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Trading Day: ASX rebounds as global banks plot easing measures

Shares rebounded by 0.7pc, from as much as 2.1pc, as major banks passed on the full RBA cut and ahead of more global stimulus.

Melissa Yeo and David Rogers
27 min read
8:13AMMarch 03, 2020.
Updated 5:07PMMarch 03, 2020
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Stocks were trading higher on Wall Street following a seven-day rout brought on by worries that the spreading coronavirus outbreak will stunt the global economy. Picture: AP
Stocks were trading higher on Wall Street following a seven-day rout brought on by worries that the spreading coronavirus outbreak will stunt the global economy. Picture: AP

That’s it for Trading Day for Tuesday, March 3. The Reserve Bank cut rates to a historic low of 0.5 per cent, a move that rocked trade in the major banks this afternoon. The broader market trimmed a rise as much as 2.1pc to just 0.7pc by the close.

The lift was just a fraction of a the large overnight gains on US markets. The Dow Jones surged nearly 1300 points, or 5.1 per cent on hopes that, like the RBA, central banks will act to shelter global economy from coronavirus.

Key ex-dividend stocks included Medibank, Oil Search, Cleanaway and Bravura, among others.

4.46pm: CSL takes title of top stock

There’s a new top dog on the Australian market today, as biotech giant CSL overtakes Commonwealth Bank as the biggest stock by market capitalisation.

The two have been jostling for the top spot for the better part of the last three months, as CSL consistently notched record highs as part of the recent rally.

By the close on Tuesday, Commonwealth Bank shares were down 1.7 per cent to $79.11 apiece, while CSL put on 2.2 per cent to $313.

Here’s the biggest movers at the close:

4.14pm: RBA cut trims ASX rebound

Drag from the major banks sapped a rise as much as 2.1 per cent on the local market, after the Reserve Bank cut rates to a new low of 0.5 per cent.

A surge of 5.1 per cent on the Dow Jones provided a strong lead for local shares, to highs of as much as 6524.3, but those gains quickly faded as investors mulled the likely flow on effects of the RBA’s cut.

At its height, the benchmark ASX200 was up by 133 points, but by the close, shares were up a more moderate 44 points or 0.69 per cent to 6435.7.

Despite the lift, the index remains 10.5 per cent lower from its recent record highs of 7197.2.

Meanwhile, the All Ordinaries put on 51 points or 0.78 per cent to 6511.6.

4.06pm: Kogan cashing in on virus stockpiling

Kogan.com founder Ruslan Kogan has used the panic stockpiling of toilet paper as a promotional opportunity for his “Japan-style luxury” toilet seats.

In a tweet earlier today, Ruslan Kogan wrote “Relax! There’s no need to rush out and buy toilet paper - we’ve got your back” alongside a picture of his $249 apiece toilet seats.

The products boast a warm air dry function and adjustable dual nozzle with automatic deodorising function.

It comes after earlier reports that supermarkets such as Costco were running out of toilet paper amid a buying frenzy as coronavirus fears grow.

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3.56pm: NAB cuts, still waiting on ANZ

3.25pm: Downward rates bias remains: JPM

JP Morgan has described today’s RBA cut as “prudent”, albeit a disappointment for those looking for a 50bps cut, but notes a strong downward bias will persist until the coronavirus outbreak is under control.

Global markets strategist Kerry Craig says “markets will continue to look for another rate cut sooner rather than later”.

“This means that the RBA is fast approaching what is widely thought to be lower bound for the cash rate at 0.25pc,” he says.

“The chance of unconventional policies be implemented this year has risen, but it is not an automatic step change and may depend on the fiscal response from the Government and exactly what goes into the May Budget.”

3.15pm: CSL overtakes CBA as largest stock

A slide in Commonwealth Bank shares has helped heavyweight biotech CSL to notch the top spot on the market, now the largest company on the ASX200 by market capitalisation.

CSL shares are higher by 3 per cent to $315.39, to give it a market value of $143.3bn, ahead of Commonwealth Bank’s $141.4bn as its shares slip by 0.7pc.

The biotech has been jostling for the top spot, and was in contention amid record breaking trade in the benchmark earlier this year. Shares hit a record high of $342.75 in late February, but the title remained elusive until the major bank came under pressure today.

Michael Roddan 3.07pm: Gov’t response to follow cuts: Cormann

Finance Minister Mathias Cormann said the government would be announcing an economic response to the coronavirus crisis after the RBA reduced interest rates to a new record low.

Scott Morrison and Josh Frydenberg on Monday met with Dr Lowe and RBA deputy governor Guy Debelle to talk about the impact of the coronavirus on the economy.

