Stocks close in negative territory despite afternoon clawback

The local bourse has closed in negative territory despite a significant paring of losses in afternoon trade.

 

The Australian sharemarket has finished in the red despite a significant paring of losses in afternoon trade as defensive sectors won back the interest of investors.

At the closing bell, the benchmark S&P/ASX 200 index weakened 5.2 points, or 0.09 per cent, to 5,474.6, while the broader All Ordinaries index lost 7 points, or 0.13 per cent, to 5,555.2.

The benchmark index had dipped as much as 0.8 per cent in morning trade as the resources sector turned laggard following a strong recent rally.

CMC Markets chief market analyst Ric Spooner said with the likelihood of a US rate hike rising through recent weeks, risk was being taken off the table.

“Stock markets are becoming nervous about the prospect of rising interest rates against a background of moderate profit growth and relatively high valuations, particularly in the US,” he said.

Bonds are testing significant levels, with near-term moves crucial to the prospect of a Santa rally.

“Failure to get clear of this level could signal the end of the bond sell-off with markets judging they have already made sufficient adjustment for a moderate improvement in inflation and a glacially paced Fed monetary tightening program,” he said.

“The reverse applies though, if bond selling does maintain its momentum beyond current levels yield based stocks like the Australian REITs will be casualties and this prospect will keep investors nervous until the situation is resolved.”

Commodities were in focus after crude oil’s momentum came to a screeching halt in offshore trade and base metals also lost ground.

It led to a sell-off in the resources space, with energy and materials among the worst performing sectors through the session.

In materials, BHP Billiton fell 1.5 per cent away from an 11-month high to $23.44, Rio Tinto slipped 0.4 per cent to $53 and Fortescue slumped 2.9 per cent to $5.03.

In energy, Santos slumped 2.5 per cent to $3.84, Origin Energy softened 2.4 per cent to $5.65, while Woodside eased 0.3 per cent to $29.97.

“With the prospect of increased producer hedging if prices move much higher, oil may begin to struggle in the absence of a compelling OPEC agreement,” Mr Spooner said.

“This will have implications for inflation and potentially limit the near term sell-off in bond and equity markets.”

The finance sector ended mixed, with CBA an outperformer through its 0.5 per cent gain following the announcement that Catherine Livingstone would replace current chairman David Turner in December.

Westpac advanced 0.6 per cent, ANZ tacked on 0.1 per cent and NAB lost 0.4 per cent due to a broker downgrade.

Among other blue chips, Telstra bounced 1 per cent to $5.10, while Qantas edged down 0.3 per cent to $3.13.

Elsewhere, Vocus skidded 2.5 per cent after two board members quit suddenly after a failed push to oust CEO Geoff Horth, Slater and Gordon tumbled 8.3 per cent on news that a $250 million-plus class action had been filed against it, while CSL advanced 1 per cent as it confirmed a buyback and benefitted from a renewed search for defensive stocks.

Meanwhile, the Australian dollar recovered to US75.7c by the end of local trade, gaining around 0.4c post the US-close.