With global iron ore prices falling under $US100 a tonne overnight, the Australian stockmarket is set to open higher this morning – that’s either fools paradise or a misreading of what happened here yesterday.
Our market was tipped to open slightly higher yesterday, and it had a brief gain until the importance of the fall in iron ore prices, then the latest Chinese property price report was released.
It then spent the rest of trading sinking like a stone, leaving investors a bit shell shocked.
But the overnight share futures contract last night was showing a 20 point gain at around 7 am – a huge turnaround from yesterday’s 70 point fall on the physical market.
The Aussie dollar eased to around 93.30 from 92.50 US cents yesterday.
Wall Street rose fitfully with Nasdaq leading the way with a gain of more than 0.8% (which was more a small relief rally than significant recovery).
The Dow (up 0.1%) and the S&P 500 (up 0.4%) were hardly convincing after European shares first sold off, then rallied a touch, especially in Germany and France to finish higher.
Oil rose a touch and gold rose above $US1,300 an ounce, then retreated to end around $US1.293 this morning.
US bond prices fell and the yield on the key 10 year security edged up to 2.54%, well away from the 2.50% low of last Thursday.
Australia’s big fall yesterday (the largest for five weeks) was driven by news from China of another rise in property price (‘China’s property bubble’ is the storyline for the bears), but more importantly, a fall last Friday night in the iron ore price to $US100.70 a tonne for the standard type ore delivered from Australia.
A further fall this week – to under $US100 a tonne, a key level in the minds of local traders – was tipped as a result of Friday’s fall.
Well, that happened overnight and the price of 62% content ore (that’s ferrous oxide) delivered to the Chinese port of Tianjin fell 2.2% to $US98.50 a dry tonne.
That’s the lowest since September 13, 2012, according to The Steel Index and iron ore spot prices have now fallen 27% so far this year.
And the Singapore futures price fell to $US97.75 a tonne yesterday.
The Index iron ore price peaked at a touch under $US120 a tonne on April 9 and is down 11.4% in the past month.
Here the ASX200 finished at the day’s low, down 70 points, or 1.3% at 5409.
The All Ordinaries fell 68.6 points, or 1.3%, to 5390.3.
As a result of the fall in iron ore prices, Australian miners led yesterday’s red inkers.
Fortescue Metals was hit hardest, losing 4.6% to finish at a 2014 low of $4.37. Fortescue shares are down nearly 30% from their February peak
Rio Tinto fell 3% to $60.10, while rival BHP Billiton slumped 1.7% to $37.43, Rio and BHP rose 1.6% and 2% respectively last week.
Rio shares are down more than 16% from their February peak, while BHP shares are now off more than 5%.
Junior iron ore miners were not spared any pain, as BC Iron dropped 4.5 per cent to $3.63, while Atlas Iron finished 1.3 per cent lower at 74¢.
