Banks, retailers hit hardest as Victoria shuts down
Heavy losses in the major banks drove the ASX lower, as retailers such as Premier and JB Hi-Fi felt the sting of strict new Victorian restrictions.
- Lockdown-exposed stocks fade further
- Seek rules our final dividend
- Tabcorp to take $1bn hit
- Regis targeted in cyber attack
That’s all from the Trading Day blog for Monday, August 3. Melbourne’s Stage Four lockdown has weighed on local shares, pulling the index down as much as 1.1pc intraday, before settling to a two-point loss at the end of the day.
Melbourne-exposed stocks have been worst affected, led by the major banks, while Tabcorp took a hit after warning of $1.1bn in impairments to come at its half year results, and as Seek slipped after ruling out its final dividend.
Patrick Commins 8.55pm: ‘Hammer blow’ of closures to crush firms
The forced closure of non-essential businesses in Melbourne will deal a “hammer blow” to the city’s manufacturing and construction industries, with business groups warning many firms will struggle to survive a six-week shutdown.
The comments came as exclusive modelling from KPMG showed the imposition of stage four restrictions across the city would cost Victoria’s economy $830m in lost output in August alone, more than erasing months of hard-fought economic recovery since the lows of April.
Premier Daniel Andrews on Monday issued a similarly dire prediction that stage four restrictions would double the state’s stood-down workers to 500,000.
Manufacturing and construction employ around 610,000 Victorians. Most of the firms employing these workers have managed to escape relatively unscathed through the early months of restrictions and shutdowns, as the accommodation and hospitality industries bore the brunt of the severe social distancing restrictions announced in late March.
But Victorian Chamber of Commerce chief executive Paul Guerra said many manufacturers and builders would be damaged in this latest round of restrictions.
“The danger … is that if we lose employees from those sectors, our ability to bounce back quickly is impacted,” Mr Guerra said. “If they are not able to supply to local, national or even international factories, that means they will lose those contracts and this will impact their ability to come back.”
James Kirby 7.43pm: Online retail awaits new boost
The online retailing sector is about to get a surprise boost from Melbourne’s second lockdown, as a new report from NAB shows Victoria to be far ahead in adapting to internet shopping.
With locally listed online retailing related stocks firing on the ASX, the bank has for the first time released a regional snapshot of shopping patterns, which shows Metropolitan Melbourne as the leading online commerce zone in the country while even regional Victoria outpaces Metropolitan Sydney.
Victoria is showing close to a 60 per cent lift in online retail sales year-on-year, against a national figure of 50 per cent.
Within specific categories the state has literally taken to online commerce with a rocket. In the games and toys area, Victoria in the year to August 2019 had an 11 per cent increase in sales, this year the figure bounded to an increase of 135 per cent.
“We are now heading into an extended new lockdown where the same conditions will recur, and I certainly wouldn‘t expect the pattern to decelerate,” says NAB’s chief economist Alan Oster.
“Moreover, this is now a nationwide structural shift, once people make a change like this for whatever reason they are unlikely to change back to their old ways. It’s like banking: once you go online, you are unlikely to go back to the bank branch very often. For investors it is time to think about upping exposure to this area,” Oster explains.
Eli Greenblat 7.25pm: Shutdown closes Myer Melbourne CBD store
The nation’s biggest department store Myer will close its historic Melbourne CBD store as part of the forced shut downs now enforced by the state government to battle the out of control COVID-19 pandemic, and is hoping consumers will turn to online and click & collect to do their shopping.
In line with government health advice, Myer will be closing stores in metro Melbourne from Wednesday night.
Previously when Myer stores were shut from the end March to the end May in the first coronavirus pandemic wave, it experienced strong demand online, and the retailer will require team members to continue working during this period to assist with this online fulfillment work.
Myer team members not working will continue to be paid through the JobKeeper program.
A spokesman for Myer said to protect the health and safety of its team members and customers, and the broader community, Myer will be closing metro stores.
“During this time, myer.com.au will be available to our customers 24/7 across our full range, with a reduced delivery fee and relaxed returns policy in place; as well as our contact-free Click and Collect service at selected stores.
“Having closed stores earlier this years and just operating online, we saw unprecedented demand through our online store, as well as through our contact-free Click and Collect service - and we expect the same again. As such, we are well prepared and ready to meet the needs of our Melbourne customers online during this period with a great range, across all categories, all in one place.”
David Ross 7.07pm: Lockdown to hit fuel retailers, toll roads
The latest lockdowns in Victoria are set to hit Australia’s toll roads, fuel retailers and wholesalers despite petrol stations remaining open.
Viva Energy, owner and operator of the Geelong refinery, on Monday warned that its Victorian petrol sales for July were 25 per below 2019 levels.
The fuel wholesaler and retailer noted that sales across the nation were 11 per cent below July 2019 figures.
According to the ACCC, the earlier rounds of lockdowns in April saw national sales volumes fall 43 per cent.
Monday’s announcement comes on the back of stage four restrictions announced by the Victorian government that would restrict most residents to within 5km of their home.
“The company is closely monitoring the situation and assessing any further potential impacts on Victorian fuel sales and refining production as a result of these additional restrictions,” Viva Energy said.
Jared Lynch 6.25pm: Infant formula fame face-off
Listed infant formula brand Nuchev has its own secret weapon to keep Chinese mums happy after rival Bubs rolled out Jennifer Hawkins as its global brand ambassador.
Nuchev, which like Bubs is a goat milk-based infant formula brand, has secured White Ice to be the face of its range in China. And before anyone conjures up Breaking Bad-like connotations, its influencer is 100 per cent legitimate.
White Ice, also known as Bai Bing or Michelle Bai, is a well-known actress and musician, and a participant on the talent show Sisters Who Make Waves — the highest rating TV program in China.
5.30pm: Bendigo Bank updates lockdown branches
Bendigo Bank will aim to keep its branches open across Victoria as part of its commitment to providing a COVID-safe essential service to the community. The bank welcomes the Victorian government’s confirmation that banking and banking related services will remain open and classed as an essential service while stage three and four restrictions are in place across the state.
