Aussie shares moved firmly lower with US index futures after the Federal Reserve warned of a long road to recovery.
The S&P/ASX 200‘s seven-session winning run came under serious threat as the index sank 110 points in the opening minutes and – unlike yesterday – continued south as a brief recovery soon gave way to further weakness. Midway through the session, the index was 136 points or 2.2 per cent in the red at 6012.
US index futures offered little comfort after a volatile overnight session on Wall Street. The S&P 500 fell 17 points or 0.53 per cent last night after the Fed indicated rates will stay at a record low for at least two and half years. S&P 500 index futures declined 12 points or 0.4 per cent this morning.
The Fed expects unemployment to remain as high as 9.3 per cent at the end of the year and will remain elevated for years to come. Chair Jerome Powell warned of “great uncertainty about the future” and said millions of Americans may not regain their jobs.
The financial and energy sectors were the biggest drags on the index for a second day. A weak morning for insurers saw IAG fall 5 per cent, QBE 5.8 per cent and Suncorp 5.7 per cent. Losses among the big four banks ranged from 3.4 per cent for the Commonwealth to 5.1 per cent for Westpac and ANZ. NAB shed 4.3 per cent.
The energy sector continued to unwind Tuesday’s sharp rally as a partial rebound in the greenback pressured US dollar-denominated commodities. Brent crude slumped 98 cents or 2.4 per cent this morning to $US40.75 a barrel. Here, Oil Search gave up 4.6 per cent, Woodside 3.5 per cent and Santos 3.4 per cent.
As in the US overnight, the recovery plays that have fuelled gains in recent weeks succumbed to profit-taking. Media group Seven West dropped 8.6 per cent, European shopping centre operator Unibail-Rodamco-Westfield 7.7 per cent, travel agent Flight Centre 7 per cent and financial services provider McMillan Shakespeare 7.4 per cent.
Health was the only sector to inch higher, rising for a second day. ResMed put on 2.6 per cent, Fisher & Paykel Healthcare 2.3 per cent and Ansell 0.4 per cent, offsetting declines of 0.8 per cent for Ramsay and 1.5 per cent for Sonic.
Gold stocks provided another substantial pocket of green. Silver Lake Resource added 7.3 per cent, Northern Star 7.1 per cent, Newcrest 6.4 per cent and Gold Road Resources 6.3 per cent. Elsewhere in the wider materials sector, Fortescue rallied 0.3 per cent, while BHP slumped 1.2 per cent and Rio Tinto 0.6 per cent.
Online retailer Kogan, which has seen its shares more than triple since March, this morning surged 11.2 per cent to a new record after the company completed an oversubscribed $100 million placement. Air New Zealand slipped 7.5 per cent after addressing speculation about a potential capital raising without ruling one out. The airline said it “continues to assess its capital structure and the options available to it”.
Declines on Asian markets were modest. China’s Shanghai Composite lost 0.1 per cent, Hong Kong’s Hang Seng 0.4 per cent and Japan’s Nikkei 1.1 per cent.
Gold caught a lift from the promise of low interest rates for years to come, rising $21 or 1.2 per cent to $US1,741.70 an ounce.
The dollar retreated 0.34 per cent to 69.73 US cents.
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Shares in Beston Global Food Company (ASX:BFC) surged after the company announced it had sold its Mount Gambier dairy farms for $40.4 million and locked in milk supply for its other operations for a decade. Aurora Dairies will buy the farms and offer BFC all the milk – around 17 million litres a year – for ten years, with an option to extend. Chairman Dr roger Sexton said, “Beston is no longer reliant on owning farms due to our long-term milk supply contracts with independent farmers.” The proceeds from the sale will be used to reduce debt and expand the company’s mozzarella and lactoferrin production. The share price jumped 36.4 per cent to 7.5 cents.