Rising fears of tougher sanctions on Russia, combined with uncertainty about the health of the world’s second biggest economy, pushed Australia’s sharemarket back into the red.
The benchmark S&P/ASX 200 Index sagged 0.5 per cent on Thursday to 5350.1 points, while the broader All Ordinaries Index shed 0.5 per cent to 5359.7 points, eroding most of Wednesday’s gains.
The losses followed a bleak night in overseas trade, where stock markets started in positive territory but ended weaker after the US and Europe agreed to possibly increase sanctions against Russia over its occupation of Crimea, St George economists said.
But Patersons Securities strategists Tony Farnham said the US-Russian tensions were a ”ready-made excuse” and the reaction of global equity markets was ”beyond reasonable”.
”If Russia pushed further into the eastern part of Ukraine, then sure markets will get nervous but at this stage they’re simply delivering a show of strength.”
Mr Farnham said the Wall Street sell-off was mainly due to technology stocks tumbling.
Investors snubbed Facebook’s $US2 billion deal to buy virtual reality company Oculus and steered clear of Candy Crush creator King Digital, which slumped 15.5 per cent on its first day of trade after raising $US500 million in an IPO.
Locally, Mr Farnham said a sell-off in base metals, which he attributed to concerns about China’s growth, weighed on the market.
Earlier this week, a closely followed indicator, the HSBC-Markit flash reading of China’s manufacturing purchasing index, fell to an eight-month low of 48.1 in March from February’s 48.5. The index has been below the 50 level since January, indicating a slowdown in the sector.
But Reserve Bank of Australia governor Glenn Stevens said during a speech in Hong Kong on Wednesday that investors were fretting too much over ”what are still relatively small movements in monthly PMIs and the like in China”.
Mr Farnham said Mr Stevens’ comments were odd.
”It was interesting that Stevens … said people get too hung up on individual stats. But those individual stats are important because they are giving you the signposts on where the large No. 2 world economy is going and from our neck of the woods it is particularly important because it’s also our major trading partner.”
He said investors would be eagerly anticipating China’s next official PMI reading, to be released on April 1.
Locally, mining stocks declined, with the resource sector slipping 1.1 per cent. Index heavyweight BHP Billiton eased 0.6 per cent to $35.98, while rival Rio Tinto dipped 0.8 per cent to $63.18. Copper and gold producer PanAust lost 4.4 per cent to $1.53, while Australia’s biggest gold producer Newcrest was down 3.3 per cent to $9.68.
Ord Minnett senior investment advisor Tony Paterno said: ”decent size gyrations had become the norm for these stocks”.
”There is a lot of talk about China’s banks and defaults happening,” Mr Paterno said. ”That is affecting the metals prices, particularly iron ore.”
The ASX gained some traction later in the session, mainly thanks to the big banks.
Commonwealth Bank, the biggest company on the ASX, rose 0.2 per cent to $76.56, while ANZ and NAB finished flat. Westpac eased 0.2 per cent to $34.22.
Mr Paterno said in the past two days there had been bank buying.
”I’d say some of the institutions are getting because it’s about 45 days now up until Westpac, ANZ and NAB start paying dividend, so you generally see a bit of strength in those stocks.”
But Mr Paterno said volumes were light, and that investors were sticking to the sidelines amid global uncertainty.
”I mean we haven’t even cracked $3 billion yet. Today’s one of the lowest volume days I’ve seen in a while.”
QBE Insurance fell 1.3 per cent to $12.75. Casino operator Crown Resorts lost 1.8 per cent to $16.58, and STW Communications plunged 2.4 per cent to $1.43.
Sigma Pharmaceuticals, the owner of chemist brands Amcal and Guardian, gained 1.6 per cent to 64¢ after its full year net profit almost doubled to $53.5 million.
Lynas Corp surged 25 per cent to 22.5¢, its biggest one day rise since September 2012, after announcing its commercial production and sales of rare earth oxide products at its Malaysian plant would hit a record high in the March quarter.
This story Administrator ready to work first appeared on Nanjing Night Net.