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ASX 200 falls from one-month high as energy stocks dive

We examine some of the key developments from the Australian markets over the last few days.

Key takeaways:

  • ASX 200 falls from one-month high as oil price drags down energy shares on Wednesday.
  • Strong economic data out of China provided cover for the bulls on Tuesday, but that sentiment faded.

The ASX 200 benchmark retreated from its one-month high as the energy sector weighed on the index due to disappointment at efforts to prop up the oil price.

Better-than-expected economic data out of China, Australia’s largest trading partner, provided some cover for the bulls on Tuesday, but it wasn’t enough to keep the ASX 200 in the black on Wednesday.

Oil market jitters outweigh positive China data

All up, the ASX 200 finished out Wednesday’s session down 21.4 points, or 0.4%, at the 5,466.7 point level. The index spent the first 30 minutes of the session in the black, touching a high of 5558.0 points, its highest level since mid-March.

But the bears quickly took over, tipping the ASX 200 into slightly negative territory where it remained for the rest of the session.

Overall, the benchmark Australian index is still comfortably in positive territory in a shortened trading week after a strong performance on Tuesday. The index jumped 100.8 points, or 1.3%, to finish Tuesday’s session at the 5,514.3 level.

Energy shares fall, a2 Milk retains its momentum

Overall, it looks to be volatile oil prices that kept the ASX 200 in the red on Wednesday. The oil price has continued to slide this week despite a massive supply cut agreement from OPEC+ nations over the weekend. As a consequence of this, Australia energy stocks lagged the benchmark on Wednesday.

Woodside Petroleum, Australia’s largest listed oil and gas company, lost 3.6% to finish out the session at $21.31 per share.

By comparison, Woodside’s biggest domestic rival Santos lost 3.7%, while Beach Energy tumbled 6.6%. Worley Parsons, an energy focussed engineering firm, shed 5.4%. Overall, the broader ASX 200 Energy index lost 3.1%.

The ASX 200 didn’t get any support from the other major sector indices, with the Financial Index losing 0.5%, the Health Care index slipping 0.3% and the Materials index falling 0.7%.

As a side note, it looks as if traders were buoyed by data out of China on Tuesday, which showed better than expected export and import figures.

This was reflected in shares for dairy producer a2 Milk, which rose to prominence by securing a sizeable portion of China’s baby formula market.

The company not only held its 5.2% gain from Tuesday but added another 3.6% on Wednesday to finish at $18.10 per share. A2 has experienced almost constant share price growth since early November, when it was trading around just $11.49 per share.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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