Stock market investors are being warned to brace for Omicron-induced volatility, despite the local bourse staging a remarkable recovery from an early plunge.
The Australian sharemarket went into free fall moments after opening, due to concern about the new Covid variant, but staged a remarkable recovery.
The local bourse fell as much as 1.4 per cent early in the session.
The benchmark S&P/ASX200 index finished down 39.6 points or 0.54 per cent at 7239.7, while the All Ordinaries Index fell 37.5 points of 0.49 per cent to 7562.4.
CommSec analyst Tom Piotrowski said there was high trepidation after northern hemisphere markets sank on Friday.
“We saw the S&P500, for example, have its worst decline since February and European markets posting their worst performances since June,” Mr Piotrowski said during intraday trade.
“In contrast, we have seen a pretty constructive tone.
“We’re actually seeing US futures consolidate in after hours trade … some reasonable improvements under the circumstances. That has helped stabilise the Australian market.”
It was an orderly sell off, followed by a consolidation, he said.
“It’s the disorderly and erratic price action that becomes concerning, when markets are having trouble finding a bottom, and there’s no evidence of that at this stage,” Mr Piotrowski said.
OMG chief executive Ivan Tchourilov said sentiment had taken a serious hit since news of the Omicron variant began to spread, but the market managed to pull off an incredible recovery after the early dive.
“Markets will continue to shift as news of the Omicron variant becomes available, so expect volatility in the near term while potential fallout is measured,” Mr Tchourilov said.
“On volatility, Flight Centre had one of the biggest intraday price recoveries.
“Bottoming out at $15.21, more than 11 per cent below Friday’s close, the price came back to jump half a per cent above.”
It then closed 0.88 per cent weaker at $16.99 after peaking at $17.44.
“That’s a massive intraday price range for a blue-chip stock,” Mr Tchourilov said.
“Flight Centre has been a favourite for retail investors looking to get their hands on Covid-sensitive companies.”
Qantas slid 2 per cent to $4.90, Webjet dropped 2.8 per cent to $5.20, Corporate Travel Management backtracked 2.36 per cent to $21.11 and Regional Express gave up 2.83 per cent to $1.37.
In the oil and gas sector, Woodside shed 1.67 per cent to $21.24, Oil Search dropped 2 per cent to $3.91, Santos retreated 1.54 per cent to $6.39 and Beach Energy declined 0.83 per cent to $1.19.
“Oil was one of the hardest-hit commodities: crude oil fell 12 per cent and US oil 13 per cent,” Mr Tchourilov said.
“Our energy sector has been cooling since October, meaning the fallout today wasn’t too significant.
“What we see elsewhere is price reversals of the last three months.
“Companies exposed to Covid have been sold off en masse, notably travel and brick and mortar retail.
“Alternatively, companies coming off a Covid high got a boost in valuation.
“Domino’s Pizza and personal protective equipment provider Ansell jumped 5 per cent each at their respective highs today.”
Domino’s finished 4.09 per cent stronger at $130.17 and Ansell firmed 2.1 per cent to $32.52.
Mr Piotrowski said the fast food giant’s rise was evidence of the “stay at home theme” playing out.
Scentre Group slid 3.8 per cent to $3.04, while fellow shopping centre operator Stockland fell 2.03 per cent to $4.35.
Department store chain Myer was steady at 50 cents after announcing it had inked a binding agreement to refinance its existing credit facilities, which were due for renewal in November next year, with a four-year asset-based loan of up to $215m.
“We have extended the life of our financing program, secured liquidity to invest in growth opportunities including our online business, and maximised our financial flexibility,” chief financial officer Nigel Chadwick said.
ANZ declined 1.66 per cent to $26.62, Commonwealth Bank dipped 1.09 per cent to $93.78, National Australia Bank erased 1.63 per cent to $27.20 and Westpac slipped 0.76 per cent to $20.92.
“The difference between short and long-term interest rates has narrowed quite substantially, and that’s going to be working against their margins,” Mr Piotrowski said.
Miners helped offset the losses, with Rio Tinto putting on 0.99 per cent to $95.39, BHP gaining 1.42 per cent to $38.57 and Fortescue jumping 2.39 per cent to $17.60, but Flinders Mines plunged 11.67 per cent to 53 cents.
The tech sector was another winner, boosted by higher Nasdaq futures.
Technology One gained 3.11 per cent to $11.92, Afterpay lifted 1.34 per cent to $110.55, Zip put on 1.35 per cent to $5.24 and Xero advanced 1.37 per cent to $141.21.
Sonic Healthcare gained 2.64 per cent to $42.70.
“The prospect of more (Covid) testing is going to be working in that organisation’s favour,” Mr Piotrowski said.
In economic news, the Australian Bureau of Statistics reported company operating profits hit a record high of $463.1bn over the 12 months to September 30, up 5.4 per cent on a year earlier.
According to the Australian Institute of Petroleum, the national average unleaded petrol price rose by 4.2 cents last week to a record high 170.4 cents a litre.
Ahead of Wednesday’s economic growth statistics for the September quarter, CBA economists tipped Australia’s gross domestic product would drop by 3.5 per cent – potentially the second biggest quarterly fall since ABS records began in 1959.
The Aussie dollar was fetching 71.34 US cents, 53.48 British pence and 63.23 Euro cents in afternoon trade.
Originally published as ‘Expect volatility’: Expert sounds warning as Covid variant fears slide off Australian sharemarket
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