ASX edges cautiously higher in broad gains as gold miners lead
All sectors finished higher to cap a 4.2pc rebound on the ASX, with tech and real estate names the key outperformers.
- Woolies calls off Endeavour drinks spin-off
- Economic toll greater than virus itself: Trump
- Seven warns of ‘material fall’ in ad revenue
- Consumer confidence plunges below GFC levels
That’s it for the Trading Day blog for Tuesday, March 24. Australian stocks rebounded from 2012 lows to notch a 4.2 per cent lift, their largest gains in a week, thanks to the promise of unlimited stimulus from the US Fed and hopes US politicians can come to an agreement over a $US2.5 trillion stimulus package tomorrow.
Gains come despite growing fears on the health of the economy, as JP Morgan warns unemployment will hit double digits and ANZ’s latest consumer confidence read shows a plunge in sentiment to below GFC levels.
Banks outperformed led by a surge in Macquarie, while heavily sold off tech and real estate names clawed back ground.
4.45pm: Banks lead market rebound
Banks led the local market rebound as Citi analysts put a buy rating on the sector, saying the 40 per cent plunge in the sector since February was “well overdone”.
Commonwealth Bank ticked higher by 5 per cent to $57, Westpac put on 2.9 per cent to $14.51, NAB rose by 3.7 per cent to $14.40 and ANZ outperformed with 5.3 per cent lift to $14.85.
Macquarie also was a standout, adding 10.9 per cent to $79.90 while Bank of Queensland lost 3.1 per cent to $4.70 and Bendigo and Adelaide Bank lost 3.5 per cent to $5.47 while lender Mortgage Choice added 3.7 per cent to 56c.
The major supermarket chains took a step back after solid performance amid the pandemic panic, and despite ANZ spending data showing supermarket spend had jumped by 40 per cent so far this month.
Woolworths dragged most, down 0.7 per cent to $36.18 as it called off its $10bn Endeavour drinks group spin-off and announced it was standing down more than 8000 staff across its ALH pubs arm.
Coles spend the day in the red but in the late rally pushed higher to finish up 3.6 per cent at $16.14 while former parent Wesfarmers rose by 2.1 per cent to $31.68 and Metcash lost 2.1 per cent to $3.22.
Here’s the biggest movers at the close:
4.11pm: All sectors green as ASX rebounds
The local market clawed back ground across all sectors on Tuesday, after the latest spate of US monetary stimulus and despite growing concerns the local recession could be deeper than first thought.
A late rally pushed the ASX200 to close at daily highs, up 190 points or 4.17 per cent at 4735.7.
Banks led the rally, while tech and real estate names clocked the biggest percentage gains.
Will Glasgow 4.08pm: China hid a third of virus cases: SCMP
China has under-reported its confirmed COVID-19 cases by one third, or more than 40,000 infections, according to a report in the South China Morning Post.
The revelation by the masthead - which is owned by China’s richest person Jack Ma, the second best known of the Chinese Communist Party’s 90 million members - adds the biggest data set yet to a growing body of research done by experts around the world studying the proportion and infectiousness of “silent carriers” of the coronavirus.
“More than 43,000 people in China had tested positive for COVID-19 by the end of February but had no immediate symptoms, a condition typically known as asymptomatic,” the South China Morning Post reported, citing classified Chinese government data.
As well as massively increasing China’s confirmed case numbers from its declared 81,600 to well over 120,000 - twice the amount in Italy - the revelation undermines claims by the World Health Organisation that have downplayed the proportion of COVID-19 cases without visible symptoms.
The WHO - which despite sending an “investigative team” to China in February for a fortnight was apparently unaware of the country’s huge asymptomatic caseload - has also said that infections by silent carriers were “relatively rare”.
3.52pm: Credit Corp, Afterpay surge
Credit Corp is charging higher by 41 per cent in late trade, as risk aversion in the market takes a back seat.
The benchmark ASX200 is higher by 3.5 per cent in the final 10 minutes of trade, but if recent volatility is anything to go by, that won’t guarantee a strong close.
Former tech darling Afterpay is also climbing after a rocky week - its shares are up 22.7 per cent.
2.55pm: ASX rally fades as Congress debate stalls
US Treasury Secretary Steven Mnuchin has told the press a deal on a US stimulus package as much as $2.5 trillion is “very close” but not happening today.
According to Reuters, Mr Mnuchin, along with Senate Democratic leader Chuck Schumer say there are optimistic of a deal on Tuesday.
The news is trimming gains in US futures to 2.6pc, from earlier as much as 3pc, and consequently pulling the ASX rally to just 1.7pc at 4624.3, from earlier highs of 4732.7.
2.39pm: Panic lifts grocery spend by 40pc: ANZ
Grocery stockpiling could have a stronger effect on retail sales for March than the introduction of social distancing measures, according to ANZ’s latest research.
Economist Adelaide Timbrell notes that the bank observed a 40 per cent surge in supermarket spending for the week ended March 16, compared to the same time last year, along with a 35pc lift in food retailing and 60p jump in pharmacy and toiletery spend.
Electronics spend also got a boost, up 22pc compared with the same period last year, but Ms Timbrell noted it wasnt expected to last as social distancing became the new normal.
“We expect household consumption to decline sharply now that tighter social distancing regulation is in place. The moves to close non-essential services could severely reduce household spending,” she says.
“An increase in online shopping could soften the blow, but is unlikely to offset the effects of layoffs, reduced income or low confidence in many households.”
ANZ data: supermarket spend up 40% in the week ended March 16 compared to the same week last year. Retail to go up in March. #Panicbuying to ease in coming months, as people become used to the “new normal†of social distancing. @Adelaide__T @DavidPlank12 #ausecon #covid19au pic.twitter.com/2yvI01lioG
— ANZ_Research (@ANZ_Research) March 24, 2020
2.03pm: Rebalance toward equitites: BlackRock
BlackRock Investment Institute says it favours rebalancing portfolios toward benchmark asset-class weights by buying equities after drastic moves in recent weeks.
“Sharp equity selloffs and government bond yield declines have mechanically turned many portfolios underweight equities and overweight bonds,” BII analyst note in a report today.
“We favor rebalancing toward benchmark weights, but recognize that timing and implementation will vary by investor.”
In a hypothetical portfolio of 60pc developed market equities and 40pc global bonds, the portfolio weight of equities has shrunk to 50pc in the past month, to a 25pc fall in equities.
“This one-month drift has been sharper than that seen during the 2008 crisis,” the analysts say.
“We still see benchmark weights as appropriate. This implies a need to rebalance portfolios – effectively buying equities and selling bonds.
“To be sure, we believe it is too soon to overweight equities (but) as we await signs coronavirus infections are peaking and decisive policy actions are stabilizing the economy and markets, it may be prudent to start leaning against market moves through rebalancing.”
Ben Wilmot 1.59pm: Unibail-Rodamco halves payout
The French shopping centre company that took over the international Westfield empire, Unibail-Rodamco-Westfield, has drastically cut its distribution in half and dropped its earnings guidance, in a sign of what lies ahead for local mall owners if widespread lockdowns occur.
Listed shopping centre owners have been battered as some retailers shut up shop while almost all, bar the surging supermarket sector, are demanding swift rental relief. Their share prices have battered into submission with rescue equity raisings being priced in despite their deep liquidity backing and investors are watching the impact of shut downs on offshore malls.
Unibail has already closed many of its European and US centres but local centres have been classified as an essential service by prime minister Scott Morrison. However, many individual stores are closing as they cannot operate with the tough social distancing restrictions and fall off in trade causing them heavy losses.
Malls have responded by providing relief and trying to ensure that tenants remain solvent through the crisis in the hope that they will eventually trade out of it.
Unibail will maintain its first half distribution per security payment of €5.40 per share, to be paid in March, but is cancelling payment of its second fiscal 2019 dividend payment. It will provide an update when it can reliably estimate the effects of COVID-19.
Unibail has good balance sheet liquidity with €10.2bn of liquidity, and this increased to €11.7bn once the sale of some French malls is taken into account. This is enough capacity to refinance most debts until fiscal 2022.
