ASX closes at 8-month high, Crown sinks
Stocks surged to close at an 8-month high amid expectations of further US gains, but Crown slumped on news of an AUSTRAC probe.
- Super funds return 2pc in September qtr
- Resolute CEO Welborn steps down
- Vic lockdown to slug property stocks
That’s all from the Trading Day blog for Monday, October 19. Australian stocks closed at an 8-month high and the Australian dollar hit a 2-day high amid US futures gains, after mixed leads from Wall Street. Crown shares sank after news of an AUSTRAC probe into the gaming company. Overall disappointing economic data from China cooled intraday gains as China’s share market turned down.
Don Stammer 8.21pm: Why investor outlook is improving
As the federal budget recedes into the distance as a news event, it is worth keeping in mind that the week of the budget saw the strongest gains in Australian shares since April.
Of course, other influences were at work, including the positive lead from US share prices despite that nation’s quirky politics. And for some time there’d been a developing view that economic conditions were “less worse” than market participants, the Reserve Bank and Treasury had earlier expected.
But the general reaction of investors is that the budget will have favourable effects on the Australian economy in these difficult times — a view supported also in the latest reading of consumer confidence, which rose by 11 per cent to its highest level since July 2018.
Investors who, in the gloomy times, adopted — and stayed with — “averaging in” strategies for share purchases have done well.
Seemingly, investors are unconvinced by the oft-made criticisms that the tax cuts will fail to lift the economy out of recession and that the projected $1 trillion of gross borrowing will cruel the economy for decades.
In my view, the balance of probabilities is that, despite many risks and uncertainties, the pandemic-induced global recession will end sooner than is generally expected, and the budget will contribute to Australia’s economic rebound.
Chris Griffith 8.03pm: Concern over cost of Covid tests
There is concern that as a fresh pandemic wave makes its way across the UK, US and Europe, residents including in some poorer countries are paying hundreds of dollars for coronavirus tests.
The Australian has heard directly that in some parts of Ukraine, tests are too expensive for some in the population.
In Hungary, hvg.hu reports that the government has newly capped the cost of privately requested coronavirus tests to HUF 20,000 ($90), in a country where a health worker might earn $500 per month. In early August the price was even more, about $136. The site says one hospital required payment of $438. People pay extra again to get results urgently.
Most of the cost is expected to be for laboratory processing of results.
It’s not just in Europe. The New York Times recently reported cases of US residents without health insurance being billed for large amounts for a coronavirus test - in one case $US2718 ($3840).
This is despite the US Congress passing a law requiring insurers to pay for tests, and the Trump administration covering uninsured people, the paper says.
The question is just how many countries are requiring citizens to pay for coronavirus tests, and to what extent the economic disincentive to be tested impacts the reported number of daily COVID infections in some countries.
It also means governments and the public in impacted countries will be less certain about where some infections are.
Perry Williams 7.53pm: John Laing sells Australian wind farms
John Laing has sold its Australian wind farms for $285m to domestic fund manager First Sentier Investors, adding to its local stakes in airports, water utilities and gas distribution companies.
The deal, foreshadowed by The Australian’s DataRoom column, includes John Laing’s six wind farms in South Australia, Victoria and Tasmania with a total generation capacity of 514 megawatts with 209MW controlled by the British firm.
First Sentier Investors, with $219bn in assets, was formerly known as Colonial First State Global Asset Management and owns a string of infrastructure assets in Australia including stakes in Brisbane and Adelaide airports, commercial rooftop solar provider CleanPeak Energy, NZ gas distributor FirstGas and Water Utilities Australia.
The race to buy the wind farms was between First Sentier and ICG with the bidders vying for a smaller portfolio after John Laing opted to exclude solar assets in its Australian business, including the Sunraysia solar farm and the Finley solar project, both in NSW.
John Laing is expected to sell the solar farms once they have been derisked for infrastructure investors amid ongoing volatility within the solar sector in Australia.
“Since acquiring interests in these assets during 2015-2018, John Laing has de-risked the portfolio, achieved key project delivery milestones and has been actively involved in putting in place off-take and new financing arrangements,” John Laing said in a statement.
John Durie 7.42pm: TWE chief sweats on China’s call on duty
TWE chief Tim Ford sweats on China’s wine import duty decision
Just over three months into his reign as Treasury Wine Estates boss, Tim Ford is wondering just whether the Chinese government will impose a temporary duty on his Penfolds exports to China with a decision deadline passing last weekend.
The 60-day time limit before interim measures can be taken expired on Saturday, so the Port Adelaide tragic had to nurse his wounds from the Richmond loss in the AFL, together with doubt over if and when Chinese duties will be imposed.
Ford’s team is working on the formal submissions to Chinese questions, which are due on November 16 pending a final decision any time thereafter.
At the same time, Ford is working on alternate distribution channels. These include a local distribution partner, a local bottler for low-end product that could be shipped across by the barrel, and even a Chinese equity stake in the local business.
Ford is pushing ahead with the separation of the Penfolds brands from the rest of the business, but officially has suspended the proposed end-of-year spin-off pending a resolution of the Chinese investigation.
The good news is that, despite the threat of duties as high as 80 per cent, by all reports Penfolds sales in China are going well as the local economy bounces back from the COVID-19 slowdown.
Nick Evans 7.34pm: CIMIC surges on Thiess talks closure
Shares in contracting giant CIMIC jumped after the company said it had finally closed long-running negotiations over the sale of half of its Thiess mining services business to Elliott Advisers, the British arm of hedge fund Elliott Management.
