For yet another day the commodity rout swept sharemarkets, hammering some of the world’s biggest resource groups. US oil prices dipped further under $US40 a barrel, Brent crude fell under that level, then recovered it in after hours trading.
The most dramatic move on the day was the surprise announcement from the world 4th biggest miner, Anglo American that it was going to downsize rapidly and suspend its dividend for at least the next year.
Its shares tumbled more than 12%, dragging the shares of other leading miners with it.
Copper held, gold and silver weakened and iron ore was again lower. If anything the losses among the commodities were not as painful as on Monday or last week.
Iron ore was down 1% to around $US38.65 a tonne according to the Metal Bulletin and a bit lower on The Steel Index at $US38.90 (down 0.3% on the day).
That was despite a 22% jump in Chinese iron ore imports in November as higher exports from Australia took market share.
Sugar remains a standout though – although it eased overnight, it is still up nearly 50% since August as the El-Nino dry spreads through the major sugar producing countries, India and Thailand (and Australia), and heavy rains in Brazil, the world’s biggest producer.
Average Chinese trade figures (See separate stories) were another factor undermining confidence among resource stocks and commodities.
The US dollar strengthened a touch, commodity currencies led by Norway’s krona and the Canadian dollar fell sharply – but the Aussie dollar remained solid, trading around or just over 72 US cents.
Sharemarkets fell in Asia, Europe and the US. The Down lost 0.9%, the S&P 500, 0.6% and the Nasdaq just 4 points and was in the green for much of the day.
Dragged lower by energy and other resource stocks, The Stoxx Europe 600 index lost 1.8% (after a 0.5% rise on Monday) to end at 365.75.Major markets fell more than 1%, with Germany’s Dax off almost 2%.
The prices of major miners plunged in London – BHP Billiton shares lost5.5% after a 5.2% fall in Australia yesterday, Rio shares were whacked more than 8%, after a 4.3% drop here yesterday, Glencore shares fell nearly 7% and Anglo American shares dropped more than 12% after its dramatic news, which includes dropping its dividend.
Our market will open deeply in the red with the overnight ASX 200 futures market tipping a fall of more than 20 points at the start of trading.
Anglo American revealed plans to more than halve its 135,000 work force in the next few years by closing mines and facilities, cutting facilities and closing offices around the world.
Nystar, Europe’s biggest zinc and lead processor and miner, revealed plans to close three mines in the US.
Shares in Anglo dropped by more than 12 per cent to a record low on the news. Other mining and natural resources stocks also fell as oil dipped below $40 a barrel for the first time since the financial crisis began and iron ore, the biggest mined commodity, hit a 10-year low.
The moves by Anglo American underscore the challenges facing the mining sector as it scrambles to deal with a slowdown in China and a glut in global supplies of everything from copper and platinum to coal and diamonds.
Shares in Anglo closed down 43.34p at 323.65p, while Rio fell 173p to £18.93 and Glencore, which hosts an investor briefing on Thursday, dropped 7 per cent to 79.45p.
Led by a 6.35 per cent slide in the energy sector and a 3.4 per cent drop in materials, the benchmark S&P/ASX 200 index shed 0.9 per cent to 5108.6, and the broader All Ordinaries lost 0.9 per cent to 5158.0. Falls in other sectors were much more moderate and industrials, health care and telcos even posted small gains.
Rio Tinto down 4.29 per cent, and announced further cuts to its capital expenditure budget after market. Fortescue Metals Group fared a little better, down 2.96 per cent.
BHP Billiton was down 5.23 per cent, with a double-whammy from the falling iron ore price and the overnight drop in oil. Unlike rivals Rio and Fortescue, BHP has a large petroleum division.
Fortescue shares closed at$1.805, down almost 3%, so it was mildly mauled by the market in yesterday’s sell off.
Woodside Petroleum ended 3.96 per cent lower after walking away from its A$11.6bn bid for rival Oil Search, which closed 16.36 per cent lower.
Santos slumped 13.12 per cent to A$3.31, and below the rights price of its recently-conducted A$3bn capital raising.
South32 dropped 8.04 per cent amid rumours the BHP spin-off could dissolve its secondary London listing next year.
OZ Minerals managed to buck the trend, up 2.54 per cent.