Read more: Unibail-Rodamco-Westfield warns of ‘unprecedented’ retail hit
Leo Shanahan 1.57pm: Pandemic forces closures of regional paper
The century-old Sunraysia Daily has become the country’s first newspaper to close until further notice as a result of the coronavirus pandemic.
In a story on its own website today the newspaper said staff were told in a meeting this morning they would be stood down until further notice.
The newspaper, which serves the Mildura area, was celebrating its 100 year anniversary this year but Saturday’s edition will be the last until further notice.
The decision will affect all Elliot Newspaper Group mastheads, including Sunraysia Life, The Guardian in Swan Hill and Gannawarra Times.
While the intention is for the paper to reopen the area is now without a local news source outside of the ABC.
Sunraysia Daily, Mildura's only daily newspaper, will suspend printing and all staff will be stood down due to the impact the coronavirus pandemic has had on the business. https://t.co/sKWEhrfXzt
— Sunraysia Daily (@sunraysiadaily) March 24, 2020
1.54pm: US airlines plan for complete shut down
Major US airlines are drafting plans for a potential voluntary shutdown of virtually all passenger flights across the US, according to industry and federal officials, as government agencies also consider ordering such a move and the nation’s air-traffic control system continues to be ravaged by the coronavirus contagion.
No final decisions have been made by the carriers or the White House, these officials said. As airlines struggle to keep aircraft flying with minimal passengers, various options are under consideration, these people said.
But amid the quickly spreading pandemic and mandatory stay-at-home orders covering some 80 million US residents, airline executives, pilot-union leaders and federal transportation officials said they increasingly view as inevitable further sharp reductions from already-decimated schedules in passenger flights.
US airlines have already eliminated the vast majority of international flying and have announced plans to cut back domestic flying by as much as 40pc. Travelers are staying home at even greater rates. The Transportation Security Administration reported that passenger flow at its checkpoints was down more than 80pc Sunday from the same day a year earlier.
Dow Jones Newswires
Gerard Cockburn 1.48pm: NAB will need more capital: BP
Bell Potter analyst TS Lim says NAB will need more capital as it simultaneously deals with both coronavirus and regulatory headwinds.
The brokerage has lowered its 12 month target price from $19.50 per share to $16.50, noting the pandemic could have prolonged adverse impacts to the bank’s financial performance.
Mr Lim also said capital raising by the bank will need to continue within the remainder of the current financial year, as financial crimes regulator AUSTRAC continues to seek legal action against NAB, following investigations into the remittance industry.
Bell Potter maintained a hold rating for NAB shares.
“Potential mark-to-market losses in the markets and treasury portfolios are unquantified at this stage but will likely follow the magnitude of losses within the now-defunct specialised group assets (SGA) division at the time of the global financial crisis,” Mr Lim said.
Still, NAB shares are trading higher by 2.7 per cent to $14.26.
Lilly Vitorovich 1.46pm: WPP cancels dividend amid caution
WPP AUNZ share slump more than 14 per cent to 30c after the embattled advertising group cancels dividend payments totalling 4.4c, citing “the unprecedented uncertainty as to the impact and duration of the COVID-19 pandemic”.
The board has decided to cancel its ordinary dividend payment of 2.9c a share, plus special dividend payment of 1.5c, which was announced on February 24.
WPP AUNZ says it’s in a “sound financial position”, with net debt of $121.4m and a leverage ratio of 1.1x net debt/ebitda at the end of December, but the board has taken action now “as a very prudent and cautious approach to capital management to ensure cash is preserved until there is greater clarity as to the full impact of the rapidly unfolding COVID-19 crisis”.
“The board will update the market as to our future intentions in relation to the payment of ordinary and special dividends as the economic and industry outlook becomes clearer.”
1.33pm: $A pushing past US59c
The Aussie dollar is approaching a five-day high as the US dollar comes under pressure.
In afternoon trade, AUDUSD is higher by 1.92 per cent to US59.45c while the US dollar index trades down 0.86pc.
If it tops US 59.60c its on track for a five-day high.
1.23pm: Woodside cuts staff, Inpex in virus scare
Woodside Petroleum has removed hundreds of workers from its North West Shelf LNG plant in Western Australia to comply with coronavirus guidelines while Inpex has pulled workers from an offshore drilling rig after a colleague tested positive for COVID-19.
Up to 400 workers were stood down at the Woodside-operated NW Shelf and Pluto LNG plants, according to the Offshore Alliance which represents the MUA and AWU unions, following several hundred positions being lost last week at the company’s Goodwyn and North Rankin plants. Woodside confirmed it had cut the number of staff at its Karratha facilities, without specifying numbers, in response to the pandemic.
“In order to continue safe and reliable production at Karratha Gas Plant while minimising COVID-19 risks, we have informed our workforce at site of plans to reduce or defer non-essential maintenance and refurbishment works,” a Woodside spokesperson said. “This is a difficult decision to take but these are highly unforeseen circumstances. Business as usual is not an option, and we need to take extraordinary measures to protect the health and safety of our workforce.”
The NW Shelf is Australia’s largest LNG facility with annual production of 16.9 million tonnes or nearly a quarter of the nation’s overall gas exports.
The Offshore Alliance said workers should still be paid on a standby basis, describing Woodside’s move as “industrial bastardry”. Woodside said it would pay workers until the end of their current shift should they be required to step down immediately and hopes to redeploy people in other roles where possible.
Japanese energy giant Inpex, best known in Australia for its $US45bn Ichthys LNG plant in Darwin, said a worker aboard its Maersk Deliverer drilling rig offshore WA tested positive for Covid-19 after returning to his home country on March 19.
All non-essential staff have been transferred from the rig to their homes to start self-isolation as a precautionary measure and production is unaffected. No workers on board the Maersk have shown symptoms of the virus while response plan is being coordinated with health agencies and Maersk Drilling which operates the rig.
Read more: ‘Brutal act of industrial bastardry’: Union slams Woodside
1.04pm: Macquarie outperforms, ASX hits daily high
Local shares are pushing higher in lunch trade, adding 3.5 per cent to near daily highs at 4704.6.
The major banks are doing a lot of the heavy lifting - up between 3pc and 6pc while Macquarie is outperforming with a gain of 9.1pc.
Consumer staples remains in the red as Woolies and Coles give back some of their recent rally, while GrainCorp leads the worst performers as it trades ex-demerger.
Here’s the biggest movers at 1pm:
12.56pm: Nikkei adds 7pc
Japan’s Nikkei 225 rose as much as 7pc in early trading, adding to positive offshore leads from a 3.5pc rise in S&P 500 futures.
Australia’s S&P/ASX 200 is bumping up against resistance from the 2016 trough at 4707 with an intraday high of 4713.5.
A more sustained break of this resistance point could trigger a further run up toward the next chart point at 5000.
US President Trump is playing a clever game by giving the market hope of just a two week economic lockdown. There’s also the possibility of the US House agreeing to the upscaled $US2.5tn coronavirus stimulus package proposed by Democrats.
But the market still needs to see signs of a peak in the virus outside China and an early restart of the US economy risks a worse pandemic and bigger US recession.
Ultimately it still looks like the world faces a bigger than normal recession and more than the “normal” 30pc falls in sharemarkets.
Michael Roddan 12.54pm: AusSuper slashes unlisted asset value
The nation’s biggest superannuation fund, AustralianSuper, is first out of the gates slashing the value of its unlisted assets portfolio, which includes toll roads, airports and infrastructure, by 7.5 per cent, reducing the main balanced option by 2.2pc.
It comes as the nation’s super funds stare down the threat of a squeeze on liquidity as the government races to allow sacked workers to access up to $20,000 worth of savings over two years, and as members rush to switch their money into safer assets such as cash options.
Each super fund across Australia is currently reviewing the value of their unlisted assets, generally done on a quarterly basis, in order for the private equity investments, property, ports, toll roads and airport holdings on investment books to reflect their actual value.
About 90 per cent of AustralianSuper’s unlisted assets are valued by an independent valuer on a quarterly basis.
AustralianSuper, which had about $180 billion in funds under management before the COVID-19 crisis, carries most of its members in the flagship $130bn balanced option.
“In the current unique circumstances, AustralianSuper has moved to revalue its unlisted assets so that members can have an up-to-date picture of their superannuation balances,” AustralianSuper chief executive Ian Silk said.
