Stocks slammed as Wall Street sell-off flows through to local bourse

Stocks have slumped at the open following Wall Street’s walloping on Friday, and have now gone negative for the year.

Image of the ASX in Bridge St, Sydney. (Toby Zerna)

The Australian sharemarket is back trading below where it started the year after a vicious sell-off on US markets on Friday night carried through to the local session.

At the 10.15am (AEST) official market open, the benchmark S&P/ASX 200 index slumped 96.6 points, or 1.81 per cent, to 5,242.6, while the broader All Ordinaries index dipped 94.4 points, or 1.74 per cent, to 5,346.1.

The figures put the benchmark at its lowest mark since July 8, with the market off 6 per cent across the past three weeks.

IG chief market strategist Chris Weston said traders were shunning this year’s market leaders as the hunt for yield turned quiet.

“As soon as the S&P 500 broke below the lower limits of its recent range of 2,150 the algorithms went crazy and the computers widely took over markets,” he said.

“Any stock which had benefited through most of 2016 from having a higher yield was quickly sold, as bond yields rose and the discount factor used in working out the net present value for future cash flows of equity holdings increased. This is an issue that will no doubt flow into Asian markets.”

At the heart of the issue are the central banks and the perception they have little else in their arsenal to boost markets.

“The moves in equity and risk sentiment more broadly seem a culmination of less supportive central banks, steepening yield curves pushing up longer dated bonds and the impact this has on expensive equity valuations,” Mr Weston said.

“There is even a view, which I share, that if the Fed are really hellbent on raising this calendar year when the data doesn’t support it, it is because they are doing so more out of concern about overheating valuations in corporate bond markets and therefore lower dislocations in various markets.”

It was hard to find any bright spots in early deals, with traders indiscriminate in their desire to sell.

If anything, resources were hardest hit after commodity prices weakened on a rising US dollar.

Mining giant BHP Billiton sank 2.9 per cent to $20.17, its primary rival Rio Tinto lost 1.9 per cent to $47.68 and iron ore miner Fortescue plunged 4.1 per cent to $4.745.

In energy, Santos slumped 3.8 per cent to $3.85, Origin surrendered 4 per cent to $5.195 and Woodside gave back 2.2 per cent to $27.70.

The big banks were a little more hardy, but were still off between 0.9 per cent and 1.5 per cent, with Westpac the leader and ANZ the laggard.

In retail, Coles owner Wesfarmers held up okay in inching down 0.4 per cent, while Woolworths slipped 1.1 per cent and Myer lost 1.4 per cent.

Among other blue chips, Telstra eased 1.3 per cent to $4.995, while Qantas gave back 1.1 per cent to $3.275.

Meanwhile, the Australian dollar was trading around US75.4c, showing little sign it would soon recover much of the US1c loss on Friday night.