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ASX hits two-month low as tech rout, vaccine setback fuels 2.5% dive

The Australian sharemarket remains deeply depressed on Wednesday after Wall Street’s overnight tech sell-off and an AstraZeneca vaccine setback sent the local index to a five-week low.

The benchmark ASX 200 fell by as much as 2.4 per cent to 5866.1 at Wednesday’s open, and at 11.30am AEST was down 2.3 per cent at 5869.7. The fall is not yet as steep as Friday’s 3.1 per cent decline but has been enough to knock the bourse to its lowest point since August 3.

Energy stocks were hit the hardest, down a collective 3.6 per cent on an overnight oil price plunge.

Tech stocks were also copping a hiding, mirroring the overnight rout of the NASDAQ to drop 3.2 per cent as a sector. All ASX 200 tech shares were lower, with Afterpay dropping 3.7 per cent to $72.25, Xero losing 2.4 per cent to $93.21, and Wisetech Global 3.5 per cent down at $27.62.

Just 12 of all ASX 200 stocks were ahead, with the heavyweight banks, miners and health firms all down.

CSL fell 2.4 per cent to $281.43 after AstraZeneca has put a hold on the late-stage trial of the highly-anticipated COVID-19 vaccine candidate being developed with Oxford University after a suspected serious adverse reaction in a study participant, though the company says this is a “routine action.”

The vaccine is the same product CSL has committed to making 30 million doses of for Australians if the product passes regulatory approvals.

Commonwealth Bank was 2.6 per cent lower at $66.70, Westpac dropped 3.3 per cent to $17.07, NAB fell 2.9 per cent to $17.39, and ANZ shed 3.4 per cent to $17.74. Macquarie Group was 1.2 per cent lower at $126.56.

Rio Tinto lost 1.1 per cent, BHP 1.8 per cent, and Fortescue Metals fell 2.2 per cent as the materials sector also sagged.

Among the other blue chips, Wesfarmers fell 2.2 per cent, Woolworths dropped 1.4 per cent, Transurban Group 2.9 per cent, and Telstra 2.2 per cent.

The ASX 200 technology sector was down 3.1 per cent this morning with all 14 companies in the sector falling by at least 2 per cent or more.

Megaport is down 6.7 per cent to $14.73, gift card and voucher company EML payments is down 4.3 per cent, and Appen is down 3.9 per cent.

Afterpay has dropped 3.5 per cent taking it down to $72.45 and clocking four straight sessions of declines. It at $82.50 a week ago.

The ASX 200 fell by as much as 2.4 per cent on Wednesday.

The ASX 200 fell by as much as 2.4 per cent on Wednesday. Credit:Louie Douvis

Technology is under-performing the rest of the market, although the energy sector has the biggest decline of 3.6 per cent.

This follows a fall of 4.1 per cent on the tech-heavy Nasdaq on Wall Street last night, which has fallen for three sessions in a row since touching record highs last Wednesday (US markets were closed on Monday for a public holiday).

Chief investment officer at Munro Partners, Nick Griffin, said he has taken some capital out of technology stocks in the past week, but said the decline is “more of a speed hump than a change of direction we think”.

The Nasdaq index contains car maker Tesla, which declined nearly 21 per cent overnight to $US330.21 after it was excluded from the Standard and Poor’s 500 index.

Inclusion would have seen the stock bought up by passively managed portfolios (instead, S&P selected online craft retailer Etsy, Teradyne, and Catalent).

Tesla was also affected by General Motors buying a $2 billion stake in competitor electric car maker Nikola Corp.

NSW has recorded nine new coronavirus cases today.

Of the nine cases, one was a returned traveller in hotel quarantine, seven are linked to known outbreaks, while one is a locally acquired case in south-eastern Sydney that remains under investigation.

A woman receives a COVID-19 swab test in Sydney.

A woman receives a COVID-19 swab test in Sydney. Credit:Lisa Maree Williams

Read the live and free coronavirus blog here

Five of the cases are linked to the Concord Hospital cluster, bringing the size of the outbreak across Concord and Liverpool hospitals to 12.

