European markets open higher after ASX turns higher in huge 14pc comeback
European markets are positive, following the dramatic surge on the ASX that added $70bn in a 14pc swing – its largest on record.
- Shares stage 14pc reversal to 4.4pc daily gain
- 10-yr yields stun with 31bps lift
- Flight Centre cuts guidance, shuts stores
- Sellers have missed the boat, hang on: Paton
- Macquarie dumps $500m raise
That’s all from Trading Day for Friday, March 13. The local market staged a remarkable recovery – coming back from a loss as much as 8.1pc to finish higher by 4.4pc for the day after the Prime Minister outlined a ban on mass gatherings from Monday.
That’s after a brutal 10pc sell off on US markets overnight – the worst crash since 1987. The Australian dollar edged up from new 11-yr lows – last at US63.09c – as investors rush to hold US dollars. Travel names were in the firing line as Flight Centre announced the closure of 100 stores and Virgin cut capacity further.
The US Fed plans to inject more than $US1.5 trillion in liquidity this week to prevent “ominous trading conditions” from making the market contraction worse and after a temporary halt to trade – the second circuit breaker triggered this week. Late on Friday night, Dow futures were up as much as 4.5pc and S&P 500 and Nasdaq futures markets were each up 4pc.
European markets opened higher. The FTSE 100 in London gained 2.87pc in opening trade. Germany’s DAX was up 3.5pc and Spain’s IBEX 35 rose 5.9pc, while France’s CAC 40 lifted 2.3pc. Italy’s FTSE MIB gained 6pc at the open.
Michael Roddan 8.35pm: Companies race to restructure borrowings
The coronavirus crisis is threatening to spark a corporate debt crisis in Australia as leveraged companies in the hospitality, education, tourism, retail and aged-care industries rush to restructure borrowings in the face of an unprecedented cash-flow squeeze.
Debt restructuring investors, known as special situations funds and which offer distressed companies an opportunity to refinance debt when mainstream lenders withdraw access to covenants, are also circling the local market as a number of high-profile companies seek to calm investors over the state of their indebtedness.
The spread on credit default swaps for the major banks, an indication of investor fear of collapse, raced to their highest point in four years early on Friday as the steepest bear market on record continued to spiral out of control and as the major lenders were tipped to suffer a $2bn blowout in provisions for bad debts.
Robyn Ironside 8.07pm: Mayday call from airlines
Airlines have begun pushing back against widespread travel restrictions, demanding governments provide relief for the “economic dislocation” caused by coronavirus containment policies.
The US ban on travel to and from Europe was the last straw for the International Air Transport Association, which warned the move — affecting 550 flights a day — would have negative consequences across the global economy.
IATA CEO Alexandre de Juniac said airlines would need emergency measures to get through the crisis, and governments should be looking at “all possible means to assist the industry”.
“Extending lines of credit, reducing infrastructure costs, lightening the tax burden are all measures that governments will need to explore,” Mr de Juniac.
“Air transport is vital, but without a lifeline from governments we will have a sectoral financial crisis piled on top of the public health emergency.”
Eli Greenblat 7.43pm: Load up the truck with cheap blue-chip stocks
Veteran Melbourne stockbroker Richard “Dickie” Morrow has seen it all before, the 1987 crash, the dotcom boom and bust and the global financial crisis.
This time around from his Melbourne office at E.L.& C. Baillieu he casually waves off the slump as no different really. In fact he believes there is less panic in the market this time than in the last few sharemarket routs.
In fact, we could all be kicking ourselves next year for not “backing up the truck” and loading up on blue-chip stocks going cheap.
7.14pm: Europe defies Wall Street downturn
European markets have opened higher, defying falls on Wall Street.
The FTSE 100 in London gained 2.87pc in opening trade. Germany’s DAX was up 3.5pc and Spain’s IBEX 35 rose 5.9pc, while France’s CAC 40 lifted 2.3pc. Italy’s FTSE MIB gained 6pc at the open.
Dow Jones Newswires
Gerard Cockburn 7.07pm: Stay home, Telstra tells staff
Telco major Telstra has told its entire Australian-based office staff to work from home from Monday for at least two weeks amid the unfolding COVID-19 crisis.
The move, which is expected to impact thousands, marks the biggest of the nation’s corporates to formally invoke a work from home policy for its staff. The telco has offices in each capital, with its headquarters in Melbourne.
Telstra said there had not been a case of COVID-19 in its own workforce, rather the move was a precautionary measure.
At the same time, Telstra has cancelled all events and meetings of more than 25 people and cancelled all domestic air travel.
James Kirby 6.54pm: Less noise, more perspective
Panic always abates; the sharemarket always beats all other assets classes over the long term.
As for switching your super to cash, that’s the easiest thing in the world. But history suggests you will pay dearly in the long run.
Alex Silva at SuperRatings says: “If you put $100,000 into cash at the bottom of the GFC and stayed there your balance would now be close to $90,000 behind the median balanced fund.”
So just ask yourself before you do it, how will you time your entry back into the market? You have to get that right or you are no longer an investor. If you know the answer let me know.
5.14pm: US, UK futures point to rebound
US futures, just like the local market, have turned this afternoon – now tipping a lift on US markets overnight.
Futures had been trading down 2pc for most of the day, but turned sharply around 4pm to push into the green.
They now suggest a gain of 1.3pc when the S&P 500 opens while the FTSE 100 futures suggest a gain of 2.6pc after a 10.9pc drop overnight – its worst day since Black Monday in 1987.
5.02pm: The most extraordinary day: Coppo
Veteran trader Richard Coppleson, of Bell Potter, described today’s session as "one of the most extraordinary days the market has seen”, pointing out the value traded was the highest on record.
“The theme started the same as it has every day for the last few weeks – almost everything was hit with indiscriminate selling across the board,” Mr Coppleson said, describing the mood early on as “dire”.
“The rally from low to the high was an extraordinary 664 points or 13.6 per cent, that is meant to be what the market returns in a whole year are!
“We saw the last of the capitulation selling that has been hitting all week and today it looked like we did see the bottom in this sell-off. From here we just need the US to stabilise tonight and we will be able to hold.”
4.45pm: Cochlear leaps 21pc to lead health kick
Cochlear shares posted outsized gains on Friday to drive the recovery in the health sector and fuel much of the day’s rebound.
