ASX erases week’s gains, dropping 5.6pc

After four weeks of heavy falls, the sharemarket has ended its fifth week since the sell-off began marginally higher as government and central intervention contends a deepening economic and health crisis.

The S&P/ASX 200 Index closed 25.8 points, or 0.5 per cent, higher over the five sessions to end the week at 4842.4 points.

The week was book-ended by heavy falls—5.6 per cent on Monday and 5.3 per cent on Friday—which came close to erasing the entire 12.5 per cent rise delivered during the first back-to-back gains since the market turmoil began.

The end to the significant rally follows news that the total number of cases in the US had overtaken both Italy and China, threatening the notion that the world’s largest economy would be back to work by Easter as hoped by US President Donald Trump.

Adding to the woes, the number of jobless hit its highest recorded level, with 3.3 million Americans applying for unemployment benefits last week.

Bounce in optimism

But after one of the sharpest sharemarket sell-offs in modern history over the preceding four weeks, sentiment was buoyed for most of this week as investors clung to positive news.

In Italy, the rise in cases showed early signs of slowing as talk that social distancing measures were producing results increased. While in China, authorities said the lockdown in Wuhan would be lifted next month after Beijing signalled they were close to having the outbreak under control.

At the same time, conversations about pharmaceutical treatment options with the potential to drop hospitalisation and death rates continued to circulate.

Adding to that, the statement from the US President that America’s economy would be open and “raring to go” from the second week of April provided hope that a war-like economic shock triggered by a nationwide lockdown would be averted.

The week also saw massive fiscal and monetary policy intervention announcements, which further lured investors with cash to redeploy back to the sharemarket.

The open of local trade on Monday came after PM Scott Morrison on Sunday announced that $66 billion in fiscal support would deployed into the economy in the coming months and more assistance would likely follow.

That added to the existing $17 billion government stimulus already announced and the Reserve Bank of Australia’s $90 billion plan to support credit markets announced at the end of last week.

While in the US, a massive $US2 trillion ($3.4 trillion) package was nearing the final stages of being passed into law by the end of the week.

That added to on an announcement from the US central bank on Monday night (AEDT) that it would intervene to support financial markets with a scope wider than anything that has previously been seen.

The Federal Reserve’s announcement was followed by the biggest one-day gains for the Dow Jones Industrial Average index in 87 years.

Buyers bought back

“We were clearly oversold in borderline panic mode, and understandably so. And I think what we’re starting to see is some more rational discussion around the numbers,” said Federation Asset Management’s Greg Bundy.

“Slowly but surely, investors are looking, believe it or not, past 2020 and starting to think about 2021.

“For example, CSL is a great company; and we know Qantas is a really good airline. They will both come out of this stronger and better companies,” Mr Bundy said.

“Yes, Qantas will have some pretty horrific numbers the next two quarters. But coming into 2021, Qantas is going to be an extraordinarily well positioned company, as is a company like CSL.”

Qantas shares surged during the week to close 31.8 higher at $3.11, while CSL recovered 3 per cent after closing at $279.12 on Friday.

Investor jumped on other heavily sold blue chips. BHP rose 7.5 per cent over the week to $29.03, Sydney Airport climbed 24.7 per cent to $6.06 and Aristocrat Leisure gained 15 per cent to close at $20.17.

Grounded optimism

But while a number of Australian shares managed to claw back ground, the week was also characterised by operational disruptions for a significant number of ASX-listed companies.

Following an expansion of containment measures announced by the Prime Minister on Sunday night, Crown Resorts and Sky Entertainment were forced to close the doors on casinos nationwide, adding to the rapidly escalating number of job losses.

Despite this, Crown Resorts ended the week 16.2 per cent higher at $7.11 and entertainment rose 23.8 per cent to $2.

Elsewhere, New Zealand, the UK, India, South Africa were among some of the countries to introduce far-reaching, nationwide shut downs, resulting in another barrage of disclosures from Australian-listed companies announcing operational disruptions or complete stoppages.

Michael Hill said it would close its stores in New Zealand after already having to shut doors in Canada. Its shares ended the week 31.4 per cent lower at 24¢.

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