Australian shares fell back to levels last seen in December on Wednesday, as investors took a gloomy view of the heavyweight miners and sold out of the sector.
The S&P/ASX 200 index dropped 32 points, or 0.5 per cent, to 6015. The All Ordinaries lost 31 points, or 0.5 per cent, to trade at 6134. The Australian dollar reached US79.54??.
Miners took 22 points off the benchmark index, with BHP falling 2.9 per cent to $30.74, Rio Tinto losing 3.5 per cent to $78.45 and Fortescue Metals down 3 per cent at $5.15.
Chinese iron ore futures fell for a fifth day to a two-and-a-half week low and copper and nickel hit multi-week lows overnight amid a steadier US dollar, profit-taking following strong gains late last year, and lingering worries over fading demand in China before the Lunar New Year.
CBA commodity analyst Vivek Dhar pointed out that Chinese GDP data is due out on Thursday. "People might be saying lets take profits here and see what happens tomorrow," he said.
Commodity prices strengthened in the fourth quarter of last year and the first weeks of 2018 amid a synchronised uptick in the global economy, a weaker US dollar and restocking demand in China, he noted.
"We anticipate that most mining and energy commodities will see their peak this quarter before sliding lower once the Chinese New Year holiday is over by March."
South32 fell 1.5 per cent to $3.92, with the firm telling shareholders that its second-quarter metallurgical coal output dropped 43 per cent due to an outage at its Appin mine in Australia. It also raising its full-year output forecast for South African manganese operations.
Bucking the lower mining sector trend, shares in OZ Minerals rose 1 per cent to $9.17 after the copper miner revealed it would produce more of the red metal in 2018 and 2019 than previously expected.
Suncorp shares edged up 0.4 per cent to end the day at $13.56. The insurance firm was told by ASIC to refund $17.2 million to 41,228 customers who bought insurance via car dealers that was of little or no use.
Sirtex Medical shares soared 12.5 per cent to $17.61 after the medical firm flagged that its earnings for the first half of 2018 were up double-digits, despite flat sales of its key liver cancer drug in the period.
Dairy producer A2 Milk Company gained 1.8 per cent to $7.55 after telling shareholders that it would dramatically expand its presence in the United States.
The broad losses in the Australian market followed a volatile session on Wall Street, when the Dow tumbled near 300 points after scaling a fresh record high, as miners and oil companies pulled the market lower.
- With wires
Stockwatch - Galaxy
Galaxy Resources fell 4.2 per cent to $4.07, with the move paring year-to-date gains to 6.3 per cent and amid a broad move lower for the mining sector. The lithium miner told shareholders on Tuesday that it had produced 155,679 tonne of spodumene concentrate in 2017, just shy of its 160,000 tonne target. Galaxy shares rose 38 per cent over the course of 2017. A raft of analyst reports on the firm emerged on Wednesday. "Finding a development partner for Sal de Vida and continue exploration success at James Bay remain key catalysts for Galaxy over calendar year 2018," Macquarie mining analysts said. "Lifting recovery at Mt Cattlin will also be an important step in achieving our estimates."
Housing finance
The value of new home loan approvals rose 2.3 per cent to $33.5 billion in November. The number of home loans approved for owner occupiers rose 2.1 per cent to $21.3 billion, with 56,876 loans approved, seasonally adjusted, Australian Bureau of Statistics figures showed. The value of investor loans rose 1.5 per cent to $12.2 billion. The 'good time to buy a dwelling' index climbed 6.1 per cent to 106.7, the highest reading since September.
Consumer confidence
A measure of Australian consumer sentiment rose in January for a second month to its highest in four years, adding to recent signs that households were ready to spend more following a long period of reticence. A Melbourne Institute and Westpac Bank survey of 1,200 people said its index of consumer sentiment rose 1.8 percent in January from December when it rose 3.6 percent. The index was up 7.9 percent on January last year at 105.1, meaning optimists now outnumbered pessimists.
Australian dollar
HSBC sees the Australian dollar at US84?? by the third quarter of this year, which would be a step up from the dollar's current level of US79.54??. "Overall, risks appear asymmetric in favour of developments in the balance of payments supporting the rise in AUD-USD towards our year-end forecast of US84c," currency strategist Tom Nash said. "Global growth is more supportive of higher commodity prices than in the recent past and history tells us that some of the windfall will find its way through to the economy, providing a cyclical tailwind for the Australian dollar."
Iron ore
Iron ore's about to collapse right back to $50 a metric ton, according to Barclays, which warns that the commodity faces an imminent sell-off as steel mills' profitability in China recedes, growth in the top importer slows, and supplies at ports are at unprecedented levels. "There are several surprises in store for the market," New York-based analyst Dane Davis wrote in a note, forecasting a rollercoaster ride for prices, and describing his call for a near-term sell-off as a "strong view".
