Bullish sentiment buckled in Asian trade, pushing the Australian sharemarket well into the red, after the Chinese August HSBC manufacturing survey remained in the contraction zone, signalling strong headwinds for the global economy.
The S&P/ASX 200 index closed 21.2 points, or 0.48 per cent, at 4397.2 points as metal prices tumbled on the weak Chinese demand outlook and another cut back in capital expenditure by mining giant BHP Billiton knocked sentiment.
The HSBC flash PMI index edged up to 47.8 points from 47.6 points, but the output component dropped to 47 from 48.2, a 10-month low.
“China’s manufacturing growth is still slowing, but the pace of slowdown is stabilising. Manufacturing activities remain lacklustre, thanks to weak new business flows and a longer than expected destocking process,” HSBC chief china economist Hongbin Qu said.
Steel rebar futures slumped 2.1 per cent and copper fell 1.6 per cent to $US8230 a tonne.
The Shanghai composite index was off 1.4 per cent at the close of the ASX with little hope of monetary relief .
Forex.com analysts Chris Tedder said the central bank continued to support bank funding via targeted reverse repurchase agreements, dashing hopes of an imminent reserve requirement ratio cut, the market’s preferred funding route because of the longer term and more fixed nature of the policy.
In Tokyo the Nikkei index fell 1.6 per cent after Japan registered a trade deficit in August and as the yen shrugged off the Bank of Japan’s quantitative easing to reverse yesterday’s losses.
The Australian dollar fell 0.8¢ to $US1.0380 as the US dollar strengthened against most major currencies except the yen.
Overnight the US S&P 500 index was little changed after existing home sales increased to a two-year high while new home construction also increased the most since 2010.
HSBC strategists said that “markets hate uncertainty, but this was where US politics and fiscal policy were heading.
“The US ‘fiscal cliff’, USD16 trillion of federal debt, and the debt ceiling will confront a ‘lame duck’ Congress. Gridlock could easily ensue,” they cautioned.
“Falling off the fiscal cliff may not be the most likely outcome, but any increase in the chance of it happening would risk a sharp market reaction.”
OptionsXpress market analyst Ben Le Brun said the Australian market was lower on Thursday after having traded in recent sessions at the top of its 18-month range.
"There a bit of profit-taking going on,” Mr Le Brun said.
"The resources, energy and materials space have been hit hardest after not warming to the manufacturing data out of China.
"All eyes are on China now, on what sort of action they’re going to take to bolster these manufacturing and these (economic) growth numbers."
Global miner BHP Billiton was 52 cents lower at $33.70 after it formally withdrew a proposal for an underground coal mine development in central Queensland.
Rio Tinto was off $1.22 at $56.58.
Elsewhere in the resources sector, Fortescue Metals was nine cents lower at $3.60 after it agreed to pay $US715 million ($A685.16 million) in royalties to Leucadia National over a legal dispute.
Focus Minerals was off 0.1 cents at 4.3 cents as a miner backed by China’s third largest gold company took a $228 million, 51 per cent stake in Focus.
Among other stocks, bricks and masonry supplier Brickworks was five cents poorer at $9.99 after it booked a 70 per cent fall in annual net profit as residential building starts dropped to near 30-year lows.
Luxury accessories retailer OrotonGroup was 16 cents higher at $6.86 as it posted a flat profit for 2011/12 and breaking ties with American fashion house Ralph Lauren.
Retailer Kathmandu firmed one cent to $1.38 despite booking a fall in profit and warning that the current tough climate for retailers was “the new normal".
Billabong dived 10.5 cents, or 7.27 per cent, to $1.34 after the troubled surfwear retailer said one of two private equity firms interested in taking over the group had withdrawn its offer.
Casinos operator Echo sagged 24 cents, or 5.85 per cent, to $3.86 after Genting Singapore decided to sell its stake in Echo.Preliminary national turnover was 2.11 billion securities worth $6.76 billion, with 506 stocks down, 438 up and 363 unchanged.
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