Markets Live: Trade fears rattle resource stocks

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2:39pm

Fast food franchisor Retail Food Group has crashed to a $306.7 million bottom line loss after booking $427 million in asset impairments and costs associated with closing as many as 250 stores.

The struggling franchise company, which owns Michel's Patisseries, Donut King, Gloria Jeans, Crust Gourmet Pizzas and Brumby's Bakeries, wrote down the value of brand systems by $403 million and booked $24.4 million in restructuring costs, including costs associated with closing 250 stores.

The company had previously flagged plans to close between 160 and 200 domestic stores that were not considered sustainable.

Excluding one-off charges, underlying net profit fell 56.1 per cent to $33.3 million - well below consensus forecasts around $42.5 million - and underlying earnings (EBITDA) fell 42.2 per cent to $71.4 million.

While group sales rose 7.1 per cent to $374 million - beating consensus forecasts around $ 338 million - costs rose as the company invested in new staff to support franchisees and initiatives aimed at turning around the business.

Sue Mitchell has the full story here.

2:26pm

With Tesla's shares briefly dipping below the $US300 level on Thursday, the electric car maker ceded its seat as the most shorted US stock to Amazon, according to data from financial technology and analytics firm S3 Partners.

Tesla short interest in dollars, calculated using the number of shares sold short and the share price, stood at $US9.93 billion, on Thursday, just shy of $US9.95 billion for Amazon, S3 Partners data showed.

Analysts said investors were still shorting Tesla shares, or taking positions that amounted to bets the stock would keep declining. Short-sellers aim to profit by selling borrowed shares, hoping to buy them back later at a lower price.

"While there was some short covering the week after the tweet, there has still not been any significant net Tesla short covering on the Street," said Ihor Dusaniwsky, head of research at S3 in New York.

Read the full story here.

2:07pm

Australian sharemarket is remaining lower and looks on track to finish the week in the red.

The S&P/ASX 200 index is down 17.4 points, or 0.3 per cent, at 6334.4.

Telstra ia still leading the market losses, down 4 per cent while BHP Billiton is also weighing.

Sandfire Resources is the index's worst performer, down 7.2 per cent whil TPG Telecom is down 6.7 per cent.

CSL is doing the heavy lifting for the index, along with NAB, ANZ and Westpac.

Beach Energy shares have risen 2.6 per cent, as has Sigma Healthcare. Ramsay Health Care is up 2.3 per cent.

1:39pm

Myer's new chief executive John King has taken the knife to the retailer's head office, cutting 30 executive and senior management roles this week in a bid to reduce costs and strengthen connections with customers.

As flagged by The Australian Financial Review in July, Mr King, who took the helm in June, has removed an entire layer of management following a review of Myer's management structure.

High-profile departures include Myer's executive general manager of marketing and customer Louise Pearson. The highly regarded Ms Pearson had worked at Myer for 22 years and held a variety of roles including executive general manager, stores and trade, general manager retail operations and general manager stores for NSW/ACT.

Ms Pearson's departure follows that of several other senior executives in the past few months.

Sue Mitchell has the full story here.

1:18pm

Data centre operator NEXTDC will invest $2.25 billion in its three new sites in Melbourne, Sydney and Perth, with the large-scale projects expected to provide jobs for up to 1000 construction workers.

The purchase of the new locations have been funded by a range of equity and debt capital raisings undertaken amounting to more than $600 million.

Construction at the new $20 million Perth site on Lord Street is about to kick off.

NEXTDC chief executive Craig Scroggie told The Australian Financial Review it had spent $90 million buying land near the Sydney CBD for its S3 site and was also close to locking in a deal for its new Melbourne location.

"These are very very large scale and materially larger than anything we've ever bought before," he said.

Yolanda Redrup has the full story here.

1:02pm

Suncorp is following in the footsteps of Westpac, announcing it will lift mortgage interest rates by 0.17 percentage points, also blaming higher funding costs.

The Queensland-based lender will also increase rates on small business loans by 0.10 percentage points. It is the second time Suncorp has raised its mortgage rates in five months - it also moved rates higher in March.

"In March we acknowledged the increase in the Bank Bill Swap Rate (BBSW), which has continued to rise. This has benefited customers who have their money in savings accounts, with our term deposit rates up over 0.20% on average," banking and wealth chief executive David Carter said.

The market's expectation that official rates will not move until well into 2019 had added to the pressure since March, he said.
"We're committed to reviewing home loan rates, should there be a sustained improvement in funding costs."

Clancy Yeates

12:51pm

Westpac may have been the first mover, but it is inevitable that the other major banks will follow its lead and raise their mortgage rates. Indeed, it's been inevitable for the past six months.

Some of the smaller banks had already lifted their rates. But the majors held off as long as they could - and long after they would have moved historically - for the obvious reason: the violently anti-big-bank environment generated by the unpalatable revelations before the royal commission.

It was inevitable because funding costs, locally and globally, had risen quite sharply earlier in the year.

Stephen Bartholomeusz has the full analysis here.

12:14pm

Credit Suisse downgraded Virgin Australia from 'neutral' to 'underperform', saying that write-offs and fuel costs point to a weaker medium-term outlook for the airline.

Despite the company's underlying PBT for FY18 hitting its highest point in 10 years at $109.6 million on the back of its strong domestic performance, that result was offset by weaker performances in other segments according to the broker.

Rising fuel costs are also set to weigh the company's result in the current financial year, with Credit Suisse cutting the airline's FY19 PBT forecast by 56 per cent.

The broker also cited the airline's write-off of $452 million worth of deferred tax assets as another weight for the company.

Credit Suisse downgraded Virgin Australia's target price from 25¢ to 20¢.

12:03pm

At midday, the Australian sharemarket is still trading lower, despite a brief, mid-morning rally.

The S&P/ASX 200 index is down 13.2 points, or 0.2 per cent, at 6338.6.

Telstra is the index's biggest weight with a 3.9 per cent loss. BHP Billiton, South32 and Rio Tinto are also weighing.

The resource stocks are all leading the list of the index's worst performers. Sandfire Resources is down 7.6 per cent while Mineral Resources is down 4.9 per cent.

CSL is the market leader, followed by ANZ, NAB and Westpac. Amcor is also adding to the index gains.

Bapcor is the index's best performer, up 2.3 per cent while Ramsay Health Care is up 1.8 per cent.

11:40am

The big four banks stand to boost their combined profits by about $1 billion if they all match Westpac's mortgage interest rate increase.

But experts are divided over whether Westpac's rivals will follow the bank's Wednesday rate hike as quickly as such changes have often occurred in the past, a pattern the competition regulator has dubbed the "fast follower" approach.

Heightened scrutiny from regulators, fear of a political backlash, and the potential for rivals to pinch some of Westpac's customers are all factors that make some believe the major banks will be more wary about hiking rates in concert this time around.

Prime Minister Scott Morrison highlighted the potential for increased competition on Thursday, telling customers to ditch their bank if they were unhappy with their homeloan rate.

"If you don't like what Westpac has done, go to another bank, because competition is the key to a more competitive and stronger and more accountable banking system," Mr Morrison said.

Clancy Yeates has the full story here.

Markets Live: Trade fears rattle resource stocks

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