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Australian shares are set to open higher, bolstered by strong gains in equities in Europe and New York with investors reassured by China’s efforts to boost its economy.

ASX futures were up 23 points or 0.3% to 7111 near 5.15am AEDT. The currency slipped.

For local investors it’s another huge day for corporate results with January’s labour force report thrown in for good measure.

AFR interim profit season calendar: Today’s scheduled results: Accent Group, Austal, Beacon Lighting, Bingo, Boral, Charter Hall Retail REIT, City Chic Collective, Coca-Cola Amatil, Domain, Ebos, Iluka, Integral Diagnostics, IRESS, LendLease, MedibankPrivate, Origin, Perpetual, Polynovo, Qantas, Santos,  Smartgroup Corp, Super Retail, Sydney Airports, The Star Group, Whitehaven Coal

Overseas markets rallied with near 1% advances across Europe’s major benchmarks and with both the S&P 500 and the Nasdaq resetting record highs.

“China cutting lending rates … is further evidence of how far the central banks are willing to go to backstop markets,” David Bahnsen, chief investment officer of Newport Beach, California-based The Bahnsen Group, told Reuters.


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“The slowdown in China’s economy is being perceived as transitory and not structural. The market does not believe that delayed sales is the same thing as lost sales.”

Telsa continues to power higher; it was up more than 7% in early afternoon trade. It has more than doubled so far this year and is up 20% over the last week.

Here are some expectations for the jobs data:

St George: “A tick higher in the unemployment rate may rein in some of the RBA’s optimism, increasing the chance of a rate cut in the coming months. Our forecast is for the unemployment rate to edge higher to 5.2% and a net 5k jobs added over the month.”

NAB: “After edging lower two months in a row, NAB forecasts a tick up in the unemployment rate to 5.2% in January, alongside weaker employment growth of 10k (market: 5.2% and 7.5k). Underlying weakness in activity and a deterioration in leading indicators of employment – such as the NAB survey and SEEK job ads – suggests that the recent improvement should be unwound. The Reserve Bank does not forecast the monthly data, but anticipates unemployment to average 5.2% into Q2 2020.”

TD Securities: “Assuming the u/e rate rises 0.1%pts per month, the earliest the RBA would cut is in June assuming a 5.5% print in May is considered a material deterioration. We have headline at +12k, u/e rate @ 5.2% and part rate unchanged @ 66%. There is likely to be greater uncertainty for the Jan print. If the print is soft, finger will to bushfires. This should show up in total hrs worked.”

Today’s agenda

Local: January Labour Force report; NZ fourth quarter PPI

Overseas data: EU consumer confidence February; UK retail sales January; US Philly Fed index February, Leading index February

Market highlights

ASX futures up 23 points or 0.3% to 7111 near 5.15am AEDT

  • AUD -0.2% to 66.71 US cents
  • On Wall St near 1.15pm: Dow +0.5% S&P 500 +0.6% Nasdaq +1%
  • In New York: BHP -0.3% Rio flat Atlassian +0.2%
  • Also in New York: Telsa +7.2% to $US920.01
  • In Europe: Stoxx 50 +0.8% FTSE +1% CAC +0.9% DAX +0.8%
  • Nikkei 225 futures +1% Hang Seng futures flat
  • Spot gold +0.4% to $US1608.48 /oz at 1.04pm New York
  • Brent crude +2.7% to $US59.31 a barrel
  • US oil +2.6% to $US53.41 a barrel
  • Iron ore -0.2% to $US90.00 a tonne
  • Dalian iron ore +1.1% to 645.5 yuan
  • LME aluminium flat at $US1720 a tonne
  • LME copper flat at $US5770 a tonne
  • 2-year yield: US 1.42% 0.74%
  • 5-year yield: US 1.40% Australia 0.74%
  • 10-year yield: US 1.56% Australia 1.03% Germany -0.42%
  • 10-year US/Australia yield gap: 53 basis points
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From today’s Financial Review

Chanticleer: Valuable lesson for boards in Wesfarmers demerger: When spun off Coles in 2018, it gave up control of a great defensive business with strong cash flows. But it has turned out to be a wise move.

Wesfarmers faces ‘Bundy clock’ solution: Wesfarmers chief executive Rob Scott says businesses have no choice but to return to clocking on systems for managers to deal with pay rules in the workplace.

Rob Priestley received immunity after cartel case help: The former JPMorgan is the most senior figure from the company to be named in the committal hearings where defence lawyers have hammered investigators and witnesses over how they reached immunity deals.

Coronavirus

Climate change and coronavirus to hit economy, IMF warns: The International Monetary Fund warned the local economy is facing a double hit from bushfires and coronavirus, singling out Australia for being in the firing line of more frequent climate-related natural disasters.

Bloomberg prepares ground for nominee race as Democrats take aim: The billionaire candidate would sell his eponymous media and data company if elected .

US homebuilding fell less than expected in January while permits surged to a near 13-year high, pointing to sustained housing market strength that could help keep the longest economic expansion in history on track.

“The economy looks good with residential home building activity beating expectations and a little more producer price inflation, even if the data overstate how well the country is doing in terms of generating the growth and inflation the Federal Reserve wants to see,” said Chris Rupkey, chief at MUFG in New York.Housing starts dropped 3.6% to a seasonally adjusted annual rate of 1.567 million units last month, the Commerce Department said. That followed three straight monthly increases.

Data for December was revised up to show homebuilding rising to a pace of 1.626 million units, the highest level since December 2006, instead of surging to a rate of 1.608 million units as previously reported.

