Global gloom rattles Aussie share market


The Australian share market rebounded at the close, sharply reversing a three per cent drop in earlier trade triggered by a slump on global markets.


Global stockmarkets fell after a surprise spike in US new jobless claims, as concerns continue over the European debt crisis.

Dealers say the global sell-off gathered pace after US figures showed new claims for unemployment benefits rose a sharp 5.6 per cent for the first gain in five weeks to confound forecasts for a modest drop.

Wall Street plunged nearly three percent on the data, helping push down European and Asian markets by similar amounts.

Aussie stocks rebound

The benchmark S&P/ASX200 index closed down 11.1 points, or 0.26 per cent, at 4,305.4 points, after falling to a low of 4.175.7. The broader All Ordinaries index fell 16.6 points, or 0.38 per cent, to 4,325.8 points.

On the Sydney Futures Exchange at 1625 AEDT, the June share price index contract was 23 points lower at 4,293 on a volume of 59,834 contracts.

MS Global head of CFDs Anthony Anderson said the Australian dollar had been supported by the RBA after falling to 80 US cents yesterday. It was trading at 83 US cents at close today.

“Traders have taken a little bit of heart by seeing the Aussie supported by the RBA and rallying three cents today,” Mr Anderson said.

“A lot of things are very, very oversold in the market, the banks in particular and BHP and Rio – 20 percent, 30 per cent in some of these stocks. “People are bottom picking, the market has made enough downside in the short term.”

Asian markets plunge

Asian markets tumbled in response to the Wall Street fall, with Tokyo ending the morning 2.51 percent lower, while Sydney was one percent off after slumping 2.9 percent to a 10-month low earlier.

Seoul tumbled 1.83 percent while Singapore was 2.17 percent off and Taipei dropped 2.59 percent.

Shanghai was 0.31 percent lower and Hong Kong was closed for a public holiday.

European markets dive

In London, the benchmark FTSE 100 index of leading shares shed 1.65 percent to 5,073,13 points but was off a low of 5,000.76 points. In Paris, the CAC 40 lost 2.25 percent to 3,432.52 points and in Frankfurt the DAX dropped 2.02 percent to 5,867.88 points.

Other European markets also suffered heavy losses.

The euro meanwhile held up better than might have been expected, finding some support from speculation of possible market intervention by the Federal Reserve, the European Central Bank and Bank of England.

‘Monster keeps coming back’

“This eurozone saga is turning into a bad horror movie,” Phillip Securities economist Joshua Tan told Dow Jones Newswires.

“You think the monster is dead but it keeps coming back.”

Germany bans short tem selling

After a damaging roller-coaster ride on fears there could be a debt default in Europe, Germany on Wednesday shocked investors and surprised her European partners with a ban on some speculative trading practices.

The move — a ban on naked short selling of government bonds and selected financial stocks — was intended to halt the downward slide by hitting such speculative trades but it backfired badly, jolting nervous markets.

Calls by German Chancellor Angela Merkel for stringent financial market and European fiscal reforms piled on the agony as investors feared such a tightening of the screws will only undercut already anaemic growth rates.

Dealers said early trade was dominated by concerns that Germany’s unilateral action betrayed deep European divisions at a time when unity was at a premium.

“The German short-(selling) ban has emphasised that Europe is not unified and this is at a juncture when it really, really needs to be,” said Credit Agricole CIB analyst David Keeble.

Altium Securities analyst Ian Williams said “Merkel, if anything, intensified her rhetoric even as her eurozone partners remained unimpressed with Germany’s unilateral actions.

“The lack of co-ordination across the supposed partners within the single currency zone is especially damaging to investor confidence,” Williams said.

How to handle the Euro zone crisis?

Eurozone finance chief Jean-Claude Juncker said he did not see a need for European policymakers to act immediately to arrest the euro’s recent declines, blaming “irrational” markets for the falls.

“I’m really concerned about the rapid (pace) of the fall of the exchange rate,” he said, adding: “I don’t think that this is a matter (requiring) immediate action.”

Analyst Dermot O’Leary, at Goodbody stockbrokers in Dublin, said investors remain unconvinced that the eurozone crisis was being properly handled.

“While the euro has strengthened … somewhat it is still close to four-year lows relative to the dollar, so some work is still required to convince markets that the situation is under control,” he said.

Strong Japanese currency a worry

The bearish US data and euro fears prompted fresh concern in Tokyo, with government officials fretting as investors piled into the safe-haven yen.

A strong Japanese currency is a worry for Japan due to its negative impact on the repatriated profits of exporters who are currently driving the country’s recovery from its deepest post-war recession.

Japanese Finance Minister Naoto Kan said Friday that the “excessive rise of the yen was not desirable”, as the safe-haven currency rapidly strengthened.

“We want to monitor the situation so that the appreciation of the yen will not become excessive,” he told a news conference.

Against the dollar, the Japanese unit hovered around 90.22 yen, sharply up from 91.39 yen seen in Tokyo Thursday afternoon.

The yen’s sharp rise prompted the Bank of Japan to inject one trillion yen (11.11 billion dollars) into the short-term money market to increase liquidity.

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