Banks on downer while mining giants rise
At the close of trade, the benchmark S&P/ASX 200 Index was 25.5 points, or 0.5 per cent, down at 5092.4. The All Ordinaries Index was 24.2 points, or 0.47 per cent, lower at 5104.4.
Falls among financial stocks came despite some gains in the materials sector, with the big miners finishing strongly.
RBS Morgans Private client adviser Bruce Smith said the local market was pulled down by the banks' poor performance.
"There's a pretty strong perception now that the banks are fully valued or overvalued and it's a dangerous time to be continuing with the yield play," he said.
UBS and Deutsche Bank have both described the Australian banking sector as overpriced.
Mr Smith said investors were beginning to look to the resources sector, which had recently lagged.
Adding to the pain among the financial stocks, National Australia Bank shares dived 59¢ to $30.95 after it announced plans to simplify its business and remove complexity and duplication. ANZ dropped 57¢ to $28.48, Commonwealth Bank fell $1.20 to $69.38 and Westpac lost 66¢ to $30.50.
The mining companies all closed higher. BHP Billiton gained 24¢ to $35.91 and Rio Tinto jumped 18¢ to $62.10.
Qantas shares gained 3.5¢ to $1.745 after it said a possible strike by hundreds of security screeners at Melbourne Airport over Easter would not affect flights.
National turnover was 1.6 billion securities worth $4.9 billion.
Meanwhile, the bond market was stronger as traders started to buy again after a fall in prices earlier in the week.
"There is a feeling that the market sold off too far without any support from economic data," UBS interest rate strategist Matthew Johnson said. There was good demand when yields for three-year bond futures hit 3 per cent and 10-year bonds reached 3.5 per cent.
The March 10-year bond futures contract was trading at 96.445 (implying a yield of 3.555 per cent) on Wednesday, up from 96.400 (3.600 per cent). The three-year contract was at 97.005 (2.995 per cent), up from 96.980 (3.020 per cent).
Mr Johnson said the focus for the bond market during the offshore session on Wednesday night would be the release of US retail sales for February.
AAP
Frequently Asked Questions about this Article…
The sharemarket closed lower largely because the four big banks dragged the market down. At the close the S&P/ASX 200 was down 25.5 points (0.5%) at 5,092.4 and the All Ordinaries fell 24.2 points (0.47%) to 5,104.4.
Financial stocks weighed on the market: National Australia Bank shares fell 59¢ to $30.95, ANZ dropped 57¢ to $28.48, Commonwealth Bank fell $1.20 to $69.38, and Westpac lost 66¢ to $30.50.
Yes — UBS and Deutsche Bank have described the Australian banking sector as overpriced, and RBS Morgans adviser Bruce Smith said there's a strong perception the banks are fully valued or overvalued. He warned it may be a risky time to rely on a yield-focused strategy in bank stocks.
The materials sector finished strongly: BHP Billiton gained 24¢ to $35.91 and Rio Tinto jumped 18¢ to $62.10, helping offset some of the market weakness from the financials.
According to RBS Morgans' Bruce Smith, investors have started looking to the resources sector, which had recently lagged, as an alternative to heavily valued bank stocks.
The bond market was stronger as traders bought after an earlier price fall. Yields moved lower as futures prices rose: three-year bond futures reached around 3.00% and 10-year yields hit about 3.5%. The March 10-year futures contract traded at 96.445 (implying a 3.555% yield) and the three-year contract was at 97.005 (2.995%).
National turnover was 1.6 billion securities with a total value of about $4.9 billion.
Qantas shares gained 3.5¢ to $1.745 after the airline said a possible strike by hundreds of security screeners at Melbourne Airport over Easter would not affect flights.
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