ASX sinks to new four-year low

Sweeping monetary and fiscal measures did little to support the local share market.

The RBA cash rate cut put pressure on the major banks, accelerating the market decline in the final hour. Picture: AFP

Sweeping monetary and fiscal measures did little to support the local share market, with shares sinking to a new four-year low at the close.

The benchmark S&P/ASX 200 clawed back ground early in the day, notching a gain as much as 3 per cent at the open, before the reality of quantitative easing and rising concern about company debt levels pulled the index into the red.

By the close, the ASX was down 170 points, or 3.44 per cent, to 4782.9, bouncing from intraday lows of 4741. Meanwhile, the All Ords finished down 189 points, or 3.79 per cent, to 4809.4.

The Aussie dollar finished the local session lower by 3.4 per cent to US55.76c, after hitting 18-year lows of US55.10c.

The Reserve Bank’s emergency move on Thursday to slash the cash rate by 25 basis points to a record low marked 125 basis points, from 1.5 per cent to 0.25 per cent, in rate cuts over the past 12 months and put pressure on the major banks - accelerating the market decline in the final hour.

KPMG chief economist Brendan Rynne noted the RBA was working in a co-ordinated manner with the government’s stimulus packages to shore up the economy from the impact of the coronavirus, with similar measures to the crisis of 2008.

“Many of the elements of this policy approach involve a re-run of the measures the RBA took during the GFC to support the financial system. Large-scale purchase of government bonds in the secondary market is the new tool that the RBA will unleash,” Dr Rynne noted.

“As was done during the GFC, the RBA will ramp up its market operations to meet the liquidity needs of the market by raising the frequency of operations to supply funds and expanding the maturity at which these funds are provided.

“As we saw in 2008-9 the central bank has scope to create new liquidity facilities, increase the range of collateral accepted and broaden the set of institutions that can participate in its market operations.”

Commonwealth Bank was the first to update its home loan rates in response to the RBA move, slashing its fixed loans by 70 basis points, while its variable rate loans will remain untouched. Shares in the bank dropped 4.7 per cent to 60.95.

At the local close, the rest of the big four banks were yet to move - but shares still came under pressure. Westpac shares shed 8.6 per cent to $14.53, ANZ gave up 9.8 per cent to $15 and NAB lost 9 per cent to $14.57.

Macquarie took a 12.9 per cent hit to $79.30 - while lender Mortgage Choice tumbled by 11.3 per cent to 63c.

Major miners edged higher led by a 0.7 per cent gain in BHP to $27.34, Rio Tinto added 0.76 per cent to $80.52 and Fortescue lifted by 5.8 per cent to $10.95.

Gold reversed Wednesday’s rally - Newcrest gave up 8.3 per cent to $22.37, Northern Star lost 7.4 per cent to $10.98, Evolution lowered by 11.7 per cent to $3.49 and Saracen Minerals lost 15.3 per cent to $3.10.

Qantas halted all international flights, sending its shares lower by 15.4 per cent to $2.14 - a bounce from $2.03 earlier in the session, its lowest since December 2014.

That also prompted another sell-off in travel peers - Flight Centre dropped 33 per cent to $9.91 after it entered crisis talks yesterday, Corporate Travel sunk 28 per cent to $4.70 while Webjet was halted for a likely capital raise, its shares last traded at $3.76.

More companies abandoned their guidance as the hit from coronavirus grows - Boral said it was ready to trim production as demand waned, a warning that sent its shares down 11 per cent to $2.11. Domino’s fell 7.5 per cent to $44.75 as it shut its European stores and jewellery chain Lovisa tumbled 43.8 per cent to $2.45 on a similar warning.

Meanwhile, BlueScope Steel withdrew its guidance citing unprecedented uncertainty - serving a 4.2 per cent hit to shares to close at $9.01.

Super Retail led the worst performers with a decline of 35 per cent to $3.58 while mall owners also took a battering, Stockland finishing lower by 24.9 per cent to $2.08 as Vicinity fell 20 per cent to $1.04 and Scentre stepped back by 16.7 per cent to $1.50. But Unibail Rodamco Westfield outperformed the sector with a 8.3 per cent lift to $4.68 after heavy selling earlier this week.