Australian economy contracts for the 1st time in 28 years: Aus shares flat at noon

Market Reports

by Katrina Bullock

The Australian share market opened higher, took a brief dip into negative territory then rose on better than expected economic data. The data was dour but managed to beat the market’s overly pessimistic forecasts.

The S&P/ASX 200 index is up almost 5 points or 0.1 per cent at 6,552. On the futures market the SPI is 10 points higher at noon.

Local economic news

The Australian Bureau of Statistics says total retail turnover in seasonally adjusted terms rose 1.6 per cent in October month on month beating the market’s expectations. Australian turnover rose 7.3% in October 2020 compared with October 2019. If you take Victoria out of the equation, total retail sales are actually up 11.9 per cent year on year. Cafes, restaurants and takeaway food services led the gains.

Major disruptions caused by the black summer bushfires and the Covid 19 pandemic have pulled a handbrake on Australia’s economic growth. After 28 consecutive years of economic growth, the ABS recorded a contraction in the Australian economy of 0.3 per cent in the 2019 to 2020 year. It was a mixed bag of results for the states. The Northern Territory saw the best product annual growth, boasting a 5.3 per cent expansion. While South Australia was the worst hit, seeing a 1.4 per cent contraction.

Broker moves

Macquarie rates Regis Healthcare (ASX:REG) as an upgrade with a price target of $1.85. Washington H. Soul Pattinson (ASX:SOL) and its consortium partner, Ashburn have submitted a non-binding proposal to acquire Regis for $1.85 per share via a scheme of arrangement. The broker consider the offer attractive, noting that the offer price is at a 25 per cent premium to the closing price of Regis Healthcare's shares on November 19. Shares in Regis Healthcare (ASX:REG) are trading 18.6 per cent higher at $1.75 at noon.

Company news

Mesoblast (ASX:MSB) shares rocketed over 14 per cent higher after it entered into an exclusive worldwide license and collaboration agreement with Novartis. The agreement covers the development, manufacture and commercialisation of the company’s lead drug candidate, remestemcel-L. Novartis will make an upfront payment of $US50 million, including US$25 million in equity. This will provide some welcome breathing room for Mesoblast, who just this morning, reported a $US24 million loss in the first quarter. The initial focus of the agreement will be on the development of the treatment of acute respiratory distress syndrome - a syndrome associated with Covid 19 complications. The contract has considerable potential upside for Mesoblast, who may receive up to US$505 million pending achievement of pre-commercialisation milestones. Shares in Mesoblast (ASX:MSB) are trading 14.07 per cent higher at $3.73 at noon.

Best and worst performers

The best-performing sector is Information Technology, adding 1.1 per cent, while the worst performing sector is Energy, shedding almost 1.1 per cent.

The best performing stock in the S&P/ASX 200 is Mesoblast (ASX:MSB) rising 14.1 per cent to $3.73, followed by shares in Mineral Resources (ASX:MIN) and Nufarm (ASX:NUF).

The worst performing stock in the S&P/ASX 200 is Oil Search (ASX:OSH),dropping 6.03 per cent to $3.50, followed by shares in Washington H Soul Pattinson Company (ASX:SOL) and Unibail-Rodamco-Westfield (ASX:URW).

Commodities and the dollar

Gold is trading at US$1,864 an ounce.
Iron ore price rose 1.2 per cent to US$127.89.
Iron ore futures are pointing to a rise of almost 0.3 per cent.
One Australian dollar is buying 72.79 US cents.

And finally a quick reminder our next online event is December 2nd. Four companies presenting starting 12:30pm. Details at the link https://www.finnewsnetwork.com.au/page/investor-events. Please register to secure a spot.