ASX low ahead of RBA’s rates decision after New York Stock Exchange closes trading floor

The Australian stock market was marginally lower, dragged down by banks and energy stocks amid an oil price war as the RBA cut rates to a new record low.

The stock market was marginally lower at noon, dragged down by banks and energy stocks as the latter are hammered in an oil price war.

The volatile benchmark S&P/ASX200 jumped as high as three per cent in early trade but was down 32.3 points, or 0.65 per cent, to 4,920.9 at noon AEDT on Thursday.

The broader All Ordinaries index sank 50.1 points, or one per cent, to 4,948.7 as the energy index fell more than five per cent.

Oil stocks slid again despite a lift in the price after a crash overnight amid a price war.

Woodside fell 6.33 per cent to $16.14, Santos dipped 8.95 per cent to $2.85, Oil Search took a 12.91 per cent hit to $2.125 and Beach fell 9.27 per cent to $1.01.

The market has seen a flood of profit warnings amid unprecedented travel bans as the spread of the coronavirus pandemic continues to cause chaos. Qantas sank 9.49 per cent to $2.29 after grounding all its international flights until the end of May.

BlueScope Steel says Malaysia’s lockdown and a US halt to auto production are potentially disruptive so it will withdraw guidance.

It’s shares were up 52 cents, or 5.53 per cent, at $9.92, possibly on news its business had been broadly in line with expectations as China ramped up. Homewares trader Adairs cancelled its interim dividend and scrapped its guidance. Its shares were down 20 per cent at 74 per cent at noon. Media giant Nine slumped 7.8 per cent to 94.5 cents after it said the COVID-19 impact had begun to affect earnings.

The RBA’s emergency meeting led to it dropping rates to 0.25 per cent drop today.

Digital market boards are seen at the Australian Stock Exchange (ASX) in Sydney.

Banks led market higher after 30 minutes of trading but had done an about-face by midday.

Commonwealth Bank lost 32 cents to $63.63 as Westpac retreated 34 cents to $15.56. NAB reversed 43 cents to $15.58 and ANZ fell 46 cents to $15.58. IG Markets analyst Kyle Rodda says signs of stress are building everywhere and it’s leading to a market environment of extreme panic.

“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,’ he said in a note.

The local market is waiting to hear the Reserve Bank of Australia’s monetary policy announcement on Thursday.

Economists expect it to cut interest rates and launch its first-ever quantitative easing program.

The Australian dollar was buying 57.18 US cents at noon AEDT, down from 59.98 US cents on Wednesday, which was the lowest level since 2003.

Shares in Asia failed to hold onto opening gains on Thursday after the latest selloff on Wall Street.

Stocks fell in Tokyo, Sydney and Seoul in early trading Thursday. Markets have been skidding as fears of a prolonged coronavirus-induced recession take hold. The Dow Jones Industrial Average lost more than 1,300 points, or 6.3% on Wednesday. It has now lost nearly all of its gains since President Trump’s inauguration.

The losses deepened after a temporary halt was triggered in the early afternoon. Even prices for investments seen as very safe, like longer-term U.S. Treasurys, fell as investors rushed to raise cash. The price of oil fell 24%, dropping below $21 per barrel for the first time since 2002. By early Thursday, they had recovered some losses, with U.S. crude down 12.4% at nearly $23 per barrel.

Stocks tumbled 6% on Wall Street on Wednesday, wiping out the last of the gains for the Dow Jones Industrial Average since President Donald Trump’s inauguration.

Even prices for investments seen as very safe fell as investors rushed to raise cash and the coronavirus pandemic continues to spread.

Traders work during the closing bell at the New York Stock Exchange (NYSE) on March 18, 2020 in New York City. Picture: AFP

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Markets have been incredibly volatile for weeks as Wall Street and the White House acknowledge the rising likelihood that the outbreak will cause a recession. The typical day this month has seen the stock market swing up or down by 4.9%. Over the last decade, it was just 0.4%.

