Bad News for Resources Stocks as China's Imports Slow
Jul 10th 2012 10:18AM
Updated Jul 10th 2012 10:26AM
SYDNEY -- The S&P/ASX 200 index (INDEX: ^AXJO) fell 0.5% to close at 4,098.3 on news that China's imports for May rose just 6.3%, less than half the 12.7% forecast, according to Reuters. The market staged an early rise, but the news from China hit our markets, and shares plummeted.
China's imports from Australia in June rose just 1.7% from a year ago. Chinese domestic demand sagged, which is bad news for our exporters, including resources companies. China is our biggest export market.
Nouriel Roubini -- known in the popular press as Doctor Doom -- has predicted that the global economy will suffer a perfect storm next year that could be worse than the GFC. By 2013, he said, the eurozone debt crisis could speed up as the U.S. heads for recession and emerging-market countries, Brazil, Russia, China, and India slow down sharply. And all that could be compounded by an inevitable war among the U.S., Iran, and Israel. Talk about doomsaying.
The Australian dollar has fallen slightly against the U.S. dollar as investors seek a safe haven. It's currently trading around $1.02.
After rising 17% in the last five days, Myer Holdings (ASX: MYR.AX) shares fell 7% to $1.67 following the aborted David Jones (ASX: DJS.AX) takeover bid and renewed enthusiasm for retail stocks.
The Sydney Morning Herald reports that prices for business-class seats are at their lowest levels in real terms in almost 20 years, thanks to ongoing competition for corporate travelers between Qantas Airways Limited (ASX: QAN.AX) and Virgin Australia Holdings (ASX: VAH.AX).
BHP Billiton has been ranked the ninth-most profitable company in the Fortune 500, ahead of companies like Microsoft, Volkswagen, Ford, Wal-Mart, IBM, and GE. However, it lost 1% on the day nonetheless.
Winners and losers
Of the top 10 stocks on the ASX, only Telstra Corporation managed to end up, rising AU$0.03 to AU$3.81. Westpac Banking Corporation was the best of the banks, ending flat.
Newcrest Mining Limited led the falls in the majors, dropping more than 3% to end at AU$22.67, a far cry from its 52 week high of AU$41.50. Brambles Limited saw its shares lose 1.8%, ending at AU$6.14, while Rio Tinto slid 1%.
The Foolish bottom line
The Australian market continues to find reasons to post losses, and investors seem to have one eye on the exit. Something tells me this may prove a missed opportunity in five years' time.
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At the time this article was published Motley Fool writer/analyst Mike King owns shares in BHP. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, while it's still available. This article contains general investment advice only (under AFSL 400691). Authorized by Bruce Jackson.The Motley Fool owns shares of Ford Motor, International Business Machines, and Microsoft. Motley Fool newsletter services have recommended buying shares of Ford Motor and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. Motley Fool newsletter services have recommended creating a bull call spread position in Wal-Mart Stores. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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