 2.7pc after surging recently. REITs sagged after UBS downgraded seven of them including Scentre, which fell 2.2pc.
11.45am: Risk correction ‘imminent’
A correction in risk assets is “imminent” according to Bank of America.
BofA’s January Global Fund Manager Survey of 194 panelists managing $US561bn found the average cash level hit an almost seven-year low of 3.9 per cent.
That has triggered a Fund Manager Survey Cash Rule “sell signal”, according to BofA chief investment officer, Michael Hartnett.
The back-tested one-month return from the S&P 500 on such sell signals for the cash rule is -3.2pc.
It comes as the allocation to stocks hit a 2-year high and the allocation to stocks and commodities combined hit a 10-year high.
The contrarian BofA Bull & Bear Indicator remained at a “bullish” reading of 7.1.
BofA recommends selling global equities when the Bull & Bear indicator rises above 8.0
But overall, Mr Hartnett warns that a “risk correction” is “imminent”.
He notes that expectations for global EPS, inflation and higher bond yields are at or close to all-time highs.
He says the most likely “correction catalysts” would be a perceptions of “peak growth” - linked to vaccines, the virus or China and “peak liquidity” in response to a higher US dollar and rates.
To gauge those catalysts, he recommends being alert to potential falls below $US46 in WTI crude and below $US133 on the ishares IBOXX Investment Grade Corporate Bond ETF.
Mr Hartnett says the “best contrarian trades” for January-February are long Treasury Bills and short commodities, long US dollars and short Emerging Markets, and long consumer staples and short small caps.
On “tail risks”, 30pc pointed to vaccine rollout, 29pc said “taper tantrum” and 18pc said “Wall St bubble”.
At the same time, investors pushed out their expectation for a positive macroeconomic impact from vaccines by six weeks to late-June.
Interestingly, long Bitcoin replaced long Tech as “the most crowed trade”, with Tech now second and short US dollar now third and long corporate bonds fourth.
That might suggest more upside for Bitcoin on a contrarian basis - the Nasdaq has surged about 70 per cent while being viewed as “the most crowded trade.”
10.44am: Consumer confidence slips from 10-yr high
Westpac’s consumer confidence index has retreated from a 10-year high.
The index fell 4.5pc to 107 in January after surging to 112 in December, which was tghe highest reading since October 2010.
Westpac chief economist Bill Evans said a pull back in the index was to be expected, but “optimists clearly outnumber pessimists”.
“Since the last survey in the second week of December we have seen domestic border closures; the emergence of Covid clusters in some states; and the sharp upswing in Covid cases overseas, notably the US and the UK,” he noted.
“This result compares to the 15 per cent fall that was registered over July and August last year as the nation was shocked by Victoria’s severe second wave and associated hard lockdown.
“It still points to healthy consumer sentiment.“
Mr Evans also said there may also be an element of statistical correction given that the index had surged by 40 per cent between August and December with the December print reaching its 10 year high.
All components of the Index fell in January, but index was 14.6 per cent above the level a year ago and 41.5 per cent above the low in April.
Ben Wilmot 10.38am: Regis slides after takeover dumped
The listed Washington H. Soul Pattinson and Company and Regis co-founder Bryan Dorman have dropped their near $600m bid for aged care company Regis Healthcare, prompting a sell off by investors.
The move drove a 14.3 per cent plunge in early trade in Regis shares to $1.59, from their last close of $1.86, and rattled the rest of the beaten down aged care sector, which had been viewed as a target for privatisation.
Soul Patts’ non-binding, indicative proposal to acquire all of the share capital of Regis for $1.85 per share via a scheme of arrangement was sweetened last year but failed to win the support of the target’s board.
Soul Patts had submitted an initial proposal at $1.65 per share last September which represented a 48 per cent premium to previous trading. In November, with the support of the Regis co-founder and major shareholder, it lifted this to $1.85 per share,.
