Trading Day: live markets coverage; Telstra shares take NBN Co blow; plus analysis and opinion
Resource profit taking erases ASX gains, while Macquarie taps $100 and Telstra investors vent NBN misgivings.
And that’s the Trading Day blog for Monday, November 27.
Joe Kelly 4.55pm: Bank inquiry gains key MP support
Queensland Nationals MP Llew O’Brien has confirmed his intention to support a bill pushing for a banking inquiry being championed by party colleague Barry O’Sullivan in a move that could force the Turnbull cabinet to change position or face humiliation on the floor of parliament.
Speaking to The Australian, Mr O’Brien said: “I am respecting the party process and will be speaking to my colleagues in the National Party. But obviously consideration has been given to my input to this bill. And I am looking favourably on it.”
More to come.
Samantha Woodhill 4.32pm: ASX flat as sellers pluck miner profit
The local share market finished the session flat as miners attracted profit taking and amid modest support for utilities, following no lead from Wall Street.
At the close of trade, the benchmark S&P/ASX200 was up 6.250 points or 0.10 per cent at 5988.801 points. The broader All Ordinaries index was up 7.256 points or 0.12 per cent, at 6070.4 points.
CMC Markets Chief Market Analyst Ric Spooner said support for industrials and utilities was offset by profit taking in energy and mining stocks.
“The market has had really no lead from the US markets which have been in neutral over the Thanksgiving period,” he said.
“Today we’re seeing some support for utilities, healthcare stocks and industrials being offset by a bit of profit taking in energy which has had a good run in recent times and also in the mining stocks which have also had reasonably good support attracting a bit of profit taking.”
Mining giants BHP lost 0.07 per cent to $27.95 while Rio Tinto edged down 0.01 per cent to $72.09.
Santos weakened 0.79 per cent to $5.09 and Woodside Petroleum gave up 0.19 per cent to $31.46. Origin Energy backtracked 0.12 per cent to $8.59.
In financials, NAB ticked up 0.27 per cent to $29.64. Commonwealth Bank shed 0.09 per cent to $80.50. Westpac edged 0.03 per cent higher to $31.52 and ANZ inched down 0.07 per cent to $28.86.
Investment bank Macquarie Group booked a record closing high, up 0.87 per cent to $100.20 at the close.
CSL also sealed a record high and closed up 0.54 per cent to $147.35.
Scott Murdoch 4.18pm: Experts eye Macquarie’s $100 run
Macquarie shares blew past the $100 mark with conviction earlier this morning, hitting a record high of $100.33 and potentially prompting a re-evaluation from a number of analysts.
Bloomberg shows that the current range from analysts which cover Macquarie is from $94.92, from Goldman Sachs’ Andrew Lyons, to as high as Shaw and Partners’ David Sportswood’s call of $114.10.
Respected analyst at UBS, Jonathan Mott, has a $105 price target on Macquarie.
Analysts at Credit Suisse, UBS, ShawBell Potter, APP Securities and Evans and Partners rate Macquarie a buy while Morgan Stanley, JPMorgan, Morgans, Goldman Sachs and Morning Star rate the bank as a hold.
The composition of the investment bank’s earnings have charged significantly over the past few years, as it shifted away from being reliant mainly on markets generated income.
Shaw and Partners analyst Timothy Officer said the majority of the bank’s revenue was earned from annuities business which meant its earnings were more stable.
“I think it’s really interesting for people to understand the difference in the business Macquarie was pre-GFC to where it is now, you had about 96 per cent of income coming from markets and trading style businesses, in 2006 for example and now it’s almost 80 per cent annuity fee income coming into the business,” Mr Officer told Sky Business. .
“So the style of earnings and the risk associated with the stock is very different at 12.8 times forward earnings 5.6 per cent dividend yield, trading at a discount in price-to-earnings terms to the broader market, this still looks interesting.”
MQG closed up 0.9 per cent on $100.20
3.56pm: Telstra investors vent NBN misgivings
Telstra has been forced to revisit its FY18 outlook after NBN Co’s said it will cease new hybrid copper (HCT) household connections to the NBN, sellers seizing both on the announcement and telco’s warning that any delay in the network’s rollout with be reflected the timing of its revenue stream.
