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A brutal sell-off sent the share market down 2.7 per cent following a tech-led rout on Wall Street.
The S&P/ASX 200 plunged 157 points in the first half hour and never looked like recovering, lately trading 166 points in the red. The decline pushed the index towards its worst one-day loss since mid-June and a third straight weekly deficit.
What’s driving the market
Wall Street dived overnight amid concerns about bloated valuations. A rotation out of the market-leading technology sector into value stocks quickly turned into a full-scale market rout. The tech-heavy Nasdaq Composite slumped 4.98 per cent, the S&P 500 shed 3.51 per cent and the Dow Jones Industrial Average 2.78 per cent. The S&P 500’s loss was its heaviest in three months.
The mood here was not helped by a steady decline in US index futures, a sign the correction may have further to run tonight. S&P 500 index futures fell 12 points or 0.4 per cent. Nasdaq futures sank 151 points or 1.3 per cent.
“There has been no obvious catalyst for the move,” NAB’s senior foreign exchange strategist Rodrigo Catril told the ABC. “US data releases have not been great, but not soft enough either to justify the move. So the overbought signal can now be used as a justification of a ‘I told you so’.”
The price to earnings ratio for Australian stocks is significantly lower than their US counterparts (around two-thirds), but our copycat market followed Wall Street. The technology sector briefly exceeded the Nasdaq’s decline, tumbling 5.7 per cent in the opening minutes before trimming its fall to 4.4 per cent. Appen and WiseTech both sank 7 per cent, Altium 5.7 per cent and Afterpay 5 per cent.
Going up
Just nine companies on the ASX 200 traded above break-even mid-morning, most of them gold miners or stocks with upside when the economy recovers. Seven West Media and SkyCity Entertainment both climbed 2.2 per cent, Star Entertainment 0.8 per cent and Corporate Travel 0.1 per cent.
Among gold miners, Gold Road Resources put on 0.2 per cent and Regis 0.1 per cent. Sector giant Newcrest dipped 0.5 per cent.
The dollar rebounded after falling 0.8 per cent overnight as money poured into the US dollar in a typical “flight to safety”. The Aussie was lately up 0.25 per cent at 72.72 US cents.
The S&P/ASX 200 VIX – the Australian equivalent of Wall Street’s famous “fear gauge” – rose a comparatively modest 7.4 per cent but never threatened to pass Tuesday’s peak. The US VIX shot up 26.5 per cent overnight to its highest level since late June.
Going down
All 11 Australian sectors declined, with falls ranging from 4.4 per cent (tech) to 1.2 per cent (utilities).
Toll road operator Transurban was the only stock on the S&P/ASX 20 index of heavyweights to avoid the selling, edging up 0.2 per cent. CSL sagged 3.4 per cent, BHP 3.1 per cent, NAB 2.7 per cent, ANZ 2.6 per cent, Westpac 2.5 per cent, Rio Tinto 2.4 per cent and CBA 1.8 per cent.
Among the heaviest hit were shopping centre operator Scentre Group and insurer Suncorp, falling 3.7 per cent and 3 per cent, respectively, on news they will be expelled from the ASX 20 blue-chip index to make way for Fortescue Metals and Coles Group. Coles and Fortescue declined 2.7 and 2.4 per cent, respectively.
Biotech Mesoblast faded 1.8 per cent after an independent review board recommended further studies on the company’s drug for treating acute respiratory distress syndrome due to Covid-19. The Data Safety Monitoring Board recommended continuing a Phase 3 trial on remestemcel-L after reviewing early trial results.
Other markets
Falls on Asian markets were modest. China’s Shanghai Composite dropped 1.2 per cent, Hong Kong’s Hang Seng 1.3 per cent and Japan’s Nikkei 0.9 per cent.
Oil dodged the worst of the bloodbath overnight, but weakened this morning. Brent crude retreated 36 cents or 0.8 per cent to $US43.72 a barrel. Gold rose $8.70 or 0.4 per cent to $US1,946.40 an ounce.
What’s hot today and what’s not
Hot today: The morning’s handful of winners included several stocks that benefitted from news they will be added to one of S&P Dow Jones Indices’ ASX benchmarks. Gold miner De Grey Mining (ASX:DEG) rose 2 per cent ahead of joining the S&P/ASX 300 on September 21. Artificial intelligence developer BrainChip (ASX:BRN) will join the S&P/ASX All Technology Index and added 1 per cent. Auckland International Airport (ASX:AIA) will join the ASX 200 and gained 2 per cent.
Not today: Online retailers that have enjoyed a golden run during the pandemic rebound copped a hiding as traders took profits on some of their best performers. Kogan (ASX:KGN) sank 10.3 per cent towards a one-month low despite news the high-flier will be added to the ASX 200 this month. Online marketplace Redbubble (ASX:RBL) retreated 8.1 per cent from yesterday’s record close.