The new cases are two healthcare workers, one patient and two household contacts of the patient, Chief Health Officer Kerry Chant said.

Concord Hospital is closed to visitors until Friday and non-urgent surgery has also been suspended until the end of the week.

Queensland has recorded eight new cases of COVID-19, with the majority of infected people already in self-isolation.

Five of the new cases are from one family, linked to the outbreak at the Queensland Correctional Services Academy, who are already in self-isolation, Premier Annastacia Palaszczuk said.

Victoria recorded 76 new cases of COVID-19 today, but the number of active cases continues to fall.

There are now 1622 active cases in the state, a drop of about 70 from yesterday, Premier Daniel Andrews has said.

The state registered 11 deaths on Wednesday.

The Australian sharemarket remains deeply depressed on Wednesday after Wall Street’s overnight tech sell-off and an AstraZeneca vaccine setback sent the local index to a five-week low.

The benchmark ASX 200 fell by as much as 2.4 per cent to 5866.1 at Wednesday’s open, and at 11.30am AEST was down 2.3 per cent at 5869.7. The fall is not yet as steep as Friday’s 3.1 per cent decline but has been enough to knock the bourse to its lowest point since August 3.

Energy stocks were hit the hardest, down a collective 3.6 per cent on an overnight oil price plunge.

Tech stocks were also copping a hiding, mirroring the overnight rout of the NASDAQ to drop 3.2 per cent as a sector. All ASX 200 tech shares were lower, with Afterpay dropping 3.7 per cent to $72.25, Xero losing 2.4 per cent to $93.21, and Wisetech Global 3.5 per cent down at $27.62.

Just 12 of all ASX 200 stocks were ahead, with the heavyweight banks, miners and health firms all down.

CSL fell 2.4 per cent to $281.43 after AstraZeneca has put a hold on the late-stage trial of the highly-anticipated COVID-19 vaccine candidate being developed with Oxford University after a suspected serious adverse reaction in a study participant, though the company says this is a “routine action.”

The vaccine is the same product CSL has committed to making 30 million doses of for Australians if the product passes regulatory approvals.

Commonwealth Bank was 2.6 per cent lower at $66.70, Westpac dropped 3.3 per cent to $17.07, NAB fell 2.9 per cent to $17.39, and ANZ shed 3.4 per cent to $17.74. Macquarie Group was 1.2 per cent lower at $126.56.

Rio Tinto lost 1.1 per cent, BHP 1.8 per cent, and Fortescue Metals fell 2.2 per cent as the materials sector also sagged.

Among the other blue chips, Wesfarmers fell 2.2 per cent, Woolworths dropped 1.4 per cent, Transurban Group 2.9 per cent, and Telstra 2.2 per cent.

Debt rating agency Moody’s has downgraded its outlook for the entire reinsurance industry from ‘stable’ to ‘negative’ and outlined the enormous challenges to their profitability in the next two years, including natural disasters and climate change.

The annual catastrophe loss budget of many reinsurers is already depleted due to coronavirus associated losses and other catastrophic events, according to Moody’s.

Debt rating agency Moody’s has downgraded its outlook for the entire reinsurance industry from ‘stable’ to ‘negative’

Debt rating agency Moody’s has downgraded its outlook for the entire reinsurance industry from ‘stable’ to ‘negative’Credit:Nick Moir

“Over the next 12-18 months, we believe the operating environment for the sector will be challenging, despite strong reinsurance pricing,’’ an international team of analysts wrote in a note to clients.

The impact of the coronavirus is extremely difficult to estimate and claims will come from many different sectors all around the world. Record-low interest rates means reinsurers are earning very little investment income on their capital despite strong balance sheets.

Moody’s believes reinsurer returns are insufficient for the volatile world of 2020, and expects to see premiums increase by at least 5 per cent next year. However, things may get better.