As Supratim Adhikari writes, the network operator’s latest move comes in response to growing discontent from retail customers over speeds, while boss Bill Morrow outlined today’s suspension as necessary to deliver a reliable and quality service on the pay TV cable.
While Telstra is yet to detail any potential impact, the curveball is the latest thrown at shareholders in quick succession this calendar year, its sacrosanct dividend made a martyr of the telco’s changing capital strategy, shortly before the NBN operator cut short its hopes of packaging up and selling future payments.
Telstra shares (TLS) were last 0.6 per cent lower on $3.46 just before the close after a sharp fall to $3.44 immediately following NBN Co’s announcement.
3.36pm: Top-shelf Treasury: Morgan Stanley
Morgan Stanley is more confident on Treasury Wine Estate’s China prospects.
After meeting with wine retailers, local experts and Government agencies, Morgan Stanley analyst Thomas Kierath says the near-term outlook will be driven by China’s booming luxury market and the long term by significant structural change.
“While pricing in China is at modest premiums to Australia, Penfolds, including Grange, is well down on retailers’ pricing architecture,” he says.
“Given the relative scarcity of Penfolds’ product and its well known branding, we think annual increases in sales of about 20pc could be achieved for the foreseeable future, especially in the Bin series.”
TWE last up 0.7 per cent at $15.94
3.18pm: Woolies tops Deutsche Bank survey
Woolworths shows “demonstrable improvement” across every metric in Deutsche Bank’s annual survey 2,400 shoppers.
“Coles has been the primary loser but independents and even Aldi appear to have given some customers back to Woolworths,” Deutsche analyst Michael Simotas says.
“The survey highlights the turnaround and market share shift have further to go, given Woolworths has not yet caught up to Coles and more customers are willing to shift to Woolworths if they see further improvement in execution.”
Mr Simotas has a “buy” rating on Woolworths, a “hold” on Metcash and “sell” on Wesfarmers — read more
WOW last down 0.2 per cent on $26.26
2.52pm: Broo taps highs on China deal
Christian Edwards writes:
Shares in Aussie beer maker Broo have soared to their highest in a year on the back of a Chinese distribution deal.
Broo shares jumped over 50 per cent on Monday after the Victorian brewer said Jihua had agreed to pay for 1.5 billion litres of Broo Premium Lager over the next seven years.
Broo forecasts $120 million in revenue from the deal but won’t start to receive the cash until 2020.
With Jihua set to market and distribute to supermarkets, retail chains and the hospitality industry, Broo founder and chief executive Kent Grogan said his beer was set to become a major brand in China over the coming years. “I am delighted to have reached agreement with such a high-calibre Chinese distribution partner,” Mr Grogan said.
Broo’s Mildura brewery has been operating at full capacity since early October. The brewery will focus on production of kegs and bottle products of Broo Premium Lager, Australia Draught, Kakadu and Mildura Brewery brands — AAP
BEE last up 36 per cent at 40 cents
1.55pm: The Trading Day ahead
Join the conversation with our Trading Day experts for breaking news and analysis in financial markets here and on Sky News Business (Ch: 602)
NOW: Yvonne Man — Bloomberg Asia
2.00pm: Michael McCarthy — Chief Market Strategist, CMC Markets
2.15pm: James Swerling — AFEX Australia
2.20pm: Jessica Rusit — FIIG Securities
2.45pm: John Flavell — CEO, Mortgage Choice
(All times in AEST)
Rachel Baxendale 1.48pm: China trade deal sealed
Immigration Minister Peter Dutton has signed a Mutual Recognition Arrangement with China, in a move aimed at boosting trade between the two countries.
Mr Dutton and Minister of China Customs Yu Guangzhou signed the agreement in Canberra today, enabling the countries’ customs and border protection departments to recognise each other’s Authorized Economic Operator programs.
Australia already has similar arrangements with New Zealand, Korea, Canada and Hong Kong, with MRA negotiations underway with other major trading partners.
1.16pm: Telstra discontent weighs on ASX
Australia’s S&P/ASX 200 is down 2 points at 5982.4 after paring a 0.4pc rise to a two-week high of 6009.
