01 July 2009

Shares End Down 2.1% On Weak US Consumer Confidence

Disappointing U.S. consumer confidence data and related weakness in commodity prices and U.S. equities generated a sharp fall in the Australian share market on Wednesday, the first day of the financial year. The benchmark S&P/ASX 200 index closed down 80.9 points or 2.1% at 3874.0 after hitting a four-day low of 3859.3. Volume was very light, with just over A$3.5 billion worth of shares turning over.   The Dow Jones Industrial Average fell 1.0% overnight after the Conference Board's June consumer confidence index fell to 49.3 versus a market consensus of 56.0.

In Asia, Japan's Nikkei 225 fell 0.1%, brushing off a weaker-than-expected Tankan business survey, while China's Shanghai Composite rose 1.4% after China's manufacturing purchasing manager's index edged up. Traders blamed the Australian share market's underperformance on a scarcity of buying at the start of the financial year, combined with recent outperformance. Traders said they expected a quiet end to the week, with attention primarily on Thursday's release of U.S. non-farm payrolls data, ahead of the Independence Day long weekend in that country.

All sectors lost ground, with cyclicals underperforming and the heavyweight banking and resources stocks doing most of the damage. In financials, National Australia Bank fell 3.3% to A$21.69, Westpac fell 2.8% to A$19.68 and Macquarie Group fell 4.2% to A$37.45. In materials, BHP Billiton fell 2.4% to A$33.90, Orica fell 4.9% to A$20.65 and Sims Metal fell 3.9% to A$25.49. Property trusts, energy and industrials were also out of favor, with Westfield Group down 3.7% to A$10.96, Origin Energy down 2.4% to A$14.29 and Leighton Holdings down 4.6% to A$22.42. But traders emphasized that volumes were very light.

A mixed bag of Australian economic data were mostly ignored by the share market Wednesday. Retail trade rose 1.0% in May versus April, the Australian Bureau of Statistics said, compared with expectations of a 0.5% rise. And building approvals fell 12.5% in May, the bureau said, versus expectations of 3.3% growth.

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