Shares bounce from daily lows on surprise jobs lift
Shares finished the session down 0.9pc, coming back from an earlier drop as much as 2.2pc thanks to lift in supermarket heavyweights.
- Virgin suspended as rescue talks continue
- Falling oil prices hit Woodside
- Transurban toll traffic plummets
- Bendigo Bank withdraws outlook
That’s for the Trading Day blog for Thursday, April 16. Australian stocks finished at their best levels for the day at 5416.3, still down 0.9pc from yesterday’s close. That’s after March employment data printed better than expected. The jobless read edged up to 5.2 per cent, but predated widescale business closures as a result of coronavirus lockdowns. On the local market all sectors were lower bar consumer staples, healthcare and telco, which were supported by defensive trade.
The local slip comes after Wall Street tumbled following a wave of weak economic data and bank earnings reports.
4.38pm: Casino, tourism names in focus
Casino operators were in focus as Crown Resorts stood down 11,5000 staff and docked its chief executive’s pay by 20 per cent. The James Packer-backed outfit finished Thursday’s session higher by 0.5 per cent to $8.30.
Meanwhile, rival Star Entertainment was one of the best performers for the day, adding 9.4 per cent to close the session at $2.56 as it laid out plans to lodge a COVID-19 business interruption insurance claim.
Travel names were among the worst hit as Virgin continued talks for a potential bail out or restructure. The embattled airline requested a further suspension of its shares while it nuts out the details. VAH last traded at 8.6c on April 9.
Across the broader tourism industry, Corporate Travel Group fell by 16 per cent to $9.21, Flight Centre lost 12.9 per cent to $10.90 while Webjet ticked lower by 6.5 per cent to $2.59 as the industry heavyweights warned operators could not operate with just a single airline.
Here’s the biggest movers at the close:
4.11pm: Closing bounce sends ASX to daily high
Fears of a prolonged economic hit from coronavirus weighed on market sentiment on Thursday, sending shares lower in broad risk aversion.
US markets provided a weak lead for local shares after warnings from the major banks and softness in economic data points – retail sales and manufacturing readings the worst seen in decades.
Pessimism pulled the ASX down by as much as 2.2 per cent early but the benchmark finished down a more moderate 50 points or 0.92 per cent to 5416.3
Meanwhile, the All Ords fell by 56 points or 1.01 per cent to 5467.6.
3.27pm: House prices to fall 10pc: UBS
UBS Australia chief economist George Tharenou now expects house prices to fall at least 10 per cent in the coming year after embracing his ‘full pandemic scenario’.
Without an easing of mobility restrictions, or more direct policy support, house price falls “will likely be larger”, Mr Tharenou warns.
He also expects housing starts to “collapse” from 175,000 in 2019 to below 100,000 in the coming quarters, the lowest since at least the 1960s.
It comes after the Westpac-Melbourne Institute consumer sentiment survey and NAB’s monthly business survey this week showed the impact of COVID-19 is leading to severe mobility restrictions and recession.
The index dived 17.8pc month-on-month in April, the largest ever monthly decline, to 75.6 points versus the GFC trough of 79.0, and ‘time to buy a dwelling’ sentiment also collapsed by a record 26.5pc on month, to the lowest since the GFC.
Meanwhile, the early impact of travel restrictions/bans was evident by total visitor arrivals in Feb-20 declining by 18pc in the last two months, with arrivals from China down 82pc.
Cliona O’Dowd 3.10pm: Don’t bet on a recovery yet: Platinum
The recent bounce in equities will likely be short-lived and markets may soon test their March lows, Platinum Asset Management boss Andrew Clifford has warned, as he revealed the group’s flagship $10bn Platinum International Fund tumbled 11 per cent in the March quarter.
“Our short-term view is that markets are likely to return to the lows of March and possibly fall further as markets continue to grapple with the economic fallout of the coronavirus pandemic,” Mr Clifford wrote in the fund’s quarterly update, published on Thursday.
“Our medium to long-term view is dictated by the value that we see in the market and what we have in the portfolio. We are finding significant opportunities to add to both new and existing ideas … and, as such, are of the view that good returns can be earned over the next three to five years,” he said.
PTM shares are up 1.2pc to $3.43.
Read more: Share bounce to be short-lived: Platinum
2.45pm: Costa cans outlook despite ‘robust’ trade
Fruit and vegetable producer Costa has withdrawn its full year trading guidance, even as it reported “a robust trading performance year to date”.
The group has been granted essential status across its growing regions, allowing it to maintain production amid broad shutdowns, but the group still said uncertainty and volatility in the social and economic environment had prompted the withdrawal of its outlook.
“The ongoing uncertainty regarding the extent, duration and potential impact of future government restrictions relating to COVID-19 both in Australia and internationally significantly hampers our ability to provide reliable and accurate forecasting,” the company said.
“On that basis, and although the company has made a very positive start to the year, it is appropriate that Costa withdraws its previous guidance for the 2020 financial year.”
CGC shares are trading flat at $2.99.
2.24pm: Bendigo underperforms big 4
Bendigo and Adelaide Bank is underperforming the big four banks in afternoon trade, off by 4.5 per cent after scrapping its full year guidance.
The bank withdrew expectations for a “steady recovery” in the housing market and its second half outlook due to coronavirus uncertainty.
BEN shares are trading down by 4.5pc to $5.91 as the majors trade lower by between 2pc and 2.8pc.
Read more: Bendigo Bank withdraws outlook
2.09pm: Oil stuck at multi-year lows
Oil languished at multi-year lows Thursday, with WTI crude close to its weakest level since 2002, as dire warnings about a virus-triggered demand shock overshadowed massive output cuts.
US benchmark West Texas Intermediate rose nearly three per cent to change hands at $20.44 per barrel after falling below $20 on Wednesday — its lowest price in 18 years.
International benchmark Brent crude, which also suffered heavy losses a day earlier, rose two per cent to trade at $28.31 a barrel.
Prices have crashed as the coronavirus pandemic saps global demand, with the situation compounded by a supply glut resulting from a price war between OPEC cartel kingpin Saudi Arabia and non-OPEC rival Russia.
A compromise hammered out at the weekend by Riyadh, Moscow and other crude producers to slash output by around 10 million barrels per day briefly boosted prices but the rally soon fizzled out.
