Trading Day: Major banks dive as RBA slashes rates to 0.25pc
Shares sunk 4.3pc to a four-year low despite unprecedented monetary and fiscal stimulus, as banks took a hit on the RBA’s latest rate cut.
- Stimulus no saviour for ASX, hits 2016 lows
- Emergency RBA cut first since 1997
- Feb unemployment edges lower to 5.1pc
- Dollar drops 5pc to lowest since 2002
- Qantas halts international flights
That’s it for the Trading Day blog for Thursday, March 19. Australian stock falls accelerated at the close, to send the market to its lowest close in four years after the RBA made an emergency rate cut of 0.25 per cent to historic lows.
Energy was the biggest drag after the oil price sank to GFC lows overnight but banks too came under pressure as the rate cut likely squeezes margins. Afterpay extended its two-day drop to near-50pc despite reassuring investors of its business model while Qantas took another hit as it cut international flights
In the US overnight, the Dow Jones sank 6.3pc and extended losses after a market suspension. The S&P sank 5.2pc and the Nasdaq fell 4.7pc.
Meanwhile the dollar fell sharply, last at US55.73c after hitting 18-year lows of US55.10c.
4:00pm: RBA prepared to intervene in FX
RBA Governor Philip Lowe says the RBA is prepared to act in the FX market if needed.
“We haven’t judged conditions poor enough to intervene,” he says after his speech today.
“We haven’t intervened in FX markets but are prepared to do so if needed.”
4.50pm: We expect significant job losses: Lowe
RBA Governor: "I am not able to provide you with an updated set of economic forecasts... But we are expecting a major hit to economic activity and incomes in Australia that will last for a number of months. We are also expecting significant job losses. " #ausbiz #ausecon #commsec
— CommSec (@CommSec) March 19, 2020
4.35pm: McMillan Shakespeare cans guidance
McMillan Shakespeare is the latest ASX200 company to withdraw its earnings guidance due to the virus.
While trading in Jan-Fed was in line with its expectaions and its “actively managing” the impact of COVID-19, it will neverthless hit its 4Q sales and earnings.
The number of ASX200 companies withdrawing guidance today - GPT, Downer, BlueScope, Nine Entertainment and now McMillan Shakespeare is probably unprecedented for one day.
Unibail Roddamco Westfield remains in a trading halt after warning two days ago that it’s too early to know the impact of the virus and related lockdowns in Europe and North America.
Read more: Overseas stores turn into a burden
4:30pm: RBA won’t put a floor under $A: CBA
CBA says the RBA will intervene to “add liquidity” if the Australian dollar remains “disorderly” but won’t “provide a floor” under the currency.
The current circumstances of AUD/USD trading are “reminiscent of what preceded the Reserve Bank’s interventions during the 2008/09 Global Financial Crisis”, according to CBA’s senior FX strategist, Joseph Capurso.
“It is our judgement that if current trading patterns continue, the RBA will enter the AUD/USD market to provide liquidity,” he says. “We do not expect the RBA to intervene to provide a floor to the Australian dollar.”
In his view the RBA is still committed to a freely floating exchange rate that buffers the economy from external shocks. But it also wants to ensure that financial markets can function as normally as possible. Mr Capurso notes that bid-offer spreads for AUD/USD surged to well above average levels as the current sank 3 US cents overnight before dropping a further 2.5 US cents in one hour in local trading on Thursday.
“The widening in the bid‑offer spread suggests liquidity has dried‑up,” he says.
“Falling liquidity reflects, in part, the ‘dash for USD cash’ currently gripping markets.”
CBA maintains that AUD/USD could hit 0.5500 or “even lower, if only for a short time, in the first half of 2020”.
But it also expects AUD/USD to will end June 2020 at 0.5700.
4.12pm: New stimulus no saviour for the ASX
Sweeping monetary and fiscal measures did little to support the local share market, with shares sinking to new four year lows at the close.
The benchmark ASX200 clawed back ground early, notching a gain as much as 3 per cent at the open, before the prospect of quantitative easing and rising concerns of company debt levels pulled the index into the red.
By the close, the ASX was down 170 points or 3.44 per cent to 4782.9, bouncing from intraday lows of 4741.
Meanwhile, the All Ords finished down 189 points or 3.79 per cent to 4809.4.
The Aussie dollar finished the local session lower by 3.4 per cent to US55.76c, after hitting 18-year lows of US55.10c.
4.06pm: 10-year bond yield ‘too high’: ANZ
The RBA’s commitment to conduct purchases to “address market dislocation”, is “especially important” given the reaction of the long-end to the statement, which initially saw the 10yr bond yield spike more than 100bp, says ANZ.
“It has since returned to a level much closer to that pre announcement but still looks too high given what forward guidance implies for the cash rate,” says ANZ’s head of Australian economics, David Plank.
Also critical is forward guidance tied to the attainment of economic outcomes, rather than being time specific. It could be many years before these outcomes are achieved.
3.55pm: Intraday yield surge ‘strange’: Westpac
Westpac says a record intraday surge in the 10-year bond yield was a “very interesting” reaction to the start of QE with yield curve control in Australia.
The 10-year yield gyrated wildly, surging 100bp to a 15-month high of 2.50pc before retreating to 1.44pc, while the 3-year fell from 0.57pc to 0.32pc.
“Given that the RBA has said it will purchase securities across the curve, that is a strange reaction in our view,” Wespac’s head of AUD rates strategy, Damien McColough.
“We think that the curve at 140bp is too steep and the 10yr yield at 1.70 per cent too high when US 10yr yields are at 1.26 per cent.”
He argues that if the RBA is able to get 3yr yields to its objective, it will also drag the long end lower as purchases continue and market volatility ebbs.
“Clearly the bearish US Treasury backdrop and fears around how much ACGB issuance is in the pipeline is dominating market thinking.
We are also very interested in how the RBA intends to enter the semi-government market.
There are few details as to their intentions... but this is certainly a positive for semi-government spreads.”
Michael Roddan 3.48pm: Cash in capital buffers: APRA
The banking regulator has thrown out its long-awaited “unquestionably strong” capital requirements, telling lenders to cash in excess capital buffers to keep credit flowing and to access a new $90bn central bank lending facility.
The Australian Prudential Regulation Authority on Wednesday told the banking sector it would “not be concerned” if the lenders don’t meet its capital buffer rules, which were first proposed by David Murray in his 2014 Financial System Inquiry and adopted by the regulator in 2016.
As the coronavirus pandemic tears through the financial system, APRA chairman Wayne Byres said allowing banks to draw down on the additional capital buffer headroom built up following the new rules, which have seen tier 1 capital ratios grow to 11.3 per cent, above the 10.5 per cent minimum, was putting the crisis buffers to work as they should.
“APRA’s objective in building up this capital strength has been to ensure it is available to be drawn upon if needed in times such as this,” Mr Byres said.
3.39pm: Myer crashes as panic sets in
Shares in Myer have crashed almost 50 per cent to below 10 cents as the market panic prompts a sell-off in the department store retailer to historic levels.
The nation’s biggest department store is now valued at less than $180m.
In afternoon trade Myer shares were down 45 per cent at 9.3 cents - an all time low.
Myer was floated on the ASX in November 2009 at an issue price of $4.10.
Richard Ferguson 3.35pm: PM to unveil $15bn stimulus package
Scott Morrison is set to unveil a $15bn package to ensure small lenders continue to support small businesses during the coronavirus pandemic and address the Reserve Bank’s historic emergency interest rate cut.
The Australian revealed on Thursday that the government was considering a loan guarantee to keep businesses afloat as part of the Prime Minister’s second-round economic rescue package.
Josh Frydenberg has said the $15bn move with enable customers of smaller lenders to still access credit during the crisis.
“Small lenders are critical to Australia’s lending markets, often driving innovation and providing competition for larger lenders,” the Treasurer said.
“This funding will complement the Reserve Bank of Australia’s (RBA’s) announcement of a $90 billion term funding facility for authorised deposit-taking institutions (ADIs) that will also support lending to small and medium enterprises.
“Combined, these measures will support the continued ability of lenders to support their customers and in doing so the Australian economy.”
3.25pm: Dividend payout ratios at risk: MS
Australian companies are highly likely to lower their dividend payout ratios as earnings fall due to the global COVID-19 crisis, warns Morgan Stanley.
WIth an implied payout ratio of 73 per cent, Australia’s S&P/ASX 200 index looks to be trading on a “globally attractive yield” of 5.6 per cent after the index dived 33 per cent in the past four weeks.
