Join our daily newsletter At The Bell to receive exclusive market insights
The wild reversals for Australian shares continued after a warning of 20 per cent unemployment in the US sent US index futures sharply lower.
The ASX 200 slumped 255 points or 4.8 per cent, reversing almost all of yesterday’s 5.8 per cent record rally. The local market has been unable to put together back-to-back advances since this global meltdown commenced in the third week of February.
In these abnormal times, overnight events on Wall Street have been quickly superseded by more immediate news. The S&P 500 jumped 6 per cent overnight, but traders were more interested in an 82-point or 3.3 per cent dive in futures following a report Treasury Secretary Steven Mnuchin told Republican senators unemployment could hit 20 per cent unless the government provides immediate financial assistance to small and medium-sized businesses. Mnuchin also reportedly said the economic impact from the Covid-19 virus could be worse than the 2008 financial crisis. A separate report said the government anticipated the pandemic could last 18 months and cause significant shortages.
In a classic “risk-off” pattern, local traders bought defensive sectors and sold the banks, oil companies and tech stocks. The gold index rose 5.5 per cent as Gold Road Resources surged 15.9 per cent, Saracen Mineral 11.4 per cent and St Barbara 11 per cent.
Consumer staples extended yesterday’s rally as IGA wholesaler Metcash jumped 4.4 per cent to its highest level since June 2018, Coles hit a record high before easing 1.6 per cent and Woolworths traded flat.
Utilities attracted a bid. APA Group rallied 5.5 per cent, Spark Infrastructure 4.1 per cent and AusNet 1.8 per cent.
Outside those sectors, the market was the now-familiar sea of red. Mid-session, an eighth of companies listed on the ASX 200 were down more than 10 per cent. Prominent victims included Afterpay -24.8 per cent, Qantas -11.5 per cent, Star Entertainment Group -10.3 per cent and Suncorp, -11.1 per cent. Qantas shares fell almost 20 per cent at one point after the government’s travel advice was raised to level 4: do not travel abroad.
The tech boom looks well and truly over, with the sector falling 7.9 per cent this morning to its lowest level since October 2017. While Afterpay took the biggest hit, Bravura Solutions tanked 10.2 per cent, Nanosonics 7.8 per cent and Altium 6.4 per cent.
The reprieve for the big four banks lasted 24 hours before yesterday’s snap rally gave way to more heavy falls. CBA shed 5.4 per cent, ANZ 7.7 per cent, NAB 5 per cent and Westpac 5.6 per cent.
Oil’s four-year low dragged the energy sector down 6.2 per cent. Oil Search dived 15.5 per cent, Santos 8.4 per cent and Woodside 4.1 per cent. Brent crude bounced 20 cents or 0.7 per cent this morning to $US28.93 a barrel after falling 4.4 per cent overnight.
Asian markets were mixed. China’s Shanghai Composite rose 0.59 per cent, Hong Kong’s Hang Seng dropped 0.25 per cent and Japan’s Nikkei gained 1.34 per cent.
Gold rallied $9.80 or 0.6 per cent this morning to $US1,535.60 an ounce.
The dollar floundered around a 17-year low, lately up 0.1 per cent at 60.04 US cents.
What’s hot today and what’s not:
Hot today: The only winners in this dire market have been companies chasing the pandemic dollar. With hand sanitisers flying off shelves, lifestyle brand Wellness and Beauty Solutions (ASX: WNB) announced it had launched its own anti-bacterial range and had an order already from Chemist Warehouse. The news lifted the share price an extraordinary 175 per cent. Shares in biotech Aeris Environmental (ASX:AEI) jumped after the company announced testing of its Aeris Active disinfectant showed it killed 99.99 per cent of a member of the coronavirus family within 60 seconds. The company also said it was experiencing unprecedented demand for its products. The share price jumped 50 per cent.
Not today: Investors got an ugly insight this morning into the impact of the collapse in crude prices on oil companies. Oil Search (ASX:OSH) announced it was suspending or deferring all discretionary activities within its control to minimise forward expenditure. The result is a cut in investment expenditure to a range of US$440 – $530 million from previous guidance of US$710 – 845 million. Managing Director Keiran Wulff said, “These unprecedented times require us to take immediate and decisive steps to position us for a potentially extended period of lower oil prices and business uncertainty.” The share price sagged 15.5 per cent to a 15-year low.
