News: Outlook: Iron ore falls to ripple onto ASX

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The SPI is pointing to a soft start for the Australian share market even after Wall Street crept higher overnight. US investors were encouraged by M&A activity helping to offset concerns conflict in Iraq could push energy prices higher. Ahead of the US Federal Reserve Meeting on Wednesday Wall Street also absorbed news the International Monetary Fund has cut its forecast for US economic growth this year.  

 

Closer to home Australian investors will respond to the RBA’s latest board meeting minutes and news the price of iron ore has dropped under $US90 per metric ton for the first time since 2012. The price of the steel making commodity has now plunged more than 30 per cent this year. 

  

Global markets

 

Wall Street started the week on positive territory: The Dow Jones Industrial Average added 5 points to close at 16,781, the S&P 500 added 1.62 points to close at 1,938 and the Nasdaq added 10 points to close at 4,321.

 

European markets slipped into the new trading week: London's FTSE 100 fell 23 points, France's CAC 40 fell 33 points and Germany's DAX fell 29 points.

 

Asian markets closed mixed on Monday: Japan’s Nikkei dropped 165 points, Hong Kong’s Hang Seng eased 19 points but China’s Shanghai Composite added 15 points.

 

The Australian share market erased the morning’s falls and backflipped to close on positive territory yesterday: The S&P/ASX 200 index started the week 7 points higher at 5,412. On the futures market the SPI is pointing 6 points lower. 

Currencies 

 

The Australian dollar at 7:20am was buying $US0.9403, 55.39 Pence Sterling, 95.77 Yen and 69.29 Euro cents.

 

Economic news due out today 

 

Reserve Bank of Australia: June board meeting minutes 

 

Australian Bureau of Statistics: New motor vehicle sales figures and merchandise imports for May

 

Company news

 

As the iron ore price continues to slide Fortescue Metals Group Limited (ASX:FMG) says it has taken another significant step toward reducing its costs. The Pilbara focussed iron ore miner will pay $US275 million for the construction of four specialist iron ore ships by a Chinese shipyard. CEO Nev Power says the vessels are a natural extension of the company’s supply chain and will aid boosting efficiencies and lowering costs at Port Hedland. Mr Power also believes the vessels reflect and strengthen Fortescue’s relationship with its largest customer China. Shares in Fortescue Metals Group fell about 10 per cent over last week but closed steady yesterday at $4.06. 

 

Speculation is circling iron ore developer Mineral Resources Limited (ASX:MIN) could be preparing to lob a takeover bid for Aquila Resources Limited (ASX:AQA). Both companies entered into a trading halt yesterday pending the details of a potentially material corporate transaction. Only last week Mineral Resources bought a 12.78 per cent stake in Aquila after which Aquila’s suitors said their bid is final. Chinese giant Baosteel and coal haulage company Aurizon Holdings Limited (ASX:AZJ) launched a $1.4 billion takeover bid for Aquila in May and say the offer will close on July 11. Mineral Resources last traded at $9.55 before entering into a trading halt yesterday. 

 

Ex-dividends today 

 

Thorn Group Limited (ASX:TGA) paying a 6.5 cent fully franked dividend

 

Ex-dividends tomorrow

 

Fisher & Paykel Healthcare Corporation Limited (ASX:FPH) paying a 8.23 unfranked dividend

 

Commodities 

Gold has gained $1.20 to $US1,275 an ounce for the August contract on Comex. 

Silver has firmed $0.06 to $19.72 for July. 

Copper has lifted $0.02 to $3.04 a pound. 

The price of oil has dipped $0.33 to $US106.58 a barrel for July light crude in New York.