ASX 200 slid another 132 points to 5221 after a better than expected start. Virgin now in administration, not helping sentiment. Dow futures turned negative following Trump’s move to ban immigration for a while, down 80 points. The oil price was the talk of the town after turning negative for the first time last night. The May contract expires tonight and the June contract is up 5% and looking better. However, the problems with the lack of short term storage remain. Energy stocks succumbed to the pressure with WPL slipping 1.3% and STO down 2.9%. BHP production report and oil prices weighed on the Big Aussie and the stock dropped 2.5% after comments from CEO on commodity pricing outlook. RIO down 2.1% and FMG even slipped 2.2%. Gold miners were back in fashion on bullion rises with NCM up 0.6% and NST up 4.2%. Banks once again struggling as brokers are gearing up to the incoming results season. NAB dropped 2.25% and CBA down 2.1% with the Big Bank Basket down to $105.24.  Elsewhere healthcare shrugged off positive moves on elective surgery with RHC down 1.85% and FPH down 6.8%. Tech stocks and credit-related players were hit hard, EML down 12.0% and EOS down 10.7%. XRO too fared badly losing 3.8% whilst APT falling 5.8%. WTC sank 12.5% after the big line of stock went through the market yesterday and the All Tech Index dropped 4.3%.  In the industrials, SYD dropped 5.6% after news of the collapse of Virgin. Not a huge surprise. In other corporate news, NEA did well after a business update with no immediate effects of CV19 on its business in the USA. IPL rose 1.0% after completing its strategic review, MTS rocked 13.5% lower on rumours the cash-raising is set to be used for acquisitions. In economic news, we saw a rebound in consumer sales, the RBA minutes and a speech by Dr. Phil on the effects of the CV19 shutdown. 10-year yields around 0.85% and the AUD lower at 63.13c. Asian markets weaker with Japan down 2.0% and China down 1.0%.

  • ASX 200 falls 132to 5221 (-2.46%). Selling accelerates as the day wore on.
  • High 5348 Low 5214. Lighter volume again. A repeat of Monday.
  • Banks under pressure. Big Bank Basket $107.55.
  • Credit-related stocks hit hard.
  • Miners slip on BHP commodity price warnings.
  • Gold a bright spot.
  • Virgin no more.
  • June WTI futures up 5%.
  • Dow Futures down 80
  • 10-year bond yields steady at 0.85%
  • AUD slips to 63.13c.
  • Aussie gold rallies to $2676
  • Bitcoin falls to US$6855
  • Asian markets weaker with Japan down 2.1% and China down 1.5%.

STOCKS                                               

  • MTS -13.49% acquisition concerns post raising.
  • EML -12.03% retail remains closed.
  • Z1P -11.40% BNPL under pressure.
  • WTC -12.51% yesterday’s large line weighs.
  • AVH -13.13% moving to the US.
  • EVN +5.05% quarterly results.
  • NCZ – IGO takes nearly 19% in placement.
  • ALG -20.83% shut downs continue.
  • AT1 -17.70% profit-taking.
  • ECX -14.49% FXL -12.20% credit stocks under pressure.
  • DTC +14.84% quarterly report.
  • CTX +1.20% revived bid talk.
  • PDN +4.76% presentation and uranium prices rising on production cuts.
  • NEA +3.33% no impact from CV19.
  • HM1 +1.14% NTA backing.
  • KGN +1.54% positive update on sales and active users.
  • Speculative stock of the day: VIP Gloves (VIP) +77.14% update on the impact of CV19. The order book is full until December, orders represent the production of approximately one hundred (100) 40-foot shipping containers of nitrile gloves, each container holding up to 4m gloves.
  • Biggest Rises: EVN, ACG, RRL, NST, SLR, NEA and ERA.
  • Biggest Falls: MTS, AVH, WTC, EML, Z1P, PRN and EOS.

TODAY

  • BHP Group (BHP) –2.50% Q3 Iron ore production came in at 60kt v 56kt a year ago, in line with UBS estimates and on track with guidance. Petroleum and metallurgical coal guidance were unchanged. Guidance for copper is under review following the temporary suspension of operations along with energy coal. Nickel guidance now 80-83kt vs prior 87kt. FY unit cost guidance remains steady. Production for petroleum, copper, iron ore, metallurgical coal & energy coal was weaker vs the December quarter. Capex anticipated to be lower than the current guidance of US$8bn. CEO comments, “while demand in China has strengthened in recent weeks, we expect other major economies, including the US, Europe, and India, to contract sharply in the June 2020 quarter.”
  • APA Group (APA) -0.37% lowers FY20 EBITDA guidance to $1.635-1.655bn vs prior $1.66-1.69bn. The revision reflects delays in the commissioning of the Orbost Gas Processing Plant. Distribution guidance of ‘in the order of 50.0cps’ unchanged. Reports no material impact on operations from the outbreak.
  • Australian Ethical Investment (AEF) -8.03% reports FUM at the end of March of $3.59bn vs quarter-ago $3.87bn. Quarterly net flows $0.24bn.
  • Metcash (MTS) -13.49% completes $300m institutional placement at $2.80/share.
  • Cooper Energy (COE) -1.14% reports Q3 production 0.28M boe vs quarter-ago 0.27M boe. Revenue $15.0m vs quarter-ago $16.4m. Cash balance $142.5m vs quarter-ago $150.7m. FY production guidance is unchanged at 1.2m barrels of oil equivalent. Capex anticipated in the middle of guidance at $86-93m.
  • Virgin Australia (VAH) – enters voluntary administration to recapitalise the business. Appointed Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes of Deloitte as voluntary administrators. Velocity Frequent Flyer, while owned by the group, is a separate company and is not in administration.
  • Oil Search (OSH) -6.02% reports Q1 production up 5% to 7.37mmboe vs quarter-ago. Total revenue US$359.4m vs quarter-ago US$446.7m. FY total production anticipated in the range of 27.5-29.5mmboe. Production costs expected to be between US$9.5-10.5/boe. Investment expenditure anticipated between US$440 – 530m.
  • Webjet (WEB) -4.02% notes it does not have a material financial exposure to Virgin.
  • Nearmap (NEA) +3.33% notes it has not seen a material impact on trading conditions from the outbreak.
  • Polynovo (PNV) –2.83% CEO labels results from NovoSorb BTM feasibility study as ‘outstanding’. “Not only has NovoSorb BTM integrated well, but the take of the split skin grafts and closure of these wounds is also remarkable.”