The bank has stringent controls in place to ensure the safety and wellbeing of its staff and customers in branches. In line with Victorian government requirements, face coverings must be worn by all staff and customers attending a bank branch, unless they fall within one of the published exemptions. Branch staff will also continue to observe all other safety protocols including the use of safety screens, physical distancing and hygiene measures. Customers are required to comply with the appropriate safety guidelines.
Future branch network decisions will be guided by customer trends and the appropriate health precautions on a case by case basis, the bank said.
“Since the onset of COVID-19, our branches have, wherever possible, remained open to support our customers and their communities. We have clear safety measures in place and will continue to assess the level of risk and take reasonable and appropriate actions to protect our staff and customers, based on the latest expert advice. This may involve branch closures or a reduction in hours in some circumstances if this is considered an appropriate precaution. The safety and wellbeing of our customers, employees and their communities is our priority and we’re here to continue supporting our customers as we have done throughout the pandemic,” said Marnie Baker, managing director.
The bank advises customers to only visit a branch if they are feeling well and encourages them to observe the required social distancing and face covering guidelines. Customers may be asked to temporarily remove their mask for identification purposes. These guidelines will be visible as customers enter the branch.
Customers can view their local branch’s operating hours at www.bendigobank.com.au/locate-us/ and can continue to use the bank’s aTMs, e-banking or the Bendigo Bank app to conduct their banking.
4.44pm: Webjet, Credit Corp hit in lockdown sell-off
Travel and consumer exposed stocks led the moves lower in Monday’s trade, amid pressure from Victoria’s strict new restrictions.
While strong gains in heavyweight healthcare stocks buoyed the benchmark ASX200, retailers, banks, travel names and some construction groups took a heavy hit.
Monadelphous was the worst performer on the index as it warned it was facing legal action from Rio Tinto, prompting a 10.3pc share slide.
Here’s the biggest movers at the close:
4.36pm: $A dives to one-week low
The Aussie dollar has dropped sharply in afternoon trade to hit its lowest levels in a week.
AUDUSD was trading at US71.45c before the close – before diving by 24 basis points to US 71.21c – the lowest since this time last week.
It comes as the US dollar index spikes by 0.24pc.
Eli Greenblat 4.32pm: Lew savages Andrews over Vic lockdown
Billionaire retailer Solomon Lew has savaged the Victorian government led by Premier Daniel Andrews for not acting more decisively and sooner in combating the coronavirus pandemic, saying the government could have prevented unnecessary illness and deaths in the community.
In a blistering attack on Premier Andrews, Mr Lew, who owns the multi billion dollar fashion empire under his Premier Investments company, said there will be significant economic consequences to the harsh restrictions announced today.
He said there would be considerable consequences to the initial inaction of the Victorian Premier in the early days and months of the COVID-19 pandemic.
“The situation in Victoria has escalated and public health needs to be protected above all else. While this is the right step, acting sooner could have prevented a lot of illness and unnecessary deaths,” Mr Lew said in a statement this afternoon.
His Premier Investments company owns chains such as Portmans, Dotti, Just Jeans, Peter Alexander and Smiggle while his family also owns a large portfolio of fashion businesses.
PMV shares fell 4pc in Monday’s session to $16.09.
Bridget Carter 4.23pm: Hrdlicka’s Virgin role in focus
DataRoom | The role that the former Jetstar boss Jayne Hrdlicka will play in the operation of Virgin Australia is increasingly coming under sharp focus, with a growing number of suggestions in the market that the highly regarded executive could have a hands-on position with the soon-to-be revamped airline.
Ms Hrdlicka worked at Bain Consulting before running the Qantas budget airline offshoot Jetstar and later A2 milk.
She has been working alongside Bain Capital in its efforts to buy Virgin Australia, as first revealed by DataRoom on April 23.
Earlier, it was thought that Ms Hrdlicka would likely emerge as chairman of Virgin Australia under Bain Capital’s ownership or a director, but now the thinking is that her expertise of operating an airline to a tight budget will be more fully utilised once Bain Capital secures control of the carrier following the creditors vote on August 26.
Read more: Former Jetstar boss in the Virgin mix
4.11pm: Victorian lockdown dents shares
Shares recovered into the green in early afternoon trade, but a blow from Victoria’s latest coronavirus restrictions pulled shares slightly lower.
By the close, the benchmark ASX200 was lower by 2 points or 0.03 per cent to 5926.1, a recovery from an early 1.1pc slip to lows of 5860.7.
Heavyweight health stocks did a lot of the heavy lifting in afternoon trade- CSL put on 2.6pc while Cochlear surged by 4.6pc.
Major bank weakness was the biggest contributor to the market weakness – Commonwealth Bank lost 1.8pc as ANZ fell 4.1pc, Westpac lost 3.5pc and NAB dropped by 4.1pc.
Rachel Baxendale 4.06pm: 250,000 Vic workers to be stood down
Victorian Premier Daniel Andrews said the new industry restrictions would result in an additional 250,000 Victorians being stood down from their jobs.
“Just to put that into some context, this speaks directly to why these changes are so important,” Mr Andrews said.
“We estimate we have about 500,000 people working from home.
“We know there is about 250,000 people stood down in one form or another and this will add a further 250,000 in rough numbers.
“We will get a clearer sense of that as a week unfolds. But that is essential: the one million workers who are not travelling to and from work every day.”
Read more: Victorian to shut all ‘non-essential’ businesses
Rachel Baxendale 3.49pm: Abattoirs, construction ‘dramatically reduced’
Mr Andrews described the move to limit industries such as abattoirs and construction as a “pilot light phase: not being turned off completely but … dramatically reducing the number of people they have working for them and their output over the next six weeks”.
“This is a very difficult decision to make, a very challenging decision to make and I know there will be substantial pain that comes from that but unless we have literally hundreds and hundreds of thousands of people at home, and not going to work, so hundreds of thousands of less movements around the community eat and every day, we will not pull this virus up, we will not see the number reduce,” Mr Andrews said.
