Australian sharemarket deeply in the red, mining giants hammered as iron ore price continues sinking
The Australian sharemarket plunged in early trade and kept tracking downwards to finish sharply lower as iron ore prices continued to plummet.
The benchmark S&P/ASX200 index slumped 2.1 per cent to 7248.2 while the All Ordinaries Index sank 2.14 per cent to 7537.9.
CommSec analyst Steve Daghlian said it came after a negative lead from Wall Street, which just had its worst two weeks of trade since February due to the spread of the Delta variant, mixed economic data and other factors.
It was the second straight trading day of falls on the ASX, making it more likely as September drew to a close that the local market’s impressive 11-month winning streak would be broken, unless there was a substantial bounce back, Mr Daghlian said.
The spot iron ore price dropped 5.4 per cent to $US100.80 per tonne overnight, had declined 22 per cent over a week and was about 57 per cent lower than the record high hit in mid-May, Mr Daghlian said.
“So we’ve really had a substantial pullback and it's mainly because of China’s demand for iron ore dropping back significantly - they’ve put some restrictions on how much steel can be produced due to environmental concerns,” Mr Daghlian said.
“That really has been a massive weight on most of our iron ore miners.”
Rio Tinto fell 3.6 per cent to $95.24, BHP lost 4.16 per cent to $37.53, Fortescue shed 3.73 per cent to $14.70 and Champion Iron slumped 12.33 per cent to $4.48.
Electricity transmission network owner AusNet Services rocketed 19.19 per cent to $2.36 after receiving an improved indicative takeover offer from Canadian asset management giant Brookfield of $2.50 per share, up from $2.35 and $2.45 previously.
AusNet said engaging further with Brookfield was in the best interests of its shareholders and should a binding bid lob, it intended to recommend investors accept the proposal.
“It’s the third bid Brookfield has thrown as AusNet with this being the sweetest of the bunch representing a 25 per cent premium to Friday’s closing price,” OMG chief executive Ivan Tchourilov said.
“It’s yet another play at high quality infrastructure business with assets like this in high demand this year.”
Toll road operator Transurban went into a trading halt when it shares were priced at $14.18, announcing a $4.2bn capital raising so its 50 per cent-held Sydney Transport Partners could take full control of WestConnex in Sydney from the NSW government for $11.1bn.
“Transurban has a massive monopoly on toll roads in Australia and has just acquired the government’s 49 per cent stake in the project to take full ownership and control of the motorway,” Mr Tchourilov said.
“This will also enable them to set and manage toll pricing as they see fit, and in turn manage margins efficiently.”
S&P said Transurban’s increased ownership of the WestConnex toll road was expected and consistent with the company’s growth strategy.
“The transaction also reinforces that Sydney is now the major market exposure for Transurban,” the ratings agency said.
“Outside of the Covid impact, traffic on WestConnex has been strong since the respective roads commenced operations.
“Sydney’s toll roads recovered quickly from the 2020 Covid-induced lockdowns and we expect the same to occur when the current Sydney Covid lockdowns are relaxed in the coming weeks.
“While Transurban will still hold significant cash reserves following completion of the WestConnex transaction, we expect these reserves are likely to be used for other development activities and possibly a contribution to the West Gate Tunnel dispute over the coming 12 months.”
Mr Daghlian said travel stocks were under pressure despite an improvement in the number of Covid cases in NSW.
“Still significant at 935 but it’s the first time in a while now that we’ve had fewer than 1000 cases over the course of a day,” he said.
Qantas retreated 2.7 per cent to $5.38, Flight Centre declined 2.5 per cent to $17.97 and Regional Express eased 0.76 per cent to $1.31 after announcing all frontline, customer-facing employees would need to be fully vaccinated against Covid-19 by November 1.
Webjet backtracked 2.03 per cent to $5.80 after RBC Capital Markets downgraded its earnings forecast for the company but increased its price target to $5.50, from $5.20 previously, saying the online travel agency was well leveraged to the resumption of global leisure trips.
RBC’s report was based on Webjet’s latest trading update, which flagged becoming operating cash flow positive in the first half.
The federal government announced a fresh $184m package for airlines and airports, but the Australian Aviation Ground Handlers Alliance was disappointed it did not include their aspect of the sector, saying that was “a missed opportunity”.
“All we ask is for our 9800 specialist ground handlers to receive the same treatment as the rest of the aviation industry,” chair Glenn Rutherford said.
ANZ slid 2.02 per cent to $27.14, Commonwealth Bank gave up 2.01 per cent to $100.81, National Australia Bank backtracked 1.97 per cent to $27.34 and Westpac shed 2.24 per cent to $25.30.
The Aussie dollar was fetching 72.30 US cents, 52.78 British pence and 61.71 Euro cents in afternoon trade.
Get the latest news from thewest.com.au in your inbox.
Sign up for our emails