Wall Street points the way down for local bourse

THE Australian sharemarket fell more than 2.6 per cent yesterday to its lowest in more than two years, amid global uncertainty following big falls on Wall Street over a downgraded economic outlook.

By InvestSMART · 23 Sep 2011

By InvestSMART ·
23 Sep 2011

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THE Australian sharemarket fell more than 2.6 per cent yesterday to its lowest in more than two years, amid global uncertainty following big falls on Wall Street over a downgraded economic outlook.

At the close of trade the benchmark S&P/ASX200 index was down 106.9 points, or 2.63 per cent, at 3964.9, while the broader All Ordinaries index fell 108.9 points at 4044.7. It was the lowest close for both indices since July 2009.

Stocks on Wall Street fell sharply overnight after the US Federal Reserve announced expected measures to support the economy, but painted a grim economic picture.

The Dow Jones Industrial Average fell 283.82 points, or 2.49 per cent, to close at 11,124.84. An adviser at Intersuisse, Andrew Sekely, said events offshore had pulled the local market lower.

"We're following suit," Mr Sekely said. "As long as [the] news from overseas continues to be bad, it's unlikely that we'll see any recovery in local markets."

An RBS Morgans client adviser, Bill Bishop, said volatility in America had translated into a weak day on the local bourse.

"The lack of a cohesive policy in either Europe or America is driving this," Mr Bishop said. "Markets don't like uncertainty."

Shares in the miner Rio Tinto fell almost 7 per cent to $65.10, while BHP Billiton was down more than 4 per cent at $35.63.

The energy sector was also weaker, with Santos down 37?, or 3.2 per cent, at $11.12, while Woodside Petroleum fell $1.15, or 3.4 per cent, to close at $32.53.

One of the few bright spots on the market came from brewer Foster's, which said on Wednesday night its board would recommend a SABMiller takeover offer to shareholders.

Foster's shares closed up 37?, or 7.57 per cent, at $5.26. It was the highest traded stock by volume with almost 308 million shares traded.

Treasury Wine Estate, the wine business spun out of Foster's Group earlier this year, was up 11?, or 3.24 per cent, at $3.51.

Oroton shares rose 6.9 per cent to $7.67 after the luxury accessories retailer announced its annual profit had increased by 8 per cent and sales so far this fiscal year had exceeded expectations.

The price of gold closed at $US1770.60 per ounce, down nearly 10 per cent on the day.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket fall more than 2.6% yesterday?

The article says the Australian sharemarket fell more than 2.6% after sharp falls on Wall Street. The US Federal Reserve announced measures to support the economy but also painted a grim outlook, which weighed on global sentiment. At the close the S&P/ASX200 was down 106.9 points (2.63%) at 3,964.9 and the All Ordinaries fell 108.9 points to 4,044.7 — the lowest close for both indices since July 2009.

How did Wall Street and US Fed comments affect the ASX and local investor sentiment?

According to the story, stocks on Wall Street fell sharply after the Fed's announcement and gloomy economic signals. The Dow Jones fell 283.82 points (2.49%) to 11,124.84. Local advisers quoted in the article said offshore events pulled the local market lower — 'we're following suit' — and that continued bad news from overseas makes a local recovery unlikely.

Which major miners and energy stocks were hit hardest during the sell-off?

The article reports heavy falls among major resources names: Rio Tinto dropped almost 7% to $65.10 and BHP Billiton was down more than 4% at $35.63. Energy stocks also weakened, with Santos down about 3.2% to $11.12 and Woodside Petroleum falling $1.15 (3.4%) to close at $32.53.

Were there any bright spots on the ASX during the market slump?

Yes. Brewer Foster's was a notable bright spot after saying its board would recommend a SABMiller takeover offer; its shares closed up 7.57% at $5.26 and it was the highest-traded stock by volume with almost 308 million shares traded. Treasury Wine Estate (spun out of Foster's earlier this year) was also higher, up 3.24% to $3.51, and luxury retailer Oroton rose 6.9% to $7.67 after reporting an 8% increase in annual profit and stronger sales.

What did market advisers say about volatility and the role of global policy?

The article quotes market advisers saying volatility in America translated into a weak day on the local bourse. One adviser noted a lack of cohesive policy in Europe or America is driving uncertainty, and reminded readers that 'markets don't like uncertainty,' implying policy coherence offshore matters for Australian markets.

How did gold and commodity prices move during the market fall?

The article states the price of gold closed at US$1,770.60 per ounce, down nearly 10% on the day, reflecting broader moves in commodity and safe‑haven markets reported that session.

What does the article suggest about the prospects for a near‑term recovery in local markets?

The piece cites an Intersuisse adviser saying the local market is following bad overseas news and that 'as long as news from overseas continues to be bad, it's unlikely that we'll see any recovery in local markets.' The implication is that near‑term recovery depends heavily on improvements in global economic indicators and policy responses.

How did takeover news affect share prices for Foster's and related companies?

Foster's said its board would recommend a SABMiller takeover offer, which drove Foster's shares higher — closing up 7.57% at $5.26 and trading heavily. The article also notes Treasury Wine Estate, spun out of Foster's earlier in the year, was up 3.24% to $3.51, suggesting takeover-related news lifted related stocks.