ECONOMIC NEWS

Minutes from RBA

Highlights from the report:

Members noted that the Australian banks were in a strong position to withstand the large economic shock from the COVID-19 outbreak and financial market volatility. The capital and liquidity positions of the banks had increased substantially since the global financial crisis. Banks’ leverage ratios (the ratio of Tier 1 capital to non-risk-weighted assets) had also increased.

The decline in asset prices had had a significant effect on superannuation fund returns and some funds would face additional withdrawals in the period ahead.

Prior to the outbreak of COVID-19, business balance sheets in Australia were generally in a healthy state, as most companies had relatively low levels of gearing and sufficient liquid assets to weather a moderate shock to their income.

Members noted that conditions in commercial property markets were deteriorating. This followed several years of commercial property price growth in excess of growth in rents.

Members noted that the policies should cushion the labour market adjustment and reduce the financial stress of households and businesses. However, they observed that it was unlikely that these policies would provide a strong boost to spending in the near term given the broadening shutdown of non-essential activities and the restrictions placed on household activities.

The Bank would continue to do what was necessary to achieve the three-year yield target, with the target expected to remain in place until progress was being made towards its goals for full employment and inflation.

The Board reaffirmed the elements of the policy package announced on 19 March 2020, namely:

  • a target for the cash rate of 0.25%
  • a target of 0.25% for the yield on 3-year Australian government bonds
  • a term funding facility to support credit to businesses, particularly small and medium-sized businesses
  • an interest rate of 10 basis points on Exchange Settlement balances held by financial institutions at the Bank.

The Board confirmed that the target for three-year yields would be maintained until progress was made towards the Bank’s goals of full employment and the inflation target and that it would be appropriate to remove the yield target before the cash rate itself was raised. The Board would not increase the cash rate target until progress is made towards full employment and it is confident that inflation will be sustainably within the 2–3% target band.

ANZ-Roy Morgan Consumer Confidence gains for the third week. ANZ economist David Plank had this to say, “the flattening in the pandemic curve and the recovery in equity markets may be helping to lift consumer confidence. Better-than-expected news on the labour market may also have boosted sentiment. Confidence is now close to 30% above the historic low reached on the last weekend of March.

ABS data showed that between 14 March and 4 April (the three weeks after Australia recorded its 100th confirmed COVID-19 case) jobs decreased by 6.0%

CV19 NEWS

  • Airlines have cut international capacity to just half a million seats a week from an average of 5.9m before the coronavirus shut borders.
  • Total capacity for international and domestic routes has dropped to 29.8m seats, down more than 70% from January.
  • China reported its sixth straight day without a fatality.

BONDS

ASIAN NEWS

  • South Korea’s exports fell so far this month. Exports fell 27% during the first 20 days of April from a year earlier, the Korea Customs Service said in a statement. Shipments to the biggest trading partner, China, dropped 17%. Semiconductor sales declined 15%.
  • Kim Jong Un was in a critical condition following surgery. According to some rumours.
  • Indonesia banned mass travel ahead of a Muslim festival.
  • Nissan to close its global HQ for 16 days.

EUROPEAN AND US NEWS

  • The U.S. disbursed $2.9bn to airlines in the first round of payroll assistance, while the Senate neared a vote on a stimulus of as much as $500bn.
  • Trump will suspend all immigration. Threaten to put tariffs on imports of Saudi oil.

  • The US Treasury Dept has given out US$2.9bn to airlines who are suffering. Six airlines including American Airlines Group Inc., Delta Air Lines Inc., Southwest Airlines Co. and United Airlines Holdings Inc. have struck agreements with the federal government for aid.
  • Sweden says its CV19 strategy is successful.
  • Spain calls for EUR1.5 trillion recovery fund. Printing presses at the ready.
  • Peugeot expects EU car market to shrink 25% this year.
  • SAP co CEO Jennifer Morgan steps down after only 6 months.
  • WTI May contract oil expiry tonight. Will be fun to watch.

And finally …my thanks as usual to Hans for his wonderful jokes…always a chuckle coming from him…keep em coming …important to share the fun these days.

A man went to church one day and afterward he stopped to shake the preacher’s hand. He said, Preacher, Ill tell you, that was a damned fine sermon. Damned good!

The preacher said, Thank you sir, but I’d rather you didn’t use profanity.

The man said, I was so damned impressed with that sermon I put five thousand dollars in the offering plate!

The preacher said, No shit?

 

Brenda and Steve took their six-year-old son to the doctor. With some hesitation, they explained that although their little angel appeared to be in good health, they were concerned about his rather small penis.

After examining the child, the doctor confidently declared, Just feed him pancakes. That should solve the problem.

The next morning when the boy arrived at breakfast, there was a large stack of warm pancakes in the middle of the table.

Gee, Mom, he exclaimed, for me?

Just take two, Brenda replied. The rest are for your father.

Clarence

XXX

mt_tryforfree

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