Goldminers lead way down as commodities slump

THE sharemarket fell more than 1 per cent to a two-year low, pulled down by investors selling out of mining and energy companies after commodity prices slumped.

By InvestSMART · 27 Sep 2011

By InvestSMART ·
27 Sep 2011

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THE sharemarket fell more than 1 per cent to a two-year low, pulled down by investors selling out of mining and energy companies after commodity prices slumped.

Goldminers led the tumble after the price of gold dropped by more than $US150 at the weekend.

Shares began the day in positive territory after a TV interview of the German Chancellor, Angela Merkel, in which she renewed talks of a possible Greek bailout.

But within a few hours the local bourse began shedding value, with both main indices dropping well below 4000 points to the lowest level since July 2009, when the market was emerging from the depths of the global financial crisis.

The S&P/ASX200 index fell 39.3 points, or 1 per cent, to 3863.9, while the All Ordinaries index slumped 50.9 points, or 1.3 per cent, to 3927.6.

Gold slumped late on Friday because of renewed strength in the US dollar and talk of hedge fund liquidation wrecking its safe-haven status. The spot price of gold in Sydney was $US1581.89 per fine ounce, down $US163.82 from Friday's close of $US1745.71.

Australia's biggest goldminer Newcrest also tumbled $3.24, or 9 per cent, to $32.86, and was the worst performer among the top 50 companies.

Rio Tinto shed 3.9 per cent, or $2.45, to $60.20 and BHP Billiton fell 60?, or 1.74 per cent, to $33.95.

Rare earth explorer Lynas Corporation was the worst performing stock on the S&P/ASX 100, plummeting 17.1 per cent to 87.5?. The best performing stock on the same index was James Hardie Industries, which rose 5.52 per cent to $5.73.

Energy stocks slipped after world oil prices slumped. Santos fell 45?, or 4.15 per cent, to $10.40 and Woodside Petroleumfell $1.57 to $29.80.

About seven out of every 10 stocks fell. Typically defensive health care stocks outperformed, up 1.45 per cent. The medical diagnostic company Sonic Healthcare rose 2.6 per cent to $11.58.

The financial sector recovered slightly from a sell-off last week to close 0.75 per cent up, after a significant rebound in European bank stocks on Friday. Westpac was the strongest performer, up 2.46 per cent at $19.19.

Woolworths rose 20? to $24.77 after it reiterated its forecast of a 2 to 6 per cent increase in this year's net profit.

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Frequently Asked Questions about this Article…

What happened to the Australian sharemarket and major indices in the recent slump?

The Australian sharemarket fell more than 1% to a two-year low after investors sold mining and energy stocks. The S&P/ASX 200 dropped 39.3 points (about 1%) to 3,863.9, while the All Ordinaries fell 50.9 points (about 1.3%) to 3,927.6 — both slipping below 4,000 points for the first time since July 2009.

Why did goldminers lead the market fall and what happened to the gold price?

Goldminers led the sell‑off after the price of gold plunged by more than US$150 over the weekend. The spot price of gold in Sydney was US$1,581.89 per fine ounce, down US$163.82 from the previous close. The drop was tied to renewed US dollar strength and talk of hedge fund liquidation undermining gold's safe‑haven status.

How did Newcrest and other big miners perform during the downturn?

Australia's biggest gold miner Newcrest was the worst performer among the top 50 companies, tumbling US$3.24 (about 9%) to US$32.86. Major diversified miners also fell — Rio Tinto shed 3.9% (US$2.45) to US$60.20 and BHP Billiton fell about 1.74% to US$33.95.

What happened to rare‑earth explorer Lynas Corporation in the sell‑off?

Lynas Corporation was the worst performing stock on the S&P/ASX 100, plunging 17.1% to 87.5 (as reported), reflecting heavy selling in more speculative and commodity‑linked stocks during the commodity slump.

How were energy stocks affected and which names were hit?

Energy stocks slipped after world oil prices fell. Santos dropped about 4.15% to $10.40, while Woodside Petroleum fell by $1.57 to $29.80, contributing to the broader market weakness.

Which sectors outperformed during the market weakness?

Defensive sectors outperformed, with healthcare leading the gains. The health care sector rose about 1.45%, and medical diagnostics company Sonic Healthcare climbed 2.6% to $11.58 as investors sought defensive exposure.

Did the financial sector recover at all amid the sell‑off?

Yes — the financial sector recovered slightly, closing about 0.75% higher after a rebound in European bank stocks the previous day. Westpac was the strongest financial stock, rising 2.46% to $19.19.

How did consumer staples like Woolworths react to the market movements?

Woolworths rose around 2% to $24.77 after reiterating its forecast of a 2% to 6% increase in this year's net profit, showing that some defensive consumer staples held up or attracted buying despite the broader commodity‑led sell‑off.