Global risk appetite was dealt a fresh blow by European finance ministers who failed to reach agreement on Greece’s bailout funding during a “marathon” 11-hour meeting, pushing the Australian sharemarket into the red.
The S&P/ASX 200 index was marginally lower in early trade following a flat lead from Wall Street, but dropped back to close 16.2 points, or 0.37 per cent, at 4369.5 points after the decision on Greece’s aid disbursement was postponed until Monday.
Sentiment was already fragile following “double-edged” comments by US Federal Reserve chairman Ben Bernanke last night and weak Japanese trade data.
Mr Bernanke said the Fed’s ability to offset growth headwinds was “not infinite” and that the Fed did not have the tools to prevent fallout from the “fiscal cliff”.
However, he also said that if the US budget talks were successfully negotiated, it might bring a “very good year for the US”.
National Australia Bank global head of currency strategy Ray Attrill said the comments failed to buoy US stocks.
“This is not terribly surprising, if we remember that at least part of the reason for the equity market sell-off since the US elections is heightened fears that capital gains tax rates will rise in January, incentivising those carrying capital gains to crystallise them before year-end,” he said.
The Australian dollar dropped 0.3¢ to $US1.0350 as the euro tumbled on the Greek news, but the dolalr was already on the back foot after Japanese trade data underlined the increasingly precarious state of the Japanese economy.
Westpac strategists said newswire stories on Chinese buyers defaulting on Australian coal shipments compounded the negative tone.
The European crisis, China’s slowdown and a diplomatic dispute with the Chinese over the Senkaku Islands saw Japan’s exports fell 2.3 per cent in October, down 11.6 per cent to China, deepening the likelihood the country was firmly in the grip of recession.
In Tokyo the Nikkei index was up 0.3 per cent as monetary stimulus hopes remained high on an expected change of government next month.
The Shanghai composite index was off 0.4 per cent at near four-year lows at the close of the ASX as global and domestic growth concerns weighed on stocks.
The benchmark S&P/ASX200 index was down 16.2 points, or 0.37 per cent, at 4369.5, while the broader All Ordinaries index was down 16.8 points, or 0.38 per cent, at 4390.7.On the ASX 24, the December share price index futures contract was 13 points lower at 4385, with 23,313 contracts traded.
CMC Markets senior trader Tim Waterer said the news on Greece that came through in the afternoon sent the market down.
“When you throw in the combination of flat leads from Wall St, negative news from the EU, the continued uncertainty about the fiscal cliff you have an absence of positive drivers,” he told AAP.
Mining stocks were big drivers of the slide, with risk averse traders selling off cyclical stocks that depend on economic growth.
Bellwether stocks BHP Billiton and Rio Tinto fell, the former down 22 cents or 0.7 per cent, to $33.36, the latter down nearly one per cent to $56.95.
The volatility of recent months continued for highly geared iron ore producer Fortescue Metals, whose stocks dropped 11 cents, or 2.74 per cent, to $3.90, making it the second worst performer among the top 50 ASX companies.
The biggest fall went to fellow miner, mineral sands firm Iluka which dropped 23 cents, or 2.8 per cent, to $7.88.
The company was the best performer among the larger ASX companies last year, but has since plummeted 53 per cent from a January high of $18.88 due to its exposure to slower Chinese growth.
Upmarket department store chain David Jones dipped 16 cents, or 6.23 per cent, to $2.41 after it said sales in the first quarter of fiscal 2013 rose 0.3 per cent to $415.6 million, ending seven straight quarters of decline.
Freight rail company QR National was one cent higher at $3.49 after it said it expects to haul just enough coal this financial year to meet its previous forecasts.
Among the major banks, National Australia Bank was two cents down at $23.67, ANZ also fell two cents to $23.52, Commonwealth Bank was three cents off at $57.88 and Westpac sagged nine cents at $24.60.
The release of monthly manufacturing data out of China on Thursday could create more volatility on the market.
National turnover was 1.3 billion securities worth $3.2 billion, with 413 stocks up, 499 down and 365 unchanged.