But a return to lower payout ratios on “what will “definitely be lower earnings” for the overall market would “materially alter ASX 200 yield credentials”, making “sustainable yield even more important in this dislocated environment”.
As investors digest the reality of abandoned guidance amidst the continued fall out of COVID-19 impacts, the short term disruption to trading and outlook is “severe”, according to Morgan Stanley Australia head of research, Chris Nicol.
“With such disruption to the small-medium enterprises and in particular service sectors of the economy – an overarching caution towards solvency and going concern is apparent.”
“We also now view that it is highly likely that dividend payouts will also be adjusted and in some cases adjusted much greater than the actual hit to earnings.
“ Also, it will be very difficult to raise capital and justify high payout ratios.”
Perry Williams 3.11pm: Energy writedowns ahead: MS
Australian energy producers may be forced into writedowns of their oil and gas assets with the plunge in crude leaving spot prices trading nearly two-thirds lower than forecasts factored in by the industry, Morgan Stanley said.
Companies in the sector baked in assumptions of $US65 a barrel compared with Brent crude trading at $US24 a barrel currently.
“We expect asset impairments will come across the sector with many companies assuming $US65 a barrel,” analyst Adam Martin said. “Impairments reduce book value but also lead to lower depreciation and amortisation which could improve profitability post the write-downs albeit from levels well below 2019.”
After Oil Search slashed its spending by 40 per cent, Woodside Petroleum may cut planned investment in half and delay Scarborough LNG while Santos could cut a third of its capex and delay sanctioning its $US4.7bn Barossa project until 2021, the broker said.
Santos could even consider cancelling last year’s $US1.4bn deal with ConocoPhillips which handed it control of Darwin LNG and Bayu-Undan.
The downturn has also come at a difficult time for Woodside which may struggle to delay project development given the need to boost supplies to the North West Shelf LNG plant, JP Morgan said. One solution is to delay a planned expansion of the Pluto LNG plant and instead pipe gas from Scarborough direct to the existing Karratha gas plant.
“This would enable Browse also to be pushed back without having to impair capacity at the Karratha gas plant,” JP Morgan said.
Woodside last off 9.8pc at $15.54, Santos down by 11.8pc to $2.76 and Oil Search by 12.7pc to $2.13.
2.58pm: Bank pressure sends ASX to new 4yr low
Shares are extending the day’s decline after the RBA’s emergency cut - now down 3.6 per cent after an early rise as much as 3pc.
The benchmark ASX200 is down 179.7 points to 4773.5 - the lowest since early 2016.
Banks are doing the most damage - extending their decline to 6.2 per cent as the RBA cut puts more presure on margins and profitability.
Commonwealth Bank is lower by 4.3pc as it slashed its fixed loan rates, while Westpac is down 5.4pc, NAB by 6.5pc and ANZ by 9.4pc.
2.46pm: $A claws back ground
The Aussie dollar spiked to US56.31c as the RBA unveiled its latest stimulus, but still remains lower for the session after setting new 18-year lows earlier today.
AUDUSD touched US55.10c earlier - its lowest since October 2002, but spiked to US56.31c after the RBA unveiled a package of rate cuts and yield curve control.
AUDUSD last at US55.75c.
Aussie dollar has hit US$0.55 for the first time since late 2002. The Aussie has fallen by ~US11c against the greenback in just nine days as money flows to the USD #ausbiz #forex
— CommSec (@CommSec) March 19, 2020
Patrick Commins 2.38pm: First emergency rate cut since 1997
Reserve Bank governor Philip Lowe has delivered an emergency rate cut to 0.25 per cent as the the RBA joins a global effort to help economies weather the financial and economic fallout of the COVID-19 pandemic.
The first unscheduled RBA move since 1997 speaks to the seriousness and increasing desperation among monetary policymakers to do what they can to ease financial conditions amid a worldwide panic in investment markets which has seen 30 per cent wiped off the ASX and plunged the Australian dollar below US56 cents and to its lowest level in 18 years.
Dr Lowe flagged earlier this week that the bank was prepared to buy Australian government bonds “to smooth the functioning of that market”, and that the RBA is “working closely together to help ensure that Australia’s financial markets continue to operate effectively and that credit is available to households and businesses”.
Read more: RBA’s emergency interest rate cut first since 1997
Cliona O’Dowd 2.35pm: CBA slashes home loan rates
CBA has slashed rates on its fixed home loans after the Reserve Bank trimmed the official cash rate to an all-time low of 0.25 per cent, but customers on variable rates will see no change after the bank failed to pass on any of the cut to its variable-rate mortgages.
Shortly after the RBA announced the cash-rate cut, CBA on Twitter said it would reduce its one, two and three-year fixed-rate home loans by 70 basis points to 2.29 per cent.
“These are unprecedented times, and they call for unprecedented measures,” CBA CEO Matt Comyn said.
The bank has also launched a new term deposit rate of 1.70 per cent, up 60 basis points, it said.
CBA was the first of the big four banks to update the market on its home loan rates following the RBA’s decision.
“These are unprecedented times, and they call for unprecedented measures.†– CBA CEO, Matt Comyn
— CBA Newsroom (@CBAnewsroom) March 19, 2020
2.30pm: RBA cut rates to 0.25pc
The RBA has cut its cash rate to historic lows of 0.25 per cent, and lauched yield curve control in a bid to shore up the local economy.
2.23pm: Afterpay’s 48pc two-day drop
Market darling Afterpay is sliding a further 23 per cent, adding to yesterday’s sell off even after defending its business model this morning.
In a letter to shareholders, Anthony Eisen, who co-founded Afterpay in 2015, moved to reassure shareholders that Afterpay has the business fundamentals in place to weather economic uncertainty from the coronavirus pandemic.
Today’s trading level at $9.80 marks a 48 per cent drop since Tuesday’s close.
Read more: Afterpay calls for calm after share rout
Leo Shanahan 2.13pm: AAP buyers emerge
Management of Australian Associated Press are in talks with several parties who have expressed an interest in buying the entirety the business was set to close in June after 85 years.
AAP’s chief executive Bruce Davidson sent a note to staff today notifying them that the newswire has been approached in recent days by several unidentified parties interested in buying the newswire service, as well as the profitable arms of the business Pagemasters and Medianet.
“This development was not expected by either management, the AAP Board or the AAP shareholders. AAP’s shareholders have now asked me to enter into discussions with the interested parties to determine if any of these approaches offer a credible and sustainable future for AAP,” he wrote to staff.
Mr Davidson cautioned staff about being overly optimistic about the latest development, but has paused the redundancy timetable with the business due to close on June 26 at the expense of journalists jobs.
1.53pm: Car loan delinquencies will grow: Moody’s
Car loans will represent the next wave of lending losses, according to ratings agency Moody’s.
Indeed, Moody’s warns coronavirus-related supply and demand shocks to hit economic activity across G-20 economies.
Moody’s which tracks auto loan securitisations says it expects delinquency rates and losses will increase in Australia over the coming year, “largely driven by self-employed borrowers hit by the deteriorating operating environment in the small business sector”.
In Australia during the December quarter there were $1.85 billion auto loan securitisations issued.
Richard Gluyas 1.46pm: Don’t let bank valuations fool you: Macq
Bank valuations are starting to look attractive but the sector will find it difficult to outperform in the current environment, according to a note by Macquarie Equities.
If the coronavirus-induced economic downturn was “shallow”, Macquarie said the impact of lower rates would continue to hurt bank profitability, while the broader market would likely rebound earlier, benefitting from stimulus packages.
However, if the downturn was severe, banks face the risk of significant loan losses, exacerbated by a new accounting approach to impairment recognition.
“While some banks are trading below NTA (net tangible assets), we don’t see that as a reason to buy, given materially lower returns outlook than in the past, and note that many global banks which have operated in a zero-rate environment are trading at a discount to NTAs and relative to the Australian banks,” Macquarie said.
The note came ahead of a 2.30pm monetary policy announcement by the Reserve Bank, which is likely to feature a further 25 basis-point cut in official interest rates to 0.25 per cent.
Reserve Bank governor Philip Lowe is considered likely to kick off a program of quantitative easing, or purchasing government bonds, to keep rates low for longer.
Read more: RBA primed for emergency cut
Ben Wilmot 1.41pm: Mall landlords in virus firing line
Mall landlords are in the firing line of the coronavirus crisis with regional mall landlords Scentre Group and Vicinity Centres sold-off aggressively and trading at a discount of about 60 per cent to their net tangible asset value, with implied asset value write-downs of 40 per cent.
