Australian stocks plunge at open as markets brace for more volatility

Stocks hit a two-and-a-half year low amid diving oil prices and continuing fears about volatility in China’s market.

The Australian sharemarket has touched a two-and-a-half year low amid worries over China and as further falls in global oil prices weighed heavily on the energy and materials sectors.

But the sharemarket pared some of its losses, and at the 4.15pm (AEDT) official market close, the benchmark S&P/ASX200 index was down 58.6 points, or 1.17 per cent, at 4932.2, while the broader All Ordinaries index had retreated 58.7 points, or 1.16 per cent, to 4990.7.

The S&P/ASX200 index had earlier skidded to 4,880.1 at 11.20am AEDT, its lowest point since July 2013, before rallying back above 4,900 soon after.

Monday’s close sealed a seven-day losing streak for the ASX, which it hasn’t done since June 2010, after entering territory not seen since July 2013. The ASX200 has now lost around 7 per cent so far this year, erasing more than $100 billion in market value.

The resource and energy sectors were the hardest hit after another tumble in commodity prices.

Oil prices had slumped to a new 12-year trough ahead of the open, with global benchmark Brent crude falling 0.6 per cent to $US33.55.

The market was also closely watching Chinese share markets and the People’s Bank of China currency-setting decision.

Shares in China fell sharply after today’s opening, following a global rout last week that centred on worries about the Chinese economy and falling yuan.

The benchmark Shanghai Composite Index dropped 1.71 per cent to 3,131.85 -- having dived almost 10 per cent last week -- while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, lost 2.25 per cent, or 44.48 points, to 1,934.24.

And Hong Kong’s benchmark Hang Seng Index slipped 2.23 per cent, or 456.29 points, to 19,997.42.

Meanwhile China guided its yuan currency stronger for a second straight session in a move that might calm concerns about a competitive devaluation, but only appeared to add to market confusion as to Beijing’s ultimate policy intent.

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Matt Felsman, a private wealth adviser at APP Securities, said investors remain concerned about China, falling commodity prices and geopolitical risks.

“The main issues remain a tsunami of negative psychology driven by growth concerns in the Chinese economy, crude oil prices plunging to 12-year lows reviving fears that indebted energy producers won’t be able to remain solvent, North Korea testing nuclear weapons heightening geopolitical worries, alongside Middle East tensions between Iran and Saudi Arabia,” he said.

IG chief market strategist Chris Weston said investors would be finely attuned to how businesses explain their leverages to oil during the upcoming Australian and US earnings seasons.

“The transparency this provides will be key,” he said.

The benchmark index had opened 1.4 per cent weaker following Wall Street’s close on Friday, which capped the worst year-opening week on record for the Dow Jones Industrial Average and the S&P500 — down 6.2 per cent and 6 per cent respectively for the five days.

The falls came despite data on Friday showing US unemployment stayed steady at 5 per cent in December.

All sectors were down today, with materials leading the declines, off 2.93 per cent.

BHP Billiton dropped 4.16 per cent to $15.67, while Rio Tinto fell 4.03 per cent to $40.21.

Energy stocks were down 2.87 per cent.

Woodside Petroleum lost 3.16 per cent to $27.30, while Santos fell 5.03 per cent to $3.21. Origin Energy was off 4.5 per cent to $4.24 after confirming its first APLNG shipment.

Financial stocks retreated 1.5 per cent.

ANZ was 1.29 per cent lower at $25.21, Commonwealth Bank eased 1.51 per cent to $78.22, NAB dropped 1.48 per cent to $27.31, while Westpac gave up 1.61 per cent to $30.50.

Consumer staples were off 0.9 per cent with both big supermarkets down.

Wesfarmers shed 0.9 per cent to $39.295, while Woolworths subtracted 0.35 per cent to $22.79.

Meanwhile Telstra declined 0.28 per cent to $5.285, while Qantas dipped 2.22 per cent to $3.97.

Elsewhere, price comparison website iSelect plummeted 36.36 per cent to 70c after it cuts its underlying earnings guidance for the year from $26 million to $15-$18m.

Today’s steep falls heralded another uncertain week for markets amid concerns about Chinese growth, its markets and its currency.

Last week’s turmoil on global markets had been triggered by a major devaluation of the yuan.

Today the People’s Bank of China set the mid-point for the yuan at 6.5626 per US dollar, confounding analysts who had looked for something around 6.5860.

The move was an apparent reversal of the recent weakening trend which included the biggest one-day drop in five months.

China’s foreign exchange regulator on Saturday said it would ramp up risk control efforts and push ahead with regulatory reforms, but was frustratingly short on specifics.

The perceived missteps by the authorities have stoked concerns Beijing might lose its grip on economic policy, too, even as China looks set to post its slowest growth in 25 years.

“Different signals about FX policy have wrong footed market participants and we are wary in believing that an immediate calmness will soon emerge,” wrote Paul Mackel, head of emerging markets FX research at HSBC in a note.

“In this context, we expect yuan volatility to remain high while depreciation pressures are likely to remain strong.”

Chinese markets have had a tortuous start to the year, buffeted by the falling yuan, two days of stock exchange suspensions, weak factory and service sector activity surveys and worries about looming share sales by major stakeholders once a ban on such sales expires.

All of which heightened tensions ahead of China trade data on Wednesday, when further declines are expected in exports and imports, underlining the parlous state of world trade flows.

Figures out over the weekend showed Chinese consumer inflation stuck at a subdued 1.6 per cent in December, while producer prices were down a steep 5.9 per cent on the year - a deflationary pulse that is being felt across the globe.

With AAP, Dow Jones, Reuters