As it happened: ASX sags 0.7% as RBA starts road to tightening

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As it happened: ASX sags 0.7% as RBA starts road to tightening

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Goodnight all

That’s it from us at Markets Live today. Thanks for your time and comments.

Alex Druce will be back in the morning with Lucy Battersby.

Get our wrap of the day on the markets, breaking business news and expert opinion delivered to your inbox each afternoon. Sign up for The Sydney Morning Herald’s here and The Age’s here.

Markets wrap: ASX retreats after RBA decision

By Alex Druce

The Australian sharemarket finished in the red after a positive start to the day, with stocks retreating after the Reserve Bank signalled its gradual withdrawal of emergency policy support had begun.

The ASX 200 closed 0.7 per cent lower at 7261.8, having risen by as much as 0.4 per cent in early trade. It was the market’s worst session in more than a fortnight.

Rate-sensitive tech, health, and communications stocks were already showing signs of weakness before the RBA release, and these sectors only fell further after the central bank made its July policy announcement.

The ASX 200 closed 0.7 per cent lower at 7261.8 on Tuesday.

The ASX 200 closed 0.7 per cent lower at 7261.8 on Tuesday. Credit: Shutterstock

CSL dropped 1.7 per cent to $277.24, Telstra dropped 2.4 per cent to $3.70, and Afterpay was 1 per cent down at $114.79.

The RBA kept the cash rate steady at a record low 0.1 per cent, but Fidelity’s Anthony Doyle noted the board had not extended one of the key emergency pillars of monetary support - the three-year Australian Government bond yield target of 0.1 per cent.

IG Markets analyst Kyle Rodda said the subsequent uptick in bond yields reflected the RBA’s growing confidence in the economic outlook as the nation continues to rebound from the pandemic-induced recession.

“What we saw today does sort of signal that the RBA is moving at the margins slightly towards a tightening phase,” Mr Rodda said.

“That loosening that we’ve seen over the past year is gone.”

Improved iron ore prices helped BHP add 0.8 per cent to $48.85, while Woodside Petroleum rose 2 per cent to $24.07, and Newcrest mining gained 0.2 per cent to $25.71.

They were the only of the 30 biggest companies on the index to rise.

The energy sector finished ahead thanks to an overnight surge in oil prices, as a rolling brawl at OPEC+ casts doubt over supply.

Winners included Oil Search, which gained 4.6 per cent to $4.08, Beach Energy, which rose 2 per cent to $1.30, and Whitehaven Coal, which added 3.9 per cent to $2.13.

Rio Tinto and Fortescue Metals fell by 0.6 per cent and 1.3 per cent respectively after a strong start to the day, while the major banks were all lower.

Further sapping confidence was a US futures market that was tracking lower as Wall Street prepared to resume after the Independence Day holiday.

ASX loses 0.7% as RBA begins gradual easing process

By Alex Druce

The Australian sharemarket finished in the red after a positive start to the day, with stocks retreating after the Reserve Bank kicked off its gradual withdrawal of emergency policy support.

The ASX 200 closed 0.7 per cent lower at 7261.8, having risen by as much as 0.4 per cent in early trade. It was the market’s worst session in more than a fortnight.

Rate-sensitive tech, health, and communications stocks were already showing signs of weakness before the RBA release, and fell further after the central bank made its July policy announcement.

CSL fell 1.7 per cent to $277.24, Telstra dropped 2.4 per cent to $3.70, and Afterpay was 1 per cent down at $114.79.

The RBA kept the cash rate at 0.1 per cent but Fidelity’s Anthony Doyle said by not extending one of the key emergency pillars of monetary support - the three-year Australian Government bond yield target of 0.1 per cent - the RBA had signalled to the market its growing confidence in the outlook for the economy as it rebounds back from the pandemic-induced recession.

BHP added 0.8 per cent to $48.85, Woodside Petroleum rose 2 per cent to $24.07, and Newcrest mining gained 0.2 per cent to $25.71. They were the only of the 30 biggest companies on the index to rise.

The energy sector finished ahead thanks to an overnight surge in oil prices, as a rolling brawl at OPEC+ casts doubt over supply.

US futures were mixed as Wall Street prepares to resume tonight after a three-day hiatus for Independence Day.

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Crown admits it dodged tax but lobs low-ball estimate

By Patrick Hatch

Crown Resorts has admitted to the Victorian government that it underpaid its casino tax for almost a decade but claimed it only owes $8 million, despite some legal advice suggesting the figure could be significantly higher.

The group’s newly appointed chief executive Steven McCann told the state’s royal commission on Tuesday that he wrote to the Victorian treasury last week conceding Crown had made illegal deductions from its poker machine tax calculations since 2013.

Crown Resorts CEO Steve McCann giving evidence to Victoria’s royal commission into the casino giant on Tuesday.

