Trading Day: live markets coverage; Stocks end in red as Santos sinks; plus analysis and opinion

The local sharemarket came under pressure, with Santos diving 9pc after it snubbed Harbour’s takeover bid.

Trading Day The Australian markets

Welcome to the Trading Day blog for Wednesday, May 23.

Samantha Bailey 4.30pm: Stocks end in the red

The local share market finished the session lower for the fifth consecutive day, in the first five-day fall since mid-January when the index retreated from decade highs.

At the close of trade, the benchmark S & P/ASX200 had lost 9.371 points, or 0.16 per cent, to 6032.5 points. The broader All Ordinaries index had lowered 9.667 points, or 0.16 per cent, to 6140.2 points.

It comes after the market rose 7 per cent in six weeks before peaking at a four-month high of 6146.8 points.

“Lacklustre trading conditions today saw the market drift lower after initial positive impulse and it’s pretty clear that pressure caused by Santos’ rejection of a takeover bid Harbour Energy is one of the key factors at play,” said CMC Markets chief market strategist Michael McCarthy.

“Volumes here in the market here in Australia and across the region are anaemic, well below average rates and there’s not a great deal of commitment in the selling that we’re seeing today so it does look like a few weak hands are forcing markets across the region lower.”

Santos dived 8.39 per cent to $5.90 after its board’s rejected Harbour Energy’s $14.5 billion takeover bid.

Elsewhere in the energy sector, Origin Energy gained fell 1.41 per cent to $9.80 while Woodside Petroleum lowered 1.2 per cent to $33.80. Oil Search lost 1.87 per cent to $8.41.

The major miners were mixed despite a fall in the price of iron ore.

3.30pm: Phi Finney McDonald to pursue GetSwift

Law firm Phi Finney McDonald will take on the sole class action against software developer GetSwift after a Federal Court justice found it had a more “preferable” funding proposal than two competing actions.

The trio of class actions were seeking damages for shareholders following allegations GetSwift engaged in misleading and deceptive conduct by failing to inform the market of the loss of materially important contracts. Earlier this year shares in GetSwift, which was founded by former AFL player Joel Macdonald and offers software to help businesses manage logistics, fell 82.5 per cent to 51 cents — wiping $253 million from its market value. Competing class actions launched by Squire Patton Boggs and Corrs Chambers Westgarth were stayed on Wednesday — meaning they will not proceed in court — with Federal Court Justice Michael Lee concluding Phi Finney McDonald had a “clearly preferable” funding proposal.

“(It) is the clearly preferable of the three funding proposals as a matter of structure, having the advantage of producing a more direct correlation between the amount ventured and the likely return,” Justice Lee said in his judgment. Given there are no significant differences among the three proposed class actions, there is no reason why the claims against GetSwift cannot be supported in one proceeding, he said.

Justice Lee also said one class action should progress as the case is likely to settle and multiple proceedings would reduce the amount shareholders may receive.

He noted there was no difference in the experience or competence of the legal practitioners concerned, and said each team of legal representatives would be “more than competent” in the proceeding and would take “adequate steps” to devote sufficient resources to the task.

Phi Finney McDonald has been ordered to serve a statement of claim by May 28, while GetSwift will prepare a defence by June 6.

AAP

Samantha Bailey 3.15pm: Healthscope shares tumble

Shares in hospital operator Healthscope have shed more than 2 per cent as analysts remain cautious on the company’s earnings outlook but remain hopeful of a higher takeover bid.

It comes after the company rejected takeover bids from BGH — AustralianSuper Consortium and Brookfield, as it downgraded its earnings guidance and flagged a review of its property portfolio.

Analysts have maintained their ratings on the stock for now, but remain cautious on the company’s profit warning, which was flagged following issues at three of its hospitals and softer-than-expected trading conditions.

Morgan Stanley analysts lowered their price target on the stock from $2.36 to $2.23 on the back of the news but maintained the equal-weight rating on the stock.

