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ASX falls 1% at three-month low; Big losses for BHP, Rio, Fortescue

The ASX 200 is subdued again on Tuesday – but the local tech sector has so far defied the drop.

Tech names are among the biggest risers, with the sector up a collective 2.1 per cent.

The tech sector was up 2.1 per cent just before 1pm.

The tech sector was up 2.1 per cent just before 1pm. Credit:Peter Braig

Appen is up 4 per cent to $32.74, Xero rose 3.7 per cent to $94.45, NEXTDC was 2.9 per cent higher at $11.99 and Wisetech was 2.8 per cent ahead at $27.03.

Altium jumped 2.5 per cent $34.30, Afterpay 1.5 per cent to $76.09, and Megaport 3 per cent $15.99.

The tech-heavy NASDAQ slipped again overnight, but it too managed to avoid the depths hit by the S&P 500 and Dow Jones.

The health sector is ahead 0.8 per cent thanks to gains from CSL, which is up 0.9 per cent to $285.68.

One of the more interesting and delicate issues to watch as the economy emerges from the pandemic is how the Australian Competition and Consumer Commission responds to the efforts to recover lost volumes by companies with market power.

Given how concentrated many major segments of the economy are, the differences between pro-competitive and anti-competitive behaviours are likely to be quite blurred.

Rex's plans to fly the Golden Triangle will add another element to the competitive dynamics of the domestic industry as it emerges from the pandemic.

Rex’s plans to fly the Golden Triangle will add another element to the competitive dynamics of the domestic industry as it emerges from the pandemic.Credit:Grahame Hutchison

Loss-leading to rekindle customer activity is probable in some of the sectors, particularly the consumer-facing sectors, while the temptation for informal collusion, or managed competition, to maximise profit recoveries and regain and maximise market shares will also be strong.

These aren’t normal circumstances and the ACCC will be confronted with the challenge of determining which behaviours are rational responses to the legacies of the pandemic in the short term, while trying to ensure they don’t lead to a structural loss of competitive intensity in the longer term.

Read Bartho’s full column here

The ASX 200 is subdued again on Tuesday – but the local tech sector has so far defied the drop.

Tech names are among the biggest risers, with the sector up a collective 2.1 per cent.

The tech sector was up 2.1 per cent just before 1pm.

The tech sector was up 2.1 per cent just before 1pm. Credit:Peter Braig

Appen is up 4 per cent to $32.74, Xero rose 3.7 per cent to $94.45, NEXTDC was 2.9 per cent higher at $11.99 and Wisetech was 2.8 per cent ahead at $27.03.

Altium jumped 2.5 per cent $34.30, Afterpay 1.5 per cent to $76.09, and Megaport 3 per cent $15.99.

The tech-heavy NASDAQ slipped again overnight, but it too managed to avoid the depths hit by the S&P 500 and Dow Jones.

The health sector is ahead 0.8 per cent thanks to gains from CSL, which is up 0.9 per cent to $285.68.

Bell Potter has downgraded pharmacy operator Australian Pharmaceutical Industries (API) to sell, warning its FY20 numbers set to be released next month are likely to show earnings will have been “decimated” in its skincare and retail pharmacy divisions.

API, which operates Priceline pharmacies and the Clear Skincare Clinics business, has been forced to shutter its beauty services throughout COVID-19 and this will have a significant impact on second-half earnings, John Hester and his colleagues wrote in a note.

API stock was trading 2.9 per cent lower at $1.01 on Tuesday.

API stock was trading 2.9 per cent lower at $1.01 on Tuesday.Credit:

Pharmacy wholesalers have reported demand for medicine products has been strong over the past six months, and API chief executive Richard Vincent has been in contact with policymakers to argue businesses like API are best placed to help distribute a COVID-19 vaccine across Australia.

Hester writes that pharmacy wholesaling is generally a low margin business, and “Despite increased activity levels, the additional earnings are unlikely to offset the losses in other divisions”.

Bell Potter predicts FY20 earnings will drop 19 per cent to $60 million for the year, and has reduced the stock to sell with a price target of 85c.

The stock was trading 2.9 per cent lower at $1.01 on Tuesday.

The Australian sharemarket is near a session low in early afternoon trade, shedding another 0.9 per cent to sink to a three-month trough. The ASX 200 is on track for a fourth straight session in the red, something which hasn’t happened since April.

