Watch out for another slide in local share prices after the price of iron ore tumbled well under $US70 a tonne overnight.
In fact iron ore prices slumped to yet another five year low – $US68.60 a tonne according to the Steel Index, down 2% on the day. It came after a worrying fall in futures prices, which sent our market lower in early trading yesterday.
The Metal Bulletin, another source, had the price at $US69.58 a tonne, down 1.2%.
So much for Monday’s big rise and some of the enthusiasm it generated – as we pointed out it was a one day sugar hit and unravelled yesterday, and not even the Medibank Private float could save the day.
And it could further unravel today.
The best thing that could be said about the market performance is that it ended with smaller losses at the close – around 27 points on the ASX 200, than indicated in the late morning session when the index was down 63 points on reports that iron ore futures in China had fallen 3%.
Futures trading had our market starting flat to slightly higher, but that’s an illusion as the Aussie dollar fell to within sight of 85 cents and four and a half year low of 85.14 US cents overnight.
That enthusiasm we saw on Monday for the 0.40% rate cut in China last Friday night vanished yesterday (although it helped the Shanghai market to a three year high yesterday).
The performance of Medibank shares was the reverse of the market – Medibank shares jumped to a day’s high of $2.23 (the instos paid $2.15, retail holders, $2 a share), so there was a nice gain.
But a wave of selling saw 587 million shares worth $1.3 billion traded yesterday and the weight of selling gradually overwhelmed the optimism and the shares closed at $2.14.
That’s a 7% gain on the day for retail shareholders who didn’t sell, and a small loss for instos. Some analysts say these big holders were selling shares to drive them lower so they could then pick them up more cheaply.
The materials sector fell 1.7% thanks to falls in the prices of BHP and Fortescue shares. BHP dropped 2.4% to $32.10, while Fortescue slumped 5.7% to $2.81.
But Rio Tinto fell only dipped 1.7% to $57.41 amid more Glencore takeover talk.
Gold shares rose, but that’s not important.
The big four banks were mixed, with the National Australia Bank down 0.7% to $32.15, Westpac lost less than 0.1% to $32.60, and Commonwealth Bank slipped 0.3% to $80.17. But the ANZ finished 0.7% higher at $32.10.
And watch oil prices as well today and for the rest of the week. US and European oil futures slumped to their lowest close in more than four years this morning in US trading as doubts grew that Opec will do anything at its meeting in Vienna later this week.
In New York Nymex West Texas type crude futures for January delivery dropped $US1.60, or 2.2%, to close at $US74.09, a barrel, the lowest finish for a most-active futures contract since September 2010. January Brent crude futures dropped $US1.35, or 1.7%, to $78.33 a barrel. In after hours trading in Asia this morning West Texas style crude fell further, to $US73.85, while Brent crude also fell to $US78.23 a barrel. This will increase pressure on local oil stocks and on BHP Billiton in particular, because it is a big oil and gas producer as well as an iron ore giant and will be hit by the slide in iron ore prices overnight.