Scentre was off another 10.7pc to $1.61 in lunch trade and Vicinity was off by 12.3pc to $1.14.
JPMorgan analysts have slashed earnings and distribution forecasts by 25-40 per cent for the companies that own many of the country’s top malls, although they say there is sufficient serviceability and liquidity.
JPMorgan said it has a slight preference for Scentre given its better asset quality, which would make it easier to lease up post stabilisation. Vicinity has a stronger balance sheet, but the analyst said Scentre would be able to sell assets once conditions stablised to bring its balance sheet broadly in line with Vicinity.
The house is maintaining an “Accumulate” recommendation on Scentre, while lowering its target price to $2.50 from $4.20. It kept a Hold rating on Vicinity, although the target price reduces to $1.85 from $2.75.
JPMorgan has assumed that all shopping centres will be non-income-producing for two months in April and May as the supermarkets and essential retailers continue to trade but the bulk of the specialty stores close.
1.16pm: Dollar drops 5pc to lowest since ’02
The Aussie dollar has dropped near 5 per cent in lunch trade, ahead of an expected emergency cut from the RBA and further stimulus from the local government.
AUDUSD hit lows of US55.10c - its weakest since October 2002 - when the dollar sank in the wake of the Bali Bombings.
Today’s decline marks a 15 per cent decline in the dollar in just a matter of days, and puts the Aussie dollar close to parity with the NZ dollar.
It comes as demand for the US dollar rises - with investors increasingly moving to hold the currency amid the market volatility.
China’s offshore yuan is also coming under pressure - hitting 7.1 yuan to the USD.
You have to go back a long time (about 18 years) to see levels like this on the Aussie dollar.
— IGSquawk (@IGSquawk) March 19, 2020
Scotty has now declared a "human biosecurity emergency", saying it could last at least six months.
Buy local it is then...$AUDUSD -4% today. pic.twitter.com/pLElxm4H7U
1.01pm: Shares lower as travel names belted
The local market is lower by 1.5pc after swing in the morning session, as the local dollar dives.
AUDUSD fell as much as 4.6pc from the NY close to hit US55.10c - its lowest since October 2002.
Travel names continue to fade after Qantas halted all international flights this morning, while energy names reel after oil prices tanked overnight.
Here’s the biggest movers at 1pm:
12.41pm: Macquarie dives to 3.5 year low
Macquarie Group shares have dived as much as 14pc to a 3.5-year low of $78.72 today, down 48pc from the top.
It’s now trading on a 12-month forward PE ratio of about 9 times. That’s a hefty 35pc discount to the 5-year average of 13.8 times.
Macquarie is probably cum-downgrade as the global COVID-19 hits asset prices, so its shares are being heavily discounted.
Macquarie is one of the largest asset managers in the world.
MQG last down 10pc at $82.00.
Perry Williams 12.17pm: Oil Search loss making amid oil slump: Macq
Oil Search is operating on a loss making basis at current oil prices and may need to consider packaging itself up for sale if the crude slump persists, analysts say.
The Papua New Guinea and Alaskan-focused energy producer slashed spending on Wednesday by 40 per cent in response to market turmoil, but still continues to be heavily sold off as investors fret over its debt levels and potential covenant breaches.
Oil Search fell a further 12.7 per cent on Thursday and has now shed 73 per cent of its value since January.
“We note that at current oil prices, Oil Search is loss-making on earnings and a free cash flow level,” Macquarie said, noting the company couldn’t pay a dividend at current spot oil prices.
Oil Search has $US3.4bn in debt, $US396m in cash and $US796m in undrawn facilities at December 31.
“We believe Oil Search’s EBITDAX/interest ratio falls to ~2.5x at current spot prices, which breaches the main corporate facility ($US440m) covenant of more than 3x EBITDAX/interest,” Macquarie said.
Credit Suisse said it was time to shift out of Oil Search and into the safer havens of Woodside and Beach Energy until oil markets stabilise.
“We ponder if perhaps Oil Search may need to consider packaging itself up for sale in these times amid limited appealing alternatives, if oil continues to soften,” the broker said.
Brent crude rebounded 8 per cent in early trading Thursday but is still at $US27 a barrel compared with Oil Search’s free cash flow break-even of $US33 a barrel.
Read more: Oil Search slashes spending as oil tanks
Gerard Cockburn 12.07pm: Village flags theme park, cinema closures
Village Roadshow has flagged its theme parks and cinema divisions may be forced to close as coronavirus continues to negatively impact its operations.
The company has withdrawn its full year earnings guidance and reduced senior executive salaries effective immediately, as major film studios postpone movie releases.
A halt in international tourism has resulted in significant reductions in theme park visits, with weaker forward bookings and annual pass sales also posing challenges to the parks’ trade.
Chief executive Clark Kirby said the company was working on a contingency plan if both divisions are forced to close.
“It is possible that cinemas and/or theme parks may be closed in Australia for a period of time, which would have a significant adverse impact on VRL’s earnings during that period,” Mr Kirby said.
Rival theme park owner Ardent Leisure on Wednesday announced to the ASX it would be closing its US-based Main Events business, due to the US government placing restrictions on gatherings.
Village executive bonuses will also be cut to zero for the 2020 financial year and the company will freeze any recruitment and capital expenditure activities. The company is also asking employees to take leave in an attempt to reduce employee costs.
VRL last traded down 12.9pc to $1.08.
Bridget Carter 12.03pm: Webjet calls in Goldmans for raise
Webjet is understood to have hired Goldman Sachs for a potential equity raising as its shares were halted Thursday.
The company last traded at $3.76 – a 72 per cent drop in the past month.
More to come
Damon Kitney 11.58am: Why one of the biggest fundies is backing cruises
One of the world’s largest fund managers, the Los-Angeles-based Capital Group, has taken a contrarian position on the embattled travel sector, including cruise lines.
In a note to clients, David Polak – the firm’s Equity investment director Based in New York – said its portfolio managers and analysts believed that consumer behaviour patterns were unlikely to change much for travel and hospitality industries.
“When disposable income increases, we drive farther, fly farther, take longer vacations, spend more. The events of 9/11 did not derail this megatrend, and it is unlikely that COVID-19’s impact will over the long term,” he said.
“As such, managers will look for appropriate entry points to add to or begin positions in companies in structurally advantaged industries with pricing power that stand to benefit from the secular trends and, at the same time, have long- term advantage due to tight supply-demand dynamics.
“Aerospace, airlines and cruise lines are areas of focus, although it may still be early.”
He made the point that while cruise lines seemed unattractive at present, “we have seen big shocks in the past, and customers for cruise lines have tended to forget and move on after a year”.
“This is a structurally attractive industry; there are a limited number of suppliers, which gives them sustainable pricing power, and there’s a demographic tailwind with a significant portion of the older population getting older and wealthier. In aerospace, there are only two major companies that supply the world’s aeroplanes.”
Capital Group, which has been serving Australian wholesale and institutional clients since 2012, is renowned on the global stage for its long-term approach to investing. Capital Group’s flagship global equity fund, the New Perspective Fund, has been running for more than 45 years.
Michael Roddan 11.40am: Fix debt now as options narrow
Indebted companies facing a cash flow squeeze have been told to “act now before your financing options narrow” by Baker & MacKenzie restructuring partner David Walker, as Australian firms rush to draw down debt “before things become more uncertain”.
Mr Walker said the markets for new equity raisings, debt capital market issuances, and US private placements for Australian companies “is largely closed” and there seemed “little to no appetite to raise equity or debt under current market conditions”.
“Underwriters are not in a position to underwrite a capital raising with any sort of timetable that stretches out more than a few days,” he said.
Banks would also be less reluctant to use “material adverse effect” clauses on existing debt facility contracts to prevent access to funding if the situation worsens, rather than tip a company into default.
In an update from the global consultancy’s Sydney restructuring team overnight, Mr Walker said there were a number of different routes being taken by Australian organisations to maintain liquidity during the coronavirus pandemic.
“We are seeing different liquidity approaches from Australian corporates: some are deferring borrowing and debt issuance decisions, others are drawing down undrawn term and revolving credit facilities and going to market to source as much debt as they can before things become more uncertain,” Mr Walker said.
Read more: Got debt? Better act now
11.32am: Feb unemployment beats forecasts
February unemployment figures have beaten market expectations, edging lower to 5.1 per cent versus consensus of 5.3 per cent.
