The Australian sharemarket followed global markets into the red as traders looked to exit holdings ahead of an expected US stimulus announcement on Thursday morning.
However, the S&P/ASX 200 index outperformed the 0.6 per cent drop in the S&P 500 index, easing 8 points, or 0.18 per cent, to 4325.8 points, after Chinese August lending increased more than forecast to boost the Chinese growth outlook.
The Shanghai composite index was off 1.1 per cent at the close of the ASX, despite bank lending climbing to 703 billion yuan ($109 billion) from 540 billion yuan in July, after auto sales missed forecasts. Japan’s Nikkei lost 0.7 per cent.
Overnight the US dollar edged higher against most risk assets on concerns an extensive quantitative easing plan had already been priced into markets, and that while some sort of stimulus would be forthcoming, it could disappoint investors.
Yesterday spot iron ore bounced 6.9 per cent to $US95 a tonne, but sentiment towards miners was capped on signs the bounce could run out of steam as Shanghai steel rebar futures rose just 0.2 per cent today.
Copper also indicated loss of momentum from the infrastructure plans, paring its overnight 1.2 per cent rally with a 0.9 per cent drop to $US7993 a tonne.
The Australian dollar edged down to $US1.0330, weighed down by doubts about how ‘real’ China’s infrastructure spending stimulus was.
“Specifically, how readily the financing will be forthcoming to allow these projects to proceed,” National Australia Bank global head of currency strategy Ray Attrill said.
“Our understanding is that 42 per cent of the total cost is to be funded by municipal and district governments, and the rest financed by the banks (and who we suspect will be the main buyers of various infrastructure bonds).”
“The AUD (dollar) has fallen from its precariously high perch over the last month but there are signs indicating that it has further to tumble,” HSBC global head of currency research David Bloom said.
“The AUD has traditionally been one of the worst performers under a US slowdown and with the (US) fiscal cliff fast approaching we expect a new risk-off movement.”
Mr Bloom expects market attention to switch to the developing US fiscal crisis, with spending cuts and tax breaks due to expire in January, posing significant risks to US growth unless US lawmakers strike a deal before then.
“The US is left with the choice between two evils: fiscal austerity or more debt to an already huge pile,” he said.
The broader All Ordinaries index was down 9.7 points, or 0.22 per cent, at 4,348.3. On the ASX 24, the September share price index futures contract was steady at 4331 with 17,749 contracts traded.
CMC Markets sales trader Ben Taylor said investors were staying on the sidelines ahead of a decision by a German court regarding the legality of the euro zone’s bailout fund for weaker European economies.
"Investors remain calm and cautious preferring to sit on their hands ahead of Germany’s Constitutional court decision and Thursday’s FOMC meeting,” Mr Taylor said in a research note.
Utilities stocks were the worst performing sector on the market on Tuesday, falling 0.96 per cent, according to IRESS data.
Financials - a big market sector - backpedalled 0.23 per cent and industrials slipped 0.72 per cent.
On a positive note, healthcare companies gained 1.57 per cent and were the best-performing sector.
Among the major miners BHP Billiton was up 12 cents at $32.58 a day after it announced job shedding at several of its coal mines.
Rio Tinto was down 17 cents at $54.53. Fortescue Metals Group was down 18 cents at $3.37, a fresh three-year low amid reports that the iron ore miner’s major lender has extended the syndication deadline of a $US1.5 billion ($A1.46 billion) loan until the end of this month.
Also making news today, Virgin Australia said passenger numbers and average airfares were up in July and August, compared with the same time a year ago.The stock rose half a cent to 42 cents.
Ports and rail operator Asciano was down one cent at $4.45 after it reported a five-year extension of an agreement with privately-owned logistics company Linfox will generate revenue of up to $400 million.
Sydney Airport was up two cents at $3.18 after announcing the appointment of former Macquarie Group executive as its new chief financial officer.
The spot price of gold in Sydney was $US1,728.30 per fine ounce, down $US8.43 from Monday’s local close of $US1,736.73 per ounce.National turnover was 1.9 billion securities worth $3.5 billion, with 413 stocks up, 498 down and 369 unchanged.
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