The Australian sharemarket dropped for the fourth straight session as investors reassessed high valuations across most asset classes amid rising interest rates and geopolitical tensions.
Following the one per cent drop in the US S&P 500 last night, the S&P/ASX 200 index closed down 6.6 points, or 0.12 per cent, at 5512 with the major banks under pressure.
US markets ignored the ISM non-manufacturing index at an eight year high and strong factory orders after Russian tensions intensified and data reflected a fragile eurozone economy.
Explaining the equity market ambivalence to the data Westpac strategist Imre Speizer warned the non-manufacturing index had provided four “false dawns” over the past four years.
“The message here is that a second half of year upswing in the services ISM has yet to be sustained beyond the start of the next year,” he said.
“This is either because the survey turns down in line with the economy, or because the economy misses to the downside but the ISM doesn’t pick it until after the fact.”
The Australian dollar dropped US0.3¢ to US93¢ and government 10-year yields rose 3.7 points to 3.503 per cent, while US 10-years rose one point to 2.48 per cent.
“US rate rises are coming; that’s the message from equities and the US dollar overnight,” National Australia Bank currency strategist Emma Lawson said.
“US yields weren’t quite as definitive but did end the day mostly higher.”
The Shanghai composite index had a choppy early session, falling almost one per cent before recovering to trade 0.1 per cent down at the close of the ASX following warnings the 8 per cent rally since late July was overdone.
In Tokyo the Nikkei index fell one per cent.
Spot iron or edged up o.1 per cent to $US95.50 a tonne, showing little correlation to the 1.7 per cent surge in Dalian iron futures yesterday. The futures reversed today and were trading 0.9 per cent lower.
Copper tumbled 1.3 per cent to $US7030 a tonne while gold reversed early weakness to trade little changed at $US1290 an ounce.
OptionsXpress market analyst Ben Le Brun said the local market’s fall of 0.12 per cent was a better performance than other markets in the region.
“The market has not done that well but is definitely outperforming the region,” he said.
Fear of escalating conflict in the Ukraine was not a strong factor for local investors, he said.
Strong earnings reports from companies in coming days and weeks could also partly insulate the local market from any correction on Wall Street, Mr Le Brun added.
“Looking at the performance of Rio Tinto, which is due to report tomorrow, there might just be a little bit of buying ahead of that fact,” he said.
“We’re playing a bit of wait-and-see, and, hopefully, we do start to march to the beat of our own drum with some stronger earnings despite whatever what is happening in an offshore context.”
According to preliminary closing data, Rio Tinto added 49 cents to $65.82, BHP Billiton rose 31 cents to $38.32 and Fortescue Metals dropped one cent to $4.69.
Mining services provider Ausdrill sank 9.5 cents, or 8.9 per cent, to 97 cents, after the company flagged another profit writedown and warned a recovery in the industry would likely be slower than expected.
Among the major banks, Commonwealth Bank lost 35 cents to $81.71, ANZ dropped 16 cents to $32.98, National Australia Bank shed six cents to $34.63 and Westpac was steady at $33.67.
Explosives producer Orica fell by 68 cents to $20.67 as the company unveiled plans to demerge its chemicals business.
The broader All Ordinaries index was down 7.5 points, or 0.14 per cent, at 5504 points.
The September share price index futures contract was down 18 points at 5456 points, with 24,998 contracts traded.
National turnover was 1.45 billion shares worth $3.9 billion.