Over the month 26,700 jobs were created, versus consensus of 6300 while the participation rate was 66pc, compared to consensus of 66.1pc.
That’s helping to fuel a tick higher in the local market – shares now up by 0.4pc.
The AUDUSD is ticking lower to US57.61c.
The February AU labour market data came in stronger than expected but we think it’s only a matter of time before the labour market deteriorates #auecon pic.twitter.com/aQ77Jmariu
— ANZ_Research (@ANZ_Research) March 19, 2020
11.23am: ASX pares gains
Australian shares have remained super volatile, with the S&P/ASX 200 index falling 0.9pc to 4917.3 after rising 3pc to 5102.5.
The early rise came as the ECB announced an additional EUR750bn ($1.4 trillion) “pandemic purchase programme” extension of its current quantitative easing, which was also broadened it to include commercial paper and Greek debt.
That pushed S&P 500 futures up as much as 2.1pc before paring that rise to 1.5pc. But the S&P/ASX 200 fell back as Australia’s 10-year bond yield surged 24bp to an 8-month high of 1.45pc.
The S&P/ASX 200 is currently flat at 4967 ahead of February jobs data at 11.30am.
A potentially-massive monetary, macroprudential and fiscal stimulus announcement in Australia is due at 2.30pm.
Bridget Carter 11.13am: Speedcast lenders circling
DataRoom | Speedcast’s US lenders have drafted in Greenhill to assist on assessing their loans to the listed satellite company.
Working for Speedcast is Moelis and Canaccord.
It comes after lenders in recent days made a request for proposals to represent their interests, with other banks pitching including Houlihan Lokey and Lazard.
The US lenders to Speedcast provided $US600m from the Term Loan B market in the United States. Other banks have a $100m revolving credit facility with the company, including Credit Suisse, Citi, Macquarie Group, ING and Credit Agricole.
Speedcast has not had its shares trading from February 5 since before the height of the coronavirus crisis, but since the global emergency surrounding the pandemic in the last few weeks, many question the company’s chances of survival.
The trading halt came after the company did not release its interim results.
The group’s market value is less than $200m now but it was worth $1.4bn in 2018.
Read more: Loans to satellite provider Speedcast ‘being assessed
Bridget Carter 11.12am: Collection House hires restructuring firm
DataRoom | Collection House lenders have hired insolvency and restructuring firm McGrath Nicol to negotiate with the company over its loans that it had been struggling to pay since before the escalation off the coronavirus epidemic.
It is understood that the listed debt collector and lender has called on the services of Flagstaff.
More to come.
Jared Lynch 11.06am: Star casino hours cut for cleaning
Star Entertainment is restricting opening hours of its three casinos as it aims to prevent the gaming venues becoming coronavirus hot spots.
The company will close its casinos in Pyrmont, the Gold Coast and Brisbane for four hours each morning to allow for a “comprehensive cleaning process”.
But the restrictions stop short of measures from other countries. On Wednesday, Nevada Governor Steve Sisolak ordered the closure of all Las Vegas casinos for at least 30 days, meaning its famed strip will go dark for the first time in almost six decades.
“This is only common sense,” Mr Sisolak said. “This is not the time for casinos to remain open. This is not a time for community recreation centres, clubhouses, movie theatres and malls to remain open. If your business brings groups of people together, it should not be open.”
COVID-19 has hit the gaming and entertainment industry hard, with government enforced travel bans stopping the flow of cashed-up Asian gamblers, while Prime Minister Scott Morrison has announced tougher measures to combat the virus, including banning non-essential indoor gatherings of more than 100 people.
SGR shares are higher by 4.6pc to $1.82 in morning trade.
Read more: Star cuts casino hours for cleaning
11.04am: ECB to buy EUR750bn bonds
The European Central Bank announced a new EUR750bn ($1.41 trillion) bond-buying program aimed at shielding the eurozone economy from the economic ravages of the coronavirus pandemic.
The unexpected move, unveiled late Wednesday, signals the bank’s determination to defend Southern European governments whose debt has come under pressure from investors. But it is likely to raise fresh concerns in the region’s largest economy, Germany, where senior officials have long criticised the ECB’s bond purchases.
In a statement, the ECB said it would buy EUR750 billion of public and private sector assets at least through the end of the year, and possibly beyond. The purchases will include Greek government debt, which was excluded under earlier ECB bond-buying programs.
The ECB is “committed to playing its role in supporting all citizens of the euro area through this extremely challenging time,” the statement said.
The bank said it would consider altering self-imposed limits on its bond purchases that restrict it to buying only 33pc of the debt of individual governments. That would give the ECB more room to manoeuvre but could also raise legal concerns in Germany, where the ECB has faced multiple lawsuits over its bond purchases.
Dow Jones Newswires
Ben Wilmot 10.58am: Redcape readies from pub, pokie blow
Pub owner the Redcape Hotel Group has bowed to the coronavirus pulling its earnings guidance as patronage to its pokies-heavy pubs is expected to take a hit.
The Morrison government on Wednesday banned pubs, clubs and restaurants from offering service to more than 100 people as it seeks to fight the spread of the virus.
Redcape said that given the uncertainty in relation to the COVID-19 pandemic, it was appropriate to withdraw its fiscal 2020 distributable earnings and distribution guidance.
“As economic conditions evolve, we will continue to manage our business within the confines of the current restrictions to ensure that the business remains strong in the long term,” chief executive Dan Brady said.
Redcape has 32 pubs of which 30 are freehold going concerns and two are leased. They are mainly in NSW with a smaller holding in Queensland.
All up Redcape owns a $1bn pub portfolio and said it had a strong balance sheet that left it well placed to navigate uncertain times. The company noted the federal government had announced additional measures in response to the crisis as it pulled guidance.
“We continue to work through the likely implications to our business including the adoption of social distancing protocols,” Redcape said.
Redcape will not be paying a March quarter distribution and said it would reassess future quarterly distributions based on trading conditions.
The company said there was no material evidence of any slowdown in patronage due to COVID-19 so far but acknowledged the “increasingly uncertain environment”.
Redcape owns the vast majority of its properties and pays minimal rent and it is geared at 35.7 per cent. The group’s lending syndicate comprises the four major Australian banks and it has a debt facility comprising two tranches with the first expiring in September 2022 and the second in September 2024.
Max Maddison 10.54am: Menulog to halve commissions
Menulog has announced it will halve all commission on pick-up orders across its 17,000 partner restaurants in response to increasing criticism of the food delivery giants.
The move comes after companies such as Uber Eats, Menulog and Deliveroo faced criticism for their substantial commissions – up to 35 per cent per order – which undermine independent businesses struggling through the crisis. However, the majority of orders through these sites are delivered, meaning the announcement is unlikely to satisfy critics.
Uber Eats responded to criticism by announcing it would drop service fees on pick up orders, and would provide 25,000 free delivered meals to healthcare workers. On March 14, American food delivery app Grubhub announced it would forego $US100m in fees from struggling restaurants during the crisis.
One such critic is 2GB radio personality Ben Fordham who launched a Change petition calling for food delivery services to halve their commissions during the coronavirus outbreak. On Thursday morning, the petition almost 17,000 signatures.
Read more: ‘Cater for a surge in home delivery’, bars and restaurants told
Eli Greenblat 10.46am: Adairs cans payout, withdraws outlook
Home furnishings retailer Adairs is trading lower by 15 per cent as it withdrew its earnings outlook and cancelled its interim dividend in the face of the coronavirus.
Adairs said given the ongoing uncertainty of the duration and impact of the COVID-19 coronavirus pandemic, the company considered it appropriate to withdraw its 2020 earnings guidance and has decided not to proceed with the interim dividend of 7 cents per share, that was previously announced to the market on February 21.
“The cancellation of the dividend is precautionary and reflects the focus of the Board on maintaining strong liquidity and protecting long term shareholder value.”
It said until recently, both Adairs and its online arm Mocka were delivering pleasing results. For the first 11 weeks of the second half Adairs’ like for like sales (excluding Mocka) were up 7.1 per cent. Mocka same store sales were 18.1 per cent up over the same period.
ADH shares last traded down 15pc to 78.5c.
10.32am: ASX bucks expectations of a dip
Australia’s S&P/ASX200 jumped 3pc to 5101.3 in early trading, bucking a 2.2pc opening fall indicated by overnight futures.