The suitor said it believed that the two proposals provided Regis shareholders with a highly attractive opportunity to realise value for their shares in light of the significant uncertainty and funding challenges currently facing the aged care industry.
But both proposals were rejected by the Regis board, prompting it to dump the move.
Regis was co-founded by Mr Dorman and Ian Roberts, who collectively own about 54 per cent of the business.
Lachlan Moffet Gray 10.28am: Smartpay posts revenue jump
EFTPOS payments provider Smartpay says Australian acquiring revenue has grown 75 per cent in the December quarter on a year-on-year basis and 35 per cent on the previous quarter.
It means total consolidated revenue for the business, which also operates in NZ, has grown by 24 per cent year-on-year to NZ$9.268m ($8.57m).
The bulk of the revenue growth occurred through margin and customer growth in Australia, with the number of transacting terminals in Australia growing by 1164 to 5775 when compared to the prior quarter.
Approximately 20 per cent of this increase is attributable to temporarily closed businesses resuming service, the company said, while the rest represents organic growth.
10.29am: ASX jumps 0.6pc to near 11-month high
Australia’s share market surged to near an 11-month high in early trading.
The S&P/ASX 200 index rose 0.6pc to 6779.8 in the first 25 minutes, breaking above the recent high of 6757.9
A 12pc after-hours rise in Netflix added to slightly positive offshore leads with S&P 500 futures rising 0.2pc.
The Technology sector was strongest with Afterpay up 4.6pc to $140.07 after Jefferies started research coverage with a Buy rating and $153.04 target price.
Other outperforming sectors included Industrials, Energy, Health Care and Consumer Discretionary.
Among standouts in those sectors, Transurban surged 4.4pc, Ampol rose 2.8pc, PolyNovo rose 5.2pc on its expansion plans, and Aristocrat rose 3.1pc before its results next week.
Banks and miners underperformed with CBA down 0.3pc and Fortescue down 0.1pc.
Cliona O’Dowd 10.13am: AFIC delivers 14.1pc return
The nation’s largest listed investment company says it is ready to pounce on buying opportunities in the market, as it cautioned on the uncertain outlook for corporate earnings and dividends.
For the six months through December, the Australian Foundation Investment Company posted a 14.1 per cent return, faring slightly better than the S&P/ASX200’s 13.2 per cent.
Companies in the portfolio that contributed to returns through the six-month period included CBA, BHP, Mainfreight, Xero, Wesfarmers, James Hardie, ARB Corp and Reece, AFIC told shareholders in an update on Wednesday.
9.57am: Best S&P 500 post-election rise since 1928
The US share market is on pace for its best election to inauguration day performance since 1928 when Herbert Hoover won the election.
It’s also on pace for the best election-to-inauguration day performance for a Democrat on record.
The S&P 500 has risen 12.8pc since election day on 3rd November 2020.
The average return from election-to-inauguration day is 0.9pc, according to Dow Jones Market Data.
When it’s the President-elect’s first term, the average drops to 0.3pc versus 3pc for second terms.
The average return for a Democratic President-elect is -0.5pc versus 2.6pc for Republicans.
The median return for a Democratic President-elect is 3pc vs 4pc for Republicans.
Joyce Moullakis 9.45am: Westpac’s Jager set for BoQ role
Bank of Queensland has tapped Westpac’s Martine Jager as its new group executive of retail banking, according to a staff memo sent on Wednesday.
She replaces Lyn McGrath, who retired from the bank. Ms Jager is expected to start at BoQ in April.
9.39am: ASX may hit 10-month high
Australia’s share market may hit a fresh 10-month high above the January 7 peak of 6757.9.
The index is just 0.2pc below the 10-month high after surging 1.2pc to 6742.6 points on Tuesday, its highest close in eight days and the third-highest daily close in 10 months.
Overnight futures relative to fair value suggest the index will open up 0.1pc.
However Netflix is up 12pc in afterhours trading, giving a potential boost to US stock index futures.
