Prospects of Fed stimulus cut keeps market in the red
It was also weakened by the Reserve Bank's decision on Tuesday to cut the official cash rate to historic lows.
The dollar rebounded from its recent low, closing at US91.40¢.
For the week, the benchmark S&P/ASX200 fell 61.6 points, or 1.2 per cent, to 5055.2 points, while the All Ordinaries fell 59.9 points, or 1.2 per cent, to 5038.8 points.
Economic data and central banks dominated news this week.
The main event was speculation the US Fed would begin winding back its stimulus program earlier than expected. The speculation peaked on Wednesday when the S&P/ASX200 index dropped 1.9 per cent, its biggest one-day fall since July 3, and Japan's Nikkei plunged 4 per cent.
The market never recovered from the blow. Market watchers questioned the intensity of the speculation - because who cares if the Fed starts "tapering" a few months earlier? - but it was too late.
The market lost $27.2 billion in one day. It was the deepest one-day rout in almost six weeks.
It came a day after the ASX shed 0.1 per cent following the Reserve Bank's decision to cut the cash rate to 2.5 per cent - the lowest level since the 1950s - and helped to snuff out a potential three-week rally.
Politicians offered their best explanations for the RBA's rate cut. The federal government and Coalition spent the rest of the week trying to convince voters why the move was a sign that the economy was in fine or dire health.
Commonwealth Bank economist Michael Workman said the Reserve still appeared to be biased towards further monetary policy easing. "The RBA's qualitative assessment of the outlook involves the economy running below trend until mid-2014, unemployment edging higher for a year or so and the inflation rate remaining in the bottom half of the target range," Mr Workman said.
"[But] the policy decision over the remainder of 2013 will remain data dependent. We will stick with our 2.5 per cent cash rate call but will watch labour market trends and the Aussie dollar very closely in assessing the case for any further cut."
The move came in the same week as the federal Coalition pledged to cut the corporate tax rate, currently 30 per cent, to 28.5 per cent within two years if it wins the election.
The announcement was generally welcomed by the business community, but some questioned how affordable it would be, given the state of the federal budget.
For the week, Rio Tinto rose 94¢, at $60.25. The miner returned to profitability in the first half of 2013 but it had to sack thousands of workers and slash $US1.5 billion ($1.64 billion) in costs to get there.
Telstra shares rose 2¢ to $5.08. The telco reported a 12.9 per cent rise in full-year net profit to $3.9 billion, with revenue up 2 per cent to $26 billion.
Cochlear shed 28¢ to $58.32, as the hearing implant maker said the success of the rollout of its Nucleus 6 device would be important for the company's financial results in the 2014 financial year.
Crown was steady at $13.26. The casino operator is shaking up its senior management team in a move that has its Perth resort boss promoted at the expense of his Melbourne counterpart.
Frequently Asked Questions about this Article…
The market slid mainly on speculation the US Federal Reserve might begin winding back its multibillion-dollar stimulus earlier than expected (September rather than December), combined with local fallout from the Reserve Bank of Australia cutting the official cash rate to historic lows.
The benchmark S&P/ASX200 fell 61.6 points, or 1.2%, to 5,055.2 points for the week, while the All Ordinaries dropped 59.9 points, or 1.2%, to 5,038.8 points.
Speculation peaked midweek and triggered a sharp sell-off: the S&P/ASX200 plunged 1.9% on Wednesday (its biggest one-day fall since July 3), Japan's Nikkei fell about 4%, and the market lost roughly $27.2 billion in one day — the deepest one-day rout in almost six weeks.
The RBA cut the cash rate to 2.5% — the lowest level since the 1950s — which dulled a potential three-week rally. Economists noted the RBA still appears biased toward further easing and said future policy will remain data-dependent, so investors should monitor economic indicators like jobs and inflation.
The Australian dollar rebounded from recent lows and closed at US91.40¢ during the week, according to the article.
Several company moves featured: Rio Tinto rose 94¢ to $60.25 after returning to profitability in H1 2013 (after job cuts and US$1.5bn of cost reductions); Telstra climbed 2¢ to $5.08 after reporting a 12.9% rise in full‑year net profit to $3.9bn and revenue up 2% to $26bn; Cochlear fell 28¢ to $58.32 as it said the rollout success of its Nucleus 6 device will be important for FY2014 results; and Crown was steady at $13.26 amid a senior management shake-up.
The federal Coalition pledged to cut the corporate tax rate from 30% to 28.5% within two years if it wins government. The business community generally welcomed the idea, though some raised concerns about affordability given the federal budget — a factor investors may watch when assessing corporate profit outlooks.
Keep an eye on central bank signals (US Fed tapering talk and RBA decisions), key economic data (labour market trends and inflation), the Australian dollar, and company-specific updates such as earnings and product rollouts — all of which the article highlights as drivers of market direction.
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