Join our daily newsletter At The Bell to receive exclusive market insights
A second day of losses drove the ASX towards back-to-back declines and a two-week low as surging Covid cases raised doubts about the global recovery.
The S&P/ASX 200 sank 97 points or 1.38 per cent by mid-session. The index touched 6905, its weakest level since April 7.
The old adage about the market taking the stairs up and the elevator down was underlined by the fact the index has wiped two weeks of gains in two sessions following yesterday’s 48-point drop.
What’s driving the market
Nineteen of the twenty heavyweights of the ASX 20 declined. Afterpay, Fortescue Metals and Woodside took the biggest hits following a down-night on Wall Street. Newcrest weathered the storm best, inching up 0.25 per cent.
US stocks sold off for a second session after the World Health Organization warned Covid infection rates were nearing a pandemic-era peak as contagious new variants spread. The S&P 500 fell 0.68 per cent.
“Newswires, ever needful of fitting facts to figures, are suggesting concerns about rising covid infection rates and what that means for fuller (global) economic re-opening later this year is are at least part of the story for this week’s stock set back and there may well be something to this. Certainly there is plenty of negative news around in his regards, in India, Japan, and Canada to name but three regions,” NAB Head of FX Strategy Ray Attrill said.
Travel and tourism stocks copped the worst of the US selling, setting up their Australian peers for a challenging session. Qantas shed 2.69 per cent, Flight Centre 1.74 per cent, Sydney Airport 1.66 per cent and Webjet 0.97 per cent. Upbeat trading updates from Corporate Travel Management, Helloworld and theme park operator Ardent Leisure shielded the sector from heavier falls (see below).
US futures ticked lower after Netflix released disappointing subscriber numbers. S&P 500 futures dipped 12 points or 0.3 per cent. Netflix shares slumped 8.76 per cent in after-hours trade.
The ASX retreat accelerated as Asian losses deepened. The Asia Dow fell 1.65 per cent. China’s Shanghai Composite lost 0.37 per cent, Hong Kong’s Hang Seng 2.02 per cent and Japan’s Nikkei 2.29 per cent.
Retail sales rebounded last month, but turnover for the quarter flattened. March sales increased by 1.4 per cent, ahead of expectations. The Australian Bureau of Statistics said quarterly figures were relatively unchanged from the December quarter, presenting a headwind for next month’s Q3 GDP report.
Going up
Gold, healthcare and other defensive assets served as havens. ResMed rose 0.72 per cent, St Barbara 0.48 per cent and NIB Holdings 0.28 per cent.
Corporate Travel Management rallied 1.89 per cent on the prospect of a return to profitability. The provider of corporate travel services broke even last month and expects to turn a profit this quarter as domestic travel recovers and European/UK business picks up. Helloworld dipped 2.42 per cent despite forecasting a return to profitability in the December quarter.
Ardent Leisure climbed 4.86 per cent on news of a 44 per cent increase in revenue this month and record Main Event sales volumes last month. The company also announced the appointment of Greg Yong to replace John Osborne as CEO.
Going down
Iron ore producers fell as dour market sentiment overshadowed a record quarter at BHP and a ten-year high in the price of ore. The spot price for ore landed in China jumped 3.6 per cent yesterday to its highest level since 2011. Copper hit a ten-year peak on Monday.
“The recent spike in iron ore and copper prices to near-decade high levels has again fuelled expectations of a commodity supercycle in 2021. While iron ore prices have already been riding high on the back of improving steel profit margins in China and burgeoning demand for steel, recently emerged supply concerns have added more fuel to the fire,” Kalkine Group CEO Kunal Sawhney said.
Fortescue Metals eased 2.82 per cent. Rio Tinto shed 1.88 per cent. Champion Iron gained 1.71 per cent. BHP sank 2.55 per cent after reaffirming full-year production guidance for ore and petroleum. The Big Australian raised its copper guidance and cut its coal outlook, citing weather impacts.
Energy was the worst of the sectors, falling 2.59 per cent as crude extended overnight losses. Brent crude dropped 48 cents overnight and another 59 cents or 0.9 per cent this morning to US$65.98 a barrel as rising Covid rates muddied demand expectations. Oil Search fell 3.46 per cent, Beach Energy 3.12 per cent and Woodside 2.59 per cent.
Santos gave up 2.85 per cent despite renewing its gas supply deal with Rio Tinto. Santos will supply the miner with up to 15 petajoules of natural gas from late this year.
Nuix dived 16.77 per cent to an all-time low after admitting it will miss revenue and contract value forecasts contained in the prospectus when the company listed in December. The analytics firm now expects revenue of $180 – $185 million, versus a $193.5 million forecast in the IPO. The company said a customer switch to consumption licences had a near-term negative impact but would prove better in the long term.
Splitit fell 7.1 per cent despite increasing merchant sales volumes by 247 per cent year over year last quarter and raising gross revenue by 292 per cent. The share price jumped earlier this month after the payments platform announced a partnership with China UnionPay.
Elsewhere in the BNPL space, Afterpay fell 2.75 per cent and Z1P Co 2.44 per cent. On the wider tech sector, Appen shed 4.88 per cent, Altium 3.3 per cent and WiseTech 3.68 per cent.
Westpac led a retreat in the banks, falling 2.1 per cent. CBA lost 0.4 per cent, ANZ 1.67 per cent and NAB 1.92 per cent.
Other markets
Gold attracted haven-buying overnight and continued to edge higher this morning. The yellow metal advanced $4.10 or 0.23 per cent to US$1,782.50 an ounce.
The dollar eased 0.08 per cent to 77.16 US cents.
