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A global sell-off drove the ASX to three-week lows as Australia’s success in containing the pandemic was eclipsed by lockdowns and surging numbers overseas.
Heavy falls on US and European markets left the local market nowhere to hide. The S&P/ASX 200 sank 89 points or 1.5 per cent by mid-session.
What’s driving the market
US and European stocks fell more than 3 per cent after France and Germany announced tough new restrictions. The S&P 500 tumbled 3.53 per cent as Wall Street slid towards its biggest weekly loss since March. The Dow Jones Industrial Average shed 943 points or 3.43 per cent. Germany’s main index lost 4.17 per cent. The pan-European Stoxx 600 gave up 2.95 per cent.
“News of tougher social restrictions in Germany and France has triggered a broad meltdown in risk assets with the market forced to reassess the prospect of the global economic recovery,” NAB Currency Strategist Rodrigo Catril said. “Until yesterday the market was travelling with the hope the improvement of health care services in dealing with the pandemic would prevent the introduction of severe lockdowns. At least in Europe, this dynamic has now changed with the rise in hospitalisation rates in Germany and France forcing politician to make a move. The question now is whether US states will follow shortly.”
Yesterday’s tentative ASX rebound proved a mere blip in a developing downtrend amid signs the virus once again threatens to strangle the global economy. This morning’s fall extended the ASX 200’s loss for the week to 3.5 per cent.
All 11 sectors declined. Falls ranged from 0.4 per cent for the defensive consumer staples sector to 3.2 per cent for the technology sector.
The market pared the worst of its losses as US index futures rebounded. S&P 500 index futures were recently up 33 points or 1 per cent.
Going up
Just three companies on the ASX 20 index of market heavyweights survived the bloodbath. Supermarket Coles topped the list with a rise of 1.4 per cent. Telstra gained 0.2 per cent. Fortescue Metals edged up less than 0.1 per cent after reporting record first-quarter iron ore shipments. This year’s Q1 total of 44.3 million tonnes was five per cent higher than the same period last year. Rivals BHP and Rio Tinto lost 2.1 and 1.8 per cent, respectively.
On the broader ASX 200, energy company Viva rallied 2.1 per cent, building products manufacturer Boral 2 per cent, Adbri 1.6 per cent and gambling group Tabcorp 1.3 per cent.
On a tough morning for companies releasing quarterly updates, Mesoblast was one of the few to advance. The biopharmaceutical firm’s share price rose 1.3 per cent on progress in bringing its lead product to market.
Advances outside the top 200 stocks included a 6.8 per cent bounce in wealth management services outfit HUB24, a 4.3 per cent advance in mining services firm Macmahon Holdings and a 2.2 per cent rise in homeware retailer Temple & Webster.
Going down
ANZ spearheaded a retreat in the banks, falling 2.6 per cent after reporting a 40 per cent slump in full-year statutory profit after tax to $3.58 billion. Westpac fell 1.9 per cent, NAB 1.4 per cent and CBA 0.4 per cent.
Gold’s reputation as a haven in times of strife took a dent. The local sub-sector tumbled 4.2 per cent in line with falls in the US as investors sold some of this year’s best performers to cover losses elsewhere. Westgold slid 8.9 per cent, Ramelius 6 per cent, Saracen Minerals 5.6 per cent and Northern Star 5.6 per cent. Sector giant Newcrest dropped 4.2 per cent to a four-month low despite meeting analyst expectations for the first quarter and reaffirming annual guidance.
JB Hi-Fi had been one of the year’s best performers, more than doubling since the March lows, but sagged 5.7 per cent today despite announcing sales grew 27.3 per cent last quarter. Department store Myer fell 4.2 per cent after Garry Hounsell announced his retirement as Chairman and a director.
There was no let-up for travel and tourism stocks, which have been under pressure all week. Webjet shed 4.2 per cent, Flight Centre 2.8 per cent and Qantas 2.8 per cent.
Other markets
Losses on Asian markets were mild relative to Europe and the US. China’s Shanghai Composite shed 0.9 per cent, Hong Kong’s Hang Seng 1.3 per cent and Japan’s Nikkei 0.8 per cent.
Oil bounced off a four-month low. Brent crude rallied 15 cents or 0.4 per cent to $US39.79 a barrel. Gold dipped $1 or less than 0.1 per cent to $US1,878.20 an ounce.
The dollar rose 0.1 per cent to 70.63 US cents.
What’s hot today and what’s not:
Hot today: Momentum traders were short of options this morning, but jumped aboard Aldoro Resources (ASX:ARN) after the mining minnow announced the launch of exploration at its Narndee project in WA. After reviewing historical data, Aldoro intends to carry out an electromagnetic survey next month and follow up with gravity, electromagnetic and geochemical programs to define drill targets for next year. The share price more than doubled, lately up 163 per cent at 25 cents.
Not today: SEEK (ASX:SEK) skidded more than 10 per cent after a US activist investment fund accused the employment marketplace of false listings on its Chinese platform. Short-seller Blue Orca Capital said Zhaopin’s platform was “inundated with fake postings by companies which were deregistered, in liquidation or flagged as ‘abnormal operations’ by Chinese authorities.” The US firm also claimed SEEK carried “a dangerous amount of debt”. SEEK shares had pared their loss to 5.9 per cent before they were suspended pending an announcement.
