Market plunge wipes off $48bn
August 15, 2007 06:56pm
HEAVY losses on the stock market has wiped about $48 billion from the value of all listed stocks on the local bourse today, following further drops on Wall Street overnight.
The benchmark S&P/ASX200 index was 176.8 points, or 2.98 per cent, lower at 5788.
The All Ordinaries was sharply lower also, having lost 181 points, or 3.03 per cent, to 5801.5. The rout shaved almost $43 billion from the market capitalisation of the stocks comprising the All Ords index.
At the close of day trading on the Sydney Futures Exchange, the September share price index contract fell 183 points to 5781 on a volume of 41,396 contracts.
CMC Markets analyst David Land said falls in the US overnight triggered heavy selling on the local market, with the resources and energy sectors some of the hardest hit.
"The sub-prime fears are the big factor behind it and we saw the same weakness in the US overnight," Mr Land said.
"The large falls on the Dow were translated to a very aggressive sell off (on the Australian market) for the course of the day, with all of the major sectors well into negative territory.
"Some of the most aggressive selling came from the resources and energy sectors ... and with the news in the US driving quite a bit of volatility in that market, I think it does seem to point towards a continued higher degree of volatility."
In the US, stocks skidded overnight on fresh signs that global credit markets were seizing up, while a lower profit forecast from Wal-Mart renewed worries about consumer spending.
Locally the big miners were weaker, with BHP Billiton losing $1.86 to $33.20 and rival Rio Tinto shedding $3.05 to $83.00.
The spot price of gold was slightly lower and it closed in Sydney trading at $US666.50 an ounce, down $US2.20 an ounce on yesterday's local close.
The gold miners were weaker, with Newcrest losing 18 cents to $25.12, Newmont dropping three cents to $4.83 and Lihir shedding 12 cents to $3.04.
The banking sector was weaker, with ANZ retreating 60 cents to $27.60, National Australia Bank falling 64 cents to $38.36 and Westpac losing 71 cents to $25.14.
The Commonwealth Bank shed $1.00 to $53.00 despite posting a solid rise in annual net profit to $4.47 billion for 2006/07, up 14 per cent on the previous year.
Allco Equity Partners added 21 cents to $4.12 after the investment firm delivered a net profit of $43.87 million for 2006/07, up from $26.17 million in the previous year.
James Hardie Industries put on 17 cents to $7.67 after the building materials company reported a lift in first quarter earnings of $US39.1 million ($A46.9 million).
The retailers were weaker, with Woolworths dropping 14 cents to $26.80, Coles shedding 28 cents to $13.77, David Jones giving up three cents to $4.75 and Harvey Norman retreating 21 cents to $4.80.
Discount retailer The Reject Shop lost 56 cents to $12.20 despite reporting a 35.8 per cent jump in annual profit to $12.3 million.peThe media sector was also weaker, with News Corp dropping 88 cents to $25.40, its non-voting shares losing 72 cents to $23.85, PBL shedding 45 cents to $17.40 and Fairfax dipping 17 cents to $4.48.
The energy sector was weaker, with Woodside losing 86 cents to $40.14, Santos dropping 32 cents to $11.38 and Oil Search giving up 18 cents to $3.25.
Empire Oil & Gas was the most traded stock on the market today, with 796 million shares changing hands collectively worth $31 million.
The oil and gas explorer shed 1.4 cents to 3.3 cents.
Market turnover reached 3.3 billion worth $8.47 billion, with 144 stocks moving up, 1,351 moving down and 199 unchanged.
Dollar tumbles as investors flee hedge funds
August 15, 2007 06:59pm
led more than one and a quarter US cents today as investors continued to defy logic in a rush to exit hedge funds amid growing credit market concerns.
At 1700 AEST, the Australian dollar was trading at 82.59 US cents, down sharply from yesterday's close of 83.86 US cents.
Declining liquidity in credit markets caused the currency to plummet from its early morning high of 83.45 US cents to a low of 82.42 US cents.
Westpac chief currency strategist Robert Rennie said much of today's fall was due to the effect of hedge-fund liquidation.
He said today marked the 45-day notice period for investors looking to withdraw money from hedge funds at the end of September.
"So there is a strong underlying feeling in the market that hedge funds will be seeing significant fund withdrawals, therefore they're having to liquidate positions," Mr Rennie said.
Concerns of a collapse in the US sub-prime mortgage sector has fuelled the recent market turmoil, which has dragged down global equity markets.
"We're literally just seeing wholesale dramatic liquidation of all currencies, one of which is the Australian dollar," Mr Rennie said.
The local unit has lost more than six US cents since its peak at 88.74 US cents on July 25, and is now trading at its lowest rate since the end of May.
"There is little logic being implied and that will continue to be the case until funding rates start to drop and the leveraged community has greater clarity surrounding potential withdrawals," Mr Rennie said.
"If we were to go into real meltdown mode, there is certainly the risk that we see this move developing further," he said.
"Somewhere between 81.20 US cents and 81.50 is not outside the realms of possibility ... but I put a fairly low probability on that."peThe Reserve Bank of Australia's trade weighted index, which measures the local dollar's performance against a basket of currencies, fell 0.6 points to 67.1 points today.
The Australian dollar was down to 96.42 yen from yesterday's close of 98.87 yen, and was at 61.20 euro cents from 61.69 euro cents.
