The Australian sharemarket reversed opening gains to close in the red as uncertainty lingered over the level of global borrowing rates following the release of the US Federal Reserve's board meeting minutes last week.
The S&P/ASX 200 index opened in line with firmer US stocks on Friday when an uptick in the US unemployment rate to 7.8 per cent soothed market fears that the Fed could end its bond purchasing program this year, but the rally was used as an opportunity to book profits and the index closed 6.5 points, or 0.14 per cent, down at 4717.3 points.
On Friday the 153,000 increase in US non-farm payrolls was in-line with consensus forecasts, but the move higher in unemployment rate away from the sub-7 per cent level at which the Fed indicated it would scale back its "money printing" operations revived investor risk appetite.
Gold initially fell to $US1630 an ounce, before recovering to $US1660/oz in early Asian trade, while the Australian dollar bounced from a low of $US1.0395 to $US1.05 today as the US dollar weakened against most risk assets.
However, the Fed minutes have added an element of uncertainty to markets that were pricing in "unlimited" quantitative easing, and the greenback began to fight back in later trade, pushing the dollar to $US1.0475.
"It is not entirely surprising that investors took the opportunity to exit short positions on US dollar, especially given the possibility that the Fed's apparent willingness to end QE3 may exasperate a drive to US dollar on the back of any positive local data," Forex.com analyst Chris Tedder said.
The ongoing US budget negotiations also kept bullish sentiment in check with more "late night drama expected".
"Higher payroll taxes will likely depress US consumer spending in the short term," Blackrock chief global investment strategist Russ Koesterich said.
"This could result in a drag on the US economy early in the year. We expect a rebound later this year, but believe gross domestic product (GDP) growth is unlikely to exceed the 2 per cent annual clip we have seen in recent years."
The Shanghai composite index was up 0.2 per cent at the close of the ASX, while Japan's Nikkei index was off 0.2 per cent as the yen hit a 30-month low against the US dollar.
Spot iron ore climbed $US3.40 to $US153.30 a tonne, while copper extended Friday's one per loss, losing another 0.3 per cent to $US8050 a tonne.
More to come