australian stocks end a shade lower on global cues 1576722015

Buffett’s landmark deal with IAG fails to move indices into positive territory

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By :  ,  Financial Analyst

Australian stocks ended nearly flat on Tuesday as investors turned cautious given that an all-important Federal Reserve policy meeting would commence later the same day in the US, and likely provide some clarity on the central bank’s plans for interest rate hikes. Investors also grappled with the looming likelihood of a Greek default, unless Eurozone finance ministers are able to rescue negotiations at a meeting scheduled on Thursday. The bonhomie from Warren Buffett’s AU$500 million deal with IAG soon vanished amidst the bearishness that gripped mining and energy stocks.

Indices and sectors

The benchmark S&P/ASX 200 fell 3.0 points, or 0.1 per cent, and closed at 5,535.8, while the broader All Ordinaries index was down 6.3 points, or 0.1 per cent, at 5,535.2.

The sectors that closed with gains were utilities (+0.97 per cent), telecommunications services (+0.59 per cent), financials (+0.47 per cent) and consumer staples (+0.20 per cent). The losing sectors included energy (-1.29 per cent), real estate investment trusts (-1.27 per cent), consumer discretionary (-1.02 per cent) and materials (-0.85 per cent).


Amongst miners, which ended across-the-board in the red, BHP Billiton Limited (ASX:BHP) fell 0.61 per cent to AU$27.75, Rio Tinto Limited (ASX:RIO) sold off 2.41 per cent to AU$55.91 and Fortescue Metals Group Limited (ASX:FMG) plunged 4.92 per cent to AU$2.32.

It was a similar story with energy stocks. Woodside Petroleum Limited (ASX:WPL) ended 0.73 per cent lower at AU$35.41, Origin Energy Ltd (ASX:ORG) fell 1.17 per cent to AU$12.72, Oil Search Limited (ASX:OSH) slid sharply by 3.06 per cent to AU$7.29 and Santos Ltd (ASX:STO) was down 1.60 per cent to AU$7.99.

The four major banks all ended with gains. Commonwealth Bank of Australia (ASX:CBA) was up 0.60 per cent to AU$82.38, Westpac Banking Corp (ASX:WBC) shot up 1.83 per cent to AU$32.30, National Australia Bank Ltd. (ASX:NAB) rose 0.80 per cent to AU$32.79 and Australia and New Zealand Banking Group (ASX:ANZ) gained 1 per cent to AU$32.17.

Insurance Australia Group Ltd (ASX:IAG) surged 4.31 per cent to close at AU$5.81 and was one of the top gainers on the S&P/ASX200 on news that Warren Buffet’s Berkshire Hathaway Inc. (NYSE:BRK.A) had agreed to acquire a 3.7 per cent stake in the company for AU$500 million. The two companies also inked a 10-year strategic partnership that will entitle the US insurance giant to receive 20 per cent of IAG’s consolidated gross written premiums and pay 20 per cent of its claims.

Telecom stocks closed mixed. Telstra Corporation Ltd (ASX:TLS) gained 0.67 per cent to AU$6.03 and iiNet Limited (ASX:IIN) was up 0.47 per cent to AU$9.60. However, TPG Telecom Ltd (ASX:TPM) fell 0.23 per cent to AU$8.58 and M2 Group Ltd (ASX:MTU) was down 1.12 per cent to AU$10.64.

In retailers, Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, was up 0.51 per cent to AU$41.32 and Woolworths Limited (ASX:WOW) gained 0.30 per cent to AU$26.84, Caltex Australia Limited (ASX:CTX) declined 1.09 per cent to AU$30.83 and Myer Holdings Ltd (ASX:MYR) fell 0.77 per cent to AU$1.29.

Economic news, currency and market outlook

The release of the RBA’s June board meeting minutes did not have much impact on the stock market. The central bank continues to have an accommodative view on monetary policy given that the Australian dollar has shown more strength than desirable, according to

Australian Trade Minister Andrew Robb and Chinese Commerce Minister Gao Hucheng will today sign a free-trade agreement in Canberra that has been under negotiation for over a decade, says ABC. Tariff barriers facing Australian companies, which could be as high as 40 per cent on their exports to China, would be removed following the signing of the FTA. Australian exporters could get an advantage over their rivals in the US, European Union and Canada.

On Wall Street Tuesday, stocks rose amidst M&A news that overshadowed the bearish news on the failure of Greece’s negotiations. The Dow Jones Industrial Average rose 113.31 points, or 0.64 percent, to 17,904.48, the S&P 500 gained 11.86 points, or 0.57 percent, to 2,096.29 and the Nasdaq Composite added 25.58 points, or 0.51 percent, to 5,055.55.

The Australian dollar is currently trading higher driven largely by mixed US economic data, according to the Business Spectator. At 07:00 this morning (AEST), the Aussie was trading at 77.52 US cents, up from 77.46 US cents on Tuesday.

The Australian stock market is likely to open higher today given that at 6.55am (AEST) this morning the June ASX SPI200 Index (AP) Futures was up sharply by 47 points at 5,574.

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