Highlights

  • The stock dropped broadly in line with the resources sub-index, which is consistent with a sector driver at work.
  • Josh Gilbert, lead APAC and Middle East analyst at eToro, offered an explanation that links the metal to technology markets.
  • There was also a less encouraging signal from China, which is a major source of Demand for commodities.
  • Whether the resources sub-index can break its losing streak may depend on whether chip stocks steady and copper finds support.

BHP Group (ASX:BHP) shares closed 1.4% lower on Monday 2 November, as Australia’s biggest miners weighed on a weak local market. The S&P/ASX 200 finished down 0.6% at 8,856.50, snapping two straight sessions of gains, and the resources sub-index fell 1.5%, marking its third consecutive losing session. Reuters linked the weakness in the miners to softer copper prices.

The coverage reviewed tied BHP’s fall to this sector-wide move rather than to any BHP-specific news. The stock dropped broadly in line with the resources sub-index, which is consistent with a sector driver at work. Rio Tinto, its large diversified peer, also closed lower, down 1.2%.

Market Context

The more interesting part of the story is why copper weakened. Josh Gilbert, lead APAC and Middle East analyst at eToro, offered an explanation that links the metal to technology markets. “Copper has become a stand-in for the AI build-out,” he said, adding that the metal tends to fall when chip stocks are hit on Wall Street, which “explains most of today’s move in the miners.” The reasoning is that copper is widely used in the electrical infrastructure behind data centres and power networks, so investors appear to be treating it as a proxy for expectations about AI-related spending.

That matters because Wall Street had a rough end to last week. On Friday 30 October, the S&P 500 fell 1.8%, the Nasdaq dropped 2.9% and the Dow lost 1.1% as investors dumped technology and AI-related stocks. Intel fell almost 30% on its results, and there were worries that the AI build-out may be a Bubble after results from Alphabet and Amazon. If Gilbert’s view is right, the selling in chip stocks fed through to copper, and from copper to the ASX miners that produce it.

There was also a less encouraging signal from China, which is a major source of demand for commodities. Factory activity in China returned to contraction in October. While

Developments and Outlook

The broader session was clearly risk-off. that decliners outnumbered advancers 702 to 376 across the ASX, with 312 unchanged, and the S&P/ASX 200 VIX rose 5.86% to 11.46, a one-month high. Among the sectors leading the market lower were the S&P/ASX 300 Metals and Mining index and the All Ordinaries Gold index. Gold was weak too: spot gold fell around 3.5% on Friday to a one-year low, although gold futures were up 0.5% to US$3,919 an ounce on Monday.

For BHP holders, the key takeaway is that Monday’s fall appears to be driven by sentiment towards copper and the global technology trade rather than by any change specific to the company. That makes the share price sensitive to developments well outside the mining sector, including the direction of AI-related stocks on Wall Street. Whether the resources sub-index can break its losing streak may depend on whether chip stocks steady and copper finds support.

Closer to home, the Reserve Bank of Australia announces its Interest Rate decision on Tuesday 3 November, with a Reuters poll showing economists expect a fifth hike this year, to 4.85%, which would be the highest level since December 2008. Gilbert said “the board doesn’t have much choice tomorrow”. The decision could affect broader risk appetite on the ASX, while China’s economic data and Wall Street’s tech sector are likely to stay in focus for the miners.