The Australian sharemarket fell well short of the positive overnight lead from Wall Street with miners leading losses after a broker downgrade for BHP Billiton, an uptick in Chinese inflation data and the cyclone enforced shutdown in the Pilbara.
The S&P/ASX 200 index opened 0.2 per cent up, but slipped to close 13.5 points, or 0.28 per cent, down at 4709.5 points, with weakness also in industrial stocks after National Australia Bank cut its 2013 growth forecast from 2.5 per cent to 2 per cent.
Losses were limted as Japan announced a $110 billion stimulus package aimed at lifting the economy ouf of the grip of deflation.
BHP was hammered after Bank of America Merrill Lynch downgraded the mining giant from neutral to underperform.
Inflation in China climbed to a seven month high of 2.5 per cent in December, but indicating ongoing slack industrial demand, producer prices dropped 1.9 per cent.
"But overall inflationary pressures will likely be manageable for the whole year as this year's growth recovery will be much more modest than in 2009/10," HSBC head of Asia reserach Qu Hongbin said. "This, plus external challenges, suggests that the PBoC will keep monetary policy accommodative, mainly through the use of quantitative tools."
On Thursday spot iron ore slipped 0.3Â¢ to $US158.20 a tonne, but steel rebar was set for its first weekly loss in six, sliding one per cent today, as the inflation data knocked hopes for interest rate relief or an easing of bank reserve requirement ratios.
"The recent rally has already absorbed the strong expectation of an improving Chinese economy," Shanghai CIFCO Futures analyst Huang Huiwen told Bloomberg. "Producer prices indicate that fundamentals are not improving substantially, so any further rally could be difficult."
The Shanghai composite index was off 0.5 per cent today at the close of the ASX.
In Tokyo the Nikkei index jumped 1.4 per cent after the yen tumbled to a low against the US dollar and the euro.
Overnight the US S&P 500 index climbed 0.7 per cent on Thursday's strong Chinese data, dismissing a fourth week of rising weekly jobless claims.
European stocks were flat after the European Central Bank left rates unchanged and dampened any hopes of a cut in the near future, sending the euro almost 2 per cent higher against the US dollar, but with sentiment also boosted by a strong Spanish bond auction.
The Australian dollar climbed to a three month high of $US1.595 before easing back to $US1.0580, with the prospect of a February rate cut fading.
"While predicting the precise month of cash rate movements is notoriously difficult, by March, the RBA will have received an update on Q4 price and wage inflation, official data on economic conditions in early 2013 and, importantly, updated capital expenditure intentions," ANZ economists said.
More to come