Resources drag down bourse

Investors were forced to go back to the drawing board on Friday after the market failed to capitalise on a 2 per cent bounce the previous day because of a weak lead from the US and flagging resource stocks.
The conflict between Israel and Hezbollah forces in Lebanon played havoc with markets early in the week but this was offset on Thursday when the US Federal Reserve indicated a pause in its fight against inflation.
Nevertheless, the less hawkish comments from Fed chairman Ben Bernanke failed to stimulate investor sentiment for a second day and the local market posted its second consecutive weekly fall.
Resource stocks fell mainly because of weaker metal prices, especially for copper and zinc, and worked to drag the bourse down.
The benchmark ASX 200 index slumped 35.9 points to 4960.6 on Friday, and was down 5.5 points over the week - almost 8 per cent less than its record high on May 11.
The broader All Ordinaries also fell 33.1 points to 4934.3 on the day and was down 9.5 points over the five trading days.
ABN Amro's head of Sydney sales trading, Justin Gallagher, said the market fell because of a weak lead from the US, where earnings from some blue-chip companies were disappointing, and a drop in local resource stocks.
"It was a very short-lived euphoria after Bernanke's speech," he said. "The main reason we weren't down more [on Friday] was good performances from Axa, ANZ and Westpac.
"It is still a fickle market out there … and the performance is indicative of the nervousness. At the end of the day we are probably no better off than we were before Bernanke's speech - it's back to the drawing board."
Investors remain on tenterhooks about the impact of the conflict in the Middle East on the oil price. Brokers believe oil will reach $US80 a barrel in coming weeks, which would resurrect inflationary fears. But Argo Investments managing director Rob Patterson said the conflict had gone some way to do the "Fed's job for them" in combating inflation.
"They are slowing down financial markets' momentum, creating nervousness amongst consumers, which probably makes less need for a further interest rate rise," he said.
Rio Tinto fell $1.91 to $73.80 on Friday - down 0.3 per cent on the week - while rival BHP Billiton dropped 64c to $28.16 on the day but was up 9c over the five days.
Colorado was one of the biggest winners of the top 200, gaining more than 7 per cent this week after Affinity Equity Partners lodged a $430 million takeover bid for the clothing retailer. The stock closed 2c higher at $4.60.
Andrew Forrest's Fortescue Metals also rose almost 8 per cent over the week after Leucadia National agreed to pump $535 million into the company to start its $2.5 billion iron ore venture in the Pilbara. The stock rose 5c to $10.15 on the day.
But Hardman Resources fell more than 14 per cent over the five days because of production problems in Mauritania, and closed unchanged at $1.59 on Friday.
The market will continue to be a slave to movements in offshore indices until the reporting season begins late next week when Adelaide Bank, GUD and Australand deliver their earnings figures.
CommSec's chief equities economist, Craig James, said he expected a solid but unspectacular profit reporting season and forecast aggregate earnings would rise by about 15 per cent.