The Australian sharemarket finished a choppy, low-volume session in the red as increasing jitters ahead of the US Federal Reserve policy announcement on Wednesday and fears of slowdown in China prompted profit taking.
The S&P/ASX 200 index fell 0.7 per cent at the open, rallied to break-even and closed 8.8 points, or 0.17 per cent, down at 5089.6 points after the HSBC Chinese flash PMI manufacturing index slipped to 50.5 points from 50.8 points in November.
Sentiment soured as the Shanghai composite index fell to a 1.4 per cent loss at the close of the ASX, down for the fifth straight session and longest losing streak since June.
In Tokyo the Nikkei index was off 1.2 per cent after Japan’s Tankan business survey showed better than forecast business conditions but a weak manufacturing outlook, showing little long term impact eight months after the governments record stimulus package was announced.
The Australian dollar fell to a low of US89.20¢ on the data but later recovered to US89.60¢.
Australian government 10-year yields tumbled 10.5 points to 4.221 per cent after global benchmark US 10-years eased 3 points to 2.84 per cent after flat US producer inflation trimmed expectations of a Fed tapering announcement on Wednesday night.
Royal Bank of Scotland currency strategist Greg Gibbs said markets may be under-estimating the pace of tapering when it started.
He said RBS economists were “beginning to think that the step-down might be even more aggressive” because the Fed had already purchased $US1 trillion of the $US1.5 trillion Fed officials have projected for the current bout of quantitative easing.
“This Fed meeting includes the quarterly FOMC projections and Mr Bernanke Press Conference, as such it provides scope for the Fed to send a more nuanced message,” he said.
Gold was up $US7 at $US1234 an ounce, copper was steady at $US7230 a tonne and spot iron ore fell 1.4 per cent to $US136 a tonne on Friday after the Chinese government ordered steel mills to close to ease choking pollution.
Lonsec senior client adviser Michael Heffernan said there was little overseas or domestic news to drive the market on Monday.
He said investors were waiting to see which way “the taper tiger” would jump on Thursday.
“There has been no impetus today. We’re really on automatic pilot,” Mr Heffernan said.
In the banking sector, Westpac lost 23 cents at $30.77, Commonwealth Bank fell 57 cents to $73.63, National Australia Bank dipped 15 cents to $33.20, and ANZ edged up four cents to $30.29.
In the resources sector, global miner BHP Billiton reversed 19 cents to $35.66, Rio Tinto retreated 18 cents to $64.91, and Fortescue Metals scraped off one cent at $5.35.
Senex Energy sagged 6.5 cents to 70.5 cents after it withdrew its $752 million takeover offer for fellow Australian oil and gas producer AWE. AWE was 8.5 cents higher at $1.27.
Diversified conglomerate Wesfarmers lifted 21 cents to $41.51 after announcing it would sell its Australasian insurance underwriting operations to Insurance Australia Group (IAG) for about $1.85 billion. IAG was in a trading halt at $5.70.
Freight rail operator Aurizon lost two cents to $4.68 after unveiling plans to cut the size of its rail fleet and finalise the termination of a Queensland project.
The broader All Ordinaries index was 8.4 points lower, or 0.16 per cent, at 5093.1 points.
The December share price index futures contract was one point lower at 5094 points, with 104,506 contracts traded.
National turnover was 1.18 billion securities worth $3.13 billion.