Miners set to drag ASX lower as base metals plunge
While there weren’t any significant moves overnight in global markets, the trend was generally negative, particularly in Europe where there were ructions between European Union countries and the UK regarding the Brexit issue.
In the US, the Dow struggled to find direction, spending most of the day in negative territory before edging above the previous close with a gain of eight points to finish at 20,957 points.
As expected, the Fed Reserve meeting was for the best part a non-event with monetary policy remaining unchanged and commentary surrounding rates consistent with prior rhetoric.
After shedding approximately 40 points in early trading the NASDAQ finished down 0.4% at 6072 points.
Similar to the Dow, it was a late rally that softened a negative performance from the FTSE 100 as it closed down 0.2% at 7234 points. Downward pressure was exacerbated by poor performances from mining companies.
The Paris CAC 40 was relatively flat at 5301 points. However, there was more confidence in German markets with the DAX rallying nearly 0.2% to close at 12,527 points.
On the commodities front, oil continued its downward trend, falling another 0.2% to close at US$47.55 per barrel.
Gold was sold down substantially as it crashed through the US$1250 per ounce level where there tended to be a degree of support to close at US$1238 per ounce, representing a decline of 1.5%.
There were also sharp declines in base metals with copper sold off heavily as it plunged more than 3% to close at US$2.51 per pound.
Nickel fell nearly 3% from US$4.29 per pound to US$4.17 per pound.
Zinc closed at US$1.16 per pound, representing a fall of 2.7%. Lead declined circa 3% to close at US$1.00 per pound.
Falls across precious and base metals suggest it could be a tough day for mining companies, which also placed a drag on the index on Wednesday.
The other flow on effect when there is a significant fall in metals prices is downward pressure on the Australian dollar, and last night’s close of US$0.742 represented a four month low.
Furthermore, technical analysts are of the view that it has breached a level of support which could see it trend down towards US$0.72.