2.30pm: Woolies to inject ‘rationality’ into pricing

Woolworths supermarkets boss Claire Peters has confirmed that the supermarket price wars are here to stay, telling the Australian Food and Grocery Council conference in Melbourne this morning that the nation’s biggest chain is squarely focused on lowering prices.

Price will still be important, Ms Peters said, both to Woolworths and it’s customer offer.

“Good pricing remains central to our plans,’’ she told a room full of food and grocery manufacturers.

However, Ms Peters also said Woolworths (WOW) would be injecting some “rationality” back into pricing of some foods and grocery products as it reacted to changes in Coles pricing and tweaked its own pricing plans.
Read more

Samantha Bailey 2.00pm: SeaLink brushes off takeover bid

Ferry operator SeaLink Travel says it has rejected an unsolicited takeover bid.

SeaLink did not identify the bidder but said: “The board carefully considered the proposal together with its financial advisers and unanimously decided to reject it, having concluded that the proposal undervalues SeaLink and that the board would not be in a position to recommend the proposal to its shareholders.

“The proposal was subsequently withdrawn.”

SeaLink (SLK) told the ASX the unsolicited, indicative and non-binding proposal for 100 per cent of SeaLink was for a cash consideration of $4.75 a share.

“The board of SeaLink recommends that shareholders take no action in respect of the proposal and the board considers that SeaLink is well positioned to continue to deliver strong growth,” its statement said.
Read more

Scott Murdoch 1.30pm: CBA divvies up advisory work

Commonwealth Bank seems to be keeping all of the major investment banks on side at the moment, by sharing around its advisory work to most of the top firms.

Citigroup was appointed to run the sale of CBA’s 37.5 per cent of BoComm, a joint venture with China’s Bank of Communications, for $668m.

The stake was offloaded to Japan Mitsui’s Sumitomo.

CBA had Citi carry out the advisory work on the sale and King & Wood Mallesons picked up the legal work for the transaction.

CBA is working with JPMorgan on the likely Colonial First State Global Asset Management (CFSGAM) float which is expected to occur before the end of the year.

JPMorgan also advised CBA on the $3.8 billion sale of the bank’s life insurance business to AIA.

The appointment of KWM on this deal has been noticed in legal circles, as CBA diversifies the firms it is calling on.

CBA has traditionally worked mainly with Herbert Smith Freehills (HSF) but that seems to be changing.

The bank appointed Clayton Utz to advise it on the Royal Commission while Minter Ellison is helping it to prepare for the upcoming Banking Executive Accountability Regime (BEAR) changes.

Paul Garvey 1.00pm: Santos has hit back at Harbour

Santos has hit back at Harbour Energy claims it has limited growth prospects in the wake of the Adelaide oil and gas company’s rejection of Harbour’s $14.5 billion bid.

And sources close to Santos say part of the Harbour bid plan included the need for most of the Santos management team to market the transaction to raise debt capital before shareholders had voted on the deal.

“PNG LNG expansion, Barossa Backfill to Darwin LNG and the Narrabri Gas Project can all be funded out of free cash flow at around $US60 a barrel,” a Santos spokesman said today.

The Santos team has bristled at Harbour’s firey response to the rejection, in which it claimed due diligence was disappointing and that Santos had essentially agreed to complexities around hedging that it later used as a reason to reject the bid.

A source close to Santos said the deal would have been unfair to Santos’s 120,000 shareholders.

“Harbour came to the table with only about a third of the money it needed to buy Santos and they wanted Santos shareholders to help them stump up with the rest,” the source said.

11.47am: S & P/ASX 200 hits fresh 3-week low

The local share market has tentatively broken yesterday’s low at 6028.5.

The S & P/ASX 200 fell 0.3pc to a fresh 3-week low of 6026.1.

That was consistent with US stock index futures which fell as much as 0.3pc.

If the S & P/ASX 200 ends down it will be the first 5-day fall since mid-January.

11.30am: ASX slides as Santos dives

Well that didn’t last long — the Australian share market has fallen 0.2pc to 6031.7, and is now close to the 3-week low of 6028.5 it hit yesterday, after initially rising to 6056.6 this morning.

S & P 500 futures have turned down 0.2pc, taking some heat out of the Aussie share market.

