Trading Day: ASX joins Wall Street in correction territory amid coronavirus rout

The virus sell-off accelerated on Friday, with shares losing 3.3 per cent, while the Aussie dollar tumbled to 11-year lows.

Mask-clad commuters make their way to work during morning rush hour at the Shinagawa train station in Tokyo. Picture: Charly Triballeau/ AFP.

• Is this the fastest correction ever?
• Japan joins global hammering
• ASX dives into ‘correction’ territory
• Harvey Norman profit slips
• Wall St headed toward worst week since GFC

That’s it for the Trading Day blog for Friday, February 28. Local stocks have taken a battering over the past week as coronavirus fears hang heavily over the global economy.

By the close on Friday, shares had lost 9.7 per cent or $210bn in value for the week, while US futures were pointing to further losses on Wall Street to mark its biggest weekly drop since the GFC.

All sectors finished lower on Friday, led by a drop in energy stocks, with 96 per cent of companies closing in the red. Former prime minister Kevin Rudd called for stimulus amid the outbreak, while commentator Shane Oliver said normal economic indicators were now “irrelevant”.

As earnings season closed, results were handed down by Harvey Norman and NextDC, sending each to be the worst performer and best performer in the top 200 respectively.

4.39pm: Energy, miners hit hardest in wipeout

Energy stocks were some of the hardest hit on Friday, the sector down 3 per cent after oil prices dived to a 12-month lows on concerns global growth will slow and demand wane amid the coronavirus outbreak.

Australia’s largest listed oil and gas group, Woodside finished lower by 3.5 per cent to $27.92, Santos shed 2.6 per cent to $6.83 and Oil Search wound back by 3.4 per cent to $5.49.

Iron ore futures in China sank for a fifth day, the longest losing streak since September, pulling bulk miners lower.

BHP sank by 4.5 per cent to $33.60, Rio Tinto stepped back by 3.5 per cent to $87.27 and Fortescue lost 6.4 per cent to $10.08 even as founder and chairman Andrew Forrest lifted his stake in the miner by 6 per cent.

Not even gold miners, which had been buoyed by safe haven buying through the week, weren’t immune to today’s sell off.

Newcrest dropped 8 per cent to $26.30, Evolution shed 9.6 per cent to $4.04, Northern Star wound back by 9.2 per cent to $13.46 but Gold Road Resources was the worst of the sector – down 14 per cent at the close to $1.45.

4.13pm: Stock tumble picks up speed

Panic selling spurred by the threat of coronavirus has wiped $210bn in value from the local market over the past week, putting the benchmark ASX200 firmly in correction territory.

At the close on Friday, shares were down 3.25 per cent or 216 points to 6441.2 to cement a 9.7 per cent loss for the week.

Further still, the battering represents a 10.5 per cent decline from last Thursday’s record high of 7197.2.

4.01pm: $A to stay below US70c this year: NAB

NAB’s head of FX Strategy Rodrigo Catril says weakness in the Aussie dollar will be the norm this year, even as the coronavirus threat winds back

“The AUD’s joint pre-eminent status (alongside NZD) as the market’s preferred China and global growth proxy means that unless or until concerns about the growth implications of the COVID-19 outbreak dissipate, AUD/USD risks remain skewed firmly to the downside,” he says in a note this afternoon.

“This is notwithstanding that current levels are several cents below what can readily be justified in relation to movements in the AUD’s traditional fundamental drivers (commodity prices, interest rates, and risk sentiment).

“We see it struggling to get back above US70c this year and then only in the context of a materially softer USD, for which some combination of improved global growth prospects and still-lower US rates are necessary.”

AUDUSD last down 0.65 per cent to new 11-yr lows of US65.25c.

3.43pm: Monday will be big for margin calls

Monday is shaping up to be a big day for margin calls, though there’s nowhere near the leverage of 2007.

A trader says many of yesterday’s calls were covered with cash, but “today will push them over”.

“They have 24hrs to cover the call, so any forced selling will occur on Monday,” he says.

Most of the volume of the heavy selling today is coming from the stops going off on warrants. For example, WEBKOE was stopped and there were 300,000 warrants on issue.

Citi would have had to dump 300,000 of the underlying stock (Webjet).

“This is 100 per cent a liquidity event,” says a trader. “Look at how the gold stocks are getting hit. They should be bid today.”

The VIX is at 42 per cent, the S&P 500 has had its fastest “correction”.

The All Ords is down 9.9pc this week, its third worst week since the ‘87 crash.

3.26pm: Fonterra faces China pain

Dairy operator Fonterra has warned the coronavirus outbreak could disrupt the flow of its products to China, where many restaurants have closed. Fonterra on Friday said the virus could affect China imports from January, where its whole and skim milk powder have been increasingly popular. The NZ dairy giant had already lowered its forecast milk collection for the 2020 fiscal year to 1,515 million kilograms of milk solids, citing challenging weather conditions.

However there is no change to its full-year forecast earnings range of 15 to 25 NZ cents per share.

Chief executive Miles Hurrell said Fonterra had already contracted a high percentage of its milk supply for the financial year, which was helping to manage the virus impact.

He said the processing of containers had slowed at Chinese ports, and staff were carefully managing the flow of its products to avoid congestion. Those Fonterra customers in China who sell to cafes and restaurants have suffered major impact, Hurrell said.

The dairy operator’s imports to China grew by 11 per cent, or 318,219 megatonnes, for the 12 months to December 31.

AAP

3.00pm: Jury out on gold stocks

Aussie gold miners are still falling this afternoon even as global markets go decidedly “risk-off”.

Risk aversion may linger due to virus risks and what are expected to be pretty dire China PMI data on Saturday.

So the baffling thing is why the gold miners are still falling – Evolution is down 9.4pc and Newcrest is down 7.7pc.

A reader called to push back on the idea that people are unwinding their risk hedges in gold miners.

He’s hearing that the gold stocks are being sold because of “a liquidity event” forcing them to raise cash.

Certainly that’s supported by what happened in the VIX last night, and others have confirmed there were margin calls in Australian shares today.

And the price action in equities, currencies and commodities this afternoon is not supporting the other possibility – that risk sentiment is about to improve.