Telstra shares (-1pc) are doing some damage after the telco said it will reassess its fiscal 2018 outlook in response to the decision by NBN Co to halt copper-hybrid (HFC) household NBN connections, warning its revenue will be set back by any potential rollout delays.
Falls in US stock index futures and regional markets are also weighing on the index, with S&P 500 futures are down about 0.1pc, the Nikkei 225 is down 0.2pc, the Hang Seng down 0.4pc and China’s CSI 300 us down 1.4pc.
Somewhat surprisingly, Santos isn’t getting any lift from speculation of another takeover attempt after appointing Rothschild as defence adviser alongside Deutsche Bank. Santos is down 1.5pc at $4.99.
A close back below 6000 after a brief move above that point today could raise some alarm bells for chartists, but of course the outlook will continue to be dictated by offshore markets.
Supratim Adhikari 12.57pm: NBN delays a revenue setback: Telstra
NBN Co’s immediate stop to the hybrid fibre-coaxial (HFC) portion of NBN household will delay payments Telstra is due to receive as compensate for loss of its wholesale monopoly.
The network operator’s boss Bill Morrow says that the suspension is necessary to deliver a reliable and quality service on the pay TV cable.
“The delay in the NBN rollout will delay a proportion of the payments to Telstra from NBN into future periods,” Telstra said following the announcement from NBN Co.
The move comes in response to the growing discontent from NBN customers who have been put on the HFC footprint, with many receiving lower than promised speeds and service dropouts. Mr Morrow acknowledged on Monday that the HFC network was struggling to cope with the number of customers being brought on to the NBN.
TLS last down 0.9 per cent at $3.45 after earlier entering into a trading halt — read more
Bridget Carter 12.33pm: Santos taps adviser Rothschild
Advisory firm Rothschild has won the role to become the independent adviser to take over target Santos, which recently received a $9.48 billion takeover bid from Harbour Energy.
Rothschild fended off competition from other independent boutiques pitching for the role, such as Luminis Partners, Flagstaff, Greenhill and Gresham.
The beauty parade was held on Thursday and the latest appointment will see Rothschild work alongside Santos’ investment bank Deutsche and also J.B North & Co, a boutique run by Jon North, who is known to be close to the Santos chief executive Kevin Gallagher.
John Wylie has previously worked for Santos but has recently been caught up with his own personal interests and has stepped away from the assignment — read more
STO last up 0.6 per cent on $5.10
Bridget Carter 12.29pm: Rothschild wins Santos advisory role
Rothschild wins Santos advisory role.
Read more from DataRoom
Supratim Adhikari 12.25pm: NBN presses pause on HFC
NBN Co has called an immediate stop on connecting households to the hybrid fibre-coaxial (HFC) portion of the National Broadband Network, with NBN Co boss Bill Morrow saying that the suspension is necessary to deliver a reliable and quality service on the pay TV cable.
The move comes in response to the growing discontent from NBN customers who have been put on the HFC footprint, with many receiving lower-than-promised speeds and service dropouts. Mr Morrow acknowledged on Monday that the HFC network was struggling to cope with the number of customers being brought on to the NBN.
NBN Co is aiming to have 3 million homes on the HFC footprint by the end of the rollout and the latest concession will now see significant delays in millions of homes connected to the NBN.
Scott Murdoch 11.38am: Macquarie shares scream past $100
Macquarie Group has roared through the $100 per share mark today, with the investment bank now trading at the highest level ever on the back of buoyant global markets.
The bank’s share price has been tracking north for most of the year but surged in September when the stock was trading at $82.70.
In October, Macquarie ordered an $800 million share buyback, after the bank’s first-half profit slumped 24 per cent because of volatile global financial markets and it lowered full-year guidance.
The bank’s first-half net profit fell to $305m, which was below the markets consensus of $333m and down from $403m in the previous corresponding period.
MQG last $100.20
Bridget Carter 11.32am: Dampener on Billabong, Ripcurl plan
A potential plan by the backers of listed surf wear company Billabong to buy its rival Rip Curl is believed to have collapsed with the group now understood to be in talks with a prospective buyer based in the United States.
