Investor appetite for the big four banks boosted the ASX for the first part of Thursday before selling in some of the biggest names on the bourse, such as AMP, CSL and Rio Tinto, sent the market sliding backwards.
Company earnings season is in full swing, with investors digesting a slew of results, while rising tension between the United States and North Korea is weighing on global financial market sentiment.
The benchmark S&P;/ASX 200 Index and the broader All Ordinaries Index each closed just slightly lower, each down 0.1 per cent per cent to 5760.9 points and 5810.6 points respectively.
"Some of the biggest names in the market are having a wobble on Thursday," says Karen Jorritsma, director of equity sales at Citi. "And rather than take their leads from offshore, Australian investors are fairly consumed with reporting season at the moment."
Appetite for the big four banks faded away throughout the afternoon, with Commonwealth Bank of Australia closing down 0.1 per cent, ANZ off 0.3 per cent, Westpac closed down 0.3 per cent while National Australia Bank managed to close 0.1 per cent higher.
The global risk aversion has driven the price of bullion higher; gold was fetching $US1279.2 an ounce in late afternoon trade, trading at a two-month high. As such, Newcrest Mining, Australia's largest gold producer, rallied 3.8 per cent, posting its third straight gain.
Shares in AMP were hammered after the wealth management giant said its first half net profit fell 15 per cent to $445 million, as it confirmed two new reinsurance deals that will release $500 million in capital from its life insurance arm. The stock closed down 2.6 per cent to $5.27.
Rio Tinto weighed heaviest on the bourse, falling 2.1 per cent as the global miner traded ex-dividend, while rival BHP Billiton slipped 0.5 per cent.
Orora shares leapt 9.2 per cent following the release of the packaging company's full-year results. Thanks largely to an impressive performance from its North American business, Orora posted its third successive year of double-digit earnings growth.
Lower performance fees have failed to offset higher management fees at global fund manager Magellan, pulling net profit down 1 per cent, while shares lost 3.6 per cent.
Stock Watch: Carsales
If there was one word to describe Wednesday's earnings report from online classifieds business Carsales it was "solid". That was the term repeated across a number of analyst reports, and investors looked like they agreed as they pushed the stock higher for a second consecutive day on Thursday, jumping 4 per cent to $13.40. An upgrade to "add" from Morgans Financial and a new "buy" rating from APP Securities after the result wouldn't have hurt. The nagging worry for many brokers remains the tension between the stock's high valuation and estimated earnings growth. "Carsales is a very good digital business," write Morgan Stanley analysts, who have an "overweight" rating on the stock. "The key debate", they write, is whether "23 is the right P/E to pay" for expected 8-10 per cent three-year annual EPS growth.
Market movers
Kiwi jawbone
Forex traders got a wake-up call from Reserve Bank of New Zealand assistant governor John McDermott on Thursday afternoon. Earlier in the day, the RBNZ in its statement explaining its decision to keep rates on hold said it favoured a weaker New Zealand dollar, but that was such a mild jawbone that the kiwi actually strengthened in reaction. That seems to have prompted the RBNZ to toughen its language to indicate growing unease. "There was a subtle change, that we 'need' a lower dollar, whereas "in the past it was 'would be helpful'," Mr McDermott explained in an interview. "The markets should notice. It's not a slap across the face, it's a little nudge." Traders listened this time, sending the kiwi tumbling.
Economic fallout
If war were to break out over North Korea, the biggest toll would be the humanitarian one. But it would shake the global economy too. An analysis by Capital Economics found that the supply and production of everything from smartphones and cars to flat screen televisions would take a significant hit, hurting growth around the world and pushing up prices. That's because South Korea is embedded in a supply chain that feeds production of electronic appliances. The country is the biggest producer of liquid crystal displays and the second biggest maker of semi-conductors used in smartphones. "The disruption would last for some time - it takes around two years to build a semi-conductor factory from scratch," the economists said.
Mighty Swiss
The main currency beneficiary of the tense standoff between the US and North Korea has been the Swiss franc, which rallied hard against the euro, the US dollar and the Aussie. The safe haven currency jumped 1.4 per cent against the euro, its biggest daily rise in more than 2-1/2 years. The greenback dropped more than 1 per cent against the franc, while the Aussie slid 1.4 per cent to 0.7602 francs. Traders said hedge funds had cut leveraged bets against the franc, though some analysts said gains may be overdone. Credit Agricole said further gains in the franc were likely to trigger renewed risk of currency intervention by its central bank as it seems to be pursuing a policy of gradual currency weakness.
Steel bubble
Chinese steel prices should hold around four-year highs even as levels look stretched, given state efforts to maintain stability before a party congress later this year and longer-term plans to cut output. "We see this as a bubble," said Kirill Chuyko, a strategist at BCS Global Markets. "But it is likely to remain for another couple of months as the Chinese stimulus should remain fully on until the China National Congress in the beginning of the fourth quarter." The spur to demand from booming local factories and construction has pushed up Chinese steel prices and led to a sharp drop in exports. Iron ore prices have over the past months piggybacked onto the surge in steel, rising to around $US75 a tonne.