ASX posts 1.3pc weekly drop; Magellan sinks 19pc

Late last month, Agi Pfeiffer-Smith found herself in the midst of an epic stoush – between the company she worked for, Endeavour, and its largest shareholder, the billionaire publican Bruce Mathieson.

Mathieson, who controls about 15 per cent of the hotels and liquor chain business, is pushing for ex-Woolworths executive Bill Wavish to join the company’s board, having identified poor performance – at Dan Murphy’s.

Pfeiffer-Smith became managing director of Dan Murphy’s just last year after working on strategy at Endeavour. Unsurprisingly, she does not agree that the liquor retail chain has lost its way and shifted too far from its original premise of big box stores known as category killers.

“Large format stores will always be in our DNA,” she says.

Endeavour operates 266 Dan Murphy’s stores, 1435 BWS liquor stores and 354 hotels, all of which were split off from Woolworths in 2021. But it is the retail arm that is at the centre of an acrimonious battle between Mathieson, and the Endeavour board run by chairman Peter Hearl.

Read more here.

Westpac has hit a “pivotal” moment in its turnaround, and it could finally correct 15 years of under-investment in its technology systems, according to analysts at Barrenjoey Capital Partners, who have upgraded the bank to “neutral” and raised their estimated valuation by more than 10 per cent to $21.

Although this is still below its $21.40 price on Friday afternoon, Barrenjoey’s Jon Mott told clients he hoped legal action launched by the corporate regulator against the bank for failing to respond to 229 hardship requests would push Westpac to invest more in technology.

Mott pointed to a line from Westpac’s audit report this year, included in the Australian Securities and Investment Commission’s statement, that said it did “not have a consolidated system view of customers for collections and hardship, and [made] inadequate progress in business ... simplification”.

Read more here.

The Australian sharemarket extended gains in late afternoon trading as the recent rout in US bonds and equities eased overnight ahead of key non-farm payroll data that will help inform the market of the Federal Reserve’s next rate move.

The benchmark S&P/ASX 200 index advanced 0.6 per cent, or 38 points to 6963.5, buoyed by a sharp rally in financial and mining stocks. All the big banks were in the green. Commonwealth Bank rose 1.5 per cent, Westpac 1.8 per cent after Barrenjoey upgraded the stock to a ‘neutral’ rating, ANZ 1.3 per cent and National Australia Bank 1.9 per cent. The biggest stock on the ASX, BHP Group, rallied 1.2 per cent.

Wall Street pared losses and bond yields eased after data showed the number of Americans filing new claims for unemployment benefits rose moderately last week but still held near historic lows.

The yield on the US 10-year eased to 4.7 per cent after touching a 16-year high of about 4.88 per cent this week. The 30-year, which recently hit the 5 per cent level, was trading around 4.9 per cent.

Ophir Asset Management head of research Luke McMillan said the latest surge in long-term bond yields had acted “like gravity” for the local sharemarket and “really put on a cap in terms of the price to earnings expansion that we’ve seen in equity markets over this year”.

“It’s causing some concern for investors in terms of what it means for valuations in an environment of higher for longer interest rates,” he added. “Investors are just adjusting what is a normalised valuation for the market if we’re now looking at 10 year bond rates that might be having a five handle on them.”

The Australian dollar was trading 0.5 per cent higher overnight at about US63.57¢; on Friday, it was about US63.79¢.

Elsewhere on the ASX, the energy sector was once again in the red as crude oil extended its slump overnight on concerns that slowing global growth would erode consumption. West Texas Intermediate settled near $US82 a barrel, crossing beneath its 50-day moving average for the first time since July.

Stocks on the move

Magellan Financial Group shares plunged 18.4 per cent and it was the worst performer on the ASX 200 after it reported a $4 billion drop in funds under management in September. The money manager booked $35 billion in FUM in its latest update, down from the $39 billion it recorded in August.

GQG Partners shares rallied 3.2 per cent. It recorded $US105.8 billion ($166.1 billion) in funds under management, according to its latest update. The September figure is a drop from the $US107.4 billion it booked for the previous month.

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New York | FTX co-founder Gary Wang took the stand at Sam Bankman-Fried’s trial on Thursday (Friday AEDT) and admitted he and his former MIT roommate committed a multibillion-dollar fraud by secretly shifting customer funds to trading company Alameda Research.

Wang, who was also FTX’s chief technology officer, told the federal court that Bankman-Fried directed him to alter the cryptocurrency exchange’s code so that Alameda was able to draw a $US65 billion ($102 billion) line of credit.

“When customers deposited money on FTX, the money went to Alameda instead,” Wang said, adding that Alameda “withdrew so much that FTX was not able to pay customers who tried to withdraw”.

Wang is testifying as a government witness against his one-time friend. Prosecutors claim Bankman-Fried committed fraud and conspiracy after the FTX cryptocurrency exchange he co-founded went bankrupt last year, owing its 50 biggest creditors almost $US3.1 billion ($4.6 billion).

Read more here.

In August 2020, the US 10-year government bond yield sat at just 0.5 per cent. That was arguably peak cheap money – the apogee of the “low-rates-for-long” paradigm. Fast-forward a few years, and the US 10-year yield pierced a staggering 4.8 per cent this week, a gigantic lift from the 3.3 per cent level that prevailed as recently as April 2023.