The Energy sector may be strongest after Brent crude oil rose 2pc to $US55.86 a barrel.
BHP ADR’s equivalent close at $46.54 suggests the resources heavyweight will open up 1.5pc.
Singapore iron ore futures rose 2.9pc to $US178 a tonne despite Rio Tinto’s plan to boost iron ore cargoes by 2.8pc this year to meet China demand.
The Financial sector could be a driver after the ASX200 Banks index surged 1.2pc to almost its highest point in 11 months on Tuesday.
Regis HealthCare shares may drop back toward $1.50 after WHSP pulled its $1.85 a share takeover offer.
Westpac’s consumer confidence index for January is due at 10.30am. It surged to a 10-year high in December.
Lachlan Moffet Gray 9.26am: Ansell upgrades guidance
Personal protection wear Ansell has provided open-ended profit guidance after the ongoing global pandemic supported continued demand for its medical, surgical and consumer protective garb.
The company expects organic growth north of 20 per cent for the first half of the financial year and unaudited earnings per share of US81c - US84c, an up to 68 per cent increase on the first half of the 2020 financial year.
As a result Ansell said it now expects to exceed its full-year guidance of US1.35 - US1.45 earnings per share provided last October, but said ongoing uncertainties relating to the virus means the second half result may not be as strong as the coming first half result.
Ansell will release its half year result on February 16.
Eli Greenblat 9.20am: Citi’s top retail picks
Citi has named Beacon Lighting, Harvey Norman and Nick Scali as its top picks in the small cap retail sector.
Analyst Sam Teeger said While Beacon and Nick Scali have largely pre-reported first half earnings, and upside exists for Harvey Norman given it has not.
“We see housing retailers outperforming the broader retail sector over the medium term given improvement in housing churn and house prices, support from HomeBuilder and other state assistance programs for the building sector, and consumers continue to have limited options of spending their money with international borders remaining closed.”
The Citi analyst expects Beacon and Nick Scali may utilise their strong balance sheets for acquisitions, property purchases and higher dividends.
Discretionary spending could remain elevated, Mr Teeger said.
“While the scale back of government stimulus is a negative for discretionary spending, we see discretionary spending remaining elevated during the second half supported by significantly higher household savings and limited spending options with ongoing travel restrictions.”
9.15am: Jefferies tops Afterpay targets
Jefferies has taken a bullish view on Afterpay, with its 12-month target price of $153.08 the highest among analysts of the company.
The target price implies a 14pc rise for Afterpay shares which hit a record all-time high of $140.40 on Monday and a record-high daily close of $134 on Tuesday.
Jefferies analyst Roger Samuel has started research coverage with a Buy rating on the buy-now-pay-later operator, noting its successful expansion in Europe and Asia and rising net transaction margins.
In his view this expansion together with continued momentum in the US could boost APT’s gross merchandise value to $208b by FY30 from A$11.1 in FY20.
US retailers prepared to pay higher merchant fees for Afterpay due to its better leads and customer insights versus competitors and Afterpay users also appear to be more loyal and have increased average spending by 90pc in two years, Mr Samuel notes.
He also sees APT’s net transaction margin widening to 2.7pc by FY30 from 2.25pc in FY20 amid cross-border transactions, penetration among smaller retailers and affiliate marketing fees.
Lachlan Moffet Gray 8.54am: Tyro downgraded after outage
Macquarie has cut their recommendation for Tyro Payments to underperform following a widespread technical issue causing terminal outages, saying the issue will stymie merchant growth and presents class action risks.
The 12-month price target has been revised to $2.55 from $3.50
Nick Evans 8.52am: BHP slashes coal mine values
BHP has slashed $US1.3bn from the value of its NSW thermal coal mines as it looks to offload the assets, citing the poor outlook for Australian energy coal and the difficulty recovering tax losses at the operations, as the company cut production expectations for its coking coal mines.
