Stocks close lower on watery GDP figures
At the close on Wednesday, the benchmark S&P/ASX 200 Index was down 65.6 points, or 1.34 per cent, at 4835.2, while the broader All Ordinaries fell 61.5 points, or 1.26 per cent, to 4825.2.
The market posted its ninth fall in 12 trading days, following Wall Street's negative lead.
CMC Markets analyst Michael McCarthy said disappointing GDP figures and a weaker outlook in Japan were weighing on sentiment. "We could see further short-term moves down," he said.
Prime Minister Shinzo Abe has outlined a blueprint for rejuvenating Japan's ailing economy, with regulatory changes to bring more women into the workforce, and coaxing companies into investing more and promoting innovation.
Meanwhile, figures released on Wednesday showed Australia's GDP grew by 0.6 per cent in the first three months of the year, and at an annual rate of 2.5 per cent, the first time it was below 3 per cent since the last quarter of 2011.
The big banks represent four of the six largest stocks on the ASX and their falls drove down the overall market.
ANZ was down 71¢ at $27.20, CBA fell 90¢ to $66.25, NAB was 66¢ weaker at $28.95 and Westpac was off 76¢ at $28.19.
The two big supermarket owners were also punished, with Wesfarmers 33¢ lower at $38.58 and Woolworths down 23¢ to $32.32.
BHP fell 47¢ to $33.79, while Rio slipped 77¢ to $54.36.
Gold stocks were also weaker, with Goldminer Newcrest falling 80¢ to $14.35.
Billabong shares continued to slide after Tuesday's plunge when the company lost half its market capitalisation after flagging asset sales to reduce debt as takeover talks collapsed. It was down 6.5 per cent at 21.5¢.
Bond futures prices rose after the release of the disappointing growth figures, which raised the prospect of more rate cuts by the central bank.
JPMorgan interest rate strategist Sally Auld said a rise in three-year futures prices came after investment bank Goldman Sachs issued a report saying the Reserve Bank was likely to cut the cash rate in July.
Ms Auld said markets were now focused on the release of US employment reports later this week.
Frequently Asked Questions about this Article…
The sharemarket fell after disappointing GDP figures and negative overseas leads. The S&P/ASX 200 dropped 65.6 points (1.34%) to 4,835.2 and the All Ordinaries fell 61.5 points (1.26%) to 4,825.2. Investors dumped bank stocks and sentiment was also hurt by a weaker outlook in Japan.
Four of the largest ASX stocks — ANZ, Commonwealth Bank (CBA), NAB and Westpac — fell and helped drive the market lower. On the day ANZ fell 71¢ to $27.20, CBA was down 90¢ to $66.25, NAB dropped 66¢ to $28.95 and Westpac lost 76¢ to $28.19.
Supermarket owners and miners were also weaker. Wesfarmers fell 33¢ to $38.58, Woolworths dropped 23¢ to $32.32, BHP slid 47¢ to $33.79 and Rio Tinto eased 77¢ to $54.36.
Billabong continued to slide after a sharp plunge the previous day when takeover talks collapsed. The company flagged asset sales to reduce debt and lost about half its market capitalisation; it was down 6.5% at 21.5¢ on the reporting day.
Australia’s GDP grew 0.6% in the first quarter and at an annual rate of 2.5%, the first time below 3% since late 2011. The weaker growth prompted a rise in bond futures and increased the prospect of central bank rate cuts — a key consideration for investors tracking interest-rate sensitive sectors and asset prices.
Bond futures rose after the disappointing growth figures, reflecting growing expectations of interest-rate cuts. A Goldman Sachs report said the Reserve Bank was likely to cut the cash rate in July, and JPMorgan’s interest-rate strategist Sally Auld noted a lift in three‑year futures prices after that report.
A weaker outlook in Japan weighed on sentiment alongside the GDP surprise. CMC Markets analyst Michael McCarthy said disappointing growth and Japan’s outlook could prompt further short-term downward moves. The article also notes Japanese Prime Minister Shinzo Abe’s plans to rejuvenate the economy by encouraging more female workforce participation, corporate investment and innovation.
According to the article, investors should watch upcoming US employment reports later in the week — markets were focused on those releases — and monitor developments around RBA rate-cut expectations (Goldman Sachs flagged a possible July cut). Short-term moves in risk assets and bond futures are likely to remain important indicators.
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