The Australian share market tumbled more than 1 per cent at open after the US Federal Reserve announced it will continue to wind back its economic stimulus program. Though the decision to reduce bond purchases by $US10 billion to $US65 billion per month was widely expected Wall Street’s major indexes each retreated more than 1 per cent in response.
The local benchmark also sank steeply in response with all major sectors dropping, led by consumer discretionary declines. The gold-sub-index has received a boost and is 1.6 per cent stronger. As investors pile into the safe haven asset gold miners such as Beadell Resources Limited
(ASX:BDR), Resolute Mining Limited
(ASX:RSG), Evolution
(ASX:EVN) and Silver Lake Resources Limited
(ASX:SLR) are back in favour.
Figures
The S&P/ASX 200 index has tumbled 52.3 points to 5,177 at noon. On the futures market the SPI is 48 points down.
Company news
Treasury Wine Estates Limited
(ASX:TWE) has plunged to the worst performer after slashing its annual earnings guidance by $40 million. The wine maker has blamed the downgrade on a bigger than expected fall in sales volumes in the US and China and increasing competition locally. Treasury Wine Estates says it does not to expect to recover the first half shortfall and expects these challenges to continue into the second half. After exiting a trading halt today shares in Treasury Wine Estates have plunged 17.03 per cent and are trading at $3.77 at noon.
Insurance Australia Group Limited
(ASX:IAG) has raised $236 million to fund its planned acquisition of Wesfarmers Limited’s
(ASX:WES) insurance division. The insurer raised the funds from investors through a share purchase plan which was oversubscribed. IAG says its planned acquisition will enable it to accelerate profitable growth in Australia and sustain its position in New Zealand. Shares in Insurance Australia Group have fallen 1.25 per cent and are trading at $5.52 at noon.
Best and worst performers
All the majors sectors have sunk into negative territory at noon. The sector with the smallest losses is telco services, losing 4 points to 1,770. Shares in Singapore Telecommunications Limited
(ASX:SGT) have added 0.96 per cent and trading at $3.15. Shares in M2 Telecommunications Group Limited
(ASX:MTU) and Telstra Corporation Limited
(ASX:TLS) are lower at noon.
The worst performing sector is consumer discretionary, sinking 28 points to 1,724. Shares in Village Roadshow Limited
(ASX:VRL) have fallen 4.99 per cent, trading at $7.04. Shares in REA Group Limited
(ASX:REA) and Slater & Gordon Limited
(ASX:SGH) are also lower.
Gold and the dollar
The price of gold rose more than $US11 overnight and has gained this morning to $US1,268 an ounce.
The Australian dollar dropped below $US0.88 following the US Federal Reserve’s tapering announcement and is now buying $US0.8745.
