Trading Day: Australian sharemarket surges to 9-month high
ASX hits highest point since February as US futures rise, and as Ampol announces buyback and big miners perform strongly.
- Ampol in talks over WA terminal
- BGH lifts Village offer
- ZIP revenue jumps
- Ampol to launch $300m buyback
That’s all from Trading Day for November 23. Australian stocks steadied at the close after surging to a nine-month high, extending the ASX’s recent rally, despite Friday’s falls on Wall Street, when the Dow Jones Industrial Average lost 0.8pc, the S&P 500 shed 0.7pc and the Nasdaq declined 0.4pc.
John Durie 8.18pm: Ampol boss impresses with shareholder focus
The prospect of no Australian oil refineries from next year loomed large from Ampol’s musings on Monday, with the company showing a keen resolve to focus on shareholder interests.
Chief executive Matt Halliday left the decision open, saying it was considering different options including the government’s desire to keep refineries going for fuel security reasons, but he is not as sure as Energy Minister Angus Taylor of the need for a refinery for fuel security.
The market was impressed with Halliday’s resolve, with a $300m share buyback from the proceeds of a $635m sale to Charter Hall of a share in the retail trust over its petrol sites.
Retail boss Jo Taylor also impressed in showing the potential for the convenience retail model that will boost earnings by $85m over the next four years.
Convenience retail has come into its own during COVID-19 and Taylor has shown she is prepared to cut costs by doing away with baristas at some of her Metro sites with Woolworths.
Taylor showed true Ampol credentials, saying she was “slowing down to speed up” in terms of the store rollout, which means she wanted to get it right before putting her foot on the accelerator.
This from a company that has revelled in the use of consultants to work out which day of the week it is that was a hallmark of Caltex of old under predecessor Julian Segal.
Ben Wilmot 7.30pm: HomeCo Daily Needs REIT lists ahead of expansion
The lift in supermarket spending has prompted a bump up in the trading of the year’s largest float on the Australian Securities Exchange, the HomeCo Daily Needs REIT.
The new fund, spun out of the listed Home Consortium via an in-specie distribution, also raised $300m via Goldman Sachs and Macquarie Capital, alongside Morgans, Ord Minnett and Jarden.
The stock lifted from its $1.33 per unit float price to $1.34, in line with expectations, as about 27 per cent of the register was held by HomeCo shareholders. Market experts said there was “flow back” as some sold out of the new fund and bought back into HomeCo.
Bridget Carter 7.08pm: AMP ‘opening door’ to Dexus Property Group
Australian listed financial group AMP is believed to be opening the door to Dexus Property Group to conduct due diligence on one of its $4 billion-plus property funds as early as this week for a potential acquisition.
It comes after Dexus in September wrote to the manager of the AMP Capital Diversified Property Fund with a proposal to merge the fund with an existing Dexus vehicle, the Dexus Wholesale Property Fund.
Dexus had been requesting due diligence on the fund and it is understood that following positive discussions, that will likely be granted as early as this week, say sources.
The ACDPF includes investments in buildings such as Sydney’s Quay Quarter office and retail complex at Circular Quay and the shopping malls Macquarie Centre in Sydney’s north and Pacific Fair on the Gold Coast and its properties are understood to be worth at least $4.5bn.
The proposal is understood to have been earlier encouraged and welcomed by many of the existing investors within the AMP Diversified Property Fund, many of which are the same that invest in the Dexus-controlled DWPF.
AMP Capital has $192bn of funds under management and market analysts say that the value of the funds’ rights depends on the length of its contracts to manage the real estate.
Dexus is working with Greenhill, while AMP Real Estate Funds Management is working with Evans and Partners Corporate Advisory and Herbert Smith Freehills.
The situation has posed a dilemma for AMP, which needs to act in the investors’ best interests but is also considering other plans for AMP Capital, namely a sale as part of a wider divestment of the whole company.
California-based private equity firm Ares Management has been in talks to buy the $5.9bn wealth manager AMP, in a move that could spark an auction or a break-up of the 171-year-old financial services company.
AMP confirmed last month it had received an indicative, non-binding, conditional proposal from Ares to acquire 100 per cent of the shares in AMP by way of scheme of arrangement, and it is understood that the bid valued the company at $6.4bn or $1.85 per share.
Access was given to the AMP data room.
Earlier, AMP had hired Credit Suisse and Goldman Sachs to assess options as part of a strategic review.
The review followed a decline in performance following the Hayne Royal Commission findings.
In July, AMP Capital’s head of real estate, Carmel Hourigan, left to head up office investments at Charter Hall.
Her departure, and that of other senior executives, followed the controversial decision by AMP to appoint Boe Pahari as head of AMP Capital despite a $500,000 fine for sexual harassment.
Dexus in the country’s largest office landlord with a portfolio worth $14.2bn and also industrial properties worth $2.2bn.
It also has a real estate funds management operation that counts $3.3bn worth of shopping centres among its investments, $9.1bn worth of offices, $400m of healthcare-related properties and $2.7bn of industrial buildings.
DataRoom reported in July that Dexus, along with other property managers, were believed to be in talks with the AMP Capital investors in a quest to take control of the funds within its $30bn real estate empire.
Invested in the fund is believed to be some of the country’s most powerful superannuation managers such as UniSuper and Sunsuper, which would need to be on board to switch their allegiances, and some say it can be a difficult task for investors to change managers due to contractual issues.
Cliona O’Dowd 6.24pm: Zip Co banking on Christmas rush
Buy now, pay later operator Zip Co is counting on the crucial Christmas spending season to deliver a further boost to its in-store volumes, as it recorded a surge in revenue over the first four months of the year on record transactions across its Australian and US businesses.
Revenue rocketed 91 per cent to $96.7m between July and the end of October, with two-thirds of the sales coming from its Australian and New Zealand operations. The US business, accounting for the final third, recorded a revenue jump of 345 per cent over the same period.
Revenue in October alone hit $27.6m on $401.1m worth of transactions, Zip said. Transaction volumes jumped 104 per cent over the month and November was shaping up to be another strong result, Zip chief executive Larry Diamond told shareholders.
“We are pleased to report yet another record month for the company across all its key metrics, as we accelerate into the final quarter of the calendar year,” Mr Diamond said.
“While online trade is expected to be very strong this year, and Zip will enjoy its share, this season Zip expects to significantly lift its instore volumes.”
The US was Zip’s biggest growth driver over the first four months of the year, with the region seeing 15,000 downloads of its app per day. Mr Diamond indicated that the company expected to lift its in-store volumes through its partnerships.
“Our partnership with Visa and access to Apple Pay and Google Pay wallets unlocks everyday spend, providing our customers with more utility and choice,” he said.
