Risk appetite fell on Tuesday as disappointing economic data piled on top of warnings from Chinese regulators that US and European stock markets were over-priced compared to economic growth and Chinas own domestic property prices were in a bubble.
Australias stock market turned a 1 per cent opening gain into a 0.4 per cent decline, closing 27.3 points lower at 6762.3 points.
BHP hit an all time high of $50.81 before closing 1.9 per cent lower at $49.13. And Rio Tinto also hit new highs of $130.30 before closing 0.4 per cent lower at $127.18.
Shaw and Partners investment advisor Craig Sydney said Tuesdays session was weak, but only when compared to Mondays surprisingly strong session.
We are only back to where we were last Wednesday, he said.
I think there is an element of profit taking and we were probably getting a bit ahead of ourselves this morning…I guess our market, unlike the US, is not so dominated by tech.
Futures markets were pointing to declines on Wall Street overnight after very strong sessions on Monday.
Australian housing approvals data plunged 19.4 per cent, seasonally adjusted, compared to expectations of a milder 3 per cent fall in January. Chinas financial regulator dampened risk appetite during Tuesdays session, warning about assets bubbles in US and European financial markets and property bubbles in China.
Portfolio manager at Tribeca Investment Partners, Jun Bei Liu, noted this commentary would have spooked markets, even though Chinese authorities have been warning about leverage for some time.
It is as we expected, but the equity market does not like the commentary, she said.
Australias gross domestic product data was due out on Wednesday and was expected to be quite reasonable given what we have seen in terms of activity on the ground, she added. The consensus forecast was for quarterly growth of 2.5 per cent.
Both Oil Search and Qantas dropped after going ex-dividend, while Fortescue Metals fell 4.7 per cent, and Afterpay dropped 1.7 per cent on news a major competitor was building a $US1 billion warchest. Gold miners dragged as falling bond yields eased inflation concerns. And Telstra dragged with a 1.3 per cent fall to $3.11. Commonwealth Bank, ANZ, and NAB closed higher, while Westpac declined slightly. And supermarket stocks Coles, Metcash, and Woolies outperformed the index.