More than $27 billion was wiped from the sharemarket in a brutal day of trading.
MORE than $27 billion was wiped from the sharemarket in a brutal day of trading yesterday after investors reacted to news of a big political left turn in Europe on the weekend, and weak US employment gains in April.
It was the sharemarket's biggest one-day fall in 4? months, with 10-year government bonds hitting a fresh 50-year low and the dollar shedding more than US1?.
Fear and uncertainty drove sentiment as markets reacted with alarm to Socialist candidate Francois Hollande's victory in France's presidential election and the routing of Greece's two-party coalition, which had imposed harsh austerity measures in return for an international bailout.
The two elections threw a big question mark over the future of the region's austerity drive, threatening a fragile political consensus that has kept Europe's currency bloc intact through more than two years of crisis.
Spooked Australian investors ran for the exits, hitting resource and energy stocks hit particularly hard. BHP Billiton fell $1.46 to $34.5 and Rio Tinto dropped $2.91 to $62.
The big banks all lost ground, but were not hit as hard. The financial sector outperformed the broader market, dropping 1.4 per cent.
The S&P/ASX 200 Index finished down 94.7 points, or 2.2 per cent, at 4301.3.
US employment data issued on Friday night contributed to the unease. Only 115,000 new jobs were created in April, well below the 165,000 new jobs in March, sparking fears that the recovery of the world's biggest economy was running out of steam.
''You could see the focus of flows was going into income securities as a proxy for bonds and then the stocks which are cyclical, or perceived to be growth stocks, were getting hit hard,'' said Clime Investment Management director John Abernathy.
''The income stocks - property trusts, infrastructure, the banks and Telstra - were holding up quite well.''
A string of positive local economic data failed to calm investors.
In good news for the beseiged retail sector, retail sales grew by the most in 11 months in April. After adjusting for inflation, retail trade rose by 1.8 per cent in the March quarter - the biggest gain in almost three years. Sales for March rose 0.9 per cent, well above the expected 0.2 per cent gain.
And residential building approvals rose 7.4 per cent to 11,501 units in March, compared with a downwardly revised 10,710 units in February, seasonally adjusted. In the year to March, building approvals were down 15 per cent.
But the news failed to lift the dollar. At the close it was at US101.53?, down from US102.64? on Friday.
''It's symptomatic of the mood of the market,'' said Westpac currency strategist Sean Callow. ''There's just a bit too much accumulated pessimism to turn around.''
Despite the concerns of investors, fund managers said it was a day to buy stocks.
''We are seeing opportunities for oversold stocks,'' said ATI Asset Management's David Liu.
''We'd like to think the fundamentals remain intact for the majority of Australian stocks. These types of issues impact sentiment rather than the fundamentals of companies. So we've probably been net buyers today.''
With AGENCIES
Frequently Asked Questions about this Article…
What triggered the sharp one-day sharemarket fall that wiped more than $27 billion?
The article says panic was driven by renewed political risk in Europe—including François Hollande's victory in France and the rout of Greece’s two‑party coalition—combined with weaker-than-expected US employment gains in April. That mix of fear and uncertainty pushed investors to sell, causing the large one‑day market drop.
How badly did the ASX 200 fall during the sell‑off?
The S&P/ASX 200 Index finished down 94.7 points, or 2.2 per cent, closing at 4301.3 on the day of the sell‑off reported in the article.
Which sectors and stocks were hit hardest, and which held up?
Resource and energy stocks were hit particularly hard — the article notes BHP Billiton fell $1.46 to $34.5 and Rio Tinto dropped $2.91 to $62. By contrast income stocks such as property trusts, infrastructure, the big banks and Telstra held up relatively well, and the broader financial sector only dropped about 1.4%.
How did the US jobs report affect investor sentiment and markets?
US payrolls rose by just 115,000 in April versus 165,000 in March, according to the article. That softer jobs print stoked fears the US economic recovery was losing momentum and added to global market unease on the day.
Did positive local Australian economic data calm markets at all?
Although Australia saw stronger local data — retail sales grew the most in 11 months, retail trade rose 1.8% in the March quarter (after inflation) and building approvals jumped 7.4% to 11,501 units in March — the article says this news failed to calm investors or lift the market on the day.
What happened to the Australian dollar during the market drop?
The article reports the Australian dollar fell: it closed at US101.53 cents, down from US102.64 cents on Friday. Westpac currency strategist Sean Callow said the mood of the market was too pessimistic to turn around quickly.
What were fund managers' reactions—was this seen as a buying opportunity?
Yes. Fund managers quoted in the article said the sell‑off presented chances to buy oversold stocks. ATI Asset Management's David Liu said fundamentals for most Australian stocks appeared intact, and managers said they were probably net buyers on the day.
What practical lessons for everyday investors does the article highlight about this volatility?
The article emphasizes that the drop was driven largely by sentiment and geopolitical risk rather than immediate company fundamentals. It notes flows moved into income securities as a proxy for bonds while cyclical or perceived growth stocks were hit — a reminder to consider how market sentiment, sector exposure and the difference between fundamentals and short‑term volatility can affect portfolios.
Call 1300 880 160
Start a chat
Schedule a call