CIMIC shares closed up $1.72, or 8.2 per cent, at $22.59, making the company the biggest mover on the S&P ASX 200.
The sale, worth $1.7bn to $1.9bn in cash proceeds, according to CIMIC, will relieve some of the strain on the company’s balance sheet exposed by its need to unwind controversial supply chain financing arrangements that have previously caused concerns about the true state of its financial position.
Ben Wilmot 7.00pm: HomeCo recruits Kelly O’Dwyer
Former cabinet minister Kelly O’Dwyer is set to join the ranks of corporate directors after a sabbatical in the wake of leaving the world of politics ahead of last year’s tight federal election.
The one-time minister, who held portfolios ranging from jobs and industrial relations, revenue and financial services, and small business, as well as being assistant treasurer, left Canberra under her own steam, seeking more time with a young family.
But an invitation from shopping centre owner HomeCo, that is fast becoming an alternative asset manager as it spins off a real estate trust, has drawn her into the top ranks of corporate Australia.
John Stensholt 6.26pm: Andrew Forrest’s $20bn portfolio
Billionaire Andrew Forrest has made big headlines with his purchase of the iconic R.M. Williams brand, though it only accounts for about 1 per cent of his portfolio.
Forrest is best known for his Fortescue Metals Group, the iron ore business he has turned from a small concern into the so-called “third force” of Australian mining in less than two decades.
It has made him vastly wealthy, providing him with a fortune that allows him both to pour funds into one of the biggest charitable foundations in Australia and have a broad range of diversified investments.
R.M. Williams, that famous maker of boots, was purchased on the weekend by Forrest and wife Nicola’s private investment group Tattarang in a deal worth close to $200m.
“R.M. Williams is a quintessential Aussie brand with a long and proud history of high-quality Australian craftsmanship,” Forrest says. “To wear RMs is to wear the boots of the countless hardworking Australians that have come before us.”
There are also big expansion plans for R.M. Williams, which only has about 2 per cent of its revenue coming from outside Australia. For example, the British arm of the business only made an operating profit of about £100,000 from £4.8m revenue in 2019, accounts lodged in London with Companies House reveal.
Ben Wilmot 6.16pm: Signs of life on Oxford Street
Developer TOGA and funds manager AsheMorgan have lodged plans for major mixed use development on Sydney’s Oxford Street in a sign that investors will back the precinct’s recovery.
To be known as The Darlinghurst Collection, the project spans three heritage buildings along Oxford Street between Oxford Square and Taylor Square, and is being pitched as sparking a renewal of the precinct.
TOGA and AsheMorgan will put in commercial, retail and creative spaces and in a sign of confidence in a tourism recovery they are also planning a 75-room boutique hotel.
The pair have engaged Richard Francis Jones, design director of fjmtstudio to lead the architectural vision for the project.
TOGA has undertaken a series of inner-Sydney projects, including the adaptive reuse of the Crown Street Women’s Hospital into the Adina Apartment Hotel in 1994 and the current revitalisation of the Surry Hills Shopping Village into a mixed-use residential precinct, Surry Hills Village. It is also proposing a major hotel and office project in the tech precinct near Central Station.
AsheMorgan has a strong history in heritage rejuvenation programs, including the refurbishment of the TCB Building in Fortitude Valley Queensland and the Midtown office development in Brisbane CBD. It was also a bidder for the David Jones properties, but Charter Hall last week went into due diligence on that asset last week.
Perry Williams 5.25pm: Snowy Hydro boss: economy reopening ‘too slow’
Snowy Hydro boss Paul Broad has criticised the Victorian government for delays in opening up the state’s economy.
“I think it’s been massively too slow,” Mr Broad said on Monday. “I think NSW can be proud of the fact they’ve been able to manage this virus because we’re going to have to learn how to live with it.”
However, he said Victoria needs to now open up.
“The economy is hurting and we’re leaving a legacy for a generation or two to come after us. We can’t let the economy - while we need all the right precautions to make sure we’re doing the right thing - we’ve got to make the economy move.”
“If consumption of electricity is any guide to what is happening out there, activity is way down, so it is a concern for all of us.”
“Some of us have lived through a few recessions and it’s very uncomfortable.”
The federal government-owned Snowy operates the Red Energy and Lumo retail electricity brands and is planning the Snowy 2.0 expansion which aims to boost hydro capacity by 2025-26.
4.35pm: ASX closes at 8-month high
Australia’s share market rose strongly amid expectations of further gains on Wall Street after House Democrats set a Tuesday deadline for a pre-election fiscal stimulus deal and President Trump said he’s prepared to do more than $US1tn.
The S&P/ASX 200 index closed up 52 points or 0.9pc at an 8-month high of 6229.4 on a daily close basis after rising as much as 1.2pc to 6248.3 intraday.
While the index lost 14 points in the closing single price auction, it was another solid performance from the local bourse which has risen 7.6pc rise in the past 11 days.
S&P 500 futures were up 0.7pc in late trading, giving positive signs for Wall Street.
That outweighed a drag from China’s share market, which turned down after disappointing September retail sales and industrial production, although 3Q GDP beat the consensus.
Cimic surged 8.2pc after agreeing to sell half it’s mining services business - Thiess - to US hedge fund, Elliot Advisors, Lynas jumped 6.3pc after the US passed a law that may limit rare earths exports and South32 rose 4.3pc after its coal production beat estimates
Gains of around 1pc in the major banks, together with a 2.6pc rise in Qantas, a 2.3pc rise in Scentre Group and a 2.7pc rise in Eagers Automotive came after some easing of coronavirus restrictions in Victoria, but the Real Estate and Consumer Discretionary sectors underperformed.
