Australia Market extends losses as oil meltdown spreads

The Australian share market lost ground for third straight session on Wednesday, 22 April 2020, on the back of sharp losses in the oil markets overnight and the Reserve Bank of Australia warning that the country will suffer a once in a century economic contraction in the first half of 2020. However, market losses were marginal after better than expected retail trade figures. At closing bell, the benchmark S&P/ASX200 index edged down 0.10 point, or 0.00%, to 5,221.20. The broader All Ordinaries fell 2.54 points, or 0.05%, to 5,276.10.

The US market provided a weak lead overnight, with the Nasdaq down by 3.5 per cent and the Dow Jones down 2.7 per cent. This marked the first back-to-back losses for the American equity market since April 1.

 

The oil market collapse weighed on investor sentiments. Concerns about oil storage availability amid weaker demand for the commodity and a week long dispute between Russia and OPEC nations, have propelled the historic oil sell-off. OPEC and Russia eventually agreed to cut production by 10 million barrels per day in May.

Oil prices remained volatile in overnight trade. West Texas Intermediate's contract for May delivery -- which traded below $0 on Monday for the first time in history -- rebounded slightly Tuesday but was trading at less than $5. For June delivery, which experts view as a better indicator of how Wall Street views oil prices, WTI fell 43.4% to $11.57 per barrel on Tuesday. The crude price rout extended to global benchmark Brent with the contract for June deliveries closed at $19.33.

In the Asian trading hours on Wednesday, he June contract for West Texas Intermediate (WTI) clawed back some Tuesday losses as it jumped 11.32% to $12.88 per barrel, after falling more than 40% on Tuesday. Meanwhile, international Brent crude futures fell 2.43% to $18.86 per barrel, having plunged from levels above $24 per barrel on Tuesday.

The benchmark stock index has shed roughly 7% this week after gaining for four straight weeks, as the spectacular crash in crude prices has started to weigh on hopes for global recovery and stoked recession worries.

Material sector was the top losers on the main Aussie bourse with a drop of 2.1%, followed by Energy sector with fall of 1.1% and consumer discretionary down 0.4%. Healthcare sector was the top gainer on the main Aussie bourse with a gain of 1.3%, followed by financial with gains of 0.7%

ECONOMIC NEWS: The Bureau of Statistics released its preliminary retail trade figures showing that March 2020 was the strongest month ever. Retail sales surged 8.2 per cent last month, driven mainly by consumers hoarding groceries like toilet paper, rice and pasta.

CURRENCY NEWS: The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 100.221 after seeing levels below 99.5 last week. The Australian dollar changed hands at $0.6292 following a decline from levels above $0.635 seen earlier this week.

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