Australia: Shares fall as recession fears knock risk appetite, NZ down

[SYDNEY] Australian shares closed lower on Thursday, dragged down by the heavyweight financials sector as fears of a possible coronavirus-influenced global recession rose, following the US President Donald Trump's warning about a rise in virus death toll in the country.

The S&P/ASX 200 index tracked Wall Street losses overnight and fell 1.98 per cent to 5,154.30 at the close of trade, taking a chunk out of the benchmark's 3.6 per cent gain on Wednesday.

Risk sentiment took a massive blow after President Trump warned of a "painful" two weeks ahead in fighting the coronavirus, with a mounting death toll that could stretch into hundreds of thousands despite strict social distancing measures.

The Australian financial sector dropped 4.2 per cent at close, with almost all its components, including the "Big Four" banks, firmly in the negative territory.

Australia's largest lenders, with units in New Zealand, were put under pressure after their neighbour country's central bank ordered banks to skip dividend payments and redeem capital notes. Investors fear Australian banks may follow down the same path.

Additionally, ratings agency Moody's downgraded its outlook for Australia's banking system to "negative" from "stable" on Thursday, as the coronavirus is expected to hit profitability via increasing provisions for loan losses and record low interest rates.

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Across the Tasman sea, New Zealand's benchmark S&P/NZX 50 index ended about 0.6 per cent down at 9,870.56.

REUTERS