Customer numbers jumped to 4.8 million at the end of October, while 36,500 merchants were registered on the platform.
Separately, fellow BNPL platform Laybuy on Monday reported its first-half numbers for the six months to the end of September, with revenue surging 151 per cent to $NZ13.3m, mainly due to growth in the UK.
Laybuy would be testing the US market pre-Christmas with a view to a progressive launch in the New Year, the company said.
Zip Co shares lifted 0.3 per cent to $6.20 on Monday, while Laybuy fell 1.8 per cent to $1.36.
James Kirby 6.04pm: As big super sweats, self starters shine
A golden era for industry super funds might be coming to an end as a series of key developments in superannuation shine light on improved prospects for Self Managed Super Funds.
Though the government’s Retirement Income Review offered little perspective on the health of the Self Managed Super Fund sector - which is used by more 1.1 million Australians - the arrival of the review will almost certainly reduce the amount of money flowing into big super funds annually.
The review’s announcement that higher superannuation guarantee contributions would lead to lower wage growth, though highly contestable, will be sufficient for the government to freeze Super Guarantee Contributions close to current levels of 9.5 per cent per annum.
Industry funds have had a strong run in the wake of the Hayne Royal Commission which revealed major failings at rival so-called retail funds, such as AMP.
But an almost certain freeze on the mandatory inflows into big super now looks likely to coincide with a rebound in SMSF sector thanks to several factors.
Elise Shaw 5.18pm: GST fraudster sentenced over million-dollar scheme
The Australian Federal Police and the Australian Taxation Office said in a joint statment that Michael Ray, a 38-year-old fraud syndicate member who conspired to defraud the Commonwealth of more than $5m through Goods and Services Tax (GST) refunds, has been sentenced to five years imprisonment with a non-parole period of three years after facing the Melbourne County Court.
The Australian Federal Police (AFP) and Australian Taxation Office (ATO) joint investigation, known as Operation SPINEL, identified and charged the South Melbourne man, in May 2017, along with two other members of the Victorian-based fraud syndicate.
Ray was charged after detectives identified he had attempted to obtain a share in over $5m and did dishonestly obtain a share in more than $2.5m from the GST fraud scheme which had operated between 12 November 2010 and 14 December 2012.
The scheme was concocted to illegally obtain personal identifying information. This information was then used to create false entities and register them for GST. Business activity statements (BAS) were then lodged to claim false GST refunds, which were directed to bank accounts that had been created using the stolen identities.
In total, the scheme intended to defraud the Commonwealth of more than $5m.
Police executed search warrants at a number of Melbourne properties and safety deposit boxes, seizing more than $1.5m in cash.
Mr Ray was sentenced today to five years imprisonment, with a non-parole period of three years, after he pleaded guilty to Conspiracy with the intention of dishonestly obtaining a gain from the Commonwealth, contrary to Section 135.4(1) of the Criminal Code (Cth).
ATO Assistant Commissioner Ian Read said this is a successful result under the partnership of the ATO and AFP, who work together to investigate serious criminal activities.
“Tax crime affects the whole community by reducing the revenue that is available to fund essential community services. We know the majority of people are honest, but there are a small percentage of people who deliberately abuse the tax and super system for their own financial benefit. Today’s sentencing shows that these people will be held to account.
“$1.5m has been recovered and those who had their identity compromised were provided support to help get their affairs back on track. This is an excellent result,” Mr Read said.
The matter was prosecuted by the Commonwealth Director of Public Prosecutions.
Elise Shaw 5.11pm: $A facing cross-current of recession and vaccine: CBA
The Commonwealth Bank’s Global Markets Research team says AUD/USD “faces the cross‑currents of positive vaccine news and growing risks of a double‑dip recession in the US”.
“US recession risks that cause a correction in global equity markets will likely bear down on AUD/USD, and AUD/JPY in particular. While there are downside risks to AUD in the near term, the medium term outlook is very positive because of China’s v‑shaped economic recovery.”
5.02pm: ASIC launches probe into ASX trading outage
The corporate regulator has launched an investigation into the cause of last week’s technology meltdown at the ASX that froze trading for almost a day.
In a statement, the Australian Securities & Investments Commission confirmed it had started an investigation into the ASX Trade outage on Monday last week.
ASIC said at the time that it would need a full incident report on the outage, which had a “significant impact” on market participants and investors, and that it would review whether the exchange was in line with obligations under its market licence. The outage shut the market operator for almost an entire trading session, putting billions of dollars worth of transactions on hold.
4.33pm: ASX steadies after 9-month high
Australia’s S&P/ASX 200 share index closed up 0.3pc at an intraday low of 6561.6 after rising as much as 0.8pc to 6594 - its highest point in almost nine-months - during the day.
While US futures stayed firm with S&P 500 futures up about 0.3pc when the Australian market closed, the intraday fade may signal an impending pullback after exceptional gains of late.
The index is up 10.7pc month to date, on track for its best month since inception in 2000, amid hopes that vaccines will soon end the global coronavirus pandemic.
The long-standing All Ordinaries index is up 10.4pc month to date, heading for its best rise since March 1988.
Energy, Materials, Tech, Utilities and Health Care outperformed, with Oil Search, Ampol, Worley, Fortescue and Beach up almost 4pc, BHP up 2.5pc and Mesoblast up 18pc.
But a number of sectors including Real Estate, Consumer Staples, Consumer Discretionary, Industrials and Financials fell back after intraday gains.
In those sectors, IAG dived 6pc on downgrades after its capital raising following an unfavourable court ruling on business disruption insurance.
Unibail and Growthpoint properties fell more than 2pc.
The Australian dollar was 0.15pc stronger against the US dollar by the close of the session, trading at US73.13c.
Elise Shaw 3.52pm: Retirees ‘missing out’ on income: Plato Investment
Plato Investment Management Portfolio Manager, Dr Peter Gardner says too many retirees are missing out on additional income because their Australian equity portfolios don’t take full advantage of Australia’s taxation system.
“With interest rates at historic lows we find ourselves in a position where more income can be generated from franking credits alone, than cash investments such as term deposits,” said Dr Gardner.
“Many pension phase and tax-exempt investors we speak to remain surprised that one dollar of pre-tax income from fully franked dividends is actually worth $1.43 to them after receiving the franking refund. This is despite the significant attention franking received at the last Federal election.
“As an investment firm specialising in retirement income, we campaigned against moves to abolish franking credits at the last federal election, now we see why they’re so important as retirees continue to be hit by rate cuts which are destroying their income from other asset classes.
“Fortunately, dividend income remains relatively strong and franking credits remain in place.”
Dr Gardner says in the current market the mining sector is leading the pack when it comes to franking yield returns.
