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.

with agencies

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Frequently Asked Questions about this Article…

Why was the Australian sharemarket sluggish in the article?

The market was subdued as investors waited for an important meeting of central bankers and economists in the US and a speech by US Federal Reserve chair Ben Bernanke. Traders were cautious ahead of any signals about US monetary policy that could affect risk appetite and currencies.

How did the resource sector and iron ore prices affect ASX performance?

Lower iron ore prices weighed on mining and resource stocks, dragging the benchmark S&P/ASX 200 down (it lost about 3 points to 4356.4). Major miners and related stocks were among the weakest performers during the session.

What happened to Fortescue Metals shares and why should investors notice it?

Fortescue Metals was the hardest hit in the session, sliding to a low of $3.65 (down about 5% for the day), its lowest level since May 2010. Such a sharp move highlights the sensitivity of junior and mid-cap miners to iron ore price swings and market sentiment.

How could Ben Bernanke's speech influence the Australian dollar and markets?

National Australia Bank strategist Emma Lawson noted currency traders were cautious. Last year Bernanke signalled Fed policy intentions in this speech, so markets hope for guidance on fresh quantitative easing. If Bernanke is less forthcoming than expected, the Australian dollar could trade a little lower after the event.

Which big Australian banks moved in the session and in which direction?

Among the big banks, Commonwealth Bank fell to $54.31, Westpac eased to $24.86, ANZ rose to $24.98, and National Australia Bank slipped to $25.09 during the trading day covered in the article.

Which companies reported positive results or gained during the session?

ROC Oil rose after reporting a $27.69 million net profit for the first half. WorleyParsons lifted after posting an improved underlying full-year profit despite headwinds, and Ausdrill gained after reporting a 54% lift in 2012 net profit and forecasting more growth.

Why did Transfield Services shares fall sharply?

Transfield Services fell about 13.5% to $1.915 after the company's head stepped down following several profit downgrades, which prompted negative market reaction.

Were there any notable corporate appointments or board changes mentioned?

Yes — the operator of the Australian sharemarket (ASX) appointed Reserve Bank board member Heather Ridout as a non-executive director, and the ASX operator's stock rose to $30.47 following the appointment.