Resource shares come back down to earth

Credit: iStock

So much for the enthusiasm that had gripped the markets over the past few days.

Many resources and energy companies have seen their share prices drop at the start of trading on the ASX today.

That follows a drop in a number of commodities prices overnight, including gold – down 0.5% to US$1,261.50 an ounce, iron ore – down 0.2% to US$63.63 a tonne, Brent crude oil down 3.4% to US$39.47 a barrel and copper also fell to US$221.35 a pound.

In early trading Woodside Petroleum Limited (ASX: WPL) is down 3.8% to $26.53, Rio Tinto Limited (ASX: RIO) share price is down 3.4% at $43.74 and BHP Billiton Limited (ASX: BHP) share price has dropped 2.9%. Origin Energy Limited (ASX: ORG) and Santos Ltd (ASX: STO) have lost 2.7 and 2.6% respectively.

Other resources and energy shares sinking include the oil and gas producers Senex Energy Ltd (ASX: SXY), Beach Energy Ltd (ASX: BPT), AWE Limited (ASX: AWE), and the primarily nickel miners Western Areas Ltd (ASX: WSA) and Independence Group NL (ASX: IGO).

The one standout is diversified miner South32 Ltd (ASX: S32), which has seen its share price rise 5.3% to $1.60 – an astonishing recovery from 87 cents in early January 2016.

Commodities prices are virtually tracking the economic news out of China. The country is the major importer of many commodities, and when economic news is not great, commodities prices tend to sink.

The culprit today was China’s weak February trade data – far worse than economists had expected, with exports sinking the most in more than 6 years – just days after the government announced that it was aiming for economic growth of between 6.5% and 7% each year of the next few years.

Foolish takeaway

It’s a topsy-turvy ride for commodities currently – which in turn impacts on resources and energy companies. Unfortunately for investors in those companies, it’s unlikely to stabilise in the short-term.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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