Stocks close in red for third day

The local benchmark has drifted further from the 5400-point milestone as investors fret.

The Australian sharemarket has endured a third day in the red, after a sell-off in the banking sector drove heavy falls in Thursday trade.

At the closing bell, the benchmark S&P/ASX 200 index had eased 44.3 points, or 0.83 per cent, to 5,278.9, while the broader All Ordinaries index slid 41 points, or 0.76 per cent, to 5,354.2.

The ASX200 has drifted well away from the 5,400-point milestone it breached last week as investors fret about the sustainability of high valuations in a low profit growth environment and worry over the prospect of higher US interest rates.

The latest losses were driven by the financial sector, which ended off 1.3 per cent, amid ongoing uncertainty around rate-rigging allegations against the big four banks and as two high-profile mid-tier institutions attracted critical commentary from analysts at Goldman Sachs.

A lacklustre retail sales report also dampened sentiment, with analysts concerned about the profitability of the sector in an era of low inflation.

“The April retail sales report was again soft although it should be noted that the likely presence of aggressive discounting implies underlying sales volumes and consumer demand are likely not as weak as the nominal sales figures would ordinarily suggest,” Westpac senior economist Matthew Hassan said.

“The weakness instead says more about prices, retail inflation, margins and profitability.”

The retail sub-index ended the session down 0.83 per cent, with Woolworths off 1.1 per cent at $21.57 and Coles owner Wesfarmers dipping 0.92 per cent to $40.06 after food retail was shown as the weakest link in the data.

In banking, ANZ slumped 1.8 per cent to $24.76, Commonwealth Bank weakened 1.2 per cent to $75.58, NAB backtracked 1.6 per cent to $26.44 and Westpac lost 0.87 per cent to $30.11.

The stock movements followed talk of rate rigging action against NAB and CBA, on the back of legal action already underway against ANZ and Westpac by the corporate watchdog.

Elsewhere, Bank of Queensland tumbled 3 per cent to $10.99, while Bendigo and Adelaide Bank plunged 5.6 per cent as Goldman Sachs analysts downgraded their view on the two companies.

In mining, BHP Billiton retreated 1.4 per cent to $18.24 and Rio Tinto yielded 2 per cent to $42.90, while Fortescue bucked the trend to jump 2.4 per cent to $3.00.

The moves followed a fall in the price of iron ore to a new three-month low below $US50 a tonne on Wednesday night.

The energy sector similarly struggled as hopes for an OPEC supply freeze faded, with Santos sliding 2.3 per cent to $4.25, Origin diving 2 per cent to $5.49 and Woodside easing 0.59 per cent to $26.75.

The three stocks had opened the session higher, with a sharp turnaround seen in late-morning trade.

Among blue chips, Telstra added 0.18 per cent to $5.53, while Qantas dropped 3.2 per cent to $3.00.

The gains in Telstra stock helped the broader telecommunications sector deliver the only gain among the 10 industries tracked on the market.

Elsewhere, Patties Foods surged 7 per cent to $1.69 after it said it would accept a $1.65 a share takeover offer, while ALS surged 27 per cent to $5.15 after shunning a $2.7 billion takeover proposal.