It is understood that major shareholders of Billabong, which counts global hedge funds Oaktree and Centrebridge as its largest investors, were planning to buy the company in recent months, but those talks have now ended.
Rip Curl has remained focused on the sale of surfing-related products while Billabong has headed more down the mass market route.
It is understood that the surf wear label has opted to focus on the mass market and allow Rip Curl to remain a dominant force in the premium end, which has been the reason for it to step aside from the negotiations — read more from DataRoom.
BBG last 70 cents.
Andrew White 11.28am: Market relief for pressured utilities
Energy utilities are the best performing sector this morning in what might be a mini relief rally on renewed hopes the sector may avoid full re-regulation in Victoria.
Significant retail customer rebates agreed to by the big three energy retailers AGL Energy, Origin Energy and EnergyAustralia are being interpreted as reducing the likelihood of full re-regulation of energy prices in Victoria.
A review of the electricity sector by former deputy premier John Thwaites in August found prices have soared since the sector was deregulated in 2008, and sparked moves by the Andrew’s Government to force retailers to supply more affordable basic services.
In deals offered over the weekend the big three retailers have agreed to significant rebates for standing offer customers and some expired market offer customers from January 2018.
Around 285,000 customers will receive a rebate of $250-440 a year.
11.08am: The Trading Day ahead
Join the conversation with our Trading Day experts for breaking news and analysis in financial markets here and on Sky News Business (Ch: 602)
NOW: Ben Le Brun — Charles Schwab
11.15am: Daniel Hynes — Senior Commodity Strategist, ANZ
11.45pm: Tim Officer — Shaw and Partners
12.00pm: Franesco de Stradis from Ord Minnett and Tony Davidson from Henderson Maxwell guest host
12.00pm: Joe Mayger — Lake house Capital
12.15pm: James King — AFEX Australia
12.45pm: Stephen Walters — Chief Economist, AICD
(All times in AEST)
11.03am: ASX tempts decade highs
Australia’s S&P/ASX 200 share index is up 0.4pc at 6005, on track for its best close in almost two weeks as offshore equities and commodities extend Friday’s gains.
Macquarie is the highlight as it jumps 0.9pc to a record high of $100.27.
The financial bellwether stock has finally broken above the $100 mark which capped the market bellwether stock before the global financial crisis a decade ago.
CSL is another highlight, up 0.9pc at a record high of $147.80.
But the gains are broad based with all sectors bar consumer discretionary and telecommunications in the green.
Banks are mixed, while resources are mostly positive.
A close above 6000 today could see a retest of the decade high of 6052 in coming days.
Bridget Carter 10.58am: New Energy launches bookbuild
New Energy Solar will launch its bookbuild today for its initial public offering, in a deal that will be closely watched.
Some question whether the business has the level of institutional support to head to the market and say it will now largely rely on support from retail investors.
Investment bank Morgan Stanley is working on the raise with broker Evans and Partners.
The company had opted to raise between $100m and $300m and apparently has already secured about $100m worth of support from retail investors.
Read more from DataRoom
10.49am: Macquarie hits $100 milestone
Macquarie Bank shares have broken through the $100 milestone with conviction as investors lift shares in the Big Five play to as much as $100.16 or 0.8 per cent higher than its close on Friday.
After early hesitation, the benchmark ASX200 index tracks Macquarie’s run and was last 0.2 per cent higher on 5994.5.
10.27am: ASX choppy ahead of key data
Local shares open mixed, the benchmark ASX200 index hovers around flat and was last 3 points higher on 5985.9 after earlier trading in the red.
Big bank weakness buffets gains in resources, while heavyweight CSL extends all-time record highs to trade as much as 0.5 per cent higher on $146.99.
“Australian investors will look to building approval and credit data while keeping an eye on AGM outlook statements. Investors’ reactions could be muted today ahead of these important economic indicators,” says CMC chief markets analyst Michael McCarthy.
“Over the week China will release both official and unofficial PMIs, Japan drops inflation, employment and production numbers, and the US will deliver housing, national accounts and inflation numbers.”
