Australian shares edge lower after US credit downgrade
The S&P/ASX200 fell 13.7 points, or 0.16 per cent, to 8,327.1, around noon on Monday, as the broader All Ordinaries lost 19.5 points, or 0.23 per cent, to 8,560.4.
The fall came after Moody's reduced its sovereign credit rating for the US from AAA to AA1.
"Moody's announced a downgrade of the US credit rating as the government continues to struggle with deficits, debt and interest costs," Westpac economist Ryan Wells said.
"Markets are yet to fully react to the news, with the spike in bond yields and fall in the USD very late in Friday's session likely to continue playing out at the start of the week."
The US has debts of more than $US36 trillion ($A56 trillion), which Moody's projected would rise to 134 per cent of GDP by 2035.
"While the move is largely symbolic, it may put slight upward pressure on Treasury yields, which could tighten financial conditions globally - especially in more rate-sensitive parts of Asia," Capital.com senior market analyst Kyle Rodda said.
Three of 11 local sectors were trading lower on Monday morning, with five in the green and three roughly flat.
Materials and energy weighed heavily on the bourse, down more than one per cent each in early trading.
Large cap miners BHP, Rio Tinto and Fortescue were all bleeding lower, tracking with a 1.6 per cent decline in iron ore futures since mid-last week to $US100.20 a tonne.
Gold prices rose along with bond yields as the US credit downgrade led investors back to the safe haven, pushing the precious metal to $US3,233 ($A5,045) and lifting local gold miners.
The banking sector pushed the bourse lower, with three of the big four banks down more than 0.5 per cent, while the Commonwealth Bank pushed 1.1 per cent higher to $171.60.
Macquarie Group slipped 2.3 per cent and is down roughly five per cent after the corporate watchdog sued it over misreporting millions, potentially billions, of short-selling transactions.
IT stocks offered some relief in the sea of red, up 0.9 per cent and tracking with broader investor reallocation into higher growth assets last week.
Coal producer New Hope Corporation was one of the worst performers of the top-200, down 6.9 per cent after cutting its sales and production guidance.
Looking ahead, the Reserve Bank will hand down its interest rate decision tomorrow, and markets still expect it to cut the cash rate by 25 basis points to 3.85 per cent, despite some hotter than expected jobs and wages figures in April.
Later in the week, producer data from the US, Europe and the UK could hint at the early impacts of recent trade volatility.
The Australian dollar is buying 64.04 US cents, down from 64.27 on Friday at 5pm.
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