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  • Fed’s Powell to Address Dire Outlook, Need for Stronger Support

    Fed’s Powell to Address Dire Outlook, Need for Stronger Support(Bloomberg) — Jerome Powell and his Federal Reserve colleagues are staring down the possibility of mass bankruptcies and long-lasting unemployment unless there’s a more concerted government effort to shield the U.S. economy from the impact of the coronavirus pandemic.That’s the context in which the Fed chair will speak Wednesday at 9 a.m. during a virtual event with the Peterson Institute for International Economics in Washington, though he may be loath to give clear hints on future monetary policy, with the central bank’s next rate decision still a month out.“Powell is likely to push back on adopting negative rates, reinforce his willingness to continue using balance sheet tools, and lean on fiscal policy makers to do more,” said Neil Dutta, head of economics at Renaissance Macro Research in New York.Powell and his colleagues on the central bank’s Federal Open Market Committee have already cut their benchmark interest rate to nearly zero, engaged in open-ended bond buying and begun rolling out emergency lending programs as U.S. unemployment has soared to levels not seen since the 1930s Great Depression.But they’ve also insisted more can and probably will need to be done, both by the central bank and by lawmakers who have already backed $2 trillion in virus relief. Democrats on Tuesday proposed a further $3 trillion in aid, though the plan has little chance of quickly gaining traction with President Donald Trump or Senate Republicans.That still leaves a question about what future fiscal measures might look like, and whether anything more will be on tap for the FOMC’s next scheduled meeting on June 9-10.Negative RatesInvestors have begun to speculate that the Fed may opt to take its benchmark overnight rate into negative territory, following in the footsteps of central banks in Europe and Japan. Implied yields on futures contracts linked to the federal funds rate have gone below zero in recent days.Fed officials have long maintained that they are not keen on imitating their Japanese and European counterparts, however, and continue to argue against adopting negative rates in the U.S.“My colleagues on the Federal Open Market Committee have been pretty unanimous in saying we don’t think that’s likely,” Minneapolis Fed President Neel Kashkari said Tuesday during a virtual event streamed on YouTube. “There are other tools we would go to first.”Yield Curve ControlMore likely would be a move toward a so-called yield-curve control policy. That would entail the central bank setting a target for yields on longer-term Treasury securities in addition to its overnight benchmark, and buying or selling Treasuries as needed to hit the target.It’s something the Bank of Japan has implemented successfully in recent years, and something that Fed officials had been discussing as a possible crisis measure to consider down the road, before the coronavirus outbreak began.The Fed is already buying lots of Treasuries. Since mid-March, it’s added about $1.5 trillion of them to its balance sheet. Initially, the stated rationale was to restore liquidity in financial markets after investor panic seized them up. Now, as market function improves, the Fed will probably continue buying, but with the aim of keeping long-term yields low — harking back to the so-called quantitative easing programs it relied on last time its benchmark rate was at the zero bound.Forward GuidanceAn eventual shift toward yield-curve control or a more structured approach to bond buying could ultimately also be accompanied by clearer guidance on what would drive the Fed’s decision-making. The central bank’s current guidance is that its benchmark rate will remain pinned near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”Some, like former New York Fed officials Krishna Guha and Simon Potter, are calling for the FOMC to be more specific. They advocate a pledge to keep rates at zero at least until the unemployment rate has fallen back down to 4%.“We would like to see a very strong lean in to enhanced forward guidance and regular open-ended QE,” Guha, now vice chairman of Evercore ISI in Washington, wrote Tuesday in a note to clients.“Our baseline expectation is a more moderate lean that does not rule out negative rates in all states of the world and stops short of embracing our own aggressive forward guidance proposals or a specific June timeline for delivering new policy settings.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Why CBA, CSR, Fortescue, & Northern Star shares are pushing higher

    It has been another disappointing day of trade for the S&P/ASX 200 Index (ASX: XJO). In late morning trade the benchmark index is down 1.5% to 5,321.5 points.

