Australian shares yesterday had their biggest fall in more than four weeks.
AUSTRALIAN shares yesterday had their biggest fall in more than four weeks as renewed concerns about Europe's ability to manage its debt crisis and signs of a slowing Chinese economy sliced more than 2 per cent from the local market.
Rising investor hopes over the past week that Europe was close to resolving its financial problems were dashed on Monday night when German politicians said it would take months to arrive at a plan to recapitalise the region's banks and to boost the firepower of its all-important stablisation fund.
At the close of Australian trading yesterday, the benchmark S&P/ASX 200 Index was down 88.5 points, or 2.07 per cent at 4186.9.
The dollar also dropped, finishing the local session down just over US1? at $US1.0204. Last night it was trading at $US1.0135.
The falls coincide with the anniversary today of the 1987 Black Monday crash when sharemarkets around the world nosedived and Wall Street lost nearly a quarter of its value.
While a significant announcement is still due at the weekend, EU leaders' summit in Brussels, German officials said more work will be needed to bring an end to the euro-zone crisis.
German Chancellor Angela Merkel's office knocked down what it called ''dreams'' that the last word in taming the crisis would be reached at the summit next Sunday.
And in a sign of continuing crisis, ratings agency Moody's warned France in a that it might place a negative outlook on its cherished Aaa credit rating in coming months, because the nation's financial strength had weakened.
The Australian sharemarket's losses accelerated after official figures from China showed its massive economy had pulled back from fast-paced growth in the third quarter.
China's economy grew at an annual pace of 9.1 per cent in the quarter, down from 9.5 per cent in the previous three months. This was slightly below consensus forecasts and was seen as evidence that measures to rein in inflation were taking hold.
Despite the slowdown, analysts said China was on track for a soft landing rather than a shock.
Earlier, high-profile hedge fund manager Jim Chanos had warned that China was heading for a hard landing.
Commonwealth Bank credit market analyst Alex Stanley said the relative optimism that has returned to markets in recent weeks has been undercut by ''setback and disappointment'' in Europe.
''The fiscal problems in Europe are structural and there are implementation risks facing any new crisis policies,'' Mr Stanley said.
In local trade, resource stocks were the hardest hit. Rio Tinto slumped $3.70, or 5.3 per cent, to $66.25 while BHP Billiton lost $1.25 or
3.3 per cent, to $36.40.
Fortescue Metals Group dived 47?, or 9.2 per cent, to $4.64 and Woodside Petroleum slipped 39?, or
1.1 per cent, to $34.98.
Banks and financials were also sold off, led by NAB, which closed down 52?, or 2.1 per cent, at $24.23.
Frequently Asked Questions about this Article…
Why did Australian shares drop more than 2% recently?
Australian shares fell sharply as investor confidence was hit by renewed concerns about Europe’s ability to manage its debt crisis and fresh signs that China’s economy is slowing. The S&P/ASX 200 fell 88.5 points (2.07%) to 4,186.9 as these global worries weighed on the local market.
How did the euro‑zone debt crisis specifically affect the ASX and investor sentiment?
Comments from German politicians that it will take months to finalise plans to recapitalise banks and boost the euro‑zone stabilisation fund undercut recent optimism. German Chancellor Angela Merkel’s office also dismissed hopes of a quick fix, and Moody’s warning about France’s credit outlook added to the sell‑off, hitting investor sentiment globally and in Australia.
What impact did China’s slowing growth have on Australian markets?
Official figures showed China’s economy grew at an annual pace of 9.1% in the quarter, down from 9.5% previously. That slower growth, seen as evidence that measures to rein in inflation are working, accelerated losses on the ASX because a softer Chinese economy reduces demand for Australian exports.
Which sectors and stocks were hardest hit during the sell‑off?
Resource stocks were the weakest on the day: Rio Tinto fell $3.70 (5.3%) to $66.25, BHP Billiton lost $1.25 (3.3%) to $36.40, Fortescue Metals Group dropped about 9.2% to $4.64, and Woodside Petroleum slipped 1.1% to $34.98. Banks and financials were also sold off, led by NAB which closed down about 2.1% at $24.23.
How did the Australian dollar move during the market decline?
The Australian dollar weakened alongside the equity sell‑off, finishing the local session at US$1.0204 and trading later at about US$1.0135, reflecting risk‑off pressure in currency markets.
Did the article link the fall to any historical market events?
Yes — the drops coincided with the anniversary of the 1987 Black Monday crash, which the article noted as a historical backdrop, though the primary drivers highlighted were current euro‑zone and China concerns rather than the anniversary itself.
What were analysts saying about the market outlook after the slide?
Analysts noted that recent optimism had been undercut by ‘setback and disappointment’ in Europe. Commonwealth Bank credit market analyst Alex Stanley warned that Europe’s fiscal problems are structural and that implementation risks could hamper crisis policies, while some commentators debated whether China is heading for a soft landing or worse.
What upcoming events should investors watch after this market fall?
Investors should watch the EU leaders’ summit in Brussels and any announcements due at the weekend about euro‑zone bank recapitalisation and stabilisation fund measures, as well as further Chinese economic indicators — all of which were cited in the article as likely drivers of market direction.
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