It wasn’t just an Australian sell-off on the market yesterday, although it felt like it in the afternoon, raising the question about the standing of our market in the eyes of offshore investors, especially in the US.
The 0.8% fall to 5062, in the ASX 200, was one of the largest across the region, along with a similar sized fall in the Nikkei in Tokyo.
Other markets in Hong Kong, New Zealand, South Korea, Singapore, Taiwan and China had weak or negative days. And all major markets in Europe sold off overnight as well.
In the US markets were again weak ahead of next week’s Fed meeting, with gold falling sharply – losing more than 2% in value to around $US1,227 an ounce.
But the selling here has so far dominated trading in December – by the close yesterday the market had dropped 4.6% from its close on November 30.
The dollar dropped sharply overnight – falling to around 89.30 US cents in US trading this morning, down a cent from the Sydney close.
Some analysts reckon the ASX is behaving independently of the US, Japan and China.
Could it be a signal that international and local investors are questioning company and country fundamentals for Australia, rather than following global trends.
Some of our biggest and most liquid stocks have sold off this month- Telstra, the CBA and other banks and BHP and Rio. The big four banks have lost 10%, which does include their final dividends, but the losses have been notable.
And if you had to pick one area that is might be getting toey, look to the US and its huge investment community.
Just look at the run of recent shocks here. QBE’s surprise, big loss, with the cost falling in the US was shocker at the start of this week, but came after a number of other surprises.
A big blow out in the cost of projects still surfacing, such as the $US2 billion rise in the cost of Chevron’s Gorgon project; the Holden closure and the Federal Government’s attack on GM (which doesn’t sit well in the US), the GrainCorp $A3.4 billion bid knock back decision, and the confusion over Qantas and its big, surprise loss and cost and job cuts.
Some analysts are wondering whether Australia is now being rerated by big US and other global investors.
This has all seen market has lost around $70 billion in value so far this month and the so-called Santa rally has not arrived.
XJO 3-Month – Our market still sliding – are offshore investors getting toey?
If that’s sustained until December 31, the market will have had the worst December since the ASX 200 was introduced back in March, 2000.
And a fall this month would be out of character for another reason because December is usually an up month for markets and investors, having experienced a rise in 50 of the past 70 years, according to ASX data.
And, taking into account the fall in November of 1.9%, our market is off by nearly 7%.
Notable moves yesterday included Transfield Services which lost 13.8% to 84.5 cents, as the analyst reaction to Wednesday’s investor presentation was mostly negative. But Oz Minerals, one of Wednesday’s big losers, saw its shares recover 12% to $2.97.
That means a couple of days like yesterday before the end of the month and our market will have lurched into correction territory.
Much of the market chat has blamed the increasing belief here and offshore that the US Federal Reserve will move to announce a time table for slowing its huge spending after its two day meeting next week.
A number of other measures are likely to be revealed to – with one, a new way of trying to influence short term interest rates likely to concern big global investors until they see how this idea works in practice.
Yesterday’s Australian jobs report for November with its surprise 21,000 jobs created, (more than double estimates for a 10,000 gain) is seen as a one off and out of whack with other recent reports (although not retail sales or home loan and building approvals which are increasingly improving).
If anything the jobs report underlined the weak nature of the economy at the moment.
AMP chief economist, Dr Shane Oliver said the jobs report was likely to be what he called "statistical noise" than the start of a jobs recovery.
"Forward looking indicators such as the ANZ job ads survey and various business surveys, a 0.7% fall in hours worked and a rise in unemployment to 5.8% all indicate that the jobs market is still weak," said Dr Oliver.
The Reserve Bank of NZ’s decision to leave its key rate steady on 2.50%, but hint at a rate rise sometime next year, if inflationary pressures deepened, pushed the Kiwi market lower, and the Kiwi dollar higher, especially against the Aussie which hit a new five year low against its Trans Tasman mate.
The sold gains by the Kiwi dollar and economy are also drawing international attention to the growing level of weak and under performance in Australia.
2014 might see a rough start to the year, Fed tapering and all.