The heavyweight health name outperformed for much of the session – trading mostly in the green for the day and finishing higher by 21 per cent to $216.11.
Across the rest of the sector, CSL notched a gain of 6pc to 11.9 per cent to $26.72.
Check out the biggest movers at the close:
4.14pm: Shares surge in final match
In a remarkable turn for local shares, the market staged a 14 per cent rebound in the final hour of trade to notch a 4.4 per cent gain for the session.
The market had been trading firmly lower for most of the day, down as much as 8.1 per cent in lunch trade to follow a 10pc tumble on Wall Street – its largest decline since the 1987 crash.
US weakness came despite a liquidity boost from the US Fed and a 15-minute circuit breaker – the second that has been triggered this week.
Those fears were erased swiftly in the final hour of trade as local Prime Minister Scott Morrison banned mass gatherings from Monday, outlined a national cabinet of state leaders to co-ordinate the country’s response to the coronavirus and warned against any non-essential air travel.
By the close, the benchmark ASX200 was higher by 234 points or 4.42 per cent at 5539.3 while the All Ordinaries notched a gain of 220 points or 4.09 per cent gain to 5590.7.
3.53pm: Pelosi says US virus deal close
House Speaker Nancy Pelosi says that she and the Trump administration are close to agreement on a coronavirus aid package to reassure anxious Americans by providing sick pay, free testing and other resources, hoping to calm teetering financial markets amid the mounting crisis.
Final details were being worked out, but the top House Democrat, who held daylong talks with Treasury Secretary Steven Mnuchin, expected an announcement Friday. The House could then swiftly vote.
“We have – are near – to an agreement,” Pelosi said, emerging from her office at the Capitol shortly before 9pm Thursday.
The potential deal between Congress and the White House would cap a tumultuous week in which Washington strained for a comprehensive response to the outbreak that is testing the nation’s political, financial and health care systems.
AP
3.41pm: 10-yr yields stun with 31bps lift
Australia’s 10-year bond yield has surged 31bps to a 4-week high of 1.09pc
This is easily the biggest rise in bond yields since 2016.
It’s an unhealthy development for the sharemarket.
Money now looks to be flowing to cash. But the S&P/ASX 200 is currently up 2pc at 5416.
3.34pm: RBA cancels speeches
The Reserve Bank has cancelled two speeches next month, following the PM’s move to ban mass gatherings.
RBA Assistant Governor Luci Ellis had been scheduled to speak on March 18, and head of economic analysis Alexandra Heath on March 16.
3.22pm: Huge 11pc rebound puts ASX in the green
The local market has staged a more than 11 per cent turnaround for the day – now trading higher by 1.5 per cent higher as the Prime Minister banned mass gatherings from Monday and set out a join federal and state government response.
ASX200 last at 5380.8.
3.16pm: Positive trade within reach
Decisive action from the Prime Minister and state government heads is helping the market to recovery today’s losses.
The benchmark ASX200 is now lower by just 15 points or 0.28 per cent to 5290.
Elias Visontay 3.17pm: Gatherings of 500+ banned from Monday
Scott Morrison has announced the government will advise against the gathering of more than 500 people from Monday.
The Prime Minister said the guidelines would apply to non-essential, organised gatherings of 500 people or more, and would not include public transport, airports or universities.
He said there would be more issues to work through and confirm before the advice kicks in on Monday.
Mr Morrison also announced that he would join state premiers and chief ministers of the territories in sitting on a new National Cabinet to respond to the coronavirus.
“We will manage this carefully in your interests”
3.13pm: Flight Centre best poised to weather virus: RBC
While Flight Centre was the last major travel name to withdraw its guidance, RBC says its balance sheet is the best positioned to weather the coronavirus shock.
In a note today, analyst Tim Piper says the company stands out with the highest quality balance sheet “with minimal debt and it typically carries a net cash position”.
“This positions the group well to withstand a severe downturn in travel activity to then capitalise on a rebound when it occurs. FLT provided a financial position update with $1.3bn in total cash and investments and a $189m net cash position as of 29 February.”
RBC trims its target price to $23 apiece, with a sector perform rating.
3.06pm: Potential vaccine fuels ASX rebound
Reports of a potential vaccine for coronavirus is helping to fuel a lift in health stocks – trimming the local losses in the last hour of trade.
At 3pm, the benchmark ASX200 is down just 1.2 per cent – coming back from intraday losses of as much as 8pc just hours ago.
Healthcare stocks are leading the rebound – last up 3.3pc while consumer staples are up by 2.7pc.
Perry Williams 3.01pm: Biggest Aussie oil conference postponed
Australia’s biggest oil and gas conference has been postponed due to the coronavirus, organisers said in a statement.
The annual Appea conference was to be held in Perth from May 18-21 with 3000 people expected to attend. The event has been officially postponed and could ultimately be cancelled.
“Due to events involving the spread of the virus both domestically and overseas, we find ourselves in a situation whereby we are simply unable to proceed with the conference as scheduled,” the Australian Petroleum Production and Exploration Association said on Friday.
“While it may be necessary for us to cancel the event at some point, we are hopeful that this will not eventuate. We are very disappointed that we find ourselves in this situation and regret the inconvenience that has been caused by the extraordinary circumstances confronting everybody.”
The Australian Oil and Gas expo took place this week in Perth and the Australian Domestic Gas Outlook conference is still scheduled to open in Sydney on Tuesday.
Damon Kitney 2.56pm: Global recession a distinct possibility: PIMCO
Global asset management giant PIMCO sees a distinct possibility of a recession in Australia, the US and the euro area during the first half of 2020, followed by a recovery in the second half as output and demand normalises.
“In the absence of major domestic economic imbalances, the downturn in the advanced economies should be relatively mild (still assuming the outbreak peaks in the next two months). We expect further rate cuts from the Fed, with a distinct possibility of a return to zero and a resumption of asset purchases,’’ the group’s Vice President Global Wealth Management, Haydn Scott, told clients today.
He said now was a time to remain cautious on risk assets and focus on liquidity and capital preservation.
“The market is pricing in a cash rate of 0.20pc for December 2020. As such, we expect Australian government bond yields to remain low for an extended period. We have been avoiding generic credit investments, and continue to favour financials and well-seasoned Australian residential mortgage-backed securities, which we believe will be more defensive than other sectors.
