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need2know: ASX to open lower as oil slumps

Local shares are poised to fall at the open as iron ore continues to slide lower.
Shanghai night field

What you need2know

SPI futures down 26 pts at 5083

AUD at 72.12 US cents

On Wall St, late, S&P 500 0-0.5%, Dow -0.7%, Nasdaq flat

In Europe, Stoxx 50 -1.9%, FTSE -1.4%, CAC -1.6%, DAX -2%

In London, BHP -5.5%, Rio -8.4%

Spot gold up $US2.57 or 0.2% to $US1073.91/oz at 2.43pm NYC

Brent crude down 2 US cents to $US40.71/bbl at 2.19pm NYC

What’s on today

consumer confidence, housing finance; China factory gate prices, consumer inflation; UK Bank of England Financial Policy Committee publishes the record of its November meeting

Stocks in focus

UBS has a “buy” recommendation on Integral Diagnostics and a price target of $2.30 a share.

Bell Potter raised Catapult Group to a “speculative buy” recommendation from “hold” and has a $2.10 price target on the stock, up from $1.80 previously.

Currencies

Oil’s rout led commodity currencies lower. Norway’s krone paced declines, tumbling to its weakest since April 2002 against the dollar, while Canada’s dollar slumped to a 11-year low. South Africa’s rand slid to a record.

The euro climbed with the yen on demand for haven assets. Europe’s 19-nation shared currency added 0.5 per cent to $US1.0896 and the yen strengthened 0.4 per cent to 122.90 per US dollar.

Bets the Federal Reserve will end the era of near-zero borrowing costs at its December 16 meeting have climbed to 78 per cent, with better-than-expected payrolls data from last Friday evidence the US economy is probably strong enough to withstand higher rates.

Commodities

Crude oil erased a decline in New York after sinking to a six-year low following the Organisation of Petroleum Exporting Countries’ decision to all but abandon any limits on its production. Oil has slumped about 40 per cent since Saudi Arabia led OPEC’s decision a year ago to maintain output and defend market share by pressuring higher-cost producers.

The Bloomberg Industrial Metals Subindex has tumbled 29 per cent this year as economic expansion cools to the slowest pace in a generation in China, the world’s top consumer. Industrial metals declined as the exports in China, the world’s largest consumer of raw materials, fell for a fifth month.

Iron ore fell to a record low as producers press on with expansions to cut costs and defend market share. Benchmark 62-per cent grade iron ore for delivery to China’s Tianjin port fell 0.3 per cent to $US38.80 a tonne on Tuesday, according to The Steel Index (TSI), falling for an eighth straight day. It was the lowest on record by TSI since it began collecting data in 2008.

United States

Wall Street was lower in afternoon trade on Tuesday as oil prices steadied but remained close to a seven-year low and weak Chinese trade data reignited fears of a global economic slowdown. Caterpillar, Exxon and Boeing led the Dow lower.

Copper miner Freeport-McMoRan sank 6.4 per cent to its lowest level since November 2002, leading raw-material shares lower. Alcoa fell 5 per cent. The Bloomberg Commodity Index declined for a second day to a 16-year low.

Morgan Stanley will take a $US150 million severance charge in the fourth quarter related to a workforce reduction, a company spokesman said on Tuesday. The charge will cover the cost of cutting jobs of 1200 workers worldwide, including about 470 front-office employees in its fixed-income business, a source familiar with the matter said.

Europe

Tumbling resource-related companies led European stocks to their lowest level in almost seven weeks after worse-than-expected Chinese data cast further doubt on the health of the world’s second-biggest economy. A gauge of miners posted the worst performance of the 19 industry groups on the Stoxx Europe 600 Index, falling to its lowest level since 2009, as commodity prices slid. Anglo American plummeted 12 per cent after suspending dividends for the second half of 2015 and next year. BHP Billiton retreated 5.5 per cent and Rio Tinto Group lost 8.4 per cent. Seadrill dropped 9.5 per cent, leading energy-related stocks lower, after Canaccord Genuity slashed its price target by 97 per cent.

The Stoxx 600 fell 1.8 per cent to 365.75 at the close of trading. A slump in Asian shares set the tone today, after Chinese data showed exports fell in November more than forecast, while imports slumped for a record 13th straight month. Germany’s DAX Index slipped 2 per cent, with Volkswagen contributing most to the drop. Greece’s ASE Index fell the most among western-European markets, sliding 4.4 per cent as Piraeus Bank and National Bank of Greece lost at least 20 per cent.

“China is moving more toward consumption and, in this transition, it is the miners that get hurt the most,” said Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich. “As long as economic data disappoint you are going to have reactions like this.”

What happened yesterday

Led by a 6.35 per cent slide in the energy sector and a 3.4 per cent drop in materials, the benchmark S&P/ASX 200 index shed 0.9 per cent to 5108.6, and the broader All Ordinaries lost 0.9 per cent to 5158.0. Falls in other sectors were much more moderate and industrials, health care and telcos even posted small gains.

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