Trading Day: ASX in broad plunge as fears of coronavirus impact grow
Energy stocks led the market drop as brent crude hit a 12-month low, while Chinese stocks were hit by more than 8pc on their return.
- Oil Search served PNG blow
- Worley chief steps down
- Westpac to defend US class action
- China to pump money into markets
Welcome to the Trading Day blog for Monday, February 3. Shares fell as much as 1.7 per cent on growing fears of the impact of the coronavirus outbreak. A 12-month low in brent crude prices weighed on energy stocks, along with drag from Worley and Oil Search after negative headlines. China’s market resumed trade after the extended Lunar New Year holiday, and fell 8.7pc at the open.
4.13pm: Virus fears weigh on ASX
The coronavirus outbreak weighed heavily on global markets on Monday, as Chinese stocks resumed trade after the extended Lunar New Year break.
A weak Wall Street lead prompted the benchmark S&P/ASX200 to fall as much as 1.7 per cent early to lows of 6897 but trimmed some losses to finish down 1.34 per cent or 94 points to 6923.3.
That’s the biggest drop since last Tuesday, when the local market was catching up with overseas falls after the Australia Day holiday.
The All Ords lost 101 points or 1.42 per cent to 7019.9.
It comes as China’s latest coronavirus case count hit more than 17,000, and UBS analysts estimated the hit to China’s GDP will be as big as SARS in 2003.
Joyce Moullakis 3.03pm: CBA pledges tech start-up investment
Commonwealth Bank chief executive Matt Comyn says he is open to ratcheting up the bank’s $1bn annual technology spend, as he launched a venture group which aims to invest in 25 start-ups over the next five years.
CBA unveiled X15 Ventures on Monday, a technology venture building group, that will back and own stand-alone digital businesses that can draw on CBA’s customers, security and balance sheet.
Mr Comyn told journalists X15 would be funded out of CBA’s $1bn annual technology budget, which he was opening to increasing despite resource constraints linked to doing that.
Ben Wilmot 2.53pm: Starwood reaffirms AOF bid
United States private equity giant Starwood Capital has recommitted to its $485m takeover bid for the Australian Unity Office Fund in the wake of Singapore’s Keppel Capital taking a half stake in the listed trust’s manager.
Starwood said that “to the extent the (responsible entity) sale will result in the failure of a defeating condition to Starwood’s announced takeover bid for all the units in AOF … Starwood confirms … that it will not rely on the RE sale to lapse the AOF bid”.
The US suitor said it remained committed to pursuing its AOF bid, which represented an attractive opportunity for all unit holders to achieve liquidity at a certain cash value above recent trading levels and AOF’s pro forma net tangible asset.
1.42pm: Apartment upturn hints on building lift
Unit approvals were a key positive in the latest building approvals data, pointing to a lift in building activity to come this year, according to ANZ.
Unpacking the latest data drop, economist Adeliade Timbrell says a more-than-doubling of Victorian approvals followed a similar surge in NSW during November and signals that appetite for property development is improving.
Still, we are some way away from more affordable homes, a similar sentiment to that echoed by today’s CoreLogic data.
“An upturn in approvals is unlikely to ease housing supply shortages and price growth in the short term (due to substantial lags between approval and completion of large apartment developments),” she notes.
“However, the recent surge in housing prices has not brought housing credit out of its subdued growth, as mortgagees take advantage of low rates by paying down debt. This means that the RBA has more scope for further rate cuts and stimulatory monetary policy.”
First we saw NSW unit approvals double from Oct to Nov and now it’s Victoria’s turn. This is a good sign for a rise in building activity later in 2020. https://t.co/wsOsZj2c4z
— Adelaide Timbrell (@Adelaide__T) February 3, 2020
1.37pm: AirAsia declines on bribery allegations
Malaysian-listed AirAsia Group shares fell as much as 9.8 per cent on Monday after allegations that it accepted a $US50 million bribe from Airbus to sponsor a sports team owned by two AirAsia executives.
“AirAsia never made purchase decisions that were premised on an Airbus sponsorship,” the Malaysian airline said in a statement on Sunday.
UK prosecutors had alleged that $US50m was paid to AirAsia to secure orders for 180 aircraft.
AirAsia shares fell 9.8pc to MYR1.29, their lowest level since January 2017.
WSJ
1.02pm: ASX paring drop as China sheds 8pc
Australia’s S&P/ASX 200 share index is down 1.1pc at 6936, paring some of its 1.7pc opening drop to a 3-week low of 6897.
