The sharemarket lost ground this week, by the thinnest of margins, shedding 0.1 per cent as concerns about a slowdown in Chinese manufacturing activity saw big resource stocks retreat.
A fall in the value of the Australian dollar - it slid to a two-month low below US104? - did help local companies with offshore earnings, boosting their bottom line when they translated revenue generated overseas back into the local currency.
But much of the week was dominated by mining or resource-related news.
For the week, the benchmark S&P/ASX200 index lost 5.75 points, or 0.1 per cent, to 4,270.4.
The week began with Australia's mining giants - BHP Billiton, Rio Tinto and Fortescue Metals - assessing the damage from wild weather that lashed Dampier and Port Hedland, in Western Australia's Pilbara region, over last weekend. Luckily there was little damage, with minor disruption to shipments to China.
With concerns about Greece fading, comments from the managing director of the International Monetary Fund, Christine Lagarde, that the US and European financial systems looked slightly healthier, gave investors confidence that things were actually improving.
But they reacted harshly to news that BHP iron ore division president Ian Ashby said growth in Chinese demand for iron ore appeared to be "flattening", but the company remained confident in the long-term demand for commodities generally.
Resource stocks were sold down from Tuesday, when the news broke, with the materials sub-index slipping 1.77 per cent through the week, the worst sector overall.
A watered-down version of the federal government's mining tax passed into law, affecting the so-called "super profits" of the country's iron ore and coal miners. Fortescue said it would take the matter to court.
HSBC's preliminary Purchasing Managers Index showed manufacturing activity in China for March slipping for the fifth month in a row.
With a reading of 50 indicating industry is expanding, and a reading below suggesting it is contracting, the index dipped to 48.1 from 49.6 in February. The news saw investors further reduce their exposure to resource stocks, a practice that continued this week.
RBS Morgans private client adviser Craig Walker said resource stocks were by far the biggest weight on the market.
"If you take resources stocks out of equation, the market would have been well up," he said.
Yesterday, BHP Billiton was down 40?, or 1.2 per cent, at $34.40, Rio gave up 97?, or 1.5 per cent, to $63.70 and Fortescue slipped 8?, or 1.3 per cent, to $6.00.
Mineral sands miner Iluka fell 55?, or 3.2 per cent, to $16.90.
Australia's largest gold miner Newcrest backtracked 35?, or 1.2 per cent, to $29 after a substantial shareholder reduced its stake by more than 1 per cent.
In the energy sector, Woodside rose 48?, or 1.38 per cent, to $35.37 and Santos was down 13? cheaper at $14.28.
The big four banks opened weaker yesterday, but by the end of the session only NAB was in the red, down 4? at $24.35.
In healthcare, CSL added 54? to $34.22 while Ramsay Health Care rose 57?, or 3.1 per cent, to $18.91.
Frequently Asked Questions about this Article…
How did the ASX market perform this week and what drove the result?
The S&P/ASX 200 finished the week almost flat, losing 5.75 points (about 0.1%) to 4,270.4. The market was volatile, with falls in big resource stocks offset by positives such as a weaker Australian dollar that helped exporters and companies with offshore earnings.
Why did resource stocks fall this week and how did Chinese manufacturing data affect them?
Resource stocks slid after signs of a slowdown in Chinese manufacturing. HSBC’s preliminary March PMI dipped to 48.1 from 49.6 (a fifth straight monthly decline), a reading below 50 that suggests contraction — news that led investors to reduce exposure to materials and mining shares.
What impact did the weaker Australian dollar have on local companies with offshore earnings?
A fall in the Australian dollar — down to a two-month low during the week — boosted the translated value of offshore revenue, helping local companies with overseas earnings improve their reported bottom lines when converted back into Australian dollars.
Did the wild weather in Western Australia damage major miners or disrupt shipments?
BHP Billiton, Rio Tinto and Fortescue Metals checked for damage after wild weather hit Dampier and Port Hedland in the Pilbara, but there was little damage and only minor disruption to shipments to China.
What happened with the federal mining tax and how did miners react?
A watered-down version of the federal mining tax passed into law, targeting so-called ‘super profits’ of iron ore and coal miners. Fortescue said it would take the matter to court in response.
Which individual ASX-listed companies moved notably this week and by how much?
Among the moves reported: BHP fell about 1.2% to $34.40, Rio Tinto down about 1.5% to $63.70, Fortescue down about 1.3% to $6.00, Iluka fell ~3.2% to $16.90, Newcrest backtracked ~1.2% to $29 after a shareholder cut its stake, Woodside rose ~1.38% to $35.37, Santos was roughly 1.3% cheaper at $14.28, NAB ended down about 4% at $24.35, while CSL and Ramsay Health Care rose to $34.22 and $18.91 respectively.
How much did the materials sector weigh on the market this week?
The materials sub-index was the weakest sector, slipping about 1.77% over the week. RBS Morgans adviser Craig Walker noted resources were the biggest drag — saying that without resource stocks the market would have been noticeably higher.
What does the HSBC preliminary PMI reading of 48.1 mean for everyday investors?
A PMI below 50 signals contracting activity; HSBC’s March reading of 48.1 (down from 49.6) indicates Chinese manufacturing continues to cool. For everyday investors, that means keeping an eye on resource exposure and sectors sensitive to Chinese demand, since investors in the week reduced holdings in resource stocks.
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