“We expect oil prices to be lower for longer; as the surplus builds, we expect U.S. crude oil to linger at $30-$40 per barrel for the next several months,’’ he wrote.
2.49pm: ASX halves intraday fall
The ASX has more than halved its intraday fall to 3.2pc despite a lack of bullish leads elsewhere.
Volume has continued to ramp, now at 93pc above normal for this time of day. That suggests these moves aren’t the result of a burst of selling initially, followed by a lack of selling sucking prices higher.
There’s some aggressive buying going on but it’s hard to understand why. It’s not as if the market is cheap on a price-to-earnings basis if one applies a suitable discount to EPS estimates.
S&P 500 futures are down 2.6pc, Japan’s Nikkei 225 is down 8.7pc, the Hang Seng is down 6.1pc.
The ASX is currently down 3.2pc at 5133 after hitting a 4-year low of 4873.
John Durie 2.43pm: Virus isolation to help supermarket stocks: BAML
Bank of America has stepped into the stock market gloom with an earnings upgrade for the supermarket sector and a buy rating reinstated on Coles.
Analyst David Errington argues supermarkets will benefit from an increase in sales due to the coronavirus which will outlive the present rush on items like toilet paper.
In a report out today he said with more people staying at home and not going to restaurants this will boost supermarket sales.
He has placed a buy on Coles with a price objective of $16.50 against the present price of $14.49.
Mr Errington tips Coles to outpace rival Woolworths, with second half sales to rise by 10 per cent, then 7 per cent next financial year versus Woolworths’ 7pc growth this half, and 6pc next year.
2.37pm: SoftBank plans $7.6bn buy back
SoftBank Group says it will spend as much as 500 billion yen ($7.6bn) to buy back up to 7pc of its own shares, following plunging stock prices and a pressure campaign from one of the world’s most aggressive activists.
The proposed share buyback isn’t as large as the one urged by Elliott Management, which had recently built a $2.5bn stake in the Japanese tech giant and was pushing for as much as $US20bn in share purchases, The Wall Street Journal has reported.
But it is SoftBank’s second major buyback in as many years – last year it repurchased 600 billion yen of its own shares – and is a sign of the company’s continued attempts to shore up a market capitalisation that for years has languished below the value of its accumulated investment holdings.
WSJ
2.01pm: ASX a key defensive stock: MS
Morgan Stanley says the ASX is the most defensive stock in its non-bank financials coverage, tipping turnover at the local bourse to benefit from the higher volatility in equities and bond rates.
In a review of the sector, the broker also points out QBE as having similar defensive qualities, saying “the market may be missing that QBE is now hedged for lower rates globally and may be concerned on potential COVID-19 exposures. We think the latter are manageable given what we know now”.
They add that Link Administration is also defensive, but “three downgrades in two years are weighing on investor sentiment”.
The broker has an equalweight rating on the ASX, with a target price of $75.50. ASX last traded down 3.2pc at $65.01.
1.53pm: Collins Food shuts KFC in virus scare
Collins Food says it has shut one of its KFC branches in Queensland after a team member contracted coronavirus.
The ASX-listed fast food chain owner said the Deagon restaurant in Brisbane’s north would be closed until further notice.
“That team member is now quarantined and all employees who have worked recent shifts with that team member have been advised to self-isolate,” it said.
“This restaurant will remain closed until we are certain that there are no health risks for our employees or customers.”
CKF last traded lower by 15pc to $5.56.
Lachlan Moffat Gray 1.47pm: Government advised to ban public gatherings
Reports are emerging that Australia’s chief medical officer has advised state and federal leaders to ban public gatherings of more than 500 people at a COAG meeting in Sydney on Friday.
Speaking to 2GB, Nine’s political editor Chris Uhlmann said the CMO advised government leaders “that gatherings of more than 500 people should be cancelled from now on”, but could not confirm if the recommendation was agreed to.
The restriction could mean that all major sporting events, concerts and live performances will be cancelled or have to proceed without an audience.
A press conference on the outcomes of the meeting is expected in about an hour.
Follow our coronavirus blog here
1.45pm: JP Morgan tips global recession in 1H
A global recession caused by coronavirus is now forecast by JP Morgan after the US investment bank slashed its US and EU economic growth forecasts for the June quarter.
While a fading of the outbreak is still expected to promote a normalisation in activity into mid-year, JPM warns that the breadth of “social distancing” is increasing at a dramatic pace. Financial conditions are tightening sharply as perceptions of credit quality across a wide range of asset classes deteriorates and market liquidity dries up, with credit spreads and market measures of corporate and sovereign default risk widened markedly.
These two recent developments have lead JPM to expect a much sharper 1H20 contraction.
“If our current forecast is realised it seems appropriate to characterise it as a novel-global recession,” says JPM global chief economist Bruce Kasman.
1.34pm: Recovery unlikely till cases stabilise: JPM
There is no specific time or valuation level to get back into the market, with any recovery to be tied to stabilisation of the virus case count, according to JP Morgan’s chief Asia markets strategist Tai Hui.
In a note, Mr Hui tips US GDP growth in the second quarter to take a severe hit and contract “due to social distancing, and cut back in consumption and business spending”.
“This is also reflected by corporate credit spreads in the US, especially in high yield markets.”
He notes that sentiment will remain jittery in the near term until the pace of new infections slows – as it has in China and South Korea.
“We also need to see fiscal and monetary policy support implementation. Hence, we are not looking at specific time or valuation to advise investors to add back equities, but instead we are looking for the right conditions,” Mr Hui adds.
1.15pm: ANZ cuts variable business loan rates
ANZ Bank will cut rates on variable interest business loans by 0.25 per cent per annum, in a bid to offset the hit from the coronavirus outbreak.
The cut, effective immediately, was touted as a move to “provide some immediate relief to our small business customers in particular”.
“The rate reduction follows the Australian Government announcement of a multi-billion dollar stimulus package that included support for business investment through accelerating depreciation deductions and an increase to instant asset write-offs,” the bank said in a statement.
“ANZ is also providing any necessary financial support for business customers experiencing hardship due to the outbreak of COVID-19. This includes suspending repayments, providing early access to term deposits without incurring break fees as well as providing access to additional credit.”
