Banks slide takes ASX into bear territory

Another wild swing on the ASX sent shares into bear market territory with a $64bn drop.

Another wild swing on the ASX sent shares into bear market territory with a $64bn drop.

Another wild swing on the ASX sent shares into bear market territory with a $64bn drop, despite a strong lead from US shares, as the RBA said it was ready to move on unconventional policy.

Optimism fuelled by reports of global stimulus pushed the benchmark S&P/ASX 200 momentarily into positive territory at the open, setting an intraday high of 5972.5, but any gains were short-lived as the US government stopped short of handing down the “major” stimulus that had been foreshadowed by US President Donald Trump.

Even the prospect of as much as $20bn in local stimulus did little to rally the local market, shares closing out the session down 214 points, or 3.6 per cent, to 5725.9.

That’s a 20.05 per cent decline from the benchmark’s 7162.5 record close.

Meanwhile, the All Ordinaries fell 207 points, or 3.44 per cent, to 5789.3.

The Australian dollar was steady, buying US65.04c by the close of the ASX session, having traded as low as US64.80c during the day.

The prospect of quantitative easing, sooner rather than later, from the Reserve Bank weighed on the major banks, as investors weighed the threat to bank margins and profitability, sending the financial sector down by 5.3 per cent at the close.

Deputy governor Guy Debelle told a forum in Sydney that the central bank was ready to “act in the government bond market as necessary” to keep yields on government bonds low. That was on top of reassurance that Australian banks were “well capitalised”.

Still, banks fuelled the day’s losses – Commonwealth Bank led the losers with a decline of 6.6 per cent to $68.50 as Westpac shed 5.3 per cent to $19.46, ANZ dropped 5.5 per cent to $19.96 and NAB fell 6.3 per cent to $19.78.

The March survey of Westpac consumer sentiment showed its weakest read in five years – down 3.8 per cent to 91.9 points.

“The survey detail shows consumers are rightly concerned about the near-term outlook for the economy but are less perturbed about their finances or the longer-term outlook for the economy,” chief economist Bill Evans said. “That is consistent with the notion that virus-related disruptions will be large but temporary.”

Across the rest of the Asia Pacific, China’s Shanghai Composite edged lower by 0.2 per cent after Prime Minister Xi Jinping visited the virus epicentre of Wuhan on Tuesday in a sign that the tide had turned, and as China’s Consul-General in Sydney reassured Australian businesses that the economy was returning to normal.

The Hang Seng lost 0.9 per cent as Japan’s Nikkei fell 1.9 per cent and South Korea’s KOSPI was worst hit with a 3.1 per cent drop.

To the rest of the market, and miners joined in the sell-off. Heavyweight BHP declined by 2.5 per cent to $28.52 after losing a $125m tax appeal in the high court as Rio Tinto ticked lower by 1.1 per cent to $82.71.

Fortescue was a rare fleck of green – adding 2.6 per cent to $9.40 after JPMorgan lifted the stock to overweight, saying shareholders would be “well-rewarded” in time.

Gold miners came under selling pressure – Newcrest dropped 8.6 per cent to $26.63 as it trimmed its full-year production guidance on the back of new problems at its giant Lihir gold mine.

Evolution Mining shed 7.5 per cent to $4.06, Northern Star dropped 5.1 per cent to $12.99 and Regis Resources tumbled by 9.9 per cent to $3.65.

Consumer names weren’t immune to the sell-off – Woolworths was hit by 3.5 per cent to $36.05 as Coles shed 1.8 per cent to $15.27.

Qantas shares fell to $3.85 apiece – the lowest in almost three years – on a downgrade from Macquarie, but settled to a loss of 9.2 per cent by the close at $4.04.

Other travel names also felt the burn as they announced cost cutting measures to offset some of the balance sheet hit. Webjet shares dropped 5.2 per cent to $6.92 while Helloworld took a 7.1 per cent hit to $2.11.