Follow the latest at our coronavirus live blog
3.36pm: Retail closures send shares lower
Victorian Premier Dan Andrews has laid out broad ranging closures, set to shut all retail trade bar essential services.
In a brief this afternoon the Premier said supermarkets and grocery stores including all food and liquor shops will remain open, along with hardware and building supply retailers.
“Retail will be very different to how it was before,” he said.
Changes come into effect as of midnight on Wednesday.
Shopping centres will remain open, for access to permitted retail only, along with markets for food with strict enforcement of density obligations.
The news is sending retail shares lower – Harvey Norman is off by 1.9pc, JB Hi-Fi lower by 2.4pc, Premier Investment by 3.8pc.
Read more: Victoria to shut all non-essential businesses
Statement from the Premier on business restrictions: pic.twitter.com/ktX49qJ4hU
— Dan Andrews (@DanielAndrewsMP) August 3, 2020
3.12pm: Investors push to spill Smiles board
Embattled dentist chain Smiles Inclusive is facing further shareholder unrest, with key backers this afternoon calling a general meeting to spill the entire board.
The long-running saga has seen founding chief Mike Timoney shafted from the group, along with delayed payments to suppliers as far back as 18 months ago.
Today, Smiles said it had received notice from a consortium of shareholders with a more than 5pc stake, to hold a general meeting and spill the current board.
While they state no alternative directors, the notice is backed former dental practice owners Philip Makepeace and Athur Walsh, among others, who sold their practises to Smiles in a profit share arrangement.
In a statement approved by the current board, Smiles said it was “in advanced discussions with financiers to reduce debt and recapitalise the company”.
“The Company notes that Camacho, Makepeace and Walsh and the other Requisitioning Shareholders have not put forward any plan to improve the Company’s balance sheet or appoint new directors,” it added.
“The Company is continuing to work with potential financiers and advisers and will update the market in due course.”
Read more: Smiles to frowns in dentist drama
2.49pm: ANZ extends losses to 4.1pc
ANZ is setting new daily lows in afternoon trade, sinking by 4.1 per cent as investors weigh the impact of sweeping closures across Victorian business and industry.
The bank is leading the sector lower, last down 4.07pc to daily lows of $17.22 – its lowest levels since late May.
NAB is trading lower by 3.9pc, as Westpac falls by 3.4pc and Commonwealth Bank sheds 2.2pc.
Across the rest of the sector, Bendigo and Adelaide Bank is lower by 4.7pc to $6.56 while BOQ loses 3.4pc and Macquarie slips by 1.8pc.
Eli Greenblat 2.41pm: Retail Food Group restructures
Scandal ridden food franchise owner Retail Food Group has restructured its retail operations by moving to separate its retail brands from its roasting and supply of coffee products and its dairy processing/manufacturing group.
Retail Food Group said the new division is called IconicCo, and its purpose is to ensure the best possible outcomes for the approximately 850 franchise partners by increasing efficiencies and strengthening relationships.
The company’s eight brands are Gloria Jeans, Donut King, Crust Pizza, Michel Patisseries, Brumbies, Pizza Capers, Cafe2U and Coffee Guy, and employ about 8,500 employees across Australia. All of these retail brands will sit within IconicCo, detaching them all from being in the same operational business as its coffee roasting and dairy arm.
It comes as Retail Food Group attempts to recover and restructure in the wake of recent scandals involving poor treatment of franchisees, a wages scandal, tens of millions of dollars in impairments, a sinking share price and investigations by tax, consumer and corporate regulators.
Retail Food Group executive chairman Peter George highlighted the new IconicCo division is part of a transformation that will install a world class franchise system across all its brands.
“These new systems reach across financial reporting, legal assistance, leasing negotiation, site selection, store design and store builds, partner recruitment and expansion, marketing, product development, supplier negotiation, operational performance and network communications,” he said.
RFG shares last down 6.4pc to 5.9c.
2.27pm: ASX reverses, Victorian closures loom
Australia’s share market turned down again as Victoria detailed exactly what kinds of businesses will be shut for at least the next 6 weeks under its Stage Four lockdowns.
The S&P/ASX 200 is down 0.3pc at 5912 in choppy trading. It had made back all of its early 1.1pc dive to a 4-week low, adding as much as 0.3pc at lunch but is fading fast.
The 50-day moving average at 5950 now seems to be offering resistance on the chart, suggesting the bottom of the two-month trading range at 5720 could be tested early this week.
Victoria’s Cabinet has proposed sweeping industrial and business closures and leaving only essential services operating to supply medical needs, food, power and communications to implement its draconian stage 4 coronavirus restrictions.
Daniel Andrews is expected to announce the full details of the Cabinet decisions later this afternoon. The list of forced business closures is said to span 12 pages and allows few exemptions.
Construction names are taking a hit ahead of the release – CIMIC dropping by 4.1pc to $20.59 as NRW Holdings falls 7.1pc to $1.70.
Follow the latest at our coronavirus live blog
2.12pm: HSBC reports 70pc profit slide
HSBC has reported a 69 per cent drop in first half profits amid higher than expected credit losses and impairments related to COVID-19.
Handing down its interim results today, the bank posted profit after tax of $3.1bn, including a $1.2bn impairment of its software assets, mainly in Europe, alongside a warning on tensions between the US and China.
“Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC’s footprint. We will face any political challenges that arise with a focus on the long-term needs of our customers and the best interests of our investors,” chief Noel Quinn said.
The group said its Asian business had been resilient through the pandemic, notching profit before tax of $7.4bn despite higher expected credit losses.
Overall, HSBC’s net interest margin was 1.43pc, down 18 points from the same time last year, with lower global interest rates forecast to pressure revenue in the foreseeable future.
“We expect mid-to-high single-digit risk-weighted asset percentage growth in 2020, primarily from credit rating migration movements, which is expected to have an adverse impact on our CET1 ratio,” it said.
“We will continue to aim to reduce RWAs in low-returning areas, and improve efficiency to allow resources to be further and faster allocated to areas of competitive advantage, higher returns and growth.”
