Stocks edge lower on fears for Spain

THE sharemarket closed slightly lower yesterday as fears that Spain might need another financial bailout overshadowed weaker domestic inflation figures.

By InvestSMART · 26 Jul 2012

By InvestSMART ·
26 Jul 2012

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THE sharemarket closed slightly lower yesterday as fears that Spain might need another financial bailout overshadowed weaker domestic inflation figures.

The S&P/ASX 200 Index fell 9.3 points, or 0.23 per cent, to 4123.9.

CMC Markets chief market analyst Ric Spooner said investors were worried that a surge in Spain's borrowing costs above 7 per cent would be unaffordable for the debt-laden country if they stayed at that level for long.

"The bottom line is it's very difficult to aggressively reposition yourself into risk assets and equities while Spanish bond rates are where they are," he said. "The Spanish government is now being obliged to pay a borrowing cost that it won't be able to sustain over the medium term."

The release of lower than expected inflation figures did little to encourage investors.

The Australian Bureau of Statistics figures showed the consumer price index rose by 0.5 per cent in the June quarter, for an annual rate of 1.2 per cent. It had been expected to rise by 0.6 per cent for the quarter, for an annual rate of 1.3 per cent.

Among resource stocks, BHP Billiton dipped 8? to $30.85 while Rio Tinto lost 75? to $51.01.

OZ Minerals dumped 10? to $7.43 after announcing that its copper and gold production for the June quarter was down from output in the previous three months.

Atlas Iron sagged 6.5? to $1.685, despite saying it was on track to double production by the end of the year.

Sundance Energy dipped 5? to 45? as it recorded net production in the US of 43,170 barrels of oil equivalent for June, less than for the previous month.

The banks were mixed. Westpac declined 17? to $22.45, ANZ lost 11? to $22.64, National Australia Bank advanced 16? to $23.82 and Commonwealth firmed 8? to $54.86.

Macquarie Group fell 43? to $23.87, despite saying it expected an improved result for the 2013 financial year.

Hastings Diversified Utilities Fund rose 6? to $2.54 after APA Group lifted its bid price.

Gold closed at $US1584.64 an ounce in Australian trading, up $US7.44.

National turnover was 1.22 billion securities worth $3.53 billion, with 543 stocks down, 334 up and 350 unchanged.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket close slightly lower yesterday?

The S&P/ASX 200 closed a little weaker as investors reacted to renewed fears that Spain might need another financial bailout and to softer domestic inflation data. The index fell 9.3 points (0.23%) to 4,123.9, with market commentary saying rising Spanish borrowing costs made it hard to move aggressively back into risk assets and equities.

How did worries about Spain and Spanish bond rates affect investor sentiment?

Analysts said a surge in Spain’s borrowing costs above about 7% was worrying because it could be unaffordable for the debt-laden country if it persisted. That pressure on Spanish bond rates made investors reluctant to increase exposure to risk assets and equities while rates remained elevated.

What did the latest Australian inflation (CPI) figures show and how did the market react?

The Australian Bureau of Statistics reported the consumer price index rose 0.5% in the June quarter, giving an annual rate of 1.2% (below expectations of 0.6% quarterly and 1.3% annually). The softer-than-expected inflation reading did little to lift investor sentiment on the day.

Which major resource stocks were affected and what were their closing prices?

Several big resource names fell: BHP Billiton closed at $30.85 and Rio Tinto at $51.01. OZ Minerals also dropped to $7.43 after reporting that its copper and gold production for the June quarter was down from the previous three months.

What did Atlas Iron and OZ Minerals report about production and guidance?

OZ Minerals said June-quarter copper and gold output was down from the prior three months, which coincided with its share fall to $7.43. Atlas Iron slipped to $1.685 despite saying it was on track to double production by the end of the year.

How did the major Australian banks trade during the session?

Bank results were mixed: Westpac declined to $22.45 and ANZ fell to $22.64, while National Australia Bank advanced to $23.82 and Commonwealth Bank firmed at $54.86. Macquarie Group fell to $23.87 even though it said it expected an improved result for the 2013 financial year.

Were there notable moves in energy and utilities stocks?

Yes. Sundance Energy recorded net US production of 43,170 barrels of oil equivalent for June (less than the previous month) and its shares dipped on the data. Hastings Diversified Utilities Fund rose to $2.54 after APA Group lifted its bid price.

What were the market-wide turnover and the gold price at the close?

National turnover was 1.22 billion securities worth $3.53 billion. Gold closed in Australian trading at US$1,584.64 an ounce, up US$7.44 on the session, while the market had 543 stocks down, 334 up and 350 unchanged.