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A fourth day of losses dragged the share market to a 14-week low following heavy falls in Europe and the US.
The S&P/ASX 200 sank to its weakest point since mid-June before trimming its decline to 44 points or almost 0.8 per cent. A loss today would hand the benchmark its longest losing run since April.
Mining stocks retreated with commodity prices and a falling dollar. The financial sector sagged to its lowest level since May after a money laundering scandal engulfed the world of finance over the weekend.
What’s driving the market
European stocks tumbled 3.2 per cent overnight and the Dow Jones Industrial Average briefly lost more than 3 per cent amid a string of negative headlines about a resurgence of Covid-19, delays in new US stimulus cash and dodgy banking practices. A late rebound in the US helped the Dow trim its loss to 1.84 per cent. The S&P 500 finished 1.16 per cent in the red after trading in correction territory.
NAB Head of FX Strategy Ray Attrill said markets were spooked by the threat of renewed lockdowns as coronavirus infection rates rise in Europe.
“In grasping for the facts that fit the market figures, there seems little doubt that amongst them are the averse trends in Covid-19 infection rates in several big European countries and too the United States – trends which have become more painfully evident since late last week – and the associated prospect of more draconian social distancing measures,” he said.
Going up
Despite the overseas turmoil, a two-speed domestic market saw solid gains in technology, health and select consumer stocks. Local investors dipped their toes in technology stocks as hopes rose that the US sector may have bottomed after entering a technical correction. Appen climbed 4.1 per cent, Xero 3.8 per cent, WiseTech 2.8 per cent and Altium 2.5 per cent.
Defensive sectors ducked the worst of the selling. Eight of the top ten largest listed healthcare companies advanced, led by ResMed +2.8 per cent, Pro Medicus +2.6 per cent and Fisher & Paykel +2.6 per cent. Supermarkets Woolworths and Coles put on 2.1 per cent and 1.3 per cent, respectively.
Retailers benefitted from the afterglow of yesterday’s strong sales report from Harvey Norman. Wesfarmers rose 1.9 per cent, Harvey Norman 0.9 per cent and JB Hi-Fi 0.6 per cent.
Going down
Mining stocks bore the brunt of the sell-off after a flight to the safety of the US dollar fuelled declines in dollar-denominated commodities. including iron ore, oil and metals. Fortescue Metals sagged 3.2 per cent to its lowest level since mid-July. Rio Tinto shed 3.1 per cent, Newcrest 2.3 per cent, Woodside Petroleum 2 per cent and BHP 1.9 per cent.
Macquarie Group and the big four high-street banks fell after Reserve Bank Deputy Governor Guy Debelle warned it was “highly unlikely” the central bank will raise the cash rate in the next three years. The dollar dropped 0.23 per cent to 72.11 US cents.
“Under the [RBA’s] central scenario, it would be more than three years before sufficient progress was being made towards full employment to be confident that inflation will be sustainably within the [RBA’s] target band. In this scenario, it is highly unlikely that the cash rate will be raised over that time horizon,” he said.
NAB and ANZ fell 2.6 per cent, Westpac 2.3 per cent, CBA 1.2 per cent and Macquarie 1 per cent. UK banking group Virgin Money UK skidded 8.5 per cent following reports the British government was considering a second lockdown.
Other markets
Asian markets extended yesterday’s falls. China’s Shanghai Composite lost 0.7 per cent and Hong Kong’s Hang Seng 0.8 per cent. Trade in Japan was suspended for a second day for a public holiday. S&P 500 index futures were recently down eight points or 0.2 per cent.
Oil mounted a tentative fightback from last night’s 4 per cent dive. Brent crude rebounded 15 cents or 0.4 per cent to $US41.59 a barrel. Gold bounced $2.90 or 0.2 per cent to $US1,913.50 an ounce.
What’s hot today and what’s not
Hot today: Shares in software company icetana (ASX:ICE) almost doubled after the company secured a foothold for its motion intelligence product in the lucrative American prison system. The company secured two orders worth US$100,000 for five-year licences for its platform from reseller Rasilient. The orders were the first from the US correctional services market, which makes extensive use of cameras. icetana’s share price bolted from 14 cents to 27 cents before trimming its rise to 28.6 per cent at 18 cents.
Not today: Lottery ticket business Jumbo Interactive (ASX:JIN) tumbled 11.5 per cent on news Tabcorp had sold its 11.6 per cent stake in the company. Tabcorp banked a profit of $69 million by selling roughly 7.2 million shares at $13.52 a share. JIN’s share price fell to $12.74.
