Australian shares had their worst session in a month as investors rushed to offload mining stocks after the iron ore price fell to its lowest since June and disappointing Chinese export data released over the weekend sparked renewed fears about ongoing demand growth from Australia's largest trading partner.
The benchmark S&P/ASX 200 Index dropped 50.8 points, or 0.9 per cent, on Monday to 5411.5, while the broader All Ordinaries Index lost 0.8 per cent to 5430.8. It was the biggest daily fall on the local bourse since February 4.
In the United States on Friday the S&P 500 and Dow Jones Industrial Index edged higher after official non-farm payrolls data showed a bigger than expected improvement in employment in the world's biggest economy. But the positive lead from the US was overshadowed after China reported the biggest drop in exports since the global financial crisis and inflation slowed to a 13-month low.
In China on Monday afternoon the currency lost 0.5 per cent. The People's Bank of China lowered the daily reference rate for the renminbi by 0.18 per cent, the most since July 2012. In Chinese equities the Shanghai Composite Index and Hong Kong's Hang Seng were both trading more than 1.5 per cent lower.
Local resources stocks were pummeled as commodity prices dropped on worries about the Chinese economy. Mining was the worst-performing sector, down 4 per cent after the spot price for iron ore, landed in China, lost 2.3 per cent to an eight month low of $US114.20 a tonne, while Shanghai copper futures plunged to the lowest level since September 2009.
Resources giant BHP Billiton shed 4.1 per cent to $36.16. Rio Tinto, Australia's biggest iron ore miner, lost 5.8 per cent to $61.20, while the third force in iron ore, Fortescue Metals Group, fell 9.4 per cent to $4.92.
Junior iron ore miners, notably Arrium, Atlas Iron and BC Iron, were among the hardest hit.
"The unexpected weakness in China's export numbers was possibly distorted by the Chinese New Year holidays, but nevertheless looking ahead the outlook for Australia's two biggest exports, iron ore and coal, is soft because demand growth is low to moderate while supply is increasing," Alphinity Asset Management portfolio manager Stephane Andre said.
UBS China analyst Tao Wang wrote he still expects China's export to strengthen through 2014, on the back of reviving US and European demand. "However, given the renminbi's persistent appreciation against the currencies of China's key trading partners and major competitors the export recovery may be weaker than the 10 per cent year-on-year annual growth UBS is currently forecasting," Mr Wang said.
Oil and gas developer Santos lost 1.8 per cent to $14.07 as the company suffered a major setback in its efforts to gain public acceptance for its plans to drill for coal seam gas in New South Wales after revelations of a lingering problem with uranium contamination in ground water in the Pilliga forest.
Energy stocks were mostly lower as Brent crude oil fell to $US108.43 a barrel, but Australia's biggest oil producer Woodside Petroleum added 0.1 per cent to $38.71.
Australia's biggest gold producer, Newcrest Mining, lost 4.1 per cent to $11.51 as the spot price of gold fell to $US1333.72 per ounce. Gold developer Silver Lake Resources was the worst-performing stock, dumping 11.5 per cent to 46¢.
The big four banks were also lower. Commonwealth Bank of Australia fell 0.3 per cent to $75.75, while Westpac Banking Corporation lost 0.4 per cent to $33.77. National Australia Bank shed 0.3 per cent to $34.65 and ANZ Banking Group dropped 0.8 per cent to $32.31.
Telstra Corporation shed 0.8 per cent at $5.03.
Construction and engineering contractor Leighton Holdings was the best-performing stock in the ASX 200, climbing 11.4 per cent to $23.09, on the news controlling shareholder Hochtief has made a $1.15 billion conditional cash takeover at $22.15 per share.
Healthcare was the best-performing sector, up 0.8 per cent, as plasma and vaccine maker CSL added 0.8 per cent to $72.48.
Clothing and footwear group Pacific Brands surged 8.7 per cent to 56¢ following a block trade of 10 million shares at 53¢ a piece.