Mr Quinn added that the bank would resume its transformation plan after it was halted in response to the COVID-19 outbreak earlier this year.
1.26pm: Rural Funds buys $81m farm
Rural Funds Management has purchased 5,409ha of sugar cane farms in Maryborough, QLD, with the view to convert the farm to macadamia orchards.
The agriculture asset investors said today it had spent $81.1m to buy the farm, along with associated plant and equipment and 8060 megalitres of water entitlement from MSF Sugar.
It said it intended to progressively convert the farms to 2,200ha of macadamia orchards, with a substantial portion of the remaining area to be used for cropping.
“Approximately 25pc of the MSF farms are leased at rates consistent with RFF’s other natural resource predominant assets. RFM will seek to lease the balance of the cane farms which are currently operated,” the company said in a statement.
“The transaction will include a two-year offtake agreement in respect to the cane produced on the farms, or a reduction in the purchase price.”
MSF is owned by the Mitr Phol Group, the world’s fifth largest sugar producer, while Rural Funds is the largest agricultural landlord in the country.
Rural Funds said settlement was expected to occur in October and would be funded by an approved increase to its debt facility. They expect no changes to forecast FY21 distributions of 11.28c.
RFF last traded down 0.5pc to $2.03.
1.15pm: AMP earnings miss a one-off: BP
The impact of AMP’s latest earnings warning is largely contained to FY20, with the business largely tracking as expected, according to Bell Potter.
On Friday, AMP warned its profit for the first half would be roughly half of the same time last year at between $140m and $150m, including a $25m provision in its banking arm due to COVID-19 related losses.
Analyst Lafitani Sotiriou keeps his buy rating on the stock, but trims his target price to $2.40 per share from earlier $2.50, noting that “we suspect this may be the last material reset for AMP”.
“From here there is $300m in pre-tax synergies to provide support, the likelihood of a share buyback being announced at the 1H20 result (given our estimate of ~$900m in excess capital above target capital buffers) and evidence the remaining businesses will return to growth,” he writes.
“AMP Bank’s Loan Book, AMP Capital’s Funds Management Book, and the large AUM base in AMP CWM appear intact. As such, this provides the foundation, along with synergies and balance sheet strength, to return the business to growth.”
AMP last traded down 3.8pc to $1.41.
Read more: AMP flags half-year profit drop
Samantha Bailey 1.10pm: More than a million tap super twice
More than $29.4bn has now been withdrawn from Australia’s superannuation sector as part of the government’s COVID-19 temporary early release scheme, with 1.04 million Australians having now tapped their super fund twice for extra cash.
In the week to July 26, super funds paid out $1.4 billion to 173,000 members, according to the latest weekly data released by the Australian Prudential Regulatory Authority, which showed that a total of 2.9 million people have now accessed their super fund once.
The early release scheme allows people hit with financial hardship as a result of the coronavirus crisis to withdraw up to $20,000 from their superannuation over two financial years.
Read more: More than 1 million tap super twice
1.01pm: Shares hold higher on health boost
Shares are holding on to a slight 0.1 per cent lift at half time, thanks in large part to outperformance in major health stocks.
At 1pm, the benchmark ASX200 is higher by 8 points or 0.1pc to 5935.5, coming back from an early dive as much as 1.1pc.
Health heavyweights CSL and Cochlear are doing most of the heavy lifting – up 3.3pc and 4.8pc respectively – and helping to offset heavy losses in financials.
While banks have trimmed losses somewhat, ANZ is still down 3.7pc, NAB by 3.5pc, Westpac by 2.8pc and Commonwealth Bank by 1.8pc.
Here’s the biggest movers at 1pm:
Eli Greenblat 12.46pm: Woolies converts stores to delivery hubs
Woolworths has announced it will temporarily convert its Dandenong Plaza, Watergardens South and Mountain Gate supermarkets into online delivery hubs as Melbourne enters Stage Four restrictions.
It comes as shoppers increasingly turn to online shopping as they face more harsher lockdown restrictions and in Victoria especially limits on the time and distance they can travel to the shops.
The nation’s biggest supermarket retailer said the three stores will close to in-store customers from Tuesday, August 4 at 7:45pm to solely serve online grocery delivery customers until further notice.
“The conversions will enable Woolworths to pick and dispatch tens of thousands more weekly online orders to customers in the surrounding suburbs. This includes online orders for the most vulnerable in the community through Woolworths’ Priority Assistance service,” Woolworths said.
During March and April Woolworths undertook similar conversions in a small number of stores in Sydney and Melbourne to meet online demand and service customers staying at home in line with government restrictions during the early stages of the pandemic.
WOW last up 0.5pc to $38.87.
Read more: The punters are not happy, Dan
12.44pm: Caixin PMI jumps to highest in 9 years
A private gauge of China’s manufacturing activity rose in July to its highest level in more than nine years, boosted by accelerated production and recovering demand.
The Caixin China manufacturing purchasing managers index, which is weighted toward small private manufacturers, rose to 52.8 in July from 51.2 in June, Caixin Media and research firm Markit said Monday.
July’s reading marked the third consecutive month that the Caixin PMI stood above the 50 level separating contraction from expansion.
Manufacturers’ production expanded for the fifth month in a row and rose at the fastest pace in 9.5 years, Caixin said. Total new orders, reflecting demand from home and abroad, also increased at the fastest rate since the start of 2011.
However, total new export orders remained in contraction territory for the seventh straight month, though the pace of contraction slowed.
Dow Jones Newswires
Latest Caixin #PMI signalled a solid improvement in the health of #China's manufacturing sector in July, as market conditions continued to recover from #COVID-19 outbreak. Output and new orders up at fastest rates since Jan 2011. More here: https://t.co/WNvxTVTowS pic.twitter.com/fNAc6vSuKC
— IHS Markit PMIâ„¢ (@IHSMarkitPMI) August 3, 2020
12.01pm: US futures prompt midday boost
Australia’s share market has turned up with US futures after a sharp intraday fall.
The S&P/ASX 200 rose 8 points or 0.1pc to 5935.9 after falling 67 points or 1.1pc to a 4-week low of 5860.7 in early trading.