2.41pm: $A drops to fresh post-GFC low

The Australian dollar has dropped half a cent this afternoon amid renewed risk aversion in global markets.

AUD/USD fell 0.6pc to a fresh 11-year low of 0.6530, as USD/JPY dropped 0.5pc to JPY109.04, with AUD/JPY to a 5-month low of JPY71.26.

Industrial commodities are also getting creamed with Brent crude down 2.4pc to a 14-month low of $60.94, Dalian iron ore futures down 2.5pc and copper futures down 1.5pc.

On the charts, AUD/USD is clearly at risk of free-fall to the GFC low of 0.6009, while resistance near 0.6600 holds.

The ASX is lower by 3pc to 6458.1, while US futures are down 0.7 per cent after an early rise.

Perry Williams 2.35pm: Oil drop whacks energy stocks

Energy stocks have been whacked after the oil price dived to a 12-month low amid concern the coronavirus will slow the global economy and cut demand for the fuel.

The global oil benchmark Brent fell 2.3 per cent to $US52.18 a barrel with the lead US indicator West Texas Intermediate off 3.4 per cent to $US47.09.

The S&P/ASX 200 energy index declined 3.10 per cent and has now dropped 18 per cent over the last month as investors exit on bearish demand signals.

Australia’s biggest listed oil and gas company, Woodside Petroleum, was down 3.5 per cent to $27.92 on Friday and has now shed 12 per cent this week and 19 per cent of its value since the start of February.

Similarly, Santos tumbled 3.4 per cent on Friday and is now down 11 per cent for the week and 22 per cent for the month.

South Australia’s Beach Energy, part owned by billionaire Kerry Stokes, has also been hard hit off 5.9 per cent on Friday, 14 per cent this week and 32 per cent for the month.

Origin Energy has fared better given its earnings spread across both LNG and electricity, falling 1.4 per cent on Friday although it remains off 10 per cent this week and 17 per cent in February.

2.09pm: Twiggy lifts Fortescue stake by $243m

Fortescue founder and chair Andrew Forrest has splurged $243m to lift his stake in the miner to roughly 36 per cent.

In a filing to the market this morning, Fortescue said the mining magnate had bought 22,11,053 shares in the miner on market at a total cost of $242.86m between February 20 to 27 – that’s an average price of $10.98 apiece.

Previously, he had previously held roughly 30pc through personal holdings and his Minderoo Group.

Shares in the miner last traded at $10.08 – down 6.4 per cent for the day and have dropped 9.7 per cent over the past 5 days.

In a statement, Mr Forrest cited the miner’s high performance and work to reduce its climate impact as reasons for the purchase.

“Disciplined capital management demonstrated” had led to “a combination rare in all industries, but particularly the resources sector, of high capital and high yield growth,” he said.

Robyn Ironside 2.03pm: Fares slashed as virus disrupts demand

Airlines have embarked on another round of fare cutting after fresh outbreaks of Covid-19 sent more shockwaves through the travel industry already reeling from plunging demand.

Air New Zealand led the way with extraordinary fares of $69 one way from Auckland to Melbourne, and $79 one way from Auckland to Sydney or Brisbane.

Available until close of business Monday, the fares were designed “to stimulate travel in the wake of softening demand”.

Read more: Auckland to Melbourne for $69

Geoff Chambers 1.59pm: Stimulus missing in virus plan: Rudd

Kevin Rudd has called on Scott Morrison to urgently roll out an economic stimulus plan to combat the coronavirus outbreak and “avoid the threat of recession”.

As stock markets crash across the globe, the former prime minister said Mr Morrison must take swift action to protect the Australian economy.

“For weeks now, I have been warning that the Morrison government has been far too complacent about the risk of coronavirus,” Mr Rudd said.

“The government’s pandemic plan is a part of Australia’s response. But a targeted economic stimulus is the other, still missing, element we need to avoid the threat of recession.”

Read more: Rudd calls for stimulus amid recession warning

1.41pm: Hyundai shuts plant, shares falter

An intraday bounce in shares is faltering after Hyundai says it had shut its Ulsan number 2 plant after a worker was infected with coronavirus.

Hyundai’s Ulsan plant is the world’s biggest plant, with 32,000 people making 5,800 vehicles a day. That's after Tokyo Disney this morning announced it would shut its resort for two weeks.

Australia’s sharemarket bounced from a 6-month low of 6426.8 to 6510.2, but is coming off the intraday high.

S&P/ASX 200 last down 2.5pc at 6494.

1.24pm: How this junior miner debuted today

Prospective gold miner Kaiser Reef has edged higher in its ASX debut, despite joining the market at the end of its worst week since the GFC.

The junior miner, with licences for exploration in NSW, joined the bourse at 1pm today, after raising $4.5m at 20c apiece. Shares opened at 22.5c and last traded at 25c.

Its site is between Newcrest’s Cadia project and Alkane Resources’ recent historic gold find – Kaiser Reef is hoping it will strike it lucky in the area too.

Funds raised will allow the company to undertake systematic exploration programs in the area.

ASX welcomes Kaiser Reef Ltd. $KAU raised $4.5m pursuant its prospectus dated 5 Dec 2019 as supplemented by a supplementary prospectus dated 28 Jan 2020 (‘Prospectus’) by the issue of 22.5m shares at an issueprice of $0.20 per share. https://t.co/W6pAlWWhvQ pic.twitter.com/VGvAsFbOq2

— ASX 🏛 The heart of Australia's financial markets (@ASX) February 28, 2020

1.07pm: Gold miners lower despite haven status

Risk aversion has boosted trade in gold this week, but in a strange turn, Aussie gold miners are under the pump in today’s trade.

Newcrest Mining is down 6.3pc at $26.80 and Evolution is down 7.2pc at $4.16, while Gold Road Resources is the worst performer in the top 200 with a drop of 12.8 per cent.

That’s as the ASX200 is lower by 2.6pc and gold futures trade flat.

Perhaps investors are unwinding some of their hedges against a further fall in global share markets, or this could be the start of a counter-trend bounce in global share markets after the sharpest ever correction in the S&P 500.

