- China's CSI300 index falls 9pc on opening
- Aussie dollar trading at four-month low
- Increasing chance of suprise RBA rate cut tomorrow, based on interbank futures
February 3, 2020 — 4.59pm
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That is all from us today. Thank you for your time and your comments.
We will be back tomorrow. It is a big day with the first interest rates decision of the year and reporting season kicks off with results from CIMIC and SCA Property Group.
ASX closes 1.3 per cent lower
Australia's stock market closed 1.3 per cent lower today with the S&P/ASX200 at 6923.3 points and the All Ords falling 101 points lower, a decline of 1.4 per cent, at 7019.9 points. The indices dropped as much as 1.7 per cent on the open before firming up in the early afternoon.
The energy sector was the worst performer, down 4 per cent, as stocks in oil companies and oil industry services tumbled. Worley fell 8.5 per cent to $13.95, and Oil Search dropped 7.2 per cent to $6.72 after the Papua New Guinea government walked away from talks with Oil Search's joint venture partner Exxon over its liquefied natural gas expansion plans, threatening a broader $20 billion gas export program. Perenti Global dropped 6.2 per cent to $1.44, and NRW Holdings fell 5.7 per cent to $2.95.
The materials sector declined 2.2 per cent with BHP falling nearly 3 per cent, Rio Tinto falling 1.9 per cent, and Fortescue Metals closed 3.4 per cent lower at $11 after falling to $10.81 during the opening sell-off.
Companies with a broad exposure to Chinese consumers were sold-off amid concerns about the impact of travel bans imposed to reduce the spread of the Coronoa Virus and a slow down in the Chinese economy. International education company IDP Education dropped 6.7 per cent, and Treasury Wines hit a one-year low of $12.30.
Utilities out-performed by ending the day 0.1 per cent higher, thanks to a 0.9 per cent gain gas pipeline owner APA Group. Healthcare, real estate, and consumer staples also out-performed. Woolworths managed to hit a new high during trading of $42, but closed at $41.82.
The Australian dollar closed higher at US67.02¢, while China's yuan fell against the greenback and was at 7-yuan-per-dollar on Monday for the first time since Christmas Eve.
Flexigroup shares drop 10.8 per cent
By Colin Kruger
Flexigroup blamed weak retail conditions for a downgrade on Monday but pleaded for patience as it enters the second year of a three-year transformation of the business. The market update from the consumer finance group reported that transaction volumes will grow just 10 to 15 per cent this financial year ending June 30 compared to previous expectations of 15 per cent growth.
The company’s shares were down as much as 12 per cent in morning trade to a low of $1.835. Near the end of trading shares were slightly higer at $1.87.
“Transaction volume uplift will be driven by new product launches, new customer segments and new partnerships, but will be partially offset by the softer retail trading environment,” said Flexigroup in the trading update.
Flexigroup said that based on its unaudited financial accounts it expects to report cash net profit of $34.5 million for the first half ending December 31. Credit Suisse analysts had forecast a first half net profit of $39.8 million.
The S&P/ASX 200 has recovered nearly 42 points since the low of 6897 at 10:12am. Index heavyweights like CSL have increased during today's session up from $309.01 to $311.81 currently.
And Commonwealth Bank is at $84.77 now compared to $84.06 this morning. Fortescue Metals Group has gone from $10.79 this morning up to $11.09, and Qantas has improved from $6.20 to $6.33.
The gains are helping to off-set the 3.8 per cent decline in the energy sector, which is absorbing a 3.4 per cent decline in brent oil prices overnight. This is weighing heavily on oil producers and associated industries with Worley down 8.1 per cent to $14, Oil Search down 7.6 per cent to $6.69, and Perenti Global (formerly Ausdrill) down 5.4 per cent to $1.45.
Perenti is now at a six-month low as it has endured several shocks in recent months including a terrorist attack on its subsidiary African Mining Services in November that saw shares drop from $2.28 to $2.08.
Wheatley's return to AP Eagers
By Lucy Battersby
AP Eagers has appointed Michelle Prater as a non-executive director, marking the return of the Wheatley family to the company they started, then sold off. Ms Prater is the granddaughter of Automotive Holdings Group's (AHG) founder, Sydney Wheatley, and daughter of AHG's long-time executive chairman Vern Wheatley.
AHG was run by the Wheatley family from its 1952 beginnings until it floated on the stockmarket in 2005. Vern Wheatley was executive chairman from 1968 until 1994 and retired in 2004. In 2012 he shocked management by selling 16.5 per cent of shares to competitor AP Eagers for $88 million plus 6 per cent of shares in AP Eagers.
At the time, family spokeswoman Ms Prater reassured AHG management that AP Eagers had no intention of taking over AHG. However, AP Eagers conducted a hostile takeover in 2019, and the Wheatley family's 6 per cent stake helped get the ball rolling early as it quickly accepted institutional offers. The takeover was completed in September 2019.
US, Europe futures higher
By David Scutt
US and European stock futures are pushing higher, signalling that some investors believe the steep falls seen on Friday were overdone.
US S&P 500 futures are now up 0.7 per cent. Stoxx 50 futures in Europe have risen 0.3 per cent while UK FTSE futures have gained 0.4 per cent.1.32pm
Ten day of news in China's market fall
The 8.7 per cent drop in the Shenzen Composite, and 8.3 per cent fall in the Shanghai Composite reflects the prolonged closure. The market last traded on January 23, the same day officials shut down travel to and from Wuhan, closing 3 per cent lower. This is the first chance the market has had to price in all the bad news of the past two weeks.
Hong Kong's Hang Seng index is up 0.4 per cent today, but down 9 per cent since January 23. It too was closed to Lunar New Year, but re-opened on January 29 with a fall of 2.8 per cent.
"[China's stockmarket] was always going to drop quite a lot,'' says chief investment officer at Talaria Capital, Chad Padowitz, adding there was a lot of accumulated news to factor into today's opening prices.
Meanwhile, Wall Street continues through its reporting season with mostly good news emerging.
China cuts interest rates
By David Scutt
China’s central bank has announced further measures to support the economy and financial markets, cutting interest rates on short-term funding for Chinese banks.
The People’s Bank of China reduced reverse repo rates by 10 basis points for 7 and 14-day terms to 2.4 per cent and 2.55 per cent respectively.
Reverse repos allow banks to offer collateral such as bonds and other securities to secure short-term funding from the central bank.
It’s tough to find a winner in China’s equity market today. While the CSI 300 Index has trimmed its earlier decline to “only” 7.3 per cent (it was down 9.1 per cent earlier), 294 of the 300 companies in the index are trading lower for the session.
Starwood still pursuing Australian Unity
By Carolyn Cummins
US giant Starwood Capital says it will continue with its $2.98 a unit bid for the Australian Unity Office Fund. On Friday the manager of the fund, Australian Unity, announced it was entering into a joint venture with the Singapore-based Keppel Capital, which could have breached one of Starwood's offer conditions of a change of management.
Starwood has said it remains committed to pursuing its AOF Bid, "which represents an attractive opportunity for all unitholders to achieve liquidity at a certain cash value above recent trading levels".
AOF's unit price is unchanged at $2.99
Chinese markets drop after two-week holiday
Of 1500 companies on the Shanghair Composite index, 1488 are currently lower and the index is down by 8.7 per cent to 2716.7, wiping off 12 months of gains.
The Shanghai Composite 300 (the 300 biggest companies) has just seven companies trading higher, all pharmaceutical. All ten sectors show losses between 7 per cent and 10 per cent.
The Chinese Yuan has dropped to a one-month low against the greenback, up to 6.98 yuan per dollar.