The ASX200 index has just fallen through the 5000-point level.
The market is now around 17% down from the heady days of February and March when stock floggers were cheering on the ASX towards the 6000 barrier that it never quite managed to push through.
It has been another ugly week for Australian shares and now the ASX is precariously close to finishing 2015 at an overall loss.
Mining and energy companies took a pummelling at the start of the week as oil and iron ore reached multi-year lows.
A tonne of iron ore now costs less than $US39, down 45% since the start of the year and 80% from its all-time high, in US dollar terms. Demand for this critical Australian export is collapsing.
Today, the financial sector is getting crushed, down around 2.5%. Bank stocks are suddenly less attractive from a yield perspective amid the prospect that we have reached the bottom of the Reserve Bank’s rate cut cycle.
The ABS said today that more than 71,000 jobs were added to the national economy last month. The number is so big that nobody believes it; in fact, the market was expecting the number of jobs to go backwards.
But the number is the number and the big result fits with a consistent theme that we have seen in the Australian economy in the past six months: jobs are being created at a very healthy pace. With unemployment falling, now at 5.8%, there is now a realistic chance that the cycle of cuts to the cash rate is over as there is sufficient policy stimulus working its way through the economy.
It’s a sign of the turbulent nature of Australia’s current market that good economic news is crushing share prices. Investors are foraging for yield and good old cash is suddenly looking a bit more attractive.
Put the mining and banking stories of the week together and there is significant loss of wealth for not just speculative shareholders and institutional banks but also the retirement savings of the Australian workforce. Pretty much every large superannuation fund out there has some holding in financial, mining, and energy stocks.
If you need a reminder that the national economy is searching around for a new spur of economic activity, a new sector to get excited about, or an industry with an unquestionably robust future, it is in the market action this week.
This is what the prime minister was calling for in his innovation statement at the start of this week. Tonight, Atlassian will begin trading on the Nasdaq on an initial valuation of around $US4.4 billion, more than 15% higher than the lower end of the initial guide price.
Of Australia’s two big, expensive sectors, one is tied to the housing market and the other is driven by global demand for metals and raw materials, particularly China. The outlook for both is weakening.
There are companies out there that have a hugely positive future outlook for growth and profitability. Their shares attract a premium. They’re just not the banks and miners that Australian capital has been allocated to for the past decade.