Defensive growth stocks were strongest with Tech, Health Care and Industrials outperforming. Within those sectors, WisTech surged 4.4cp, CSL rose 1.7pc and Cochlear jumped 2.2pc, while the above mentioned gains in Cimic and Qantas boosted Industrials.
Diversified miners mostly lagged with BHP up 0.7pc, Rio Tinto up 0.1pc, while iron ore pure play, Fortescue Metals rose 1.1pc.
Crown Resorts dived 8.2pc on an AUSTRAC investigation into potential money laundering.
Lachlan Moffet Gray 3.57pm : NAB facing $15m fine
NAB could be hit with a $15m fine after a court found it accepted information to be used for home loan applications from third-party referees that did not have a credit licence, a practice unearthed during the Hayne Royal Commission.
In a federal court judgment handed down on Monday, NAB admitted it breached the National Credit Act on 521 occasions between 2013 and 2016 by failing to adequately police its “spot and refer” introducer program.
The program allowed individuals to receive a loan commission if the individual referred NAB to someone who then took out a mortgage.
However, national credit regulation prevented any individual who did not have an Australian Credit Licence from providing NAB with any more information than a customer’s name and contact details.
Read more: NAB facing $15m fine after court finds bank guilty of accepting referred loans
Lachlan Moffet Gray 3.18pm: Capex measures to benfit infrastructure, retail: Macq
Companies in the waste management, infrastructure, retail, utilities and potentially the telecom sectors are set to benefit from the budget’s capital expenditure measures, according to analysts at Macquarie.
In this month’s federal budget, the government introduced numerous capex measures for the next two financial years, such as the full expensing of capital assets acquired from October 6 and installed before June 2022, a tax loss carry-back scheme, and other incentives.
In a note to clients, analysts at Macquarie said the companies that will benefit the most for these measures are the ones that are capital intensive, have a high share of domestic assets, have longer duration assets, a strong balance sheet and recently paid cash taxes that could be “returned if full expensing causes a tax loss in FY21 or FY22”.
Given this criteria, the analysts believe the largest beneficiaries are likely to be listed infrastructure companies such as AusNet Services, Spark Infrastructure Group, APA Group and Aurizon Holdings.
They also believe that some waste management companies like Bingo and Cleanaway to reap the benefits, as well as some specific stocks like Mineral Resources, Adbri and Sealink Travel Group.
“As flagged at the FY20 result, SLK’s (Sealink Travel Group) FY21 capex guidance for Australia was $41m, with $28m for 72 buses and $13m for 3 vessels,” the analysts wrote.
“To the extent eligible, SLK is a natural candidate to potentially utilise the Budget’s capex incentives by bringing some capex forward for both Tourism & Marine and Australian bus.”
On a more micro level, the capex the measures will inspire in smaller businesses will flow-on to retailers of computers, cars, tools and office equipment.
The analysts flagged Wesfarmers, JB-Hi-F, Harvey Norman, Eagers Automotive and ARB Corp as listed companies that would benefit from a small business capex bonanza.
They also said that as capex measures only apply to companies with annual revenue under $5bn, telecom and utility players like Telstra, TPG and AGL Energy would miss out unless the cap was removed.
ABS Capital expenditure data for the next two quarters is set to be released on November 26 and then February 26.
2.50pm: A$, stocks fade after China data
Intraday gains in the Australian dollar and shares faded after China’s weaker than expected September retail sales and industrial production data, although Q3 GDP beat expectations.
AUD/USD slipped to 0.7084 from a 2-day high of 0.7108 just before the data were released.
The S&P/ASX 200 share index eased to 6230 after peaking at a 7.5-month high of 6248.3 just after the China data, but has recovered to be up 1.1pc at 6245.
China’s Shanghai Composite turned down 0.3pc after rising 1pc before the data.
WTI crude oil futures also reacted negatively, falling as much as 0.7pc to $US40.59 a barrel.
But S&P 500 futures are up 0.6pc after rising as much as 0.7pc after House Democrats set a Tuesday deadline for pre-election fiscal stimulus and President Trump said he would agree to more than $US1.8tn. Thus the global risk appetite has remained supported by hopes of US fiscal stimulus despite some worries about the pace of China’s economic recovery.
Ben Wilmot 2.40pm: Pub rent stoush heads to court
The long running stoush between the country’s largest listed pub landlord ALE Property Group and its tenant, the Woolworths-backed ALH Group, is back on despite appearing to have settled in September.
The pair have disagreed on rent increases that ALE claims are due on a series of pubs it owns in its $1bn empire which came up for review in 2018.
ALH, a unit of Endeavour Group, which is 85.4 per cent owned by Woolworths, with the remainder held by billionaire Bruce Mathieson, looked to have won out in September as the landlord was awarded only limited increases.
But now ALE has run to the Supreme Court of Victoria seeking declarations that rent determinations on 19 Victorian venues are not binding on the parties.
All up it owns 86 pubs run by ALH including famed properties like the Breakfast Creek Hotel and Melbourne’s Young & Jackson Hotel.
ALH’s Victorian operations have already been hit by the harsh coronavirus-related lock downs and the closure of many venues also brings the court case into sharp focus.
ALE said that following a “detailed review” of the 2018 rent determinations it considers that the determinations were “not made in accordance with the requirements of the rent review provisions of the relevant leases”.
