THE sharemarket ended a horror week in which investors' worries about Europe's finances and a slowing Chinese economy took the monthly loss to about $110 billion.
The benchmark S&P/ASX 200 Index lost 2.7 per cent on the day and 5.6 per cent for the week, the worst five-day return since late September.
It shed 110.9 points for the day the highest this year to end at 4046.5, its weakest close in almost six months.
The dollar also touched new lows for the year, sinking to US97.95? at one point. Interest rate futures markets are now rating the chance of another 50-basis-point rate cut by the Reserve Bank when it meets on June 6 at 75 per cent.
Investors are also pricing in another 125 basis points in cuts for the cash rate in one year. If this eventuates the cash rate would drop to just 2.5 per cent, half a percentage point below its lowest point during the global financial crisis.
IG Markets analyst Stan Shamu said the market was already pricing for a worst-case scenario in Europe and it was hard to make predictions. "People are now scared that we will get a lot of contagion from Greece and Spain and the situation will end very badly," he said.
The week began with the news that Greece had failed to form a government and will hold elections on June 17. The prospect of weeks of doubt about whether a new government will emerge, and whether it will back the European Union's austerity package, is likely to dog markets for weeks.
In the meantime, investors have already begun looking for the next European debt domino to fall, with Spain the most likely candidate.
With more signs of a slowing China, confidence that Australia's reliance on Asia will shield it from another European crisis is evaporating.
Big broking houses, including Goldman Sachs, are cutting growth targets for China for the year. China's home prices in cities fell last month and car dealers' inventory levels foreshadowed deeper price cuts the latest in a string of bad news.
Australian Stock Report head of research Geoff Saffer said worries about China will continue to affect the market.
"We expect the Chinese story to continue as an overhang to the Australian market for some time," he said. "Until China implements wide-ranging stimulus measures we expect fears about a slowdown to continue. The short-term outlook is probably still bearish."
Miners have borne the brunt of the falls. BHP Billiton lost $1.31, or 4 per cent, to $31.46, and Rio Tinto slumped $2.96, or 5.1 per cent, to $55.20 on the day.
Among big banks, National Australia Bank sagged $1.03 to $23.32, Westpac shed 81? to $20.41, ANZ lost 73? to $20.84, and Commonwealth Bank fell $1.62 at $49.40.
Woolworths and Wesfarmers lost 1 per cent to $26.68 to be among the better performers of the top 50 stocks on the day, while Wesfarmers lost 2.1 per cent to $29.55. Telstra fell 1.7 per cent to $3.52.
Frequently Asked Questions about this Article…
Why did the Australian sharemarket fall sharply this week?
The article says the market fell as investors worried about Europe’s debt problems (especially uncertainty in Greece and concern about Spain) and signs of a slowing Chinese economy. Those worries pushed the S&P/ASX 200 lower and prompted broad selling across resources and financial stocks.
How much did the S&P/ASX 200 and overall market value decline?
According to the article the S&P/ASX 200 lost 2.7% on the day and 5.6% for the week, falling 110.9 points to 4,046.5. The monthly loss wiped about $110 billion off the market.
Which sectors and stocks were hit hardest in the sell-off?
Miners took the biggest hits: BHP Billiton fell $1.31 (4%) to $31.46 and Rio Tinto dropped $2.96 (5.1%) to $55.20. Big banks also fell — National Australia Bank, Westpac, ANZ and Commonwealth Bank all gave up ground — while other top-50 names like Woolworths, Wesfarmers and Telstra were relatively better but still down.
How did Australia's major banks perform during the market downturn?
The article reports National Australia Bank sagged $1.03 to $23.32, Westpac fell (about 81 cents) to $20.41, ANZ lost 73 cents to $20.84, and Commonwealth Bank dropped $1.62 to $49.40 — showing material declines in the big four banks during the sell-off.
What did the article say about the Australian dollar and interest rate expectations?
The dollar touched new lows for the year, sinking to around US97.95 at one point. Interest rate futures were pricing a 75% chance of a 50-basis-point cut by the Reserve Bank on June 6, and investors were pricing in another 125 basis points of cuts over the next year, which would put the cash rate near 2.5% if realised.
How is the slowing Chinese economy affecting Australian investors and markets?
The article notes growing signs of a slowdown in China—home prices falling in some cities and weaker demand indicators—have reduced confidence that Australia’s reliance on Asia will fully shield it from European troubles. Analysts expect China concerns to remain an overhang and keep the short-term outlook more bearish for the Australian market.
Were there any relatively defensive performers among large stocks during the sell-off?
Yes. The piece mentions Woolworths and Wesfarmers were among the better performers in the top 50 on the day, each down less than many peers (Woolworths lost about 1% to $26.68; Wesfarmers fell about 2.1% to $29.55), while Telstra fell about 1.7% to $3.52.
What European political events are investors worried about and why does it matter for Australian markets?
Investors were spooked because Greece failed to form a government and called new elections for June 17, creating weeks of uncertainty about whether a pro‑EU austerity government will emerge. The article says that fear of contagion to countries like Spain and the broader European debt picture is already being priced into markets and contributing to the downturn in Australia.
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