MARKET CLOSE REPORT
The Australian sharemarket had its worst day in two months, pushed lower by Ben Bernanke's much anticipated testimony before congress last night. The All Ordinaries index (XAO) slumped by 2 per cent, adding to yesterday's 0.27 per cent losses.
Tim Wimborne / Reuters
People look at market display indicators through the window of the Australian Stock Exchange in Sydney
There were two parts to the testimony, starting with Chairman Bernanke's prepared statement. As expected, he said the US is still not out of trouble with high unemployment the major concern. Bernanke said that "a premature tightening of monetary policy could lead interest rates to rise temporarily" but also could slow or end the world's largest economy's recovery. These comments pushed the US dollar lower and in turn boosted the Australian dollar.
This all changed however after the Q&A part of his testimony. It was hinted that the Fed would consider a pullback in stimulus as early as the next few months if conditions permit and if the central bank "...sees continued improvement" in the economy. The sooner than expected timeframe surprised markets, sending stocks and currencies in the red against the greenback. Bernanke's stimulus has been pushing the US dollar lower for years.
At 11.45am (AEST), disappointing economic news in China hurt the miners today. BHP Billiton (BHP) fell by 1.11 per cent, Rio Tinto (RIO) slumped by 2.13 per cent, Newcrest Mining (NCM) ended 2.15 per cent lower and iron ore miner was down 2.75 per cent by close of business.
The banks have outperformed the broader market this year, with the big four up more than 20 per cent; however this week has been somewhat different. The majors fell by between 2.8 per cent and 4.1 per cent today, taking the losses for the week to more than 4 per cent.
It wasn't all bad news however, with QBE Insurance (QBE) benefiting from the prospects of a stronger greenback. QBE carries out about a third of its business in the US.
It was a busy session of trading today, with 2.15bn shares changing hands, worth $7.55 billion. 274 stocks rose, 695 slipped into the red and 357 finished unchanged.
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