the asx 200 falls 0 5 per cent on weak gdp growth numbers selling in miners and banks 1105102015

ASIC launches an investigation into suspect Australian dollar trading ahead of the RBA decision

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By :  ,  Financial Analyst

The ASX spent the second consecutive session in the red on Wednesday, pressured by soft GDP growth data, tired bull liquidation and profit-taking, and selling in mining and banking stocks.

Investors appeared to be still chewing over the unexpected decision Tuesday by the Reserve Bank of Australia to refrain from another rate cut, and the resulting failure of the benchmark S&P/ASX 200 to take out the 6,000 level. Yield-sensitive stocks such as banks and certain blue chips have therefore taken it on the chin.

Barring a perfunctory spike at the opening, the S&P/ASX 200 maintained a downward trend until around 13:00, but spent the rest of the session in sideways, somewhat volatile trading that was well supported by the 5,900 line.

“What goes up has to come down, and a lot of traders are pocketing recent profits,” said Macquarie Equities division director, Lucinda Chan, and quoted by The Australian. “It’s fine for the market to take a breather. Investors will always buy back in.”

Indices and sectors

The benchmark S&P/ASX 200 fell 32.3 points, or 0.5 per cent, and closed at 5,901.6, while the broader All Ordinaries index was down 31.4 points, or 0.5 per cent, to 5,871.5.

The significant gaining sectors were healthcare (+0.67 per cent), information technology (+0.49 per cent) and industrials (+0.36 per cent). The big losers were materials (-1.06 per cent), consumer staples (-1.04 per cent), telecommunications (-0.89 per cent) and financials (-0.68 per cent).


Mining stocks weighed heavily on the market yesterday. BHP Billiton Ltd (ASX:BHP) fell 0.69 per cent to AU$33.31, Rio Tinto Ltd (ASX:RIO) fell 1.38 per cent to AU$62.40, and Fortescue Metals Group Ltd (ASX:FMG) slumped 5.37 per cent to AU$2.29.

The major banks all closed in negative territory. Commonwealth Bank of Australia (ASX:CBA) slipped 0.86 per cent to AU$91.13, Westpac Banking Corp (ASX:WBC) was down 0.91 per cent to AU$37.91, Australia and New Zealand Banking Group (ASX:ANZ) fell 0.39 per cent to AU$35.52 and National Australia Bank Ltd (ASX:NAB) closed lower by 0.5 per cent to AU$38.09.

Energy stocks showed a mixed performance. Woodside Petroleum Ltd (ASX:WPL) closed unchanged at AU$35.10, while Santos Ltd (ASX:STO) was down 0.13 per cent to AU$7.93. Origin Energy Ltd (ASX:ORG) gained 0.41 per cent to AU$12.28 and Oil Search Ltd (ASX:OSH) lost 0.37 per cent to AU$8.07.

Retailers were on the back foot, too. Woolworths Ltd (ASX:WOW) was down 1.6 per cent to AU$29.35, while Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, lost 0.9 per cent to AU$43.26.

Macquarie Group Ltd (ASX:MQG) announced a AU$5.1 billion acquisition of a portfolio of 90 aircraft from private equity giant Terra Firma and the Canada Pension Plan Investment Board, pushing it into the ranks of the world’s largest airplane lessors, according to the Australian Financial Review. The stock was under a trading halt and unchanged from AU$73.52, with the company having completed a capital raising worth AU$500 million from institutional investors at AU$73.50 per share. Qantas Airways Ltd (ASX:QAN) closed higher by 0.35 per cent to AU$2.87, while rival Virgin Australia Holdings Ltd (ASX:VAH) vaulted 2.08 per cent to AU$0.490.

Economic news, currency and insight

Official figures from Australia’s Bureau of Statistics showed that the country’s GDP grew 0.5 per cent in the December quarter of 2014, and 2.5 per cent on an annual basis, down from 2.7 per cent in the previous quarter, according to ABC. "The good news is we've now completed 23 years of continuous growth, the bad news is we're still running below trend, which will keep upward pressure on the unemployment rate, and keeps the RBA on rate-cut watch," Commonwealth Bank chief economist Michael Blythe commented. “When you have a central bank with a strong easing bias, as they laid out pretty clearly yesterday, then you've got to think there's a good chance in the next couple of months we'll see another cut," he added. The Reserve Bank of Australia kept interest rates on hold at its meeting last Tuesday.

However, ASIC has launched an investigation into suspect trading in the Australian dollar that appeared to have prior knowledge of the interest rate decision to be announced by the RBA, says ABC. Barely half a minute before the latest decision by the RBA became public, an unidentified trader bought enough of Australian dollars to push the local currency higher by nearly 25 basis points. Australian Treasurer Joe Hockey said he had spoken to Reserve Bank Governor Glenn Stevens and had been assured that the bank’s statement had been published exactly at 2:30 PM and according to procedures. "He advised me that he'd spoken to ASIC about the matter," Mr Hockey said. "I'm satisfied that that investigation will be properly undertaken.”

According to the World Bank, the glut in the global iron ore market will likely prevail for another two years, with the price of the steelmaking materials averaging around US$75 per tonne during 2015, says ABC. This is likely to crimp Western Australia’s royalty revenue. "I don't think you're going to see a significant upswing in the price of iron ore for the foreseeable future," said Western Australia Treasurer Mike Nahan. "The reality is there's a hell of a lot of supply coming onto the market from Australia and Brazil and there's slowing demand in China.”

A report in the Business Spectator this morning said the iron ore price is headed towards a new five-and-a-half-year low, having declined in seven out of the last eight trading sessions. Iron ore for spot delivery at Tianjin port in China last traded at US$62.10 a tonne down 0.3 per cent from the previous close of US$62.30 a tonne.

National Australia Bank’s Online Retail Sales Index for January showed Australians spent AU$16.6 billion online in the year ended January 31, an increase of 9 per cent year-on-year, according to The Australian. It is notable that domestic retailers accounted for 74.8 per cent of the total online spending.

At 06:30 this morning (AEDT), the Australian dollar was trading at 78.14 US cents, down from 78.23 US cents yesterday.

The local stock market is likely to open flat today considering the March ASX SPI200 Index (AP) Futures was trading down by just 1 point to 5,882.0 at 07:59 this morning (AEDT).

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