“We are both making judgments in relation to that,” Mr Cormann told a Senate Estimates committee on Tuesday.

“The Reserve Bank has announced its judgment today. The government will be announcing our decisions in relation to this in due course,” he said.

“This is a time when all sides of politics need to come together and focus on what needs to be done to maximise our strength and resilience.

“The government is absolutely focused on what needs to be done. The RBA has done their bit. We will be doing our bit.

“There is a time for political rhetoric and political spear throwing — I don’t think now is the right time.”

3.00pm: CBA passes on 25bps cut

Commonwealth Bank is the second to pass on a 25 basis point cut to its variable loan customers, after Westpac too announced it would pass on the full RBA cut.

CBA shares are now lower by 0.32pc to $80.21, from a high of $81.59 earlier in the day.

2.46pm: Major banks reverse gains on rate cut

Major banks have taken a sharp U-turn to trade lower after the RBA cut rates to a new historic low of 0.5 per cent.

The big four had all been trading solidly in the green ahead of the release, but quickly reversed those gains, led by a 0.8 per cent drop in Westpac to $23.02 as it announced it would pass on the full rate cut to its variable loan customers.

Commonwealth Bank is lower by 0.6 per cent to $80.05, ANZ is down 0.4pc to $24.24 and NAB has slipped by 0.2 per cent to $24.42.

Those losses are trimming the market’s earlier gains, with the ASX200 last up 1.2pc, after an as much as 3pc gain earlier in the session.

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2.40pm: Westpac first to pass on full cut

Westpac has wasted no time in passing on the full rate cut to its variable loan customers, noting the effect of the coronavirus on the economy.

Just minutes after the RBA slashed the cash rate to 0.5 per cent, Westpac said it would decrease variable interest rates by 0.25 per cent per annum for home loan customers, as well as rates on small business cash-based loans and overdrafts.

“We recognise that COVID-19 will have a direct impact on our nation’s economy and we want to provide additional support to our small business and home loan customers at this unprecedented time,” chief executive of the bank’s consumer division, David Lindberg says.

“This will give our variable home loan and small business customers more money in their back pocket through passing on the full 0.25pc p.a. interest rate reduction.”

That’s prompted a drop in the bank’s shares, from positive trade earlier today to a loss of

0.45 per cent at $23.09.

2.34pm: ASX trims rise on RBA cuts rates

Shares had been up as much as 1.9 per cent today, but are pulling back to a gain of 1.4 per cent after the announcement of an RBA cut.

2.31pm: $A rises as RBA cuts 25bps

The RBA has cut the cash rate by 25 basis points, citing coronavirus as a key consideration in its decision.

“The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected,” the RBA said.

AUD jumps 30 points to US65.60c, evidence that some traders had expected greater cuts.

Lilly Vitorovich 2.18pm: AAP to be shut down, broken up

Australian Associated Press will be broken up after 85 years, with its national newswire to be shut on June 26 and some of its remaining media operations sold off.

Chief executive Bruce Davidson informed staff at 2pm of the decision by AAP’s shareholders, which include News Corp Australia, Nine Entertainment, Seven West Media and Australian Community Media.

Mr Davidson told staff that Nine and News Corp will boost their staff numbers and “there will be opportunities for some of our staff”, according to a tweet by AAP’s political reporter and chief of staff Daniel McCulloch.

AAP chairman Campbell Reid described the newswires as Australian “journalism’s first responder”.

“It is a great loss that professional and researched information provided by AAP is being substituted by with the unresearched and often inaccurate information that mascarades’s as real news on digital platforms,” added Mr Reid, who is also a senior News Corp executive.

Medianet and Mediaverse will be sold off, but Pagemasters will also be shut down.

Bridget Carter 2.15pm: PEP awaiting verdict on O-I buy

DataRoom | It is not only Laureate International Universities that Pacific Equity Partners is waiting for news on to find out if it is the successful bidder.

Information is also due out shortly as to whether it will acquire the Australian and New Zealand operations of Owens Illinois.

After the deadline was pushed out at least once, final bids for the Australian and New Zealand arm of glass bottle and container manufacturing giant Owens Illinois were due on Monday.

DataRoom understands both PEP and industry giant Visy lobbed a final bid.

The expectations are that the business will sell for a price somewhere between $500m and $1bn.

Earlier, it was believed that the operation could be divested for a price closer to $1bn, but suitors are understood to have been less than impressed with the declining manufacturing volumes and capital spending needed on the operation, which some say has been under invested in for some time.