It comes as China’s central bank cut its rates of 7 and 14 day reverse repos by 10 basis points amid a $US21bn liquidity injection.
The Shanghai Composite is down 7.2pc after opening down 8.7pc after extended Lunar New Year holidays.
S&P 500 futures are up 0.7pc after the index tumbled 1.8pc on Friday.
Here’s how the biggest movers are shaping up at 1pm:
Eli Greenblat 12.41pm: Woolies, Coles best retail picks: Jefferies
Research and investment firm Jefferies has named Woolworths and Coles as its top picks in the consumer sector, with analyst Michael Simotas also favouring Coca-Cola Amatil in the upcoming reporting season while JB Hi-Fi is expected to report a robust result driven by solid trading over Black Friday and Christmas.
In a report to clients Mr Simotas highlighted the twin supermarket giants arguing food inflation is building, the market is rational and with the retreat of Kaufland he expects market sales growth and profitability to be supported.
“We also like Coca-Cola Amatil and expect confirmation of continued improvement and cost of goods sold tailwind, setting the business up for mid single digit growth in 2020. Harvey Norman is likely to report another soft result from Australia but we will be looking for signs of improvement stemming from rising house prices.’’
A good result is tipped from JB Hi-Fi however, post the strong share price outperformance, Mr Simotas believe this is priced in. “JB Hi-Fi also tends to have less operating leverage than most retailers, suggesting cost growth will somewhat offset the sales benefit and there is a risk that the January trading update will reveal a sales slowdown.’’
The research firm prefers Harvey Norman as “its share price has lagged and we expect strong growth from offshore businesses and believe the rapid appreciation of Australian house prices will eventually lead to a sales improvement.’’
The analyst sees downside risk in Domino’s with another weak result from its Australian and New Zealand operations.
12.31pm: Shanghai Comp drops 8.7pc
China’s Shanghai Composite has been pummelled on its return to trade on the first day back after the extended Lunar New Year Holiday.
Futures had tipped a fall of 7.5 per cent, but the index dropped by 8.7pc early, recovering slightly to 8.1pc.
The Chinese Yuan is weaker by 0.77pc to 6.98 against the US dollar.
Meanwhile, the ASX is lower by 1.41pc.
Chinese stocks plunge 9%, the most since an equity bubble burst in 2015. Here's how the Shanghai Composite opened: https://t.co/KcpBP3xNAg pic.twitter.com/apqDczqTiJ
— Bloomberg (@business) February 3, 2020
12.25pm: Expect volatility in earnings: Macq
Investors can expect a volatile reporting season ahead as consensus earnings estimates are still being downgraded, Macquarie warns.
Its best buy ideas are a2 Milk, BHP and Fortescue, based on Macquarie’s Outperform ratings and above-consensus estimates, plus rising consensus estimates.
Star Entertainment and Flight Centre are also favoured for an expected second half rebound amid rising house prices and recovery in travel and tourism assuming virus fears recede.
Its best sell ideas are ANZ, Suncorp, IAG, Medibank Private, South 32 and Newcrest, based Macquaries’ Underperform ratings and below-consensus estimates, plus falling consensus estimates.
Analyst Jason Todd warns that the downgrade cycle for consensus earnings estimates isn’t over, yet forecasts for outer years has risen to “overoptimistic” levels.
He notes that the Industrials FY21 EPS growth forecast has risen to 12pc from 8pc in October 201. Given average growth of 2pc a year over 2009-19, he thinks 12pc is “high”.
Mr Todd says he still expects the US to progress to the expansion phase of the cycle, albeit perhaps delayed by the coronavirus, and he favours stocks that benefit from reflation, rather than positioning for a downturn.
Macquarie’s reporting season outlook follows similar sentiment from Citi, who tipped a rebound in the retail and building sectors.
12.13pm: Chinese commodities drop
Chinese commodity markets have dropped at the open, hinting at a likely plunge when its equity markets open later in the hour.
Shanghai crude oil is down 10pc to hit the lower limit of its decline, while aluminium trades down 4pc and zinc is lower by 5.4pc.
On the Chinese markets a daily price limit restricts a stock from trading more than 10 per cent higher or lower than its previous closing price, in a bid to stabilise markets.
Oof. China's commodities market just re-opened and futures on copper, palm oil, rubber, iron ore, oil are all limit down (-8%). Stocks open in a few minutes....