S&P 500 futures are pointing to further gains on Wall Street, with S&P 500 futures up 0.2pc and Nasdaq futures up 0.5pc.
Key resistance for the S&P/ASX 200 now lies at the 50-day moving average at 5950.
David Ross 11.47am: Lockdown 2.0 a more mild share hit
Shares may be teetering in flat trade, but investors are firmly risk off when it comes to Melbourne exposure. We look at who’s taking the biggest hit and how it compares to the blow from the initial nationwide lockdown:
- Crown Resorts is lower by 2.8pc to $8.70 as its Melbourne casino entered another round of lockdowns. The casino first shut on March 23, before briefly reopening for dining on July 1, but by July 8 dining at the venue’s restaurants was once again put to a stop. Today’s early drop is the stock’s lowest level since the end of April, though still well off its initial pandemic hit, which send shares down to $5.84.
- All the big four Banks and Bendigo & Adelaide bank are leading the market weakness, with ANZ the most seriously hit, last down 3.5 per cent.
- Myer is sliding 4.9 per cent to 19.5c as the market awaited the Victorian government’s announcement of which shops would be allowed to remain open – again still better than its March lows of 8.3c.
- Transurban, owner and operator of Melbourne’s CityLink, is down a more moderate 0.3 per cent, on fears of the impacts of increased restrictions of movements. Traffic volumes on Transurban’s Melbourne tollways slumped 53 per cent in the first round of lockdowns. Shares sunk to lows of $9.10 in March.
11.43am: CSL rally sends ASX into the green
Shares have staged a sharp reversal in the second hour – coming back from losses as much as 1.1pc to edge into the green.
The benchmark ASX200 was last up just 0.6 points or 0.01 per cent to 5928.4 – helped by a 3pc jump in CSL while miners too supported shares.
Weakness in the major banks continues however, with CBA down 1.8pc, Westpac lower by 2.8pc, ANZ off by 3.7pc and NAB by 3.1pc.
11.38am: ANZ job adds rise 16.7pc
ANZ’s survey of Australian job ads for July shows a 16.7 per cent month-on-month lift, adding to a 41pc surge in the previous month.
Still, senior economist Catherine Birch warns that the data only takes into account the start of the second wave of coronavirus in Melbourne, with further Victorian weakness to come.
#ANZ Aus Job Ads rose by 17% in July, building on June’s 41% rebound. But the second wave of COVID-19 cases and tightening of restrictions in Melbourne slowed the pace of gains, particularly in the second half of the month #ausecon @cfbirch pic.twitter.com/u3QUBQcs6R
— ANZ_Research (@ANZ_Research) August 3, 2020
11.30am: Online sales return to growth: NAB
NAB’s online retail index shows a mild return to growth last month, led by grocery, appliance and homewares sales.
The bank today released the indicator of online retail performance, showing a 0.2pc lift for the month, and higher by 49.6pc year-on-year after a considerable surge in online sales during the peak of the national lockdown.
Grocery and liquor sales continue to lead the index, recording growth in each month over the past year, while takeaway food had the biggest fall of each of the subcomponents this month.
“Our NAB online retail sales index data returned to more moderate growth in June, from the contraction in May and record growth in the two months prior,” chief economist Alan Oster said.
“While online sales growth is typically volatile month to month, the recent changes that COVID-19 has brought to the broader economy, and day to day life, has made it even more so.”
Nick Evans 11.17am: Rio suit shakes Monadelphous shares
Mining services contractor Monadelphous says it faces a $493m lawsuit from Rio Tinto over a fire at a Pilbara iron ore processing facility that blew a hole in Rio’s annual production hopes early in 2019.
Along with damage caused by Cyclone Veronica, the fire at Rio’s Cape Lambert port in January 2019 helped cut 14 tonnes from the company’s annual production guidance in 2019, adding to the woes of its flagship division.
Rio had previously blamed the fire, which ripped through an ore processing plant at its port facilities in the Pilbara, on hot metal from welding during a shutdown hitting a moving conveyor belt.
Monadelphous was conducting the maintenance work at the time, and said on Monday the mining giant had filed a writ in the WA Supreme Court alleging it was “in breach of the maintenance contract, thereby causing the fire”.
MND shares are sliding by 6.9pc to $8.30, while RIO adds 0.8pc to $102.80.
Read more: Rio suing Monadelphous for $500m
Ben Wilmot 11.01am: Vicinity’s Melbourne exposure a worry
Chadstone co-owner Vicinity Centres could be slugged by Melbourne’s move to stage 4 lockdown restrictions, with about half of its broader portfolio in Victoria, says Goldman Sachs.
Retail stores were permitted to stay open last month during stage 3 lockdown measures, but the analysts say even then there was a risk that retailers would voluntarily close during the lockdown period.
The analysts, Jeffrey Pehl, Ian Randall, Sam Watson, allowed for 12 weeks of rental abatement for Vicinity’s Victorian portfolio as a result of the stage 3 lockdowns, which it said captured the impact of the announced stage 4 lock down restrictions for metropolitan Melbourne.
Vicinity last month announced its June asset net valuations declined 11.3 per cent, the bottom end of its previous announced draft asset valuations range of 11 per cent-13 per cent representing a $1.79bn decline over the six-month period.
Investors have focused on the flagship portfolio – Chadstone, premium CBD and DFO outlets – which had a net valuation loss of 8.8 per cent.
Most concerning was Chadstone’s cap rate which softened, equating to a net valuation decline of $254m, or a 7.5 per cent drop, and a continued challenging environment could result in further asset valuation declines to this portfolio.
Goldman Sachs is allowing for further asset devaluations in Vicinity’s portfolio that imply a 13 per cent devaluation to June book values. However, its trading price suggests a 39 per cent devaluation of its portfolio and an implied cap rate of 9 per cent.
The analysts said a further 10 per cent and 20 per cent decrease in asset values would push Vicinity’s gearing levels to 29 per cent and 32.6 per cent respectively, still within its target gearing.
