And with that, we’ll tie the blog off there for the day.
Thanks for tuning in to Markets Live. Alex Druce is back in the morning.
The local stock market rebounded strongly Wednesday, buoyed by rising commodity prices, a surging technology sector, and hopes of a US economic recovery package.
However, the benchmark index lost its puff in the afternoon as oil prices softened and futures pointed to declines on Wall Street overnight.
The ASX got as high as 6719.2 points on Wednesday before closing at 6679.2, a gain of 0.7 per cent.
The index remains lower than it was a week ago, while it is still unclear if the traditional December Santa-rally came a month early this year, or if it is yet to kick in.
Information technology gained 2.6 per cent, followed by a 1.8 per cent gain in materials. Healthcare and energy lagged. The financial sector was up 0.7 per cent after the banking regulator on Tuesday removed restrictions on dividends.
However, banks were unlikely to return to pre-pandemic payout ratios, according to Kunal Sawhney, chief executive to equities research firm Kalkine.
“It will not be the seven or six per cent that we are used to in the past few years, but around a five per cent pay out,’’ he said.
News that the federal government asked the World Trade Organisation to investigate an 80 per cent tariff imposed on Australian barley by Chinese authorities was good for the ASX, he added.
“That is a sign for Australian businesses that the government is not sitting back and taking all these tariffs and restrictions. It is a strong foot forward and takes this to the next level.’’
Among the biggest movers, Resolute Mining gained 10 per cent to 80 cents after announcing the sale of a gold mine in Ghana, while Service Stream fell 12.1 per cent to $2.10.
Recent ASX50 inductees Afterpay and Xero gained 4.2 per cent and 2.2 per cent respectively. BHP added 1.8 per cent to $42.55 and Fortescue gained 2.3 per cent to $21.97.
And Shaw & Partners senior investment advisor Craig Sidney noted Thursday, 17 December, was the expiry for options on the ASX. After this, market activity was likely to wind down as staff at institutional investors started their summer holidays.
“Beyond Friday, once (option) exercises are done, a lot of institutions will effectively close off their books,’’ Mr Sidney said.
Gold prices were up to a one-week high of $US1,857, or $2,456 in the local currency.
ANZ Bank’s new chair Paul O’Sullivan says the lender’s dividend policy will be guided by how the coronavirus crisis evolves, despite the bulk of its customers affected by the pandemic lockdowns restarting to make payments.
Mr O’Sullivan, speaking at the bank’s annual general meeting on Wednesday, said he was “acutely aware” of how important dividends are to shareholders and committed to reviewing the bank’s approach in 2021.
“Ultimately, our final decision as a board will be influenced by how the remainder of the crisis evolves, particularly from a macro-economic perspective, and our views on the longer term sustainability of the dividend,” Mr O’Sullivan, who replaced David Gonski in the role this year, said.
The onset of COVID-19 in March forced the banks, in coordination with the federal government and regulators, to offer affected Australians the ability to pause loan repayments for six months. The deferral period was subsequently extended by an additional four months.
ANZ shares closed 1.4 per cent ahead on Wednesday at $23.28.
The Australian sharemarket rebounded on Wednesday with a 47.9 point, or 0.7 per cent, rise to 6679.2, fuelled by gains for the miners, banks, and tech stocks.
The index hit a peak of 6719.6 in afternoon trade – a rise of 1.3 per cent – before fading into the close. US futures are muted and point to a weak session on Wall Street tonight.
The biggest ASX 200 movers on Wednesday were:
So what drove the market higher today?
OANDA’s Jeffery Halley says US political developments – following a string of weak data – certainly played a role.
“Rising hopes that US stimulus negotiations were making progress, with the two-part latest incarnation appearing more palatable to both sides, stopped Wall Street’s multi-day retreat in its tracks,” the Asia-Pacific analyst said.
“The price action overnight emphasising that a positive outcome to the bi-partisan talks and, to a lesser extent, the $US1.4 trillion government funding bill are trumping even the FOMC meeting in importance.”
Mr Halley said lawmakers may have been also given another nudge to get something done with the New York Empire State Manufacturing Index, and US Industrial Production data disappointing.
“That follows a series of disappointing weekly Initial Jobless Claims and Non-Farm Payrolls data suggesting that Covid-19’s rampage across America is undermining the economic recovery,” Mr Halley said
Markets also received a booster shot from the US FDA; whose scientists stated that Moderna’s Covid-19 vaccine appeared highly effective. That clears the way for formal emergency use approval by the FDA, possibly as soon as Friday.
Mr Halley said Asian markets are likely to maintain their positive outlook , barring any headline surprises, with “old-economy/resource-centric” markets outperforming.
“Euphoria will ebb when Europe arrives though, with European markets negotiating a packed data calendar and the Brexit saga,” he added.
“It is much the same for US markets with heavyweight data followed by the critical FOMC meeting outcome. Anything less than uber-dovish and an intention to cap longer-term US yields could result in a sharp, but short, downward correction.”
NAB today announced it will sell its New Zealand life insurance business BNZ Life to leading New Zealand life insurance provider Partners Life for NZ$290 million ($272 million).
Upon completion, the sale is expected to result in an increase in NAB Group’s Common Equity Tier 1 ratio of 6 bps based on the group’s risk-weighted assets as at September 30.
As part of the sale, BNZ will also enter into an exclusive 10-year agreement for the referral of BNZ’s customers with life insurance needs to Partners Life, subject to Partners Life continuing to meet
agreed operating standards.
The sale is subject to regulatory and other approvals with completion expected to occur in late 2021
The agreement to sell is consistent with NAB’s strategy to focus on its core banking businesses
across Australia and New Zealand.
