Good overseas leads no help to stocks

POSITIVE developments in the US and Europe failed to impress investors this week. Despite a mid-week bump to the sharemarket, thanks mainly to a huge loan issue from the European Central Bank, the benchmark index drifted lower.

By InvestSMART · 3 Mar 2012

By InvestSMART ·
3 Mar 2012

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As the reporting season wound down and thoughts turned to next week's Reserve Bank board meeting, the ECB agreed to pour a further ?529.5 billion ($A656 billion) through the region's troubled banks.

According to fund managers, the multibillion-dollar loan issue failed to excite because most people expected it, so the "hot" money that drove momentum in the markets last year when the ECB's first round of money printing took investors by surprise, had nowhere to go this time.

The other highlight came from the lips of Ben Bernanke, chairman of the US Federal Reserve, who sparked a free fall in the price of gold after he said, among other things, that the US labour market was showing signs of improvement.

Traders took that to mean the US economy might not need a quick shot of money printing to jolt it back to life, so the party was ruined for those who had bet it would.

The spot price of gold collapsed $US66.47 an ounce, or 5 per cent,

to finish Thursday's session at $US1720.82, after hitting a

one-month low of $US1688.40.

It was little changed yesterday.

The S&P/ASX 200 Index gained 17.6 points to 4273.1. For the week,

it lost 33.68 points, or 0.8 per cent.

NAB this week released its inaugural Online Retail Sales Index, showing Australians spent

$10.5 billion with online retailers last year. Although that represented just 4.9 per cent of Australia's

$216 billion retailing industry sector, the sector grew at an annual pace of 29 per cent compared with 2.5 per cent for bricks and mortar retailers.

Harvey Norman yesterday was down 4?, or 2 per cent, at $1.98.

The Australian dollar, meanwhile, continued to appreciate against its major trading partners through the week. It strengthened against the greenback, closing at $US1.0788 and rose against the yen, closing at 87.86.

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Frequently Asked Questions about this Article…

How did the Australian sharemarket (S&P/ASX 200) perform this week?

The S&P/ASX 200 gained 17.6 points to finish at 4,273.1 on the day, but for the week it slipped 33.68 points, a fall of about 0.8%, after a mid-week bump faded.

What was the impact of the ECB’s big loan issue on markets this week?

The European Central Bank agreed to pour a multibillion-dollar loan package (around A$656 billion by the article’s account) into troubled banks, but fund managers said the move failed to excite markets because it was widely expected, so the earlier momentum driven by surprise stimulus didn’t reappear.

Why did the spot price of gold fall sharply and by how much?

Gold plunged after Federal Reserve chairman Ben Bernanke said the US labour market was showing signs of improvement, which traders read as reduced near-term need for extra monetary stimulus. The spot price fell about US$66.47 an ounce (roughly 5%), finishing Thursday at US$1,720.82 after hitting a one-month low of US$1,688.40.

What did NAB’s inaugural Online Retail Sales Index reveal about Australian e‑commerce?

NAB’s Online Retail Sales Index showed Australians spent about A$10.5 billion with online retailers last year. That represented roughly 4.9% of Australia’s A$216 billion retail sector, but online retail grew about 29% annually compared with 2.5% growth for bricks‑and‑mortar retailers.

How did Harvey Norman shares move and what was the quoted price?

Harvey Norman shares were down on the day, trading around A$1.98, with the article reporting a decline of about 2%.

How did the Australian dollar move against major currencies this week?

The Australian dollar appreciated against several major trading partners: it strengthened against the US dollar to close at US$1.0788 and rose against the yen to close at 87.86.

Did comments from Ben Bernanke influence investor sentiment here in Australia?

Yes. Bernanke’s remarks about an improving US labour market prompted traders to scale back expectations for immediate further Fed stimulus, which knocked back assets that had benefited from easing bets – notably contributing to the sharp fall in gold and weighing on broader risk sentiment.

What should everyday investors take away from this week’s market moves and the end of reporting season?

With reporting season winding down and attention shifting to the upcoming Reserve Bank board meeting, markets reacted more to policy signals and anticipated central bank moves than to earnings surprises. The key takeaway is that expected policy actions (like ECB loan packages or Fed comments) can have muted market impact if already priced in, while surprise commentary can drive sharp moves in assets such as gold and currency pairs.