S&P 500 futures have turned up 1pc, sharply reversing an early fall of 1pc, suggesting the impressive intraday bounce on Wall Street will continue.
The ASX200 has no resistance on the charts until 5300, implying a potential 7pc rise before the joint RBA/APRA/federal government stimulus plan at 2.30pm.
All sectors are in the green bar the Energy and Gold sectors which have been hammered by sharp drops in those commodities.
The Australian dollar’s 3.8pc fall to a 17-year low of 0.5702 last night seems to be helping the market overall.
Stocks that withdrew earnings guidance this morning – GPT, Downer, BlueScope and Nine Entertainment – have been remarkably well supported with only Nine currently down.
Surging bond yields haven’t hurt the market so far today but are worth watching after the 10-year yield jumped 19bps to 1.40pc amid a further bear steepening.
Perhaps the bond market is just shifting from pricing pure QE by the RBA to QE with yield curve control, but the sharp rise in long-bond yields is concerning.
Perry Williams 10.27am: Boral readies to trim production
Construction materials supplier Boral has suspended earnings guidance, will reconsider the structure of its Knauf plasterboard venture and is awaiting an Australian class action to be filed over its US accounting scandal.
“We are working closely with our customers to respond quickly to changes in their activity, and we are well prepared to curtail production as required,” Boral chief executive Mike Kane said.
A long awaited $US441m deal unveiled in August with German giant Knauf may also have to be reworked following talks with Australia’s competition regulator.
Boral had proposed paying $US200m for the remaining 50 per cent stake of USG Boral in Australia and $US241m for a half share of the Asian venture.
Under the deal, Knauf had a call option to buy the half stake back within five years for the Australian USG stake. However, Boral says that call option for Knauf in Australia and NZ is unlikely to be approved by the Australian Competition & Consumer Commission following talks it held with regulators.
“As a result, a range of potential options will be considered. Any alteration to the transaction signed in August 2019 remains subject to agreement between Boral and Knauf, Board approval and ultimately will also require the approval of regulators including the ACCC and NZCC,” Boral said.
10.16am: ASX edges up
The local market is rebounding in early trading, up 58 points or 1.16 per cent to 5010.8.
Energy shares are the only detractor after oil fell sharply overnight to the lowest since the GFC.
10.06am: Webjet shares paused
Webjet shares have been paused ahead of the open, pending a further announcement from the travel group.
Its been one of the hardest hit from the recent travel restrictions – dropping 71 per cent year-to-date as countries shore up their borders to stem the coronavirus outbreak.
WEB last traded at $3.76 – from $13.02 on December 31.
10.04am: ASX futures reopen up 1pc
Australian’s SPI 200 futures have opened up 1pc backing a bounce in the index today.
Gerard Cockburn 10.01am: Harvey Norman shuts overseas stores
Overseas Harvey Norman stores have been forced to close due to governments placing countries in full quarantine lockdowns.
The Slovenian government has ordered the closure of stores until further notice, while Croatian stores have been forced to close from March 19 for a period of 30 days.
Malaysian stores by order of the government will be closed from March 18 to March 31.
Stores in New Zealand, Ireland, Northern Ireland, Singapore and Australia will remain open for business as usual.
9.48am: Stimulus could provide boost
Australia’s sharemarket may buck negative offshore leads in a strong rise before a stimulus announcement from the RBA, federal government and APRA at 2.30pm AEDT.
Overnight SPI200 futures fell 1.4pc, suggesting the ASX200 will open down 2.8pc at a 4-year low of 4815. But while S&P 500 e-mini futures are down about 1pc this morning, the intraday bounce on Wall Street was encouraging.
After plunging 9.8pc intraday, the S&P 500 almost halved its fall to close down 5.2pc at 2398.1.
Also, note that the ASX200 pattern of the past four days has been for alternate sharp gains and losses. And daily candlestick charts now favour a bounce back to resistance at 5300, implying a potential 7pc rise.
Still while the average recession pushes the market down about 30pc, the world faces a worse-than-normal recession due to the global COVID-19 crisis.
Magellan’s Hamish Douglass says the global fiscal response needs to be a staggering 20-30pc of GDP. Thus the ASX200 may fall something closer to the GFC fall of 54pc.
There’s a risk of a “buy the rumour, sell the fact” reaction to fresh stimulus today.
The ASX200 pared a 7.7pc intraday fall to close down 6.4pc at a four-year low of 4953.2
Gerard Cockburn 9.44am: ‘ No news here’ as Afterpay dives
Afterpay says its 33 per cent share price collapse on Wednesday is solely down to market volatility induced by the coronavirus pandemic.
In a letter to shareholders this morning, the buy now, pay later provider said it is “unaware” of any other factors which may have caused its shares to fall to $12.76 on Wednesday.
“We advise that we have not seen a material impact on our business activity and timing of instalment repayments or transaction losses to date,” chief executive Anthony Eisen said.
Prior to the outbreak, Afterpay’s shares were trading as high as $41.14 each.
Mr Eisen said the company would be releasing a business operating update following the end of the March quarter.
According to the shareholder letter, Afterpay has a liquidity position of $672.1m and $402.5m in cash.
“We have put in place the appropriate level of risk mitigation measures into our operating model that take into consideration the current economic environment and continue to monitor this on a daily basis,” Mr Eisen said.
Read more: Afterpay, Zip hammered as tech index falls 10pc
Perry Williams 9.40am: BlueScope, Downer suspend guidance
Steelmaker BlueScope and contractor Downer have joined the growing list of Australian corporates suspending earnings guidance in the wake of the coronavirus pandemic.
BlueScope has withdrawn its outlook for the second half of the 2020 financial year citing the unprecedented environment and economic uncertainty. It had previously guided to a similar earnings performance achieved in the first half of $302.4m.
Chief executive Mark Vassella said while performance during the half so far had been in line with expectations, a decline in sentiment and economic outlook had taken hold due to COVID-19 over the last few weeks.
“Most recently we have experienced business interruption due to national shutdown in Malaysia, and overnight it was announced that a number of automakers in North America would temporarily cease production. It is not yet clear what impact this will have on North Star’s dispatch volumes,” Mr Vassella said.
BlueScope had net debt of $47m as of December 31 with $358m net cash and liquidity of $2.5bn.
Contractor Downer also withdrew its earnings guidance for the 2020 financial year citing the uncertainty of the coronavirus spreading and said its cutting costs across the company.
Chief executive Grant Fenn said demand for the vast majority of Downer’s services will remain strong with its business tilted toward government and critical infrastructure.
“We are making hard decisions due to the unprecedented impact of this virus, and these decisions have been taken to position Downer for the future when the COVID-19 situation eases.”
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.
9.35am: What’s on the broker radar?
- Appen raised to Outperform – Credit Suisse
- Auckland Airport raised to Equal-weight – Morgan Stanley
- Beach Energy raised to Equal-weight – Morgan Stanley
- Brambles raised to Hold – Jefferies
- Commonwealth Bank raised to Hold – Morgans
- Domain raised to Outperform – Credit Suisse
- Iluka raised to Outperform – Credit Suisse
- Iress raised to Overweight – JP Morgan
- Mirvac Group raised to Outperform – Credit Suisse
- Oil Search cut to Equal-weight – Morgan Stanley
- Oil Search cut to Underperform – Credit Suisse
- PointsBet cut to Speculative Hold – Bell Potter
- Qube raised to Buy – Jefferies
- REA Group raised to Hold – Morgans
- REA Group raised to Outperform – Credit Suisse
- Super Retail cut to Hold – Morgans
- Sydney Airport raised to Buy – Jefferies
- Transurban raised to Buy – Jefferies
9.29am: Virus adds to Nine’s advertising woes
Nine Entertainment has scrapped its full year guidance after just three weeks as the coronavirus disruption dents its ad revenues.
In a notice to the market, Nine said the “rapid progression of COVID-19 is beginning to have an impact on Nine’s markets”.
“The short term impact remains limited to date, with Nine’s March quarter FTA ad revenues continuing to track close to flat and overall results for the quarter broadly in line with Company expectations,” it said.
“However, the forward ad market is becoming increasingly difficult to reliably predict. As a result of this Q4 uncertainty, Nine considers it prudent to withdraw its FY20 guidance.”
It reassured customers that it had recently completed refinancing of its debt facilities of 3 and 4 year revolving cash advance facilities of $545m and one year $80m working capital facility.
Bridget Carter 9.23am: Flight cuts fuelling meat shortages
DataRoom | The cancellation of international flights has led to less meat exports, creating more supply in the domestic market, according to one industry participant.
