Negative interest rates in Europe and confirmation of an asset buying program failed to prevent the Australian sharemarket from a third straight loss after a rout in iron ore markets sent miners tumbling
The S&P/ASX 200 index lost 32.6 points, or 0.58 per cent, to 5598.7 after the Australian dollar remained stubbornly firm and Dalian iron ore futures fell another 2 per cent following the 1.5 per cent fall in the spot price to $US84.30 a tonne yesterday.
The Australian dollar was little changed at US93.40ï¿½ a after the European Central Bank surprisingly cut bank deposit rates to minus 0.2 per cent last night, sending yields out two or more years deep into negative territory across the eurozone.
"In response to persistently low inflation and weakening activity indicators, the ECB lowered the corridor for its benchmark interest rates by 10bps and also confirmed that it will begin outright purchases of ABS from October," ANZ economist Brian Martin said.
The euro tumbled more than 2 per cent to a 14-month low against the US dollar and the Aussie dollar after ECB president Mario Draghi took over the global stimulus baton from the US Federal Reserve by implying the central bank would buy about 1 trillion euro worth of asset back securities over the next year.
Last night European stocks soared almost two per cent on average but US stocks slipped 0.2 per cent after the ADP private payrolls report missed forecasts and point to a weaker reading from the key non-farm payrolls report out tonight.
"We won't receive the final details until October, but it is not necessarily the case that funds received from the outright sale of securities to the ECB will have to be used to fund new loans to the private sector," Westpac economist Elliott Clarke said. "This is a concern for the real economy which, to date, has missed out on liquidity offered by the ECB. Note that private-sector credit has continued to decline as bank's foreign and sovereign-debt assets increased."
The Shanghai composite index was up 0.4 per cent at the close of the ASX on ongoing speculation the central bank would support growth with fresh stimulus measures.
In Tokyo the Nikkei index was flat.
Gold dropped $US8 to $US1263 an ounce and copper was little changed at $US6940 a tonne.
"The iron ore issue is now really starting to ramp up," IG market strategist Evan Lucas said."You're now seeing sustained downward pressure (on the iron ore price)."
The pressure on the iron ore price was a result of oversupply and lower demand from China, and there is nothing to suggest a slowdown in the slide in the near term, he added.
Fortescue Metals fell 13 cents, or 3.2 per cent, to $3.92, Rio Tinto shed 84 cents to $61.30 and BHP Billiton lost 37 cents to $35.65, according to preliminary closing figures.
Mr Lucas said small to mid-sized iron ore miners like Mount Gibson and BC Iron were experiencing sustained sell-offs.
Mount Gibson dropped 2.5 cents to 63.5 cents and BC Iron retreated nine cents to $2.24.
Gold stocks also dropped, with Newcrest dropping 35 cents to $10.59, Regis Resources slumped 11 cents to $1.69 and Perseus descended 2.5 cents to 37.5 cents.
Most other sectors also fell, including the major banks.
National Australia Bank dropped 21 cents to $34.84, ANZ reversed 18 cents to $33.34, Commonwealth Bank shed 27 cents to $81.30 and Westpac was 17 cents weaker at $34.76.Telstra eased three cents to $5.64.
The broader All Ordinaries index was down 33.2 points, or 0.59 per cent, at 5,598.9 points.
The September share price index futures contract was down 42 points at 5,591 points, with 27,236 contracts traded.
Preliminary national turnover was 1.95 billion securities worth $3.36 billion.