australian stocks falter amidst commodities downturn and weak wall street 905852015

Oil down to six-year lows as research firms slash 2015 price targets

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By :  ,  Financial Analyst

Australian shares closed lower Monday weighed down by the continuing downturn in commodity prices, particularly oil, losses on Wall Street and fresh doubts on the implementation of quantitative easing measures to revive the eurozone. The benchmark S&P/ASX 200 index finished lower by 42.9 points, or 0.8 per cent, to 5,422.7, while the broader All Ordinaries index was down 40.6 points, or 0.8 per cent, to 5,399.5.

Except a small gain in utilities, all other sectors ended with losses. The energy sector was the biggest loser, down 2.56 per cent, effectively negating nearly all of Friday’s 3.15 per cent gain. “Energy names have been sold with gusto again,” Chief Market Strategist for IG, Chris Weston, said. “It feels like we are close to a bottom in oil, but … there is some way to go before the market feels we have reached that perfect equilibrium where OPEC and the US shale producers can coexist.” Santos Ltd (ASX:STO) fell 5.2 per cent to AU$7.29, Woodside Petroleum Ltd (ASX:WPL) declined 1.89 per cent to AU$36.35 and Oil Search Ltd (ASX:OSH) lost 0.60 per cent to AU$7.30. The outlook for energy stocks dimmed further after ratings agency Goldman Sachs analysts cut their three-month target for Brent crude to $42 a barrel from $80, said The Sydney Morning Herald. Ratings agency Standard & Poor’s also slashed its 2015 Brent crude forecast by over 30 percent and warned that energy producers could feel the pain from downgrades as their cash position deteriorated.

Overnight, February US oil futures plunged to a fresh six-year low of $45.76 as analysts chopped price forecasts due to continued oversupply, while gold prices hit a 12-week high at US$1,232.80 per troy ounce. Iron ore continued its fall, slipping further below US$70 to US$68.50 per tonne in the latest offshore trading session said The Australian.

Losses in miners yesterday were led by Atlas Iron Ltd (ASX:AGO) which fell sharply by 15.09 per cent to AU$0.225 and BC Iron Ltd (ASX:BCI), which plunged 8.45 per cent to AU$0.65. The two junior miners were among the biggest losers in the S&P/ASX 200. BHP Billiton Ltd (ASX:BHP) gave up 2.23 per cent to AU$28.51, Rio Tinto Ltd (ASX:RIO) was down 1.52 per cent to AU$58.50 and Fortescue Metals Group Ltd (ASX:FMG) shed 3.24 per cent to AU$2.69.

Home loans in Australia fell unexpectedly during November according to data from the Australian Bureau of Statistics. The number of home loan approvals declined 0.7 per cent from October, whereas analysts had expected a rise of 1.7 per cent. The value of mortgage loans to home investors fell by 2.2 per cent, the first decline in five months and the largest since January 2014. The shock numbers may be an indication that the housing sector could be slowing down despite low interest rates, said The Australian.

Job ads in newspapers and on the internet jumped 1.8 per cent on a monthly basis and 11.4 per cent on a year-on-year basis says ABC, quoting the widely watched ANZ jobs ad report. Yet, unemployment remains stubbornly perched at 6.3 per cent according to BLS figures for November. ANZ's chief economist Warren Hogan said this anomaly was likely due to high job losses in certain sectors as well as strong immigration flows.

ASIC plans to review important corporate documentation, including prospectuses, of companies listed on the ASX but mainly operating overseas in a bid to shield Australian investors from foreign corporate corruption, poor legal protections, insider trading and misleading advertising. “ASIC wants people to have trust and confidence in the companies in which they invest, so we have shone a light on emerging market issuers and their governance and disclosure,” ASIC commissioner John Price said.

The recent rally in the Australian dollar is already under question following the continued downturn in commodity prices. As at 08:57 today (AEDT) the Aussie was trading at 81.56 US cents, down from the high of 82.55 reached on Monday.

Australian stocks may open weaker today, says the Business Spectator, given that at 06:45 today (AEDT) the March share price index futures contract was down 51 points to 5,334.

Find up to date information on the ASX at City Index.

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