While meat is selling out on the shelves of supermarkets due to panic buying related to the COVID-19 crisis, the problem is understood to be with the supermarket supply chain struggling to keep up with demand rather that enough supply of meat in Australia being processed.
Among major producers are JBS, Teys and Australian Country Choice. Prices have increased for cattle, but that has been due to the rain.
Producers who previously sold supply to restaurants and the hospitality industry will likely now be diverting that to the supermarkets. Sales to the supermarkets are said to typically offer narrower profit margins.
The greatest challenge for processors is having enough staff to come to work and making sure processes are in place to manage the work force.
However, most already have fastidious cleaning policies and regimes, with hygiene and safety procedures that allow food to be kept on the shelves for 70 days.
9.18am: Domino’s to close French stores
Domino’s Pizza is closing its stores in France for two weeks starting today, in a voluntary move as the government implements a suite of measures to combat the spread of coronavirus.
In an update to the market, Domino’s said the decision had been made in consultation with its French employees as the government said it was providing support measures to those that temporarily close.
Stores in other markets continue to trade in takeaway and delivery products.
“In France it is clear our community prefers businesses to close and, in an environment in which several quick service restaurants have closed, the community expects the same of Domino’s,” chief Don Meij said.
“In other markets the community preference is for stores such as ours to continue serve our customers particularly through delivery – we respect both of those positions. We will reassess the situation at the end of the 15-day period.”
Damon Kitney 9.13am: Growers fight to extend worker visas
The nation’s largest fruit and vegetable growers are seeking the urgent extension of visa entitlements for more than 2,700 seasonal workers and 7,000 backpackers currently in the country to ensure a continuity of supply of fresh produce to supermarkets across the country.
“If we do not secure these extensions workers will need to return to their home countries and there will not be the required workers to harvest a large number of fruit and vegetable crops meaning Australians will not have access to healthy and nutritious fresh produce at this unprecedented time,” said Australian Fresh Produce Alliance CEO Michael Rogers.
With more than 80,000 people employed in fresh produce, the current workforce includes seasonal workers from the Pacific and Timor-Leste, and backpackers from around the world.
The AFPA is made up of Australia’s key fresh produce growers and suppliers, led by Costa Group, the Smorgon family-backed Perfection Fresh, Montague, American berries giant Driscoll’s and the OneHarvest family of companies.
Perry Williams 9.09am: Caltex takeover could be at a discount
An $8.8bn takeover bid for Caltex could be struck at a lower price after bidder Couche-Tard said it expects a dramatic change in the value of M&A deals amid global market turmoil.
The Canadian suitor is currently midway through due diligence on the Australian fuels retailer and while still committed to buy the entire business said it will apply “rigour and discipline” to any buyout proposal.
“I think it’s very likely that the landscape for credit and M&A multiples will change dramatically, and our goal is to be ready if the right opportunities present themselves,” Couche-Tard chief executive Brian Hannasch said when asked by analysts about the deal environment.
“With regard to Caltex, specifically, we’re in the middle of our due diligence process and we’ll get comfortable by applying our usual rigour and discipline around M&A. Our first and foremost goal is to make sure that any transaction we do will deliver appropriate returns to build long-term value for all of our stakeholders.”
Couche-Tard has a $35.25 a share bid on the table but huge volatility in equity markets and the plunging oil price has seen Caltex shares plummet 44 per cent below the offer price, closing down 10.5 per cent to $19.77 on Wednesday.
Couche-Tard noted cheaper deal opportunities can arrive in the market during tough economic conditions with some of its competitors holding less financial firepower.
Read more: Sharemarket rout may scupper Caltex bid: Credit Suisse
Ben Wilmot 9.06am: GPT feeling the heat of mall closures
The GPT Group has dumped its earnings and distribution guidance as more property companies come to the market warning about the impact of the coronavirus.
The diversified real estate trust is a major shopping centre owner and its shares have slumped to just $4.05, a far cry from the $6.34 they were trading at in early February.
Developer Mirvac on Wednesday pulled its guidance and more property companies, particularly mall owners are expected to update the market in coming days.
GPT has previously issued guidance for 2020 of growth in both Funds From Operations per security and distribution per security of 3.5 per cent.
But it said that given the rapid escalation of measures being employed by governments and business to slow the spread of the COVID-19 virus and the current uncertainty in relation to the duration and impact of the pandemic on its operations, GPT has determined that it is appropriate to withdraw its guidance.
“We recognise that these are uncertain times for our people and for our customers. Through the implementation of the policies and procedures we have in place to respond to such an event, we are taking the appropriate steps to support our stakeholders during this time,” GPT chief executive Bob Johnston said.
Eli Greenblat 8.56am: Lovisa supply ramps up as stores shut
Jewellery retailer Lovisa has provided an update in the face of the coronavirus pandemic, saying that production capacity at both its suppliers and distribution hub in China have begun to return to normal levels but government mandated store closures was hitting sales.
Still, the chain said it continued to experience delays in freight movements out of China and uncertainty in timing of supplier deliveries.
In terms of the disruption to its business, Lovisa said all of its stores in France and Spain have been closed since Sunday, March 14, with stores in Spain expected to remain closed until at least the end of the month, and France currently expected to remain closed until the middle of April, both as a result of a government imposed shutdown.
Stores in Malaysia have been closed since Wednesday, March 18 and are expected to remain closed til the end of the month. It has 25 stores closed or closing across the USA as a result of local government directives for shopping malls to close which are expected to remain closed until at least early April.
“All other markets are currently still open and trading, however have seen a declining sales trend with large decreases in store traffic in recent days. This, when combined with the above impacts, has resulted in a significant deterioration in sales,” the company said.
“We are supported by a strong balance sheet position having bought net cash of $12.6m as at December 2019 into the second half.”
8.42am: Qantas halts international flights
Qantas and Jetstar are suspending scheduled international flights from late March, as airlines reel from the downturn in travel caused by the coronavirus pandemic.
It says some ongoing ad hoc services are possible.
Qantas also says domestic flights are being cut by 60pc.
Two-thirds of employees will be temporarily stood down to preserve as many jobs as possible in the longer term.
The airline says payment of a $201m shareholder dividend will be deferred until September 2020.
Earlier this week, Qantas announced cuts to 90 per cent of international flights and about 60 per cent of domestic flights.
“With the federal government now recommending against all overseas travel from Australia, regularly scheduled international flights will continue until late March to assist with repatriation and will then be suspended until at least the end of May 2020,” Qantas said.
Read more: Qantas slashes international flights by 90pc
8.40am: Gold falls amid cash rush
Gold has dropped as much as 3.6 per cent as investors dumped precious metals in favour of cash after additional stimulus measures by the United States failed to calm markets hit by mounting fears over the economic downside from the coronavirus.
Spot gold was down 2.7 per cent at $US1,486.82 ($A2,527.04) per ounce.
US gold futures settled 3.1 per cent lower at $US1,477.90.
“Gold continues to suffer from risk-off panics in the market, trading back below $US1,500 level as S&P futures gave up stimulus-driven gains,” said Tai Wong, head of base and precious metals derivatives trading at BMO. “Liquidity here, as in most markets, is deeply compromised and we expect to see continuing volatility, mood-driven swings.”
Reuters
8.26am: Petrol price gouging ‘appalling’
ACCC head Rod Sims has slammed fuel retailers for price-gouging Australians at the pump while global oil prices are crashing.
Mr Sims told 2GB that it is important for Australians to call out “this appalling behaviour” and said that average prices should be “around a dollar ten, or less”.
“I know it sounds silly but really what we got to do … is completely shun the people who are overcharging us,” he said.
Mr Sims said the ACCC did not have the power to fix prices or prosecute fuel retailers for charging higher than average prices.
Global oil prices have collapsed over the last few weeks to an 18-year low due to the coronavirus crisis and an escalating production war between members of OPEC.
On Wednesday the global price for brent crude oil fell to US $24.52 per barrel.
8.25am: Crown extends virus controls
Crown Resorts has cut the number of people it allows in groups at its Melbourne and Perth casinos, as part of coronavirus “social distancing” moves.
Crown has already shut down many of its poker machines to try to curb the spread of coronavirus.
Today it told the ASX: “Following consultation with the Victorian and Western Australian governments, Crown’s social distancing policies at Crown Melbourne and Crown Perth have been amended to revise the restriction on the number of patrons in individual food & beverage, banqueting and conference facilities from 450 persons to 100 persons.”
