Commodities prices have continued to lose ground, with iron ore falling 1.1 per cent overnight to $US38.65 per metric tonne.
The WTI oil price fell below $US37 per barrel for the first time since early 2009 before rebounding to close just two cents lower at $US37.63.
CMC Markets analyst Ric Spooner said the overall market weakness was essentially commodities-driven, despite some of the nation’s biggest resources players like BHP Billiton and Woodside finishing in positive territory.
“The markets seem to be focusing on the implications of excess capacity and what commodity prices continuing to fall says about the prospects for global growth and demand,” Spooner said.
“That seems to be the focus even though in many respects falling oil prices is a positive story.”
Weaker oil prices could mean greater discretionary spending, lower input costs for companies and potentially a slower trajectory of rate cuts, he said.
The nation’s big miners were mixed, with BHP Billiton shares 11 cents, or 0.65 per cent, higher at $17.16, Rio Tinto was 35 cents, or 0.83 per cent, weaker at $42.05 and Fortescue Metals shares were 1.5 cents higher at $1.82 at 1630 AEDT.
In the energy sector Woodside added 14 cents to $27.03, Santos rose 19 cents to $3.50 and Oil Search was six cents higher at $6.35.
Commonwealth Bank was the only big bank in positive territory, adding 15 cents to $80.29, but Westpac fell 19 cents to $32.05, NAB lost 35 cents to $28.96 and ANZ was 39 cents weaker at $26.43.At 12pm (AEDT) on Wednesday, the currency was trading at 72.31 US cents, up from 72.25 cents on Tuesday.
In overnight trade, it fell as low as 71.87 US cents, its weakest level since Monday of last week.
Sustained falls in iron ore and oil prices have put downward pressure on equities and riskier currencies, such as the Australian dollar.
But Westpac chief currency strategist Sean Callow said buyers had snapped up the currency in order to make investments in Australia.
“Commodities do finally seem to be a taking a toll on the Aussie, but it should continue to find support on dips from underlying merger and acquisition inflows to Australia and a lack of enthusiasm over another Reserve Bank rate cut,” he said.
The sell-off in commodities has continued overnight with iron ore falling 1.1 per cent to $US38.65 per metric tonne. WTI oil price slipped below $US37 per barrel for the first time since early 2009 before rebounding to close just two cents lower at $US37.63.
CMC Markets analyst Ric Spooner said that while the banks and iron ore miners were still tracking south, the energy and oil producers looked to be steadying.
“It’s probably just a little bit of relief associated with the fact that the big drop in oil prices we saw before has stalled a bit,” he said.
While the overall sector was down, key energy players were in positive territory. Oil Search had gained 12 cents to $6.41, Santos was up four cents to $3.35 and Woodside had lifted 32 cents to $27.21.
However, iron ore miners continued to be a drag, with Rio Tinto losing $1.53, or 3.61 per cent, to $40.87 and BHP Billiton dropping 26.5 cents, or 1.55 per cent, to $16.78.
Investor favourites like Telstra and the big banks offered no relief.
ANZ was down 18 cents at $26.64, National Australia Bank was off 23 cents at$29.06, Westpac had edged 14 cents lower to $31.11 and the Commonwealth Bank had dipped 13 cents to $80.
ANZ economists said oil had a volatile trading session overnight with prices reaching seven-year lows before recovering.
The initial sharp falls pushed bond prices higher, but the subsequent lift in oil prices caused bonds to retrace much of their gains to become broadly unchanged, they said.
“The local market should open with a bias to lower yields,” ANZ economists said.
Investors are looking ahead to next week’s US Federal Reserve policy meeting, with market pricing for the chance of an interest rate hike now higher at around 80 per cent, Westpac Strategist Imre Speizer said.
At 8.30am (AEDT) on Wednesday, the December 2015 10-year bond futures contract was trading at 97.125 (implying a yield of 2.875 per cent), down from 97.135 (2.865 per cent) on Tuesday.
The December 2015 three-year bond futures contract was at 97.875 (2.125 per cent), down from 97.880 (2.120 per cent).
INTERNATIONAL MARKETS ROUNDUP
NEW YORK – Wall Street is lower as oil prices steady but hover near their seven-year low and weak Chinese trade data reignitess fears of a global economic slowdown.
US crude fell below $US37 per barrel and Brent below $US40 for the first time since early 2009, before paring some of those losses.
Oil major Exxon was down 2.2 per cent, making it the biggest drag on the S&P. The S&P energy sector was down 0.99 per cent, on track to close in the red for the fifth straight day. The sector has lost more than 11 per cent since Dec. 2.
“We do think oil is putting in a bottom here as US production is expected to fall and view this as a good buying opportunity,” said Gary Bradshaw, portfolio manager of Hodges Capital Management in Dallas, Texas.
All the 10 major S&P 500 sectors were lower, with the industrials’ 1.07 per cent fall leading the decliners. Boeing’s 2.5 per cent fall weighed the most on the Dow.
At 12.35pm ET (0435 Wednesday AEDT) the Dow Jones industrial average was down 173.17 points, or 0.98 per cent, at 17,557.34, the S&P 500 was down 15.49 points, or 0.75 per cent, at 2,061.58 and the Nasdaq Composite was down 16.12 points, or 0.32 per cent, at 5,085.70.
LONDON – A slump in Anglo American shares has hit UK-listed miners, dragging Britain’s main share index to a fourth consecutive day of losses.
