Commodity falls take toll on mining stocks

THE sharemarket took another hit yesterday, with large falls in mining and energy stocks after commodity prices sagged overnight on rising fears of a global economic slowdown.

By InvestSMART · 16 Dec 2011

By InvestSMART ·
16 Dec 2011

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THE sharemarket took another hit yesterday, with large falls in mining and energy stocks after commodity prices sagged overnight on rising fears of a global economic slowdown.

The S&P/ASX 200 Index gave up 50.7 points, or

1.21 per cent, to 4139.8. This was down 4.2 per cent from its highest close this month of 4321.3 points on December 5.

The market finished in the red for the third straight day amid concerns about Europe's inability to deal with its liquidity and solvency problems, and as industrial production in the euro zone proved weaker than expected. Economists warned that Europe could be heading into recession.

Data showing that China's manufacturing sector continued to contract in December, as exports slowed, compounded fears that the euro-zone debt crisis had already begun to slow growth in Asia.

Miners and energy stocks led the market lower as the resource-heavy ASX became one of the worst performers in the region.

BHP Billiton lost 73?

(2 per cent) to $34.97, Rio Tinto fell $1.81 (2.9 per cent) to $61.35 and Fortescue Metals was 15? lower (3.2 per cent) at $4.54.

Goldminers were hit hard, with Newcrest losing 93? (2.9 per cent) to $30.88 and the group as a whole shedding 3.8 per cent.

Spot gold dived $US71.66 to finish the Australian session at $US1568.17 an ounce.

"The colossal falls in gold over the past few days have broken several support levels on the way down," said IG Markets market analyst Stan Shamu. "If we see a break lower . . . the assumption could be that the gold super-cycle is over."

Energy stocks also fell, led by Woodside Petroleum, which slipped 53? (1.7 per cent) to $31.10.

The big banks all lost ground, NAB falling 38?

(1.6 per cent) to $23.48, Westpac 34? to $20.46, Commonwealth 75? to $48.63 and ANZ 19? to $20.78.

The dollar slipped to US98.78? from Wednesday's close of $US1.0016. It even lost ground against the euro, slipping to 76.06 euro cents from 76.87.

"The Australian dollar has been underperforming the euro in periods of high volatility throughout this crisis, and now that we've morphed into a concern about growth and European sovereigns, it makes more sense," said NAB senior currency strategist Emma Lawson.

She described the Aussie as a global-growth currency that was taking a hit because of Australia's reliance on growth in China, which in turn counted on Europe for a great deal of its exports. With AAP

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Frequently Asked Questions about this Article…

Why did the ASX 200 fall and how much did it drop?

The S&P/ASX 200 fell amid rising fears of a global economic slowdown linked to Europe’s liquidity and solvency issues and weaker-than-expected euro‑zone industrial production. The index gave up 50.7 points, or about 1.21%, finishing at 4,139.8 — around 4.2% below its high earlier in the month.

How did commodity price falls affect Australian mining stocks like BHP and Rio Tinto?

Commodity price weakness pushed resource-heavy stocks lower. BHP Billiton slid about 2% to $34.97 and Rio Tinto fell $1.81 (roughly 2.9%) to $61.35, as miners led the market down when commodity prices softened overnight.

What happened to iron ore and other major miners such as Fortescue and Newcrest?

Fortescue Metals dropped around 3.2% to $4.54, while gold miner Newcrest fell about 2.9% to $30.88. The broader gold‑miners group lost around 3.8% as metal prices weakened.

How steep was the fall in the gold price and what did market analysts say?

Spot gold fell US$71.66 to finish the Australian session at about US$1,568.17 an ounce. IG Markets analyst Stan Shamu said the recent 'colossal falls' had broken several support levels and warned that a further break lower could lead some to conclude the gold 'super‑cycle' is over.

Which energy stocks were hit and by how much?

Energy stocks also declined, led by Woodside Petroleum which slipped about 1.7% to $31.10, reflecting the broader commodity and growth concerns weighing on the sector.

How did Australia's big banks perform during the sell‑off?

Major banks lost ground in the market downturn. NAB fell about 1.6% to $23.48, while Westpac, Commonwealth Bank and ANZ also retreated, finishing the session lower at around $20.46, $48.63 and $20.78 respectively.

Why did the Australian dollar weaken and how much did it move?

The Australian dollar slipped amid growing worries about global growth — especially weaker China manufacturing data and European sovereign concerns — which dented demand expectations for Australia's commodity exports. The Aussie fell below US$1 to about US$0.9878 and eased to roughly 76.06 euro cents from 76.87.

How did concerns about Europe and China contribute to the market decline?

Markets were hit by a mix of worries: economists warned Europe could be heading into recession because of liquidity and solvency issues and weak euro‑zone industrial production, while China’s manufacturing continued to contract and exports slowed. Those factors combined to amplify fears of a global slowdown and pressured commodity‑linked Australian stocks.