Miners lead sell-off on virus jitters

Miners were the biggest drag on the market on fears of slowing commodity demand.

Chinese Premier Li Keqiang speaks with medical workers at Wuhan Jinyintan Hospital in Wuhan in central China's Hubei province. Picture: Li Tao/Xinhua via AP.

The Australian market joined a global sell-off to start the short week, as the toll from the outbreak of coronavirus rose to more than 100.

A sharp drop in US and European markets overnight prompted an early 1.8 per cent sell-off as investors weighed up the economic impact of the spread of the virus.

By the close, the S&P/ASX 200 had rebounded somewhat to finish down 96 points, or 1.35 per cent, at 6994.5 for its biggest drop all year.

Meanwhile, the All Ords slipped 105 points, or 1.45 per cent, to 7098.4.

The Aussie dollar was lower against the US dollar, but rebounded from a three-month low of US67.47c to trade at US67.59c at the local close.

Former Treasurer Peter Costello described the coronavirus outbreak as an “immediate negative” to the local and global economy that will have a “significant impact” on tourist regions of Australia grappling with the fallout of the bushfire crisis.

Across the rest of the region, Hong Kong and Chinese markets remain closed for the Lunar New Year break. Japan’s Nikkei was down 0.9 per cent at the local close while South Korea’s KOSPI shed 3 per cent.

In a bid to contain the spread of the virus, China has extended the trading break to February 3, while Hong Kong will resume trade on Wednesday.

Miners were the biggest drag on the market on fears of slowing commodity demand. RBC analyst Tyler Broda noted that potential implications of the coronavirus are materially larger than that of the SARS outbreak in 2003.

Comparing China’s consumption of key commodities, he noted that China consumed just 35 per cent of the world’s iron ore in 2003, which has grown to 70 per cent in 2019 while its copper consumption has grown from 20 per cent of the world’s supply to 50 per cent.

“In our view, even a less virulent disease could create more impact than comparisons to 2003 and this appears to be what the copper and iron ore markets are telling us, down 7 per cent and 10 per cent respectively over the past five days,” he said.

That sentiment dented heavyweight miners – Fortescue dropping 7.3 per cent to $11.57 after hitting records last week, while Rio Tinto shed 3.1 per cent to $99.99 and BHP pulled back by 3.3 per cent to $39.10.

Travel and China-exposed stocks also came under pressure – Qantas fell 5.2 per cent to $6.36 as UBS analysts noted the outbreak put downside risks on the airline to add to weakness after the bushfire crisis.

Similarly, shares in casino groups Crown and Star Entertainment fell, with the Lunar New Year period a key period for international high rollers. Crown shares shed 5.1 per cent to $11.43 – a fall exacerbated by a change in its management announced after the market closed on Friday.

Star Entertainment shed 5.2 per cent to $4.16.

Webjet was the worst performer on Tuesday after a broker downgrade from Morgan Stanley suggested Google was a material threat to its business. That added to downward momentum in the stock sending it lower by 13.9 per cent to $12.37.

Similarly, Flight Centre finished lower by 4.1 per cent to $39.76.

Defensive trade helped gold names to outperform – Saracen led the market with a 3.5 per cent lift to $3.87, while Northern Star added 3.1 per cent to $13, Evolution edged up by 2.4 per cent to $3.86 and Gold Road Resources rounded out the top four with a gain of 2.2 per cent to $1.38.

Major banks traded in line with the broader market downturn. Commonwealth Bank lost 1.1 per cent to $84.02, Westpac slipped 0.83 per cent to $25, ANZ gave up 1.7 per cent to $25.46 and NAB lost 0.74 per cent to $25.61.

Macquarie was hit by 1.9 per cent to $143.01 as it was downgraded by Citi on valuation grounds, after hitting a record high of $146.84 last week.

Pathology group CSL was untouched by the sell-off and edged to a new record high of $319 before settling up 0.6 per cent to $312.66 at the close.