“Fortescue Metals is currently paying a gross income of 14.5%, including a franking yield of 4.3%. We expect this to be sustainable in the foreseeable future and believe there remains a positive outlook for the price of iron ore.
“Rio Tinto and BHP are other notable dividend payers at the moment which offer retirees the additional benefit of fully franked dividends.
“A focus on investing in companies that offer franked dividends in a no-brainer for retirees, but unfortunately we find many aren’t doing this, the same goes for tax effective buybacks which can also add considerable after-tax alpha when on offer.
“Retirees should assess the management of their equity portfolios to ensure they have a bias towards franked dividends and take advantage of other tax-effective opportunities such a buybacks.
Over the past 12 months, Plato’s Australian Shares Income Fund has generated gross income of 7.7%. 2.2% of which has been franking yield.
Elise Shaw 3.36pm: Village Roadshow shares jump
Shares in Village Roadsow gained 16pc by the afteroon on Monday to $2.86 after BGH Capital announced a sweetened takeover offer for the theme park and cinema company.
Ben Wilmot writes: Village Roadshow has taken another step towards privatisation, with private equity suitor BGH Capital significantly bumping up its offer for the company to as much as $3 per share.
Village has been in play since before the coronavirus pandemic struck when BGH was circling at $4 per share, but the company‘s Queensland theme parks were hit and cinemas are now under more immediate threat from streaming services.
The sweetened takeover deal is worth up to $586m for shareholders and values the overall company, including debt, at about $900m.
Perry Williams 3.29pm: Keane launches attack on AGL Energy
NSW Energy Minister Matt Kean has launched an attack on AGL Energy after the power giant blamed the state’s new energy policy for a decision to defer a Newcastle gas plant and giant battery at Liddell.
Big energy producers and users had already raised fears over a plan by the NSW government to underwrite investment in renewable and storage generation, saying the move would distort market signals and detract from a national approach already underway.
AGL said the state‘s energy roadmap - which aims to attract $34bn in private investment spread through renewable energy zones - meant it would have to defer and review the two major NSW projects as it seeks to understand the implications of the policy.
However, Mr Kean rubbished the move by AGL as a convenient excuse given several years of delays in sanctioning the Newcastle gas plant.
“AGL promised they’d build this gas peaker in 2018 and we haven’t seen a sod being turned. So this seems like a bit of a convenient excuse if you ask me,” Mr Kean told a business conference on Monday.
The Australian Energy Council - which represents the big three of AGL Energy, Origin Energy and EnergyAustralia - has also said the NSW move will detract from a national approach already underway.
Mr Kean said the big producers could move aside if they were not prepared to invest.
“I’m here to look after the business and families of NSW. If the vested interests want to stand in the way, I say to them get out of the way. Let us get on with delivering cheaper, reliable energy,” Mr Kean said.
“The people complaining about this are the ones that don’t want this competition in the market - they don't want lower prices because they want to continue to make super profits at the expense of the families of NSW and I say that’s unacceptable.”
Federal Energy Minister Angus Taylor earlier took aim at Mr Kean, criticising the NSW government for a lack of consultation over its energy blueprint, noting AGL Energy’s decision to pause development of major investments.
“AGL has said that the NSW announcement has impacted their investment plans. We are currently working through the details of that policy,” Mr Taylor said. “The Commonwealth would like to see the modelling behind the policy. And I’m confident that we can work through it. NSW has indicated its strong intent to get to a sensible outcome.”
Ben Wilmot 3.12pm: Mirvac sells Brisbane office block to Forza Capital
The listed Mirvac has sold a Brisbane office block to Melbourne-based fund manager, Forza Capital for about $86.75m, and the buyer will put it into a new syndicate.
The Forza fund will hold the building at 340 Adelaide Street that Mirvac sold at an 11 per cent premium to its last book value. The B-Grade tower spans about 12,800sq m of office space across 17-levels.
It also has a ground floor cafe and parking for 100 cars. The building is located in the Brisbane CBD, near the Golden Triangle precinct. It is 93 per cent leased to customers including Covermore, Cerebral Palsy League and Oracle, and has a weighted average lease expiry of 3.8 years.
Mirvac undertook a refurbishment program and the proceeds will be poured into the company’s development pipeline of offices, apartments and mixed-use precincts.
The sale was brokered by Flint Davidson and Tom Phipps of CBRE Capital Markets.
Forza said the 17 level office building had been purchased for $6,759 per sq m and on a fully leased yield of 7.5 per cent with a 3.8 year lease term. It is 93 per cent leased to tenants including Oracle, Cover-more Insurance and the Queensland Attorney General’s Office.
The Forza fund is targeting an 8 per cent per annum distribution yield over the first five years of the investment. Forza completed a $240m capital raising in September and Adelaide Street is the first asset to be bought with the new capital commitment.
3.07pm: Where to buy the cheapest petrol in Australia
Average at the pump petrol prices are 20 per cent lower than they were this time last year, with the national average price 122.2 cents a litre - but the cost disparity between locations is “huge”, notes CommSec.
According to CommSec and the Australian Institute of Petroleum, metropolitan prices rose by 3.6c a litre last week to 124.9c, while regional prices fell by 0.3c to 116.7c.
That compares with a national average last November of 153c a litre, which CommSec calculates is saving the average household $50 a month in fuel costs.
Despite the lower overall costs, Sydney and Brisbane are in the top 15 most expensive areas to fill up alongside remote regional areas where fuel costs are naturally higher.
In all, regional motorists are paying 8c less a litre than those in cities.
The most expensive location in the country to fill up is Alice Springs, with an average price of 170.9c a litre, followed closely by Tennant Creek and then Weipa in Queensland, which is almost 20c a litre cheaper at 149.60c.
Brisbane is fifth on the list at 138.10c a litre while Sydney is 11th at 133.50c a litre.
The cheapest location to fill up in the country is Muswellbrook in NSW at 102.10c a litre, followed by Hamilton in Victoria and Murray Bridge in SA each at around 106c a litre.
CommSec said the two-month rolling average retailer margin increased from 16.34c a litre to 17.25c, with the future direction of prices hinging on OPEC and COVID-19.
“Petrol prices are still well down for this time of the year compared with previous years, but pump prices are set to trend modestly higher,” CommSec chief economic Craig James said in a note.
“World crude oil prices have lifted on optimism about the potential for an effective vaccine to be rolled out, potentially boosting demand.
“But putting a cap on prices is the rising number of coronavirus cases across Europe and the US. The next OPEC+ meeting looms large on November 30-December 1.”
2.49pm: Manufacturing near 3-year high
Government and central bank stimulus is kick-starting the economy with manufacturing activity near three-year highs and service economy activity at four-month highs.