Investors fear the agreement does not go far enough to offset massive demand losses, as storage capacity around the world shrinks because of the glut.
AFP
1.44pm: Expect more labour volatility: RBC
RBC analysts concede their estimates for March jobs data were off the mark, but say April data will substantially weaker, with more volatility and more revisions to come.
Today’s data predated the government’s travel ban and social distancing restrictions, which will be better captured in April’s data.
RBC’s chief economist Su-Lin Ong warns weakening in the economy will be evident in statistics beyond just the headline unemployment rate.
“Indeed, hours worked will be a key gauge of the health of the labour market and total income pie with many on the JobKeeper payment likely to be counted as employed but with substantially reduced hours, possibly zero, in the coming months,” she writes.
“Similarly, the underemployment rate will likely rise substantially given that the nature of this shock disproportionately hits sectors that are more part time and casualised in nature. Worryingly, this begins from a very elevated level of 8.8pc highlighting considerable slack already.”
She adds that with additional data points to be released from the ABS, there will be more considerable month-to-month changes.
Read more: Jobless rate of 5.2pc fails to reflect coronavirus damage
1.02pm: Tourism worst hit as ASX sheds 1.2pc
Travel agencies and tourism names are the worst hit in Thursday’s session, after warning the industry cannot operate with just one airline if Virgin collapses.
At 1pm, Corporate Travel and Flight Centre were leading the market’s worst performers – down 12.8pc and 10.7pc respectively as the broader market slips by 1.27 per cent or 70 points to 5397.1.
Consumer Staples is the only sector pushing higher – up 1.2 per cent as Blackmores and Woolworths outperform.
Here’s the biggest movers in the top 200:
12.43pm: Who bought Australia’s huge $13bn bond?
The Australian Office of Financial Management issue by syndication of the new 0.25 per cent November 21, 2024 Treasury Bond was priced on Wednesday.
Figures released by the AOFM this morning show 68.1 per cent went to domestic players versus 31.9 per cent offshore.
The bulk of offshore buyers (17.6 per cent) were Asia-ex Japan. Significantly there was virtually no demand from Japanese investors which have long been big buyers – now barely there (0.2 per cent).
The bulk of buyers (52 per cent) were banks for balance sheet and trading. Fund managers picked up 25.3 per cent and hedge funds picked up a whopping 17.3 per cent.
The joint lead managers were: ANZ, Deutsche Bank, UBS AG, Australia Branch and Westpac Institutional Bank.
12.38pm: Rates to stay ultra-low for 5 years: GS
Goldman Sachs Australia chief economist Andrew Boak says the RBA will maintain rates at historic lows for at least the next five years.
After running the RBA’s macroeconomic model “MARTIN” to assess the economic outlook under several different assumptions around the potential containment of the virus, he notes his central scenario assumes economic activity is suppressed for around six months.
Consistent with his bottom-up forecasts, MARTIN suggests the unemployment rate peaks at 8.5pc in late 2020 under the central scenario, with underlying inflation bottoming at 1pc year on year in late 2021.
The economy recovers at a fairly solid pace beyond this, but the soft starting point means the RBA doesn’t need to lift the cash rate until the mid-2020s, reaching a terminal rate of 2pc late in the decade.
He expects the current 0.25pc target of the RBA’s “yield curve control” QE policy to be relaxed several years before the cash rate increases – or around 2023 in the central scenario.
While acknowledging “many layers of uncertainty around the projections” he says they “also speak to the high likelihood that the RBA will remain stuck at its ‘effective lower bound’ for a large part of the 2020s”.
Read more: RBA governor Lowe details the band and the ugly
12.32pm: Afterpay growth to slow significantly
Buy now, pay later platform Afterpay can weather a recession but growth will slow significantly in the short-term, according to analysts at Citi.
After the group’s trading update this week, analyst Siraj Ahmed notes that merchant sales are likely to be negatively impacted by weak consumer discretionary spend and more stringent risk controls/thresholds.
“We assume a decline in spending over the next 6 months, with an improvement later this year, and have lowered our FY20e gross merchant volume (GMV) forecasts by -3pc to $9.8 billion, which assumes 4Q GMV grows ~50pc to $2.5 billon (flat on 3Q),” Mr Ahmed says.
Adding to that, he notes that bad debts are expected to increase going forward.
He downgrades the stock to Neutral from Buy, but lifts his target price 28pc to $27.10.
APT last traded down 2.5 per cent to $27.18.
Read more: Afterpay navigates retail lockdown
12.29pm: Caltex refiner margins pick up
Caltex Australia says its refiner margin has shown short-term growth but remains roughly half as strong compared with 2019 amid the coronavirus pandemic. The company says its March refiner margin was $US4.62 per barrel – above the February figure of $US4.14 per barrel but significantly lower than March 2019’s price of $US8.67 a barrel.
However, Caltex says ongoing reliable operations saw refiner margin sales from production in March of 515ML, which was slightly above February’s 505ML and higher still than the same time last year.
Caltex Australia’s year-to-date refiner margin figure is $US4.87 per barrel but was $US7.53 per barrel by March 2019.
Caltex’s refiner margin represents the difference between the cost of importing a standard basket of its products to eastern Australia and the cost of importing the crude oil required to make that product basket.
The takeover target on Thursday restated that it would bring forward and extend the duration of the planned shutdown of its Brisbane-based oil refinery Lytton’s maintenance – now to begin in May – in response to the coronavirus crisis.
CTX last traded up 1.9pc to $23.98.
AAP
12.02pm: $A spike short-lived
The Australian dollar quickly resumed its slide despite stronger-than-expected jobs data as global risk aversion builds.
AUD/USD extended its fall to 0.7pc, hitting a 5-day low of 0.6272 after a half-hearted uptick on jobs data that clearly failed to capture the coronavirus shutdown.
As with the equity markets, AUD/USD is breaking down from a rising wedge pattern, suggesting it could retest the 18-year low at 0.5510 in coming days.
The former support line from the rising wedge pattern now offers resistance today at 0.6365.
AUD/USD remains the second worst performing G10 currency after NZD/USD today.
