Welcome to Monday and the start of a new week. Here are the five things I'm looking at today on the Australian sharemarket.
- The S&P/ ASX 200 (Index: ^AXJO) (ASX: XJO) has opened flat, but could end the day either up or down.US markets again provided no lead, with mixed results on the major indices on Friday. The Dow Jones dropped 0.1%, the broader S&P 500 was flat, while the tech-heavy NASDAQ gained 0.2%.
Gold stocks could come under more selling pressure as hedge funds exit their futures and options positions in the gleaming metal. Holdings have dropped an astonishing 49% in just three weeks, the most since December, according to Bloomberg. The spot gold price is trading at around US$1,188 an ounce, and many analysts are expecting it to fall further, as the US Dollar strengthens.
- Chinese Iron ore traders have tipped iron ore prices to trade below US$60 per tonne in 2015, with much of the decline attributed to weak Chinese property markets. The last time we saw iron ore prices below US$60 per tonne was briefly in 2009.Analysts expect a temporary rally into the end of the calendar year, before resuming its downward trend again next year.At US$60 per tonne, only the giant iron ore miners, BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Brazil's Vale are likely to be profitable. That raises a question of where the smaller, higher cost iron ore producers like Arrium Limited (ASX: ARI), BC Iron Limited (ASX: BCI), Mount Gibson Iron Limited (ASX: MGX) and Atlas Iron Limited (ASX: AGO) go from here.
There's also concerns over Fortescue Metals Group Limited (ASX: FMG), which slots in between the higher cost juniors and the majors, but also boasts a whopping debt balance.
Do the miners cease operating, put their mines on care and maintenance and wait out the commodity price until it climbs higher? Or do they put themselves up for sale?
The big miners don't get off scot-free either. As we wrote last week – those lower iron ore prices will decimate the profits of the larger miners.
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- Tweet of the Day
.@Qantas returns to 70s with new @Boeing to inspire brand loyalty @MikeSmithAFR #Retroroo https://t.co/cQXy8G9KUT pic.twitter.com/g3LQXuozZz
Financial Review (@FinancialReview) November 16, 2014Will a retro-style tail help Qantas Airways Limited (ASX: QAN)? Who knows, but the airliner is going all out to get back to profitability.
- Stock of the Day – brought to you by Tim McArthur – REA Group Limited (ASX: REA). The owner of the realestate.com.au property portal has an exciting period ahead. Tim outlines why the company is a future blue-chip here, and he gets no argument from me.