The pub landlord said the valuer that made the determinations had erred by not taking into account an estimate of earnings before rent based upon “what a good average manger would have achieved in relation to each of the Victorian properties”.
It also claimed that the valuer took into account a submission from ALH when it was “not permitted” to do so.
The listed landlord is banking on the court giving it a better result than the valuer and is also acting so when rents are next reviewed in 2028 it is in a good position.
ALE said it expects that a court decision on the rents would be “relevant” to rent determinations which are due in eight years, when an uncapped and uncollared review is due for all properties where the tenant has exercised its option to renew the lease
for a further decade.
Cliona O’Dowd 2.25pm: Regional banks push to grab market share: S&P
The race for market share is about to heat up among Australia’s lenders as low interest rates and sluggish credit growth crimp margins, with regional banks facing stiffer competition than the big four, according to S&P Global Ratings.
Bendigo and Adelaide Bank, Bank of Queensland and Suncorp will need to carefully manage broker and digital strategies in the coming years to support growth as they battle to snatch market share from not just the major lenders but also foreign challenger banks HSBC and ING, which have the advantage of strong broker relationships and superior investment digital infrastructure, the ratings agency warned on Monday.
“Similar to the wider lending sector in Australia, regional banks will have to contend with lower credit growth over the next two years. In our view, their ability to manage broker and digital strategies over this period is imperative to success, with the sector becoming increasingly competitive and margins remaining constrained,” S&P said.
“We expect Australia‘s regional banks to continue ramping up spending on digital infrastructure to keep costs low and cast a wider net given an accelerated customer shift to online banking due to COVID containment measures.
“A focused third-party distribution strategy will help regional banks garner market share,” S&P said.
Investment in digital strategy by some regional lenders in recent years would underpin their growth prospects, with customers adapting to a more virtual operating environment in the post-COVID world, the S&P analysts said.
Ben Wilmot 1.34pm: Ian Ferrier to step down from Goodman
Goodman Group’s long-standing independent chairman Ian Ferrier has confirmed he will stand down at the coming annual meeting with director Stephen Johns to succeed him following the close of the meeting.
Mr Johns joined the board in 2017 as an independent director and chair of the audit committee and steps up after Mr Ferrier whose tenure as Goodman director began in 2003.
The move was flagged earlier this year and will see Mr Johns, who had extensive experience as a Westfield executive and director, take the helm.
Goodman’s $50bn logistics property empire has fared well though the coronavirus crisis but the group traditionally faces opposition to its hefty remuneration practices at its annual meeting.
Ben Wilmot 1.27pm: 360 Capital launches unit stock fund
Expanding alternative assets manager 360 Capital Group, which has taken stakes in companies ranging from wealth adviser Evan Dixon to residential developer Peet & Co., has briefly returned to its property roots.
The fund manager has launched a new unlisted vehicle, the 360 Capital Residual Stock Fund, to capitalise on the desire of cash-strapped developers to exit projects where unit sales have slowed.
360 Capital will assemble a parcel of loans secured against unsold units and townhouses, allowing developers to refinance completed residential projects.
The fund is seeking to raise up to $50m and will offer investors a target return of 6 per cent per annum distribution yield. The manager is aiming to build up exposure to a portfolio of well-secured, senior loans to completed, individually titled residential apartments and townhouses across major cities.
360 Capital said in coming months it also intends to repurpose the listed Velocity Property Group into a new entity called 360 Capital Finance Group.
The finance group will have three key business lines including commercial real estate lending, loan origination, and investment management of commercial real estate loans.
Once the entity is established, the group plans to transfer the running of 360 Capital Residual Stock Fund to 360 Capital Finance Group.
Will Glasgow 1.09pm: China’s economy grows by 4.9pc
Australia’s biggest trading partner China has almost reached its pre-COVID level of economic activity, after it grew by 4.9 per cent in the third quarter.
Packed cinemas screening patriotic blockbuster films, a dramatic recovery in domestic travel and steel mills that never stopped during the coronavirus outbreak have all contributed to China’s economic recovery.
“China has become the first major economy to return to its pre-virus growth path, thanks to its rapid containment of COVID-19 and effective stimulus response,” said analysts from Capital Economics.
After being the first hit by the coronavirus, quarterly GDP numbers released by China on Monday confirmed the world’s second biggest economy is now growing faster than any other major economy.
However, the growth in the three months to the end of September was slightly below analysts’ expectations. A survey of economists conducted by Reuters ahead of the release had forecast third quarter growth of 5.2 per cent.
The Washington-headquartered IMF last week said China would be the only significant economy to grow in 2020.
12.41pm: Asia stocks post early gains
Hong Kong stocks opened on a positive note, with investors keeping tabs on US stimulus talks.
The Hang Seng Index rose 0.73 per cent, or 178.64 points, to 24,565.43. The benchmark Shanghai Composite Index climbed 0.44 per cent, or 14.74 points, to 3,351.10, while the Shenzhen Composite Index on China’s second exchange added 0.67 per cent, or 15.14 points, to 2,280.57.
Earlier, Tokyo stocks opened higher with bargain-hunting purchases supporting the market, as investors closely watched developments over a fresh US stimulus package and the coronavirus pandemic.
The benchmark Nikkei 225 index was up 0.84 per cent, or 197.03 points, at 23,607.66 in early trade, while the broader Topix index rose 0.75 per cent, or 12.06 points, to 1,629.75.
