Australia shares extend losses, high yield stocks falter

Sun May 26, 2013 9:43pm EDT

(Adds details, comments, stocks on the move)

SYDNEY May 27 (Reuters) - Australian shares fell 0.8 percent on Monday, extending last week's sharp decline to one-month lows on concerns the U.S. Federal Reserve may scale back its stimulus measures, with losses led by the financial sector.

Trading was relatively subdued ahead of a public holiday in the United States.

Defensives also suffered extensive losses. Australia's sixth biggest company, Telstra Ltd fell 0.8 percent while biotechnology firm CSL Ltd lost 1.2 percent. Consumer retail staples Woolworths Ltd dropped 1.5 percent to trade at 3-month lows, while Wesfarmers Ltd dived 1.2 percent to 6-week lows.

"I think it's just more of a continuation from what we're seeing from last week. There's a fair bit of international selling now of the high income or the yield play on our market," said Peter Esho, investment adviser at Wilson HTM Investment Group.

The S&P/ASX 200 index faltered 39.9 points to 4,943.6 by 0126 GMT. The benchmark lost 3.8 percent last week - the biggest weekly drop in a year.

The local index was weighed down along with the rest of the region. The MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.3 percent.

Japan's Nikkei index slid 3.0 percent in early trade on Monday, following on from a 3.5 percent slide last week in breath-taking volatitlity that has also left many investors shaken.

Global iron ore miners BHP Billiton Ltd and Rio Tinto fell 0.8 percent and 2.4 percent, respectively after Shanghai steel futures posted their second weekly loss, pressured by slow Chinese demand that is unlikely to pick up any time soon as the economy loses steam.

Financials dragged on the market. Westpac Banking Corp lost 1.1 percent while top lender Commonwealth Bank of Australia fell 0.6 percent.

The banking sector has enjoyed a recent rally on the back of strong earnings reports and high dividend yields.

"There's also pressure or speculation mounting around the sustainability of banking margins, earnings and growth, on top of dividends and how much they've been bid up," Esho noted.

The S&P 500 declined for a third day on Friday, with the three major U.S. stock indexes posting their first negative week since mid-April on lingering concerns that the U.S. central bank may scale back its stimulus measures.

New Zealand's benchmark NZX 50 index declined 0.7 percent or 33.5 points to 4,492.7.

STOCKS ON THE MOVE

* David Jones stumbled 3.9 percent to A$2.48, its lowest trading price since early February. Australia's No.2 department store chain on Monday reported a 3.4 percent fall in its third-quarter sales, as a mild start to winter affected its womenswear business and electronics sales continued to come under pressure.

(0124 GMT)

* Sundance Resources Ltd soared 11.3 percent to A$0.09. The international iron ore company said it has been approached by numerous groups with interest in becoming involved in the Mbalam-Nabeba project.

(0125 GMT)

* Trust Company Ltd fizzled 3.3 percent to A$6.38 after the company announced Equity Trustees has extended its initial offer until Wednesday July 31, 2013.

(0126 GMT)

(Reporting by Thuy Ong; Editing by Jacqueline Wong)

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