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The share market tilted towards a second straight loss after the Federal Treasurer forecast a record deficit and the biggest economic challenge in a century.
The S&P/ASX 200 reached mid-session 11 points or 0.2 per cent in the red after a mid-morning rally faded.
Real estate and consumer discretionary stocks led a fleeting recovery after Treasurer Josh Frydenberg outlined enormous challenges ahead, but declared the national debt burden “manageable”. The Treasurer expects the budget to plunge $184.5 billion into the red at the end of this financial year as the government spends its way out of the COVID-19 economic crash. Unemployment is expected to peak at 9.25 per cent next quarter and GDP to contract 2.5 per cent over the financial year.
“Australia is experiencing a health and economic crisis like nothing we have seen in the last 100 years,” he said. “Our economy has taken a big hit and there are many challenges we confront.”
The share market was underwater when the Treasurer started his 11 am EST address and higher when he finished, but slowly gave way to a second down-wave. A negative close this afternoon would end a run that has seen the index reverse the previous day’s direction each day for 11 sessions. The index slumped 81 points or 1.3 per cent yesterday as a record rise in coronavirus cases in Victoria compounded a tech sell-off in the US. Victoria this morning announced 403 new cases, down from a record 484 cases on Tuesday.
A mixed market saw gains in REITs, consumer stocks and industrials partially offset declines in miners and the big banks. Property group Stockland climbed 3.7 per cent, Charter Hall Group 3.3 per cent and Scentre Group 2.4 per cent. Coca-Cola Amatil jumped 4.8 per cent after restating earnings.
Santos rose 1.1 per cent on news of record half-year production. Cooper Energy had a record quarter for both revenue and production, lifting the share price 1.2 per cent.
Gold miner Newcrest burst to a nine-month high after hitting its full-year production guidance. The share price was last up 1.3 per cent, aided by a near nine-year peak in the precious metal overnight. Gold settled $21.20 or 1.2 per cent higher at US$1,865.10 an ounce, a level last seen in September 2011.
The index’s decline was anchored by weakness among several market heavyweights. Rio Tinto slid 1.7 per cent, Commonwealth Bank 1 per cent, CSL 0.8 per cent, Woolworths 0.8 per cent and BHP 0.7 per cent.
Business confidence suffered its biggest hit since the GFC last quarter. NAB’s survey showed confidence deteriorated for a fourth straight quarter, falling 15 points over the three months to the end of June, the biggest setback since 2009.
A mixed morning on Asian markets saw China’s Shanghai Composite down 1.3 per cent and Hong Kong’s Hang Seng up 0.3 per cent. Japanese markets were closed for a public holiday. S&P 500 index futures were recently down two points or less than 0.1 per cent.
Oil edged higher this morning. Brent crude rose four cents or 0.1 per cent to $US44.33 a barrel.
The dollar was steady at 71.38 US cents.
What’s hot today and what’s not:
Hot today: Shares in Traka Resources (ASX:TKL) briefly quintupled after the company secured the rights to mine gold at Galaxy Resources’ Mt Cattlin project in WA. With Galaxy (ASX:GXY) focussed on mining lithium and other pegmatite minerals, Traka exchanged its 20 per cent interest in the Mt Cattlin North tenements for the rights to 100 per cent of the gold and other minerals except pegmatites on the tenement. With gold near a record high, Traka believes several zones in the project now present attractive opportunities. The share price shot from one cent to 5.3 cents before easing back to 3.8 cents, still a gain of 280 per cent.
Not today: The challenging environment for raising capital was underlined by news medicinal cannabis company Cann Group (ASX:CAN) offered shares at a 51.2 per cent discount to raise $24.3 million in working capital. Not surprisingly, the capital raising was oversubscribed. Retail investors will have an opportunity to follow institutional and sophisticated investors buying at the cap raising price of 40 cents. The looming flood of discounted new shares has dragged the share price from 82 cents before the raising announcement to 49.5 cents this morning. The funds will go towards expanding the company’s facility in Mildura.
