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A volatile morning saw the share market spiral 90 points to a two-month low before recouping all of its losses.
The S&P/ASX 200 reached mid-session 16 points or 0.25 per cent ahead after earlier tumbling to its weakest level since December 1. The index bottomed at 6517.2 and at its low had given up more than 300 points or 4.5 per cent in four sessions. By mid-session it had recovered to 6624.
The initial dive came as negative US futures signalled ongoing concerns over the speculative mania that triggered Wall Street’s worst week since October. S&P 500 futures opened firmly weaker before trimming their fall to 12 points or 0.3 per cent.
What’s driving the market
The mood on global markets soured last week as Wall Street was rattled by the new phenomenon of retail traders banding together to take on professional investors at their own game. Hedge funds scrambled to close out losing positions at heavy losses after being caught in organised “short squeezes“. Wall Street’s three major indices shed between 3.3 and 3.5 per cent over a week of turbulent trade.
“Markets remain nervous that hedge funds that are short will be forced to sell other assets to cover losses, while the wave of retail money is also prompting debate around equity valuations,” NAB Director of Economics Tapas Strickland said. “Importantly the SEC [Securities and Exchange Commission – the US regulator] does not appear to be stepping in the way of this wave of money chasing shorted stocks, suggesting in the near-term this phenomenon is set to continue.”
Selling here was broad, with all 11 sectors declining at the open before the miners, Woolworths and CSL led a recovery. Energy stocks and some of the banks were among the lingering lunchtime drags.
Going up
Many of the morning’s biggest winners mirrored trends in the US, where investors have targeted the most heavily-shorted stocks and recently turned their attention to silver. Heavily-shorted funeral company InvoCare bounced 3.4 per cent. Other shorted companies to advance were Blackmores +4.8 per cent, A2M Milk +1.4 per cent and Mesoblast +5 per cent.
Silver producers soared as a spike in the precious metal continued. Silver was lately up $1.43 or 5.3 per cent at US$28.34 an ounce. The metal surged at the end of last week amid speculation on the Reddit forum it was ripe for the sort of “short squeeze” that saw huge gains in GameStop and AMC in recent weeks.
Here, Silver Mines Ltd jumped 28.6 per cent, Equus Mining 28.1 per cent, Argent Minerals 21.1 per cent and Thomson Resources 42.3 per cent. Major producer South32 gained 3.7 per cent. GME Resources, which happens to share the same stock code as GameStop, climbed 23.5 per cent.
At the top end of the market, gold miner Newcrest put on 2.1 per cent. Ore producer Fortescue Metals added 1.6 per cent, Rio Tinto 1 per cent and BHP 0.9 per cent. Aristocrat Leisure gained 2.5 per cent, CSL 1 per cent and Wesfarmers 0.9 per cent.
Link Administration Holdings rose 2.3 per cent after abandoning plans to acquire Pepper European Servicing. The company said it would prioritise the sale of its interest in Property Exchange Australia.
Going down
Energy stocks continued to be depressed by concerns about demand as vaccine rollouts fall behind schedule. Woodside Petroleum gave up 0.7 per cent. Santos shed 0.9 per cent and Oil Search 1.3 per cent.
Not all of the banks caught the mid-morning rebound. NAB and Westpac fell 0.3 per cent. ANZ gained 0.4 per cent and CBA 0.1 per cent. Macquarie Group shed 0.1 per cent.
Other heavyweight drags included Transurban -0.5 per cent and Afterpay -0.3 per cent.
The speculative end of the market bore the brunt of the selling. The S&P/ASX Emerging Companies Index fell 0.6 per cent.
Crown Resorts declined 1.5 per cent after announcing the suspension of gaming, drinking and dining operations at its Perth casino in response to a five-day lockdown in parts of WA.
Other markets
Key Asian markets advanced. Hong Kong’s Hang Seng added 0.62 per cent and Japan’s Nikkei 0.9 per cent. China’s Shanghai Composite dipped 0.17 per cent.
Oil reversed early losses. Brent crude edged up a cent or less than 0.1 per cent to $US55.05 a barrel. Gold climbed $3 or 0.2 per cent to $US1,853.30 an ounce.
The dollar rose 0.26 per cent to 76.4 US cents.
What’s hot today and what’s not
Hot today: Thinly-traded healthcare tech firm Oneview (ASX:ONE) more than doubled in value on news of a deal to enter the north American market with multinational Samsung. Oneview will offer American hospitals a “bundled solution for bedside digital services” delivered through Samsung tablets. The technology was deployed in four New York hospitals at the height of the pandemic. Shares in the company bolted from 4.2 cents to 13 cent before settling at 10.5 cents, a gain of 150 per cent.
Not today: Mining engineering and design firm Worley (ASX:WOR) tanked 15.4 per cent on news Covid delays impacted its first-half result. Chris Ashton, Chief Executive Officer, said, “Although the ongoing impacts of the pandemic are deferring some of our existing projects, we expect they will restart when economic circumstances improve. We’re still winning new work and we’re actively engaged in supporting our customers on their sustainability journey.”