Bridget Carter 12.00pm: UBS names its best dividend prospects
DataRoom | Analysts at investment bank UBS have selected Aurizon, Ausnet Metcash, Coles Group, APA Group and Woolworths as having the best prospects for investors focused on dividend payments.
This is at a time that companies, such as those in the financial services space, abandon their payouts to conserve cash on the back of the coronavirus crisis.
They also believe AGL Energy, Amcor, Brambles, Bunnings landlord BWP Trust, CSL, Inghams, Kogan, Magellan, ResMed Rural Funds, Wesfarmers, Telstra and Clover Corporation will provide reliable earnings streams.
However, in a research note, they highlight SkyCity, Sydney Airport, JB Hi-Fi, Scentre Group, Challenger and Vicinity Centres as having dividend payout expectations that are too high.
Other companies likely to pay a smaller dividend in the year ahead or no dividend, say analysts, are Alumina, ANZ, NAB, Northern Star, Oz Minerals, QBE, Servcorp, Stockland, Western Areas and Westpac.
“It is likely that many other stocks will also reduce dividends, either in-line with payout ratios or via a reduction in payout ratios, due to the COVID-19 downturn,” UBS analysts said in a research note.
Perry Williams 11.53am: LNG export revenue may dive by $20bn
Australia faces a $20bn hit to LNG export revenue in 2020-21 due to plummeting oil prices in a hit three times as large as official government forecasts, consultancy EnergyQuest said.
Gas export revenues in the next financial year will tumble by 40 per cent to $30bn from $50bn in 2019-20, reflecting the oil crash which has seen prices sliced in half in the last month to under $US30 ($48) a barrel.
The figures paint a far gloomier picture than the last government forecasts in March which predicted LNG exports would fall to $44bn in 2020-21 from $49bn in the current financial year.
The government forecaster expects oil prices to average $US60 a barrel in 2020 which looks optimistic given record cuts to output last weekend have so far failed to resuscitate prices to even half those levels.
It typically takes three months for lower oil prices to be reflected in the LNG market, meaning the hit will be pushed into the next financial year.
“Lower oil prices are likely to have their full impact on export revenue next financial year when revenue could be as low as $30bn,” EnergyQuest said.
Read more: Tough coronavirus conditions hit ASX-listed junior LNG Limited
11.42am: $A rises back above US63c
The Aussie dollar has bounced off daily lows to trade back above US63c after the latest jobs data which failed to show any meaningful hit from coronavirus.
AUDUSD spiked by more than 30 basis points to US63.09c and was last trading at US62.91c.
The ASX trimmed some of its early losses but has quickly retreated back to a 1.6pc loss.
11.31am: Jobless rate better than feared
Unemployment for March has printed better than expected at 5.2 per cent, from consensus of 5.4 per cent but employment numbers have surprised the most.
The latest data from the ABS shows 5900 jobs were created over the period, smashing expectations of a loss of 30,000.
Keep in mind though, that the data is taken from just the first two weeks of March, before the widescale shutdowns and job cuts – with the figures likely to be revised weaker.
“Today’s data shows some small early impact from COVID-19 on the Australian labour market in early March, but any impact from the major COVID-19 related actions will be evident in the April data,” ABS chief economist Bruce Hockman said.
Aust March jobs data better than expected: emp +5.9k & unemp up 0.1% to 5.2%. Underemp was very high tho at 8.8%.
— Shane Oliver (@ShaneOliverAMP) April 16, 2020
This is very dated & reflects the survey reference period of 1 to 14 Mar before the shutdowns
Apr will see a big deterioration with unemp rising towards 10% by June.. pic.twitter.com/QiORXpXGoJ
11.29pm: RBA makes smallest bond purchase yet
The RBA is buying just $1bn of 5 to 7 year Australian Commonwealth Government Securities today, its smallest yet.
It comes after significant bull flattening of the ACGS yield curve and stabilisation of the 3-year yield near the 0.25 bps target since the RBA began its QE program almost 4 weeks ago.
11.22am: Atomo doubles on ASX debut
Rapid blood test group Atomo Diagnostics has more than doubled its market valuation on its ASX debut, as it signs new orders for its test devices for COVID-19.
The group raised $30m in its IPO with shares offered at 20c apiece – and the stock was trading at 46c after just half an hour.
The group said it had orders for more than 947,000 of its test devices – which use a pin prick to test for infectious diseases including coronavirus, HIV and for female fertility.
Contracts include an agreement with NG Biotech SAS covering France and the UK for the
supply of up to 2.46 million rapid COVID-19 test devices in 2020, including to the French
Ministry of Defence, it says.
11.18am: Consensus for a bleak jobless read
March employment data are due for release in just over ten minutes and will likely be pretty bleak.
Consensus is for a 5.4pc jobless rate and 30,000 fall in jobs versus 5.1pc and 26,700 respectively for February.
If so, unemployment will be the highest since May 2018 and employment will fall the most since December 2013.
The consensus also assumes the participation rate slips to 65.9pc from 66.0pc in February.
But the ranges of economists estimates are heavily skewed toward weaker outcomes, in line with the offshore experience.
Estimates range from 5.0pc to 6.4pc for the unemployment rate and -125,000 to -10,000 for employment.
20 minutes out from the March employment report. Keep in mind the survey period for this report was 1-14 March. This was before the travel ban (20 March), social distancing initiatives (21 March) & business shutdowns (23 March) #ausbiz
— CommSec (@CommSec) April 16, 2020
11.12am: JPM tips these names as ‘truly defensive’
JPMorgan’s Shaun Cousins highlights a2 Milk and Domino’s Pizza as winners from the global coronavirus crisis as “the extent revenue is truly defensive is being tested” by the outbreak.
He says a2 Milk is “the most defensive income stream” in the Australian Food & Beverages and Restaurants sector and is “seeing its route to market being supported by efforts from partners like Mother & Baby stores in China”, while it “enjoys a shift to in-consumption due to social distancing”.
Domino’s is “expected to be a winner due to delivery and value position” and “enjoy a tailwind from delivery”, yet a “softening consumer is a modest risk”.
Meanwhile CC-Amatil and Treasury Wine “face a challenged route to market, which weighs on volumes”.
10.59am: $A falling sharply
The Australian dollar is falling sharply before domestic jobs data at 11.30am AEST.
