Investors wait on news of China and EU

THE sharemarket closed slightly lower yesterday as investors mulled over mixed earnings results, the Greek debt crisis and whether China would cut its benchmark interest rate.

By InvestSMART · 10 Feb 2012

By InvestSMART ·
10 Feb 2012

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THE sharemarket closed slightly lower yesterday as investors mulled over mixed earnings results, the Greek debt crisis and whether China would cut its benchmark interest rate.

The S&P/ASX 200 Index fell 7.8 points, or 0.18 per cent, to 4282.9.

"It's been a very volatile day, today," said OptionsXpress market analyst Ben Le Brun.

Earnings reports from Telstra yesterday and BHP Billiton on Wednesday had fallen short of investors' expectations and weighed on the market, he said.

A higher than expected inflation figure from China also dampened hopes it would cut interest rates. Mr Le Brun said lower rates in China would boost the Australian resource sector.

Investors were still waiting for announcements from the European Union about measures to stem the region's debt problems.

Greece is expected to announce another round of spending cuts so it can secure bailouts from the International Monetary Fund and its neighbours.

Shares in Telstra fell 7? to $3.37 after it reported a half-year profit of $1.47 billion, below market expectations.

News Corp closed 17? higher at $18.91 after it unveiled a strong rise in second-quarter earnings, driven mainly by its cable television and film businesses.

Tabcorp improved 5? to $2.91 after the wagering and gaming company lifted its first-half underlying profit by 14.1 per cent and said it expected a similar performance for the rest of the year.

Property group Stockland eased 6? to $3.21 after the company posted a 28 per cent fall in first-half net profit due to tough economic conditions.

Scrap metal recycler Sims Metal Management surrendered $1.06 at $14.20 after it wrote down the value of its North American business by $614 million.

BHP Billiton was off 59? at $37.16 after it reported on Wednesday a drop in first-half profit of 5.5 per cent, to $US9.941 billion.

Rio Tinto was down 16? at $71.60. Rio released its full-year results after the market closed yesterday.

It booked a 59 per cent slump in full-year net profit, due mainly to a write-down of its aluminium business, but underlying earnings rose 11 per cent.

National turnover was 2.11 billion shares worth $4.97 billion, with 506 stocks up, 487 down and 392 unchanged. On Wall Street on Wednesday night, the Dow Jones Industrial Average Index edged up 0.04 per cent.

The dollar was marginally lower after economic data showed Chinese inflation at its highest in three months.

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Frequently Asked Questions about this Article…

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

The S&P/ASX 200 slipped 7.8 points (about 0.18%) to 4,282.9 as investors digested mixed corporate earnings, concerns about the Greek debt crisis and uncertainty around China’s inflation and interest-rate outlook. Weak results from major companies weighed on sentiment and added to market volatility.

How did China’s inflation data affect Australian resource stocks and interest-rate expectations?

Chinese inflation came in higher than expected, which reduced hopes Beijing would cut benchmark interest rates. Market analyst Ben Le Brun noted lower Chinese rates would have helped the Australian resource sector, so the higher inflation reading dampened that near-term boost for resources.

What European news were investors waiting for and why does it matter for Australian investors?

Investors were waiting for announcements from the European Union on measures to address the region’s debt problems, with Greece expected to announce another round of spending cuts to secure bailouts. Developments in Europe matter because they can affect global risk sentiment and commodity demand, which in turn influence Australian markets.

What happened to Telstra’s shares after its half-year results?

Telstra’s shares fell to $3.37 after the company reported a half-year profit of $1.47 billion, which was below market expectations. The weaker-than-expected result weighed on investor confidence in the stock.

Why did BHP Billiton and Rio Tinto shares fall, and what did their results show?

BHP Billiton’s shares fell after it reported a first-half profit decline of 5.5% to US$9.941 billion. Rio Tinto released full-year results showing a 59% slump in net profit, mainly due to a write-down of its aluminium business, although its underlying earnings rose by 11%. Both sets of results disappointed the market and pressured their share prices.

Which other company results were notable and how did the market react?

News Corp closed higher at $18.91 after a strong rise in second‑quarter earnings driven by cable TV and film. Tabcorp improved after lifting first‑half underlying profit by 14.1% and saying it expected similar performance for the rest of the year. Property group Stockland posted a 28% fall in first‑half net profit and eased in price. Scrap recycler Sims Metal Management wrote down $614 million of its North American business and saw its share price move to $14.20 after surrendering $1.06.

What was overall market activity and breadth on the day?

National turnover was 2.11 billion shares worth $4.97 billion. On the day 506 stocks rose, 487 fell and 392 were unchanged. Meanwhile, Wall Street’s Dow Jones Industrial Average had edged up about 0.04% on Wednesday night.

As an everyday investor, what should I watch next given this market update?

Keep an eye on upcoming China inflation data and any signals about Chinese interest‑rate policy, announcements from the EU or Greece on debt measures, and upcoming corporate earnings from major ASX-listed companies. Those factors are the main drivers mentioned in the update and can influence market volatility and sector performance, especially resources.