This sent shockwaves through lackadaisical valuations of asset classes that price off this risk-free “discount rate”, including listed equities, venture capital, infrastructure, real estate, junk bonds and private credit, which are only reluctantly adjusting to the new normal of structurally elevated cash rates.

Many clients have asked what precipitated the sudden jump in US 10-year yields from 4.1 per cent one month ago to almost 5 per cent today. The catalyst was a big shift in the US Federal Reserve’s outlook.

At its September meeting, the Fed slashed its expectations for rate cuts in 2024 in half from 100 to 50 basis points. Combined with robust global economic data, and stubbornly sticky services inflation that has been bolstered by brisk wage growth and poor productivity, financial markets have been compelled to once again radically revise their assessment for the path of interest rates. This, of course, has profound consequences for the price of everything.

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Rio Tinto has loaned $US100 million ($157 million) to the Chinese and Singaporean companies that will build railways and ports for Guinea’s Simandou iron ore project, in a major show of faith in its consortium partners, rival miners and the grand plan to build an African iron ore industry.

Rio plans to mine iron ore from two tenements in the Simandou mountains through the “Simfer” consortium, which features four Chinese companies including state-owned steel and aluminium giants Chinalco and Baowu.

Despite those powerful partners participating in the Simfer consortium, the $US100 million loan was made by Rio individually, and was designed to fund ongoing studies until a final feasibility study and funding agreement for the rail and port can be struck with the Guinean government and a rival mining consortium.

The railway will traverse close to 600 kilometres of Guinean countryside on its way to a river port and trans-shipping operation in the Morebayah Estuary.

Read more here.

The Australian sharemarket extended gains as the recent rout in US bonds and equities eased overnight ahead of key non-farm payrolls data that will help inform the market of the Federal Reserve’s next rate move.

The benchmark S&P/ASX 200 index advanced 0.4 per cent, or 26 points to 6951.5 at midday, buoyed by a sharp rally in financials stocks. All the major banks were in the green. Commonwealth Bank rallied 1.4 per cent, Westpac jumped 1.8 per cent, ANZ added 1.3 per cent and National Australia Bank rose 1.8 per cent.

Wall Street pared losses and bond yields eased after data showed the number of Americans filing new claims for unemployment benefits rose moderately last week but still held near historic lows.

The yield on the US 10-year eased to 4.7 per cent after touching a 16-year high of about 4.88 per cent this week. The 30-year, which recently hit the 5 per cent level, was trading around 4.9 per cent.

Ophir Asset Management head of research Luke McMillan said the latest surge in long-term bond yields had acted “like gravity” for the local sharemarket and “really put on a cap in terms of the price to earnings expansion that we’ve seen in equity markets over this year”.

“It’s causing some concern for investors in terms of what it means for valuations in an environment of higher for longer interest rates,” he added. “Investors are just adjusting what is a normalised valuation for the market if we’re now looking at 10 year bond rates that might be having a five handle on them.”

The Australian dollar was trading 0.5 per cent higher overnight to around US63.57¢ and was trading around US63.79¢ on Friday.

Elsewhere on the ASX, the energy sector was once again in the red as crude oil extended its slump overnight on concerns that slowing global growth will erode consumption. West Texas Intermediate settled near $US82 a barrel, crossing beneath its 50-day moving average for the first time since July.

Stocks on the move

Magellan Financial Group shares plunged 13 per cent and was the worst performer on the ASX 200 after it reported a $4 billion drop in funds under management in September. The money manager booked $35 billion in FUM in its latest update, down from the $39 billion it recorded in August.

GQG Partners shares rallied 3.4 per cent. It recorded $US105.8 billion ($166.1 billion) in funds under management, according to its latest update. The September figure is a drop from the $US107.4 billion it booked for the previous month.

With Bloomberg

Institutional and retail investors pulled $2 billion from Magellan Financial’s various strategies last month, even as difficult global markets lowered the fund manager’s returns.

The outflows came primarily from the firm’s institutional clients, which pulled $1.7 billion in September. Funds under management have dropped another $4 billion to $35 billion, after falling below $40 billion earlier this year for the first time since 2016.

The institutional exodus adds to the $3.9 billion in institutional investor money the firm lost over March, after two Airlie Funds Management clients, including superannuation fund HESTA, ended their mandates with the Magellan-owned Australian equities manager.

The outflows came in a month when tensions between Magellan and Nick Bolton, an activist fund manager, deteriorated. Mr Bolton wrote to unitholders at one Magellan strategy last month, asking them to join him to force the company to wind up the fund.

Read more here.

Oil headed for the biggest weekly drop since March as worries over the global economy clouded the demand outlook.

West Texas Intermediate edged higher toward $US83 a barrel, after closing at the lowest level since late August on Thursday. The US crude benchmark has tumbled almost 9 per cent for the week with deep losses on Wednesday and Thursday.

Oil lost ground this week following a poor print for US gasoline consumption, coupled with a rise in inventories of the motor fuel.

After soaring in the third quarter as OPEC+ leaders Saudi Arabia and Russia choked off supply and inventories fell, crude’s rally has been thrown into reverse in the last week and a half as macroeconomic concerns escalated. Still, both Moscow and Riyadh reaffirmed their commitment to output cuts through to the end of the year, with Saudi Arabia also hiking its official selling prices.