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Aussie shares plumbed two-month lows as a deepening mining sell-off drove the index down more than 2 per cent.
The S&P/ASX 200 hit its low mid-session, down 152 points or 2.06 per cent. The fall pushed the index under 7300 for the first time since July 21.
Mining giants BHP, Rio Tinto and Fortescue Metals sank to multi-month lows. Uranium stocks logged heavy declines. Takeover action involving electricity infrastructure and hotels offered the morning’s best returns.
What’s driving the market
The materials sector slumped almost 5 per cent to its weakest since December in the wake of Friday falls in iron ore and most metals. Fortescue Metals, arguably the purest of the major iron ore plays, dropped 6.78 per cent to a 14-month low, mirroring Friday’s retreat in ore prices. The spot ore price tanked almost 22 per cent last week.
“Blue skies policy ahead of Chinese holidays (mid-Autumn this week and National Day in October), as well as ahead of the Winter Olympics in early February has added to growth fears and rising steel inventories,” NAB Director, Economics, Tapas Strickland, said.
“The delta outbreak in Fujian province is also ongoing with 45 new cases on Saturday. In this light commodity prices were generally lower on Friday… Of note, iron ore futures traded below $100/tonne on Friday for the first time since July last year.”
BHP and Rio Tinto have many more strings to their bows than ore, but fell to fresh 2021 lows. BHP shed 5.06 per cent. Rio Tinto dropped 5.36 per cent.
The morning’s ten biggest losers on the ASX 200 were all connected to demand for materials. Declines ranged from 5.81 per cent for Perseus Mining up to 13.7 per cent for Champion Iron. Lynas Rare Earths fell 11.27 per cent, Nickel Mines 8.07 per cent and Mineral Resources 8.06 per cent.
Takeover action involving AusNet and ALE Group cushioned the market from a deeper loss (more below). Utilities, real estate investment trusts and other defensive assets weathered the sell-off best.
Wall Street paved the way to today’s falls with a third straight losing week. The Dow dropped 0.48 per cent on Friday. The S&P 500 and Nasdaq both gave up 0.91 per cent.
Deteriorating US futures added to the down-pressure. S&P 500 futures wilted 30 points or almost 0.7 per cent.
The falls came as an ongoing collapse in China’s second-largest property developers wreaked havoc in Asia. Hong Kong’s Hang Seng fell 3.34 per cent as shares in Evergrande dropped 14 per cent. The Asia Dow shed 1.21 per cent. Markets in mainland China and Japan were closed for holidays.
Going up
Energy distribution network AusNet jumped 17.68 per cent to a record after suitor Brookfield Asset Management raised its offer a third time to $2.50 a share. Today’s non-binding, indicative offer represented a 26 per cent premium to AusNet’s closing price on Friday.
In the absence of a superior offer, the AusNet board said they would unanimously recommend a binding offer at the new price. Brookfield will be allowed to conduct due diligence on an exclusive basis. The asset manager previously made non-binding offers of $2.35 and $2.45.
ALE Property Group, Australia’s largest portfolio of freehold pubs, jumped 20.85 per cent to $5.68 after Charter Hall Long WALE REIT (CLW) and superannuation fund Host Plus agreed to buy the group for a mix of cash and shares. ALE security holders will receive 0.408 CLW shares, plus cash of $3.673 per share, as well as a distribution of 5.5 cents. CLW shares dipped 3.6 per cent.
Transurban announced it and its partners will buy out the NSW Government’s 49 per cent stake in the WestConnex Sydney toll road for $11.1 billion. Shares in the toll road operator entered a trading halt while it taps investors for $4.2 billion to help fund the purchase. Transurban will own 50 per cent of the asset in partnership with AustralianSuper, Canada Pension Plan Investment Board and Tawreed Investments.
Havens were scarce by mid-session. Just 11 companies on the ASX 200 were ahead. GUD Holdings gained 1.48 per cent, Healius 1.01 per cent and Auckland International Airport 0.9 per cent. Nufarm added 0.8 per cent and Deterra 0.67 per cent.
Going down
A rally in uranium stocks faced its first serious test after many local players hit multi-year highs last week. Sharp declines in major producers in the US prompted a bout of profit-taking. Vimy Resources shed 16.98 per cent, Deep Yellow 16.42 per cent, Bannerman Energy 16 per cent and Boss Energy 15.94 per cent.
G8 Education fell 2.62 per cent on news it will acquire in-home childcare and NDIS services provider Leor for $2 million up-front, and up to $9.5 million in total if earnings targets are met. G8 said the acquisition would offer an entry into the “underserved in-home child care and specialised NDIS segments for children”.
While the miners bore the brunt of the selling, the broader market also weakened. The big four banks shed between 1.2 and 1.7 per cent. Aristocrat Leisure gave up 3.03 per cent, Goodman 2.51 per cent and Afterpay 1.37 per cent.
Other markets
Oil faded with US equity futures. Brent crude sagged 52 US cents or 0.7 per cent to US$74.82 a barrel.
Gold faded US$6.20 or 0.35 per cent to US$1,745.20 an ounce.
The dollar reversed early gains amid a wider retreat from risk. The Aussie dropped 0.47 per cent to 72.29 US cents.
