Stocks plunge in broad sell-off

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Stocks plunge in broad sell-off

The sharemarket has logged its biggest drop in four months, in what may be the beginning of a long-expected correction, amid concerns the global economic recovery has stagnated.

At the close, the benchmark S&P/ASX200 index was down 110.4 points, or 2.4 per cent, at 4574.7, its biggest one-day percentage fall since June 23. The index has fallen about 6 per cent this week. The broader All Ordinaries fell 112.1 points, or 2.4 per cent, to 4575.2.

On a sector-by-sector basis, materials were down 3.4 per cent, gold stocks sank 4.1 per cent, financials were off 2.8 per cent and energy fell 2.9 per cent.

"Today’s sell-off really shouldn’t come as a surprise to investors," said CMC Markets analyst David Taylor. "The only surprise is how long it’s taken to get here."

Mr Taylor said corporate earnings had been driven by cost cutting as well as fiscal and monetary stimulus. Once stimulus is removed and interest rates start going up together with fuel costs, "you have a recipe for very, very sluggish growth".

"The market is now starting to price that in," he said.


Asian shares
dollar


ANZ reported an 11 per cent fall in annual net profit to $2.943 billion but said the Australian market is close to a peak in the bad debt cycle. ANZ shares were down 50 cents, or 2.1 per cent, at $22.85.

NAB fell 78 cents, or 2.6 per cent, at $29.05, Westpac shed 60 cents, or 2.3 per cent, to $26.10 and Commonwealth Bank was down $1.58, or 3 per cent, at $51.45.

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BHP Billiton sank $1.27, or 3.3 per cent, to $37.13 while fellow mining giant Rio Tinto backtracked $3.12, or 4.9 per cent, to $60.98.

Making headlines today, department store Myer's shares have been priced at $4.10, at the low end of expectations, with the private equity owners apparently bowing out.

BT Investment Management said it is optimistic about the financial year as the economy improves, after reporting a ‘‘disappointing’’ 11 per cent decline in annual profit. Shares in BT Investment Management inched 1 cent lower to $3.01.

Flight Centre jumped 61 cents, or 3.7 per cent, to $17.01 after the company reiterated its annual pre-tax profit guidance and said it is happy with its progress in 2009/10 so far.

Gold miner Newcrest Mining said the outlook for the precious metal remained positive as worldwide supply tightens, and pledged to pursue growth through mergers and acquisitions. Shares were down like other gold stocks, losing $1.45, or 4.3 per cent, to $32.46.

Lihir Gold said it is on track to meet its full year production guidance after achieving quarterly output targets and boosting reserves by 36 per cent at its flagship Lihir Island operation in Papua New Guinea. Its shares fell 8 cents to $2.98.

Newmont was down 15 cents at $4.57 while China-focused Sino Gold lost 35 cents to $6.38 after saying its expects its full-year production to be at the lower end of guidance.

The spot price of gold in Sydney was $US1031.70 per fine ounce, down $US7.875 on Wednesday’s closing price of $US1039.575.

Among energy stocks, Oil Search was 4 cents lower at $5.89, Santos had eased 42 cents to $14.90 and Woodside was $1.70, or 3.5 per cent, weaker at $46.69.

Major retail stocks were lower. Woolworths was down 17 cents at $28.65 and Coles owner Wesfarmers shed 10 cents to $27.95.

The most traded stock by volume was gold miner Focus Minerals with 154.67 million shares worth $7.55 million changing hands. Its shares were up 0.7 of a cent, or 14.58 per cent, at 5.5 cents.

Preliminary market turnover was 3.57 billion shares worth $7.32 billion, with 177 stocks up, 1,083 down and 242 steady.

CommSec chief equities economist Craig James said investors were pulling back after a spate of irrational exuberance earlier this month when the market rose 6 per cent in the space of eight days.

‘‘That has proved to be unsustainable,’’ Mr James said. ‘‘There’s nothing fundamental driving losses today other than the good news has dried up.

‘‘We’re seeing declines in nations all around the world from Brazil through to Europe and the US.

‘‘It’s basically because investors around the world got a little bit too excited about economic prospects and were pushing shares too far, too fast, and we’re paying the price for that exuberance now.’’

Mr James said the cyclical sectors that had driven growth in recent months, mining and banking, accounted for the heaviest losses on Thursday as investors flocked to defensive stocks.

Despite this week’s sell off, the Australian market is still up 47 per cent from March lows.

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