BHP released its December quarter production report on Wednesday, saying it had booked a record first half of the year at its WA iron ore operations, although December quarter production fell 6 per cent to 70.4 million tonnes compared to the previous period.
Its Pilbara network produced 144.6 million tonnes of iron ore in the first half of the fiscal year, however, a record rate for the mining giant.
BHP had previously flagged a softer December quarter, saying output was likely to be slowed as it began to integrate its new South Flank mine into its existing infrastructure, and conducted maintenance on unloading equipment at its Port Hedland operations.
BHP’s Pilbara network exported 74 million tonnes of iron ore during the September period, and the company has said it expects to export 276 to 286 million tonnes of iron ore this financial year.
Strong prices for the steel making commodity, along with the are likely to deliver a big boost to first-half profits, with BHP realising an average $US103.78 a tonne at the port for its iron ore, up from $US78.30 in the first half of the previous year.
But while its dominant iron ore division put in a flying start to the year, its coal operations have suffered from China’s bans on Australian coal and from bad weather.
The mining giant said its half-year financial report would include a $US1.15bn to $US1.25bn writedown on the value of its Mt Arthur coal mine in NSW as it looks to sell the operations.
“This reflects current market conditions for Australian thermal coal, the strengthening Australian dollar, changes to the mine plan and updated assessment of the likelihood of recovering tax losses,” BHP said.
Lachlan Moffet Gray 8.48am: WHSP withdraws Regis offer
Washington H. Soul Pattinson has withdrawn its bid for Regis Healthcare after the board of the company rejected a revised offer.
WHSP submitted an initial bid for the company of $1.65 per share on September 30, a 48 per cent premium to the weighted average price in that month.
In November, with the support of major Regis shareholder Ashburn, WHSP submitted a revised proposal of $1.85 per share, representing a 59 per cent premium to the month’s weighted average price.
Both proposals have been rejected by the Regis Board and WHSP has withdrawn both offers and ceased its association with Ashburn.
Eli Greenblat 8.40am: Headwinds predicted for supermarkets
The Australian supermarket sector has seen an unpredictable end to the year, with an increased propensity to dine out appearing to have continued in December and suggesting incremental headwinds for supermarkets, a Goldman Sachs report says.
Analyst Andrew McLennan says 2020 was a year of extremes in sales. An initial pandemic stockpiling stage over March and April was followed by the second phase of consistent double digit industry growth as more people stayed home.
“However, we need to keep in mind that Christmas in 2020 was expected to be characterised by an increased level of home entertaining as consumers caught up with family and friends after a long period of lock downs and border restrictions,” Mr McLennan said.
“The feedback from suppliers and independent retailers has been mixed, showing a range of growth from mid single digit to low double digit growth.
“Feedback also suggests the sales uplift for Christmas came late, requiring strong nerves for supermarkets that had loaded significant inventory into the distribution network in expectation of a strong Christmas sales peak and to mitigate risk of flooding due to La Nina weather patterns on the eastern seaboard.”
Mr McLennan said overall this still bodes well for demand in December and furthermore demand for high gross margin entertaining categories. However relative performance is likely to come down to execution from a supply chain perspective.
Woolworths and Coles will perform differently under these conditions.
“With Woolworths automated facilities expected to have outperformed Coles over the period and independents look to have continued their strong performance, continuing to gain share.
“Key risk factors to the upside are potentially stronger liquor sales and to the downside shrinkage in food is the key risk to gross margins.”
Goldman Sachs has forecast strong sales for supermarkets overall in the second quarter, though slightly slower than the first quarter with Woolworths second quarter like for like sales forecast at 9 per cent and Coles at 7 per cent.
8.38am: What’s impressing analysts today?
