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 material 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 was expected to announce an interest rate cut, and the BoE was expected to unveil a $A76.78 billion 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 US102.68?, down from US102.89? 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? at $32.42 and Rio Tinto losing 29? at $58.68.

The banks kicked the trend, ANZ rising 11? to $22.48, NAB 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.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket have such a slow trading day?

Trading was unusually quiet because investors were waiting for the outcomes of key policy meetings in Europe and Britain (the ECB and BoE). A weak lead from Europe and no lead from the US (markets closed for the July 4 holiday) also left the ASX without clear direction, so many shareholders stayed on the sidelines.

How did the S&P/ASX 200 perform on the slow day and what does that mean for investors?

The S&P/ASX 200 slipped 3 points to close at 4169.2, a very small move reflecting a lack of buying interest rather than a major market shift. For everyday investors, small daily moves like this during periods of low volume usually signal consolidation and waiting for fresh economic or policy news.

Which sectors drove the falls on the day and why did materials and energy weaken?

Materials and energy sectors drifted lower, driven by weaker commodity prices overnight. When commodity prices fall, big miners and energy producers often give up gains or decline, which can pull the broader index down.

What were investors waiting for from the European Central Bank and the Bank of England?

Investors were waiting for the ECB and BoE policy meetings. The ECB was expected to announce an interest rate cut, while the Bank of England was widely expected to unveil a roughly A$76.78 billion stimulus package to support a recession-hit Britain—outcomes that could influence markets and investor decisions.

How low was trading volume and why does trading value matter to investors?

Only about $2.9 billion of value passed through the market, the lowest in two months. Lower trading value means fewer shares changing hands, which can increase volatility for individual stocks and make it harder to buy or sell large positions without moving prices.

What happened to the big miners and major banks on the slow trading day?

The big miners gave up early gains—BHP Billiton closed at $32.42 and Rio Tinto at $58.68—reflecting the commodity pullback. Major banks provided some support to the market, with ANZ, NAB, Westpac and Commonwealth Bank all closing higher (to $22.48, $23.85, $21.75 and $53.81 respectively), showing how banking stocks can lead market sentiment on quieter days.

What did the latest trade figures and the Australian dollar show on the day?

Trade figures showed a seasonally adjusted goods and services deficit of $285 million in May (worse than April's $26 million deficit but better than economists' $500 million forecast). The Australian dollar was slightly weaker, trading around US102.68 cents, down from about US102.89 cents the previous day.

Why was Fairfax in the headlines and what changed with its ownership?

Fairfax was the most heavily traded stock by volume that day and was among the higher-value trades. It closed up at 58.5 after mining magnate Gina Rinehart reduced her stake in the company to 15 percent, a change that attracted investor attention.