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Stock market slides towards correction


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The Australian share market opened lower and then rebounded by midday despite sharp falls on Wall Street and early fears the local exchange is sliding towards a technical correction.

A technical correction is a decrease in the entire market after extensive price increases even when there is no evidence that the increasing price trend should cease.

Australian Stock Report senior equity analyst Benny Sada says the local market faced a sixth consecutive session of losses.

“Certainly, on the balance of probabilities, given what’s happened in the last month or so, you’d be betting on another down move today,” he said.

Financial stocks on Wall St took a hit from a late drop on US markets, as global growth concerns worried investors trading on the Columbus Day holiday.

The Australian market followed that trend in early trade Tuesday as Commonwealth Bank shed 48 cents to $73.65, ANZ dropped 16 cents to $30.85, Westpac lost 17 cents to $31.73 and NAB was 21 cents lower at $31.61.

But better-than-expected Chinese trade figures boosted iron ore prices, which in turn sparked a turnaround.

Higher commodity prices also boosted other sectors, and are likely to help break the share market’s recent losing streak, CMC Markets chief market analyst Ric Spooner said.

“When people start to see some buying momentum develop, as we’ve begun to see this morning kicked off by the move in resource stocks, that feeds on itself,” he said.

The miners drove the gains, with BHP Billiton up 75 cents at $33.35, Rio Tinto up $1.75 at $60.11 and Fortescue Metals 25 cents higher at $3.71.

Commonwealth Bank jumped back to $74.32, ANZ was up seven cents at $31.08, Westpac had found 23 cents to $32.13 and NAB was 23 cents higher at $32.05.

Telstra shares were up two cents at $5.26 after the telco’s chief executive David Thodey reaffirmed the telco’s financial guidance for the year ahead at its annual general meeting.

In other moves Australian business confidence has taken a dive in the face of tough trading conditions and dwindling profits a report says.

Confidence is at its lowest level since it bounced last year, just before the federal election that brought Tony Abbott to power, according to figures from National Australia Bank on Tuesday.

The bank’s monthly business survey showed confidence had fallen to five points in September, from seven in August.

Actual business conditions were down to one point – a dramatic fall from July when it was at eight points, and profitability was at zero.

“The multi-year high for business conditions in July appears to have been a flash in the pan, with the index falling for the second straight month,” NAB chief economist Alan Oster said.

Business conditions were still well up on last year’s averages but below their long-run average, Mr Oster said.

“The effects of soft national income growth – a function of lower commodity prices, excess capacity and cautious spending behaviour – are being felt across the economy,” Mr Oster said.

“This has been reflected in most industries, with conditions falling in the month for all but transport and utilities and recreation and personal services.”

Persistently soft operating conditions were dragging confidence down, he said.

He said talk from the Reserve Bank about curbing investor activity in the housing market had weighed on the construction industry.

“Despite remaining positive, confidence fell the most in construction during the month, possibly reflecting slower growth in new approvals (orders also fell) and increasing speculation that authorities may introduce measures to address speculation in residential property markets,” Mr Oster said.

A large fall in construction forward orders suggested the boom in new residential building approvals was losing momentum, he said.

NAB economists expect the Reserve Bank to keep rates on hold until the end of next year.

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