ASX dives to one-month low as sell-off continues

Investors on Tuesday shrugged off the decision by the RBA to hold rates steady. Photo: Sasha WoolleyShares dived to a one-month low on Tuesday, weighed down by the big banks and falls in energy and mining stocks after further drops in commodity prices, while investors shrugged off the decision by the Reserve Bank of Australia to hold rates steady.

Negative leads from US markets and weaker oil prices led the market lower from the opening bell and the bourse headed lower from there, with the benchmark S&P/ASX200 closing 1.4 per cent lower at 4924.4 and the broader All Ordinaries down 1.4 per cent to 5000.4.

“The opening fall was no surprise given the US lead and the fact that oil prices are coming back a little bit,” said senior private client advisor Alistair McCorquodale.

“I think there’s some things like Arrium filtering through and obviously our domestic banks have got some exposure to that, so I think there’s a little bit of nervousness around bad debts.

“Commodities continue to slide so you see a bit of weakness in the miners. The strength has been in the offshore defensives – stocks like Ansell and Amcor that have good defensive offshore exposure.”

Chris Conway, Head of Research at Australian Stock Report, said equity markets remained tightly linked to oil markets.

“The weakness is hardly surprising given how commodities fared overnight,” he said. “As oil goes, so too will equities.

“It follows that if you can form a strong opinion about the outlook for oil, you should, by default, have an equally strong opinion about the fortunes for equity markets.”

Mr Conway said “compelling, sustainable” growth stocks such as Premier Investments, APN Outdoor and Qantas could withstand the oil-equity correlation.

On Asian markets, Japan’s Nikkei plunged to a six-week low, after the stronger yen hurt the overall market mood. Analysts said worries that the strong yen might erode exporters’ profits would probably continue to weigh on the market.

Among blue-chip mining stocks, BHP Billiton was down 3.3 per cent to $15.98 and Rio Tinto dipped 2 per cent to $41.96. Oil and gas producer Woodside dropped 4.2 per cent.

In banking news, The Australian Financial Review reported that Westpac would be the latest major lender to be targeted by the corporate regulator.

The paper revealed that ASIC was readying action against a second major bank in relation to alleged market misconduct, chats and potential rigging of the bank bill swap rate.  ANZ Banking Group is already the subject of court action spearheaded by the regulator.

Investors continued to dump the major lenders. Westpac dropped 1.9 per cent to $29.13. ANZ fell 1.5 per cent to $22.47, National Australia Bank shed 1 per cent to $25.56 and Commonwealth Bank dived 2.3 per cent to $71.25.

Shares in Nine Entertainment tumbled as much as 29 per cent to a record low following the TV broadcaster’s revenue update.

A rain-plagued summer of cricket and a poor start to the ratings year, including the disastrous launch of Reno Rumble, all weighed on Nine’s revenue to start 2016.

Nine’s television revenues were down 11 per cent in the third quarter of the financial year, compared with the corresponding period, which the company said was also affected by an earlier Easter and no Cricket World Cup.

Shares ended Tuesday 23.7 per cent lower at $1.17.

Downer EDI came under more pressure to win new rail contracts after losing a key mining services contracts with Fortescue.​

Downer’s shares plummeted 9.6 per cent to $3.38 after the contractor revealed late on Monday that Fortescue would perform its own mining services work at its Christmas Creek iron ore mine in Western Australia from October.

The mining services contract is estimated to contribute around $400 million of annually to Downer’s group revenues, and account for about 20 per cent of its mining work-in-hand, according to Citi.

Virgin Australia shares were flat at 36 cents after news its credit rating has been placed on review for a possible downgrade by Moody’s, amid ongoing uncertainty over the airline’s capital structure, the level of shareholder support and its slower than expected reduction of debt.

Last week, Air New Zealand said it could sell all or part of its 26 per cent stake in the Australian carrier.

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