Shares add 1.1pc, Jefferies highlights China threat
Shares closed at daily highs as miners and CSL lifted, while travel names gained ground and Jefferies highlighted market risk from China tensions.
- China tension could hit half of ASX
- Business conditions fall, confidence lifts
- Scentre collects 86pc of rents
- Leadership overhaul at Woolies
That’s all from the Trading Day blog for Tuesday, September 8. The local market rally built to 1.1pc by the close, with gains across most sectors, following offshore strength, while Jefferies highlighted the threat of deteriorating relations with China.
On the local data front, the NAB’s monthly business survey showed a fall in conditions, while confidence recovered slightly, while ABS payrolls data quantified the drag of Victoria on the national jobs market.
Glenda Korporaal 8.02pm: How safe are our execs in China?
The rushed departure from China by the last two correspondents for Australian news organisations now raises questions about how much Australia’s $200bn trade with China can continue in the face of concern about the physical safety of Australians in China.
The recent detainment of Chinese-Australian journalist Cheng Lei and the hasty departure of the last two Australian journalists in China this week raises real questions for Australian companies about whether they can safely send their executives into China even when COVID-related travel restrictions are eased.
What happens, for example, in November, when foreign countries will be seeking the fly their flags at China’s third Import Expo in Shanghai — an event that is currently planned by China to be a combination of a physical and online presence?
How many of the falling number of Australian expatriate executives currently in China will be able to attend? Who from Australia will be able to give a cheery picture in an online presentation of the virtues of our clean and green exports?
Can Australia and Australian companies continue to make their pitches to sell into the China market in the same way that they have done so enthusiastically in the first two meetings?
When the official travel warnings from the Department of Foreign Affairs and Trade that Australians in China faced arbitrary arrest were issued some weeks ago, some in the Australia-China business community wondered whether this was a statement that unnecessarily inflamed relations even more. But this week’s events seem to confirm the potential dangers facing Australians in China as a direct fallout of deteriorating political ties.
And without the regular to and fro of business meetings on both sides, which range from business people in iron ore, beef, dairy, wine, education and tourism, how can trade continue in the long term at anywhere near the record levels it has done?
How can Australian executives in future consider attending the annual Boao forum on Hainan Island that is partly sponsored by iron ore miner Fortescue, or the Austrade organised bilateral trade fairs in the lead-up to the AFL match in Shanghai that has been a big drawcard for Australian expats in the region?
Eli Greenblat 7.14pm: Seafolly boss slams lockdown
The new chief executive of swimwear business Seafolly, Brendan Santamaria, has added his name to the chorus of retail leaders criticising the Victorian government’s slow exit from stage four restrictions, saying it would have a “dreadful” impact on the sector just as it faces the crucial spring and summer seasons.
It comes as Seafolly pins its hopes on a stronger domestic market, where consumers who are unable to travel overseas choose to travel locally and spend money on items such as new swimwear, with the brand’s inbound international tourist market dormant for the moment.
Newly appointed to Seafolly after it was restructured and revived from voluntary administration three months ago by its private equity owned L Catterton, Mr Santamaria said the Victorian government’s failure to fix a date for when retail could reopen made it extremely difficult to plan stock, rosters and staff.
He added that he couldn’t see Melbourne’s retail sector opening “this side of November” and that this would have a terrible impact on the fashion industry, not just in Victoria but for the rest of the country.
“I think it has a dreadful impact on our industry because it is where new seasons are normally launched,’’ Mr Santamaria told The Australian on Tuesday.
“We are coming into spring so you can imagine what spring and summer means to this time of the year, to our potential of hitting our numbers for the year.”
Jared Lynch 5.56pm: Bunnings finds borers in Chinese screens
Bamboo screens imported from China and sold at Bunnings hardware stores have been found to be infested with a pest known for decimating wooden furniture and other timber products in a serious biosecurity breach.
Northern Territory’s Department of Primary Industries and Resources detected a bamboo borer, or dinoderus minutus, in the Eden brand of bamboo screening, which is imported from China and sold across Bunnings stores.
News of the infestation comes a week after Chinese customs banned barley imports from Perth-based co-operative CBH after it claimed to have found “harmful weeds” in Chinese shipments.
The ban was the latest in a series of suspensions the communist regime has slapped on Australian products amid worsening relations between Beijing and Canberra.
But it appears the detection of the live borer in Chinese bamboo screening has exposed flaws in its own measures to eradicate pests in its products before exporting.
The borer is native to Asia but has become widespread across the globe via the trade of infested bamboo products. It, along with three other beetles, are responsible for more than 90 per cent of insect damages on harvested culms and finished bamboo products, according to the Department of Agriculture.
Rather than slap a ban on the Chinese bamboo screens, Agriculture Minister David Littleproud said the government would work with the importer to ensure it did not happen again.
4.36pm: Webjet leads, JB Hi-Fi lags
Travel stocks have staged a solid recovery in Tuesday’s session, led by outperformance in Webjet, as all sectors bar staples made back ground.
