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An extraordinary swing session saw the share market plunge to two-month lows before reversing more than 150 points as turmoil in the US infected Australian trade.
The S&P/ASX 200 dived 90 points in the first hour of trade, only to recover all of those losses plus Friday’s as US futures recovered from early weakness. By the close, the index had gained 55.6 points or 0.84 per cent.
What moved the market
Negative leads from the US, plus grim signals from US futures triggered heavy selling at the start of the day. The index slumped to 6517.2, its lowest level since December 1 before buyers stepped up. By the close, the index had swung through a 158-point trading range, more than eight times the range this time last week.
The reversal began around 11 am AEDT and continued until the close. The big miners set the early pace and were later joined by the banks and every sector except defensive utility companies.
“Today was the biggest positive intraday reversal since March 13 last year – and that was pretty close to signalling the ‘big’ low of 2020,” ThinkMarkets analyst Carl Capolingua said. “We closed over 2 percent off the lows. That’s the best way to think about the magnitude of buying that occurred today… The question now is, will US investors follow this lead tonight?”
The action was indicative of the skittish mood on financial markets as regulators assess the significance of retail traders using chat rooms to arrange speculative buying raids on stocks. Wall Street was rattled last week by the new phenomenon as retail traders took on professional investors at their own game. Hedge funds scrambled to close out losing positions at heavy losses after being caught in organised “short squeezes“. Wall Street’s three major indices shed between 3.3 and 3.5 per cent during a turbulent week.
The rush of retail money into the market sharpened concerns about stock valuations following the spectacular rebound since last March.
“We think that the vulnerabilities are there, and while we do not know precisely which catalysts might emerge or their exact timing (including some of the recent retail-oriented pushes against heavily shorted stocks), we suspect that they would derail the current rally and provide entry points that may be 10 per cent lower,” Citigroup’s chief US equity strategist Tobias Levkovich wrote.
US futures opened sharply lower this morning, but recovered as the Asian session progressed. S&P 500 futures were lately up 14 points or 0.4 per cent.
Winners’ circle
A day that began with 18 of the heavyweights of the S&P/ASX 20 in the red ended with 18 in the black. Goldminer Newcrest bounced 2.1 per cent from a ten-month low after gold broke its longest losing run in two years. The big three ore producers caught a bounce from an uptick in iron ore. Fortescue Metals gained 2.2 per cent, BHP 1.3 per cent and Rio Tinto 0.9 per cent.
The financial sector took until lunchtime to turn positive, but finished strongly. ANZ climbed 1.5 per cent, CBA 1.4 per cent, NAB 1.2 per cent and Westpac 0.4 per cent.
Health giant CSL put on 2.3 per cent, Aristocrat Leisure 2 per cent, Telstra 1.3 per cent and Afterpay 0.6 per cent.
Many of the day’s biggest winners mirrored trends in the US, where investors have targeted the most heavily-shorted stocks and recently turned their attention to silver. Heavily-shorted natural health retailer Blackmores bounced 8.9 per cent. Other shorted companies to advance were Mesoblast +5.9 per cent, InvoCare 1.9 per cent and A2M Milk +0.8 per cent.
Silver producers soared as a spike in the precious metal continued. Silver was lately up $1.85 or 6.9 per cent at US$28.76 an ounce. The metal surged at the end of last week amid speculation on the Reddit forum it was ripe for the sort of “short squeeze” that saw huge gains in GameStop and AMC.
“US$30 is now a logical short-term target, but above that, there’s not a great deal of resistance until $US37/oz,” Capolingua said.
Here, Silver Mines Ltd jumped 49 per cent, Equus Mining 37.5 per cent, Argent Minerals 59.7 per cent and Thomson Resources 73.1 per cent. Major producer South32 gained 3.9 per cent. GME Resources, which happens to share the same stock code as GameStop, climbed 22.1 per cent.
Link Administration Holdings rose 1.7 per cent after abandoning plans to acquire Pepper European Servicing. The company said it would prioritise the sale of its interest in Property Exchange Australia.
Doghouse
At the top end, the only companies to miss the rally were logistics specialist Brambles -0.2 per cent and supermarket Coles -0.3 percent. The speculative end of the market also trailled. The S&P/ASX Emerging Companies Index eased 0.02 per cent.
Crown Resorts declined 0.2 per cent after announcing the suspension of gaming, drinking and dining operations at its Perth casino in response to a five-day lockdown in parts of WA.
Other markets
Asian markets built as the session progressed. Hong Kong’s Hang Seng added 1.9 per cent, Japan’s Nikkei 1.36 per cent and China’s Shanghai Composite 0.1 per cent.
Oil reversed early losses. Brent crude rallied 35 cents or 0.6 per cent to $US55.39 a barrel. Gold climbed $13.10 or 0.7 per cent to $US1,863.40 an ounce.
The dollar rose 0.39 per cent to 76.5 US cents.
Hot today and not today
Hot today: Thinly-traded healthcare tech firm Oneview (ASX:ONE) more than doubled in value on news of a deal to enter the north American market with multinational Samsung. Oneview will offer American hospitals a “bundled solution for bedside digital services” delivered through Samsung tablets. The technology was deployed in four New York hospitals at the height of the pandemic. Shares in the company bolted from 4.2 cents to 13 cent before settling at 9.3 cents, a gain of 121.4 per cent.
Not today: Mining engineering and design firm Worley (ASX:WOR) tanked 10.9 per cent on news Covid delays impacted its first-half result. Chris Ashton, Chief Executive Officer, said, “Although the ongoing impacts of the pandemic are deferring some of our existing projects, we expect they will restart when economic circumstances improve. We’re still winning new work and we’re actively engaged in supporting our customers on their sustainability journey.”
