(Australian Associated Press)
Australia’s share market sunk from the beginning of trade and never recovered, after US investors continued to sell the technology stocks that have helped Wall Street to record highs.
The S&P/ASX200 benchmark index closed lower by 129.2 points, or 2.15 per cent, at 5878.6 on Wednesday.
It’s the lowest closing position of the index since June 29, when it finished at 5815.0.
The All Ordinaries index finished down by 131.3 points, or 2.12 per cent, to 6058.9.
All sectors were lower. Energy had the biggest loss, 4.68 per cent, after a seven per cent drop in crude oil prices.
There were losses of more than two per cent for industrials, consumer discretionaries, financials, information technology and telecommunications.
The big falls came after US stocks closed lower for a third consecutive session as investors turned on the likes of Apple, Amazon, Facebook and Tesla.
Tech stocks had been the darlings of Wall Street on expectations they can continue to deliver profit growth regardless of the economy and coronavirus pandemic.
The Nasdaq has dropped more than 10 per cent in three sessions.
ThinkMarkets Australia analyst Carl Capolingua believed there were a few factors behind US investors’ recent change of attitude to tech stocks.
One factor was reports that the Japanese SoftBank Group had built up stakes in major US tech companies worth around $US4 billion. It bought a similar amount of call options for the underlying shares.
Counterparties who sold the call options to SoftBank would have needed to hedge their exposure by buying the underlying shares.
Mr Capolingua said this would have artificially inflated prices.
He also believed traders were likely concerned by the absence of more US government stimulus.
The lofty heights of the US markets also made them more vulnerable to shifts in momentum, he said.
“It wouldn’t surprise me to see markets pull back further, but not too far down,” Mr Capolingua said.
Investors were also worried by AstraZeneca and Oxford University suspending a late-stage study of a coronavirus vaccine.
One trial participant had a serious reaction. A committee will review the illness before the trial resumes.
Australia is hoping to have 3.8 million doses of the vaccine in January.
There was better news in the monthly Westpac-Melbourne Institute consumer sentiment index, which surged 18 per cent in September after dropping 9.5 per cent in August.
This recovery came despite confirmation last week the nation is in recession for the first time since 1992.
There was also good news in lending figures. Australian Bureau of Statistics figures showed the value of new loans for owner-occupied housing jumped 10.7 per cent in July, the largest month-on-month on record.
First-time home buyer loans also surged 1.4 per cent.
The bureau put this strong demand for credit down to the easing of COVID-19 social distancing restrictions in most states and territories.
Yet few companies could avoid the gloom of investors. In banking, ANZ dropped 3.0 per cent to $17.81, the Commonwealth sunk 2.48 per cent to $66.79, NAB fell 2.57 per cent to $17.44 and Westpac slumped 3.34 per cent to $17.44.
The miners fared a little better due to iron ore prices. BHP was down 1.68 per cent to $36.78, Rio Tinto eased 0.2 per cent to $99.08 and Fortescue fell 2.7 per cent to $18.00.
In the hardest hit sector, energy, Beach had one of the biggest dives. It dropped 9.18 per cent to $1.33.
Property giant Lendlease completed the sale of its engineering business to Acciona for $160 million.
The former will retain the NorthConnex tunnel and Kingsford Smith Drive projects in Sydney, as well as the Melbourne Metro Tunnel.
Shares finished higher by 0.63 per cent to $12.72.
In announcements scheduled for Thursday, department store group Myer will give its full-year results.
The Aussie dollar was buying 72.16 US cents at 1713 AEST, down from 72.97 US cents at the close on Tuesday.
ON THE ASX
* The S&P/ASX200 benchmark index closed lower by 129.2 points, or 2.15 per cent, at 5878.6 on Wednesday.
* The All Ordinaries index finished down by 131.3 points, or 2.12 per cent, to 6058.9.
* At 1713 AEST, the SPI200 futures index was trading higher by 18.0 points, or 0.31 per cent, at 5,878 points.
One Australian dollar buys:
* 72.16 US cents, from 72.92 US cents on Tuesday
* 76.42 Japanese yen, from 77.46 yen
* 61.31 Euro cents, from 61.76 cents
* 55.79 British pence, from 55.51 pence
* 108.93 NZ cents, from 109.0 cents