The IHS Marking “flash” index for manufacturing rose from 54.2 to a 35-month high of 56.1 in November while the services index lifted from 53.7 to 54.9
Readings above 50 on the index indicate a growth in activity. Markit economists said the index showed stimulus and a relaxing of restrictions was helping the economy.
“Latest PMI data showed the expansion in the Australian private sector economy strengthened midway through the fourth quarter as containment measures were eased further,” they said.
“Business activity growth accelerated in November, led again by the service sector. Inflows of new business rose further, but at a noticeably slower rate when compared to output.
“Business sentiment continued to improve and was the strongest for over two years as more firms anticipated further recovery momentum to boost business activity.”
CommSec chief economist Craig James said the figures are the outcome of good government policy.
“The recovery of the Australian economy continues, supported by government and central bank stimulus and the good performance of health authorities in flattening the virus curve,” he said.
2.15pm: Bubs commits to backing daigou to boost sales
Listed baby formula manufacturer Bubs Australia chairman Dennis Lin has committed to rebuilding the daigou shopping channel to increase sales to China.
Speaking at the company’s AGM, Mr Lin said that COVID-19 border closures had caused a sharp decline in daigou outbound sales to China, which accounted for 21 per cent of company gross revenue in the last financial year.
Mr Lin said the company was working alongside corporate daigou partners to support new e-commerce platforms, which would culminate in positive channel sales growth in the second half of the financial year.
“The transition time from the uptake of sales in the cross-border channel, compared with the rebound in daigou channel is difficult to predict,” he said.
Mr Lin said the company was on track to meet a stated goal of $400m in gross sales by the end of 2025.
Perry Williams 2.09pm: Chevron restarts production after cracks halt
Chevron has restarted production from Train 2 of its $US54bn ($74bn) Gorgon LNG project in Western Australia after major cracks were discovered during maintenance in July with inspections of the remaining units to create further outages.
The US energy major, which also operates WA’s Wheatstone LNG plant and is selling its stake in the North West Shelf gas facility, had originally planned to resume production at Train 2 of the 3-train plant in October.
That was then pushed out to the latter half of November with inspections to follow on the first and third production plants, known as trains, over the next few months.
“LNG production from Train 2 has safely recommenced at the Gorgon plant site on Barrow Island off the northwest coast of Western Australia,” Chevron said in a statement on Monday.
“Insights gained from Train 2 repairs will contribute to more efficient inspections and potential repairs on Trains 1 and 3, with preparations underway for shutting down Train 1 for inspections.”
Cracks up to 1m long and 30mm deep on between eight and 11 pressurised propane “kettles”, or heat exchangers, on train 2 of Gorgon were discovered during scheduled maintenance.
It confirmed inspections would now take place on Trains 1 and 3, meaning further production outages will hit its operations.
“The length of the shutdown will be determined by what is discovered during inspections. Following completion of inspections and potential repairs on Train 1, Train 3 will undergo a similar process,” Chevron said.
“Chevron and the regulator share the same goal of maintaining the safety of our workforce and operating facilities and will maintain alignment on requirements for sequencing of inspections and potential repairs on Trains 1 and 3.”
The Gorgon processing plant houses three LNG trains with a combined capacity of 15.6m tonnes. There have been fears the entire processing facility could face an extended shutdown and loss of production if the problems found in train 2 are replicated in the other facilities.
Gorgon is 47 per cent owned by Chevron, the operator, while fellow oil super majors ExxonMobil and Royal Dutch Shell each have a 25 per cent stake.
Perry Williams 1.17pm: Ampol stalks Puma’s WA terminal
Ampol is in talks to buy Puma Energy’s Perth fuels terminal in Western Australia as it looks to grab a greater share of the storage market following BP’s decision to close its Kwinana refinery and convert it to a fuel import terminal.
The fuels retailer, previously known as Caltex, revealed it would look to acquire the partially completed facility to build a stronger position in WA, where it holds no infrastructure assets. The terminal would store diesel, petrol and chemical supplies.
“Ampol is in discussions with Puma Energy Holdings in respect of a potential acquisition of Puma’s partially constructed Perth terminal. There is no certainty at this time that a transaction will proceed. Further details will be provided at the appropriate time,” Ampol said as part of its investor day presentation.
BP blamed a regional oversupply of capacity and sustained low refining margins for its decision to switch Kwinana to an import terminal model.
Ampol chief executive Matt Halliday said it was considering the deal as the industry changes strategy.
“We’re clearly looking at an opportunity like the Puma terminal to ensure that we can extract full value from that integrated import chain in Perth,” Mr Halliday said.
Ampol hinted it may look at any deal as a springboard for further growth.
“With control you create new opportunities and it’s pretty rare you see an asset like this under construction for sale. We believe we are a logical owner of that terminal and would look to find a way to maximise returns from a change in supply chain for Ampol,” Ampol executive general manager for commercial Brent Merrick said.
Puma, Australia’s largest independent fuel retailer, was scooped up for $425m in December 2019 by US giant Chevron.
However, the Perth fuels terminal was not included in the sale to Chevron.
Caltex was using the brand name under licence from Chevron but the US giant terminated the deal in December after re-entering the Australian fuel retail sector.
1.10pm: Ampol, miners lead ASX gains
Resource and energy companies have pushed the ASX higher by lunch on the back of the iron ore spot price coming within striking distance of its six-year high and Ampol announcing a $300m off-market share buyback.
Ampol is the second-best performing stock of the day following the close of a $635m sale of a 49 per cent interest in its petrol stations and the announcement of the $1.20 a share buyback, lifting 5.14 per cent to $29.90 a share.
Fortescue Metals’ share price increased by more than four per cent to 17.71 as the iron ore spot price approached its six-year high of $US130.6, while BHP posted a 3.2 per cent gain to $37.33.
However, the best performing company was Mesoblast, which has seen similar gains to its 11 per cent Friday rally on the back of an announcement of a partnership with Swiss biotech Novartis to develop a drug that cures COVID-19 respiratory syndromes.
Mesoblast rose by more than six per cent to $3.87 a share.
Insurance Australia Group was the worst-performing company after analysts downgraded the company’s target price following the completion of its $650m capital raising. Its shares fell 5.86 per cent to $5.14.
Retail shopping centre and commercial property landlords took minor hits with Unibail-Rodamco-Westfield dropping 2.17 per cent per cent to $4.50.
12.40pm: Equities vulnerable to rebalancing: JPM
Global equities are vulnerable to month and quarter end rebalancing after strong gains of late, according to JPM.
“We see some vulnerability in equity markets in the near term from balanced mutual funds, a $US7 trillion universe, having to sell around $US160bn of equities globally to revert to their target 60:40 allocation either by the end of November or by the end of December at the latest,” says JPM global market strategist, Nikolaos Panigirtzoglou.
