Rise in unemployment adds to poor sentiment

THE local sharemarket slipped into the red yesterday after a rise in unemployment put further pressure on investors who were already holding their breath before last night's European debt crisis summit.

By InvestSMART · 9 Dec 2011

By InvestSMART ·
9 Dec 2011

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The benchmark S&P/ASX200 closed 11.8 points, or 0.27 per cent, lower at 4280.7, while the broader All Ordinaries was down 12.4 points, or 0.28 per cent, at 4338.9.

A loss of 40,000 full-time jobs in November pushed the local unemployment rate to 5.3 per cent, up from 5.2 per cent in October.

Economists said the job losses were in line with Reserve Bank and Treasury forecasts, as hiring intentions, restrained by the Europe's crisis, fed through to employment.

"There's been a phenomenal shift over the last year towards lower levels of jobs and labour-force growth," Commonwealth Bank senior economist Michael Workman said.

"It confirms that the employment market has been significantly softer over the last four to five months than it was at the start of the year, and the end of last year.

"It implies that the unemployment rate is going to drift a little bit higher over the next few months."

Energy stocks weighed heavily on the local bourse, with the sector losing 1.5 per cent in value.

Woodside Petroleum, the country's second-biggest oil and gas producer, dropped 2.3 per cent to $32.90 despite participants approving the first phase of its new $2.5 billion project on the North-West Shelf off Western Australia.

The positive news came after three land acquisition notices were ruled invalid by the West Australian Supreme Court. Oil and gas producer Santos lost 3.9 per cent to $13.

The financial sector lost 0.3 per cent after news two of the big-four banks, ANZ and NAB, had agreed to pass on the Reserve's rate cut in full.

ANZ lost 11?, or 0.52 per cent, to $21.13. NAB gained 21?, up 0.86 per cent, to $24.61.

Investors were biding their time ahead of the euro-zone leaders' debt summit last night.

But, with Germany and France forcing the other nations to adopt severe cuts in spending and tax increases, the drawn-out crisis has markets pushing for more rate cuts here.

"Markets are still very keen on another four (0.25 per cent) rate cuts by the middle of next year," Mr Workman said.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket slip into the red on that trading day?

The market fell after a rise in unemployment and before a high-profile euro-zone debt summit. Investors became cautious after Australia reported a loss of 40,000 full-time jobs in November and the unemployment rate rose to 5.3%, and global uncertainty around the European debt crisis weighed on sentiment.

How much did the ASX200 and All Ordinaries fall, and what does that mean for investors?

The benchmark S&P/ASX200 closed 11.8 points lower (down 0.27%) at 4,280.7, while the All Ordinaries fell 12.4 points (down 0.28%) to 4,338.9. For everyday investors, these are modest daily moves that reflect short-term caution driven by jobs data and global events rather than a single company-specific shock.

How did the November jobs report affect market expectations and the unemployment outlook?

November saw a loss of 40,000 full-time jobs, lifting the unemployment rate to 5.3% from 5.2% in October. Economists said the job losses were in line with Reserve Bank and Treasury forecasts, and the weaker hiring intentions—partly due to Europe’s crisis—suggest the unemployment rate could drift a little higher in the coming months.

What happened to energy stocks and which oil and gas companies were most affected?

The energy sector fell about 1.5%. Woodside Petroleum dropped 2.3% to $32.90 despite approval of the first phase of its new $2.5 billion North-West Shelf project and a favourable WA Supreme Court ruling on land notices. Santos declined 3.9% to $13, weighing on sector performance.

Why did banks and the financial sector move after the Reserve Bank's rate cut?

The financial sector lost 0.3% after two of the big-four banks, ANZ and NAB, agreed to pass on the Reserve Bank's rate cut in full. On the day ANZ fell 0.52% to $21.13 while NAB rose 0.86% to $24.61, reflecting differing market reactions to each bank's positioning on the rate change.

How is the European debt crisis influencing Australian markets and hiring intentions?

Investors were cautious ahead of the euro-zone leaders' debt summit. The drawn-out crisis—and pressure from Germany and France for spending cuts and tax increases—has restrained hiring intentions domestically and pushed markets to expect additional monetary easing in Australia.

Are markets expecting more interest rate cuts in Australia, and what is the outlook?

Yes. Market commentary in the article noted that markets are keen on another four 0.25% rate cuts by the middle of next year, reflecting expectations that domestic weakness and global uncertainty could lead to further Reserve Bank easing.

What's the practical takeaway for everyday investors from this market move?

The key takeaway is that short-term market moves were driven by weak jobs data and global uncertainty from the euro-zone debt crisis. Energy and financial stocks were notably affected. Everyday investors may want to stay informed about employment reports, central bank policy expectations, and major global events that can influence market sentiment.