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ASX down 2.5% as coronavirus claims businesses


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Markets faced a cold closing Monday as some of the virus's impacts became clearer.

The ASX ended last week on a comparatively buoyant note, up around 20% on 17 April compared to its 23 March lows.

It fell back 2.5% on Monday in its worst session in 3 weeks, buffeted to varying degrees by several factors.

The big one was oil prices sinking to a 21-year low, driving an overall 4.6% loss across energy stocks, including a 7.8% plunge from Caltex Australia as it revealed that its prospective buyer was walking away from an $8.8 billion takeover bid in the face of all the uncertainty.

In the meantime, the oil glut is spelling trouble for businesses both now and in the future.

"Oil names looking sickly here today, and no surprise when the production costs for the majority of producers globally is between US$25 and US$95 per barrel," said RBC Capital Markets' head of equities Karen Jorritsma. "At current levels, the entire industry is out of the money."

In finance, Australia's Big Four banks each experienced drops near par for the ASX200 average, ranging from -1.9% (Commonwealth Bank) to -2.5% (ANZ), as the complex impacts of the virus worked its way along.

"Ultimately, the market is likely to reach its low at the point of greatest uncertainty," said Platinum Asset Management co-founder and CEO Andrew Clifford. "Potentially, we have already seen that occur as the major monetary and fiscal initiatives that were announced by governments at the end of March did reduce some of the worst-case scenarios as discussed earlier. On the other hand, there were rallies in markets of the order of 20% on two occasions in the latter months of 2008, only for the market to falter and fall to new lows."

"Stock markets collapsed in one of the fastest declines in history and debt markets are struggling under the possibility that companies that only weeks ago looked in good financial shape are now bankruptcy candidates," Clifford said.

Monday evening saw a prime example of exactly that with news breaking Monday afternoon that voluntary administration was "imminent" for Virgin Australia.

The turnaround today makes it look like the virus will throw a few more curve balls before the end of lockdown, giving investors a few more opportunities to knock them out of the park.

If you're interested in guides on investing during the coronavirus market crash, head on over to our coronavirus investing hub.

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