While PEP has worked with Credit Suisse on its tilt, Visy – the private packaging empire of the billionaire Pratt family – is understood to have been self-advised.

Eli Greenblat 1.49pm: Costco sells out of toilet paper amid panic

US warehouse retailer Costco has completely sold out of toilet paper in two of its big-box stores in Australia, with its shoppers also stripping the shelves of staples such as rice and flour, as panic buying due to the feared spread of the coronavirus threatens to deplete retailers of key supplies.

Costco Australia managing director Patrick Noone told The Australian that its Costco stores in Auburn, New South Wales, and Canberra, had completely sold out of toilet paper as its customers leave its shelves empty.

“We are in Auburn today and we have sold out of toilet paper in about three hours, so it is happening,’’ Mr Noone told The Australian. “It is happening in a few Costco buildings.”

He said Costco was seeking further supplies of key grocery items from its own suppliers to build up its stock again.

“We are restocking everyday, the factories and vendors are shipping as much as they can as quick as they can. And we are restocking each Costco warehouse everyday of the week.”

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1.37pm: Clinuvel leads on FDA progress

Biotech Clinuvel is the best performer on the market in afternoon trade, after confirming a meeting with the US drug administration to discuss a study of its lead drug SCENESSE to treat genetic and skin disorders.

The group is proposing to study the effectiveness of its drug to treat vitiligo, a disease that causes the loss of skin colour in blotches.

“Our team has been waiting for this moment, since we first planned to gain US marketing authorisation for SCENESSE in EPP. This was received in October 2019,” chief scientific officer Dennis Wright said.

“It was obvious that a positive scientific review of SCENESSE would need to come from the FDA’s Division for Dermatology and Dental Products before we would be able to initiate the final stages of the American vitiligo program.”

CUV shares are higher by 10.1pc to $18.83.

1.20pm: Virus concerns already priced in: Shaw

Shaw and Partners has raised its Australian sharemarket rating to overweight after the recent correction, saying that while the coronavirus is “playing havoc with the global economy” and “there will be a material reduction in growth”, this is “more than priced into equity markets and a policy response is not”.

He recommends sticking with a pro-growth stance via overweight positions in Energy and Materials, hedged somewhat with a large overweight position in Banks. His model portfolio is positioned for an expected policy response and subsequent rebound in global growth.

While the 12-month forward PE ratio of the market remains almost one standard deviation above its long-term average even after a 10pc fall in the market, “in the context of record low interest rates, however equities are among the cheapest they have been for decades”.

“As we wrote last month, we remain confident that the COVID-19 outbreak will be contained, and that business will return to normal once it has,” Mr Crabb says.

“Markets are clearly taking a more pessimistic view, and this is creating an opportunity for longer term investors to move idle cash into equities.”

Rio Tinto was cut from the model portfolio after a “lacklustre result and a ‘good as it gets’ feel about the company”, and the proceeds added to his preferred miners BHP, South32 and Oz Minerals.

Suncorp was also cut since he sees “limited upside considering the peril costs of bushfire, hailstorms and difficult trading conditions for the banking division”. The proceeds from Suncorp were divided between Macquarie and Westpac.

1.15pm: Weak BoP to pull GDP lower: Oliver

A miss on expectations of public demand and net exports has prompted AMP chief economist Shane Oliver to trim his forecasts for December quarter GDP to flat, with some risk it could be negative.

That’s down from his previous estimate of 0.3pc quarter-on-quarter growth.

1.01pm: All sectors green ahead of RBA meet

The local market is holding higher by 1.8 per cent at lunch, as markets wait for the RBA to cut rates this afternoon.

The benchmark ASX200 is higher by 115 points or 1.8 per cent at 6505, after hitting as much as 6524.3.

Utilities have reversed an early loss to trade higher by 1.1 per cent, but Tech shares are the most improved – lifting 3.2 per cent.

Here’s the biggest movers at 1pm:

12.46pm: $A slips on PM comments

If there was any doubt about the likelihood of rate cuts this afternoon, comments from Prime Minister Scott Morrison have seemingly added more weight to the prospect, pulling the Aussie dollar lower accordingly.

After Mr Morrison’s comments, the AUDUSD pulled to US65.11c, now down 0.41pc for the session.

The ASX remains higher by 1.8pc or 117 points at 6509.1.

Elias Visontay 12.39pm: PM urges banks ‘do the right thing’

Scott Morrison has urged the big four banks to “do the right thing” for Australians and pass on any rate cuts in their entirety if the Reserve Bank makes such a decision on Tuesday afternoon.