“The values of all investment portfolios have been adjusted to reflect the economic and financial market impacts of Covid-19,” Mr Silk said.
12.31pm: $A, ASX surge as risk appetite grows
Australian shares and the Aussie dollar have surged amid an improvement in the global risk appetite after Monday’s trouncing.
The S&P/ASX 200 extended its rise to 3.4pc to 4705.8, near key resistance from former the Feb 2006 trough at 4706.7, as S&P 500 futures expected their rise to 3pc.
AUD/USD soared 1.6pc to a 2-day high of 5933 as the USD dollar index DXY fell 0.7pc.
Positive overnight developments included Germany’s planned supplementary budget and preparedness to fiscally support Italy, and the Fed’s move to unlimited and broader QE.
House Democrats’ counter-proposal for a $2.5tn coronavirus stimulus package also seems to be helping sentiment.
Elsewhere, WTI crude futures are up 5.8pc at $US24.53 after surging 4pc overnight.
Cliona O’Dowd 12.18pm: Virus having no impact … yet: Cleanaway
Cleanaway Waste Management has suspended its earnings guidance despite the company’s financial performance remaining in line with its forecasts and it seeing no material impact in volumes across its operating segments.
Increasing uncertainty in the market around the impact of COVID-19 led it to suspend its guidance, the company said on Tuesday. It also confirmed it would go ahead with paying the previously announced interim dividend of 2¢ per share.
“Cleanaway has a strong balance sheet and significant liquidity, with over $357m of committed headroom available at the end of February 2020 under existing banking facilities,” the company told shareholders. It had also issued long-term notes in the US private placement market, increasing the weighted average maturity across its debt facilities to six years, it said.
“Cleanaway provides a range of essential services to a diverse customer base which includes municipal councils, government infrastructure, hospitals, resources, manufacturing, commercial and industrial customers,” chief executive Vik Bansal said.
“We have not observed any decline in overall trading in any of our operating segments to date. However, as the COVID-19 situation evolves and uncertainty increases, we expect the SME part of our C&I waste volumes to be impacted.”
Demand for other services, including health and municipal collections was expected to remain strong, he said.
CWY shares last up 4.6 per cent to $1.49.
12.12pm: Food, alcohol spending surges: CBA
Spending by Australians on food, alcohol and health surged sharply over the past week, according to figures from Commonwealth Bank economics team on credit card spending.
At the same time spending on clothing and footwear, recreation, transport and education fell sharply, the CBA figures show.
It is no surprise as the coronavirus fears spread through the economy so too did the spending habits of Australians.
In a read for Woolworths, Coles and Metcash, food spending over the past week is up 49.7 per cent, on the same week a year ago. Food services on cafes and restaurants is down 1.3 per cent (although this is after averaging double digit increases in the early part of this year). CBA economics team says the total amount spent on food may see overall household spending increase in the March quarter.
According to CBA data, food spending over the past week is up 49.7% on the same week a year ago with grocery stores & supermarkets up by a whopping 74.1%. Health spending also rose sharply while recreation & transport (incl public transport) spending fell #ausbiz #ausecon
— CommSec (@CommSec) March 23, 2020
Lilly Vitorovich 12.04pm: Seven bounces despite scrapping forecasts
Seven West Media shares are rebounding slightly, up 7.6 per cent to 7.1c, despite the debt-laden media group dumping its annual earnings guidance because of the fallout from the coronavirus, including a “material fall” in advertising.
Investors could be feeling some relief over Seven’s comments about the Tokyo Olympic Games, which its free-to-air television network was to broadcast from late July.
If the games are postponed it is “likely to result in rights payments” by Seven being pushed back to reflect the revised scheduling.
However, a postponement may also result in Seven incurring some cancellation costs from underlying suppliers.
Read more: Seven warns of ‘material fall’ in ad revenue
12.01pm: Benefits of $A weakness absent: MS
This time it is different notes Morgan Stanley when it comes to the falling Australian dollar. The dollar has fallen 18 per cent this calendar year and broken through a key sentiment level of 60c vs the US dollar.
In normal circumstances, a 10 per cent move lower in Australian dollar would assist ASX 200 earnings by 5 per cent to 7 per cent and we have seen this at work in mitigating operating softness.
“However, some of the usual positives to emerge from a lower Australian dollar are absent – in particular the dislocation of education and tourism sectors and also demand disruption for certain exports categories,” Morgan Stanley analysts led by Chris Nicol say.
“So while the typical benefits are deferred what will be immediate is the increase in cost of imports particularly to consumer facing sectors. This cost push element … is less than helpful and further weakness could be seen as potentially undesirable for policy makers”.
AUDUSD last at US58.90c.
11.56am: Bank sell-off ‘well overdone’: Citi
A 45pc sell-off in Australian banks since coronavirus hit the sharemarket in February is “well overdone”, according to Citi.
Citi analyst Brendan Sproules upgraded the sector to Buy today after lifting his ratings for ANZ, Bank of Queensland, Bendigo and Adelaide Bank, Commonwealth Bank and Westpac to Buy.
“Even in a severe BDD (bad and doubtful debt) scenario, the COVID-19 crisis is not set to destabilise the sector, like in the GFC,” he says.
Whereas many of the banks are trading below book value – implying capital is insufficient for the ultimate impact – Mr Sproules says COVID-19 “remains a transitory economic shock”.
In his view it’s “not expected to develop into an existential threat” that triggers a property market collapse of 40 per cent or more. Credit quality will deteriorate quickly, with ultimate non-housing losses rising 3 fold, but unlike the GFC, COVID-19 will impact people-orientated, service based industries, which typically have lower debt.
“Therefore, non-housing losses are set to rise 3 fold from current levels to about 1.2 per cent of non-housing loans, meaningfully lower than about 1.8pc in the GFC, where capital intensive industries were more affected,” Mr Sproules says.
“Significant borrower equity in housing, will limit housing loan losses, rising 4 fold from current levels to 12bp.”
Mr Sproules sees credit provisions “peaking quickly” and earnings turning up 17pc in FY22 after falling 14pc by the first half of FY21. But in his view a more severe GFC-style loan loss scenario sees further declines in earnings and dividends in FY21, without the need for large capital raisings.
In today’s trade, CBA is leading the sector with a 4.1pc lift to $56.60. The sector dived 11pc yesterday to its lowest since March 2009, with NAB hitting its lowest point since 1996.
11.51am: Democrats lob $US2.5tr stimulus bill
US House Democrats have just upped the ante by introducing a $US2.5tn coronavirus stimulus bill.
An optimistic view would be that this stimulus package ends up being more than the $US2.1tn proposed by the White House.
S&P 500 futures are up 2pc – though below their early high – which AUD/USD has extended its intraday gain to 0.9pc and the S&P/ASX 200 is up 2.6pc and near its intraday high of 4667.
Eli Greenblat 11.47am: 8000 Woolies pub workers stood down
Woolworths chief executive Brad Banducci has confirmed this morning that it has stood down 8000 workers at its pubs, hotels and clubs business ALH with some of those employees able to be redeployed into the wider Woolworths group.
It is the latest in a growing line of businesses to stand down thousands of workers in the wake of the coronavirus pandemic and the shut down of entertainment venues across Australia.
ALH, which is part owned by the Mathieson family and Woolworths, has 15,000 employees across more than 300 venues as well as more than 500 liquor stores.
Woolworths has also asked all staff members aged over 70 work from home or go on leave for their own safety.
11.41am: Unemployment to reach 11pc by June: Westpac
Westpac has thrown out its previous estimates on the economic impact of coronavirus after just a week, now tipping unemployment to reach 11 per cent in the next three months.
Chief economist Bill Evans said last week’s forecast of 7pc unemployment had been thrown out after “the roll out of more extensive shutdowns than we had originally envisaged”.
“Economic disruptions are set to be larger as the government moves to address the enormous health challenge which the nation now faces,” he notes.
“That challenge is probably best summarised by a potential shortage of ICU beds in coming weeks if we do not significantly slow the rate of infection immediately.”
Gerard Cockburn 11.35am: Magellan well poised to ride out storm
Global fund manager Magellan says its defensive equity strategy saying is well positioned to ride out the financial storm caused by the coronavirus pandemic.