— Tracy Alloway (@tracyalloway) February 3, 2020
Follow the latest here: https://t.co/U4eMzVVNjG pic.twitter.com/z2n4wkxjLD
Perry Williams 11.57am: Worley chair shrugs share drop
Worley chairman John Grill has shrugged off an 8 per cent drop in the company’s share price following the unexpected decision by Andrew Wood to step down as chief executive and blamed market jitters for much of the fall.
The appointment of company veteran Chris Ashton as his replacement appeared to have caught investors by surprise.
But Mr Grill, Worley’s third largest shareholder, said general market jitters and volatility had likely contributed to the sell-off.
“I think there are a lot of factors out there in the market today and trying to separate the change in CEO from all the factors in the market is too hard for us to be doing at this stage,” Mr Grill told reporters on a briefing after the management announcement. “It’s a very mobile time in markets around the world.”
Worley shares tumbled as much as 8.3 per cent in early trade on Monday and were off 7.7 per cent to $14.07 at 11.45 Sydney time.
11.43am: Gold miners lift in safe haven trade
Local gold miners are leading the market’s best performers amid a rush to safe havens.
Gold prices rose on Friday, headed for their best month in five amid continuing concerns of the impact of the coronavirus on global economic activity.
That’s helped Northern Star to snag pole position of the top 200, adding 3 per cent in Monday’s trade.
Evolution is higher by 2pc, Saracen Minerals by 1.7pc and Gold Road Resources by 1.8pc.
11.39am: Building approvals better than tipped
Building approvals data has printed better than anticipated, clocking a 0.2pc decline as opposed to the 5 per cent slip expected.
For the year, approvals were higher by 2.7pc, from a forecast slip of 1.4pc.
Despite being a volatile data series, the positivity is rubbing off on the Aussie dollar, helping it higher to US67c.
Bridget Carter 11.35am: Headwinds facing Village takeover
DataRoom | Concerns about the impact on Australia’s tourism sector connected to the Coronavirus will no doubt be a key point of interest for executives at BGH Capital and Pacific Equity Partners as they both weigh a takeover of Village Roadshow.
BGH and PEP are offering $4 per share and $3.90 per share for Village Roadshow respectively, with their offers valuing the company at around $1bn including debt.
Morgan Stanley brokers have pointed out in a note that some headwinds remain for the leisure and tourism market currently, which could make an acquisition easier for one of the two.
Both parties are carrying out due diligence but the board is yet to recommend an offer.
It comes as Citi analysts maintain a buy rating on Village Roadshow’s rival, Ardent Leisure, which reports its results on Friday.
In a research note, Citi analysts say that its US based business, Main Event, and the Gold Coast based Dreamworld, are seeing improved customer momentum, based upon online reviews from customers.
Other positive factors, they say, is an increasing corporate interest in the global entertainment sector, KKR’s interest in US rival Dave and Busters and Cineplex’s acquisition of Cineworld in North America.
Mackenzie Scott 11.32am: Home affordability issues rising again
Melbourne and Sydney house price growth slowed in January as market watchers warned affordability is re-emerging as a concern.
But that did not stop all capital cities from reporting gains for the first time since 2017 as the property market emerged from its holiday lull, the latest data from CoreLogic shows.
The property researcher’s monthly house price index showed the pace of growth slowed nationally to 0.9 per cent in January, but the annual rate of growth rate climbed to 4.1 per cent, the highest in three years.
Sydney kicked off the year with price growth of 1.1 per cent through January, down from 1.7 per cent the month prior. It was a similar story in Melbourne, which recorded New Year gains of 1.1 per cent, down from 1.4 per cent in December.
Gerard Cockburn 11.14am: IOOF completes ANZ buy
IOOF has provided an underlying profit guidance for the first half of the financial year in the range of $61m to $63m as it completes its purchase of ANZ’s Pensions and Investment business.
After a protracted negotiation period, IOOF gained a $125m reduction in the price to $850m in October, including $25m it had already paid for ANZ’s aligned dealer groups back in 2018.
Chief executive Renato Mota said the acquisition will provide “efficiencies” in customer outcomes.
“The impact of the step down in the ANZ P&I coupon interest and additional months’ ownership of ex-ANZ Advice Licensees were in line with our expectations,” Mr Mota said.
“During the period we also experienced some gross margin reset from both regulatory and competitive dynamics, in addition to a greater investment in governance.”
IOOF lifted its cost synergies to $68m pre-tax per annum, from earlier estimates of $65m, $13m of which it said had been achieved by ANZ prior to the deal’s completion.
