australian investors head for the exits as chinese stocks continue to bleed and commodities sell off

In a significant sell-off on Wednesday, the ASX gave up all of the gains of the previous session, and then some, as investors grappled with the twin crises of a looming Grexit and a seemingly out-of-control Chinese stock rout. A sharp sell-off in commodities also emboldened the bears, and the materials sector, not surprisingly, was the biggest loser for the day.

Indices and sectors

The benchmark S&P/ASX 200 fell 111.9 points, or 2.0 per cent, and closed at 5,469.5, while the broader All Ordinaries index was down 107.5 points, or 2.0 per cent, at 5,456.5.

The big losing sectors were materials (-3.20 per cent), energy (-2.59 per cent), consumer discretionary (-2.34 per cent), industrials (-2.20 per cent) and financials (-1.99 per cent). There were no gaining sectors for the day.

Stocks

Materials and mining was the worst hit sector Wednesday following another sharp cut in iron ore prices. BHP Billiton Limited (ASX:BHP) crashed 3.12 per cent to AU$25.43, Rio Tinto Limited (ASX:RIO) slumped 3.25 per cent to AU$50.06 and Fortescue Metals Group Limited (ASX:FMG) was down over 6 per cent to AU$1.675. According to the Business Spectator, iron ore prices fell in the latest session by 11 per cent to a 10 year low. Benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at US$44.10 a tonne, down 11.3 per cent from its prior close of US$49.70 a tonne.

In energy, Woodside Petroleum Limited (ASX:WPL) was down 2.94 per cent to AU$33.62, Santos Ltd (ASX:STO) gave up 3.25 per cent to AU$7.45, Oil Search Limited (ASX:OSH) was down 2.43 per cent to AU$6.83 and Origin Energy Ltd (ASX:ORG) shed 1.85 per cent to AU$11.13.

The four major banks lost between 1.5 per cent and 2.5 per cent. Commonwealth Bank of Australia (ASX:CBA) declined 2.19 per cent to AU$85.77, National Australia Bank Ltd. (ASX:NAB) dumped 2.57 per cent to AU$33.33, Westpac Banking Corp (ASX:WBC) fell 1.78 per cent to AU$83.16 and Australia and New Zealand Banking Group (ASX:ANZ) was down 2.3 per cent to AU$32.27.

Airlines gave up most of the sharp gains of the previous session. Qantas Airways Limited (ASX:QAN) finished lower by 2.33 per cent at AU$3.35 and Virgin Australia Holdings Ltd (ASX:VAH) slumped 3.33 per cent to AU$0.435.

In retailers, Myer Holdings Ltd (ASX:MYR) was down nearly 4 per cent to AU$1.245, Caltex Australia Limited (ASX:CTX) fell 1.18 per cent to AU$33.37, Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, gave up 1.56 per cent to AU$39.72 and Woolworths Limited (ASX:WOW) was down a mere 0.29 per cent to AU$27.32.

Economic news, currency and market outlook

There was no respite for Chinese investors as the country’s massive stock rout continued unabated despite frantic measures by the Chinese government to limit the damage. In what must be a sign of utter desperation, over half the companies listed on the Shanghai and Shenzhen bourses had been suspended for trade to stem the slide, apparently to no avail. At the close of business yesterday, the Shanghai Composite was down nearly 6 per cent, while the Hang Seng index also crumpled by a similar amount.

Greece requested European leaders for a three-year loan, giving assurances that it would make quick changes to its tax and pension systems, but giving no specific details thereof, nor even quantifying the amount of loan it required. The Greek government said it would provide further details on Thursday, according to the New York Times.

Stocks closed sharply down on Wall Street as troubles owing to the Chinese stock market crash as well as the Greek debt crisis were compounded by a major outage on the New York Stock Exchange that shut the bourse for over three hours. The Dow Jones Industrial Average fell 261.49 points, or 1.47 percent, to end at 17,515.42. The S&P 500 lost 34.65 points, or 1.66 percent, to 2,046.69 and the Nasdaq Composite dropped 87.70 points, or 1.75 percent, to 4,909.76.

The Australian dollar rebounded above the key 74.00 US cents level, despite the shock downturn in commodities, particularly iron ore prices, as well as the growing concern with an economic fallout from China’s stocks collapse. At 07:30 this morning (AEST) the local currency was trading at 74.27 US cents, up from 73.84 US cents on Wednesday, according to Business Spectator.

The Australian stock market is likely to open lower today given that at 06:45 am (AEST) this morning the September ASX SPI200 Index (AP) Futures was down 31 points at 5,370.