Investors initially looked on the bright side of Reserve Bank doubt over growth momentum when the dollar fell on the weaker yield outlook, but the ASX dropped back to finish a choppy session in the red after soft investment data out of China.
The S&P/ASX 200 index reversed a 0.4 per cent drop in early trade as the Reserve minutes erased lingering concerns over a rate rise this year.
But the index declined to close 11.6 points, or 0.21 per cent, lower at 5400.7 after a surprise fall in China fixed direct investment signalled a slowdown of "hot money" flowing into the country as the yuan was allowed to weaken.
Although Chinese credit market jitters have eased in recent months after officials blinked by announcing “mini stimulus” measures, the FDI data and US Treasury data suggest the world’s second biggest economy was likely still undergoing a cash shortage.
Dalian iron ore futures were off another 0.5 per cent in early trade today following the 2.2 per cent slump in spot iron ore to a fresh 20-month low of $US89 a tonne yesterday, but they later ramped to a one per cent gain.
The Shanghai composite index was off 0.8 per cent at the close of the ASX after FDI declined 6.7 per cent in May, while Chinese holdings of US Treasury bonds fell for the third straight month in May, down $US8.9 billion from April, to $US1.26 trillion.
The Nikkei index was up 0.2 per cent.
The Australian dollar dropped US0.5¢ to US93.50¢ after the Reserve minutes “struck a more uncertain tone” by noting that “it was difficult to judge the extent to which (low interest rates) would offset the expected substantial decline in mining investment and the effect of planned fiscal consolidation”.
Westpac economist Mathew Hassan said developments since the June meeting had generally added to dovish arguments – in particular the weaker than expected consumer detail in the GDP data, the absence of a rebound in consumer sentiment from its post-Budget fall in May, clearer signs of a housing slowdown and a further widening in the wedge between a rising dollar and falling commodity prices.
“While the Bank’s goal of navigating the economy through its transition from mining to non-mining led growth is facing bigger challenges these still fall short of posing a big enough threat to 2015 forecasts to warrant further policy easing,” he said.
Government 10-year yields dropped 3.9 points to 3.705 per cent while US 10-years eased one point to 2.59 per cent ahead of the US Federal Reserve board meeting starting tonight.
Gold fell 1.5 per cent to $US1264 an ounce an ounce while copper edged up 0.3 per cent to $US6711 a tonne.
IG chief market strategist Chris Weston said Shell’s liquidation of much of its $6.3 billion stake in Woodside on Tuesday would have attracted interest from investors who sold other shares to buy into the petroleum company.
"Shell has taught everyone a lesson in buying low and selling high ... taking advantage of the big rally in Woodside shares of late,” he told AAP.
However he said the violence in Iraq involving jihadist militants has sparked worries about global energy supplies and possible oil price rises.
Woodside Petroleum shares are at three year highs and are due to start trading again on Wednesday at $42.85 after being placed in a halt.
Among other energy stocks, Santos fell 22 cents, or 1.5 per cent to $14.50 and Oil Search dropped five cents to $9.77.
The big three miners were down as iron ore prices fell below $US90 a tonne for the first time since 2012.
Fortescue Metals, which produces only iron ore, fared worst, shedding 12 cents, or three per cent, to $3.94, Rio Tinto retreated 57 cents to $57.45 and BHP Billiton gave up 26 cents to $35.36.
Among the major banks, National Australia Bank lost five cents to $33.14, Commonwealth Bank moved down 36 cents to $81.24, Westpac was 16 cents worse at $34.14 and ANZ was 13 cents weaker at $33.93.
The broader All Ordinaries index was down 9.9 points, or 0.18 per cent, at 5380.7.
The June share price index futures contract was 19 points lower at 5398, with 156,644 contracts traded.
National turnover was 1.75 billion securities worth $3.9 billion.