All it took was the reality of the US jobs report for June and that 9% slide in iron ore prices late last week and the Australian market’s charge to the peak to its November, 2017 all time high was terminated yesterday for the time being.
The ASX 200 Index posted its biggest one-day fall since June 3, losing 79.1 points, or 1.2% to end at at 6672.2. The All Ordinaries shed 74.4 points, or 1.1%, to 6757.4.
Last week, the All Ords closed just 21 points shy of an all-time and the ASX 200 was within 82 points.
Gone was the confidence of last week that saw the ASX 200 surge towards record levels with a 2% gain.
Other markets in Asia fell with the Nikkei off 1%, Shanghai off 2.6% and Hong Kong down 1.67%.
Also not helping confidence was the start of mass sackings at Deutsche Bank’s local offices with hundreds of people in its Australian operations (reportedly more than 700 strong) getting their pink slips yesterday.
Fund managers are wondering what will happen to the billions of dollars Deutsche Bank has invested for clients in this country such as super funds.
But as we suggested on Monday, the stronger than expected new jobs in June in the US (244,000 against the expected 160-170,000) has ended the talk about a 0.50% rate cut from the Fed at the end of this month and undermined the cause of a 0.25% nip in the Federal Funds rate.
With Fed chair, Jay Powell due to speak before the US Congress tomorrow and Thursday, investors are now worried the Fed’s previous obvious easing bias will become lesser clearer and the central bank will haul back on the much speculated rate cuts for a while.
And the weak iron ore prices late last week hit home yesterday with BHP shares losing 1.8% to $40.56, Rio Tinto shares fell 1% to $102.91 but Fortescue Metals shares ended up 0.8% at $8.85 because the price of its core 58% Fe ore product didn’t fall quite as much as other ore types.
Major banks also weighed the market down. Credit Suisse downgraded its earnings expectations for each of the commercial banks on the back of the latest rate cut and said they would struggle to pass through much of any future cuts.
Commonwealth Bank led the losses falling 1.2% to $81.28, Westpac dropped 1.2% to $28.02, ANZ lost 1% to $27.88 and NAB eased 0.8% to $26.75,
Bendigo & Adelaide Bank slid 1.5% to $11.39 and Bank of Queensland lost 1.2% to end the session at $9.44.
Infrastructure and real estate investment trust stocks were weaker on Monday as Australian bond yields rose firmly – the 10 year yield ended at 1.32% up from 1.28% on Friday. Goodman Group securities slid 3.8% to $15.46, Transurban securities eased 1.3% to $15.12 and shopping mall group, Scentre Group dropped 1.9% to $4.05.