Magellan Financial last week in a note to shareholders detailed its equity strategy for the group’s $100bn investment portfolio.
Approximately 15 per cent of its investments will be held in cash (US dollars), with other investments in US utilities, telecommunication infrastructure and consumer staples.
It also noted its holdings in luxury brands such as LVMH (Louis Vuitton Moet Hennessy) and technology investments are well positioned due to existing financial strength within respective companies.
Magellan Financial chief executive Hamish Douglas also warned that the fund does hold exposure to McDonalds, Starbucks and Yum! Brands, which are facing a “challenging demand situation” as economies begin to shut down due to the virus.
MFG shares last up 5.4 per cent to $32.39 – after touching record highs of $74.91 only a month ago.
Read more: Hamish Douglass warns of near total shutdown of world economy
11.28am: Baby Bunting ‘non discretionary’: Citi
Retailer Baby Bunting is “non-discretionary” according to brokerage Citi.
The comments follow a trading update by the retailer late Monday which revealed both like-for-like sales and online momentum improved over the last 6 weeks of the June half relative to the prior 6 weeks.
“This supports our buy recommendation and demonstrates the non-discretionary nature of the baby products category,” Citi analysts told clients in a note.
Citi said the better than expected performance is likely a result of consumers stockpiling non-discretionary baby products such as nappies and wet wipes and flow-on benefits to other categories from higher store and online traffic.
Baby Bunting on Monday indicated it was delaying $7m of capex associated with the rollout of the new brand to support its balance sheet. Further, the company indicated short-term liquidity is supported by $27m of unused funds.
Shares in Baby Bunting surging on Tuesday, shares up 9.1 per cent at $1.74 each.
Read more: Baby Bunting, Nick Scali scrap forecasts
Eli Greenblat 11.21am: Lew fortune hit as Premier falls to 6-year low
Shares in billionaire Solomon Lew’s Premier Investments continue to slide, falling another 7 per cent this morning to $8.35 – a six-year low.
The collapse in the share price has also severely dented Mr Lew’s personal wealth with his estimated fortune of $2.5bn weighted heavily towards the Premier share price. Mr Lew is chairman of Premier and owns 43 per cent of the company.
The share price decline comes after the company last week delayed its dividend and said it was preparing to close more of its retail stores, saying it was bracing for “significant hardship”.
After the latest government shutdown measures, brokers at Credit Suisse have cut their target price on the stock by 51pc to $9.94 while Morgan Stanley trimmed their target by 34pc to $13.50.
Read more: Lew’s Premier Investments flags ‘significant hardship’
10.57am: GrainCorp’s malt spin-off joins ASX
GrainCorp’s demerger of its malt business has today become effective, with the new entity United Malt Group joining the ASX, albeit trading initially on a deferred settlement basis.
The spin-off, first announced in April last year, is expected to be fully implemented by April 1, at which point its shares will trade as normal under the ticker UMG.
GNC shares today were down 53 per cent to $3.23 as it traded on an ex-demerger entitlement basis.
As part of the demerger, Peter Richards assumes the role of chairman of the GrainCorp board and Robert Spurway commences the role of managing director and chief executive of GrainCorp as former chief Mark Palmquist moves to be boss of the new entity.
Read more: GrainCorp raises glass to a deal well done on malt merger
Cameron Stewart 10.48am: Economic toll greater than virus: Trump
Donald Trump has signalled he will soon ease social distancing rules to help rescue the US economy despite warnings from health experts that it could cause a catastrophic increase in coronavirus infections and deaths.
In what looms as one of the most difficult trade-offs of his presidency, Mr Trump said the damage to Americans from a collapsed US economy was greater than the danger posed by the virus. He cited the high number of deaths from the flu and from car accidents as examples of other threats that Americans routinely faced.
“The doctors say let’s shut down the entire world and that would be wonderful …(we are) the number one economy in the world we can’t do that,’ Mr Trump said.
He said the cost of a collapsed economy in terms of lost jobs, anxiety, depression and suicides would ‘probably’ lead to a larger death toll than that caused by the coronavirus if the economy was allowed to remain closed for long.
“This could create a much bigger problem than the problem you start out with … because of the magnitude of our economy … we can’t turn that off … there will be tremendous death, probably more death from that than anything with respect from the virus,’ he said.
Mr Trump has agreed to temporarily back social distancing as a means of slowing the spread of the virus but is increasingly alarmed by the massive economic fallout as the nation grinds to a halt and financial markets plunge.
Read more: Trump to ease social distancing
WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
— Donald J. Trump (@realDonaldTrump) March 23, 2020
Gerard Cockburn 10.42am: Shutdowns force Retail Food warning
Doughnut King and Gloria Jeans owner Retail Food Group (RFG) has withdrawn its 2020 financial year as it closes stores in Australia and abroad due to widening restrictions to stem the spread of coronavirus.
The booting of its outlook, which was estimated to be between $42m and $46m, follows social distancing and shutdown measures implemented by the government that is limiting the group’s food chains to takeaway only.
Brumby’s bakery, Crust Pizza and Michel’s Patisserie are also within the group’s portfolio.
RFG executive chairman Peter George said the group had experienced a handful of closures across its brands Australia-wide, noting a growing need for the group to financially assist franchisees.
“To date we have only experienced a handful of temporary domestic outlet closures which are attributable to the coronavirus, however some of our master franchise partners and the USA network have indicated more direct impacts on trading as a consequence of stricter health measures within their territories,” Mr George said.
The company noted at this stage 200 international outlets had closed, including 29 in the US.
“While it remains premature to make reliable judgments, we anticipate there will be a growing need for RFG to provide additional financial and other support to its franchise community as the COVID-19 situation develops,” Mr George said.
RFG last traded at 3.3c, down 5.7pc.
10.39am: Financials, Energy lead bounce
It was a very strong open but the sharemarket is far from okay as coronavirus rages, lockdowns intensify and the US Senate dilly dallies on fiscal support.
Australia’s S&P/ASX 200 opened up 2pc at 4639.6 as S&P 500 futures surged 2.7pc, and the local bourse has not chart resistance now until 4706.7.
Some of yesterday’s underperforming sectors have perked up with Real Estate and Tech leading the bounce.
Energy is also doing well after WTI crude added 4pc overnight and another 4pc this morning to trade at a still-distressing US$24.37 a barrel.
Banks are also bouncing back with CBA up 3pc after Citi upgraded three of the four major banks to Buy.
10.28am: The latest to ditch earnings guidance
One thing sure to keep investors on edge today is the continued mass withdrawal of earnings guidance.
It will be hard to top the huge number of companies that withdrew their guidance yesterday but already today we’ve seen Perenti, Seven West Media, Cleanaway, Retail Food Group, GWA Group and Healius withdraw.
Dividends are also being deferred with Downer the latest to do so. Widespread dividend cuts will be next. The consensus-based 12-month dividend yield of 5.8pc is an illusion.
10.14am: ASX claws back ground
The local market is edging higher by 1.6 per cent at the open, with all sectors bar consumer staples trading in the green.
In early trade, the benchmark ASX200 is higher by 73 points or 1.6pc to 4618.5.
Gold miners continue to outperform – Newcrest lifting by 12pc as Evolution puts on 10.1pc.
Damon Kitney 10.10am: AGMs need 21st century update: GIA
The Governance Institute of Australia has called for the nearly 20 year old Corporations Act to be brought into the 21st century as many organisations are turning to alternatives to staging the traditional Annual General Meeting due to the coronavirus pandemic.
Many are facing hurdles such as restrictions on their ability to use technology to hold meetings or communicate with their shareholders or use electronic signatures on documents, according to Governance Institute of Australia CEO Megan Motto.
“It is time to bring the Corporations Act into the 21st century,” Ms Motto said. “Business currently finds itself exposed to many of the shortcomings of our existing legislation – and this has sped up the need for an overhaul.”
To assist companies currently planning their AGM (or other General Meetings, and Scheme meetings), the Governance Institute and the Australasian Investor Relations Association, with the assistance of the Business Law Section of the Law Council of Australia, has today
issued a ‘Guidance — COVID-19 and the impact on AGMs’, outlining in detail the options currently available.
