You are here

Australia: Shares lose steam to hit 4-year low ahead of RBA meeting

rk_ASX_190320.jpg
Australian shares gave up early gains to hit a four-year low on Thursday as investors turned their focus to a key central bank policy meeting amid rising fears of a coronavirus-induced recession.

[BENGALURU] Australian shares gave up early gains to hit a four-year low on Thursday as investors turned their focus to a key central bank policy meeting amid rising fears of a coronavirus-induced recession.

The benchmark S&P/ASX 200 index jumped 3 per cent in early trade after the European Central Bank's 750 billion euro (S$1.18 trillion) bond purchase announcement, but quickly lost its steam to trade 1.5 per cent lower by 0200 GMT. The benchmark lost more than 6 per cent on Wednesday.

The Reserve Bank of Australia is set to make its announcement at 0330 GMT, where economists expect a quarter-point interest rate cut to 0.25 per cent and its first ever quantitative easing programme to prevent a recession in nearly three decades.

"Markets are trading nervously today," said Damian Rooney, director of equity sales at Argonaut.

The RBA used its daily money market operation to pump a record A$12.7 billion (S$10.6 billion) into the banking system on Thursday, and has been flooding the system with cash all week.

Banks rose in early trade before reversing course to trade 0.3 per cent to 3 per cent lower. Financial services firm Macquarie Group tumbled 11.4 per cent to its lowest since November 2016.

"It's going to be some time before there is certainty as investors price in risk," said James McGlew, executive director of corporate stockbroking at Argonaut.

Energy stocks continued to be weighed down by a plunge in oil prices.

The sub-index dived more than 6 per cent, with Oil Search extending falls to hit its lowest in more than 15 years, while index heavyweight Woodside Petroleum dropped 7.5 per cent to a near 16-year low.

Buy-now-pay-later firm Afterpay sunk 21.5 per cent and was one of the biggest drags on the benchmark, as recession fears in its key markets raised questions about revenue growth, funding and loan losses.

In neighbouring New Zealand, the benchmark S&P/NZX 50 index fell 2.4 per cent, or 222.45 points, to 9,232.44 as the total coronavirus cases rose to 28 and data showed that the economy slowed in the last quarter of 2019.

Casino operator SkyCity Entertainment slumped 17.1 per cent to its lowest in nearly two decades, while adventure goods retailer Kathmandu Holdings gave up 18.7 per cent in its twelfth straight session of drop. 

REUTERS