Goldman Sachs has a 12-month price target of $1.74 and has a buy rating.
Risks to that include a weaker-than-expected retail sales environment and development pipeline execution. Furthermore, weaker economic growth could affect occupier demand and impact valuations through weaker-than-expected market rent growth, it said.
VCX last traded down 1pc to $1.29.
Eli Greenblat 10.49am: Online retailers defy lockdown slump
Shares in retailers were hit hard in the opening hour of trade as investors feared a harsh statewide lockdown of retailers and shops in Victoria would come at the cost of sales and profits. Melbourne-based department store Myer one of the biggest losers with its stock down more than 6 per cent.
Victorian Premier Daniel Andrews is expected to announce today which stores can remain open, deemed essential, and which must close due to the growing COVID-19 pandemic with non-discretionary retailers such as those involved in fashion and apparel expected to be forcibly shut.
In morning trade Myer was down 6.34 per cent to 19.2 cents, Solomon Lew’s fashion vehicle Premier Investments down 3.28 per cent to $16.21, Adairs down 2 per cent to $2.43 and City Chic Collective down 2 per cent to $3.33.
Wesfarmers down 1 per cent to $46.04, Super Retail Group down 1 per cent to $8.79, JB Hi-Fi down 0.98 per cent to $45.22 and Harvey Norman down 1.6 per cent to $3.66.
Online retailers are expected to gain from the shut downs, they don't have physical stores to be shut, and Kogan.com was up 5.5 per cent to $17.58 and Temple & Webster up 1.59 per cent to $7.64.
David Ross 10.36am: Vic petrol demand slides: Viva
Viva Energy, owner and operator of the Geelong refinery, has warned Level Four lockdowns in Victoria sent petrol sales in the state down 25 per cent last month, compared to last year’s levels.
In comparison, sales across the nation were 11 per cent below July 2019 figures.
“The Company is closely monitoring the situation and assessing any further potential impacts on Victorian fuel sales and refining production as a result of these additional restrictions,” Viva said in a statement.
Victoria represents about one quarter of Viva’s national petrol and diesel sales volumes on both a retail and wholesale level.
According to the ACCC the earlier rounds of lockdowns in April saw national sales volumes fall 43 per cent on the same time last year.
VEA last traded up 1.6pc to $1.64.
10.29am: Lockdown-exposed stocks fade further
Retailers and service providers exposed to the lockdowns in Melbourne are leading early losses on the ASX, as Victoria spends its first day in Stage Four lockdown.
With the prospect of domestic travel now largely off limits, Qantas is losing 1.6pc, while Corporate Travel is down 4.8pc to $8.31, Webjet lower by 1.8pc to $2.78 and Flight Centre by 4pc to $10.17.
Retailer Premier Investments is lower by 3.6pc to $16.16, JB Hi-Fi down by 1.3pc to $45.10 and Harvey Norman slipping by 0.7pc.
Mall owners are surprisingly quite resilient today – perhaps due to heavy selling in the sector already – Vicinity, owner of Melbourne’s Chadstone shopping centre, is lower by 0.4pc while GPT Group sheds 0.3pc and Stockland is eking a 0.2pc lift.
ASX200 is trimming its early drop to 0.4pc
10.14am: Shares dive 1pc
Shares are headed lower by 1 per cent in early trade, as financials and consumer discretionary stocks drag.
The index dived 1.1pc to a 4-week low of 5863.8, with domestic cyclic stocks under pressure, particularly those more exposed to Victoria
In the major banks, Commonwealth is shedding 2.6pc, Westpac by 3pc, NAB by 3.3pc and ANZ by 3.9pc.
Tabcorp is lower by 3.1pc after earlier warning of a impairments as much as $1.1bn to come at its half year results.
Seek is also underperforming, down 2.9pc to $21.05 after ruling out a final dividend.
10.08am: iSelect takeover deal scrapped
Insurance and utilities marketplace iSelect says its has failed to strike a takeover deal with key shareholder Innovation Holdings, abandoning a 40c per share bid for the company.
In a notice to the market this morning, iSelect said it had been in discussions with IHA over the past month, but that the bidder had said it would not proceed as the two could not agree on various terms, including the material adverse change condition and any impact of COVID-19.
IHA remains a 28.7pc shareholder in the group.
Alongside the notice, iSelect also said it had made an underlying profit for the fourth quarter, despite disruption to its Melbourne office and the shift to work from home.
It said early signs were positive for July earnings of $1.5m, an improvement of $600,000 on the same time last year.
Rachel Baxendale 10.01am: Victoria records 429 new COVID-19 cases
Victoria has recorded 429 new coronavirus cases on Monday, as the state spends its first day in Stage Four lockdown.
The Australian also understands a double digit number of people have died with coronavirus in the state in the 24 hours to Monday.
While 429 would have been a record a fortnight ago, it is significantly below Thursday’s record of 723, as well as 627 on Friday and 671 on Sunday.
It also brings Sunday’s record seven-day average of 518 down to 504.
Premier Daniel Andrews is due to address the media later today regarding the shutdown of certain businesses and workplaces.
Mr Andrews’ office says his press conference is likely to be held “after lunch”.
Follow the latest at our live blog
9.41am: 7-Eleven buys US petrol stations for $21bn
Fuel maker Marathon Petroleum said it has agreed to sell its petrol stations to the owners of the 7-Eleven convenience-store chain for $US21bn in the largest US energy deal of the year.
The all-cash agreement with 7-Eleven comes less than a year after Marathon agreed to spin off its convenience-store chain, known as Speedway, under pressure from activist investors including Elliott Management Corp.
Findlay, Ohio-based Marathon had been close to a deal with Seven & I, the Japanese parent of 7-Eleven, earlier this year, but talks fell apart in March as the coronavirus pandemic took hold. Other suitors included Canada convenience store chain Alimentation Couche-Tard Inc.
“Our announcement crystallises the significant value of the Speedway business, creates certainty around value realisation and delivers on our commitment to unlock the value of our assets,” Marathon Chief Executive Michael Hennigan said in a statement.
