Banks hit hard as sharemarket takes nosedive
MORE than $70 billion has been wiped from the value of Australia’s big four banks over two weeks as investors take flight amid growing fears a recession looms.
And the sharemarket has now surrendered almost all its gains of the past year after a sea of red again engulfed the bourse yesterday, extending a two-week rout.
On another day of seemingly indiscriminate selling, Australia’s benchmark share index, the ASX 200, fell 2.8 per cent – its second-worst session since the sell-off started on February 21.
A further $54.2 billion was cut from the value of the market, lifting the damage bill to more than $280 billion.
Since notching an all-time high on February 20, the index is down 13.2 per cent, stripped of almost 950 points. It is now slightly above 6200 points, where it sat last April.
The sell-off has been particularly punishing for the major banks, the Commonwealth Bank, Westpac, National Australia Bank and ANZ.
In all, $73.4 billion has been cut from their market value in two weeks – a 17.9 per cent slump that has them within cooee of the 20 per cent retreat regarded as a bear market.
All four were in the crosshairs yesterday, but none more so than NAB.
Shares in the group tumbled 5.5 per cent in their worst outing since 2016, falling more than they did during the darkest days of the banking royal commission hearings in 2018.
It came as an official update on retail sales came in below expectations, while ratings agency Standard & Poor’s warned the nation was at risk of “recession” – albeit without using the usual yardstick.
Analysts at S&P Global Ratings cut their forecast for growth in Australia’s gross domestic product this year, from 2.2 per cent to 1.2 per cent.
They said they were expecting Australia, Hong Kong, Japan, Korea, Singapore and Thailand to all “enter or flirt with recession” this year, citing the spread of coronavirus.
But the analysts cautioned that they were not referring to two consecutive quarters of falling GDP – the widely-held definition.
What we do mean is at least two quarters of growth substantially below trend and sufficient to cause unemployment to rise, underlying inflation to fall, and policymakers to react with stimulus,” they said.
Other analysts, including economists at ANZ, CommSec and AMP Capital, warned earlier this week that there was growing prospect of recession in Australia as the spread of COVID-19 buffeted the economy. It would be the first recession here in almost 30 years.
Separately yesterday, the Australian Bureau of Statistics said retail sales clocked in at $27.3 billion in January.
Economist were broadly expecting sales to be steady, but they fell 0.3 per cent, seasonally adjusted, from December as bushfires took a toll.
There was 0.4 per cent rise in food sales – too little to offset a 2.2 per cent pullback in spending at department stores.
Capital Economics analyst Marcel Thieliant said the retail figures pointed to “a sharp fall in consumer spending this quarter and the impact of the coronavirus outbreak has yet to be felt”.