Market takes a pummeling

Gloomy US forecast sparks worst single-day loss

THE Australian share market has plunged 3 per cent in its worst day in six weeks, snapping a seven-day winning streak.

The benchmark S&P/ ASX200 index closed yesterday down 187.8 points, or 3.05 per cent, at 5960.6 points, while the broader All Ordinaries index closed down 189.8 points, or 3.03 per cent lower, at 6079.5.

The drop was the worst single-day loss since the ASX200 plunged five per cent on May 1, and it left the index down 38 points, or 0.64 per cent, for the week.

Pepperstone head of research Chris Weston blamed a gloomy economic forecast announced by the US Federal Reserve yesterday morning, Australian time.

The central bank’s policymakers projected a 6.5 per cent decline in US gross domestic product this year and a 9.3 per cent unemployment rate at year’s end.

“I think in terms of economic projections, they’ve taken a V-shaped recovery off the table,” Mr Weston said.

There’s also worrying signs of a second wave of coronavirus infections in the United States, Mr Weston said.

“At the end of the day, this whole thing was premised on economic reopening,” Mr Weston said, referring to the ASX’s strong gains in recent weeks.

He said the US was in for an interesting trading session on Thursday, but in Australia “it still feels like this is a buy the dip market”. All sectors were lower yesterday, with energy and financials falling slightly over five per cent.

The big banks accounted for 54.7 points of the ASX200’s decline, with ANZ falling the most, 6.2 per cent to $19.47.

Westpac dropped 6.1 per cent to $18.50, NAB retreated 5.4 per cent to $19.07 and CBA was down 4.4 per cent to $68.44.

In the energy sector, Woodside, Oil Search, Beach Energy and Origin Energy were all down between 5.1 and 7.1 per cent as the price of Brent crude dropped 2.5 per cent to just above $US40 a barrel.

Goldminers were the standouts, as the price of the precious metal climbed back over $US1,730 an ounce. Newcrest, Evolution, Saracen Mineral and Northern Star gained between 4.2 and 6.8 per cent.

Among the diversified miners, BHP fell 2.0 per cent to $36.76, Rio Tinto declined 1.6 per cent to $98.86 and South32 dipped 4.4 per cent to $2.19. Flight Centre dropped 10.4 per cent to $15.10, Webjet declined 10.1 per cent to $4.18 and debt buyer Credit Corp fell 10.3 per cent to $18.27.