Resource shares come back down to earth

Resources and energy companies slide as commodities prices fall

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published March 9, 2016 11:19 am AEDT

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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