The Australian sharemarket extended losses as ongoing emerging market jitters prompted investors to use the overnight bounce on Wall Street to trim positions.
The S&P/ASX 200 index opened in the black, but fell along with US index futures to close 26.8 points, or 0.53 per cent, at 5070.3 despite a tentative 0.7 per cent bounce in the US S&P 500 index last night.
Some strategists are advising investors not to panic, but volatile moves continued to shake out financial markets.
However, compounding uncertainty over the “fragile five” emerging markets – India, Brazil, South Africa, Indonesia and Turkey – Pimco chief executive Bill Gross told Bloomberg China was a “mystery” and a “wild card”.
“Nobody knows what’s there… so we’re just going to have to wonder going forward through this year as to the potential problems in China and other emerging markets,” he said.
Last night a 1.5 per cent fall in US factory orders beat expectations but underscored warnings the world’s biggest economy was decelerating.
However, keeping a lid on sentiment, two Fed speakers said they expected to see further QE tapering at upcoming meetings and the hurdle was high for any pausing in tapering.
Market attention is now on Friday’s non-farm payroll data where a number over 200,000 could spark a fresh bout of risk aversion.
“At this stage the market is not expecting the Fed to pause its policy tapering, but it may be leaning this way waiting for further evidence from the data this week,” Royal Bank of Scotland currency strategist Greg Gibbs said.
“The Fed appears unlikely to be knocked off its tapering trajectory by a couple of reports and will potentially look through a few months softer data.”
In Tokyo after a volatile session the Nikkei rallied after lunch to trade 1.5 per cent up, paring its 4.2 per cent loss yesterday.
The Australian dollar slipped from its overnight high of US89.2¢ to US88.80¢, while government 10-year yields rose 2.1 points to 4.016 per cent.
IG chief market strategist Chris Weston said uncertainty about equity markets and emerging market commodities were causing investors to be nervous.
Investors were also waiting for more earnings results to be delivered by local companies to get a clearer picture of the short term direction of the top 200 listed companies.
"Equities are a confidence game,” Mr Weston said.
"We need to have that clarity that earnings aren’t going to be hit further down the line and until we do, people are going to tread with caution."
The big banks all fell, while the resources sector was mixed.
Echo Entertainment was one of the worst performers, losing 14 cents, or 6.03 per cent, to $2.18 after the casino owner’s half year profit dropped by 30.5 per cent.
Its chief executive John Redmond also announced he will leave the casino operator after slightly more than a year in the job.
BHP Billiton shed 22 cents to $35.28, while Rio Tinto gained 48 cents to $64.59.
Commonwealth Bank lost 71 cents to $72.49, National Australia Bank dropped 25 cents to $32.14, Westpac shed nine cents to $30.31 and ANZ was 28 cents weaker at $29.02.
The broader All Ordinaries index was down 25.4 points, or 0.5 per cent, at 5088.7.
The March share price index futures contract was 32 points lower at 5018, with 36,943 contracts traded.
National turnover was 1.75 billion securities worth $5.49 billion.