“In the current environment shareholder engagement is more important than ever. Every effort should be made to facilitate that in the most cost-effective way. Hybrid and virtual meetings are a great way to do so and should become commonplace in Australia on a permanent basis,” AIRA CEO, Ian Matheson said.
The corporate regulator has also provided some comfort to those companies struggling to organise their AGM in light of the changed circumstances, issuing a statement that than they will take no action against companies for a delay of up to two months in holding their AGM
or holding meetings using technology.
Patrick Commins 10.04am: Unemployment on path to 10pc: JPM
Unemployment will surge into double-digits as the partial shutdown of the economy triggers a nearly 10 per cent contraction in the economy through the June quarter, new analysis by JP Morgan shows.
The new, dire forecast comes as Josh Frydenberg met with leading finance ministers on a phone hook-up which included the International Monetary Fund, the OECD, and central banks.
“The expectation is that global growth will be negative this year,” the Treasurer said following the meeting.
Mr Frydenberg also noted that there were growing concerns of a looming financial crisis among emerging countries as the global coronavirus crisis triggered capital flight.
“Significantly around 80 countries have approached the IMF for financial support with the impact on many developing countries becoming acute,” he said.
“The IMF is also seeing significant capital outflows from emerging economies creating instability in those financial markets.”
10.02am: RBA injects $7bn of liquidity
The RBA continues to inject a massive amount of liquidity in its daily open market operations.
This morning it has injected a total of $6.882bn via 37, 90 and 181-day reverse repos.
No doubt it will also be buying billions of dollars of bonds again today via its QE program.
Adam Creighton 9.59am: Consumer confidence collapses
Consumer confidence has collapsed in its biggest one week fall on record, as fears the coronavirus will kneecap the economy and employment ripple throughout the nation.
As long queues form outside social security offices around the nation, a major consumer confidence index has plunged 28 per cent over the past week to a level below where it registered in the depths of the global financial crisis.
“The increasingly negative news about the impact of the coronavirus pandemic in Australia has had a dramatic impact on consumer sentiment,” said ANZ analyst David Plank. “Consumer confidence has been lower than this level, but only just and only during the 1990-91 recession,” he added.
The confidence index, based on a survey by Roy Morgan of over 1,700 consumers on the weekend, showed its biggest ever weekly fall since the index shifted from month to weekly in 2008.
State governments moved to shut down non-essential services over the weekend, as the number of coronavirus infections approached 2,000 nationally, seven of whom have died.
ANZ-Roy Morgan Australian Consumer Confidence: plunges. All sub-components are well below average and well below the levels of the GFC. Only the 1990-91 recession is comparable. #ausecon #ausretail @roymorganonline @DavidPlank12 pic.twitter.com/2urGojYuae
— ANZ_Research (@ANZ_Research) March 23, 2020
Eli Greenblat 9.52am: Woolies drinks spin-off called off
The global coronavirus pandemic has killed off this year’s planned $10bn separation and possible sharemarket float of Woolworths’ hotels and liquor business, Endeavour Group, in a sign that the virus will likely quash any major business deal and IPO this year.
Woolworths has confirmed that the planned separation and possible float of Endeavour will be pushed off to 2021 due to the uncertainty in the wake of the pandemic, with the supermarket chain also withdrawing its earnings guidance for fiscal 2020.
However, as suspected from the panic buying at Australian and New Zealand supermarkets Woolworths did say in an ASX statement this morning that it had experienced a large uplift in sales at its grocery chains.
The putting on ice of the Endeavour Group puts an end to plans kickstarted almost nine months ago by Woolworths to structurally separate ALH hotels and pubs businesses and the liquor chains Dan Murphy’s and BWS into a new business that would eventually likely be sold this year.
But these plans were put in turmoil as the government ordered hotels and pubs to close this week in an attempt to slow the spread of the coronavirus.
9.49am: ASX primed for early jump
Australia’s sharemarket is set to jump alongside US futures … if only initially
Overnight futures relative to fair value point to a flat open but S&P 500 futures rose 1.8pc in early trading. Moreover, a 2.9pc fall in the S&P 500 and 2.5pc fall in the EuroStoxx 50 wasn’t anywhere near as much as expected.
That’s because of the Fed’s move to broader and unlimited quantitative easing and Germany’s plan for a supplementary budget, as well as a Bloomberg report that Germany is ready to back a rescue plan to help Italy.
There have also been some significant broker upgrades particularly Citi’s upgrade to Buy ratings on three of the four major banks and Credit Suisse raising JB Hi-Fi to Neutral.
On the charts, the S&P/ASX 200 could bounce all the way back to the Feb 2016 low at 4706.7, implying a potential 3.5pc intraday gain.
But this potential bounce could easily be cut short by further panic selling as the virus and associated lockdowns continues to worsen.
Overall a 36.5pc fall in the S&P/ASX 200 so far doesn’t seem consistent with the magnitude of the expected recession.
9.44am: What’s on the broker radar?
- Bank of Queensland raised to Buy – Citi
- Bendigo and Adelaide Bank raised to Buy – Citi
- Cardinal Resources raised New Speculative Buy – Canaccord
- Commonwealth Bank raised to Buy – Citi
- Cooper Energy raised to Buy – Bell Potter
- Incitec raised to Hold – Jefferies
- JB Hi-Fi raised to Neutral – Credit Suisse
- Janison Education raised to Buy – Bell Potter
- Pacific Smiles raised to Buy – Bell Potter
- Wesfarmers raised to Neutral – Credit Suisse
- Westpac raised to Buy – Citi
Perry Williams 9.41am: Downer suspends payout citing volatility
Contractor Downer will suspend payment of its 14c interim dividend until September due to market volatility.
“In the extraordinary environment created by COVID-19 we consider it is appropriate to defer payment of the interim dividend until September 2020,” Downer chief executive Grant Fenn said.
The unfranked payment will now be paid on September 25.
Downer last week withdrew its earnings guidance for the 2020 financial year citing the uncertainty of the coronavirus spreading and said it was cutting costs across the company.
Downer had cash of $515m as of December 31 with undrawn facilities of $1.14bn and $50m of debt maturing in the next year which it plans to fund using existing committed facilities.
Earlier in March Downer suspended plans to sell its mining business due to volatility from the coronavirus pandemic.
The resources contractor has been hoping to land a potential $700m deal with Perenti Global but has frozen the process.
Lilly Vitorovich 9.37am: Seven warns of ‘material fall’ in ad revenue
Kerry Stokes-controlled Seven West Media has become the latest Australian media company to ditch its annual earnings guidance, blaming the escalating fallout from the coronavirus, including a “material fall” in advertising.
The free-to-air television and publishing company also cited the suspension or postponement of productions and events for the decision, just a day after Southern Cross Media requested a trading halt to assess the fallout from COVID-19.
Seven said Tuesday morning visibility into future advertising bookings was “now insufficient to provide meaningful earnings guidance for the remainder” of the 2020 financial year.
The announcement comes less than 24 hours after its marquee sporting event, Australian Football League, suspended all games until the end of May.
Seven, which is also due to broadcast the Tokyo Olympic Games from late July, is also under major doubt.
“While the International Olympic Committee’s current position is that Tokyo 2020 is scheduled to proceed, the IOC has stated they are exploring a postponement scenario and the Australian Olympic Committee and other national bodies have been more definite about a date change,” Seven said in its trading update.
Seven said an announcement is expected shortly.
Gerard Cockburn 9.30am: oOh!media halted for raise
oOh!media shares have been halted ahead of the open, as the company prepares a capital raising, as tipped by The Australian’s DataRoom.
The company requested a trading halt for up to five days as it “is currently considering a capital raising and is not yet in a position to make an announcement regarding this measure”.
“oOh! considers it appropriate that it enters a voluntary suspension that it can manage its continuous disclosure obligations and to avoid the market trading in oOh! shares on a basis that is not reasonably informed,” the company added.
OML shares last traded at 84 cents each.
Eli Greenblat 9.26am: GWA on track, still cans guidance
Bathroom fittings and fixtures company GWA has decided to withdraw its earnings guidance given the uncertainty caused by the coronavirus pandemic but said despite this turmoil its business was performing well.
This decision to cancel its guidance was taken even though trading to date for the second half is in line with expectations and better than the trend experienced in the first half. GWA said it has seen nothing to date in its business that indicates the guidance will not be achieved.
