MARKETS SPECTATOR: Trading grim glances

Ford's decision to leave Australia, a falling dollar and contraction in China has markets losing faith in company earnings prospects.

The trading room chatter is all about the dollar, Ford and China. All of this is not good for stocks.

At 3:27pm AEST the benchmark S&P/ASX 300 Index was down 92.465, or 1.79 per cent, to 5072.90, after earlier falling as low as 5062.20. All sectors with the exception of IT had fallen.

Traders and analysts said Ford’s decision to stop manufacturing cars in Australia after 90 years – because costs were double that of Europe and four times that of Asia – was a negative sign for business investment and the economy, and had negatively impacted the dollar. Further dampening sentiment toward the economy’s prospects was a report by HSBC that showed China’s manufacturing is contracting in May for the first time in seven months.

At 3pm AEST the Australian dollar was down against the US dollar by 1.1 per cent, to $US0.9645, compared with $US0.9754 against yesterday, according to Bloomberg data. The Australian dollar has dropped 6.8 per cent this month and was trading at $US100.12 on May 1, its high for the month.

The S&P/ASX200 Index has fallen 2.2 per cent in May.

Nomura strategist Tim Rocks says foreign investors today are selling stocks as the fall in the Australian dollar may hurt any gains they might have if they are 'un-hedged'. Other investors are selling, believing an end to the yield trade may be in motion.

At 3:02pm AEST ANZ shares were down $1.06, or 3.6 per cent, to $28.24. Commonwealth Bank’s stock had fallen $1.99, or 2.8 per cent, to $69.71. NAB had dropped 93 cents, or 2.8 per cent, to $31.78. Westpac had slid $1.325, or 4.3 per cent, to $29.865.