It was just a day before that the Dow surged more than 5% after Trump promised massive aid to the economy, but the number of infections keeps climbing, and the Dow slumped to its lowest level since 2016. The S&P 500, which dictates how 401(k) accounts perform much more than the Dow, is down 31% from its record set last month, though it’s still up nearly 9% since Election Day 2016. The S&P 500’s slide was so sharp that trading was halted for 15 minutes Wednesday. The losses deepened after trading resumed, and the S&P 500 was down 7.9%, as of 3:20 pm. Eastern time.

As big swaths of the economy retrench while much of society comes to a halt in an attempt to slow the spread of the virus, investors have clamored for Congress, Federal Reserve and other authorities around the world to support the economy until it can begin to reopen.

They got a big shot of that Tuesday, when the Trump administration briefed lawmakers on a program that could surpass $1 trillion and the Fed announced its latest moves to support markets.

A trader holds his hand to his head after trading was halted at the New York Stock Exchange. Picture: AP

But the worldwide number of known infections has toped 200,000, which creates more uncertainty about how badly the economy is getting hit, how much profit companies will make and how many companies may go into bankruptcy due to a cash crunch.

“It’s, it’s a very tough situation,” Trump said at a news conference, during which losses for stocks accelerated. “You have to do things. You have to close parts of an economy that six weeks ago were the best they’ve ever been.... And then one day you have to close it down in order to defeat this enemy.” “The volatility is going to be here to stay,” said Brian Nick, chief investment strategist at Nuveen. “It’s about the virus and not the economic response.” Wednesday’s selling swept markets around the world. Benchmark U.S. oil fell 24% and dropped below $21 per barrel for the first time since 2002. European stock indexes lost more than 4% following broad losses in Asia. Even prices for longer-term U.S. Treasurys, which are seen as some of the safest possible investments, fell as investors sold what they could to raise cash. Gold also fell.

“They’re just saying, ‘I may take some losses here, but if we have cash we can deploy it when we know more,”’ said J.J. Kinahan, chief strategist with TD Ameritrade. “The problem for the market really is we just don’t know anymore. And until we really know where things are at, you may see people who just want to have as much cash as possible.” The bond market is also operating under strain, and it hasn’t been this difficult for buyers to find sellers at reasonable prices since the financial crisis of 2008, said Gene Tannuzzo, deputy global head of fixed income at Columbia Threadneedle Investments.

Traders work on the floor at the opening bell of the Dow Industrial Average at the New York Stock Exchange. Picture: AFP

Investors are selling their highest-quality bonds to raise cash, thinking they will be the easiest to sell and will hold up the best. That’s paradoxically undercutting their prices further.

Also exacerbating moves is so many traders making these trades not from their office.

“I’m calling the Citigroup dealer, who’s on his home Wi-Fi with his kid in the living room,” Tannuzzo said. “That causes gaps” in pricing.

For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough, and those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems, and recovery could take six weeks in such cases. “These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast,” Deutsche Bank economists wrote in a report Wednesday.

Treasury Secretary Steven Mnuchin speaks during a press briefing with the coronavirus task force. Picture: AP

With all the uncertainty and early evidence that China’s economy was hit much harder by the virus than earlier thought, they now see “a severe global recession occurring in the first half of 2020.” But they also are still forecasting a relatively quick rebound, with activity beginning to bounce back in the second half of this year in part because of all the aid promised from central banks and governments.

The Dow Jones Industrial Average was down 1,796 points, or 8.5%. If stays there, it would be the eighth straight day the Dow has moved by more than 1,000 points. All the uncertainty has pushed many people toward safety. Last month, investors pulled $17.5 billion out of stock mutual funds and exchange-traded funds, even though stocks set all-time highs in the middle of the month. Money-market funds, meanwhile, drew $25.5 billion, according to Morningstar.

That was all before the market’s sell-off accelerated this month, as broad swaths of the economy shut down in hopes of better containing the outbreak. Restaurants have closed to dine-in customers, planes are parked and sports arenas have been dimmed. Goldman Sachs strategists describe this month as “March Sadness.”

Originally published as ASX low ahead of RBA’s rates decision after New York Stock Exchange closes trading floor