Markets Live, Monday December 16 – The Sydney Morning Herald

Credit: Original article can be found here

Perenti Global shares have now slipped 20 per cent down to $1.67, the lowest price since late August. U

Earlier today we noted the company slashed its full-year profit forecast by as much as $25 million after its African subsidiary lost a lucrative contract in Ghana. This means post-tax profits will be up to $140 million for 2019-20, down from $181.3 million in 2018-19. 

The ASX has added $32.3 billion with its biggest one day gain since May this year, now up 1.63 per cent. It has eclipsed the 1.5 per cent rise in June, the 1.7 per cent set in May, and the last record standing in its way is 1.95 per cent on February 5. 

The S&P/ASX 200 is currently at 6849.6 points. 

(Apologies, an earlier headline said the gains were worth $20.2 billion. It should have stated $29.7 billion)

The market is booming today because of ”concrete” progress in the trade discussions between the US and China with an outcome that allows the leaders of both countries to maintain their dignity, according to senior market analyst for Asia Pacific at OANDA, Jeffrey Halley.

Australia’s stock market is up 1.6 per cent. 

“In broad terms, the US has cancelled the next round of tariffs on Chinese imports that were due yesterday,” Mr Halley explains. 

“It reduced tariffs from 15 per cent to 7.5 per cent on another $120 billion of goods but keeps 25 per cent tariffs on $250 billion of Chinese imports. China, for its part, has apparently committed to purchases of $200 billion of American goods over the next two years. Of, that some $80-$100 billion will be agricultural goods with the remainder split between manufactured products and energy.”

“It is a big win for President Trump amongst some important rural and manufacturing constituencies with an election year ahead. Some doubt has been expressed about how China will import that much food in dollar terms. Soya beans, for example, are mostly used for pig feed. China’s African swine flu epidemic has wiped out half of those. China will also have to tread a fine line with other export partners, who will be the first to cry WTO-wolf if China is appearing to favour the US over them.”

It’s a booming day on the stock market with the S&P/ASX 200 up by 1.47 per cent to 6838.6 points, the biggest percentage gain since June 11. 

The All Ordinaries is currently up at 6944.7, heading towards the all-time high of 6996 reached on November 29. 

CSL is adding the most points today with a rise of 2.2 per cent to $284.33, while there has been a rise of 1.5 per cent by Commonwealth Bank, Westpac, BHP, and ANZ Bank. 

QBE Insurance is up 2.5 per cent to $13.30, Lendlease Group is up 3.2 per cent to $19.55, and nearmap is up 7.2 per cent to $2.82. 

There are just 28 companies in red, with the biggest fall from Perenti Group, down 18.6 per cent to $1.70 after losing a mining services contract in Ghana. 

Supermarket giant Woolworths has indicated its trading for the first half of the financial year has been “pleasing” thanks to a strong performance from its Lion King ‘Ooshies’ and Discovery Garden collectibles. In a speech at the company’s annual general meeting in Sydney on Monday, chief executive Brad Banducci said it had been a solid start to the financial year. Shares are up 0.7 per cent to $37.70 today.  

While not providing trading figures, the company head said positive sales momentum had continued across the company, including its food, department stores, and drinks division. In the first quarter of the 2020 financial year, sales were up 7.1 per cent, including a comparable increase of 6.6 per cent for the company’s food division, driven by its Ooshies collectable campaign.

Both Mr Banducci and chairman Gordon Cairns also attempted to shine a positive light on the company’s $300 million wage scandal, which saw the retailer underpay 5700 staff for nearly 10 years due to discrepancies with the general retail award. Announced last month, Mr Banducci will forgo his short-term incentives, worth $2.6 million, and Mr Cairns will cut his chairmans’ fee by 20 per cent.

Later in the day, shareholders will also vote on the company’s $10 billion demerger of its drinks and hotels business, which will see a separate entity, Endeavour Drinks, likely list on the ASX next year.

Read the full story here

Openpay took to the ASX boards at midday only to plunge more than 15 per cent from its offer price of $1.60 to as low as $1.35 by 12:30pm.

The business covers just a small slice of a market that analysts  most notably those at UBS this year – have said is increasingly crowded.

The company has grown revenue from $3 million to $11 million over the past two years but is still operating at a $14 million loss.

Gibb Rivers Diamonds is ecstatic that corporate raider Ron Brierley has sold out of the company, saying it is ”an extremely welcome development” that will make it easier for them to promote and finance the Blina Diamond Project. 

“The involvement of Sir Ron Brierley in the company goes back to March 2015 when he launched a hostile takeover bid for Gibb River Diamonds. This attempted takeover was spectacularly unsuccessful, with Sir Ron failing to purchase even a single share in Gibb River.” 

Sir Brierley’s investment vehicle Mercantile Investment Company held 14.5 million shares before he started the takeover attempt. Since then Mercantile has been selling on the open market, creating an overhang (like Telstra had when the Future Fund was selling down on-market over many months). 

Executive chairman Jim Richards said Sir Brierley’s exist was ”an excellent outcome” and will allow the company to effectively promote the Blina Diamond project ”through either a strategic partner or financing via Joint venture or the asset sale of the Highland Plains Phosphate Project (the latter two being potentially non-dilutive).” 

Mr Richards said Mr Brierley had sold down his shares (at low prices_ every time Gibb River released news about its diamond mines, making it difficult to find a floor price from which to do a capital raising. 

“When I tried to do a cross-over trade with him, on a very favourable price I might add, he knocked that back preferring to sell on market,” Mr Richards told me. 

There were no real surprises in the mid-year economic update with reasonable adjustments, but the government continues to put pressure on the Reserve Bank to improve the economy. 

“The $21.5 billion downward revision to the budget surplus over the 4 years to 2022-23, or just over 1 per cent of GDP is reasonable, with surpluses of 0.2-0.4 per cent GDP per year, modest and easily revised,” says head of Australian and New Zealand strategy at Royal Bank of Canada’s Sydney branch, Su-Lin Ong.

“In other words, they are not particularly robust surpluses and easily erased on downside macro surprises.” 

The update reinforced the government’s message that it would not be spending money to stimulate the economy. 

“The implications for the RBA are clear at this juncture – it will need to continue to do the heavy lifting. While it is a long way until the 2020-21 Commonwealth budget in May 2020, we suspect the only two triggers for a rethink from the Treasurer will be a larger deterioration in the labour market and/or co-ordinated global fiscal stimulus.”

The update is ”marginally bond positive” with no major changes to government issuance programs. 

On a day when most of the index is in green the companies in red really stand out. Treasury Wines is down 0.6 per cent to $16.83 compared to a 1.1 per cent rise in the ASX 200. 

This morning the biggest shareholder, The Capital Group, revealed it has reduced its holding from 9.6 per cent to 8.6 per cent of shares. The group holds shares on behalf of American investment funds including Cede & Co, JP Morgan Chase bank, State Street, and the Bank of New York Mellon. 

Treasury Wine shares have been falling wince the start of the month, falling from $19.19 on November 27 down to $16.78 today. 

The ASX continues to rise this morning with strong gains of more than 1 per cent in all the biggest companies – CSL, Commonwealth Bank, BHP, Westpac, ANZ, NAB, Wesfarmers – and Aristocrat Leisure is up 2.8 per cent to $35.15. 

Currently there is 167 companies trading higher and just 30 lower. 

BlueScope Steel is up to 14-month highs of $15.45. Santos is up at five-year highs after climbing 1.8 per cent this morning to $8.40. And is up at all-time highs of $17 this morning.