IFL shares are lower by 4.2pc to $7.58.
Bridget Carter 11.04am: Link purchase a ‘sensible’ buy: Macq
DataRoom | Link Group’s $322m acquisition of Pepper Group’s European Servicing business appears “sensible” on face value according to Macquarie analysts.
Working for Link on the acquisition that was announced on Friday was investment bank Citi and the transaction will see the listed group grow its assets under management by $65bn.
“At face value the deal appears sensible with Link acquiring a complementary business at a fair multiple of about nine times earnings before interest, tax, depreciation and amortisation before synergies.”
The analysts said that from this point, Link would need to ensure the acquired business generated enough organic growth to offset the natural run-off of the non-performing loans and deliver on the synergies of about $16m.
This was based on the share price reaction on Friday, where shares soared nearly 10 per cent on the news.
Macquarie analysts predict that the deal will be about 10 per cent earnings per share accretive and about 16 per cent after synergies are factored in.
10.59am: Qantas shares hold 200-day line
Qantas shares have bounced nicely off their 200-day moving average today.
QAN shares were down 2.2pc at $6.26 after hitting a 4-month low of $6.20 versus the 200-DMA at $6.21.
There’s also significant support in the $6.00-$6.23 area from former peaks and troughs and the 61.pc retracement of the Oct 2018-Dec 2019 rally.
It comes as the airline provided its latest update on the evacuation flight of Australians from Wuhan, where chief Alan Joyce said his planes were safer than public transport for the risk of being infected with the virus.
QAN shares had fallen as much as 17pc from a record high of $7.46 on December 20th.
From that level, stock has fallen as much as 12pc since the coronavirus was reported to have gone human-to-human on Jan 20th.
Supratim Adhikari 10.58am: Dubber signs Telstra deal
Shares of listed call-recording outfit Dubber Corporation, backed by billionaire Alex Waislitz, have tumbled over 6 per cent despite the company signing up Telstra as a customer.
Dubber started the session 6.15 per cent weaker at $1.12. Despite the rocky start on Monday, Dubber’s shares are still up over 90 per cent over the last 12 months. They hit a peak of $1.63 in October 2019.
Melbourne-based Dubber’s technology will be available to customers using the Telstra Liberate, Telstra IP Telephony and the Telstra SIP Connect products. However, any revenue generated from the agreement dependent upon take up of its service by Telstra’s business customers.
Dubber’s artificial intelligence-powered analytics platform records and monitors calls for sentiment, key words and phrases to give businesses real-time information on customer sentiments and compliance.
Eli Greenblat 10.51am: Supermarkets join sell-off ahead of results
The supermarket giants Woolworths and Coles have traded down in morning trade this morning, as investors await their first half results and further insight into performance over the crucial Christmas and New Year period.
Shares in Woolworths were down 5 cents to $41.79 this morning, ahead of the issue of its December half results, with investors also preparing to consider the sale or float of its Endeavour liquor and hotels business.
Coles shares were down 6 cents to $16.49 with it slated to issue its first half results on February 18.
Bridget Carter 10.40am: Caltex drifts back to bid price
DataRoom | The Caltex stock price has drifted back to around Alimentation Couche-Tard’s takeover bid price.
Alimentation Couche-Tard is offering $34.50 per share and the Caltex share price was around $34.38 in Monday morning trade.
It comes as the share price performance of rival Viva Energy has been waning, falling 4 per cent last week, largely due to weak refining margins.
Questions remain as to whether EG Group will make a rival bid for Caltex, given that it has hired advisers for a possible tilt.
EG Group purchased US retailer Kroger in 2018 for $US2.15bn, and according to a broker’s note from Morgan Stanley, the company paid a full price for the target at the time in what was a competitive process.
The brokers said that EG Group was very fuel focused and cost control focused after the acquisition.
10.35am: Brent crude falls to 1-yr low
Brent crude has tumbled as much as 4.1 per cent this morning, to touch a new 12-month low of $US55.77 on fears of Chinese oil demand.
It come as China estimated oil demand to have plunged 20 per cent on the virus lockdown, industry executives reportedly calculating the loss of demand at 3 million barrels per day.
WTI fell as much as 2.2 per cent.
That’s hitting local energy stocks – the sector down 3.1 per cent. Woodside is lower by 2.2pc, Santos down 4 per cent but Oil Search and Worley are doing the most damage after negative headlines this morning – down 6.9pc and 7.6pc respectively.