“All of the factors that contribute to our negative outlook on the reinsurance sector are sowing the seeds of better performance once the uncertainties associated with the coronavirus dissipate’’.

On the other hand, the impact of climate change and proliferation of insurable buildings is a long-term problem that increases the volatility of insurers’ results.

“Over the past few years, large losses from wildfires in California and typhoons in Japan have resulted in a reassessment of exposures among both insurers and reinsurers….Reinsurers are adjusting their risk and pricing models to account for increased catastrophe frequency.”

Consumers are dubbing Australia’s official slide into recession as ‘old news’ and instead appear focused on the future, if the latest sentiment reading is anything to go by.

The Westpac-Melbourne Institute Index of Consumer Sentiment rose 18 per cent from 79.5 in August to 93.8 in September in a surprising bounce from the previous month’s 9.5 per cent decline.

Consumer confidence has bounced despite Australia's slide into recession.

Consumer confidence has bounced despite Australia’s slide into recession.Credit:The Age

The result comes despite official confirmation in the survey week that Australia had experienced its first recession since 1992.

“Clearly this was ‘old news’ with respondents more focussed on the future,” Westpac chief economist Bill Evans said.

The rebound means the Index is now just 1.6 per cent below the average over the six months prior to the emergence of COVID-19 in March.

It should be noted that the September survey was completed before the announcement by Victorian Premier Daniel Andrews on September 6 of a slower move towards reopening.

“The disappointment with that announcement could have been expected to dampen the 14.9 per cent surge in confidence in Victoria, although frustration at the extended lockdown measures would likely still be more than outweighed by the clear success they have had in containing the virus,” Mr Evans said.

“We do not expect the Premier’s announcement would have had any impact on the positive results in other states.

Westpac said the best way to assess the September sentiment results is by comparing them with the results in June, when states were in the process of reopening and Victoria’s second wave problems had not yet emerged.

The Index nationally was at 93.7 in June. On a state basis confidence is back at its June level in NSW; 5.6 per cent below its June level in Victoria; 2 per cent above in Queensland; 11.2 per cent above in Western Australia and 3.8 per cent above in South Australia.

Gold Road Resources’ Western Australia Gruyere mine has been working for a full year now. The company reported half year results this morning revealing 131,460 ounces of gold was produced and 60,400 ounces sold in the six months ending 30 June.

It sold at an average price of $2,237 per ounce, leading to revenue from gold sales of $135.1 million.

Gold Road Resources reported a first-half post-tax profit of $23.4 million off $61 million in revenue, an improvement on the previous corresponding period’s $17 million loss.

Gold Road Resources reported a first-half post-tax profit of $23.4 million off $61 million in revenue, an improvement on the previous corresponding period’s $17 million loss. Credit:AAP

The company reported a post-tax profit of $23.4 million off $61 million in revenue, an improvement on the previous corresponding period’s $17 million loss.

Gold Road also boasted it became debt free on 21 July after repaying $25 million in borrowings. Chief executive Duncan Gibbs said Gold Road’s production was not materially impacted by COVID-19 and the company is transitioning into “fresh rock’’.

“Our exploration push continues in the under-explored Yamarna Greenstone Belt,’’ he told shareholder this morning.

“The half year saw us realign strategy to increase the likelihood of us making meaningful discoveries, as befits a company of our size. The relatively shallow aircore drilling completed so far this year will lead to deeper bedrock drilling of new targets over the coming six to 12 months’’.

The RBC Capital Markets’ mining team said the result was broadly in line with their expectations. They have an outperform rating on the stock and a $2.25 price target. Shares closed at $1.52 on Tuesday and dipped 0.7 per cent to $1.51 at Wednesday’s open.

“We remain constructive on Gold Road in the Australian gold space,’’ RBC’s analysts wrote.

“The ramp-up of Gruyere has been relatively smooth (in stark contrast to most development projects) with Gold Road demonstrating an ability to deliver (or even slightly exceed) plan.”