Afterpay started at Buy; $153.08 target price: Jefferies
Bapcor cut to Sell:t Morningstar
Bingo cut to Sell: Morningstar
Hub24 raised to Outperform: CS
Hub24 cut to Hold: Morgans Financial
Premier Investments cut to Hold: Bell Potter
Qube cut to Neutral:JPMorgan
Sydney Airport raised to Neutral: JPM
Technology One raised to Buy: Bell Potter
Transurban raised to Overweight: JPMorgan
Computershare raised to Outperform, Macquarie & Tyro Payments cut to Underperform: Macquarie
Computershare raised to Outperform: Macquarie
Tyro Payments cut to Underperform: Macquarie
Premier Investments cut to Hold: Bell Potter
Technology One raised to Buy: Bell Potter
Leadlease cut to Neutral: Macquarie
Goodman Group cut to Neutral: Macquarie
Dexus raised to Outperform: Macquarie
Centuria Industrial REIT raised to Buy: UBS
Stockland raised to Buy: UBS
GPT Group cut to Neutral: UBS
Charter Hall Group raised to Buy: UBS
Vicinity Centres cut to Sell: UBS
BWP Trust cut to Sell: UBS
Scentre Group cut to Sell: UBS
Charter Hall Retail REIT cut to Neutral: UBS
8.15am: Netflix tops 200m subscribers for first time
Netflix ended last year with more than 200 million subscribers, a milestone powered by consumers left homebound by the pandemic and rising demand in international markets where the streaming giant has a head start over many rivals.
Netflix said it added more than 8.5 million subscribers on a net basis in the fourth quarter, a gain that surpassed its forecast for the period. Overall, Netflix signed up what it said was a record 37 million subscribers in 2020 and had a total of 203.7 million users when the year finished up.
The company’s subscriber count has roughly doubled since the third quarter of 2017, when it first exceeded 100 million paying customers.
Dow Jones Newswires
8.09am: ASX to open higher
Australian stocks are set to rise at the open after gains on Wall Street following earnings reports and Janet Yellen’s backing for higher coronavirus relief spending.
At about 8am (AEDT) the SPI futures index was up 12 points, or 0.2 per cent.
Yesterday, Australian stocks rebounded from Monday’s losses to close 1.2 per cent higher.
The Australian dollar is higher at US76.94c.
Spot iron ore is down 1.9 per cent to $US170.25 a tonne, while Brent oil is up 2.1 per cent to $US55.90 a barrel.
8.05am: Wall Street up on earnings, stimulus hopes
US stocks climbed as Janet Yellen endorsed higher coronavirus relief spending and some of the country’s biggest banks beat expectations for fourth-quarter earnings.
The Dow Jones Industrial Average rose 116 points, or 0.4 per cent, as of the close of trading Tuesday in New York. The S&P 500 advanced 0.8 per cent, while the technology-heavy Nasdaq Composite jumped 1.5 per cent.
The gains came as US markets reopened after a long holiday weekend, marking an upbeat start to the week, after all three major indexes posted declines last week.
Ms Yellen backed major fiscal stimulus to help workers and businesses battered by the coronavirus pandemic as she testified before the Senate Finance Committee, which will vote on her nomination for Treasury secretary. In prepared remarks, she said the US risks a longer, more painful recession unless Congress approves more aid, and encouraged lawmakers to “act big” to shore up the recovery.
President-elect Joe Biden unveiled a plan for a $US1.9 trillion fiscal stimulus package last week, which would include direct payments of $US1400 to most households and spending on vaccine distribution. Passing it through Congress is one of the first major tests for the incoming leader, who will be inaugurated tomorrow morning (AEDT).
Ms Yellen will be the “holder of the keys of unprecedented spending,” said Ludovic Subran, chief economist at Allianz. “It will be reassuring for people to see she’s very pragmatic in the way that she addresses the crisis, similarly to how she was in her role at the Fed.”
Earnings season kicked into high gear. Shares of Bank of America slipped less than 0.1 per cent after it reported a 22 per cent profit decline in the fourth quarter, but still came ahead of analysts’ forecasts. Goldman Sachs slumped 1.9 per cent despite releasing earnings that significantly beat expectations.
