A final cleaning out and then a recharge, or the start of a more serious shakeout? Take your pick, but on Thursday the Australian stockmarket finally wiped out the rally that started in the wake of the first NSW lockdown on June 16.
Between the start of the NSW lockdowns and yesterday, we saw a very strong June 30 earnings season with buybacks galore ($6 billion from the Commonwealth Bank, $2 billion from Woolies and $2.5 billion from the NAB), along with huge record dividends from iron ore giants Rio Tinto, BHP and Fortescue Metals, as well as Newcrest Mining and OZ Minerals, JB Hi Fi, Harvey Norman and others.
The enthusiasm and flood of cash from those and other companies buoyed the market and investor confidence and yet the rising number of Covid Delta infections, especially in NSW and then Victoria, continued, almost out of sight to those in the market.
Slumping iron ore prices came and went and occasionally interrupted things – it wasn’t until the last few days of August and the first week of September that the plunge started having a real impact on the prices of BHP, Rio Tinto and Fortescue shares.
Several times in the past couple of weeks the ASX 200 has opened weakly, fallen but then retraced and closed with a small gain or tiny loss, and then rebounded in the next day or so.
And ironically it was on the very same day that the embattled NSW government produced a timetable for freeing up the lockdown once double vaccination levels reached or passed 70% in the state that the stockmarket sighed and fell out of bed.
The night before Wall Street fell – but not by much – from 0.13% for the S&P 500 to 0,57% for the Nasdaq. They were nowhere near the size of drops that usually trigger a headless chicken selloff in Australia the next day.
It has been the literal rollercoaster ride for the market since the middle of June and the appearance of Delta infections in Sydney’s Eastern Suburbs.
The ASX 200 closed at 7,380 on June 15 (the day before the lockdown started), then peaked at 7,627 on August 13, an all-time high, and the slowly eased lower till Wednesday when it closed at 7,512, before falling out of bed big time on Thursday with a 1.9% or 142.5-point lurch lower to end at 7,369.5.
That means the market has fallen 3.3% or 258 points from the August 13 record high to yesterday’s close.
No part of the market escaped the Thursday’s slump, with all 11 subsectors finishing the day in the red.
The banks and other financial and the big miners took the brunt of the selling.
Medtech ResMed emerged as the biggest winner of the day, up 1.8% to $40.30, while BHP lost 1.7, and Rio Tinto lost 2.5%. Fortescue shares did ‘well’ – down just 0.6%, but then they were cleaned out by the 10.9% plunge the day the shares went ex-dividend.
Oz Minerals shares lost 2.8%, shares in JB Hi Fi shed 1.9% and Harvey Norman shares lost 2.5%.
The CBA led the market lower with a drop of 2.3% buy Macquarie Group shares tumbled 2.1% from the peak on Wednesday and NAB shares lost 1.6%, while ANZ shares dipped 1.8%. Westpac shares fell nearly 2%.
So the sell off yesterday is either a final cleanout of the June 30 reporting season headiness or the market is now going to be more sensitive to the daily progress of Covid Delta in Australia, events in China (which have been ignored here by investors) and the progress of the slow re-opening that NSW and Victoria (with the ACT tucked away in the boot) are about to embark on.