“However, because of the uncertainty that lies ahead the board of directors have decided that the guidance should be withdrawn.
GWA’s CEO Tim Salt said: “GWA is well positioned to manage through these unprecedented events and we continue to take decisive action to proactively manage the business through this period”.
“Our primary focus is to ensure the health and safety of our employees. We have implemented business continuity plans internally and with our suppliers to minimise disruption to the business and our customers.
“We are in a strong supply position with ample inventory to supply all key products to customers.”
He said GWA is in a strong financial position with a single three-year multicurrency revolving facility of $210 million which matures in October 2022 and it has a $40 million revolving bilateral facility which matures in October 2020.
9.20am: Rio Tinto to slow some operations
Rio Tinto says actions in Quebec and South Africa to slow the spread of coronavirus will slow some of its operations.
It says it will curtail production at Richards Bay Minerals in South Africa, in compliance with a directive from the SA government. As a result, all mining operations at RBM will
be halted by midnight on March 26, for 21 days.
Resumption of the construction of the Zulti South project will be delayed.
In Canada, Rio’s Quebec operations will be reduced.
“Rio Tinto understands that the Quebec government has designated industrial complexes including the aluminium sector and the mining industry as essential industries but instructed that they must reduce their business activity to the minimum.”
Gerard Cockburn 9.16am: Ardent’s SkyPoint closed
Ardent Leisure has closed its SkyPoint observation deck on the Gold Coast due to government-imposed restrictions on entertainment venues.
The company said the viewing platform at Surfers Paradise will be closed until at least May 31.
On Monday, Ardent Leisure announced it would close its theme park Dreamworld due to restrictions induced by the coronavirus.
9.14am: New Hope expects weaker profit
New Hope Corp forecast a weaker second half profit due to reduced production volumes and higher unit costs, but said thermal coal markets currently appear balanced despite the impact of the coronavirus pandemic.
New Hope assessed the outlook alongside its first-half result, which featured a 42pc drop in net profit for the six months through January to $69.8 million and a 25pc reduction in its interim dividend to 6.0 cents per share.
New Hope said it expects production volumes will be slightly softer in the second half of the current fiscal year, driven largely by its operations in Queensland state. This will have a negative impact on unit costs, it added.
Dow Jones Newswires
Eli Greenblat 9.05am: Shaver Shop trimmed
Shaver Shop has reported a sudden and rapid slide in its sales in the wake of the coronavirus pandemic, with in-store sales slumping by almost one quarter, and has decided to cancel its interim dividend as well as withdraw its earnings guidance for 2020.
The personal grooming retailer said it had observed a “material deterioration” in trading conditions, reflected in a decrease in total like-for-like sales (including online sales) of approximately 11 per cent. The rate of decline in like-for-like sales in the company’s bricks and mortar stores was 23 per cent.
“Our online channel is performing better, but the growth in this channel is not enough to offset the decline in sales observed in our bricks and mortar stores in recent weeks.”
It said given the exceptional current circumstances and heightened uncertainty in relation to prospects, Shaver Shop is withdrawing its 2020 earnings guidance.
In addition Shaver Shop has cancelled its interim dividend of 2.1 cents per share that was set to be paid on April 23.
Cameron Fox, Shaver Shop’s CEO, said: “The impact of COVID-19 on our business is changing at a rapid pace. Our number one focus is on the health and safety of our team members and customers while continuing to deliver exceptional customer service.
“Up until the last week, we were on track to deliver a record sales and earnings result for Shaver Shop in 2020. Unfortunately, it is now just too difficult to forecast with any degree of certainty, what our sales or earnings will be in the weeks and months ahead.”
8.55am: Michael Hill stores close
Jeweller Michael Hill International has immediately suspended the operation of its stores in Australia and New Zealand amid measures to fight coronavirus.
The Australia and New Zealand-listed jeweller said in Australia “the current ‘social distancing’ guidelines are not consistent with the day to day conduct of our business”, while consumers were also focused on more serious issues.
New Zealand, meanwhile, has moved to an essential services-only shutdown.
Australian operations will be suspended “for an indefinite period with immediate effect”.
Michael Hill had already shut down its Canadian stores.
The company earlier said it had decided to postpone its 1.5 cents per share interim dividend for six months, reporting a fall in foot traffic as its Canadian stores shut indefinitely.
Damon Kitney 8.42am: Crown staff will still be paid
The James Packer-backed Crown Resorts has told its staff they will continue to be paid as per their roster until they are advised otherwise after the group’s Melbourne and Perth casino properties suspended gaming, food and beverage and conference operations on Monday.
“It is not clear how long this ban will last but first and foremost we want to make sure that when its over we will be able to return our business to the same standard of customer service as we have always prided ourselves on,’’ chief executive Ken Barton and Australian resorts boss Barry Felstead told staff overnight.
“There will be some roles that will continue as normal until further notice and relevant staff will be advised of this. We will be in contact with all staff in the coming days around what support and assistance is available.”
They said unless advised otherwise, staff were not required to attend work today.
Crown shares are expected to resume trading this morning after being halted since Friday. Since February 21 the Crown share price has fallen 48 per cent.
8.30am: Supermarkets cleared to work together
Supermarket operators will be able to co-ordinate immediately to ensure consumers have reliable and fair access to groceries during the COVID-19 pandemic, following the ACCC’s granting of interim authorisation.
The competition watchdog says its interim authorisation will allow supermarkets to co-ordinate when working with manufacturers, suppliers, and transport and logistics providers.
The ACCC says the purpose is “to ensure the supply and the fair and equitable distribution of fresh food, groceries, and other household items to Australian consumers, including those who are vulnerable or live in rural and remote areas”.
The authorisation does not allow supermarkets to agree on retail prices for products.
ACCC chair Rod Sims said supermarket shortages were essentially due to panic buying rather than any supply problems.
“We recognise and appreciate that individual supermarket chains have already taken a number of important steps to mitigate the many issues caused by panic buying. We believe allowing these businesses to work together to discuss further solutions is appropriate and necessary at this time,” Mr Sims said.
7.58am: More retailers scrap guidance
Two more retailers have pulled their earnings guidance in the wake of the economic shocks triggered by the coronavirus pandemic, although furniture retailer Nick Scali and baby furniture and equipment chain Baby Bunting have reported positive sales momentum to date and a pick-up in activity by Chinese suppliers.
Meanwhile jewellery retailer Michael Hill has decided to postpone its 1.5 cents per share interim dividend for six months.
7.55am: Aluminium hits 45-month low
The London Metal Exchange open-outcry ring went dark for the first time since World War II and aluminium prices slumped to their lowest since June 2016 on fears of a severe global recession.
The 143-year-old LME temporarily closed its circle of padded, red-leather seats, Europe’s last open-outcry trading venue, in response to the coronavirus pandemic.
The transition to full electronic trading on the LME went smoothly, but volumes were patchy, traders said.
Base metals joined stocks, oil and other financial markets in a sell-off while Shanghai copper fell to the weakest in nearly 11 years.
“Right now we’re seeing demand falling off a cliff, consumer confidence is shaken across the world, and commodities are responding accordingly,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. “Sentiment also got a knock overnight after the US Congress struggled to reach agreement (on an economic stimulus package). The focus will be on whether they can get a package over the finish line, that may give some relief to the market.”
Benchmark LME aluminium slid as much as 2.8 per cent to $US1,538.50 a tonne, the lowest since June 2016. But pared losses to $US1,562, down 1.3 per cent. Aluminium, widely used in transport and packaging, has shed 16 per cent since hitting a five-month peak of $US1,835 a tonne in early January. LME copper lost 3.7 per cent to $US4,630 a tonne, while Shanghai copper prices dropped to their lowest in nearly 11 years.
Reuters
7.50am: Gold surges on plan
Gold prices soared more than 4 per cent overnight, shrugging off early losses after the US Federal Reserve took aggressive new steps to combat the economic impact of the coronavirus outbreak, boosting investor sentiment.
The US central bank said it would begin backstopping an unprecedented range of credit for households, small businesses and major employers in an effort to offset the “severe disruptions” caused by the coronavirus outbreak.