Those wanting to play a potential bounce could look at buying the ETFs GEAR (Betashares Geared Australian Equity Fund) or GGUS (Betashares Geared US Equity Fund – currency hedged).

1.02pm: Shares remain firmly lower

Shares have lifted from daily lows but remain firmly in correction territory at half time.

The benchmark ASX200 is lower by 172.6 points or 2.59 per cent to 6485.3 at 1pm, from lows as much as 6426.8.

At these levels, the market has lost 9.2 per cent for the week.

All sectors are in the red, led by a decline in mining stocks as bulk miners drag, while gold miners too are feeling the pressure – despite their usual status as safe havens.

Just seven stocks in the top 200 are trading in the green, and only marginally so.

Here’s the biggest movers at lunch:

12.36pm: China joins the sell-off

Chinese markets are succumbing the virus selling – the benchmark Shanghai Composite pulling lower by as much as 2.2 per cent at the open.

Meanwhile, the Shenzhen Composite, a basket of Chinese growth stocks, fell by 3.3pc early.

Ben Wilmot 12.27pm: Property names feel the pressure

Listed property groups have been hammered in early morning trade, following a rout that hit the US real estate sector last night as big global names including Prologis and Simon dipped by 5 per cent.

ASX/S&P 200 property index is down 3.3 per cent with growth stocks Charter Hall and Goodman Group among those hit.

Charter Hall was down 4.8 per cent to $12.35 and Goodman was down 3.3 per cent to $15.04, partly unwinding earlier gains this week.

Residential developer Stockland was down 3.7 per cent to $4.69, perhaps reflecting concerns about a spill over to the housing market, but stocks with long leased portfolios were holding up.

The retail landlords that are most in the gun from the coronavirus continued to leg down with Vicinity Centres off by 3.5 per cent to $2.20 and local Westfield landlord the Scentre Group down 3.1 per cent to $3.44.

The shares of both companies have suffered as concerns about the virus have spread with Vicinity cutting guidance for the financial year but Scentre saying at its results that it was too early to tell the impact.

Gerard Cockburn 12.01pm: OpenPay customers rising as loss widens

Buy now, pay later platform OpenPay says it is experiencing record growth in active customers and merchants, despite pegging a half yearly loss almost four times the size of the previous corresponding period.

The Melbourne-based fintech booked a loss of $16.1m for the first six months to December 31, a blow out by 246 per cent compared to the previous year’s interim loss of $4.6m.

Revenue for the period grew by 72 per cent to $8.3m, compared to $4.8m in the previous period.

The company floated on the ASX in December last year after a $50m IPO at $1.60 apiece, it last traded at $1.16 per share.

Chief executive Michael Eidel said the company was focusing on international expansion in the second half of the financial year.

“We have achieved record growth across all BNPL metrics and through our international expansion, created significant momentum in the UK,” Mr Eidel said.

11.45am: Is this the fastest ASX correction ever?

We won’t know for sure until the close, but this could be the fastest ever correction in the S&P/ASX 200.

A “correction” is normally defined as a 10 per cent fall from a peak on a daily closing basis. It can’t be interrupted by a rebound of at least 10 per cent, according to the standard definition.

The S&P/ASX 200 index is currently down 3.3pc at 6440 for the day. That puts it on track for a 10pc fall in the past six days.

It’s almost certain to be the worst 6-day losing streak since January 2008. If it ends down at least 10pc, this will be the fastest correction since the S&P/ASX 200 was launched in April 2000.

It’s quite possible that this would also be the fastest ever correction in the All Ordinaries index, which is now down 10.2pc from its record close.

On Thursday the US S&P 500 entered correction territory with a 12pc fall from its high, marking its fastest ever correction of at least 10pc.

Of course as well as the virus, the sharp falls in shares are partly a function of how fast they haven risen. At one point in January, the Australian sharemarket was having its best start to any year since 1985.

Eli Greenblat 11.35am: Woolies leads retail sell-off

Retailers have not been spared from the carnage swirling through the markets this morning as Woolworths takes one of the biggest hits.

The supermarket giant is lower by 3.33 per cent to $38.88, but still trading higher for the year after a steady run up to a recent record high of $43.96.

Billionaire Solomon Lew’s Premier Investments, which will report its interim results next month, has seen its shares down 2.8 per cent to $17.20. Premier has a burgeoning business in Asia and Europe via its Smiggle chain.

Coles shares are down 2.3 per cent to $14.82, Wesfarmers is down 2.1 per cent to $40.95 and JB HiFi is down 1.2 per cent to $36.67.

Department store Myer, which also reports its interim results next month, is down 2.8 per cent to 34.5 cents.

11.30am: Canberra Casino’s negative assets deepen

Tony Fung’s Aquis Entertainment, which owns the Canberra Casino, falls deeper into negative net assets of $20.6m at end-December (vs -$16.6m for the same time last year).

It comes after Aquis reported a full year loss of $3.96m versus a loss of $3.39m last year. However Aquis directors “believe that there are reasonable grounds to believe that the consolidated entity will be able to continue as a going concern”.

They cite unused financing facilities of $3.07m at the balance date, the 2020 forecast cash flow is positive and the casino operator’s major shareholder – Tony Fung’s Aquis Capital H K – has provided the Directors with an undertaking to provide financial support to the consolidated entity should it be required.

Shares in Aquis last at 2.6c each.

11.23am: Nikkei plunges 3pc

Tokyo’s key Nikkei index plunged more than 3 per cent at the open on Friday after US and European sell-offs, with investors worried about the economic impact of the coronavirus outbreak.

The Nikkei 225 lost 3.08 per cent, or 676.55 points, to 21,271.68 while the broader Topix index was down 2.98 per cent, or 46.67 points, at 1,521.39.

European and US stock markets slumped painfully again on Thursday as coronavirus infections spread outside China, exacerbating fears of a global slowdown.

“Japanese stocks are experiencing an inevitable hit from the US market rout,” Seiichi Suzuki, senior market analyst at Tokai Tokyo Research Institute, told AFP.

“Since the US market was unusually strong earlier, once it took a downturn, it’s a hard plunge,” he said. “Selling has been inviting more selling.” Suzuki said no one knew when the drop would stop.

