Investor caution leads to modest drop

THE Australian sharemarket has closed modestly lower, after climbing back from the day's lows, with investors remaining cautious after weak global growth forecasts from the International Monetary Fund.

By InvestSMART · 11 Oct 2012

By InvestSMART ·
11 Oct 2012

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The benchmark S&P/ASX200 slipped 14.6 points, or 0.2 per cent, to 4490.7, while the broader All Ordinaries lost 14.7 points, or 0.3 per cent, to 4511.9.

Among the sectors, financials dropped 0.4 per cent, materials lost 0.3 per cent clawing back some of their earlier losses while energy and health stocks gained 0.4 per cent and 0.7 per cent, respectively.

Poor leads from overseas did not help the local market, the head of research sales at Deutsche Bank, Glenn Morgan, said.

"There was a little bit of trepidation globally as we head into three key events: first, the US reporting season we had the first bit of that overnight which is relevant to us, in Alcoa second, when Spain is going to ask for a bailout and third, whether Greece is going to get its next aid instalment," Mr Morgan said.

"Slightly long-term there are the US fiscal cliff issues, which are really on the horizon for us."

Iron ore prices rose above $US117 a tonne overnight, as miner Rio Tinto added 0.2 per cent, while rival BHP traded relatively flat, at $33.48.

Fortescue Metals failed to cash in on the lift in iron ore, falling 2.8 per cent, to $3.84.

Mr Morgan said that while the iron ore price seemed to have found some support, investors were more likely to opt for the security of the bigger miners.

"The US reporting season is going to drive things more than anything else, including the big financials that report in the next few days," Mr Morgan said.

Overnight in the US, Alcoa, which is part of a global joint venture with ASX-listed Alumina, reported a $US143 million third-quarter loss.

When Australian markets opened, investors were unsure how to react, with Alumina falling as much as 2.9 per cent before rallying to finish up 2.3 per cent, at 90?.

The big four banks posted losses: ANZ dropped 0.2 per cent to $25.56, CBA fell 0.1 per cent to $56.65, NAB lost 0.4 per cent to $26.20 and Westpac slipped 0.7 per cent to $25.72.

Wesfarmers lost 0.7 per cent, to $34.52, while rival Woolworths lost 0.3 per cent, to $29.40.

Transurban dropped 9? to $6.10 as it said its share of revenue from its portfolio of toll roads rose 2.5 per cent in the September quarter, driven partly by an increase in tolls on some roads.

The Australian dollar rebounded yesterday after an initial sell-off, trading around $US1.0225, as demand for Australian bonds pushed the currency higher.

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Frequently Asked Questions about this Article…

Why did the S&P/ASX 200 close modestly lower today?

The S&P/ASX 200 slipped 14.6 points (about 0.2%) to 4,490.7 as investors remained cautious after weak global growth forecasts from the IMF and poor leads from overseas. Concerns about upcoming events — the US reporting season, possible Spanish bailout requests and Greece's next aid instalment — also weighed on sentiment.

Which sectors moved on the ASX and what does that mean for everyday investors?

Financials dropped about 0.4% and materials lost 0.3%, while energy and health stocks gained roughly 0.4% and 0.7% respectively. For everyday investors, that highlights how macro news can push capital toward defensive or growing sectors (like health and energy) while cyclicals and banks can pull back during global uncertainty.

How did the big four Australian banks perform and should investors be worried?

The major banks posted small declines: ANZ down 0.2%, CBA down 0.1%, NAB down 0.4% and Westpac down 0.7%. These were modest falls tied to broader market caution and upcoming reporting; they reflect short-term sentiment rather than necessarily signaling structural problems for the banks based on the article's coverage.

What happened to iron ore prices and how did miners react on the ASX?

Iron ore rose above US$117 a tonne overnight. Rio Tinto added 0.2% and BHP traded relatively flat at $33.48, while Fortescue Metals fell 2.8% to $3.84. The market showed a preference for larger, more established miners despite the lift in iron ore prices.

Why did Fortescue Metals fall when iron ore prices rose?

Even though iron ore found some support, investors tended to favour the perceived security of the bigger miners such as Rio Tinto and BHP. As a result Fortescue fell about 2.8%, suggesting market preference for larger, more liquid iron-ore producers amid uncertainty.

How did Alcoa's results affect Alumina and what should shareholders note?

Alcoa reported a US$143 million third-quarter loss, which unsettled investors linked to the Alcoa-Alumina joint venture. Alumina fell as much as 2.9% on the open before rallying to finish up 2.3%. Shareholders should note that results from global partners can trigger short-term volatility in related ASX-listed companies.

What caused Transurban's drop and what did the company report about revenue?

Transurban dropped around 9% to $6.10 after commenting on its portfolio: the company's share of revenue from its toll-road portfolio rose 2.5% in the September quarter, driven partly by toll increases on some roads. The share move suggests investors weighed the revenue update against other factors affecting sentiment.

How did the Australian dollar move and what drove that change?

The Australian dollar rebounded after an initial sell-off, trading around US$1.0225. The bounce was supported by demand for Australian bonds, which pushed the currency higher despite broader market caution.