BNZ chief executive Angela Mentis said it was important that BNZ customers continue to access insurance.
“We’re confident that this sale will provide the best outcome for our insurance customers and that they will continue to receive a high standard of customer service from a New Zealand insurance provider with a strong local reputation.”
NAB shares were up 1.4 per cent in late trade on Wednesday at $23.71, outpacing a 1 per cent rise for the wider financial sector.
The S&P/ASX 200 has dipped a little in the past half hour – dropping from 6719 down to 6698 points.
Among the heavier stocks, Aurizon is down 2.2 per cent, CSL is currently down 0.6 per cent, Coles is down 0.7 per cent, and Insurance Australia Group (IAG) is down 1 per cent.
Senior investment advisor at Shaw & Partners, Craig Sidney, points out tomorrow is the expiry date for options. He also expects to see trading volumes decline significantly after that for a couple of weeks, which means the last three and a half days of trading next week will be subdued.
“Beyond Friday, once exercises are done, a lot of institutions will effectively close off their books this week,” he says.
ASX-listed gold prospector Resolute Mining is leading the local sharemarket on Wednesday after it struck a $US105 million ($139.3 million) deal to sell a mine in Ghana to China’s Chifeng Jilong Gold Mining.
Resolute Mining shares were up 8.3 per cent to 79 cents at 1.30pm AEDT – and hit a high of 80 cents – after announcing a binding agreement to sell the Bibiani Gold Mine.
Resolute will receive a $US5 million deposit from Chifeng Jilong on signing the agreement and US$100 million on completion of the deal by March 2021, pending the satisfaction of government approvals and other conditions.
Resolute said both it and Chifeng were committed to ensuring an orderly transition of ownership at Bibiani.
“Chifeng is committed to injecting the necessary capital to achieve the rapid restart of Bibiani to ensure that all local and national stakeholders benefit from the economic and social advantages that the successful operation of the mine will provide,” Resolute said.
The transaction is not expected to result in any immediate changes to employment or contract relationships at Bibiani with Chifeng seeking to retain all existing local employees in future activities.
“Resolute is proud of its contribution to Ghana and pleased that our investments at Bibiani in exploration, feasibility studies, and community support will provide a strong base for future success and value creation,” Interim chief executive officer Stuart Gale said.
“I am confident that Resolute’s positive legacy in Ghana, and the interests of all stakeholders in Bibiani, will be protected and enhanced under Chifeng’s ownership.”
Transaction completion is conditional upon approval Ghana’s Minister of Lands and Natural Resources, Australia’s Foreign Investment Review Board, and various Chinese governmental approvals.
Metal detectors have become so popular that ASX-listed Codan told shareholders this morning it’s first half result could be better than last year’s record $30 million.
“The demand for our metal detectors across both recreational and artisanal mining markets has been exceptional,” the company wrote in a letter to shareholders.
During the past six months Codan has increased its distribution and released its Minelab-branded products to more retail channels.
“Despite our Tactical Communications business being significantly down on the record first half 2019-20, the board expects the net profit after tax for the six months to 31 December 2020 to be in the order of $40 million.”
Shares are up 5 per cent to $10.06 this afternoon.
Codan does not know if the strong sales in metal detectors will continue into the second half, which is usually the stronger performing period, but says there is “strong market anticipation” about a new feature packed detector coming out in the March to June period of 2021. Its communications business has an order book in excess of $30 million.
“Both will contribute to an expected strong full year result,” the board told shareholders.
Minelab metal detectors sell for between $200 and $1000 at outdoor retailers. With gold prices round $AUD2,460 currently, finding just one ounce would cover the cost of purchase.
Detecting has become popular in recent years, including a whole television series based on the activity called The Detectorists. It is especially popular in Victoria, where people look for nuggets in the old gold mining districts.
The current trade spat between Australia and China is part of a longer-term fundamental shift in global relations, according to Ben Powell, Asia Pacific chief investment strategist at the BlackRock Investment Institute.
“We think the US-China tensions are structural and persistent, and will therefore persist,” he said during a roundtable with journalists today. .
There will be changes in the tone of dialogue coming out of the US with the change of administration to be “less Twitter, more alliance building”.
However, the tensions are part of “rewiring of globalisation, potentially in the direction of two spheres – Anglo led by the US and Sino led by China.”
He also noted the extraordinary events of 2020 had prompted the Institute to an anti-consensus theory on a new investment order.
“We increase our overall pro-risk stance by upgrading equities on a tactical basis, and take a sectoral approach,” the institute’s 2021 global outlook states.
“We like tech and healthcare due to the pandemic’s transformative shifts. We balance this with a preference for prime potential beneficiaries of the economic restart, such as emerging market (EM) equities and U.S. small caps.”
BlackRock believes there is a “policy revolution” underway that sees a more muted response of nominal yields to a higher inflation regime. In other words – central banks will not be terrified of inflation and will keep rates low.
“Central banks appear committed to limit any rises in nominal yields even as inflation picks up. Investors will need a new playbook to navigate this. We (are) underweight government bonds and maintain a higher strategic allocation to equities than in typical periods of rising inflation.”
This means 2021 will be a year of “rampant economic recovery”, but with the key overhanging risk of COVID-19 breaking out or vaccines failing to curb the spread.
The good news for Australian investors is that Charlie Lanchester, head of fundamental active equities, for BlackRock Australia, says the bank likes Australian equities and is still finding opportunities. He believes dividends will grow again in 2021 even if prices don’t.
“Three per cent and growth is better than nothing in the bank. It’s pretty simple,’’ he said.
However, he warns that some of the companies that did extremely well during the COVID period may lose their sparkle when more normal future periods are compared to 2020.