Mining and energy stocks were already being sold off in earlier trading amid lower prices for iron ore and oil and concerns over a slowdown in the Chinese economy, which is a major user of Australian resources, such as iron ore.
But the selling intensified after trading on the Shanghai and Shenzhen stock exchanges in China was frozen for the day after shares tumbled more than 7 per cent.
Chinese markets were temporarily suspended on Monday for the same reason. That caused a rout on share markets globally.
At around 2pm (AEDT) on Thursday, shares in global miner BHP Billiton were down more than 4 per cent, and Rio Tinto was nearly 4 per cent lower.
South32 had slumped by more than 6 per cent, and iron ore pure-play Fortescue Metals was down by more than 5 per cent.
Oil stocks were also getting hammered, with Woodside Petroleum nearly three per cent weaker, and Santos off by well over six per cent.
CMC Markets chief market strategist Michael McCarthy said the suspension of the Chinese market for a second time was clearly making things worse for mining and energy stocks on Thursday.
“I don’t think it should, but I’d have to say yes. Looking at the way these things have occurred together and how the situation has worsened after that closure (in Chine) – yes,” McCarthy said.
The Chinese share market is increasingly being perceived as a barometer for the Chinese economy.
But seasoned market observers say the volatile Chinese share market does not necessarily reflect the state of the Chinese economy.
“It’s always true that the stock market is not the economy, and the economy is not the stock market,” McCarthy said.
“But it’s even more particularly true in China where we get a lot of official intervention in the market, and we also are restricted in who can access that market.
“So while it is not to be ignored, it is not signalling that growth in China will slump to 3 per cent this year.”
McCarthy said the pace of the investor retreat appeared to be driven by fear, given the belting that the market has copped all week.
Markets in London, Germany and France all fell overnight before US stocks closed at their lowest level since early October on fresh concerns over China, slower global growth and energy shares hit by tumbling oil prices.
At 10.24am (AEDT) on Thursday, the benchmark S&P/ASX200 index was down 0.18 per cent, dragged lower by resources giants Rio Tinto and BHP Billiton, which continued their poor overnight performance in London.
Burrell Stockbroking senior investment advisor Jamie Elgar said the Australian market was “stuck in the rain”.
“The start we had at the start of the week is just going to continue and we haven’t got any positive news to turn that around,” Elgar said.
“We got the Fed out of the way at the end of last year but we probably need some decent economic news from the US to maybe steady the ship there and maybe a bit of belief that the Chinese economy is not as bad as people think it is.”
With concerns over demand for iron ore and the commodity’s price dropping overnight, BHP was down 49 cents, or 2.86 per cent, at $16.66, while Rio Tinto was down 80.5 cents, or 1.88 per cent, at $41.945.
The energy sector was also weaker, with Origin Energy down nine cents, or 1.7 per cent, at $4.63 and Oil Search down nine cents, or 1.36 per cent, to $6.53.
Santos dropped 10 cents, or 2.85 per cent, to $3.41, and Woodside Petroleum declined 60 cents, or 2.11 cents, to $27.79.
Three of the big four banks were in negative territory, with ANZ the biggest loser, down 15.5 cents, or 0.58 per cent, to $26.55. NAB was down 11 cents, or 0.38 per cent, to $28.87, and Westpac was down 14 cents, or 0.43 per cent, to $32.07.
Commonwealth Bank was up 10 cent to $82.21.The market on Wednesday, ended its fourth straight session in the red.
The benchmark S&P/ASX200 index was down 61.3 points, or 1.18 per cent, at 5,123.1 point
The broader All Ordinaries index was down 61.2 points, or 1.17 per cent, at 5,178.0 points.
On Wednesday, new data showed that the Chinese services sector expanded at its slowest rate in 17 months in December.
The figure added to concerns that world’s second-largest national economy may be losing steam, especially after the release of very weak Chinese manufacturing figures earlier in the week.
Bank of New Zealand currency strategist Jason Wong said it was another night of nervous trade on financial markets.
“Investors switching out of equities into the safety of the bond market has seen US Treasuries well bid,” he said.
“And just as if things seemingly couldn’t … North Korea decided to detonate what experts believe was probably a hydrogen bomb, under test conditions.”
At 8.30am (AEDT) on Thursday, the March 2016 10-year bond futures contract was trading at 97.275 (implying a yield of 2.725 per cent), up from 97.230 (2.770 per cent) on Wednesday.
The March 2016 three-year bond futures contract was at 98.020 (1.980 per cent), up from 98.000 (2.000 per cent).
NEW YORK – US stocks extended losses in late trading on Wednesday as energy shares dropped with oil prices and minutes from the last Federal Reserve meeting added to investor concerns about the economy.
Fresh concerns over the impact of a slowdown in China on the global economy and heightened geopolitical concerns also weighed on stocks.
The year got off to a shaky start on Monday after weak data from China triggered declines in global markets, with the Dow recording its worst first day of the year since 2008.
