Stocks down on new chapter in euro saga

THE market gave up earlier gains to end lower yesterday as renewed concerns about the European debt crisis took the steam out of a retailer-driven rally.

By InvestSMART · 1 Feb 2012

By InvestSMART ·
1 Feb 2012

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THE market gave up earlier gains to end lower yesterday as renewed concerns about the European debt crisis took the steam out of a retailer-driven rally.

CMC Markets sales trader Ben Taylor said growing concern that Portugal might soon follow Greece in being unable to finance its sovereign debt scared off investors in the run-up to the Australian earnings season.

"I have the feeling that the blowout in Portuguese [bond] yields and falls in commodities will see a dropoff in the funds flooding back into the markets," he said.

At the close, the S&P/ASX 200 Index was down

10 points, or 0.23 per cent, at 4262.7.

The Australian equities market added about

$65 billion last month, one of the best starts to the year since 1970.

Yesterday's top performers were retailers, with consumer staples gaining 0.7 per cent and consumer discretionary up 0.2 per cent.

JB Hi-Fi led the push higher, gaining 78?, or 6.6 per cent, to $12.60, while David Jones rose 14?, or 5.7 per cent, to $2.59.

Woolworths added 34?, or 1.3 per cent, to $24.74 after it reported a 5 per cent rise in first-half sales to $29.7 billion despite the supermarket chain facing subdued consumer confidence and falling prices.

"There's already been a lot of bad news priced into the [retail] sector after the race to downgrade ahead of Christmas," said Burrell Stockbroking director Richard Herring. "This could be a reasonable opportunity to buy in."

Wesfarmers, while closing higher, was the poorest performer in the sector after the owner of Coles announced it would cut its fruit and vegetables prices by up to 50 per cent. Its shares rose 13? to $30.30.

BHP Billiton was down 19? at $37.48 while Rio Tinto rose 16? at $69.16.

Shares in Telstra firmed 2? to $3.33 after it said it would shed 99 administrative roles from its operations division.

Shares in Lynas Corp closed up 1.5? at $1.325 after the rare-earths miner said its Mount Weld plant in Western Australia was recovering ore ahead of targets.

Financial stocks shed

0.3 per cent after ratings agency Fitch put the big four banks on a credit downgrade watch on Monday.

Westpac was the only bank to finish higher, adding 5? to $21.15. Commonwealth lost 38? to $50.66, ANZ 6? to $21.41 and NAB 6? to $23.85.

Newcrest fell 60? to $33.72 despite a further rise in the gold price. At the close, spot gold was up $US5.95 at $US1736.21 an ounce.

The dollar jumped to $US1.0632 from $US1.0567.

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Frequently Asked Questions about this Article…

Why did the ASX 200 fall yesterday and what caused the market pullback?

The ASX 200 slipped as renewed concerns about the European debt crisis — particularly fears Portugal might follow Greece in struggling to finance sovereign debt — weighed on investor sentiment. A rise in Portuguese bond yields and falls in commodities also scared off some buyers, leaving the S&P/ASX 200 down 10 points at 4,262.7.

Which sectors and retailers performed well despite the market decline?

Retailers led the market on the day: consumer staples rose about 0.7% and consumer discretionary about 0.2%. Standouts included JB Hi‑Fi (up 6.6% to $12.60), David Jones (up 5.7% to $2.59) and Woolworths (up 1.3% to $24.74).

What did Woolworths report and why does that matter to everyday investors?

Woolworths reported a 5% rise in first‑half sales to $29.7 billion despite subdued consumer confidence and falling prices. For investors, that suggests the supermarket chain showed resilience in sales during a challenging consumer environment, which can signal stability in the consumer staples sector.

How did Wesfarmers react to Coles cutting fruit and vegetable prices?

Wesfarmers — owner of Coles — was the weakest performer in the retail sector on the day after Coles announced it would cut fruit and vegetable prices by up to 50%. Despite that, Wesfarmers’ shares still closed higher at $30.30, reflecting mixed investor reactions to the pricing move.

What notable moves were seen among mining and resources stocks?

Some major miners moved in different directions: BHP Billiton fell to $37.48 while Rio Tinto rose to $69.16. Rare‑earths miner Lynas closed up 1.5% at $1.325 after saying its Mount Weld plant was recovering ore ahead of targets. Newcrest’s shares fell to $33.72 even though the gold price strengthened.

Why did bank shares soften and which banks were affected?

Financial stocks shed about 0.3% after ratings agency Fitch put the big four Australian banks on a credit downgrade watch. Westpac was the only major bank to finish higher (at $21.15), while Commonwealth Bank, ANZ and NAB finished lower at $50.66, $21.41 and $23.85 respectively.

What happened to the gold price and did it help gold miners?

Spot gold rose by about US$5.95 to US$1,736.21 an ounce. However, that didn’t uniformly lift gold miners — for example, Newcrest fell to $33.72 despite the stronger gold price, illustrating that company‑specific factors can outweigh commodity moves.

How did the Australian dollar (AUD) move and why should investors care?

The Australian dollar jumped to US$1.0632 from US$1.0567. Currency moves matter because a stronger AUD can reduce returns for exporters and miners when converted back to Australian dollars, while helping consumers by making imports cheaper.