15.22 AEST, Thursday 30 August 2012
Falling iron ore captures headlines
By Ben Taylor (Sales Trader, CMC Markets)
The Iron ore price has captured the attention of the market and commodity traders around the world. The recent weakness
is putting a dampener on commodity plays here in Australia as well as having a constraining effect on the Australian
dollar.
The falling Iron Ore price translates into falling terms of trade and therefore increasing the chances for further rate
cuts by the RBA. Our dollar is taking its cue from the commodities spectrum as well as Australian bonds as they paint a
weakening local picture.
Comments by China’s largest listed steel maker that Iron Ore supply may rise while demand drops has fuelled the fire and
has placed huge pressure on the likes of RIO, FMG and AGO.
Today’s housing data showed that people are not jumping back into the housing market despite a 75bp reduction to cash
rates since June. The Aussie dollar took a hit on the news and has continued to trade soft through the day as Iron Ore
plays see continued selling.
News that Twiggy Forest bought shares in FMG yesterday and rumours that he bought more today gave some relief to the
stock under siege. With further downside forecast by many in the Iron Ore space we are however seeing clients interest
in shorting the stock increase.
ends