The Prime Minister said he expected the banks to act no differently to how Qantas had when helping evacuate citizens from China, calling the airline “a great Australian company”.

Mr Morrison said he hoped “the big banks would do their bit, just like Qantas did their bit and that they would follow through”.

“This is the same call-out, on behalf of all Australians,” Mr Morrison said of his plea to the banks.

Mr Morrison said he had also spoken with Coles and Woolworths as supermarkets battle to secure supply as Australians look to stock up on essential supplies ahead of a potential outbreak.

11.55am: Current account surplus narrows to $1bn

Australia’s current account is in surplus for a third consecutive quarter but it shrank by $5.5bn to $955m in the December quarter.

The result is lower than the market’s anticipated $2.4bn surplus, which slips from a downwardly revised $6.5bn in the September quarter.

Tuesday’s seasonally adjusted figures from the Australian Bureau of Statistics showed exports of non rural goods fell by 6.0 per cent as prices for metal ores, minerals, coal and mineral fuels softened.

Export volumes of meat and cereal grains increased.

The balance on goods and services surplus increased by half a billion, widening the surplus to $8.9bn, with an expected contribution of 0.1 percentage points to growth in the December quarter.

AAP

11.51am: Market pricing for the next cuts

RBA rate cuts of 25 basis points each are more than fully priced for today (March) and July, according to Bloomberg.

The market-implied cash rate for today’s meeting has crept up a few points to 0.493pc since Monday’s lows. According to NAB, when money markets have priced a rate cut with the degree of confidence they currently do, the RBA has delivered some 94pc of the time.

It comes as risk markets have been somewhat becalmed by the prospect of co-ordinated central bank easing. But the market is still seeing some chance of more than two cuts, with a terminal rate of 0.20pc projected for November.

Leo Shanahan 11.36am: AAP to address closure, job cut rumours

Chief executive of newswire service AAP Bruce Davidson will address staff at 2pm this afternoon following reports of jobs cuts or possible closure of service.

“I would like to apologise that you have all faced levels of uncertainty due to the publishing of various news stories in recent days and will provide all relevant detail,” he said in a statement ahead of the address.

11.33am: Building approvals surprise to downside

January’s building approvals dropped by 15.3 per cent since December, smashing expectations of a 1 per cent lift.

For the year, that represents a 11.3 per cent drop, versus expectations of a 2.4pc gain.

Gerard Cockburn 11.20am: CBA no. 1 for millenials: UBS

UBS says Commonwealth Bank’s digital strategy has been a hit with Millennials, luring more than half of the 18 to 24 year age group, but losing out on older generations.

The brokerage notes that CBA’s customer demographics skew towards younger consumers, helped by the 43.6 per cent of high school students holding an account with the bank.

Analysts led by Jon Mott attribute that to the bank’s highly successful Dollarmites school banking program, though that is under threat amid a review of school banking by ASIC, as well as legacy banking, where young customers opt to bank where their parents hold accounts.

He calculates that the bank’s share of customers born in each year of the mid-90s has jumped by 15 per cent over the last six years, likely due to the bank’s digital focus.

But the effects of digital banking are not translating to older demographics – the bank has experienced declining rates of growth in the Baby Boomers age group, partly a result of reputational damage incurred from the banking royal commission.

UBS also noted CBA had stable numbers of Generation X account holders, who are primarily focused on paying down debt or investing for retirement.

CBA last up 0.83pc to $81.14.

UBS notes that Commonwealth Bank’s Dollarmites campaign helped it to grow its share of youth customers. Picture: Supplied.
UBS notes that Commonwealth Bank’s Dollarmites campaign helped it to grow its share of youth customers. Picture: Supplied.

11.16am: Rio expects China stimulus: UBS

UBS analysts note that Rio Tinto expects the Chinese government to launch a comprehensive stimulus package but uncertainty remains as to when this will be executed.

The note comes after a round table meeting with Rio chief JS Jacques, chief commercial officer Simon Trott and head of strategy Peter Toth.

The key data points that Rio is monitoring as indicators of recovery are: 1) are people going back to work? and 2) are the trucks moving on the road?, according to UBS notes of the meeting.

“Overall, Rio is not experiencing issues moving their products or the products required to resource their operations. Rio is staying close to its customers and suppliers with over 200 calls made into China last week to monitor the situation,” UBS adds.

They have a $97.50 price target on Rio Tinto, with a neutral rating.

RIO shares last traded at $89.69, up 4 per cent.

11.11am: Building approvals to rise 1pc

Building approvals for January and current account data for the December quarter are due at 11.30am.

