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.
Frequently Asked Questions about this Article…
Why did the ASX fall yesterday and how did Fortescue's announcement set the tone for the market?
The S&P/ASX 200 dropped about 0.6% (26.2 points) to 4,303.5 after Fortescue Metals said it would cut jobs and slash spending to save more than $300 million. That surprise announcement came just before the market opened and helped set a downbeat tone for the day.
What exactly did Fortescue announce about job cuts and spending that affected investors?
Fortescue told the ASX it planned to reduce its workforce and cut capital and operating spending to deliver more than $300 million in savings, a direct response to recent sharp falls in iron ore prices.
How did major bank stocks perform on the day and which banks were hardest hit?
Financial stocks weighed heavily on the market. ANZ fell about 2% to $24.34, Westpac dropped about 2.1% to $24.32, Commonwealth Bank was down around 0.6% to $54.46, and National Australia Bank fell to $25.10, making the big banks some of the weaker performers on the ASX.
How did other big miners react to concerns about China slowing and falling iron ore prices?
Despite the Reserve Bank noting weaker Chinese growth, some large miners shrugged off worries: BHP Billiton rose about 0.47% and Rio Tinto increased about 1.04%, while Fortescue was an exception and fell (around 4.2% to $3.41).
What macro events were investors watching that contributed to low trading volumes?
Investors were cautious ahead of the European Central Bank meeting and key US employment figures later in the week. CommSec analysts said the US employment number is a major mover for global markets, which kept volumes low as traders stayed on the sidelines.
What happened to the Australian dollar and how did the RBA's decision influence it?
The Australian dollar hit a six‑week low in the morning, then rose slightly after the Reserve Bank kept the cash rate steady at 3.5%. Analysts suggested the brief spike was likely short‑covering rather than a hawkish RBA signal, and some economists expect the AUD may continue to lose ground to the US dollar as Europe improves.
How is China’s slower growth mentioned in the article likely to affect Australian markets and miners?
The RBA’s monthly policy statement noted weaker growth in China, adding uncertainty about near‑term growth and dampening the Asian region. That weakness has pressured iron ore prices and directly affected companies exposed to them—Fortescue in particular—though some big miners like BHP and Rio Tinto traded higher on the day.
What national economic data was due and what were the headline forecasts investors expected?
The Bureau of Statistics was set to release June‑quarter national accounts, including GDP. The median forecast mentioned in the article was for a 0.8% rise in GDP for the quarter and a 3.7% pace for the year to June—data investors would watch for broader market direction.
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