Sell-off in resources sector leaves market in the red

The sharemarket lost further ground this week. It has now fallen for five of the past six weeks.

Sharp falls in global commodity prices, particularly gold, meant resource companies took a pounding. For the week, the benchmark S&P/ASX200 lost 81.1 points, or 1.6 per cent, at 4931.9 points, while the broader All Ordinaries index lost 93 points, or 1.9 per cent, at 4923 points.

Things got off to a poor start when data showed Chinese growth for the first three months of the year was 7.7 per cent, below expectations of 8 per cent.

Fixed asset investment and industrial production were weaker than expected, while house prices in China's major cities continued to rise (they have now risen 3.6 per cent year on year).

Market watchers said that though the disparity between the real figure and the expected figure was not that large, the response from shareholders suggested many had been expecting a sharp V-shaped recovery for China's economy.

The price of gold fell like an anvil this week. Economists said there were several reasons.

"Just over a week ago it broke through technical support at around the $US1550 an ounce level, which triggered technical selling," AMP Capital's chief economist Shane Oliver said. "More fundamentally, there is no sign of the hyperinflation or US dollar collapse that 'gold bugs' had expected to follow quantitative easing in the US."

We should also remember that gold is part of the commodity complex that has been under pressure since 2011, he said.

And the financial crisis in Europe seemed to have settled a bit, reducing gold's "safe haven" demand.

But Paul Donovan, UBS's deputy head of global economics, questioned one politician's assessment of conditions in Europe.

"France's finance minister has declared that the existential crisis of the euro is over," he said. "It seems an odd time to say this. While we believe the euro survives, to declare the existential threat over when Cyprus has been forced to impose capital controls seems somewhat odd timing."

At any rate, the gold price is sitting about 27 per cent lower than its all-time high of $US1900 an ounce, hit on September 2011.

For the week, Echo Entertainment slipped 21¢, or 5.7 per cent, to $3.46, after the casinos operator ramped up its effort to fend off rival James Packer's Crown in a battle for wealthy Chinese gamblers in Sydney.

Qantas slipped 3.5¢, or 1.96 per cent, to $1.75, after it said the delivery of its first Boeing 787 Dreamliner may be delayed by "a couple of months" but reiterated its backing for the troubled aircraft.

Rio Tinto fell $2.58, or 4.5 per cent, to $54.32, as the global miner posts a better-than-expected quarterly iron ore production report.

Woodside Petroleum lost $2.30, or 6.3 per cent, to $34.10, with the company looking to spend some extra cash in Canada after shelving its controversial Browse project in Western Australia.

Harvey Norman gained 16¢, or 6.2 per cent, at $2.74, after the retailer achieved sales growth for the first time in 18 months despite it continuing to struggle to sell enough televisions and computers.

Billabong lost 2.5¢, or 5 per cent, to 49.5¢, as the surfwear retailer's shares continued to lose ground on the back of a cut-price $287 million takeover proposal.