Australian shares pummelled despite some optimism about coronavirus vaccine development

The ASX has lost 3.9 per cent, or $82bn of value, in the past two days as coronavirus contagion escalates.

Oil prices are likely to be pressured lower if more countries and continents are affected by the coronavirus, which could have substantial effects on global economic activity and travel, Commerzbank said. Picture: AFP

Australian shares were pummelled for a second day after Wall Street suffered its worst day in two years.

The benchmark S&P/ASX 200 share index closed down 111.7 points, or 1.6 per cent, at 6866.6 points.

The index fell as much as 2.6 per cent to a seven-week low of 6800 in early trading after the S&P 500 fell 3.5 per cent - its biggest fall since 5 February 2018 - after the international spread of novel coronavirus worsened significantly over the weekend.

The ASX All Ordinaries dropped 1.58 per cent, or 111.6 points, to close at 6953.80. The Australian market has lost 3.9 per cent, or $82bn of value, in the past two days.

Global markets were helped by some optimism about coronavirus vaccine development, leading to a 0.9 per cent rise in S&P 500 futures.

US President Donald Trump tweeted: “Stock market starting to look very good to me!”

The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!

— Donald J. Trump (@realDonaldTrump) February 24, 2020

Soon after, the Wall Street Journal reported that Moderna sent vaccine samples to the government for Phase 1 trials. Moderna’s share price rose 18 per cent in afterhours trading.

Similarly in Japan, Fujifilm spiked 8.8 per cent after Japan’s health minister said Japan will recommend its Avigan drug to treat the virus.

Japan’s sharemarket fell 3.3 per cent as it caught up global markets after a holiday.

The Australian dollar was 0.08 per cent stronger against the US dollar, buying US66.10c by the close of the ASX session.

Goldman Sachs Australia chief economist Andrew Boak lowered his Australian and NZ GDP forecasts to account for a larger than expected economic impact on China from the coronavirus outbreak, and its spread to other regions.

Australia’s 2020 growth is now expected to be 2.1 per cent against 2.4 per cent previously expected on a year-on-year basis, he said. March quarter GDP is expected to contract 0.3pc quarter on quarter. That’s based on Goldman’s revised forecast that China’s GDP will slow to just 2.5pc year on year from 6 per cent in the December quarter.

This is the weakest Australian GDP forecast in the market, albeit there were already a number of economists expecting a negative quarter. The question is whether this might be sustained for a second consecutive quarter because of the coronavirus outbreak overseas.

On the market, Treasury Wine Estates shares dived as much as 6.7 per cent to a low of $10.85 after unveiling a third profit warning in as many months as it admitted that the outbreak and spread of the coronavirus in China had dented sales of its wines into the region. Shares closed down 3.96 per cent at $11.17.

Gold prices fell in Asia amid profit taking after the metal surged to its highest level since February 2013.

On the ASX, gold miner St Barbara was the biggest percentage drop of the day, down 9.67 per cent to $2.71 a share, while Saracen Minerals was down 7.33 per cent to $4.17.

Northern Star lost 3.1 per cent to $14.50 while Evolution Mining fell 3.3 per cent to $4.41. Newcrest Mining was 3.6 per cent lower at $29.09.

Of the major miners, BHP lost 2.05 per cent to close at $36.33, Rio Tinto was 1.7 per cent lower at $93.60 and Fortescue Metals Group was down 0.6 per cent at $10.93.

Telstra was 3 per cent lower to close at $3.60 while Appen was the biggest mover of the day, up 6.5 per cent to close at $25.40 a share. The machine learning specialist lifted full-year underlying profit by 32 per cent, beating its thrice upgraded earnings guidance.

In financial services, Commonwealth Bank lost 1.35 per cent to close at $86.80, ANZ was down 0.9 per cent at $26.59, NAB lost 1.14 per cent to $26.80 and Westpac was 1.65 per cent lower at $25.08.

Qantas closed down 2 per cent at $5.90.

In the energy sector, Papua New Guinea-focused Oil Search said its annual net profit fell 8 per cent on lower oil and gas prices, as it backtracked on a plan to press ahead with a slimmed down LNG expansion in the country, saying it was now focused on the original and larger $20bn scheme. Shares dropped 2.3 per cent to $6.01, while Woodside lost 2.2 per cent to $30.40 and Santos fell 3 per cent to $7.43.

Nymex was trading at $US51.59, up 0.31 per cent and Brent was at $US55.91, up 0.25 per cent as oil prices ticked higher in Asia after settling lower in the US session as the market fretted over the impact of the coronavirus outbreak on energy demand.

Oil prices are likely to be pressured lower if more countries and continents are affected by the virus, which could have substantial effects on global economic activity and travel, Commerzbank said.

with wires