ASX slumps on commodity fears
Sentiment buckled on the Australian sharemarket and it finished deep in the red as investors belatedly reacted to tumbling oil and commodity prices, with the fallout spreading to most other sectors.
There was no lead from Wall Street because of the Thanksgiving holiday last night but the S&P/ASX 200 index tumbled 87.9 points, or 1.63 per cent, to the low of the day at 5313 after oil prices crashed about 8 per cent last night after OPEC failed to cut production quotas.
Energy stocks slumped between 5 and 15 per cent after Brent crude oil traded 6.7 per cent down at $US72.55 a barrel, while BHP Billiton followed with a 4 per cent fall because of its exposure to US shale oil.
Yesterday spot iron ore bounced 2 per cent to $US70 a tonne, but Rio Tinto was the only miner in the black after reporting it was scaling back plans for production increases.
Dalian iron ore futures were up one per cent, copper fell 1.1 per cent to a six-month low of $US6500 a tonne and gold dropped $US5 to $US1183 an ounce.
The Australian dollar fell US1¢ to US84.85¢, just a whisker above its four-year low at US84.80¢ reached on Wednesday.
"The fall in oil prices from $US100 to $US80 was probably positive for the US dollar, but the recent further fall towards $US70 is probably neutral and it may have negative consequences below $US70 on increasing sensitivity of the (US) energy sector to price falls below more companies' cost of production," Royal Bank of Scotland currency strategist Greg Gibbs said.
Government 10-year yields fell 6.3 points to a fresh low of 3.043 per cent, while in a clear signal which way investors see domestic rates moving, government three-year yields lost 3.7 points to 2.403 per cent, 10 below the cash rate.
Data showed that private sector credit grew 5.7 per cent year-on-year last month, slightly better than forecasts, with the 9.9 per cent increase in housing investor lending the leading factor.
"In October, personal credit was flat, after a run of gains for four consecutive months to September, the first such run since the start of 2010. Annual growth remains soft at only 1 per cent," Westpac economist Andrew Hanlan said.
Last night German, French, Spanish and Italian 10-year yields hit record lows, led by Germany to just 0.7 per cent, after European Central Bank president Mario Draghi said inflation was very low.
"If current measures aren't enough, the Governing Council is unanimous in its commitment to use other unconventional instruments... ...What assets? All range of assets," he said.
In Tokyo the Nikkei index was up 1.1 per cent, while the Shanghai composite index was up one per cent at the close of the ASX.
More to come…
