Aust stocks to come under more pressure after Wall St drops
2001-07-09
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Stocks preview
By Ben Ready
BRISBANE, July 8 AAP - The Australian share market is set to
continue its downward spiral on Monday after hopes of an economic
recovery in the United States were dealt another blow on Friday,
driving Wall St sharply lower.
Profit warnings by data storage giant EMC and microchip maker
Advanced Micro Devices Inc belted hopes of a broader earnings
recovery, undermining optimism they would rebound this year.
The news prompted heavy selling by investors with the Standard &
Poor's 500 Index crumbling to its biggest drop in three months.
The S&P 500 fell 28.65 points to 1190.59 while the Nasdaq
Composite Index dropped for a fourth day, falling 75.95, or 3.7 per
cent, to 2004.16 points.
The benchmark Dow Jones Industrial Average sank 227.18, or 2.2
per cent, to 10,252.68, taking overall losses for the first week of
the new financial year to 2.4 per cent.
The renewed bout of selling on Wall St is expected flow into the
local market from the opening bell tomorrow with Australia's
relative strength over the last couple of months to come under
renewed pressure.
On Friday, the all ordinaries index closed 23.1 points down at
3302.2 points while the benchmark S&P/ASX200 fell 23.9 points to
3353.9.
CommSec chief economist Craig James said some investors were
questioning the ability of the local market to make further gains
given its relatively strong performance.
"Since late March, it has effectively been one way traffic
higher for the Australian sharemarket," he said.
"So the recent correction should be regarded as a healthy
development."
After hitting a record high of 3425.2 points on the last trading
day of last financial year the all ordinaries retreated nearly 3.6
per cent last week to its lowest level since mid-May.
The biggest contributor to the falling local market last week
was Telstra with a steady stream of bad news, including a profit
warning from UK telecoms equipment maker Marconi plc and negative
news about its partner in Asia, Pacific Century CyberWorks Ltd
(PCCW), pushing the stock to three year lows.
The shares lost a further 11 cents, or 2.13 per cent, to $5.05
on Friday, after briefly falling below $5.00 to $4.98.
Adding uncertainty to the market outlook this week is a host of
economic news which may, or may not, give investors a firmer handle
on the outlook for the domestic economy.
The highlight of the week will be Tuesday's speech by Reserve
Bank of Australia (RBA) governor Ian Macfarlane to business
economists which may give some indication of future movement on the
interest rate front.
Commonwealth research senior economist David Moore said
financial markets will be looking for some insights into the RBA's
thinking on the economic outlook and their decision to leave rates
steady in June and July.
"Particularly important will be any comments governor Macfarlane
may make on how the risks to Australia's growth outlook have
shifted in recent months," he said.
"Key issues include the still uncertain economic environment and
the durability of the current domestic recovery."
Other key data to be released this week include consumer
sentiment figures on Wednesday followed by unemployment figures on
Thursday.
Most economists expect consumer sentiment to continue to
recovery after rising sharply last month following large falls in
early-2001 while employment is expected to remain flat.
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