HSBC forecasts two rate cuts by August  05/16/2019 06:34:00 

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The rate cut camp has grown just a little larger this afternoon, with HSBC is now forecasting the Reserve Bank of Australia will pull its policy lever as soon as next meeting.

Chief economist Paul Bloxham says the RBA will be forced to cut the cash rate twice before August is out, having previously said the bank to remain on hold through 2019.

"Despite considerable reluctance to cut the cash rate, and a strong preference for a fiscal policy response, we now expect that the RBA will be forced to cut," said chief economist Paul Bloxham.

"With little reason to wait, we now expect the RBA to cut its cash rate in June by 25 basis points to 1.25 per cent, and to cut again in August (after the Q2 CPI) to 1.00 per cent. Any further policy action could be highly affected by the way in which the trade tensions evolve."

HSBC's Paul Bloxham is now forecasting cuts.

HSBC's Paul Bloxham is now forecasting cuts.Credit:Glenn Hunt

Australian shares rose on Thursday as expectations the Reserve Bank of Australia would be forced to cut rates in order to battle rising unemployment drove gains on the local market.

The S&P/ASX 200 Index rose 43.6 points, or 0.7 per cent, to 6327.8 while the broader All Ordinaries closed 46.6 points, or 0.7 per cent, higher at 6417.5.

The local sharemarket made a firm start to the day's trade before dropping through the morning. It rallied firmly though following April's labour force data, as the rising unemployment rate increased bets the RBA would cut rates sooner than expected.

"By opting to highlight jobs growth and the direction of the unemployment rate the market is now focusing on a lagging indicator of economic activity rather than a forward looking one," said J.P. Morgan Asset Management global market strategist Kerry Craig.

"Central banks can often say too much, or sometimes not enough. But with markets so closely tuned to movements in the labour market, a clear message on what's moving the needle will be required."

Xero rose 10.8 per cent to $60.15 on Thursday after reporting it was edging closer to achieving profitability, recording positive free cash flow in 2019 and a modest net profit in the second half. The company did make a net loss for the financial year to March 31 of $NZ27.1 million ($25.7 million).

CSL shares rose after UBS lifted its price target on the healthcare giant following an analysis of its competitors, suppliers and partners' first quarter financial results. CSL advanced 1.1 per cent to $202.98.

Aristocrat Leisure closed the session 5 per cent higher at $26.87. In a note on Thursday, UBS analyst Matt Ryan said there would be continued near-term growth, despite its US revenue share almost doubling over the last five years. It said it was likely its growing online market share would drive share gains.

The major banks were mixed on Thursday. Commonwealth Bank shares rose 1.1 per cent to $73.33 amid reports it would cut 10,000 jobs while ANZ advanced 1.4 per cent to $26.66. NAB closed 0.3 per cent lower at $24.20 while Westpac was the largest weight on the index and responsible for most of the market's losses as it traded ex-dividend, falling 3.9 per cent to $25.85.

BWX slid heavily after an announcing on Thursday it had reduced its earnings outlook, appointed a new chief executive and would make changes to it governance structure. The company said it expected trading earnings before interest, tax, depreciation and amortisation to be in the range of $21 million to $23 million. In February, the company said it expected underlying earnings before interest, tax, depreciation and amortisation to be in the range of $27 million to $29 million. BWX's shares tumbled 15 per cent to $1.70.

UBS increased its price target on healthcare giant CSL by 7.5 per cent after reviewing its competitor, supplier and partner first quarter financial results.

"While cognisant of potential competitive pressures to certain Behring products, our overall investment view is unchanged, with market dynamics continuing to support robust immunoglobulin growth while we expect China albumin growth to recover from the fourth quarter of 2018-19," said analyst Saul Hadassin.

"For Seqirus, favourable market segmentation places the business in a sound position to grow share without using price as a lever."

It said CSL Behring needed to demonstrate improved earnings growth to justify its current valuation multiples.

UBS increased its target price on CSL from $207.50 to $223.

China sold the most Treasuries in more than two years in March, ratcheting up concerns that the country might weaponise its position as the US government's largest foreign creditor in the ongoing trade dispute between the two countries.

China sold $US20.5 billion ($29.6 billion) of US government bonds over the course of the month, according to data released by the US Treasury on Wednesday (Thursday AEST). The data covers trading in Treasuries with a maturity of more than one year by foreign official institutions such as central banks as well as private investors.

