The Australian sharemarket remained on the back foot, falling for the sixth session out of seven, as offshore markets lost ground last night following a surge in US weekly jobless claims and confirmation that Europe had dropped back into recession.
However, with markets oversold in the short term losses were limited and the S&P/ASX 200 index limited its losses, finishing 12.5 points, or 0.29 per cent, down at 4336.8 points, off 2.8 per cent for the week.
Negative sentiment was kept in check by comments from US Federal Reserve officials and chairman Ben Bernanke that the Fed would not hesitate to try new measures to revive the economy.
Last night the S&P 500 index slipped 0.2 per cent after mixed US data, with weekly jobless claims soaring to 439,000 from 361,000 and the Philadelphia Fed index contracting, while the rate of mortgage delinquencies fell to the lowest level since 2008.
In Tokyo the Nikkei index soared 2.1 per cent, before easing to 1.7 per cent, and then yen extended its fall as investors wagered a looming election would see a new government in place and another round of stimulus to support the ailing economy.
The Shanghai composite index was off 0.9 per cent at the close of the ASX after the “conservative” new leadership failed to deliver on hopes of further measures to boost growth. However, analysts warned that the Chinese economy needed to rebalance by reducing “financial repression” of savings rates and improving capital allocation to projects that earned market related returns.
Westpac economists said there was a cross over point in the developmental trajectory of an economy where the risks of not liberalising the financial system were equated with the risks of doing so.
“China is clearly not far away from this cross over point, if it is not there already,” they said.
Professor Michael Pettis from Peking University said that as had occurred in other countries, powerful groups who benefitted from the old growth model – in China they were referred to generically as “vested interests” – had always succeeded in diluting or preventing the necessary reforms.
“The rebalancing always occurs anyway, either in the form of a debt crisis and negative growth or in the form of a long period of no growth and slow rebalancing,” he said.
The Australian dollar continued its slide, hitting a low of $US1.0305 before settling at $US1.0330, following evidence yesterday that the Reserve Bank was directly selling currency to foreign central banks.
ANZ foreign exchange strategist Andrew Salter said the Aussie had outperformed most currencies recently largely as a result of foreign central banks buying the currency, and was overvalued.
“I actually think the fair value of the Aussie dollar is somewhere between 90 and 95 US cents, based on commodity prices and interest rate differentials,” he said.
Gold failed to get any traction from Mr Bernanke’s comments or the prospect of quantitative easing in Japan, slipping $US12 to $US1712 an ounce. Copper climbed 0.3 per cent to $US7645 a tonne and iron ore edged up US40¢ to $US122.80 a tonne.
The broader All Ordinaries index was down 10.5 points, or 0.24 per cent, at 4360.1.
On the ASX 24, the December share price index futures contract was two points lower at 4349, with 21,760 contracts traded.
BBY Ltd client adviser Henry Jennings said several overseas factors had led to weakness on the local market
"Everyone is now focusing on the US fiscal cliff, coupled with problems in Europe,” Mr Jennings said.
"We’ve also got this escalation in the Gaza strip, with rockets fired at Tel Aviv which is never a good thing for markets.
"There’s still a lot of uncertainty out there. Confidence is low and volumes are reflecting that."
Among local financial stocks, ANZ shed 39 cents to $23.66, Westpac fell 22 cents to $24.42, Commonwealth Bank had reversed 41 cents to $58.28, while National Australia Bank fell three cents to $23.20.
In the resources sector, mining giant BHP Billiton had lost 19 cents to $32.93, and Rio Tinto had gained eight cents to $56.90.
Iluka fell 12 cents to $7.79 following downgrades by brokers this week.
Clothing and camping equipment retailer Kathmandu rose six cents to $1.41 after it posted a 19.5 per cent boost in sales for the last 15 weeks.
Cash Converters shares gained one cent to 99 cents after the company said it expected to increase its short-term lending this financial year as smaller providers leave the industry due to regulatory changes.
National turnover was 1.6 billion stocks worth $3.4 billion, with 438 stocks up, 483 down and 380 unchanged.