A short-squeeze rally yesterday triggered by the US Federal Reserve unwound on the Australian sharemarket today as investors digested the Fed’s perennial over-optimism and uncertain Chinese outlook amid rising oil prices.
The S&P/ASX 200 index was down 0.4 per cent down until the afternoon but slipped further to close 48.7 points, or 0.89 per cent, at 5419.5 with losses across the board, despite firmer iron ore and metals prices.
After the initial knee-jerk reactions across financial markets yesterday morning momentum faded last night as investors, strategists and economists struggled to come to terms with the Fed’s optimistic growth forecasts and benign inflation outlook and what they meant for bubbling asset prices.
The action in precious metals was the biggest talking point as gold surged 3.7 per cent to $US1315 an ounce and silver soared 4.6 per cent to $US20.90 an ounce.
“It was yet another very strange night for asset markets around the world,” Westpac strategist Graeme Jarvis said.
“There were a whole bunch of idiosyncratic chapters that really did not combine together to give us a cohesive story.
Europe dodged one way, the US darted another, and (currency) markets tried to tell the same story as precious metals.”
Global benchmark US 10-year yields initially fell 3 points before reversing 7 points to 2.64 per cent, unchanged from before the Fed meeting, but they dropped to 2.61 per cent today, ensuring Australian 10-years were flat at 3.672 per cent.
Brent crude oil climbed 0.7 per cent to a fresh eight-month high of $US115.50 a barrel
The Australian dollar was steady at US94.05¢ after retreating from a high of US94.35¢.
The Shanghai composite index was off 0.3 per cent at the close of the ASX as concerns over buyer dilution from a spate of initial public offerings compounded property market jitters.
In Tokyo the Nikkei index was flat.
Spot iron ore rose 0.4 per cent to $US90.70 a tonne yesterday, Dalian iron ore futures were up 1.2 per cent today, copper rose 0.3 per cent to $US a tonne.
CMC Markets chief market strategist Michael McCarthy said most surprising to him were falls in consumer related stocks such as retail and healthcare.
“The pressure on consumer stocks suggests that concerns about consumer behaviour post budget have not been dealt with by the improvement in the global outlook this week,” he told AAP.
“It was a very disappointing day for Australian investors.”
The major retailers and supermarket owners were down, with Wesfarmers 54 cents lower at $41.25 and Woolworths dropping 37 cents to $35.40.
The biggest retail loser on the ASX200 was JB Hi-Fi, falling 87 cents, or 4.6 per cent, to $18.10.
Blood plasma producer CSL fell 77 cents to $67.45.
Making news, billionaire Frank Lowy won his battle to get shareholders to approve a $70 billion split of the Westfield Group, separating its international business and Australasian shopping centres.
Westfield Group shares gained a cent to $10.28 and Westfield Retail Trust was steady at $3.21.
In other news, Australia’s second largest hotel and resort operator Mantra Group debuted on the share market.
It opened at $1.85 each, valuing the company at $449 million, and closed $1.78.
Some investors sought the defensive safety of precious metals sending up the price of gold, with gold miner Newcrest Mining rising 42 cents, or more than four per cent, to $10.81.
The broader All Ordinaries index was down 44.8 points, or 0.82 per cent, at 5401.6.
The September share price index futures contract was 41 points lower at 5380, with 29,648 contracts traded.
National turnover was 2.5 billion securities worth $4.9 billion.