Market falls as US stimulus hope fades

THE Australian sharemarket lost ground as hopes faded for a further round of US stimulus measures after data revealed the world's biggest economy was showing signs of life.

By InvestSMART · 16 Aug 2012

By InvestSMART ·
16 Aug 2012

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THE Australian sharemarket lost ground as hopes faded for a further round of US stimulus measures after data revealed the world's biggest economy was showing signs of life.

Trading divided along risky and defensive lines yesterday, with utilities, resources and energy stocks slipping backwards, while health care and telecommunications stocks performed well.

Resource stocks suffered some of the steepest falls - BHP Billiton lost 33?, or 1 per cent, to $32.62, and Rio Tinto slipped $1.42?, or 2.5 per cent, to $55.10 - on news that the eurozone economy had contracted again, raising fears for global growth.

The S&P/ASX 200 Index finished down 11 points, or 0.3 per cent, at 4281.2.

Analysts said that investors were concerned yesterday after US retail sales figures, which were released on Tuesday night, rose for the first time in four months in July, while the pace of inventories growth slowed further in June.

The news dampened hopes that the US Federal Reserve would attempt to breathe life into the economy with a third-round of stimulus measures - normally a boon for equities markets.

Contributing to the sombre mood, investors absorbed news that the eurozone economy had contracted by 0.2 per cent in the June quarter, shrinking by 0.4 per cent from a year earlier.

On the Australian scene, the Westpac-Melbourne Institute's consumer confidence survey showed an unexpected 2.5 per cent fall this month.

The institute's results contrasted with the latest Roy Morgan consumer confidence survey, which last week was up at 113.1 points, its highest in three months.

As the reporting season rolls on, shares in National Australia Bank, Westpac and ANZ all fell. NAB lost 44?, or 1.8 per cent, to $24.26, Westpac was down 2?, at $23.68, and ANZ lost 13?, or 0.5 per cent, to $23.63.

Only Commonwealth Bank bucked the trend, climbing 51?, or 0.9 per cent, to $56.05 after posting a record $7.09 billion full-year profit.

Shares in medical centres operator and pathology provider Primary Health Care jumped 12 per cent to $3.46, after it reported a 49 per cent increase in net profit.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket fall when US stimulus hopes faded?

The Australian sharemarket slipped as investors grew less confident a new round of US stimulus would arrive after better-than-expected US retail sales in July and slower inventory growth in June. Those US data suggested the economy was showing signs of life, reducing expectations the Federal Reserve would deliver further stimulus – news that weighed on risk-sensitive Australian stocks.

Which sectors and stocks were hit hardest during the market fall?

Riskier sectors such as resources, utilities and energy slipped the most. Major resource stocks fell notably: BHP Billiton dropped about 1% to $32.62 and Rio Tinto fell about 2.5% to $55.10. Investors reacted to weaker global growth signals, including a eurozone contraction, which pressured resource and energy names.

Which sectors performed well amid the market weakness?

Defensive sectors did better on the day. Health care and telecommunications stocks outperformed the broader market, with healthcare names benefiting from company-specific profit upgrades and relative safety during the risk-off move.

How did the big Australian banks fare in the reporting season?

Bank shares were mixed: National Australia Bank (NAB) fell about 1.8% to $24.26, Westpac slid roughly 2% to $23.68, and ANZ dropped about 0.5% to $23.63. The reporting season and market sentiment contributed to those declines.

Why did Commonwealth Bank buck the downward trend among banks?

Commonwealth Bank climbed about 0.9% to $56.05 after reporting a record full-year profit of $7.09 billion, which helped its shares buck the broader bank sell-off.

What drove the strong move in Primary Health Care shares?

Primary Health Care shares jumped about 12% to $3.46 after the company reported a 49% increase in net profit, a positive earnings surprise that attracted investor buying in the healthcare sector.

How did global economic news, like the eurozone contraction, affect Australian markets?

News that the eurozone economy contracted by 0.2% in the June quarter (down 0.4% year‑on‑year) boosted concerns about global growth. Those worries hit resource and export-exposed stocks in Australia, contributing to the overall market decline.

What domestic consumer confidence signals were noted and why do they matter to investors?

Domestically, the Westpac‑Melbourne Institute consumer confidence index unexpectedly fell 2.5% in the month, while the Roy Morgan measure was up at 113.1 points, its highest in three months. These consumer confidence surveys matter because they give investors clues about household spending trends, which can influence corporate earnings and market sentiment.