It was a roller-coaster ride. Billions of dollars were wiped from and then piled back onto the sharemarket in a series of dramatic trading days and, when the dust settled, the bourse was sitting almost exactly where it began: less than half a point lower.
News that China cut its official interest rate by 25 basis points, the first reduction since 2008, did little to impress traders yesterday, who took it as a sign of growing concern over the growth outlook for the world's second-biggest economy.
After a week of extraordinary headlines, the benchmark S&P/ASX 200 Index closed the week basically flat, down 0.18 points at 4063.7. The All Ordinaries Index finished down 5.8 points at 4111.1.
Investors had been waiting for the Chinese to release a string of economic data this weekend, including consumer price index, producer price index, fixed asset investment and industrial production data but the rate cut announcement on Thursday night took the market by surprise.
"The timing of the rate cut, ahead of the keenly-awaited monthly data dump over the weekend, suggests that the Chinese economy almost certainly fails to show significant improvement in May," Commonwealth Bank currency strategist Andy Ji said.
Shareholders exploited a trifecta of positive local economic news: the Reserve Bank cut rates on Tuesday by 25 basis points on Wednesday, economic growth of 1.3 per cent for the March quarter was stronger than expected on Thursday, employment grew by much more expected. It helped the Australian dollar post its first weekly gain in six weeks.
Yesterday, the US Federal Reserve chairman, Ben Bernanke, dampened hopes of further economic stimulus in the US when he testified in front of the US Congress's joint economic committee.
Bernanke had warned that the situation in Europe posed significant risks to the US financial system and economy and the fiscal cliff would pose a significant threat to the recovery.
On the local bourse, traders sold the market down heavily early in the week amid growth fears before being buoyed by rate cuts and growth figures.
On Friday, the market fell again. In the resources sector, global miner BHP Billiton rose 33? to $31.91. Rio Tinto rose 17? to $55.59. Miner Ivanhoe Australia rose 2? to 56.5? after its chief executive, Peter Reeve, resigned.
National Australia Bank fell 40? to $22.16, Westpac fell 34? to $20.43, ANZ fell 25? to $21.56 and Commonwealth Bank fell 57? to $50.47. ANZ on Friday announced it would cut its variable home loan and business rates by 25 basis points, matching the RBA's cash rate cut.
Among other stocks, casino operator Crown was 23? lower at $8.13 after major shareholder and billionaire James Packer succeeded in disrupting the board of rival casino operator Echo Entertainment, forcing the dumping of its chairman, John Story. Echo was 19? higher at $4.49.
Qantas Airways fell 9? to 97? after it was placed on a ratings watch by Standard & Poor's.
The price of gold in Sydney was $US1571.18 per fine ounce, down $US50.67 from Thursday's close of $US1621.75.
with agencies
Frequently Asked Questions about this Article…
What happened on the ASX this week and why was trading so volatile?
The ASX went through a roller-coaster week of big swings driven by global and local economic news. By the close the S&P/ASX 200 was essentially flat (down 0.18 points at 4,063.7) after investors reacted to China’s surprise rate cut, local rate and growth data, and comments from US Federal Reserve chair Ben Bernanke.
How did China’s interest rate cut affect Australian markets and investor sentiment?
China cut its official interest rate by 25 basis points — the first reduction since 2008 — which traders read as a sign of growing concern about China’s growth outlook. Rather than calming markets, the move increased growth worries and contributed to the week’s market volatility.
What local economic news helped lift the Australian dollar and parts of the market?
A trifecta of local positives helped: the Reserve Bank cut official rates by 25 basis points, GDP growth for the March quarter came in stronger than expected at 1.3%, and employment rose more than anticipated. Those factors helped the Australian dollar record its first weekly gain in six weeks and supported parts of the market.
How did major Australian banks trade and did any pass on the RBA rate cut?
Major banks fell on the week — National Australia Bank, Westpac, ANZ and Commonwealth Bank all slipped in price. ANZ announced it would cut its variable home loan and business rates by 25 basis points to match the RBA’s cash rate cut.
What happened to big resource stocks like BHP Billiton and Rio Tinto during the volatility?
Resource names outperformed on Friday: global miner BHP Billiton rose to about $31.91 and Rio Tinto rose to about $55.59, reflecting strength in parts of the resources sector amid the choppy market backdrop.
Why did Crown and Echo Entertainment move in opposite directions on the ASX?
Crown fell after billionaire James Packer succeeded in disrupting the board of rival casino operator Echo Entertainment, a move that forced Echo’s chairman John Story out. Echo shares rose on the news while Crown shares fell.
What was the market reaction to Qantas being placed on a ratings watch by Standard & Poor’s?
Qantas shares fell after Standard & Poor’s placed the airline on a ratings watch, reflecting investor concern about the impact of a potential credit downgrade on the carrier’s financial position.
How did gold prices move in Sydney during the week and what were the figures?
Gold fell sharply over the period: the price in Sydney was reported at US$1,571.18 per fine ounce, down US$50.67 from the prior close of US$1,621.75.
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