FEARS that Israel might bomb Iran and concerns about a slowdown in Chinese growth were enough to convince investors to pull money from the sharemarket yesterday.
Energy and materials stocks again weighed heavily, as copper slipped almost 1 per cent amid worries of a slowdown in demand from China. Mining stocks dropped, with BHP Billiton down 81?, or 2.3 per cent, to $34.58, and Rio Tinto shedding $1.47, or 2.3 per cent, to $63.62.
The materials sub-index which includes producers of agricultural commodities, fertilisers, paper and forestry products, and chemicals and building materials had its worst day since December 19, losing 2.3 per cent. The only sector to avoid losses was the information technology sector, which rose by 1.2 per cent.
"It's seen a change in sentiment," said Wingate Asset Management chief investment officer Chad Padowitz. "We've definitely seen companies geared to global growth taking somewhat of a hit, like oil and commodity companies.
"Where the market's been very resilient and quite strong over the last couple of months, there is certainly [some] real weakness starting to be shown in commodity companies."
Concerns that Israel has run out of patience and could soon start bombing Iranian nuclear sites kept global equity markets weaker. The benchmark S&P/ASX 200 Index was down 58.3 points, or 1.37 per cent, at 4204.7.
The dollar lost more than US1? after the Reserve Bank kept the cash rate steady at 4.25 per cent. RBA governor Glenn Stevens said the monetary policy setting was "appropriate" for the moment. Economists said that, despite some of the central bank's more upbeat observations about the European financial system, it appeared to hold a bias towards cutting rates, with much depending on domestic economic conditions.
Attention will now turn to ANZ's independent rate decision on Friday.
At 5pm, the dollar was trading at $US1.0627, down from $US1.0708 on Monday.
Currency strategists suspected more was behind the drop than the RBA decision. "It was a bit perplexing," said Andrew Salter, a foreign exchange strategist at ANZ. "A couple of headlines might have been factors. One was regarding the Iranian conflict . . . the other comments from Chinese central bank officials that they had confidence in Europe."
ANZ fell 11? to $22.09, Commonwealth Bank gave up 51?, to $48.58, and National Australia Bank shed 5?, to $23.48.
Frequently Asked Questions about this Article…
Why did the Australian sharemarket fall yesterday?
Markets fell after geopolitical fears that Israel might bomb Iranian nuclear sites and worries about a slowdown in Chinese growth prompted investors to pull money from the sharemarket. The benchmark S&P/ASX 200 was down 58.3 points, or about 1.37%, at 4204.7.
How did mining and materials stocks perform and why should investors care?
Energy and materials stocks weighed heavily as copper slipped almost 1% on concerns of weaker Chinese demand. The materials sub‑index had its worst day since December 19, losing about 2.3%, and mining stocks fell — for example, BHP Billiton was down about 2.3% to $34.58 and Rio Tinto fell $1.47 to $63.62.
Which sector avoided losses during the sell-off?
The only sector to avoid losses was information technology, which rose by about 1.2% on the day.
What happened to major Australian banks in this market move?
Major banks gave back some ground: ANZ, Commonwealth Bank and National Australia Bank all fell and were trading at $22.09, $48.58 and $23.48 respectively, according to the report. Attention is also turning to ANZ’s independent rate decision due on Friday.
How did the Reserve Bank decision affect the Australian dollar?
After the Reserve Bank kept the cash rate steady at 4.25%, the Australian dollar fell against the US dollar. At 5pm it was trading at US$1.0627, down from US$1.0708 on Monday.
What did the RBA say and how are economists interpreting it?
RBA governor Glenn Stevens said the current monetary policy setting was “appropriate.” Economists noted the RBA’s comments sounded more upbeat about Europe but suggested the central bank may hold a bias toward cutting rates in future, with decisions depending on domestic economic conditions.
How are China-related headlines affecting commodity prices like copper?
Headlines suggesting a slowdown in Chinese growth dented demand expectations and helped push copper down nearly 1%. That fall in copper and broader China growth worries contributed to weakness in commodity and resource companies.
What key events should everyday investors watch next based on this article?
Investors should watch geopolitical headlines around Iran and Israel, updates on Chinese growth and central bank commentary, and the upcoming ANZ independent rate decision on Friday — all of which the article highlights as market drivers.
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