Shares finish the year on a negative note

SHARES closed lower on the last trading day of the year, one in which the market fell more than 15 per cent as offshore events strangled investor sentiment.

By InvestSMART · 31 Dec 2011

By InvestSMART ·
31 Dec 2011

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SHARES closed lower on the last trading day of the year, one in which the market fell more than 15 per cent as offshore events strangled investor sentiment.

The market opened about 0.2 per cent firmer yesterday, after a positive lead from Wall Street. However, stocks turned negative in the afternoon amid low trading volumes.

Jamie Elgar, an adviser at Burrell Stockbroking, said it was a soft finish to the year. "It is a little disappointing considering the lead that we had from Wall Street," Mr Elgar said.

"We seem to be disconnected from what's going on on Wall Street, with everyone looking to what is happening in Europe."

Equity markets around the world have slumped on worries that problems stemming from Europe, where countries including Greece, Italy and Ireland have had difficulty repaying debt, will cause global credit markets to freeze up.

At the end of a shortened session yesterday, the benchmark S&P/ASX 200 index was down 14.5 points, or 0.4 per cent, at 4056.6. The broader All Ordinaries Index finished down 12.1 points, or 0.29 per cent, at 4111.

Some book squaring among traders was another, though minor, factor for the dip after morning trade, Mr Elgar said. Europe was the "overriding factor at the moment".

"That unfortunately will continue for January and early next year," he said.

BHP Billiton, the biggest listed company on the local market, ended down 8? at $34.42, while Rio Tinto was steady at $60.30.

The big retail banks ended in the red. ANZ was off 12? at $20.53, Commonwealth Bank slipped 11? to $49.22, NAB closed 16? weaker at $23.36 and Westpac fell 15? to $20.

In New York overnight, the Dow Jones Industrial Average advanced 1.12 per cent, the S&P 500 rose 1.07 per cent and the Nasdaq index gained 0.92 per cent.

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Frequently Asked Questions about this Article…

Why did Australian shares finish the year on a negative note?

Shares closed lower on the last trading day after a year in which the market fell more than 15%. Offshore events — especially worries about sovereign debt in Europe — squeezed investor sentiment. Low trading volumes and some end-of-year book squaring also contributed to the soft finish.

How much did the S&P/ASX 200 and All Ordinaries fall on the final trading day?

The benchmark S&P/ASX 200 was down 14.5 points, or 0.4%, to 4056.6, while the broader All Ordinaries Index fell 12.1 points, or 0.29%, to finish at 4111.

What role did European debt concerns play in the market decline?

Concerns about debt problems in countries such as Greece, Italy and Ireland drove global equity markets lower. The fear that those issues could freeze up global credit markets was described as the overriding factor weighing on investor sentiment in Australia.

Why did the ASX seem disconnected from the positive lead coming from Wall Street?

Although Wall Street provided a positive lead, the Australian market turned negative by the afternoon. Traders cited low volumes, book squaring and dominant worries about Europe — making the ASX appear disconnected from New York moves.

How did major miners like BHP Billiton and Rio Tinto perform on that day?

BHP Billiton ended lower — reported down around 8% to $34.42 — while Rio Tinto remained steady at $60.30.

What happened to Australia’s big retail banks during the sell-off?

The big banks finished in the red: ANZ was down about 12% to $20.53, Commonwealth Bank slipped about 11% to $49.22, NAB closed roughly 16% weaker at $23.36, and Westpac fell about 15% to $20.00.

How did US markets perform overnight compared with the ASX?

New York finished higher overnight — the Dow Jones rose 1.12%, the S&P 500 gained 1.07% and the Nasdaq added 0.92% — but those gains did not prevent the ASX from turning negative later in the day due to Europe-driven caution and low local volumes.

What’s the short-term outlook for investors after this negative year-end close?

Market commentators in the article expect European debt worries to remain influential into January and early next year, suggesting continued caution and potential volatility for investors as global developments unfold.