The iron ore giants, banks, gold miners, property, and energy firms were suffering as the index fell to 5769.8 at about noon. It’s the lowest the market has been since June 16, and represents a 4.7 per cent loss for September so far.

The market, which hasn’t had a monthly loss since March, has mirrored a recent decline in US stocks where investors have dumped tech giants amid increasing political and economic uncertainty.

Just after noon BHP had lost 2 per cent, Rio Tinto 3 per cent, and Fortescue Metals 3.1 per cent as most commodity-reliant firms copped a beating. A US dollar rebound knocked oil, iron ore, and gold prices lower overnight.

Westpac was 2.1 per cent lower and ANZ and NAB both 2.2 per cent lower to weigh heavily on the financials. Commonwealth Bank was down 1.1 per cent.

Asian markets are also lower, though only Korea’s KOSPI had fallen further than the local bourse. US futures were flat.

Payroll jobs fell 0.4 per cent in the fortnight to September 5, data from the Australian Bureau of Statistics show, casting doubt on the strength of the national employment market.

The ABS found the drop was due to a 0.8 per cent drop in Victoria which was going through its coronavirus lockdown.

The ABS found the drop in payroll jobs was due to a 0.8 per cent drop in Victoria which was going through its coronavirus lockdown.

The ABS found the drop in payroll jobs was due to a 0.8 per cent drop in Victoria which was going through its coronavirus lockdown.Credit:AP

But payroll numbers also fell by 0.3 per cent in both NSW and Queensland while in the ACT they dropped by 0.9 per cent.

In the Northern Territory, which last week’s employment data showed a huge fall in the jobless rate, payroll jobs fell by 0.8 per cent.

There are continuing signs of recovery elsewhere. Payroll jobs were up by 0.2 per cent in Tasmania and South Australia while they improved by 0.1 per cent in WA.

Since mid-March, payroll are down by 4.5 per cent nationally but by 8.3 per cent in Victoria.

The strongest recoveries have been in WA, which has recovered almost 89 per cent of its payroll jobs, the NT and SA.

Men bore the brunt in the drop over the fortnight to September 5, with their payroll jobs down by 0.5 per cent. Females suffered a 0.2 per cent fall.

Agriculture, hospitality and arts and recreation jobs suffered the biggest fall in the period. Agriculture payroll jobs alone fell by 1.5 per cent to be 9.3 per cent lower since mid-March.

Hospitality jobs are down by 21.9 per cent while those in the arts and recreation sector are down by 14.1 per cent.

But retail jobs are now 3 per cent higher than mid-March, those in public administration and safety are up by 2.4 per cent while those in health care and social assistance are up by 1.2 per cent.

The second-largest shareholder in struggling department store Myer has told the company’s chairman to permanently reduce its number of directors and slash their fees in a further escalation of tensions between the retailer and its biggest investors.

On Tuesday morning, Wilson Asset Management chairman Geoff Wilson issued a directive to Myer’s chairman Garry Hounsell, notifying him the 7 per cent Myer shareholder would be looking for changes at the company’s upcoming annual general meeting.

Wilson Asset Management's Geoff Wilson has issued Myer with a 'please explain'.

Wilson Asset Management’s Geoff Wilson has issued Myer with a ‘please explain’.Credit:James Alcock

In the letter, seen by The Age and The Sydney Morning Herald, Mr Wilson said he believed it would be appropriate for Myer’s board to reduce its number of directors and their fees to be in line with companies of a similar market capitalisation.

“I note that in the 2020 annual report that the non-executive directors have accepted a 16.7 per cent fee reduction in response to the impact of COVID-19,” Mr Wilson said.

“Our belief is the reduction needs to be permanent. We would also call on the board to reduce the directors’ aggregate fee pool to reflect the current market capitalisation of Myer.”

Myer shares were last flat at 24 cents and have more than halved in value in 2020.

Full story here

NSW recorded just two new cases in the latest 24-hour reporting period, both returned travellers in hotel quarantine. The news comes as South Australia prepares to welcome travellers from NSW from Thursday.

SA Premier Steven Marshall told reporters his government had decided to reopen borders despite a Sydney taxi driver testing positive on the weekend, prompting fears of a new outbreak.