AUD/USD is down 0.5pc at 0.6285 after hitting a 4-day low of 0.6284 in New York trade.
It’s the second worst performing G10 currency today behind NZD/USD.
AUD/USD is still the best performing G10 currency in the past month with a 2.8pc gain.
10.50am: Sportsbet blames WFH for ASX betting
Sportsbet has blamed challenges in its remote working set up for the initiation of betting on the ASX, a product that has been withdrawn after ASIC intervention.
Just two weeks ago, the gaming group rolled out options allowing punters to bet on whether the ASX200 or All Ordinaries was headed higher, lower or would end on an odd or even figure at the end of the day.
In a notice this morning, ASIC said it had stepped in after concerns over the betting products which Sportsbet was not licensed to offer.
In its response to the regulator, Sportsbet cited “challenges in implementing its control framework in the current environment, with many staff working remotely”.
As such, ASIC has issued a warning that all firms need to maintain compliance with their regulatory obligations, regardless of any work from home arrangements.
Read more: Sportsbet allows punters to bet on sharemarket movements
ASIC intervened when the betting agency Sportsbet began offering bets over the S&P/ASX 200 Index following concerns that the bets constituted a financial product that Sportsbet was not licensed to offer. https://t.co/P4KqdWNnZA
— ASIC Media (@asicmedia) April 15, 2020
10.45am: Banks to cut payouts, raise capital: Macq
Macquarie’s Victor German predicts Australian banks will cut their dividends by 50pc and raise $3.5bn to $4bn via dividend reinvestment plans and equity capital raisings due to higher impairment charges.
“While our new forecasts represent about one third of the potential APRA stress scenario, we now incorporate a ‘credit cycle’ with impairment charge peaking at about 50-65bps,” he says.
“It is about two times the mid-cycle level and current consensus estimates, which we believe is warranted given the current economic outlook.
“Furthermore, if economic recovery takes longer than expected and the unemployment rate remains elevated for a prolonged period, there is downside risk to our below-market estimates.”
He has cut his FY20-21 earnings forecasts by 6pc to 32pc, largely as a result of higher impairment charges, but leaves his share price targets unchanged after unwinding valuation discounts.
“Given our earnings now incorporate a more realistic outcome, the discount is no longer warranted,” Mr German adds.
“While in the longer term banks may benefit from reduced competition, better volume growth and improved spreads, in the short term elevated impairments outweigh that benefit, and we continue to see the balance of risk-return skewed to the downside.”
He has an Underperform rating on the sector, albeit with an Outperform on NAB and Neutral ratings on Westpac, Bendigo and Band of Queensland.
Read more: Bendigo withdraws hopes of housing ‘recovery’
10.31am: Shares rewind weekly gain
A triple hit from weak US data, earnings reports and oil prices has spurred a 2.1 per cent drop on the ASX, what could be its worst daily drop in two weeks.
The S&P/ASX 200 fell to a 3-day low of 5346.2 early – a drop of 2.1pc from yesterday’s close as risk-sensitive real estate, financials, energy and consumer discretionary sectors underperform.
Some of the worst falls in those sectors include Scentre down 5.2pc, NAB down 3.8pc, Santos down 4.3pc, BHP down 3.8pc.
Meanwhile the defensive consumer staples, healthcare, utilities, communications and gold sectors are outperforming.
Those outperformers include Woolworths up 0.2pc, a2 Milk up 2.7pc, CSL up 0.1pc, Spark up 1pc, Telstra up 0.2pc and Newcrest flat.
Gerard Cockburn 10.29am: SEEK job ads fall further
Online recruiting group SEEK says the decline in job ads has amplified across all industry sectors, as coronavirus continues to batter Australia’s labour market.
For the week ending April 12, job postings on SEEK tumbled by 68.6 per cent compared to the same time last year, with Victoria and New South Wales hit hardest, with falls of 75.1 per cent and 70 per cent respectively.
“It is not pleasing to see the continued impact of COVID-19 on the labour market however our data does indicate that the typical Easter decline in hiring was not as prominent this year,” SEEK managing director Kendra Banks said.
“In past years we get a notable drop in job advertising over the Easter period however this year given the already low advertising levels we have not seen such a notable decline.”
Job advertisements in the previous two weeks declined at rates of 64.6 per cent and 65.3 per cent.
SEEK noted job demand still remains within some industries, including healthcare, manufacturing, mining and transport.
Read more: SEEK hurting as job ads plunge amid shutdowns
10.12am: Jobs jitters send ASX lower
Recession fears are dragging the market down by 1.9 per cent early, ahead of a likely jobless surge to be released later this morning.
At the open, the benchmark ASX200 is lower by 102 points or 1.9 per cent to 5364.9 – unwinding any gains for the week to date.
All sectors bar healthcare are trading in the red – led by outsized losses in energy and financial stocks.
Eli Greenblat 10.06am: Aussie wine exports to China halve
The value of Australian wines exported to mainland China slumped by almost half in March as the coronavirus pandemic saw entire Chinese regions in lockdown and people isolated in their homes, with the $45bn Australian wine industry bracing for even more bad news in coming months as similar lockdowns across Europe and North America crunch wine sales.
Australian export value in the month of March 2020 to China was 43 per cent lower than March 2019 and 14 per cent lower than the same quarter in 2019, turning Australia’s biggest and most important wine markets into a laggard.
The local wine sector is pinning its hopes on consumers still buying and drinking Australian wine at home, as pubs, clubs, cafes and restaurants shut down in our key export markets and social distancing makes gatherings almost extinct.
Nick Evans 10.03am: No virus hit to Aurizon freight volumes
Rail hauler Aurizon says the coronavirus pandemic had no impact on the volumes of coal or iron ore it moved in the March quarter as Australia’s bulk mines maintained output as the virus crisis hit.
Aurizon released its March quarter figures on Thursday, leaving its coal haulage annual guidance intact at 210 to 220 million tonnes, and saying its central Queensland volumes had lifted 2 per cent compared to the same period in 2019.
The company moved 37 million tonnes of coal on its Queensland network in the quarter, up from 36.4mt in the March 2019 period, but down slightly from the December quarter when 37.7mt ran across its lines.