AFP
12.05pm: ASX at seven and a half month high
Australia’s share market has surged to a 7.5-month high amid expectations of further gains on Wall Street.
The S&P/ASX 200 share index rose as much as 64 points or 1pc to 6240.20 just before midday, its highest point since March 5.
S&P 500 futures rose 0.6pc and Nasdaq futures gained 0.7pc after House Democrats gave a Tuesday deadline for talks on pre-election US fiscal stimulus and President Trump said he would agree to more than $US1tn.
The technology sector led broad-based gains with WiseTech up 5.8pc and Xero, Appen, Computershare, Altium, Bravura Solutions and Megaport up more than 2.2pc.
Health Care also outperformed with CSL up 2.1pc and Cochlear up 2.7pc.
Lynas surged 9pc, Cimic rose 4.7pc and South32 rose 4.5pc after its production report.
Fortescue rose 2pc and BHP gained 0.8pc while major banks performed in line with the market.
Crown Resorts was down 8pc after falling as much as 10pc on a money laundering investigation by AUSTRAC.
11.22am: Super funds return 2pc in September quarter
The median super fund in the “growth” category - 61pc to 80pc in growth assets - returned a solid 2pc in the September quarter, despite a slight retreat in September, according to Chant West.
“Share markets wobbled a little in September after rallying strongly for the previous five months,” says Chant West senior investment research manager, Mano Mohankumar.
“In the month of September, we saw the value of diversification come to the fore – just as we did during the market crisis in February and March.”
Australian and hedged international shares were down 3.6pc and 2.9pc respectively in September, but by having exposure to a wide range of growth and defensive asset sectors the median growth fund was able to contain the loss to just 0.6pc.
With share markets having regained momentum in October, Mr Mohankumar estimates that the median growth fund is up 2.5pc for the month to date and up an impressive 11.5pc since the end of March.
The median growth fund has now erased most of a 12pc loss experienced back in February and March.
10.51am: Crown sinks to six-month low
Crown shares fell as much as 7.7pc to a six-month low of $8.30 on news of the AUSTRAC money-laundering investigation.
The clean break below the August 3 low at $8.57 today is a very negative development on the chart.
It is currently finding support from the 38.2pc Fibonacci retracement of the March-June rise, at $8.35.
In the worst cast it could presage a retest of the March 16 low at $5.84, since $8.57 was the bottom of a major consolidation band that held since late April.
Crown is also in a major down channel and the bottom of that channel, currently at $7.40, could be tested fairly soon if the former support at $8.57 turns into resistance.
The 61.8pc Fibonacci retracement at $7.75 is also a potential support level on the chart.
CWN last down 6.3pc at $8.42.
Nick Evans 10.47am: South32 resumes share buyback
South32 has reinstated its share buyback program in a sign it believes its core markets are stabilising, as the company continues its reshuffle amongst the ranks of senior management.
South32 suspended its on-market buyback program in march as global markets tumbled as the coronavirus crisis hit, and chief executive Graham Kerr had said the company would not resume the program until it was confident it had built enough cash on its balance sheet to withstand any further market hiccups.
The company released its September quarter production report on Monday, saying it had built its net cash position by $US70m through the quarter, to $US368m at the end of September, despite the effects of the coronavirus pandemic on its markets.
South32 said the return of its South African manganese operations from pandemic movement restrictions helped lift manganese ore output by 19 per cent compared to the June quarter, to $1.46 million tonnes, with both metallurgical and thermal coal production both up by 20 per cent.
Mr Kerr said South32 expected to resume the remaining $US121m portion of its share buyback shortly.
10.25am: ASX opens 0.8pc higher
A positive share market reaction to Friday’s resilience on Wall Street has been magnified by light volumes and early gains in US stock index futures.
The S&P/ASX 200 rose 0.8pc to 6224.8 in early trading with the heavyweight banks, miners and health care stocks making the biggest contributions to strength.
The index exceeded a 0.6pc rise projected by Friday night futures, as S&P 500 futures rose 0.5pc after House Democrats set a Tuesday deadline for pre-election US stimulus talks and President Trump said he would agree to more than the $1.8tn package now on the table.
If the index ends the day above 6210.3 this will be the highest daily close for the Australian market in 7.5 months. So far it remains below last week’s high at 6233.4. Share trading volume was about 44 per cent below the 20-day average for this time of day.
Among heavyweight stocks, the major banks and CSL are up just over 1pc, while Cochlear is up 2.7pc , Fortescue is up 1.7pc, BHP is up 0.7pc and South32 has jumped 2.6pc after its production report.
By 10.30am, Crown Resorts fell as much as 5.9pc to a six-month low of $8.46 after revealing that it’s under investigation by AUSTRAC for money laundering.
10.15am: Crown shares down on AUSTRAC probe
Shares in Crown Resorts have lost ground in early trade on news AUSTRAC has identified potential non-compliance by its Melbourne operations.
AUSTRAC this morning flagged concerns relating to customer due diligence, as well as adopting, maintaining and complying with an anti-money laundering and counter-terrorism financing program.
Crown shares were last down 2.3pc at $8.78.
Ben Wilmot 10.04am: Lockdown to slug property stocks
Stock market investors are yet to fully factor in the impact of Melbourne’s second wave COVID-19 lockdown, which has drawn out for longer than initially expected, according to Morgan Stanley.
The broker’s analysts warned that Vicinity Centres and the GPT Group were the most impacted from a rent collection perspective and predicted that consensus earnings per share forecasts would be revised down.
