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Australian shares hit by global worries

Colin Brinsden, AAP Economics and Business Correspondent
·4-min read

The Australian share market and the Aussie dollar took a hit as global markets fretted over a potential second coronavirus wave, particularly in Europe, adding to the already unsettling backdrop of a US presidential election.

The S&P/ASX200 benchmark index closed 38.5 points down, or 0.7 per cent, to 5784.1 on Tuesday, but did manage to recover from a three month low of 5763.2 earlier in the day.

The All Ordinaries index fell 40 points, or 0.7 per cent, to 5973.5, and also above a low of 5951.3.

The Aussie dollar sank to a one month low just below 72 US cents at one stage.

"After a treacherous start to the week, global markets are still in a slight state of fright," IG Markets market analyst Kyle Rodda said.

The local market was down from the opening bell following a further decline on Wall Street, although the major indices there managed to recover earlier falls by the close.

Fears of a second wave of COVID-19 hit European markets on Monday, and local investors followed the trend, regardless of Australia getting its own hotspot in Victoria under control.

Market heavyweights among the miners and banks were a sea of red.

BHP was down 1.8 per cent at $36.67 and Rio Tinto was off 2.4 per cent at $97.

Among the big four, Commonwealth was 0.7 per cent lower at $63.07, ANZ fell 2.3 per cent to $16.46, NAB was down 2.4 per cent to $16.64 and Westpac declined 2.1 per cent to $16.05.

There were some bright spots with retailers gaining ground as data showed consumer confidence - a pointer to future household spending - rose for a third straight week to stand at a three-month high.

Woolworths shares rose 1.8 per cent to $36.85 and Wesfarmers were 1.5 per cent higher at $44.38.

The Aussie dollar fell to a one-month low of 71.92 US cents at one stage, before partially recovering to 72.09 US cents at 1615 AEST.

But that was still down from 73.14 US cents at the close on Monday.

The currency fall coincided with a speech by deputy Reserve Bank governor Guy Debelle, where he indicated lower interest rates are possible in Australia without going negative.

Mr Debelle said the central bank had four policy options should the economy need a further boost.

These include extending its bond buying program to longer maturing issues, foreign exchange intervention and negative interest rates.

Another option is to lower the current structure of interest rates in the economy, both in terms of the target for government bond yields and the borrowing rate the RBA offers to banks from the current 0.25 per cent.

"It is possible to further reduce these interest rates," he said in his speech to the Australian Industry Group.

But he emphasised these were all just options.

Even so, National Australia Bank economists now see a "significant risk" of the Reserve Bank easing policy further by cutting the cash rate, 3-year yield target and the term funding facility rate to 0.10 per cent from 0.25 per cent.

Other data on Tuesday showed payroll jobs fell 0.7 per cent for the month ending September 5.

The Australian Bureau of Statistics said over this period jobs fell by 2.1 per cent in locked-down Victoria and by 0.2 per cent over the rest of the economy.

Payroll jobs remain about 4.5 per cent lower than mid-March - 8.3 per cent lower in Victoria and 3.1 per cent lower in the rest of Australia.

ON THE ASX

* The S&P/ASX200 benchmark index closed down 38.5 points, or 0.7 per cent, at 5784.1 points on Tuesday

* The All Ordinaries index finished 40 points lower, or 0.7 per cent, at 5973.5

At 1710 AEST, the SPI200 futures index was trading one point higher, or 0.02 per cent, at 5772 points.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 72.09 US cents, from 73.14 US cents on Monday

* 75.35 Japanese yen, from 76.31 yen

* 61.32 Euro cents, from 61.67 cents

* 56.33 British pence, 56.52 pence

* 108.19 NZ cents, from 108.06 cents