Netflix is expected to report results after markets close.
Major banks’ earnings suggest they are “seeing the economy stabilize; their worst-case scenarios haven’t been met,” said Shaniel Ramjee, a multiasset fund manager at Pictet Asset Management. “Even if the virus is still with us, banks are seeing an uplift in the economy.”
Investors are keeping a close eye on the rollout of Covid-19 vaccines, which has hit early snags as the U.S. has struggled to deliver limited supplies of the inoculations to the most vulnerable segments of the population. A vast swath of the country must be vaccinated before the economy can return to pre-pandemic levels of activity, particularly in the travel and leisure sectors.
Eight of the S&P 500’s 11 sectors were in positive territory on Tuesday. Energy stocks posted the biggest gains, boosted by rising oil prices. Futures on Brent crude, the global oil benchmark, gained 2.1 per cent to $US55.89 a barrel on hopes that stimulus and vaccinations will boost energy demand.
Overseas, the pan-continental Stoxx Europe 600 declined 0.2 per cent. Jeep-owner Stellantis, the recently combined business of Fiat Chrysler and PSA Group, gained 2.6%, extending Monday’s pop after it made its debut on French and Italian exchanges.
Dow Jones Newswires
6.35am: MGM abandons bid for Ladbrokes owner
Casino operator MGM Resorts International folded on its $US11 billion bid for the owner of the Ladbrokes gambling brand.
MGM is walking away after “limited recent engagement.” The UK-based Entain rejected the bid, saying it significantly undervalued the company.
A deal would have taken advantage of a surge in online sports betting and gaming as the pandemic keeps people at home with plenty of time on their hands. MGM will continue to operate an online sports betting joint venture with Entain called BetMGM.
Shares of Las Vegas-based MGM jumped 3.2pc earlier, while Entain fell 12pc in London after hitting a 52-week high.
JPMorgan analyst Joseph Greff wrote in a note that he was surprised MGM didn’t try to raise its bid, but “we don’t think this changes MGM’s ability to secure equity value enhancing benefits from the attractively growing U.S. sports betting and iGaming pie.”
Dow Jones
6.15am: Wall Street rises as earnings season ramps up
US stocks climbed amid a flurry of earnings reports and testimony by Janet Yellen in which she endorsed higher coronavirus relief spending.
In early afternoon trade the Dow Jones Industrial Average rose 0.5pc, the S&P 500 advanced 0.9pc, while the technology-heavy Nasdaq Composite was up 1.5pc.
The gains came as US markets reopened after a long holiday weekend and followed a decline in the three major indexes last week.
Earnings season kicked into high gear. Shares of Bank of America gained 1.5pc after it reported a 22pc profit decline in the fourth quarter, but still came ahead of analysts’ forecasts. Goldman Sachs slumped 1.1pc despite releasing earnings that beat expectations.
Netflix is expected to report results after markets close.
Major banks’ earnings suggest they are “seeing the economy stabilise; their worst-case scenarios haven’t been met,” said Shaniel Ramjee, a multiasset fund manager at Pictet Asset Management. “Even if the virus is still with us, banks are seeing an uplift in the economy.”
The strong markets of recent months have also boosted some investment banks’ trading revenue, which was reflected in Goldman’s earnings, Mr Ramjee added.
Ms Yellen backed major fiscal stimulus to help workers and businesses harmed by the coronavirus pandemic as she testified before the Senate Finance Committee, which will vote on her nomination for Treasury secretary. In prepared remarks, she said the US risks a longer, more painful recession unless Congress approves more aid, and encouraged them to “act big” to shore up the recovery.
President-elect Joe Biden unveiled a plan for a $US1.9 trillion fiscal stimulus package last week, which would include direct payments of $US1,400 to most households and spending on vaccine distribution. Passing it through Congress is one of the first major tests for the incoming leader, who will be inaugurated Wednesday.
