australian stocks fall sharply on fed and chinese stock market concerns 2187262015

Australian stocks shrugged off the change in the country’s political leadership, preferring instead to focus on the continuing downtrend in Chinese shares and the US Fed policy decision later this week.

The benchmark S&P/ASX 200 was under selling pressure right from the open and fell to its low of 5,017.80 by around 1:30 PM and traded sideways thereafter.

Indices and sectors

The benchmark S&P/ASX 200 fell 78.1 points, or 1.6 per cent, and closed at 5,018.4, while the broader All Ordinaries index was down 73.9 points, or 1.5 per cent, at 5,046.6.

The top losing sectors included financials (-1.98 per cent), materials (-1.80 per cent), real estate investment trusts (-1.38 per cent), healthcare (-1.31 per cent), industrials (-1.19 per cent) and consumer discretionary (-1.09 per cent). There were no gaining sectors.

Stocks

Banks lost substantial ground in Tuesday’s trading. National Australia Bank Ltd. (ASX:NAB) fell 2.32 per cent to AU$29.83, Westpac Banking Corp (ASX:WBC) was down 2.55 per cent to AU$30.20, Commonwealth Bank of Australia (ASX:CBA) dipped 1.52 per cent to AU$73.42 and Australia and New Zealand Banking Group (ASX:ANZ) ended lower by 2.3 per cent at AU$27.14.

In mining, BHP Billiton Limited (ASX:BHP) lost 1.31 per cent to AU$23.43, Rio Tinto Limited (ASX:RIO) plunged 2.16 per cent to AU$50.74 and Fortescue Metals Group Limited (ASX:FMG) was down 1.95 per cent to AU$2.01. BHP’s spin-off South32 Ltd (ASX:S32) was the biggest loser on the S&P/ASX 200, falling nearly 7.5 per cent to AU$1.54. However, two gold miners figured in the top five gaining stocks on the S&P/ASX 200; Regis Resources Limited (ASX:RRL) was up 3.58 per cent to AU$1.59 and EVOLUTION FPO (ASX:EVN) rose 4.82 per cent to AU$1.20.

In energy, while Santos Ltd (ASX:STO) gained 3.10 per cent to AU$4.65, other companies ended in the red. Woodside Petroleum Limited (ASX:WPL) fell 0.56 per cent to AU$28.25, Oil Search Limited (ASX:OSH) fell 2.94 per cent to AU$7.27 and Origin Energy Ltd (ASX:ORG) was down 1.53 per cent to AU$7.07.

In the consumer retail space, Woolworths Limited (ASX:WOW) fell 0.48 per cent to AU$24.67, Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, was down 1.09 per cent to AU$38.85, Caltex Australia Limited (ASX:CTX) fell 1.27 per cent to AU$30.43, Myer Holdings Ltd (ASX:MYR) fell 2.84 per cent to AU$0.86 and Metcash Limited (ASX:MTS) plunged 2.79 per cent to AU$1.05.

In healthcare, Ansell Limited (ASX:ANN) fell 2.93 per cent to AU$20.22, CSL Limited (ASX:CSL) dipped 1.23 per cent to AU$88.96, and Ramsay Health Care Limited (ASX:RHC) dipped 1.09 per cent to AU$59.10.

Seven West Media Ltd (ASX:SWM) shot up 6.47 per cent to AU$0.740 and was the top gainer on the S&P/ASX 200 after the media company announced a AU$75 million on-market share buyback. Other media stocks also were in the limelight as investors thought the new Prime Minister would usher in new media reach rules.

Economic news, currency and market outlook

The ANZ-Roy Morgan Australian Consumer Confidence fell another 1.3 per cent in the week ending 13 September, following on the heels of a sharp decline of 5.8 per cent in the previous week. Confidence levels are at their weakest since July 2014.

ANZ Chief Economist Warren Hogan said: "This represents a major challenge for the new Prime Minister and his leadership team. It will be a key indicator, in my view, of the Government’s ability to revive its economic credentials with the broader community. Next week’s consumer confidence reading will be an important first take on Australia’s view of the new leadership.”

Business circles, meanwhile, have welcomed Mr. Turnbull’s assumption of the prime ministership. "When we invest in a company we're looking for companies that are extremely well managed and if I'm looking at investing in Australia I want it to be incredibly well managed and I believe Malcolm Turnbull can do that,” said Geoff Wilson, the chairman of Wilson Asset Management, as quoted by The Sydney Morning Herald. "I don't believe Bill Shorten can do that and unfortunately Tony Abbott wasn't able to do that."

Moody’s associate managing director Atsi Sheth said yesterday that political uncertainty could further weigh on business confidence and worsen the country’s economic challenges, according to The Australian. “If political uncertainty leads to economic policy uncertainty or dampens business sentiment, it would add to the challenges facing the Australian economy,” she said, acknowledging, however, that the leadership change at the country was a normal feature of the democratic process.

On Wall Street Tuesday, stocks ended higher on healthy consumer spending data, amidst continuing uncertainty regarding the stance of the US Fed on raising interest rates. The Dow Jones Industrial Average rose 228.89 points, or 1.4 percent, to end at 16,599.85 points. The S&P 500 gained 1.28 percent to 1,978.09 and the Nasdaq Composite added 1.14 percent to 4,860.52.

The Australian dollar is trading higher, boosted by speculation that the US Fed may not raise interest rates this week given mixed economic data and the global turmoil in financial markets. At 06:30 am this morning (AEST) the Australian dollar was trading at 71.47 US cents, up from 71.15 US cents on Tuesday.