ASX 5pc drop wipes $83bn off market

The drop is the worst daily hit in five weeks and effectively halves the market’s previous monthly jump.

A pedestrian walks past the melting ice sculpture called "Main Street Meltdown". Picture: AFP

Australian shares plunged by 5 per cent on Friday, wiping $83bn off the market in a stark reversal of sentiment after its biggest monthly rise on record.

Weak US earnings, soft economic data and potential profit taking spurred a steady decline over the session, but the knockout blow came in the final match, sending the S&P/ASX 200 to close at the day’s low of 5245.9, down 5 per cent, or 276 points.

The drop is the worst daily hit in five weeks and effectively halves the market’s previous monthly jump - winding back strength in the index over the past week.

Meanwhile, the All Ordinaries finished Friday down 273 points, or 4.87 per cent, to 5325.

At these levels the benchmark ASX 200 is 27.1 per cent below its record high from February 20, and 19.2 per cent above its March lows.

With losses across all sectors, AMP Capital chief economist Shane Oliver pointed out that some of the downfall might be attributable to profit taking after very strong gains last month.

He warned that weak earnings were likely to persist, just as Amazon and Apple results came in softer-than-expected overnight.

“The March quarter earnings reporting season in the US which is now more than half way through is seeing only 49 per cent of companies reporting profit growth on a year ago and profits are running down around 10 per cent from a year ago and consensus expectations for second quarter earnings are down 36 per cent from the 2019 high,” he wrote, noting weakness in the major banks this week.

“The bottom line remains that after the strong run up in global and Australian shares since the low around March 23 they are vulnerable to a pullback on the back of the very poor economic and profit data we will see over the next few months.”

By the close of the day’s ASX session, the Australian dollar was 0.88 per cent weaker against the US dollar, buying US64.55c.

Materials were worst hit in Friday’s sell-off amid a twin blow from weak commodity prices and Newcrest’s $1bn placement.

Heavyweight BHP took a hit of 7.8 per cent to $29.84 as Rio Tinto shed 5.6 per cent to $82.59 and Fortescue dropped by 8.2 per cent to $10.98.

In the gold names - Newcrest lost 8.7 per cent to close at $25.15 after raising funds at $25.60 apiece. Peer Northern Star was sold off by 8.1 per cent to $11.75 while Evolution lost 7.6 per cent to $4.72 and Saracen Minerals slipped by 8.5 per cent to $3.97.

Adding to the downward pressure, major banks all took a heavy blow. Analyst downgrades sent ANZ lower by 6.8 per cent to $15.75 after its first-half profit hit of 60 per cent.

Commonwealth Bank gave up 6.1 per cent to $58.84 as Westpac traded down by 5.8 per cent to $15.34 and NAB fared best with a loss of 3.1 per cent to $16.14.

Macquarie Group dropped by 5.6 per cent to $96.92 ahead of its results to be released next week, as analyst consensus tipped dividends to be cut by 31 per cent.

In a rare splash of green, ResMed shares edged higher by 3.3 per cent to $24.16 after sharing its first-quarter results, saying a pivot to ventilators had helped boost its revenue.

Across the rest of the health sector, CSL wound back by 3.5 per cent to $298.76 while Sonic Healthcare gave up 3.3 per cent to $26.30.

Elsewhere, ship builder Austal took a hit of 20 per cent to $2.69 after losing a tender for a US navy contract, despite being awarded a record local contract while Reliance Worldwide was sold off by 8.1 per cent to $2.51 after curbing its manufacturing to counter the coronavirus hit.