Australian shares have opened lower after the US Federal Reserve indicated it could wind back of its massive stimulus program for the world’s largest economy before too long.
Shortly after the beginning of trade on Thursday, the A&P/ASX200 had dumped 1.5 per cent, with a similar result from the broader All Ordinaries index.
The falls follow comments from Fed chairman Ben Bernanke that the US central bank could begin winding back its $US85 billion-a-month bond-buying program some time later this year and bring the operation to a close by mid-2014.
The stimulus, known as quantitative easing, or QE, not only boosts America’s debt-ridden economy, but is a major influence on share market activity around the world.
The news caused falls of 1.4 per cent on New York’s Dow Jones index, while its tech-rich Nasdaq also dropped more than one per cent.
IG markets analyst Evan Lucas described the falls as violent, but maintains Dr Bernanke’s comments should support the markets.
“Growth forecasts were upgraded … (interest) rates look like holding at near zero till at least 2015 … and it is going to retain the mortgage-backed securities purchased during QE on the balance sheet till expiry – all very supportive,” Mr Lucas said.
“Today will be a very interesting positioning day. The markets will enjoy punishing top-heavy stocks as the carry trade unwinds, profits are locked in … It will be a very tough day to be a bottom-up investor.”
In the mining sector, market heavyweight BHP Billiton had fallen 46 cents, or 1.4 per cent, to $32.53, while diversified miner Rio Tinto had dropped a $1.03, or 1.9 per cent, to $53.35.
Telstra had lost five cents, or 2.4 per cent, to $4.60, typical of the downwards trend of blue-chip securities.
All the big banks were down, with ANZ losing 42 cents, or 1.5 per cent, to $27.93, CBA was $1.40, to two per cent, worse off at $66.96, NAB had shed 60 cents, or two per cent, to $29.44, while Westpac had dropped 72 cents, or 2.5 per cent to $28.51.
KEY FACTS
* At 1020 AEST on Thursday, the benchmark S&P/ASX200 index was down 70.8 points, or 1.5 per cent, at 4,790.6.
* The broader All Ordinaries index was down 67.4 points, or 1.4 per cent, at 4,774.4.
* The June share price index futures contract was 79 points lower at 4,796, with 11,401 contracts traded.
* 1039 AEST, national turnover was 556 million securities worth $2.4 billion.