8.18am: Copper sinks below $US5000
Copper prices have crashed below $US5000 a tonne for the first time in more than three years as growing expectations of surplus metal were reinforced by large deliveries to London Metal Exchange-registered warehouses.
Benchmark copper ended down 7.8 per cent at $US4840 ($A8,226) a tonne in LME ring trading on Wednesday.
Prices of the metal used widely in power, construction and manufacturing are on course for their largest daily drop since October 2008, during the financial market crash that saw copper prices drop below $US3000 a tonne. Copper touched $US4738.5 during the session, a drop of more than 25 per cent since the middle of January and the lowest since November 2016.
Reuters
8.00am: NYSE closing trading floor
Intercontinental Exchange said the New York Stock Exchange will go to fully electronic trading, temporarily, on Monday, March 23.
ICE said it was initiating the business contingency plan as “a precautionary step to protect the health and wellbeing of employees and the floor community in response to COVID-19.”
The facilities to be closed are “the NYSE equities trading floor in New York, NYSE American Options trading floor in New York, and NYSE Arca Options trading floor in San Francisco,” the company said.
“On the NYSE’s equities market, the Exchange’s Designated Market Makers will connect to the exchange electronically to provide liquidity in their stocks, however floor broker order types will be unavailable. On the NYSE’s options markets, electronic trading will continue normally but open-outcry trading will be suspended with the closure of the options trading floors,” ICE said.
The company said it will “continue to monitor events to determine the appropriate time to re-open the NYSE trading floors.”
Dow Jones Newswires
7.50am: Rio suspends mine after quake
Rio Tinto says it’s was temporarily halting operations at its Kennecott mine near Salt Lake City, Utah, following an earthquake.
The company said the copper mine was impacted by a 5.7-magnitude quake that struck close to the town of Magna. “All employees have been safely accounted for and evacuated from the potential risk areas,” the company said.
The company also said it identified “limited damage to the operation or risk to the surrounding community.”
Rio Tinto is carrying out a detailed inspection of the complex in conjunction with local emergency services and the Utah Department of Transportation.
Dow Jones Newswires
7.30am: ASX poised for another dive
Australian investors face another bleak day of panic selling as they wait to hear what the Reserve Bank will do to ease economic pain.
Offshore equities and oil prices dived overnight amid confusion and fear about how long the deadly coronavirus, that’s sent countries into lockdown, will last.
At 7am (AEDT) the Australian SPI200 futures contract was down 80 points, or 1.63 per cent, at 4834 points at, suggesting Australia’s volatile market will also fall.
After falling more than six per cent on Wednesday, the local market is down 31 per cent in the past 19 trading sessions since hitting a peak February 20. Fears about the economic impact of the coronavirus is driving equities markets down as they watch for a peak in the number of cases.
“We’ve seen big falls in equities and oil, as well as widespread selling of government bonds, even gold is being ditched. The only winner is the US dollar,” NAB’s morning call note says.
The local market is waiting to hear the Reserve Bank of Australia’s monetary policy announcement at 2.30pm (AEDT).
Economists expect it to cut interest rates and launch its first ever quantitative easing program.
Markets widely expect the RBA to cut the cash rate to a new record low 0.25 per cent.
The Australian dollar was buying US57.94, down from US59.98 cents on Wednesday, its lowest level since 2003.
AAP
7.20am: Dow sinks below 20,000
Stocks, bonds and commodities fell in a simultaneous sell-off that suggests investors are seeking to raise cash quickly to cope with the economic disruption sparked by the coronavirus pandemic.
The S&P 500 dropped 5.2pc as of the 4pm close of trading in New York, making up some declines from earlier in the day when the index was down about 10pc.
The Dow Jones Industrial Average fell 1,338 points, or 6.3pc, to 19899, its first close below 20,000 since early 2017. The Nasdaq Composite declined 4.7pc.
All three indexes are down about 30pc from their mid-February highs.
Oil, meanwhile, plunged 24pc to its lowest level since 2002.
Investors are even shunning assets that are normally considered the safest, including long-term government bonds and gold. That rarely happens when riskier assets like stocks are also falling.
Yields on government bonds in most major economies including the US, Japan and across Europe rose sharply Wednesday, while investors sheltered in the shortest-term government debt and cash.
The yield on the US 10-year Treasury note rose to 1.220pc from 0.994pc Tuesday as bond prices tumbled. The yield on the one-month US Treasury bill briefly turned negative for the first time since 2015. Gold fell 3.1pc.
The selling of government debt shows the market mentality has completely flipped, said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“Now that they’ve gotten around to U.S. Treasurys, that tells you that legitimately nothing is safe,” he said. “There’s no place to hide other than cash.”
The ramifications of the pandemic are spiralling quickly. The number of infections globally crossed 200,000, more than doubling in just two weeks. Governments are asking citizens abroad to come home and those already at home to stay there.
“It’s happening so fast, it’s almost too much to grasp at this point,” said Frank Cappelleri, the executive director at Instinet. “It’s at the point where if you check the futures at night-time and you’re not limit down, it’s a relief.”
That has thrown the market’s “risk on” attitude into sharp reverse. A month ago, stocks were hitting new records daily. A week ago, investors were debating whether the pandemic would cause a recession. Now, the question is whether the economy will be thrown into its worst recession in decades.
“When even silver and gold are getting crushed, that’s a panicked drawing of liquidity,” said Rob Arnott, founder of California-based investment firm Research Affiliates. “In the U.S., you can’t find toilet paper anywhere: This is the capital markets equivalent of that.”
The pan-continental Stoxx Europe 600 index fell 4.2pc, hitting its lowest level since December 2012. Most major Asian markets closed lower, with Hong Kong’s Hang Seng index falling 4.2pc.
US crude futures plunged to their lowest level since early 2002 as Saudi Arabia and Russia forged ahead with plans to raise output in their continued price war. The demand for oil is also likely to drop as authorities globally escalate emergency measures to curtail the spread of the virus. Brent crude, the global benchmark for oil prices, fell 13pc.
In commodity markets, copper prices tumbled as the pandemic sapped demand for raw materials outside China. The base metal fell below $US5000 a metric ton on the London Metal Exchange for the first time since late 2016.
The British pound fell to its lowest level against the dollar in at least 35 years as investors reassessed the growth outlook for the UK. Sterling fell 2pc against the dollar to $US1.1816 Wednesday, extending its rout this year to 11pc.
Dow Jones Newswires
7.10am: US plunge wipes Trump gains
Dow Jones industrials sinks 1300 points, or 6.3pc, erasing nearly all of their gains since President Trump’s inauguration.
The index, which closed at 19,903.50, sank by as much as 10 per cent earlier in the session, which saw trading halted yet again.
The broadbased S&P 500 dropped 5.2 per cent to finish at 2,398.24, while the tech-rich Nasdaq Composite Index tumbled 4.7 per cent to 6,989.84.
AP/AFP
6.30am: Facebook to launch virus info hub
Facebook. will roll out a coronavirus information hub at the top of users’ feeds on the platform, as the company scrambles to adapt its products amid the global pandemic.
In a press call, Facebook CEO Mark Zuckerberg walked through the company’s efforts to suppress misinformation, prepare for users’ mental health issues and support governmental responses during the growing crisis.
With quarantines and social distancing causing spikes in the usage of Facebook’s products, Mr Zuckerberg said, the gravity of the medical and economic risks posed by the virus requires Facebook to prioritise the public good.
Dow Jones Newswires
6.33am: US car makers shut plants
US automakers will temporarily shut down North American production as the economic hit from the coronavirus spreads to manufacturing, the auto workers union said.
General Motors and Ford will halt operations throughout North America through March 30, the companies announced in a statement with the United Auto Workers.
Fiat Chrysler, the third member of the “Big 3,” had also agreed to temporarily suspend production, a UAW spokesman said.
The move comes only hours after the “Big Three” had previously announced that the plants would be kept open with modified procedures to employ social distancing in manufacturing.
AFP
5.45am: US stocks deep in the red
Wall Street stocks were deep in the red after another trading halt, as the economic toll mounts from the coronavirus despite massive financial stimulus measures.
In afternoon trade, the Dow Jones Industrial Average was down around 2000 points, or 9.4 per cent, and below its level when US President Donald Trump was inaugurated.
The broadbased S&P 500 slumped 8.3 per cent, while the tech-rich Nasdaq Composite Index tumbled 7.4 per cent.
