Australia Market falls 0.9%

Headline indices of the Australian financial market nosedived on Tuesday, 18 December 2018, due to profit taking across the board on following a similarly widespread sell-off on Wall Street overnight amid heightened concerns about a slowing global economy. Almost all ASX sectors declined, with shares in financial, energy, materials, technology, healthcare, consumer and industrial sectors being notable losers. In late afternoon trade, the benchmark S&P/ASX200 index dropped 50.57 points, or 0.9%, to 5,607.70 points, while the broader All Ordinaries index shed 54.96 points, or 0.96%, to 5,677.90 points.

US stocks hit nine-month lows overnight as a number of geopolitical concerns weighed on sentiment. Investors are also cautious ahead of the Federal Reserve's interest rate decision Thursday morning. The market is pricing in a 70% chance of a US rate hike however economists will pay most attention to the tone of Fed Chair Jerome Powell's statement. Many investors now expect signs of economic turbulence would prompt the Fed to signal a slowdown in the pace of tightening next year.

 

Fears of a potential partial US government shutdown next week should President Trump not receive the necessary funding to build a wall with Mexico is also a concern.

Shares of energy sector tumbled the most among ASX sectoral peers, after crude oil prices fell on US supply concerns and fears over global economic growth. US crude fell to as low as $49.01 per barrel on Monday, its lowest level since September last year and last stood at $49.33, down 1.1% on the day. Among energy stocks, Origin, Woodside, Oil Search, and Santos were down between 1% and 3%.

Shares in fuel giant Caltex have tanked as much as 7.6% to a new four-year low after its Lytton refinery weighed heavily on a bleak earnings outlook. The company's unaudited profit guidance for the year ending 2018 showed replacement cost operating profit had dropped to between $533 million and $553 million, down by about 15% at the mid point. The company's historic cost profit after tax is now $530 million to $550 million, a fall of about 13% compared with 2017, while fuels and infrastructure earnings are set to decline 14% from $666 million thanks to unplanned third-quarter outages at the Lytton refinery in Queensland, and a lower regional refining margin.

Shares of materials and resources were softer. Major miner BHP eked out a 0.2% gain, while Rio Tinto, South32 and Fortescue lost between 0.5 and 1.7%. Bluescope fell 4.4%.

Shares of financials were also lower, with Australia and New Zealand Banking Group lead the losses for the big four lenders, down 2.5%, while Commonwealth Bank lost the least, 1.1% lower.

Among individual stocks, Carsales.com (CAR) dropped 1% after auto classified site announcing a likely $48 million impairment on its share in Stratton Finance. CAR has blamed this on ASIC legislation changes and tighter credit market conditions.

Fletcher Building climbed nearly 3% after confirming its intention to restart paying dividends in FY19 for the first time since October 2017. The building products company also announced the $840 million sale of the Formica Group to Netherlands-based Broadview Holding.

CURRENCY: Australian Dollar, seen as a proxy for China-related trades, edged up against greenback on Tuesday. The Australian dollar was quoted at 71.86 US cents, up from 71.73 US cents on Monday.

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