“A continuation of the equity market rally into December is likely to give rise to additional $150bn of equity selling into the end of December by pension fund entities that tend to rebalance on a quarterly basis.”
Entities that tend to rebalance on a quarterly basis include US defined benefit pension plans, the Norwegian oil fund, and the Japanese government pension plan.
It comes after a 10.5pc month-to-date and 8pc month-to-date rise in the MSCI All-Country World index.
S&P/ASX 200 last up 0.6pc at 6575.
11.58am: ASX extends rally, hits nine-month high
Australia’s S&P/ASX 200 share index has surged to a nine-month high of 6593.8 points as US futures turned up more decisively.
S&P 500 futures and Nasdaq 100 futures have both risen by 0.3pc despite a lack of fresh positive catalysts.
The Energy, Materials, Utilities and Health Care sectors continue to outperform, but all sectors except Real Estate are in the green now.
Standouts include Mesoblast, Fortescue and Aldi which are all up by around 6pc, as well as BHP and Oil Search which are up about 4pc.
On the S&P/ASX 200 chart there’s a line across the tops which may offer resistance near the current level.
That may form resistance from an ascending wedge pattern with support near 6530.
But in a strong uptrend like that which exists now, this pattern is normally bullish.
Perry Williams 11.53am: NSW splits WestConnex sale
The NSW government has thrown a curveball into the $10bn sale of the remaining 49 per cent stake in Sydney toll road WestConnex by splitting the deal in two in an effort to spark more bidders.
The sale will be split into two tranches selling equal 24.5 per cent stakes as it seeks to “maximise competition”.
Transurban is the clear frontrunner given the consortium it fronts owns pre-emption rights after buying the original 51 per cent share in 2018.
A formal bid process for the first 24.5 per cent stake will start in the second quarter of 2021 once potential buyers have worked through registration and expression of interest phases. Sources expect the sale may be worth up to $10bn.
“The sale process has been designed to deliver a competitive process to achieve the best result for the people of NSW,” a NSW Treasury statement said.
The government sold the controlling 51 per cent stake for $9.26 billion in the 33km motorway to the Sydney Transport Partners consortium in 2018.
The STP consortium is owned by toll road giant Transurban, AustralianSuper, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority sovereign wealth fund.
The sale of a second tranche will then be kicked off with the state open to selling to Sydney Transport Partners “or interested parties” through a competitive bid process.
Working on the sale are Royal Bank of Canada and Citi, and flyers are expected to be sent to prospective buyers at the end of November.
Transurban in 2018 beat a rival bid led by IFM Investors with Canadian pension fund OMERS and Dutch fund APG who may look to revive a consortium to bid for the remaining 49 per cent stake.
Overseas focused toll road operator Atlas Arteria is also tipped to show some interest along with local infrastructure investor Morrison & Co and Brookfield.
Transurban is in pole position with chief executive Scott Charlton previously stating the Sydney-based company sees the 49 per cent stake among its growth options.
Still, the company gave away little in a statement on Monday.
“WestConnex is a vital part of Sydney’s transport network, with thousands of motorists saving around an hour each day and further stages still to come,” a Transurban spokeswoman said.
“While we note today’s announcement from the NSW Government, and will monitor further developments, our focus remains on operating our existing roads and delivering our current major road projects for Sydney.”
11.45am: Miners thrive as iron ore extends rally
Iron ore miners are performing strongly today as the price of the commodity continues to approach a six-year high.
At 11.30am (AEDT), Fortescue Metals was trading at $17.95 a share, up 5.9 per cent on opening.
BHP was trading at $37.52, up 3.82 per cent on opening.
The rallying price of iron ore comes despite simmering trade tensions between Australia and China, the largest purchaser of Australian produced ore.
The current iron ore spot price is $US129.50 a tonne, up roughly 10 per cent since the start of October.
11.10am: Early super withdrawals reach $35.2bn
The amount of superannuation withdrawn under the COVID-19 early super release scheme has reached $35.2bn, with just over a month to go until the scheme expires.
With the level of payouts over the past 10 weeks amounting to just $2.2bn, it is likely the scheme will not hit the $42bn total withdrawal estimation set by Treasury when the scheme was extended from September to December 31.
The average amount paid out under the scheme is $7553, with fund members who applied for a second withdrawal on average requesting $8319.
So far, 4.7 million applications have been made under the scheme.
Perry Williams 10.55am: AGL to build Loy Yang battery
AGL Energy plans to build a 200 megawatt battery at its Loy Yang A coal plant in Victoria’s Latrobe Valley, the latest in a string of giant batteries set to help ease the power grid from its current coal base to renewables.
The power giant has laid out a 850MW battery storage target by 2024 including plans to build a 250MW battery at South Australia’s Torrens Island to back up the state’s wind and solar supplies.
The Loy Yang battery will sit alongside the coal station, which supplies 30 per cent of Victoria’s power needs and is due to operate until 2048.
AGL chief executive Brett Redman said increasing investment in batteries mirrored the rush to solar a decade ago.
“Ten years ago a lot of the things we talk about today in terms of batteries and storage - we had the same conversations about solar ten years ago in that it looked difficult, it looked expensive, where would it go, what kind of operational issues would we have,” Mr Redman told a business conference on Monday.
“I think batteries are at the beginning of that same conversation which tells me in ten years time we’ll be very comfortable with that technology, it will be cost effective and it will be ubiquitous.”
AGL said last week it was reviewing a big battery investment at its Liddell coal plant amid uncertainty around the NSW government’s controversial energy blueprint.
Ben Wilmot 10.44am: BGH lifts Village Roadshow offer
Theme park and cinema company Village Roadshow has taken another step towards privatisation with private equity suitor BGH capital significantly bumping up its offer for the company to as much as $3 per share.
BGH is making two separate proposals for the company, one at $3 per share, and a second offer at $2.95 per share, with the founding Kirby family and former chief executive Graham Burke, who control about 40 per cent, only able to vote on the second scheme.
The private equity company has also locked in the support of Spheria Asset Management, which holds a stake of about 7.8 per cent, giving the first $3 per share scheme a chance of being voted up.
Dissident investor US-based Mittleman had previously rejected the prospect of a bid around $3 per share, saying that Village is worth $5 per share. It will now come under scrutiny over how it will vote its 14.34 per cent stake.
10.40am: G8 to defend disclosure class action
Slater and Gordon have filed a class action against publicly traded childcare operator, G8 Education, alleging that the company breached continuous disclosure obligations between 23 May 2017 and 23 February 2018.
The law firm says that investors suffered loss after the company failed to inform them of an expected impact to earnings of regulatory changes affecting staffing levels, and that the company realised it would be unlikely to achieve the May 2017 forecast.
