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ASX set to open lower as miners tumble on iron ore warning

06:58 UTC+8 April 28, 2017 | Lucia Stein

Big miners set to drag the ASX lower. (Supplied by BHP Billiton)

The big miners, BHP Billiton and Rio Tinto, are set to drag the Australian market lower this morning after tumbling in London overnight.

Markets at 8:00am (AEST):

  • ASX SPI 200 futures -0.06pc to 5,905
  • AUD: 74.70 US cents, 57.89 British pence, 83.08 Japanese yen, 68.67 eurocents, $NZ1.08
  • US: S&P 500 +0.05pc to 2,388, Dow Jones +0.03pc to 20,981, Nasdaq +0.39 to 6,048
  • Europe: Euro Stoxx -0.43 to 381.63, FTSE -0.71pc to 7,237
  • Commodities: Gold -0.39pc to $US1,263.70/ounce, Brent crude -0.23pc to $US51.70

BHP fell 5 per cent and Rio was down more than 2 per cent, as BHP cautioned that a significant amount of iron ore supply will hit the market in the next two to three years, weighing on prices.

The World Bank delivered a similar warning only hours before.

Earlier this week, the big investment bank Goldman Sachs also noted a weakening Chinese steel market could cause commodity prices to fall again, which did little to help the miners' cause.

Coal and iron ore account for half of BHP's operating earnings, causing the bank to cut the miner's rating while it kept Rio Tinto at neutral.

"Data showing another surge in China's industrial profits helped improve investor sentiment after an extended period of bearishness," an ANZ analyst note said.

"However, the market also heard further calls of weakness ahead."

A further fall in oil prices also weighed on BHP, with benchmark Brent and US crude futures both easing overnight amid deteriorating gasoline futures.

Reports of a restart of two key oilfields in Libya and a higher dollar in the wake of the European Central Bank's latest interest rate decision drove prices lower.

Trump tax plan fails to fire up Wall Street

The broader market in the United States barely moved overnight as investors continued to assess President Donald Trump's tax plan.

Earnings were back in focus after a deluge of results were released in the US, pushing the Nasdaq up to yet another record high.

Technology stocks were one of the strongest performers during the session, while analysts said some profit-taking after the French election saw financial stocks fall after three days of gains.

In company news, PayPal rose more than six per cent after the company raised its full-year earnings forecast.

European shares were lower, weighed down by weaker banking stocks.

There was little reaction from the market after a widely expected European Central Bank (ECB)decision to keep interest rates on hold.

ECB president Mario Draghi stuck to his script at his post ECB press conference overnight, flagging some improvement in the balance of growth risks.

"The Euro briefly popped above 1.09 but relented, seemingly taking Draghi outlook at face value," NAB economist David de Garis wrote in an analyst note.

It is set to be a lacklustre open on the local market, with futures trading pointing to a slip dip of around 0.1 per cent.

At 8:00am (AEST), the Australian dollar was steady at 74.71 US cents.

At the same time, West Texas Crude oil was lower at $US48.91 a barrel and spot gold was down at $US1,264 an ounce.

AustraliaPlus


 

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