Benchmark closes flat in wait for leads

THE sharemarket had its slowest day in 2 months yesterday, based on the value of shares traded, as investors waited for the results of key policy meetings in Europe and Britain that were held last night.

By InvestSMART · 6 Jul 2012

By InvestSMART ·
6 Jul 2012

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The lack of investor interest was compounded by a weak lead from Europe, and no lead at all from the US (closed for the July 4 holiday), so the market lacked direction from the opening bell.

The benchmark drifted lower on falls in the materials and energy sectors, a response to weaker commodity prices overnight.

The S&P/ASX 200 Index lost 3 points, or 0.07 per cent, closing at 4169.2.

Shareholders stayed on the sidelines waiting to see what would come of policy meetings of the European Central Bank and the Bank of England. The ECB announced an interest rate cut, and the BoE unveiled a stimulus package to help recession-hit Britain.

Unwillingness to buy stocks without knowing the outcome of those meetings meant just $2.9 billion of value passed through the market: the least since the Monday before the Anzac Day holiday ($2.75 billion) this year.

At 5pm, the dollar was trading at US102.69?, down from US102.91? on Wednesday. It reacted only slightly to the release of trade figures that showed a slightly lower than expected trade deficit.

The balance on goods and services was a deficit of $285 million in May, seasonally adjusted, compared with a deficit of $26 million in April.

Economists' forecasts had centred on a deficit of $500 million in May.

ANZ foreign exchange strategist Andrew Salter described the day's trading as one of consolidation.

"The release of the trading figures had a marginal impact and they weren't out of line with market expectations," he said.

The big miners gave up early gains, with BHP Billiton slipping 5? to $32.42 and Rio Tinto losing 29? to $58.68.

The banks kicked the trend, ANZ rising 11? to $22.48, National Australia Bank 2? to $23.85, Westpac 22? to $21.75 and Commonwealth 22? to $53.81.

Fairfax was the most heavily traded by volume and 12th highest by value, closing up 0.5? at 58.5? after Gina Rinehart reduced her stake in the company to 15 per cent. With AAP

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Frequently Asked Questions about this Article…

What happened to the S&P/ASX 200 on the slow trading day and how did the benchmark close?

The S&P/ASX 200 drifted slightly lower and closed almost flat, losing 3 points (about 0.07%) to finish at 4169.2 as investors waited for policy news from Europe and Britain.

Why was trading volume so low on the sharemarket that day?

Trading value was unusually low — only about $2.9 billion passed through the market — because investors stayed on the sidelines awaiting the outcomes of key policy meetings (the ECB and Bank of England). A weak lead from Europe and no lead from the US (markets closed for the July 4 holiday) also reduced market activity.

How did the European Central Bank and Bank of England announcements affect investor sentiment?

The ECB announced an interest rate cut and the Bank of England unveiled a stimulus package. Those policy moves made investors cautious ahead of and after the announcements, contributing to consolidation in trading as people waited to see the full market impact.

Which sectors weighed on the market and why did materials and energy stocks fall?

Materials and energy sectors drifted lower during the session, responding to weaker commodity prices overnight — a key reason the benchmark lost ground on the day.

What did the trade and currency figures show and did they move the market?

The trade balance recorded a seasonally adjusted deficit of $285 million in May (compared with a $26 million deficit in April), which was smaller than economists' forecasts of about $500 million. The Australian dollar traded around US102.69 (down from US102.91), but those figures had only a marginal impact on trading according to ANZ foreign exchange strategist Andrew Salter.

How did major miners BHP Billiton and Rio Tinto perform during the session?

The big miners gave up early gains: BHP Billiton slipped to $32.42 and Rio Tinto fell to $58.68, reflecting the pressure on materials stocks from softer commodity prices.

What was the performance of the big banks and did they influence the market trend?

The major banks bucked the broader market softness and helped kick the trend higher for financials: ANZ rose to $22.48, National Australia Bank to $23.85, Westpac to $21.75 and Commonwealth Bank to $53.81 during the session.

Why was Fairfax heavily traded and what did Gina Rinehart do with her stake?

Fairfax was the most heavily traded stock by volume and 12th highest by value on the day, closing up at about 58.5. The stock moved after Gina Rinehart reduced her stake in the company to 15 percent.