THE sharemarket lost ground after Europe's leaders failed to strike a crucial deal on a Greek bailout for the second week in a row.
Mining stocks were big drivers of the slide, with risk-averse traders selling off cyclical stocks that depend on economic growth.
Bellwether stocks BHP Billiton fell 22?, to $33.36, while Rio Tinto lost nearly 1 per cent, to $56.95.
Healthcare and retail stocks suffered some of the day's biggest losses, with the embarrassing failure of Click Frenzy's website compounding the sombre mood.
Overall, the benchmark S&P/ASX 200 Index fell 16.2 points, to 4369.5 points.
The sharemarket was directionless for much of the day.
But come mid-afternoon the mood turned sour after European authorities, including representatives from the International Monetary Fund and European Central Bank, failed to reach consensus on the best way to reduce Greece's debt burden, without which Athens cannot receive financial assistance.
The news drove the market to close down 16 points as the Dow futures dropped 44 points, and the S&P 500 futures dropped 0.6 per cent, pointing to losses at the start of trade on Wall Street.
The dollar lost ground against a broadly stronger US dollar, slipping to $US1.0352 from $US1.0384.
Westpac's global head of interest rates strategy and international markets, Russell Jones, said the shares slump was due to Australia importing bad news from Europe.
"The meeting of European finance ministers broke up without a meaningful deal of the Greek bailout coming through. I think the markets are expressing their disappointment with that," he said.
"For the moment at least, we're in a situation where all the international news is troubling. You've not just got Europe failing to address its problems, but you've got all the uncertainties around US budget position. Maybe what we need is for Mr [Reserve Bank chief Glenn] Stevens to cut rates in December."
Among local stocks, department store chain David Jones dipped 6.2 per cent, to $2.41 after first quarter profit inched higher, ending seven straight quarters of decline but missing forecasts.
Ord Minnett senior analyst Craig Turton said retail came under pressure after David Jones' sales data was weaker than expected. "I think there could be some overlay with Click Frenzy website breaking down overnight, because Myer's sales came in in line with expectations last week, but it has lost ground today, along with David Jones," he said.
Meanwhile, volatility continued for iron ore producer Fortescue Metals, with the stock falling 11?, or 2.7 per cent, to $3.90, making it the second worst performer among the top 50 ASX companies.
Frequently Asked Questions about this Article…
Why did the Australian sharemarket slide after Europe failed to reach a Greek bailout deal?
The market fell after European leaders and institutions failed to agree on how to reduce Greece’s debt, which stopped Athens from receiving needed assistance. That news soured sentiment mid‑afternoon, sending the S&P/ASX 200 down 16.2 points to 4369.5 and pushing Wall Street futures lower (Dow futures fell about 44 points, S&P 500 futures down ~0.6%).
Which sectors and stocks were hit hardest in the sell‑off?
Mining stocks were major drivers of the slide, with bellwethers like BHP Billiton slipping to $33.36 and Rio Tinto losing nearly 1% to $56.95. Iron ore producer Fortescue Metals was volatile and fell to $3.90, while healthcare and retail stocks also suffered — notably David Jones, which dipped 6.2% to $2.41.
How did Click Frenzy’s website failure affect retail stocks and investor sentiment?
The embarrassing breakdown of the Click Frenzy website compounded an already sombre mood for retail shares. Analysts noted an overlay effect: weaker‑than‑expected sales from David Jones and the Click Frenzy outage helped pressure retail names, including Myer and David Jones, on the day.
What happened to the Australian dollar (AUD) during the market downturn?
The Australian dollar slipped against a broadly stronger US dollar, moving to US$1.0352 from US$1.0384 as investors reacted to the negative international news flow.
Did Australian market commentators link the sell‑off to global concerns?
Yes. Westpac’s Russell Jones said the share slump reflected Australia ‘importing bad news’ from Europe, and he pointed to broader international uncertainties, including questions around the US budget, as factors weighing on markets.
How did David Jones’ results influence its share price?
David Jones reported a first‑quarter profit that inched higher and ended seven straight quarters of decline, but it missed forecasts — a report that saw its shares fall about 6.2% to $2.41 as investors reacted to weaker‑than‑expected sales.
Was there any talk of central bank action after the market drop?
Some commentators suggested monetary policy could respond: Westpac’s Russell Jones said the market reaction might increase calls for Reserve Bank chief Glenn Stevens to cut rates in December, reflecting concern over deteriorating international news.
What should everyday investors watch following this market slide?
Keep an eye on developments in the Greek bailout negotiations and other international headlines, US budget news and Wall Street futures, commodity and mining stock volatility, upcoming retail sales and corporate updates (like David Jones and Myer), and any signals from the RBA about interest‑rate policy.
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