Economists polled by Reuters had forecast housing starts falling to a pace of 1.425 million units in January. Housing starts jumped 21.4% on a year-on-year basis in January. An estimated 1.291 million housing units were started in 2019, up 3.3% compared to 2018.

Building permits soared 9.2% to a rate of 1.551 million units in January, the highest level since March 2007, lifted by gains in both single- and multi-family housing segments.

Europe

European shares notched a fresh record high on Wednesday, bolstered by a decline in the number of new coronavirus cases and hopes of more stimulus from Beijing.

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A broad-based rally saw the pan-European STOXX 600 index end up 0.8%, led by chipmakers that were hit a day earlier by a revenue warning from iPhone maker Apple due the outbreak.

Dialog Semiconductor, STMicroelectronics and AMS, were among the top performers on the day.

“As long as markets take the view that these disruptions do not alter the growth trajectory for macro and earnings growth, there is no need to react to the news flow,” said Andrea Cicione, head of strategy at TS Lombard.

Puma’s strong fourth quarter saw it top the STOXX 600 and pull up Adidas. Other luxury stocks also rallied, with LVMH and Gucci-owner Kering rose 2.5% and 3% respectively.

A planned EU-China investment agreement looks unlikely to be struck by September as planned because of the coronavirus outbreak, European Union trade chief Phil Hogan said, while also casting doubt on deals with other Asian countries.

EU chiefs are set to meet Chinese counterparts in Beijing in late March before EU and Chinese leaders convene in Leipzig, Germany, in September – ideally to sign a deal.

EU Trade Commissioner Hogan told the international trade committee of the European Parliament on Wednesday that the March meeting would now probably not happen, and that he was not optimistic of a deal by the Leipzig summit.

“There’s a lot of time lost now and going to be lost because of the coronavirus. A lot of meetings have been cancelled,” Hogan said. “If we were going to get a deal by the Leipzig summit we would have to largely have it completed by July.”

Asia

Hong Kong stocks ended higher on Wednesday, following a slight decline in the number of new coronavirus cases in mainland China and amid hopes of more stimulus to shore up the world’s second-largest economy.

At the close of trade, the Hang Seng index was up 0.5% at 27,655.81, while the Hang Seng China Enterprises index rose nearly 1%.

Investors welcomed news that China will cut some pension contributions and insurance fees to help companies cope with the outbreak, while firms in Hubei were exempted from paying pensions, jobless and work-injury insurance until June.

In contrasst, shares in Shanghai ended a three-day winning streak on Wednesday as worries persisted over the spreading coronavirus epidemic.

At the close, the Shanghai Composite index was down 0.3% at 2975.40. The index rose in the previous three trading days. The blue-chip CSI300 index was down 0.2%.

Analysts at Nomura estimated 70% of workers who went home for the extended holidays have yet to return to cities to work, and said the business resumption rate, based on capacity utilisation, was less than 40% on average.

In Tokyo, the Nikkei share average closed 0.89% higher at 23,400.70, while the broader Topix recovered from the four-month closing low it hit on Tuesday to end up 0.37% at 1671.86.

Topix value index dipped 0.05%, compared with a 0.79% rise in Topix growth. That pushed the growth-heavy Nikkei to the highest level relative to the broader Topix on record.

The NT ratio rose to 14, the highest level since a big reshuffling in the Nikkei in 2000.

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Currencies

Minneapolis Federal Reserve Bank president Neel Kashkari said he is comfortable with where US interest rates are right now and expects they will stay put for “a while,” but predicted the next Fed move will be a rate cut.

Speaking at an Ag symposium in Mankato, Kashkari also said he is looking at the data out of China, which shows the spread of the new coronavirus may be slowing, with a “sceptical eye” and said the US economy will not be immune to the impact of the disease that has already brought parts of China’s economy to a standstill.

Commodities

LNG market rout offers glimmer of hope: Amid a brutal slump in LNG prices, one of the world’s most respected LNG consultants sees a chance of a rebound that may surprise the market.

Copper prices steadied on Wednesday near three-week highs.

Benchmark copper on the London Metal Exchange ended little changed at $US5770 a tonne, down around 9% since the middle of January.

Prices of the metal used as a gauge of global economic health hit $US5828.50 on Monday, the highest since January 27.

“Metal prices seem to be holding up on hopes that the worst of the crisis is over and that Chinese efforts to stimulate the economy will frontload demand into the second half of the year,” ED&F Man Edward Meir said in a note. “Both of these assumptions are a bit of a stretch at the moment.”

Copper stocks, at more than 262,000 tonnes, are at their highest since mid-March and nearly double the level on January 19.

“ShFE stocks are expected to continue to build more sharply than normal,” analysts at Citi said in a note.

The premium for the cash over the three-month lead closed at a nine-year high of $US68 a tonne on Tuesday due to worries about nearby supplies on the LME market. It was around $US50 a tonne on Wednesday.

Australian sharemarket

‘You can’t replace lost revenue’: Virus warning for ASX: Some companies will recover revenue lost to the coronavirus. Others, like Crown Resorts, are in a tougher position. While the infection rate may be slowing, the impact on companies seems to be growing with each day of reporting season.

The Australian sharemarket closed at a fresh record high on Wednesday as a number of strong earnings results offset losses from the major banks and miners.

The S&P/ASX 200 Index advanced 30.9 points, or 0.4 per cent, to 7144.6, clearing the previous record high of 7132.7 it hit on January 22.

Earnings results once again dominated the market moves, with a majority of stocks reporting on Wednesday ending the session higher.

“I think most people are pretty happy,” said Atlas Funds Management chief investment officer Hugh Dive.

“You would have thought there’d be no room for error but it’s been the best reporting season in a while. The outlook statements have been pretty upbeat too.”

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