Stocks slide as oil slump adds to global fears
THE Australian sharemarket fell the most in four weeks as energy producers led steep declines in global markets.
THE Australian sharemarket fell the most in four weeks yesterday as energy producers led steep declines in global markets amid a slump in crude oil prices and political uncertainty in Europe.
Australia’s benchmark S&P/ASX 200 index closed 1.6 per cent lower at 5364.8, losing $24.3 billion in market capitalisation.
The bourse fell as much as 2.1 per cent to a three-week low of 5338.6 points during the day.
Crude oil dived to a fresh 5½-year low after production from Russia and Iraq increased last month, and Iraq planned to further increase production this month.
Brent crude oil, the global benchmark, fell 6.2 per cent to $US52.94.
The moves came on the back of the US S&P 500 index diving 1.8 per cent, its biggest fall in three months, while oil briefly fell below $US50 a barrel.
Japan’s Nikkei Stock Average fell 3 per cent, hit after a stronger yen against both the US dollar and euro hurt many Japanese exporters who pay costs at home. Elsewhere, stock indexes fell 3 per cent in France and Germany and 2 per cent in Britain.
US stocks slumped, with the Dow Jones Industrial Average sliding 331.34 points, or 1.9 per cent, to 17,501.65, its largest point and percentage drop since October 9. The retreat was led by steep declines in energy shares and a lesser pullback in large banks.
Local investors snapped up safer assets such as gold, which rose 1.5 per cent, and US government bonds.
Investors reacted by shunning Australian energy producers and buying fuel-dependent companies. BHP Billiton and Woodside Petroleum fell almost 5 per cent, while Santos and Oil Search dived almost 9 per cent.
Qantas soared more than 4 per cent. However, turnover remained light after the Christmas break.
After rising strongly in recent weeks as the US Federal Reserve calmed interest rate jitters and investors bet that lower oil prices would boost the global economy, shares suffered from a sell-off in energy companies and concern that Greece would be forced out of the European single currency block if anti-austerity sentiment dominates national elections later this month.
“There’s nothing local about this,” said Macquarie Private Wealth senior investment adviser Noel Yeates. “This is purely just a sentiment trend in line with what happened in offshore markets.”
Even so, a range of factors may combine to make this a volatile week for shares.
The US Federal Reserve is due to release the minutes of its December board meeting early tomorrow, Australian time, and US non-farm payrolls data are due on Friday night.
European inflation data overnight may be weak enough to stoke speculation of increased bond-buying from the European Central Bank.
Markets are also watching political developments in Greece before elections on January 25.
Greece’s commitment to its austerity program is being questioned, and there are concerns that Europe may be preparing to let Greece exit the European single currency.
“I think the market will be looking for some calming comments out of Europe,” Mr Yeates said. “We have been down this road with Europe in recent years, and we have already got to the point of the ECB saying it will do ‘whatever it takes’ to preserve the euro.
“If you look at investors who actually made good money in the past 12 months, they were actually those who took the punt (on stability) when Europe and the US were in the toilet.”
The value of shares traded was just $2.2 billion, versus a 30-day average of $3.8bn.
Mr Yeates said a strong bounce in offshore markets was possible.
“I think you will see a buying opportunity emerge later this week, but it really depends on what happens in the US — if the Dow Jones index recovers strongly overnight, people will come in and buy our market on the back of it, but if it peels off another couple of hundred points, people will say this is the start of another correction we had to have after the December rally.”
Crude oil futures stabilised in Asian trade yesterday after a steep sell-off on Monday night, but analysts said oil markets must brace for additional bearish factors this year, including worries about Greek debt and a rising US dollar.
additional reporting: agencies
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