The travel agent rose 7.7pc to $4.06, as Corporate Travel added 1.6pc and Flight Centre rose by 3.6pc.
Sydney Airport missed out on the rally however, slipping by 2.8pc after yesterday completing its retail shortfall offer.
Here’s the biggest movers at the close:
Bridget Carter 4.23pm: PointsBet clears bookbuild at $12.50
DataRoom | Online bookmaker PointsBet has cleared its Institutional Entitlement Offer Shortfall Bookbuild at $12.50 per share.
The book build closed on Tuesday at 3pm, with 4.8m shares on offer.
It attracted strong demand from existing shareholders and other sophisticated investors, according to a term sheet sent to fund managers.
The price represents a premium of $6 to the entitlement offer price of $6.50 per share.
It comes after PointsBet Holdings last week announced a $303m equity raising through Bell Potter, MST Financial and Moelis out of the United States.
The raise includes a fully underwritten 1 for 6.5 accelerated pro rata renounceable entitlement offer to secure $153.2m at $6.50 per share.
4.11pm: Shares rally 1.1pc, Qantas, Webjet jump
The local market has finished near its best levels of the day, settling above 6000 for the first time in three sessions.
At the close, the ASX200 was up by 63 points or 1.06 per cent to 6007.8.
CSL led the rally with a 2.1pc lift on vaccine hope, while BHP added 0.9pc, Rio gained 1.4pc and Fortescue lifted 3.5pc on an upgrade from JP Morgan.
On the downside, Afterpay fell by 1.7pc, leading weakness in the buy now, pay later sector as Zip fell 2.2pc but the latest entrant Laybuy rose by 0.5pc to $2.06.
Travel names outperformed – Qantas lifted by 4.3pc, Webjet was the best on the benchmark with a 7.7pc gain.
3.52pm: Drought-breaking rains to boost crop output
Australia’s winter crop production is set to soar 64 per cent after much-needed rainfall eased a drought that had ravaged the country’s southeast, according to official projections released Tuesday.
The agriculture department said production of major winter crops including wheat, barley and canola would increase substantially, taking output 20 per cent above the 10-year average.
It comes after Australia’s hottest and driest year on record in 2019 drove summer output to the lowest levels since 1980-81, with a two-thirds fall in production.
Steve Hatfield-Dodds, executive director of the department’s statistical body ABARES, said the boost in output was driven largely by rainfall in New South Wales state, which has borne the brunt of a prolonged drought.
“New South Wales production is forecast to be 14.8 million tonnes in 2020-21 — that’s more than a 300 per cent increase on last year and the highest since 2016-17,” he said.
Parts of the state — as well as large swathes of neighbouring Queensland — remain in drought, but above-average rainfall predicted through spring has raised hopes of an end to the three-year dry spell.
The agriculture department said the expected favourable conditions would support summer production in most regions with the exception of Western Australia, where less rainfall was expected.
AFP
3.03pm: Nothing to disclose: Brainchip
Rocketing tech developer Brainchip says it has nothing to disclose as its shares soar by 39pc in Tuesday’s trade, marking a 130pc jump in just the past five days.
The maker of artificial intelligence technology earlier this month announced a collaboration agreement to develop a processor with NASA suitable for spaceflight and aerospace applications, sparking a rally in its shares.
On Tuesday, the stock jumped to heights of 78c apiece, prompting a speeding ticket from the market operator.
“Brainchip is not aware of any matter that would have affected the recent trading in its securities,” it said in response.
The company raised $3.12m at 3c in April in a placement led by Shaw and Partners, to two institutional investors – holdings which have rocketed higher by 24x.
BRN shares were last up 33.9pc to 75c, with over $90.6m shares traded.
2.26pm: Longer lockdown delays earnings recovery: MS
The extension of Victoria’s lockdown is likely to pressure consensus earnings expectations, as business activity remains subdued, according to Morgan Stanley.
Equity strategist Chris Nicols writes that the road map unveiled by the Andrews’ government at the weekend will “carry several implications for the path of activity recovery and shape of the earnings cycle”.
He forecasts that any meaningful reopening of the state’s economy will be unlikely until later in quarter four, and in step with the rollback of stimulus, will increase the likelihood of more permanent job and business losses in the state.
“The formal shift in target to a trailing 14-day average case number makes the prospect of earlier easing of this new road map limited, in our view, and the bar for a widespread return of activity high,” Mr Nicols writes.
“This adds to our view that aggregate 1H21e fiscal earnings pulse will be soft and earnings recovery delayed, potentially posing a challenge to the current elevated level of market valuations.”
Read more: Jobs market recovery restarts
1.55pm: Vic jobs down 3.3pc since lockdown
The latest payrolls data shows the disparity between states, especially Victoria, as response to the COVID-19 threat varies across the country.
Commonwealth Bank senior economist Belinda Allen points out that payrolls in Victoria have fallen by 3.3pc since early July, when lockdowns were introduced, and are unlikely to recover until November under the state government’s recovery road map.
