US recession indicator rears its head: ASX closes 1.1% lower, biggest lost since Jan

Market Reports

by Jessica Amir

The Australian share market experienced its sharpest fall since January, losing 1.1 per cent today after most of the sectors finished with a loss.

It comes as the major US indices retreated at the weekend with the S&P500 seeing its biggest drop since January after a recession indicator reared its head, with the spread between the 3-month Treasury bill yield and the 10-year note rate turning negative for the first time since 2007, inverting the curve.

Tech stocks fell the most locally and in the US on Friday, while Energy led the major sectors lower after the oil price slipped from its 2019 highs, falling 1.6 per cent to US$59.04 a barrel.

At the closing bell the S&P/ASX 200 index closed 69 points lower to finish at 6,126 points.

On Friday the S&P500 lost 1.9 per cent, the tech-heavy Nasdaq fell 2.5 per cent and the Dow Jones lost 1.8 per cent with Bank stocks like Citi falling 4 per cent, while Goldman Sachs, Morgan Stanley and Bank of America lost about 3 per cent.


Dow futures are suggesting a fall of 107 points.
S&P 500 futures are eyeing a fall of 13 points.
The Nasdaq futures are eyeing a fall of 51 points.
And the ASX200 futures are eyeing a 74 point fall tomorrow morning. 

Company news

Thermal coal producer, New Hope Corporation (ASX:NHC) which is based in south-east Queensland, has increased its stake in the Bengalla Joint Venture to 80 per cent after snapping up 10 per cent of Mitsui’s stake. The effective economic date the transaction took place was 1 December 2018. It follows on from NHC reporting its profit before tax and non-regular items, rose 33 per cent to $229 million, while its EBITDA grew over 30 per cent and its interim dividend rose over 30 per cent to 8 cents per share in the half-year results to 31 January 2019, with the bolstered results coming on the back of its Benalla JV and a favourable rise in commodity prices. Morningstar has the material stock at a $3.50 price for fair value. Shares in New Hope Corporation (ASX:NHC) closed 6.8 per cent lower at $3.03. Year-to-date its shares are 11 per cent lower, but year-on-year its shares are 42 per cent higher.

One of the largest providers of aged care in Australia, Regis Healthcare (ASX:REG) has included a payment of about $10.4 million from a government funding increase in its half-year results to 31 December 2018. It comes as the Federal Government announced a one-off payment of $320 million for residential aged care, and for Regis Healthcare (ASX:REG) that’s $1,800 per patient for its 5,800 permanent residents. Its FY19 NPAT will be in the range of $47 to $51 million and its 2H FY19 EBITDA will be broadly in line with its 1H. Year-to-date its shares are 29 per cent higher.

St Barbara (ASX:SBM) has been upgraded to a buy by Goldman Sachs (GS), after the gold producer decided not to proceed with its hydraulic hoisting solution, known as Gwalia Mass Extraction (GMX), which simplifies the company’s outlook. GS revised its 12-month target price to $3.90 per share, implying a 21 per cent upside. Meantime SBM downgraded Gwalia FY19 production guidance by 10-15 koz (thousand ounces) due to impacts from construction of its extension project. Year-to-date its shares are 28 per cent lower.

Think Childcare (ASX:TNK) announced plans to buy four purpose-built Nido childcare services from incubator partners for $6.5 million, funded by an institutional placement, expected to raise $18 million. After the acquisitions, CY19 EBITDA (underlying) should range from $13.8 million to $14.8 million. Year-to-date its shares are 26 per cent higher.

Best and worst performers of the day

The best performing sector was S&P/ASX Real Estate Investment Trusts adding 0.3 per cent while the worst performing sector was S&P/ASX Energy, shedding 3.4 per cent.

The best performing stock in the S&P/ASX 200 was Newcrest Mining Limited (ASX:NCM), rising 3.2 per cent to close at $26.20 after the gold price rose amid recession fears. Shares in Spark New Zealand (ASX:SPK) and Saracen Mineral Holdings (ASX:SAR) followed higher.

The worst performing stock in the S&P/ASX 200 was Eclipx Group (ASX:ECX), dropping 12.75 per cent to close at $0.64. Shares in Altium (ASX:ALU) and New Hope Corporation (ASX:NHC) followed lower.

Asian markets

Japan’s Nikkei has lost 3.3 per cent, Hong Kong’s Hang Seng has shed 1.8 per cent and the Shanghai Composite has lost 1.4 per cent.

Commodities and the dollar

Gold is trading at US$1,317 an ounce.
Iron ore price rose 1.7 per cent to US$85.96
Iron ore futures are pointing to a rise of 0.1 per cent.
Light crude is $0.94 lower at US$59.04 barrel.
One Australian dollar is buying 70.82 US cents.

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