The major banks have dragged the Australian share market lower after Westpac’s half-yearly results missed expectations.
Westpac’s first-half profit came in under analysts’ expectations due to an increase in provisions for bad loans, with the weak result triggering fears among investors that the financial sector faces major headwinds, Bell Direct equities analyst Julia Lee.
“The sensitivity towards Westpac has caused the banks to decline,” Ms Lee said.
“Westpac’s big miss in terms of results have reignited concerns about the risk of the bad debt cycle ticking up and the impact of another potential round of capital raising from the sector in the next couple of years.”
She said the mining, energy and telecommunications sectors were performing strongly, and if it weren’t for the banks, the market would likely be in positive territory.
“If you cut out the financial space it is actually a pretty good day for the market,” she said.
Westpac closed $1.10, or 3.54 per cent, lower at $29.95.
National Australia Bank had shed 56 cents, or 2.06 per cent, to $26.63, ANZ had declined 54 cents, or 2.22 per cent, to $23.73, and Commonwealth Bank had dropped $1.55, 2.1 per cent, to $72.34.
In the resources sector, global miner BHP Billiton was down 24 cents at $20.92, Rio Tinto was 85 cents lower at $52.40, and Fortescue Metals was off one cent to $3.40.
Virgin Australia has shed two cents, or 5.71 per cent, to 33 cents after reporting a quarterly loss and flagging cuts to its regional domestic flights capacity.
As for the best performing stocks, Telstra gained 15 cents to $5.51 after announcing it will return at least $1.5 billion to shareholders starting from the first half of the 2017 financial year.
Slater and Gordon jumped 29.5 cents, a 100 per cent rise, to 59 cents after the legal firm said lenders had agreed to a restructure of the company’s debt facilities.
Ms Lee said the market continues to price about a 56 per cent chance of the Reserve Bank cutting the cash rate by 25 basis point on Tuesday.
The market is also awaiting the federal government’s May budget to be handed down on Tuesday night.
KEY FACTS:
* At the close on Monday, the benchmark S&P/ASX200 index was down 9.2 points, or 0.18 per cent, at 5,243 points.
* The broader All Ordinaries index was down 4 points, or 0.08 per cent, at 5,312 points.
* The June share price index futures contract was down 9 points at 5,222 points, with 36,131 contracts traded.
* The price of gold in Sydney at 1700 AEST was $US1,293.20 per fine ounce, up $US18.90 on Friday’s price of $US1,274.30.
* National turnover was 3.06 billion securities traded, worth $5.3 billion.