“We expect the employment market to remain weak in Vic in coming months and the unemployment rate to peak higher than the national average,” Ms Allen writes.
“Big employers like Retail and Hospitality are not slated to reopen till November under the reopening plans.
“There is more than a normal amount of disparity between outcomes by state at the moment – both in terms of jobs and also economic activity. This is no surprise given there are different restrictions placed on households and businesses across the country and the varying degrees community transmission of COVID-19.”
Read more: Jobs market recovery restarts
1.11pm: China tension could hit half of ASX
Worsening trade tensions between China and Australia could send shockwaves through the local market, warns Jefferies, as impacts extend through banks, consumer firms and tourism-related stocks.
In a note cited by Bloomberg, analyst Brian Johnson highlights the risk of geopolitical tensions beyond the barley, beef and wine moves so far.
His forecasts suggest that sectors likely to be impacted by the friction with China account for around 55pc of the ASX200 index, including jobs site Seek, milk formula maker A2 Milk and vitamin maker Blackmores.
The broader shift to lower migration may weigh on house prices too, Mr Johnson notes, putting pressure on firms such as Commonwealth Bank and Westpac while Crown, Qantas and Star could bear the brunt of lower Chinese tourists.
Read more: Aussie exports to China down 26pc
Jefferies equity analyst Brian Johnson says the ongoing deterioration of the Australia-China relationship could hit half of Australia’s benchmark stock index.
— Haidi Lun Stroud-Watts 伦海迪 (@HaidiLun) September 8, 2020
On the upside, can we talk about the quality of this research note title? #dropbearmarkethttps://t.co/IKP04uTISK pic.twitter.com/tgltVNyVI3
1.02pm: CSL drives market lift
The local market has dulled its earlier boost but is holding higher at halftime as CSL and the major miners add to yesterday’s rally.
At 1pm, the benchmark ASX200 is higher by 33 points or 0.55 per cent to 5977.4.
CSL is rising by 2.1pc and a key contributor to the rally, while BHP lifts by 0.3pc, Rio adds 1.1pc and Fortescue gains by 2.7pc.
The major banks are all trading around 0.6pc higher, while Sydney Airport takes a hit after the completion of its retail shortfall bookbuild.
Here’s the biggest movers at 1pm:
12.50pm: Magellan to see $12bn of inflows: CS
A range of new sustainable and retirement offerings from Magellan will see the top fund rake in as much as $12bn in inflows over the next three years, according to analysts at Credit Suisse.
The broker upgrades Magellan to Outperform, and lifts its target price to $65 based on a 22x 24-month forward earnings ratio.
It comes after Magellan’s latest monthly update showed it had grown its funds under management past $100bn for the first time since January, making back weakness from the COVID-19 rout.
Credit Suisse notes that average institutional fund flows of roughly $300m per month have proven resilient to date this year, and the fund’s characteristic of 50pc downside captures and 100pc upside capture “will resonate well”.
In addition, its Sustainable Strategy is tipped to see increased demand, while performance fees are likely to remain a key feature of its earnings.
“Around $33bn of MFG’s funds under management is eligible to generate performance fees. This means that broadly for every 100bp of outperformance it will earn $33m of performance fees.”
MFG last traded up 1.9pc to $59.60.
Read more: Magellan back above $100bn
Bridget Carter 12.19pm: Intertrust expands into Australia
DataRoom | Capital markets and private wealth services provider Intertrust Group is expanding into Australian trustee services.
The group has been issued with an Australian Financial Services Licence and has appointed former Perpetual executive Andrew Cannane as its Australian executive director at the start of the year.
It comes after the company opened a New Zealand office in 2019.
For the past eight years, Intertrust has provided a wide range of corporate and fund administration services in Australia, including company secretarial, board support, accounting and reporting, payroll and Know Your Customer and Anti Money Laundering services.
However, it will now expand those services to include regulated trustee, custody and escrow services.
Ben Wilmot 12.05pm: Retail rent provisions to remain elevated
The Victorian government’s staged road map out of COVID-19 restrictions, which will see restrictions on retail only materially eased from late October, was slower than anticipated by JPMorgan’s property team.
They say this implied Victorian sales and, in turn, rents would likely be impacted for the majority of this half. “We understand about 30 per cent of stores are currently trading so we expect waivers and provisions will remain elevated in the December 2020 half for Victorian assets,” analysts led by Richard Jones write.
Among the major retail landlords the most exposed are Vicinity and GPT Group. Vicinity’s balance sheet was well positioned to absorb further valuation pressure in retail but its Victorian exposure is weighing on it more than Scentre, JPMorgan added.
JPMorgan said visitation at Victorian centres was about 30 per cent of this time last year and it expects the continued restrictions on trade to be a drag on sales and require further rental support for tenants.
