Investors wait on words of Bernanke

THE sharemarket had a sluggish day yesterday as investors waited for an important meeting of central bankers and economists in the US tomorrow.

By InvestSMART · 30 Aug 2012

By InvestSMART ·
30 Aug 2012

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THE sharemarket had a sluggish day yesterday as investors waited for an important meeting of central bankers and economists in the US tomorrow.

The resource sector weighed on the market as lower iron ore prices anchored mining stocks.

Fortescue Metals shares were the hardest hit, with the stock scraping a low of $3.65 for the session (down 5 per cent), its lowest since May 2010. Overall, the benchmark S&P/ASX 200 Index lost just 3 points, to 4356.4.

By close of trade, the dollar was at US103.72?, down from US103.74?.

National Australia Bank strategist Emma Lawson said currency traders were behaving cautiously before a speech by US Fed chairman Ben Bernanke tomorrow.

"It has been relatively range-bound for a while now," Ms Lawson said.

Last year Dr Bernanke used the speech to signal the Fed's policy intentions, so some market participants hope for an indication this time that the US will undertake a fresh round of quantitative easing.

Ms Lawson said traders could be left disappointed by the speech. "If Bernanke is less forthcoming than the market expects, then you might, in fact, see the Australian dollar a little bit lower after that event," she said. In the resource sector, BHP Billiton fell 34? to $32.76, while Rio Tinto dropped $1.21 to $50.54.

The Australian oil and gas producer ROC Oil rose 0.5? to 32? after booking a $27.69 million net profit for the first half.

Among the big banks, Commonwealth Bank dropped 10? to $54.31, while Westpac lost 1? to $24.86. ANZ rose 4? to $24.98, and National Australia Bank shed 16? to $25.09.

Among other stocks, Transfield Services was 13.5? lower at $1.915 after the head of the company stepped down, following several profit downgrades.

The engineering outfit WorleyParsons lifted 12? to $26.32 after posting an improved underlying full-year profit despite the impact of uncertain economic conditions and the high dollar.

Mining services group Ausdrill was up 3? at $3.49 after lifting its 2012 net profit by 54 per cent. It forecast more growth this year.

ASX rose 7? to $30.47 after the operator of the Australian sharemarket appointed Reserve Bank board member Heather Ridout as a non-executive director.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket have a sluggish day?

The market was subdued as investors waited for an important meeting of central bankers and economists in the US and a speech by US Fed chair Ben Bernanke. At the same time the resource sector weighed on the market because lower iron ore prices dragged mining stocks down. The S&P/ASX 200 Index fell slightly to 4356.4.

How did lower iron ore prices affect major mining stocks like Fortescue, BHP and Rio Tinto?

Lower iron ore prices put pressure on resource names. Fortescue Metals was the hardest hit, scraping a session low of $3.65 (down about 5%), its weakest since May 2010. BHP Billiton fell to $32.76, while Rio Tinto dropped to $50.54.

What are investors watching in Ben Bernanke’s upcoming speech and how could it affect markets?

Market participants hope Bernanke might signal US policy intentions or indicate a fresh round of quantitative easing. National Australia Bank strategist Emma Lawson said currency traders were cautious ahead of the speech and that if Bernanke is less forthcoming than expected, the Australian dollar could be a little lower after the event.

How did the big Australian banks trade during the session?

Bank share moves were mixed: Commonwealth Bank traded around $54.31, Westpac around $24.86, ANZ rose to about $24.98, and National Australia Bank was near $25.09 on the day.

Which companies reported positive profit news, and how did the market react?

ROC Oil rose after booking a $27.69 million net profit for the first half. Ausdrill lifted after reporting a 54% increase in its 2012 net profit and forecasting further growth. WorleyParsons also rose after posting an improved underlying full-year profit despite a high dollar and uncertain conditions.

Were there any notable management or board changes that affected stock prices?

Yes. Transfield Services fell to about $1.915 after the company's head stepped down following several profit downgrades. Separately, ASX rose to $30.47 after appointing Reserve Bank board member Heather Ridout as a non-executive director.

How did the Australian dollar perform and what influenced its movement?

By close of trade the Australian dollar was around US103.72, slightly down from US103.74. NAB strategist Emma Lawson said currency traders were behaving cautiously ahead of Ben Bernanke’s speech, which was a key driver of the modest movement.

What practical takeaways should everyday investors consider from this market update?

Keep an eye on central bank commentary (especially Fed speeches) and commodity prices like iron ore, as they can quickly sway resource and currency markets. Also watch company-specific news — profit results, downgrades and management changes can cause sharp share moves, as seen with ROC Oil, Ausdrill, Transfield and WorleyParsons in this update.