European downgrades cut rally short
THE market ended sharply lower yesterday after a mass downgrade of European countries' credit ratings took the wind out of investors' winning streak.
THE market ended sharply lower yesterday after a mass downgrade of European countries' credit ratings took the wind out of investors' winning streak.Stocks fell more than1 per cent from Friday's close, the market's highest this year, after Standard & Poor's stripped France and Austria of their top-notch AAA status and cut the ratings of seven debt-laden European countries.Miners and financials took the biggest hits as investors dived for cover in more defensive telecom stocks before a debt sale by newly downgraded France and talks on restructuring Greece's debt this week."If we had a Greek default there would be an initial bad reaction, but I think there are probably a lot of people who have factored in an event like that," said Burrell Stockbroking adviser Jamie Elgar.At the close, the S&P/ASX 200 was down 48.7 points, or 1.16 per cent, at 4147.2.Miners dropped 1.6 per cent after a fall in metal prices on Friday night as investors lost their appetite for riskier assets.BHP Billiton shed 62?, or 1.6 per cent, to $36.01, while Rio Tinto dropped 32?, or 0.5 per cent, to $64.89.Fortescue Metals shed 13?, or 2.7 per cent, to $4.62.Gold was also caught in the down draught. The spot price, which hit a recent high of $US1662 in European trading on Thursday, finished yesterday's Australian session at $US1638.65 an ounce, down $US6.34 from Friday's close.Commodities and resources could come under further pressure this week if China's gross domestic product figures, due today, come in below the 8.7 per cent growth that analysts expect."China GDP numbers will take centre stage, as the world waits to see how the fastest-growing economy is travelling," said IG Markets market strategist Stan Shamu.Financial stocks were down 1.2 per cent as dealers worried that the euro-zone debt crisis might put further pressure on banks' lending costs. A series of bond issuances is scheduled in Europe this week, starting with France last night, and Greece and Spain tonight.Leighton climbed 4.4 per cent to $21.44 after the construction company upgraded its underlying profit forecast for the December half-year to$270 million, from $250 million.One of the few stocks to buck the market trend was Dart Energy. It put on 4?, or 9.2 per cent, to 47? after the company announced it had created a wholly owned subsidiary and business unit to develop its growing European shale gas resources.