Vicinity and GPT had the highest Victorian retail asset exposure at 52 per cent and 38 per cent. JPMorgan increased its forecasts of rent waivers and provisions due to the extended Melbourne lockdown cutting earnings forecasts for Vicinity by 5.9 per cent and for Scentre by 4.5 per cent.
GPT will be hit as income in this half from Highpoint and Melbourne Central is estimated to be down 60 per cent and JPMorgan puts normalised post-COVID-19 retail income in Victoria and the rest of Australia this year at 80-83 per cent of last year.
Eli Greenblat 11.54am: Seafolly plots turnaround with new chief
The resurrected swimwear group Seafolly has bounced back from voluntary administration and returns to former owners, private equity firm, L Catterton, with the appointment of Brendan Santamaria as Seafolly’s new chief executive.
Mr Santamaria has the job of fixing, resetting and growing Seafolly, paving the way to recovery through the challenging COVID-19 retail landscape while tapping into the brand’s local and international growth potential, L Catterton said.
Mr Santamaria has over 15 years of CEO experience in the branded consumer goods industry, leading global brands such as Everlast, Lonsdale and Disney. In his most recent role as CEO of Designworks, he transitioned a private label apparel business into one of Australia’s largest branded apparel and footwear wholesalers.
Read more: Seafolly administrators acquire Pas Group’s Jets
11.33am: Victorian jobs drag weighs on nation
Weak payroll jobs data from Victoria has pulled down the national figure, with the latest data showing a 0.4pc drop over the month to August 22.
The data is the first to truly capture the Stage Four lockdown in Victoria, where jobs fell by 2pc, while the rest of Australia rose a moderate 0.1pc.
Still, there was some optimism, with the drop in Victorian jobs slowing toward the end of August, compared to the rate of job losses earlier in the month.
Nationally, payroll jobs at August 22 were 4.2 per cent below mid-March, when Australia recorded its 100th confirmed COVID-19 case. Payroll jobs in Victoria were 7.9 per cent below the level reported in mid-March, compared with 2.9 per cent for the rest of Australia.
11.31am: Business conditions fall, confidence lifts
Australian business conditions fell to -6 in August from 0 in July, while business confidence rose to -8 from -14, according to NAB’s monthly business survey.
Employment conditions dived to -13 points from 1, trading conditions slipped to -2 from 1 and profitability fell to -3 from 1. Forward orders fell to -10 from -7.
NAB chief economist, Alan Oster, said the fall in business conditions reflects that activity remains weak, and confidence “remains very weak and likely fragile”.
“Uncertainty around the virus and the global economy remains high, as does the path to a reopening domestically,” he said.
“The impact of the Melbourne stage 4 restrictions on activity is evident in Victoria with a decline in conditions – though not as bad as feared. While confidence in Victoria improved amid lower case numbers, the state continued to show the weakest confidence and second worst conditions across the states.”
And the fact that the decline in conditions in the month was broadbased across states, with Qld, Tas and SA showing steeper declines than Victoria, is “of some concern”.
Forward orders and capacity utilisation remained very weak and capacity utilisation was 5ppt below its long-run average, with all industries below average and only WA and Tas having rebounded to pre-COVID levels.
“This suggests that there is some way for the economy to see a full recovery,” Mr Oster said. “Only then can capex and employment intentions rise.”
Read more: Business confidence ‘very weak and fragile’
10.56am: Citi doubles down on bearish GDP call
The extension of Victoria’s lockdown will pull third quarter GDP into negative, and adds downside risk to weakness into the fourth quarter, according to the latest forecasts from Citi.
Analyst Josh Williamson has doubled down on his forecast of negative growth in the third quarter, as Victorian output continues to be constrained by government restrictions.
He sees GDP slipping by 1pc, adding to the 7pc drop in the June quarter, and potentially weighing well into the fourth quarter to threaten his forecast of a 1.4pc rebound.
“With news of the delay to participation in the Victorian economy for a further six weeks for key industry sectors, we reiterate our central view of our negative 1.0pc GDP growth forecast for Q3 and highlight downside risk to our Q4 growth forecast,” he writes, adding that the hurdle to progress from Step 2 to Step 3 is also high.
Read more: Andrews’ Covid lockdown goal too hard
Lachlan Moffet Gray 10.42am: Higher OneVue bid may be justified: BP
Analysts at Bell Potter suggest wealth manager OneVue Holdings may be justified in pushing for a higher takeover bid from its suitor Iress, backing up the view of major shareholder Thorney Investments which plans to reject the current offer from the financial software business.
In June Iress launched a takeover bid for OneVue Holdings at 40c a share, a 66.7 per cent premium on the company‘s pre-bid share price of 24c.
But in July, Thorney lifted its stake in OneVue from 17.09 per cent to almost 18 per cent in what some believe to be an attempt to block an insufficiently priced takeover.
Since June, the price of OneVue shares have increased to 39c.
Analysts at Bell Potter observed that while this represented a gain of 63 per cent since the start of June, comparative listed financial technology and wealth management companies like Netwealth Group and Hub24 have seen their share price increase on average by about 50 per cent without the obvious benefits of an acquisition premium.
