A fall in commodity prices is weighing on Australia's mining sector which is, in turn, acting as a drag on the broader Australian share market with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) down nearly 0.5% at 5675 points.
The Australian economy is heavily weighted towards the mining sector so when commodity prices fall, the market generally follows. That's exactly what is happening today after the iron ore price suffered its worst fall in more than three weeks on Friday, shedding 4% of its value, while Brent oil also tumbled 2.1%. These falls can largely be attributed to the heavy losses experienced on China's stock market which investors worry could impact the nation's demand for resources.
Indeed, iron ore and oil are BHP Billiton Limited's (ASX: BHP) two most important commodities so their falls have resulted in a 1.4% decline for the miner's shares. Rio Tinto Limited (ASX: RIO) is also down 1.1%, while energy companies Woodside Petroleum Limited (ASX: WPL), Origin Energy Ltd (ASX: ORG) and Oil Search Limited (ASX: OSH) have fallen 1%, 1.5% and 1.8%, respectively.
It seems that the Reserve Bank of Australia's pending interest rate decision could also be weighing on the market's sentiment. With the Board expected to leave rates unchanged, some of the nation's biggest dividend-paying stocks are recording losses for the day. Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB) are between 0.3% and 0.7% down, while Telstra Corporation Ltd (ASX: TLS) is down 0.5%.
Investors will note that today marks the beginning of a brand new earnings season with some of the nation's biggest companies set to announce their annual results over the coming weeks. As it stands, analysts are expecting fairly flat results across the board and investors are taking a somewhat cautious approach as a result.
Although that is a concern for short-term traders, long-term investors should look to take advantage of any uncertainty which could force the share prices of high-quality companies lower. With the market trading significantly below the multi-year highs achieved earlier this year, there are certainly plenty of great companies to choose from.