Anglo American shares fell 12.3 per cent to a record low after the company suspended dividends for the second half of this year.
This was the stock’s biggest drop since February 2009, and trading was 2.5 per cent of its 90-day average.
British mining stocks have fallen around 50 per cent so far in 2015, due to a slowdown in China, the world’s biggest consumer of metals.
Data on Tuesday showed that China’s imports fell for the 13th consecutive month with an 8.7 per cent decline in November compared to a year earlier, adding to uncertainty about the broader economic outlook for the country.
“The miners will probably continue to weaken while the Chinese economic outlook remains a concern,” Beaufort Securities sales trader Basil Petrides said.
The blue-chip FTSE 100 index was down by 1.4 per cent at 6,135.22 points at its close, with the FTSE 350 Mining index losing over seven per cent, its biggest one-day fall since the end of September.
HONG KONG – A surprise leap in Chinese commodity imports helped steady oil prices and energy-exposed currencies, though a second day of falls for world stocks and a two-month low for emerging market bourses kept the global mood subdued.
Investors were still struggling for confidence after Monday’s six per cent plunge in oil had whacked it to its lowest level of the year and the prospect of the first US interest rate hike in almost a decade next week also loomed.
“If you are looking to play weak oil prices you would want to sell the Canadian dollar and the Norwegian crown,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.
“With oil prices falling and some even talking about oil falling to $US30 a barrel, revenues for these countries will take a beating and hence their currencies will remain under pressure.”
Tokyo’s Nikkei ended down more than one per cent despite data showing Japan dodged recession in the third quarter, while Chinese stocks fell 1.8 per cent.
Though there was the surprise jump in commodities demand, overall Chinese imports fell for the 13th consecutive month with a 8.7 per cent decline in November compared to a year earlier.
“Beyond the December hike (by the Federal Reserve), investors are concerned about the lack of Chinese demand which is acting as a millstone around the neck of risky assets,” said Cliff Tan, East Asian head of global markets at Bank of Tokyo-Mitsubishi UFJ in Hong Kong.
WELLINGTON – The S&P/NZX 50 Index slipped 29.43 points, or 0.5 per cent, to 6035.
ENERGY
Oil prices have plumbed lows last seen during the financial crisis as an intensifying supply glut sparked fears the world will run out of storage for crude.
US crude hit $US36.64 a barrel and Brent hit $US39.81, their lowest levels since February 2009, before rebounding.
Brent crude was last down US51 cents, at $US40.23 a barrel, while US WTI crude was last down US6 cents at $US37.59 per barrel.
PRECIOUS METALS
Gold has risen as the US dollar has receded slightly and stocks have fallen globally, though expectations that the US Federal Reserve will raise interest rates next week has kept gains in check.
A slide in commodity prices – particularly crude oil’s drop to its lowest in almost seven years as OPEC continues to pump near-record amounts of oil to defend market share – also prevented gold from reaching higher levels.
Spot gold rose 0.3 per cent to $US1,073.18 an ounce at 2.42pm EST (0642 Wednesday AEDT), while US gold futures for February delivery settled up US10 cents at $US1,075.30 an ounce.
Stock markets worldwide slipped, weighed down by weak China trade figures, while the US dollar was down 0.2 per cent against a basket of other leading currencies.
“For gold, now it’s just a wait and see game,” said Saxo Bank’s head of commodity strategy Ole Hansen, adding that the market is still preoccupied with the rate increase.
“At the same time, though, the market is not prepared to react in terms of cutting exposure until we actually have the news.”
Silver was down 0.6 per cent at $US14.14 an ounce. Platinum fell 0.8 per cent to $US846.44 and palladium was down 0.5 per cent at $US556.47.
BASE METALS
Copper prices have risen as the US dollar has slipped, but gains have been capped by trade data from top consumer China, which has fuelled worries about demand growth in the metal’s top consumer.
Benchmark three-month copper on the London Metal Exchange closed up 0.7 per cent at $US4,587 a tonne.
China’s overall exports fell a worse-than-expected 6.8 per cent in November from a year earlier, their fifth straight month of decline, while imports tumbled 8.7 per cent, their 13th consecutive drop.
However, its copper imports in November jumped 10 per cent to 460,000 tonnes compared with November 2014, as the price plummeted to six-and-a-half-year lows of $US4,443.50 a tonne and spurred opportunistic buying even as demand growth slows.
“The latest trade data is disappointing as far as exports and imports are concerned, it’s another weak growth signal for China and it’s negative for miners,” said Gianclaudio Torlizzi, managing director at consultancy T-Commodity.
“People needed to restock. It won’t change the medium-term picture, which is still bearish because infrastructure spending is still weak.”
Three-month aluminium ended down 0.5 per cent at $US1,477 a tonne, zinc finished unchanged at $US1,531, lead gained 0.6 per cent to $US1,697, tin dropped 1.4 per cent to $US14,400 and nickel shed 0.6 per cent to $US8,700.
“It is only a matter of time before the industry is forced into large-scale production cuts in order to restore supply and demand balance and to bring down the level of inventory that exists on world markets,” Investec said in a note.
ASX stocks to watch
BHP – BHP BILLITON
RIO – RIO TINTO
FMG – FORTESCUE METALS GROUP: Miners are again at risk of suffering a hit to their share value on Wednesday as the iron ore price continues its decline.
CM8 – CROWD MOBILE: CrowdMobile holds its annual general meeting in Melbourne on Wednesday.
AAP
