Aussie share market plunges amid coronavirus chaos and emergency rate cut

Australian shares began the day positively but the downward trajectory has resumed this afternoon, wiping out years of gains.

The Australian share market plunged once again on another destructive day for the economy, with four years of gains now wiped off the board.

The ASX200 closed 3.4 per cent lower at 4782.9, its lowest level since February 2016.

Local stocks have now moved three or more percentage points higher or lower for 10 consecutive days, illustrating to CMC Markets chief strategist Michael McCarthy the “destruction of demand and disruption of supply chains” as a result of the coronavirus pandemic.

“A 10 per cent rise can be just as concerning as a 5 per cent fall,” he told news.com.au, explaining the volatility of the outbreak is “extremely worrying” for the economy.

The broader All Ordinaries suffered slightly heavier losses, down 3.8 per cent, detailing the significant losses being inflicted on smaller companies outside of the top 200.

The Reserve Bank of Australia announced an extraordinary out-of-cycle emergency rate cut for the first time since 1997, causing the banking sector to plummet due to the thinning of future profit margins on loans.

All the major lenders were down with ANZ suffering the heaviest loss at 9.1 per cent, Westpac and NAB both fell 7 per cent and Commonwealth Bank lost 4.6 per cent.

Meanwhile, Qantas continues to be one of the worst impacted by the coronavirus-induced travel bans after it announced 30 per cent of staff would be stood down.

Its share price was down 14.2 per cent this afternoon, but the airline and travel sector will continue to come under pressure after Prime Minister Scott Morrison this afternoon effectively closed the borders for all international visitors.

The Aussie dollar wasn’t spared either, tumbling to a fresh 18-year low of 55.10 US cents.

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Wild and erratic movements have been inflicted on local stocks with the pandemic wiping hundreds of billions of dollars off local stocks over the last two weeks.

And the downward trajectory is expected to continue after the Wall Street’s Dow Jones dived 6.4 per cent overnight, IG market analyst Kyle Rodda.

“There are severe signs of stress in global financial markets,” he said, which is leading to a “market environment of extreme panic”.

For benchmark purposes, Australia's ASX 200 has fallen 40% from the record high hit in late February in $USD terms...#ouch #ausbiz

— David Scutt (@Scutty) March 19, 2020

“Investors have returned to liquidating assets en masse, as confidence disappears the global economy can weather the COVID-19 ‘sudden stop’.

“There are red flags everywhere, as fears build that the global economy is headed for recession, and the financial system is heading towards a crisis.”

Trading today has largely revolved around the central bank pulling the trigger on an emergency rate cut in its extraordinary out-of-cycle meeting.

Mr Rodda said investors were eager to dissect the announcement from RBA governor Philip Lowe and the plan for quantitative easing to help stimulate the spluttering economy, and the share market fell further after the announcement.

“The devil will be in the detail, so how big this program is going to be, whether they’ll have other measures to try and support the financial system and stimulate economic growth,” Mr Rodda said.

“The impacts will reverberate through the market once we know that outcome.”

The release of workforce data at 11.30am was better than expected, with unemployment rising to 5.1 per cent, but the figures don’t account for the impact of the virus.

Australia's population grows by 1.5%https://t.co/wwh5pnKNN5

— Australian Bureau of Statistics (@ABSStats) March 19, 2020

It will also do little to ease the nerves of the nation after ratings agency S&P Global this week predicted severe job losses.

It predicted unemployment would rise to 7 per cent this year, which would be the highest level in Australia since 1998.

“Australia is an example of an economy vulnerable to labour market shocks. While the headline unemployment rate is low, the underemployment rate – that is the proportion of workers that have a job but would like to work longer hours – has remained stubbornly high at over 8 per cent,” the report states.