The Australian sharemarket surrendered an opening rally as profit taking returned ahead of Chinese industrial production data and the US Federal Reserve meeting next week.
Overnight the US S&P 500 rose 0.2 per cent to a record high, but after opening 0.7 per cent higher the S&P/ASX 200 index dropped back to close 0.82 points, or 0.02 per cent, down at 5143.6 points as slack domestic fundamentals weighed on stocks.
The bullish global growth outlook was dealt a blow last night after German industrial production fell 1.2 per cent in October, well short of forecasts for a 0.7 per cent increase.
Markets reflect the view that US and Chinese growth would offset any negative impact from a reduction in the Fed’s bond purchasing program which could be announced as early as next week.
However, Chinese stocks continued to languish, with the Shanghai composite index up just 0.2 per cent at the close of the ASX, as officials tighten the screws on credit extension and the yuan hit a 20-year high against the US dollar.
Shanghai repo – repurchase agreement – rates eased yesterday, but banks are still paying a hefty 6.3 per cent for three-month money from the central bank, while the Financial Times reported rules had been changed to interbank loans to prevent the circumventing of lending restrictions.
In Tokyo the Nikkei index was off 0.2 per cent.
The Australian dollar was little changed at US91.05¢ as the euro continued to rally against most major currencies, hitting a five-year high against the yen.
Government 10-year yields bounced 2 points to 4.29 per cent as global credit markets remained on high alert for Fed tapering to begin next week.
Gold climbed $US12 to $US1242 an ounce, copper was little changed at $US7100 a tonne and yesterday spot iron ore edged up 0.1 per cent to $US139.40 tonne.
OptionsXpress market analyst Ben Le Brun said investors were still looking for assurance that the US Federal Reserve would not start tapering its economic stimulus program too soon.
He also said insurer QBE’s shock announcement yesterday that it expects a $250 million net loss this year continued to weigh upon investor sentiment today.
"It (the market) has completely died on its run this afternoon, unfortunately,” Mr Le Brun said.
"There could be a little bit of institutional selling around these levels,” Mr Le Brun said.
The major banks still had been unable to get much drive, and materials stocks were out of favour ahead of the release of Chinese economic data after the close of the market.
QBE continued to drop, falling $1.18, or 9.83 per cent, to $10.82. QBE shares fell more than 22 per cent on Monday.
Among the big four banks, Westpac lifted 10 cents to $31.19, ANZ firmed three cents to $30.78, Commonwealth Bank put on 36 cents at $75.26 and National Australia Bank was steady at $33.17.
In the resources sector, global miner BHP Billiton was five cents richer at $36.82, Rio Tinto lost 36 cents at $66.17, and Fortescue Metals retreated nine cents to $5.63.
Embattled surf-wear maker Billabong jumped six cents, or 18.46 per cent, to 38.5 cents as it admitted that shareholders have suffered from its drawn-out negotiations for a refinancing deal with two US investment firms.
Brambles spin-off Recall Holdings closed at $4.50 on its first day of trading as a separate entity, after starting trading at $4.15.
And Qantas shares fell three cents, or 3.02 per cent, to a record low of 96.5 cents, following on from the airline’s prediction last week of a first half loss of up to $300 million.
The broader All Ordinaries index was off 2.2 points, or 0.04 per cent, at 5146.2 points.
The December share price index futures contract was up five points at 5148 points, with 28,606 contracts traded.
National turnover was 1.63 billion securities worth $4.65 billion.