1.01pm: This stock is bucking the meltdown
Shares are trading near daily lows at 1pm, with few stocks managing to buck the pessimism.
The benchmark ASX200 is lower by 7pc or 378 points to 4926.1 with banks leading the sell-off with a 9.4pc tumble.
IDP Education is a standout, gaining by 1.9 per cent after Bennelong Australian Equity funds boosted its stake in the education outfit to 7.73 per cent from 6.72 per cent.
Maybe Pharma and Cochlear are both up marginally too but swinging in and out of positive territory.
Take a look at the biggest movers at 1pm:
12.40pm: ASX sheds 8pc as global markets fall
The ASX just hit a new 4-year low of 4875 to be down 8pc on the day, its worst fall since the GFC.
S&P 500 futures are 2pc and the Nikkei 225 is off 9.4pc.
The Shanghai Comp opened down 4pc and the Hang Seng dropped 7.6pc.
The Australian market is currently down 32pc from the record high close of 7162.5 three weeks ago. It’s also down 22pc for the week and 27pc for the quarter.
Where do we go from here? Total capitulation by markets - and yes, the FOMO trade always reverses very violently. pic.twitter.com/1Om8cJj5mf
— Trinh Nguyen (@Trinhnomics) March 13, 2020
Ben Wilmot 12.32pm: Unibail-Rodamco smashed by 19pc
Unibail-Rodamco-Westfield, that bought the international Westfield mall empire for $32bn in 2018, has been smashed by heavy selling with the mall company’s secondary units, that are traded on the ASX, plunging by 18.6 per cent in early trade on Friday.
The CHESS Depositary Interests units fell to just $6.06, well down from its last close on at $7.44 on Thursday.
The sell off marks one of the greatest reversals seen in the coronavirus-driven selling and comes as a pallor descends over its major markets.
Major British mall owners have been hardest hit by fall off values and smaller malls in the US have also been savaged.
Unibail-Rodamco-Westfield has mainly very large malls across Europe and the United States and has been selling assets in order to focus on flagship centres in major cities that also have hotels, apartments, office and leisure complexes.
This strategy, which is being adopted by local groups including Scentre and Vicinity Centres to varying degrees, may come unstuck, at least in the short term, due to the coronavirus.
Unibail-Rodamco-Westfield has already trimmed its development pipeline back to €8.3bn but has now been caught out in the global panic about the future of shopping centres, and this could be wound back.
12.12pm: ASX gives up early bounce
Australia’s S&P/ASX 200 fell as much as 7.8pc to a 4-year low of 4889.
No doubt there was forced selling of any remaining leveraged accounts at 11am.
The price action is very worrying, particularly after the liquidity additions from the Fed and RBA.
After bouncing from 4919 to 5095 in early trading, the index is now finding resistance near 4950.
There’s no chart support until the Feb 2016 low at 4707. In other words, the index could easily drop another 4.5pc.
The most important chart level now is 4678. That’s the 61.8pc Fibonacci retracement of the 2008-2020 rise.
Perry Williams 12.09pm: Caltex share tumble to kill deal: CS
Caltex’s plummeting share price amid broader market turmoil will likely scupper the chances of a takeover proceeding, Credit Suisse says.
Caltex fell a further 9.6 per cent on Friday morning to $22.55, marking a 36 per cent discount on Couche-Tard’s $35.25 a share bid.
The broker questioned whether a buyer like Couche-Tard would proceed with a bid at a 40 per cent premium to Caltex’s share price and whether funding would be available given deteriorating market conditions.
“That is too many uncertainties, in our view,” Credit Suisse said.
Couche-Tard is midway through due diligence on Caltex and is expected to complete the process later this month. However, there is now significant uncertainty over its appetite to proceed with its $8.8bn bid given the changed market dynamics.
12.03pm: Raise ‘impossible’ amid volatility: Pengana
Listed investment fund Pengana is adding to the list of dumped capital raisings, saying today it was “impossible” to conduct an orderly process for its secondary offer amid the market volatility.
The LIC withdrew the secondary units that had been offered for its Pengana Private Equity Trust.
“We do not believe that it is in the best interests of any parties involved to proceed with a raising under these circumstances,” it said, adding that the withdrawal was not related to the performance of the trust.
Despite that, it said that the disruption would likely be positive for the fund, “which will continue to invest in private equity assets over the next few years”.
“This environment should present an abundance of well-priced investment opportunities that Grosvenor Capital Management will be particularly well placed to source and negotiate on attractive terms.”
11.56am: Afterpay soothes debt concerns
Afterpay has moved to reassure the market of its debt arrangements, saying it was well capitalised and prepared to respond to any changes in “customer repayment behaviour”.
Its update came as the company’s shares fell a further 6.4pc – in line with the broader market – but marking a 32 per cent drop in just the past week.
The payments provider said it had over $1.09bn of warehouse facilities in place with major financial institutions and a strong liquidity position of over $676.1m.
“Due to the dynamic nature of Afterpay’s system and the short duration of our receivables book (less than 30 days) we are able to manage losses in real time by identifying them early and modifying risk parameters in the system immediately,” it said, adding that it had not yet seen any changes in repayment behaviour relative to past performance.
11.47am: Banks head toward 23pc weekly drop
Australia’s biggest bank names are being hammered in the market meltdown, with the sector down 23 per cent in just the past week.
NAB is leading the drop, down 13.5 per cent to a new 11-year low of $15.64.
Westpac is down 11.7 per cent to similar lows of $15.53, Commonwealth is taking a hit of 8.6 per cent to trade at $58.57 and ANZ is lower by 11.4 per cent to $16.26.
11.35am: Fortescue one of just 4 positive names
As the local market sets new daily lows, Fortescue is a rare fleck of green on the top 200.
The miner is bucking the broad pessimism to trade higher by 1.6 per cent – coming back from an early fall as much as 7pc.
The stock was tipped by one analyst as “on track for guidance beat” according to Bloomberg, while other traders expect that stimulus from China could buffer some of the downside risk from the coronavirus outbreak.
Elsewhere in the top 200, Mayne Pharma is edging up by 1.8pc as IDP Education adds 0.8pc and Syrah trades flat at 30.5c.
11.20am: ASX extends drop as Asia joins sell-off
The local market is diving fast now, as Asian markets join the global plunge, even as the RBA moved to shore up liquidity in the bond market.