Bloomberg’s consensus estimates are for a 1pc month-on-month rise in building approvals, up from a 0.2pc slip last month.

On the current account, consensus is for a $2.4bn balance and a 0.2pc net exports contribution to GDP data tomorrow.

11.04am: Tech shares lead ASX bounce

High growth tech stocks are leading the market reversal, helping the sector to gain 3.9 per cent in morning trade.

The sector had been sold off heavily over the past week – but remains down 10.7 per cent from the start of the sell-off.

WAAAX stocks are the key contributors – Afterpay is higher by 8 per cent, Altium by 3.5pc, Appen by 4.4pc and Xero by 7.2pc.

WiseTech is the only anomaly – shedding 0.1 per cent.

10.27am: ASX up 1.7pc, US futures rise

Australia’s S&P/ASX 200 share index rose a relatively-modest 1.7pc to 6492 in early trading, significantly underperforming a 4.6pc rise in the S&P 500 overnight.

S&P 500 futures have risen about 0.3pc in early Asian trading, adding to the positive global backdrop that may drive the Australian market higher before an expected RBA rate cut announcement at 2.30pm AEDT.

The Technology, Health Care and Communications sectors are outperforming, while the Utilities, Industrials, Consumer Staples, Energy, Real Estate, Consumer Discretionary and Financial sectors are underperforming.

Heavyweights including CSL, BHP, Westpac, Macquarie and Telstra make up the top 5 points contributors, suggesting investors are buying a mixture of quality, growth and defensive yield, although real estate an infrastructure are missing out.

The major banks are performing in line to weaker than the market, as investors focus on the prospect of narrowing interest rate margins stemming from expected RBA rate cuts.

Eli Greenblat 10.23am: Spotlight in hot seat to buy Harris Scarfe

The Spotlight retail empire, owned by the Melbourne-based Fraid family has won the exclusive right to buy the failed department store business Harris Scarfe.

Harris Scarfe was placed into voluntary administration two weeks before Christmas, the second time the retailer had collapsed, and its administrators at Deloitte have been searching for a buyer.

This morning, they advised they had granted exclusivity to the Spotlight Group, estimated to be worth more that $1.65 billion, to buy the business. It said this comes after a vigorous due diligence process which saw four parties short-listed and given access to the key trading records of the business.

“The Spotlight Group is a family-owned, longstanding and highly experienced Australasian retailer with a large property portfolio ideally suited to enabling future growth for Harris Scarfe employees and all stakeholders,’’ the administrators said.

Spotlight is a nationwide fabric, craft and home decor business owned by the Fraid brothers and run by their family, it also owns the Anaconda outdoor adventurewear chain and the family also recently took a stake and board position in last year’s sharemarket float of banker David DiPilla’s HomeCo, a convenience retail property group.

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The Harris Scarfe department store at Stockland Earlville is closing down. Picture: Brendan Radke.
The Harris Scarfe department store at Stockland Earlville is closing down. Picture: Brendan Radke.

10.13am: Shares rebound by 1.4pc

Local stocks have rebounded by 1.4 per cent early, just a fraction of the Wall Street rebound, but with gains across all sectors bar utilities.

The benchmark ASX200 is higher by 1.4 per cent or 90 points to 6481.9.

10.04am: Reliance probed in aware query

Reliance Worldwide has fielded questions from the market operator over its revised profit forecasts released alongside its first half results.

The group posted a 22pc profit drop on February 24, and said full year profits would likely be between $140m and $150m, down on its previous estimates.

The ASX questioned the company on when it first knew of the revision lower, and whether it expected the information to be materially sensitive.

“No, RWC would not expect the magnitude of difference in the Revised NPAT Forecast to be information that a reasonable person would expect to have a material effect on the price or value of its securities,” the company replied.

“The Revised NPAT guidance relates to full year NPAT and RWC’s full year results remain uncertain. However, RWC considered that, given the release of its half year results, it was an appropriate time to provide updated full year NPAT guidance.”

RWC shares last at $3.42.

9.49am: Confidence dives on virus fears: ANZ

ANZ’s survey of consumer confidence dived 3.2 per cent last week, to a five-and-a-half year low as coronavirus concerns spread across the world.

The current economic conditions subindex declined by 16.6pc, the largest since January 2009, as the stock market fell into correction territory.

“The fall seen in ‘current economic conditions’ shows that Australians are getting skittish about the wellbeing of the economy, though they are still quite content about their personal financial circumstances,” ANZ head of Australian Economics David Plank says.

“This divergence remains the most notable aspect of the confidence survey. So far the negative economic outlook has been a better guide to household spending than more positive financial sentiment.”

