2nd worst day in 27 years, ASX falls ~7%
WHAT MATTERED TODAY
A savage sell-off hit stocks today with the ASX recording its 2nd biggest sell-off in the last 27 years, only one session during the GFC was worse being the 10th October 2008. The ASX was whacked 455 points today with the market closing right on the lows, US Futures were down ~5% during our time zone while Oil traded ~25% lower in Asia after being hit 10% Friday night – yes that’s right, 35% down thanks to the Saudi’s and Russians. Banks were down between 6.47% (CBA) and 9.51% (BEN), large cap resources were down hard, BHP off -14.41% closing the day at $27.55 – a huge move. Margin pressure throughout today with forced sellers hitting very thin bids – I could feel the pit of my stomach today, totally underestimated the savage nature of this selling.
From the peak of 7197 just 12 trading days ago, the mkt closed today at 5760, a drop of 1437pts / ~20%.
Overall, the ASX 200 fell -455pts / -7.33% today to close at 5760 - Dow Futures are trading down -1220pts/-4.75%
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE
NO WHERE TO HIDE: its hard the really offer much value after a day like this…. markets have clearly gone into panic mode, pure and simple. The Coronavirus was enough however the ructions between the Russians and Saudis has thrown another spanner in the works. The Saudi’s pledging to flood the global oil market with supply, in order to exert their will over oil prices, that has a flow on effect in the credit markets where a lot of energy companies struggle, and bond holders take a bath as a consequence, just look at NBI today which has exposure to US high yield credit markets, it fell 10% amid panic selling, other more defensive ASX securities did the same as investors looked to cash up in any way possible – a clear panic sell-off.
The obvious concern being Coronavirus will slow global growth and cause a recession, central banks have very little room to move in terms of policy response and credit markets could freeze as a consequence. Markets clearly have little faith in the ability for emergency support to stem the tide right here and so we see an aggressive move to the exits. The more the panic, the closer we are to intervention, however the bigger the intervention needs to be.
Looking at the longer term chart of the ASX 200 puts things into context, some sever pain felt today right across the board as the market has aggressively rejected to top of its channel and is now close to testing the lower extremity…more on this tomorrow morning.
ASX Chart – Long term
BROKER MOVES
· Santos Cut to Underperform at Bernstein; PT A$5.90
· Woodside Cut to Market Perform at Bernstein; PT A$24.40
· Orora Raised to Overweight at Morgan Stanley; PT A$3.50
· Sonic Healthcare Cut to Sell at Morningstar
· AMP Raised to Buy at Morningstar
· Harvey Norman Raised to Hold at Morningstar
· Downer EDI Raised to Buy at Morningstar
· Alumina Raised to Hold at Morningstar
· Magellan Financial Raised to Hold at Morningstar
· Tabcorp Raised to Buy at Morningstar
· Aurizon Raised to Hold at Morningstar
· Breville Cut to Neutral at JPMorgan; PT A$20
· ARQ Group Ltd Raised to Hold at Bell Potter
OUR CALLS
We tweaked the Platinum Portoflio today, cutting Pact Group (PGH) and Boral (BLD) as they both hold higher debt, while we topped up on Bingo, Macquarie & BHP into weakness.
Major Movers Today
Have a great night
James, Harry & the Market Matters Team
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