The Australian share market has fallen by nearly one per cent following more weak economic signs from China and a fresh slump in iron ore prices.
The miners are weighing heavily on the market due to disappointing Chinese factory data and the fall in iron ore prices to $US70 a tonne for the first time in five years, Australian Stock Report’s senior equity analyst Benny Sada said.
“The miners are 95 per cent of why the market is down,” he said.
“The iron ore miners are being sold heavily especially when you consider, for example, Fortescue Metals has breakeven cash costs of $US70 a tonne.
“It might get to a stage iron ore miners like Fortescue are uneconomical.”
HSBC’s preliminary purchasing managers’ index shows manufacturing activity in China fell to a six-month low in November, reinforcing fears about China’s economy.
The index fell to 50.0 this month from 50.4 in October. The index uses a 100-point scale on which numbers below 50 indicate contraction while numbers above show expansion.
Mr Sada said the market had expected a reading of 50.2.
“It shows China’s manufacturing sector is not growing or contracting,” he said.
“But it doesn’t bode well for the outlook for iron ore which has contributed to weakness in our mining sector.”
Fortescue Metals dumped 10 cents, or 3.65 per cent, at $2.64, while fellow iron ore miners Atlas Iron fell 4.88 per cent to 21.5 cents and Mount Gibson Iron was flat at 40 cents.
BHP Billiton was down 87 cents at $31.80 and Rio Tinto had shed $1.57 to $56.41.
The big banks were mostly lower, with Commonwealth Bank down 20 cents at $80.34, Westpac down 26 cents at $32.53, National Australia Bank down three cents at $32.10, while ANZ gained 17 cents to $31.94.
The supermarket giants were continuing their recent bad run, with Woolworths 96 cents lower at $31.30 and Coles owner Wesfarmers down 79 cents at $42.10.
KEY FACTS
* At 1615 AEDT on Thursday, the benchmark S&P/ASX200 index was down 52.6 points, or 0.98 per cent, at 5,316.2 points.
* The broader All Ordinaries index was down 50.1 points, or 0.94 per cent, at 5,302.4 points.
* The December share price index futures contract was 54 points lower at 5,321 points, with 26,236 contracts traded.
* National turnover was 1.6 billion securities worth $4.6 billion.