A DIABOLICAL assessment of the Gillard government snatched the sharemarket's pulse as it flatlined yesterday, rejecting a positive lead from Wall Street.
In the latest Age/Nielsen poll, the Australian Labor Party's primary vote sank to 26 per cent the lowest in the poll's 39-year-history.
The result, which left the ALP trailing the Coalition 39-61 per cent in a two-party vote, unsettled investors.
The S&P/ASX 200 Index fell 1.5 points, or 0.03 per cent, to 4472 points.
IG Markets strategist Ben Potter said political instability in Canberra was the market's "number one" problem.
He said the ASX had tumbled 6.9 per cent since the government announced its resource rent tax in April last year, compared with a 10.9 per cent gain on Wall Street over the same period.
"Shortly after this tax was announced last year, the Australian market witnesses a significant exodus of overseas money, which has continued since," Mr Potter said.
"Worse again, there is no signs of it returning, with many offshore institutions citing perceived political uncertainty as the major reason."
The carbon tax has also weakened the Gillard-led ALP's standing in the polls.
Goldman Sachs dealer Richard Coppleson said: "These are very dire times for the ALP. Unless they can turn these polls around then the Colonel Custer's Battle of Big Horn [will] look like a picnic".
But the rocky political landscape is just another notch in the belt that investors are using to tighten their purse strings.
Mr Coppleson said too many macro events were overhanging markets, chiefly the European sovereign debt crisis and America's increased threat of defaulting if the Obama administration fails to raise its debt ceiling before August 3.
Index heavyweight BHP Billiton closed down 4? at $42.85 as investors digested the miner's $US12 billion ($A11.3 billion) acquisition of Petrohawk Energy last week, while Rio Tinto
added 24? to $81.60.
The energy sector was among the worse performers, losing 1.2 per cent. Woodside Petroleum fell 92?, or 2.4 per cent to $38.25. Santos plunged 49?, or 3.7 per cent, to $12.74 on the company's scrip bid for coal seam gas explorer Eastern Star Gas.
The retailers were mostly lower. Myer Holdings was down 4? at $2.30 and Harvey Norman was off 2? at $2.25 but David Jones finished unchanged at $3.15.
Goldminer Newcrest put on 41c to $40.41. Gold closed $US17.72 higher at $US1598.92 an ounce. Last night it was trading at $US1600 an ounce.
Frequently Asked Questions about this Article…
Why did the ASX200 flatline and close lower yesterday?
The S&P/ASX 200 essentially flatlined as investors were unsettled by political instability in Canberra — notably an Age/Nielsen poll showing the ALP's primary vote at a historic low — plus ongoing macro risks. The index fell 1.5 points (about 0.03%) to 4,472 as markets digested domestic policy uncertainty and global concerns.
How did recent Australian political polling affect investor sentiment and offshore money flows?
The Age/Nielsen poll that put the ALP's primary vote at 26% (its lowest in 39 years) added to perceived political uncertainty. IG Markets strategist Ben Potter said that since the government announced the resource rent tax last April the ASX has fallen around 6.9% and many offshore institutions cited political uncertainty as a reason for an exodus of overseas money.
What role did the resource rent tax and carbon tax play in market moves?
According to market commentators in the article, the resource rent tax announcement coincided with a significant drop in the Australian market and an outflow of overseas funds, while the carbon tax also weakened the Gillard-led ALP’s standing in the polls—factors investors pointed to when tightening their purse strings.
How did major miners BHP Billiton and Rio Tinto perform and why did they move?
BHP Billiton closed down about 4% at $42.85 as investors digested the miner’s US$12 billion (A$11.3 billion) acquisition of Petrohawk Energy. By contrast Rio Tinto rose roughly 2.4% to $81.60 on the same session.
What happened to energy stocks like Woodside Petroleum and Santos?
The energy sector was one of the weakest, losing around 1.2% overall. Woodside Petroleum fell about 2.4% to $38.25, while Santos plunged roughly 3.7% to $12.74 amid news of its scrip bid for coal seam gas explorer Eastern Star Gas.
How did retailers perform — what happened to Myer, Harvey Norman and David Jones shares?
Retailers were mostly lower: Myer Holdings fell about 4% to $2.30, Harvey Norman was down roughly 2% at $2.25, and David Jones finished unchanged at $3.15.
What were the moves in gold and gold miners reported in the article?
Gold rose by about US$17.72 to US$1,598.92 an ounce (trading around US$1,600 overnight), and goldminer Newcrest added 41 cents to finish at $40.41.
What global macro risks were identified as weighing on markets that everyday investors should watch?
Commentators in the article pointed to the European sovereign debt crisis and the risk of the US government defaulting if the debt ceiling wasn’t raised before August 3 as major macro headwinds currently overhanging markets and contributing to cautious investor behaviour.
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