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 robb.stewart@wsj.com
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