ASX 200 stocks shed 2% over the week
Australian shares ended 2% down after a volatile week that found investors unable to shrug off nerves over falling oil prices and China’s helter-skelter financial markets.
The benchmark S&P/ASX 200 index shed 2% over the week. On Friday, it was 16.6 points, or 0.34%, softer at 4,892.80 as investors kept mainly to the sidelines after a tumultuous week.
The main stocks gauge has fallen nearly 8% so far this calendar year, making for a harsh start to 2016.
Asked whether the market was in correction mode, CommSec market analyst Tom Piotrowski said: “This is definitely a correction.”
Piotrowski added the market had ended in positive territory only once so far this year.
“It’s been a long time since we’ve seen a start to the year this bad.”
Energy sector sapped
Wild swings in China’s financial markets continued to worry investors but prolonged declines in oil prices also weighed heavily on sentiment.
The energy sector index shed more than 5% over the week and 9.2% so far in 2016 as oil and gas prices continued to slump.
Woodside Petroleum (ASX: WPL) was 4.3% off at $26.99, while Santos (ASX: STO) gave up 14.8% over the week to $2.87.
“It’s difficult because the cataclysm that you’re seeing in oil prices is suggestive of deflationary forces hard at work,” Piotrowski said.
Sustained deflation, or falling prices, can erode company profits, leading to lower share prices.
“Even though the real impact of lower energy prices and what that means for the consumer are a great boon, the cataclysmic decline you’re seeing in oil prices with such rapidity is actually a bit of a risk for overall confidence,” he said.
Shares in Beach Energy (ASX: BPT) closed out the week 10.9% down at 41 cents. Earlier in the week, the company appointed Matthew Kay its new chief executive.
The materials sector index was 5.7% lower over the week, largely on the back of declines in BHP Billiton (ASX: BHP), the world’s biggest miner.
Battered oil and gas prices, including a drop of 30% over the past three months according to BHP, led the blue chip to write down the value of its US onshore oil and gas assets by US$4.9bn.
BHP Billiton ended the week nearly 8% down as deteriorating iron ore prices, in addition to sharp declines in the benchmark oil price, continued to pressure its share price. It was at $15.07 at the close on Friday.
Other sectors down about 2%
Most other sectors shed about 2% over the week.
Wesfarmers (ASX: WES), which owns coal operations as well as Coles supermarkets and some of Australia’s other well-known retailers, fell 1% over the week to $39.32.
Wesfarmers said on Thursday it has offered about $700m for a home improvement chain in the UK which it plans to brand as Bunnings over the next three to five years.
Austal (ASX: ASB) plunged 28.5% this week after the shipbuilder said David Singleton would take over as chief executive from Andrew Bellamy.
One index ending the week higher was the S&P/ASX 200 VIX index, which measures the market’s implied volatility. It advanced 7.5% this week.