“The bottom could be today or one week ahead … As for the spread of the virus, even infectious diseases experts don’t know.

AFP

11.17am: Margins, ETFs a worry

Traders are starting to worry about potential forced selling in shares after a 10pc fall in the past week.

Some say margin calls are no longer a factor as there’s not anywhere near the margin loans that there were pre-GFC. But an institutional trader tells The Australian he does expect some margin calls today.

Another trader says the margin calls are happening and that Monday will also be busy.

This could be why the market fell much more than expected this morning. It’s coming off again now as the positions are normally sold around 11am.

Another trader says his biggest concern right now is the liquidity of ETFs.

The S&P/ASX 200 is currently down 3.2pc at 6433. It fell 3.5pc to a 6-month low of 6526.8 in early trading

11.12am: Collateral damage amid the outbreak

The so-called “purchase intent” for Corona beer among adults in the U.S. “has plunged to the lowest in two years, according to data from YouGov Plc.”$STZ https://t.co/nolF86pF70

— Carl Quintanilla (@carlquintanilla) February 28, 2020

11.01am: Blue chips lead sell-off

Blue chips are being sold off across the board, as the ASX trades down 3.2 per cent.

Of the ASX’s top 20 stacks – gold miner Newcrest is hardest hit, with a 4.3pc loss, while BHP is off 4.2 per cent.

Woodside is down 4pc after oil prices dived to the lowest in a year while NAB is leading financials lower at 3.8 per cent. Macquarie Group is also off 3.8 per cent.

In the broader 100, Afterpay is down 8 per cent and Link Administration down 6 per cent.

10.56am: Mainland China reports latest virus toll

Mainland China has reported 327 new cases of coronavirus as at the end of Thursday, down from 433 new cases reported the day prior.

The local health authority reported 44 new deaths, up from 29 on Wednesday.

10.44am: Treasury the only green in top 200

Treasury Wines is the single positive stock in the top 200 this morning, as the market tumbles by 3.1 per cent.

All sectors are in the red, led by a slide in mining and tech stocks, but Treasury Wine is still edging higher by 1.2 per cent.

According to Bloomberg, the stock had one of the biggest decreases in short positions this week.

10.32am: ASX dives into ‘correction’ territory

The greater-than-tipped drop in the local market has pushed it to enter a “technical correction” in early trading.

Shares fell 3.5pc to a 6-month low of 6426.8, to be down 10.3pc from the record high close of 7162.5 a week ago.

It has since recovered to 6453.5 points as bargain hunters react to the correction, helped by a 0.4pc rise in S&P 500 futures.

But the situation is very fluid and the market is likely to fall further as coronavirus spreads, with even the Federal Reserve to possibly take action soon.

Expect another wave of selling from margin calls around 11am today because of the sharp fall in the past week.

The index is currently on track for its worst six-day losing streak since the height of the subprime crisis in January 2008.

Michael Roddan 10.24am: ASIC readies for virus hit

Corporate watchdog chairman James Shipton said “one never knows” the impact of pandemic events on financial markets, but warned the regulator stood “prepared for any eventuality” and was teaming up with global watchdogs to guard against the crisis.

Appearing before the Parliamentary oversight committee on Friday, the Australian Securities and Investments Commission said it was working with large institutions and the Australian Financial Markets Association to ensure financial markets remained open during the coronavirus crisis, which is threatening to explode into a pandemic.

ASIC executive director of markets group Greg Yanco said the regulator was making sure the market could operate, although he said the economic impact of the COVID-19 virus was uncertain.

“Precedence suggests it could be short lived,” Mr Yanco said.

Mr Yanco said a number of AFMA institutions had tested financial market infrastructure if their organisation needed to move to another site or have staff working from home.

“We haven’t had any points of failure. We’re confident that if there is an escalation in our region the market participants will be ready for it,” Mr Yanco said.

Mr Shipton said ASIC was “closely co-ordinating with market participants and with brokers” in the Australian market.

10.21am: Shares drop 3.5 per cent

Shares have dropped as much as 3.5 per cent at the open, as fears of the coronavirus spread picked up steam overnight.

The benchmark ASX200 touched a low of 6426.8, its lowest level since August before bouncing slightly to trade down 209 points or 3.14 per cent at 6449.

It comes as US markets took a battering overnight, with the Dow Jones and S&P500 both falling 4.4 per cent while the US 10-year yields hit a record low amid safe haven buying.

[CHART] Flight to safety - The US Ten Year Note hit a record low yield of 1.24% overnight as investors looked for the safe harbour of Gvt bonds, amidst the anticipation of near term rate cuts from the US Federal Reserve #ausbiz #coronavirusaustralia pic.twitter.com/uc2likm0hF

— CommSec (@CommSec) February 27, 2020

10.07am: Heavyweights tumble early

The first minutes of trade are already pointing to battering on the local market.

Of the major stocks already trading, Commonwealth Bank is lower by 3pc, BHP down by 4.7pc, CSL and Macquarie taking hits of 3.3pc while Magellan falls 6.6pc.

It comes after a 4.4 per cent drop on the Dow Jones Industrial Index – while the ASX trades lower by 2.2 per cent so far.

9.49am: Hand sanitiser maker boasts virus-proof

Small cap biotech Zoono says it has successfully tested its Microbe Shield hand sanitiser against coronavirus.

The company, which has soared 254 per cent since the outbreak shook markets in late January, today released a statement to the market, saying the technology in its hand sanitiser was more than 99.99 per cent effective against COVID-19.

“COVID-19 has become a global concern, in particular as it has been shown to survive on surfaces for up to 9 days,” it said.

“Zoono products have been successfully tested against a variety of pathogens for up to 30 days on surfaces and 24 hours on hands.”

ZNO shares last at $1.62.

Read more

Eli Greenblat 9.46am: Harvey Norman profits slip

Furniture, consumer electronics and whitegoods retailer Harvey Norman has posted a 4.1 per cent drop in its interim net profit to $213.59m as the weakened value of its property portfolio, especially those in residential zones in NSW weighed on the company’s profitability, while the bushfires also disrupted foot traffic at its stores.