Dow Jones Newswires
9.38am: What’s on the broker radar?
- Metro Mining cut to Hold – Argonaut
- OceanaGold rated new Overweight – JP Morgan
- Origin Energy raised to Buy – Morningstar
- Origin raised to Add – Morgans
9.33am: Stage 4 lockdown a downside risk
Australia’s share market has downside risk from economic jitters over Victoria’s worsening coronavirus pandemic and extended lockdown.
Friday night futures relative to fair value had pointed to a 0.2pc opening rise after the S&P 500 rose 0.8pc to a 7-day high of 3271.27.
But with Victoria moving to Stage 4 lockdown for at least the next six weeks and COVID-19 cases still rising in VIC and NSW, the prospect of a worse-than-expected economic impact could hit shares.
After falling 2.1pc to a 3-week low of 5927.8 on Friday, the S&P/ASX 200 may now be capped by this line and could test the bottom of its two-month trading range at 5720 in coming days.
The major banks, REITS, gaming companies, airlines and travel companies and other domestically-exposed stocks are vulnerable as earnings season gets underway.
On the flip side, the Australian dollar has not seen much reaction to weekend developments and the share market may be supported by expectations of greater stimulus.
CoreLogic house price data are due at 10am, followed by ANZ job ads at 1130am China’s Caixin PMI data at 1145am.
9.21am: Magellan restructures global equity funds
Magellan is set to consolidate its global equities offerings – bringing together the unlisted open-ended Magellan Global Fund, the listed open-ended Magellan Global Equities Fund and listed closed-ended Magellan Global trust.
The combined fund will have two unit classes, an open class and closed class, both of which will be traded on the ASX – with combined funds under management of $15bn.
Magellan said it would undertake a one-for-four entitlement offer to its unitholders post-merger, to subscribe for new Closed Class Units with an attached bonus three-year option.
“We believe that combining Magellan’s three core global equities trusts into a single, unified trust with a listed open class unit, which can also be transacted off-market, and a listed closed class unit is a groundbreaking innovation,” chairman Hamish Douglass says.
“We expect it will lead to simplification and efficiencies for unitholders and importantly should improve the trading price of closed class units.”
9.06am: SEEK rules out final dividend
Jobs classifieds group SEEK says it will not pay a final dividend for FY20, as it seeks to preserve capital to weather the coronavirus downturn.
The group said it had paid its interim dividend on July 23, but would hold off any final payout “to preserve capital in an uncertain environment to fund SEEK’s long-term growth strategy”.
The group also outlined its capital levels, noting that it had received the proceeds of its July $75m subordinated notes issue, and extended its debt maturity profile, with the earliest of its debt maturity now November 2022.
“The combination of our debt capital market transactions and the decision not to pay a final FY20 dividend increases our funding flexibility so we can continue to invest for the long term, even in this uncertain economic environment,” chief Andrew Bassat said.
“The dividend decision was not taken lightly but we believe it is the right trade-off to maximise returns for long-term shareholders. Once economic conditions improve, we intend to resume payment of dividends.”
9.01am: NextDC appoints Doyle to board
Data centre operator NextDC has appointed seasoned director Eileen Doyle to its board.
Dr Doyle currently sits on the boards of Boral and Oil Search, after appointments at GPT and State Super and more than 10 years of service to the CSIRO as deputy chair.
“We are very pleased to welcome Dr Doyle to the NextDC team and we look forward to her contribution, insights and learnings as we continue to scale the NextDC infrastructure business,” chairman Douglas Flynn said.
Imogen Reid 8.53am: Major setback for trans-Tasman bubble
New Zealand Prime Minister Jacinda Ardern has put off the possibility of a trans-Tasman travel bubble between New Zealand and Australia due to the developing situation in Victoria.
Ms Ardern said Australia would need to have 28 consecutive days with zero community transmission, something she believes will not be possible in the upcoming months.
Speaking to RNZ, Ms Ardern said the Victoria’s outbreak was a “major step back for trans-Tasman travel.”
“Obviously this is going to be some time away now,” she said.
“Anywhere where we have COVID-free travel they have to be free of community transmission for a period of time – that will be some time for Australia.
“It will be on the backburner for several months.”
The New Zealand Government has previously discussed the possibility of approving travel with Australia’s individual states and territories, but said they needed to be satisfied that restrictions on interstate travel were strictly enforced.
Read more: ‘We’re at war, every Victorian on the front line’
8.20am: Tabcorp set to take $1bn hit
Tabcorp says it is bracing for non-cash goodwill impairment charges in the range of $1bn to $1.1bn in its annual results as a result of the coronavirus pandemic.
It says the charges relate to the wagering and media and gaming services businesses.
Tabcorp also says it currently expects full year EBITDA, before significant items, to be between $990m and $1bn, down from $1.12bn in full year 2019.
Net profit after tax is expected to be between $267m and $273m, down from $396m last year.
Tabcorp says the impairment charges relate to pandemic lockdown measures, the “possible acceleration of retail contraction and uncertainty”, structural changes in the wagering and media business and the potential decline in consumer confidence and increased economic uncertainty.
It says the charges are non-cash and do not impact the company’s covenants with its lenders.
Tabcorp’s CEO, David Attenborough said: “COVID-19 has materially impacted our wagering and media and gaming services businesses.
“We are facing into a challenging and uncertain environment, and the current operating conditions and those expected into the future are relevant factors in assessing the value of the goodwill in those businesses at this time.”
He said Tabcorp remained “confident in the strength and resilience of Tabcorp’s diversified portfolio of assets”.
Tabcorp says final results, including the goodwill impairment charges, are subject to completion of audits and board review.
Read more: Tabcorp braces for annual loss, $1bn virus hit
8.10am: Regis targeted in cyber attack
Aged care operator Regis Healthcare says it’s been the subject of a cyber attack by an “overseas third party”.
It said it enacted back-up systems and the incident did not affect services. Nor was it materially impacting Regis’s day-to-day operations.
However the hackers had copied and released some personal data.