Crown Resorts CEO Steve McCann giving evidence to Victoria’s royal commission into the casino giant on Tuesday.

Crown’s long-standing practice of classifying parton giveaways such as free food and hotel rooms as “winnings” was revealed explosively in the commission on June 7, with estimates it may have underpaid as much as $270 million since 2012.

Mr McCann said when he wrote the letter last week, based on recent advice suggesting the $8 million underpayment, he was aware of some, but not all of the previous legal advice Crown had received since 2012 that suggested the underpayment could be far higher.

Commissioner Ray Finkelstein QC asked whether Crown was “shopping around for better advice”.

Read the full story here

Huge broadside from Lew on Myer board

The Solomon Lew-backed Premier Investments confirmed this afternoon it has acquired an additional 41.1 million shares in Myer at 40 cents each - giving it an overall effective stake of 15.77 per cent - and paving the way for a clean-out of the department store’s board.

As reported earlier by Elizabeth Knight, the additional stake has undoubtedly altered the balance of control in Lew’s favour as he continues a long-running battle against the beleaguered retail chain’s boardroom.

Solomon Lew has called for the Myer board to resign immediately.

Solomon Lew has called for the Myer board to resign immediately. Credit: Eddie Jim

“Something has to change, and Premier has put itself in a position to make change happen,” Lew said in a release.

“Premier calls on the failed Myer Board to resign immediately. We will work with other shareholders to reconstitute the Myer Board with directors who have expertise across retail, property, logistics and e-commerce so that Myer can reverse its decline.”

Lew’s investment in Myer stands as probably his worst in 50 years of investing in retail. He spent more than $100 million to acquire a stake in March 2017 at $1.15 a piece but the struggling department store chain has lost about two-thirds of its value and over the past 12 months has traded as low as 19 cents.

Since Lew’s initial investment, Myer’s financial performance has continued to deteriorate. In the 2020 financial year it reported a loss of $172 million - a result that Lew, at the time, labelled ‘disastrous and shameful’ further describing its turnaround strategy as being in ‘tatters’.

In a release, Lew said Premier remained “bitterly disappointed” by Myer’s performance.

“It’s now been more than eight months since then Myer Chairman, Garry Hounsell abruptly resigned on the morning of Myer’s 2020 AGM sighting lack of key shareholder support for his re-election,” Lew said in a release.

“On that day, Myer announced that Ms JoAnne Stephenson had been appointed Acting Chairman of Myer while a global search would be undertaken to find a replacement Chairman.

“We are stunned that Premier has not heard from the Acting Chairman at any stage. Neither the Acting Chairman nor any of the remaining Directors have bothered to pick up the phone to the company’s major shareholder about reconstituting Myer’s emaciated Board which is bereft of the retail experience, skills and talent required to turn the business around.

“In a market where innovative, experienced retailers are benefitting from rapid change, Myer continues to go backwards and its Board is missing in action.”

US firm in push to oust Adani director over risks at ‘globally unpopular Carmichael Mine’

By Nick Toscano

A prominent global shareholder advisory group has told shareholders in India’s Adani Enterprises to vote against the re-election of one of the company’s directors due to risks surrounding the controversial Carmichael coal mine in Queensland.

In a sign of lingering concerns within the global financial community about the Indian conglomerate’s Australian operations, US-based Glass Lewis recommended removing director Pranav Adani from the Adani board in light of his “failure to fulfil his duty to shareholders as a member of the risk management committee”.

Anti-Adani campaigners surround Federal Treasurer Josh Frydenberg’s Kooyong in Kooyong electorate in Melbourne, protesting the Carmichael coal mine.

Anti-Adani campaigners surround Federal Treasurer Josh Frydenberg’s Kooyong in Kooyong electorate in Melbourne, protesting the Carmichael coal mine.Credit: Justin McManus

Glass Lewis – which advises large institutional investors on how to vote on matters including executive pay and board appointments – said a recent ruling by the Queensland Supreme Court revealed business practices at Adani that “reflect poorly upon business and risk management strategies”.

The court found Adani’s port business had engaged in monopolistic business practices and ordered it to pay $107 million to four companies that used its Abbot Point coal export terminal for “unconscionable conduct”.

“We believe these matters should be concerning to shareholders in how Adani Enterprises’ board oversees risk in operations that may be associated with the globally unpopular Carmichael Mine,” Glass Lewis said.

The firm also noted there was “significant global opposition” to Adani’s Carmichael project, including the company’s plan to ship coal out through the Great Barrier Reef, which recently became a global flashpoint for the Morrison government’s climate policy.

Read the full story here

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RBA keeps rates unchanged but starts winding back emergency levels of support

By Shane Wright and Jennifer Duke

The Reserve Bank has started winding back its emergency level of support delivered to the economy through the pandemic recession as it becomes more confident about Australia’s recovery.

