australian stocks closed lower as investors worry about commodities 1271662015

Australian stocks closed lower on Thursday, giving up the gains of the previous session, as investors sold off the mining and energy sectors, and banks ended in the red.

In market action, stocks commenced their slide in the opening hour, and barring intermittent rallies, maintained a downward trend through the session, though the 5,930 level on the S&P/ASX 200 appeared to offer repeated support.

According to analysts, Australian stocks were underpinned by hopes of interest rate cuts but pressured by the fallout from the slide in commodities and its impact on the country’s finances. Besides, the 6,000 level on the S&P/ASX 200 has been acting as a strong technical resistance level.

Indices and sectors

The benchmark S&P/ASX 200 on Thursday fell 28.5 points, or 0.5 per cent, and closed at 5,932.2, while the broader All Ordinaries index was down 26.8 points, or 0.5 per cent, at 5,901.5.

Consumer discretionary (+0.27 per cent) and utilities (+0.27 per cent) were the only two gaining sectors. The main losing sectors were materials (-1.27 per cent), energy (-0.91 per cent), telecommunications services (-0.66 per cent) and healthcare (-0.62 per cent).

Stocks

The mining stocks led the market lower. BHP Billiton Limited (ASX:BHP) fell 1.79 per cent to AU$30.19, Rio Tinto Limited (ASX:RIO) was down 0.74 per cent to AU$56.58, Fortescue Metals Group Limited (ASX:FMG) slipped 2.58 per cent to AU$1.89 and Mount Gibson Iron Limited (ASX:MGX) was lower by 2.56 per cent to AU$0.190. However, BC Iron Limited (ASX:BCI) ran against the tide, gaining 7.27 per cent to AU$0.295 after it announced that third-quarter shipments of iron ore were up 20 per cent, and that it would undertake to further reduce costs in the aftermath of plunging iron ore prices.

Energy stocks were the second largest losing sector, as crude oil prices declined prior to the market open. Woodside Petroleum Limited (ASX:WPL) fell sharply by 2.68 per cent to AU$34.13, Oil Search Limited (ASX:OSH) declined 0.26 per cent to AU$7.62 and Santos Ltd (ASX:STO) fell 0.54 per cent to AU$7.37. However, Origin Energy Ltd (ASX:ORG) was up 0.87 per cent to AU$11.65.

Qantas Airways Limited (ASX:QAN) was higher by 3.44 per cent to AU$3.31, though Virgin Australia Holdings Ltd (ASX:VAH) fell 0.90 per cent to AU$0.550.

The major banks all ended in the red yesterday. Commonwealth Bank of Australia (ASX:CBA) dipped 0.16 per cent to AU$93.85, Westpac Banking Corp (ASX:WBC) was down 0.60 per cent to AU$39.52, Australia and New Zealand Banking Group (ASX:ANZ) fell 0.46 per cent to AU$6.62 and National Australia Bank Ltd. (ASX:NAB) was lower by 0.18 per cent to AU$39.38.

Retailers ended up mixed. Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, was down 0.30 per cent to AU$43.72 and Caltex Australia Limited (ASX:CTX) fell 0.06 per cent to AU$34.73. However, Woolworths Limited (ASX:WOW) closed flat at AU$29.05 and Myer Holdings Ltd (ASX:MYR) moved up sharply by 5.26 per cent to AU$1.50, as rumours continue to float that the department store chain was a takeover target. Myer was the second largest gainer on the S&P/ASX 200 yesterday, and is already up 15 per cent this week.

Economic news, currency and insight

The Australian Industry Group – Housing Industry Association Performance of Construction Index jumped 6.2 points in March to 50.1, barely making it past the dividing line of 50.0 which separates contraction from expansion, according to ABC. "Renewed strength in house and apartment building drove the Australian construction industry back into growth territory in March," observed the Australian Industry Group's head of policy Peter Burn. However engineering construction, which derives most of its business from mining activities, fell again to a 10 month low of 41.2.

According to ABC, China may cut back on its steel production this year in the midst of a slowdown, resulting in lower demand for iron ore, the steelmaking raw material. "Right now our steel industry has the problem of overcapacity and faces plenty of problems," said Li Xinchuang, from the China Metallurgical Industry Planning and Research Institute, a Chinese government think tank. "Our economy will change from high-speed development to medium-high-speed development. The demand for steel in China has reached its peak and will decline," he added.

At 07:00 this morning (AEST), the Australian dollar was trading at 76.92 US cents, down from 76.99 US cents on Thursday after the US dollar gained strength from data on new claims for unemployment benefits, according to The Australian.

On Wall Street, stocks closed higher, as the energy sector was enthused by a rebound in crude oil prices, and investors prepared for a possible surprise from earnings results after analysts lowered their expectations, according to Reuters. The Dow Jones Industrial Average rose 56.22 points, or 0.31 percent, to 17,958.73, the S&P 500 gained 9.29 points, or 0.45 percent, to 2,091.19 and the Nasdaq Composite added 23.74 points, or 0.48 percent, to 4,974.57.