Australia Shares Fall on US Budget Impasse, Capping Strong Quarter

   By Robb M. Stewart 
 

MELBOURNE, Australia--The threat of a U.S. government shutdown weighed heavily on Australian equities Monday, taking the shine off the strongest quarterly advance for the market since the third quarter of 2009.

Shares across the Asia-Pacific region were sold off after U.S. budget talks hit an impasse over the weekend, leaving little time for Congress to pass a budget by a Tuesday deadline and avoid the first federal closure since 1996. Leaders of both parties have said they want to avoid a partial shutdown, although barbed comments suggest that passage is far from certain.

Still, the uncertainty that weighed on investor sentiment also bolstered gold's perceived safe-haven status, lifting the price of the precious metal and the shares of gold miners.

"It has to be said that the selling has been orderly, the volumes low and therefore the falls seem like a result of a buyers' strike rather than genuine panic," said Chris Weston, chief market strategist at IG in Melbourne. "Momentum is still favoring buying dips."

The S&P/ASX 200 fell 1.7% to finish the day at 5218.9 amid broadbased selling. The benchmark index climbed 8.7% over the quarter and twice in the last two weeks nudged above the 5300 mark during the course of trading, the highest level for the ASX in more than five years.

"All the heavy lifting by the index to test the key 5300 level has been undone in a single day to leave us back at last Monday's price," said Michael Bogoevski, head of sales trading at CMC Markets in Sydney.

Despite the day's fall, Mr. Bogoevski said there still is a bullish bias to the market and clients are expecting the benchmark index to again test 5320.

New Zealand's NZX-50 finished 1% lower at 4736.387.

The big banks were all lower, with ANZ down 2.4% and Commonwealth Bank down 2.7%. Australia's four largest lenders climbed an average 9.9% in the latest quarter.

BHP Billiton ended the day 1.7% weaker, while Rio Tinto fell 2.5%. Still, the mining companies climbed 14% and 18% this quarter.

Among energy stocks, Woodside Petroleum fell 1.3%, Santos was down 3.7% and Oil Search dropped 2.9%.

Gold miner Newcrest Mining, however, rose 2% on the day after the bullion price rose.

Tim Radford, an analyst at Rivkin Securities, said that while the ASX could fall sharply if there is a prolonged U.S. government shutdown and a downgrade of government debt, it would also reduce the likelihood the Federal Reserve will withdraw economic stimulus this year. Australia's benchmark index could fall back to February levels, he said.

"While a selloff of this magnitude would feel overly unpleasant, it should be swift and short-lived, unfolding by the end of October for instance," Mr. Radford said, adding any substantial selloff could see a strong rally into the end of the year.

Write to Robb M. Stewart at [e-mail]

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