The Australian share market suffered its worst session of the new year as US futures deteriorated and an unexpected drop in unemployment reduced the prospects for future interest rate cuts.
At lunchtime the ASX 200 was down 56 points or 1.3% at 4196 after hitting its lowest level in more than four weeks. All sectors lost ground except telecoms +0.1%. Worst hit were materials -1.9%, metals & mining -1.9% and gold -1.7%. Financials fell 1.5% after Westpac's quarterly earnings report missed targets.
The declines followed losses in the US overnight as a delay in a second bailout for Greece heightened default fears. The gloomy mood continued this morning with a further decline in US futures. Dow futures were recently off 39 points or 0.3% despite rallies in Japan and Shanghai. The Nikkei added 0.06% Shanghai 0.22% and Hong Kong's Hang Seng lost 0.25%.
An unexpected drop in the unemployment rate pushed up the dollar and had analysts reassessing the odds on more interest rate cuts this year. The jobless rate fell to 5.1% last month from 5.2% in December as the economy added the most jobs in a month since November 2010. The net gain in jobs was 46,300, compared to the 10,000 tipped by economists. The dollar jumped around half a cent after the figures were released and was recently buying US$1.0706.
"It's incredibly strong," Joshua Williamson, senior economist at Citi, told Fairfax. "The RBA was right not to cut interest rates in February."
Crude oil futures eased 36 cents this morning to US$101.69 a barrel. Spot gold was $6.20 weaker at US$1,723.70 an ounce.
Whee. The brakes are off today. It will be interesting to see how risk appetite at the spec end - which has been rock-solid this year - survives a couple of sessions like this. So far so good. I've been chasing lows in the mid-caps. Profits taken in JHX and MML and positions open in AMC and CWN. Rode HVN from the open as the retailers benefitted from reports of a bid for BBG.
