Australian shares traded lower on Wednesday as resource-based stocks dropped after oil prices dived on worries of oversupply and slowing global demand.
Australian shares traded lower on Wednesday as resource-based stocks dropped after oil prices dived on worries of oversupply and slowing global demand. Crude prices dropped 7 percent, extending Tuesday’s fall, triggered when U.S. President Donald Trump condemned planned oil output cuts by the Organization of the Petroleum Exporting Countries.
The S&P/ASX 200 index fell 0.5 percent or 31.2 points to 5,803 by 0100 GMT. The benchmark saw significant sell-offs on Tuesday and fell 1.8 percent. “There’s a certain amount of oversupply in 2019 that’s been priced in, but on the other hand you’ve got weaker global economic growth and that’s expected to drive down demand,” said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.
“If you’ve assumed that with oil, you’ve got to translate that to other economic factors and then you start to see weaker commodity prices in metals as well.” The energy sub-index fell as much as 2.5 percent and plunged to a seven-month low. Oil and gas explorers Woodside Petroleum Ltd, Santos Ltd and Oil Search Ltd fell more than 3 percent each.
Materials and mining stocks slipped 1.3 percent with mining giants BHP and Rio Tinto Ltd declining 1.3 percent and 1.8 percent, respectively. Financial shares reversed early gains to trade lower. Australia’s second largest lender Westpac Banking Corp fell 1 percent, while peer National Australia Bank Ltd declined 1.4 percent.
Plastics packaging maker Pact Group Holdings was the worst performer on the ASX 200, tumbling 15 percent to a record low after it cut its earnings forecast for fiscal 2019. Bucking the trend, technology stocks bounced back from heavy losses on Tuesday and gained as much as 0.9 percent. Tech equities were battered after i-Phone maker Apple Inc’s suppliers forecast lower earnings.
New Zealand stocks were flat, with the benchmark S&P/NZX 50 index falling about 0.1 percent to 8,851.74. A2 Milk fell 2 percent, while Meridian Energy Ltd rose 1.6 percent after it reported October retail sales volumes higher than the previous month. Freight services provider Mainfreight Ltd was the best performer on the among the country’s stocks after the company reported strong half year results.