Australia Market hits fresh four-year low amid virus jitters

The Australian share market extended losses on Thursday, 19 March 2020, hitting a fresh four-year low and taking the losses so far this week to ~14%, as fears over the economic impact of the coronavirus pandemic continued to weigh on investor sentiment. The sellofftriggered inspite of the Reserve Bank of Australia (RBA) announced Thursday a comprehensive package, including a reduction in the cash rate target to 0.25%, to support the country's economy as it grapples with the impact of the virus. At closing bell, the benchmark S&P/ASX200 index tumbled 340.21 points, or 6.43%, to 4,953.20. The broader All Ordinaries sank 334.02 points, or 6.26%, to 4,998.80.

Sydney market surged as much as 3% in early trade. Stocks in the region had earlier gotten a boost after the European Central Bank announced Wednesday a new Pandemic Emergency Purchase Programme that will use 750 billion euro to purchase securities to help support the European economy.

But the benchmark index quickly reversed into negative territory and kept on going, undermined not only by not only recession fears but also a sharp lift in longer-dated Australian bond yields after the RBA announced it will begin buying government bonds from Friday with the aim of capping three-year yields at 0.25%.

The spike in yields indicates that Australian bond prices, like equities, were also under selling pressure during the session.

Developments surrounding the global coronavirus outbreak continued to be watched on Thursday. So far, at least 207,860 have been infected while at least 8,657 lives have been taken by the disease globally, according to the latest data from the World Health Organization.

Energy stocks were some of the hardest hit companies on Thursday following a 24% slump in the oil price overnight. This means the commodity has more than halved this month, is down ~70% in 2020 and is near 18-year lows. Two reasons for the decline: 1. Saudi Arabia and Russia's price war continuing and 2. The coronavirus outbreak is reducing demand (jet fuel accounts for 7% of oil demand while road transport accounts for as much as 45%).

Qantas (QAN) fell 15.4% after saying 20,000 of its 30,000 employees will be temporarily stood down to preserve jobs long term. QAN decided to defer its next dividend until September. QAN has cut all international flights (as required by the Federal Government). Webjet (WEB) entered a halt ahead of a capital raising. Flight Centre (FLT) is down an additional 33%.

Adairs (ADH) fell by 27.5%. The retailer has withdrawn its earnings guidance for the year due to the unpredictability of the coronavirus' impact on spending. ADH will not pay investors an interim dividend of 7c in a bid to maintain strong liquidity.

Shares in troubled department store Myer have plummeted over 40% during trade today as investors expect the country's department stores to be some of the hardest hit by the coronavirus pandemic. The market capitalisation of the had sunk to just $81 million just before market close, with shares at an all-time low of just 9.9 cents.

CURRENCY: The Australian dollar was also pummeled inline with the weakness in Australian stocks and bonds, sliding in excess of 4% at one point to 55.10 US cents, its weakest level since 2002.

Powered by Capital Market - Live News