Stimulus moves send market lower

THE sharemarket lost ground yesterday after Europe, Britain and China tried to kick-start their economies with looser monetary policy and succeeded in adding to fears about a slowdown in global growth.

THE sharemarket lost ground yesterday after Europe, Britain and China tried to kick-start their economies with looser monetary policy and succeeded in adding to fears about a slowdown in global growth.

But yesterday's concerns about the global economy did not prevent the Australian market gaining ground for the week (and for the second week in a row).

For the week, the benchmark S&P/ASX 200 Index rose 63.17 points, or 1.5 per cent, to 4157.8.

Yesterday the market lost value after the Bank of England said it would pump an extra #50 billion ($A76 billion) into the UK economy, and the European Central Bank cut its main interest rate to a historic low of 0.75 per cent, both citing weaker inflation.

The news sent the Aussie to a record high against the euro and took it to a two-month high against the greenback. It reached 83.19 euro cents, its strongest reading against the European currency.

But traders had anticipated the monetary authorities' moves, and some were disappointed that the measures did not go further.

China quickly followed with a cut in its official cash rate to 6 per cent from 6.31 per cent.

European and US markets lost ground on the news (while the US dollar jumped by the most in seven months), because the sight of three of the world's most powerful central banks all trying to stimulate their economies was not encouraging.

It almost guaranteed that Australia's market would have a tough time of it yesterday.

"It is hard to escape the conclusion that there is a growing sense of desperation on the part of central bankers, and especially those in the northern hemisphere," said Westpac's global head of fixed income strategy, Russell Jones.

"They are rapidly running out of conventional ammunition, while, unfortunately, there are signs of diminishing returns . . . where their unconventional departures are concerned."

Australian traders yesterday were also holding off for the crucial US non-farm payrolls number, a key measure of unemployment in the world's biggest economy that can shift market sentiment.

But over the week local stocks gained ground as concerns about a slowdown in the global economy eased.

BHP Billiton gained 64? to $32.09.

David Jones lost 13? at $2.46 after one of the strangest weeks in Australian corporate history, where a mysterious UK private equity firm placed a $1.65 billion takeover offer for the troubled retailer, sparking an investigation by the corporate watchdog.

Echo Entertainment gained 5? to $4.33 and Perpetual climbed 10? to $23 after regulators gave Perpetual the all-clear to lift its stake in Echo, raising the possibility that other shareholders might gain approval to lift their stakes.

Billabong finished the week 10? higher at $1.17 after putting on 13? yesterday.

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