Volumes in NSW and southern Queensland were down 3 per cent on a year ago, to 14.8mt, as production at BHP’s Mt Arthur mine fell, New Hope’s New Acland mine nears the end of its life and Whitehaven Coal’s mines were hit by bushfire and labour shortage constraints.
Aurizon said it hauled more iron ore than it did a year ago as high prices led to bigger volumes from existing clients and the company added Mineral Resources to its roster in WA.
Aurizon shares last traded at $4.41.
Perry Williams 10.01am: Santos to sell Barossa gas stake
Santos says it has signed a letter of intent to sell a 12.5 per cent stake in its Barossa development to Japan’s JERA with the gas project underpinning gas volumes for Darwin LNG. JERA already owns 6.1 per cent of Barossa.
Santos scooped up ConocoPhillips’ Northern Australia business for $2bn last year, giving it control of Darwin LNG and Barossa but has flagged to the market it wanted to lower its ownership in the two projects.
It sold a 25 per cent stake in the Darwin LNG project and associated Bayu-Undan gas field to South Korean firm SK E&S for $US390m ($603m) on March 12.
Santos will now hold a 43.4 per cent interest in Darwin LNG and said it ultimately expects to lower its current 50 per cent stake in Barossa down to 40 per cent.
“We are continuing to advance discussions with other parties for the sale of further equity in the Barossa project in line with our previously stated target ownership level of around 40 per cent to achieve increased partner alignment and prudent future allocation of growth capital. We are also in discussions with buyers for Barossa volumes,” Santos chief executive Kevin Gallagher said.
STO last traded at $4.39.
John Stensholt 9.53am: Crown stands down 11,500 staff
Crown Resorts has stood down more than 11,500 of its employees, or about 95 per cent of its workforce, and chief executive Ken Barton will take a 20 per cent pay cut as the gambling giant responds to the coronavirus pandemic.
The company announced the standing down of its workers on Thursday morning, having shut its Melbourne and Perth casinos in late March in response to government orders to close non-essential businesses due to COVID-19.
Crown will provide an ex-gratia payment of two weeks pay to full and part-time workers who have been stood down and a $1000 lump sum to eligible casual workers.
The company is still committed to paying its interim dividend of 30c per share, which is due on Friday, and has also entered into new banking facilities worth $560m and a $450m project financing facility to support the continued construction of Crown Sydney.
CWN last traded at $8.26.
Read more: Crown stands down 11,500
9.44am: Economy in focus for markets
The economic cost of coronavirus shutdowns is back in focus for markets after the Energy sector led a 2.2pc fall in the S&P 500 overnight.
Futures suggest Australia’s S&P/ASX 200 will open down about 2.2pc at a 3-day low near 5345.
A daily close below 5470 today would suggest the recent rising wedge pattern is complete. If so, the March 23 low at 4402.5 should in theory be retested and probably broken before any further recovery.
But of course governments and central banks can increase their policy response, which might include broadening asset buying to shares in some countries.
Markets were broadly risk averse overnight with AUD/USD down 1.9pc to 0.6319, the US 10-year bond yield down 12bps to 0.63pc, though spot gold fell 0.6pc as the US dollar rose.
Apart from plunging oil prices after EIA and IEA reports highlighted the glut, the sharp fall in the S&P 500 was caused by weak earnings reports and economic data.
Citi and BofA fell 5.6pc and 6.5pc on coronavirus writedowns, while US retail sales, industrial production for March and the NAHB housing index and Empire State index for April were much worse than expected.
It’s a bad omen for the Australian market which faces March employment data today. The consensus is for a 5.4pc jobless rate and 30,000 fall in jobs, but estimates range from 5.0 to 6.4pc and -125,000 to -10,000 respectively.
9.37am: What’s on the broker radar?
- Afterpay cut to Neutral – Citi
- Coca-Cola Amatil cut to Hold – Jefferies
- Coca-Cola Amatil cut to Neutral – Citi
- Emeco cut to Hold – Jefferies
- Evolution raised to Buy – Shaw and Partners
- NRW Holdings raised to Buy – Jefferies
- OZ Minerals raised to Add – Morgans
- Perenti cut to Hold – Jefferies
- SRG Global rated new Buy – Shaw and Partners
Bridget Carter 9.33am: Bapcor launches $180m raise
DataRoom | Bapcor has launched a $180m equity raising through Morgan Stanley and UBS.
The raise at $4.40 per share is by way of a placement.
The price is an 8.5 per cent discount to the last traded price of $4.81 on April 15.
After the placement, Bapcor will also raise up to $30m for a share purchase plan.
Proceeds are being used to drive down debt.
9.23am: Star cuts costs amid shutdowns
Casino operator Star Entertainment says more than 90 per cent of its staff have been stood down as its venues remain shutdown, while its chief executive takes a salary cut and capital expenditure plans are slashed in an attempt to save cash.
In an update to the market, following the shutdown of its properties from March 23, the company said it was shoring up its balance sheet – adding $200m in debt funding from existing lenders while also executing stringent cost cutting.
The group said it had stood down 8500 staff – a lift from its earlier estimates that 8000 staff would be affected – while directors fees were cut by 50pc and the chief executives salary cut by 40pc.
Star said its capital expenditure plans had been slashed by $25m for the first half of the year, and by roughly 25pc in the second half.
Still, it continued to pump money into its joint venture Queen’s Wharf project in Brisbane, which it said was progressing to plan.
“Our cash and undrawn debt facilities are certainly at a robust level, providing a high level of security as the business community continues to navigate uncertain times,” chairman John O’Neill said.
It comes as rival group Crown this morning announced it was standing down 11,500 staff.
9.14am: Virgin suspended as rescue talks continue
Virgin has requested a suspension of its shares pending news on a potential rescue package or restructuring.
In a notice to the market, Virgin said “discussions with respect to financial assistance and restructuring alternatives which are ongoing”.
“While this consideration and these discussions have continued over the last two days including discussions which remain confidential and are incomplete, the Company is not presently in a position to make an announcement to the market with respect to these matters.
“In particular the Company requests that trading in its securities be suspended to enable this consideration and these discussions to continue so as to ensure the market is not trading in the relevant securities on an uninformed basis.”
Virgin requested the suspension be in place for 7 days, or until the news is released to the market.
VAH last traded at 8.6c on April 9.