Adding to investors’ nervousness was North Korea’s announcement that it had successfully tested a hydrogen bomb.
Minutes from the last Federal Reserve policy meeting showed policymakers decided to raise interest rates last month after almost all of them gained confidence inflation was poised to rise, but some voiced worries inflation could get stuck at dangerously low levels.
LONDON – European stocks fell on Wednesday, hit by weakness in the commodity sector as concerns over the Chinese economy resurfaced after it allowed the yuan to weaken
further.
Miners came under pressure after the People’s Bank of China set a weaker midpoint for the yuan, prompting concerns that the economy of the world’s largest metals consumer could be even weaker than imagined.
A survey showed that China’s services sector expanded at its slowest pace in 17 months in December.
Risk sentiment was also dampened after North Korea said it had successfully conducted a test of a miniaturised hydrogen nuclear device on Wednesday morning, marking a significant advance in the isolated state’s strike capabilities and raising alarm bells in Japan and South Korea.
TOKYO – Hong Kong’s benchmark index fell to a three-month low, while a gauge tracking Chinese companies almost touched its lowest since mid-2013, hit by
weakness in private sector activity in the territory.
Sentiment was hurt by a survey showing private sector activity shrank again in December for the 10th month running, with the rate of contraction the steepest since September.
The market was little helped by a strong rebound in mainland shares, as Hong Kong authorities issued a holiday health alert after a woman in nearby Shenzhen died after being infected with the highly contagious H5N6 bird flu virus.
WASHINGTON – US Federal Reserve policymakers decided to raise interest rates last month after almost all of them gained confidence inflation was poised to rise, but some voiced worries inflation could get stuck at dangerously low levels.
US businesses stepped up hiring last month, led by solid gains in construction and retail, a private survey has found.
The US trade deficit dropped to the lowest level in nine months in November as exports fell to a nearly four-year low.
KUALA LUMPUR – Malaysia Airlines has lifted a much-criticised ban on checking in baggage on flights to Paris and Amsterdam, a day after limiting bags to lighten the plane and save fuel.
ENERGY
Oil prices have fallen around six per cent to new 11-year lows as the row between Saudi Arabia and Iran made any co-operation between major exporters to cut output even more unlikely.
The furore over Saudi Arabia’s execution of a Shi’ite cleric has stripped nearly eight per cent off the price of oil in the last three trading days, killing speculation that OPEC members might agree to production cuts to lift prices.
“There are rising stockpiles and the tension between Iran and Saudi Arabia make any deal on production unlikely,” said Michael Hewson, chief market analyst at CMC Markets.
Evidence of slowing economic growth in China and India has meanwhile fuelled fears that even strong demand elsewhere may not be enough to mop up the excess crude that has resulted from near-record production over the last year.
PRECIOUS METALS
Gold prices have hit a seven-week high, extending gains for a third session as persistent concerns over the Chinese economy battered stock markets.
The metal has broken through a key chart level at $US1,088, which could indicate prices have bottomed for now after twice rebounding from the $US1,045 area in December, analysts said.
“(The) geopolitical situation along with a cocktail of global market sell-offs is fuelling this move,” Naeem Aslam, chief market analyst at Ava Trade, said.
World stocks fell for a fifth day as China fuelled fears about its economy by allowing the yuan to weaken further, and a nuclear test by North Korea added to a growing list of political worries.
BASE METALS
Copper prices have hit a two-week low as a weak yuan and poor Chinese services data fanned fears over slowing growth in a market still reeling from weak Chinese factory activity.
China’s services sector expanded at its slowest rate in 17 months in December, data showed, while the People’s Bank of China set the yuan’s official midpoint rate at its weakest level in four and a half years.
Traders and economists fear the yuan’s depreciation may mean the economy in the world’s top metals consumer is even weaker than had been expected.
Copper’s falls came despite news that China’s state stockpiling agency is expected to start buying as much as 150,000 tonnes of copper.
“The fact that this didn’t have a positive impact on the market tells you sentiment is very bearish,” said Julius Baer analyst Carsten Menke.
ASX stocks to watch Thursday, January 7
AEB – ALGAE.TEC – up one cent, or 25.64 per cent, at 4.9 cents: Perth-based Algae.Tec has started producing algae for nutraceuticals, and said its new production facility in Atlanta can produce up to 50 tonnes of algae per year for nutraceuticals, which include food and dietary supplements.
GRR – GRANGE RESOURCES – up 0.4 cents, or 4.4 per cent, at 9.5 cents: Iron ore miner Grange Resources has warned of job losses as it races to cut costs to keep up with sliding commodity prices.
JBH – JB HI-FI – up 47 cents, or 2.29 per cent, at $21.03: JB Hi-Fi is continuing to benefit from the demise of rival electrical retailer Dick Smith, with their shares bucking the Australian stock market’s downward trend.
AAP