They warned that after the extended closure period, some tenants may not have been able to survive such a duration without revenue, increasing vacancy risks across GPT’s and Vicinity’s malls.
“We think the street may be too bullish on the Melbourne-exposed stocks,” analysts Simon Chan and Lauren Berry said.
They cut forecasts for Vicinity’s funds from operations by 21 per cent to 7.2c per share for this financial year and trimmed GPT’s FFO for 2020 calendar year by 2 per cent.
Vicinity is half owner of Melbourne’s Chadstone Shopping Centre, alongside billionaire John Gandel, and GPT and its funds own Highpoint Shopping Centre.
For Vicinity, the analysts assume it will collect only 55 per cent of contracted rent in this half and three-quarters in the following half.
At GPT, they expect that 60 per cent of total retail rent will be collected in this half and 80 per cent in the following half.
But this may be offset by the “reopening trade”. “If Melbournians splash their pent-up cash at the malls post reopening, tenants’ ability to pay rent at the contracted level increases, leading to out-performance,” the analysts said.
They also warned of more difficulties in other sectors. “We have not made any office changes in relation to Melbourne, but there is perhaps slight risk to the downside on that front from smaller tenants,” the Morgan Stanley pair said.
On the residential front they said the HomeBuilder stimulus had offset the impact of the lockdown, although this may simply be reflecting the closure of some negotiations that had commenced prior to strict rules coming into place.
9.59am: Resolute CEO Welborn steps down
Gold miner Resolute Mining is on the hunt for a new chief executive after John Welborn stepped down from the top job after five years in the role.
CFO Stuart Gale has been appointed as interim chief executive officer.
“John has worked hard to reposition and transform the business over the past five years, and the time is right to introduce a new CEO to take Resolute forward, to deliver improvement in operational outcomes and resilience, and to deliver the next phase of sustainable value for the company,” chairman Martin Botha said.
“Under his leadership, Resolute has been active corporately to build its mining profile and dual-list on the London Stock Exchange.
“On behalf of the board I would like to thank him for his valuable contribution and wish him well in his future endeavours.”
9.47am: Derivatives firms fined for unconscionable conduct
Derivative issuer AGM Markets and former authorised representatives OT Markets and Ozifin have been ordered to pay a total of $75m in penalties after the Federal Court found the three companies had engaged in systemic unconscionable conduct while providing over the counter derivative products to retail investors.
According to a statement by the Australian Securities and Investments Commission, Justice Beach noted that as a result of the contravening conduct, clients of the three companies lost a total of about $32m, which translated to revenue earned by the defendants.
In one example, Justice Beach said that OT Markets account managers were instructed to “kill your customers”, which was a reference to the purpose of the defendants to encourage deposits and trades and ultimately for those clients to lose their funds.
“The serious nature of the contraventions and the need to send a clear message to the limited number of licensees who are dealing in OTC derivatives justifies high penalties,” he said in his judgment.
The three companies were also ordered to refund about 10,000 former clients, though the refund amount will depend on the individual circumstances of clients and the amount of money available, as each of the defendants are now in liquidation, ASIC said.
9.34am: What’s impressing analysts?
NAB target price raised 6pc to $21 - Bell Potter
Medibank Private cut to Hold: Morningstar
Nickel Mines raised to Outperform: BMO
Tyro target price raised 25pc to $5 - Bell Potter
9.22am: Ampol to be hit by virus slump
Petrol retailer Ampol says its third quarter results were hit by weaker volume and market conditions caused by lower demand compared to the second quarter.
Diesel volumes were down 10 per cent on the same quarter a year ago, according to unaudited results, while gasoline volumes were down 14 per cent on the previous corresponding period, impacted by the stage four travel restrictions in Victoria.
Jet volumes declined 64 per cent for the period, compared to the same period last year.
Meanwhile Ampol said its convenience retail division was strong with like-for-like shop sales up 11 per cent on the same period last year, reflecting favourable industry retail fuel margins, strong shop performance and solid management of controllable costs, which more than offset the impact of COVID-19 restrictions in Victoria.
“The resilient performance of our integrated business in the third quarter, particularly in convenience retail, was pleasing considering weak economic conditions and the continued impacts of COVID-19 on hydrocarbon demand,” chief executive Matt Halliday said.
“Our focus remains on optimising value across our integrated supply chain against prevailing market conditions to maximise value for shareholders.”
9.18am: Crown facing money laundering probe
AUSTRAC has identified potential non-compliance by Crown’s Melbourne operations, flagging concerns relating to customer due diligence, as well as adopting, maintaining and complying with an anti-money laundering and counter-terrorism financing program.
The concerns were identified as part of a compliance assessment that focussed on Crown’s management of customers identified as high risk and politically exposed persons.
AUSTRAC’s enforcement team has now initiated a formal enforcement investigation into the compliance of Crown Melbourne.
Crown said it would fully co-operate with AUSTRAC’s investigation and information requests.
9.17am: US futures jump, may boost ASX
US stock index futures have jumped in early Asian trading.
S&P 500 futures rose 0.4pc and Nasdaq futures gained 0.6pc.
This comes after US House Democrats set a Tuesday deadline for agreement on a fiscal package.
It suggests Australia’s S&P/ASX 200 index may rise a bit more than the expected 0.6pc.
9.11am: CIMIC sells 50pc stake in Thiess
CIMIC is selling a 50 per cent stake in mining services provider Thiess to fund manager Elliott for between $1.7bn and $1.9bn.