SWING STOCKS:
+ Worley Parsons (3.1pc), St Barbara (2.9pc), Downer EDI (2.8pc), Vocus (2.2pc)
— Costa Group (2.1pc), Automotive Holdings (1.7pc), South 32 (1.6pc), Domain (1.4pc)
Bridget Carter 10.12am: Bingo splashes $120m on waste plants
Bingo Industries is raising $120 million to buy businesses National Recycling Group and Patons Lane.
The funds will also be used for organic redevelopment opportunities and to repay debt.
Bingo Industries listed on the Australian Securities Exchange through Macquarie Group this year.
However, the company has elected investment bank UBS for the latest raising.
As part of the raise, shareholders will be offered 1 share for 5.55 held — read more from DataRoom
BIN last $2.07
10.10am: Downer jumps 6pc on outlook
Downer EDI jumps as much as 6 per cent to $7.13 after it brightened its FY profit outlook and indicated synergies from its recent takeover of Spotless are likely to result in costs cuts enough to offset the acqusition’s impending profit result likely to come in at the low-end of guidance.
DOW last $6.73
10.03am: ASX tipped for steady start
Australia’s S & P/ASX 200 share index is likely to by offshore gains in equities and commodities.
Friday night SPI 200 futures close relative to fair value points to an opening rise of 0.1pc.
The S & P 500 and Nasdaq rose 0.2pc and 0.3pc respectively, hitting record highs in holiday shortened trading.
Resources stocks may be strongest today after commodity prices mostly rose on Friday.
Spot iron ore rose 0.4pc to $US67.94 to be up 8.6pc in 3 days.
Brent crude rose 0.5pc to $US63.68 and LME copper gained 1pc on Friday.
On the charts, the S & P/ASX 200 faces minor resistance at 6000 ahead of the decade high at 6052.2.
Minor support likes at Friday’s low at 5951.4, followed by November 16 low at 5916.1.
9.32am: Analyst rating changes
Western Areas cut to Underweight — JPMorgan
South32 cut to Neutral — JPMorgan
Orica raised to Equalweight — Morgan Stanley
Newcrest cut to Neutral — Goldman Sachs
CC-Amatil raised to Buy — Citi
Bubs Australia initiated at Hold — Morgans
Automotive Holdings cut to Hold — Bell Potter
Seek raised to Outperform — CLSA
Monash IVF cut to Outperform — CLSA
Domain initiated at Sell, $3.25 target price (12m) — CLSA
Bridget Carter 9.29am: Next thins Scottish Pacific stake
Next Capital has offloaded half of the stake it owns in Scottish Pacific through investment bank Citi.
The private equity firm that floated the finance company offloaded an 8.3 per cent interest in the business for $37 million.
Shares were sold at $3.22 each, which was a 2.4 per cent discount to its last closing price — read more from DataRoom
SCO last $3.30
9.25am: Bingo Industries in trading halt
Fresh ASX waste management listing Bingo Industries has entered into a trading halt this morning pending an announcement in relation to a potential capital raising.
BIN last $2.07
9.13am: Downer, Spotless synergies surface
Engineering group Downer EDI has upgraded its full-year profit guidance after identifying larger than expected cost savings following its purchase of a 87.8 per cent stake in Spotless.
Downer upgraded its net profit guidance to $195 million from April’s $190 million after a review identified $25 million of cost savings. But it expects Spotless’s profit to be at the bottom end of its previously issued $85 million to $100 million guidance after deciding to record almost $80 million in costs and impairments at the cleaning and catering firm Spotless.
AAP
8.55am: Uber breach may soften offer
As soon as this week, SoftBank Group Corp. is expected to proceed with an offer to buy billions of dollars worth of shares from Uber Technologies Inc.’s stakeholders.
First it must settle on an offer price, only days after Uber disclosed a security breach involving 57 million accounts that took place a year ago and prompted regulatory scrutiny from government agencies around the world.
Uber’s decision to keep quiet about last year’s data breach until earlier this week raises the prospect that the incident could affect SoftBank’s offer price. SoftBank learned of the hack about a month ago, which may have changed its evaluation of Uber’s shares, according to people familiar with the matter.
Richard Gluyas 8.36am: Loan fraud in ASIC sights
ASIC is ramping up surveillance of the $1.5 trillion home lending market, with individuals and a “handful” of large and small lenders under investigation for fabrication of documents and inadequate fraud detection systems.