The company this morning said that profit before tax was $301.15m, a fall of 4.6 per cent, while sales revenue from across its Australian and overseas networks rose 1.9 per cent to $4.07bn. Same store sales growth for the December half was 1.6 per cent.

It declared an interim dividend of 12 cents per share, flat with last year, and payable on May 4.

Harvey Norman said the profit result for the first half of 2020 was impacted by a decrease in the net property revaluation increment of its extensive property holdings and mainly attributed to valuation falls for its residential zoned property in NSW as well as the first time application of new accounting treatments of leases.

Its holding of various property assets hit $2.97bn in the December half, only up slightly from its valuation of $2.93bn in 2018.

9.42am: Shares to dive to 5-month low

Australia’s sharemarket is set for its biggest fall in six months after the spread of coronavirus pummelled the US sharemarket overnight.

Futures suggest the S&P/ASX 200 will open down 2.5pc at a 5-month low of 6490. If sustained, this will be the worst day since August 15.

The latest drop on US markets pushed the S&P 500 down 4.4pc, the biggest one day fall since August 2011, to a 4.5-month low of 2978.7. The S&P 500 has fallen 12pc from its record high close of 3386.15 in just over a week.

That the two most recent corrections are the fastest in history is surely no coincidence. Lots of funny derivatives business going on in quant land. Long periods of absurdly low volatility followed by bursts of madness seems to be a feature pic.twitter.com/L8NCFhFeLX

— Steve Johnson (@ForagerSteve) February 27, 2020

It came as the US said it was monitoring 8.400 people for coronavirus after confirming 33 cases. Elsewhere, Germany recorded new 14 cases and Italy reported 150 new cases. WHO said the outbreak has reached a “decisive point” and has “pandemic potential” after spreading to 50 countries.

Highlighting the risk of a major deleveraging event in financial markets, the VIX volatility index surged to 39.3pc, its highest point since the low volatility funds blew up in February 2018, while the US 10-year bond yield hit a record low of 1.2408pc before closing down 7bps at 1.2656pc.

The Australian market will cross the -10pc threshold for a “correction” at 6443 points. Bargain hunters will be interested at point but may be overwhelmed as they were in the US market.

The Australian market has already had its worst 5-day fall since August 2011. Its six-day fall today will likely be the worst since January 2008. But such sharp falls on Wall Street and the associated tightening of US financial conditions – now the tightest since December 2018 – could prompt the Fed to take some action soon.

Jared Lynch 9.37am: Lynas posts 80pc profit plunge

Rare earths miner, Lynas Corporation, has reported almost an 80 per cent plunge in half year profit amid regulatory uncertainty which only ended this week after it finally received a licence renewal for its Malaysian operations.

The company’s net profit dived 79.6 per cent to $3.9m in the six months to December 31, with chairman Mike Harding, citing “difficult regulatory and market conditions”.

“Lynas Malaysia did not receive regulatory approval for an uplift in the lanthanide concentrate processing limit for Calendar Year 2019. As a result, production during the half year was managed at reduced rates,” Mr Harding said.

In addition, he said the Chinese light rare earth market was currently oversupplied with concentrate from the US and Africa.

“(This has led) to local market structural modifications, increased competition and continued weak prices.

“Future trends depend on how the China central government addresses this new situation.”

On Thursday, Lynas won a three-year extension to its Malaysian operating licence, ending uncertainty over the future of its refining operations.

LYC last traded at $1.99.

Ben Wilmot 9.32am: National Storage bids down to 1

The race for the National Storage REIT is coming down to the Australian group’s ability to agree a price and lock down a proposed $1.9bn takeover deal with US-based sector giant Public Storage, after rival Warburg Pincus pulled out of the race.

Warburg Pincus had made a proposal for the company at $2.20 per share and was undertaking non-exclusive due diligence.

But like fellow bidder, Gaw Capital, that has also exited, it was behind the price offered by Public Storage, that has made an indicative proposal price of $2.40 per share.

Warburg Pincus has withdrawn its indicative offer but reserved its right to revisit its decision at any time. It is advised by Credit Suisse and UBS.

National Storage, which has a $2.2bn portfolio but had soft first half results, is now working with Public Storage on closing out its proposal to acquire the Australian company.

The US group told investors this week that its balance sheet was in great shape but with some pricing tension gone, its takeover foray into Australia may come down to how much it has to pay to win a final recommendation from the target’s board.

National Storage is advised by JPMorgan.

Read more

9.23am: Regulator probes Asahi sale

The competition watchdog is calling for views on Asahi’s proposed $16bn acquisition of Carlton United Breweries, particularly its divestment of some beer and cider assets in order to satisfy the regulators preliminary concerns.

In a bid to ease initial competition concerns, Asahi had agreed to divest its Strongbow, Bonamy’s and Little Green cider brands as well as its Stella and Becks beer brands.

“The release of the proposed divestment undertaking for public comment should not be interpreted as a signal that the ACCC will ultimately accept the undertaking and clear the transaction. We are following our usual practice of publicly consulting on a proposed divestment package,” ACCC Chair Rod Sims said.

“We are seeking feedback from industry participants on whether the divestment package will be sufficient to address the competition concerns.”

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9.15am: What’s on the broker radar?

• Afterpay cut to Neutral – Goldmans
• AP Eagers raised to Overweight – JP Morgan
• AP Eagers cut to Neutral – Macquarie
• Auswide Bank cut to Hold – Bell Potter
• Bank of Queensland raised to Hold – Jefferies
• Bank of Queensland raised to Buy – Bell Potter
• Domain raised to Hold – Morningstar
• Flight Centre raised to Outperform – Credit Suisse
• Healius cut to Hold – Morningstar
• Infomedia raised to Buy – UBS
• Link Administration cut to Equal-weight – Morgan Stanley
• Link Administration raised to Outperform – Credit Suisse
• Metcash raised to hold – Morningstar
• OZ Minerals raised to Buy – Morningstar
• Pendal Group raised to Neutral – Evans & Partners
• PolyNovo cut to Market-Weight – Wilsons
• Qube raised to Hold – Morningstar
• Ramsay Health Care cut to Neutral – Citi
• Stanmore Coal raised to Buy – Bell Potter
• Woolworths Group raised to Hold – Shaw and Partners

9.05am: Japara warns of funding ‘challenge”

Aged care provider Japara has trimmed its full year earnings estimates as it warned of the continued fallout from the Aged Care Royal Commission.

