Rally shortlived as confidence evaporates
THE local stockmarket closed 1.4 per cent lower yesterday as warnings from two credit ratings agencies wiped out optimism that Europe's debt crisis may be nearing a resolution.
THE local stockmarket closed 1.4 per cent lower yesterday as warnings from two credit ratings agencies wiped out optimism that Europe's debt crisis may be nearing a resolution.Moody's said it would review the credit ratings of all European nations after last week's Brussels summit failed to deliver "decisive policy measures".Fitch Ratings forecast that Europe was unlikely to avoid a "significant economic downturn", despite the measures agreed to last week."The onslaught on risk assets really reflects how unimpressed investors were by the results from the European summit," an IG Markets strategist, Stan Shamu, said.The benchmark S&P/ASX200 index closed 59.4 points, or 1.4 per cent, lower at 4193.4, while the broader All Ordinaries was down 59.7 points, or 1.4 per cent, at 4251.7.Two interest rate cuts in as many months by the Reserve Bank has not been enough to save Australia's economy from the contagion spreading from Europe, a survey found.National Australia Bank's monthly business survey showed domestic business confidence was unchanged, but investors remained concerned about the effect of Europe's deteriorating economy."[Monday's] optimism was like one single ray of sunshine squeezing through an otherwise cloudy sky," a CommSec analyst, Steven Daghlian, said. "Without that rate cut we could have seen confidence pulling back."Dealers are now looking towards a slew of US and Chinese data this week - particularly US monthly retail figures due out last night - to determine further market direction.Locally, resource stocks came under further pressure after the federal government downgraded its forecasts for export earnings for minerals and energy exports to $206 billion in 2011-12 from $215 billion previously.BHP Billiton was down 71? at $35.82 while Rio Tinto was down $1.37 at $62.76.Energy stocks also were under pressure, ending down 2.1 per cent. Woodside fell 84? at $31.53 and Santos fell 21? to $13.01.The banks all lost some ground, with NAB down 61? at $23.75, Westpac 46? at $20.83, the Commonwealth 48? at $49.35 and ANZ 21? at $20.74.Market turnover was 1.67 billion shares worth $4.15 billion.