Australian shares fell for the third time in four sessions as investors balanced weak leads from Wall Street against fresh moves in China towards reopening.
The S&P/ASX 200 briefly halved an opening loss of almost 1 per cent after Bloomberg reported China will relax quarantine restrictions and scrap mass Covid testing.
The index fell away again in the closing auction to a loss of 62 points or 0.85 per cent.
Today’s changes take China closer to abandoning a strict zero-Covid policy that has caused civil unrest at home and supply-chain issues for the rest of the world. The latest pivot comes as trade figures underlined the impact of anti-virus controls on the domestic and global economy.
Here, growth stocks and energy producers weighed as recession fears grew in the US. Materials was the only sector to resist the downdraft.
What moved the market
The ASX 200 logged its heaviest loss in a month as a partial recovery faltered. The early pressure came from across the Pacific, where a growing number of business leaders anticipate a recession.
The S&P 500 fell 1.44 per cent overnight after the CEOs of JPMorgan, Goldman Sachs and Bank of America all warned of mounting pressures on the economy.
Adding to investor worries, the Australian economy grew less than expected last quarter, according to ABS data this morning. Gross domestic product increased by 0.6 per cent in the September quarter, down from growth of 0.9 per cent the previous quarter. Annual growth of 5.9 per cent fell short of the consensus forecast from economists of 6.3 per cent year-on-year.
The market temporarily pared its fall as China further relaxed Covid restrictions. Citing sources in the know, Bloomberg forecast health authorities would allow low-risk patients to quarantine at home, instead of centralised isolation facilities. Testing will be reserved for people at high risk.
“The reopening of the Chinese economy, expected after the government has sounded more receptive toward people’s demands, is one silver lining that can bring in positive momentum in the Aussie equity market,” Kunal Sawhney, chief executive of research group Kalkine, said.
“With China’s industry creating demand, miners could anticipate a better-than-expected month in December. For the benchmark index, China’s rebound and a positive government approach toward relaxing the lockdown can be a big stimulus,” he added.
The move away from zero-Covid was given fresh impetus by soft November trade data. Chinese imports and exports contracted sharply as lockdowns crippled domestic consumption and inflation undermined overseas demand. Exports shrank 8.7 per cent, more than twice what economists expected. Imports dropped 10.6 per cent.
The session’s best performers were coal miner Coronado +3 per cent, ore miner Champion Iron +2.75 per cent, health insurer NIB +2.41 per cent and public transport provider Kelsian +2.41 per cent.
Some of the heavily-weighted bulk metal miners rose as the promise of China reopening helped them move past yesterday’s speed bump. Ore prices hit their highest since mid-June on Monday as more Chinese cities watered down Covid testing and quarantine rules.
Fortescue Metals put on 2.27 per cent. BHP inched up 0.09 per cent. Rio Tinto faded 0.48 per cent.
Gold miners steadied with the metal price following back-to-back declines. De Grey firmed 1.62 per cent, Newcrest 1.12 per cent and Gold Road Resources 0.58 per cent.
Other miners to advance included Pilbara Minerals +2.17 per cent, Nickel Industries +1.51 per cent and Alumina +1.25 per cent.
Beach Energy slumped 9.89 per cent as the battle for control of Warrego Energy took another twist. Strike Energy announced it had increased its stake in Warrego to 19.9 per cent using share swap agreements. The swap arrangement makes Strike the largest shareholder in Warrego, complicating Beach’s bid to acquire the firm.
Strike started a bidding war for Warrego with an all-scrip bid, later topped by rival offers from Beach and Hancock Energy. Warrego shares eased 3.17 per cent. Strike gained 7.35 per cent.
Santos dropped 1.01 per cent in a tough market for energy producers after announcing it will double the size of a share buyback. The company will buy back an additional US$350 million of its shares on-market once an initial US$350 million buyback announced in August concludes.
Woodside lost 2.04 per cent after oil fell to its lowest since January 3. Brent crude settled US$3.33 or 4 per cent lower overnight at US$79.35 a barrel.
SkyCity Entertainment fell 2.7 per cent after AUSTRAC launched court proceedings alleging the company’s Adelaide casino failed to comply with anti-money laundering legislation. AUSTRAC Deputy CEO Peter Soros said investigations found systemic failures at the casino. SkyCity said it would consider the allegations before responding.
Growth stocks struggled amid concerns over the rising cost of borrowing. BrainChip slumped 6.62 per cent, Megaport 6.3 per cent and Technology One 6.08 per cent.
A generally downbeat session on Asian markets saw the Asia Dow lose 0.15 per cent, China’s Shanghai Composite 0.4 per cent and Japan’s Nikkei 0.6 per cent. Hong Kong’s Hang Seng added 0.15 per cent.
S&P 500 futures firmed seven points or 0.17 per cent.
Brent crude crawled eight US cents or 0.1 per cent off an 11-month low to US$79.43 a barrel.
Gold was little changed, off ten US cents or 0.01 per cent at US$1,782.30 an ounce.
The dollar eased 0.1 per cent to 66.92 US cents.