9.44am: Shares set for super rebound

Australia’s sharemarket could rise as much as 5 per cent today considering the extent of recent fall, the magnitude of US gains and the prospect of co-ordinated central bank stimulus.

A 1.1pc rise in overnight S&P/ASX 200 futures seems way too light for the Australian market today since the S&P 500 surged 4.6pc to 3090.2 whereas futures were up just 0.4pc at the ASX close.

The S&P 500 closed above its 200-day moving average at 3048.4 points. An equivalent rise in the S&P/ASX 200 to its 200-DMA at 6715 would be a 5pc rise.

As with the US market, cash is likely to flood into Australian shares today after the S&P/ASX 200 fell as much as 12.8pc from a record high close of 67162.6 to a 10-month low of 6245.2 in the past 7-days, one of its fastest corrections in history.

A strong rise will be even more likely if the RBA leaves the door open for further easing after a widely expected 25bps cut in the cash rate to a new record low of 0.50pc today.

The prospect of co-ordinated global central bank easing – after a JPY500bn ($7bn) liquidity add by the BoJ yesterday – may drive global markets materially higher ahead of the policy response, barring a material worsening in the global spread of coronavirus.

US President Donald Trump slammed the Fed for being “slow to act” and Bloomberg reported that Treasury Secretary Mnuchin and White House economic adviser Larry Kudlow both favour the Fed cutting rates before its March 17-18 meeting.

Mr Mnuchin together with Fed chair Jerome Powell are due to lead an emergency meeting of G-7 central bankers and finance ministers from 3pm AEDT to discuss their response to the coronavirus outbreak.

If the S&P 500 stabilises above its 200-day moving average, the Australian market might go on to test the 61.8pc retracement of its recent fall, at 6833, in coming days.

Australian building approvals and current account data are due at 11.30am AEDT, ahead of the RBA’s interest rate decision at 2.30pm AEDT.

Lilly Vitorovich 9.37am: Southern Cross bolsters radio ops

Southern Cross Austereo has bolstered its Triple M and Hit radio operations in northern Western Australia by acquiring Carnarvon Communications for an undisclosed sum, just months after snapping up Redwave Media in the region.

The acquisition includes two radio stations, Classic Hits 666 and Hot Hits 997, which will be rebranded to Triple M and Hit 997, respectively.

The announcement comes two weeks after Southern Cross reported a 27 per cent drop in underlying earnings to $62.2m for the six months to December 31 in line with expectations, hurt by difficult advertising conditions, with management targeting further cost cutting.

Southern Cross completed its $28m acquisition of Redwave, which included eight stations in Western Australia’s Karratha, Broome, Geraldton, Port Hedland and remote mine site areas, from Seven West Media at the end of December. The stations are set to be rebranded to Hit and Triple M on March 16.

Chief executive Grant Blackley said Carnarvon, like Redwave, was a “logical acquisition” for the group to extend its radio coverage of Western Australia.

9.25am: Virus ‘greatest danger since GFC’: OECD

The Organisation for Economic Development, a research organisation made up of mostly advanced economies, said Monday that the coronavirus outbreak “presents the global economy with its greatest danger since the financial crisis” in 2008.

The OECD cut its world growth forecast and said that even if there are only limited outbreaks outside China, the global economy will grow just 2.4pc this year, the weakest since the crisis. That forecast matches several private estimates.

If other countries are hit with outbreaks similar to China’s, growth could fall as low as 1.5pc, the OECD said.

Separately, economists at Goldman Sachs slashed their forecasts for US growth to just 0.9pc in the first quarter and to zero for the April-June quarter. For investors, the great amount of uncertainty over how consumer behaviour and spending will be affected has been unsettling.

“It’s not a typical economic blow,” said Bill Strazzullo of Bell Curve Trading. “What if major cities are on some kind of a lockdown? What will that do to restaurants, entertainment, shopping, travel? It’s almost impossible to game this out.”

Last week’s rout knocked every major index into what market watchers call a “correction,” or a fall of 10pc or more from a peak. Market watchers have said for months that stocks were overpriced and long overdue for another pullback.

The last time the market had a drop of that size was in late 2018, when the trade war with China was escalating and investors were worried about rising interest rates.

AP

8.59am: What’s on the broker radar?