Santos is the biggest detractor from the index, down 9.4pc at $5.83 after rejecting Harbour Energy’s advances.

CSL is down 0.9pc after forming a bearish key reversal pattern yesterday.

CBA is down 0.4pc at $69.97 and is heading for its lowest daily close since 2016.

In fact CBA is now only 1pc above its 2016 low at $69.12, a break of which would give a 5-year low. It comes as the third round of the banking royal commission continues. For more on this, go to our live royal commission blog.

Woodside is down 1.5pc despite buoyant crude oil prices, after more than doubling its planned Pluto LNG expansion.

Aristocrat is down 2pc at the Australian dollar starts to bounce.

BHP, Rio Tinto, Telstra and Macquarie are lending some support.

11.01am: Santos sinks after takeover rejection

Santos shares are down close to 9pc after it last night rejected a takeover bid from Harbour Energy.

After resuming trade at 11.00am, Santos shares dived 8.7pc to $5.88 — the lowest level since April 10.
Read more

Matt Chambers 10.45am: LNG shortfall within 2 yrs: Woodside

Woodside chief Peter Coleman says a global LNG shortfall that many were expecting to take until the mid 2020s to happen now looks likely to occur within two years.

In its investor day in Sydney today, Woodside dramatically boosted its demand forecasts that were presented at its February results as non-Chinese Asian demand gathers pace.

The result is that Woodside now sees a supply gap starting to open in 2020. In August Woodside said the gap was expected in around 2023.

“Consensus has come back to 2021 andwe think it could be as early as 2020,” Mr Coleman said.

“The supply-demand gap is becoming critical today.”
Read more

10.30am: Stocks in positive territory

The local sharemarket is slightly higher in early trade with telcos pushing the bourse higher.

At about 11.20am (AEST), the ASX 200 had put on 11.129 points or 0.18 per cent to 6053 points.

Telstra rebounded 1.09 per cent, following recent weakness on the back of speculation of a lower dividend as competition puts pressure on its margins.

Materials and financials sectors were also in the black, with BHP up 0.95 per cent while Rio was 0.73 per cent higher.

The lift in major miners came despite low steel prices prompting weaker demand for iron ore and a 0.6 per cent fall in the spot price overnight to $US64.50 a tonne.

In financials, Commonwealth Bank edged 0.09 per cent lower while Westpac gained 0.67 per cent. ANZ was up 0.61 per cent while NAB was 0.06 per cent higher.

It follows mixed offshore leads overnight, with European markets up but Wall Street finishing the session lower.

Elsewhere, Sirtex shares were down 4.73 per cent at $28.42 after suitor Varian overnight said it would not submit a counter proposal to the $1.87bn offer made by Chinese group CDH Genetech.

Santos is due to resume trade at 11.00am and will be closely watched after it rejected Harbour Energy’s $14.5 billion takeover bid last night.

Michael Roddan 10.26am: Bouris-led YBR taken to court

The mortgage broking group led by Celebrity Apprentice Australia host Mark Bouris has been taken to court by a former business partner over an earn out dispute.

Yellow Brick Road announced today that it had been served with a suit over earn-out provisions in a deal struck with non-bank lender Resi Mortgage, which it took over in 2014 for a price of $36 million.

As part of the deal, an earn-out amount of up to $2.5 million in cash was agreed to be paid by Yellow Brick Road to the owners of Resi after a year of ownership if the business performed well.

Resi foundational shareholder Peter James was made the head of lending for the YBR-owned business once it was subsumed, but left the business in 2016 after a difference of opinion with the new parent group. At the centre of the departure was the earn-out dispute between Mr James and YBR over what was described as a perceived changed of conditions.
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Matt Chambers 10.15am: Woodside boosts Pluto LNG expansion

Woodside Petroleum has boosted the size of its planned Pluto LNG expansion and associated offshore Scarborough gas development, raising the expected cost to $US11 billion, from previous estimates of between $US8.5bn and $US9.7bn.

