The gloomy domestic growth outlook and US Federal Reserve tapering uncertainty pushed the Australian sharemarket into the red, but demand for large cap miners and financials limited losses.
The S&P/ASX 200 index traded in a tight range in and out of the black before closing 7.1 points, or 0.14 per cent, down at 5096.1 points as most investors showed little fear any Fed decision tonight could end the bull rally.
Domestic focused stocks were hit by fears of a decade of budget deficits would crimp growth and earnings.
Goldman Sachs economists said the growth downgrade to 2.5 per cent next year and budget blow-out had been flagged in the press, but they still expected it to have negative implications for business and consumer confidence over the coming weeks and months.
“Together with recent negative headlines about the exit of General Motors, difficulties at Qantas, and a sharp fall in equity prices over the past month, such a sharp deterioration in Australia’s public finances will serve to further undermine sentiment at a critical time (as we enter the Christmas retailing period),” they said.
The Australian dollar fell to a low of US88.80¢ before bouncing to US89.10¢, while government 10-year yields were
Last night the US S&P 500 lost 0.2 per cent as the US current account deficit narrowed and “core inflation” of 1.7 per cent beat forecasts.
The data tipped the scales in favour of the Fed clarifying its tapering intentions tonight.
National Australia Bank currency strategist Emma Lawson said whether the taper occurred in December or January, markets were prepared for a small, $US5 billion to $US10 billion reduction.
“What may move markets are any other measures they introduce at the same time to allay any “taper tantrum” as seen earlier this year,” she said.
“That involves containing the longer dated yields and anchoring expectations for when the Fed may eventually raise interest rates.”
The Shanghai composite index was marginally lower at the close of the ASX while in Tokyo the Nikkei index was up 1.7per cent.
Gold dropped $US10 to $US1242 an ounce, copper slipped 0.3 per cent to $US7254 a tonne and spot iron ore lost 0.4 per cent to $US134.30 a tonne yesterday.
Morgans private client adviser Alistair McCorquodale says investors don’t like waiting.
“It’s really the uncertainty as to what the Federal Reserve will do,” he said.
“The fact that you have a situation where it could go either one way or another ... just creates uncertainty in investors’ minds.”
Among the major banks, Westpac fell 25 cents to $30.62 as Commonwealth Bank shed 25 cents to $73.68. But ANZ rose 22 cents to $30.70 as National Australia Bank advanced one cent to $33.41.
In the resources sector, diversified global miner BHP Billiton had climbed 13 cents to $35.79, Rio Tinto was up three cents to $65.33 and Fortescue Metals was eight cents higher at $5.60. Telstra was two cents higher at $5.04.
Meanwhile, shares in hotel booking business Wotif.com plunged $1.33, or 31.82 per cent, to a five-and-a-half year low of $2.85, after it issued a weaker half year profit forecast.
And shares in REA Group continued to tumble, losing $1.74, or more than 4.6 per cent, to $36.
REA shares fell almost seven per cent yesterday after the company announced chief executive Greg Ellis would leave the business.
Pact Group lost 12 cents, or 3.61 per cent, to $3.20 a day after the packaging firm’s shaky float saw it lose 12.63 per cent on its first day.
Retail conglomerate Wesfarmers lost 76 cents, or 1.79 per cent, to $41.80 while rival Woolworths lost five cents to $32.68.
The broader All Ordinaries index was down 6.8 points, or 0.13 per cent, at 5099.3 points. The December share price index futures contract was three points lower at 5097 points, with 92,842 contracts traded.
National turnover was 1.4 billion securities worth $4.3 billion.