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Central bank, bond worries hit Aust stocks

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Published on: Friday, July 07, 2017

The Australian share market fell on Friday, erasing its gains for the week as investors worried that central banks are about to wind back economic stimulus measures.

The benchmark S&P/ASX200 stock index fell almost one per cent to 5,703.6 points.

Globally, both share and bond markets have come under pressure after the European Central Bank's latest minutes indicated it may wind back its bond-buying program.

"It's pretty clear that consistent messaging from central banks this week has rattled investors," CMC Markets chief market strategist Michael McCarthy said.

"They're focusing on the potential for stimulus withdrawal."

Mr McCarthy said worries that stimulus withdrawal could start as early as September is starting to weigh on investors' minds.

"Rising interest rates are one thing but draining the global liquidity pool is a completely different matter altogether, and the fact that we're seeing pressure across the asset classes suggests that's where investors are focused at the moment," he said.

Mr McCarthy said that more immediately, investors are awaiting the release of the key US non-farm payroll figures due out on Friday night.

He said a strong lift in the jobs data would lead markets to conclude that stimulus withdrawal is on track, whereas a weak number may lead to the conclusion that any slowdown in bond-buying programs will be deferred.

On the local bourse, energy stocks Woodside Petroleum and Santos tumbled by 2.6 per cent, with oil prices remaining weak despite a slight lift in overnight trading.

Healthcare stocks were also hit, with blood products and vaccines supplier CSL down by two per cent and cochlear implant company Cochlear 1.7 per cent lower.

The big four banks - Westpac, Commonwealth Bank, ANZ and National Australia Bank - were down between 0.78 per cent and 1.28 per cent.

In contrast, many of the big miners benefited from higher iron ore prices in China on Friday.

Global miner BHP Billiton and Rio Tinto each lifted by more than one per cent, to $24.59 and $65.04 respectively.

In company news, Coca Cola-Amatil dropped by 2.7 per cent to $8.67, continuing Thursday's decline after it emerged that the beverages supplier lost a contract with Australia's largest pizza chain, Domino's and had failed to get its latest no-sugar offering on the shelves of supermarket giant Woolworths.

CCA issued a statement minutes before the close of trading to say neither event was material but the stock finished six per cent lower for the week.

Troubled infant formula supplier Bellamy's was in a trading halt after Chinese food regulatory authorities suspended a key licence of its recently-acquired Camperdown Powder canning facility.

Meanwhile, the Australian dollar was trading at 75.91 US cents at 1630 AEST, down from 76.00 US cents on Thursday despite the greenback falling following a round of weaker-than-expected US employment data.

Bond prices were lower on the expectation of interest rate hikes from major central banks.

ON THE ASX:

* At 1630 AEST, the benchmark S&P/ASX200 was down 55.2 points, or 0.96 per cent, at 5,703.6 points.

* The broader All Ordinaries index was down 53.6 points, or 0.92 per cent, at 5,743.9 points.

* The September SPI200 futures contract was down 49 points or 0.86 per cent at 5,650 points.

* National turnover was 1.9 billion securities traded worth $6.3 billion.

CURRENCY SNAPSHOT

CURRENCY ASK BID PREVIOUS

AUD/USD 0.7594 0.7589 0.7585

AUD/JPY 86.37 86.34 85.86

AUD/EUR 0.6655 0.6651 0.6639

AUD/NZD 1.0433 1.0426 1.042

AUD/GBP 0.5863 0.5862 0.5847

GOLD:

The spot price of gold in Sydney at 1700 AEST was $US1,221.84 per fine ounce, from $US1,224.74 per fine ounce on Thursday.

BOND SNAPSHOT AT 1630 AEST:

* CGS 4.50 per cent April 2020, 1.9333pct, from 1.8756pct

* CGS 4.75pct April 2027, 2.6717pct, from 2.5826pct

Sydney Futures Exchange prices:

* August 2017 10-year bond futures contract at 97.270 (implying a yield of 2.730pct), from 97.360 (2.640pct) on Thursday

* August 2017 3-year bond futures contract at 97.970 (2.030pct), from 98.040 (1.960pct).


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