European swings leave market on edge

This week’s volatility was driven by a mix of political and economic news: left-leaning election results in France and Greece, weak Chinese industrial production, softer US employment data and big corporate shocks such as JPMorgan Chase’s trading loss. Together these headlines stirred fears about global growth and pushed markets lower. For everyday investors, volatility can be worrying but it also creates opportunities to review portfolios, focus on long-term goals and avoid knee-jerk moves.

The benchmark S&P/ASX 200 fell 113.4 points (about 2.6%) to 4282.6 for the week. The market also recorded its biggest one-day fall for the year on Monday, dropping 2.15% after weak US employment data and the election results in France and Greece prompted a broad risk-off reaction.

JPMorgan Chase admitted it lost A$1.99 billion over six weeks in a flawed hedging operation with complex financial instruments. The disclosure hit investor confidence and its stock fell almost 7% in after-hours trading, contributing to a weak start for markets as traders reassessed risk.

Big four bank shares drifted lower after the RBA cut rates and amid the broader market sell-off. ANZ was weaker at around $22.04 after being the last of the big banks to pass on some of the cut; NAB was about $24.55, Westpac near $22.72 and Commonwealth Bank about $51.80. The share movements reflect both rate pass-through decisions and the general risk-off mood.

Global miners were knocked by renewed eurozone concerns and growth fears: BHP Billiton slipped to about $34.37 and Rio Tinto fell to about $61.07. The sector weakness was driven by worries about global growth that weigh on commodity demand.

Yes. Telstra eased to around $3.60. Slater & Gordon said it would book a $10 million write-down after the High Court denied leave to appeal in the Vioxx class action, with its stock near $1.75. SkyCity Entertainment Group downgraded profit expectations and sagged to about $2.90. Alesco eased to roughly $2.06 after urging shareholders to take no action on a $188 million takeover offer from Dulux Group.

Currency markets reacted to the gloomy data and political uncertainty. Poor Chinese industrial production helped pull the dollar toward parity with the greenback—the lowest level since December—and currency strategists said the dollar could slip below parity as fears about the situation in Greece weighed on global markets.

Some fund managers quoted in the article saw the pessimism as an opportunity to buy quality stocks at a discount. Allan Gray Australia executive director Simon Marais said extreme negativity among average investors can signal lower actual risk and potential buying opportunities when money flows back into the market. Long-term investors should still assess fundamentals and diversification before buying into weakness.