Stocks tumble as banks, miners lose ground
The benchmark S&P/ASX 200 Index dropped 60.2 points, or 1.2 per cent, to 5032.2, while the All Ordinaries lost 60.6 points, or 1.2 per cent, to 5043.8.
The two biggest drags on the market were material and financial stocks, down 2.2 per cent and 1.1 per cent respectively.
"The materials sector has been a big underperformer and that's clearly related to the peaking and slowing down of the mining investment boom," said division director at Macquarie Private Wealth Martin Lakos.
BHP fell 2.3 per cent to $35.09, while rival Rio Tinto also dipped 2.3 per cent to $60.70. Fortescue Metals lost 6.1 per cent to $3.97.
Doing no favours for the miners, iron ore fell to a new low for 2013 of $US139 a tonne. It is predicted to continue to fall to around $US120.
Mr Lakos remained positive about resources, saying miners stand to benefit from a more stable iron ore price. With costs in the $US45-$US55 a tonne range, the industry, with the ability to deliver higher volumes and less cost associated with infrastructure, had the potential for more profit, he said.
Westpac led losses among banks, falling 1.2 per cent to $30.13, while ANZ slid 1.1 per cent to $28.18. Commonwealth Bank and NAB both dropped a little under 1 per cent, to $68.88 and $30.69.
The financial sector had been overstretched, so it was no surprise that share prices had eased, Mr Lakos said .
"Given that we've got five or six weeks to go before banks report, I think there's probably limited downside at the moment," he said.
Myer shares surged 5.5 per cent to $3.07 after reporting a better than expected half-year profit of $88 million. Since record lows in June last year, Myer shares have rebounded nearly 100 per cent, but are still well below their 2009 IPO level of $4.10.
The dollar rose almost a full cent to US103.70¢ in late trading, after the unemployment rate remained flat at 5.4 per cent and 71,500 jobs were added to the economy.
ANZ economist Justin Fabo said that despite the headline number there were worrying factors. "In trend terms, full-time employment fell 2000 in the month, not a sign of a strong labour market," he said.
Frequently Asked Questions about this Article…
The S&P/ASX 200 fell 60.2 points (about 1.2%) to 5,032.2 and the All Ordinaries lost 60.6 points (1.2%) as investors took profits on banks and resources. Materials and financial stocks were the biggest drags — down about 2.2% and 1.1% respectively — with a fresh drop in iron ore prices hitting miners.
Major miners fell: BHP dropped 2.3% to $35.09, Rio Tinto also fell 2.3% to $60.70, and Fortescue Metals slid 6.1% to $3.97. The falls were linked to weaker iron ore prices and softer demand dynamics described in the article.
Iron ore fell to a 2013 low of US$139 a tonne and was predicted in the article to continue toward about US$120. Lower iron ore prices reduce miners' revenue, which helps explain the materials sector underperformance; however, the article notes costs are around US$45–US$55 a tonne, so miners with lower costs and higher volumes could still be profitable if prices stabilise.
Banks fell across the board: Westpac led losses, down 1.2% to $30.13; ANZ slid 1.1% to $28.18; Commonwealth Bank and NAB fell just under 1% to $68.88 and $30.69 respectively. The article cites profit‑taking and the view that the financial sector had been overstretched as reasons for the easing in bank share prices.
Martin Lakos said the materials sector underperformance is tied to the peaking and slowing of the mining investment boom. He also described the financial sector as overstretched and suggested there was probably limited downside in bank shares in the five or six weeks before banks report earnings.
Myer shares surged 5.5% to $3.07 after reporting a better‑than‑expected half‑year profit of $88 million. The article notes Myer shares have rebounded nearly 100% since record lows in June last year but remain below their 2009 IPO level of $4.10.
The Australian dollar rose almost a full cent to US103.70¢ after unemployment stayed flat at 5.4% and 71,500 jobs were added. The article also quotes ANZ economist Justin Fabo warning that full‑time employment fell 2,000 in trend terms, which is a concerning detail beneath the headline jobs number.
The article highlights two short‑term market risks: volatility from falling commodity prices (notably iron ore) affecting mining stocks, and profit‑taking or stretched valuations in the financial sector ahead of bank reporting season. It also points to mixed labour market signals that can influence currency and market sentiment.
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