need2know: Commodities rout widens

For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant
For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant
For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant

For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant

For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant

For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant

For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant

For 2014, the benchmark S&P/ASX 200 Index edged up just 1.1 per cent to 5411 points. Photo: Angus Mordant

Local shares are poised to extend their losses as mining shares dropped overseas, felled by a plunge in copper as the commodities rout widens beyond oil.

What you need2know:

• SPI futures down 21 pts at 5282

• AUD at 81.48 US cents, 95.50 Japanese yen, 69.10 Euro cents and 53.47 British pence

• S&P 500 -0.6%, Dow -1.1%, Nasdaq -0.5%

• In Europe, Stoxx 50 -1.4%, FTSE -2.4%, CAC -1.6%, DAX -1.3%

• In London, BHP fell 5.3%, Rio fell 4%

• Spot gold up $US1.49 or 0.1% to $US1232.13 an ounce

• Brent oil up $US1.14 or 2.35% to $US47.73 per barrel

• Iron ore slips 0.6% to $US68.30

What's on today

Australia December employment data, Euro zone November trade data, US Empire State January manufacturing data, producer prices, initial jobless claims and Philly Fed survey.

Stocks to watch

Shares of BHP Billion and Rio Tinto fell in London, caught in copper's downdraft.

Advisers for the potential $3 billion MYOB float will start introducing the accounting software provider to fund managers next week, according to Street Talk in the Australian Financial Review.

One of BHP's biggest shareholders says that the mining giant has a responsibility to stick to its $US6.5 billion progressive dividend policy.

Telstra shares have continued their relentless march higher in 2015.

Citi Research has downgraded AGL Energy to "neutral" and cut its target price by 4 per cent to $14.62.

Morningstar has a "buy" recommendation on IProperty Group and a $2.65 target price.

Currencies

The New Zealand dollar "continues to play catch-up with AUD remaining resilient to USD buying," ANZ Research wrote as the kiwi bought 94.73 Austrlaian cents.

"Better Chinese trade data was a supporting factor for AUD, which unlike NZD has had a far higher reaction function to Chinese news."

The greenback dropped to a four-week low against the yen after data showed a surprise drop in US retail sales last month, despite the holiday season, which muddied the outlook for interest rates this year. The greenback has fallen four straight days versus the yen and was on track for its first monthly loss since June last year. So far in January, the dollar was down 2.5 per cent against the Japanese currency.

Commodities

Benchmark LME copper plunged more than 8 per cent at one point as traders slashed positions to limit losses, while Shanghai copper prices hit their limit down after falling 5 per cent. LME copper prices fell to their lowest since July 2009 at $US5353.25 a tonne in intraday trade, before paring losses to trade at $US5603.75 at 1613 GMT, still down nearly 5 per cent.

Copper is falling faster than Commerzbank's Axel Rudolph predicted. He says it still has further to go. Rudolph, who saw his forecasts for the next few weeks met today, said copper may drop to $US4868 a metric ton within the next few weeks, implying a 12 per cent slump. For Barclays's Lynnden Branigan, the retreat will be closer to 6 per cent.

Citigroup cut its iron ore and coal forecasts as supply costs fall, a sign the energy rout is feeding through to other commodities. Iron ore will average $US58 a metric ton in 2015 and $US62 a ton in 2016, down from estimates of $US65 for both years, analysts including Ivan Szpakowski wrote in a report. The forecasts for coking coal and thermal coal were reduced for the same period by as much as 18 per cent.

United States

US stocks are lower in afternoon trade, on track for a fourth day of losses, as a World Bank forecast sparked concerns about weak economies and December US retail sales missed expectations. The S&P 500 broke below its 120-day moving average, a technical support level, and came within about 4 points of the low for the year of 1992.44

US retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter. The Commerce Department said on Wednesday retail sales fell 0.9 per cent last month after a 0.4 per cent increase in November.

JPMorgan Chase & Co, the biggest US bank by assets, reported a 6.6 per cent drop in quarterly profit as legal costs exceeded $US1 billion in the wake of government probes, leading chief executive Jamie Dimon to claim banks were "under assault".

Europe

European shares sank on Wednesday, knocked down by worries over the pace of global growth fuelled by grim US retail sales data and as the World Bank cut its forecast for growth.

Shares in mining giants tumbled, with Glencore down 10.5 per cent and hitting a record low, and Anglo American falling 9.6 per cent. Copper mining represented nearly two-fifths of Glencore's operating profit in the first half of 2014 and about a quarter of Anglo's profit.

What happened  yesterday

The Australian sharemarket fell on Wednesday despite an unexpected rebound in energy stocks as crude oil extended its rout. The S&P/ASX 200 index slid 51.1 points, or 1pc, to 5353.6.

This story need2know: Commodities rout widens first appeared on The Sydney Morning Herald.