ASX tumbles for a fourth day as Sigma nosedives


Sigma shares slumped 12.3 per cent to 53.5¢. The collapse of takeover talks also weighed on API shares, seeing them close 3.6 per cent lower at $1.35.

Car dealer Automotive Holdings Group slid 3.3 per cent to $1.88. The stock will be removed from the top 200 in S&P’s quarterly index rebalance effective March 18.

Discretionary stocks were mixed, with Myer up 8.3 per cent to 52¢ and JB Hi-Fi up 0.7 per cent to $23.94. Harvey Norman fell 1.3 per cent to $3.80.

Westpac-MI’s consumer sentiment index, released on Wednesday, “highlights the risk that a move by households to increase savings rates could further undermine consumer demand”, warned Westpac senior economist Matthew Hassan.

New Hope Corporation rallied in response to an impediment to the New Acland coalmine stage three being removed, up 4.3 per cent to $4.39. New Hope disclosed after-market on Tuesday that an application to amend the environmental authority was granted.

Microcap chocolate maker Yowie surged more than 20 per cent to 8.5¢ on a 9.2¢-a-share bid from Keybridge Capital, which Yowie said “fundamentally undervalues” the company.

Other things that moved the market:

Stock watch: AusNet Services

Broker Morgans downgraded its recommendation on electricity and gas distributor AusNet Services’ shares to “hold” from “add” after its share price appreciated, limiting the potential of future returns. “We think the share price is being driven by falling government bond rates, and a switch from [Spark] to [AusNet] given [Spark’s] tax issues,” wrote analyst Nathan Lead. The broker has a $1.73 price target on AusNet shares, and five-year return of around 6 per cent a year including distributions. “We think regulatory outperformance will become tougher to achieve,” Mr Lead said, noting regulatory decisions regarding rate of return guidelines and their impact on medium-term cashflow. He forecasts a distribution of 9.7¢ a share in 2019-20, flat versus 2018-19.

Commodities

Higher iron ore prices have led NAB’s non-rural commodity price index to a forecast increase of 3.1 per cent for the March quarter. NAB expects prices to have peaked this quarter, then “ease modestly”. In iron ore, the bank sees limited downward pressure amounting to “a relatively balanced market in the short term” and anticipates spot prices easing to an average $US80 a tonne for 2019 and $US70 a tonne in 2020. In other bulks, hard coking coal prices are forecast to decline from around $US185 a tonne in 2019 to $US158 a tonne in 2020. Thermal coal prices are set to fall from an expected $US95 a tonne in 2019 to $US90 a tonne in 2020.

The economy

The Westpac-Melbourne Institute consumer sentiment index fell 4.8 per cent to 98.8 points in March from a reading of 103.8 in February. That reduced sentiment to its lowest level since September 2017. Commonwealth Bank economist Gareth Aird speculated that the slowdown in fourth-quarter economic growth and discussion of a “per capita” recession. However, as Mr Aird noted, job security fears rose sharply which is at odds with the January employment survey which showed the unemployment rate is at 5 per cent. “It looks like the Australian consumer needs a circuit breaker. And the sooner the better,” he concluded.

Brexit

British Prime Minister Theresa May’s Brexit deal was defeated by 149 votes in parliament, setting up a parliamentary vote on a no-deal Brexit to follow. While an extension of the Brexit date from March 29 now seems likely, ANZ says “the path forward is far from clear”.

“The key point is that by the end of Thursday we might finally know whether MPs will pass [Mrs] May’s deal, pursue ‘no deal’, or delay Brexit beyond March 29 by requesting an Article 50 extension,” Capital economist Oliver Jones wrote. “Clearly, there is scope for very large moves in (the) sterling once the outcome becomes clear.” Betting odds put the chance of an extension to Article 50 at more than 70 per cent, he noted.

Trade

Japan’s machinery orders fell in January at the fastest pace in four months, Reuters reported, due to declining demand in the auto and telecommunications equipment sectors as the US-China trade war dented global demand. The 5.4 per cent decline month-on-month in core machinery orders, a leading indicator of capital expenditure, was more than the median estimate for a 1.7 per cent decrease and followed a revised 0.3 per cent decline in the previous month. It was also the fastest month-on-month decline since September last year. Economists say uncertainty over trade policy will discourage Japanese companies from increasing capital expenditure, which will act as a curb on economic growth.

Vesna covers markets from our Sydney newsroom.

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