The Australian sharemarket lost ground again as investors weighed the risks from the broadening of the Chinese yuan trading range and possible Western government sanctions on Russia.
Trade was subdued as the S&P/ASX 200 index closed 11.8 points, or 0.22 per cent, down at 5317.6 following the referendum in Crimea yesterday which showed an overwhelming 93 per cent support for the region to secede from Ukraine.
The Shanghai composite index was up 0.5 per cent at the close of the ASX as investors shrugged off a rise in the yuan back to a ten-month high of 6.1630 to the US dollar.
Over the weekend the People’s Bank of China widened the trading band from one to 2 per cent around the central bank’s daily peg as part of its plans to liberalise Chinese financial markets.
“It is a positive step in so far as it shows that China will not be deflected from medium term reforms by short term economic considerations (pace the evident slowdown in economic activity in recent months),” National Australia Bank global head of currency strategy Ray Attrill said.
The Australian dollar rallied off the day’s low of US90.20 to US90.50¢ after Westpac chief economist Bill Evans, one of the most accurate forecasters in the past few years, revised his interest rate forecast.
Mr Evans expected a 25 point cut later this year but has switched to a neutral stance until late 2015 when he expects rates to begin rising.
“We still see those (negative) forces operating to moderate growth and inflation pressures but now assess that better news on employment; consumption; and business confidence will dampen those contractionary forces to exclude a sufficiently strong case to cut rates,” he said.
Government 10-year yields were little changed at 4.047 per cent.
In Tokyo the Nikkei index was off 0.2 per cent.
Gold climbed $US3 to $US1383 an ounce, copper reversed a 0.4 per cent drop to trade little changed at $US6415 a tonne and spot iron ore fell 1.3 per cent to $US110.10 a tonne on Friday.
CMC Markets adviser Ric Spooner said it had been a quiet and steady day on the local bourse.
“The opening tone of the week has been cautious, with the market waiting to see what happens in Crimea and although it’s likely that the west is going to impose minor sanctions people would like to make sure that’s the limit of what happens,” Mr Spooner said.
The banking sector weighed on local stocks, while resources stocks were also weaker. Shares in retailer Woolworths fell 84 cents, or 2.3 per cent, to $35.48.
On the local market, gold miners were the best performers as investor caution causes a rise in the price of the precious metal.
Newcrest Mining was up six cents at $12.16.
Other miners were more subdued, with BHP Billiton down 19 cents at $35.47 and Rio Tinto 22 cents lower at $61.28.
The big four banks were mixed, with Commonwealth Bank down 40 cents at $74.85, National Australia Bank down 13 cents at $34.20, Westpac 11 cents lower at $35.54 and ANZ up 19 cents at $32.06.
The US is to publish data on New York’s manufacturing activity and reports on industrial production and long term securities transactions on tonight, Australian time.
America’s central bank is also due to announce its federal funds rate and publish economic forecasts for inflation and growth on Wednesday.
Leighton Holdings shed 72 cents at $20.65 as investors worry about the construction giant’s future profits, lower dividends and more than $5 billion in unpaid bills.
The broader All Ordinaries index was down 11.9 points, or 0.22 per cent, at 5335.2.
The March share price index futures contract was seven points lower at 5318, with 69,290 contracts traded.
National turnover was 1.6 billion securities worth $3.3 billion.