Stocks close firmly in the red

The local sharemarket has ended more than 0.8 per cent lower, as Australian bond yields jump.

The Australian sharemarket has ended sharply lower, after a fresh bond sell-off and the shunning of gaming stocks following the detention of several Crown employees in China.

At the close, the benchmark S&P/ASX 200 index slumped 45.3 points, or 0.83 per cent, to 5,388.7, while the broader All Ordinaries index weakened 47.6 points, or 0.86 per cent, to 5,470.9.

It was the benchmark’s fourth consecutive fall, and brought the bourse to a three-week low.

CMC Markets chief market analyst Ric Spooner said the reaction on bond markets was tied to weekend commentary from the US Federal Reserve.

“Fed chair Yellen’s speech on Friday has seen Australian bond yields jump as markets react to the possibility that the Fed might join the Bank of Japan in conducting policy to steepen the yield curve,” Mr Spooner said.

“Share investors may be cautious until they assess whether this morning’s bond market weakness will continue. Although iron ore prices rose again on Friday, other key commodities like copper and oil softened, suggesting a cautious approach for the resources sector.”

‘Yield’ stocks, in particular, are tipped by several analysts to underperform as higher bond yields detract from their attractiveness.

“The ‘defensive yield’ trade has come under pressure since the end of July as bond yields have inflected moderately upwards from extremely low levels,” UBS analyst David Cassidy said.

“While the impact on overall equity market performance is arguable, the “defensive yield” trade remains highly correlated with bond yields and we stay cautious (these sectors remain our largest underweight position in our model portfolio).”

While defensive yield stocks were out of favour, their losses paled into insignificance against heavy selling in Crown Resorts shares, which plunged 13.9 per cent to $11.15.

The heavy $632 million retreat – Crown’s worst fall on record – came after questions were raised over its VIP business in the wake of 18 of its staff being arrested in China on gambling promotion charges.

Key rival Star Entertainment was dragged down as well, slumping 3.7 per cent to $5.52 by the close.

In energy, Santos softened 2.4 per cent to $3.62, Oil Search slipped 1 per cent to $7.09, while Woodside was off 1.5 per cent to $29.10.

Action in materials was mixed, with BHP Billiton backtracking 0.9 per cent to $22.39 and Rio Tinto losing 0.8 per cent to $50.62, while Fortescue bucked the trend to surge 2.6 per cent to $5.01.

In finance, ANZ led the way among the big four with a 0.3 per cent rise, while Westpac traded steady, CBA lost 0.3 per cent and NAB retreated 0.7 per cent.

Among other blue chips, Telstra eased 1 per cent to $5.03, while Qantas weakened 1.5 per cent to $3.19.

Elsewhere, Westfield slid 2.1 per cent, Dexus tumbled 2.7 per cent and Stockland dipped 1.7 per cent as the high-yielding property sector came off the boil.

Meanwhile, the Australian dollar was steady around US76c as investors awaited key local jobs data later in the week.