The project, partly funded through the $120 million in extra funding last year from the Turnbull government, will be completed by next September and include a report on the industry’s practices and the level of consumer harm.
8.32am: Gold hints risk scope
Renita D Young and Eric Onstad write:
Gold prices have dipped as some investors lock in profits at the end of the week, and risk appetite strengthened, but expectations hovered that gold prices could move higher next week.
Spot gold traded 0.3 per cent lower near $US1,287 an ounce on Friday, on track for a 0.5 per cent weekly decline.
US gold futures for December delivery settled down $US4.90, or 0.4 per cent, at $US1,287.30 per ounce. “There’s some liquidation of gold taking place, but light volume,” said Bill O’Neill, partner at Logic Advisors in Upper Saddle River, New Jersey.
Reuters
Joe Kelly 8.25am: Nats mull ‘all in’ on bank inquiry
The Nationals will consider embracing a push by Queensland senator Barry O’Sullivan for an inquiry into the banking sector, in a move that could split the Coalition and challenge Malcolm Turnbull’s authority.
Nationals MPs have told The Australian it is expected that Senator O’Sullivan’s plan to move a motion in the upper house establishing a probe into the financial services sector would be discussed at next week’s party room meeting.
7.35am: Aussie unchanged against greenback
The Australian dollar is unchanged against its US counterpart, which has fallen to a two-month low as investors grow optimistic about the strength of the eurozone’s recovery and lose their appetite for the greenback.
At 0635 AEDT on Monday, the Australian dollar was worth US76.21c, unchanged from Friday.
The dollar index fell to its lowest level since September 26, having suffered its worst single-day decline in more than five months on Wednesday after minutes from the Federal Reserve’s latest meeting showed some policymakers were concerned about stubbornly weak US inflation.
For the week, the US dollar index fell nearly 1 per cent, its worst weekly loss since September.
The Aussie dollar is lower against both the yen and the euro.
7.05am: ASX set to open flat
The Australian sharemarket is tipped to start the week flat, despite a strong positive lead from Wall Street.
In the US on Friday — in a half session on the post-thanksgiving holiday known as Black Friday — technology stocks led the S & P 500 and Nasdaq to record closing highs.
But locally, AMP Capital chief economist Shane Oliver says the benchmark S & P/ASX200 is likely to gain less than five points at Monday’s open, with “a bit of caution around” after that index exceeded 6000 points several weeks ago. “I think there’s a bit of a correction happening after that surge,” Mr Oliver said.
The progress of tax reform in the US will continue to be the main focus for investors globally this week, with its Senate expected to vote on the bill which was recently approved by the House of Representatives.
The Republicans have 52 out of 100 Senators, meaning they can only stand to lose two votes to get the package over the line.
If it passes, the overhaul is expected to provide a stronger base for growth in the US, which would have a flow-on effect for international financial markets, including Australia.
Back home, the key development will be the release of Australian Bureau of Statistics (ABS) business investment data for the September quarter on Thursday. Dr Oliver says those figures will be watched closely to see if a long- anticipated pick up in non-mining investments actually materialises. Housing data will also be a theme of this week, with CoreLogic releasing capital city house prices for November on Friday.
The ABS will also publish building approvals for October on Thursday, the same day the Housing Industry Association releases it new home sales for October. The local market closed flat on Friday, with the S & P/ASX200 index down 0.06 per cent to 5,982.6 points — although it rose by 0.4 per cent across the week. The Australian dollar was trading at 76.21 US cents.
AAP
ASX braces for Trump tariff dance falls; Insignia bidders lift offers
Bain, CC Capital tip in same increased offer for Insignia. 'Erratic' Cyclone Alfred's growing risk. Equity markets jittery over day-to-day changes in Trump's tariff policy. The European Central Bank cuts interest rates. Star in focus.
ASX 200 slumps; Star close to Queen’s Wharf deal
Casino operator's deal with Hong Kong partners to help avoid administration. Ex-dividend trading, oil price slide weigh on bourse. Insurers face $2bn-plus hit from Cyclone Alfred. APRA moves to tighten financial board rules.