energy stocks push the spasx200 into a 2 per cent decline 902942014

The price war in crude oil and weak manufacturing data from China wipe out AU$30 billion in stock valuations

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By :  ,  Financial Analyst

The S&P/ASX200 slumped 2 per cent to 5207.7 as plunging energy stocks followed crude down in its headlong fall and the latest PMI data out of China showed manufacturing in the world’s second largest economy was slowing, despite a recent interest rate cut.

"The PMI data suggests that fundamentals are still very weak," said Macquarie Group economist Larry Hu on the Chinese data, as quoted by Dow Jones Newswires. "Investment in property and manufacturing remains weak, so the government is the only one spending," he added. "And when government spending wanes in the winter months, the economy falls off." in part due to cold weather affecting construction projects. A slowdown in China has ominous implications as the country is Australia’s largest trading partner.

The energy sector lost 6.1 per cent on the ASX yesterday as the benchmark Brent crude fell 2.6 per cent to a new six-year low of US$68.34 per barrel, according to The Sydney Morning Herald. Amongst the biggest falls were Liquefied Natural Gas Ltd (ASX:LNG) which crashed 22.46 per cent to AU$2.52, Woodside Petroleum Limited (ASX:WPL) lost 4.34 per cent to AU$34.20, Santos Ltd (ASX:STO) was down 9.8 per cent to AU$9.11 and Origin Energy Ltd (ASX:ORG) fell 4.49% to $11.70.

Despite a brief bear market rally in iron ore, BHP Billiton Limited (ASX:BHP) and Rio Tinto Limited (ASX:RIO) were down 5.34 per cent and 4.13 per cent respectively, while PanAust Limited (ASX:PNA) lost 19.15 per cent off its price following fresh declines in copper and gold.

Shares in BHP have started to underperform Rio, as the market realises that BHP's huge investment of over US$30 billion in the US shale oil sector may fall victim to the latest price war unleashed by OPEC, according to The Australian. Analysts at Citi trimmed their forecasts for iron ore and crude oil prices, and revised downwards their profit projections for BHP and Rio Tinto over the next two years by AU$14.57 billion combined.

Australian stocks lost about AU$30 billion in yesterday’s fall, said The Australian Business Review. This was the biggest one-day loss in the S&P/ASX200 in seven weeks and, taken with the losses the day before, marked the largest decline in over two years. “It does appear that there has been a generalised sell-off in Australian equities, so it may be indicative of an asset allocation shift out of Australia,” said UBS Equities Strategist Dean Dusanic.

Qantas Airways Limited (ASX:QAN) gained 4.69 per cent to AU$2.01. The airline pushed past the psychological AU$2.00 barrier for the first time in over three years, as the crash in oil prices led investors to expect better profits. Ten Network Holdings Limited (ASX:TEN) gained 4.08 per cent to AU$0.255 as Pay TV operator Foxtel and US cable giant Discovery Communications Inc.(NASDAQ:DISCA) are both expected to bid for the company, according to The Australian.

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

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