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CSL drops on raising, Qantas flags loss

plane in the sky after taking off from runway

The S&P/ASX 200 closed lower on Thursday, dropping 31.40 points, or 0.43% to 7295.70. CSL led the decline, down more than 8%, after announcing a $6.3bn capital raising to help fund its Vifor Pharma purchase. Qantas fell, by around 0.6%, after flagging a $1.1bn loss for the first half of the 2022 financial year on growing concerns for travel-related companies as Covid cases rise.

US markets

US markets jumped on the US Federal Reserve’s projected rate timetable of three increases over 2022. Treasury yields rose and the US dollar weakened.

Markets are betting the Fed will be able to combat rising prices without choking economic growth and recovery. The S&P 500 closed near its record high. The Nasdaq jumped almost 2.5%. The Dow Jones Industrial Average was up 380 points. The new forecasts also showed policy makers see another three rate increases in 2023 and two more in 2024.

Local news

Australia’s mid-year budget update revealed the nation’s deficit bill has improved by $7.4bn. Treasurer Josh Frydenberg warned the global pandemic would continue to “pose headwinds for domestic and global recovery from some time to come”.

Listed company IGO confirmed it will fully acquire Western Areas for $1.096bn after both companies were placed in a trading halt on Thursday. The deal will be funded from IGO's existing cash reserves and a new $900m senior-secured debt facility. IGO says it will pay $3.36 per Western Areas share in cash as part of the transaction.

Qantas is expecting to record a $1.1bn loss for the first half of the 2022 financial year. The dire result was due to the drastic reduction in flying from July to November, with capacity less than 30 per cent of pre-Covid levels, the aviation giant said on Thursday. Qantas is changing some of its international flight restart timings and has reported a drop in booking momentum since the Covid-19 omicron variant appeared. Cases continue to climb in Australia and other parts of the world.

CSL has completed the largest capital raising ever in Australian history, raising $6.3bn from institutional investors to support its $16.4bn purchase of Sweden's Vifor Pharma.

The ACCC said it would not oppose Woodside Petroleum's proposed acquisition of BHP Petroleum International, a wholly owned subsidiary of the mining giant.

Woodside and BHP Petroleum supply domestic natural gas in Western Australia, and export Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG), condensate and oil from Australia.

PointsBet has launched its online and mobile sports betting operations in Virginia, marking its eighth operational US state that also includes New Jersey, Iowa and Michigan.

Explosives maker Orica says earnings before interest and taxes from continuing operations for the full year is anticipated to increase with a much stronger first half than the prior year. Orica reported full year EBIT of $426.6m for FY21.

Broker upgrade

Macquarie analysts upgraded Corporate Travel Management to Outperform from Neutral, following its decision buy Helloworld's corporate travel and entertainment businesses for $175m.

RBA monetary policy update

Reserve Bank of Australia governor Philip Lowe says the central bank’s $4bn-a-week bond buying program could end as soon as February, should spending and jobs growth come in better than expected over the summer break.

Dr Lowe also said the best way to address the country’s housing affordability crisis was to build more homes, as he again played down fears that inflationary pressures could trigger rate hikes as early as next year.

The RBA governor has said for some time that the RBA would reconsider the pace of its quantitative easing, or QE, when it next meets in the New Year, but in a speech this morning in Wagga Wagga, NSW, he flagged the central bank may move more quickly to rein in an extraordinary monetary policy measure introduced to help the economy through the Covid-19 health crisis.

Australia's largest bank, Commonwealth Bank, raised fixed lending rates for investors and owner occupiers. Principal and interest repayments over one to five-year periods will lift between 0.05 per cent on one-year loans and up to a 0.25 per cent hike on four-year fixed loans.

China

China is likely to set a floor for economic growth of 5% next year as it tries to balance a desire to rein in the real-estate sector with the need for stability in a year of crucial political change.

That’s the consensus among economists after year-on-year growth weakened to below that threshold in the second half of this year, According to Bloomberg. The target would represent a sizeable drop from pre-pandemic growth rates that were closer to 7%, and reflect expectations that Beijing will persist with its efforts to reduce its reliance on real estate even at the cost of slower growth.


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