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ASX drops on lockdown hit, global sell-off

·3-min read

Australian shares ended lower amid a broader sell-off in Asian markets, as worries over the economic impact of lockdowns in Sydney and Melbourne weighed on investor sentiment.

The benchmark S&P/ASX200 index on Monday lost 62.1 points, or 0.85 per cent, to 7286, while the broader All Ordinaries dropped 71 points, or 0.93 per cent, to 7559.70.

The stumble in the local market was in line with its Asian peers as a relentless surge in coronavirus cases in a number of countries in the region underlines the risk to economic growth.

"It would seem the markets are really quite concerned about the global growth outlook," said Kyle Rodda, analyst at broker IG Markets.

"We're seeing the unwinding of the reflation trade that has been driving markets for pretty much the last six to nine months."

Most of the losses in the local market were focused in the heavyweight mining, energy and financial stocks, as investors dumped cyclical stocks amid signs of faltering economic growth.

The declines were led by mining, energy and financial stocks with traders keen to book some profits due to growing uncertainty over the local COVID-19 outbreaks.

NSW has already tightened restrictions, ordering a shutdown of all non-essential retail as well as construction sites in Sydney as infections show no signs of falling despite three weeks of lockdown.

On Monday, Victoria's premier also confirmed he will also be extending a lockdown in Melbourne after the city recorded 17 new COVID-19 cases.

The decisions have sparked concerns about the hit to Australia's economic recovery, with some economists estimating negative GDP in the September quarter as a result.

Materials shares led the slide, with BHP, Rio Tinto and Fortescue Metals each losing more than 2 per cent of their value. Gold miners were also on shaky ground, with Newcrest Mining down 2 per cent at $26.37, and Evolution Mining tumbling 8.7 per cent to $4.28.

Energy stocks took a hit after the OPEC+ grouping of oil exporting nations on Sunday agreed to boost production in a move designed to ease soaring crude oil prices.

Crude prices sank, along with the share prices of oil and gas majors Santos, Woodside Petroleum and Oil Search, dropping between 2-5 per cent.

Major banks also suffered collateral damage amid concerns over the rising impact of the extended lockdowns in Australia's two biggest cities. Shares in the Big Four banks, which have a significant exposure to the booming housing market, ended between 0.5-2.0 per cent lower.

The caution-first market sentiment was reflected in the gains among defensive sectors such as healthcare, utilities and consumer staples.

Shares in medical device maker Resmed jumped 2.4 per cent to $34.52, while biotech giant CSL gained 1.8 per cent at 282.74 each.

Shares in supermarket giants Coles and Woolworths also ended higher.

Meanwhile, the US dollar continued to firm up against a basket of currencies and the heightened local risk saw the Aussie dollar slip to its lowest level since last December.

By 1700 AEST, it was buying 73.81 US cents, sharply down from Friday's close of 74.31 US cents.

ON THE ASX

* The benchmark S&P/ASX200 index on Monday closed down 62.1 points, or 0.85 per cent, to 7286.

* The All Ordinaries closed lower by 71 points, or 0.93 per cent, to 7559.70.

* At 1700 AEST, the SPI200 futures index was unchanged at 7197 points.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 73.81 US cents, from 74.31 cents on Friday

* 81.13 Japanese yen, from 81.75 yen

* 62.53 Euro cents, from 62.93 cents

* 53.68 British pence, from 53.81 pence

* 105.57 NZ cents, from 105.98 cents.

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