Markets wrap: Major miners crushed as Beijing blues sap ASX

Mining and energy sectors were under siege as the prospect of Covid-19 lockdowns extending across China sent shockwaves through the Australian sharemarket.

Australia’s mining and energy sectors were badly bruised on Tuesday as investors panicked that Chinese hunger for mineral imports will dry up if lockdowns spread to the city of Beijing.

Iron ore titans BHP, Rio Tinto and Fortescue Metals were savaged as core commodity prices went into free fall, wiping $50bn from the benchmark ASX 200 in the first hour after the long weekend.

The trigger was the dire outlook for commodity and energy exports as the Covid-19 lockdown in Shanghai entered its fourth week and appeared set to spread to Beijing after a mass testing blitz.

A near 40 per cent fall for payments firm EML didn’t help either, with the company copping a hiding after issuing a profit downgrade that hinted at more problems in Europe.

The ASX 200 fell by as much as 2.4 per cent at Tuesday’s open and never really recovered.

The bourse fell by as much as 2.4 per cent at Tuesday’s open and never really recovered as it closed 155.3 points, or 2.1 per cent, lower at 7318.0.

The broader All Ordinaries also dropped 2.1 per cent, or 164.2 points, to finish at 7604.0.

Investors have now lost a month’s worth of value in the space of two sessions and face a nervous wait for Wednesday’s key inflation data, which could prove the final straw for the RBA to hike rates next week.

Elsewhere, the Aussie dollar improved to 72.10 US cents after Chinese authorities pledged more support for their economy and the local currency, although analysts noted that perhaps these measures fell short of the carte-blanche stimulus markets had grown used to.

“This time around, China appears to be sticking to its guns and simultaneously trying to deleverage certain sectors (property) while applying targeted stimulus to specific sectors such as SMEs, energy, agricultural production etc. as it locks down swathes of the country and keeps borders closed to play whack-a-mole with Covid-19,” said OANDA Asia-Pacific senior analyst Jeffrey Halley.

“Unfortunately, China is finding out what other previously Covid-zero countries have. You have to be right 100 per cent of the time, the virus only has to get lucky once.”

BHP shares dropped by as much as 6.2 per cent to $45.51, with the company losing about $15bn in the process.

China is a major customer for Australian mineral exports, while the companies that represent that sector account for more than a quarter of the local sharemarket.

It goes without saying that – following a massive retreat for iron ore and base metals – the big miners suffered greatly.

BHP shares dropped by as much as 6.2 per cent to $45.51, with the company losing about $15bn in the process, before it closed 5.8 per cent down at $45.66.

Rio Tinto lost 4.3 per cent to $108.76 and Fortescue Metals finished 6.9 per cent lower at $19.76.

Mineral Resources plunged 9.9 per cent to $54.67, Champion Iron fell 9.2 per cent to $6.79, and Mount Gibson Iron was 12.2 per cent down at 57.5 cents.

Steelmaker BlueScope wasn’t spared, dropping 8.7 per cent to $20.05, while South32 finished 7.9 per cent down at $4.46.

Gold miner Newcrest fell 2.9 per cent to $27.47 as the precious metal weakened against a stronger US dollar, with Northern Star 4.9 per cent down at $10.21 and Evolution 1.7 per cent lower at $4.10.

The damage was by no means limited to resources stocks.

China lockdown worries also savaged oil prices, with Brent Crude down 5.3 per cent to $US101 a barrel and US oil 4.7 per cent lower at $US97.30 a barrel.

Woodside Petroleum duly fell 4.6 per cent to $30.60 and Santos was 4.3 per cent lower at $7.80.

The energy and materials sectors may have been the hardest hit, but the damage was by no means limited to resources stocks.

The major banks all fell, with Westpac leading losses after a 1.3 per cent decline to $23.90.

Macquarie Group shed 1.7 per cent to 3$204.18, while there was also pain for blue chips such as Wesfarmers, Woolworths, Telstra, Coles, CSL, and Resmed.