Read more: Tourism chiefs brace for Virgin hit
9.07am: Falling oil prices hit Woodside
Woodside Petroleum said its first-quarter revenue was hurt by falling oil prices and lower trading activity as the coronavirus pandemic and threat of a crude supply glut rattled the global energy sector.
Woodside said its sales revenue totalled $US1.08bn in the three months through March, down from $US1.41bn in the December quarter of 2019.
Still, Woodside’s production totalled 24.2 million barrels of oil equivalent despite the impact of a severe cyclone that tore through Western Australia during the period. Output was up 12pc compared to the first quarter a year earlier.
“Tropical Cyclone Damien, which crossed the Western Australian coast in February, was the most significant weather event ever to pass over Woodside’s production facilities on the Burrup Peninsula,” Chief Executive Peter Coleman said. “Despite the severity of the storm, the team put in an outstanding effort to ensure the safety of our people and our assets and restore normal operations in a matter of days.”
The price of Brent crude – the global oil benchmark – fell by 66pc in the March quarter, representing its largest percentage decline on record.
Dow Jones Newswires
Perry Williams 9.02am: Transurban toll traffic plummets
Transurban has seen traffic plummet by nearly half across its sprawling toll network in late March as the coronavirus economic shutdown keeps drivers off roads.
Average daily traffic in Melbourne plunged 54 per cent in the week starting March 29 on the same period a year earlier as drivers obeyed government orders and stayed at home.
In Sydney – where it operates seven of the city’s nine toll road concessions – traffic fell 42 per cent in the same week long period while Brisbane tumbled by 39 per cent.
Transurban suffered its biggest fall in North America with traffic dropping 67 per cent across its three roads in Washington and Montreal road following mandated lockdowns, in line with peer toll road operators in Europe which dived between 60 and 80 per cent due to lockdowns.
Its overall average daily traffic fell by 48 per cent for the week starting March 29 compared with the same period a year ago.
8.55am: Bendigo Bank withdraws outlook
Bendigo Bank has scrapped its guidance for the second half of the 2020 financial year, noting coronavirus has inhibited its ability to provide any outlook.
The regional bank said Thursday that the pandemic has made it difficult to provide future guidance. Still, it said its balance sheet and capital position were strong following the institutional placement and share purchase plan that were completed earlier this year.
“Bendigo and Adelaide Bank’s balance sheet remains strong and its capital position is well above APRA’s unquestionably strong benchmark target – with a pro-forma CET1 ratio of 9.8pc,” said the bank.
The Bank’s retail funding strategy and profile is supported by a high level of customer deposits which are complemented by prudent exposure sourced from wholesale funding markets. The bank has not commented on the level of stressed housing or business loans, a key area that investors will be looking for in terms of impact on the banking sector.
Bendigo and Adelaide Bank Managing Director Marnie Baker said it was “in a very strong position to support customers, staff and communities throughout this pandemic and beyond”.
BEN last traded at $6.19.
8.53am: Bapcor halted for raise
Car parts and accessories group Bapcor has halted trade in its shares ahead of the open, pending a capital raise.
The group, which owns retail stores Autobarn and Autopro, said this morning it was working on a fully underwritten institutional placement together with a non-underwritten share purchase plan.
It requested the halt in trade until April 17.
BAP last traded at $4.81.
Eli Greenblat 8.10am: Paul Zahra resurfaces
Paul Zahra, the former chief executive of David Jones, has started his role as the new executive director of the Australian Retailers Association one month earlier than planned as the $320 billion retail sector is punished by the coronavirus pandemic through mass store closures and lay-offs.
Mr Zahra wasn’t slated to start as the new ARA boss until May, but such is the turmoil now sweeping through the sector that his commencement date was brought forward.
Mr Zahra is a career retailer whose previous executive roles have included CEO and managing director of David Jones and senior leadership roles at Officeworks and Target. He quit David Jones in 2014 when it was taken over by Woolworths Holdings.
Former ARA executive director Russell Zimmerman announced recently his intentions to retire. He had been in the role for 10 years.
7.40am: Oil sinks
US crude prices fell to an 18-year low and Brent lost more than 6.0 per cent after the United States reported its biggest weekly inventory build on record, while global demand is expected to fall to quarter-century lows due to the coronavirus pandemic.
The grim figures undercut the positive feeling from the weekend agreement between global oil producers to phase-in a record output cut, making clear that supply reductions would not be enough to prevent storage from filling and leaving countless barrels stranded.
“We have crude oil backing up in the system in epic fashion,” John Kilduff, a partner at Again Capital in New York, said after the US government’s weekly oil inventory report.
“This is probably one of the most bearish, if not darkest reports I’ve ever seen.” Brent crude settled at $US27.69 a barrel, dropping $US1.91, or 6.45 per cent. US West Texas Intermediate crude settled at $US19.87 a barrel, shedding 24 US cents, or 1.19 per cent.
WTI logged its lowest close since February 2002.
Reuters
7.20am: ASX set to plunge ahead of jobs data
Australian shares are tipped for sharp early losses as global equities sour and a likely bleak March unemployment figure looms.
At 7am (AEST) the SPI200 futures contract was down 122 points, or 2.23 per cent, at 5,340.0 points, suggesting local stocks will follow Wall Street lower as concerns mount over the coronavirus fallout.
The Dow Jones Industrial Average fell 1.86 per cent to 23,504.35, the S&P 500 lost 2.20 per cent to 2,783.36, and the Nasdaq dropped 1.44 per cent, to 8,393.18 overnight as dismal economic data and first-quarter earnings reports sent investors scurrying.
The S&P/ASX200 benchmark index finished Wednesday down 21.4 points, or 0.39 per cent, to 5,466.7 points.
The jobless rate is tipped to rise from 5.1 per cent to 5.4 per cent for March, though widespread COVID-19 shutdowns and social restrictions were not implemented until the second half of the month, meaning the April data will be worse again.
The Australian dollar was buying US63.19 cents at 7am (AEST), up from US63.54 cents at the close of markets on Wednesday.
AAP
6.10am: Wall Street, oil sink
Stocks fell as US retail sales dropped more than expected in March, underscoring the economic toll of the coronavirus pandemic, while slumping energy demand sent oil prices to an 18-year low.
