The share market fell after early gains on the back of strong US jobs data evaporated and investors took profits in the big four banks and Telstra.
The benchmark S&P/ASX 200 index lost 13.6 points, or 0.3 per cent, to 5387.1, while the broader All Ordinaries index also fell 13.6 points, or 0.3 per cent, to 5380.8.
“Despite a strong lead from the United Stated, Australian equities were more rational,” Clime Asset Management chief investment officer John Abernethy said.
“The US market seems to be magnifying good news, the US non-farm payrolls data released over the weekend was better than expected but it still wasn’t very strong, especially considering the horrendous expense of running massive trade and fiscal deficits, zero interest rates, $US85 billion worth of monthly asset purchases and the underwriting of the banking system all to stimulate growth.”
While aggressive tapering of US stimulus would be negative for Australian equities, Mr Abernethy said it was unlikely that would happen with the bigger risk being that the Federal Reserve will continue to delay a reduction in stimulus.
“They should have started the already, and should begin next month, rumours every day about when the taper will start is causing volatility on markets.”
The better than expected US jobs data sparked speculation that the Federal Reserve might begin reducing the $US85 billion in monthly asset purchases it is currently making to stimulate economic growth before the end of 2013, which boosted the greenback.
At the local close, the dollar was buying US93.82¢ from US94.64¢ at Friday’s close.
“A sell-down in the Aussie dollar may have prompted some selling by offshore investors in the banks and Telstra,” Patersons Securities head of strategy Tony Farnham said.
The biggest laggard was ANZ, down 1.7 per cent to $32.14, followed by Commonwealth Bank of Australia, which lost 1 per cent at $78.35. National Australia Bank fell 0.6 per cent to $34.56, while Westpac finished down 0.2 per cent at $33.12.
Telecommunications was the worst-performing sector, down 0.8 per cent, as Telstra fell 0.8 per cent to $5.14.
Wesfarmers, owner of Coles, rose 0.8 per cent to $43.89 a it traded without the rights to a 50-cent distribution and completed a share consolidation. Rival Woolworths lost 0.6 per cent to $34.54.
Department store operator Myer rose 3.9 per cent to $2.68, ahead of publishing first-quarter sales results on Wednesday. Rival David Jones added 0.3 per cent to $3.02.
“Myer and DJs’ monthly sales results don’t really matter. Customers can get better deals and choice online and neither of the department stores have a viable long term strategy,” Mr Abernethy said.
Index heavyweight BHP Billiton dropped 0.1 per cent to $37.91.
“There was no cause for concern in data released over the weekend in China that showed inflation, retail sales, industrial production and urban fixed asset investment figures all pretty much in line with expectations,” Mr Farnham said.
Rio Tinto fell 0.3 per cent to $65.07. Junior iron ore miner Sundance Resources was one of the top stocks as the spot price for iron ore, landed in China, dropped to $US135.90 per tonne.
Linc Energy was the worst-performing stock, dropping 11 per cent to $1.22. Last week shareholders approved the company’s plan to re-list on the Singapore Stock Exchange.
Explosives and chemical manufacturer Orica was the best-performing stock, jumping 11.6 per cent to $2.27 after the explosive and chemical manufacturer reported a headline 49 per cent increase in annual net profit. However, that statutory figure does not account for a $247 million write-down in fiscal 2012.
“Orica’s adjusted profit actually fell 7.5 per cent in the fiscal year ending September 30, but this was better than the 10 per cent fall most analysts were expecting,” CIMB analyst Andrew Scott said. “The real highlight was cash flow which was stronger than expected suggesting they are running the business well despite tough markets.”
Written by Sally Rose. Clime Asset Management’s Chief Investment Officer, John Abernethy comments in the article Investors take profits in banks, published in Brisbane Times on November 11 2013
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