Stocks give back year’s gains so far

The local market has closed sharply in the red after suffering its largest one-day fall in two months.

The Australian sharemarket has surrendered all its gains for the calendar year so far, as global financial markets reacted cautiously to Donald Trump’s weekend executive order temporarily freezing refugee and migration from some countries. It saw investors favouring safe havens like previous metals and government bonds over equities at the start of the week.

Australia’s S&P/ASX 200 share index fell 0.9 per cent to 5661.5 points, while the broader he broader All Ordinaries was down 51.3 points, or 0.89 per cent, at 5,714.3 points.

The biggest one-day fall in the Australian share market in the past two months came as US stock index futures shed about 0.3 per cent and Japan’s Nikkei 225 slipped 0.6 per cent amid a 0.6 per cent rise in the Japanese yen. The Australian dollar was supported near $US75.50 against a weaker greenback.

Among safe-haven investments, ten-year US Treasury bond yields fell 1.5 basis points to 2.47 per cent and spot gold rose 0.2 per cent to $US1194.05 an ounce. Most Asian markets were closed for Lunar New Year holidays, but turnover in Australian shares was near its recent average.

IThe Australian sharemarket had risen more than 15 per cent after the US election, before paring some of its rise before Mr Trump’s inauguration earlier this month. Last week it rose 1.1 per cent as Mr Trump vowed to go ahead with pro-business measures including, deregulation and infrastructure spending.

Analysts said Mr Trump’s immigration policy — which drew criticism from some business executives and political leaders — could fuel concern about draconian US trade policies that may offset hopes of stronger US economic growth stemming from his yet-to-be-articulated plans for fiscal stimulus.

However, while expressing some concern about the Trump administration’s focus on protectionism and immigration and the lack of clarity on economic policy, analysts weren’t expecting a significant negative impact on financial markets from the change in US immigration policy.

“Markets will be cantankerous early in the week as they’re completely uncertain of what’s next from President Trump on the geopolitical landscape,” said Stephen Innes, senior trader at OANDA.

“But I don’t believe this immigration stance is economically disruptive to the scale where it will dampen Wall Street’s current momentum and the dollar should regain solid ground quickly.”

Still, global markets are expected to remain on tenterhooks before central bank meetings in the UK, Japan and the US this week. Although no changes in interest rate settings are expected, the powerful US Federal Open Market Committee may signal that it’s preparing to hike rates again in March.

“The FOMC meeting is sure to have a hawkish tone to it reflective of recent stronger U.S. economic data and President Trump’s coming fiscal stimulus,” said Richard Grace, head of currency strategy at CBA. “The FOMC will remain under pressure to lift the Fed funds rate this year, and the risk is more than the market is currently anticipating.”

All of the big banks were around 0.5 per cent to 1 per cent lower, with Westpac the worst hit as it lost 1.05 per cent to $32.01. Commonwealth Bank shed 0.95 per cent to $82.19, ANZ gave back 0.74 per cent to $29.55 and National Australia Bank fell 0.46 to $30.54.

In the resources sector, global miner BHP Billiton was off 0.58 per cent to $27.36 and Rio Tinto edged down 0.03 per cent to $67.83. Fortescue Metals had a sharper drop of 2.26 per cent, to $6.48.

Gold miner Newcrest jumped 27 cents to $21.45 after reaffirming its annual production guidance, despite flat production in the December quarter. Energy stocks were lower as oil prices eased following news that US oil drillers had increased the number of rigs.

Elsewhere, insurer QBE firmed 0.16 per cent to $12.35 amid takeover speculation, despite the company saying it was not in talks with anyone. Construction software firm Aconex’s plummeted $2.55, or 45.1 per cent, to $3.10 after the company issued a profit warning and caterer Spotless fell 5.1 per cent to 93 cents on news it faces a possible class action over its 2015 financial results.

with AAP