  • APA Group raised to Outperform – RBC
  • Appen raised to Buy – Bell Potter
  • Aristocrat raised to Outperform – Credit Suisse
  • Autosports raised to Overweight – Wilsons
  • Bega Cheese price target raised 16pc to $4.17 – Morgans
  • Brickworks raised to Hold – Morningstar
  • Cochlear raised to Overweight – Wilsons
  • Coles Group raised to Outperform – Credit Suisse
  • Credit Corp raised to Hold – Morningstar
  • Flight Centre raised to Buy – Morningstar
  • Frontier Digital raised to Add – Morgans
  • GPT Group raised to New Buy – Jefferies
  • GPT Group raised to Hold – Morningstar
  • GWA Group raised to Hold – Morningstar
  • InvoCare cut to Sell – Moelis
  • Nine Entertainment raised to Buy – Morningstar
  • OZ Minerals rated new Buy – Jefferies
  • Pro Medicus raised to Outperform – RBC
  • Sandfire Resources rated new Buy – Jefferies
  • Super Retail Group raised to Outperform – Credit Suisse

8.44am: All US indexes smash points record

All three major US indexes have had their best one-day points gains on record, as Wall Street rebounds from the virus rout.

The Dow Jones Industrial index clocked a 1293.96 point rise – or 5.1 per cent – more than 200 points ahead of the previous 1086.25 record set on December 26, 2018.

On the S&P500, a new record of a 136 point gain was set, while the Nasdaq lifted 384.8 points.

Despite the records, the Dow remains lower by 9 per cent from its record highs touched in late February.

8.20am: Surge adds 5.1pc to Dow

Wall Street stocks surged on Monday, bouncing back after an historically bad week as markets cheered news that global finance heavyweights plan a co-ordinated response to the coronavirus epidemic.

The Dow Jones Industrial Average jumped 5.1 per cent, a gain of nearly 1,300 points, to end the day at 26,703.32. The index shed more than 12 per cent last week.

The broadbased S&P 500 gained 4.6 per cent to 3,090.23, while the tech-rich Nasdaq Composite Index advanced 4.5 per cent to 8,952.17.

7.47am: Activist buys into Twitter

Twitter shares rose Monday following reports an activist investor took a stake in the social media service and plans to push for changes. Elliott Management has taken a $US1bn stake in the company, or about 5 per cent, and plans to nominate four directors to the board, according to people familiar with the matter who spoke on condition of anonymity because talks are confidential.

Twitter has lagged behind other tech powerhouses like Facebook and Google in terms of user growth and advertising revenue. CEO Jack Dorsey left the company to start payments company Square, but returned in 2015. Now he splits his time between Square and Twitter. Dorsey has also tweeted that he would spend three to six months in Africa this year, leading some to question who would be running Twitter.

Elliott has been in talks with Twitter’s board to discuss how the lack of a full-time CEO has affected high-level executive retention and product innovations, the people familiar with the matter said. Facebook and Snapchat have introduced new products and features that attract advertisers, while Twitter hasn’t changed its product much beyond raising its character count. In February the company reported fourth-quarter user numbers that exceeded expectations, but profit still fell as expenses rose. Twitter and other social media companies have been spending more to step up efforts to remove misinformation, abuse, hate speech and spam.

Shares jumped $US2.21, or nearly 7 per cent, to $US35.41 in afternoon trading Monday.

7.38am: Apple to pay up on batteries

US iPhone owners could get $US25 from Apple after the company agreed to pay up to $US500 million to settle claims over intentionally slowing down older phones to preserve older batteries.

Apple and lawyers representing iPhone consumers agreed to a deal stemming from Apple’s 2017 admission that it was slowing down phone performance in older models to avoid unexpected shutdowns related to battery fatigue. That admission led to Apple offering discounted battery replacements at $US29, but many people claimed they had already spent hundreds of dollars to buy new phones because Apple didn’t reveal the cause of the problem. If they had known they could just buy new batteries, they might not have bought new phones, some consumers in the case said.

Apple did not admit wrongdoing. As part of the settlement, the company will pay $US310 million to $US500 million, including about $US93 million to lawyers representing consumers.

iPhone users who were named in the class-action lawsuit will get up to $US3,500 each. The rest of the settlement money will be distributed to owners of iPhone 6, 6S, 7 and SE models who meet eligibility requirements related to the operating system they had running. They must file claims to get the award. If too many people file, the $US25 amount could shrink.

A federal judge in San Jose, California, still needs to approve the settlement.

AP

7.08am: ASX won’t mirror Wall Street lift

The Australian sharemarket seems headed for moderate falls despite a rebound on Monday and overnight gains on US markets.

The SPI200 futures contract was down 40 points, or 0.63 per cent, at 6,304 at 7.00am on Tuesday, suggesting a fall when the local market opens. It closed lower on Monday after a dramatic turnaround from huge early losses amid hopes the Reserve Bank will again cut rates on Tuesday. US and European stocks rebounded overnight on hopes of central bank stimulus action.

