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COVID concerns outweigh strong metals prices - futures down 45 points

Published 14-JUL-2020 09:08 A.M.


3 minute read

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The S&P/ASX 200 index (XJO) increased 1% or 59 points to close at 5956 points on Monday with strong performances from the financial sector as well as mining stocks.

A combination of an upbeat gold price, and a surge in base metal and iron ore prices is providing a lift for the mining sector.

Ironically, while coronavirus has severely negatively impacted equities markets, commodity prices are thriving as traditional sources of supply such as Brazil have been railroaded by COVID.

Brazil is a large exporter of iron ore and copper, and as China looks to crank up its manufacturing industry demand for these metals is accelerating.

The index also received a boost from strength in overseas markets, a factor that could well be reversed today as negative sentiment was evident in the US overnight.

On the home front, coronavirus is looking out-of-control in Victoria, and with new cases being reported in New South Wales this could also present headwinds for our market.

The ASX SPI200 index is down 45 points to 5892 points.

24 hours

It was really only when US markets opened that negativity set in.

Earlier in the day, Asian markets fired up, led by the Nikkei 225 which gained 2.2% or nearly 500 points to close at 22,785 points.

The Shanghai Composite continued its stellar run gaining 1.8% or 60 points to close at 3443 points.

The Hang Seng registered a slight gain of 44 points, closing at 25,772 points.

Key markets across the UK and Europe were all up more than 1%.

The FTSE 100 gained 80 points or 1.3% to close at 6176 points.

The DAX climbed 166 points or 1.3%, closing at 12,800 points, only 50 points shy of its best close since February.

The CAC 40 gained 85 points or 1.7% to close at 5056 points.

After being up about 550 points midway through the session, the Dow crashed in the last hour to close up just 10 points at 26,085 points.

However, it was big falls amongst tech stocks which drew most attention, prompting a fall of more than 2% in the NASDAQ as it declined 226 points to close at 10,391 points.

The S&P 500 also shed nearly 1% or 30 points to close at 3155 points.

Iron ore soars, copper eyes off US$3/lb, zinc breaks US$1/lb

On the commodities front, the Brent Crude Oil Continuous Contract increased strongly in afternoon trading, but gave up all of those gains in the last few hours, falling from more than US$43 per barrel to US$42.24 per barrel.

Gold continued to hold its position above US$1800 per ounce, closing at US$1805 per ounce.

The iron ore price has continued its run, now sitting at US$111 per tonne.

Copper continued its search towards a long-term high, increasing another 2% to US$2.96 per pound.

It is now sitting just shy of the US$3.00 per pound mark, a level it hasn’t traded at since 2018.

Zinc also notched up a milestone, delivering its six consecutive day of gains to close just above the US$1.00 per pound mark, a level it hasn’t traded at since early-February.

Lead continued to track zinc, and after six consecutive days of increases it is sitting at US$0.85 per pound, representing a four month high.

Nickel retraced slightly, but is holding above the US$6.00 per pound mark.

One data set to be released today that will be of interest is the NAB business survey which could well have a negative tone given the coronavirus resurgence and the shutting down of Victoria.

The Australian dollar pushed up towards US$0.70 around midday, but fell away to close just below the US$0.695 mark.

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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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