The Dow Jones Industrial Average slid 443 points, or 1.9 per cent. The S&P 500 dropped 2.2 per cent, while the Nasdaq Composite Index declined 1.4 per cent.
Overseas, the pan-continental Stoxx Europe 600 retreated 3.2 per cent. Major Asian benchmarks also fell.
After closing lower yesterday, Australian stocks are set to set to fall sharply at the open. Shortly before 6am (AEST) the SPI futures index was down 115 points, or 2.2 per cent.
The sharp drop in US retail sales for March, when restaurants, malls and most stores were closed, highlights the effect of the global health crisis on US consumer activity. Lay-offs and furloughs, as well as the looming recession, are denting American households’ appetite for non-essential goods.
Meanwhile, US industrial-production figures showed a decline in factory activity as global supply chains were disrupted and demand for goods evaporated. Production for March fell a worse-than-expected 5.4pc.
US crude futures declined 24 cents a barrel, or 1.2 per cent, to $US19.87, the first time since 2002 that they settled below the $US20 mark. That came after new data showed US oil inventories climbed more than expected last week, as stay-at-home orders have kept drivers off the roads.
Futures on Brent crude, the global oil benchmark, fell $US1.91 a barrel, or 6.5 per cent, to $US27.69. Global oil demand is likely to fall by a record 9.3 million barrels a day this year, the International Energy Agency said in its monthly report. The demand in April will fall by 29 million barrels a day to levels not seen since 1995, the agency said.
Investors also parsed fresh cues on the looming wave of defaults by US consumers and companies as major banks reported quarterly earnings. The billions of dollars being set aside for bad-loan provisions have highlighted the pain of the economic contraction that is widely expected in the coming months, while also pommeling bank stocks.
Bank of America shares slumped 5.2 per cent after the bank said it was setting aside $US4.8 billion to cover credit losses. Citigroup stock fell 3.8 per cent after the bank boosted its allowances to $US20.8 billion.
“Earnings numbers are a bit of a reality check: The market has anticipated weak figures for the first and second quarters, but this is a reminder that things are not OK,” said Seema Shah, chief strategist at Principal Global Investors. “We may be close to an inflection point with the virus, and we may have policy support, but that’s not enough to avoid a deep contraction.”
Investors sought the safety of government bonds, seen as havens in times of financial distress. The yield on the U.S. benchmark Treasury fell to 0.646 per cent, from 0.751 per cent Tuesday. Bond yields move in the opposite direction of prices.
In Asia, Japan’s Nikkei 225 closed 0.5 per cent lower, while Hong Kong’s Hang Seng ended trading down 1.2 per cent.
Dow Jones Newswires
5.50am: Thais rush to sell jewellery
Thais are flocking to Bangkok’s Chinatown to sell their gold jewellery as the price of the precious metal spikes and the economy tanks due to the coronavirus pandemic.
Gold surged to a seven-year high on Tuesday to $US1,731.25 an ounce, following global moves led by the US to reinflate economies with trillions of dollars of stimulus measures.
That has boosted the price of gold across the world, tempting many to sell their stocks of the precious metal at a time of economic hardship without recent precedent.
Many Thais buy gold jewellery as an investment in times of plenty, to be sold when prices rise or belts tighten.
In Bangkok, where a virtual lockdown has taken root for a fortnight, hundreds flocked to Yaowarat, Bangkok’s Chinatown, to trade bracelets, necklaces and rings for cash as local gold prices jumped more than 20 per cent.
AFP
5.45am: US economy ‘contracted sharply’
US economic activity “contracted sharply and abruptly” nationwide amid the lockdowns imposed by the coronavirus pandemic, the Federal Reserve said.
Businesses across all regions “reported highly uncertain outlooks … with most expecting conditions to worsen in the next several months.”
The “beige book” report showed the early signs of the carnage spreading through the US economy as factories, shops and restaurants were forced to shut down nationwide.
Government reports have shown 17 million workers lost their jobs in the three weeks through April 4, and the Fed said “the near term outlook was for more job cuts in coming months.” With over two million cases worldwide, the spread of COVID-19 has driven the global economy into recession, with the International Monetary Fund warning $9 trillion will be slashed from global GDP.
AFP
5.40am: Trump name on stimulus cheques
President Donald Trump’s name will be printed on the stimulus cheques that the Internal Revenue Service will be sending to tens of millions of Americans around the country, in an unprecedented move finalised this week.
The Treasury Department confirmed the decision in a statement. It marks the first time a president’s name has appeared on any IRS payments, either refund cheques or other stimulus cheques that have been mailed during past economic crises.
Treasury said that the decision to add Trump’s name will not delay issuance of the paper cheques, which will be mailed to people who are not set up to receive direct deposit payments from the IRS.
AP
5.38am: Stocks and oil prices slide
Global stocks sank as COVID-19 infects the global economic outlook, while oil prices slumped as OPEC-led output cuts were deemed insufficient to soak up a supply glut.
Sentiment turned sour on grim warnings over the economic impact of the coronavirus, which emerged in China and has so far killed more than 125,000 people and infected almost two million globally.
The International Energy Agency said 2020 was likely to be “the worst year in the history” of the sector.
The IEA put the drop in demand at 29 million barrels per day in April, far more than a daily cut of 10 million agreed at the weekend by the OPEC oil cartel and its allies.
The benchmark West Texas Intermediate oil contract hit $US19.20 per barrel, the lowest level in 18 years.
Top stock markets across Europe finished more than three per cent lower. Wall Street was also in the red, with the Dow down 2.7 per cent in late morning trading, as more banks reported setting aside billions of dollars to cover a wave of expected sour loans.
Sentiment was also shaken by data showing US retail sales tumbled 8.7 per cent last month while industrial output fell by 5.4 per cent.
The dollar clawed back some ground versus rival currencies, after being slammed earlier this week when the US Federal Reserve announced more cash was on the way to soften the virus’ economic impact.
London closed down 3.3 per cent, Frankfurt lost 3.9 per cent and Paris fell 3.8 per cent.
AFP
5.35am: US economic carnage mounts
The devastation caused to the US economy by the coronavirus pandemic was thrown into even sharper relief with the release of data showing deep damage to retail sales and manufacturing.