10.29am: Shares open at three-week low
The ASX200 share index opened down 1.7pc to a 3-week low of 6897 as expected after the S&P 500 lost 1.8pc on Friday.
US futures have turned up 0.2pc in early trading though, offering some support, and helping the S&P/ASX 200 to recover to 6922.
Energy, Technology and Financials stocks are underperforming while Utilities, Real Estate, Health Care, Consumer Staples, Industrials, and Consumer Discretionary stocks are outperforming.
Among large caps, BHP is down 2.6pc, Santos is down 4.5pc, Fortescue Metals is off 3.4pc and Macquarie is down by 2.6pc.
S&P/ASX 200 last down 1.4pc at 6921.
10.23am: Worley drops as CEO exits
Worley shares have shed 8 per cent at the open, after long-serving chief Andrew Wood announced his intention to exit the company.
Mr Wood has been with the company for 26 years, including the past seven as its managing director.
WOR last down 7.6pc to $14.09.
10.12am: Shares slide as virus tally rises
Local share are sliding by 1.7 per cent early, as concerns of the spread of coronavirus spread further over the weekend.
The ASX200 was down 118 points or 1.68 per cent to 6899.1 at the open.
BHP is lower by 2.7pc, Fortescue by 4pc and Oil Search is dragging with as much as a 10pc drop after news that the PNG government had ended talks on its gas expansion project.
9.50am: Oil Search served PNG blow
Progress by Oil Search on its $20bn P’nyang gas expansion plan in Papua New Guinea has come to halt, as the country’s prime minister this weekend stopped negotiations with joint venture partner ExxonMobil.
Oil Search noted the announcement this morning “with disappointment” but said it would continue dialogue with the state for any future development.
“It is unfortunate that, at this time, the stakeholders in P’nyang cannot agree on the appropriate balance of value and benefits for a Gas Agreement to be concluded,” the company said in a statement.
“Under the terms proposed by the State, the joint venture partners were unable to obtain a return on their investment that made the project investable and bankable.”
Oil Search said it would continue to talk to the Papua New Guinea government about the P’nyang field, seeking better terms while ensuring an appropriate share of value from any development goes to local landowners and the state. But it would now focus on other opportunities, including Papua LNG, also in the Asia-Pacific country.
“We will seek to advance the Papua LNG Project in a timely way, recognising that several engineering and commercial modifications will need to be made now that the P’nyang development is delayed,” managing director Peter Botten said.
9.38am: Shares to tumble ahead of China reopen
Australia’s sharemarket is set to open down 1.7pc at about 6898 based on futures.
At that point it will be 3.3pc off the record high close of 7144.9 – perhaps not enough of a discount to account for the economic risk from the coronavirus.
That follows a 1.8pc fall in the S&P 500 on Friday amid concern about the global growth implications of the outbreak – US 10-year bond yields dropped 14 bps to 1.51pc reflecting safe haven demand and Australian 3-year yields have hit a record low of 0.556 this morning.
S&P/ASX 200 chart support from the November 29 peak at 6893.7 offers potential support before China’s market reopens at 12.30pm after the Lunar New Year break.
If it breaks that point, the 50-day moving average at 6847 may be tested. Traders may also target 6835, based on a bearish pennant pattern.
The Chinese share market is expected to open down about 7.5pc based on futures, but it may be less given the potential for state support and the liquidity add announced yesterday.
China has today reported 2103 new cases of novel coronavirus and 56 deaths for February 2, compared to the previous day, that’s less cases but more deaths.
Also today, Australia’s manufacturing PMI has hit a 5.5-year low for January.
CoreLogic house price data are due at 10am and building approvals data are due at 11.30am.
Overnight the focus will turn to global PMI data which will give a snapshot of the economic outlook before the coronavirus hit.
Perry Williams 9.35am: Worley chief steps down
Resources contractor Worley’s chief executive Andrew Wood has stepped down with the company’s chief operating officer Chris Ashton promoted to the top job.
Mr Wood will remain an adviser to the company until June 30 but will step down as managing director after delivering its interim results on February 24 following a 26 year career with Worley.
Mr Ashton, also a veteran of the engineering firm, said the energy transition to lower carbon sources were among his priorities.
“The next decade will see unprecedented change in the energy, chemicals and resources industries which we serve. Our customers are being driven by having to address two fundamental structural disruptions; the Energy Transition and changes resulting from the adoption of digital processes,” Mr Ashton said.
