Worley profit downgrade drags market lower

A profit downgrade by the contractor WorleyParsons sent the Australian sharemarket lower on Wednesday.

It also offset the impact of comments by US Federal Reserve chairman Ben Bernanke, who alluded to an environment of ultra-low rates for longer.

The benchmark S&P/ASX 200 Index was down 45.2 points, or 0.84 per cent, to 5307.7 at the close of the session. Worley alone lost roughly a quarter of its market value and the stock closed 25.9 per cent lower.

The contractor’s admission that this year’s net profit could be as much as 20 per cent below the previous period wiped out stocks across mining and industrial services sector on fears that Worley’s problems are not isolated and could spread.

Monadelphous Group lost 5.3 per cent, Boart Longyear 5.1 per cent, NRW Holdings 4 per cent, and Ausdrill closed just shy of 4 per cent lower.

Meanwhile, the outgoing Fed chairman revealed in his annual speech to economists in Washington on Tuesday night that the central bank could keep rates at or close to zero even if the economy met the Fed’s self-imposed employment target.

It had ascribed a 6.5 per cent jobless threshold to the Fed funds rate, implying that if US unemployment fell beneath 6.5 per cent and inflation was in check, the central bank would consider tapering its bond purchase program.

Mr Bernanke said that the threshold was more a guide than a trigger, and the Fed would have good reason to keep rates suppressed even if the jobs market improved.

His words pushed the S&P500 futures higher, as well as markets in Asia, on hopes that critical policy support for the sharemarket will last.

CommSec economist Savanth Sebastian deemed the Australian sharemarket to have underperformed its foreign counterparts, including the US.

But the All Ordinaries Accumulation Index, which includes dividends to investors, is just 1.1 per cent away from a record high, rising by 19.3 per cent in 2013.