Canberra eclipses Cyprus in uncertainty
"While the political issues in Cyprus roll on, albeit slightly more constructively, it is down to Australia this time to steal the limelight from a political standpoint," IG Markets' Chris Weston wrote to clients.
"Today was one of the most explosive political plays in recent months and it seems that political risk in Australia has once again skyrocketed."
The benchmark S&P/ASX 200 Index slipped 7.9 points to 4959.4, while the broader All Ordinaries dipped 5.8 points to 4976.8.
Bond futures spent the day trading lower as fears about Cyprus' financial problems eased, RBC Capital Markets senior economist Su-Lin Ong said.
At the close, the June 10-year bond futures contract was trading at 96.405 (implying a yield of 3.595 per cent), down from 96.475 (3.525 per cent) the day before.
The Cypriot parliament's rejection of a move to levy bank deposit holders as part of a European Union-led bailout package has weighed on market sentiment in past days.
But Ms Ong said concerns about fallout from the decision had eased on Wednesday night. "It's a bit of a spillover from last night, there has been nothing else to really give them market direction," she said.
Ms Ong said the federal leadership spill in Canberra had little effect on the bond market.
Following Goldman Sachs' decision on Wednesday to downgrade its forecasts for iron ore prices, the global investment bank on Thursday downgraded its view of iron ore exporter Arrium.
Iron ore has become more important for Arrium, as the high dollar keeps conditions tough for local steel producers. Goldman Sachs downgraded the company - formerly OneSteel - from a buy to neutral. Its shares rose 1¢ to 91.5¢.
In the resources sector, BHP Billiton lost 13¢ to $33.49, but Rio Tinto rose 82¢ to $58.30. Fortescue gained 11¢ to $3.91.
Billabong International fell to a record low before the company asked to be placed in a trading halt.
The stock fell as much as 22 per cent to 63¢, the lowest since its August 2000 sharemarket listing, as it awaited takeover offers from two private equity groups. By the time it was placed in a trading halt, its shares had risen to 69.5¢.
Frequently Asked Questions about this Article…
The article says political news from Canberra — specifically a federal leadership spill — pushed aside concerns about the Cypriot banking system and drove market weakness. IG Markets' Chris Weston described the move as one of the most explosive political plays in recent months and said political risk in Australia had "skyrocketed," contributing to the market pullback.
The benchmark S&P/ASX 200 slipped 7.9 points to 4,959.4, while the broader All Ordinaries dipped 5.8 points to 4,976.8, according to the article.
Yes — the article reports bond futures traded lower as fears about Cyprus' financial problems eased. The June 10-year bond futures contract was trading at 96.405 (implying a yield of 3.595%), down from 96.475 (3.525%) the day before. RBC Capital Markets' Su-Lin Ong also noted concerns from the Cypriot decision had eased and that the federal leadership spill had little effect on the bond market.
After Goldman Sachs downgraded its iron ore price forecasts, it downgraded Arrium (formerly OneSteel) from a buy to neutral. The article notes Arrium's shares still rose 1¢ to 91.5¢, and that iron ore has become more important for Arrium as a high Australian dollar is making conditions tough for local steel producers.
Per the article, BHP Billiton lost 13¢ to $33.49, Rio Tinto rose 82¢ to $58.30, and Fortescue gained 11¢ to $3.91.
Billabong International fell to a record low amid anticipation of takeover offers from two private equity groups and then asked to be placed in a trading halt. The stock fell as much as 22% to 63¢ (its lowest since its August 2000 listing), and by the time the halt was requested its shares had risen to 69.5¢.
The article highlights that political events in Canberra can quickly influence market sentiment — IG Markets noted political risk had "skyrocketed" and the sharemarket slipped. At the same time, RBC's Su-Lin Ong said the leadership spill had little effect on the bond market. For everyday investors this suggests monitoring major political developments is important because they can affect equities, while fixed-income reactions may differ.
The article explains that the Cypriot parliament's rejection of a levy on bank deposit holders had weighed on market sentiment in previous days, but concerns about fallout eased by Wednesday night. That easing helped bond futures trade lower and reduced some immediate spillover risk to markets.
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