They were also of the view that with action happening at the “big end of town” like IOOF‘s bid for MLC, opportunity is being created for independent wealth management companies to disrupt the market.
Read more: Thorney’s OneVue move could block Iress takeover
10.30am: ANZ confidence a positive surprise
ANZ’s weekly confidence survey lifted by 1 per cent last week, a “positive surprise” suggesting consumers see the current economic conditions as close to the bottom.
The weekly read lifted by 1pc to 91.1, just ahead of the four-week average of 90.7 driven by improved confidence in ‘future economic conditions’ and ‘time to buy a household item’.
“The up-tick in confidence comes as a positive surprise. We had thought the release of the weak Q2 GDP report during the week, with the media in particular focusing on the confirmation that Australia is in recession, would have dampened sentiment overall,” head of Australian economics David Plank said.
“The jump in ‘future economic conditions’ may indicate that a number of people think the economic situation is close to the bottom.
“Indeed, sentiment in this category is now close to the neutral level of 100. People are much more negative about the near-term economic outlook, however, though they are positive about their own ‘current financial conditions.”
10.12am: Shares spring back with 0.9pc jump
The local market has sprung back more than anticipated at the open, adding 0.9pc with gains across all sectors.
In early trade, the benchmark ASX200 is higher by 50 points or 0.85 per cent to 5995.1, as US futures rise 0.5pc.
It comes as the major miners extend their rally from yesterday – BHP adding 1.1pc as Rio adds 1.3pc and Fortescue lifts by 1.7pc.
CSL is up by 0.9pc, while Sydney Airport reverses by 2.6pc after completing its shortfall bookbuild.
Magellan Financial rose 4pc after Credit Suisse lifted its rating to Outperform while raising its price target 8pc to $65.
10.04am: Follow the earnings growth: Macq
Brokerage Macquarie Equities says follow the stocks that guided to earnings growth.
Among the top 100 this includes WiseTech, NextDC, Goodman Group, Amcor, CSL, Brambles and James Hardie.
“Management teams typically do not issue guidance unless they think they can hit, if not beat the number,” Macquarie equities says in its review of the reporting season.
“There is often a margin of safety for unforeseen events too, and in the current uncertain environment that margin might be larger. As a result, companies with guidance should be more likely to deliver positive (earnings per share) surprise.”
While reporting season generally beat expectations Macquarie noted earnings and dividend declines were on par with the GFC.
“Going into results we expected FY20 EPS to fall around 19 per cent. The actual result was slightly weaker, with a fall of around 20 per cent. This is like the fall in FY09,” Macquarie said.
Ben Wilmot 9.51am: Scentre collects 86pc of rents
Scentre Group, owner of the local Westfield empire, has fired a fresh shot in the broader battle between landlords and tenants, saying it has collected 86 per cent of rents in August.
Scentre has taken a relatively aggressive approach to collecting rents and has also lobbied against an open-ended extension of the Morrison government’s leasing code.
The landlord said this morning it had collected $183m of gross rent in August, which represents 86 per cent of monthly gross rental billings.
At its half year results last month, Scentre referred to the rising trajectory of cash collections for the month of August and today’s announcement confirmed the actual amount collected. In July rent collections ran at 82 per cent and in June they ran at 80 per cent, well above the 28 per cent in April.
Scentre had been riding a share-price lift on the back of its tough approach getting better results than some rivals, and also on speculation that it could launch a major equity raising.
SCG last traded at $2.18.
Read more: Leasing code warning as Scentre Group boards up Mosaic Brands’ stores
Nick Evans 9.47am: Vale’s Goro mine facing closure
Vale’s troubled Goro nickel mine is facing closure after a deal to sell the operation to ASX-listed New Century Resources fell through on Tuesday.
New Century told the market it had elected “not to submit a binding offer” for the mine, saying it had not been able to negotiate a funding package and equity structure for Goro that would benefit its shareholders.
The sale would have seen Vale kick in about $US500m into the local company that controls the mine to complete a “simplification plan” to turn the mine around, with the French government considering the renewal of a €200m facility. Other stakeholders include the regional New Caledonia government and state-owned minority shareholder SPMSC.
New Century has said the turnaround plan could also involve additional financiers to back the package, and it is believed at least one of the stakeholders has raised engineering concerns about the Goro plant, which the parties have not been able to resolve before the exclusivity period was due to expire.
It is believed Vale is now considering mothballing Goro after the deal fell through, putting about 3000 jobs at risk.
The news comes only a week after major NCZ shareholder IGO sold down its entire stake in the company at 15.5c a share.
New Century shares closed Monday at 15c.
Bridget Carter 9.43am: First State lobs offer for OptiComm
DataRoom | OptiComm has received a competing $609m takeover proposal from First State Super following an earlier offer from the Uniti Group.
