ASX follows US, European sharemarkets lower as Delta variant stokes economic recovery slowdown fears

The ASX followed US markets lower, closing in the red for the second straight day as the highly infectious Delta strain spooked investors.

The Australian sharemarket continued its negative run, closing firmly in the red for the second straight day as the Covid-19 Delta variant depressed investors.

The S&P/ASX200 finished 0.46 per cent lower at 7252.2 while the All Ordinaries Index dropped 0.45 per cent to 7525.8.

CommSec noted the benchmark ASX200 index had been stuck between about 7200 and 7400 points for a month, partly due to the Covid-19 lockdown uncertainty.

The brokerage said the local bourse’s 1.3 per cent loss in two days was enough to wipe out all of last week’s gains. 

It was looking worse in early trade on Tuesday, with the market down the better part of 1 per cent, but losses were pared back, OMG chief executive Ivan Tchourilov said.

Tech stocks such as Zip Co led the market higher, with the buy-now-pay-later provider jumping 5.4 per cent to $7.41.

That was interesting, Mr Tchourilov said, given the major indices on Wall St including the tech-heavy Nasdaq fell overnight to their lowest levels in almost a month.

CommSec senior economist Ryan Felsman said surging global Delta variant infections had unnerved investors, stoking concerns that rising case numbers could lead to renewed lockdowns and a protracted economic recovery, with European markets also closing lower overnight.

Martin Place in Sydney’s CBD, a centre of finance, is usually bustling. But not now. Picture: NCA NewsWire/Adam Yip

Webjet slid 1.26 per cent to $4.69, Flight Centre declined 1.3 per cent to $14.31 and Qantas fell 2.37 per cent to $4.54 after Victoria’s lockdown was extended for another week while South Australia will enter its own seven-day lockdown from 6pm local time.

But the biggest drag on the ASX was mining stocks, with Rio Tinto weakening 2.67 per cent to $124.42 and BHP retreating 2.5 per cent to $49.24.

BHP reported its full-year production results, with Ord Minnett praising the overall result as strong, while RBC Capital Markets said petroleum and metallurgical coal output was better than it expected.

“Guidance for 2022 is a bit lighter than our forecasts … however, the most meaningful divisions of WA iron ore and copper are in line with our forecast,” RBC said.

Mr Tchourilov said energy stocks felt the pinch after OPEC announced it was planning to end oil production cuts by September 2022.

Woodside gave up 1.93 per cent to $21.90 and Santos slumped 4.98 per cent to $6.49.

Oil Search bucked the trend after issuing a statement “clarifying” it had received a merger proposal from Santos, which it had rejected.

Oil Search chairman Rick Lee refused to comment on takeover or merger approaches on Monday but on Tuesday it was a different story. Mr Lee was in the role when the company knocked back a bid from Woodside in 2015.

The news came a day after Oil Search refused to answer a question on a conference call over the shock departure of chief executive Keiran Wulff about whether it had been approached by a prospective corporate suitor.

“We certainly don’t comment on those types of things,” chairman Rick Lee told the call.

“We’re very mindful of disclosure rules. At the point where a disclosure is appropriate, it will be made.”

Santos said in a statement the proposal would leave Oil Search with 37 per cent of the merged group and Santos with 63 per cent.

Santos also said it had subsequently sought to engage the Oil Search board on the “logical combination” and “extremely attractive opportunity”.

But in its second statement for the day, Oil Search said it had advised Santos it was open to a revised bid and “at this stage no such proposal has been forthcoming”.

Oil Search surged 6.27 per cent to $3.90, more than making up the 5.17 per cent it shed on Monday after attributing Dr Wulff’s sudden departure to his long-term medical condition but also saying the board had received complaints from staff that he had behaved in an “unacceptable” manner.

The company also revealed it no longer expected to progress its Alaskan oil project in the second half of 2021.

Stockbrokers Morgans labelled the development and departure of Dr Wulff “unsettling”.

JB Hi-Fi booked record full-year earnings and sales. Picture: NCA NewsWire/Jeremy Piper

Retailer JB Hi-Fi reported its preliminary unaudited full-year financial results, showing net profit had soared by 67.4 per cent, with chief executive Richard Murray saying the record earnings came after record sales.

Earnings growth for The Good Guys chain was particularly strong, up more than 90 per cent.

JB Hi-Fi shares rose 3.73 per cent to $49.51.

Crown Resorts lost 2.6 per cent to $10.46 after scathing closing submissions to the Victorian royal commission by counsel assisting Adrian Finanzio, who said the company had lost public confidence in the wake of its money-laundering scandal and it was open to the commission to strip the casino giant of its Victorian gaming licence.

Commonwealth Bank inched 0.07 per cent lower to $97.61, National Australia Bank backtracked 0.7 per cent to $25.47 and Westpac shed 0.69 per cent to $24.52 but ANZ firmed 0.63 per cent to $27.32 after announcing an on-market share buyback of up to $1.5bn.

The Aussie dollar was buying 73.19 US cents, 53.67 British pence and 62.15 Euro cents in afternoon trade.

Originally published as ASX follows US, European sharemarkets lower as Delta variant stokes economic recovery slowdown fears