The Australian sharemarket closed in the red for the first time in 11 sessions after the US economy joined Japan and the eurozone by contracting in the December-quarter, delivering a blow to the bullish global growth outlook.
Following the 0.4 per cent loss on Wall Street, the S&P/ASX 200 index lost 0.5 per cent by mid-afternoon, but the "buy-the-dip" outlook supported by month-end window dressing by fund managers saw the index close 17.9 points, or 0.37 per cent, down at 4878.8 points, with another round of domestic data clouding the domestic growth outlook.
Export prices fell 2.4 per cent in the December-quarter, missing forecasts for a 1.5 per cent drop, and although private sector credit beat forecasts by increasing 0.4 per cent in December, the annual rate declined to 3.6 per cent, little changed over the past three years.
Credit for housing advanced by 4.5 per cent during 2012, with a rise of just 0.30 per cent in the month of December and a slowdown from 7.2 per cent in 2010 and 5.4 per cent in 2011.
"The housing sector continues to face a number of headwinds," Westpac economists said
"Notably, household debt levels are elevated, tempering household's appetite for additional debt."
Making a mockery of economic forecasts, the US contracted 0.1 per cent for the quarter, well short of the 1.1 per cent expansion expected and 3.1 per cent in September, with a sharp fall in defence spending offsetting a rise in consumer spending.
However, equity market sentiment was underpinned by the US Federal Reserve monetary policy statement which reaffirmed its commitment to ongoing quantitative easing and blamed the weather for the weak growth.
Metals were the biggest winners after the Fed statement fanned inflation fears, with copper jumping 1.5 per cent to $US8226 a tonne and nickel leaping 3 per cent to $US18,365/t. Gold and silver climbed 0.8 per cent to $US1679 an ounce and 2 per cent to $US32.10/oz respectively, while US 10-year treasury yields climbed 3 points to 2.03 per cent.
The euro also rallied against most major currencies, sparking the unwinding of short euro, long Australian dollar positions that pushed the Aussie 0.9Â¢ down to $US1.0385 and 76.55 euro cents.
The euro was supported by a lift in economic confidence, but analysts have cautioned that the strong currency would soon start to bite the eurozone's ailing exporters now that it is trading 5 to 7 per cent above last year's levels.
The Shanghai composite index was up 0.1 per cent at the close of the ASX, while in Tokyo the Nikkei index was downn 0.6 per cent.