Australian stocks dropped as much as 1.2% after job advertisements fell in June, especially in Western Australia – the heart of Australia’s mining boom – pointing to a deteriorating economy that will impede earnings growth in the year ahead.
At 1309 AEST the S&P/ASX200 Index was down 44.448, or 0.9%, to 4787.30, after falling as much as 4786.10. In morning trading the index had gained as much 0.2%.
ANZ’s Australia June job advertisements fell 1.8% last month and a revised 2.5% in May. Job advertising “fell sharply” in Western Australia in line with declining mining activity, the ANZ report said. The jobless rate probably rose to 5.6% in June from 5.5% in May, according to the median estimate of economists surveyed by Bloomberg News.
Sentiment toward global stock markets soured last week when US Treasury bond yields recorded their biggest one-day rise in two years after strong US jobs numbers. That has further emphasised the different direction the US and Australian economies seem to be taking: the US recovering, Australia deteriorating.
The Australian dollar’s 14% decline from $US1.0545 on April 11 is further evidence of the perceived investor view of the poor immediate prospects of the Australian economy. Paul Brennan, Citigroup’s chief Australian economist, says how the Australian economy can generate growth amid a slowdown in global commodity demand is a topic of immense interest to foreign and local investors.
“We believe that no crash landing is likely for Australia from the rebalancing task,” says Brennan. “The landing will be made with some turbulence on the way down, but should be done without a major incident occurring”.
Credit Suisse’ Australian strategist Damien Boey isn’t so sure. The Australian currency is a proxy for global growth and commodity prices. As the currency weakens investors will become increasingly dour on the prospects of the local economy and its stock market.
BHP shares fell 71.5 cents, or 2.3%, to $30.885. Rio Tinto declined $1.09, or 2.1%, to $51.61. National Australia Bank dropped 26 cents, or 0.9%, to $$28.91. Woolworths slid 18 cents, or 0.6%, to $32.51. Myer slipped 1.5 cents, or 0.6%, to $2.455.