The transaction is expected to generate a pre-tax gain for CIMIC of around $2.2bn, and a post-tax gain of around $1.4 billion, subject to certain adjustments, the company told the ASX this morning.
The deal was flagged in The Australian’s Dataroom column last week.
“The sale agreement reflects Thiess’ ongoing strategic importance as a core activity for CIMIC,” said CIMIC chairman Marcelino Fernández Verdes.
“It capitalises on the robust outlook for the mining sector and, together with Elliott, we will pursue market opportunities in line with Thiess’ growth and diversification strategy.”
CIMIC will retain the other 50 per cent equity interest in Thiess under the deal, which remains subject to conditions including financing and regulatory approvals.
9.03am: ASX poised to rebound, $A under pressure
Australia’s share market is set to rebound while the Australian dollar may fall as bond yields remain under pressure amid expectations of RBA easing next month.
Overnight futures relative to fair value suggest the S&P/ASX 200 will rise 0.6pc to 6213.9, more than fully recovering from Friday’s 0.5pc fall to 6176.8.
A move back above 6200 would further challenge the view of investors expecting pullbacks from this previously-strong resistance level.
The index unexpectedly jumped on Thursday after a dovish speech from RBA Governor Philip Lowe.
Meanwhile the Australian dollar has come under pressure from narrowing interest rate differentials and may test support at 0.7000 while 0.7100 caps.
China’s 3Q GDP and September economic activity data are due at 1pm (AEDT) and RBA minutes on Tuesday should support the dovish narrative.
On Friday, the major US indexes lost 0.6-0.9pc in the final hour of trading, leaving the DJIA up 0.4pc, the S&P 500 flat and the Nasdaq down 0.4pc.
But US fiscal stimulus talks continued with over the weekend House Speaker Nancy Pelosi putting a Tuesday deadline to get a deal agreed.
President Trump said he was prepared to go higher than the $US1.8trn Republican lawmakers have offered, but Senate Republican remain opposed to a bigger package.
In commodities, spot iron ore rose 2.8pc to $US117.40, WTI crude rose 0.9pc to $US40.90, and spot gold fell 0.5pc to $US1899.3.
8.56am: Link board mulls takeover bid
Registry and superannuation administration company Link Administration holdings says its board is carefully considering a takeover offer by a consortium comprised of Pacific Equity Partners and Carlyle Group for $5.20 a share.
“The board is undertaking detailed consideration of the proposal, including obtaining advice from its financial and legal advisers,” the company said in a letter to shareholders this morning.
“The board’s focus remains on protecting shareholders’ interests, our people and continuity of Link Group’s services to its clients.”
Link received the takeover offer on October 12 and following discussions last week, received further correspondence outlining additional information on the potential scrip alternatives referred to in the proposal.
Ben Wilmot 8.50am: Kelly O’Dwyer to join HomeCo board
Former federal Liberal minister Kelly O’Dwyer has made her first major move in corporate Australia since leaving parliament last year, and will join the board of shopping centre owner and fund manager Home Consortium.
The former Turnbull government minister will face election at the company’s forthcoming annual general meeting as part of a broader shake up of the board, in which executive chairman David Di Pilla will make way for an independent chairman.
He will remain on the board and as managing director as HomeCo, backed by some of Australia’s wealthiest families, shifts gear by spinning off a new real estate trust for which it has raised $300m.
A resolution to appoint Ms O’Dwyer to the board will be put to securityholders at the annual general meeting on November 18 and, if elected, Ms O’Dwyer will be an independent non-executive director, resulting in a majority of independent directors on the HomeCo board.
Ms O’Dwyer was in parliament for over nine years representing the Liberal Party in the federal seat of Higgins. Elected at 32, Ms O’Dwyer was the youngest woman appointed to cabinet and the first woman to serve in cabinet in a treasury portfolio.
Ms O’Dwyer held a number of senior economic portfolios including minister for jobs and industrial relations, minister for revenue and financial services, minister for small business and assistant treasurer.
Prior to entering Parliament, Ms O’Dwyer worked in law, government and finance including as a mergers and acquisitions lawyer at Freehills and as a senior adviser to the federal treasurer Peter Costello. She also headed private and institutional wealth at the National Australia Bank.
Ms O’Dwyer said HomeCo had achieved a great deal since its IPO in 2019 and she was very pleased to be asked to be part of their growth into the future. Mr Di Pilla cited her leadership over her political career as being an asset to the board.
Existing director Christopher Saxon will become independent chairman from January 2021, resulting in HomeCo satisfying all of the ASX Corporate Governance Council principles and recommendations.
8.15am: Worley ‘strengthens liquidity position’
Worley says a Bank of England program has helped it increase its liquidity and further strengthen its balance sheet.
The global engineering company says it has been confirmed as an eligible issuer for the Bank of England COVID Corporate Financing Facility (CCFF) for a $540m commercial paper program.
Investment-grade rated companies that make a material contribution to the UK economy are eligible to participate in the facility.
“With the existing debt facilities and the CCFF, Worley’s sources of liquidity will provide the group with additional headroom to support business activities,” Worley told the ASX. “The CCFF will be used to provide additional liquidity and is currently unutilised.”
5.25am: ASX poised to start the week stronger
Australian stocks are set for a positive start to the week after a mixed lead from Wall Street.
At about 5am (AEDT) on Monday, the SPI futures index was up 39 points, or about 0.6 per cent.
The Australian dollar was lower at US70.80.
