A ratings downgrade for the big banks helped push the ASX into reverse this morning despite strong overseas leads.
The ASX 200 dropped 26 points or 0.4% to 5780 as investors absorbed the implications of ratings agency Moody's announcement that it was cutting the long-term ratings of 12 Australian banks, including the big four. The financials sector declined 0.7%.
"In Moody's view, elevated risks within the household sector heighten the sensitivity of Australian banks' credit profiles to an adverse shock, notwithstanding improvements in their capital and liquidity in recent years," the agency said in a statement quoted on Fairfax. "In Moody's assessment, risks associated with the housing market have risen sharply in recent years... Significant house price appreciation in the core housing markets of Sydney and Melbourne has led to very high and rising household indebtedness."
Consumer discretionary was the best of the sectors with a gain of 0.5%. Also resisting the downtrend: IT +0.3% and health +0.1%. Hardest hit were gold stocks -2.3% and energy -0.8%.
US equity futures remained buoyant following last night's record closes. Dow futures were recently ahead 18 points or 0.1%. China's Shanghai Composite eased 0.26% and Hong Kong's Hang Seng 0.14%. Japan's Nikkei added 1.1%.
Crude oil futures edged up three cents or 0.07% this morning to US$44.23 a barrel. Gold futures held steady at US$1,246.70 an ounce. The dollar was buying 75.92 US cents.
The ASX and Wall Street barely seem to be on talking terms these days. It's like a bad marriage: if one turns right, the other turns left. Index traders must be pulling their hair out. Didn't use to be this hard to predict how we'll go on any given day. Trading: struck a bit of much-needed form this morning with wins in UTR and PRL. Nothing big, but I'm at the point when any profit at all looks good.
