Australia: Shares dive, wiping out A$42b in broad sell-off as global risks mount

[BENGALURU] Australian shares dived on Thursday, wiping out about A$42 billion (S$39 billion) in value as more weak US data fanned worries about an economic slowdown there, made worse by Washington's latest trade salvo - this time against Europe.

Overnight, the United States said it will impose tariffs on US$7.5 billion worth of goods from the European Union, triggering a shakeout in global markets already reeling from the protracted US-China trade war.

Not helping was data from the ADP National Employment Report showing hiring by US private employers slowing further last month, reinforcing global recession fears and of a slowdown in the US economy.

The benchmark S&P/ASX 200 index tumbled 2.5 per cent to more than one month lows, but by 0133 GMT it had pared some of those losses to be off 2.1 per cent, or 141.8 points, to 6,498.1. The index had closed 1.5 per cent lower on Wednesday after poor US manufacturing data.

Traders are pricing in a more worrying trajectory for the global economy, said Pepperstone's Head of Research Chris Weston.

There was a broad sell-off across sectors in Australia, with gold stocks the only bright spot as investors sought safe-havens.

Just 16 out of the 200 stocks on the benchmark were in positive territory.

Financial stocks, led by the Big Four banks, were sold off heavily between 2.5 per cent to 3.3 per cent. Analysts have warned that the three interest rate cuts this year by the Reserve Bank of Australia and any further easing may inflict even more pain on their margins.

Morgan Stanley downgraded National Australia Bank, and warned that all the major banks should lower their payout ratios and target higher capital levels instead.

On Wednesday, NAB nearly doubled the total amount it has set aside to repay wronged customers, adding further pressure on earnings. Its shares were down the most among its peers.

Energy stocks extended their declines as oil prices lost further ground, pressured by a rise in US inventories.

Woodside Petroleum dropped 3.3 per cent, while Santos fell 4.1 per cent.

Global miners BHP Group and Rio Tinto slid 2.7 per cent and 3.2 per cent.

The economic gloom supported a safety-bid for gold, with local firm Newcrest Mining climbing 3.6 per cent.

Agricultural firm Webster Ltd surged 54 per cent to a nearly 16-month high after it received a A$854 million takeover offer by shareholder PSP Investments.

New Zealand's benchmark S&P/NZX 50 index fell to two-week lows after losing as much as 1.5 per cent to 10,784.14.

The local listings of Westpac and ANZ fell 3.3 per cent and 3.2 per cent, respectively.

The only major stock in the green was Fonterra Shareholders' Fund, which gained 4 per cent.

REUTERS