On Wall Street, optimism over positive economic data was tempered by a soaring US deficit and the prospect a new stimulus package is unlikely anytime soon. The Dow gained 0.4 per cent, the S&P 500 was essentially flat and the Nasdaq lost 0.4 per cent.
Locally on Friday, the S&P/ASX 200 fell as much as 0.7pc to a three-day low before closing down 0.5pc. Still, it rose 1.2pc for the week after surging 5.4pc during budget week, its best one-week gain in six months. The index is up 6.2 per cent for the month after shedding 4pc during the September pullback in global markets.
Locally, a highlight of the week will be the release on Tuesday of Reserve Bank minutes, which will be examined for more clues about the likelihood of a rate cut and more quantitative easing in November
On global markets, the US election campaign and negotiations over a US stimulus bill will continue to be major drivers, although new waves of coronavirus infections in some major economies will continue to weigh on sentiment. US earnings season continues with results expected from Tesla and Netflix.
Economists will study quarterly GDP data for evidence of the strength of China’s recovery.
6.00am: Pelosi sets relief deal deadline
House Speaker Nancy Pelosi told the White House it had until Tuesday to reach a deal with Democrats, or legislation to provide additional coronavirus relief to struggling households and businesses couldn’t be passed before the election.
“That depends on the administration,” Mrs. Pelosi said Sunday on ABC’s “This Week,” when asked about whether a deal could still be struck. The 48-hour deadline “only relates to if we want to get it done before the election, which we do,” she said.
If Tuesday evening passes without reaching an agreement, negotiations could continue, but would be unlikely to produce sweeping relief legislation worth trillions of dollars within the next two weeks, an aide to Mrs. Pelosi said. The election could create new political uncertainties that could make an agreement even harder to reach after November 3.
Republicans and Democrats have been sparring for months about a new deal. Some of the programs passed in the spring -- including the federal $US600 weekly supplements to workers who lost jobs -- have expired.
President Trump recently said he could support even more than the White House’s latest $US1.88 trillion proposal, though it isn’t clear Senate Republicans would get behind it. Mrs. Pelosi and Treasury Secretary Steven Mnuchin spoke Saturday night. After the conversation, her spokesman said there were an array of differences that still needed to be worked through.
AFP
5.55am: New China law to protect tech
China has passed a new law restricting sensitive exports to protect national security, a move that adds to policy tools it could wield against the US as tensions -- especially in technology -- continue to rise.
The law, which China’s top legislature passed on Saturday, comes into effect on December 1 and allows Beijing to “take reciprocal measures” against countries that abuse export controls and pose a threat to national security.
Technical data related to items covered will also be subject to export controls, according to the published text of the law.
Beijing’s latest measure gives it more room to hit back in US President Donald Trump’s war on Chinese tech firms, with the White House moving against popular platforms and major companies -- including apps TikTok and WeChat, tech giant Huawei and chipmaker Semiconductor Manufacturing International Corp.
The new law, “formulated to safeguard national security and interests”, adds to China’s regulatory toolkit which also involves a restriction catalogue of tech exports and an unreliable entity list.
“Where any country or region abuses export control measures to endanger the national security and interests of the People’s Republic of China, (it) may take reciprocal measures,” the law states.
It adds that Chinese authorities will formulate and adjust an export control list of items to be published in a “timely manner”.
Foreign individuals and groups can also be found liable for violating export control rules.
AFP
4.50am: Wall Street recap
US stocks ended the week mixed on Friday as optimism over positive economic data was tempered by a soaring US deficit and the growing realisation a new stimulus package is unlikely anytime soon.
Better-than-expected retail sales data and consumer confidence showed Americans remain willing to spend -- for now -- and shares were boosted by positive news about Boeing’s 737 MAX and drugmaker Pfizer.
The benchmark Dow Jones Industrial Average gained 0.4 per cent to finished an up-down week at 28,606.31, while the broadbased S&P 500 was essentially flat, rising just 0.1 per cent to end at 3,483.81.
But declines by industry titans like Amazon, Apple and Netflix reversed early gains in the tech-rich Nasdaq, which lost 0.4 per cent to close at 11,671.55.
US retail sales climbed 1.9 per cent in September, triple expectations, with purchases of cars and parts, clothing and sporting goods increasing dramatically, according to the Commerce Department report released before markets opened.
The data was a reassuring sign of the economy’s resilience after key provisions of the $2.2 trillion CARES Act preventing lay-offs and providing support to consumers expired in recent months.
Democrats and Republicans have been negotiating on another stimulus package but growing signs that nothing would be approved before the November 3 presidential election has sent indices closing lower in recent days.
However, separate data from the Federal Reserve showed industrial production in September declining for the first time in five months, losing 0.6 per cent as manufacturing and utilities fell.
Peter Cardillo of Spartan capital Securities said that shows the recovery was losing steam and the economy still needs stimulus.
“The market seems to be holding onto hopes that eventually we will get a stimulus plan,” he told AFP.
“I still think there is a possibility that we’ll get it before the elections even though it does not appear that way. It would make political sense for both parties to come up with a plan.” There were glimmers of optimism following market close yesterday with news Treasury Secretary Steven Mnuchin may yield to some Democratic demands on COVID-19 testing to get a stimulus deal passed.
Pfizer jumped 3.8 per cent and BioNTech rose 4.1 per cent after announcing they would seek emergency authorisation for their COVID-19 vaccine in late November.
Boeing rose 1.9 per cent after the director of the European Union’s aviation safety agency told Bloomberg the grounded 737 MAX aircraft was safe to fly again and could return to the skies by the end of the year.
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.