Moodys Warning on Spain Spooks Bourse

Source:

". . .investors appeared concerned about the pace of slowdown in China."

Slightly disappointing manufacturing data from China helped drag the Australian share market to a six-week low yesterday.

Earlier, Wall Street was spooked by a warning from Moody's that it could downgrade Spain's credit rating.

Reports of an imminent agreement between Canberra and Australia's biggest miners on a proposed mining tax helped the share market recover slightly in late trading but it finished well into negative territory.

The benchmark S&P/ASX 200 closed down 64.0 points, or 1.5%, at 4237.5, off an intraday low of 4214.7, its lowest point since May 21, when the index spiked down to 4175.7. The index has fallen in each of the past eight trading days, shedding 8.0% in that period. The last time it fell eight days in a row was January 2008, when it dropped 18% over 12 days.

Overnight, Wall Street's S&P 500 fell 1.0 per cent after US private sector jobs growth missed expectations and Moody's said it was considering cutting Spain's AAA-credit rating due to weak economic prospects, challenging fiscal targets and funding costs.

Selling of Australian shares accelerated after news that China's June PMI fell to 52.1 from 53.9 in May. While an index reading above 50 points to an expansion of manufacturing activity, investors appeared to be concerned about the pace of the slowdown in China.

In afternoon trading mining stocks bounced to their intraday highs after reports the government and miners have made significant progress in talks about a mining tax compromise.

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