“Realistically, the European data has generally been poor for most of the year anyway, so this in itself isn’t news. The US data has been middling, but both confirm what everyone already knew: the global economy is slowing down after a 10-year quantitative-easing-induced bull run.”
The major cyclical stocks led the retreat on the local sharemarket. ANZ closed 2.3 per cent lower at $25.92, Westpac slid 1.5 per cent to $26.12, Commonwealth Bank fell 0.9 per cent to $70.78 and NAB declined 0.9 per cent to $24.87.
BHP Group closed the session 1.3 per cent lower to $37.13, Rio Tinto slid 1.1 per cent to $93.13, South32 went down 2.8 per cent to $3.76 and Fortescue Metals Group slipped 1.2 per cent to $6.51.
Energy stocks were also weaker as global oil prices extended their losses from last week. Woodside Petroleum fell 2.8 per cent to $34.79, Origin Energy slid 4.5 per cent to $7.22, Santos declined 3.8 per cent to $6.92, Oil Search closed 3.3 per cent lower at $8.00 and Beach Energy went down 5.6 per cent to $2.03.
Growth stocks also retreated from their strong year-to-date performances. Altium shares closed 8.4 per cent lower at $32.07, Appen fell 5.6 per cent to $22.11, Wisetech Global slid 4.5 per cent to $22.28 and Afterpay Touch closed at $19.55, down 5.3 per cent.
Estia Health shares fell 4.6 per cent to $2.72. Two staff members at the company’s Kensington Gardens aged care home were sacked and charged with aggravated assault following allegations of abuse of an elderly resident. The news comes as the ongoing royal commission into the aged care sector concludes its second round of hearings.
The market slide was capped slightly by gains in gold mining, real estate investment trust and infrastructure stocks. Gold producer Newcrest Mining rose 3.2 per cent to $26.20, Spark New Zealand advanced 2.9 per cent to $3.57, Saracen Mineral climbed 2.5 per cent to $2.83 and Resolute Mining closed at $1, up 2.1 per cent.
Asian markets were also weaker across the board. The Shanghai Composite declined 1.3 per cent, Hong Kong’s Hang Seng slid 1.7 per cent, Korea’s KOSPI fell 1.7 per cent and Japan’s Nikkei 225 went down 3.1 per cent.
ST BARBARA MINING
Credit Suisse upgraded its rating on St Barbara Mining from ‘underperform’ to ‘neutral’ following an investor sell-off that saw its value cut by a third. The gold miner announced last week that its leading-edge underground ore pumping technology concept had been canned following a disappointing feasibility study. “The combination of asset concentration and net present value premiums to valuations inevitably leaves clear air for steep share price changes when expectations change,” said analyst Michael Slifirski. “Gwalia’s maturity is battling technology limitations, resulting in a weaker and higher cost outlook, no doubt increasing management’s resolve to acquire a new operation.” The broker said that positive news on the Simberi sulphide expansion could offset the value lost by the Gwalia outlook downgrade. Credit Suisse reduced its target price on St Barbara from $3.90 to $3.30.
What moved the market
US CRUDE PRODUCTION
US crude oil production remains at an all-time high with more than 12 million barrels a day being produced by the country. The strong production is helping to offset OPEC-led production cuts, keeping the price of the commodity relatively even. Saudi Arabia has been leading the charge for the cartel, production 10.1 million barrels per day, equating to a compliance level 1.7 times its quoted target. “The move underscores Saudi Arabia’s willingness to ignore the White House’s renewed call to open taps and thus reduce US gasoline prices,” said RBC Capital Markets analyst Ben Wilson.
The price of iron ore continues to fluctuate, with a number of events surrounding the bulk commodity. Expected disruptions to supply in Western Australia from Tropical Cyclone Veronica are being offset by news that Brazilian miner Vale was allowed to resume operations at its Brucutu mine, its largest iron ore complex in the Minas Gerais state. Port Hedland, the world’s largest iron ore export terminal, has been temporarily closed, along with Port Dampier and Cape Lambert, sidelining supply of the bulk ore temporarily. “While the extent of disruption to port operation remains unknown, a 5-day shutdown could see seaborne supply fall 10 megatons or 0.6 per cent,” said CBA mining and energy commodities analyst Vivek Dhar.
The Norwegian krone just missed hitting a four-month high last week after the country’s central bank raised its policy rate. On Thursday, the Norges Bank hiked its rate from 0.75 per cent to 1 per cent, a move that was widely anticipated by investors. They were, however, surprised by the bank’s much more hawkish stance, where it suggested another rise in the second half of the year was very likely. The gains of the Norwegian krone could be capped, however, particularly if the price of oil moves lower, with the commodity contributing heavily to the Scandinavian country’s economy.
Energy stocks were among the market’s worst performers on Monday as oil prices opened the week’s trading lower. Concerns that a sharp global economic slowdown would reduce demand offset production cuts from the OPEC-led cartel. The price of both Brent and West Texas Intermediate crude fell on Friday but extended those losses through Monday as Asia took its turn to respond to the global sell-off last week. The price of crude oil has fallen more than 3 per cent since last week.
William McInnes covers markets from Sydney including editing the Markets Live blog.