Rising dollar sees investors fall back

THE sharemarket closed lower, ending a three-day rally after a week of volatility, as investors pulled back in response to the local dollar rising in afternoon trade.

By InvestSMART · 17 Aug 2011

By InvestSMART ·
17 Aug 2011

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THE sharemarket closed lower, ending a three-day rally after a week of volatility, as investors pulled back in response to the local dollar rising in afternoon trade.

The benchmark S&P/ASX200 index fell 35.6 points to 4247.3, while the broader All Ordinaries index was down 29.5 points at 4317.3.

A CMC Markets trader, Ben Taylor, said the dollar's strength had prompted investors to pull back from trading.

"I think people are really seeing that as an indication [they should] cut some of their long bets over the last week and consolidate," he said.

Mr Taylor expects the market to hold steady for the next couple of days as investors await greater direction from offshore markets. "People are still more scared than they are confident and it seems like people are sitting on a bit of a knife's edge right now," he said.

Shares traded higher earlier in the day, led by bargain-hunting investors, after a number of positive trading reports were released during the morning.

Shares in the gambling company Tabcorp closed up 3? at $3.22, after it lifted net profit 14 per cent.

Among banks, Westpac shares lost 92?, or 4.4 per cent, to $20.25 after posting a 2 per cent fall in third-quarter cash earnings due to slowing credit growth. National Australia Bank was 36? lower at $23.21, ANZ fell 30? to $20.35 and Commonwealth Bank was down 55? at $46.83.

Qantas shares were 0.5? lower at $1.525, after the airline group announced a new strategy including aircraft acquisitions, new brands, and 1000 job losses.

OneSteel shares were up $1.50 at $1.45 after the steelmaker posted an 11 per cent fall in net profit. OZ Minerals was down 45? at $11.90 after posting a 72 per cent profit fall following the settlement of a class action. James Hardie Industries shares were up 5? at $5.40, after the building products maker reported a 99 per cent fall in quarterly profit.

Among the miners, BHP Billiton ended the day weaker, losing 42? at $39.43, while its rival, Rio Tinto, fell $1.13 to $73.39. The price of gold in Sydney was $US1768 a fine ounce, up $US32.40 from Monday's local close at $US1735.60.

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Frequently Asked Questions about this Article…

Why did the ASX fall today and how did the rising Australian dollar influence the market?

The local sharemarket pulled back after a three-day rally as the Australian dollar strengthened in afternoon trade. The S&P/ASX 200 fell 35.6 points to 4,247.3 and the All Ordinaries dropped to 4,317.3. CMC Markets trader Ben Taylor said the dollar's strength prompted investors to cut some long bets and consolidate, which reduced trading activity.

What did market commentators say about investor sentiment and short-term outlook?

Ben Taylor from CMC Markets said people are more cautious than confident and appear to be 'sitting on a bit of a knife's edge.' He expects the market to hold relatively steady for the next couple of days as investors await clearer direction from offshore markets.

Which stocks rose on bargain-hunting and why were they higher?

Shares were higher earlier in the day due to bargain-hunting after several positive trading reports. For example, Tabcorp closed at $3.22 after lifting net profit by 14%, which helped lift its stock during morning trade.

How did recent bank results affect major bank share prices on the ASX?

Bank shares fell after earnings updates. Westpac slid to $20.25 after reporting a 2% fall in third-quarter cash earnings attributed to slowing credit growth. Other major banks also fell, with National Australia Bank at $23.21, ANZ at $20.35 and Commonwealth Bank at $46.83.

What impact did Qantas' new strategy announcement have on its share price?

Qantas shares were slightly lower at $1.525 after announcing a new strategy that includes aircraft acquisitions, new brands and around 1,000 job losses. The plan weighed on investor sentiment for the airline.

How did mining and materials stocks perform, including BHP, Rio Tinto and OZ Minerals?

Miners were generally weaker: BHP Billiton ended the day lower at $39.43 and Rio Tinto fell $1.13 to $73.39. OZ Minerals fell to $11.90 after reporting a 72% profit fall following the settlement of a class action.

Were there any notable profit swings for industrial and materials companies?

Yes. OneSteel reported an 11% fall in net profit but its shares traded up to $1.45, while James Hardie Industries reported a steep 99% fall in quarterly profit and its shares were trading at $5.40. These large profit moves drove stock-level reactions during the session.

What happened to the gold price and how did it move during the session?

Gold rose in Sydney, trading at US$1,768 an ounce — up US$32.40 from Monday's local close of US$1,735.60, reflecting stronger demand or safe-haven flows during the volatile week.