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The share market’s three-session winning run came to a crashing halt as a broad sell-off drove the benchmark to its lowest in nearly a month.
The S&P/ASX 200 dived 134 points or 1.89 per cent to a level last seen on April 21.
All 11 sectors declined. All 20 of the market juggernauts of the S&P/ASX 20 retreated. Iron ore miners were pressured by a Chinese threat to ramp up domestic production. Fintech EML Payments briefly crashed more than 50 per cent after revealing regulatory problems in Europe.
What’s driving the market
“The ASX 200 is trading sharply lower today, tracking an overnight dip in Wall Street. While the energy sector is under pressure amid a dip in oil prices, iron ore miners slumped after China said it will step up domestic iron ore production and widen import channels,” Kalkine Group CEO Kunal Sawhney said.
Today’s collapse followed a late sell-off on Wall Street. The Nasdaq Composite finished 0.56 per cent in the red after being up as much as 0.8 per cent. The S&P 500 lost 0.85 per cent. Analysts struggled to identify a trigger, but pointed to lingering concerns about inflation. The US dollar index fell to its lowest level in four months.
“Stocks have taken a step lower later in the session, not helping the case of the USD, the DXY [dollar index] moving down to its lowest level in four months. Oil prices did an about face, earlier supported before heading lower on hopes of a US-Iran nuclear deal,” NAB Senior Economist and Director David de Garis said.
“Late-day weakness in this sector [tech] is becoming commonplace adding to fears it could be headed for a longer and more pronounced period of consolidation than expected,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC.
Soft US futures stifled any hope of an ASX bounce this morning. S&P 500 futures declined 11 points or 0.28 per cent.
Consumer optimism faded a little this month, but remained at historically elevated levels. The Westpac-Melbourne Institute index of consumer sentiment dropped 4.8 per cent to 113.1 from its highest level in 11 years.
“While a 4.8% fall is always going to attract attention, we should put this result in perspective,” Westpac Chief Economist Bill Evans said. “It is still the second highest print for the Index since April 2010.”
Wages increased slightly more than expected over the first three months of the year. The Wage Price Index climbed 0.6 per cent over the quarter, versus expectations for growth of 0.5 per cent. The annual growth rate was 1.5 per cent.
“After two quarters of minimal growth, wages rose 0.6% for the second successive quarter. This quarter saw a return to regular patterns of wage growth for the time of the year,” Michelle Marquardt, Head of Prices Statistics at the Australian Bureau of Statistics, said.
Going up
Artificial intelligence software-maker Appen was the standout on a morning when winners were scarce. The share price bounced 13.17 per cent off two-year lows after the company announced a business restructure and reaffirmed earnings guidance. The company will also change its reporting currency to US dollars to reflect the fact more than 90 per cent of revenue is generated in US dollars.
Nuix was the morning’s other star turn, rising another 4.57 per cent following yesterday’s Investor Day update.
United Malt Group overcame early weakness after reporting half-year results slightly above guidance. Covid lockdown restrictions helped drag revenue down 11 per cent to $590 million. The company said volumes had recovered since March to around 95 per cent of pre-Covid levels. The share price climbed 2.49 per cent.
Kathmandu inched up 0.34 per cent after announcing Michael Daly will take over from Xavier Simonet as CEO and Managing Director.
Going down
Sector declines ranged from 0.88 per cent for defensive REITs up to 2.79 per cent for energy stocks after crude wobbled overnight. Oil Search led the retreat in oil companies, falling 3.55 per cent. Santos dropped 2.99 per cent. Woodside shed 2.44 per cent. The heavyweight materials and financial sectors dropped 2.77 and 1.78 per cent, respectively.
“In a latest development, China has decided to boost iron ore production to reduce its dependence on Australian imports,” Kalkine’s Mr Sawhney said. “Adding iron ore to plenty of curbs already in place on Australian commodities may turn out to be a risky move for China, given record-high prices of iron ore and the country’s dependence on Australia’s imports.”
Rio Tinto sank 4.03 per cent, BHP 3.09 per cent and Fortescue Metals 3.5 per cent. CBA shed 2.17 per cent, ANZ 1.44 per cent, NAB 1.63 per cent and Westpac 1.3 per cent.
EML Payments picked the wrong day to reveal its Irish subsidiary had been contacted by the Central Bank of Ireland over concerns about anti-money laundering and counter-terrorism financing and risk control and governance. The bank said it was “minded to issue directions”. EML said directions, if issued, would impact its European operations. The share price briefly halved before paring its fall to 40.39 per cent.
An optimistic outlook helped investors look beyond an 86 per cent collapse in full-year revenue at online travel agent Webjet. Revenue dived from $266.1 million in FY2020 to $38.5 million this year as Covid restrictions crushed international travel. The company said it was well positioned to harvest pent-up demand when borders reopened. The share price eased 0.64 per cent.
St Barbara probed fresh 14-month lows following yesterday’s production downgrade, falling 6.43 per cent.
Other markets
The Asia Dow declined 0.77 per cent. China’s Shanghai Composite dropped 0.24 per cent. Japan’s Nikkei shed 1.49 per cent. Trade in Hong Kong was suspended for the Buddha’s Birthday public holiday.
Oil added to overnight weakness. Brent crude slid 71 cents or 1.06 per cent to US$67.98 a barrel. Gold eased $1.30 or 0.07 per cent to US$1,866.70 an ounce.
The dollar hovered just below 78 US cents following overnight weakness in the greenback. The Aussie dipped 0.01 per cent to 77.87 US cents.