Spot gold jumped 4.1 per cent to $US1,559.55 an ounce. US gold futures settled 5.5 per cent higher at $US1,567.60 an ounce.
Reuters
7.40am: Crude edges higher
Oil prices inched higher overnight while US gasoline prices plunged more than 30 per cent to a record low as global restrictions on travel to slow the spread of coronavirus destroyed demand for fuel.
Brent crude futures ended the session up 5 US cents at $US27.03 a barrel while West Texas Intermediate crude futures for May delivery rose 73 US cents, or 3.2 per cent, to $US23.36 a barrel.
Reuters
7.35am: ResMed ramps up ventilator supply
ASX-listed medical equipment maker ResMed says it is looking to “double or triple” its output of ventilators, and scale up ventilation mask production more than tenfold, as the world scrambles to fight coronavirus.
The US-based ResMed says its equipment, often used for sleep disorders, can help people breathe while their immune system fights the virus.
“We are working with governments, health authorities, hospitals, physicians, and patients worldwide to assess their needs, and to deliver the ventilation therapy that is essential to treat the respiratory complications of COVID-19,” ResMed said.
“Our primary focus is to maximise the availability of ResMed ventilators and other respiratory support devices for the patients that need them most.”
7.22am: ASX set for small bounce
Australia’s share market is poised to rise slightly from a near eight-year low even as the coronavirus pandemic continues to spread.
At 7am (AEDT) the SPI200 futures contract was up 39 points, or 0.87 per cent, at 4522 points, suggesting a bounce at the open.
US markets were lower even after the Federal Reserve’s second wave of rescue actions that included bond buying to ensure liquidity.
“More could be done in the US though, with congress again failing to pass a stimulus deal, just as the World Health Organisation warms that the global infection rate is escalating,” NAB’s morning call note says.
The local bourse has dropped 36.8 per cent in 22 trading sessions since February 20, after closing on Monday at its lowest level since December 6, 2012. There was a fresh wave of panic buying as some businesses and state and territory borders closed amid stricter measures to control the pandemic.
The Australian dollar was buying US57 cents at 7am (AEDT).
AAP
7.14am: US closes lower despite Fed
US stocks dropped in another volatile session Monday as US politicians failed for a second day to pass a rescue package to ease the blow from the coronavirus pandemic.
Senate Democrats and Republicans remained at odds over a stimulus package worth at least $US1.6 trillion, stirring anxiety among investors who remain anxious for aid at a time when a recession appears imminent.
They took some solace from the Federal Reserve, which signalled a wide-ranging effort Monday to help the American economy by extending loans and purchasing hundreds of billions of dollars in government debt.
“The political dysfunction adds to uncertainty,” said David Bahnsen, chief investment officer of Bahnsen Group.
Stocks swung sharply based on developments tied to the rescue package.
The Dow Jones Industrial Average fell nearly 1000 points, recovered most of those losses on hopes for a deal and then tumbled again when the measure failed.
The Dow Jones Industrial Average sank 3.0 per cent, or nearly 600 points, at 18,591.93.
The broadbased S&P 500 sank 2.9 per cent to 2,237.40, while the tech-rich Nasdaq Composite Index dipped 0.3 per cent to 6,860.67.
Australian stocks are tipped to open higher, with the SPI futures index up 74 points, or 1.65pc.
The spot price of iron ore was down 7.3pc to $US80.20, according to CommSec.
US stock futures hit the maximum 5pc loss allowed in a single session in overnight trading after Senate Democrats first blocked the rescue package after a dispute with Republicans over corporate bailout provisions and aid to dislocated workers.
They later briefly turned positive after the Fed said it would buy unlimited amounts of Treasurys and mortgage-backed securities. But those gains proved short-lived.
The moves come after a bruising stretch for markets that has put the Dow and S&P on course for their worst first quarters on record, falling more than 30pc apiece. The indexes just concluded their worst weeks since October 2008 and are on the cusp of losing their gains since the November 2016 election.
Still, investors said they found the Fed’s additional support reassuring.
“The Fed is on the job right now. They need the help of fiscal policy makers,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. “The longer they wait, the more angst that grows.”
While stocks fluctuated, investors sought shelter in traditional safe-haven assets, such as bonds, gold and currencies like the Swiss franc and Japanese yen, a return to a more traditional trading pattern that gave some investors solace. For several days last week, those assets fell along with stocks, a sign that markets were coming under severe strain.
European markets were lower, but recovered from steeper losses. The Stoxx Europe 600 pan-continental index fell 4.3pc, and the German Dax dropped 2.1pc.
Dow Jones Newswires
6.40am: Wall St drops amid rescue squabble
Stocks dropped in another volatile session as US politicians failed for a second day to pass a rescue package to ease the blow from the coronavirus pandemic.
Senate Democrats and Republicans remained at odds over a stimulus package worth at least $US1.6 trillion, stirring anxiety among investors who remain anxious for aid at a time when a recession appears imminent.
They took some solace from the Federal Reserve, which signalled a wide-ranging effort to help the American economy by extending loans and purchasing hundreds of billions of dollars in government debt.
“The political dysfunction adds to uncertainty,” said David Bahnsen, chief investment officer of Bahnsen Group.
Stocks swung sharply based on developments tied to the rescue package.
The Dow Jones Industrial Average fell nearly 1,000 points, recovered most of those losses on hopes for a deal and then tumbled again when the measure failed. The blue-chip index was off about 500 points, or roughly 2.8pc in afternoon trading. The S&P 500 lost 2.6pc. The tech-heavy Nasdaq Composite edged down 0.4pc.
Stock futures hit the maximum 5pc loss allowed in a single session in overnight trading after Senate Democrats first blocked the rescue package after a dispute with Republicans over corporate bailout provisions and aid to dislocated workers.
They later briefly turned positive after the Fed said it would buy unlimited amounts of Treasurys and mortgage-backed securities. But those gains proved short-lived.
Dow Jones
6.15am: Trump considers easing social-distancing
The White House is discussing easing social-distancing guidelines as early as next week as advisers and business leaders push President Trump to boost an economy beset by deepening job losses nationwide, people familiar with the discussions said.
The President has told people that he wants to open the economy as soon as possible. The talks have centred on relaxing or restructuring the 15-day guidelines the administration issued last week to stem the spread of coronavirus, one of the people said. Other advisers have cautioned Mr Trump against easing the guidelines, warning the measures remain necessary.
An administration official said the White House is discussing targeting guidelines for social distancing at vulnerable groups, such as requiring the elderly and those with underlying medical conditions to take greater precautions than younger, healthy people. Such a shift may not happen immediately after the 15-day period ends, the official said, adding that the White House is operating with a “high degree of caution.”
The social-distancing guidelines instructed all Americans to avoid non-essential travel, sit-down restaurants and gatherings of more than 10 people, among other steps. Meanwhile, governors and mayors nationwide have rolled out their own restrictions, shutting schools and many retail businesses.
Easing the guidelines would run counter to public-health experts who have said sustained social distancing is needed until the US develops a vigorous testing regime to identify and isolate cases. Widespread testing is still a long way off and labs now are struggling with supply issues that are further hampering the ability to identify cases. The virus can be spread when people are asymptomatic.
WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
— Donald J. Trump (@realDonaldTrump) March 23, 2020
Dow Jones Newswires
5.50am: Wall St falls despite Fed moves
US stocks dropped in another volatile session as the Federal Reserve unveiled additional support for the financial system.
The rapid spread of coronavirus cases and Washington’s delay over an economic rescue package have rattled markets, sending U. stocks, global shares and oil prices lower.
The Dow Jones Industrial Average fell nearly 1000 points, recovered most of those losses and then tumbled again. In midday trading the blue-chip index was off about 600 points, or roughly 3.3pc. The S&P 500 lost 3.3pc. The tech-heavy Nasdaq Composite edged down 1.2pc.
After yesterday slumping nearly 6pc to the lowest level since 2012, the ASX is tipped to open higher, with the SPI future sindex up 111 points at 5.30am. However the market has proved extremely volatile.
The Aussie dollar was higher at US57.99c.
Major US indexes staged a short-lived rebound after Senate Minority Leader Chuck Schumer said politicians are “very close to reaching a deal” aimed at easing the economic damage from the virus. But they dropped again after the measure was put to a vote and Senate Democrats formally blocked the advancement of the deal for the second straight day.
