the asx loses 1 3 per cent on mining downtrend us rate hike fears 1129462015

Breaking news: Goldman Sachs downgrades Australian banks

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By :  ,  Financial Analyst

Australian stocks were locked inside an unrelenting bear grip on Monday, as fresh falls in iron ore and gold prices pressured companies in the mining space and Friday’s sell off on Wall Street weighed on sentiment. Moreover, the spectre of a hike in interest rates by the US Fed loomed larger after strong US job numbers.

The S&P/ASX 200 plunged sharply in the opening hour of trade, and maintained the downward momentum right through the trading session. In a bearish sign, the index closed just a whisker above the day’s low of 5,814.70, indicating strong selling pressure.

Indices and sectors

The benchmark S&P/ASX 200 on Monday fell 77.6 points, or 1.3 per cent, and closed at 5,821.3, while the broader All Ordinaries index was down 75.6 points, or 1.3 per cent, to 5,793.

All the sectors ended in negative territory following the market slump. The big losers were utilities (-3.05 per cent), telecommunications (-2.23 per cent), materials (-1.72 per cent), industrials (-1.68 per cent) and energy (-1.61 per cent).


Amongst the miners, BHP Billiton Ltd (ASX:BHP) fell 1.50 per cent to AU$32.15, Rio Tinto Ltd (ASX:RIO) was down 1.97 per cent to AU$59.20, and Fortescue Metals Group Ltd (ASX:FMG) slipped 0.47 per cent to AU$2.14. Atlas Iron Ltd (ASX:AGO) fell 3.03 per cent to AU$0.160 and BC Iron Ltd (ASX:BCI) plunged 6.90 per cent to AU$0.405. Mining equipment supplier Bradken Ltd (ASX:BKN) was the worst performer on the S&P/ASX 200, falling over 14 per cent to AU$1.90. According to the Business Spectator, iron ore prices touched a fresh six year low in overnight trade. Benchmark iron ore for spot delivery at Tianjin China last traded at US$58.00 per tonne, down 0.3 per cent from its previous close. The steelmaking ingredient has therefore fallen 11 per cent over the last 11 trading sessions.

However, gold miners were hit harder. Newcrest Mining Ltd (ASX:NCM) dropped sharply by 4.74 per cent to AU$12.65, Regis Resources Ltd (ASX:RRL) plunged 12.14 per cent to AU$1.23, Beadell Resources Ltd (ASX:BDR) declined 8.93 per cent to AU$0.255 and Evolution Mining Ltd (ASX:EVN) was down 6.94 per cent to AU$0.805. The last-named three stocks all figured in the top five losers list in the S&P/ASX 200. Gold prices fell by nearly 3 per cent on Friday following the release of strong employment numbers in the US which boosted the strength in the US dollar. A strong US dollar is negative for gold prices.

In energy stocks, Woodside Petroleum Ltd (ASX:WPL) fell 0.91 per cent to AU$34.84, Santos Ltd (ASX:STO) was down 3.7 per cent to AU$7.55, Oil Search Ltd (ASX:OSH) dipped 1.02 per cent to AU$7.76, and Origin Energy Ltd (ASX:ORG) closed lower by 2.62 per cent at AU$11.91. However, AWE Ltd (ASX:AWE) shot higher by 6.97 per cent to AU$1.30 after the company confirmed a preliminary maximum gas flow rate of 18.5 million standard cubic feet per day (mmscf/d) from the flow testing program at the Senecio-3 well, in the onshore Perth Basin, Western Australia, according to OilVoice. AWE was the top gainer on the S&P/ASX 200 yesterday.

Commonwealth Bank of Australia (ASX:CBA) fell 0.63 per cent to AU$90.52, Westpac Banking Corp (ASX:WBC) was down 0.85 per cent to AU$87.36, Australia and New Zealand Banking Group (ASX:ANZ) slipped 0.65 per cent to AU$35.16 and National Australia Bank Ltd (ASX:NAB) was down 0.90 per cent to AU$37.63.

The retailers met with their share of the sell-off too. Woolworths Ltd (ASX:WOW) fell 0.86 per cent to AU$29.81, Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, lost 0.75 per cent to AU$43.60 and Myer Holdings Ltd (ASX:MYR) declined 1.18 per cent to AU$1.68.

Telstra Corporation Ltd (ASX:TLS) declined by 2.23 per cent to AU$6.14.

Economic news, currency and insight

The ANZ job advertisements series for February showed a ninth straight month of improvement, rising 0.9 per cent. “Job advertisements remain on a moderate upward trend, suggesting that labor demand is holding up across certain sectors of the Australian economy," ANZ chief economist Warren Hogan said, as quoted by the Business Spectator. "That said, while job ads did experience their ninth consecutive monthly increase, the annual pace of growth has eased somewhat in the previous two months, suggesting some loss of momentum." ANZ expects the RBA to cut interest rates next month, “given that the RBA has indicated that the transmission mechanism of monetary policy is muted at present, and that one 25 basis point cut in isolation will have limited economic impact."

New research from the Reserve Bank of Australia suggests that Australian banks would incur only limited losses in the event of a severe economic shock to the country’s households, according to The Sydney Morning Herald. A kind of ‘stress test’ of the resilience of households, the RBA paper by Tom Bilston, Robert Johnson and Matthew Read estimated the likely loan losses for banks from a severe shock would equal a little less than 10 per cent of the bank capital reserves earmarked for such losses.

According to a report in The Sydney Morning Herald this morning, Goldman Sachs has downgraded Australian bank shares as the lenders face a weak economy and tougher regulations. Strategist Matthew Ross lowered the rating on the Australian banking sector from neutral to underweight citing the significant risks it faces, particularly given that stock prices have hit the roof in 2015.

The Australian dollar is correcting from its recent fall and at 07:00 this morning (AEDT) it was trading at 77.10 US cents, from 76.99 US cents yesterday, according to The Australian.

The Australian stock market is likely to open in the black today given that March ASX SPI200 Index (AP) Futures was up 12 points at 5,827.0 at 06:59 this morning (AEDT).


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