Stocks turn down as buyers think twice

THE sharemarket rally that began on Tuesday last week petered out yesterday, leaving the benchmark index down 0.8 per cent.

By InvestSMART · 17 Aug 2011

By InvestSMART ·
17 Aug 2011

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THE sharemarket rally that began on Tuesday last week petered out yesterday, leaving the benchmark index down 0.8 per cent.

The S&P/ASX 200 Index finished with a loss of

35.6 points at 4247.3.

CMC Markets trader Ben Taylor said the renewed strength of the dollar had prompted investors to pull back.

"I think people are really seeing that as an indication [they should] cut some of their long bets over the last week and consolidate," he said.

Mr Taylor said he expected the market to hold steady for the next couple of days as investors awaited greater direction from offshore markets.

"I don't think it's going to push much higher from here," he said. "People are still more scared than they are confident and it seems like people are sitting on a bit of a knife's edge right now."

Markets across Asia lost ground yesterday, though falls were slightly heavier in Australia.

Last night in Europe, the downturn gathered pace. After three hours' trading, London's FTSE 100 was down 1 per cent, France's CAC 40 was down 1.7 per cent and Germany's DAX had dropped 2.4 per cent.

The Australian session began promisingly after several companies issued positive financial reports.

CMC Markets analyst Ben Le Brun said investors, particularly from Asia, moved into strong performers at the start of the Australian reporting season.

Shares in Tabcorp closed up 3? at $3.22 after the company lifted net profit

14 per cent.

Among other companies reporting results or otherwise making news yesterday, Westpac lost 92?, or 4.4 per cent, to $20.25 after posting a 2 per cent fall in third-quarter cash earnings.

The rest of the major banks were lower, with NAB down 36? at $23.21, ANZ losing 30? to $20.35 and Commonwealth slipping

55? to $46.83.

Qantas dipped 0.5? to $1.525 after the airline announced a new strategy.

OneSteel was up 1.5? at $1.45 after the steel maker posted an 11 per cent fall in net profit.

Copper and gold miner OZ Minerals was down 45? at $11.90 after posting a 72 per cent profit fall following the settlement of a class action.

James Hardie rose 5? to $5.40 after the building products said it expected a higher profit this financial year after a 99 per cent fall in three-month profit to June.

Among the miners, BHP Billiton lost 42? at $39.43 and Rio Tinto fell $1.13 to $73.39.

Gold shot up $US33.73 to $US1769.33 an ounce. However, goldminer Newcrest dropped $1.70 at $38.70.

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Frequently Asked Questions about this Article…

Why did the ASX 200 fall on the day covered in the article?

The S&P/ASX 200 slipped 0.8% (down 35.6 points to 4,247.3) after a short rally petered out. Traders cited a renewed strength in the dollar that prompted investors to trim long positions and consolidate, while weakness in offshore markets also weighed on sentiment.

How did a stronger Australian dollar affect investor behaviour?

According to market traders quoted in the article, the stronger dollar encouraged investors to cut some long bets and consolidate gains. In short, currency strength often leads investors to become more cautious and reduce risk exposure until there’s clearer market direction.

What happened to major bank shares and what drove those moves?

Bank shares were weaker overall. Westpac fell about 4.4% to $20.25 after reporting a 2% fall in third-quarter cash earnings. Other major banks were also lower, with NAB at $23.21, ANZ at $20.35 and Commonwealth Bank around $46.83 — reflecting earnings-driven pressure during reporting season.

Which companies stood out in the reporting season mentioned in the article?

Tabcorp attracted buying after it lifted net profit 14% and shares closed higher at $3.22. James Hardie rose after forecasting a higher profit for the year following a sharp prior fall in short-term profit. OneSteel and others also featured in results-driven moves during the start of the Australian reporting season.

How did miners and commodity stocks perform, and what happened to the gold price?

Miners were mixed-to-weak: large miners like BHP Billiton and Rio Tinto fell, OZ Minerals dropped after reporting a large profit fall linked to a class action settlement, and Newcrest fell even though the gold price jumped. Gold rose US$33.73 to US$1,769.33 an ounce, but some gold miners still fell on company-specific news.

What did market analysts say about the short-term outlook for stocks?

Analysts expected the market to hold relatively steady in the near term. CMC Markets’ Ben Taylor suggested the market was unlikely to push much higher immediately as investors remain cautious and are waiting for clearer direction from offshore markets.

How did international markets influence Australian trading that day?

Markets across Asia lost ground and the downturn accelerated in Europe — the FTSE 100 was down about 1%, France’s CAC 40 down about 1.7% and Germany’s DAX down about 2.4% after three hours of trading. That global weakness added pressure to Australian stocks and contributed to a heavier local fall.

As an everyday investor, what practical steps does the article suggest during this period of consolidation?

The coverage highlights cautious, short-term behaviours: trimming some long positions, consolidating gains and waiting for clearer signals from offshore markets. In other words, consider reducing exposure if you’re heavily positioned, focus on company-specific results during reporting season, and avoid chasing rallies until direction becomes clearer.