Shares end winning streak

February 23, 2012

Australian shares broke a four-day winning streak today, weighed down by banks and miners, hurt by concerns higher oil prices will inhibit global growth, and as data showed the euro zone may slip into a recession.

The local market was propped up by gains in some individual companies that reported pleasing earnings, including Insurance Australia Group, Virgin Australia and Toll Holdings.

The benchmark S&P/ASX200 index slipped 6.9 points, or 0.2 per cent, to 4286.2, while the broader All Ords lost 4.6 points, or 0.1 per cent, to 4367.5.

Financials and materials led the market lower, falling 0.5 per cent and 0.4 per cent respectively, but losses were offset by a 1.8 per cent rise in the energy sub-index on the back of recent gains in the oil price. Industrials added 0.3 per cent.

IG Markets market strategist Stan Shamu said soft manufacturing and services PMI (Purchasing Managers’ Index) data out of Europe dampened risk sentiment among investors. It came hot on the heels of disappointing export and manufacturing data from China a day earlier.

‘‘Investors are still hesitant ... due in part to persistent concerns about how bad things can go in Europe, and partly due to uncertainty on how China will manage in its attempt to engineer a soft landing,’’ Mr Shamu said.

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Oil price worries

The recent rise in the oil price had contributed to today's falls, as investors were starting to worry about the possible effects on the global economy, said CMC Markets analyst Ben Taylor.

"Oil has been somewhat overlooked of late as Greece’s issues have taken centre stage," he said. "The rising price is however probably just as big an issue."

This afternoon, Brent crude for April delivery is down 5 cents at $US122.85, holding steady near nine-month highs, while US crude futures for April are down 41 cents to $US105.87

Energy stocks, however, profited from the recent rise, which is being driven by concerns about Iran’s suspected nuclear weapons activities. Oil Search as up 11 cents, or 1.6 per cent, at $7.07 while Woodside gained $1.22, or 3.3 per cent, to $38.08.

Origin was up 26 cents, or 1.9 per cent, at $14.05 after the integrated energy company  posted an interim net profit of $794 million compared to a $136 million loss for the previous corresponding period.

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Among other companies that released earnings results, department store chain David Jones reported a 3.1 per cent fall in total sales in the December quarter to $598.5 million, better than the expected $557 million. David Jones was two cents softer at $2.55.

IAG beats expectations

Insurance Australia Group’s first half profit fell by 10.6 per cent as insurance claims exceeded its allowances, but the company upgraded its forecast for full year revenue growth. The report was well received, with the stock gaining 24 cents, or 8.3 per cent, to $3.14.

Fairfax Media chief executive Greg Hywood said the company’s first half results were disappointing and difficult trading conditions were expected to continue. Fairfax inched half a cent lower to 82 cents.

In other news, about 330 jobs may be at risk at BHP Billiton’s Tasmanian manganese alloy plant as it undertakes a three-month review of the 50-year-old operation. BHP Billiton was down 18 cents at $36.23 while fellow mining giant Rio Tinto backtracked $1.02, or 1.5 per cent, to $67.51.

The big four banks were down by between 0.2 per cent and 1 per cent, with National Australia Bank the worst performer.

One Steel surges

Steel maker and miner OneSteel surged for the third consecutive day in the wake of its first half results on Tuesday, in which it flagged an improved second half result and job cuts following a $74 million interim net loss. OneSteel was up 20 cents, or 21.05 per cent, at $1.15.

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