Australian shares have suffered their second-worst day since the year began, as Wall Street eased off its record highs and Facebook shares were sold off more heavily than other tech stocks.
The ASX 200 index closed 92 points (or 1.3 per cent) lower at 6,794.
The broader All Ordinaries index also fell by a similar level to 7,064 points, wiping out all its gains from the past two weeks.
In fact, the last time the market experienced such heavy falls (in a single day) was January 28 — when it shed 1.9 per cent.
The Australian dollar rose was steady at 77.72 US cents.
Bitcoin has pulled back slightly from the record high ($US52,622) it reached on Thursday. The volatile cryptocurrency last traded at $US51,357 on Friday afternoon.
Spot gold was down (-0.4pc) to $US1,769.31 an ounce.
Brent crude oil futures dropped (-2.4pc) to $US62.46, down from its 13-month high.
Friday’s worst performers were Treasury Wine Estates (-6.9pc), IPH (-6.4c), along with oil and gas companies Oil Search (-4.5pc) and Woodside Petroleum (-5.3pc), BlueScope Steel (-5pc) and Iluka Resources (-4.6pc).
Woodside said it had signed a contract to supply liquefied natural gas (LNG) to wholesale energy trader RWE Supply & Trading for a term of seven years, starting in 2025.
The agreement, signed through its subsidiary, Woodside Energy Trading Singapore Pte, is for supply of 0.84 million tonnes of LNG per year from the company’s global portfolio.
Australia’s biggest independent gas producer says the agreement underscores expectations of strong market demand for LNG in the second half of the decade.
However, the broader market was weighed down by ASX heavyweights BHP (-2.5pc), Rio Tinto (-3.3pc), Fortescue Metals (-3.7pc), Commonwealth Bank (-1.3pc), CSL (-5pc), Macquarie Group (-2.3pc), Westpac (-1.1pc) and NAB (-1.6pc).
On the flip side, Crown Resorts (+5.3pc), Zip Co (+5.6pc), Inghams (+3.6pc) and Orora (+2.4pc) enjoyed solid gains.
Cochlear shares soared (+8.4pc) after the company said it would resume paying dividends with an interim payout of $1.15 per share.
The hearing implant maker reported an underlying first-half profit of $125.3 million (down 6 per cent on the prior year).
The company also said its results were helped by improved surgery rates across most markets following the disruption caused by COVID-19.
Shares in QBE Insurance initially fell sharply but ended sharply higher (+3.1pc). That was despite the fact it will not pay a final dividend.
However, it expects to resume paying dividends of “up to 65 per cent of adjusted cash profits” during its next set of results.
The insurer also posted a wider annual loss than it forecast two months ago due to surging COVID-related provisions and catastrophe claims.
It swung to a $1.5 billion full-year loss, which was a steep downgrade from last year’s $550 million profit.
Shares in Facebook fell (-1.5pc) as investors assessed the wider ramifications of its move to block all news content in Australia.
Australians were blocked from accessing news in their Facebook feeds on Thursday, in a dramatic escalation of the social media giant’s stand-off with the federal government over its proposed media bargaining laws.
“The market was reacting to information which may support the argument that Facebook is now too big, and needs more anti-monopolistic regulation put in place to maintain a level playing field for competition,” said Chris Pedersen, the chief executive of Pedersen Asset Management.
“This is a monopolistic business plan — it’s the end result of a tremendously successful business model. Free market economics and capitalism at work.”
The social media giant was sold off more heavily than its tech-related peers, including Apple (-0.9pc), Netflix (-0.6pc), Google’s parent company Alphabet (-0.6pc), Tesla (-1.4pc) and Microsoft (-0.2pc).
This was part of a broader tech and communications sector pullback, given those two sectors (alone) have driven a 76 per cent surge in the benchmark index (the S&P 500) since its March 2020 lows.
Facebook was the clear underperformer, but any impact on its share price as a result of the Australian “news ban” appears to be relatively minor (at best) in the eyes of Wall Street investors.
“Facebook has been dead money for months and lack of near-term catalysts remain a reality,” said Joel Kulina, head of technology and media trading at Wedbush Securities.
He said Pinterest, Twitter, Snap and Google were better investments, for those betting on a “huge recovery in digital ad spending”.
“Facebook’s sequential advertising growth of 28 per cent appeared impressive until you see that industry data (provided by Kenshoo) shows social media ad spend jumped 61 per cent (over the past quarter), and 39 per cent (in the past year).”
InvestSMART’s chief market strategist Evan Lucas believes there could be longer-term ramifications for the company as “people might see this as Facebook abusing its market power to curb ‘free media’ to some extent”.
“The world paid close attention to what Facebook did in Australia, and it could potentially strengthen the case for US anti-trust laws being tightened,” he said.
“That wouldn’t be good for Facebook’s business, especially if it is forced to sell WhatsApp or Instagram down the line.
“But the EU [European Union] is a bigger concern for Facebook, as they’re thinking of passing similar legislation to Australia.
Australia’s retail industry saw weaker-than-expected sales in January as a coronavirus lockdown in Brisbane kept shoppers at home.
Sales rose slightly (+0.6pc) in January, compared to the previous month, according to the Bureau of Statistics’ preliminary estimates.
This result was below expectations as the market had expected a 2 per cent bounce in retail trade.
However, last month’s sales of $30.54 billion were significantly higher (+10.7pc) than where they were in January 2020, before the pandemic hit.
Queensland sales dropped (-1.5pc) as as COVID-19 restrictions in Brisbane hit household goods retailing, clothing, footwear and department stores.
Retail activity has been wildly volatile in recent months amid lockdowns and massively popular online sale events, with spending surging (+7.1pc) in November only to dive (-4.1pc) in December.
“There is clear momentum in the consumer sector thanks to supportive government policies, low interest rates and a recovering labour market,” said AMP Capital senior economist Diana Mousina.
The ABS will release its final retail sales figures on March 4.
On Wall Street, the Dow Jones index finished trading 120 points (or 0.4 per cent) lower at 31,493.
The S&P 500 dropped (-0.4pc) to 3,914, its third straight day of losses. The tech-heavy Nasdaq Composite dropped (-0.7pc) to 13,865.
Earlier this week, a stronger-than-expected earnings season, progress in vaccination efforts across the United States, and hopes of a $US1.9 trillion stimulus package helped US markets hit hit fresh records.
However, concerns over a potential rise in inflation have pushed investors to cash out on stocks with high valuation in the S&P 500 — the tech giants in particular.
“There was a lot of irrational exuberance built into things heading into the year … then we started to enter an environment where risk actually became a factor once again, and notably inflationary risk,” said Peter Essele, head of portfolio management at Commonwealth Financial Network in Boston.
Market sentiment was weighed weighed down by disappointing job figures which pointed to a fragile economic recovery from the pandemic.
The US Labor Department’s latest report showed that initial claims for unemployment benefits rose unexpectedly to 861,000 last week (compared with 848,000 in the prior week).