The sharemarket fell the most in four weeks yesterday after political uncertainty in Spain and Italy triggered risk aversion in global markets and domestic earnings reports mostly disappointed investors.
THE sharemarket fell the most in four weeks yesterday after political uncertainty in Spain and Italy triggered risk aversion in global markets and domestic earnings reports mostly disappointed investors.
The Reserve Bank left interest rates unchanged as expected, while giving positive commentary on the domestic and international economies.
The benchmark S&P/ASX 200 closed down 0.5 per cent at 4882.7 after hitting a three-day intraday low of 4869.5. The index touched a 21-month high of 4951.3 on Monday, having risen 24 per cent since June last year.
Resources were among the weakest stocks in the Australian market, with BHP Billiton, Rio Tinto, Woodside Petroleum and Fortescue Metals falling 1 per cent to 1.7 per cent after European political developments ended a multi-month rise in risk assets.
Defensive sectors outperformed, with Woolworths, Wesfarmers and CSL up 0.5 per cent to 1.1 per cent. Money also flowed to bonds, with the local 10-year bond yield falling 10 basis points to 3.5 per cent.
Italian shares fell 4.5 per cent during Monday trading as former prime minister Silvio Berlusconi gained in opinion polls after vowing to reduce taxes if his coalition won elections this month. That stoked fears the nation would diverge from its reformist path.
Spain's IBEX 35 index declined 3.8 per cent as Prime Minister Mariano Rajoy sought to contain the political fallout amid allegations of a corruption scandal. The US S&P 500 subsequently lost 1.2 per cent, its biggest fall since mid-November, while China, Tokyo, Hong Kong and South Korea were down 0.6 per cent to 1.4 per cent late yesterday.
Notwithstanding the potential for global equity markets to stabilise in the short term, European political uncertainty was likely to be a continuing source of concern, with the Italian election due on February 24 to 25, said Stephen Halmarick at Colonial First State Global Asset Management in Sydney.
"Obviously, there's been a negative reaction to political uncertainty in Italy and Spain, and unfortunately we are just going to have to put up with that for the next few weeks," he said. "Equity markets have had a great run so a bit of a pullback is not totally unexpected."
Among companies reporting yesterday, Cochlear dived 9.3 per cent after reporting a first-half net profit of $77.7 million, below the $81.2m the market was expecting. Macquarie Group tumbled 4.1 per cent after its forecast of a 10 per cent rebound in earnings for this financial year fell short of expectations.
Meanwhile figures from the ASX showed that despite a 5.1 per cent run up in the All Ordinaries index during January investors were not rushing back to the market.
Total value traded was up just 5 per cent - but with an extra trading trading day - while average daily turnover flat at $3.6 billion. The total number of trades rose 28 per cent to 13.7 million.
