Investors in the Australian stockmarket faces another tough decision today – do they continue to be bearish after yesterday’s big swings, or do they take their lead from another record on Wall Street?
Complicating the matter was another bad trading session for gold which lost $US34 an ounce to end at $1,392 as commodity prices eased as the US dollar had another solid day.
Despite that, the Aussie dollar traded back over 99 US cents this morning in early Asian trading, a touch higher than yesterday.
The US dollar was stronger against the yen and the euro after new data confirmed that much of the EU and eurozone remained recessed or was very sluggish in the March quarter.
On top of that data from the US painted a picture of an economy running well below par and certainly not worth another record for the Dow. The culprit for the day’s gains remains the flood of money from the Fed and the Bank of Japan.
And we saw more worries about China surface and that usually means offshore investors sell Australia first, then think.
That hurt commodity prices, especially gold and silver, while oil traded around $US94 a barrel and copper lost 2c a pound to $US3.25. The prices of major miners were also weak in London and the US.
The Dow was up more than 60 points, but the wider the S&P and Nasdaq made smaller gains. It was the Dow’s 20th record close for the year so far.
20th record close for Dow for 2013 – no help for our market?
With the yen weakening and the Tokyo market soaring, it seems there’s a continuing rush of foreign investors to take money out of Australia and redeploy that capital to other markets. Last week’s rate cut hasn’t helped either.
The new highs on Wall Street, the peaks for Tokyo in the end meant nothing here for the local market as offshore selling of major resource stocks drove the market lower.
The market actually opened higher on the back of the solid gains on Wall Street and at one stage, the ASX 200 was up 29 points – but then the selling appeared and at one stage yesterday the index was down more than 52 points.
It closed at 5191.7, down 29.3 points or around 0.55%, with the wider All Ordinaries finishing down by a similar amount at 5173.3.
But miners remained weak due to lower commodity prices with Rio Tinto dropping 3.1% $55.77 to cent and BHP Billiton down 1.9% at $34.03 as investors ignored the new approach for the company to spending and shareholder rewards laid out on Tuesday night by the company’s new CEO, Andrew Mckenzie.
Telstra fell a cent to $5.01, and the banks saw the CBA up 56c 0r 0.8% to $72.65. The ANZ rise 9c to $29.98, Westpac dipped 8c to $31.67 and the NAB lost a cent to $33.07. Woolworths jumped 1.5% to $34.39 but Wesfarmers, owners of Coles, lost 14c to $42.80.
Companies with exposure to the US dollar/economy continued to benefit from the softer Australian dollar. QBE added nearly 1%, and the world’s second-biggest wine company, Treasury Wine Estates rose 1.6%.
Australia’s performance was contrary to how Tokyo traded.
The Nikkei Index jumped 2.1% to above 15,000 for the first time since January 2008 after the yen fell to its lowest level against the dollar in four and a half years.
The Nikkei is now up an amazing 73% since last November’s election of Prime Minister Abe and his government, and 45% so far in 2013. By sway of contrast, the US S&P 500 is only up 14% so far in 2013.
Also a driver for the commodity companies was a mixture of news from China led by Bank of America Merrill Lynch dropping its GDP estimate for 2013 to 7.6% from 8%. It also trimmed the 2014 estimate to 7.6% from 7.7%.
As well, the Chinese government indicated that there wasn’t much room for new stimulus spending should the sluggish economy continue to stumble.
And a fall in global iron ore prices to $US1287.10, a tonne, the lowest so far in 2013, seems to have hurt confidence in BHP and Rio.
The spot price averaged $US135 a tonne so far this quarter, down from $US148 for the three months to March. So far in 2013 spot iron ore prices are down 12%.