The action has been filed in the Supreme Court of Victoria.
In a statement to the ASX G8 Education acknowledged the action and said it would defend itself against the claims.
“G8 has not received any correspondence nor service of the proceedings for Slater and Gordon,” the company said. “Any such proceedings, if served, will be vigorously defended.”
10.26am: ASX at its highest since February
Australia’s S&P/ASX 200 share index rose 0.5pc to 6574.8 in opening trade.
This move to the highest point in almost nine months was consistent with Friday’s rise in futures.
It was also underpinned by marginal gains in US futures, although those moves have faded since the open.
Energy, Materials, Communications and Health Care are outperforming, with Ampol up 6.6pc on a share buyback announcement and Oil Search up 2.8pc on higher crude oil prices.
Financials, Real Estate, Techy, Consumer Discretionary, Staples and Industrials are underperforming with IAG down 7pc after resuming trade amid broker downgrades after its
The local sharemarket’s rally was interrupted on Friday after news of a split between the US Treasury and the Fed over COVID lending programs and a month-long curfew in California.
10.18am: Crown Melbourne to reopen
Crown Resorts’ Melbourne Hotel and Casino will resume operations under new COVID-19 guidelines.
From November 25 table games at the casino will recommence, with a total patron limit for the facility of 1000 people.
Every second electronic table and gaming machine will be deactivated and each separate indoor space will be limited to the “lesser of 150 patrons or the number permitted by the density quotient of one person per four square metres.”
The Crown Metropol hotel will reopen on Tuesday December 1.
10.15am: ZIP revenue jumps 91pc
Buy now pay later platform ZIP Co has released results for the first four months of the financial year that show a record level of revenue and transactions across the business.
BNPL revenue was up 91 per cent on the previous comparable period to $96.7m, with the inclusion of the ZIP business credit platform bringing revenue to $100.2m on a pro forma basis.
Transaction volume in October increased 104 per cent year on year to $401.m while customer numbers increased to 4.8m with 36,500 merchants now registered on the platform.
The company’s strongest growth area was the US which saw pro-forma revenue for the period of $34.8m, up 345 per cent.
Comparatively, Australian and New Zealand revenue grew by 44 per cent to $61.9m in that same period, with the USA now representing one-third of BNPL revenue and more than half of all customers.
ZIP managing director and CEO Larry Diamond said the company expected to lift its in store volumes through its new partnerships.
“Our partnership with Visa and access to Apple Pay and Google Pay wallets unlocks everyday spend, providing our customers with more utility and choice,” he said.
Perry Williams 10.13am: Gas plant move delayed
EnergyAustralia has delayed a final investment decision on its planned $400m Tallawarra gas plant in NSW amid heightened uncertainty over the threat of state and national government interventions in the energy sector.
The power giant has planned a decision before the end of the year but said it had now deferred that until the first quarter of 2021.
EnergyAustralia said it continues to assess the NSW government’s controversial plan to build more power generation in addition to the Morrison government’s threat it may build its own gas plant in the Hunter Valley.
“In the last couple of months we have deferred the final investment decision into the first quarter of next year driven by the work stream progress and the project execution readiness,” EnergyAustralia executive - energy Liz Westcott told a business conference on Monday.
“It’s also meant we have been able to reflect on the various announcements made by both federal and NSW governments and consider the role that this project needs to play in that market moving forward. We are continuing to assess that project but we obviously can’t make a call on which way it will go.”
EnergyAustralia chairman Graham Bradley said in September it had already lost an opportunity to move the Tallawarra project along due to Canberra’s interventionist approach in the electricity sector.
AGL Energy last week paused its Newcastle gas plant decision and is reviewing a giant battery investment at Liddell, amid uncertainty around the NSW government’s controversial energy blueprint, in a move that may also nix Scott Morrison’s hopes for 1000 megawatts of new power capacity to be committed in the state by April.
10.10am: Position for higher bond yields: Macquarie
Macquarie’s Australian equity strategist Matt Brooks tells clients to position for higher bond yields in 2021.
On that basis he adds Westpac, ANZ, Suncorp, Computershare and NIB Holdings to his model portfolio, while removing Evolution and GPT Group and reducing Spark Infrastructure, City Chic Collective and James Hardie.
He argues that effective coronavirus vaccines reduce the need for more monetary easing, which should allow bond yields to “catch up with the cycle”.
And he notes that bond yields are also more likely to rise in expansions than other times in the cycle.
Mr Brooks does see a risk for equities in 2021 from a rise in yields that does not only impact specific groups - like gold, bond proxies, growth - but the overall market, due to a rise in the discount rate.
“It’s hard to judge when that tipping point will be crossed, but owning stocks that benefit from rising yields provides a hedge,” he says.
“Stocks may pull back after recent gains, especially given rising cases in the US and Europe, but with multiple effective vaccines, we think investors should be positioning for the end of the pandemic.”
He argues that a greater risk for the portfolio would be a sustained fall in yields as this could cause financials and value to underperform.
“This could occur if there were widespread shutdowns in the US, or the Fed or RBA targeted 10-year yields, but we think effective vaccines reduce the risk of both these events.”
10.03am: Bega Cheese in halt for acquisition, raising
Bega Cheese has sought a trading halt ahead of an announcement on a proposed acquisition and capital raising.
It says the proposed acquisition “remains incomplete and subject to final negotiations”.
It also says the proposed capital raising is likely to include an accelerated pro rata offer component.
9.57am: HomeCo Daily Needs REIT to list
Property investors have heavily backed the HomeCo Daily Needs REIT as supermarket sales surge nationally and investors chase their landlords’ safe income streams.
The trust lists on Monday and has just snapped up the Marsden Park Shopping Centre in Brisbane’s southwest from QIC for $48m.
The Coles-anchored centre will add to the Daily Needs REIT’s existing portfolio, which is being spun out of parent company HomeCo.
HomeCo hit its highest trading price yet on Friday of $4.23 and the REIT is going to list at nil premium to its asset backing allowing for a healthy debut.
HomeCo is switching strategy to become funds manager, as well as owning former Masters outlets, which it has converted into convenience and lifestyle-based shopping centres.
The company said the Daily Needs REIT was performing and had a 19 per cent like-for-like increase in foot traffic in October. Comparable sales at its Woolworths and Coles supermarkets were up 37 per cent in the first quarter.
The company is already on track to boost its firepower to buy more centres in what is emerging as a hot area in property with its debt facility to be upsized from $400m to $500m so that the fund has liquidity of $215m for developments and acquisitions.
The company said the REIT portfolio’s unadjusted cash collection continues to improve with October running at 96 per cent, November already at 94 per cent and on track to collect closer to 98–99 per cent.
