MARKET CLOSE (4.30pm AEDT)
The Australian sharemarket fell for the first time in five sessions, with the All Ordinaries Index (XAO) slipping by 0.7 per cent or 32 pts to 4502.2. No sectors were spared from the selling; however local shares are coming off an impressive winning streak, with equities (shares) ending in the red for just two of the past nine sessions.
Global markets plummeted overnight, with concerns shifting to the U.S fiscal cliff. Essentially, American politicians are running out of time to agree on ways to improve the nation's budget deficit (when spending is greater than income). In January next year if no agreement has been reached, automatically triggered spending cuts and tax increases will be set off.
Shares in North America slid by 2.4 per cent overnight while European markets (including French and German equities) dropped by 2 per cent.
The European commission downgraded growth forecasts last night and is now expecting a measly 0.1 per cent boost to the Eurozone's growth rate next year. There have been concerns this week ahead of the Greek Parliament's vote on its austerity package; however the new measures were approved (barely) by Parliament today. The troubled economy will now be making as much as €18.5 billion worth of spending cuts by 2016. Greece has the Eurozone's second highest jobless rate of 25.1 per cent; almost five times worse than Australia's.
All sectors ended in the red today, but none worse than the energy and mining stocks. Iron ore miner, Fortescue Metals Group (FMG) fell 2.72 per cent or 11 cents to $3.94 while the larger BHP Billiton (BHP) eased by 0.89 per cent or 31 cents to $34.67. BHP is almost 10 times larger than FMG on the Australian sharemarket. Rio Tinto (RIO), the local market's second largest miner dropped by 1.08 per cent or 65 cents to $59.35.
The major banks finished mixed with Commonwealth Bank of Australia (CBA) rising 0.66 per cent or 38 cents to $58.18, while Westpac (WBC) also improved by 0.27 per cent or 7 cents to $25.93. ANZ Banking Group (ANZ) was the worst performer after going ex-dividend today. This essentially means if you bought ANZ shares today onwards you would not be eligible to receive its next 79 cent a share distribution which is to be paid on 19 December. A company's share price typically falls on its ex-dividend day. National Australia Bank (NAB) eased by 0.48 per cent or 12 cents to $24.87.
A number of Annual General Meetings (AGMs) were held today including Specialty Fashion Group (SFH), Deep Yellow (DYL) and Infomedia (IFM). SFH shares rose by more than 6 per cent today, its best daily performance since last Wednesday. Specialty is the company behind brands such as Millers, Crossroads and Katies and has close to 900 stores. At its AGM it said it is well placed to benefit from improving conditions despite a tough run for retailers at the moment.
On the economic front today, the Australian Bureau of Statistics (ABS) said there were around 10,700 jobs created across the country last month while the unemployment rate was steady at 5.4 per cent. The participation rate (the size of the workforce) fell to a near 6-year low. Looking ahead, expectations are for the jobless rate to rise slightly by the end of the year and to peak at just over 5.5 per cent in early 2013.
CommSec Economist Savanth Sebastian said that "What is clear is that the labour market is treading water. Yes, it was encouraging that employment grew but more forward looking indicators like job advertisements have suggested that further labour market gains may be more circumspect. In fact internet and newspaper job advertisements have fallen for seven consecutive months, suggesting job growth is likely to flat line in coming months. Employers aren't keen to hire unless they have to, given the global uncertainties. But while jobs are being lost in some industries, clearly they are being created in other industries. Overall it does seem like a fare proportion of Aussie businesses are holding onto existing staff, rather than significantly adding to the workforce."
It will be one of the busiest nights of trade in Europe this week, with two of the world's largest central banks meeting to discuss monetary policy. The European Central Bank (ECB) will be making its decision on rates at around 11.45pm (AEDT) while the Bank of England (BoE) will be announcing its decision at around 11pm (AEDT). Both central banks are expected to keep rates steady at 0.75 per cent and 0.5 per cent respectively.
In the U.S tonight, international trade numbers will be out for September while the weekly unemployment claims are also scheduled for release at 12.30am (AEDT).
Volume of shares traded came in at 1.67 billion today, worth just $5.41 billion. 328 shares were up, 583 were weaker and 376 ended unchanged.
At 4.30pm (AEDT) on the Sydney Futures Exchange, the ASX24 futures contract is down 0.25 per cent or 11 pts to 4475.
Due to the end of daylight savings in Europe, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT). Futures are currently pointing to a weaker start to trade tonight.
U.S futures are pointing to a slightly better start tonight. Due to the start of daylight savings in Australia and its end in the U.S, American markets will now be trading between 1.30am (AEDT) and 8am (AEDT).
Turning to currencies, the Australian dollar (AUD) is a little weaker than this time yesterday. One AUD buys US104.1 cents, is trading at £65.2 pence and €81.5 cents.
Australia is a commodity based economy, with commodities in general accounting for almost 80 pct of all our exports over the past nine months. In essence, when the going gets tough globally, there is fear of less demand for our commodities, which tends to result in a weaker AUD.
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