THE sharemarket lost more than 0.5 per cent yesterday after Fortescue Metals, the world's fourth-biggest iron ore miner, told the ASX it was planning to cut jobs and slash spending to save more than $300 million.
The announcement was a direct response to precipitous falls in iron ore prices in recent weeks, and it came moments before the market opened, setting the tone for the day.
Financial stocks weighed heavily, with ANZ dropping 50?, or 2 per cent, to $24.34, and Westpac falling 53?, or 2.1 per cent, to $24.32.
They were the two worst-performing stocks on the S&P/ASX 20. Overall, the benchmark S&P/ASX 200 index lost 26.2 points, or 0.6 per cent, to 4303.5.
CommSec market analyst Juliette Saly said investors were looking ahead to tomorrow's European Central Bank meeting and the release of US employment figures later this week.
As a result, trading volumes were low yesterday, with investors preferring to stay on the sidelines.
"The [US employment] number at the end of the week is always a major mover for global markets," Ms Saly said. "Volumes are still very low so we are not seeing that many trades go through."
The dollar hit a six-week low, touching US1.02.41? in the morning, before rising slightly after the Reserve Bank kept the cash rate steady at 3.5 per cent.
Economists said that despite the small immediate rise, the dollar would probably continue to lose ground against the greenback as conditions in Europe improved.
"The Australian dollar spiked higher, but we suspect on short-covering rather than reacting to a hawkish RBA message," Asia- Pacific macro strategist at TD Securities, Alvin Pontoh, said.
The Reserve Bank's monthly policy statement said growth in China had become weaker, adding to uncertainty about near-term growth, with growth in the Asian region being dampened by "more moderate" Chinese expansion, and the weakness in Europe.
But the big miners brushed off any concerns about a slowdown in China, with BHP Billiton up 0.47 per cent and Rio Tinto up 1.04 per cent. Fortescue fell 15?, or 4.21 per cent, to $3.41. In percentage terms it was the second-largest decline among stocks in the S&P/ASX 50.
"We know that iron ore prices have been falling for a few months and obviously had a big impact on Fortescue's bottom line," Ms Saly said.
Commonwealth Bank was off 36?, or 0.6 per cent, at $54.46, and National Australia Bank fell 20? to $25.10.
Today, the Bureau of Statistics releases the June-quarter national accounts, which includes gross domestic product data. The median forecast is for a 0.8 per cent rise in GDP in the quarter, and for a 3.7 per cent pace for the year to June. With AAP
Frequently Asked Questions about this Article…
Why did the Australian sharemarket fall after Fortescue’s announcement?
Fortescue Metals told the ASX it planned to cut jobs and slash spending to save more than $300 million in response to steep falls in iron ore prices. The news came before the market opened and set a downbeat tone, contributing to the S&P/ASX 200 falling about 0.6% that day.
How did Fortescue’s cost-cutting plans affect its share price?
Fortescue’s announcement about job cuts and spending cuts—driven by weaker iron ore prices—hurt investor sentiment and the stock fell, trading down to around $3.41 as the market reacted to the company’s hit to its near-term outlook.
What happened to major bank stocks like ANZ, Westpac, Commonwealth Bank and NAB?
Financial stocks weighed on the market: ANZ dropped about 2% to $24.34 and Westpac fell about 2.1% to $24.32, making them the worst performers on the S&P/ASX 20. Commonwealth Bank was down roughly 0.6% at $54.46, while National Australia Bank also fell and traded near $25.10.
Why were trading volumes low and investors cautious?
Investors were largely on the sidelines ahead of key events—an upcoming European Central Bank meeting and US employment figures later in the week—so volumes were low as traders awaited those major market-moving announcements.
How did the Australian dollar react to the market and RBA decision?
The Australian dollar hit a six-week low against the US dollar in the morning, then rose slightly after the Reserve Bank left the cash rate steady at 3.5%. Economists noted the currency might lose ground as European conditions improve, and some strategists said the short-lived spike looked like short-covering rather than a hawkish RBA signal.
How did big miners like BHP Billiton and Rio Tinto perform despite China slowdown concerns?
BHP Billiton and Rio Tinto largely shrugged off worries about slower Chinese growth: BHP was up about 0.47% and Rio Tinto rose roughly 1.04%, suggesting investors saw resilience in some major miners even as Fortescue struggled.
What economic data should everyday investors watch this week?
Investors should watch the European Central Bank meeting, US employment figures later in the week, and local data such as the Bureau of Statistics’ June-quarter national accounts—the median forecast at the time was for a 0.8% rise in quarterly GDP and a 3.7% year‑to‑June pace.
What does Fortescue’s move tell investors about exposure to iron ore price swings?
Fortescue’s cost-cutting response highlights that companies heavily exposed to iron ore prices can face quick impacts to earnings and share price when commodity prices fall, underlining the importance for investors of understanding commodity risk in mining stocks.
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