The negative domino effect on Wall Street may hit the ASX

February 21, 2020 - 2 months ago
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All three major U.S. stock indexes were lower on Thursday, with most of the losses coming in sudden move midday, as investors fretted over a rise in the cases of coronavirus and its economic impact.

The Dow closed the day down about 131 points, after plummeting 338 points earlier, while the S&P 500 and Nasdaq both fell from their record highs.

Some traders attributed the rapid losses to a report that the coronavirus cases surged in Beijing, while others pointed to a momentum unwind trade.

The SPI 200 futures ended down -2 points to 7,108, paring earlier more profound losses staged earlier in the session.

Looking to the opening bell, the ASX 200 is likely to be mixed due to the fresh coronavirus fears.

At least 114 new deaths from the coronavirus outbreak were reported on Thursday, bringing the death toll to 2,118 in China.

China’s National Health Commission also reported 394 new confirmed cases, significantly lower than the 1,749 infections announced nationwide the previous day. A total of 74,576 victims are now infected.

The technical assessment currently displays a shooting star candlestick.
The shooting star candlestick is a chart formation consisting of a candlestick with a small real body, and a large upper shadow. The open, close, and low are near the low of the candlestick.

Although this candlestick identifies a potential market reversal, we first need confirmation to support the reversal.

A close beneath 7,130 should confirm the call to the bears and open the way to a potential target of 7,050-70. Reassess from there.

Daily outlook on the benchmark S&P/ASX 200

The domestic earnings season continues today – Here are some of the names scheduled results: Ardent Leisure, Charter Hall Group, Inghams, Mayne Pharma, Orocobre, Platinum Investment Management, Village Roadshow

As Australia’s share market inked in another record high on Thursday, the Australian dollar, meanwhile, ran into all sorts of bearish trouble and sunk near an 11-year trough as data showed a surprisingly sharp rise in unemployment which has added to the case for further cuts in interest rates, possibly as near as March or out to April. Not helping matters, China’s central bank also cut their interest rates too.

The benchmark S&P/ASX 200 index finished the Thursday session to a gain of +17.9 points, or +0.25%, at a closing record of 7,162.50 after setting an intraday peak/record high of 7,197.20 in early afternoon trade, while the broader All Ordinaries index gained +17.8 points, or +0.25%, to 7,255.2, also setting a record high of 7,289.70.

The Australian dollar delved as deep as US$0.6609 on thursday, its lowest level since March 2009 – after the People’s Bank of China lowered its benchmark lending rates to stimulate an economy threatened by the coronavirus outbreak.

Besides the coronavirus worries, the Australian dollar came unstuck when the Australian Bureau of Statistics (ABS) released the Unemployment rate, which edged up from 5.1% to 5.3% in January, even though, a better-than-expected employment number of 13,500 increase (forecast 10,000).

The Reserve Bank of Australia (RBA) has repeatedly said it would reconsider cutting rates again should the jobless rate trend higher in a meaningful way, although it would much prefer a period of stable policy.

On the ASX, every sector except health care and tech stocks were bullish on another busy day in reporting season.

Biotech giant CSL briefly became the largest company on the Australian share market after hitting a high of $342.75 and taking its market capitalisation to $155 billion, while Cochlear dropped -3.66% to $242.35.

Lendlease gained +6.7% to a two-month high of $18.60 after the multinational property developer announced it made $313 million in half-year profit, up from a $16 million a year ago.

Meanwhile, Qantas gained +5.9% to a one-month high of $6.67 after the airline increased its dividend and announced a $150 million off-market share buy-back after a robust first half, along with plans to reduce flights throughout Asia for the next three months due to the coronavirus.

Coca-Cola Amatil (CCL) surged +8.6% to $13.07 after lifting its Australian revenue for the first time in seven years. Shares in Lend Lease (LLC), Super Retail Group (SUL) and Iluka ILU) all improved in response to profit results.

The Charter Hall REIT securities slid -0.93% to $13.90 despite the company lifting full-year operating earnings guidance to 2.3%, from 2.2%. The trustees announced a distribution of 14.52¢ a unit, which will be paid on February 28.

Boral told investors on Thursday said that it’s expecting the financial year 2020 earnings to be lower than 2019, with net profit after tax in the range of $320 million to $340 million expected for the year. (BLD) shares closed effectively flat at $4.83.

Among the other companies to release earnings results was Medibank, which closed -2% lower at $2.92, while Origin shares climbed +1.79% to $7.97.

Fund manager Perpetual surged +11.2% to $47.27 after announcing half-year profit slipped -14% to $51.6 million.

Domain (DHG) was one of the worst performers after its half-year results fell short of hopes and were mainly held back by a dramatic decline in property listings nationally.

Shares in Sydney Airport (SYD), IRESS (IRE) and Santos (STO) were all pushed lower following earnings.

WiseTech Global plummeted -11.8% to a one-year low of $18.88, on top of Wednesday’s -27.3% drop that came after the logistics software company announced the Wuhan coronavirus outbreak would crimp its earnings forecast.

Other tech stocks were also struggling for direction, with Afterpay slipping -3.1% to $39.26, while Altium dropped -3.8% to $35.88 and Appen sank -2.8% to $25.02.

Southern Cross Media shined brightly on the ASX 200 after surging +13.9% to a two-week high of $0.86 after the Fox FM and Triple M owner swung from a $119 million loss last year into a first-half profit of $20.4 million.

All the “Fab Four (banks) were up, with the ANZ gaining +1.0% to a three- month high of $27.03, while the NAB and Westpac were both up +0.3%, to $27.40 and $25.69, respectively, while the Commonwealth was up two cents to $87.85.

Mineral sands miner Iluka Resources added +6.4% gain to $10.03 after announcing it would spin off its royalty business on BHP’s iron ore mining in the Pilbara into an ASX listed company.

Whitehaven (WHC) dropped by -5.5% as its 91% decline in earnings was driven by a significant fall in coal prices recently.

Titans, BHP along with Rio Tinto eked out a +0.05% gain to $38.52, and $98.14 respectively, while Fortescue chalked up a healthy +1.80% gain, while Amcor and James Hardie slipped -0.32% and -1.30%, respectively.

St Barbara rose +7.3%, Resolute Mining added a +5.3% gain and Regis Resources climbed +5.0%.

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