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The mining sector’s worst session in eight months dragged the ASX into the red for the week amid concerns about Chinese demand.
The S&P/ASX 200 sank 44 points or 0.65 per cent, obliterating Monday’s 24-point rally.
The heavily-weighted materials sector fell 3 per cent as BHP, Rio Tinto and Fortescue Metals hit three-week lows. Iron ore dropped over the Australia Day holiday after Chinese steel production declined for a fifth week amid a rise in inventories.
What moved the market
Weak leads from Wall Street were compounded by concerns Chinese appetite for raw materials may be waning as Covid-19 lockdowns depress demand. Reuters reported utilisation rates at steel mills declined for a fifth straight week. Inventories at mills increased by 6 per cent from the previous week, signalling softening demand ahead of Lunar New year holidays.
The nation’s big three iron ore producers fell further from record levels hit earlier this month when the price of ore surged above US$170 a tonne. The spot price for ore landed in China eased $3.85 or 3.2 per cent yesterday to US$164.65. Fortescue Metals fell 6.4 per cent to a three-week low. Rio Tinto dropped 3.9 per cent and BHP 3.4 per cent.
The market returned from yesterday’s public holiday to broadly negative leads. Wall Street’s three major indices eased overnight following a mixed close on Monday. Copper and gold declined. Overnight, the S&P 500 dropped 0.15 per cent amid signs of growing resistance to President Joe Biden’s coronavirus relief package.
A brief rally in US futures faded as the Australian session wore on. S&P 500 futures were lately down six points or almost 0.2 per cent after earlier rising on a well-received earnings update from Microsoft. Dow futures declined almost 0.3 per cent. Nasdaq futures gained 0.4 per cent.
The local market largely ignored news inflation last quarter was stronger than expected. The Consumer Price Index climbed 0.9 per cent as petrol prices rose from Covid-depressed levels and the government wound back free government childcare.
Winners’ circle
Wesfarmers provided one of the highlights of a downbeat session, climbing for a seventh straight day. The retail conglomerate rallied 1.7 per cent to a new record.
The big supermarkets and two of the big four banks fought a rearguard action against the broader market trend. Woolworths and Coles gained 1.6 and 0.3 per cent, respectively. Commonwealth Bank added 1.6 per cent and NAB 0.4 per cent. Westpac slumped 0.6 per cent. ANZ lost 0.5 per cent.
Tech stocks also resisted the trend as the reaction to Microsoft’s result raised hopes for tonight’s Nasdaq performance. Altium climbed 2.6 per cent, Xero 2.5 per cent and Afterpay 1.8 per cent.
Reliance Worldwide was the index’s second best performer, soaring 6.6 per cent on a 13 per cent hike in half-year sales. IDP Education +7.7 per cent, Pro Medicus +6.4 per cent and Domain Holdings +5.7 per cent made up the rest of the top four.
Doghouse
Damage to the materials sector extended far beyond the big three ore producers following pressure on copper and other commodities. Oz Minerals sank 5.8 per cent, South32 3.6 per cent and Mineral Resources 3.4 per cent. Steelmaker BlueScope lost 4.6 per cent.
Mineral sands miner Iluka was knocked down 5.5 per cent after reporting declines in zircon and rutile production. Overall production dropped to 585,000 tonnes last quarter from 702,000 over the same period last year.
An 8 per cent slump in crude production last quarter sent Beach Energy down 5.1 per cent. Oil Search dropped 3.3 per cent despite reporting a record quarter of natural gas production. A weak session for the energy sector saw Santos fall 4.3 per cent and Woodside 2.9 per cent.
CSL dipped 0.1 per cent on news the CEO of AstraZeneca, Pascal Soriot, had stood down as a director over a potential conflict of interest. The decision comes after Astra acquired US pharmaceutical company Alexion, which operates in some of the same spaces as CSL.
Air New Zealand sank 2.9 per cent after Australia closed its border with NZ for 72 hours in response to a case in Auckland. NZ Prime Minister Jacinda Ardern said the snap closure would dent traveller confidence.
Other markets
Asian markets trimmed gains as US futures deteriorated. China’s Shanghai Composite dipped 0.03 per cent. Hong Kong’s Hang Seng cut its rise to 0.21 per cent and Japan’s Nikkei to 0.18 per cent.
Brent crude rose 17 cents or 0.3 per cent to $US55.81 a barrel. Gold retreated $5.90 or 0.3 per cent to $US1,845 an ounce.
The dollar dropped 0.18 per cent to 77.37 US cents.
Hot today and not today
Hot today: Progress towards producing a substitute fertiliser for African farmers lifted shares in explorer and developer Minbos Resources (ASX:MNB) 42.9 per cent. The company announced it had executed a Mineral Investment Contract for a phosphate project with the Angolan government. The aim is to produce enhanced phosphate to replace imported fertilisers. The signing of the contract clears the way for Minbos to complete approvals, strike land and port access agreements and arrange offtakes.
Not today: Shareholders abandoned auto repair group AMA (ASX:AMA) after the company revealed a legal battle with CEO and Executive Director Andrew Hopkins. The board announced Hopkins had obtained a temporary order preventing it from dismissing him following an independent forensic investigation into whistleblower allegations against him. The company did not outline the allegations. A further hearing will take place next week. The company’s share price dived 14.2 per cent to 63.5 cents.