OptiComm had agreed to complete a scheme of arrangement with Uniti, which was offering $5.10 per share for the company, equating to $530m or $540m factoring in a dividend payment.
However, First State is offering $5.85 cash, with the proposal lobbed with the company on Monday.
OptiComm has deferred the meeting to vote on the Uniti deal and First State has now been offered the opportunity to carry out due diligence on the company until September 18.
It comes after DataRoom reported on August 27 that another suitor was believed to be circling OptiComm.
Read more: OptiComm takeover sparks interest from an acquisitive suitor
9.28am: ASX expected steady after US holiday
Australia’s share market is expected to be fairly steady after the US Labor Day long weekend.
Overnight futures relative to fair value suggest the S&P/ASX 200 will open up 0.1pc at 5951 after rising 0.3pc on Monday.
The global risk appetite continued to recover from last week’s sell-off, with the Euro Stoxx 50 up 1.6pc and the FTSE 100 up 2.4pc overnight.
European stock market gains came despite UK PM Johnson’s threat to walk away from UK-EU trade talks if there’s no agreement by October 15.
US stock index futures rose with S&P 500 futures up 0.6pc and Nasdaq futures rose 0.2pc after falling during Asian trading on Monday.
In commodities, LME copper Brent crude oil fell 1.5pc to $US42.01, but LME copper rose 1.2pc and spot iron ore rose 1.5pc to $US124.80.
The S&P/ASX 200 bounced on Monday after hitting a 5-week low of 5869.9, leaving chart support from its August low at 5860.7 intact. But a potential retest of 200-day moving average resistance at 6118.4 may depend on Wall Street rebounding strongly overnight.
NAB’s monthly business survey for August is due for release at 11.30am.
BlueScope, GWA, Northern Star, Origin Energy and Austal will trade ex-dividend.
Tuesday September 8, 2020
— CommSec (@CommSec) September 7, 2020
The Daily Table: a wrap of overnight markets
#ausbiz #ausecon #bonds #rates #fx #markets #audusd #aud #usdaud #metals #LME #metalprices #ironore #commsec @CommSec pic.twitter.com/4VCY6SdnAJ
9.23am: Syd Airport completes shortfall bookbuild
Sydney Airport has completed its retail shortfall bookbuild, taking total funds raised in the past month to $2bn.
The airport operator sold 58.1 million new securities under the shortfall bookbuild at $5.50 apiece, representing a 94c premium per share to the offer price of $4.56.
The completion of the latest component takes total funds raised to $2bn, along with the institutional offer and retail entitlement offer.
“We would like to thank our securityholders for their continued support. The funds raised will enhance our financial resilience in these challenging times and ensure that we are strongly positioned when the recovery emerges,” chairman Trevor Gerber said.
Read more: Sydney Airport raising covered at $5.20
9.09am: Atlas Arteria prices €500m of bonds
Toll road operator Atlas Arteria has priced €500m ($811m) of bonds under its medium term note program, set to mature in January 2029.
The bonds were priced on September 7 at 99.373pc of par with a coupon rate of 0.125pc.
“Eurobond investors demonstrated their continued support for the APRR business in this transaction with the book several times oversubscribed. It provides APRR with additional liquidity, further reduces its average cost of debt, extends its weighted average debt maturity and strengthens APRR’s capacity for growth,” chief financial officer Nadine Lennie said.
9.00am: Platinum posts $202m in outflows
Platinum Asset Management has reported $202m in outflows in August.
After the close yesterday, the Andrew Clifford-led fund said its funds had experience net outflows, in large part due to $160m in outflows from its Platinum Trust Funds.
Still, the firm posted a lift in funds under management for the month, to $21.68bn from $21.38bn thanks to uplift in the market.
8.56am: What’s on the broker radar?
- Beach Energy raised to Outperform – Macquarie
- Fortescue raised to Overweight – JP Morgan
- GUD Holdings raised to Hold – Morningstar
- Magellan Financial raised to Outperform – Credit Suisse
- Newcrest raised to Overweight – JP Morgan
- Pharmaxis cut to Speculative Hold – Bell Potter
- Regis Resources raised to Neutral – JP Morgan
- Saracen Minerals raised to Neutral – JP Morgan
- Spark Infrastructure raised to Buy – Morningstar
8.30am: Leadership changes at Woolies
Woolworths has announced a series of senior executive changes as it puts more emphasis on its “food and everyday needs” business.
It says the current managing director of Woolworths supermarkets, Claire Peters, will become managing director of B2B and Everyday Needs.
Natalie Davis, currently head of Woolworths New Zealand, will return to Australia to head
Woolworths supermarkets.
Colin Storrie, currently managing director of group portfolio, will take up a new role as
MD of new business and partnerships.
In her new role, Ms Peters will head Woolworths’ portfolio businesses including BIG W, Woolworths International, wholesale and property. She will also take stewardship of the new partnership with PFD Food Services.
