ASX set to open lower on tumbling iron ore prices
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The world is facing high energy prices for the foreseeable future as oil and natural gas producers resist the urge to drill again, according to Chevron’s top executive.
“There are things that are interfering with market signals right now that we haven’t seen before. Eventually things work out, but eventually can be a long time,†Chief Executive Officer Mike Wirth said on Wednesday in an interview in New York. He expects strong prices for gas, liquefied natural gas and oil, at least “for a while,†without specifying a time frame.
Oil producers are resisting the urge to drill despite rising prices. Credit:AP
Even though oil and gas prices have surged this year as the world recovers from the COVID-19 pandemic, major producers have been reluctant to invest their cash in new projects, a shift in behaviour from previous upswings. That’s leading to concerns of shortages. Already, Europe is facing its worst natural gas crunch in decades, with prices rising to record levels even before winter when demand is typically at its strongest.
One reason executives are wary to plow investment dollars into new supply is shareholders haven’t shown they’re in their corner. They want cash returned to them immediately rather than seeing it re-invested in new developments. Although soaring commodities markets are “signalling we could invest more,†equity prices are sending boardrooms a different sign, Wirth said.
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Air New Zealand may have suspended its guidance last month after prolonged lockdowns hit home, but it has continued to provide updates on the continuing financial impact of its wings being clipped, and it is acting as a sobering proxy for the likes of Qantas and Virgin.
In its latest update today the Kiwi airline says, following a month of constrained trading it remains unclear how long these restrictions, the suspension of trans-Tasman flights and associated travel restrictions will continue. And there is also uncertainty about how demand will recover when the restrictions are lifted.
Air New Zealand is drawing on its government debt facility to fund aircraft payments. Credit:Getty Images
But it did provide some numbers on the estimated impact on its financial performance.
The monthly impact of nationwide New Zealand Level 3 or 4 travel restrictions is approximately $NZ45 million to $NZ55 million, including the benefit of any wage subsidies received.
The monthly impact of an Auckland-only Level 3 or 4 travel restriction, with the rest of New Zealand operating at Level 1 or 2 is approximately $NZ25 million to $NZ35 million, including the benefit of any wage subsidy.
The monthly impact of suspension of New Zealand to Australia travel is approximately $NZ20 to $NZ25 million it says.
“Operation of cargo flights is continuing with approximately 50 flights per week and the company is observing strong demand for air travel across regions in New Zealand that are currently under Level 2 restrictions.â€
The airline has had to draw down further on government loans provided to it to meet planned cash payments relating to aircraft.
“The Company has recently requested additional drawdowns on the Facility which, including those drawings, will total $NZ435 million. Remaining available funds under the Facility are $1.065 billion. Earnings and cash flow guidance remain suspended.â€
Good Morning and welcome to another day on Markets Live.
Your editors today are Emma Koehn and Colin Kruger.
This blog is not intended as financial advice.
Crown Resorts director Toni Korsanos will depart the casino giant next month, in a surprise exit that comes as the crisis-stricken group tries to rebuild its board and governance.
Ms Korsanos joined the Crown board in mid-2018 and, along with former senior bureaucrat Jane Halton, is one of only two directors to survive a subsequent wave of scandals and public inquiries into the James Packer-backed group.
Crown director Toni Korsanos during her inquiry hearing at the Royal Commission into the casino operator in July this year.
Crown said in a statement on Thursday afternoon that Ms Korsanos will retire after its annual general meeting on October 21.
The company’s board currently has only four members, with former Telstra and Optus boss Ziggy Switkowski awaiting probity clearance to join as chairman. He will replace Helen Coonan, who resigned last month following Victoria’s damning royal commission into Crown’s Melbourne casino.
Ms Korsanos said was stepping down to focus on her “extensive†other commitments, which include a directorship at Treasury Wine Estates and executive vice chair at US gaming company Scientific Games.
She said she was proud of the work Crown had done to date reforming itself. “I am confident under the leadership of Dr Ziggy Switkowski and [new chief executive] Mr Steve McCann, and the refreshed senior management team, Crown is well positioned today to become one of the most responsible and respected operators of integrated resorts,†Ms Korsanos said in a statement.
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Wall Street swung between gains and losses ahead of today’s expiration of options and futures, a quarterly event that usually brings increased volume and volatility. Iron ore prices continued to fall, dragging on the US shares of mining giants BHP and Rio Tinto and setting the Australian sharemarket up for a weak start.
The S&P 500 fluctuated on either side of unchanged after the index posted its biggest gain since August on Wednesday, and closed 0.2 per cent lower at 4473.75 points. The equity market benchmark is down about 1 per cent so far this month amid concern about a broader pullback in the wake of a string of record gains. The Dow Jones Industrial Average also dropped 0.2 per cent, while the Nasdaq edged up 0.1 per cent.
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The lack of direction on Wall Street and the iron ore’s slump are set to make for a soft open at the local bourse. ASX futures were down 20 points, or 0.3 per cent, at 7422 as of 6:46am AEST. The US-traded shares of BHP fell 3.6 per cent and Rio’s stock tumbled 4.6 per cent as the iron ore price extended its recent slide, falling by a further 8.1 per cent to $US107.21 per tonne.
Technology companies weakened, along with communications and health care stocks. Nvidia fell 0.4 per cent and Facebook fell 0.2 per cent.
“After seven months of gains, equity markets have been choppier mid-way through September,†said Keith Lerner, chief market strategist at Truist Advisory Services. “This is actually quite normal from a historical seasonal standpoint, though the ongoing carousel of concerns continues.â€
Losses for banks were tempered by rising bond yields that help them charge more lucrative interest on loans. The yield on the 10-year Treasury rose to 1.34 per cent from 1.30 per cent late Wednesday.
US indices began fluctuating as investors weighed the impact of mixed economic data on the Federal Reserve’s plans to taper stimulus.
Retail sales unexpectedly increased in August, suggesting that demand for goods remains strong. Consumers simply shifted spending to more online purchases and away from businesses that are still struggling to recover from the pandemic, including restaurants and other business that rely on in-person spending.
Wall Street was also reviewing a disappointing report showing that weekly unemployment claims rose more than expected.
Bloomberg, AP and SMH
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