Other major foreign holders, including Japan and the UK, were also net sellers.

Analysts noted the period covered by the data is before the latest breakdown in trade talks between the US and China and the subsequent increase in tariffs on Chinese imports by the Trump administration.

Read the full story here.

Investors have bet $US846 million ($1.2 billion) that Uber's shares will drop even further from their initial public offering price, analysis shows.

Uber debuted as a publicly traded company on Thursday last week, with its shares opening below their $US47 a share IPO price. They extended losses on Friday and then fell again on Monday - touching $US36.08 at one point.

Shares in Uber, however, bounced 3.3 per cent to $US41.29 a share in New York on Wednesday - as Wall Street rallied on hopes of an easing in global trade tensions - temporarily putting a floor on the stock.

Temporarily could prove the key word.

Timothy Moore has the full story here.

A surge in short bets represents a new challenge for Uber CEO Dara Khosrowshahi.

A surge in short bets represents a new challenge for Uber CEO Dara Khosrowshahi.Credit:Michael Nagle

Santos has finally struck a long-awaited deal to buy into the P'nyang gas field in Papua New Guinea, agreeing to pay $US187 million ($270 million) for a 14.3 per cent stake that will ease the way to a proposed $US14 billion expansion of LNG.

As an existing partner in the producing PNG LNG venture, Santos has been working to also take a stake in the field that will underpin the construction of a third production unit at the plant north of Port Moresby.

It is buying its interest from the three existing partners in the field, ExxonMobil, Oil Search and JX Nippon's Merlin Petroleum, with Exxon to sell the biggest chunk.

The deal for Santos to buy into the PRL3 permit that holds the 4.4 trillion cubic feet gas field has been under discussion for several years.

Angela Macdonald-Smith has the full story here.

The expansion involves adding three production units at the PNG LNG site north of Port Moresby.

The expansion involves adding three production units at the PNG LNG site north of Port Moresby. Credit:{Richard Dellman/AdvantagePNG}

Galaxy Resources' long-held interest in rival lithium producer Alliance Mineral Assets has been confirmed through a share placement that has made Galaxy the biggest shareholder and most likely acquirer of its neighbour.

Galaxy on Thursday subscribed for $22.5 million worth of Alliance shares, making it the biggest shareholder in Alliance.

Statements to the ASX did not clarify what size stake Galaxy would hold in Alliance after the placement, but it is expected to be between 10 per cent and 13 per cent, pushing Galaxy above Burwill, currently the biggest shareholder in Alliance.

Burwill currently owns just less than 15 per cent of Alliance's Australian stock, but will be diluted to a lower stake given it is not participating in this week's raising.

Eight months after declining to respond when asked by The Australian Financial Review whether Galaxy was a shareholder in Alliance, Galaxy chairman Martin Rowley confirmed that Galaxy had been sitting below the substantial shareholder threshold for some time.

Peter Ker has the full story here.

Australian shares are trading higher through the afternoon session.

The S&P/ASX 200 Index is up 12.8 points, or 0.2 per cent, to 6297.

Commonwealth Bank is up 0.8 per cent, Aristocrat Leisure has risen 4.8 per cent and ANZ is up 1 per cent.

Xero is up 11.5 per cent, Mayne Pharma Group has risen 5.4 per cent and Lynas Corp is trading 5.2 per cent higher.

Westpac has fallen 4.5 per cent, Wesfarmers is down 1.1 per cent and NAB has slid 0.6 per cent.

McMillan Shakespeare is trading 5.3 per cent lower, Afterpay Touch is down 3.5 per cent and Seven West Media has fallen 3 per cent.

Commonwealth Bank chief executive Matt Comyn will look to hose down reports of massive layoffs by reiterating the bank's plans to bring the cost base down over the next three to five years in an address to staff on Friday.

Reports claiming the bank was implementing plans to cut 10,000 jobs triggered a conciliation meeting with the Financial Services Union and CBA on Wednesday, as ordered by the Fair Work Commission.

A CBA spokesman confirmed the closed hearing took place but said it would not provide running commentary on discussions before the commission.

James Frost has the full story here.

Commonwealth Bank CEO Matt Comyn will address staff on Friday and meet with the FSU next Wednesday.

Commonwealth Bank CEO Matt Comyn will address staff on Friday and meet with the FSU next Wednesday.Credit:MARK GRAHAM

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