The increased capital costs come after Woodside said it would increase the size of a second LNG production unit, or train, planned at Pluto, on Western Australia’s Burrup Peninsula as it looks at the potential to help develop third-party fields in the offshore Carnarvon Basin.

The train is now planned to have annual capacity of between 4 million and 5 million tonnes of LNG a year, up from previous plans of either a train with annual capacity of 2 million tonnes or one with 3.3 million, Woodside said in presentations slides filed ahead of an investor briefing in Sydney today.

A final investment decision is planned for 2020.

9.55am: S & P/ASX 200 set for fifth-consecutive fall

Australia’s share market looks set for its fifth consecutive daily fall after bearish key reversal/engulfing patterns on the US market.

If so this will be the longest unbroken string of falls in the local market since mid-January when it was retreating from a decade high of 6150.

The fall earlier this year ultimately hit a 6-month low of 5724.8, a fall of almost 7 per cent from peak to trough, and it could be happening again.

While the S & P/ASX 200 has fallen as much as 1.9pc in the past 6 days, it’s currently up 1pc for May.

But it normally falls 4.3 per cent over May-June due to corporate “confession season”, ex-dividend falls in banks, and tax-loss selling before financial year end.

It won’t be helped today by a likely sharp fall in Santos after it spurned a $14.5bn bid from Harbour Energy.

Sources said Santos is instead putting together a debt-laden $3b bid for Quadrant Energy.

Index last 6041.9.

Samantha Bailey 9.37am: AACo swings to heavy loss

Australian Agricultural Company has delivered a heavy full-year loss partly driven by challenging seasonal conditions resulting in higher input expenses.

Unveiling a statutory net loss after tax of $102.6m for the 12 months to March 31, compared to a net profit after tax of $71.6m last fiscal year, the company said it suffered increased competition, reduced volumes and increasing costs due to dry weather conditions.

The result included a one-off non-cash impairment of $69.5m and a provision for an onerous contract of $5.4m, following a review of the carrying value of its Livingstone Beef processing facility near Darwin.

The company did not declare a final dividend, in line with last year.

Earnings before interest, tax, depreciation and amortisation fell 127 per cent to a loss of $35.3m, due to investment in “building the herd”, which lead to a $67.0m decline in revenue for the 2018 financial year, combined with a higher Australian dollar and increased input costs due to dry weather conditions, the company said.

It comes after the company issued a profit warning in April, flagging an EBITDA loss within the range of $30m and $40m.
Read more

9.30am: CBA sells stake in Chinese life insurer

Commonwealth Bank of Australia has sold a 37.5 per cent stake in a Chinese life insurer for 3.2 million yuan ($670m).

CBA said it will sell the interest in BoComm Life Insurance Co. Ltd. to Japan’s Mitsui Sumitomo Insurance Co., assuming it can secure the support of Chinese regulators.

“This transaction represents a further step in simplifying and focusing our portfolio and follows the announcement of the proposed sale of the group’s life insurance businesses in Australia and New Zealand to AIA Group, and the strategic review of the group’s life insurance business in Indonesia,” chief executive officer Matt Comyn said.

CBA said it expects to make an after-tax gain of around $450m on the sale. It added that net proceeds after making a capital contribution to BoComm will boost its CET1 capital buffer by 13 basis points.
Dow Jones
Read more on this from banking reporter Michael Roddan

9.20am: Broker rating changes

CSL cut to Hold — Wilsons

BWX cut to Hold — Shaw & Partners

Growthpoint started at Neutral; $3.20 target price — JPM

OFX cut to Neutral; $1.83 target price — Macquarie

Santos cut to Sell; target price $5.30 — Citi

Supratim Adhikari 9.00am: Optus hit with $1.5m fine over NBN

Optus has been slugged $1.5 million for trying to force customers onto the National Broadband Network, with the Federal Court taking the telco to task for misleading its customers.

The telco came under scrutiny last year after reports that it was telling customers that their broadband service would be disconnected unless they moved to the NBN as soon as possible and that they had to sign up to Optus’ NBN services.

According to the Australian Competition and Consumer Commission, Optus had mislead around 14,000 customers and made around $750,000 as a result of its conduct.