The group said it expected FY20 earnings to be 10 per cent lower than the previous year as “the funding environment continues to present challenges and occupancy remains below historic levels”.

Japara posted a 28 per cent drop in net profit to $5.4m, after the opening of one new home and three home extensions during the period, while revenues were higher by 10 per cent to $212.6m.

Those new developments were expected to help mitigate some of the headwinds in the industry, though will also add to the group’s interest and depreciation costs in the second half.

The board declared an interim dividend of 2c per share, down from 2.8c last year.

8.55am: Dow’s worst week since GFC

After another hammering on Wall Street, the Dow Jones Industrial Index is now down 8.81 per cent for the month, for its worst one month percentage decline since February 2009.

Thursday’s session finished down 4.4 per cent, to take the weekly decline to 11.13 per cent – the largest one week percentage decline since October 2008.

8.30am: Wall St indexes fall into correction

US stocks closed sharply lower as investors braced for the spreading coronavirus to slow business activity and depress corporate earnings.

The Dow Jones Industrial Average fell 4.4pc, about 1,186 points, as of the 4pm close and the Nasdaq Composite slid 4.5pc. The S&P 500 was down 4.4pc.

All three closed near the lows on the day and finished the session down more than 10pc from their recent highs, a decline known as a correction.

For the broadbased S&P 500, it was the fastest decline into correction territory from an all-time high since at least 1980, according to Dow Jones Market Data.

All three indexes were in negative territory for the year after punishing losses this week, and the Dow over the four days was down 11pc.

The losses set Wall Street on pace for its worst week since the 2008 financial crisis, as investors continued to flee equities into safer investments like US Treasuries and gold.

Investors have grown increasingly worried about the potential economic impact of the virus as it emerges in new locations.

“Obviously it’s a bloodbath,” said David Bahnsen, chief investment officer of The Bahnsen Group, a wealth-management firm. “When you get into a free-fall mode, there’s really little that can be done but wait for some sort of footing to be found.”

Some US companies say they could lose as much as half their annual revenue from China if the coronavirus epidemic extends through the summer. American businesses will generate no earnings growth in 2020 if the virus becomes widespread, Goldman Sachs Group’s equity analysts warned on Thursday.

“We have to brace ourselves for wave after wave of earnings downgrades,” said Paul O’Connor, head of multi-asset at Janus Henderson Investors. “The globalisation of the virus extinguishes confidence in the V-shaped recovery that was the view last week.”

European indexes also dropped, with the Stoxx Europe 600 tumbling 3.7pc. In Asia, Japan’s Nikkei 225 closed 2.1pc lower, while South Korea’s Kospi declined 1pc.

Investors continued to seek the safety of government-bond holdings. The yield on the benchmark 10-year U.S. Treasury, which closed at a record low of 1.310pc on Wednesday, fell to 1.299pc Thursday, according to Tradeweb. Yields move inversely to bond prices.

A key measure of turbulence in US stocks also rose, with the Cboe Volatility Index, or VIX, jumping to 33.27, its highest level since December 2018. The options-based gauge tends to rise when markets fall and investors reach for insurance-like contracts to protect their portfolios.

“It’s very scary on a personal level, and I think that psychology pervades through the market” said Sam Hendel, president and portfolio manager at Levin Easterly Partners. “As an investor, my job is to keep a cool head.”

More than 82,000 people have been infected by the virus and the death toll stands at more than 2,800 globally. On Wednesday, American authorities said a patient in California might be the first U.S. coronavirus case to be diagnosed without a clear explanation for how the disease was transmitted.

Dow Jones Newswires

8.20am: Lynas earnings sink 13pc

Rare earths producer Lynas says EBITDA fell 13pc to $44.2m.

Revenue rose 0.2pc to $180.1m.

Net profit attributable to members slumped 79.6pc to $3.9m.

Lynas won’t pay a dividend

8.11am: US stocks drop more than 4.0pc

Wall Street stocks were pommeled again on mounting fears the coronavirus amid outbreak will derail global growth.

Shortly after the closing bell, the Dow Jones Industrial Average was down nearly 1200 points or 4.4 per cent, to 25,766.03, its worst session in more than two years.

The broadbased S&P 500 also slumped 4.4 per cent to 2,978.66, while the tech-rich Nasdaq Composite Index shed 4.6 per cent to 8,566.48.

8.09am: ASX poised for sharp fall

Australian stocks are poised to extend their losses after another rout on most global markets.

At 8am (AEDT) the SPI200 futures contract was down 164 points, or 2.48 per cent, at 6,452, pointing to another sharp fall when the local market opens.

By Thursday’s close, shares on the benchmark index had fallen to levels last seen on December 5 as $170 billion in value was wiped from the market.

Global markets continued to fall overnight as the growth in coronavirus cases outside China jumped significantly on Thursday.

Harvey Norman and Rural Funds Group are among the local companies reporting their earnings on Friday.

The Aussie dollar was buying US65.80 cents, up from US65.50 cents at the market close on Thursday.

AAP

8.00am: Oil prices dive

Oil prices tumbled for a fifth day overnight to their lowest in more than a year, as further novel coronavirus cases outside China fanned fears that a pandemic could slow the global economy and erode demand for crude.

Brent crude dropped $US1.25, or 2.3 per cent, to settle at $US52.18 a barrel, off the session low of $US50.97 a barrel, the lowest since December 2018. West Texas Intermediate (WTI) futures sank $US1.64, or 3.4 per cent, to $US47.09, after hitting their lowest since January 2019.

For the first time since the outbreak erupted, the number of new coronavirus infections outside China exceeded new Chinese cases.

Reuters

7.53am: Dow on pace for correction

US stocks deepened their losses as investors braced for the spreading coronavirus to slow business activity and depress corporate earnings.

