The Australian sharemarket registered its first real correction in more than two weeks as the reality of dismal business investment data compounded the lingering Chinese credit market uncertainty and a spike in geopolitical risk surrounding Ukraine.
Investors were also spooked by news of the loss of 5000 jobs from national carrier Qantas and a big half-year loss.
Wall Street was flat last night and Chinese stocks were moderately higher but the S&P/ASX 200 index slipped steadily to close 25.6 points, or 0.47 per cent, down at 5411.4 after December-quarter private capital expenditure slumped 5.2 per cent, well in excess of the forecast 1.3 per cent decline.
The capex survey also revealed a 17.4 per cent drop in the estimate of $125 billion for the next 18 months, indicating the economy had dropped off the “mining investment cliff” and rebalancing was urgently needed.
The Australian dollar fell US0.5¢ to $US89.30¢ on the news and Government 10-year yields dropped 6.8 points to 4.057 per cent as market swung away from a neutral yield outlook to one of another rate cut this year.
“Judging by today’s figures, predicted growth in non-mining parts of the economy isn’t going to come close to picking up the slack left behind by falling mining investment,” Forex.com analyst Chris Tedder said.
“In terms of monetary policy, today’s data isn’t bad enough to force the RBA back into a dovish stance, but it is something the bank will be worried about.”
The dollar was also knocked by rising geopolitical risks from the sabre rattling between the US and Russia over Ukraine which sparked safe haven demand for the US dollar and the retreat from emerging markets.
“News that Russian had put armed forces on alert in the western part of the country (officially unrelated to events in the Ukraine) has promoted some observers to draw parallels with the 2008 invasion of Georgia and this has seen the rouble lose about 1 per cent,” National Australia Bank global head of currency strategy Ray Attrill said.
The Shanghai composite index was up 0.5 per cent at the close of the ASX despite the central bank draining $10.8 billion from the banking system which investors interpreted as a vote of confidence in credit market stability.
In Tokyo the Nikkei index was down 0.2 per cent as the yen held steady against the US dollar.
The greenback was supported by a 9.6 per cent jump in US home sales in January that knocked claims that other weak data had been affected by the old weather, but on the downside mortgage applications fell 8.5 per cent.
Gold dropped $US18 to $US1326 an ounce, copper fell 0.8 per cent to a two-month low of $US7000 a tonne and spot iron ore fell one per cent to $US117.80 a tonne.
IG market strategist Stan Shamu said public attention may have been on Qantas, but the bigger concern for the market was the disappointing capital expenditure, or capex, data.
The disappointing figures could indicate weaker than expected economic growth during the quarter.
Mr Shamu said they also do not justify the recent shift by the Reserve Bank of Australia towards a neutral stance on interest rates.
“I think that’s why we’re seeing the market being sold off,” he said.
Qantas shares lost 11.5 cents, or 9.1 per cent, to $1.155.
Mr Shamu said the sharp fall in Qantas reflected the uncertainty surrounding the airline’s future rather than the job cuts and the first half loss, which had been largely expected.
Broadcaster Nine Entertainment nudged up one cent to $2.29 after the recently relisted company showed it is on track to beat its forecasts for full year earnings.
Seven Group dropped 16 cents to $8.01 after an economic slowdown in its key media and industrial businesses hurt half year earnings.
In the resources sector, BHP Billiton shed 20 cents to $38.38, Rio Tinto dumped 37 cents to $66.60, and Fortescue Metals lost 18 cents to $5.50.
Among the major banks, Commonwealth Bank dropped 29 cents to $75.20, National Australia Bank eased five cents to $34.82, Westpac shed two cents to $33.54, while and ANZ gained seven cents to $32.15.
The broader All Ordinaries index was down 26 points, or 0.48 per cent, at 5421 points.
The March share price index futures contract was 42 points lower at 5395 points, with 25,672 contracts traded.
National turnover was 2.03 billion securities worth $4.8 billion.