Oil glut, RBA outlook take toll on ASX

The local market was awash with negative news on Tuesday, sending the ASX to its worst two-day drop in five weeks.

RBA governor Dr Phillip Lowe arrives to speak to the media on Tuesday. Picture: AAP

The local market was awash with negative news on Tuesday, sending the ASX to its worst two-day drop in five weeks.

Crude oil prices collapsed into negative trade overnight for the first time in history over fears on a supply glut caused by coronavirus shutdowns. But the knockout blow for the local market were the RBA’s latest estimates for economic growth.

The speech by governor Philip Lowe, released at 3pm, sent the ASX200 into a tailspin to finish the session down by 132 points or 2.46 per cent at 5221.3 - marking a 4.85pc decline in just the past two days.

Meanwhile, the All Ords gave up 136 points or 2.51 per cent to 5278.6, while the Australian dollar fell 0.3 per cent to US63.17c.

Dr Lowe set out the bank’s forecasts for output to slump by 10 per cent in the first half, while total hours worked in the economy are set to contract by 20 per cent.

That compounded a weak fortnightly labour force read as revealed by the ABS earlier in the day - with 780,000 jobs lost in the two weeks to April 4.

NAB economist Kaixin Owyong noted the data was on a worrying trajectory: “it is worth stressing that if a similar decline is captured in the labour force survey in April, it would equate to a loss of 0.8 million jobs … If this occurs, it would represent the largest percentage decline since monthly data were first published in 1978”.

Overseas, US President Donald Trump announced a halt on immigration to “protect US jobs”, which hit US futures but the overwhelming negativity was the swift knock from oil weakness, likely to continue to pressure energy stocks according to JP Morgan global market strategist Kerry Craig.

“Energy stocks will come under further pressure, despite their already low valuations. Companies in the upstream of the energy supply chain will face the greatest pressure,” he said.

“Much like other sectors, those companies that can survive during this period of pain stand to gain the most in a post-COVID-19 world.”

Despite that, energy was still not the worst performing sector for the session - finishing the day down 2 per cent.

Oil Search posted a near 10 per cent drop in first quarter revenue, but still beat estimates, but despite that its shares were the worst hit in the sector, falling by 6 per cent to $2.50.

Woodside gave up 1.3 per cent to $19.89, Santos lost 2.9 per cent to $4.01 and Beach Energy lost 3.4 per cent to $1.29.

BHP, which has some oil exposure through its partnership with Woodside, among others, handed down its quarterly production report, saying it expects a sharp contraction in the US, Europe and India. Its shares finished the session down 2.5 per cent to $30.03 while Rio Tinto lost 2.1 per cent to $87.06 and Fortescue wound back by 2.2 per cent to $11.10.

Gold mining names were the only relief, buoyed by defensive buying. Newcrest put on 0.6 per cent to $27.66 as Evolution jumped by 5 per cent to $4.99, Regis Resources put on 4.3 per cent to $4.15 and Northern Star lifted by 4.2 per cent to $12.99.

By the close, technology was the worst performing sector - led by a 12.5 per cent slide in WiseTech to $13.78.

Buy now, pay later darling Afterpay gave up 5.8 per cent to $27.32 as Xero edged lower by 3.8 per cent to $75.02 on a downgrade from RBC and Appen slipped by 6.7 per cent to $23.18.

All eyes were on Virgin, even as its shares remain suspended, after the group formally entered voluntary administration. The news delivered a quick boost to Qantas but its shares finished flat at $3.59.

Across the rest of the travel names, Webjet gave up 4 per cent to $2.39 after setting new 4.5-year lows of $2.33 while Flight Centre lost 2.5 per cent to $9.79 and Corporate Travel slipped by 3.3 per cent to $9.02.

Incitec Pivot edged up by 1 per cent to $2.11 after announcing it would cancel the $500m sale or demerger of its fertiliser arm amid coronavirus uncertainty while aerial imaging group Nearmap jumped by 3.3 per cent to $1.24 as it said it was taking steps to shore up its balance sheet.