8.00am: Restaurant Brands profit plunges
ASX-listed fast food franchisee company Restaurant Brands has posted a 42.9 per cent fall in half year net profit to $NZ11.4m, citing the “significant impact” of the coronavirus pandemic.
Sales fell 13.4 per cent to $NZ383.4m.
Restaurant Brands, which counts KFC, Taco Bell and Pizza Hut among its brands, will not pay an interim dividend.
7.30am: ASX set to rise at the open
Australian stocks are set for a stronger start, building on yesterday’s rise, after gains on European markets overnight. US markets are closed.
At around 6.00am (AEST) the SPI futures index was up 25 points, or about 0.4 per cent.
On Monday, the Australian sharemarket hit one-month lows early but support from the major miners and CSL helped the market to gains of 0.3pc by the close.
The Australian dollar was this morning down at US72.77.
Brent oil was down 1.5 per cent at $US42.01 a barrel, while spot iron ore was up 0.9 per cent at $US129.90.
Cameron Stewart 6.35am: Trump slams Biden on China
Donald Trump has vowed to decouple the US economy from China if he wins the election, and has attacked his opponent Joe Biden as a “pawn” for Beijing as both candidates enter the final eight weeks of a ferociously fought campaign.
Mr Trump’s strident comments came during a wide-ranging White House press conference on the Labour Day holiday which traditionally marks the home stretch of the US election campaign.
Mr Trump accused the former Vice President Mr Biden of being “stupid” for selling out US jobs to China through his past support for Beijing’s integration into the world economy, a move which he said had caused 70,000 US factories to shut.
“Today’s Labour Day — it’s a good time to talk about where we’re being ripped off by countries, but nobody’s even close to China,” the president said.
“In 2001 Biden said the United States welcomes the emergence of a prosperous integrated China at the global stage because we expect this is going to be a China that plays by the rules. They didn’t play by the rules.
“If Biden wins, China wins, because China will own this country,” he said.
5.50am: Tech volatility unnerves investors
The US market rollercoaster ride into the Labour Day weekend is confronting investors with fresh questions about the soundness of the technology-led advance in major stock indexes.
The Nasdaq Composite slid more than 6pc over two days last week after hitting a fresh high, led by Thursday’s record one-day decline in market value at Apple, the most-valuable US listed company. Selling intensified Friday, at one point pushing the index down almost 10pc from its record and spreading to markets including crude oil and gold, before a broad reversal narrowed losses in some stocks and sent others back into more familiar, green territory.
Few investors believe the late-week rout signals the end of a rally that has taken the Nasdaq to 43 record closes and pushed the S&P 500 up more than 6pc for the year. The economy continues to show signs of improvement and with interest rates near record lows, the investor mantra that “there is no alternative” to purchasing the shares of major U.S. corporations remains very much intact. The main driver of the tech boom — strong growth that has been boosted during the pandemic as more consumers work and learn remotely — also still holds, investors say.
Even so, the scale of the gains among major technology shares this year, the resulting rich valuations and the gobsmacking market capitalisations of many of these firms, raise the possibility of large share-price drawdowns this fall. The Nasdaq Composite is up 26pc for the year. Swings in the shares of Alphabet Inc., Amazon.com Inc., Facebook Inc., Microsoft Corp. and others stand to accentuate expected volatility around the U.S. presidential election in the fall and attempts to control the coronavirus outbreaks that have hobbled the global economy.
“They’ve run up so much and they’re overextended,” said Leslie Thompson, managing principal at Spectrum Management Group in Indianapolis, which manages about $US700 million. She has been cutting her investments in tech stocks such as Apple and chip maker Nvidia Corp. recently. The speed of the climb “was just really ridiculous,” she said.
Dow Jones
5.45am: China bid to set global data rules
China is launching its own initiative to set global standards on data security, countering US efforts to persuade like-minded countries to ringfence their networks from Chinese technology.
Chinese Foreign Minister Wang Yi is scheduled to announce the initiative on Tuesday at a seminar in Beijing on global digital governance, according to people briefed on the matter.
Given rising risks to data security that require a global solution, “what is pressing now is to formulate global rules and norms that reflect the aspiration and interests of the majority of countries,” said a briefing note on the new initiative that Chinese diplomats provided to foreign counterparts, a copy of which was reviewed by The Wall Street Journal.
Beijing’s initiative comes amid heightened tensions with Washington over issues including trade and technological competition, which has raised the spectre of an increasingly bifurcated internet.
In recent months, the Trump administration has taken steps to curtail what it describes as national-security threats from Chinese tech firms like Huawei Technologies Co. and popular Chinese apps including ByteDance Ltd.’s TikTok and Tencent Holdings Ltd.’s WeChat. Chinese officials, meanwhile, have accused the U.S. of imposing a double standard and of trying to sabotage the efforts of Chinese businesses to expand.
Dow Jones
5.40am: Sterling hit over no-deal Brexit fears
The British pound took a hit as Prime Minister Boris Johnson appeared to revive investor fears of a no-deal Brexit, dealers said.
