ASX closes deep in the red
The Australian sharemarket got off to a weak start on US rate rise fears but fell deeper into the red today after the Reserve Bank kept interest rates on hold and said policy needed to remain accommodative.
The lead from Wall Street last night was firmer, but the S&P/ASX 200 index was down 1.1 per cent before the rates decision and extended losses to close down 99.4 points, or 1.73 per cent, at 5636, the low of the day, with losses across the board.
Miners were weaker on softer iron ore prices and a declining global steel production outlook, while the chorus of warnings from Treasury and Reserve officials about “bubbling” Sydney house prices weighed on the major banks.
The Australian dollar climbed US0.5¢ to US76.80¢ despite the Reserve retaining an “implicit” neutral bias, while government 10-year yields rose 3.5 points to 2.743 points after US 10-years climbed 6 points to 2.18 per cent last night.
“The bank noted that Australia’s uncertain and somewhat bleak economic outlook requires accommodative monetary policy, especially considering the RBA isn’t getting much help from the fiscal side of the equation,” Forex.com analyst Chris Tedder said.
“This is a slightly more dovish tone from the central bank when compared with its last policy statement, but not by much.”
US rate rise jitters have increased ahead of Friday’s US non-farm payroll data, with better than forecast US manufacturing, construction and personal income data compounding the jitters.
However, the US Federal Reserve’s preferred inflation measure, the private consumption expenditure deflator, dipped to 1.2 per cent in April, down from 1.3 per cent and short of the 1.4 per cent forecast.
The Shanghai composite index was up 0.3 per cent at the close of the ASX as brokers suggested the market needed to take a breather.
In Tokyo the Nikkei index was slightly lower despite the yen falling to a 13 year low of 125 against the US dollar.
Spot iron ore fell 0.9 per cent to $US61.85 a tonne yesterday and Dalian iron ore futures were up 0.2 per cent today.
Shares fell from the opening bell, despite no local drivers for such a move, Morgans senior private client adviser Bill Chatterton said.
A combination of profit taking by some investors and overseas leads of selling ahead of the northern hemisphere summer break may be to blame, he said.
“I just think the market run up got up to over 5700 (last Friday) and the fundies are taking a little bit of money off the table,” he said.
Losses were posted across all sectors, excluding gold producers.
BHP Billiton dropped 86 cents, or nearly three per cent, to $28.33, Rio Tinto shed 93 cents to $56.49 and Fortescue Metals was flat at $2.38.
Commonwealth Bank dropped $1.48 to $83.00, ANZ declined 42 cents to $32.30, National Australia Bank shed 68 cents to $33.35 and Westpac was off 78 cents to $32.34.
Bucking the trend was New Zealand based transport group Z Energy, which soared $1.11, or 23.5 per cent, to $5.84.
It said it had acquired Chevron’s New Zealand interests, including service stations, for $NZ785 million.
The broader All Ordinaries index was down 94.1 points, or 1.64 per cent, at 5639.9 points.
The June share price index futures contract was down 107 points at 5623 points, with 38,053 contracts traded.
National turnover was 1.98 billion securities worth $5.1 billion.