The Aussie dollar was buying 65.33 US cents at 0700 AEDT, from 65.27 US cents on Monday.

6.58am: World Bank, IMF ready to act

The International Monetary Fund and the World Bank say they stand ready to help member countries address the human and economic challenges of the fast-spreading coronavirus outbreak, including through emergency funding.

In a joint statement, the two institutions say they are focused especially on poor countries where health systems are weakest.

They urged member countries to strengthen their health surveillance and response systems to contain the virus.

“International co-operation is essential to deal with the health and economic impact of the COVID-19 virus,” the statement said.

It said both the IMF and World Bank were fully committed to supporting these efforts.

The outbreak is plunging the world economy into its worst downturn since the global financial crisis more than a decade ago, the Organisation for Economic co-operation and Development warned on Monday.

The organisation urged governments and central banks to fight back to avoid an even steeper slump.

Finance ministers from the world’s seven largest economies (G7) are expected to hold a conference call on Tuesday to discuss measures to deal with the economic impact of the coronavirus outbreak, four sources told Reuters.

Reuters

6.20am: US manufacturing lifts

American factories expanded in February for the second straight month, despite disruptions caused by the coronavirus outbreak. The winning streak, however, may prove short-lived.

The Institute for Supply Management, an association of purchasing managers, said Monday that its manufacturing index registered 50.1 last month. That is down from 50.9 in January. But anything above 50 signals growth.

The February reading was slightly lower than economists expected. Fourteen of 18 manufacturing industries expanded in February, led by wood products and furniture manufacturers.

The institute’s index showed that American manufacturing contracted from August through December last year, hobbled by President Donald Trump’s trade wars, which raised costs and generated uncertainty about where to locate factories and buy supplies.

Much of China has been locked down because of the coronavirus, disrupting supply chains that many U.S. companies rely on.

In February, manufacturing production and new export orders grew. But new orders and hiring contracted in February.

AP

6.11am: UK, EU in post-Brexit trade talks

British and EU trade negotiators held the first day of what could be months of talks aimed at forging a new post-Brexit relationship on Monday, with timing tight and the sides far apart on key issues.

The EU’s chief negotiator Michel Barnier and UK counterpart David Frost met in Brussels, launching several months of intense closed-door negotiations involving around 100 officials on each side.

“We approach these negotiations in a constructive spirit. We want to agree an ambitious and fair partnership,” Barnier tweeted after the talks, at which the negotiators did not shake hands because of fears of the novel coronavirus.

“We will respect our prior joint commitments. We will close the round on Thursday and I will debrief the press afterwards,” he said.

A UK spokesman said Frost and members the UK delegation met Barnier and his task force for around two hours.

“The UK will engage constructively to reach a free-trade agreement which fully respects the UK’s political and regulatory autonomy,” he said.

The negotiations began just over a month after Britain left the EU, and are meant to wrap up by the end of this year — an exceedingly tight time frame that few see as feasible for anything but a bare-bones accord.

The deadline is effectively December 31, the end of the UK’s current transition period during which it trades like an EU member with no tariffs or other barriers.

British Prime Minister Boris Johnson has ruled out extending the transition and both sides are looking to an EU-UK summit in June to decide whether talks are worth continuing.

AFP

6.08am: Jack Welsh dead at 84

Jack Welch led General Electric Co. through two decades of unparalleled growth and transformation, with a brash style that single-handedly remade the conglomerate and changed the landscape of America corporations. He died Sunday at age 84.

Mr Welch’s success, driven by a hard-nosed strategy to slash less profitable businesses and unproductive employees, made him an international celebrity in the 1980s and drove GE to become the most valuable US company during the 1990s. He groomed a generation of business leaders who went on to run giants such as Boeing Co. and Home Depot Inc.

His retirement in 2001 brought best-selling books and more adoration, but GE’s troubles in the decades after his exit – under his hand-picked successor, Jeff Immelt – raised questions about Mr Welch’s management methods and whether he pushed the conglomerate too hard.

“Today is a sad day for the entire GE family. Jack was larger than life and the heart of GE for half a century. He reshaped the face of our company and the business world,” GE CEO Larry Culp said in a statement. “We’ll continue to honour his legacy by doing exactly what Jack would want us to do: win.

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Original URL: https://www.theaustralian.com.au/business/trading-day/us-stocks-bounce-as-markets-eye-rate-cuts-and-stimulus/news-story/93935b0af3a502b954711ffa4b632891