Resources gravy train leaves retailers, banks behind

A LAST-MINUTE rally was not enough to lift stocks back into the green at the close of trade yesterday.

By InvestSMART · 15 Jul 2011

By InvestSMART ·
15 Jul 2011

Comments

A LAST-MINUTE rally was not enough to lift stocks back into the green at the close of trade yesterday.

The downward spiral was led by the retailers and compounded by losses from market heavyweights in the banking and resources sectors.

The benchmark S&P/ASX 200 index slipped 24.1 points, or 0.53 per cent, at 4,490.7, while the broader All Ordinaries index dropped 21.9 points, or 0.48 per cent, to 4561.3.

Coal, steel and gold stocks all rallied as investors scrambled to climb aboard the commodities gravy train after US Federal Reserve chairman Ben Bernanke alluded to the possibility of a third round of quantitative easing.

RBS Morgans private client adviser Bill Bishop said the US central bank's announcement had encouraged investors to snap up resources stocks.

"The resources have been the big performers of the day, with one or two exceptions, but it hasn't been able to hold the market up," Mr Bishop said.

Goldminer Newcrest added 84?, or 2.16 per cent, to $39.80, Iluka Resources gained 59?, or 3.5 per cent, to $17.44, and oil and gas explorer Santos added 11?, or 0.84 per cent, to $13.25.

Mining heavyweight BHP Billiton was down 3? at $43.60 and Rio Tinto closed flat at $80.95.

Mr Bishop said the big banks all fell on the back of European uncertainty. "The banks are going down because there is a perception that some of them have exposure to Europe," he said.

Commonwealth Bank lost 58? to $49.02, NAB dropped 30? to $23.46, Westpac shed 37? to $20.77 while ANZ gave up 18? to $20.98.

Retail stocks took a hammering on the back of Wednesday's after-market downgrade of retail heavyweight David Jones. David Jones shares were sold off aggressively, losing 71?, or 18.61 per cent, to $3.20.

Rival Myer went the same way, shedding 17?, or 6.42 per cent, to $2.48, while Westfield Group lost 20?, or 2.32 per cent, to close at $8.42.

Mr Bishop said the market was nervy due to continued weak consumer sentiment.

Qantas continued to plummet, losing 3.5? to $1.825 after engineers threatened to take industrial action.

National turnover was 2.398 million shares, worth $5.09 billion, with 482 shares up, 549 down and 388 unchanged.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

Why did the ASX fall on that trading day and how much did the S&P/ASX 200 drop?

The market slipped after retailers led a downward spiral that was compounded by losses in banking and resources heavyweights. The benchmark S&P/ASX 200 fell 24.1 points, or 0.53%, to 4,490.7, while the All Ordinaries dropped 21.9 points, or 0.48%, to 4,561.3.

How did talk of a possible third round of quantitative easing (QE3) affect Australian resources stocks?

When US Fed chairman Ben Bernanke hinted at the possibility of a third round of quantitative easing, investors rotated into commodities. Coal, steel and gold stocks rallied—Newcrest added 84 cents (2.16%) to $39.80, Iluka Resources gained 59 cents (3.5%) to $17.44, and Santos rose 11 cents (0.84%) to $13.25.

Which major miners moved and what happened to BHP Billiton and Rio Tinto?

The article noted mixed moves among big miners: BHP Billiton was down about 3% at $43.60, while Rio Tinto finished flat at $80.95. Some other resource names rallied as investors chased commodities after the Fed remarks.

Why did the big Australian banks fall and which banks were affected?

According to market commentary in the article, the big banks fell on concerns about European uncertainty and perceived exposure to Europe. Commonwealth Bank lost 58 cents to $49.02, NAB dropped 30 cents to $23.46, Westpac shed 37 cents to $20.77 and ANZ gave up 18 cents to $20.98.

What caused the sharp sell-off in retail stocks like David Jones and Myer?

Retail stocks were hit after an after‑market downgrade of retail heavyweight David Jones. David Jones shares plunged 71 cents, or 18.61%, to $3.20; Myer fell 17 cents, or 6.42%, to $2.48. The downgrade and weak consumer sentiment made retail names especially vulnerable.

How did Westfield Group perform and what does that say about retail property trusts that day?

Westfield Group lost 20 cents, or 2.32%, to close at $8.42. The decline in Westfield alongside sharp falls in department store stocks reflected broader nervousness in the retail sector and weaker consumer sentiment that day.

What happened to Qantas shares and why were they under pressure?

Qantas continued to fall, losing about 3.5% to $1.825 after engineers threatened industrial action. The prospect of industrial disruption put downward pressure on the airline's share price during that session.

What was the market turnover and breadth on the day, and why should everyday investors notice those figures?

National turnover was reported as 2.398 million shares worth $5.09 billion, with 482 stocks up, 549 down and 388 unchanged. Turnover and market breadth give a snapshot of trading activity and sentiment — relatively more decliners than advancers indicated a broadly weaker session across the market.