A ‘risk-off’ morning saw the Australian share market reverse into the new week as US index futures reacted to a steep plunge in the price of oil.
The S&P/ASX 200 declined 52 points or 0.9 per cent to 5436, erasing much of Friday’s 71-point rally.
Market sentiment was rattled by a dramatic sell-off in crude. West Texas Intermediate briefly dived more than 20 per cent to US$14.47 a barrel this morning before trimming its loss to 15.5 per cent at US$15.44. The sell-off helped drag S&P 500 index futures down 12 points or 0.4 per cent.
The global oil market has been hit hard by business lockdowns and travel suspensions to contain the Covid-19 pandemic. West Texas Intermediate declined almost 20 per cent to an 18-year low last week as stockpiles backed up due to weak demand. The international benchmark, Brent crude, has been more resilient, this morning falling a modest 21 cents or 0.8 per cent to US$27.87.
Unsurprisingly, the energy sector led the Australian share market lower, falling 3.1 per cent. Caltex slumped 8 per cent following the collapse of a Canadian takeover proposal (see below for more). Beach Energy gave up 2.9 per cent, Santos 2.6 per cent and Woodside 2.3 per cent.
Ten of eleven sectors declined. Consumer staples fared best with a rise of 0.1 per cent. IGA wholesaler Metcash entered a trading halt to raise up to $330 million. Woolworths edged up 0.4 per cent and Coles 0.1 per cent.
The financial sector was hamstrung by another billion-dollar profit warning. NAB announced it expected a $1.14 billion hit to earnings from a combination of customer remediation costs, tax changes and problems in its life insurance wing. The share price slid 0.8 per cent. CBA shed 0.5 per cent and ANZ 0.6 per cent. Westpac crept up 0.1 per cent.
The pandemic’s heavy toll on air travel was underlined by news passenger traffic through Sydney Airport dropped by 96 per cent in the first half of this month. The company announced it had scrapped its interim dividend and secured $850 million in bank debt to strengthen its balance sheet. Shares in the airport fell 0.8 per cent.
A new ABS survey into the impact of Covid-19 showed around 3 per cent of the working population lost their jobs between early March and early April. Almost a quarter of workers were working fewer hours than usual, but 12 per cent were working more. Ninety-eight per cent of people surveyed were practising social distancing.
Asian markets were mixed. China’s Shanghai Composite and Hong Kong’s Hang Seng inched up 0.1 per cent. Japan’s Nikkei fell 0.9 per cent.
Gold faded $2.90 or 0.2 per cent this morning to $US1,695.90 an ounce.
The dollar retreated almost 0.4 per cent to 63.4 US cents.
What’s hot today and what’s not:
Hot today: Junior digital analytics firm RooLife Group (ASX:RLG) briefly quadrupled in value after announcing a deal with Jack Ma’s financial juggernaut Alipay. The Chinese mobile payment platform is the largest in the world, surpassing PayPal thanks to its huge Chinese user base. RooLife will supply marketing services to businesses looking to sell to Chinese shoppers. RooLife’s share price surged from 1.4 cents to 5.6 cents before paring its gain to 171 per cent.
Not today: Shares in fuel supplier and convenience store operator Caltex (ASX:CTX) slumped after a Canadian suitor abandoned its takeover plan, citing economic uncertainty caused by Covid-19. Caltex said discussions with Alimentation Couche-Tard had ended. The Canadian convenience store operator decided not to proceed with its conditional, non-binding and indicative proposal, but told Caltex it viewed the Australian company as a strong strategic fit for its business, hinting that a second tilt may follow once conditions have improved. Caltex’s share price sank 8 per cent.