The RBA added a net $6.91bn of liquidity to the financial system via daily repo operations in an attempt to provide liquidity to the repo funding markets as the spread of the funding rate to the risk free rate widens.
The RBA’s repo operation cleared at around 37-41bps over overnight indexed swap, the widest levels of the year, showing pressure building in funding markets.
Beyond this, banks have been building cash buffers as seen by the Exchange Settlement, or ES balances. Which have risen from around $2bn to close to $7bn. Companies are hoarding cash and tapping revolver credit facilities as a way of drawing on credit lines.
Local shares are lower by 6.8pc to 4944.8 after rebounding slightly to 5304.6.
Japan’s Nikkei 225 is down 8pc in early trading while S&P 500 futures are down 0.9pc.
10.52am: Virgin cuts more flights, reduces salaries
Virgin Australia has cut more flights, reduced executives’ fees, and will seek relief from government charges as it joins rivals in attempting to soften the impact of the COVID-19 spread.
The airline on Friday suspended full-year earnings guidance as it flagged reductions in its Los Angeles, Japan, and trans-Tasman services, as well as announcing the exit of Auckland services to and from Tonga and the Cook Islands. That came after it was reported that a flight attendant tested positive for the virus.
Virgin said guests with any changes to their bookings will be contacted directly with alternative travel arrangements including refunds for any routes that the group is no longer servicing.
The airline’s bonds have been in the spotlight this week as global airlines come under pressure.
VAH shares are lower by 6.7pc to 5.6c after hitting lows of 5c.
AAP
10.46am: Bitcoin tanks 40pc in 24hrs
The flight to safety has sent Bitcoin into free fall, dropping 39.89 per cent over the past 24 hours.
The price of bitcoin is now $US4692.22 apiece, and total market capitalisation worth $US85.72bn.
That’s a 55 per cent drop in just the past month for what was heralded previously as a “safe haven” asset.
10.33am: Flight Centre cuts guidance, shuts stores
Flight Centre is the latest casualty in the coronavirus outbreak, this morning withdrawing its full year guidance and announcing the closure of up to 100 underperforming stores to stem the damage.
In a notice to the market, just a day after chief Graham Turner urged governments and citizens to “stop panicking”, Flight Centre cited “heightened uncertainty surrounding the coronavirus” as the cause of the drastic measures.
At its half year results just three weeks ago, the company warned that the virus would hit earnings, cutting its profit before tax forecast to between $240m to $300m.
Today, it said that estimate would be withdrawn entirely.
“Total transaction value (TTV) trends generally in line with expectations in early 2H trading
but virus’s spread & increased travel restrictions mean demand is softening significantly and
time frame for recovery is unclear,” it said.
FLT shares were halted for the announcement – but opened lower by 8.3 per cent.
10.25am: $689bn wiped in bear-market drop
Australia’s sharemarket has continued to plunge after the US sharemarket fell the most since 1987.
The S&P/ASX 200 opened down 385 points or 7.1pc at a four-year low of 4919, as a 0.9pc turn lower in US futures keeps pressure on trade.
The energy sector is weakest after Brent crude dived 7pc on the US-EU travel ban. The materials, industrials, technology and financial sectors are broadly matching the market fall.
Unibail is down 15pc – weakest in the ASX200 due to its shopping mall exposure while Challenger is down 14pc due to its junk bond exposure.
Westpac is down 9pc, Macquarie is down 11pc, Sydney Airport is down 13pc and James Hardie is down 12pc
ASX200 last down 6.5pc at 5948.
10.14am: Shares tumble 7pc, below 5000
The local market is tumbling at the open to follow a dramatic sell off on US and European markets overnight.
The benchmark ASX200 is lower by 359 points early, down 7 per cent, to 4945.5 – breaking the 5000 level for the first time since 2016.
Lachlan Moffet Gray 10.08am: Opposition calls for parliament recall
Anthony Albanese has called for federal parliament to be recalled next week to urgently deal with legislation addressing the coronavirus crisis.
The Labor leader has written to Prime Minister Scott Morrison asking for the next sitting to be brought forward so the federal government’s stimulus package can be rushed through parliament.
“Labor will expedite any passage of legislation through both houses of parliament,” the opposition leaders told reporters in Brisbane on Friday.
“Parliament should resume next Tuesday, after the party rooms have a chance to consider any legislation next Monday, Mr Albanese said.
“Labor will expedite any passage of legislation through both Houses of Parliament and there won’t be any procedural issues raised by us with the normal notice that has to be given to the Houses of Parliament for legislation to be introduced and then debated.”
Follow the day’s breaking virus news at our coronavirus blog
9.59am: We don’t have circuit breakers: ASX
The ASX has taken to twitter to reassure investors ahead of the open, saying it doesn’t use circuit breakers like the NYSE, rather order thresholds that can pause trade in individual stocks for two minutes.
“The Anomalous Order Thresholds and Extreme Trade Range mechanism promotes orderliness by striking a balance between restricting large and sudden price movements, while allowing natural market forces to guide trading,” it said.
“We observed in other markets that circuit breakers can exacerbate volatility.”
Overnight, brutal selling on Wall Street triggered a 15 minute halt in trade, the second circuit breaker this week.
1/3 ASX doesn't use circuit breakers like #NYSE. We have AOTs—Anomalous Order Thresholds—that calculate reference prices for all stocks every minute and prevent the placing of aggressive orders (an order +/-10% the reference price). See: https://t.co/PrUpQNWQc2#Ausbiz #ASX
— ASX 🛠The heart of Australia's financial markets (@ASX) March 12, 2020
9.55am: Goodman could be a rare positive stock
Industrial property company Goodman Group has sold a $1.7bn property portfolio in central Europe to investment manager GLP, as it continues to cut back leverage of both its balance sheet and funds it manages.
The sale was sealed despite market ructions and helps build on Goodman’s position as it has low debt position and the backing of major pension funds to pounce on cut price deals if the cycle turns down.
The unlisted Goodman European Partnership and listed Goodman Group said they had signed an agreement for the sale of assets in Central and Eastern Europe for about €1bn ($1.7bn) to GLP. The transaction includes properties in Poland, Hungary, Czech Republic and Slovakia.