“Against a background of unprecedented change, Worley has a critical role to play and, importantly, a positive contribution to make to our customers and to the lives of those in the communities in which we operate. I am confident we have built the foundation upon which we will look to transform not just what we do but how we do it.”
WOR shares last traded at $15.24.
9.19am: Flexigroup, Flight Centre link up
Buy now, pay later platform Flexigroup has this morning inked a deal with Flight Centre to provide its long term interest free finance products for travel purchases.
In a four year deal, Flexigroup will be the exclusive provider of credit products for the travel agency, tipped to drive a double-digit increase in the agency’s total income over the period.
Alongside the deal, Flexigroup said it estimated first half cash net profit of $34.5m, up 8pc from last year as its volumes lifted by 23pc.
9.11am: What’s impressing analysts, what’s not
- Beach Energy cut to Underweight – Morgan Stanley
- BlueScope raised to Hold – Morningstar
- Caltex cut to Equalweight – Morgan Stanley
- GUD Holdings cut to Sell – Morningstar
- GUD Holdings raised to Neutral – UBS
- Newcrest raised to Hold – Morningstar
- Panoramic Resources cut to Reduce – Hartleys
- Pilbara Minerals cut to Reduce – Hartleys
- ResMed cut to Neutral – UBS
- Senex raised to Overweight – Morgan Stanley
- Sonic Healthcare cut to Sell – Morningstar
8.55am: Getswift takes stake in Euro firm Logo
Logistics group Getswift has acquired a majority stake in European info and communications firm Logo, in a bid to accelerate its global expansion.
In a note to the market, the tech firm – who is plotting a return after a horror 2018 – said it was paying 5.5m euros cash for the deal, to be funded from its balance sheet.
Chief Bane Hunter is set to become the new chairman of Logo, while its chief operating officer Robert Bardunias will become vice chairman.
“GetSwift and Logo offer complementary services to customers. The two companies currently serve some common clients and partners that include multinational firms operating across diverse industries,” it said.
8.30am: Lynas plant recognised
Lynas Corporation says it’s been awarded major project status by the Australian government to
establish its new rare earths processing plant in Kalgoorlie, Western Australia.
“Major project status formally recognises the strategic significance of the project to the Australian economy and provides a single entry point for Commonwealth government approvals as well as project support and co-ordination and assistance with state government approvals,” Lynas told the ASX.
The Lynas Kalgoorlie plant will undertake cracking and leaching of rare earth concentrate
from Lynas’s Mt Weld mine. Lynas will also explore opportunities for additional processing in Kalgoorlie.
8.10am: Westpac to defend US class action
Westpac has confirmed a US class action accusing former chief executive Brian Hartzer and outgoing financial officer Peter King of “attesting to the accuracy” of “materially false and misleading statements” in contravention of US federal securities laws.
The accusations are contained in the second class action lawsuit launched against Westpac over the child exploitation scandal, after prominent litigator US-based Rosen Law Firm announced it had filed a claim against the bank on behalf of investors who purchased shares on the New York Stock Exchange.
The bank told the ASX today: “Westpac will be defending the claim and notes other similar lawsuits may be filed.”
8.00am: Gold price thrives
Gold prices rose on Friday and were heading for their best month in five as worries over economic growth due to the fast-spreading coronavirus boosted appetite for safe havens.
Supply-squeezed palladium, meanwhile, was on track for its biggest monthly percentage gain since November 2016.
Spot gold was up 0.8 per cent at $US1,585.66 per ounce. The metal has gained more than 4 per cent so far this month.
US gold futures settled 0.1 per cent lower at $US1,587.90.
Reuters
7.45am: AMP names new CFO
AMP has confirmed the appointment of James Georgeson as chief financial officer, effective immediately.
Mr Georgeson was appointed AMP’s acting CFO in August 2019, after being deputy CFO.
AMP chief executive Francesco De Ferrari said Mr Georgeson has “deep knowledge of AMP that will help to drive the execution of our strategy as we transform into to a client-led, simpler, growth orientated business”.
The appointment follows the resignation in August of CFO designate John Patrick Moorhead.
Mr Moorhead was due to take over from outgoing CFO Gordon Lefevre in October – a date that had already been delayed by four months – as the financial giant negotiated the divestment of its life insurance business.
7.40am: Oil slides
Oil prices fell overnight and were on track for a fourth straight weekly loss on mounting worries about economic damage from the coronavirus that has spread from China to around 20 countries, killing more than 200 people.
