The Australian sharemarket fell for the third straight session after the Reserve Bank left rates on hold and a slump in Chinese services data compounded lingering uncertainty from the bailout of Portugal’s Banco Espirito Santo.
The S&P/ASX 200 index dropped 22.3 points, or 0.4 per cent, to 5518.6 despite the 0.7 per cent rally on Wall Street last night.
US stocks staged a late surge after European stocks surrendered early gains and Germany’s DAX index fell 0.6 per cent as the bailout failed to quell fears the cleanout of high yielding assets that started last week was over.
Acquasia credit analyst Mark Bayley said there were other European Banks in a similar predicament to BES and “investors will be on the look out for them”.
The Australian dollar edged US0.1¢ up to US93.35¢ after the Reserve Bank kept interest rates on hold at 2.5 per cent, while government 10-year yields dropped 2.4 points to 3.468 per cent.
The Shanghai composite index was off 0.7 per cent at the close of the ASX after the services PMI tumbled 3.1 points to 50 points, the lowest level since the index was started in 2005.
“The data highlights the uncertainty in China with deregulation and reforms running at different speeds, at times tightening financial conditions and at others and in different sectors easing them,” Royal Bank of Scotland strategist Greg Gibbs said.
“The property market downturn gathered pace in recent months and the service sector PMI data suggests it is generating a bigger drag on the economy.”
In Tokyo the Nikkei index fell 0.9 per cent.
Spot iron ore firmed 0.1 per cent to $US95.40 a tonne while Dalian iron ore futures were up 1.7 per cent on stimulus hopes in the wake of the weak services data.
Copper climbed 0.6 per cent to $US7120 a tonne while gold slipped $US4 to $US1289 a tonne.
CMC Markets chief strategist Michael McCarthy said the market was unfortunately following a trend experienced over the last two years.
"The market breaks though a new high, hovers above it for a while, but once it pushes back, there’s a clear bias shifts towards selling,” he said.
"With low overall market volatility, if you sell near the highs there is a fair chance you’ll see a pullback that could lead to a rewarding opportunity to buy back in again."
The biggest falls were among gold stocks, following a 0.5 per cent fall in the price of the precious metal overnight.
Newcrest Mining slumped 16 cents, or 1.5 per cent, to $10.64 while Beadell Resources dropped 2.5 cents, or 4.8 per cent, to 49.5 cents, according to preliminary figures.
The company earning reports began to pour in, with hearing implants maker Cochlear’s strong outlook well received.
Its shares soared $6.46, or 10.3 per cent, to $69 after the company reported a decline in net profit, but forecast growth in sales.
Toll road operator Transurban reported a 45 per cent rise in annual profit, but its shares fell seven cents to $7.58.Shares in engineering Group Downer EDI fell 20 cents, or 4.2 per cent, to $4.58 with traders focused on its pessimistic outlook for the mining sector rather than a six per cent rise in profit.
The big miners and banks all weighed on the market with share price falls.
The broader All Ordinaries index was down 21.8 points, or 0.39 per cent, at 5511.5.
The September share price index futures contract was 10 points lower at 5474 points, with 23,773 contracts traded.
National turnover was 2.2 billion shares worth $5 billion.