mining stocks reeled friday from fresh iron ore troubles but health care saved the day 1124582015

The Australian stock market’s benchmark S&P/ASX 200 plunged from the day’s high of 5,916.40 to its lowest point of 5,870.70 in volatile trading during the first two hours of trade on Friday. However, bargain hunters seized the initiative from the bears thereafter, and pushed the market high enough by the close to retrieve most of the day’s losses. However, their efforts were not sufficient to take the index into positive territory, and it closed a shade in the red.

The market was dragged down by the materials sector, chiefly miners, as iron ore prices plunged to their lowest level since the global financial crisis, in the wake of China’s lowered projections of economic growth and unbridled exports by the biggest iron ore mining companies. However, healthcare was able to neutralise some of the negative fallout from the resources sector.

Indices and sectors

The benchmark S&P/ASX 200 on Friday fell 5.3 points, or 0.1 per cent, and closed at 5,898.9, while the broader All Ordinaries index was down 5.1 points, or 0.1 per cent, to 5,868.6.

The significant gaining sectors were healthcare (+1.07 per cent), information technology (+0.64 per cent), consumer staples (+0.47 per cent) and utilities (+0.28 per cent). The big losers were materials (-1.15 per cent), energy (-0.71 per cent) and telecommunication services (-0.60 per cent).

Six resource companies, half of them iron ore miners, have been removed from the S&P/ASX 200 upon its quarterly review. Atlas Iron Ltd (ASX:AGO), BC Iron Ltd (ASX:BCI), Mount Gibson Iron Ltd (ASX:MGX), Beadell Resources Ltd (ASX:BDR), Horizon Oil Ltd (ASX:HZN), and Lynas Corporation Ltd (ASX:LYC) are now excluded from the index. In their place are beef producer Australian Agricultural Company Ltd (ASX:AAC), electronics retailer Dick Smith Holdings Ltd (ASX:DSH), retirement home operators Estia Health Ltd (ASX:EHE) and Regis Healthcare Ltd (ASX:REG), travel agent Corporate Travel Management Ltd (ASX:CTD) and mining exploration firm Syrah Resources Ltd (ASX:SYR). Medibank Private Ltd (ASX:MPL) and SEEK Ltd (ASX:SEK) will replace Worleyparsons Ltd (ASX:WOR) and Iluka Resources Ltd (ASX:ILU) in the top-50 index, according to The Sydney Morning Herald.

Stocks

Miners were the biggest drag on the S&P/ASX 200 on Friday. BHP Billiton Ltd (ASX:BHP) declined 1.57 per cent to AU$32.64, Rio Tinto Ltd (ASX:RIO) was down 1.24 per cent to AU$60.39, Fortescue Metals Group Ltd (ASX:FMG) plunged 6.11 per cent to AU$2.15, Atlas Iron Ltd (ASX:AGO) was down 5.71 per cent to AU$0.165, Mount Gibson Iron Ltd (ASX:MGX) fell 2.17 per cent to AU$0.225, and BC Iron Ltd (ASX:BCI) dipped 5.43 per cent to AU$0.435.

Regis Resources Ltd (ASX:RRL), the biggest decliner in the S&P/ASX 200, crashed 26.70 per cent to AU$1.40 after the gold miner lowered its production forecasts. "Despite lower than expected production in the March 2015 quarter, the company remains on track to deliver within the lower end of the group's 2015 gold production guidance of 305,000 to 355,000 ounces," said managing director Mark Clark.

All the major banks closed in the red. Commonwealth Bank of Australia (ASX:CBA) was down 0.03 per cent to AU$91.09, Westpac Banking Corp (ASX:WBC) fell 0.40 per cent to AU$37.68, Australia and New Zealand Banking Group (ASX:ANZ) finished lower by 0.31 per cent to AU$35.39 and National Australia Bank Ltd (ASX:NAB) was down 0.34 per cent to AU$37.97.

The energy sector was also down on Friday. Woodside Petroleum Ltd (ASX:WPL) fell 0.20 per cent to AU$35.16, Santos Ltd (ASX:STO) declined 0.13 per cent to AU$7.84, Oil Search Ltd (ASX:OSH) fell nearly 3 per cent to AU$7.84 and Origin Energy Ltd (ASX:ORG) was down 0.24 per cent to AU$12.23. Bucking the trend was Worleyparsons Ltd (ASX:WOR), which gained 2.22 per cent to AU$10.15.

Amongst retailers, Woolworths Ltd (ASX:WOW) gained 0.80 per cent to AU$30.07, Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, was up 0.37 per cent to AU$43.90, and Myer Holdings Ltd (ASX:MYR) rose 1.80 per cent to AU$1.70.

Telstra Corporation Ltd (ASX:TLS) fell 0.63 per cent to AU$6.28.

Entertainment and gambling company Tabcorp Holdings Ltd (ASX:TAH) was the second largest loser on the S&P/ASX 200 after the stock went ex-dividend and the company finalised the retail offering portion of its AU$236 million capital issue.

Economic news, currency and insight

The Australian construction sector contracted for the fourth consecutive month in February, declining two points to 43.9, according to the Australian Industry Group/Housing Industry Association performance of construction index released Friday. The level of 50 is a demarcation line which separates growth from contraction.

A study by global management consultants A T Kearney says that low oil prices could trigger a wave of global energy acquisitions within months as deep-pocketed oil majors with healthy balance sheets prowl the globe for bargains in the energy space. “These deals take three or four months to come to the table,” said AT Kearney’s Melbourne-based resources consultant Ankit Mishra to The Australian. “So (private) discussions might be ongoing and we think some of this wave is going to hit the papers in a couple of months’ time.”

According to the Financial Times, which quoted an internal memo issued by Rio Tinto Ltd (ASX:RIO) chief Sam Walsh, hundreds more jobs are likely to be lost at the mining major as it cuts costs to grapple with the downturn in the commodity markets. “It is becoming more difficult to deliver further efficiencies with our current organisational structure,” said Mr. Walsh in his memo. “In the current business environment we can no longer afford duplicated activities.”

Stronger than expected job numbers in the US have fuelled a surge in the US dollar, and the Australian dollar is paying the price. The local currency plunged its lowest level in six years this morning at 07:00 (AEDT), trading at 77.07 US cents, down from 78.01 US cents on Friday, according to The Australian.

The Australian share market will open sharply lower today, considering that the March ASX SPI200 Index (AP) Futures traded lower by 64 points to 5,826.0 at 07:59 this morning (AEDT).