australian stocks turn sharply negative on chinas stock selloff and worries on greece 1658482015

Australian stocks corrected sharply on Friday after three consecutive winning sessions. Investors went into defensive mode after the sell-off on Chinese exchanges showed no signs of abating, and the national referendum in Greece on austerity measures loomed large with its implications for market volatility Monday. In addition, resource rich Australian stocks took it on the chin following sharp falls in the price of crude and iron ore the past week.

Indices and sectors

The benchmark S&P/ASX 200 fell 61.5 points, or 1.1 per cent, and closed at 5,538.3, while the broader All Ordinaries index was down 59.9 points, or 1.1 per cent, at 5,528.

The big losing sectors were energy (-2.44 per cent), materials (-1.74 per cent), healthcare (-1.55 per cent), telecommunications services (-0.95 per cent) and financials (-0.94 per cent). There were no gaining sectors.

Stocks

Energy sector stocks were big losers in Friday’s trading following the sharp decline in crude oil prices since Wednesday. Woodside Petroleum Limited (ASX:WPL) fell 1.45 per cent to AU$34.76, Origin Energy Ltd (ASX:ORG) slumped 3.45 per cent to AU$11.75, Oil Search Limited (ASX:OSH) was down over 3 per cent to AU$7.07 and Santos Ltd (ASX:STO) crashed 3.14 per cent to AU$8.01.

Stocks in the mining sector were also heavily sold off following a fall in the prices of iron ore. BHP Billiton Limited (ASX:BHP) slumped 1.52 per cent to AU$26.59 and Rio Tinto Limited (ASX:RIO) slid 1 per cent to AU$52.50. Fortescue Metals Group Limited (ASX:FMG) was down 4.71 per cent to AU$1.82 and was one of the top losers on the S&P/ASX 200.

Banks saw selling across-the-board. In the major banks, Commonwealth Bank of Australia (ASX:CBA) gave up 0.90 per cent to close at AU$86.66, Westpac Banking Corp (ASX:WBC) fell 0.76 per cent to AU$32.76, Australia and New Zealand Banking Group (ASX:ANZ) was down 1.37 per cent to AU$32.46 and National Australia Bank Ltd. (ASX:NAB) lost 0.97 per cent to AU$33.71.

In retailers, Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, closed lower by 0.53 per cent at AU$39.75, Woolworths Limited (ASX:WOW) shed 0.61 per cent to AU$27.63, Caltex Australia Limited (ASX:CTX) was down 2 per cent to AU$32.35 and Myer Holdings Ltd (ASX:MYR) sold off 1.1 per cent to AU$1.26.

Economic news, currency and market outlook

Over the weekend, China’s securities regulator suspended 18 IPOs in a desperate attempt to stem the slide on the Chinese stock exchanges, according to Bloomberg. Previously, it had relaxed margin norms that had been tightened earlier – a move which triggered the sell-off in the first place. A group of Chinese brokerages has set apart 15 per cent of their assets to invest in a market stabilisation fund. According to media reports, the securities regulator is also investigating short selling in Chinese index funds. The benchmark Shanghai Composite index fell nearly 6 per cent on Friday.

Greece resoundingly rejected the European Union’s austerity measures with a landslide “no vote” in the country’s national referendum. The vote lends more power to Prime Minister Alexis Tsipras in future negotiations with the Euro group. Earlier, Mr Tsipras seized on an IMF internal report which apparently said that Greece needs its debt to be restructured as well as a €50 billion debt write-off, and claimed it supported his views. The result of the referendum could instigate substantial volatility when financial markets open Monday, according to The Australian.

Stocks closed a shade lower on Wall Street Thursday as investors digested a soft jobs report for the month of June and the IMF cautioned on Greek financial turmoil ahead of the country’s referendum on Sunday. The Dow Jones Industrial Average fell 30.5 points, or 0.16 percent, to 17,730.11, the S&P 500 lost 0.64 points, or 0.03 percent, to 2,076.78 and the Nasdaq Composite dropped 3.91 points, or 0.08 percent, to 5,009.21. US markets remained closed on Friday for a holiday.

The Australian dollar is trading sharply lower following the rejection of austerity by Greek voters in its national referendum on the bailout negotiations. According to the Business Spectator, at 06:30 this morning (AEST) the local currency was trading at 75.48 US cents, down from 75.84 US cents on Friday.

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 seven points at 5,480.