Euro waiting game takes its toll on investors

AUSTRALIAN shares closed almost 1 per cent lower, after clawing back some of the session's losses, with investors worried about a critical German vote on the European Union's rescue fund.

By InvestSMART · 30 Sep 2011

By InvestSMART ·
30 Sep 2011

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AUSTRALIAN shares closed almost 1 per cent lower, after clawing back some of the session's losses, with investors worried about a critical German vote on the European Union's rescue fund.

The bourse opened more than 1 per cent weaker yesterday following the end of a three-day rally on offshore markets.

The benchmark S&P/ASX 200 index fell 31.2 points, or 0.77 per cent, to close at 4008.3 yesterday, while the broader All Ordinaries index lost 29.8 points, or 0.73 per cent, to 4067.9.

The Macquarie Private Wealth division director Lucinda Chan said sentiment was "lower than ever", with markets watching developments on the euro-zone debt crisis closely.

Germany voted to expand the scope and size of the EU's rescue fund - the European Financial Stability Facility - for debt-ridden Greece after the market closed.

Resources stocks registered the biggest falls on the market, with many investors selling in response to heavy falls in commodity prices over the past week and also in overnight trade.

The materials sector was down by 1.6 per cent.

BHP Billiton dropped 48?, or 1.4 per cent, to $35.04, and Rio Tinto lost $1.60, or 2.5 per cent, to close at $62.45.

Gold, silver and copper prices all drifted lower in offshore markets. The spot price of gold in Sydney was trading at $US1623.3 an ounce, down $US29.53 from Wednesday's close of $US1652.83 an ounce.

Energy stocks were weak for most of the session following falling oil prices after data showed a bigger-than-expected increase in energy stockpiles in the United States. But the sector closed 0.33 per cent higher after share prices bounced back.

Oil Search shares lost 5? to $5.62, Woodside Petroleum rose 20? to $32.14 and Santos added 21? to close at $11.27. The uranium miner Paladin Energy plunged 14?, or 10.7 per cent, to $1.17.

Typically defensive health-care stocks also gained ground during the day, with CSL the strongest performing stock on the ASX 100, adding 3.7 per cent to $29.87.

Qantas was down 3?, or 2.1 per cent, to $1.42 after customs workers walked off the job for a second time this week.

More than 8000 domestic and international passengers would have their flights disrupted by strikes today, the airline said.

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Frequently Asked Questions about this Article…

What happened to Australian shares and the ASX 200 in the latest trading session?

Australian shares closed almost 1% lower as the S&P/ASX 200 fell 31.2 points (0.77%) to 4,008.3. The broader All Ordinaries index lost 29.8 points (0.73%) to 4,067.9 after the market opened more than 1% weaker following the end of a three-day offshore rally.

How did the euro-zone debt crisis and Germany's vote affect market sentiment?

Investors were nervous about a critical German vote to expand the European Financial Stability Facility (EFSF) to help debt-ridden Greece. Macquarie Private Wealth director Lucinda Chan said sentiment was “lower than ever,” and markets were closely watching euro-zone developments, which contributed to the sell-off.

Which sectors and major resources stocks were hardest hit during the rout?

Resources and the materials sector were the weakest, with materials down about 1.6%. Major miners fell: BHP Billiton slipped 48 cents (around 1.4%) to $35.04 and Rio Tinto lost $1.60 (about 2.5%) to close at $62.45. The decline in commodity prices weighed heavily on these stocks.

What happened to commodity prices like gold, silver and copper, and how did that impact investors?

Gold, silver and copper drifted lower in offshore markets. The spot price of gold in Sydney traded at about US$1,623.30 an ounce, down roughly US$29.53 from the prior close of US$1,652.83. Falling commodity prices pressured resource stocks and contributed to the negative market tone.

How did oil prices and energy stocks perform, and what drove those moves?

Oil prices fell after US data showed a bigger-than-expected increase in energy stockpiles, which left energy stocks weak for most of the day. The sector, however, bounced back late and finished 0.33% higher. Individual moves included Oil Search down to $5.62, Woodside Petroleum rising to $32.14, and Santos closing at $11.27.

Which defensive stocks gained ground during the market weakness?

Defensive healthcare stocks performed well in the downturn. CSL was the strongest performer on the ASX 100, adding about 3.7% to trade at $29.87, reflecting investor interest in defensive names during bouts of market volatility.

Why did Qantas shares fall, and how severe was the impact?

Qantas fell about 3% (to $1.42) after customs workers walked off the job for a second time that week. The airline warned that more than 8,000 domestic and international passengers would face flight disruptions due to the strikes.

What should everyday investors keep an eye on after this trading update?

According to the article, investors should watch further developments in the euro-zone debt crisis—especially votes and policy moves around the EFSF—as well as commodity price trends and US energy stockpile data, since these factors were driving sentiment and sector moves on the day.