The Australian share market was bracing for another day of carnage after yesterday’s record loss, but it has taken investors by surprise.
The ASX has had a surprising rally after experiencing its best day since 1997 – just one day after its largest one-day fall in 33 years.
The local sharemarket rose at the opening today, catching off guard investors bracing for a fresh plunge after yesterday’s horror.
By noon, the benchmark S & P/ASX200 was up 111.9 points, or 2.24 per cent, at 5,113.9 points with investors buying up a bank, supermarket, healthcare and mining stocks.
The broader All Ordinaries index was up 97.1 points, or 1.92 per cent, at 5,155.3 points as the materials index was up more than six per cent.
And it closed at 5293.4, representing a gain of 5.8 per cent and the best day in 23 years.
Monday’s carnage caused the haemorrhaging of billions of dollars and pushed markets into panic mode as the ASX shed 9.7 per cent. Then US equities tanked overnight just hours after Australian stocks suffered the worst loss in history.
NAB’s morning call note says global markets were far from impressed with measures to counteract the economic impacts of the coronavirus on Monday – despite the Federal Reserve cutting interest rates by a full 1 per cent and the return of quantitative easing.
CMC Markets chief strategist Michael McCarthy told news.com.au this morning that the only certainty was more volatility.
“It might not be as bad as it looks, particularly looking at that huge fall on the Dow overnight,” he said.
“Despite the fact that we’re down around 12 or 13 per cent, we’ve already dropped 10 per cent and we’ve had time to react to yesterday’s news of big cuts from the Federal Reserve and the Reserve Bank of New Zealand and reports of an increase in infections over the weekend – certainly it will be a negative start with futures down about 4 per cent, but it might not be as ugly as the US,” he said.
The ASX dropped more than 7 per cent at the opening of trade yesterday. Picture: AAP Image/James Gourley
The ASX dropped more than 7 per cent at the opening of trade yesterday. Picture: AAP Image/James GourleySource:AAP
“But one of the challenges for the market is that if it does open below the previous low in this sell-off – a low of 4874 on Friday the 13th before that big rally – so if we open below that level it will send a signal … of a downtrend in place and that in itself should accelerate selling.”
But Mr McCarthy said “extremely volatile environments” also meant big rallies were possible. “There’s always a chance that anything could happen with markets, but now that uncertainty is higher there will be more pressure on Australian shares, so prepare for anything,” he warned.
“One thing we didn’t see yesterday was crude prices were absolutely hammered overnight – the energy sector was among the worst performers yesterday and that big slip will also weigh on trading today.”
Just after 3pm today, IG market analyst Kyle Rodda said in a note that in short, volatility was at “post GFC highs for the ASX200”.
“It’s made for a day of very choppy trading for the index, with losses swinging between three and eight per cent throughout the day’s trade,” he wrote.
“At this stage, the ASX200 is staging an afternoon rally, which seemed to kick off when broader Asian markets came online around midday.
“There’s a high degree of stress being placed on the financial system at the moment, and that’s brought about a ‘sell-everything’ mentality in markets. The USD has ground higher in the last 12-24 hours as a result, as investors look to liquidate what they can, and store their wealth in a safe-haven of last resort.”
Meanwhile, a survey of experts and economists conducted by comparison site Finder has revealed just over half expect the Reserve Bank of Australia to cut interest rates this week, while 87 said a recession was now likely.
It represents a huge shift from the 89 per cent who did not expect a 2020 recession when surveyed in December – but while most are bracing for a recession, two-thirds believe it will be over by the end of the year.