Market ends week in the red
The Australian sharemarket lost ground after weak eurozone GDP data sent a shiver of panic through global bond markets last night.
Following the one per cent drop on Wall Street the S&P/ASX 200 index dropped 31.8 points, or 0.58 per cent, to 5479 after investors dumped bonds in eurozone peripheral nations and scrambled for safety in US and German bonds.
Weak GDP data from France, Italy and Spain dealt a heavy blow to the bullish outlook priced into global equity markets and riskier corporate bond markets, sending investors scurrying for the sidelines.
The weak sentiment was compounded by the European Central Bank which downgraded its inflation forecasts and rumours Greece was planning to tax foreign bond holders.
Growth in eurozone powerhouse Germany rose 0.8 per cent, but France registered zero growth, Italy contracted 0.1 per cent and in the Netherlands it contracted 1.4 per cent.
"We had some good data, some bad data, some encouraging news, some uncomfortable news but at the end of the day (night) markets reverted in spades to the default position of a proper risk-off market," National Australia Bank currency strategist Emma Lawson said.
Bond yields in Spain leapt 16 points to 3.02 per cent and Italian 10-years leapt 19 points to 3.10 per cent, while Italian stocks tumbled 3.6 per cent.
Safe-haven demand today saw Australian government 10-years drop four points to a 10-month low of 3.708 per cent.
The Australian dollar slipped US0.2¢ to US93.50¢.
In the US data was mixed as jobless claims dropped to a seven year low and consumer inflation edged up to 0.3 per cent, but industrial production fell 0.6 per cent, the Bloomberg consumer comfort index fell and the NAHB housing index also dropped.
The shanghai composite index was off 0.4 per cent at the close of the ASX
In Tokyo the Nikkei index fell 1.7 per cent as the yen rallied.
Gold dropped 4US6 to $US1297 an ounce, copper lost 0.5 per cent to $US6890 a tonne, spot iron ore dropped 0.7 per cent to $US102.80 a tonne yesterday and Dalian iron ore futures tumbled 2 per cent today.
More to come…
