S&P/ASX 200 morning report – Australian shares to open flat

The Australian share market and S&P/ASX 200 (ASX: XJO) is expected to open flat according to data from SPI futures. Here’s what you need to know.

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ASX 200 recap

The ASX 200 moved past a weak global lead to deliver a positive day on Monday, finishing 0.4% higher, in advance of the RBA’s rate decision today.

Most sectors finished higher, outside of energy (-1.1%) as European lockdowns place further pressure on oil demand. Utilities and property, 2.0% and 1.8%, both benefitted from the renewed search for yield with the RBA expected to cut rates from 0.25% to just 0.1%.

Westpac Banking Corp (ASX: WBC) was the latest to announce full-year earnings and it was quite a disappointment, a dividend cut of 60% to just 31 cents per share sending shares down 0.6% on the day. WBC shares remain 50% below their February highs. The company reported a 62% fall in cash profit to $2.6 billion with $3.2 billion in impairments and a record $1.3 billion AUSTRAC fine the biggest detractors.

Management’s poor risk processes has seen shareholders the worst hit as return on equity fell to just 3.8% for the year. On the positive side, the company reported that deferred home loans had fallen from $54 billion to just $16.6 billion, noting that stress is emerging but not at the level expected.

Ares values AMP offer, Seek responds, CSR delivers upbeat profit

AMP’s suitor Ares Capital confirmed the pricing of their offer for 100% of the shares in the company, the result being $1.85 per share. Shares rallied 9.8% on the day but remain well below the offer prices. It’s clear that the entire AMP business is in play and that Ares are really seeking the AMP Capital ‘crown jewel’ with its $200 billion in assets under management. Yet both the wealth management and AMP Bank divisions will be highly attractive to a number of buyers, including Macquarie Group (ASX: MQG). In my view, no action is required at the present time as we await another bidder to enter the fray.

Building products manufacturer CSR Ltd (ASX: CSR) announced a 15% fall in net profit to $58.7 million for the first six months, far better than expected as building product sales fell just 6% despite the lockdowns benefitting from a continuation of construction in Australia. The result bodes well for Boral Ltd (ASX: BLD) with both finishing over 5% higher.

Seek Ltd (ASX: SEK) responded strongly to a short attack, highlighting inaccuracies in the assertions made by ‘Blue Orca’ and flagging the strong increase in cash flow and cash balance of $222 million to confirm revenue had not been ‘overstated’. SEK shares fell just 0.8%.

US markets tread water

It was another mixed night for US markets ahead of the US election, with the more diversified S&P 500 adding 1.0% following a strong rally in the energy sector. The positive news came from Russia who hinted they may hold off on scheduled supply increases in light of weaker global demand. The Nasdaq fell 0.2% driven lower by further profit-taking in Amazon Inc. (NASDAQ: AMZN), -1.8%, and Apple Inc. (NASDAQ: AAPL) down 0.7%.

Investors appear to be shifting into more cyclical and value sectors ahead of the election. Nintendo Co. (TYO:7074), Macquarie Group and PayPal Inc. (NASDAQ: PYPL) are all expected to report today along with Chinese economic data.

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