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Shares suffered their sharpest loss of the new year as the local market played catch-up with heavy overseas falls.
The ASX 200 dived 97 points or 1.4 per cent to 6993, erasing more than a week’s gains as it tilted towards its biggest slump since a 121-point fall on New Year’s Eve. Investors returned from the Australia Day long weekend to find world markets in freefall as the coronavirus outbreak prompted travel bans and a suspension of some business operations in China.
The S&P 500 in the US shed 1.57 per cent overnight, its largest one-day loss since October. The Dow lost 454 points. While US index futures rallied this morning, Asian markets continued to lose ground. South Korea’s benchmark index lost 2.8 per cent as trade resumed after Lunar New Year holidays. Japan’s Nikkei gave up 0.88 per cent. S&P 500 index futures bounced 12 points or 0.4 per cent. Chinese and Hong Kong markets remained closed for holidays.
Resource stocks led the retreat as traders factored in the impact of a Chinese economic slowdown on demand for raw materials. BHP tanked 3.7 per cent to a three-week nadir, Rio Tinto 3.6 per cent and Fortescue 7.5 per cent.
Online travel agent Webjet was the index’s worst performer, sliding 10.4 per cent ahead of an expected profit hit from reduced travel to China. The company was last month the subject of takeover speculation. Other travel and tourism operators took a hit. Qantas fell 4.8 per cent, Sydney Airport 1.8 per cent, Auckland International Airport 3.7 per cent, Corporate Travel Management 5.5 per cent, Star Entertainment Group 5.1 per cent, Flight Centre 3.8 per cent and Crown Resorts 4.4 per cent.
Oil stocks were cruelled by a three-month low in crude. Oil Search sagged 7.8 per cent after its December production figures fell short of some predictions. Cooper Energy and Beach Energy dropped 2.6 per cent, Santos 2.4 per cent and Woodside 2.9 per cent. Brent crude futures slid another 27 cents or 0.5 per cent this morning to $US59.05 a barrel.
The big four banks all lost between 1 and 1.8 per cent. Treasury Wine Estates, which has significant sales in China, declined 5.9 per cent.
Gold and health stocks offered the only refuges. A six-year high in gold overnight helped lift Saracen Mineral 3.3 per cent, Evolution Mining 3.2 per cent and Gold Road Resources 2.8 per cent. Sector heavyweight Newcrest faded to a mid-session loss of 0.1 per cent. Gold edged up $2.90 or 0.2 per cent this morning to $US1,580.30 an ounce.
Health sector leader CSL hit an all-time high before trimming its gain to 0.7 per cent. The company formerly known as Commonwealth Serum Laboratories is a major player in treatments for influenza and other viruses. ResMed put on 1.6 per cent. Cochlear declined 0.8 per cent.
The dollar eased as last month’s bushfires and drought helped send business confidence to a six-year low. NAB’s Business Confidence Index weakened two points to -2 in December, the worst reading since mid-2013. The dollar dipped a tenth of a cent to 67.52 US cents.
What’s hot today and what’s not:
Hot today: new highs were scarce this morning, but defence contractor Electro Optic Systems (ASX: EOS) climbed to a fresh peak after announcing plans to acquire an American space communications business. EOS subsidiary EOS Defense Systems USA will acquire Audacy Corporation, a satellite communications business, for $10 million in cash. CEO Dr Ben Green said the acquisition was a logical step towards the company’s plan to enter the space communications market. Shares surged 5.7 per cent to a record $10.51.
Not today: shares in tourism retailer AuMake (ASX: AU8) hit a record low after the company warned of an impact from a Chinese travel ban. The company specialises in selling Australian and Kiwi products to Asian tour groups through retail outlets in Australasian tourist hubs. Chinese authorities ordered Chinese travel agents to suspend all overseas tour groups and flight and hotel packages, cutting off AuMake’s principal customer base. Shares slumped 2.3 cents or 20 per cent to 9.2 cents.
