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Australian Sharemarket Continues to Decline Amidst Global Economic Concerns

Strategic Insights

— 1 min read

The Australian sharemarket continued to fall yesterday, with the benchmark S&P/ASX 200 plummeting 2.3 per cent, the steepest drop since February 2013. The sell-off comes as National Australia Bank launches a $5.5 billion share issue as part of its UK exit strategy, and global markets remain jittery after the US Federal Reserve warned of potential dangers in equities and bonds. Fed chief Janet Yellen highlighted that equity-market valuations are high, particularly when compared to returns on safe assets like bonds.

Key Takeaways:

  • The S&P/ASX 200 index fell 2.3 per cent, marking the steepest drop since February 2013, and hitting a fresh three-month low of 5606.7.
  • National Australia Bank launched a $5.5 billion share issue as part of its UK exit strategy, with Morgan Stanley, Bank of America Merrill Lynch, and Macquarie underwriting the issue at $28.50, a 19 per cent discount to yesterday's close.
  • US Federal Reserve chief Janet Yellen warned of potential dangers in equities and bonds, highlighting that equity-market valuations are high when compared to returns on safe assets like bonds.
  • US 10-year Treasury bond yields hit a two-month high, and German 10-year bund yields rose to the highest level this year despite monthly bond buying from the European Central Bank.
  • UBS strategist David Cassidy stuck with his call for 5900 year-end call for the S&P/ASX 200, despite the market's recent decline.
  • The Australian dollar remained above US79.50c, with expectations of local interest rate cuts continuing to fade after the Reserve Bank of Australia declined to signal any further easing after its rate cut this week.

Statistics:

  • The S&P/ASX 200 index fell 2.3% yesterday, marking the steepest drop since February 2013.
  • National Australia Bank launched a $5.5 billion share issue.
  • US 10-year Treasury bond yields hit a two-month high of 1.64%.
  • German 10-year bund yields rose to 0.34%, the highest level this year.
  • The Australian dollar remains above US79.50c.

Sources:

  • "US Fed's Yellen warns of `AoI dangersAo in bonds and shares": Sydney Morning Herald, 2015 Global Data Point. All Rights Reserved.
  • "Sharemarket falls 2.3%": The Australian, 2015.
  • "US Federal Reserve warns of bond and equity dangers": Financial Times, 2015.

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