Goodman Continental Europe chief executive Philippe Van der Beken said the proceeds of this transaction would enable the company to capitalise on the strong demand for industrial property and continue to scale up in the major consumer markets in Germany, France, Spain, Benelux and Italy.
Michael Roddan 9.50am: Macquarie dumps $500m raise
Macquarie Group has killed off a $500m raising due to “significantly changed” market conditions.
It’s the latest in a string of dumped capital raisings in the wake of the steepest bear market in history.
The bank reassured investors that the decision di not affect its commitment to repay $429m of capital notes on March 24, and $400m of income securities on April 15.
Listed equities manager Argo also said on Friday morning it would scrap a raising for its Global Listed Infrastructure fund and would refund customers.
Last night National Australia Bank pulled the trigger on cancelling a $2b raising through a hybrid capital notes offer, after the listed hybrid market suffered its worst trading day on record.
9.48am: ASX to follow global plunge
Australia’s sharemarket is set to plunge after extremely sharp falls in offshore markets.
The S&P 500 fell 10pc, the Euro Stoxx fell 12pc and Brent crude fell 7.2pc to $33.22 after US stimulus and coronavirus containment plans disappointed and ECB and US Fed actions fell flat.
Futures relative to fair value suggest the S&P/ASX 200 will open down 7.8pc at 4890 points, with Energy, Financials, Industrials and Utilities likely to underperform based on US trading.
The S&P 500 has now fallen 27pc from its record high three weeks ago and if the S&P/ASX 200 falls as much as expected today it will be down 32pc from its record high close of 7162.5.
These falls are the worst since the global financial crisis but more worryingly, happening at a faster rate than they did at that time and are occurring at a time of record low interest rates.
The ECB added EUR120bn to its QE program for 2020, while lowering bank capital ratios and saying it will focus on a new round of loans to small business. The Fed expanded its $60bn Treasury Bill program to all Treasuries to match the maturity composition of Treasury securities outstanding, thereby officially restarting QE.
“The aggressive move from the Fed makes it very clear that the Bank will not allow USD liquidity to dry up,” says NAB’s Rodrigo Catril.
The Fed will offer $500bn in a three-month repo today, with a further $500bn three-month and a $500bn one-month repo tomorrow. These will continue each week, in addition to the $175bn daily and $45bn two-week repos twice per week.
Ben Wilmot 9.30am: Stimulus of little benefit for REITs: Macq
The federal government’s fiscal stimulus package in response to coronavirus would have limited direct benefit for REITs, according to Macquarie Securities.
Property stocks exposed to the impact of the coronavirus and the potential a further fall off in the retail trade were heavily sold off on Thursday and could again fall on Friday.
Looking at the stimulus announcement, Macquarie’s property team said retail tenant sales may be higher but leasing outcomes would remain soft. They prefer office stocks, rent collectors and those with strong balance sheets.
Macquarie Securities has outperform recommendations on Dexus, Charter Hall Retail REIT, and Investec Australia Property Fund, and the team is sceptical about whether the package would flow through to shopping centre owners.
“We continue to believe a short-term uplift in sales is not enough to change the structural headwinds facing regional mall landlords,” Macquarie Securities analysts led by Darren Leung said.
They said initial industry feedback suggests retailers are seeking rental assistance which would form headwinds to earnings in the retail REITs. “Conversely, we remain positively exposed to neighbourhood malls given more exposure to non-discretionary tenants,” they said.
They said debt markets were relatively accessible but noted property groups with elevated debt refinancing risks on a three-year view include Lendlease, Scentre Group, Growthpoint and National Storage REIT.
Eli Greenblat 9.26am: Argo the latest to scrap raising
Argo Global Listed Infrastructure fund is the latest to scrap its capital raising due to the turmoil on global equity markets, this morning deciding to bin its shareholder rights offer that would have raised up to $53.2m.
The listed investment company, which invests in global infrastructure assets, had announced last month the one-for-six share entitlement offer for existing shareholders to take up their rights and hand over more money to the fund managers.
Argo Global Listed Infrastructure has around $300m invested in infrastructure assets.
On Thursday the WAM Active fund decided it was in the best interests of shareholders to cancel its share purchase plan and return all amounts to shareholders who participated in the capital raising.
John Durie 9.17am: Sellers have missed the boat, hang on: Paton
Stock market veteran Brett Paton has warned investors “you have missed the boat now if you plan on selling so outside some immediate financial needs the best tactic is to hang on”.
Mr Paton, chair of the high net worth fund Escala Partners, said obviously the time to sell was January of February.
He spoke to The Australian as a private investor not in his official capacity.
One US fund manager told the Wall Street Journal, “we’re beyond logic and mathematics this is a complete over-reaction because of the fear of the unknown”.
Mr Paton noted logic would tell you economic activity will slow in the next six months and risk premium is high so after factoring that into discounted cash flow valuations you would probably conclude stocks are fairly valued.
Bit that is logical in a market which isn’t.
9.10am: What’s on the broker radar?
- ASX raised to Neutral – UBS
- ANZ Bank raised to Buy – UBS
- APA Group raised to Add – Morgans
- Atlas Arteria raised to Outperform – Macquarie
- Bendigo and Adelaide Bank raised to Neutral – UBS
- Challenger price target cut 20pc to $7.70 – UBS
- Coca-Cola raised to Outperform – Macquarie
- Commonwealth Bank raised to Neutral – UBS
- Computershare raised to Buy – UBS
- CSL raised to Buy – Citi
- Domino’s raised to Outperform – Macquarie
- Flight Centre cut to Underperform – Macquarie
- Magellan raised to Neutral – UBS
- Medibank Private raised to Neutral – UBS
- National Australia Bank raised to Neutral – UBS
- Netwealth raised to Neutral – UBS
- NIB raised to Overweight – JP Morgan
- Pendal raised to Buy – UBS
Gerard Cockburn 8.55am: Westpac hit with fresh class action
Westpac has been hit with a fresh class action by law firm Johnson Winter & Slattery over its Austrac money transfer scandal.
“The claim relates to market disclosure issues connected to Westpac’s monitoring of financial crime over the relevant period and matters which are the subject of the Austrac proceedings,” Westpac says.
It covers similar ground to the earlier class action filed by Phi Finney McDonald in December 2019. The latest claim does not identify the amount of any damages sought.
