The local sharemarket suffered major losses on Wednesday, led by a hefty selloff in the mining sector, but the big banks were also dumped, while poor consumer confidence figures and a weak sales report from Myer Holdings soured the mood even further.
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Despite Wall Street's Dow Jones index inching to a new record – its sixth straight gain in a row – the positive lead wasn't enough to prevent the Australian market sliding from the opening bell. The All Ordinaries fell 0.97 per cent to 5440.6 while the ASX 200 dropped 1.03 per cent to 5460.5
"You've got a lot of weight coming out of the banks, with three of the big four going ex-dividend," said Luke McElwaine, senior dealer at RBS Morgans. "But the worst performers have been the materials sector on the back of the falling iron ore price. BHP is down, Rio is down. That's the biggest weight as a whole on the market."
Iron ore miners fell sharply, despite the iron spot price holding up around the $US76 level, amid extremely bearish forecasts for the long-term price of the metal. A number of banks from Australia and New Zealand Banking Group to Citigroup have predicted further sharp falls in the bulk commodity's price as supply expands while demand shrivels.
Oil prices also fell amid signs that Organisation of the Petroleum Exporting Countries members will keep up supply despite falling prices. Brent for December settlement declined as much as US58¢ to $US81.09 a barrel in Wednesday trading.
Among the small miners, Fortescue Metals Group, Atlas Iron, Mt Gibson, Arrium and BC Iron all reached 2014 lows, with several stocks suffering double-digit percentage drops.
Atlas plunged 14.3 per cent to 21 cents, BC Iron dived 10.4 per cent to 77.5 cents, Mt Gibson lost 4.7 per cent to 40.5 cents and Arrium fell 3.3 per cent to 29 cents. Fortescue closed below the $3-mark for the first time this year, dropping 2 per cent to $2.96.
Among the big miners, BHP fell 2.8 per cent to $33.22 and Rio dived 1.8 per cent to $59.42. BHP's decision to shelve the sale of its Nickel West assets after it was unable to find a buyer also hit its share price.
The fall in the iron ore price "is on the back of increases in iron ore production," said Mr McElwaine. "Demand is really outstripping supply – and the smaller players are the ones worst hurt. They just can't compete from a cost perspective. They are really struggling."
The banks all performed poorly today. National Australia Bank fell 1 per cent to $32.62, ANZ lost 1.05 per cent to $32.17, Commonwealth Bank of Australia fell 1.4 per cent to $81.84 and Westpac Banking Corp dropped 1 per cent to $33.29.
"NAB, ANZ and Westpac have all gone ex-dividend within the last week. There's a bit less buying support for them. You'll find a lot more money going into the Commonwealth Bank as a result of money going out of the others, because it's the next one to go ex-dividend early next year," said Mr McElwaine.
"You have all banks down today and you get a few of those big resources names off, and that's a big part of the index. It doesn't take much to be down 40 points," said Mr McElwaine.
BBY senior private client adviser Henry Jennings also pointed to the ex-dividend factor for the poor performance of the banks. "We've got a bunch of stocks going ex-dividend, Macquarie among them. But there's also some weakness in CBA after the AGM comments and then there's the spectre of more regulation - Murray Inquiry, etc - in the banks. They have run pretty hard so there's a bit of profit-taking there. When we've seen that in the past we've seen banks down, resources up and vice-versa but today we're seeing everything down
"They're not cheap, the banks. If you've got consumer confidence falling, if you've got unemployment at 6.2 per cent, and if the only thing going for the Australian economy is the Sydney property bubble, it's not great," said Mr Jennings.
The miners, meanwhile, have "just been pretty sloppy", he said."There's no incentive to buy these miners at the moment. The gold miners are having a better day than they have recently but they're not helping too much because they're such a small part of the index."
Poor consumer confidence weighed on the market as well. Westpac Melbourne Institute Index of Consumer Sentiment rose by a marginal 1.9 per cent in November, from 94.8 in October to 96.6 in November.
The index is 12.5 per cent below its level of a year ago and 3.6 per cent below its level before the lead up to the Commonwealth budget in May.
Mr Jennings said the consumer confidence figures "were not flash - almost as bad as during the GFC. That's taking a toll."
Among other stocks, Myer dived a whopping 8.2 per cent to $1.74 on the back of a poor sales report. "Myer is not going too well today," said Mr Jennings. "Their sales figures were flat and uninspiring. They're hoping Christmas will save them."
Telstra and CSL by contrast, did relatively well, falling but outperforming the overall market. Telstra dropped 0.34 per cent to $5.77 and CSL dipped 0.62 per cent to $79.50. "Telstra is bucking the trend, it's a little bit more defensive," said Mr McElwaine. "On Tuesday it hit fresh year-highs - $5.79 - so Telstra's really going quite well. Its year-rolling low is $4.92 so it's going quite well."
"The other defensive that's still going ok is CSL. It's close to those year highs. That's another big stock doing well."
