Reality check wipes $83bn off ASX

Investors wiped $83bn off the Australian market as outlook statements from Apple and Amazon offered a reality check.

Investors wiped $83bn off the Australian sharemarket as outlook statements from US technology giants Apple and Amazon offered a reality check about the economic impact of the coronavirus pandemic, unsettling global markets after an exceptionally strong month.

In its worst day in five weeks, the S&P/ASX 200 benchmark plunged 277 points or 5 per cent to a four-day low of 5245.90, with sharp falls in the materials, energy, real estate, financials and industrials sectors leading broad declines.

Among the biggest drags on the local bourse, BHP fell 7.7 per cent, Commonwealth Bank lost 6.1 per cent, CSL fell 3.5 per cent, ANZ lost 6.8 per cent and Westpac dropped 5.8 per cent.

“After a strong rally from March lows, shares are vulnerable in the short term as economic data to be released over the next month shows the devastating impact of the coronavirus-related shutdowns,” said AMP Capital’s head of investment strategy and chief economist, Shane Oliver.

After plunging 21 per cent in March — its worst month since 1987 — the S&P/ASX 200 jumped 8.8 per cent in April — its best month since 1988 — following similar moves in global markets.

But with US unemployment claims exceeding estimates, the S&P 500 slipped 0.9 per cent on Thursday, and futures suggested the US benchmark will fall more than 2 per cent on Friday as Apple shares fell 2.6 per cent and Amazon lost 4.3 per cent in after-hours trading after quarterly results.

While beating the consensus estimate for its second-quarter earnings per share, sales and iPhone revenue, Apple was unable to provide a forecast for the first time in a decade due the coronavirus pandemic.

Amazon missed the consensus estimate for its first-quarter EPS by 20 per cent and said it may incur a loss in the current quarter as it boosted spending for logistics in the ­pandemic.

The Australian dollar dived 1 per cent to US64.38c after rising as much as 19 per cent from an 18-year low of US55.1c to a seven-week high of US65.7c in recent weeks.

Westpac senior currency strategist Sean Callow said he was “sceptical” of the drivers of the recent rallies in both the Australian and New Zealand dollars since mid-March.

A string of tough economic and earnings data was likely to drive the dollar lower, he said.

The sell-off in shares and currencies was also driven by geopolitical factors, exacerbated by a lack of liquidity owing to Labour Day holidays throughout Asia and Europe.

Japan’s Nikkei 225 fell 2.8 per cent on Friday and Britain’s FTSE-100 fell 2.8 per cent in early trading, while markets elsewhere in Asia and Europe were closed for holidays.