Overseas, the pan-continental Stoxx Europe 600 declined 0.2pc. In Asia, most major benchmarks rose. Hong Kong’s Hang Seng Index advanced 2.7pc and Japan’s Nikkei 225 index added 1.4pc, led by shares of tech and car companies. The Shanghai Composite Index slipped 0.8pc.
Dow Jones
6.05am: Stranded coal fleet swells
Beijing’s bar against Australian coal imports is up-ending global flows of the energy commodity, leaving dozens of loaded ships stranded off the Chinese coast and reshaping the direction of the seaborne trade.
The flotilla of coal carriers sitting outside Chinese ports has grown to some 65 vessels, according to ship brokers in Singapore and London. Ship operators and coal suppliers unable to find new buyers for their cargo are waiting out a trade dispute that has lasted several months.
China is the world’s largest buyer of coal on international markets, and the country has stepped up purchases from Indonesia and other suppliers as the country’s factories have sought to stoke a continuing economic rebound from the coronavirus-driven downturn. China began restricting the Australian imports early last year following Australia’s criticism of Beijing’s handling of the coronavirus outbreak.
The bar has been a blow to a key export business for Australia and has maritime bulk carriers adjusting to changing global trade networks and the idling of a shipping capacity that is now effectively serving as floating storage for the commodity.
Dow Jones
6.00am: Markets mixed ahead of Biden’s inauguration
European stock markets were softer Tuesday after a strong showing in Asia, as investors reacted to comments by US Treasury secretary nominee Janet Yellen, and COVID-19 developments.
In New York, meanwhile, the Dow Jones index was higher in midday trading, with upbeat US corporate earnings helping to boost the mood.
The US dollar was mixed on the eve of Joe Biden’s inauguration as US president, with traders focused on his vast $US1.9-trillion stimulus plan.
Oil prices gained on optimism over the global economic recovery and vaccine rollouts that are offsetting concerns about the emergence of new, apparently more contagious strains of the novel coronavirus.
The key event this week is Biden’s inauguration tonight (AEDT), with the Democrat vowing swift action to fight pandemic fallout and boost the ailing US economy.
In the meantime, investors tuned in to hear Yellen tell US lawmakers that the world’s top economy could suffer if they do not approve his stimulus package.
She also emphasised that the dollar’s value should be determined by foreign exchange markets, and expressed support for global digital tax negotiations taking place under the auspices of the Organisation for Economic Co-operation and Development (OECD).
A global agreement would allow the US to collect taxes from corporations that have moved their headquarters overseas, Yellen told the Senate Finance Committee during her confirmation hearing.
“It would enable us to collect a fair share from corporations, while maintaining the competitiveness of our businesses and diminish the incentives that American companies now have to offshore activities,” she said.
In New York, traders also scoured US corporate results, which Oanda market analyst Craig Erlam suggested might “spark markets back into life”.
In Germany meanwhile, investor confidence jumped in December, the ZEW institute’s monthly barometer showed.
London closed down 0.1 per cent, Frankfurt lost 0.2 per cent and Paris shed 0.3 per cent.
AFP
5.58am: Yellen says Biden to act against China trade abuses
The incoming administration of President-elect Joe Biden will use all available tools to address “China’s abusive unfair and illegal practices” that undermine the US economy, Treasury secretary nominee Janet Yellen said.
Responding to questions from the Senate Finance Committee at her confirmation hearing, Yellen said China has been “undercutting American companies” with a series of policies, including illegal subsidies, dumping of products, theft of intellectual property and barriers to US goods.
She said “we’re prepared to use the full array of tools” to address those issues.
AFP
5.55am: FedEx to lay off up to 6,300 workers in Europe
FedEx plans to cut up to 6,300 jobs in Europe as it eliminates staff duplication across following the 2016 takeover of TNT, FedEx announced.
FedEx said the downsizing will take place over an 18-month period following consultation with works council representatives across Europe and in accordance with local rules across the region.