The falls forced a markets suspension for the fourth time in eight days.
After another day of drama yesterday, when the S&P/ASX 200 share index tumbled 6.4 per cent, local stocks are poised for more steep falls at the open. At 5.30am (AEDT) the SPI futures index was down 131 points, or about 2.8 per cent.
The Australian dollar took another steep dive and at 5.30am (AEDT) was at US57.66.
The pan-continental Stoxx Europe 600 index fell 4.2PC, hitting its lowest level since December 2012. Most major Asian markets closed lower, with Hong Kong’s Hang Seng index falling 4.2PC.
Wall Street was suffering through another bruising session amid the crisis over the pandemic, after a rare positive day yesterday on optimism the government would soon pass a massive stimulus package.
Companies from the most embattled sectors, such as airlines and hotels were down more than 20 per cent, while energy, industrial and financial stocks were also disproportionately hit.
As the economic carnage builds, officials in Washington are preparing a $US1.3 trillion stimulus package that includes deferrals on tax payments and loans for small businesses pummeled by the economic shutdown as well as immediate cash payments to all Americans.
US President Donald Trump said at a midday briefing that the Department of Housing and Urban Development will provide immediate relief to renters and homeowners by suspending all foreclosures and evictions until the end of April.
Still, anxiety remained sky-high as more of the economy shuts down. In an interview with CNBC, investor Bill Ackman called for a global economic shutdown for 30 days, arguing that failure to take radical action will lead to the virus reaching epidemic proportions.
“The only answer for this is to shut the world for 30 days,” Ackman told the network. “Capitalism does not work in an 18-month shutdown. It can work in a 30-day shutdown.”
AFP
I want all Americans to understand: we are at war with an invisible enemy, but that enemy is no match for the spirit and resolve of the American people...
— Donald J. Trump (@realDonaldTrump) March 18, 2020
5.42am: Oil price plummets
Oil prices collapsed as crude oversupply and the coronavirus pandemic’s economic upheaval drowned markets.
New York’s benchmark WTI plunged 24 per cent to $US20.37, its lowest price since 2002, while London’s Brent North Sea oil hit its lowest mark since 2003, slumping 14 per cent to end trading at $US24.67.
Crude has repeatedly hit record lows in recent days as the global economy flirts with recession caused by travel restrictions and business closures brought on by the virus, along with a price war between major producers Saudi Arabia and Russia.
The latest oil price fall came as Wall Street indices once again tripped “circuit breakers” halting trading for 15 minutes after losses on the S&P 500 hit seven per cent, while the benchmark Dow Jones Industrial Average was meanwhile down 9.3 per cent.
As the economic carnage builds, officials in Washington are preparing a $US1.3 trillion stimulus package that includes deferrals on tax payments and loans for small businesses pummeled by the economic shutdown as well as immediate cash payments to all Americans.
US President Donald Trump said at a midday briefing that the Department of Housing and Urban Development will provide immediate relief to renters and homeowners by suspending all foreclosures and evictions until the end of April.
Still, anxiety remained sky-high as more of the economy shuts down. In an interview with CNBC, investor Bill Ackman called for a “30-day shutdown” of the global economy.
AFP
5.41am: European markets plunge
European markets closed with heavy losses on concerns that the coronavirus outbreak will cause even more lockdowns on businesses around the world and put large numbers of people out of work.
France’s CAC 40 dropped 5.9pc to 3,754.84, with shares in plane maker Airbus nosediving 22pc on concerns that airlines struggling with the near-complete shutdown of air travel will slow down purchases.
Britain’s FTSE 100 fell 4.1pc to 5,080.58 and Germany’s DAX lost 5.6pc to 8,441.71.
AFP
5.40am: Pound sinks over 4pc
The pound slumped more than four per cent against the dollar, reaching a 35-year low, as traders eyed worsening fallout for the UK economy from the coronavirus pandemic.
Sterling struck $US1.1463, the lowest level since 1985.
It recovered slightly moments later to trade at $1.1554. The pound meanwhile slid 2.6 per cent against the euro, with the single currency trading at 93.58 pence.-/
5.37am: Scania halts Europe truck production
Scania, part of Volkswagen’s Traton group, said Wednesday it was halting most of its European truck production following disruptions in the supply chain as a result of the coronavirus.
The company said in a statement that production at most European units would stop from March 25 “due to component shortages and the major disruptions that have occurred in the supplier and logistics chain as a result of the spread of COVID-19 in Europe.” Some production would keep running so as to not hurt Europe’s infrastructure, however.
AFP
5.35am: Volvo orders recall
Volvo is recalling more than 736,000 vehicles worldwide because the automatic emergency braking system may not detect obstacles and stop the vehicles as designed.
The recall covers certain 2019 and 2020 S60, V60, S90L and V90 models. The company says in government documents that a software-hardware incompatibility glitch causes the problem. If the system doesn’t work as intended, it can increase the risk of a crash, Volvo said in documents posted on the US National Highway Traffic Safety Administration website. The company says it has no reports of crashes or injuries.
In a statement, Volvo says forward collision warning systems will work as designed, but there’s a very small risk in certain environments and temperatures that the automatic braking system won’t function properly.
Volvo will notify owners and dealers will update the software at no cost to customers. The recall is expected to start May 1 in the U.S., according to government documents.
AP
5.32am: US mortgages dip as virus hits
Fewer Americans filed for home loans last week as the coronavirus hit, according to industry data, in the latest disruption caused by the pandemic that’s transformed the US economy.
That could have implications for a US housing market that was steaming hot before the virus hit, with government data for February showed homebuilding continued at a solid pace, sharply higher than a year ago.
Mortgage applications for the week ending on March 13 fell by 8.4 per cent, seasonally adjusted, compared to the week earlier, while refinancing decreased 10 per cent, according to data from the Mortgage Bankers Association.
“The ongoing situation around the coronavirus led to further stress in the financial markets late last week, with unprecedented volatility and widening spreads,” said Joel Kan, MBA vice president of economic and industry forecasting.
AFP
5.30am: GM pays price for Aust pullout
General Motors disclosed that it expects to record total charges of $US1.1 billion, primarily in the first quarter and continuing through the end of 2020, as part of the previously announced actions to wind down sales, design and engineering operations in Australia and New Zealand.
GM’s stock tumbled 10pc in morning trading to the lowest prices seen since it began trading in its current form in November 2010.
The automaker also said last month that it would cease sales of Holden vehicles no later than 2021, and sell its manufacturing facility in Thailand.
Dow Jones
5.25am: Oil tumbles to 2002 level
Benchmark WTI oil slumped 12 per cent to the lowest level since 2002, at under $US24 per barrel, as the coronavirus slashes global demand for crude.
WTI slid to $US23.60 per barrel, while Brent North Sea oil touched a 2003 trough at $US26.65 a barrel.
AFP
5.20am: British pound nosedives
Sterling tanked Wednesday against the dollar, hitting its lowest level since 1985 as investors snapped up the safe haven US currency in markets panicked by the coronavirus outbreak.
The pound slid about 1.9 per cent to $US1.1828 according to Bloomberg data. It later stood at $US1.1861.
“Sterling has completed one of its steepest declines in memory by hitting its weakest level since 1985, excluding … the brief dive of the October 2016 flash crash,” said Markets.com analyst Neil Wilson.
“This seems to be an offloading of risky-ish pounds in favour of safer dollars.”
AFP
5.15am: Tencent may benefit from virus
Chinese internet giant Tencent recorded a jump in profit last year and said it could be a rare beneficiary of the global coronavirus pandemic as people stay home and businesses ramp up remote working.
The Shenzhen-based behemoth, one of the largest stocks on the Hong Kong bourse, said Wednesday net profit last year rose 19 per cent to 93.3 billion yuan ($US13.3 billion).
Total revenues in 2019 were up 21 per cent at 377.3 billion yuan ($US53.7 billion), primarily driven by its international gaming and lucrative cloud services, the latter bringing in 17 billion yuan in revenues and consistently outgrowing the market.
The company said the global economic chaos caused by the spread of the deadly coronavirus, which began in China late last year, would be a short term challenge.
Initially its fast growing cloud computing services might take a hit, it said. But the company remained more bullish in the long term, cushioned by the expectation that many more people will turn to remote working and online health care services that often require significant cloud computing power.
“We believe enterprises will be increasingly keen to adopt cloud-based solutions over the longer term, in order to facilitate remote working and remote interactions with their customers,” chairman Ma Huateng said in the annual results statement.
AFP
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