Stocks drop ahead of Fed talk

As the shadow of Federal Reserve commentary looms, investors have driven the market down.

The Australian sharemarket has ended the week on a negative note, as investors were wary to make heavy bets ahead of a Friday night speech from US Federal Reserve chair Janet Yellen.

At the closing bell, the benchmark S&P/ASX 200 index weakened 26.4 points, or 0.48 per cent, to 5,515.5, while the broader All Ordinaries index lost 24 points, or 0.43 per cent, to 5,607.4.

IG market analyst Angus Nicholson said investors were uneasy as the shadow of hawkish Fed commentary loomed large.

“After a week where most markets have barely moved from where they started, there are likely a number of traders who would relish a bit of volatility [in US trade],” he said.

“There certainly is a fear evident in markets that Janet Yellen is going to be surprisingly hawkish and talk up a September hike, this may be devoid of any real evidence apart from constant calls from the band of perma-hawk US economists, but, nonetheless, market liquidity has dried up in fear.”

The local market ended the week down 0.2 per cent, with two straight losses overshadowing gains in the banks and miners through the Tuesday and Wednesday sessions.

The index has remained in a fairly narrow 5505 to 5565 window for the last three weeks. That is despite some sharp swings in the share prices of individual stocks as investors have reacted to corporate earnings reports, and reflects uncertainty regarding the Fed’s stance on rates, said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

Energy stocks were under pressure as oil prices continued to fall in Asian trade. It came as the prospect of a production freeze among major oil producers dimmed after Saudi Arabia oil minister Khalid al-Falih said there had been no substantial discussion of any action by the Organization of the Petroleum Exporting Countries to rein in output.

Woodside Petroleum dropped 0.6 per cent, Oil Search lost 1.6 per cent and Origin Energy declined 1.3 per cent.

Among miners, BHP Billiton and Rio Tinto were down 0.7 per cent and 0.6 per cent, respectively, and South32 was 0.8 per cent lower.

The major banks also weakened, led by a 1 per cent fall in Commonwealth Bank of Australia. Westpac was 0.9 per cent lower, National Australia Bank was 0.8 per cent weaker and Australia & New Zealand Banking shed 0.7 per cent.

A number of companies released earnings numbers Friday, as earnings season in Australia tailed off.

Drinks bottler Coca-Cola Amatil’s shares fell 4.4 per cent after it reporting a 7.8 per cent rise in its first-half profit but a fall in underlying earnings in Australia, its biggest market.

Star Entertainment Group was flat despite the casino operator saying it would lift its dividend after annual profit rose 15 per cent.

Mayne Pharma climbed 3.4 per cent in the wake of a jump in its full-year profit and strong growth prospects, driven by recent product acquisitions.

- with Dow Jones newswires