With Optus entitled to compensation from NBN Co for every customer that moves from the telco’ existing Hybrid Fibre Coaxial (HFC) to the NBN, the telco pressured its customers to switch by giving them a false time frame within which their service would be disconnected.

Customers switching to the NBN have up to 18 months to move their service once NBN Co announces an area is ready for service. They can also sign up with any retail service provider for their service.

8.55am: Stocks to watch

Australian Agricultural Company — The Australian Agricultural Company releases its full year results on Wednesday.

BWX — BWX Shares in personal care products marketer BWX rose 35 per cent on Tuesday, after the company received an $810 million buyout bid from senior managers teamed up with private equity player Bain Capital.

Northern Star, Newcrest Mining, Evolution — Gold prices have steadied just above their lowest point for the year as the US dollar fell from a five-month high, although risk appetite in the broader financial markets kept the metal’s gains in check.

Woodside, Santos, Oil Search, Origin — Brent crude prices settled slightly higher on Tuesday after a volatile session in which potential supply concerns surrounding Venezuela and Iran jockeyed with comments from President Donald Trump, who said he was not pleased with US-China trade talks.

AAP

8.29am: Bank deregulation bill passes US congress

Congress took a big step Tuesday to relax a wave of crisis-era restrictions placed on financial firms, as the House approved a plan to ease rules for small and midsize banks.

The House voted 258-159 to approve the most significant bipartisan revamp of financial rules since Republicans took control of government last year. Thirty-three Democrats sided with Republicans to pass the bill.

The measure now advances to President Donald Trump for his signature, setting off a wave of deregulatory actions by federal agencies that will ease — but not dismantle — the 2010 Dodd-Frank financial law, which sought to prevent another financial crisis. The legislation leaves untouched most of Dodd-Frank’s major planks, such as emergency government powers to take over failing financial firms and curbs on derivatives and bank trading. These provisions are expected to remain in place for years to come.

The bill could encourage deal-making and make it easier for banks to expand. The Senate passed the legislation in March on a 67-31 vote, with support from 17 members of the Democratic caucus.

Dow Jones — Read more

8.20am: Oil prices mixed amid supply concerns

Brent crude prices settled slightly higher on Tuesday after a volatile session in which potential supply concerns surrounding Venezuela and Iran jockeyed with comments from President Donald Trump, who said he was not pleased with US-China trade talks.

Brent futures rose 35 cents to settle at $US79.57 a barrel, a 0.44 per cent gain. Last week, the global benchmark topped $US80 for the first time since November 2014.

US West Texas Intermediate (WTI) crude futures fell 11 cents to settle at $US72.13 a barrel, a 0.15 per cent loss. They earlier touched $US72.83 a barrel, the highest since November 2014.

Futures pulled back from session highs in afternoon trading after Trump said he was not pleased with recent trade talks between the United States and China, but kept the door open for further negotiations.

Reuters

8.05am: Gold steadies as US dollar rally ends

Gold prices have steadied just above their lowest point for the year as the US dollar fell from a five-month high, although risk appetite in the broader financial markets kept the metal’s gains in check.

The US dollar lost momentum after a rally sparked by rising US bond yields and the prospect of a resolution to US-China trade tensions.

“Gold is tracking the dollar and the dollar is a little weaker today,” said Rob Haworth, senior investment strategist for US Bank Wealth Management. A weaker US dollar makes dollar-priced gold cheaper for non-US investors. Spot gold was flat at $US1,292.51. US gold futures for June delivery settled up $US1.10, or 0.1 per cent, at $US1,292 per ounce.

Reuters

Matt Chambers 8.01am: Rio edging closer to a Grasberg sale

Rio Tinto appears to be edging closer to a sale of its stake in the controversial Grasberg copper and gold mine in Indonesia, with the miner saying talks over price are ongoing but not ruling out reports it could get $US3.5 billion from the government for the stake.

The value of the stake, which is currently a share of production that will turn into a 40 per cent stake in the 2020s, has been hard to value.

