After being one of the top sharemarkets in Asia for the past two weeks, Australian shares underperformed on Tuesday, led down by the mining and bank stocks.
Futures trading had suggested a muted Tuesday session ahead of a crucial two-day US Federal Reserve meeting. However the market opened lower, and losses accelerated through the afternoon.
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At close of trade the S&P/ASX 200 ended 1.4 per cent, or 74 points lower, to 5111.4, the biggest loss in nearly three weeks. The broader All Ordinaries fell 1.4 per cent or 73.7 points to 5168.6.
Upbeat consumer confidence data failed to cheer investors, despite the ANZ-Roy Morgan consumer confidence index rising to its highest level in 14 months.
The day's underperformance was due to a combination of factors, IG market strategist Evan Lucas said.
A fall in the oil price, a slipping Australian dollar from its eight-month high, and a pullback in a rally that has seen the local sharemarket outperform its regional and developed market peers over the past week and a half as well as a fall in Chinese sharemarkets were to blame.
"We had the RBA minutes as well and there was nothing in the minutes that would give you confidence of further rate cuts," he said.
In its March meeting minutes the Reserve Bank of Australia appeared sanguine in its view on Australia's consumer and housing-led rebalancing, but remained cautious about the recent market volatility.
However, that was before the Australian dollar had rebounded to almost US76¢, noted Capital Economics' chief Australia economist Paul Dales.
"The stronger exchange rate is one reason why the RBA may yet have to reduce interest rates below 2 per cent," he said.
Few sharemarkets around the Asian region posted gains on Tuesday. The Shanghai Composite Index fell more than 1 per cent by lunchtime while Japan's Nikkei, trading steadily ahead of a rate decision by its central bank, plunged almost 1 per cent after the Bank of Japan kept its monetary policy steady.
The central bank left interest rates at negative 0.1 per cent and maintained its base money target for keeping cash and deposits in circulation at ¥80 trillion annually.
Locally, the big four banks and miners dragged the most on the index by weight. Commonwealth Bank of Australia fell 1.8 per cent to $75.45, Westpac Banking Corporation shed 1.8 per cent to $32.30, National Australia Bank fell 1.8 per cent to $27.79 and ANZ Banking Group lost 1.4 per cent to $25.39.
BHP Billiton fell 3.4 per cent to $17.13 and Rio Tinto fell 3.9 per cent to $42.97.
Energy names also struggled, with the energy sub-index the worst performer, down 3.6 per cent. Woodside Petroleum lost 3.9 per cent to $25.72 and Origin Energy fell 5 per cent to $4.94.
In the other blue chips, Woolworths fell 1.3 per cent to $22.79, Wesfarmers fell 0.6 per cent to $41.27, while Telstra was one of the stronger performers of the blue chips, rising 0.2 per cent to $5.29. The telecommunications sector was the only sub-index to post a gain, up 0.1 per cent.
Property names powered the list of the gainers, of which there were just 30 out of 200 stocks. Westfield Corporation was the biggest lift, rising 1.4 per cent to $10.06. Scentre Group rose 0.5 per cent to $4.35 and Dexus Property Group climbed 0.8 per cent higher.
In company news, Qube and Asciano went into a trading halt after Qube flagged a $9.05 billion bid for ports and rail group in a joint-takeover offer with Canada's Brookfield Infrastructure. Asciano rose 1.4 per cent to $8.99 after returning to trade and as its board recommended the offer.
The best performing stock of the day was Cover-More Group, up 3.8 per cent to $1.49. The worst performer was Whitehaven Coal, which shed 8.1 per cent to 68.5¢.