Steep resource losses act as dampener

THE sharemarket finished almost 1 per cent lower yesterday as resource companies suffered steep losses amid weakness on commodities markets.

By InvestSMART · 31 Aug 2012

By InvestSMART ·
31 Aug 2012

Comments

THE sharemarket finished almost 1 per cent lower yesterday as resource companies suffered steep losses amid weakness on commodities markets.

At the close, the benchmark S&P/ASX 200 Index was down 40.7 points, or 0.93 per cent, at 4315.7.

RBS Morgans director of equities Bill Chatterton said resource stocks and mining services companies found a dip in commodities prices tough, while financial stocks remained unharmed.

"Anything with a resources focus is not having an easy day, and the market is really in a defensive mode," Mr Chatterton said.

"The falls seem to be washing into the support companies."

In the resource sector, shares in BHP Billiton fell 77?, or 2.4 per cent, to $31.99.

Rio Tinto was down $1.91, or 3.8 per cent, at $48.63. Fortescue Metals was also hit, losing 6?, or 1.6 per cent, to $3.59.

The major banks were mixed. Commonwealth fell 33?, or 0.6 per cent, to $53.98, while Westpac lost 10?, or 0.4 per cent, to $24.76. ANZ fell 12?, or 0.48 per cent, to $24.86, and National Australia Bank shares rose 11?, or 0.44 per cent, to $25.20.

Miners such as Iluka Resources, OZ Minerals, Lynas and some energy stocks all suffered substantial losses. The fund manager Perpetual reported a 57 per cent slide in net profit, driven largely by a big restructure and weak sharemarket conditions. Its shares fell 41?, or 1.5 per cent, to $26.59.

Regional broadcaster Prime Media Group posted a slight rise in its full-year net profit of $27.7 million, up 1.9 per cent on the corresponding period. Shares in the company jumped 6?, or 8.8 per cent, to 74.5?.

National turnover was 1.6 billion shares worth $4.1 billion, with 317 shares up, 640 down and 358 unchanged.

Gold closed in Sydney at $US1657.42, down $US8.56.

Meanwhile, the dollar fell to its lowest in more than a month after official figures showed mining investment was likely to grow by less than expected this year.

At 5pm, the dollar was trading at US103.36?, down from US103.72?.

The Commonwealth Bank's foreign exchange economist, Chris Tennent-Brown, said falling commodity prices as well as quarterly Australian capital expenditure data helped push the Australian dollar lower. AAP

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What happened to the S&P/ASX 200 today and why should everyday investors care?

The S&P/ASX 200 fell 40.7 points (0.93%) to 4,315.7 as resource companies suffered steep losses on weaker commodity markets. Everyday investors should note that commodity-driven moves can drag the broader index and affect portfolio sectors tied to resources and mining services.

Why did resource stocks and mining companies fall on the market day covered in the article?

Resource and mining stocks dipped because commodity prices weakened, putting pressure on miners and mining services. RBS Morgans equities director Bill Chatterton said the market moved into a defensive mode, with falls in commodity names flowing into related support companies.

How did major miners BHP, Rio Tinto and Fortescue perform and what were the price moves?

BHP Billiton fell about 2.4% to $31.99, Rio Tinto dropped $1.91 (around 3.8%) to $48.63, and Fortescue Metals lost about 1.6% to $3.59, reflecting the sector-wide hit from weaker commodity markets reported in the article.

Were the big Australian banks affected and which bank stocks moved?

Bank results were mixed: Commonwealth Bank fell about 0.6% to $53.98, Westpac lost roughly 0.4% to $24.76, ANZ slipped about 0.48% to $24.86, while National Australia Bank rose about 0.44% to $25.20 — showing financials were less uniformly impacted than resources.

Which smaller miners, energy stocks or other firms were mentioned as suffering losses?

The article notes substantial losses among miners such as Iluka Resources, OZ Minerals and Lynas, along with some energy stocks, highlighting that the weakness extended beyond the largest diversified miners.

What corporate earnings or company news influenced stock moves (for example Perpetual and Prime Media)?

Perpetual reported a 57% slide in net profit, attributed largely to a major restructure and weak sharemarket conditions, and its shares fell about 1.5% to $26.59. By contrast, regional broadcaster Prime Media Group posted a slight rise in full‑year net profit to $27.7 million (up 1.9%), and its shares jumped around 8.8%.

How did commodities and currency markets move — what happened to gold and the Australian dollar?

Gold in Sydney closed at US$1,657.42, down US$8.56. The Australian dollar fell to its weakest in more than a month — trading at US103.36¢ (down from US103.72¢) — after data suggested mining investment was likely to grow less than expected and commodity prices fell.

What was the market turnover and breadth on the day, and what does that tell everyday investors?

National turnover was 1.6 billion shares worth $4.1 billion, with 317 stocks up, 640 down and 358 unchanged. That breadth — more stocks down than up — reinforces that the market weakness was broad-based, driven largely by the resource sector sell-off described in the article.