A shock capital raising from NAB and a dive in the price of oil helped cap a share market rally this morning.
The S&P/ASX 200 edged up 15 points or 0.3 per cent to 5258 by mid-session, a fraction of the advance indicated by strong pre-market index futures after Wall Street ended last week on an upswing. The S&P 500 climbed 39 points or 1.39 per cent on Friday as the oil shock at the start of last week faded.
The playbook for today’s Australian session was shredded by news National Australia Bank will slash its interim dividend and tap capital markets for $3.5 billion in new equity. The bank surprised the market by releasing its half-year results ahead of schedule, revealing cash earnings more than halved to $1.436 billion due to a surge in credit impairment charges and mark-to-market losses on its bond and share portfolio.
The bank said it was raising money because it expects the economic situation to deteriorate as lockdowns to contain COVID-19 continue: “Our expectations are for a recession and much higher unemployment over 2020 and into 2021,” it said in a statement. “Given the uncertain outlook, we are taking proactive steps to further strengthen our balance sheet.” CEO Ross McEwan will forego 20 per cent of his base salary and the board of directors 20 per cent of their fees.
The threat of further capital raisings helped push the other three major banks to multi-week lows. Westpac sank 4.1 per cent to its weakest level since March 24. Commonwealth Bank dropped 1.3 per cent, also marking a one-month low. ANZ shed 3.3 per cent but held at last week’s low. NAB shares were in a trading halt.
S&P 500 index futures were recently up 10 points or 0.4 per cent after shaking off a brief dip as oil prices entered a new week in reverse. West Texas Intermediate crude oil slid $1.02 or 6.1 per cent to US$15.89 a barrel. The less-volatile international benchmark, Brent crude, was last down just two cents or 0.1 per cent at US$21.42. Here, Beach Energy gave up 2.9 per cent, Woodside 1.2 per cent and Santos 0.9 per cent.
On the Australian market, losses among banks and resource stocks were outweighed by advances in tech, industrial and consumer stocks. Engineering group Monadelphous rose 7 per cent, casino group SkyCity Entertainment 7 per cent, construction materials supplier Boral 6.5 per cent, kitchen appliance maker Breville 5.4 per cent and software developer Altium 3.5 per cent. Real estate media group Domain Holdings rallied 11.6 per cent after securing a new debt facility for $80 million to tide the group through the next 18 months.
NAB was far from the only company seeking fresh capital as the pandemic casts a long cloud over the economic outlook. Fertility clinic operator Monash IVF will ask shareholders for $80 million at a 27.2 per cent discount to Friday’s closing price. Property trust Charter Hall Retail will seek $275 million from institutional shareholders. Import/export logistic services provider Qube Holdings entered a trading halt while it raised capital. Pokie-maker Aristocrat Leisure announced it was suspending its interim dividend and standing down 1,000 staff.
Asian markets chased Wall Street higher. China’s Shanghai Composite ran up 0.7 per cent, Hong Kong’s Hang Seng 1.6 per cent and Japan’s Nikkei 2.2 per cent.
Gold improved $5.40 or 0.3 per cent this morning to $US1,741 an ounce.
The dollar charged up 0.7 per cent to 64.32 US cents, its highest level in at least two weeks.
What’s hot today and what’s not:
Hot today: Shares in Adslot (ASX:ADJ) briefly tripled this morning after the internet marketing company announced a partnership with Swedish operator Kalin Settererg Data to target the European media industry. The partnership will see Adslot’s Symphony digital workflow solution integrated with KSD’s Marathon enterprise resource planning software. KSD provides cross-media financial management to 50 media agencies in seven European countries. Adslot’s share price ran from 1.3 cents to 4.1 cents before drifting back to 2.2 cents, a gain of 69.2 per cent.
Not today: High hopes for gold explorer Resolution Mining’s (ASX:RML) Alaskan prospects were dented by news initial assays from the first diamond drill hole hit little of note. While the company claimed to be “highly encouraged” by the results, shareholders voted with their feet, sending the stock price down 54 per cent. RML’s market capitalisation had more than tripled since the start of the month on hopes of mineralisation similar to Northern Star’s nearby Pogo mine. Managing Director Duncan Chessell said the company looked forward to drilling more areas of the target zone during the northern summer.