Australia: Shares fall as Federal Reserve rate cut fails to rein in virus fears; New Zealand slips

[BENGALURU] Australian shares fell on Wednesday as investors fled to the safety of bonds on fears that the US Federal Reserve's emergency interest rate cut would not be enough to buffer the global economy from the widening fallout of the coronavirus.

The S&P/ASX 200 index declined as much as 1.7 per cent and was down 1 per cent, or 63.2 points, at 6,372.5 by 0023 GMT, heading for an eighth session of drop in nine.

Hot on the heels of the Reserve Bank of Australia's 25 basis point rate cut on Tuesday, the Fed shaved off half a percentage point from its key rates, in an emergency move that highlighted its urgency to prevent a possible global recession.

"It seems unclear what rate cuts will do though, but the market has demanded them, and central banks have no choice but to meet the market (demand) or risk causing more damage and higher volatility," Chris Weston, head of research at brokerage Pepperstone, said in a note.

"What started as a concern about the extent of fragility to the Chinese economy has mopped into a worldwide problem."

Australian bonds have surged in the past week or so, driving yields to record lows, as investors priced in more rate cuts by central banks around the world.

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Financials will likely be the worst hit as the low interest rate environment will bite into bank margins.

The sub-index was down 2 per cent, with the "Big Four" lenders shedding between 2 per cent and 2.9 per cent. Brokerage UBS cut its earnings forecasts for the sector as low rates could further pressure capital generation and dividends.

Oil & gas companies fell as crude prices slipped overnight on demand concerns. Woodside Petroleum dropped as much as 2.6 per cent, while Oil Search lost 2.8 per cent.

Tech firms slumped 3.7 per cent, in line with declines in Wall Street peers overnight. Computershare shed 6.6 per cent, while WiseTech Global was down 3.7 per cent.

Gold stocks jumped as much as 5.3 per cent in their best intraday gain in more than six months, as bullion prices soared more than 3 per cent overnight.

Miners Saracen Mineral Holdings and Northern Star Resources were among the top gainers on the broader benchmark index, jumping 11.6 per cent and 9.2 per cent, respectively.

New Zealand's benchmark S&P/NZX 50 index was down 0.3 per cent, or 28.85 points, to 11,317.46.

Air New Zealand fell 3.5 per cent after the company confirmed that a passenger on board tested positive for the coronavirus.

REUTERS