    Four shares that have not let that hold them back are listed below. Here’s why they are pushing higher:

    The Commonwealth Bank of Australia (ASX: CBA) share price is up 1% to $60.34. This follows the release of the banking giant’s third quarter update this morning. Commonwealth Bank delivered cash net profit from continuing operations of $1.3 billion during the quarter. This was a 41% reduction on the average quarterly cash net profit it achieved in the first half. The main drag on its result was an additional credit provision of $1.5 billion for the potential longer term impacts of COVID-19. This may have been lower than many were expecting.

    The CSR Limited (ASX: CSR) share price is up a further 1% to $3.76. The building products company’s shares have been pushing higher since the release of its full year results on Tuesday. Although CSR delivered a 25.8% decline in underlying net profit to $134.8 million, this was better than the market was expecting. In addition to this, CSR revealed that trading conditions have been relatively steady during the first six weeks of FY 2021.

    The Fortescue Metals Group Limited (ASX: FMG) share price has climbed over 1% to $11.85. The catalyst for this appears to have been a rise in the iron ore price overnight. According to Commsec, the spot iron ore price rose by a decent 1.3% to US$86.69 a tonne.

    The Northern Star Resources Ltd (ASX: NST) share price has pushed 2% higher to $13.43. Investors have been buying Northern Star and other gold miners today due to the broad market selloff and a rise in the price of the precious metal. At the time of writing the S&P/ASX All Ordinaries Gold index is up by a solid 1.1%.

    Missed these gains? Then don’t miss these dirt cheap shares which just got even cheaper during today’s market weakness.

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post Why CBA, CSR, Fortescue, & Northern Star shares are pushing higher appeared first on Motley Fool Australia.

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  • ASX retail rental war gathers pace

    The rental war between landlords and retailers has gathered pace as Premier Investments Limited (ASX: PMV) became the latest retailer to reopen stores. But the retailer, which is Australia’s biggest retail tenant, says it will pay rent based on a proportion of gross sales.

    ASX retail shares seek rent relief 

    Premier Investments is among a plethora of Australian retail shares that have sought rent relief during the coronavirus pandemic. Accent Group Ltd (ASX: AX1) is also seeking for rent to be calculated by reference to a percentage of sales. 

    Premier Investments has said it’s prepared to walk away from stores if landlords don’t play ball. Around 70% of Premier’s leases are due to expire in 2020 or are already in holdover. The company has refused to pay rent since it shut its stores in March, although it announced the reopening of stores from Friday. 

    Premier Investments experienced a 74% fall in sales in the 6 weeks to 6 May. Retail store sales were down 99%, however, online sales have increased by 99%. Accent Group has also seen a surge in online sales which quadrupled in the period during which stores were closed. 

    Accent Group has concluded successful rental negotiations with landlords of more than 100 stores, but says if it is unable to achieve an outcome it considers fair it will close stores. This has already occurred with one major landlord, with Accent Group giving notice to exit 28 stores at lease expiry over the next 6 months. 

    ASX REITs also suffering 

    Landlords are not escaping unscathed. This week, Scentre Group (ASX: SCG) said it would not be paying its interim dividend due to uncertainty around the pandemic and the timing of operating cash flows. Customer visitation to the Scentre shopping centres fell to a low of 39% of the previous year’s levels in April and May. 

    At Scentre’s properties, 57% of retailers representing 70% of gross lettable area are open, with more retailers to reopen over coming weeks. The shopping centre operator is targeting at least a 25% decrease in centre operating expenses during the pandemic period. 

    Vicinity Centres (ASX: VCX) reported that as of 4 May, 50% of stores in its shopping centres were open, representing 65% of gross lettable area. Vicinity withdrew earnings and distribution guidance in March given the uncertainty around the impact of COVID-19 on operations. 

    Vicinity is negotiating with retailers whose businesses have experienced a downturn and accelerating temporary arrangements to assist them through the situation. CEO Grant Kelley said, “inevitably, our income at this time is being impacted negatively, however we agree with the Federal Government’s sentiment that landlords and tenants have a shared responsibility to tackle the challenges brought about by these unprecedented times.”

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

    Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.

    Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.

    See the 5 stocks

    Returns as of 7/4/2020

    More reading

    Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended Accent Group and Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post ASX retail rental war gathers pace appeared first on Motley Fool Australia.

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