Australian shares fall as miners tumble

Australian shares dropped on Monday under the weight of selling in mid-cap mining stocks following a weak set of numbers from short-seller target and graphite producer Syrah Resources.

The S&P/ASX 200 Index fell 21 points or 0.35 per cent, to 6278.4, after closing at a 10-year high on Friday.

In New Zealand, the NZX 50 fell 0.8 per cent to 8921.38 points. Asian equities were flat to lower ahead of a full roster of central bank meetings this week. Japan’s Nikkei 225 fell 0.7 per cent and Hong Kong’s Hang Seng 0.8 per cent.

The broader materials sector fell 0.65 per cent on a day where only telecommunications and consumer staples stocks finished in the green.

Syrah shares dropped more than 6 per cent to $2.93 after the company cut its production target, confirmed prices remain below expectations and pushed back its target date for achieving positive cash flow. Syrah’s cash balance fell from $US80.5 million to $US56.7 million during the three months to June 30, it told the market in its quarterly update. The stock rallied 48 per cent in 2017.

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Copper producer Sandfire Resources dropped almost 9 per cent to $7.43, while diversified miner Independence Group and lithium producer Orocobre lost more than 6 per cent to $4.47 and $4.64.

Short interest in Syrah is at 19.4 per cent, according to ASIC’s latest available short position data, and 13.4 per cent for Orocobre.

AMP rallied following its admission on Friday that first-half profit will include a provision of $290 million for potential advice remediation. The stock advanced 4.2 per cent to $3.44, clawing back some of Friday’s 5 per cent loss.

Telstra, which laid out a management reshuffle under chief executive Andy Penn, added 1.8 per cent to $2.81.

The Australian market is ahead 3.5 per cent year-to-date, and broke through last week for a fresh decade-high close on a recovery in base metals prices and big movers BHP Billiton, CSL and Macquarie Group sustaining their valuations heading into the annual earnings season beginning in the coming days.

What moved the market

Stockwatch

Sandfire Resources shares dropped 9 per cent and the firm was the worst performer in percentage terms in the ASX 200. Sandfire’s losses came after brokers took their first chance to react to a fourth-quarter production report from the copper and gold extractor released last last week. Macquarie analysts said Sandfire’s quarterly results were strong but the outlook for fiscal 2019 was weaker than they had expected, with lower grades at the firm’s Monty and DeGrussa operations to blame. “Weaker production guidance drives an 11 per cent cut to fiscal year 2019 earnings, which is offset by changes in our grade profile,” the broker added.

Aussie looking for cues

The Australian dollar traded flat at US73.97¢ against the US dollar. The Australian dollar has been stuck in a range between US73¢ and US75¢ for around six weeks. Commonwealth Bank’s foreign exchange strategy team noted. However, the Australian currency may find some impetus this week from global manufacturing surveys, they suggested, with China’s manufacturing PMI due out on Tuesday and JP Morgan’s global manufacturing PMI due out on Thursday.

Oil perks up

US oil regained some ground at the start of the week, after the commodity posted losses on Friday. West Texas Intermediate crude futures were up 23¢ at $68.92 recovering a touch from a 1.3 per cent drop on Friday. There are contrasting forces at work in the energy markets, with data out Friday showing the US economy grew at its fastest pace in nearly four years in the second quarter but with trade tensions remaining high between Washington and Beijing.

Tech troubles

Technology stocks fell in Japan and South Korea after poorly-received results from Twitter and Intel at the end of last week depressed sentiment toward the sector. Japanese investors are waiting for the outcome of the Bank of Japan’s latest policy meeting that wraps up on Tuesday amid speculation policymakers could tweak the bank’s huge asset-buying programme. SoftBank shares dropped 1.2 per cent in Japan, where Uniqlo owner Fast Retailing was the worst performer by weight, with its 2 per cent drop taking 35 points off the index.

Not so healthy

Chinese drug makers slumped after arrest warrants were applied for over the weekend for 18 people at vaccine maker Changsheng Bio-technology after it was found to have falsified data and sold ineffective vaccines for children. The firm dropped by the 5 per cent daily limit for the third day. Shanghai Hile Bio-Technology has plunged 34 per cent over the last six days. Chongqing Zhifei Biological Products and Changchun High & New Technology Industries Group fell at least 6.4 per cent each.

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