Trading on the ASX will start lower this morning after another nervous night on world markets which saw that big sell off in China continue, some stability in Europe, but a nasty fall on Wall Street after the New York Stock Exchange was closed for three hours as technical issues hit two of its three markets.
And as if that wasn’t enough, the spot price of iron ore plunged 10% overnight, thanks to a big sell off in Chinese futures market as fears the stockmarket rout would impact demand for ore and the steel industry.
That fall alone – to $US44.59 a tonne (according to Metal Bulletin) was the lowest price on record dating back to May 2009. It will knock the already weak shares of Fortescue and other small miners lower today and rattle those of the giants, BHP Billiton and Rio Tinto – both slid in London trading overnight – Rio off around 2% and BHP down around 1.8%.
The futures market has the ASX 200 starting with a sizeable loss of around 35 points this morning, but another bad day on Chinese markets will see it hit harder and wipe out all the remaining gains for the year so far. The Aussie dollar was trading around 74.25 in early Asian trading, up half a cent from its new six year low of around 73.75 hit overnight.
The combination of worries over Greece (not evident in Europe though where markets traded high), the fears about China and the three hour trading halt knocked Wall Street sharply lower this morning.
That combination saw investor fears frazzled, volatility rose and the Dow lost 1.5%, the S&P 500 shed 1.6% and Nasdaq was down around 1.75%. The Dow ended at a five month low of 17,512.42
Global commodity prices were on track to finish at their lowest level since late 2001 as falling stock markets in the world’s largest consumer sap confidence.
The Bloomberg Commodity Index of 22 commodities from oil to natural gas, fell to 96.8069, its lowest level on a closing basis un nearly 14 years, according to the Financial Times. The index has lost over 4% in the past five trading days.
Spot world iron ore prices have lost a quarter of their value in the past three weeks and look certain to go lower because of the high level of instability in Chinese financial markets.
Last night’s fall was one of the biggest on record and that will also add to pressure as the drop was driven by a plunge on the Chinese iron ore futures market (which is shut to speculators and only used by buyers and producers).
In Australia yesterday, the local market ended down 2% as the rout in China and lower commodity prices battered investor confidence.
Among the iron ore companies, BHP tumbled 3.1% to $25.43 and Rio Tinto dropped 3.2% to $50.06. Fortescue crashed more than 6% to a fresh six-year low of $1.67. They will go lower today.
In other commodities overnight, gold prices rose by $US5 a tonne overnight, copper was also higher, halting the recent slide and oil prices fell in New York but rose in London.
US oil prices settled lower, down for a fifth straight session, after the weekly Government production and stocks report proved disappointing – stocks rose, production was slightly higher.
In New York US type crude futures settled at $US51.65 a barrel, down 68 cents, or 1.3%, bringing the losses over five sessions to more than 13%., while in London, August Brent crude futures rose 20 cents, or 0.4%, to $US57.05 a barrel.
