The Australian sharemarket pared its steep mid-session fall but still closed well in the red as Chinese credit market jitters fuelled further heavy losses in metals markets.
Following the 0.6 per cent loss on Wall Street last night the S&P/ASX 200 index was down 1.3 per cent at its worst as Chinese stocks extended losses, but it bounced back and closed 29.6 points, or 0.55 per cent, down at 5384.2 as bargain hunters lifted copper and steel prices off the opening lows.
Negative sentiment has been fuelled by reports of further likely bond defaults by so-called Chinese “trust companies” that could trigger margin calls on lending and force further sales of metal holdings used as collateral for loans.
“While there was no new economic data out of China, a story that another company (Baoding Tianwei) had been suspended over concerns about its ability to meet debt payments continues to raise concerns about the broader credit market in that country,” National Australia Bank currency strategist Emma Lawson said.
“And on from that, the broader state of economic growth.”
Copper slumped 2.6 per cent overnight and was off another 0.2 per cent at $US6450 a tonne, while steel rebar futures remained volatile, swinging from a 0.7 per cent loss to a gain 0f 0.3 per cent. Gold climbed $US12 to $US1357 an ounce.
The Shanghai composite open in the red, bounced to a 0.5 per cent gain before reversing sharply before the lunch break to settle 0.6 per cent down at the close of the ASX.
In Tokyo the Nikkei index fell 2.2 per cent.
The Australian dollar fell US0.7¢ to US89.60¢ on the Chinese growth uncertainty and a drop in the Westpac consumer confidence index.
Government 10-year bond yields were little changed at 4.187 per cent after soft housing finance data pointed to diminishing need for the Reserve Bank to counteract the surge of housing market speculation.
Home loan growth was flat in January while the December drop of 1.9 per cent was revised to a drop of 3.3 per cent.
Invast Securities chief market analyst Peter Esho said resources stocks appeared to have arrested their fall, which came after a sharp drop in the iron ore price.
The price stabilised overnight. Mr Esho said the local market had run up quite hard recently and was consolidating within a range of 5350 to 5450 points.
“There’s no real game changer,” he said.
Investors were waiting on more economic data from China tomorrow, including industrial production and retail sales, Mr Esho added.
“That will be very closely watched,” he said.
Recent trade data from China has some analysts worried that China may not reach its economic growth targets.
Locally, Westpac lost 35 cents to $33.94, Commonwealth Bank shed 50 cents to $75.75, ANZ dropped 16 cents to $32.18 and National Australia Bank was 22 cents lower at $34.55.
In the resources sector, BHP Billiton gained six cents to $35.99, Rio Tinto added 17 cents to $61.39 and Fortescue Metals climbed 14 cents to $4.97.
Energy stocks were lower on the back of weaker oil prices. Woodside Petroleum eased 28 cents to $38.36 and Santos backtracked 22 cents to $13.78.
The broader All Ordinaries index was down 28.8 points, or 0.53 per cent, at 5400.5 points.
The March share price index futures contract was down 37 points at 5378 points, with 33,005 contracts traded.
National turnover was 1.9 billion securities worth $4.8 billion.