The sharemarket was hammered yesterday after Chinese economic data missed market expectations, adding to pressure from a slump in commodity prices that followed the release of disappointing US retail sales and consumer confidence data on the weekend.
China's economy grew 7.7 per cent in March quarter compared with the same period a year earlier, short of the 8 per cent that economists had been expecting. Industrial production growth of 8.9 per cent was short of the expected 10 per cent, and fixed-asset investment and retail sales also missed forecasts.
On the weekend, US retail sales for March fell 0.4 per cent versus market expectations of a 0.1 per cent rise, and the Thomson-Reuters/University of Michigan consumer confidence index declined to 72.3 early this month, from 78.6 in late March. Additionally, US producer prices fell 0.6 per cent in March versus an expected 0.4 per cent decline.
Locally yesterday, the benchmark S&P/ASX 200 closed down 0.9 per cent at 4967.9, its biggest fall in four weeks. However, the index recovered from a four-day low of 4933.3.
"The afternoon rally off the low was actually very impressive and again makes me think the market in April will be a lot higher," said Goldman Sachs institutional dealer Richard Coppleson.
Weak economic data in the two largest economies were causing resources investors to "capitulate", but resources had already priced in a lot of bad news, said AMP Capital's head of dynamic asset allocation. Nader Naeimi. China's disappointing data would give it scope to ease monetary and fiscal policy in response, said Mr Naeimi. "The good news is that China's inflation is also running below expectations," he said.
Stop-loss selling, driven by heavy selling of share price index futures, was followed by "tepid" bargain hunting in resources, traders said.
"At these levels, there is a perception of value in resources, but there's still obviously a very negative vibe towards the sector," said BBY institutional dealer Anson Rosewall. "But with the capitulation in gold, there could be some short-term selling in the sector to cover losses in gold-related bets."
Among diversified miners, BHP Billiton fell 3.1 per cent to $32.31 and Rio Tinto fell 4.8 per cent to $55.09. Fortescue Metals fell 6.2 per cent to $3.76 and fellow iron ore miner Atlas Iron fell 7.7 per cent to $1.02.
Goldminer Newcrest Mining fell 8.5 per cent, and in the mid-cap gold sector Silver Lake Resources, Resolute Mining, Kingsgate and Medusa Mining fell 14-16 per cent.
Mining-linked industrial stocks were also under pressure, with Toll, Downer, Monadelphous and Seven Group down 3.5-7 per cent.
Defensive and high-yield stocks outperformed, with Telstra up 0.9 per cent, Commonwealth Bank up 0.7 per cent and National Australia Bank up 0.5 per cent.
CBA was upgraded to neutral from sell and NAB to buy from neutral by Goldman Sachs.
IG markets strategist Stan Shamu said investors were looking for somewhere safe to park their money, making defensive stocks appealing. "We're seeing all of the major resources names struggle," Mr Shamu said.
