Profit warnings pinch

AUSTRALIAN stocks have fallen for just the fourth time in 2020 after days of record highs amid profit warnings and concerns about the deadly virus outbreak in China.

The benchmark S&P/ ASX200 index closed yesterday down 44.7 points, or 0.63 per cent, at 7088 points while the broader All Ordinaries index was down 50 points, or 0.69 per cent, at 7199.

In the worst day for the market so far this year, every sector except property trusts and tech stocks were down, with industrials falling the most, by 1.8 per cent.

Downer EDI and CIMIC Group dragged on the sector as both contractors issued profit warnings.

CIMIC Group fell 19.9 per cent to a three-year low of $28.03 after warning it would take a $1.8 billion hit exiting the Middle East and wouldn’t offer a final dividend for 2019.

Downer fell 18.1 per cent to a six-month low of $7.17 meanwhile after declaring it expected $300 million in full-year profit, 18 per cent less than forecast, following a number of loss-making construction contracts.

Australian Stock Report senior advisor Ben Le Brun said the downgrades may have weighed on investor sentiment.

“CIMIC has been a serial offender,” he said, noting it issued a similar downgrade a year ago. “There’s that old saying, there’s never just one cockroach in the kitchen.”

Key jobs data released also proved to be slightly better than expected, reducing pressure on the Reserve Bank board to cut the cash rate when it meets on February 4.

BIS Oxford Economics chief economist Sarah Hunter said she still expected the central bank to provide further stimulus, but it could be delayed until March.

“Perhaps some interest rate cuts that had been priced into the market might have just been putting the cart before the horse,” Mr Le Brun said.

The big banks – which would find another cash rate cut eating into their margins – were mixed, with Westpac falling 0.2 per cent to $25.08 and NAB down 0.1 per cent to $25.69, while ANZ ($25.75) and Commonwealth ($84.52) both rose 0.1 per cent.

Afterpay helped prop up the tech sector, with the buy now, pay later company rising 3.7 per cent to $36.12.

The mining sector retreated 0.9 per cent, with BHP down 0.3 per cent to $41.08, Rio

Tinto falling 1.1 per cent to $106.19 and Fortescue Metals down 1.3 per cent to $12.53.

Goldminers were also mostly down, with Newcrest and Evolution dipping 1.9 and 1.8 per cent respectively as the price of the precious metal declined. With the Brent crude price falling further to just over $US62 a barrel, the energy sector was also in retreat, dipping 1.7 per cent as Beach Energy dropped 6.0 per cent and Woodside Petroleum fell 1.6 per cent.