Australian stocks finish the week 4.2% lower
Australian shares slumped 4.2% over the week, a reverse from last week’s gain, as lacklustre economic data and continued market volatility drove prices lower.
Minor gains today and on Wednesday failed to prevent the benchmark S&P/ASX 200 index shedding 223 points over the five days to end at 5,040.6. Last month, the index declined 8.6%.
The nation’s gross domestic product grew just 0.2% in the three months to June, while retail sales unexpectedly dropped 0.1% in July, data released this week revealed. Meanwhile, the Reserve Bank of Australia kept the official cash rate at 2%, noting continuous ‘moderate’ growth in the economy.
“We probably saw the focus shift towards the domestic growth picture. This week we’ve seen some soft retail sales numbers, and we’ve also seen some soft national accounts figures as well,” said CommSec market analyst Tom Piotrowski.
“It basically confirms the story that the RBA has been consistently outlining to people that we’re looking at sub-trend growth as far as the Australian picture is concerned,” he said.
Meanwhile, the S&P/ASX 200 VIX Index—a measurement of investor sentiment and market expectations—stood at 28.9 today, compared with 15.1 just a month ago. The higher the index level, the more likely the ASX 200 will experience drastic price movements over the next 30 days.
Piotrowski said the August US non-farm payrolls report, which will be released tonight in Australian time, will set the tone for the local stock exchange next Monday.
The non-farm payrolls report shows the number of jobs added or cut in the US economy over the past month, excluding jobs related to the farming industry, and is an important indicator of the health of the world’s largest economy.
“If we see a strong jobs report in the US, the conversations around raising US interest rates will put more upward pressure on the US dollar, so the risk is for the Aussie dollar to keep falling,” Piotrowski stated.
The Australian dollar weakened to below 70 US cents, trading at 69.79 US cents at around 4:20 pm AEST.
Consumer stocks down, Myer tumbles
Weaker retail spending impacted consumer stocks, with the S&P/ASX 200 Consumer Discretionary index down 5.2% over the week, while the S&P/ASX 200 Consumer Staples index declined 5.3%.
Harvey Norman (ASX: HVN) slumped 10% over the week to $3.97, while JB Hi-Fi (ASX: JBH) lost 6% to $18.18.
Meanwhile, Myer (ASX: MYR) sank to an all-time low of 90 cents yesterday after the company announced a 21% drop in underlying full year profit and a $221m capital raising exercise to reduce the group’s debts.
The stock rebounded slightly today to end the week at 93.5 cents.