Sterling fell back by around 0.87 per cent versus the dollar and was about 0.73 per cent lower against the European single currency.
Johnson has given an October 15 deadline for a post-Brexit trade agreement with the European Union, brushing off fears about “no-deal” chaos if the talks fail.
“If we can’t agree by then, then I do not see that there will be a free-trade agreement between us,” Johnson said, insisting it would still be a “good outcome” for Britain.
The Financial Times meanwhile reported that Johnson is planning legislation to override parts of the withdrawal treaty that Britain and the EU agreed last year.
EU leader Ursula von der Leyen warned that Britain is legally obliged to respect the Brexit withdrawal agreement, which must form the basis of future bilateral relations.
The weak pound boosted the London stock market, which rose 2.3 per cent, because it supports the share prices of multinational companies that earn profits in dollars.
Frankfurt (up 2.0pc) and Paris (up 1.8pc) also posted solid gains as investors hunted for bargain stocks following heady losses last week.
Investors also hope the European Central Bank will follow the US Federal Reserve in signalling low interest rates over the medium to long term.
Asian equities struggled however, with a mixed US jobs report last week offsetting a pledge from Fed boss Jerome Powell that interest rates would remain rock-bottom for years.
In New York, financial markets were closed for the long Labour Day weekend. In commodity markets, world oil prices fell further on concerns over the long-term energy demand outlook, as economies struggle to shake off coronavirus fallout.
AFP
5.32am: Italy probe into Google, Apple
Italy’s competition watchdog said it had opened probes into tech giants Google, Apple and Dropbox for possible unfair commercial practices in their cloud computing services.
Six investigations in total have been opened against Google’s Google Drive, Apple’s iCloud and Dropbox, the Autorita Garante della Concorrenza e del Mercato (AGCM) said.
“Proceedings relate to alleged unfair commercial practices and the possible presence of unfair clauses in contractual terms,” the AGCM said in a statement.
The probes against Google and Apple look at a “failure or inadequate indication on the collection and commercial use of data provided by the user”, the authority said.
Consumers, in order to use cloud storage services “would not be in a position to consent” to the companies using their data for commercial purposes.
AFP
5.30am: Sterling sinks 1pc
The British pound sank after Prime Minister Boris Johnson appeared to revive investor fears of a no-deal Brexit, dealers said.
Heading into the halfway point in London, sterling deepened losses to shed 1.0 per cent versus the dollar. It was also down 0.8 per cent against the European single currency.
Johnson has given an October 15 deadline for a post-Brexit trade agreement with the European Union, brushing off fears about “no-deal” chaos if talks fail.
“If we can’t agree by then, then I do not see that there will be a free-trade agreement between us,” Johnson said, insisting it would still be a “good outcome” for Britain.
AFP
5.28am: Water giant eyes $1bn listing
Bottled water giant Nongfu Spring said it is aiming to raise more than $US1 billion in a Hong Kong listing, as Beijing cajoles Chinese companies to raise cash at home.
Nongfu, which claims to be number one in China’s massive bottled water market, is ubiquitous across the country, where most people shun tap water for health reasons.
In a filing to the Hong Kong Stock Exchange a day ahead of the listing, the company said it would put more than 388 million shares on the market at an introductory price of $HK21.50 ($US2.77).
The pricing means a potential listing worth nearly $US1.1 billion — which Bloomberg said would be the second-biggest IPO by a food and beverage company this year.
Nongfu Spring, which is headquartered in the eastern city of Hangzhou, supplies mineral water unlike most of its competitors who sell purified water.
AFP
5.25am: Emirates refunds $US1.4bn
Emirates, the largest airline in the Middle East, said Monday it had so far returned $US1.4 billion in refunds to customers amid sharply reduced global travel due to the coronavirus pandemic.
“Emirates reveals that is has returned over 5 billion dirhams in COVID-19 related travel refunds,” the aviation giant said in a statement.
“More than 1.4 million refunds requests have been completed since March, representing 90 per cent of the airline’s backlog.” The Dubai-based carrier posted 1.1 billion dirhams ($US288 million) in net profit for the financial year ending March, up from $US237 million the previous year.
It was the 32nd straight year of profit for Emirates, but the sharp downturn in global travel in 2020 may result in a loss.
AFP
5.20am: German industry loses steam
Germany’s economic recovery lost steam in July, as momentum gained from the easing of lockdowns in the spring subsided, official statistics showed.
Industrial production rose by 1.2 per cent in July month-on-month, much slower than the 9.3-per cent increase recorded in June, statistics agency Destatis said.
The July figure is well below the jump of 4.5 per cent that analysts surveyed by Factset had been expecting.
“This is quite a disappointment,” said Jens-Oliver Niklasch, analyst at German public bank LBBW. “The fact remains that there will not be a return to pre-crisis levels any time soon.” The increase was mainly driven by Germany’s key auto sector which saw output grow by 6.9 per cent, but construction fell 4.3 per cent due in part to the summer break.
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.