Market makes best daily gain since 1997

Double digit gains in the major banks and BHP defied Wall Street’s biggest drop on record.

Shares in Qantas and Virgin both fell on Tuesday. Picture: AFP

Double digit gains in the major banks and BHP helped the local market to clinch its best daily gain since 1997, despite Wall Street’s biggest drop on record overnight.

Still, considering the market’s 9.7 per cent tumble on Monday, there is still plenty of room to regain the record high of February.

A slight gain for the S&P/ASX 200 at the open picked up pace by the afternoon session and helped the market to claw back 291 points, or 5.83 per cent, to 5293.4 by the close.

Meanwhile, the All Ords added 275 points, or 5.43 per cent, to 5332.8.

The major banks and miners were the key drivers of the strength, helping the local market to outperform the rest of the Asia-Pacific.

In China, shares were flat at the local close, Hong Kong edged higher by 1 per cent, South Korea’s KOSPI edged lower by 1.5 per cent and Japan’s Nikkei added 0.8 per cent.

IG Markets strategist Kyle Rodda notes that high levels of volatility were driving the large intraday swings and exaggerating moves in both directions.

“Implied volatility continues to be high, even if today’s price ranges are a bit tighter, and risk-assets have seen a lift,” he said.

“There’s little sign this storm will pass any time soon, and the markets are priced for it. The US VIX closed at record highs last night – higher than the levels clocked-up during the GFC.”

He added that the local volatility index remains at the 42 level, significantly higher than usual levels.

The Australian dollar was down 0.4 per cent against the US dollar to test the day’s lows, buying US60.94c an hour after the close of the ASX.

To equities, and major brokers highlighted a number of top stocks as oversold in the recent market turmoil.

BHP was called out by Morgan Stanley for its potential at current prices, after a 31 per cent de-rating so far this year. Shares in the miner surged 11.9 per cent to $28.21.

Meanwhile, Rio Tinto put on 6.9 per cent to $83 and Fortescue lifted by 10.7 per cent to $10.69.

In other high profile upgrades, three of the four major banks were upgraded by Jefferies – helping the broader sector higher by 9.2 per cent.

Commonwealth led the charge, adding 13.3 per cent to $67.64 as Westpac gained 7.9 per cent to $17.25, ANZ rose by 11.8 per cent to $18.40 and NAB lifted by 6.7 per cent to $17.21.

As more offices were evacuated to stem the coronavirus spread, mall and office building owners came under pressure.

REITs were the only sector to finish in the red, down 2.4 per cent, led by a 9.7 per cent drop in Charter Hall to $7.68 while Unibail Rodamco Westfield lost a further 22.8 per cent to close at $4.60 after flagging weakness in Europe from broad city closures earlier this week.

Qantas slashed its international capacity by 90 per cent – sending its shares down by 5.3 per cent to $2.86 while rival Virgin continues to dive – last down 8.7 per cent to 6.3c.

Its debt levels are now firmly in focus, with reports that the airline is now working closely with law firm Clayton Utz as it waits for news of government support.

Gold miners were back in favour – Gold Road Resources added 21 per cent to 98c, Silver Lake Resources gained 20.1 per cent to $1.26 and Northern Star jumped by 19.7 per cent to $11.00.

Major supermarket chains enjoyed a boost as panic buying continues to strip shelves – Woolworths put on 9.8 per cent to $39.85, Coles put on 8.4 per cent to $17.22 and Metcash was the best performer on the market with a 27 per cent gain to $3.06 after a broker upgrade from UBS.