Market set for huge losses as coronavirus fears take hold


Following heavy falls on Wall Street and Europe overnight, the local futures index is forecasting Aussie shares to fall below the nadir from last week when global stocks lost trillions of dollars.

Markets both here and abroad have been fluctuating wildly recently, clinging to updates of the deadly virus and the slashing of Australian and US interest rates.

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The ASX rose 280 points over two sessions after the Reserve Bank of Australia governor Philip Lowe cut interest rates to a historic low of 0.5 per cent on Tuesday, and an amateur observer would be forgiven for dismissing the latest slump as just another rise and fall.

But CMC chief market strategist Michael McCarthy says these erratic movements are significant and concerning.

“It tells you that we don’t know what’s going on and that’s the big issue for the market at the moment,” he told news.com.au. “It’s just the uncertainty of the economic impact of the virus.

“We get optimistic about potential central bank support and fiscal stimulus from governments, then we see another school close or another border shut and the sell-off comes.

“That uncertainty means the volatility is likely to continue and, unfortunately, the longer it lasts the more economic damage is done and the more likely we’ll see lower levels on the Australian share market.”

Mr McCarthy said whatever gains come from the fluctuations will likely be met with further losses.

“The fact that the market rose so hard this week was not a good sign. Markets that are this volatile means we haven’t yet found a balance,” he said.

US shares fell heavily overnight. Picture: David Dee Delgado/Getty Images/AFPSource:AFP

Shares on Wall Street fell sharply overnight as coronavirus fears intensified after the number of cases confirmed in the US rose to 164 and California declared a state of emergency.

Local investors will be watching out for retail spending figures released later today for January, to get a snapshot of the health of Australia’s retail sector and consumer spending.

The Aussie dollar was buying 66.02 US cents at 0800 AEDT on Friday, down from 66.28 as the market closed on Thursday.

Australian Health Minister Greg Hunt, Australian Prime Minister Scott Morrison and Australia’s Chief Medical Officer Professor Brendan Murphy provide an update on the deadly virus. Picture: Lukas Coch/AAP

Australian Health Minister Greg Hunt, Australian Prime Minister Scott Morrison and Australia’s Chief Medical Officer Professor Brendan Murphy provide an update on the deadly virus. Picture: Lukas Coch/AAPSource:AAP

INVESTMENT OPPORTUNITY

The market slide comes just weeks after the ASX200 was at all-time highs, which should present profitable options for mum and dad investors.

Burman chief investment officer Julia Lee says it’s important to remember volatility is normal for stock markets.

“What we have seen in the past is it is an opportunity for longer-term investors who can keep their cool,” she told news.com.au.

“But the problem is we don’t know how long this is going to go for.

“My best case scenario is that we start to see better news flow coming through by April.

“When we see falls of more than 2 per cent in one session it can be quite scary, but it’s also quite normal.

“I went back 11 years and crunched all the times the Aussie market has fallen more than 2 per cent, and on average it’s about seven times a year.

“When I see volatility hit, my general rule of thumb is that we can expect it to generally stay about two or three months.

“About six or eight weeks after it started, my strategy is to slowly start accumulating stock.”

— with AAP



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