The share market hit an eight-week low before paring its loss as a rebound in risk assets helped settle jitters over the new Omicron Covid variant.
The S&P/ASX 200 was off six points or less than 0.1 per cent at 7273 mid-session after earlier sinking to 7180, a level last seen on October 1.
The market recovered as US equity futures, crude oil and risk-sensitive currencies rallied in a sign international investors were taking a more measured view of the threat from the new strain.
Speculative stocks, shopping centres and travel companies bore the brunt of the selling. Tech and mining stocks led the rebound.
What’s driving the market
Australian stocks moved off their lows amid tentative signs Friday’s Omicron panic may be subsiding. Reports over the weekend suggested the new variant’s symptoms may be less severe than previous strains.
S&P 500 futures bounced 32 points or 0.7 per cent, signalling possible relief when Wall Street reopens tonight. Brent crude rallied US$2.75 or 3.84 per cent to US$74.34 a barrel, reversing around a third of Friday’s loss.
The dollar – another useful gauge of the market’s appetite for risk – rose 0.25 per cent to 71.37 US cents against the greenback (a traditional haven in times of uncertainty).
Global equity markets plunged on Friday as investors opted to sell first, ask questions later. Wall Street‘s main indices shed between 2.2 and 2.5 per cent. European markets lost up to 5 per cent.
BetaShares’ chief economist David Bassanese said the sell-off could be a buying opportunity.
“While it’s still early days, my hunch is that Omicron won’t lead to new lockdowns – as while it may well be highly transmissible, it’s symptoms may prove to be not too severe. If my hunch is right, the current sell-off in equity markets represents a good buying opportunity,” he said.
“We can expect the world’s leading and best-resourced hedge funds will be furiously trying to assess its severity as quickly as possible,” he added. “In turn, that suggests markets will quickly sniff out how worried we need be.”
Vaccine-makers were already exploring potential treatments for Omicron. Moderna’s chief medical officer said they could have a reformulated vaccine ready by early next year.
Going up
Tech and mining stocks spearheaded the fightback. The tech sector rallied as a slump in bond yields reduced the cost of borrowing. Technology One advanced 5.28 per cent, Xero 2.25 per cent, Altium 2.06 per cent and Afterpay 1.8 per cent.
Potential winners from renewed lockdowns also rose. Domino’s Pizza gained 4.63 per cent and online retailer Kogan 2.87 per cent.
Mining heavyweight Fortescue Metals put on 2.33 per cent, BHP 1.71 per cent and Rio Tinto 0.93 per cent.
Defensive healthcare stocks drew a bid. Ansell climbed 4.71 per cent, Healius 2.95 per cent and Sonic Healthcare 2.45 per cent. CSL slipped 0.66 per cent.
A broker upgrade from Jefferies lifted Bendigo Bank 0.7 per cent off a 12-month low.
Myer firmed 0.5 cent after securing a four-year funding package to replace existing credit facilities. CEO John King said the new facility may ultimately help the chain store resume dividend payments.
Going down
A sharp retreat in yields pulled the banks to multi-month lows. CBA dropped 0.32 per cent, ANZ 1.22 per cent, NAB 1.05 per cent and Westpac 0.43 per cent.
Friday’s carnage in oil markets dragged on energy stocks. Woodside shed 0.79 per cent, Oil Search 0.5 per cent and Santos 0.62 per cent.
A wave of border closures and travel bans weighed on travel and tourism companies. Webjet shed 2.24 per cent, Flight Centre 0.47 per cent, Corporate Travel Management 1.94 per cent and Qantas 1.2 per cent.
Shopping centre landlords wilted under the threat of further lockdowns. Unibail-Rodamco-Westfield skidded 5.39 per cent, Vicinity Centres 5.2 per cent and Scentre Group 3.48 per cent. Casino groups Star Entertainment and Crown Resorts fell 1.94 and 1.16 per cent, respectively.
Mesoblast slipped 1.47 per cent after Chair Joseph Swedish told today’s AGM the next 12 months would be “pivotal” as regulators determine the fate of several of the biotech’s experimental treatments. The company has several potential treatments for inflammatory conditions in the pipeline.
The speculative end of the market fell for the eighth time in ten sessions. The S&P/ASX Emerging Companies Index sank 1.07 per cent.
Other markets
A red session on Asian markets saw the Asia Dow lose 0.76 per cent, China’s Shanghai Composite 0.56 per cent, Hong Kong’s Hang Seng 0.71 per cent and Japan’s Nikkei 0.76 per cent.
Gold rallied US$8.30 or 0.46 per cent to US$1,793.80 an ounce.