The Australian sharemarket lost ground again as positive Chinese manufacturing data failed to offset ongoing uncertainty over US Federal Reserve policies and overbought market conditions.
The S&P/ASX 200 index traded in the red for the whole session and closed 24.2 points, or 0.46 per cent, down at 5252.5 points, after Fed President James Bullard stoked uncertainty on Friday when he said that last week’s decision to maintain the quantitative easing policy was “borderline”.
He added hat “it’s possible you could get some data that changes the complexion of the outlook and could make the Committee comfortable with a small taper in October”.
There ASX finished off its lows after the Chinese HSBC flash PMI manufacturing index climbed to a six-month high of 51.2 points.
The Shanghai composite index was up 1.1 per cent at the close of the ASX.
Japanese stocks were closed for a public holiday, but other Asian markets continued to retreat from the short term highs reached after the Fed decision on Thursday.
“Certainly markets have become more optimistic on China over the past two months as the data have stabilised,” ANZ currency strategist Richard Yetsenga said.
“A few indicators suggest we are close to the peak in the market’s expectations of China growth.”
He said the ANZ China Commodity Index which weights commodity prices by Chinese consumption, rather than the global production weights used by most conventional commodity indices, appeared to have peaked on August 28.
“Our medium term view is for growth in China to ultimately take another step down,” he said.
The Australian dollar dropped 1¢ to US94.2¢ and government 10-year yields edged up 2 points to 3.959 per cent.
The euro held firm against the US dollar after German chancellor Angela Merkel won the German election but fell short of being able to form a majority ruling coalition partners, while the anti-euro Alternative for Germany got 4.8 percent, just short of the 5 per cent threshold needed for representation in the Bundestag.
Gold fell $US40 to $US1620 an ounce, copper fell 1.3 per cent to $US7188 a tonne and spot iron ore was little changed at $US131.80 a tonne.
The broader All Ordinaries index was down 25.0 points, or 0.47 per cent, at 5,245.8.
On the ASX 24, the December share price index futures contract was nine points lower at 5,260, with 17,094 contracts traded.
IG market strategist Chris Weston said the local market managed to pare back some early losses in afternoon trade following positive news out of China.
“More positive action from China has put an upside on some of the materials and energy plays,” Mr Weston said.
“The Chinese equity market is up more than one per cent and the HSBC number added further evidence that at least in the short-term Chinese growth is firmly stabilising.”
Uncertainty about a US Congressional deadlock on raising the debt ceiling also weighed on resources stocks.
Mining giant BHP Billiton was down 29 cents to $36.10, Rio Tinto fell 34 cents to $62.57, Fortescue rose three cents to $4.59 and gold miner Newcrest was down $1.07, or 8.1 per cent, at $12.03.
Making news on Monday, Treasury Wine Estates’ chief executive David Dearie has resigned immediately, after just two years in the job.
The company’s shares have fallen 30 cents, or 6.3 per cent, to $4.45.
Perseus shares were down 10 cents, or 15 per cent, at 57 cents after two of the company’s founding directors announced they will depart in November.
The big banks were mixed, with ANZ adding 10 cents to $31.19, Westpac adding five cents to $32.80, National Australia Bank was down three cents to $34.83, but Commonwealth Bank had shed 24 cents to $73.51.National turnover was 1.37 billion securities worth $3.1 billion.