Bourse slips into red as euro debt fears return

THE local market gave up earlier gains to end lower as renewed concerns about the European debt crisis took the steam out of a retailer-driven rally.

By InvestSMART · 1 Feb 2012

By InvestSMART ·
1 Feb 2012

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THE local market gave up earlier gains to end lower as renewed concerns about the European debt crisis took the steam out of a retailer-driven rally.

A CMC Markets trader, Ben Taylor, said growing concern that Portugal may soon follow Greece in being unable to finance its sovereign debt had scared off investors in the run-up to the local earnings season.

"I have the feeling that the blowout in Portuguese [bond] yields and falls in commodities will see a drop off in the funds flooding back into the markets," he said.

At the close, the benchmark S&P/ASX200 index was down 10 points, or 0.23 per cent, at 4262.7, while the broader All Ordinaries fell 8.7 points, also 0.2 per cent, to 4325.7. The March share price index futures contract was down 19 points at 4226.

Retailers were the day's top performers, with consumer staples adding 0.7 per cent and consumer discretionary adding 0.2 per cent.

JB Hi-Fi led the push, rising 78?, or 6.6 per cent, to $12.60, while David Jones rose 14?, or 5.71 per cent, to $2.59. Woolworths rose 34?, or 1.29 per cent, to $24.74 after it reported first-half sales had risen 5 per cent to $29.7 billion, despite it facing subdued consumer confidence and falling prices.

"There's already been a lot of bad news priced in to the [retail] sector after the race to downgrade ahead of Christmas," the director of Burrell Stockbroking, Richard Herring, said. "This could be a reasonable opportunity to buy in."

Wesfarmers rose 13? to $30.30 after the owner of Coles announced it would cut its fruit and vegetables prices by up to 50 per cent.

BHP Billiton was down 19? at $37.48 and fellow miner Rio Tinto was up 16? at $69.16.

Telstra shares rose 2? to $3.33 after it said it would shed 99 administrative roles from its operations division.

Shares in Lynas Corporation rose 1.5? to $1.325 after the rare earths miner said its Mount Weld plant is recovering ore ahead of targets.

Financial stocks fell 0.3 per cent after ratings agency Fitch put the big four banks on a credit downgrade watch on Monday because of their strong reliance on overseas funding.

Westpac was the only bank to finish higher, rising 5? to $21.15, while the other big banks all shed between 0.3 and 0.7 per cent.

The price of gold in Sydney closed at $US1736.20 per fine ounce, up $US5.94.

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Frequently Asked Questions about this Article…

Why did the ASX slip into the red today?

The local market gave up earlier gains as renewed concerns about the European debt crisis spooked investors. The S&P/ASX200 fell 10 points (0.23%) to 4,262.7 and the All Ordinaries dropped 8.7 points to 4,325.7, while March futures were down about 19 points.

How did worries about Europe — especially Portugal — affect investor sentiment?

Traders flagged growing concern that Portugal could follow Greece in struggling to finance sovereign debt. A blowout in Portuguese bond yields and falls in commodities made some investors pull back, reducing the funds flowing back into the market ahead of local earnings season.

Which sectors held up or led gains despite the market decline?

Retail-related sectors outperformed: consumer staples rose about 0.7% and consumer discretionary added roughly 0.2%. Retailers led the session even as the broader market finished lower.

What were the notable moves among major retailers and why should investors care?

JB Hi‑Fi jumped about 6.6% to $12.60 and David Jones rose around 5.7% to $2.59. Woolworths gained 1.29% to $24.74 after reporting first-half sales up 5% to $29.7 billion. Wesfarmers (owner of Coles) rose to $30.30 after Coles said it would cut some fruit and vegetable prices by up to 50%.

How did the big miners perform today?

BHP Billiton eased (down about $0.19 to $37.48) while Rio Tinto finished higher (up about $0.16 to $69.16), reflecting mixed moves in the mining sector on the day.

Were the banks affected by any credit rating concerns?

Yes. Financial stocks fell around 0.3% after Fitch put the big four Australian banks on a credit downgrade watch because of their strong reliance on overseas funding. Westpac was the lone big bank to finish higher (to $21.15), while the others slipped 0.3–0.7%.

Did any company-specific announcements move share prices?

Telstra said it would cut 99 administrative roles in its operations division and its shares rose to $3.33. Lynas Corporation said its Mount Weld plant is recovering ore ahead of targets, and its shares rose about 1.5% to $1.325.

What happened to the gold price today?

Gold in Sydney closed at US$1,736.20 per fine ounce, up US$5.94 on the day.