The local sharemarket fell for the seventh time in the past eight sessions, joining a regional slide ahead of the US Federal Reserve’s meeting this week and after a measure of factory activity in China unexpectedly fell to a three-month low.

The benchmark S&P/ASX 200 Index dropped 8.8 points, or 0.2 per cent, to 5089.6, while the broader All Ordinaries index lost 8.4 points, or 0.2 per cent, to 5093.1.

Global investors remain cautious ahead of a possible reduction in United States central bank stimulus later this week.

Russell Investments investment strategist Graham Harman said: “The great rotation out of cash in to equities will continue in 2014, spurred by lacklustre returns from government bonds, strong reported results from equity funds, continuing low-inflation, and a recovery in global growth.

Energy was the worst-performing sector, down 0.6 per cent as the West Texas Intermediate crude oil price eased to $US96.34 a barrel.

Woodside Petroleum lost 1.4 per cent to $37.22. Mr Abbott has called on West Australian Premier Colin Barnett to stop objections to the Woodside-led Browse liquified natural gas processing plant being developed offshore.

Senex Energy was the worst-performing stock, dumping 8.4 per cent to 70.5¢, after junior oil and gas explorer AWE rejected its merger proposal. AWE added 7.2 per cent to $1.27.

Three of the big four banks were lower. Commonwealth Bank lost 0.8 per cent to $73.63, while Westpac Banking Corporation dropped 0.7 per cent to $30.77 and National Australia Bank shed 0.5 per cent to $33.20. ANZ Banking Group bucked the trend, up 0.1 per cent to $30.29.

“While local shares are likely to become less attractive global investors, relative to other developed equity markets over the next 12 months, the S&P/ASX 200 will be driven higher by local investors searching for tax-effective yield stocks, such as the big four banks and Telstra,” Mr Harman said.

Telstra Corporation rose 0.2 per cent to $4.98.

Investment house Macquarie Group added 0.3 per cent to $51.50, after trading without the rights to an allotment of Sydney Airport stapled securities.

Insurance Australia Group, owner of NRMA and CGU, which last traded at $5.70, entered a trading halt to announce a $1.85 billion deal to buy Wesfarmers Australia and New Zealand insurance underwriting business. The deal is subject to the approval of competition regulators.

Rival insurer QBE Insurance Group dropped 2.3 per cent to $10.36.

Wesfarmers, owner of Coles, rose 0.5 per cent to $41.51 as analysts endorsed the deal to divest a non-core asset. Rival supermarket operator Woolworths edged up 1¢ to $32.66.

Retail stocks were mostly higher as the Australian National Retailers Association Christmas Retail Index predicted Aussie shoppers will splurge more than $8.7 billion on gifts and festive trimmings in the last week before Christmas.

Among the biggest department stores David Jones added 2.2 per cent to $2.81, while Myer rose 5.6 per cent to $2.66.

The biggest resource stocks fell as commodity prices dipped and an HSBC flash reading of China’s purchasing manufacturing index for December was weaker than expected. The latest private survey of Chinese factory activity recorded a three-month low of 50.5. Consensus analysts forecasts tipped a slightly more expansionary reading of 50.9.

BHP Billiton fell 0.5 per cent to $35.66, while Rio Tinto lost 0.3 per cent to $64.91, as the spot price of iron ore, landed in China, dipped to $US136 a tonne.

Industrial rail operator Aurizon dipped 0.4 per cent to $4.68, after announcing it take asset impairments of up to $197 million, slash its locomotive fleet by 28 per cent, and scale back expansion plans due to diminished demand growth from the mining industry.

Mining services has been one of the most volatile sectors this quarter after a number of companies in the industry issued profit warnings and downgraded guidance. But on Monday, mining services companies made some of the biggest gains.

Monadelphous Group was the best-performing stock, climbing 10.1 per cent to $16.51. WorleyParsons added 7.1 per cent to $16.53, while Boart Longyear gained 8.2 per cent to 33¢, UGL rose 9 per cent to $6.91, and Bradken was up 6 per cent at $5.63.

One analyst said that it appeared as fund managers close off their trades for the end-of-year some were taking short positions in mining services stocks that had fallen heavily.

Utilities was the best-performing sector, up 0.9 per cent as APA Group added 3.3 per cent to $6.36.

Amcor rose 1.5 per cent to $11.47, as most analysts endorse the demerger if its Orora brand through a listing on Wednesday. Rival packaging company PACT Group will make its IPO on Tuesday.