The Australian sharemarket retreated further from six-week highs hit last week, as lower commodity prices weighed on mining and energy stocks, while mixed trade data out of China rekindled worries about the health of the world's second-largest economy.
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The S&P/ASX 200 index fell 30 points, or by 0.7 per cent, to 5202.9, dropping for a second day, while the All Ordinaries was down 32 points, or by 0.8 per cent to 5234.6.
Trading was pushed down by the combination of commodity and financial companies that make up the top end of the ASX, with a few notable exceptions such as ANZ Banking Group bucking the downward trend.
Fidelity Australian equities portfolio manager Kate Howitt said the market was entering a period of volatile trading and corrections as the key stories investors had been following petered out.
"The fundamental conditions in the market are still here, but it's already reflected in the market prices. So these drivers don't provide much direction, so we'll see choppy and directionless trading through most markets including local equities," she said.
Tuesday was a choppy trade of trading. Energy stocks and miners were under pressure from the start after a drop in major commodity prices overnight, including a 5 per cent plunge in oil.
The mood was further soured by mixed trade data out of China, which showed that imports dropped 17.7 per cent in August, continuing the longest streak of import declines in six years. The news also knocked the Chinese share market from a seven-week high and weighed on regional sentiment.
The energy giants all lost value: Santos 6.2 per cent lower at $5.56, Origin Energy 5.4 per cent at $5.93 and Woodside Petroleum shed 2 per cent to close at $31.36.
Meanwhile, the miners finished lower. Rio Tinto finished down 2.6 per cent at $53.4, BHP Billiton dropped 2.2 per cent to $24.81, while iron ore major Fortescue slumped 8.8 per cent to $2.19.
Ms Howitt identified two themes that could soon to completed: the slowing Chinese economy hurting commodity prices and the probable rise of the US eventually increasing rates boosting the greenback as central to current trading behaviour.
"Looking forward, we'll get to a point soon where everyone who was going to sell out of commodities has, and everyone who wanted to opt for US dollar denominated companies here (such as many healthcare stocks) also have. This means the higher priced stocks may be hit by profit taking while commodity stocks could get a bounce," she said.
While the biggest losses of Tuesday were among the usual suspects such as Liquefied Natural Gas, down 10 per cent $1.65 and Fortescue Metal Group, down 8.8 per cent to $2.19, the upward momentum drivers were more diverse.
ANZ led the market up after revealing its plans to target China's booming middle class. It finished up 0.6 per cent at $28.51 while fellow big banks languished.
Commonwealth Bank of Australia finished 0.6 per cent lower at $74.23, Westpac lost 0.6 per cent at $30.44 and National Australia Bank was down 0.6 per cent at $31.23.
Another leader of gains was the Transurban Group, which continued to be buoyed by strong growth numbers revealed earlier this week. It closed up 2.6 per cent at $10.06.
While industrials, consumer staples, health and information technology sectors finished the day higher, most indexes finished in the red.
Energy stocks plunged 3 per cent, with materials, telecoms, consumer discretionary, financials and utilities also finished lower.
"Certainly the mood of the market has changed," Australian Stock Report head of research Chris Conway said, adding the downward direction was likely to continue.
"Last week, the fear of missing out saw bullish momentum build all week, whilst to start this week it's the fear of paying too much for stocks that have rallied on next to no fundamental changes that is driving decisions."