9.54am: ASIC to probe ASX outage
The Australian Securities and Investment Commission has confirmed it is conducting an investigation into the ASX trade outage on Monday November 16.
The outage occurred when the market froze at 10.24am. The problem was attributed to a glitch in a new ASX trade system developed by NASDAQ.
In a statement to the market today the ASX confirmed the investigation and said it would fully cooperate with the regulator.
“ASX acknowledges that this is appropriate given ASIC’s regulatory oversight,” it says.
“ASX takes its obligations very seriously and will cooperate fully with ASIC.”
9.52am: ASX rally set to resume
Australia’s sharemarket rally is set to resume after a minor setback in global markets on Friday.
Friday’s news of a split between the US Treasury and the Fed over COVID lending programs and a month-long curfew in California was offset by Pfizer BioNTech’s filing for an emergency use authorisation for its vaccine as well as declining infection rates in Europe.
While the S&P 500 lost 0.7pc, the MSCI All Country World index fell just 0.1pc and futures suggest Australia’s S&P/ASX 200 will open up 0.5pc at 6572.
A move above last week’s high at 6562.1 would mark the highest point for the Australian market in almost nine months.
The All Ordinaries index is currently up 9.7pc month-to-date, on track for its best month since 1988 when it rose 13.6pc.
While it may struggle to go much higher unless US futures turn up, the Australian market remains in an ascending wedge pattern.
That pattern is currently defined by 6532-6606 on the S&P/ASX 200.
The S&P 500 is in a bullish pennant pattern which will probably break higher.
But the market could soon start to worry about the potential for Thanksgiving to worsen the spread of COVID in the US.
9.50am: What’s impressing analysts?
BlueScope cut to Sell: Morningstar
Downer EDI cut to Hold at Morningstar
Insurance Australia cut to Hold: Morningstar
Mineral Resources cut to Sell: Morningstar
Orica cut to Hold: Jefferies
Vocus cut to Hold: Ord Minnett
City Chic Collective raised to Buy: Citi
Accent Group raised to Buy: Citi
Chalice Gold Mines raised to Speculative Buy: Bell Potter
Perry Williams 9.20am: Ampol to launch $300m buyback
Fuels retailer Ampol will launch a $300m off-market buyback after completing a sale of its convenience retail property assets for $635m.
It completed the sale a 49 per cent stake in its property trust, comprising 203 convenience retail sites, to Charter Hall and Singapore sovereign fund GIC after first announcing the deal in August.
Ampol said on Monday the deal delivered net cash proceeds of $635m, higher than prior guidance of $612m.
It had originally planned to use the profits to cut debt given ongoing volatility in fuel demand.
However, conditions have improved as lockdowns lift across Australia, sparking the buyback decision.
“Since the transaction announcement, Ampol has experienced an improvement in trading performance following the lifting of various COVID-19 restrictions, as reflected in third quarter financial performance,” Ampol said.
“Ampol has balanced considerations of its strong financial position with the likely ongoing economic uncertainty heading into 2021 in deciding now is an appropriate time to utilise the property transaction proceeds for a combination of reducing leverage, returning capital to shareholders and pursuing appropriate growth opportunities.”
The buyback, representing $1.20 per share on issue, will open on December 7 and complete on January 22.
“We have delivered on our stated 2019 plan to unlock value through network optimisation and I am pleased the completion of the property transaction will further strengthen our balance sheet while allowing us to return capital and release franking credits,” Ampol chief executive Matt Halliday said.
“The property transaction has complemented the resilient performance of the business in a tough environment and the strong action we have taken to protect cash flows in response to COVID-19.”
9.09am: Covid case ‘manageable’ for insurers
Analysts at UBS have retained a positive view of listed insurers despite the industry losing a test case over liability for COVID-19 business interruption in the NSW Court of Appeal.
UBS said that although subsequent test cases to determine, prevention of access, proximity of outbreak and property damage triggers are likely to occur, provisions made by the insurers means they will be resilient.
Suncorp Group has covered about 90 per cent of expected liability arising from the test case decision, UBS said, with $195m in provisions, making it the best-placed in UBS’s view.
IAG has made a provision of $1.24bn while the impact on QBE is estimated to be minimal with the company indicating the average business interruption claim is worth about $5m.
“As such, net impacts appear manageable for now although depend on subsequent test-cases being favourable,” the analysts said.
9.05am: IAG completes $650m placement
IAG says it has successfully completed a $650m fully underwritten institutional placement announced on November 20.
Under the placement, IAG will issue approximately 128.7 million new fully paid ordinary shares at a price of $5.05 per placement share.
IAG said it had received “significant” interest in the placement from both domestic and offshore institutional investors.
“The success of the raise is an endorsement of the decisive action to maintain balance sheet strength,” it said.
8.55am: Helloworld in cruise, Qantas deals
Helloworld Travel has struck a deal to buy cruise wholesaling specialist, CruiseCo.
It says the acquisition aligns with its strategy of expanding its cruise offerings in Australia and New Zealand.
“The acquisition will be funded from existing cash reserves and the purchase price is not considered material,” Helloworld said.
Helloworld also announced it has renewed its partnership with Qantas with a new three-year
commercial agreement to sell the national carrier’s fares and products until 2023.
8.45am: ‘Massive demand’ for flights: Qantas
Qantas CEO Alan Joyce says he believes demand for domestic routes will reach 60 per cent by Christmas and 100 per cent in the New Year as regular flights between Sydney and Melbourne resume.
In just 24 hours after the announcement that the NSW-Victoria border was opening, Qantas and Jetstar sold 25,000 seats on the Melbourne to Sydney route, Mr Joyce said. Many stood-down workers were also returning to work, although up to 8000 could still be out of a job.
“We’re seen massive demand already occurring,” Mr Joyce told ABC’s Radio National on Monday.
Jetstar CEO Gareth Evans said demands for domestic flights were increasing as border restrictions began to fall across the country, and as regular flights between Sydney and Melbourne resumed today.
“We had a sale that we launched in the middle of last week and we sold 120,000 fares in the first 24 hours,” Mr Evans told ABC News Breakfast on Monday.
“That’s 25 times the normal rate of sale. So we know that there’s confidence there to travel when border restrictions are removed.
“For us, we are now looking to a positive future rather than the difficult months that we’ve had over the last nine.”
6.45am: US firms resume paying dividends
After scrambling to hoard cash in the spring, some large US companies that halted their dividend payments are reversing their decision, a sign that their leaders believe the worst of the crisis is behind them.
Earlier this year, when much of the country’s economy shut down in the first waves of the coronavirus pandemic, companies withdrew cash from credit lines, stopped repurchasing stock and halted dividend payments amid the uncertainty. The public health plight continues, but many businesses -- from factories to law firms -- have learned how to operate during the pandemic. Retailers, fast-food restaurants and car makers are doing better, and there is hope among executives that any new restrictions to battle the latest U.S. surge in cases won’t be as severe.
