Closing Bell 2nd August – investor Optimism Begins to Dry Up as USD is Downgraded

The benchmark S&P/ASX 200 index was weighed down by losses in all the 11 industry sectors. Mining stocks tumbled 1 per cent, tracking a lower iron ore price. Futures traded lower on the Singapore exchange in the afternoon, down 1.1 per cent to $US106.80 on the August contract. Iron ore giant Fortescue Metals dropped 1.4 per cent, BHP 1 per cent and Rio Tinto 1 per cent. Gold stocks also declined, led by gold miner Northern Star Resources, down 2.8 per cent. Newcrest lost 0.9 per cent. The banks were also a big drag on the market with the Big4 falling 2% on average. Oil resumed a rally after an industry estimate pointed to a huge drawdown in US inventories, adding to signals the market is tightening. China’s Shanghai Shenzhen CSI 300 fell 0.7%, while the Shanghai Composite sank 0.8% as traders soured on Beijing’s promises for more stimulus measures. While a slew of top-level Chinese officials vowed to roll out measures and support a slowing economic recovery, China has offered scant cues on exactly how it plans to enact said stimulus measures.

The local currency, which fell on the RBA’s rate decision, was heavily sold off in US and European trading, tumbling 1.5 per cent to a low of US66.02¢. The weakness extended into Wednesday with the Aussie falling below the key US66¢ level to touch US65.80¢, the lowest since June 1.