The well-telegraphed Federal Budget had little initial impact on the ASX but shares edged lower as Chinese property market jitters escalated and hopes for a bounce in the US economy faded.
The S&P/ASX 200 index opened slightly higher but dropped back to close 1.7 points, or 0.03 per cent, lower at 5496.5 as iron ore futures resumed falling amid mounting concern that falling Chinese property prices could knock growth below the psychological 7 per cent level.
The Shanghai composite index was little changed at the close of the ASX following reports the People's Bank of China had encouraged Chinese banks to accelerate mortgage lending to counter the sharp slowdown in property prices.
Chinese home sales fell 18 per cent in April from the previous month.
Chinese fixed asset investment growth slowed to 17.3 per cent in March and was below expectations for the seventh straight month.
“While this is still a high growth rate, it is a low since 2001 and is down significantly from 19.6 per cent in 2013,” Royal Bank of Scotland currency strategist Greg Gibbs said.
“It is consistent with the weaker trend for iron ore prices this year and, in light of a slowdown in the property sector, continues to point to a bigger downside risk for Australian commodity prices this year.”
In Tokyo the Nikkei index slipped 0.3 per cent.
Last night US stocks hit record highs but closed marginally firmer after April retail sales growth of 0.1 per cent fell short of forecasts for a 0.4 per cent increase, leaving average growth of sales, excluding autos, for the first four months of the year at the weakest level in five years.
Sentiment was supported by the NFIB small business survey which climbed to a post-GFC high.
The Australian dollar was steady at US93.40¢ after the budget but rallied to US94¢ last night as the euro fell on reports German Bundesbank officials were supportive of rates cuts and quantitative easing in the eurozone.
Government 10-year yields dropped 3.6 points to 3.81 per cent to follow the 5 point drop last night in US 10-years to 2.60 per cent.
Talk of negative deposit rates in the eurozone over the past week has lifted the US dollar index against six major currencies more than one per cent and sparked a global scramble for yields.
The German ZEW business survey provided a signal that the growth recovery in the region was stalling and deflation getting a grip after the outlook component slumped 10 points to 33.1 points, well below forecasts and the lowest level since January 2013.
Gold was slightly firmer at $US1295 and copper dropped 0.5 per cent to $US6830 a tonne. Yesterday’s spot iron ore price was not updated but Dalian iron ore futures were down 0.8 per cent.
Commonwealth Bank shares hit a record high after posting strong growth in cash profit in the third quarter of the financial year, and ANZ shares also rose.
But National Australia Bank and Westpac shares were sold after the banks paid out their interim dividends.
"Our financial stocks have struggled because we have seen 22 points coming out of the market as Macquarie, National Australia Bank and Westpac went ex-dividend,” IG market analyst Chris Weston.
"If you take out those three stocks the market would actually be up on the day."
The market had been lower during the day, but rose in the final stages of trade, as investors predicted a positive session ahead on US market.
National Australia Bank lost 90 cents to $33.60, Westpac fell 94 cents to $34.20 and Macquarie Group lost 84 cents to $59.16.
Commonwealth Bank gained 99 cents to $80.89 and ANZ added 25 cents to $33.15.
Among major resources stocks, Rio Tinto dropped seven cents to $62.78 despite its Pilbara iron ore operations producing ore more quickly than previously anticipated.
BHP Billiton gained 34 cents to $38.30, and Fortescue Metals eased seven cents to $4.73.
Building materials firm CSR dumped 17 cents to $3.34 despite returning to profit in the year to March.
There was mixed performances from other construction sector stocks, with Lend Lease adding one cent to $13.51, Leighton shedding 59 cents to $19.60 Boral dropping five cents to $5.41 and James Hardie eight cents lower at $13.77.
Stocks under pressure from health sector cuts in the federal budget were pathology providers Sonic Healthcare, which lost 79 cents to $17.49, and Primary Health Care, which fell 24 cents to $4.53.
Qantas shares gained 3.5 cents to $1.26 after it said it will cut dozens of pilots’ jobs as it continues to slash costs.
The broader All Ordinaries index was up 0.5 points, or 0.01 per cent, at 5475.9.
On the ASX 24, the June share price index futures contract was 21 points higher at 5508, with 18,452 contracts traded.
National turnover was 1.14 billion securities worth $3.3 billion.