The Australian sharemarket finished a quiet session in the red after the World Bank downgraded its global growth forecast, turning the spotlight on stretched valuations.
Following a flat lead from Wall Street the S&P/ASX 200 index lost 15.6 points, or 0.29 per cent, to 5454 with miners leading the losses as the Australian dollar edged higher amid talk of a return to parity with the US dollar.
The World Bank said the global economy would expand 2.8 per cent this year, compared with its January projection of 3.2 per cent, while the US forecast was slashed to 2.1 percent from 2.8 percent and estimates for Brazil, Russia, India and China were also lowered.
The Shanghai composite index was off 0.2 per cent at the close of the ASX after MSCI bowed to fund manager pressure saying Chinese stocks would not be included in its benchmark global indices. Fund managers objected because of restrictions placed on foreigners in trading Chinese stocks.
In Tokyo the Nikkei index was up 0.4 per cent.
The Australian dollar rose US0.3¢ to US93.90¢ and Government 10-year yields jumped 6.9 points to 3.853 per cent despite the ANZ-Roy Morgan consumer confidence index and the Westpac measure both showing no evidence of an inclination to bounce from the post-Budget plunge.
The dollar has gained upside momentum since the European Central Bank cut rates last week and introduced negative rates for bank excess reserves, making domestic yields more attractive to eurozone investors.
“The euro and yen should be increasingly viewed as the best currencies to fund carry trades, in our view,” Royal Bank of Scotland currency strategist Greg Gibbs said. “As such, we expect both to weaken.”
Global benchmark US 10-year yields climbed 5 points to 2.65 per cent after an increase in the NFIB Small Business Optimism index and a jobs opening report bolstered hopes the winter slowdown was receding.
Spot iron ore fell 0.7 per cent to US93.60 a tonne yesterday, Dalian iron ore futures slipped 0.3 per cent today, copper bounced 0.2 per cent to $US6680 a tonne and gold climbed $US6 to $US1261 an ounce.
Lonsec senior client adviser Michael Heffernan said uninspiring leads from overseas markets, lower iron ore prices affecting mining stocks, and two surveys showing flat consumer confidence had contributed to the modest drop.
Two separate surveys show that consumer confidence remains in the doldrums, with households worrying about the impact of the May budget’s spending cuts on their finances.
“Hence the market sort of did nothing today,” Mr Heffernan said.
He said investors initially reacted negatively to a profit downgrade by travel agency Flight Centre but then reversed direction after concluding that the downgrade was not so bad after all.
In the resources sector, global miner BHP Billiton fell 34 cents to $35.94, Rio Tinto was 24 cents lower at $59.40, and Fortescue Metals shed nine cents to $4.54.
WA iron ore miner Aquila Resources was 12 cents higher at $3.61 as Mineral Resources appeared to be positioning for a bidding war for Aquila.
Engineering firm Downer EDI plunged 59 cents, or 11.15 per cent, to $4.70 after BHP Billiton cancelled a $360 million mining services contract with Downer at a Queensland coal mine.
The major banks were mixed. National Australia Bank scraped off one cent to $33.63, Commonwealth Bank backtracked 22 cents to $82.20, Westpac gained 12 cents to $34.75, and ANZ added 14 cents to $33.90.
In the retail sector, travel agency Flight Centre was 53 cents higher at $46.43 despite cutting it profit forecast.
The broader All Ordinaries index was down 16 points, or 0.29 per cent, at 5432.5 points.
The June share price index futures contract was 21 points lower at 5456 points, with 20,096 contracts traded.
National turnover was 1.24 billion securities worth $3.15 billion.