Wave of selling over US recovery doubts

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Wave of selling over US recovery doubts

Close Australian shares fell deep into the red this afternoon after a wave of selling hit the market as doubts emerged over the size of the US Federal Reserve's planned quantitative easing program.

At the close, the benchmark S&P/ASX200 index was down 39.7 points, or 0.8 per cent, at 4648.1, after earlier rising as high as 4698. The broader All Ordinaries index fell 41 points, or 0.9 per cent, to 4720.5.

Among the sectors, materials fell 1.6 per cent, energy shares dropped 1 per cent, and even financials slipped 0.1 per cent, after posting gains for the better part of the day on the back of a strong NAB result.

need2know:
- The dollar falls to 97.42 US cents
- Asian shares drop to two-week low
- Gold inches down to $US1338
- Oil slips for a third day, towards $US82
- Dow futures are 54 points lower at 11,070

    Traders said the sudden market slump was sparked by an article in the Wall Street Journal saying the US Federal Reserve's asset purchase program – known as quantitative easing – will be lower than hoped for by the markets.

    “It might be a touch smaller than people were thinking,” said Angus Gluskie, managing director of White Funds Management. “It’s not likely to be a massive.”

    Any disappointment in the Fed’s asset purchase program, which is supposed to boost the sluggish US economy, will likely hit riskier assets including the Aussie dollar, commodities prices and by extension the Australian market, said City Index head of dealing Asia Pacific Michael McCarthy.

    The dollar was also pressured by the US recovery doubts, falling as low as 97.2 US cents, after earlier taking a hit from lower than expected inflation numbers.

    ASX shares extend slide

    A slew of negative stock-specific news also hurt the market.

    Rail and shipping group Asciano fell 4.3 per cent after issuing a cautious outlook, while its former parent, Toll Holdings, gave up 6.6 per cent when its founding boss Paul Little announced retirement plans.

    Shares in ASX extended their slide over concerns the proposed merger with Singapore’s exchange may not be approved by Canberra. The stock lost $1.37, or 3.5 per cent, to $37.30, following the previous day’s 7.4 per cent fall.

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    Burrell Stockbroking client adviser Daniel Manley said political uncertainty was driving investors away from the stock after an initial spike in its price following the merger announcement on Monday.

    ‘‘They are caught in the middle of some political crossfire and certainly there will be objections out there to having an overseas market running our stock exchange,’’ he said.

    NAB leads gains

    National Australia Bank led the gains among the ASX 200, adding 51 cents, or 2.1 per cent, to close at $25.26, after its second-half profit beat expectations, prompting a relief rally in some financial stocks following downbeat comments from Commonwealth Bank of Australia a day earlier..

    ANZ was third among the ASX 200, adding 19 cents, or 0.8 per cent, to $24.04, after saying it had increased its stake in Shanghai Rural Commercial Bank.

    '‘NAB announced a 40 per cent reduction in bad and doubtful debts, which shows business is getting better for all of them,’’ Bell Financial Group senior adviser Chris Kimber said. ‘‘NAB also said it won’t be making any big acquisitions and will focus on Australian growth, so that might reassure some analysts.’’

    Commonwealth fell in late trade to end the day down 63 cents, or 1.3 per cent, to $49.55.

    Miners hit by sell-off

    Among the miners, BHP Billiton fell 34 cents to $41.49, while Rio Tinto lost $1.71, or 2.03 per cent, to $82.35.

    ‘‘It is a sell-off in some of the resources moving the market,’’ Bell Financial’s Mr Kimber said. ‘‘That is probably currency-driven to an extent.

    Major retailers ended the day flat, with Harvey Norman steady at $3.43, Myer down 3 cents to $3.76 and JB Hi-Fi 2 cents lower at $19.66.

    The biggest mover on the market was GPT Group, with 265.9 million shares changing hands for $733.22 million, after Stockland sold its 13.1 per cent interest in the group, losing $208 million in the process. GPT ended 2 cents lower at $2.83, while Stockland ended the day down 3 cents at $3.75.

    Total market turnover was 3.148 billion shares changing hands for $6.61 billion, with 434 shares up, 722 down and 346 unchanged.

    AAP, Reuters, with BusinessDay

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