The share market has fallen for a second straight session as international investors sold shares on concerns about a weaker outlook for the Australian dollar.
The benchmark S&P/ASX200 stock index dropped 0.9 per cent to 5,652.1 points, its lowest level since February 8.
CMC Markets chief market strategist Michael McCarthy said the recent selling in the share market, amid low volumes, appeared to be currency related.
He said the potential for a stronger US dollar was prompting strategists to lower their targets for the Australian dollar, making local shares unattractive.
"The shift in the outlook for the Australian dollar is I believe weighing on the local market," Mr McCarthy said.
"With so many strategists shifting their view on the Aussie from up to somewhere between 80 and 84 (US) cents to now down to somewhere between 76 and 72 (US) cents, we've got a lot of reasons for international investors to bale out or even short."
The Australian dollar rebounded from Tuesday's fall, prompted by the Reserve Bank's monetary policy statement, to be trading at 78.67 US cents at 1700 AEDT, from 77.92 US cents on Tuesday.
Mr McCarthy said trading on the share market was thin on Wednesday, amid school holidays in many states, and holidays in China, meaning little guidance for iron ore markets.
The major banks fell, with ANZ the weakest performer, dropping 2.1 per cent to $29.24.
QBE Insurance bounced back from its fall on Tuesday when it said recent hurricanes and earthquakes would dent its earnings, gaining 2.7 per cent to $10.09.
BHP Billiton lost 0.6 per cent to $26.00, Rio Tinto dropped 1.5 per cent to $67.43 and Fortescue Metals surrendered 2.1 per cent to $5.15.
Weaker oil prices hit the energy companies, with Woodside Petroleum stepping back 1.1 per cent to $28.70 and Santos one per cent weaker at $3.97.
ON THE ASX:
* The benchmark S&P/ASX200 dropped 49.3 points, or 0.86 per cent, to 5,652.1 points.
* The broader All Ordinaries index dropped 44.6 points, or 0.77 per cent, to 5,719.6 points.
* The SPI200 futures contract was down 51 points, or 0.9 per cent, at 5,628 points.
* National turnover was 2.9 billion securities traded worth $5.9 billion.
CURRENCY SNAPSHOT AT 1700 AEDT:
One Australian dollar buys:
* 78.67 US cents, from 77.92 US cents on Tuesday
* 88.55 Japanese yen, from 88.17 yen
* 66.83 euro cents, from 66.56 euro cents
* 59.26 British pence, from 58.81 pence
* 109.47 NZ cents, from 108.88 NZ cents
GOLD:
The spot price of gold in Sydney at 1700 AEDT was $US1,276.34 per fine ounce, up from $US1,269.35 per fine ounce on Tuesday.
BOND SNAPSHOT AT 1630 AEDT:
* CGS 4.50 per cent April 2020, 2.0182pct, from 2.0364pct on Tuesday
* CGS 4.75pct April 2027, 2.7562pct, from 2.7894pct
Sydney Futures Exchange prices:
* December 2017 10-year bond futures contract at 97.165 (implying a yield of 2.835pct), from 97.13 (2.87pct) on Tuesday
* December 2017 3-year bond futures contract at 97.84 (2.16pct), from 97.82 (2.18pct).
(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)
In the U.S., Wall Street rallied to fresh highs on Wednesday on encouraging growth worldwide, while the dollar fell even as data revealed an accelerating U.S. service sector that could lead to higher interest rates in December.
The Dow, S&P 500 and Nasdaq all set new closing highs for the third consecutive session, while MSCI’s index of stock performance in 47 countries also hit a new high.
The Dow Jones Industrial Average .DJI rose 19.97 points, or 0.09 percent, to 22,661.64. The S&P 500 .SPX gained 3.16 points, or 0.12 percent, to 2,537.74 and the Nasdaq Composite .IXIC added 2.91 points, or 0.04 percent, to 6,534.63.
U.S. Treasury debt yields rose on the Institute for Supply Management’s index of non-manufacturing activity, which rose in September at its fastest clip in 12 years.
Oil prices were mixed on caution that rising U.S. crude output could scupper a crude rally that lasted for most of the third quarter.
The potential for U.S. tax reform has been driving the recent rally on Wall Street as geo-political tensions have ebbed and economic data remains strong, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“If the earnings season comes in as expected, you continue to see progress made on tax reform and you see diminished concerns about the geopolitical situation, the market wants to move higher,” he said.
European shares fell as the impact of the crisis in Catalonia spread from Madrid and Spanish banks to the wider industry and euro zone region, particularly Italy.
Spain's IBEX .IBEX posted its worst single-day loss in 15 months with a 2.85 percent decline.
Spanish government borrowing costs rose to their highest since March, stretching the gap over German benchmarks to the widest in over five months after Catalonia’s secessionist leader said the region will declare independence in “days.”
Catalonia will move next week to declare independence from Spain, a regional government source said, as a violence-marred vote on Sunday threatens the country’s foundations and has unnerved financial markets.
Spain’s 10-year bond yield rose as much as 7 basis points to 1.795 percent ES10YT=RR in early trades, according to Reuters data, the highest since mid-March.
Data from major economies showed solid growth worldwide.
In Europe, business across the euro zone grew rapidly in September as firms struggled to keep up with demand, a survey showed, with October looking likely to be lively as well.
IHS Markit’s final composite Purchasing Managers’ Index for the euro zone bounced to 56.7 last month from August’s 55.7, in line with an earlier flash estimate and comfortably above the 50-mark that separates growth from contraction.
Japan’s services sector expanded in September at the slowest rate in 11 months as the pace of new orders eased, but a raft of other data suggest the economic recovery remains intact even as momentum may have ebbed slightly in the third quarter.
Source: Netwealth Morning Business Roundup
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