But it is safe to say that a sale of that magnitude would be seen as a win for Rio (RIO) chief Jean-Sebastien Jacques and that with Rio’s net debt where the company wants it, funds could be expected to go back to shareholders.

“Rio Tinto notes reports of the potential purchase by PT Indonesia Asahan Aluminium (or Inalum) of Rio Tinto’s entire interest in the Grasberg mine in Indonesia for $US3.5bn,” Rio said.

Read more

Matt Chambers 7.35am: Harbour urges Santos vote on bid

Spurned Santos suitor Harbour Energy is not going away, issuing a fiery response to the rejection of its $14.5 billion bid last night and saying shareholders should be given the chance to decide on the bid for themselves.

Harbour, which today said its five-weeks of due diligence revealed some disappointments and that it thought Santos had limited growth options, is ready to re-engage if the Santos board changes its mind.

Santos last night said it had rejected the $US5.25 ($6.95) per share Harbour offer as too low, too complicated in its hedging demand, exposing shareholders to currency risk and as not treating all shareholders equally.

Santos shares (STO), which closed yesterday at $6.44, are expected to slump this morning on the rejection, but, thanks to the oil price and operating and balance sheet improvements, no where near the $4.38 price the stock was at in November when Harbour’s interest was made public.

Read more

Scott Murdoch 7.16am: Quadrant play foils Harbour bid

Santos is putting together a $3 billion bid for Quadrant Energy and the prospective debt-laden deal was a major reason for its rejection of Harbour Energy’s $14.5 billion bid.

DataRoom understands that Santos has approached banks to put together a funding package to help buy the West Australian energy company’s assets.

The deal would also be reliant on Santos (STO) carrying out a major rights issue and taking on a large package of debt, even though that was a sticking point in its Harbour Energy discussions.

Santos chairman Keith Spence is reportedly keen to capitalise on the company’s bolstered share price which has risen sharply since Harbour emerged as a potential buyer earlier this year.

Mr Spence is expected to face pressure today to explain to major shareholders the reasons for Santos knocking back the $US5.21 per share bid which was supported by a number of institutions.

Read more

7.24am: Stocks set to dip at open

The Australian share market is expected to open broadly flat, pulled in opposite directions by falls on Wall Street and gains in base metals prices. At 7am (AEST), the Australian share price futures index was down four points, or 0.07 per cent, at 6,043 points.

In the US, the Dow Jones index closed 0.7 per cent lower after US President Donald Trump raised doubts about US-China trade talks and the North Korean summit.

Trump said the China trade talks “were a start” and that there was no deal with China on ZTE Corp.

The Australian sharemarket on Tuesday posted its largest daily fall in seven weeks due to weakness for Telstra, the major banks and mining giants. The benchmark S & P/ASX200 was down 42.6 points, or 0.7 per cent, at 6,041.9 points, while the broader All Ordinaries index was 40.3 points, or 0.65 per cent, at 6,149.9 points.

In economics news on Wednesday, Reserve Bank Governor Philip Lowe speaks at Australia-China Relations Institute.

In equities news, the Australian Agricultural Company releases its full year results, and Woodside Petroleum holds an investor briefing.

AAP

Ben Butler 6.46am: New UK bribery charges related to Leighton Iraq pipeline

The UK’s Serious Fraud Office has laid new bribery charges against two Unaoil executives over a $US730m Iraqi government contract to build oil pipelines won by Australian company Leighton in 2010.

Unaoil’s Iraq partner, Basil Al Jarah, has been charged with two counts of conspiracy to give corrupt payments and the Monaco-based company’s Iraq territory manager, Ziad Akle, faces one count of the same offence, the SFO said in a statement.

The charges, which follow an SFO investigation assisted by Australian Federal Police, add to similar charges laid in November against the two men over Iraqi government contracts won by another Unaoil client, SBM Offshore.

Former SBM executive Paul Bond, who lives in France, and former SBM and Unaoil manager for Iraq, Kazakhstan and Angola Stephen Whiteley, who lives in Scotland, were also charged with corruption offences by the SFO in November.

Mr Al Jarah and Mr Akle, who both live in the UK, are to appear before Westminster Magistrates’ Court on 23 May 2018.