Follow our live and free coronavirus blog here

He said SA Health had discussed the matter with NSW Health and received “all necessary information” regarding the new case.

South Australia reopened its borders to ACT travellers last week.

NSW has 77 coronavirus patients receiving treatment. Of these, three are in ICU and one is on a ventilator.

Victoria’s 28 new cases of COVID-19 came from 11,123 tests on Sunday. Of the new cases, 22 are linked to known outbreaks and the “majority” of these are in aged care, Mr Andrews said.

Three people died from COVID-19 in Victoria overnight. These are a woman in her 70s, a woman in her 90s and one woman in her 100s.

The Reserve Bank has signalled it may buy more government debt to drive interest rates lower, warning the Australian economy faces a “gradual and uneven” recovery out of the coronavirus recession.

Bank deputy governor Guy Debelle, in an address to a virtual conference put on by the Australian Industry Group, on Tuesday revealed that official interest rates – already at a record low 0.25 per cent – may not move for at least three years given the headwinds facing the jobs market and inflation.

RBA deputy governor Guy 
Debelle has revealed the bank may buy more government bonds to drive down long term interest rates.

RBA deputy governor Guy Debelle has revealed the bank may buy more government bonds to drive down long term interest rates.Credit:Louie Douvis

The bank has already cut official interest rates to a record low and bought public debt on the secondary market to drive down the costs on three year government bonds.

It has also extended a cheap line of credit to commercial banks. This has now reached $75 billion with the RBA expecting up to $200 billion being taken up by the middle of next year.

Full story here

Coal miner New Hope Corporation has slumped to a $157 million full-year loss and will not pay a final dividend after the coronavirus pandemic smashed coal prices and forced it to make a suite of hefty writedowns.

Revenue fell by $223 million, or 17 per cent, to $1.08 billion as the company slipped from a net profit of $210 million a year ago.

Coal miner New Hope Corporation has slumped to a $157 million full-year loss.

Coal miner New Hope Corporation has slumped to a $157 million full-year loss.Credit:Glenn Hunt

The company said coal market fundamentals have deteriorated due to impacts of COVID-19, which has also made for a challenging start to the year ahead.

“The short term outlook for thermal coal demand is dependent on post-pandemic economic and industrial recovery in our region,” the company told investors on Tuesday.

“The mid to long-term outlook remains healthy as the need for industrial and domestic electricity generation remains strong based on future growth in Asia, New Hope’s key export market.”

Wilsons analysts note New Hope made $345.1 million in pre-tax write-downs for the year to July 31, including the impairment of its QLD mining assets, coal exploration, and a near-total write-down of the Bridgeport oil business.

“While new management look to effectively ‘kitchen sink’ this year’s results, the quantum of the write-downs is surprisingly large,” the firm said.

The company also suffered lower US$ revenues due to market index pricing conditions and increased cost of sales as its Acland Mine nears the end of the Stage 2 life.

Shares were 1.6 per cent lower at $1.23 by 11am AEST and fell as low as $1.19.

The company has shed more than 40 per cent of its value in 2020.

Genomic sequencing startup Illumina’s share price dropped by 9 per cent to $US270 overnight after unveiling a mammoth $US8 billion acquisition of cancer detection startup Grail.

Illumina has had strong share price growth since the global selloff in March and the $US40 billion biotech’s Melbourne branch has been helping researchers unlock secrets of COVID-19.

Illumina has had strong share price growth since the global selloff in March and the $US40 billion biotech’s Melbourne branch has been helping researchers unlock secrets of COVID-19.

Illumina has had strong share price growth since the global selloff in March and the $US40 billion biotech’s Melbourne branch has been helping researchers unlock secrets of COVID-19. Credit:iStockPhoto

The acquisition will see Illumina use its DNA sequencing expertise to help commercialise Grail’s cancer testing technology with the aim of making blood tests for early cancer detection more widely available.

“As we accelerate our path to clinical leadership and the path to multi-cancer early detection, we will continue to drive significant value creation for our stockholders,” chief executive Francis d’Souza said.

Investors were sceptical about the deal, however, with a selloff occurring after the company’s presentation last night. Illumina shares were sitting at $US209 in late March and went as high as $US400 in August before losing momentum and declined below $US300 throughout September.

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