INVESTORS wiped $21 billion off the value of Australian shares yesterday after a fresh outbreak of fears for the eurozone's future led to the sharpest market slump in almost two months.
The S&P/ASX 200 Index fell 70.2 points, or 1.7 per cent, to 4128.9 and the dollar shed US1?, as sentiment soured in response to a surge in Spain's borrowing costs.
Government bonds issued by Spain the fourth-biggest economy in the eurozone had last night climbed to a record high above 7.5 per cent, raising fears the country may need a full-scale bailout.
Last month Spain's banks were thrown a ?100 billion lifeline by eurozone members, but there are worries that if current conditions remain, the country's government will be locked out of financial markets.
The surge sent fears rippling around the world, with Australian mining stocks sold off heavily and the dollar falling to US103.12?, down from US104.09? on Friday.
Octa Phillip director of equities Andrew Sekely said the market had suffered one of its biggest one-day falls in recent months due to debt fears in Europe and a local report about the end of Australia's mining boom.
"It's a combination of overseas influences and negative comments coming out of Europe and the local press," Mr Sekely said.
US stocks fell about 1 per cent on Friday, following renewed concerns about Spain after its borrowing costs rose past the mark that is considered too high to be sustainable.
Just as European ministers approved a rescue of Spain's troubled banks, the region of Valencia revealed it would become the first to tap a new fund designed to provide liquidity to the country's 17 semi-autonomous regions.
And locally, a Deloitte Access Economics report found the mining boom was about to peak and an economic slowdown would be inevitable.
Woolworths was one of the only local stocks to buck the downward trend, beating expectations to lift its sales by 4.7 per cent to $56.7 billion in the 2012 financial year.
Woolworths shares closed 27? higher at $27.89.
Shares in the big miners were all substantially lower after the Deloitte report came out.
BHP Billiton was 81? lower at $30.55, Rio Tinto was $1.87 lower at $51.52 and Fortescue was down 31? at $4.05.
The four major banks were all weaker.
Westpac was 30? lower at $22.55, ANZ lost 25? to $22.82, National Australia Bank was down 30? to $23.69 and Commonwealth Bank 38? lower at $54.74.
The price of gold in Sydney was $US1576.35 an ounce, down $US9.64 on Friday's close of $US1585.99.
National turnover was 1.36 billion securities worth $3.2 billion, with 245 stocks up, 653 down and 347 unchanged.
Frequently Asked Questions about this Article…
Why did Australian shares drop sharply after concerns about Spain and the eurozone?
Australian shares fell after a fresh surge in Spain's borrowing costs — government bond yields climbed above 7.5% — which revived fears the country might need a full-scale bailout. That overseas debt worry dented sentiment at home: the S&P/ASX 200 fell 70.2 points to 4,128.9 and investors wiped about $21 billion off the value of Australian shares.
How did the Spanish debt scare affect different sectors on the ASX?
The article reports the shock hit cyclical sectors hardest: Australian mining stocks were sold off heavily after a Deloitte Access Economics report said the mining boom was about to peak, while the four major banks were all weaker. By contrast, defensive retailers such as Woolworths bucked the trend.
What happened to major miners like BHP Billiton, Rio Tinto and Fortescue during the sell-off?
Shares in the big miners fell significantly: BHP Billiton was down to about $30.55, Rio Tinto fell $1.87 to $51.52 and Fortescue slipped to about $4.05, according to the article’s market close figures.
How did Australia's big four banks perform during the market slump?
All four major banks were weaker on the day. Reported closing prices were Westpac around $22.55, ANZ about $22.82, National Australia Bank near $23.69 and Commonwealth Bank at about $54.74.
Were there any stocks that did well despite the market downturn?
Yes. Woolworths beat expectations, lifting sales by 4.7% to $56.7 billion for the 2012 financial year, and its shares closed higher at $27.89 — one of the few local positives during the slump.
What happened to the Australian dollar and gold during the market move?
The Australian dollar weakened, falling to about US103.12 cents from US104.09 cents. Gold in Sydney was quoted at US$1,576.35 an ounce, down US$9.64 from the previous close of US$1,585.99.
How active was the market on the day of the slump and what was market breadth like?
National turnover was 1.36 billion securities worth about $3.2 billion. Market breadth was negative: 245 stocks rose, 653 fell and 347 were unchanged.
What developments should everyday investors monitor after this kind of eurozone-driven volatility?
Based on the article, investors may want to watch Spanish borrowing costs and any eurozone rescue measures (including regional use of liquidity funds), updates on bank rescue actions, major economic reports such as Deloitte’s assessment of the mining cycle, and local market commentary — all of which were cited as drivers of the recent market move.
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