European sovereign debt jitters returned to push the Australian sharemarket into the red today, with deepening territorial tensions between China and Japan compounding the caution.
The S&P/ASX 200 index lost 0.8 per cent in early trade, but rallied to close 22.8 points, or 0.52 per cent, at 4385.5 points as Chinese stocks bounced from a fresh 44-month low.
The Shanghai composite index initially fell more than one per cent, but it rallied to 0.1 per cent up at the close of the ASX on speculation authorities would announce some sort of measure to halt the rout in Chinese stocks.
Japan’s Nikkei index was off 0.5 per cent amid warnings the dispute over the Senkaku/Diaoyu islands could cause significant damage to the world’s second and third biggest economies.
The Australian dollar fell 0.8¢ to $US1.04, before bouncing to $US1.0420, on fears European sovereign debt talks were deadlocked, with Germany and France disagreeing over a timetable for regional bank oversight.
Knocking back French President Francois Hollande’s call for a quick deal, German Chancellor Angela Merkel said it was important that “quality is ensured”.
“It is pointless to do something very quickly that in the end doesn’t work ... It must be thorough, it must be of good quality and then we’ll see how long it takes,” she said.
Fanning fears Greece could be ejected from the euro, German magazine Der Spiegel also claimed that the Greek budget deficit was 20 billion euro, almost double the reported 12.5 billion euro.
“There seems to be a fair amount going on behind the scenes on the much anticipated Spanish bailout request, while over in Greece there is further confusion over its next tranche of bailout money following calls for more leniency over its 2013-2014 austerity programme and the troika talking tough,” National Australia Bank economist Ken Hanton said.
Signalling renewed global growth concerns and the waning effect from the US Federal Reserve’s quantitative easing announcement, gold fell $US13 to $US1760 an ounce and copper dropped one per cent to $US8200 a tonne.
On Friday Shanghai spot iron ore fell 2.5 per cent to $US106.40 a tonne, while steel rebar futures bounced 0.6 per cent today.
Barclays’ analysts wrote that markets were concerned that with business confidence low, growth faltering and export demand poor, weakness in China’s commodity imports would become “more pervasive”, especially with high inventories overhanging sectors such as copper and steel.
“The latest data show that after the broad-based strength that characterised China’s commodity import demand for much of this year, a more mixed picture is emerging, with distinct signs of weakness in some areas but still some pockets of strength.
The strongest Chinese sector for base metal imports in August was lead, which rose 51 per cent year on year, supported by very strong demand from lead acid and e-bike battery makers. Platinum was the precious metal stand-out, rising 43 per cent driven by falling platinum jewellery stocks.
The broader All Ordinaries index had fallen 21.6 points, or 0.49 per cent, to 4,409.2. On the ASX 24, the December share price index futures contract was 13 points lower at 4,397 with 20,889 contracts traded.
CMC Markets senior trader Tim Waterer said the weak commodity prices included a $US10 fall in the gold price and had led to falls in Asian stocks.
He said he also believed investors wanted clarity around the Spanish bail-out situation until they pushed risk assets higher.
"Those factors all translated into a soft performance by materials stocks today on the index,” Mr Waterer told AAP.
"Once commodity prices opened on the downside it set the tone and the market was always up against it."
Mining stocks reacted to that news finishing about 1.3 per cent weaker while energy companies were about one per cent worse off.
BHP Billiton was 29 cents lower at $33.41, Rio Tinto dropped $1.36 to $54.97 and Fortescue fell one cent to $3.60.
Mining services companies had a tough day on news that BHP had axed a large part of a iron ore-related contract with NRW Holdings, that would cost the latter $80 million in revenue.
NRW was nine cents off at $2.25, while fellow contractor Macmahon was 0.5 cent down at 30 cents.
ANZ was 14 cents lower at $24.70, National Australia Bank gained 10 to $25.50, Westpac had lost four cents to $24.58 and Commonwealth Bank shed seven cents to $55.08.
In other local news, agricultural chemicals maker Nufarm has reported net profit of $72.6 million for the year to July 31, 2012, up from a loss of $49.9 million in the prior corresponding period.
Nufarm shares were down eight cents, or 1.4 per cent, at $5.77.
Preliminary national turnover was 1.6 billion securities worth $3.87 billion, with 400 stocks up, 556 down and 316 unchanged.