Local shares fell on news that Qantas Airways will slash 5000 jobs and halt spending, and fell further after official data showed new business investment is declining more than expected.
The benchmark S&P/ASX 200 Index lost 26.1 points, or 0.5 per cent, on Thursday to 5410.9, with the broader All Ordinaries Index also shedding 0.5 per cent to 5420.3. All major sectors finished in the red, with industrials the hardest hit following heavy falls in Qantas, Transfield Services and ALS Ltd.
Australian shares took a mixed lead form offshore after stockmarkets in the United States closed marginally higher while shares in the United Kingdom and Europe were mostly lower.
The local currency and stockmarket both moved lower after Australian Bureau of Statistics data showed business spending fell 5.2 per cent in the December quarter. It was a bigger decline than the market expected. More worryingly, the downturn in capital expenditure looks set to worsen with a measure of business spending intentions 17.7 per cent lower than the same period a year earlier. Forecasts for mining investment are down 25 per cent.
Qantas Airways lost 9.1 per cent to $1.16 after confirming 5000 jobs will be slashed as the struggling airline posted a $252 million underlying loss for the six months ended December 31.
Speaking generally about the trend for large companies to slash jobs and rein in spending, CIMB equity strategist Shane Lee shrugged off concerns the tactic could limit future growth.
“In the short-to-medium term cutting labour costs is an effective way to drive productivity growth. Remaining staff increase their output per hour and by the time demand growth improves to a point where the lower staffing levels are no longer sufficient firms are in a better position to afford to start hiring again,” Mr Lee said.
“The downside to the broader picture is that current corporate cost-cutting trend puts pressure on the unemployment rate.”
Iron ore still falling
Transfield Services was the worst-performing stock in the ASX 200, falling 11.9 per cent to 85¢ despite showing a return to profitability in the six months ended December 31. The company unveiled plans to change its business structure, including selling its Indian operations and a minority stake in power producer Ratch Australia.
Laboratory service provider ALS Ltd (formerly Campbell Brothers) lost 10.8 per cent to $7.50 after downgrading its full year profit guidance.
The biggest miners were lower amid soft commodity prices. Resources giant BHP Billiton lost 0.5 per cent to $38.38, while main rival Rio Tinto shed 0.6 per cent to $66.60 as the spot price for iron ore, landed in China, fell to $US117.80 a tonne – its lowest price since July 1.
The big four banks were mixed. Commonwealth Bank of Australia fell 0.4 per cent to $75.20, while Westpac Banking Corporation edged down 0.1 per cent to $33.54. ANZ Banking Group added 0.2 per cent to $32.15, and National Australia Bank shed 0.1 per cent to $34.82.
Among other bluechip stocks Telstra Corporation fell 0.4 per cent to $5.07. Woolworths lost 0.3 per cent to $36.42, while Wesfarmers, owner of Coles, shed 0.4 per cent to $42.60.Analyst upgrades abound
Mining services, media and investment conglomerate Seven Group Holdings fell 2 per cent to $8.01 after underlying interim net profit sunk 44 per cent, and the company confirmed its guidance for a 30 per cent to 40 per cent fall in annual earnings. Rival media company Nine Entertainment Co rose 0.4 per cent to $2.29 as its maiden interim results as a listed company came in slightly ahead of expectations outlined in the prospectus for its December float.
Online jobs outsourcing platform Freelancer dipped 5.4 per cent to $1.40 after its interim financial results beat the estimates outlined before the company floated in November but undershot aggressive analyst expectations.
Wealth management giant Perpetual Ltd rose 2.2 per cent to $50.79 after lifting its interim dividend by 60 per cent following strong revenue and profit growth.
Investment manager Henderson Group was the best-performing stock in the ASX 200, climbing 4.9 per cent to $4.68 as brokers, including Goldman Sachs, lifted their recommendations on the stock following Wednesday’s better than expected interim profit result.
Whitehaven Coal and Virtus Health each added more than 4.5 per cent after a raft of broker upgrades following results reported on Wednesday..