Australia: Shares drop more than 6% as virus sparks recession fears

[BENGALURU] Australian shares closed more than 6 per cent lower on Wednesday on fears that policy impetus against the coronavirus pandemic would ultimately not be enough to stop the economy from slipping into its first recession in nearly three decades.

The S&P/ASX 200 index lost 340.2 points to settle at 4,953.20, wiping out gains copped on Tuesday when the benchmark marked its best day since October 2008 on a bigger-than-expected cash injection by the central bank.

Australia's government earlier this month pledged to pump US$11.4 billion into the economy, but analysts at Westpac and ANZ in a note said the package was likely insufficient to avert a recession in 2020.

"The Australian economy is entering this extremely difficult coronavirus period with insipid momentum and is therefore more vulnerable to the shock," Westpac said.

In the same vein, ANZ analysts said the policy support would be unable "to offset the demand loss that will come from social distancing and widespread closures."

Investors now await the Reserve Bank of Australia's (RBA) policy meeting on Thursday, where the central bank is widely expected to follow in the footsteps of its US counterpart in cutting interest rates.

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Energy stocks dropped 10.6 per cent to end at its lowest level since June 2004. Industry heavyweight Santos Ltd shed 12.3 per cent to close at its lowest since June 2017, while Woodside Petroleum weakened 8.8 per cent.

The financial sector fell 7.6 per cent, with most components of the sub-index, including the "Big Four" banks, finishing firmly in negative territory.

Meanwhile, companies continued to withdraw their earnings guidance due to the uncertainty surrounding the virus outbreak. Hospital operator Ramsay Health Care fell 8.6 per cent, while real estate firm Mirvac Group tumbled nearly 14.8 per cent to its lowest in over two years, after each recalled their fiscal 2020 outlook.

Safen-haven gold stocks found favor amid the wider rout, strengthening 5 per cent on a rise in bullion prices.

Gold miner Evolution Mining closed about 9 per cent higher, its best session since November 2016, while St Barbara Ltd also rose as much.

New Zealand's benchmark S&P/NZX 50 index inched up 0.2 per cent to finish at 9,454.89.

Pushpay Holdings settled 21.5 per cent higher, after the payments platform provider raised its core earnings forecast for the year, while electricity retailer Mercury NZ gained 5.3 per cent.

REUTERS