The reorganisation will cut between 5,500 and 6,300 jobs, the company said.
AFP
5.50am: GM says Microsoft to invest in Cruise self-driving vehicle
General Motors announced that Microsoft is joining its Cruise autonomous driving venture, coming on board as an investor and technology partner as it pushes to commercialise self-driving technology.
Microsoft will join GM, Honda and institutional investors in a new $US2 billion equity investment round, GM and Cruise said in a press release.
The companies have established “a long-term strategic relationship”, with Microsoft providing hardware and software engineering support.
AFP
5.45am: Goldman Sachs 4Q profits surge
Goldman Sachs said the firm’s fourth-quarter profits more than doubled on a strong performance across operations and lower costs.
Goldman profits soared to $US4.4 billion in the final quarter of the year, a 153 per cent increase compared with the year-ago level, again underscoring the investment bank’s might at a time when other sectors have been devastated by the coronavirus pandemic.
Revenues rose 18 per cent to $US11.7 billion.
Goldman’s results reflected surging revenues in financial advising services, good trading activity and much lower expenses for litigation and regulatory matters.
And amid the COVID-19 restrictions, the financial giant saw lower travel and entertainment costs.
“It was a challenging year on many fronts, and I am deeply proud of how our people helped clients respond to the economic disruption brought on by the pandemic and the extreme market volatility experienced over the past months,” Chief Executive David Solomon said.
“We hope this year brings needed stability and a respite from the pandemic, but we remain ready to handle a wide range of outcomes.” Shares rose 2.3 per cent to $308.00
AFP
5.40am: Zambia copper mine settles pollution claims
Zambia-based Konkola Copper Mines (KCM), a unit of London-listed Vedanta Resources, has agreed to settle claims brought by more than 2,500 villagers suing the mining conglomerate over pollution, the holding company and lawyers said.
The villagers filed a claim in London in 2015 against KCM, one of Africa’s largest copper producers, and Vedanta for alleged toxic pollution caused by water discharged from its unit Nchanga Copper Mine, situated in Zambia’s central copper belt region.
The claimants, which included 643 children, said the toxic discharge affected the health of people living in nearby villages, as well as farming and fishing activities -- their primary source of income.
AFP
5.35am: EU to approve Boeing 737 MAX flights
The European Union Aviation Safety Agency (EASA) plans to authorise the Boeing 737 MAX to fly again next week, 22 months after the plane was grounded following two fatal crashes.
“For us, the MAX will be able to fly again starting next week,” after publication of a directive clearing the jet, EASA director Patrick Ky said in a video conference.
“We have reached the point where our four main demands have been fulfilled,” Ky said during the conference, organised by the German association of aviation journalists.
The MAX was grounded in March 2019 after two crashes that together killed 346 people -- the 2018 Lion Air disaster in Indonesia and an Ethiopian Airlines crash the following year.
Investigators said a main cause of both crashes was a faulty flight handling system known as the Manoeuvring Characteristics Augmentation System, or MCAS.
AFP
5.30am: Covid, economic impact are top global threats: WEF
Business and government leaders currently see the loss of life from COVID-19 and related economic effects as the world’s greatest short-term threats, the World Economic Forum said.
The group which organises an annual get together of leading industrial and political voices at the Swiss Alpine resort of Davos carries out a survey of its members beforehand to determine what they consider as the greatest global threats.
Unsurprisingly, this year the COVID-19 pandemic is at the top of the list for short-term threats, though climate change remains among the top long-term concerns.
“The immediate human and economic cost of COVID-19 is severe,” said the WEF’s Global Risks Report (GRPS) 2021.
“It threatens to scale back years of progress on reducing poverty and inequality and to further weaken social cohesion and global co-operation,” it added.
Most of those who replied to the GRPS identified “infectious diseases” and “livelihood crises” as the top short-term threats worldwide.
AFP
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