STOCKS fell more than 1 per cent from their highest close so far this year after Standard & Poor's stripped France and Austria of their top-notch triple-A status and also cut the ratings of seven other debt-laden European countries.
Miners and financials led the 1 per cent slump from Friday's close in the local market as investors dived for cover into more defensive telecom stocks ahead of 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," Burrell Stockbroking adviser Jamie Elgar said.
At the close yesterday, the benchmark S&P/ASX200 index was down 48.7 points, or 1.16 per cent, at 4147.2, while the broader All Ordinaries index was down 46.5 points, or 1.09 per cent, at 4208.9.
On the ASX 24, the March 2012 share price index futures contract was down 58 points at 4122, with 25,804 contracts traded.
Miners dropped 1.6 per cent after metals prices fell amid a growing aversion by investors to holding riskier assets. BHP Billiton shed 1.6 per cent, or 62?, to $36.01, while Rio Tinto dropped 0.5 per cent, or 32?, to $64.89.
The spot price of gold closed at $US1638.65 a fine ounce, down more than $US6 from Friday's local close of $US1644.98.
Fortescue Metals shed 2.7 per cent, or 13?, to $4.62, as it resumed operations at two of its Pilbara operations that were closed because of tropical cyclone Heidi last week.
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 expected by analysts.
"China GDP numbers ... will take centre stage, as the world waits to see how the fastest growing economy is travelling," IG Markets market strategist Stan Shamu said.
Financial stocks were down 1.2 per cent as dealers worried the euro zone debt crisis could put further pressure on banks' lending costs.
The big four banks finished 1.1 per cent to 1.6 per cent lower as investors fretted about a spate of bond issuances in Europe this week, starting with France on Monday and Greece and Spain's treasury bill sales tonight.
"As an investor these are high-yield stocks but they're facing headwinds," Fidelity's head of Australian equities, Paul Taylor, said.
One of the few stocks bucking the market trend was Dart Energy. Its shares ended up 9.2 per cent at 47? after it announced it had created a subsidiary, Dart Energy International Shale, to develop its growing European shale gas resources.
Frequently Asked Questions about this Article…
Why did Australian shares fall after S&P cut European sovereign ratings?
The S&P downgrade of France and Austria, plus cuts to other debt-laden European countries, increased investor risk aversion. That pushed miners and financial stocks lower as investors sought defensive sectors ahead of European bond sales and talks about Greek debt restructuring.
How much did the S&P/ASX 200 and All Ordinaries drop on the day described?
The S&P/ASX 200 fell 48.7 points (1.16%) to 4,147.2, while the broader All Ordinaries was down 46.5 points (1.09%) at 4,208.9.
Which sectors and major companies were hardest hit in the market slump?
Miners and financials led the fall. Miners dropped about 1.6% as metal prices eased. BHP Billiton lost 1.6% to $36.01, Rio Tinto fell 0.5% to $64.89, and Fortescue Metals slid 2.7% to $4.62. Financial stocks fell roughly 1.2%, with the big four banks down between 1.1% and 1.6%.
How did gold and other commodities move during the sell‑off?
The spot price of gold closed at US$1,638.65 an ounce, down more than US$6 from the previous local close. Overall metals and commodity prices weakened, contributing to pressure on resource stocks.
What impact could China GDP data have on Australian commodities and resources?
China’s GDP figures were expected to be watched closely — analysts were looking for about 8.7% growth. If China’s GDP comes in below expectations, commodities and resource stocks could face further pressure because China is a major driver of metal demand.
Why were bank stocks under pressure and how are European bond sales connected?
Banks were worried the euro‑zone debt crisis could push up borrowing costs. Investors fretted about a spate of bond issuances in Europe (starting with France and including sales by Greece and Spain), which can raise concerns about wider financial stress and bank lending costs.
What caused Dart Energy’s shares to rise despite the market downturn?
Dart Energy bucked the trend, rising 9.2% to 47¢ after announcing a new subsidiary, Dart Energy International Shale, to develop its growing European shale gas resources — a company‑specific positive catalyst.
Should everyday investors expect more volatility from the European debt situation and Greek talks?
Yes. The article notes that if there’s a Greek default there could be an initial negative reaction, though some market participants may have already priced in such risks. Bond sales and ongoing euro‑zone debt developments mean investors should expect potential short‑term volatility.
Call 1300 880 160
Start a chat
Schedule a call
