License article

Icahn warning spooks investors

The Australian sharemarket closed lower closed lower for a second straight day after investors took their cues from a late slide on Wall Street.

The benchmark S&P/ASX 200 Index lost 31.8 points, or 0.6 per cent, to 5352.9, while the broader All Ordinaries fell 30.1 points, or 0.6 per cent, 5347.8.

Local shares fell at the open after a late sell-off on Wall Street, where the S&P 500 closed lower at 1791.5 points after hitting 1800 points during the session, while the Dow Jones closed at 15,976 points, having touched 16,000 points for the first time.

Comments from billionaire investor Carl Icahn suggesting Wall Street is set for a big drop dampened investors’ mood, after China’s new reform plans had boosted sentiment.

A speech from outgoing US Federal Reserve chair Ben Bernanke after the local market opens on Wednesday will be scrutinised for clues as to when the central bank might start reducing its unprecedented levels of stimulus. Most economists expect no change before March, after a new chair is installed.


“The local sharemarket is still likely to be driven higher by improving global macro-economic conditions, which have been getting better over the past six months after being mostly negative over the past five years,” Avoca Investment Management portfolio manager John Campbell said.

Minutes from the RBA’s November policy meeting, at which it voted to keep the official interest rate at a record low 2.5 per cent, showed that while the central bank’s policy makers do believe easy monetary policy is beginning to stimulate economic growth it has not ruled out another rate cut, declaring the dollar remains “uncomfortably high”.

At the local close, the dollar was buying US93.86¢ compared with US93.96¢ at the previous close.

Strategists are anticipating further clues to the direction of monetary policy when RBA governor Glenn Stevens delivers a speech about the currency on Thursday evening.

In local stock market trade, the big four banks all fell. Westpac dropped 1 per cent to $32.54, while National Australia Bank lost 0.8 per cent to $34.07. ANZ fell 0.6 per cent to $31.92 and Commonwealth Bank of Australia shed 0.2 per cent to $77.20.

Telstra fell 0.8 per cent at $5.11.

Wesfarmers, owner of Coles, fell 0.6 per cent at $43.75, while Woolworths declined 0.7 per cent at $33.86. Shopping mall operator Westfield Group dropped 2.4 per cent to $10.52.

Plasma and vaccine maker CSL was the only S&P/ASX top 10 stock to close higher, up 1.1 per cent at $68.35. That in turn helped push the health care sector 0.8 per cent higher, the only sector to end in the black.

Australia’s two biggest miners both closed lower. BHP Billiton dipped 0.1 per cent to $37.90. Rio Tinto fell 0.8 per cent to $65.16, despite the spot price for iron ore, landed in China, strengthening 0.2 per cent to $US137 per tonne. Junior iron ore producer Mount Gibson Iron jumped 3.7 per cent to $1.12.

Woodside Petroleum lifted 0.1 per cent to $38.50, despite increased uncertainty over its planned investment in the Leviathan petroleum venture in Israel and the Brent crude oil price losing 0.5 per cent to $US107.97 per barrel.

West African based gold explorer Perseus Mining was the worst-performing stock, dumping 11.1 per cent at 4¢ as the gold spot price weakened to $US1273.30 an ounce.

Mining contractor Ausdrill lost 5.9 per cent to 88 cents, after the drilling company earlier this month forecast profit to drop 61 per cent this financial year.

“Annual general meeting season is proving there is still plenty of weakness in the mining services sector,” Mr Campbell said. “Ausdrill, Emeco Holdings, Mermaid Marine and other have all showed conditions remain challenging. Capital expenditure on new projects has peaked in 2013 and we expect earnings expectations for the mining services sector will continue to be revised down over the next couple of years.”

But Avoca is “more comfortable holding investment in mining services companies that are more exposed to the production cycle, such as Skilled Engineering, Tox Free Solutions and Transpacific Industries”, he said.

Rural services group Ruralco added 3.1 per cent to $3.31, despite revealing annual net profit after tax slumped to $5.7 million for the year-ended 30 September 2013, down from $13.8 million the previous year.

Commonwealth Property Office Fund was the best-performing stock, climbing 5 per cent to $1.27, after GPT Group made a $3 billion takeover offer at $1.24 per security to rival a $2.84 billion bid from Dexus Property Group and the Canadian Pension Plan Investment Board.