Monday Report – September 20, 2021


Daily market reports | 9:12

By Greg Peel

Material weakness

It started with Beijing’s crackdown on steel production in so-called environmental names, and was exacerbated by the gradual collapse of China’s largest real estate developer, Evergrande, which owed $ 400 billion. to public banks. Throughout the early stages of the fall in the price of iron ore, the big miners were supported before they pulled out of the dividend.

Afterward, they still saw some support as iron ore fell below the cost of production for higher priced producers, but on Friday the levee broke.

Evergrande went bankrupt, the Chinese iron ore futures price fell below US $ 100 / t and brokers decided to downgrade large miners, including UBS downgrading Fortescue Metals ((FMG)) to sell.

Fortescue was the worst performing index stock on Friday as the materials sector fell -4.0%. BHP Group ((BHP)) lost -3.7% and Rio Tinto ((RIO)) -4.7% while Mineral Resources ((MIN)) lost -8.5% and Mt Gibson Iron ((MGX )) -10.5%.

Falls among the material names weren’t just for iron ore. Iluka Resources ((ILU)) fell -8.8% and Whitehaven Coal ((WHC)) fell -6.8% as gold miners were hit again with yet another setback for the price of l ‘gold.

There was contagion among oil and gas companies, with energy down -1.3% and utilities down -1.9%. The hard-pressed AGL Energy ((AGL)) fell a further -6.6%.

Iress ((IRE)) was the only non-resource company to make the top five losers table, which fell -10.7% after private equity contender EQT decided its initial thesis didn’t hold up. , after conducting due diligence so far.

Outside of the resource sectors, the next worst drop was in consumer staples (-0.7%), but all sectors in discretionary goods, health care, industrials, real estate and technology closed in the green, the latter 2.1% on a rise in Square’s share price. .

Things don’t look much rosier today, with spot iron ore falling -5% again on Friday to be down -22% for the week and hold, for now, at US $ 100 / t. Base metal prices were fairly calm on Friday, as was gold, but silver fell -2% and oils are weaker.

With the S & P500 down -0.9% on Friday night, our futures were down -0.6% on Saturday morning.

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