continued selling in banks pushes down the benchmark asx 200 despite gains in miners and energy 1408

Australian stocks represented by the benchmark S&P/ASX 200 index were unable to sustain sharp opening gains and were sold off by investors right through Monday’s session. The index touched a low of 5,622.80 by around 3 PM, and closed just a shade above that level.

The energy and materials sectors saw bidding interest from investors on news of the Chinese interest-rate cut, but the gains in these sectors were neutralised by the selling pressure witnessed in financials and banks.

Indices and sectors

The benchmark S&P/ASX 200 on Monday fell 9.4 points, or 0.2 per cent, and closed at 5,625.2, while the broader All Ordinaries index was down 7.8 points, or 0.1 per cent, at 5,627.6.

The best gaining sectors were energy (+1.47 per cent), materials (+0.94 per cent), consumer discretionary (+0.42 per cent) and utilities (+0.21 per cent). The top losing sectors on the day were telecommunications services (-1.75 per cent), consumer staples (-0.87 per cent), real estate investment trusts (-0.61 per cent) and financials (-0.51 per cent).

Stocks

Energy stocks ended solidly in the black on Monday. Woodside Petroleum Limited (ASX:WPL) gained 2.07 per cent to AU$34.50, Origin Energy Ltd (ASX:ORG) was up 2.74 per cent to AU$12.77, Oil Search Limited (ASX:OSH) jumped 2.77 per cent to AU$7.78, while Santos Ltd (ASX:STO) remained unchanged at AU$8.59.

Mining stocks also had a good day. BHP Billiton Limited (ASX:BHP) closed higher by 1.66 per cent at AU$31.82, Rio Tinto Limited (ASX:RIO) was up 0.33 per cent at AU$58.62 and Fortescue Metals Group Limited (ASX:FMG) shot up 2.80 per cent to AU$2.57. Mount Gibson Iron Limited (ASX:MGX) closed flat at AU$0.215 and BC Iron Limited (ASX:BCI) vaulted 5.62 per cent to AU$0.470. The Australian reported this morning that iron ore prices shot up to the highest level in over two months in response to the move by the People’s Bank of China to cut interest rates, with benchmark iron ore for immediate delivery to the port of Tianjin in China trading at US$62.50 per tonne, up 3.3 per cent from its prior close of US$60.50 a tonne.

Banks, however, were at the receiving end. Commonwealth Bank of Australia (ASX:CBA) was down 0.57 per cent to AU$82.17, Westpac Banking Corp (ASX:WBC) sold off 1.03 per cent to AU$33.70, Australia and New Zealand Banking Group (ASX:ANZ) shed 1.33 per cent to AU$31.92 and National Australia Bank Ltd. (ASX:NAB) remained halted for trading. While Macquarie Group Ltd (ASX:MQG) corrected 0.51 per cent lower to AU$78.78.

Telecommunications stocks were a mixed bag. Telstra Corporation Ltd (ASX:TLS) fell 1.94 per cent to AU$6.05, iiNet Limited (ASX:IIN) was up marginally by 0.10 per cent to AU$9.95, TPG Telecom Ltd (ASX:TPM) declined 0.66 per cent to AU$9.70 and M2 Group Ltd (ASX:MTU) shot up 2.97 per cent to AU$11.11.

The retail and supermarket sector was also sold off yesterday. Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, fell 0.89 per cent to AU$43.35, Woolworths Limited (ASX:WOW) ended down 0.88 per cent at AU$27.14, Caltex Australia Limited (ASX:CTX) slipped 0.27 per cent to AU$33.00 and Myer Holdings Ltd (ASX:MYR) closed unchanged at AU$1.36. ABC reported that Michael Chaney, who is currently chairman of Woodside Petroleum Limited (ASX:WPL) and National Australia Bank Ltd. (ASX:NAB), will return as chairman at Wesfarmers, a decade after he stepped down as managing director. He will, however, relinquish his NAB role in December.

The major airlines corrected sharply yesterday. Qantas Airways Limited (ASX:QAN) plunged 2.35 per cent to AU$3.32 and Virgin Australia Holdings Ltd (ASX:VAH) shed 2.00 per cent to AU$0.490.

Economic news, currency and insight

The latest National Australia Bank survey of more than 400 companies found that business confidence remained more or less unchanged during April, remaining at 3 index points, the same as in March, according to The Sydney Morning Herald. Budget jitters, erratic economic growth, weak consumer spending as well as unemployment together took a toll on business confidence. Alan Olster, NAB’s chief economist, said the two recent interest-rate cuts by the RBA had had limited impact so far. "Until confidence lifts significantly it is difficult to see a sustained economic recovery developing," Mr Oster said, as quoted by The Sydney Morning Herald. "To date, rate cuts have not appeared to do much and it will be interesting to see what, if anything, this week's Federal Budget will do."

Treasurer Joe Hockey will present the federal budget today at 19:30 hours. According to ABC, the budget will be a “dull and routine” affair as per remarks by Tony Abbott, and will not attempt to replenish federal coffers at the expense of the household purse. However, it is quite likely that the budget will introduce a tax on bank deposits and raise AU$400 million. "This tax is actually an announcement of the former government, but it hasn't been ruled out by the current Government and until they do it remains in the budget," said Australian Bankers Association's chief executive, Steven Munchenberg, and quoted by ABC. "So we were hoping that the Government would rule this tax out tomorrow. If it doesn't, it means that they are on track to bring in a tax on people's savings, on deposits that you have in the bank." Treasurer Joe Hockey has also made no secret of his plans to crack down on tax avoidance by multinational companies through“contrived or artificial tax arrangements.” "These contrived arrangements have been used to avoid paying tax in Australia and they are very complicated transactions," he said. "Tomorrow night I will be releasing legislation that strengthens our anti-avoidance regime."

On Wall Street, stocks ended down on Monday, buffeted by concerns regarding slowing economic growth in China, weak oil prices and the possibility of a default by Greece, according to Reuters. The Dow Jones Industrial Average fell 85.94 points, or 0.47 percent, to end at 18,105.17. The S&P 500 lost 10.77 points, or 0.51 percent, to 2,105.33 and the Nasdaq Composite dropped 9.98 points, or 0.2 percent, to 4,993.57.

The Australian dollar was weak despite the rate cut move by the People’s Bank of China and the resurgence in iron ore prices, according to Business Spectator. At 07:00 this morning (AEST), the Australian dollar was trading at 78.89 US cents, down from 79.10 US cents on Monday.

The Australian stock market is likely to open lower today given that at 6.45am (AEST) today, the June ASX SPI200 Index (AP) Futures was down by 4 points at 5,570.