Watch for a sell off in Australian iron ore shares today after industrial commodity futures, led by iron ore and oil tumbled yesterday. Only gold managed to rise.
The wider market will be looking at a 20 point plus gain after overnight futures trading saw a late steadying on Wall Street after early weakness in Asian, European and US markets.
The Dow fell for an eighth session on Monday – its longest losing streak since August 2011 as the market sentiment weakened following President Trump’s health-care bill debacle last week.
The failure of Republicans to support for the American Health Care Act has cast doubt on President Trump’s ambitious agenda to lower taxes and rollout fiscal stimulus.
The Dow lost 45 points, or 0.2%, to end at 20,551 (it had been down 150 points in futures trading in Asia) while the S&P 500 lost 2 points, or 0.1%, to close at 2,341. But the Nasdaq Composite rose 11 points, or 0.2%, to finish at 5,840.
Leading miners will come under more pressure today. Yesterday BHP lost 2.9%, Rio 1.8%, Fortescue 3% and South32 1.8%. That last performance was despite announcing a big buyback.
Futures prices for iron ore in China fell 6.7% at one stage yesterday as traders sold because of rising stockpiles of ore among steel mills and falling steel prices.
The spot price of iron ore dropped 4.1% to $US81.57 a tonne, according to the Metal Bulletin Index. The price has now fallen 14% since peaking at $US94.86 on February 21. The gain for 2017 so far was cut to just 3.7%. That was after spot iron ore prices fell more than 7% last week, according to the Metal Bulletin Index.
The weakness in iron ore is far more important than Wall Street’s small gains which influenced the local futures market. Australian traders will again be watching the Chinese futures market for any further weakness today.
This latest sell-off could end the long rally in iron ore prices. Chinese speculators (who drive the market) are reacting to growing concerns that steel demand will be hit by fresh curbs on lending in real estate in China last week.
Oil prices weakened despite Sunday’s meeting of five Opec and non-Opec producers which agreed on the need to extend the current production cap past its June expiry date.
The drop puts the futures price of iron ore on the Dalain Exchange at the lowest level since January 10 and represents a fall of 17.6% from the most recent intraday high on March 16.
The fall comes after iron ore inventories at China’s ports rose for the second week running – and at a faster pace – to a record 132.5 million tons, according to figures published on Friday by Shanghai Steelhome, a steel market data platform. Other hard commodities were faring badly in China on Monday as well: Shanghai copper futures were down 1.8% and futures in Dalian for coking coal, used in steel making, fell 3.8%. Thermal coal futures fell half a per cent.
In New York May West Texas Intermediate crude 0.5%, to settle at $US47.73 a barrel—giving up nearly all of the 0.6% rise it saw last Friday. In London May Brent crude futures lost 0.1%, to $US50.75 a barrel.
On Friday US crude futures oil rose 0.5%, while Brent gained 0.5%, but each saw weekly losses of 1.7% and 1.9%, respectively.
Five representatives of countries that signed up to the Organization of the Petroleum Exporting Countries output agreement—K uwait, Algeria, Venezuela and non-OPEC nations Russia and Oman—met in Kuwait on Sunday to review the current levels of compliance.
OPEC officials urged an extension of the production cap that is due to expire in June. The compliance committee will meet again in late April to recommend to the cartel whether cuts need to be extended another six months.
Comex April gold futures in New York were up more than 1% at over $US1,260 an ounce, its highest since mid November. Gold eased a touch to end up $US7.20, or 0.6%, to settle at $1,255.70 an ounce.
May silver also gained 36 cents, or 2%, to $18.108 an ounce. Comex copper was little changed at $US2.632 a pound.
