A SHARP fall in resource stocks pushed the market to a two-month low yesterday, on intensifying worries of a possible messy Greece exit from the eurozone and its impact on the global economy.
The benchmark S&P/ASX200 index fell 100.8 points, or 2.4 per cent, to 4165.5, while the broader All Ordinaries fell 101.6 points, or 2.4 per cent, to 4214.7.
Since the beginning of May, the sharemarket has lost more than $75 billion in value amid fears of another escalation in Europe's debt crisis.
After six rounds of fruitless wrangling, Greece abandoned efforts to form a government and called a new election that some investors fear may hand victory to the leftists, undo the country's bailout package, and push it closer to bankruptcy and out of the eurozone. Greek political leaders are due to meet tonight to establish a caretaker government before a second election in just over a month.
The dollar also suffered, falling to US98.85?, its lowest this year, as investors fled riskier assets. "It's just a general bout of risk aversion around the globe," says Rochford Capital director Derek Mumford. "It's not just Greece, it's the whole European situation. The Aussie is certainly under pressure."
Mr Mumford predicts the currency will drop as low as US97.5? within the next couple of weeks.
The sharemarket's falls were broad-based with utilities the only winner, albeit marginally.
IG Markets analyst Stan Shamu said an exit by Greece from the eurozone could lead to a prolonged period of uncertainty on the European front.
"It would cost them a lot of money, cause a lot of instability in the region," Mr Shamu said. "Investors are running scared, there's a widespread sell-off, particularly in resources."
There was a run of cash out of European banks, with bond yields rising, particularly in Spain, meaning confidence in the region was falling.
The only positives were short sellers - investors who bet on stocks falling - were winning and value could be found quality stocks such as BHP Billiton and Rio Tinto, Mr Shamu said.
BHP closed at a three-year low, down $1.37, or 4.05 per cent, at $32.49. Rio lost $2.32, or 3.85 per cent, to $57.99 and iron ore miner Fortescue Metals fell 26?, or 5.1 per cent, to a four-month low at $4.84. Australia's largest listed oil and gas player, Woodside Petroleum, shed $1.08 to $31.72 and Santos retreated 27 cents to $12.28.
The banks all lost ground, with the Commonwealth down 89? at $51.77, ANZ 50? to $51.61, Westpac 22? to $21.68 and National Australia Bank closing 27? lower at $24.40.
Toll Holdings shares slumped 15 per cent to $4.73 after the transport and logistics group flagged lower earnings because of weaker demand from the struggling retail sector.
Industrea shares jumped by 43 per cent to $1.23 after General Electric announced a takeover of the mining services group. Shares in CSR slipped 1.5 per cent after the building products maker recorded a slight increase in net profit for the year to $90.7 million, but expected challenging conditions in the housing construction industry to continue.
with agencies
ALL ORDS AUSTRALIA MAY 16
HIGH 4316.3
LOW 4214.7
4214.7
101.6 (-2.4%)
SOURCE: BLOOMBERG
Frequently Asked Questions about this Article…
What triggered the recent ASX market fall and how big was the drop?
The sell-off was driven by fears a messy Greek exit from the eurozone and broader European debt worries, which hit resource stocks especially hard. The S&P/ASX 200 fell 100.8 points (‑2.4%) to 4,165.5 and the All Ordinaries dropped 101.6 points (‑2.4%) to 4,214.7. Since the start of May the sharemarket had lost more than $75 billion in value, according to the article.
Which sectors and shares were hardest hit during the sell-off?
Resource and commodity stocks led the declines, with major miners and energy companies down sharply. Banks also lost ground. The only sector that was marginally positive was utilities. The article highlights big falls in miners, oil & gas firms and broad-based selling across the market.
How did major miners like BHP Billiton and Rio Tinto perform in the downturn?
BHP closed at $32.49, down $1.37 (about 4.05%) at a three‑year low, while Rio Tinto fell $2.32 (about 3.85%) to $57.99. The article notes short sellers were profiting and some analysts suggested value could be found in quality miners such as BHP and Rio Tinto amid the weakness.
What happened to Australia’s big banks in the market drop?
All the major banks lost ground during the sell‑off. According to the article, Commonwealth Bank fell 89c to $51.77, ANZ dropped 50c to $51.61, Westpac eased 22c to $21.68 and National Australia Bank closed down 27c at $24.40.
Did any company-specific news move share prices during the market turmoil?
Yes. Toll Holdings plunged 15% to $4.73 after flagging lower earnings due to weaker retail demand. Industrea jumped 43% to $1.23 after General Electric announced a takeover of the mining services group. CSR slipped 1.5% after reporting a slight rise in annual net profit to $90.7 million but warning of continued challenging conditions in housing construction.
How did the Australian dollar and investor risk sentiment react to the Greece situation?
Risk aversion pushed the currency lower: the Australian dollar fell to US98.85 (its lowest this year at the time of the article) as investors fled riskier assets. A market commentator in the article predicted it could fall as low as US97.5 within weeks. Overall sentiment turned risk‑off amid European uncertainty.
Are there any suggested opportunities or winners amid the sell‑off?
The article notes that short sellers were winning during the decline, and an analyst suggested value might be found in quality stocks such as BHP Billiton and Rio Tinto. That observation came from market commentators rather than as investment advice.
What broader European risks should everyday investors watch according to the article?
Analysts warned that a Greek exit from the eurozone could cause prolonged uncertainty and regional instability, including runs on European banks and rising bond yields (especially in Spain). The article quotes an IG Markets analyst saying such a scenario would cost a lot of money and create significant instability, which underpinned the global risk‑off reaction.
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