Australian stocks dropped 0.8 percent on Wednesday to a one-month closing low, with wide selling of mining and bank stocks after comments by Federal Reserve Chairman Ben Bernanke weakened the US dollar and strengthened the Australian currency, hurting exporters. Mining services companies were particularly pressured as WorleyParsons Ltd plunged 26 percent to a 4-1/2 year low after the company cut its 2014 full-year profit guidance.
The S&P/ASX 200 index fell 45.2 points to 5,307.7 extending losses for a third session The benchmark fell 0.6 percent on Tuesday. New Zealand's benchmark NZX 50 index fell 0.5 percent to 4,840.3. Australian stocks dropped 0.8 percent on Wednesday morning. Analysts noted that Bernanke's comments had dampened the US dollar and made the Australian dollar more expensive, which was a negative for local equities.
"The Australian dollar going higher is a backward position for those people who have been investing in Australia over the last six months with a lower Aussie dollar. It could be international carry trade moving out," said Evan Lucas, a market strategist at IG. Bernanke said on Tuesday the Fed will maintain ultra-easy monetary policy "for as long as needed" and will only begin to taper bond buying once it is assured that labour market improvements would continue.
One Sydney stockbroker, however, said Bernanke's remarks were bullish for the local market. "Bernanke has just made some positive comments, and I think that those positive comments will flow through to the market and support us at these levels," said Shawn Hickman, stockbroker and managing director at MarketMatters. Big banks weighed on the market, with top lender Commonwealth Bank of Australia falling 0.7 percent and Australia and New Zealand Banking Group dropping 1.1 percent. Bluechip miners BHP Billiton Ltd and Rio Tinto Ltd both dropped 0.7 percent. But gold miners had a better run, with Newcrest Mining Ltd gaining 0.6 percent. Mining services company WorleyParsons Ltd plunged 21.3 percent to a 4-1/2 year low after the company cut its 2014 full-year profit guidance.