There was little sign of fiscal year-end window dressing as the Australian sharemarket finished deep in the red after miners led losses and the Bank of International Settlements warned of a “puzzling disconnect” in financial markets.
The S&P/ASX 200 index lost 49.4 points, or 0.91 per cent, to 5395.7, the day’s low as fund managers remained on the sidelines leaving the index up just 0.8 per cent for the year so far.
In its latest quarterly report the BIS, the central banks central bank, said it was “hard to avoid the sense of a puzzling disconnect” between the markets’ buoyancy and underlying economic developments globally.
“Despite the euphoria in financial markets, investment remains weak,” they said.
“Instead of adding to productive capacity, large firms prefer to buy back shares or engage in mergers and acquisitions. And despite lacklustre long-term growth prospects, debt continues to rise. There is even talk of secular stagnation.”
Evidence of late tax-loss selling may also have accentuated the day's losses.
The Australian dollar was little changed at US94.20¢ and Government 10-year yields flat at 3.542 per cent as the 4.3 per cent decline in domestic new homes sales in May and 0.4 per cent increase in private sector credit undermined forecasts the housing sector would take up the growth slack from the mining slowdown.
“Personal credit remains soft as households opt to move spending broadly in line with incomes,” Westpac economist Andrew Hanlan said.
The Shanghai composite index was up 0.7 per cent at the close of the ASX despite Chinese industrial profit growth slowing to 9.8 per cent from 10 per cent last month and revenue growth slowing to 8.1 per cent from 8.4 per cent.
In Tokyo the Nikkei index was up 0.3 per cent.
Dalian iron ore futures were down 2 per cent today following the 0.4 per cent drop in the spot price to US94.90 a tonne on Friday, while copper slipped 0.2 per cent to $US6940 a tonne and gold was flat at $US1316 an ounce.
The year’s best performing stocks - banks, Telstra and healthcare providers - were the hardest hit by profit taking.
“Double digit gains for share prices over the financial year have investors locking in gains and realising profits in anticipation of tax bills,” CMC Markets chief strategist Michael McCarthy said.
Electronics retailer Dick Smith was one of the few stocks to rise, after reporting strong sales growth in the final three months of the financial year.
It gained three cents, or 1.55 per cent, to $1.96.
Among the banks, Commonwealth Bank dropped 59 cents to $80.88, Westpac shed 29 cents to $33.88, ANZ lost 26 cents to $33.34 and National Australia Bank was 25 cents weaker at $32.78.
Telstra shed five cents to $5.21 while in the health sector Ramsay dropped 80 cents to $45.50 and CSL was 39 cents lower at $66.55.
Fortescue Metals Group was another big loser, shedding 20 cents to $4.35. Rio Tinto dropped 75 cents to $59.31 and BHP Billiton lost 52 cents to $35.90.
The broader All Ordinaries index was down 47.1 points, or 0.87 per cent, at 5382.
The September share price index futures contract was 62 points lower at 5354, with 39,247 contracts traded.
National turnover was 2.08 billion securities worth $4.3 billion.