The ASX 200 index suffered its worst day in more than four months on December 19, 2024, as heavy-weight banks and technology stocks were badly battered. The day marked a significant downturn, with the index closing down 141.20 points, or 1.7%, to land at 8168.20 points. This major decline wiped out approximately $50 billion from the market, shocking investors amid widespread selling pressure.
The downturn was heavily influenced by the U.S. Federal Reserve's recent announcement, which cut its forecast for interest rate cuts from three to two. Following this news, the U.S. Dow Jones index experienced a staggering drop of more than 1100 points, sending ripples through global markets. Hugh Dive, Chief Investment Officer at Atlas Funds Management, noted the reaction on the ASX reflected the U.S. Fed's decision rather than any structural weaknesses within Australian companies.
"The market moved because of the Fed, not on company fundamentals," Dive commented, emphasizing the unpredictability of trading activity during the holiday season. He pinpointed the sell-off as somewhat excessive, likely exacerbated by thinner trading volumes typically seen during this time of year. Despite the current fallout, Dive remains optimistic about recovery, as he cited the lack of negative company revelations—what Wall Street often terms as “company confessions”. "There has not been any this year; that's why I am optimistic about the next year," he said, indicating overall confidence in the corporate sector's health.
Across the board, all ASX sectors closed lower, with the biggest casualties being the financial and mining sectors. Australia's big four banks endured notable setbacks, with shares for Commonwealth Bank decreasing by 2.3% to $155.99. Xero, the technology company, also felt the pressure, dropping 2.6% to $166.27. Real estate stocks, which typically react sensitively to interest rate changes, were not spared either; the Goodman Group saw its share price tumble by 2.3%, trading at $36.00.
The commodities sector, particularly copper and gold miners, faced significant selling as well. Copper miner Sandfire Resources fell by 2.8% to $9.27, reflecting fears of reduced demand for the metal amid the Fed's anticipated tighter monetary policy. Likewise, Northern Star Resources, heavily impacted by the falling gold price linked to strength in the U.S. dollar, saw its stock down 4.1% to close at $15.33.
Despite the bleak panorama for most stocks, there was one notable exception. Shares of biotech firm Mesoblast surged by 54% to $3.05 after receiving approval from the U.S. Food and Drug Administration for its cell therapy, Ryconcil, to treat life-threatening complications linked to bone marrow transplants. This news provided at least some positive momentum within the otherwise bleak market conditions.
Similarly, Patriot Battery Metals stocks rose by 15.9% to $0.37 following Volkswagen’s announcement of investment amounting to $76.8 million for nearly 10% stake. This investment underlines how strategic corporate activities can still generate sprouts of growth even during market downturns.
Conversely, the day also delayed some previously inflated gains. A classic case was data centre provider Megaport, which reversed earlier session gains by plummeting 10.6% to $7.45. ANZ shares fell 2.6% to $28.61 amid broad sell-off sentiments affecting bank stocks and following significant shareholder dissent over its remuneration report. Notably, more than one third of ANZ shareholders voted against proposed compensation measures during the most recent meeting.
Market analysts warn against panic selling, stressing the current price movements may not be entirely indicative of the long-term outlook for Australia’s financial markets. While traders react emotionally to news, solid company fundamentals are likely to prevail once the market stabilizes. With uncertainty expected to continue through the holiday season, traders and investors are advised to remain cautious yet vigilant.
Overall, as the ASX closes at its six-week low amid the U.S. market turmoil, investors are left weighing their options for the year to come. Will the ASX bounce back after the holiday season? Only time will tell, but optimism remains as underlying economic indicators suggest the fundamental health of many Australian companies is solid.
