By Virginia Harrison, MarketWatch
SYDNEY (MarketWatch) — Australian shares sank on Wednesday as a pick-up in Chinese manufacturing activity failed to offset a string of disappointing U.S. economic reports, and investors remained cautious ahead of earnings season.
The benchmark S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +0.78% lost 0.9%, or 37 points, to end the session at 4,225.70.
Home prices, consumer confidence drop
U.S. home prices fell again in November, while January's consumer confidence gave back some of its recent gains.
The market reacted to a negative lead from Wall Street after US consumer confidence, data showing slowing business activity and a fall in home prices troubled investors. Read more about the U.S. session.
“The U.S. data last night let people know the recovery is not [progressing] as quickly as we thought,” Lucinda Chan, investment adviser at Macquarie Private Wealth said.
“There is also a bit of caution with reporting season coming up and some profit-taking after a strong start to the year,” she said.
Data from China showed a mixed picture of manufacturing activity in the world’s second-largest economy, as HSBC’s Chinese manufacturing survey remained stuck in contraction in January, while the government version indicated the sector is now growing.
Macquarie Private Wealth’s Chan said the China readings “weren’t too bad, but the U.S. data overshadowed them and resulted in weaker commodity prices, which hit our market pretty badly today.”
Of large-cap miners, BHP Billiton Ltd. /zigman2/quotes/201448516/delayed AU:BHP +2.50% /zigman2/quotes/208108397/composite BHP +0.83% lost 1.5% after the firm said it would cut up to 155 workers from its nickel division due to the impact of a strong Australian dollar.
Fortescue Metals Group Ltd. /zigman2/quotes/202351558/delayed AU:FMG +4.07% dropped 1.4% and Rio Tinto Ltd. /zigman2/quotes/200083756/delayed AU:RIO +2.46% /zigman2/quotes/202627887/composite RIO +0.72% lost 0.6%.
Shares in Energy Resources of Australia Ltd. /zigman2/quotes/202164166/delayed AU:ERA 0.00% /zigman2/quotes/208082385/delayed EGRAF +16.75% slumped 13.6% after the uranium miner swung to a sharp annual loss in 2011, with the result impacted by heavy rainfall and poor quality ore.
Other commodity-linked stocks fell after prices for raw materials weakened overnight. OneSteel Ltd. and Alumina Ltd. /zigman2/quotes/210515632/delayed AU:AWC -0.34% each shed 2%.
Fairfax Media Ltd. dazzled, with shares surging 10.1%, after reports that iron ore billionaire Gina Rinehart’s stake in the company has increased to approximately 12%.
Elsewhere in the media sector, Ten Holdings Ltd. edged up 0.6% while Seven West Media Ltd. /zigman2/quotes/204453093/delayed AU:SWM 0.00% shed 2.9%.
Property firms were weak, as Stockland Ltd /zigman2/quotes/206429402/delayed AU:SGP +1.79% declined 1.2% and Lend Lease Ltd. /zigman2/quotes/205094623/delayed AU:LLC +0.28% fell 2.7% while building products maker James Hardie Industries SE /zigman2/quotes/201411224/delayed AU:JHX -0.84% /zigman2/quotes/200042563/composite JHX -0.60% dropped 2%
The falls came as a Housing Industry Association survey showed new home sales in Australia fell 4.9% in December. Separately, the Australian Bureau of Statistics reported capital city house prices fell 1% in the fourth-quarter of last year.
Also on the economic front, manufacturing improved slightly in January, with the Australian Industry Group - PwC Australian performance of manufacturing index rising 1.4 points to 51.6.
“The growth was underpinned by expansion in key sub-sectors such as food & beverages and transport equipment,” said Australian Industry Group chief executive Heather Ridout.