Monday 7 May 2012

Black day on Australian stock market

This is Australia...We will have to wait a few hours to see what the reaction of the European and US markets to the political news in Europe. The NZ market does not seem to have reacted to the news.

Australia: Spooked investors wipe $27b off shares
The Australian sharemarket took a heavy beating today, as fears the French and Greek election results could derail the collective response to the eurozone debt crisis sent spooked investors running for the exits.





7 May, 2012

The Australian sharemarket took a heavy beating today, as fears the French and Greek election results could derail the collective response to the eurozone debt crisis sent spooked investors running for the exits.

The benchmark S&P/ASX200 index plunged 94.7 points, or 2.15 per cent, to 4301.3, posting its biggest loss since mid-December. The broader All Ordinaries index fell 97.8 points, or 2.2 per cent, to 4361.6.

The sell-off marked the worst day of the year for the local market, wiping more than $27 billion off the value of shares.

The election results threaten a fragile political consensus that has kept Europe's currency bloc intact through more than two years of crisis, forcing investors globally to dump risky assets.

"Markets were already facing a weak start following negative leads from the US. Election outcomes in Europe have only led to a brutal sell-off," IG markets said in a report to clients.

Wall Street ended its worst week this year with a sharp sell-off on Friday after a slowdown in job creation in the world's top economy raised the biggest question mark yet about the prospects for US growth.


US + elections = 'ugly confluence'

Markets reacted with alarm to Socialist candidate Francois Hollande’s victory in France’s presidential election and the routing of Greece’s two-party coalition, which had imposed harsh austerity measures in return for an international bailout.

CMC Markets chief markets strategist Michael McCarthy said the developments in France and especially Greece, plus the lower-than-expected number of new jobs in the US had created ‘‘an ugly confluence’’.

‘‘The biggest concern for the market is Greece,’’ he said. ‘‘While it remains insignificant economically, the potential for them to reject the required reforms seems to be high.
‘‘If that’s the case, the damage here is political - there’s a chance that they will have to exit the euro, and if that happens, it’s very bad news.

‘‘Overall, it’s a revision downward of global growth.’’

Mr McCarthy said some encouraging Australian retail and residential building figures for March, which were released on Monday, had not been enough to generate any optimism among investors.

Big miners lead sell-off

On the local market, mining stocks were hit the hardest as investors fear a global slowdown, driving the materials sub-index down 3.6 per cent.

Global miner BHP Billiton was $1.46, or 4.1 per cent, lower at $34.57, and Rio Tinto dropped $2.91, or 4.5 per cent, to $62.00. Both stocks ended the day at the lowest level in four months.

Whitehaven Coal was 31 cents weaker at $4.60 after it launched a $172 million offer for NSW coal explorer Coalworks. Coalworks was 14 cents higher at 99.5 cents.

Explosives supplier Orica was down 14 cents at $26.40, after chemical leaks at its ammonia plant near Newcastle in NSW contributed to a four per cent drop in the company’s first half net profit.

Construction firm Leighton descended 71 cents to $19.25 after it said the completion date for Brisbane’s Airport Link toll road had been pushed back by almost two months.

Big banks lose less than market

The financial sector outperformed the broader market, dropping 1.4 per cent. Among the major banks, Commonwealth Bank retreated 56 cents to $52.06, ANZ was cents 34 cents lower at $23.10, National Australia Bank dumped 43 cents at $24.71, and Westpac reversed 19 cents to $22.72.

Building products supplier Alesco firmed six cents to $2.10 as it urged its shareholders to take no action on a $188 million takeover offer from DuluxGroup until it has further details of the offer.

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