Red ink across the board as sentiment sours

THE sharemarket ended a third straight trading session in the red on fresh concerns about European sovereign debt.

By InvestSMART · 7 Sep 2011

By InvestSMART ·
7 Sep 2011

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THE sharemarket ended a third straight trading session in the red on fresh concerns about European sovereign debt.

The S&P/ASX200 index closed down 66.4 points, or 1.6 per cent, at 4075.5, while the broader All Ordinaries index fell 63.5 points, or 1.5 per cent, to 4160.7. The September share price index futures contract was 72 points lower at 4073.

The market opened lower on a weak lead from European markets as investors were concerned about euro zone debt and the risk of a new recession in leading economies.

A City Index dealer, Jian Wei, said sentiment was weak, with investors reeling from disappointing US jobs data on Friday and the euro zone debt crisis. "Traders are betting the governments or central banks [will] have to take more action to save the ... crisis on financial markets," he said. "The sentiment is still flowing to low-risk, better stocks."

An IG Markets analyst, Ben Potter, said afternoon trade was fairly neutral after the Reserve Bank announced it would leave interest rates steady for the 10th straight month, as expected. "It's a pretty tough environment at the moment," he said. "[The local market] really is being driven by stuff outside of Australia."

Rio Tinto fell $1.38, or 1.98 per cent, to $68.41 after it announced it would sell its 57.7 per cent stake in the South African copper producer Palabora Mining because it was no longer of sufficient scale for the parent company. Fellow miner BHP Billiton was down 82? at $36.88.

Transfield Services was down 2? at $2.26 after it was awarded a $133 million contract to help build the national broadband network.

The major banks were all lower, with National Australia Bank the worst performer, closing 2.77 per cent or 63? down at $22.14. Westpac fell 48? to $19.50, Commonwealth Bank fell 41? to $45.98 and ANZ fell 15? to $19.26.

Seven West Media was the worst performer, closing 5 per cent down at $3.02 after going ex-dividend.

The spot price of gold in Sydney hit a record high at $US1920.44 ($1819) an ounce, before easing to close at $US1918.25, up $US32.25.

Preliminary national turnover was 2.06 billion shares changing hands for $5.11 billion.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket close lower and investor sentiment sour?

The article says sentiment weakened on fresh concerns about European sovereign debt and the risk of a new recession in major economies, compounded by disappointing US jobs data. Traders were shifting toward lower-risk stocks and were betting governments or central banks might need to take further action, which helped push the market lower.

How much did the S&P/ASX200 and All Ordinaries fall on that trading day?

According to the article, the S&P/ASX200 closed down 66.4 points, or 1.6%, at 4,075.5. The broader All Ordinaries index fell 63.5 points, or 1.5%, to 4,160.7. The September share price futures contract was about 72 points lower at 4,073.

Did the Reserve Bank of Australia interest rate decision affect the market?

The Reserve Bank left interest rates steady for the 10th straight month, which was expected. An IG Markets analyst described afternoon trade as fairly neutral after the decision, and noted that the local market was being driven largely by events outside Australia.

What happened to Rio Tinto and why did its share price fall?

Rio Tinto's shares fell $1.38, or about 1.98%, to $68.41 after it announced it would sell its 57.7% stake in South African copper producer Palabora Mining because the asset was no longer of sufficient scale for the parent company.

How did other big miners and resources stocks perform?

The article reports that BHP Billiton also fell and closed at $36.88. Overall, resource stocks were weaker amid the broader market decline driven by global debt worries.

How did the major Australian banks fare during the sell-off?

Major banks were all lower. National Australia Bank was the worst performer, closing 2.77% down at $22.14. Westpac, Commonwealth Bank and ANZ also fell, closing at $19.50, $45.98 and $19.26 respectively.

Why did Seven West Media drop sharply that day?

Seven West Media was the worst performer on the day, closing 5% down at $3.02 after going ex-dividend, which is identified in the article as the reason for the decline.

Were there any notable moves in safe-haven assets like gold?

Yes. The article notes the spot price of gold in Sydney hit a record high at US$1,920.44 (A$1,819) an ounce before easing to close at US$1,918.25, up US$32.25 on the day.