Prices briefly found support after Russian Energy Minister Alexander Novak said Russia was ready to bring forward a meeting of OPEC and its allies to February from March to address a possible hit to global oil demand from the virus. Novak said he was in discussions with OPEC leader Saudi Arabia and that the oil- producing nations would need several more days to assess the impact and decide on the date of the meeting.
“The cartel stands ready to act again if necessary but may accept the short-term pain for now on the expectation that the economic consequences won’t be as bad as people fear and (the) price will bounce back to more acceptable levels on its own,” said Craig Erlam, senior market analyst at OANDA.
Brent crude fell 13 cents to settle at $US58.16 a barrel and was down about 4 per cent on the week.
US West Texas Intermediate (WTI) fell 58 cents to end the session at $US51.56 a barrel, down 4.8 per cent on the week. During the session, prices sank to as low as $US50.97 a barrel, the lowest since early August.
Reuters
Cliona O’Dowd 6.55am: ASX set to tumble at open
The wave of selling that stormed global sharemarkets on Friday is set to spread to the local bourse on Monday as fears grow over the rapid advance of the new coronavirus and its potential to drag on global growth.
ASX futures were pointing to a 119-point, or 1.7 per cent, drop at the open, as investors weigh up the risks posed by the outbreak and watch for what could be a brutal session on China’s equity markets, which resume trading on Monday following an extended break for the Lunar New Year holiday.
The death toll from the coronavirus epidemic has topped 300, while the number of infected has risen to 14,380, according to the latest figures from Chinese officials. The bulk of the infections and all but one of the deaths to date have taken place in China, with nations around the globe resorting to drastic action, including strict travel restrictions, in a bid to stem the spread of the virus.
US sharemarkets tumbled on Friday, giving up their January gains, as President Donald Trump declared a US public health emergency, restricting entry into the country and ordering a 14-day quarantine for citizens returning from the Hubei province in China.
The Dow Jones and the S&P 500 both suffered their biggest one-day falls since August, with the Dow tumbling 2.1 per cent to 28,256.03 and the S&P 500 losing 1.8 per cent to 3225.52. The Nasdaq fell 1.6 per cent to 9150.94.
The Australian dollar was this morning buying US66.94 cents, down from US67.19 as the local bourse closed on Friday.
6.50am: OPEC to discuss oil price fall
OPEC members and their ally Russia will convene a technical meeting this week to analyse oil price falls since the outbreak of a coronavirus epidemic, a source close to the cartel said.
The Organisation of the Petroleum Exporting Countries will assemble experts in a “joint technical committee’ in Vienna on Tuesday and Wednesday, the source said.
Crude prices have suffered since the virus outbreak as worries about its impact on China’s economic growth have taken hold.
China is the world’s second-biggest economy and a huge consumer of crude. US benchmark oil contract WTI has fallen by around 18 per cent over the past month.
Top oil exporter and OPEC kingpin Saudi Arabia said this week that the impact of the virus on oil demand was “extremely limited” but that the kingdom was closely following events.
AFP
6.45am: WeWork parent names new CEO
WeWork named real-estate industry veteran Sandeep Mathrani as its new chief executive, a critical step in the company’s bid to rebuild following a failed IPO attempt and the departure of co-founder and former CEO Adam Neumann.
Mr Mathrani, previously chief executive of Brookfield Property Partners’ retail group, replaces Artie Minson and Sebastian Gunningham, who have served as co-CEOs of WeWork parent We Co since Mr. Neumann stepped down in September.
It will begin a new chapter for a company that has become synonymous with excess among privately funded start-ups. In early 2019, just months ahead of its eagerly anticipated listing, WeWork received funding from SoftBank that valued it at a staggering $US47 billion, making it one of the nation’s most highly valued start-ups.
But after public investors baulked at paying anything near that valuation amid questions about WeWork’s governance, Mr. Neumann’s quirky stewardship and the company’s business prospects, the IPO was pulled and SoftBank put in new money at a valuation of just $US8 billion.
Since then, SoftBank has worked on a five-year business plan that it expects will get the company to profitability. As part of that plan, WeWork will continue to open new locations, according to a person familiar with the matter.
Dow Jones
6.42am: US traders set for more volatility
Investors are betting the volatility that has rattled markets over the past two weeks is here to stay.
Many are bracing for dramatic swings in stocks as the US presidential election season ramps up and investors assess the impact of the coronavirus outbreak on global economic activity.
Options traders are forecasting increased volatility around key dates tied to the election, including Monday’s Iowa caucuses. They are picking up stock hedges that would pay out if turbulence continues to jump in coming months.