The class action against the country’s second largest bank is open to shareholders who acquired an interest in Westpac securities or equity swap confirmations over a six-year period, between December 16, 2013 and 19 November, 2019.
Westpac said it will be defending the claim.
Damon Kitney 8.50am: Risk of virus spread on planes low: Qantas
Qantas chief customer officer Stephanie Tully has reassured the airline’s customers overnight that the risk of catching coronavirus on an aircraft is low.
“We know there’s community concern about coronavirus and public spaces. The wellbeing of our customers and staff is always our highest priority, so we want to explain why you can still fly with confidence,’’ she said in a letter to the airline’s Frequent Flyers overnight.
“Qantas has its own team of dedicated medical professionals who have been closely monitoring the coronavirus outbreak. All the decisions we make are guided by their advice and the advice of authorities including the World Health Organisation and Australia’s Chief Medical Officer.”
She said that because of high cleaning standards and hospital-grade air filtration systems,” the risk of catching a virus on an aircraft is low”.
“In-flight transmissions have not been a feature of this outbreak. As the US Centres for Disease Control says, the cabin air environment is not conducive to the spread of most infectious diseases.”
Qantas shares fell almost 10 per cent yesterday following Donald Trump’s shock move to ban travel between the United States and continental Europe.
Damon Kitney 8.48am: Virgin chief bows out of tourism conference
Virgin Australia chief executive Paul Scurrah was an unsurprising no show at Tourism Australia’s annual Destination Australia conference in Adelaide on Thursday as speculation mounts that the airline may follow the lead of Qantas earlier this week and cut domestic capacity.
Among the 450 delegates that attended there was a mood of optimism, albeit through gritted teeth.
“It is absolutely unprecedented what is facing Australia’s visitor economy. It is ticking the airlines, airports and the tourism industry. And it is happening so quickly,’’ said Australian Tourism Industry Council executive director Simon Westaway.
“We will come out of it but the industry has another round of pain to come. It will get worse before it gets better in the short term which makes the government’s stimulus package all the more important.”
8.10am: Palladium tanks 28pc as gold falls
Palladium prices have plunged as much as 28 per cent as panic selling driven by intensifying fears over the coronavirus pandemic seeped into precious metals, with gold slumping more than four per cent as investors rushed to cover margin calls in other assets.
Platinum plummeted nearly 13 per cent and silver shed over seven per cent earlier in the session.
“It is a rush to cash and a mild panic-type move. What we’re seeing is market participants and investors indiscriminately selling every asset class,” said David Meger, director of metals trading at High Ridge Futures. “People are selling gold and silver positions to finance equity positions or other situations.”
Global stocks plunged below bear market thresholds and oil slid eight per cent after US President Donald Trump banned travel from Europe to stem the spread of coronavirus, threatening more disruption to the world economy.
Auto-catalyst metal palladium led the bloodbath in the precious complex, diving to its lowest since early October 2019 at $US1,653.51 per ounce. Spot gold, meanwhile, slid 3.2 per cent to $US1,582.35 per ounce in afternoon trade. US gold futures settled 3.2 per cent lower at $US1,590.30.
Bullion has erased gains from a surge past the $US1,700 per ounce level for the first time since late 2012 on Monday, when investors made a beeline for safe havens amid the rapid spread of the virus.
Reuters
8.02am: US, Europe – the final numbers
On Wall Street:
- Dow Jones: -10.0pc at 21200.62
- S&P500 -9.51pc at 2480.64
- Nasdaq -9.43pc at 7201.8
Europe overnight:
- FTSE100 -10.9pc 5237.48
- DAX -12.2pc at 9161.13
- Stoxx600 -11.5pc at 294.93
[CHART] S&P 500 intra-day chart #ausbiz Bloomberg pic.twitter.com/LcmSnmg2aV
— CommSec (@CommSec) March 12, 2020
7.57am: AUD falling fast
The Australian dollar is tumbling in response to the global market turmoil, falling more than half a US cent this morning to be trading at US62.34c.
The local currency was as high as US64.59c at 7pm last night, falling steadily to be trading at US63.62c at midnight. It bumped to around US63.78c at 4am before falling again through this morning as Wall Street shares took a hammering.
Lachlan Moffet Gray 7.49am: No negative rates: PM
Prime Minister Scott Morrison said Australia could see lower interest rates in coming months as the economy slows due to coronavirus, but dismissed the idea that the cash rate would go negative, saying “the heavy lifting has to be done by fiscal policy now”.
“I’d be very surprised if we saw that situation in Australia,” the Prime Minister told 2GB’s Alan Jones on Friday.
“Based on my recent discussions with the (RBA) governor, Australia is in a strong position.”
Mr Morrison moved to reassure Australians, saying he will still be attending the NRL on Saturday despite coronavirus fears and urged the country to “keep calm and carry on”.
“I’ll be out supporting the sharks on Saturday night and I’m sure it’ll be a great game,” he said.
“Until there is health advice – and we haven’t got that health advice at this point … people should go about their daily life. It is important for our economy and just our general wellbeing that people get about their daily lives.”
Mr Morrison also defended the measures contained within his government’s $17.6bn stimulus package, including a payment of up to $750 for individuals on government benefits, saying the measure will get “people to spend in the economy because that’s what supports people’s jobs” and hinted at further, targeted support for China export-orientated businesses like abalone fishermen who have seen sustained declines in their business.
7.46am: Disneyland to close
Disneyland will close its doors from Saturday due to the spread of the novel coronavirus in California, the resort said on Thursday.
The theme park will remain closed at least until the end of March while the situation is monitored, with hotels remaining open until Monday to give guests time to leave.
“While there have been no reported cases of COVID-19 at Disneyland Resort, after carefully reviewing the guidelines of the Governor of California’s executive order and in the best interest of our guests and employees, we are proceeding with the closure of Disneyland Park and Disney California Adventure,” the resort said in a statement.
7.14am: Europe lashes Trump travel ban
European Union leaders on Thursday lashed out at President Donald Trump’s decision to restrict travel from Europe to the United States because of the new coronavirus, calling the pandemic a global crisis that “requires co-operation rather than unilateral action”.
Trump, who had called COVID-19 a “foreign virus” and claimed that European travellers “seeded” infection clusters in the United States, said late Wednesday that all European travel would be cut off.