Following its July board meeting, the bank revealed it would maintain official interest rates at 0.1 per cent but would not continue its yield control target on the three-year bonds beyond April next year.

In a major shift to its quantitative easing program, it will purchase $4 billion worth of government debt until at least mid-November. The current $100 billion round of purchases is due to end in September.

RBA governor Philip Lowe.

RBA governor Philip Lowe. Credit: Dominic Lorrimer

And in a signal the economy is in much better shape, governor Philip Lowe changed the bank’s usual statement that it would keep interest rates unchanged until “2024 at the earliest”.

Dr Lowe said while the bank would not lift interest rates until inflation was sustainably within the RBA’s 2 to 3 per cent target, its “central scenario for the economy is that this condition will not be met before 2024”.

He said the economy was in a better condition than had been forecast.

    “The economic recovery in Australia is stronger than earlier expected and is forecast to continue. The outlook for investment has improved and household and business balance sheets are generally in good shape,” he said.

    Dr Lowe did caution the bank’s growing concern about the lift in house prices across the nation’s capital cities.

    Read the full story here

    RBA board holds cash rate at 0.1% and will continue bond-buying program

    The Reserve Bank of Australia has kept the official cash rate steady at a record low 0.1 per cent, and will continue bond purchases at a slightly reduced rate.

    The board’s 2.30pm statement on Tuesday said it will continue purchasing government bonds after the completion of the current bond purchase program in early September.

    These purchases will be at the rate of $4 billion a week until at least mid-November.

    The central bank also announced it will keep its three-year yield target pegged to April 2024 bond at 10 basis points.

    The ASX 200 was little moved by the release, and was last down 0.2 per cent.

    Bond yields were steady, and the Aussie dollar remained near 75.62 US cents.

    Myer’s zombie board waits for Solly Lew’s axe to fall

    By Elizabeth Knight

    Opinion

    It’s the Myer end of financial year clearance but with a twist. This time it’s the directors that will be in the metaphoric ‘throw out bins’ courtesy of Myer’s largest shareholder Solomon Lew’s plans to rid the company of its outdated governance inventory.

    It’s the closest thing to a zombie board in corporate Australia as its members face the prospect of wholesale removal.

    The smouldering embers of Lew’s campaign to overhaul Myer’s board received a big puff from the bellows on Monday night when he was offered a parcel of 5 per cent of Myer shares - thereby boosting his stake to close to 16 per cent.

    Myer Bourke Street Mall, Melbourne

    Myer Bourke Street Mall, MelbourneCredit:

    Lew achieved partial success last year in his five year battle against the Myer board when he spearheaded the shareholder push for the resignation of the department store’s chairman, Garry Hounsell, but he failed to get the support to oust the rump of the board and the chief executive, John King.

    The additional stake has undoubtedly altered the balance of control in Lew’s favour, assuming he has the support of Myer’s other major shareholder Geoff Wilson - who was part of the anti-Hounsell push last year.

    It is understood Lew will not seek King’s resignation but given Lew had previously publicly called for him to go, it may be only a matter of time before a new board would start looking for a new chief executive.

    Read Elizabeth Knight’s full column here

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    EML Payments defies tech sector slump

    By Alex Druce

    Technology stocks were weighing the ASX 200 down in afternoon trade, with major players Afterpay, Xero, Wisetech Global, Appen and Nearmap all in the red.

    However, payments firm EML Payments was bucking the trend.

    The $1.3 billion ASX company was trading 2.8 per cent higher at $3.65 on an upgrade from RBC Capital markets, which sees EML exceeding its earnings estimates as the fallout from an Irish regulatory wrangle may not be as bad as initially feared.

    EML Payments was up by as much as 6.5 per cent this morning.

    EML Payments was up by as much as 6.5 per cent this morning. Credit: Jim Rice

    EML plunged 45 per cent in a single session in May after revelations the Central Bank of Ireland was probing its subsidiary PFS Card Services for major breaches of anti-money laundering (AML) and counter-terrorism financing (CTF) laws.

    However, RBC analysts this morning said feedback from an Irish regulatory expert discussion suggested a one-off fine and higher compliance costs as the most likely outcomes for EML, with the loss of the company’s e-money licence only a remote possibility.

    RBC said the company’s share price appeared to be factoring in a permanent50 per cent fall in earnings by PFS, which it said appeared overdone

    RBC said it now expects EML’s earnings estimates for the 2022 and 2023 financial years to be $73.6 million and $101.9 million, up 2 per cent and 10 per cent, respectively, over its previously announced outlook.

    The brokerage firm also lifted its rating on EML from “sector perform” to “outperform” and hiked its price target on the stock from $3.50 to $4.50.

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