Market declines for second week with ASX down 0.8%

The Australian sharemarket limped to the finish line on Friday, with stocks weighed down by predictions that the price of iron ore will fall further.

The S&P/ASX200 finished 0.76 per cent lower to 7403.7for the day, pushing the index down a small 2.9 points for the week overall.

A brief jump in the oil price midweek powered energy stocks higher on Thursday, but miners sunk the market at Friday’s open after the iron ore price extended its recent slide to sit at $US107.21 a tonne.

Fortescue led the declines on Friday, losing 11.5 per cent for the session to $15.27 and earning a downgrade from UBS, while Rio Tinto finished the day 4.7 per$39.16 cent lower to $98.8 and BHP lost 3.4 per cent to $39.06.

Gold stocks also struggled off the back of a declining gold price, with Newcrest down 3.1 per cent to $23.78.

Analysts have been warning investors this week that there is more pain to come for iron ore, with expectations that weaker steel production in China will send the market into surplus sooner than anticipated.

The team at UBS cut its price forecasts for 2021 to 2023 by 10 per cent on Friday, with expectations that China’s steel production will plateau by 2023.

“We expect the price to fall below $100/t by the end of 2021 and average $89 a tonne in 2022 (vs consensus of ~$132 a tonne),” Myles Allsop wrote in a note to clients.

The path out of lockdowns was also on the minds of investors this week with Victoria and New South Wales both moving towards higher vaccination rates and modest easing of restrictions.

Chief executive of equities research firm Kalkine, Kunal Sawhney, said it appeared the market was still digesting the impacts of lockdowns on the labour market.

“Lockdowns forced several businesses to slash working hours and lay off workers in August, keeping employment levels muted. While the unemployment rate dipped to its lowest level in almost 13 years, it was majorly due to a sharp decline in the number of people seeking work,” he said.

In the midst of these broader economic worries it was the stocks with positive news to share that performed the best this week. Pharmaceuticals wholesaler API finished the week up 10.5 per cent, hitting $1.47 after telling investors it would open its books to its takeover suitor, Wesfarmers.

Embattled department store Myer booked gains of 12.6 per cent to 58 cents after revealing its 2021 numbers, which saw the business bounce back to profit but decline to reinstate its dividend.

Telco giant Telstra also finished 1.3 per cent ahead to $3.92 in a week where boss Andy Penn revealed the company’s corporate strategy for the next four years.