Stimulus fails to halt ASX decline

Local sharemarket falls to the lowest level since November 2016, despite governments’ moves on coronavirus.

Stock fall concept Stock fall concept

The bear market drop on the ASX extended by 7.4 per cent on Thursday to send shares to their lowest levels since November 2016.

Fiscal stimulus measures from the local government and in the US were firmly in focus, accounting for much of the daily swings. Shares opened slightly lower, but the decline accelerated as Prime Minister Scott Morrison unveiled a $16.7bn stimulus package to fight off a recession, including a $750 cash boost for households on welfare.

Those falls were exacerbated as US President Donald Trump stopped short of the “major" stimulus that he had previously flagged - pushing shares to lows of 5290 in afternoon trade.

By the close, the ASX was lower by 421 points, or 7.4 per cent, to 5304.6 for its biggest daily fall since October 10, 2008. The market lost $127bn in value for the day. At these levels, the benchmark is lower by 25.9 per cent from its February 20 record close.

The ASX All Ordinaries was down 418.4 points, or 7.23 per cent, at 5370.90 by the close.

Recession panic was front and centre for global markets, regardless of any fiscal or monetary stimulus, and drove the decline on the ASX.

Westpac chief economist Bill Evans noted the local fiscal measures were “only likely to offset the contraction in the June quarter that we had estimated, rather than lift growth into positive territory”.

“However, the current domestic and global environment has deteriorated more rapidly than we had expected. The downside risks to our central case forecast that we envisaged earlier in the week are now materialising.

“For us, despite the government’s bold efforts, the June quarter is still likely to show negative growth and Australia will experience a technical recession.”

Those sentiments continue to fuel safe-haven buying, with Australian 10-year yields down to 0.76 per cent, while the US 10-year yield shed 15 basis points to 80.7 per cent.

The Aussie dollar was on track to notch 11-year lows at the local close, down 0.4 per cent to US64.60c.

Across the rest of the Asia Pacific, China was the best performer with a loss of just 1.5 per cent as many of its operations came back online. The Hang Seng was lower by 3.8 per cent, Japan’s Nikkei by 3.8 per cent after hitting its lowest level since 2017 and South Korea’s KOSPI by 3.2 per cent.

To equities, and energy names led the decline with a 8.2 per cent fall, as crude oil prices dropped more than 6.7 per cent. The 30-day travel ban imposed by the Trump administration on flights between the US and Europe is set to put further pressure on oil prices with less demand for jet fuel.

Even before Mr Trump’s announcement, Caltex flagged flight cancellations as a key demand issue - withdrawing its previous estimates of a 5 per cent to 10 per cent decline in jet fuel demand. The stock finished lower by 9.4 per cent to $24.95.

Across the rest of the sector, Santos gave up 7.9 per cent to $4.29 as it argued that the price crash was “not permanent”.

Origin dropped 8.3 per cent to $5.50, Woodside shed 9.1 per cent to $19.09 and Oil Search fell 10 per cent to $2.97.

Meanwhile Soul Patts issued a profit warning after the close on Wednesday, sending shares down 4.5 per cent at the close on Thursday to $17.94.

In the major banks, Commonwealth Bank ticked lower by 7.9 per cent to $63.11, a seven-year low for the stock while Westpac gave up 8.8 per cent to $17.74. NAB lost 8.3 per cent to $18.13 and ANZ dropped 8.5 per cent to $18.26.

Macquarie joined the sell-off with a 7.5 per cent fall to $111.78 while regional peers Bendigo Bank shed 7 per cent to $6.50 and Bank of Queensland gave up 6 per cent to $5.91.

In the major miners, BHP took a 7.7 per cent hit to $26.33, Rio Tinto lost 6.4 per cent to $77.40 and Fortescue wound back by 6.5 per cent to $8.79.

Qantas shares led the travel names lower with a hit of 9.9 per cent to $3.64 while Webjet dialled back by 19.7 per cent to $5.56, Flight Centre shed 18.2 per cent to $19.61 and Virgin set a new record low of 6c - a 17 per cent decline.