“Multinationals are beginning to exhale,” said Mark Zandi, chief economist at Moody’s Analytics. “The resumption of corporate dividend payments is an encouraging sign that executives believe that the pandemic will soon be behind us.”
Kohl’s Corp. was one of the 42 companies in the S&P 500 index that suspended its dividend to preserve cash after the Covid-19 virus arrived. In September, finance chief Jill Timm said the retailer would protect its cash reserves because of continued uncertainty. “As we see stabilisation, we’ll move back into paying a dividend,” she said at an investor conference.
Her tone changed last week when the department store chain reported third-quarter results that showed its business recovering after reopening locations. Revenue fell 14 per cent, compared with a 23 per cent drop in the previous quarter. Kohl’s said it would resume its dividend in the first half of 2021.
“We have shown progressive improvement and stability in the business,” Ms. Timm said on a conference call.
A company’s decision to pay a dividend typically depends on management’s comfort with having enough cash flow for other uses -- post-payment -- along with its ability to access other cash. It is a commitment to make regular payouts to shareholders and suspending it is frequently a last resort in a crisis.
Of the 42 companies in the S&P 500 index that suspended their dividend earlier this year, six have resumed paying their dividend and several more have given a timeline to do the same, according to S&P Dow Jones Indices.
Dow Jones
5.30am: ASX set to open higher
Australian stocks are tipped to make a positive start to the week despite Friday’s falls on Wall Street.
SPI future were this morning pointing to a 34-point, of half a per cent, opening rise on the ASX 200.
The local index slipped on Friday as US futures turned down after the Trump administration moved to end several emergency pandemic lending programs at the Fed. However the ASX 200 recorded a third successive week of gains last week, with the financial and energy sector driving the gains.
Globally, markets continue to balance between optimism over COVID-19 vaccines and concern over surging infections and tighter lockdowns in the US and Europe.
In the US, markets will be watching minutes from the US Federal Reserve’s last meeting for any sign the central bank is willing to step in with further monetary policy stimulus.
This morning, the Australian dollar was higher at US73.1c.
5.05am: Covid vaccine could unleash pent-up demand
Inflation could be poised for a comeback.
Some economists are starting to embrace the idea that a prospective COVID-19 vaccine could allow people to once again spend money on travel, restaurants and other services -- and drive up prices in the US.
That would be a change from the past 10 years, when inflation rarely hit the Federal Reserve’s 2pc target despite a strong economy and low unemployment. It would also test the central bank’s new framework, which calls for periods of inflation above that level after stretches, like the current one, when it has run below.
The economy’s progress since the sharp, pandemic-induced recession in the spring has made forecasters more confident of a strong recovery once a vaccine enables people to resume their pre-pandemic lives.
Airlines and hotels, which laid off thousands of workers and slashed prices at the start of the pandemic, could struggle to meet the surge in demand, sending prices higher. And city rents, which dropped as people hunkered down, could start creeping up again as they look at alternatives.
Likewise, the March coronavirus relief bill, which sent direct payments to households and increased unemployment aid, gave people more cash -- and much of it has yet to be spent, as suggested by a relatively high savings rate. Those payments will contribute to pushing the federal debt to 98pc of gross domestic product this year, according to the Congressional Budget Office, the highest since the end of the World War II. That also should cause prices to rise since there is more money sloshing through the economy.
All this could push up the price index for personal-consumption expenditures, the Federal Reserve’s closely-watched measure of inflation. Annual inflation by that measure stood at 1.4pc in October, shy of the central bank’s 2pc target.
Dow Jones
5.00am: US banks aid Black-owned businesses
The biggest banks in the US will give Black-owned businesses advantageous terms on a crucial type of financing that companies use to manage their cash flow, a novel effort to narrow the wealth gap between white and non-white communities.
Banks made multibillion-dollar commitments to expand lending to Black consumers and businesses after the wave of protests throughout the U.S. sparked by the killing of George Floyd. The targeted lending is meant to correct decades of discrimination in lending whereby banks denied loans to Black borrowers or steered them toward products with high interest rates and other terms many couldn’t afford.
As part of those promises, Citigroup Inc, JPMorgan Chase & Co. and Bank of America Corp. say they will lower charges to Black- and other minority-owned companies in supply-chain finance programs. Companies use supply-chain finance to manage short-term spending needs, similar to the way a consumer might use a credit card.
Dow Jones
4.55am: Wall Street recap
Wall Street stocks fell on Friday to conclude a volatile week as markets weighed worries about rising coronavirus cases and a surprise US government move to end some emergency lending programs.
The Dow Jones Industrial Average ended down 0.8 per cent at 29,263.48. The broadbased S&P 500 dropped 0.7 per cent at 3,557.54, while the tech-rich Nasdaq Composite Index declined 0.4 per cent to 11,854.97.
US pharma giant Pfizer and its German partner BioNTech said Friday they have applied for emergency use authorisation for their coronavirus vaccine, which could come next month.
The announcement comes as US virus case totals continue to rise, with an average of 167,400 cases per day this week, and states impose fresh restrictions to slow the outbreak.
Some analysts questioned a decision by Treasury Secretary Steven Mnuchin to phase out a series of Federal Reserve programs enacted in the spring to support the corporate credit market, municipal lending and small and medium-sized businesses.
Mnuchin said he was following congressional intent in phasing out at year’s end the Fed programs, which were intended to help the US financial system weather the shock of the pandemic.
He said the funds unused by the central bank should be repurposed to other pandemic relief efforts.
But the Fed criticised the move in a rare public break with Treasury, and congressional Democrats accused Mnuchin of trying to sabotage the incoming administration of Joe Biden.
Ending the programs poses a “risk” for the economy, said a note from Oxford Economics.
“The emergency lending facilities have been little used, but their existence has been key in ensuring a credible safeguard against financial market stress,” Oxford said.
“With the COVID-19 crisis worsening and activity slowing in the absence of fiscal aid, the decision to curtail the Fed’s firepower could unsettle markets and exacerbate economic stress.”
AFP
More Coverage
ASX 200 down as Trump tariffs loom; tech sector hit
Steel, aluminum producers mixed after latest Trump tariff threat. Is JB Hi-Fi topping out? Car Group, JB Hi-Fi and WiseTech leading losses. In contrast, Star and Ansell find support.
ASX treads water before US jobs data; CBA and Westpac hit highs
ASX ends flat as markets await key US jobs numbers. CBA and Westpac hit record highs and NAB an 18-year high. Domino's jumps 21 per cent, as Collins Foods and Nick Scali also gain. Amazon falls after earnings disappoint.