The ASX dropped more than 7 per cent at opening of trade yesterday as concerns over COVID-19 grow. Picture: AAP Image/James Gourley
The ASX dropped more than 7 per cent at opening of trade yesterday as concerns over COVID-19 grow. Picture: AAP Image/James Gourley

‘Extremely volatile’: ASX’s surprise move

The ASX has risen at opening, surprising investors bracing for a fresh plunge after the Aussie share market was decimated by its largest one-day fall in 33 years yesterday.

The volatile stock market jumped more than one per cent as investors scrambled to snap up bank, supermarket and big mining stocks.

In a small recovery following its worst-ever day, the benchmark S&P/ASX200 was up 53.5 points, or 1.07 per cent, at 5,102 points at 1030 AEDT on Tuesday.

The broader All Ordinaries index was up 66 points, or 1.3 per cent, at 5,124.2 points as the materials, financials and consumer staples indices soared.

Investors has been expecting another black day with the futures at 0700 AEDT pointing to a four per cent drop after US equities tanked overnight. The Dow Jones closed nearly 13 per cent lower.

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 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 Gourley

"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 down trend 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."

Analysts say signs suggest the ASX200 will open 4.1 per cent lower today.

"Though it's proven an unreliable indicator amidst all the market volatility, SPI Futures are suggesting the ASX200 ought to open 4.1 per cent lower this morning," IG market analyst Kyle Rodda said in a note this morning.

"The expected spill in the index comes after a day in which it registered the worst intraday performance in its history. The ASX200 shed 9.7 per cent on Monday, with the big banks leading the losses.

"The financial sector sapped 174 points from the market, largely due to investors' pricing-in the negative consequences of lower rates on bank profits."

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.

- with AAP copy


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