In late trade the Dow Jones Industrial Average fell 3.7pc, about 1000 points, and the Nasdaq Composite slid 3.9pc. The S&P 500 was down 3.8pc, all near the lows on the day. If the indexes maintain those losses, they will close the session down more than 10pc from their recent highs, a decline known as a correction.

If the S&P 500 were to close below the correction threshold, it would be the broad US stock index’s fastest decline into correction territory from an all-time high in data going back to 1980, according to Dow Jones Market Data.

Dow Jones

7.35am: Vale ore ship wrecked

The Brazilian navy said it has set up a crisis team to handle potential environmental damage caused by a ship loaded with iron ore that is at risk of sinking after an accident.

The South Korean ship, which is reportedly loaded with 300,000 metric tons of iron ore from Brazilian mining company Vale, was setting sail for Qingdao, China on Monday night when it apparently struck an object and began taking on water.

Vale said the 20 crew members were evacuated, as the ship listed badly to its right side, sparking fears that it could sink.

The navy said its crisis team would analyse possible environmental damage and options to remove the ship, together with representatives from Vale and the South Korean company that owns and operates the vessel, Polaris.

A South Korean ship loaded with iron ore sinking off Brazil. Picture: AFP

AFP

7.19am: Dow near correction territory

US stocks deepened their losses as investors braced for the spreading coronavirus to slow business activity and depress corporate earnings.

In late afternoon trade the Dow Jones Industrial Average fell 2.8pc, about 774 points, and the Nasdaq Composite slid 3.1pc. The S&P 500 was down 2.7pc. If the indexes maintain those losses, they will close the session down 10pc from their recent highs, a decline known as a correction.

If the S&P 500 were to close below the correction threshold, it would be the broad U.S. stock index’s fastest decline into correction territory from an all-time high in data going back to 1980, according to Dow Jones Market Data.

All three indexes were in negative territory for the year after punishing losses this week. Investors have grown increasingly worried about the potential economic impact of the virus as it emerges in new locations.

Dow Jones

7.15am: ASX poised for another sharp fall

Australians stocks are poised to extend their losses for a sixth day after another rout on most global markets.

At 7am (AEDT) the SPI200 futures contract was down 112 points, or 1.69 per cent, at 6,504, pointing to another sharp fall when the local market opens.

By Thursday’s close the benchmark index had fallen 7.0 per cent in a week, returning to a level last seen on December 5 and wiping $150 billion in value from the market.

The Aussie dollar was buying US65.84 cents, up from US65.50 cents at the market close on Thursday.

AAP

6.55am: Wall St falls sharply again

US stocks continued to fall, extending a recent string of losses as investors braced for the spreading coronavirus to slow business activity and depress corporate earnings.

The Dow Jones Industrial Average dropped 960 points in morning trading, then erased much of the loss by midday before giving way to another round of selling in the afternoon.

In late afternoon trade the Dow Jones Industrial Average was down 3pc, nearly 800 points, and the S&P 500 lost 2.8pc. The Nasdaq Composite slid 3pc.

Before paring losses from earlier in the session, all three indexes had been on pace to drop 10pc from recent highs, a decline known as a correction. Still, all three were in negative territory for the year after punishing losses this week.

After diving for a fifth day yesterday, Australian stocks are set for more solid falls. At 6.30am (AEDT) the SPI futures index was down 106 points.

US investors have grown increasingly worried about the potential economic impact as the virus emerges in new locations.

“Obviously it’s a bloodbath,” said David Bahnsen, chief investment officer of The Bahnsen Group, a wealth-management firm. “When you get into a free-fall mode, there’s really little that can be done but wait for some sort of footing to be found.”

Some US companies say they could lose as much as half their annual revenue from China if the coronavirus epidemic extends through the summer. American businesses will generate no earnings growth in 2020 if the virus becomes widespread, Goldman Sachs Group’s equity analysts warned.

“We have to brace ourselves for wave after wave of earnings downgrades,” said Paul O’Connor, head of multi-asset at Janus Henderson Investors. “The globalisation of the virus extinguishes confidence in the V-shaped recovery that was the view last week.”

Microsoft warned that supply-chain disruptions from the coronavirus would hurt sales this quarter, making it the second major tech company — after Apple — to lower expectations because of the epidemic.

European indexes also dropped, with the Stoxx Europe 600 tumbling 3.7pc. In Asia, Japan’s Nikkei 225 closed 2.1pc lower, while South Korea’s Kospi declined 1pc.

Investors who have been seeking the safety of government-bond holdings eased back. The yield on the benchmark 10-year U.S. Treasury, which closed at a record 1.310pc on Wednesday, rose to 1.314pc Thursday, according to Tradeweb. Yields move inversely to bond prices.

A key measure of turbulence in U.S. stocks also rose Thursday, with the Cboe Volatility Index, or VIX, jumping to 30.26, its highest level since December 2018. The options-based gauge tends to rise when markets fall and investors reach for insurance-like contracts to protect their portfolios.

Brent crude, the global oil benchmark, fell 2.1pc to $US51.70 a barrel, reflecting anxiety about the demand for energy if growth prospects sour.

Dow Jones Newswires

6.50am: Iron ore down 2.2pc

The spot price of iron ore was down 2.2 per cent to $US85.40, according to CommSec.

6.48am: DoorDash nears IPO

Food delivery giant DoorDash has taken a first formal step toward a stock market debut.

The San Francisco-based company announced that is has confidentially filed a draft S-1 form with the Securities Exchange Commission outlining its proposed public stock offering. There was no proposed date for an initial offering, which could be a long way off. Last year, rival Postmates delayed plans for an IPO, citing unfavourable market conditions.

DoorDash Inc. has overtaken Grubhub as the top digital food delivery company in the U.S., according to data analytics firm Second Measure, capturing 38pc of monthly food delivery sales in January, compared to 31pc for Grubhub. Analysts have said both DoorDash and Postmates are burning cash and need money- raising options as the third-party delivery business becomes more fragmented and competitive.

AP

6.45am: Virus to cost tourism at least $US22bn

The deadly coronavirus epidemic will cost world tourism at least $US22 billion owing to a drop in spending by Chinese tourists, the head of the World Travel and Tourism Council said Thursday.

The COVID-19 epidemic has killed more than 2,760 people, mostly in China — where it first emerged in December — and infected more than 81,000 in over 45 countries.