The data from the Commerce Department and Federal Reserve represented readings not seen in decades — or ever — for the monthly surveys that gauge the performance of the sectors, both crucial for the world’s largest economy.
March industrial production data released by the Federal Reserve makes clear the damage to factories. The index declined by 5.4 per cent, its largest drop since 1946, while output dropped 6.3 per cent, also its biggest fall in seven decades, with the pain felt across most industries.
While acknowledging the data were “very bad,” Ian Shepherdson of Pantheon Macroeconomics warned the worst was yet to come.
“Further big drops are likely in April, because lockdowns began to bite hard only in mid-March, so roughly half the month was largely unaffected by the virus crisis,” he said in a note.
Wall Street opened lower after the surveys’ release, with the Dow down about 2.8 per cent about 90 minutes into trading and the Nasdaq and S&P 500 also slumping.
AFP
5.30am: Apple releases budget iPhone
Apple has released a smaller iPhone priced at $US399 ($633), cutting the starting price for the company’s smartphone line in a move to broaden its appeal to budget-conscious customers as the coronavirus hobbles the global economy.
The lower-cost model could also attract more consumers to Apple services, a growing driver of revenue.
US shares of Apple fell 1.1 per cent, less than the 2.8 per cent decline of the S&P 500 index.
The iPhone SE, available on April 24, is the second generation of a previous budget model.
It will start at $US50 less than what was previously the cheapest iPhone available, the $US449 iPhone 8, which will be retired.
Every previous iPhone has been unveiled in a polished presentation in front of fans but large events remain banned in Apple’s home base of Santa Clara County, California, where public officials ordered the first lockdowns in the United States to slow the spread of the coronavirus.
Apple will begin selling the new model online while its stores around the world are closed, except those within its greater China sales region. Apple will start taking orders for the phone on its website on Friday, with delivery of devices expected to start April 24.
Reuters
5.28am: Canada growth falls 9pc
Canada’s GDP plunged 9 per cent in March due to travel restrictions and temporary business closures to fight the coronavirus pandemic, dragging down first quarter growth to -2.6 per cent, Statistics Canada said.
The estimates marked the biggest one-month GDP drop on record (since 1961), but beat analyst forecasts as low as -11.7 per cent for the quarter.
On Tuesday, the IMF predicted Canada’s economy would plunge -6.2 per cent this year, before rebounding 4.2 per cent in 2021.
AFP
5.27am: US retail sales plunge
US retail spending took a dive in March as the coronavirus forced businesses to close and people to stay home, falling 8.7 per cent from the prior month, the Commerce Department reported.
The result was better than expected but shows the rapid deterioration from the 0.4 per cent decline in February, with sales plunging in sectors including clothing, furniture and motor vehicles and parts dealers.
Food and beverage stores, in contrast, saw sales surge by 28 per cent.
AFP
5.25am: Social unrest warning
The economic stresses caused by the global coronavirus pandemic could spark an outbreak of protests, the International Monetary Fund warned, urging governments to take steps to prevent unrest.
The IMF cautioned that “some countries remain vulnerable to new protests, particularly if policy actions to mitigate the COVID-19 crisis are perceived as insufficient or as unfairly favouring large corporates rather than people.”
Already in South Africa, police on Tuesday fired rubber bullets and tear gas in clashes with Cape Town township residents protesting over access to food aid during a coronavirus lockdown.
In the semi-annual Fiscal Monitor report, the IMF said protests are “more likely in countries with histories of widespread corruption, lack of transparency in public policy, and poor service delivery.”
Even well-intentioned government spending measures to ease the harm inflicted by the lockdowns to contain the virus “may not quell such tensions given that protesters are not necessarily the poorest,” or if the programs are “viewed as transfers to outsiders.”
AFP
5.22am: Citigroup sets aside $7bn
Citigroup reported a steep decline in first-quarter profits as it set aside around $US7 billion in case of loan defaults due to coronavirus shutdown.
Net profit came in at $US2.5 billion for the quarter ending March 31, down 46 per cent from the year-ago period. Revenues rose 12 per cent to $US20.7 billion.
AFP
5.20am: Goldman profit down 49pc
Goldman Sachs reported a steep drop in first-quarter profits as it set aside funds for bad loans due to coronavirus shutdowns, even as upheaval in markets boosted its trading business.
The investment banking giant reported profits of $US1.1 billion, down 49 per cent from the year-ago period. Revenues dipped one per cent to $US8.7 billion.
Goldman set aside $US937 million during the quarter to deal with potential defaults, citing “continued pressure in the energy sector and the impact of the COVID-19 on the broader economic environment.”
The move follows similar announcements from JPMorgan Chase and other large banks, which are girding for a US recession that some fear could be deep and prolonged.
The shock from the coronavirus crisis had a feast-or-famine impact of many of Goldman’s divisions.
On the positive side, the firm enjoyed double-digit revenue boosts to fixed income and equity trading, and won the bank “significantly higher” revenue in corporate lending and underwriting.
But Goldman suffered an operating loss in its asset management business due to losses in equity and debt investments. The firm also saw a big drop in revenues tied to financial advising for corporate mergers.
AFP
5.15am: Bank of America profits tumble
Bank of America reported a steep drop in first-quarter earnings, joining other financial heavyweights in setting aside significant funds for bad loans in the wake of coronavirus shutdowns.
The biggest US bank by assets after JPMorgan Chase, Bank of America set aside $US4.8 billion for potential defaults, $US3.6 billion of which was added in the first quarter.
Bank of America reported quarterly profits of $US3.5 billion, down 48.4 per cent from the year-ago period.
Revenues were down about one per cent to $US22.8 billion.
The results came after both JPMorgan Chase and Wells Fargo also set aside billions of dollars to cover loans from companies that have been especially harmed by the shutdowns to try to curb the spread of coronavirus.
AFP
ASX 200 falls on China update; BHP leads mining reversal
Iron ore, copper futures, AUD down after China's underwhelming economic update. RBA's 'step down' in hawkishness evident in September minutes, but deputy governor Andrew Hauser says inflation job's not done yet.
ASX 200 rises on banks; Arcadium top gainer
Rio Tinto's takeover approach lifts Arcadium Lithium appeal. West African Resources drops on Burkina Faso mining concerns. Qantas may avoid second strike after proxy backing.