The gold price is good for Australian producers, and they said the miner would soon be entering a “cash harvesting’’ phase with a free cash flow yield of more than 10 per cent over 2021-22.

“Exploration news flow from activities across the relatively under-explored Yamarna Greenstone Belt is likely to provide near term catalysts, along with quarterly reporting to demonstrate cash generation.”

Wall Street’s tech sell-off and an AstraZeneca vaccine setback hinted at an Australian sharemarket plunge, and the local bourse has duly delivered.

The benchmark ASX 200 fell by as much as 2.4 per cent to a five-week intraday low of 5866.1 at Wednesday’s open. All sectors were bright red as $40 billion was wiped from the boards, easily erasing two sessions of gains.

Just nine of the top 200 stocks were ahead after 20 minutes.

The financials were battered, losing a collective 2.9 per cent. Materials dropped 1.6 per cent and health care stocks fell 2.2 per cent.

The tech sector – the focal point of the overnight US decline – was 3.7 per cent lower.

Energy stocks dropped 3.4 per cent, after oil prices took a beating overnight.

The ASX 200 has lost a collective 3.1 per cent over six trading days in September.

Departing QBE boss Pat Regan will receive a payment of $310,000, in lieu of a reduced notice period, after finishing with the company yesterday.

The chief executive’s high-profile exit this week comes after a complaint from a female employee led the board to find he had breached the insurer’s code of conduct.

Departing CEO Pat Regan. The second QBE chief in a row to fall on his sword after an issue with a female employee.

Departing CEO Pat Regan. The second QBE chief in a row to fall on his sword after an issue with a female employee.Credit:Renee Nowytarger

Mr Regan will receive his statutory leave entitlements but will miss out on any grants under the QBE Incentive Schemes for the 2020 Financial Year.

All of his unvested conditional rights under the Incentive Schemes will lapse immediately, in accordance
with plan rules.

QBE last week said Mr Regan was leaving the insurer, with chairman Mike Wilkins to fill in as executive chairman, following an external investigation into certain communications in the workplace. The board found the communications did not meet the standards of QBE’s code of ethics and conduct.

Shares in QBE were worth $9.79 before trade on Wednesday and have fallen 24 per cent in 2020 against a 10 per cent drop for the ASX 200.

In breaking potato news, Pure Foods Tasmania wants to expand on Tasmania’s reputation in China as a pristine food-growing environment by purchasing a family-run potato farm.

This morning it announced plans to buy Daly Potato Company for $1.4 million worth of shares and $400,000 in cash to the Daly family. It plans to expand the potato operations and secure an export license for the potato company.

Pure Foods Tasmania has announced plans to buy Daly Potato Company for $1.4 million worth of shares and $400,000 in cash to the Daly family

Pure Foods Tasmania has announced plans to buy Daly Potato Company for $1.4 million worth of shares and $400,000 in cash to the Daly familyCredit:Getty Images

“Meal solutions is a $1 billion market in Australia alone and we also see a large opportunity to support our Asian customers with unique 100 per cent Tasmanian-based meal solutions,’’ managing director Michael Cooper told shareholders. Daly Potatoes would bring some synergies, reduced expenses, and some new products.

Pure Foods Tasmania shares are up 140 per cent in the past year, from 25c to 60c.

Mining services firm IGO Limited has announced its chairman Peter Bilbe will retire next year.

Mr Bilbe has been a member of the Board since 2009 and has held the role of chair for nine years since July 2011. IGO said he advised the company of his intention to retire from the board on or before the 2021 Annual General Meeting scheduled for November 2021.

Gerard Daniels, an executive search and board consulting company, has been engaged to conduct the search process to identify the future chair.

IGO expects to complete this process and make an appointment by the end of December 2020.

The gold, copper, and nickel miner goes ex-dividend this Thursday for a dividend of 5c, down from 11c the previous year. Shares closed at $4.51 on Tuesday.

IGO’s website says Mr Bilbe is also the non-executive director of Adriatic Metals Plc and Horizon MineralsLimited.

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