The Australian Securities and Investments Commission is also investigating Leighton, which is now in the hands of China’s CIMIC, over bribery allegations.

In January last year ASIC charged former Leighton chief financial officer Peter Gregg and another former senior Leighton executive, Russell Waugh, with falsifying the company’s books. They are to face trial in the District Court in Sydney in October.

6.43am: Local dollar dips against greenback

The Australian dollar is slightly lower after Wall Street fell, weighed down by comments from US President Donald Trump about the US-China trade talks. At 6.35am (AEST) on Wednesday, the local currency was worth US75.76c from US75.88c on Tuesday.

The Dow Jones index closed 0.7 per cent lower after US President Donald Trump said the China trade talks “were a start” and that there was no deal with China on ZTE Corp.

Trump has adopted a more conciliatory stance in the China talks as North Korea, whose chief ally is Beijing, has called into question a summit planned for next month in Singapore.

AAP

6.35am: US stocks slip amid trade talks

US stocks slid Tuesday, giving up some gains a day after waning concerns about trade tensions between the US and China helped send major global indexes to their highest close in months.

Shares waffled between small gains and losses for most of the session before turning lower in the final 90 minutes of trading. Industrial stocks — which powered Monday’s rally after Treasury Secretary Steven Mnuchin said the US would suspend its efforts to apply tariffs to $US150bn in Chinese imports — were among the biggest losers.

Boeing was the biggest drag on blue chips, falling 2.5 per cent, while Caterpillar dropped 1.7 per cent.

The Dow Jones Industrial Average fell 179 points, or 0.7 per cent, to 24834, after rising Monday above 25000 for the first time since March. The S & P 500 fell 0.3 per cent, and the Nasdaq Composite dropped 0.2 per cent.

Financial stocks, meanwhile, were a bright spot, climbing 0.6 per cent in the S & P 500. Those shares rallied as the House was expected to vote on a bill that would relieve small and regional lenders from a number of restrictions tied to the 2010 Dodd-Frank financial-overhaul law. If the bill becomes law, it would drastically cut the number of banks subject to heightened Federal Reserve oversight by raising a key regulatory threshold to $US250bn in assets from $US50bn.

Dow Jones

6.38am: US and China work on ZTE rescue

The United States and China are working toward an agreement that would ease US sanctions that were imposed on ZTE Corp. and let the Chinese telecommunications giant stay in business.

President Donald Trump said Tuesday that the deal might require ZTE to revamp its board and to pay a fine of $1 billion or more.

The ZTE talks occur after the US and China over the weekend suspended plans to impose tariffs on as much as $US200bn in each other’s goods, pulling back from the brink of a trade war. China on Tuesday made a conciliatory gesture by cutting the tariff on imported vehicles to 15 per cent from 25 per cent, effective July 1.

In the face of congressional criticism, Treasury Secretary Steven Mnuchin on Tuesday denied that the US is offering relief for ZTE in exchange for trade concessions.

“This is not a quid pro quo or anything else,” Mnuchin told a Senate Appropriations subcommittee.

AP

5.45am: Zuckerberg apologises to EU MPs

Facebook boss Mark Zuckerberghas apologised to European Union MPs for a massive data leak, in his latest attempt to draw a line under a scandal that has rocked the world’s biggest social media network.

Picture: AFP

Zuckerberg agreed to meet leaders of the European parliament to answer questions about how political consultancy Cambridge Analytica improperly got hold of the personal data of 87 million Facebook users, including up to 2.7 million in the EU.

In his opening remarks on Tuesday, Zuckerberg said it had “become clear over the last couple of years that we haven’t done enough to prevent the tools we’ve built from being used for harm as well.

“Whether it’s fake news, foreign interference in elections or developers misusing people’s information, we didn’t take a broad enough view of our responsibilities. That was a mistake, and I’m sorry.” His comments, sitting at a circular table with EU parliament leaders, echo an apology last month to US politicians.

But questions remain over how Facebook let the leak happen and whether it is doing enough to prevent a recurrence.

Reuters