SYDNEY, Apr 18: Australian shares fell 0.7 percent in late morning trade on Thursday, as investor sentiment was hit by a sharp drop in commodities prices and increasing worries about global growth and demand for Australia’s raw materials.
Big miners were a drag on the index. BHP Billiton sunk 3.4 percent and Rio Tinto Ltd dropped 3.6 percent, after copper sank more than 3 percent overnight and iron ore was pressured as Shanghai steel futures dropped for a fourth straight day.
With commodities prices falling sharply, weighed by worries over global growth, the resources-heavy Australian market has come under pressure, said Shane Oliver, head of investment strategy at AMP Capital Investors.
‘Markets are gradually realizing that the long-term commodity boom, or super cycle some people call, that started around the turn of the century is now over,’ Oliver said.
The benchmark S&P/ASX 200 index had lost 34.8 points to 4,969.8 by 0145 GMT. The benchmark rose 1.1 percent on Wednesday. Broad losses on Wall Street overnight also kept buyers at bay.
The Australian market has been on the backfoot in recent sessions as soft data from the United States and the resource-rich nation’s biggest export market China hit sentiment.
Financials and some domestic consumer stocks traded higher, as investors fled cyclical stocks such as miners and energy stocks.
‘There is ongoing demand for yield-bearing stocks perceived to be defensive in nature,’ Oliver said, noting that investors tend to buy into these stocks at times of uncertainty.
Australia’s big four banks all gained, led by a 0.8 percent rise in Australia and New Zealand Banking Group. The No. 1 lender Commonwealth Bank of Australia rose 0.3 percent.
New Zealand’s benchmark NZX 50 index slipped 0.4 percent, or 19.2 points, to 4,459.0.
STOCKS ON THE MOVE
* Fortescue Metals Group, Australia’s third-biggest iron ore miner, tumbled 4.0 percent to A$3.57, hit by the broad declines in miners. The stock’s fall came despite an improvement of 20.2 million tonnes of iron ore shipments in the quarter ended March 31, up 3 percent from the previous quarter and 60 percent from a year ago.
Fortescue said daily Chinese steel production was matching demand, despite a broader slowdown in economic growth.
* Australia’s Wesfarmers Ltd rose 0.9 percent to A$42.28, after the mining-to-retail group said its Coles supermarkets posted improved quarterly sales results, driven by strong volume growth and competitive grocery prices.
* Australia’s biggest telecommunication company Telstra
Added 0.9 percent A$4.87, its highest since May 2008, after it said it secured a A$1.1 billion ($1.1 billion), six-year contract to overhaul communications for Australia’s Defence Department.
* Woodside Petroleum Ltd, Australia’s top oil and gas company, was down 1.1 percent to A$34.69, despite reporting a 55 percent rise in first-quarter production on Thursday, boosted by its flagship Pluto liquefied natural gas (LNG) project.
(AGENCIES)
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