July 20, 2020 / 6:42 AM / 21 days ago

Australia shares ease as virus recovery appears a long haul

* Travel stocks hit by prospects of delayed COVID-19 recovery

* Energy sector knocked down by lower oil prices

* Loan deferments from rolling lockdowns could hurt banks - Citi (Updates to close)

By Nikhil Subba

July 20 (Reuters) - Australian shares closed lower on Monday, dragged by the energy sector on weaker oil prices, and as authorities warned that the coronavirus outbreak in the country’s second-most populous state could take weeks to control.

The S&P/ASX 200 index settled 0.6% lower at 6,001.60, reversing Friday’s gain.

Australia’s acting chief medical officer said the outbreak in Victoria state could take weeks to subside despite a lockdown and orders to wear masks.

Victoria reported a daily record of 438 new COVID-19 cases on Friday, most of them from Melbourne, while New South Wales saw 18 new infections on Sunday, its highest in three months.

“Australian investors have their eyes on the second wave of COVID-19 infections, particularly with NSW, our biggest domestic economy,” said James McGlew, executive director of corporate stockbroking at Argonaut.

“Any acceleration in the numbers, as we have seen in Victoria, will raise anxiety and increase uncertainty.”

Prospects of a stretched recovery from the outbreak hit travel stocks hard, with Victoria and New South Wales being busy commercial air traffic hubs.

Travel booking firm Webjet and Corporate Travel Management each closed about 3.6% down.

The energy index fell 2.6% to its lowest close since May 18 as oil prices declined on fears that a recovery in fuel demand could be derailed by a rise in the pace of coronavirus infections globally.

Industry major Santos settled down 3.6%, while Woodside Petroleum shed 2.6%.

The heavyweight financial index slipped 1.1%, with almost all components finishing in the red.

Citi said the prospect of rolling lockdowns would result in a persistent portfolio of loan deferments, create solvency challenges for small lenders, and slow dividend recovery.

New Zealand’s benchmark S&P/NZX 50 index closed 0.3% lower at 11,553.16.

Among top losers, Pushpay Holdings fell 4.1%, while Restaurant Brands New Zealand lost 2.4%. (Reporting by Nikhil Subba in Bengaluru; Editing by Subhranshu Sahu)

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