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The share market plunged to a fresh eight-month low after a wild session on Wall Street left traders nervous about holding over the Australia Day public holiday.
The S&P/ASX 200 declined 168 points or 2.37 per cent by the halfway mark. The benchmark sank below 7000 for the first time since mid-May last year. The decline pushed the local market towards its fifth loss in six sessions.
All 11 sectors retreated as the market briefly declined more than 3 per cent. Energy and bank stocks spearheaded losses. Consumer and health stocks fared best.
What’s driving the market
Wall Street rallied overnight, but the severity of intraday gyrations left investors rattled. The Nasdaq Composite swung from a loss of almost 5 per cent to a gain of 0.63 per cent.
The Dow and S&P 500 took similar paths to rises of just under 0.3 per cent. At their lows, the Dow was down more than 1,100 points and the S&P 500 off nearly 4 per cent.
The overnight action had the characteristics of a classic “capitulation” session, but market analysts said it was too soon to declare a turning point in the month-long market rout.
Wall Street is deep into a quarterly corporate earnings season and still has to hear this week from behemoths such as Apple, Tesla and Microsoft. A Federal Reserve rates meeting also looms large among risk events. The Fed meets tonight and will update the market on Thursday morning Australian time.
“It is premature to call a market bottom, but there was some classic capitulatory action Monday,” wrote author and sharkinvesting.com operator James Deporre.
“Action, like we had Monday, is a great start to a market turn, but the key now is some confirmation in the form of follow-through. Today is day one of a potential bottom, but more work is needed,” he added.
With Wall Street set to trade twice across the Australia Day holiday, investors decided discretion was the better part of valour. All 11 sectors retreated. All 20 heavyweights of the ASX 20 fell.
The dollar bounced after consumer prices increased more than expected last quarter. The Consumer Price Index rose 1.3 per cent, lifting the annual growth rate to 3.5 per cent. The trimmed mean favoured by the RBA also came in stronger than expected at 1 per cent. The report appeared to increase pressure on the Reserve Bank to plan rate increases this year.
“There’s no doubt inflation is becoming an issue given the 3.5% annualised growth rate printed today,” Peter Esho, co-founder of property investment manager Wealthi, said.
“It’s hard to see how the Reserve Bank of Australia walks away and we reiterate our view last week that interest rates will rise sooner than expected, probably in the second half of this year.”
Going up
The prospect of consolidation in the BNPL sector briefly lit a fuse under the share prices of Zip Co and Sezzle. Zip Co confirmed it was in acquisitions talks with its US-focussed rival. Sezzle said discussions about a possible merger were still “preliminary” and there was no certainty a transaction would occur.
Sezzle shares bounced 10.28 per cent off a 19-month low. Zip Co faded to a loss of 1.83 per cent as the wider market declined.
Tech firm Codan was the morning’s standout, climbing 16.85 per cent after a record first half. The communications and metal detector manufacturer said unaudited first-half sales increased by 32 per cent over the prior corresponding period to $257 million. Net profit was expected to rise 21 per cent to around $50 million.
Just four stocks besides Codan advanced on the ASX 200. A2 Milk Company bounced 7.07 per cent off yesterday’s four-year low. The morning’s other gainers were ResMed +0.55 per cent and Domain Holdings +0.42 per cent.
A 12.3 per cent increase in total sales across the last five months of 2021 lifted Myer 2.03 per cent. The department store said pre-Christmas sales were particularly strong.
At the speculative end of the market, a gas resource upgrade lifted Blue Energy 6.25 per cent.
Going down
Woodside and the heavyweight banks led the retreat. Woodside lost 3.66 per cent. NAB shed 3.59 per cent, ANZ 3.56 per cent, CBA 3.31 per cent and Westpac 3.03 per cent.
US payments giant Block fell 4.3 per cent to its lowest since completing its acquisition of Afterpay. Other notable tech falls included Appen -5.05 per cent and Xero -4.36 per cent.
Fortescue Metals dipped 2.83 per cent after reporting record half-year iron ore shipments. The Pilbara miner shipped 47.5 million tonnes last quarter for a half-year tally of 93.1 million tonnes, an increase of 3 per cent over 1H21.
A 7 per cent decline in quarterly production dragged Beach Energy down 6.71 per cent. The oil company attributed the decrease to natural field decline, maintenance and unplanned downtime.
A 3.4 per cent dip in like-for-like sales at the end of 2021 helped pull shoe retailer Accent Group down 3.32 per cent.
The S&P/ASX Emerging Companies Index swooned almost 5 per cent. The index of speculative companies has fallen almost 12 per cent in three brutal sessions.
Other markets
US futures fell sharply. S&P 500 futures were recently down 33 points or 0.77 per cent. Nasdaq futures dropped almost 1 per cent.
In Asia, the Asia Dow gave up 1.75 per cent, China’s Shanghai Composite 0.5 per cent, Hong Kong’s Hang Seng 1.82 per cent and Japan’s Nikkei 1.7 per cent.
Oil rebounded from its lowest in more than a week. Brent crude bounced 57 US cents or 0.65 per cent to US$86.83 a barrel.
Gold edged up 40 US cents or 0.02 per cent to US$1,842.10 an ounce.