US officials later said the entry ban only would apply to most foreign citizens who have been inside Europe’s passport-free travel zone during the 14 days prior to their arrival in the United States.
“The European Union disapproves of the fact that the US decision to impose a travel ban was taken unilaterally and without consultation,” European Council President Charles Michel and European Commission President Ursula von der Leyen said in a joint statement.
“The coronavirus is a global crisis, not limited to any continent, and it requires co-operation rather than unilateral action,” the two said. Europe’s passport and visa-free Schengen travel area comprises 26 countries including EU members France, Italy, Germany, Greece, Austria and Belgium, where the bloc has its headquarters, but also others like Switzerland, Norway and Iceland.
The measures announced by Trump don’t apply to the United Kingdom, where the number of confirmed cases has reached almost 460, with eight deaths, or Ireland, which isn’t part of Schengen, and has 43 cases.
AP
7.09am: Wall St hammered in worst day since 1987
Wall Street stocks endured another bruising rout Thursday, joining a global sell-off as emergency measures by central banks failed to douse mounting recession fears due to the coronavirus.
At the closing bell, the Dow Jones Industrial Average stood at 21,197.90, its lowest point of the day and a loss of around 2,350 points.
The broadbased S&P 500 plunged 9.5 per cent to 2,479.90, while the tech-rich Nasdaq Composite Index also tumbled 9.5 per cent to 7201.8.
7.05am: Oil drops 7pc
Brent crude slid 7 per cent overnight after President Donald Trump restricted travel to the United States from Europe as part of measures to try to halt the spread of coronavirus pandemic.
A flood of cheap supply coming onto the market from Saudi Arabia and the United Arab Emirates compounded pressure on prices. The Gulf Arab producers are raising production as they go on the offensive in an oil price war with Russia. Brent crude was down $US2.57, or 7.2 per cent, at $US33.22 a barrel while US West Texas Intermediate Texas crude was down $US1.48, or 4.5 per cent, at $US31.50.
Global equities plunged and the Dow Jones index was on course for its worst performance since Wall Street’s “Black Monday” crash of 1987 after Trump announced the travel restrictions.
Prices pared losses briefly after the Federal Reserve Bank of New York said it would increase Treasury purchases and introduce new repo operations, but the bounce faded quickly across markets.
AP
6.48am: UN cancels meetings
The United Nations has announced the cancellation of unofficial UN-sponsored meetings at its headquarters in New York.
Cancelled events range from the launch of a global environment outlook for young people to a civil society orientation and session with partners of this year’s 75th UN anniversary celebration.
UN spokesman Stephane Dujarric said Thursday that UN Secretary-General Antonio Guterres made the decision to cancel all informal UN-sponsored events from March 16 until the end of April.
Guterres is strongly urging the organisation’s 193 member nations to consider cancelling all meetings, exhibition openings and other events they are sponsoring.
Dujarric said this could affect nearly 100 so-called side events planned by the U.N. and by member states over the next seven weeks.
Meetings of the U.N.’s main bodies that will still take place at its headquarters include the Security Council, the General Assembly and the Economic and Social Council.
Robyn Ironside 6.18am: Nightmare for airlines
Running an airline has never been easy. Former American Airlines chief executive CR Smith once said no one could make money in the “goddamn airline business, the economics are sheer hell”.
If that is true in normal conditions, than it’s difficult to imagine the challenges currently being experienced by the world’s carriers.
In a matter of weeks, the coronavirus outbreak has devastated demand for travel like nothing before – not the 9/11 terrorist attacks, the 2007-09 global financial crisis, and certainly not the 2002-2003 SARS epidemic to which COVID-19 was originally compared.
Since China confirmed the outbreak, reputable airlines such as Cathay Pacific, China Eastern and Qantas have seen demand and bookings simply evaporate.
A Qantas flight from Hong Kong to Sydney this week in an A330, an aircraft capable of carrying 297 people, had just 39 passengers on board. “Hope you enjoyed your private flight to Australia,” the pilot wrote in a passenger’s travel diary.
6.03am: Fed intervenes to stop rout
The Federal Reserve moved Thursday to try to ease disruptions in the financial markets stemming from the coronavirus by announcing that it will sharply increase its purchases of short-term Treasury bonds.
The Fed said it’s making available at least $US2 trillion in short-term lending as a way to ensure that the Treasury market can function smoothly. It’s also broadening its ongoing $US60 billion-a-month purchases of Treasurys to include longer-term bonds.
Initially, the Fed’s actions led the stock market to sharply pare its deep losses, before share prices fell back down. By midafternoon, the Dow Jones Industrial Average was still off more than 8pc. Likewise, the announcement caused Treasury yields to fall before they rose back up again.
The reaction in the markets suggested little faith that the Fed’s moves would do much to restore the confidence of investors and consumers in the face of travel disruptions, event cancellations and business closures.
Thursday’s central bank action, being led by the New York Fed, is intended to keep credit markets functioning and ensure that banks can continue to provide loans to businesses and other borrowers across the economy.
AP
5.55am: ECB pumps stimulus
The European Central Bank deployed targeted new stimulus measures to cushion the shock to the economy from the virus outbreak, but its president said monetary policy couldn’t do it alone and called for a “decisive and determined” response from governments.
ECB President Christine Lagarde said the economy was facing a “major shock” and that the central bank measures unveiled Thursday were “almost surgically” targeted at areas where monetary policy could help.
The central bank, she said, was “determined to support households and firms in the face of the current economic disruptions and heightened uncertainty.” But she added that a stronger response from eurozone governments was urgently needed to prevent the eurozone from falling into recession: “An ambitious and co-ordinated fiscal policy response is required to support businesses and workers at risk.”
She said action should come “in the next few weeks and not months.” She repeated the phrase at the start of her statement, and when asked if the eurozone faced a recession, said that depended “on the speed, the strength of the collective approach” by all players.
She said currently announced fiscal measures were only 27 billion euros, or about a quarter of one per cent of GDP. The bank’s 25-member governing council decided a stimulus package that included the purchase of up to 120 billion euros more in bonds this year.
The money is newly created and injected into the financial system. It comes on top of purchases worth 20 billion euros a month it is already carrying out, and would be aimed at corporate bonds, which should help keep credit available to companies.
AFP
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