“Our priority is maintaining safe and reliable operations while ensuring the security of personal information of our residents, clients, and employees,” said CEO Linda Mellors.
“To this end, we are working with expert IT and security advisers to continue to investigate and deal with this incident.”
6.00am: Stocks set for flat open
Australian stocks are set for a steady start despite a positive lead from Wall Street and ahead of the Reserve Bank meeting and the start of earnings season.
The SPI futures index was this morning down just one point, or 0.02 per cent.
Wall Street stocks on Friday finished a choppy session higher after strong earnings from tech giants. The
Nasdaq led, gaining 1.5 per cent, while the Dow added 0.4 per cent and the S&P 500 gained 0.8 per cent.
Earlier on Friday, Australian stocks fell 2 per cent to a three-week low following Wall Street’s decline on news the US economy contracted by one-third in the second quarter – the worst decline on record.
The ASX still managed a 0.5 per cent gain in July.
Apart from the deepened coronavirus shutdown in Victoria, local focus this week will be on the RBA, which meets on Tuesday but which is not expected to move interest rates or its policy settings. However the RBA’s Statement on Monetary Policy on Friday may provide more clues to the RBA’s economic forecasts.
Retail sales figures on Tuesday are expected to shed some light on the impact of the reopening of parts of the economy in June.
Australian reporting season will click into gear later in the week, with the coronavirus pandemic expected to produce some shocking results.
In the US, attention will focus on negotiations on a new jobless support package and on Friday’s jobs report.
Elsewhere, China’s Caixin manufacturing index is expected to show another month of expansion in July.
The Australian dollar was this morning at US71.41c.
5.30am: Key US jobs data ahead
The July US jobs report, to be released on Friday, could be among the most politically consequential of the economic downturn caused by the coronavirus pandemic.
The labour market has swung wildly since the virus nearly halted the economy in mid-March. Consumer fear of infection and government-mandated shutdowns of businesses caused the loss of more than 20 million jobs in April, the largest decline in a single month in Labor Department records back to the late 1930s. Allowing employers to reopen and recall workers subsequently resulted in the best back-to-back months of hiring in May and June, with employers adding a combined 7.5 million jobs.
The July report will show whether the healing continued or sputtered amid rising COVID-19 cases and deaths, as some jurisdictions halted or rolled back reopening plans. The information could influence policy makers’ next steps, businesses’ hiring strategies, consumers’ confidence and voters’ moods.
If job creation in July continued anywhere near the May and June pace, and the unemployment rate extends a steep descent, it would send a bright message about the economy: The labour market is recovering rapidly, the need for further federal financial assistance is limited, and President Trump can tell an economic comeback story as he seeks re-election in November.
If job growth slowed, stalled or reversed in July, the takeaway would be darker, that a short and partial economic rebound is faltering. This could bolster arguments for extended government support and strengthen presumptive Democratic presidential nominee Joe Biden’s pitch for change in the White House.
Dow Jones
5.25am: Fed weighs moves to curb inflation
The Federal Reserve is preparing to effectively abandon its strategy of pre-emptively lifting interest rates to head off higher inflation, a practice it has followed for more than three decades.
Instead, Fed officials would take a more relaxed view by allowing for periods in which inflation would run slightly above the central bank’s 2 per cent target, to make up for past episodes in which inflation ran below the target.
“It would be a significant change in terms of how they are thinking about” the trade-off between employment and inflation, said Jan Hatzius of Goldman Sachs. “A lot of those things look very different now from the way they looked a few years ago,” he said.
Fed Chairman Jerome Powell hinted at the shift at a news conference last week when he said the central bank would soon conclude a comprehensive review of its policymaking strategy that began last year.
Mr. Powell initiated the review with an eye toward beefing up the Fed’s ability to counteract downturns in a world where interest rates are lower and more likely to remain pinned at zero.
Even before the severe shock from the coronavirus pandemic, the Fed had grown concerned about spells of low inflation that have bedevilled authorities in Japan over the past two decades and in Europe for the past decade.
The change being contemplated now is a way of essentially telling markets that rates will stay low for a very long time. Markets have likely already picked up on this change, given the continued declines in long-term interest rates.
The changes on their own will do little to provide more support to the economy right now because investors already understand that the Fed isn’t likely to raise interest rates for years, said Steven Blitz, chief U.S. economist at research firm TS Lombard. “It is a change at this point without meaning. It’s just words,” he said.
The Fed would formally adopt changes by altering a statement of long-run goals that it approves annually, something it last did in January 2019. “The changes we’ll make … are really codifying the way we’re already acting with our policies,” Mr. Powell said last week.
One way for the Fed to do that would be to amend that document to say inflation should average 2pc “over time.”
Dow Jones
5.20am: Wall Street recap
US stocks finished a choppy session higher on Friday after large tech companies reported strong earnings and Washington policymakers haggled over another round of fiscal support.
The tech-rich Nasdaq Composite Index led the major indices, winning 1.5 per cent to end at 10,745.27.
The Dow Jones Industrial Average added 0.4 per cent at 26,429.06, while the broadbased S&P 500 gained 0.8 per cent to 3,271.26.
Tech giants Amazon, Alphabet, Apple and Facebook all reported better-than-expected results after the market closed Thursday, validating surging valuations built on expectations the sector would be a big winner amid the pandemic upheaval.
Apple surged 10.5 per cent and Facebook won 8.2 per cent, both all-time highs. Amazon also climbed, while Google parent Alphabet ended lower.
“What’s good for these companies is not great for everybody else,” said Art Hogan, chief market strategist at National Securities.
Broad investor sentiment has been weighed down by worries over the state of negotiations over a follow-up to the CARES Act stimulus measure passed by Congress in March.
Supplemental unemployment benefits paid for by the measure that have been credited with boosting consumption amid soaring joblessness are set to expire Friday.
“Now that we’re coming back for an additional round, Washington politics as usual is taking hold,” Hogan said. “Both sides are arguing over things that they want, included in the next round. Neither side wants to give much.”
AFP
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.
ASX ends up 0.5pc; Brookfield enters Insignia battle; former Star CEO cops ban
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