Another challenging day for the ASX as U.S. stock drop, Oil plummets to 2002 lows, AUD/USD hits 17-yr lows – Eyes on the RBA at 2:30 pm

March 19, 2020 - 2 weeks ago
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Wall Street displays another down session on Wednesday, with the Dow Jones industrial average nearly erasing all its gains since U.S. President Trump took office as coronavirus lockdowns and travel restrictions expanded.

By mid-day, in New York, the “circuit breaker” tripped for the fourth time bring a 15-minute trade halt, however, the short pause did little to dent the bearish momentum.

After the closing bell on Wednesday, the New York Stock Exchange said it would temporarily close its historic trading floor and move entirely to electronic trading after two people tested positive for coronavirus infection at screenings it had set up this week.

All-electronic trading will begin on March 23 at the open, the exchange said.

At the close, the Dow lost -1338.46 points or -6.30%, after earlier falling as much as -10%. The index last closed below 20,000 in late January 2017; it was trading above 29,000 a month ago. The Dow pared its loss by -800 points in the final half-hour of the session.

Oil prices collapsed with the U.S. benchmark falling more than -24% at one point and revisited the lows posted back in 2002 after inking in an intraday low at $20.45 a barrel, while Brent crude ended to a loss of -13.2% at the close.

Meanwhile, the SPI 200 futures closed at 4,826 and points to a fall of +70 points, or +1.4%, at the opening bell.

Looking ahead, the ASX has a busy day, as the Australian Bureau of Statistics will publish the February employment data, while later in the day, the RBA has an emergency monetary policy.

The forecast is expected to have added +8,500 new jobs in the month, while the unemployment rate is expected to remain unchanged at 5.3%.

In January, the country added +13,500, with 46,200 full-time positions added and part-time jobs were down by 32,700.

As for the RBA, a monetary policy announcement will be released at 2.30 pm.

Presently, the markets are pricing in a 25-basis point cut to the cash rate, to the RBA’s effective lower bound of 0.25 per cent, as well as the announcement of a quantitative easing program.

This will be followed by the Governor’s speech at 4.00 pm.

As for the Australian Dollar, the bears continued to weigh on the local currency, with the overnight’s decent hits a fresh near-17-year low of US$0.5701 and is currently buying US$0.5790 (as of writing).

From the technical assessment, the ASX 200 – 3-day Relative Strength Index (RSI) lookback is supporting ‘bullish divergence’ as the indicator slowly climbs out of the extreme oversold territory.

Therefore, we could soon see a short-term correction, but to what degree, remains questionable, considering the current market (and global) environment.

In technical analysis, divergence can be a significant warning signal that a bullish or bearish trend is coming near to an end.

Divergence appears when a technical indicator (oscillator) begins to establish a trend that disagrees with the actual price movement.

These “disagreements” are strong signals and somewhat useful for the trader/investor.

Bullish divergence occurs when the price of an asset makes a new low while the indicator starts to climb. Bearish divergence happens when the price of the asset reaches a new high, but the indicator fails to do the same and instead closes lower than the previous high.

Daily outlook on the benchmark S&P/ASX 200

After what looked to a promising steadier start to the Wednesday session, the local sharemarket slipped off the rails, with the benchmark S&P/ASX 200 Index plummeted +340 points, or -6.43% to close at 4,953, a close below 5,000 points last recorded back in since April 2016.

The value of the index has now fallen to a whopping $665 billion since historical highs of just four weeks ago at 7,197.

The catalyst for Wednesday’s reversal was from the Australian Federal Government’s warning that extreme social isolation measures could last for several months which includes a reduction in the size of the mass-gathering ban to just 100 people for indoor events. The outdoor limit remains for gatherings up to 500 people.

On top of this, there have been further restrictions put in place for aged-care visits and international travel, though schools are remaining open for the time being.

The Infotech sector was the significantly hit on the ASX after nose-diving, as buy-now-pay-later, Afterpay, lost a third of its value after plummeting -33.05% to $12.76.

Meanwhile, EML Payments plunged -23.7%, while Zip Co dropped -17.8%, and Flexi-group tumbled -22.4%, with Xero fell -9.8%, and Computershare dropped -6.24% and WiseTech sank -6.24%.

The entire real estate sector closed lower with shopping centre owners like Scentre Group plummeted -16.3%, Vicinity was down -11%, and Stockland fell -15%.

National Storage plummeted -28% to $1.29 after a takeover offer from U.S. company Public Storage was withdrawn.

The financial sector dropped by -7.7% and completely reversed yesterday’s gains as the “Fab Four” (banks) and posted some deep losses with ANZ falling the most by -9.67% to $16.92, while Westpac dropping -7.83% t0 $16.40, with NAB falling -6.97% to $16.43 and the Commonwealth Bank was down -5.46% to $65.68.

Meanwhile, Macquarie Group had its single worst day since listing in 1996 after plummeting -12.9% to $91.05.

Supermarket giants Woolworths and Coles both losing -0.63% and -1.45%, respectively, while A2 Milk Company closed to a +5.28% gain.

Metcash continued its record run, closing at its highest share price since June 2019 and gaining +2.29%.

Heavyweight iron ore producers weighed on the materials sector with Titans BHP falling -3.79%, and Rio Tinto dropped -3.72%, while Fortescue Metals slumped -3.18%.

Gold miners had a healthy run as Newcrest rose +1.63%, while Northern Star gained +7.82%, Evolution added a +8.82% gains, and Saracen Mineral Holdings advanced +7.02%, and Perseus Mining surged +12.59%.

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