Australia Stocks End Down as G-20 Statement Stokes Fears of Trade Barriers -- Update
By David Winning
SYDNEY--Australian shares fell Monday, reflecting widespread skittishness of the possible impact that trade barriers could play in putting a brake on global growth.
The S&P/ASX 200 index closed down 0.4%, or 20.7 points, at 5778.9 as investors responded to the Group of 20 communique over the weekend that replaced a pledge to avoid all forms of protectionism with a commitment to work toward strengthening the contribution of trade to economies.
Economists at Australia & New Zealand Banking Group said deleting the language on protectionism signaled that anything is now possible as the trade rule book gets rewritten.
A streamlined global supply chain and the lowering of barriers have been key drivers of productivity growth and earnings. "You can't have the antithesis and expect the productivity and earnings story not to be dented," ANZ said.
Fletcher Building slumped 10% to 7.51 Australian dollars (US$5.80) on a warning that management now expects its construction unit to be unprofitable in the 2017 fiscal year. Problems at the construction division are forecast by Fletcher to drag down annual earnings before interest and tax to 610 million-650 million New Zealand dollars (US$430 million-US$458 million), compared with prior guidance for NZ$720 million-NZ$760 million.
The impact of Fletcher's stock fall on Australia's benchmark index was mild compared with the pain wrought on New Zealand's NZX-50 index, where the company is dual listed and held the second-biggest weighting of late. Fletcher single-handedly took 22 points out of the NZX-50, which closed 1.4% lower.
Other Australia-listed building materials suppliers were mostly lower with CSR falling 0.9% to A$4.47 and Boral down 0.2% to A$6.01. However, Adelaide Brighton rose by 0.2% to A$5.61.
Seek gained 1.5% to A$14.96 after unveiling a A$118.5 million (US$91.3 million) deal to raise its stake in a company that provides education qualifications online for colleges and other institutions. Seek--best known for its online job-classifieds business--said increasing its stake in Online Education Services to 80% from 50% would likely buoy its cash earnings per share in the 2018 fiscal year.
Spot iron-ore prices hovering close to a two-and-a-half-year high failed to give the major mining companies much of a lift. BHP Billiton rose by 0.2% to A$24.88, while Rio Tinto fell by 0.9% to A$62.39. Fortescue Metals, which was unchanged at A$6.70, benefited from Deutsche Bank raising its price target on the stock by 15%.
Citi said bears didn't need to look far to support their view that iron-ore and steel prices are too high, noting that there are hefty stockpiles in both markets. However, the firm said prices would be set by macro news for some time to come.
"Spot iron-ore trading volumes have been weak recently, but traders continue to show" a strong desire to support "prices thanks to robust macroeconomic sentiment and expectations on sequential increase of steel output," Citi said.
Elsewhere in the resources sector, New Hope dropped by 1.4% to A$1.745 ahead of its first-half earnings results due Tuesday. The coal-mining company last month signaled a net profit after one-off items of between A$64 million and A$68 million for the six months through July.
Write to David Winning at [email protected]