Those bets coincide with a pause in the stock market’s record run. Worries about the coronavirus, which so far has infected more than 12,000 people around the world, have driven the S&P 500 down 3.1pc from its Jan. 17 record and into the red for 2020.
Some investors have dished out money for insurance-like contracts tied to a broader pullback. Others have placed targeted wagers on individual sectors, girding for different candidates’ positions to spark volatility in corners of the market such as health care or financials.
6.40am China bank gives economy a boost
China’s central bank said it will inject 1.2 trillion yuan ($A260 billion) worth of liquidity into the markets via reverse repo operations on Monday, as the country prepares to reopen its stock markets amid a new coronavirus outbreak.
China’s authorities have pledged to use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the virus epidemic, which has so far claimed 305 lives, all but one in China.
The People’s Bank of China made the announcement in a statement published on its website on Sunday, adding the total liquidity in the banking system will be 900 billion yuan higher than the same period in 2019 after the injection. According to Reuters calculations based on official central bank data, 1.05 trillion yuan worth of reverse repos are set to mature on Monday, meaning that 150 billion yuan in net cash will be injected.
Investors are bracing for a volatile session in Chinese markets when onshore trades resume on Monday after a break for the Lunar New Year which was extended by the government.
China’s stock, currency and bond markets have all been closed since January. 23 and had been due to re-open last Friday.
There will be no further delays to the reopening, the country’s securities market regulator said in an interview published by the state-backed People’s Daily newspaper on Sunday.
Reuters
6.35am: ‘Worst to come’ for stocks in China
Stocks in China are primed for a steep fall on Monday when markets in Shanghai and Shenzhen reopen after a week-long closure, even as Chinese authorities try to calm frayed nerves over the fast-spreading Wuhan coronavirus.
The last time mainland-listed Chinese stocks traded was January 23, two days before the start of the Lunar New Year, and the benchmark Shanghai Composite had fallen 4.5 per cent since mid-January at that point.
The markets were originally scheduled to reopen on Friday, but that was pushed to Monday when China extended its national holiday in an attempt to slow the spread of the new coronavirus that was first identified in the central city of Wuhan in December.
6.30am: Wall St recap
Wall Street stocks tumbled with other leading equity markets Friday on mounting fears that the coronavirus will significantly dent global growth.
The Dow Jones Industrial Average skidded 2.1 per cent, losing more than 600 points to finish the session at 28,256.03, the biggest decline since August.
The broadbased S&P 500 fell 1.8 per cent to 3,225.52, while the tech-rich Nasdaq Composite Index dropped 1.6 per cent to 9,150.94.
At least 213 people have died and nearly 10,000 people have been infected in China by the new coronavirus, while fresh cases were found abroad with more than 20 countries now affected.
Just after markets closed, US authorities declared a public health emergency, and said starting Sunday they would will ban entry into the country of any foreign national who has travelled to China in the past two weeks, while quarantining Americans who have made the trip.
The three largest US airlines had already announced they were suspending service to China after the US State Department urged no travel to the country, ratcheting up their restrictions after earlier cancelling only some flights.
“Based on the continuing rise in the number of coronavirus cases and deaths, it’s increasingly apparent the disease is becoming an economic as well as a public health concern,” said a note from Oxford Economics.
Quincy Krosby, chief market strategist at Prudential Financial, said the outbreak has raised doubts about whether growth would accelerate in the aftermath of the US-China trade détente.
“We expected to see global growth,” she said. “What this does is perhaps slows that down and adds more uncertainties.” Krosby said the outbreak also could pose problems for companies with supply chain dependent on China.
Losses on Wall Street were broadbased, with oil giants Exxon Mobil and Chevron both losing around four per cent, Apple down 4.4 per cent and JPMorgan Chase 2.6 per cent. United Airlines and American Airlines both lost more than three per cent.
An exception was Amazon, which surged 7.4 per cent after releasing quarterly earnings results for the holiday period that trounced market expectations.
AFP
ASX 200 falls on China update; BHP leads mining reversal
Iron ore, copper futures, AUD down after China's underwhelming economic update. RBA's 'step down' in hawkishness evident in September minutes, but deputy governor Andrew Hauser says inflation job's not done yet.
ASX 200 rises on banks; Arcadium top gainer
Rio Tinto's takeover approach lifts Arcadium Lithium appeal. West African Resources drops on Burkina Faso mining concerns. Qantas may avoid second strike after proxy backing.