The Australian market fell from a cliff today on the back of a weak Wall Street and falling iron ore prices.
The S&P/ASX 200 closed the week down 1.28% to 5,313.40, a fall of 68.77 points, and the fifth week in a row to show a loss.
The local market is lower now by about 0.7% than it was at the start of 2014.
And local shares remain at risk of further short term weakness.
Shane Oliver, Chief Economist at AMP Capital, says to look to the end of US quantitative easing next month and the US mid-term elections in November.
Australian shares are also vulnerable in the short term to further falls in the iron ore price and as foreign investors stay on the sidelines as the Australian dollar falls.
“However, this is likely to be nothing more than a healthy correction, allowing shares to let off a bit of steam, and should be seen as a buying opportunity as the cyclical bull market in shares likely has further to go,” Oliver says
“We still don’t see the signs of shares being over valued, over loved and over bought normally seen at major market tops.
“Valuations remain okay, global earnings are continuing to improve on the back of gradually improving economic growth, global monetary conditions are set to remain easy and there has been no sign of investor euphoria.”
The big banks got caught today in the market pessimism.
Westpac was down 0.99% to $31.89, NAB 1.24% to $32.70, the Commonwealth 1.81% to $75.26 and the ANZ almost 1.05% to $30.99.
Iron ore crashed again last night, with the December 62% fe futures reversing all of the last two days gains $1.88 a tonne lower to $77.67.
And this pushed the miners off the cliff.
BHP closed 1.81% down to $34.16, Forestcue 2.21% to $3.54 and Rio Tinto 2.26% to $60.11.
Overnight in the US, the S&P 500 was down 1.62% to 1,965.99.
In the region, the Nikkei 225 was down 0.85% to 16,235.50 and Hong Kong’s Hang Seng was down 0.34% to 3,687.00.