Expectations that company earnings for the 12 months to June 30 will be worse than many have telegraphed is the overriding concern among many investors and that’s what’s pressuring stock prices.
At 1515 AEST the S&P/ASX200 Index was down 37.106, or 0.8 per cent, to 4798.10. The index is up 18 per cent in the last 12 months. “The market has had a great run,” said one salesman. “The ass can fall through the market pretty quickly”.
Some traders and salesmen say the longer the sell-off goes in Australian stocks the further the index will fall as bargain hunters have not yet snapped up some of the market’s favorite shares, the banks.
ANZ shares were down 17 cents, or 0.6 per cent, to $27.03, Commonwealth Bank was unchanged at $66.25, Westpac fell 31 cents, or 1.1 per cent, to $27.88 and National Australia Bank rose, up 4 cents, or 0.1 per cent, to $28.99.
Rio Tinto fell 29 cents, or 0.5 per cent, to $54.07. The spot price for iron ore imported through the Chinese port of Tianjin halted its two-day 5.6 per cent rally yesterday and was unchanged at $US116.60 a tonne, according to Bloomberg data.
Moreover the outlook for mining services companies still appears gloomy judging by comments by Engenco chief executive Dennis Quinn today. His company said its net loss for the 12 months to June 30 will be as much as $14 million compared with an earlier forecast of around $12 million as demand for axels and transmissions and the servicing of them by mining services companies has dropped dramatically in the last 12 months.
Transfield fell to a 52-week low today of 80 cents and was down 3.25 cents, or 3.9 per cent, to 80.75 cents at 1523 AEST. Transfield rival WorleyParsons dropped 88 cents, or 4.4 per cent, to $19.20.
Goldman Sachs analyst Tim Toohey said that the Reserve Bank of Australia will cut its benchmark cash rate to 2.50 per cent next month, partly in a bid to stimulate weak consumer spending. Department store operator David Jones was down 4 cents, or 1.6 per cent, to $2.48 and rival Myer was down 3 cents, or 1.2 per cent, to $2.40. Supermarket operator Woolworths fell 9 cents, or 0.3 per cent, to $32.23.