In other currencies, the euro dropped to 1.3495 US dollars from yesterday's close of 1.3598, and to 157.56 yen from 160.31 yen.
The US dollar closed the local session at 116.77 yen, down from yesterday's close of 117.90 yen.
The volatility has sent investors scrambling for safe-haven bonds, driving up prices and depressing yields.
At 1630 AEST, the yield on the Commonwealth Government February 2017 bond was at 5.898 per cent, down from yesterday's close of 5.980 per cent, while the August 2010 bond yield was at 6.260 per cent from 6.340 per cent.
The September 10-year bond futures contract was at 94.090, up from yesterday's close of 94.020, while the three-year contract was at 93.740 from 93.650.
RBC Capital Markets fixed interest strategist Su-Lin Ong said bonds had strengthened in price throughout the local session as equities dropped on continued credit market concerns.
"Regional equity markets are pretty weak, US Treasuries were strong overnight and our market has followed suit."
Ms Ong said the market would pay close attention to what RBA governor Glenn Stevens says on Friday when he appears before the House of Representatives Standing Committee on Economics, Finance and Public Administration.
The 90-day bank bill rate closed at 6.948, up from yesterday's close of 6.760, while the 180-day bank bill rate ended at 6.975 from 6.840.
US stocks skidded overnight on fresh signs that global credit markets were seizing up, while a lower profit forecast from Wal-Mart Stores Inc. renewed worries about consumer spending.
Wal-Mart's pessimistic outlook and subsequent news that a US investment firm wants to halt redemptions delivered a one-two punch to already shaky confidence.In the latest sign of a deteriorating credit environment, Sentinel Management Group Inc., which oversees about $1.6 billion in assets, told clients it wants to stop investors from withdrawing their cash to avoid forced liquidation.
"Sentinel caught the biggest headlines today, and there were rumours about more liquidity issues and more distress concerning the investment banks," said David Katz, chief investment officer at Matrix Asset Advisors in New York.
"The market is shooting first and asking questions later, and as in the past weeks, weakness has begotten more weakness."
The Dow Jones industrial average tumbled 207.61 points, or 1.57 per cent, to 13,028.92 - its lowest close since April 24.
The Standard & Poor's 500 Index slid 26.38 points, or 1.82 per cent, to 1426.54, leaving it up just 0.6 per cent for the year.
The S&P 500 hit a lifetime high on July 16, and on that date, it was up 9.7 per cent for the year.
The Nasdaq Composite Index slumped 43.12 points, or 1.70 per cent, to 2499.12, closing below the 2500 mark for the first time since April 13.
US Treasury bond prices rose as investors dumped equities for the safe haven of government bonds. The yield on the benchmark 10-year note slipped 3 basis points to 4.73 per cent - a full 60 basis points below a June high - the biggest two-month drop in yields for nearly a year.
Reflecting the punishing day in the stock market, losers beat winners by a ratio of about 8 to 1 on the New York Stock Exchange and by 3 to 1 on the Nasdaq.
Trading was moderate on the NYSE, with about 1.8 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.98 billion shares traded, below last year's daily average of 2.02 billion.
Wal-Mart woes
Wal-Mart blamed pressure from the housing market for its disappointing earnings report and the reduction in its full-year earnings forecast, sending its shares down 5.1 per cent to $43.82, leading decliners in the S&P.
Home Depot Inc. shares dropped 4.9 per cent to $33.52 after the home improvement store reported its first quarterly sales decline in more than four years as the housing market softened.
The S&P retail index slid 3.6 per cent to 454.93, an 11-month low.
Boeing Co. was the top drag on the Dow, partly on concern that some orders for its planes hinge on financing that could be threatened by the credit market turmoil. Its shares fell 2.4 per cent to $97.63 on the NYSE.
Financial pains
Inflicting further pain on financial stocks was news that a Canadian trust couldn't find the funds it needed to repay outstanding asset-backed commercial paper and that a bank had declined to provide liquidity.
And Swiss bank UBS, the world's largest wealth manager, warned that market turmoil was likely to hit its investment banking business in the second half of the year.
Stocks of large brokerages were some of the sharpest losers in the S&P 500, with the broker dealer index down 3.1 per cent. Shares of Goldman Sachs fell 4.4 per cent to $169.75, while Lehman Brothers lost 6.3 per cent to $53.67.
Shares of Countrywide Financial Corp., the largest US mortgage lender, skidded 8.1 per cent to $24.46 after the company said foreclosures and delinquencies rose in July to their highest level in at least several years.
The battering of home builders' stocks did not let up, with the Dow Jones US home construction index slumping 4.5 per cent.
A rare bright spot was software maker VMware Inc., whose shares soared 75.9 per cent to close at $51 in its NYSE trading debut.
At its session high of $55.50, VMware's stock was up 91 per cent from its IPO price of $29.
The Dow average was a sea of red, with Exxon Mobil the only one of the 30 components ending higher as it benefitted from rising oil prices. Its shares rose 0.3 per cent to $83.13.
US crude oil for September delivery gained 76 cents to settle at $72.38 a barrel.
In economic news, rising energy costs drove up US producer prices last month, while the trade deficit unexpectedly narrowed in June on stronger exports, according to reports, suggesting the Federal Reserve will remain cautious about cutting interest rates.
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