“The political dysfunction adds to uncertainty,” said David Bahnsen, chief investment officer of The Bahnsen Group.
The moves come after a bruising stretch for markets that has put the Dow and S&P on course for their worst first quarters on record, falling more than 30pc apiece. The indexes last week suffered their worst weeks since October 2008 and are on the cusp of losing their gains since the November 2016 election.
Traders and investors were bracing for another turbulent day in markets as they tracked politicians’ negotiations. Stock futures hit the maximum 5pc loss allowed in a single session after Senate Democrats blocked a $US1.3 trillion rescue package after a dispute with Republicans over corporate bailout provisions and aid to dislocated workers. Lawmakers and administration officials still hoped to reach an agreement to allow both chambers of Congress to approve it.
Still, investors said they found the Fed’s additional support reassuring.
Futures briefly turned positive after the Fed said it would buy unlimited amounts of Treasurys and mortgage-backed securities. Those gains proved short-lived.
“The Fed is on the job right now. They need the help of fiscal policy makers,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. “The longer they wait, the more angst that grows.”
While stocks fluctuated, investors sought shelter in traditional safe-haven assets, such as bonds, gold and currencies like the Swiss franc and Japanese yen, a return to a more traditional trading pattern that gave some investors solace. For several days last week, those assets fell along with stocks, a sign that markets were coming under severe strain.
The yield on the 10-year US Treasury note fell to 0.758pc, according to Tradeweb, from 0.932pc Friday. Yields move in the opposite direction to prices.
The Securities and Exchange Commission has tweeted that “the nation’s capital markets have functioned well” and that “normal market hours will apply.” Monday marks the first day that the New York Stock Exchange closed its famed trading floor in lower Manhattan, after two people who work at the exchange tested positive for coronavirus.
European markets were lower, but recovered from steeper losses. The Stoxx Europe 600 pan-continental index fell 4.3pc, and the German Dax dropped 2.1pc.
In Asia-Pacific, most stock benchmarks dropped. Australia’s benchmark S&P/ASX 200 fell nearly 6pc to levels last reached in 2012, despite the country’s federal government rolling out a stimulus package of $66 billion. Indian shares plunged, triggering trading halts, with the S&P BSE Sensex index falling 13pc.
Japan’s Nikkei 225 bucked the downtrend, ending 2pc higher. It had been closed Friday, when some other Asian markets had rallied.
Dow Jones Newswires
5.40am: World stocks drop again
Stock markets on both sides of the Atlantic resumed their downward trend in volatile trading, as a rollout by the Federal Reserve of another flurry of measures for companies failed to turn the fearful mood around.
The Fed’s move came shortly after a trillion-dollar Senate proposal to rescue the reeling US economy crashed to defeat Sunday, with a devastating impact on stocks first in Asia, and then in Europe and the US.
“A leap in the global death toll led by Italy from the coronavirus coupled with a failed stimulus vote in the United States saw markets rocked at the start of the week,” said London Capital Group analyst Jasper Lawler.
For a while it looked like equity markets were ready to rise again, with US futures higher ahead of Wall Street’s opening bell as the Fed went “all in … to infinity and beyond,” said Michael Hewson, chief market analyst at CMC Markets UK.
“While US politicians continue to procrastinate the US central bank has decided to double down, and go all in, by not only helping Wall Street, but by also helping to keep Main Street on its feet as well,” he said.
But in the absence of the US government doing something similarly ambitious, analysts said monetary policy was showing its limits.
“The problem is that the Fed is addressing the supply of credit, whereas the problem is demand — or lack thereof — by households and businesses as the global economy shuts down,” said Fawad Razaqzada at TradingCandles.com.
“It’s time for Congress to get its act together as well,” added Craig Erlam, at OANDA.
European markets did, however, come off their worst levels as the Fed announcement was compounded by an unprecedented move by the German government, which ditched constitutional debt limits and said it would raise 156 billion euros of new money to fight the novel coronavirus.
“The package aims to protect the economy with a shield,” Oxford Economics said of the German plan. “At over one trillion euros, or over 30 per cent of GDP, the package is now one of the largest around the world and the largest in the country’s history,” it said.
But investors were just too spooked by a mounting global death toll from the pandemic to be swayed.
London closed down 4.3 per cent, Frankfurt ended 2.1pc lower and Paris fell 3.3pc.
AFP
5.35am: Trump appears to question shutdown
President Donald Trump suggested he had qualms about extending the current 15-day suggested shutdown as his officials warned about the deepening coronavirus crisis and administration officials and congressional leaders struggled to complete a nearly $US2 trillion economic rescue package.
“I didn’t expect to be starting off my week with such a dire message for America,” Surgeon General Jerome Adams said on “CBS This Morning.” “Things are going to get worse before they get better. We really need everyone to understand this.”
Hours earlier, Trump suggested that the remedies may be more harmful than the outbreak in a tweet contradicting the advice of medical experts across the country.
In all capital letters, he tweeted: “We cannot let the cure be worse than the problem itself. At the end of the 15-day period, we will make a decision as to which way we want to go.”
AP
5.30am: Shutdowns hit Dubai
Dubai is closing its famous malls and halting all passenger flights, capping a series of shutdowns on once-thriving sectors that serve as its economic lifeline but which have been sacrificed to curb coronavirus.
A few days after barring foreigners, including those with residency permits, from entering the country, the emirate said it would close its airports to commercial flights, shut shopping centres and restrict restaurants to home deliveries.
Within hours of the announcement, which will be enforced by Wednesday, the city’s vast malls were already largely deserted, with corridors and concourses empty and shops devoid of customers.
AFP
5.25am: Fed steps up debt buy move
In its boldest effort to protect the U.S. economy from the coronavirus, the Federal Reserve says it will buy as much government debt as it deems necessary and will also begin lending to small and large businesses and local governments to help them weather the crisis.
The Fed’s announcement removes any dollar limits from its plans to support the flow of credit through an economy that has been ravaged by the viral outbreak. The central bank’s all-out effort has now gone beyond even the extraordinary drive it made to rescue the economy from the 2008 financial crisis.
“The coronavirus pandemic is causing tremendous hardship across the United States and around the world,” the Fed said in a statement. “Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus. While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.”
Financial markets sharply reversed themselves after the announcement but then fell back again after the market opened.
AP
5.22am: Diageo in hand sanitiser boost
Drinks giant Diageo said it would supply two million litres of alcohol to make antibacterial hand sanitiser to boost stocks depleted by the global coronavirus outbreak.
The British-based company, whose brands include Smirnoff vodka, Johnnie Walker whisky and Guinness, said the alcohol would help to make eight million 250ml bottles.
Priority would be given to frontline health professionals battling the spread of the disease, it added.
Ethyl alcohol of 96 per cent strength normally used to make gin and vodka will be made available to Britain and Ireland, the United States, India, Kenya, Italy, Australia, and Brazil.
Listoke Distillery near Drogheda in Ireland is making its own hand sanitiser, as is Australia cricket legend Shane Warne’s SevenZeroEight, and British craft brewer Brewdog.
AFP
5.18am: Germany to shrink ‘at least 5pc’
Germany’s virus-hit economy will suffer a drop in output this year at least as bad as during the financial crisis in 2009, when gross domestic product shrank by 5 per cent, Economy Minister Peter Altmaier said Monday.
“We expect economic output to decline and it will be at least by as much as in 2008-2009,” Altmaier told reporters.
Before the coronavirus crisis hit, the government had forecast Europe’s top economy would grow by 1.1 per cent in 2020.
AFP
5.15am: Fed aids US business
In a series of sweeping steps, the US Federal Reserve will lend to small and large businesses and local governments as well as extend its bond buying programs.
The announcement is part of the Fed’s ongoing efforts to support the flow of credit through an economy ravaged by the viral outbreak.
The Fed said it will set up three new lending facilities that will provide up to $US300 billion by purchasing corporate bonds, buying a wider range of municipal bonds, and purchasing asset-backed securities.
It also says it will buy an unlimited amount of Treasury bonds and mortgage- backed securities in an effort hold down interest rates and ensure those markets function smoothly.
AP
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