Australian shares are trading flat for the week following an overnight fall in the price of iron ore and a modest retreat in Chinese stocks this morning.
At lunchtime the ASX 200 was down seven points or 0.2% at 4352, three points above where it closed on Friday. A "risk-off" morning saw defensive sectors such as telecoms +1.2%, consumer staples +0.8% and health +0.5% advance while resource stocks slumped. The metals & mining sector dropped 1.5% as RIO sagged 2.3%, FMG 5.9% and AGO 6.8% after the price of iron ore retreated 4.6% overnight to US$94.80 per tonne.
"The market is a litter weaker, and this is very much centred on the two leading resource stocks in BHP Billiton and Rio Tinto," Shaw Stockbroking dealer Jamie Spiteri told Fairfax. "We've seen further weakening of the iron ore price overnight to the lowest levels we've seen in quite a while."
Asian markets were mixed. Japan's Nikkei rallied 0.28%, Shanghai eased 0.25% and Hong Kong's Hang Seng was near flat at +0.02%. Dow futures were recently up 10 points or 0.1%.
There was more bad news for the building sector following yesterday's news of a slide in house prices last month: construction work deteriorated in the June quarter, according to figures released this morning. Construction eased 0.2% over the quarter. Analysts expected a 0.5% increase.
"It was a bit softer than we expected, and obviously, continuing to be dragged down by the weakness in building activity," NAB senior economist Spiros Papadopoulos told Fairfax.
Crude oil futures reversed 18 cents this morning to US$95.92 a barrel. Spot gold was $2.10 softer at US$1,667 an ounce. The dollar was buying $US1.0366.
There appears to be a rotation going on this week out of resources into defensives. The collapse in the iron ore price is starting to bite. Doesn't bode well for the medium term. The perils of day trading mean I would be better off today if I still held everything I traded yesterday - AKK and AFR have bolted and NCM and AZH offered higher exits today than my sell prices. Comes with the territory. I couldn't find much this morning but squeezed a day's wage out of GFF's tiny bounce.