“It is too soon to know but the WTTC has made a preliminary calculation in collaboration with (research firm) Oxford Economics which estimates that the crisis will cost the sector at least $US22 billion,” Gloria Guevara told El Mundo daily.

“This calculation is based on the experience of previous crises, such as SARS or H1N1, and is based on losses deriving from Chinese tourists who have not been travelling in recent weeks,” she said.

“The Chinese are the tourists who spend most when they travel.”

AFP

6.40am: European stocks, oil slump

European and US stock markets slumped painfully again Thursday as new coronavirus infections spread outside China.

While the markets in Shanghai and Hong Kong closed higher, Europe was a sea of red with London, Frankfurt and Paris all posting losses of more than three per cent on the day.

New York showed a drop of almost 2.0 per cent in midday trading, while Tokyo closed with a loss of 2.1 per cent.

Oil prices plunged by more than four per cent at one point before recovering somewhat, while the yen gained as traders turned to a traditional haven in times of economic turbulence.

The euro was almost 1.1 per cent higher against the pound as EU and British leaders laid down red lines in Brexit trade talks.

“There was more coronavirus carnage on the markets,” Spreadex analyst Connor Campbell said.

He noted that “this is one of the worst weeks in recent memory and terrifyingly, it’s not over yet. Friday is a tricky proposition.”

IG trading group analyst Joshua Mahony remarked that “what was a centralised focus on Italian containment efforts has now turned into a European-wide crisis as new cases pop up throughout the continent.”

President Emmanuel Macron said France was preparing for a surge in the number of cases, adding: “We are facing a crisis, an epidemic.” Denmark and Estonia reported their first cases, meanwhile.

In Japan, Prime Minister Shinzo Abe on Thursday told schools to close nationwide from Monday for several weeks, and Saudi Arabia banned pilgrims from visiting Islam’s holiest sites to try to contain the virus.

Around 2,760 people have died worldwide and more than 81,000 have been infected in dozens of countries, raising fears of a pandemic.

AFP

6.37am: UK power firm to axe coal

British electricity generation company Drax revealed that it will stop using coal next year, four years ahead of the UK government’s official target, with the loss of 230 jobs.

Drax will cease almost 50 years of coal-fired electricity generation at its Selby plant in Yorkshire, northern England, in March 2021, it said in a statement.

The London-listed company will shutter the country’s largest power station ahead of Britain’s 2025 deadline to achieve “net zero” carbon emissions.

The government wants to phase out coal power generation as part of its plans to combat climate change.

Drax meanwhile aims to become carbon negative by 2030, meaning that it seeks to capture more carbon — via bioenergy carbon capture and storage technology — than its operations release into the atmosphere.

A coal-fired power plant in Germany. Picture: Getty

AFP

6.35am: US economy grew at 2.1pc

The US economy grew at an annual rate of 2.1% in the final quarter of last year, but damage from the spreading coronavirus is likely depressing growth in the current quarter and for 2020 as a whole.

The Commerce Department said the overall pace of growth in the October-December quarter was unchanged from its initial estimate a month ago, though the components were slightly altered.

A slowdown in business restocking was less severe than first believed. But a cutback in business investment in new equipment was more of a drag on growth last quarter than initially estimated.

Economists have been downgrading their forecasts for the first quarter of this year as fears of the virus’ impact have escalated.

AP

6.30am: AB InBev buoyant

The world’s biggest brewer, AB InBev, Thursday forecast a rise in 2020 operating profits despite a difficult first quarter owing to the coronavirus epidemic, which has already cost it $285 million.

The company behind brands like Stella Artois and Budweiser announced 29-percent growth in 2019 net profits to $US8.09 billion, helped by the $US5-billion listing of its Asian subsidiary in Hong Kong in September.

But the Belgian-Brazilian brewer said it was “not satisfied” with the results and warned of a stormy first quarter because of coronavirus.

“The outbreak has led to a significant decline in demand in China in both on-premise and in-home channels. Additionally, demand during the Chinese New Year was lower than in previous years as it coincided with the beginning of this outbreak,” the company said.

“For the first two months of 2020, we estimate that the outbreak has resulted in lost revenue of approximately $US285 million.” In an unfortunate coincidence for AB InBev, one of its leading lager brands is called Corona.

AFP

6.25am: Bayer profit jumps

The acquisition of seeds and pesticides maker Monsanto remained both boon and burden for German chemical and pharma giant Bayer in 2019, ensuring bumper profits but miring the company in tens of thousands of legal disputes over a key weedkiller.

“We met our financial goals, even though we had to battle a difficult market environment, especially in the agricultural sector,” chief executive Werner Baumann said Thursday as he presented Bayer’s annual results.

Net profit leapt 141 per cent year-on-year, to 4.1 billion euros ($US4.5 billion), beating forecasts from analysts surveyed by Factset.

Much of the effect was down to the full integration of Monsanto into Bayer’s business after the mid-2018 takeover.

Operating profit at the group’s crop science unit jumped 80 per cent. But Bayer also reported it had been served with around 48,600 American lawsuits — up from 42,700 in October — over Monsanto weedkiller glyphosate, a vital ingredient in widely-used products like Roundup.

Plaintiffs argue glyphosate caused their cancers, but Bayer insists the science shows its chemical is safe and is “vigorously” appealing first-instance court decisions against it.

Bayer’s profit beat forecasts. Picture: AP

AFP

6.20am: WPP reports slump in profits

British advertising group WPP announced a 41-per cent drop in annual net profit as the company restructured last year after the controversial exit of founder Martin Sorrell.

Profit after tax slumped to £624 million in 2019 from £1.06 billion a year earlier, WPP said in a statement.

Investors were left unimpressed by the update that also revealed a 22-percent drop in annual pre-tax profits and a worse-than-expected final quarter.

The group’s share price was sent crashing almost 16 per cent in London morning trading.

“It seems that the market was hoping for a brighter turnaround story,” said Richard Hunter, head of markets at Interactive Investor.

“The company is putting a brave face on its turnaround prospects, which now look like they will take longer than the market had hoped,” he told AFP.

AFP