The Australian sharemarket lost ground for the second straight
day, with the All Ordinaries Index (XAO) falling by 1.3 pct or
58.7 pts to 4295.5. Almost all sectors finished in the red with
the I.T sector the lone improver. The world's largest share
registry, Computershare (CPU) was the biggest contributor to the
sector's gains, rising by 1.9 pct or 15 cents to $8.05. Listed
companies tend to have a share registry that looks after their
administration tasks and shareholder responsibilities.
Australia's two largest miners, BHP Billiton (
) and Rio Tinto (
) both struggled today, with commodity prices falling following
China downgrading its growth forecasts for its economy yesterday.
Combined, BHP and RIO make up around 11 pct of the Australian
sharemarket. BHP fell 2.29 pct or 81 cents to $34.58 while the
smaller RIO (which is around four times smaller on the local
market) slumped by 2.26 pct or $1.47 to $63.62. BHP is trading at
its lowest level since the end of 2011.
The big four banks were helping minimise losses early in the
session, but could not hold onto the gains. Commonwealth Bank (
) fell 1.04 pct or 51 cents to $48.58, Westpac (
) lost 0.96 pct or 20 cents to $20.56, ANZ Banking Group (ANZ)
eased by 0.5 pct while National Australia Bank (NAB) dropped by
The insurance sector was one of the bright spots this morning,
however ended mostly flat by close. QBE Insurance (QBE) fell 0.25
pct or 3 cents to $11.82. Australia's largest listed insurance
business said that it is close to finalising a number of
acquisitions which should eventually add around US$500 million to
its premiums each year.
Cotton prices rose by 4.5 pct last night partly due to India's
Commerce Ministry banning cotton exports until further notice.
India is the second largest producer of the fibre and last year
made up around 12.5 pct of total global exports. Wheat and
soybean prices fell while corn ended higher.
The Reserve Bank of Australia (
) met this afternoon at 2.30pm (AEDT) for its monthly meeting on
monetary policy. As expected, interest rates were kept on hold at
4.25 pct for yet another month (for the second straight RBA
meeting). December was the last time the central banks cut rates
by 25 bps (0.25 pct).
The RBA has kept the door open for further rate cuts however,
saying that "Should demand conditions weaken materially, the
inflation outlook would provide scope for easier monetary
policy". Effectively (in English), should Australians continue
cutting back on spending money and if the situation in Europe
worsens significantly, the central bank will not hesitate cutting
Commsec's Chief Economist, Craig James said that "The Reserve
Bank Governor is in that "happy place". Inflation is in the
middle of the 2-3 per cent target band; economic growth is
expected to be close to "trend" over the next year; and the
European debt crisis is a "watching brief" rather than a major
issue. In short, there are no pressing reasons to cut interest
rates and there are no pressing reasons to lift rates. And the
Reserve Bank would require a significant shove to move from its
Tomorrow, the latest GDP (economic growth) reading will be out
for the previous quarter in Australia. The market is expecting
the economy to have expanded by 0.8 pct over the quarter. Deputy
Governor, Philip Lowe will be delivering a speech and the
Australian Industry Group will issue its Performance of
Construction Index (PCI) for February.
In the region yesterday, China reduced its growth forecasts
for its economy from 8 pct, down to 7.5 pct. China has targeted
an 8 pct growth rate for the last eight years. It is important to
keep in mind that China's actual growth rate tends to often
exceed its government's targets. China's Premier Wen Jiabao
expressed a slight shift in attention after saying that he hopes
to "guide people in all sectors to focus their work on
accelerating the transformation of the pattern of economic
development and making economic development more sustainable and
No major data was released in the region today. Tomorrow is a
public holiday in Thailand and its markets will be closed.
In Europe last night, the British services sector (which makes
up around 75 pct of its economy) grew at a slower than expected
pace in February. An investor confidence report showed that
investors in Europe are more pessimistic about the state of the
European economy than expected. Although the 2008 Global
Financial Crisis (GFC) is behind us, many are still feeling its
affects. Geir Haarde, Iceland's former Prime Minister is going to
trial facing charges of negligence over the crisis. Iceland's
three largest banks went bust and triggered its crisis, due to
taking on too much risk and debt. Mr Haarde is being accused of
not placing sufficient regulatory standards on the banks.
Tonight, Europe's revised GDP (growth) reading will be out for
the previous quarter at 9pm (AEDT). The market is expecting the
Eurozone to have contracted by 0.3 pct. Should the result
surprise the market, shares will potentially react to the
In the U.S last night, the Dow Jones Industrials Average
(DJIA) eased by 0.1 pct. Last week, the index crossed the key
13,000 pt mark on more than 70 occasions. This psychological
barrier was not breached once overnight and the U.S markets
remained in the red for the duration of the session.
The American services sector showed some signs of improvement.
Internet giant, Yahoo (YHOO) is considering making significant
job cuts to try and revamp its business. Google and Facebook have
been winning advertising dollars from Yahoo, which has been
hurting the business. Yahoo currently has around 14,000
No major data is scheduled for release in the U.S tonight,
however weekly retail sales numbers will be issued. Tonight has
also been termed 'Super Tuesday', due to it being the busiest day
of the U.S Republican primaries to date in North America. This
will be one further step towards deciding the Republican nominee
to face President Obama in the November elections later this
It was a busier day on the market today, with the volume of
shares traded coming in at 2.19 billion today, worth $5.25
billion. 317 shares were up, 707 were weaker and 360 ended
At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24
futures contract is down 0.05 pct or 2 pts to 4208.
Due to daylight savings, most major European markets are now
trading between 7pm (AEDT) and 3.30am (AEDT). Futures in Europe
are pointing to a slightly weaker start to trade tonight.
Dow Futures are currently lower; indicating that U.S stocks
could open weaker tonight. American markets open at 1.30am
(AEDT). Due to the Americans going back an hour on November 5
last year, U.S markets will be trading between 1.30am (AEDT) and
Turning to currencies, the Australian dollar (AUD) buys
US106.2 cents (around 1 cent lower against the greenback than at
this time yesterday). The AUD is currently trading at £67.0 pence
and €80.5 cents.
Steven Daghlian, CommSec Market Analyst
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