Australian stocks eased 1.2 per cent on Tuesday as initial optimism about the boost of a stronger yuan gave way to fears that more costly Chinese exports could interfere with a recovery in global growth.
Analysts said a yuan revaluation would still help boost Chinese domestic demand over time, and hence demand for Australian commodities, but investors were focusing on the negatives such as higher-cost consumer goods out of China.
“We couldn’t really understand why the market reacted so strongly to it yesterday. Nothing really has changed, it is going to be a gradual shift and it is not going to be the catalyst people were thinking for the next move up (in stocks),” said IG Markets research analyst Ben Potter.
Discretionary retailers were among the weakest stocks on Tuesday, with the sector index down 1.4 per cent, led down by Harvey Norman off 2.8 per cent and JB Hi-Fi down 3.6 per cent on worries about more expensive imported goods. JB also had a broker downgrade after recent price strength.
The benchmark S&P/ASX 200 index ended down 54.3 points at 4,558.3, after gaining 1.3 per cent on Monday.
Potter said the market looked overextended on a technical basis after seven firmer sessions in the last 10, and was due for a period of consolidation.
New Zealand’s benchmark NZX 50 index fell 0.5 per cent to 3,054.2.
Shares in Telstra topped the most actives list but gave up most of Monday’s gains as investors realised the path to a final agreement with the government on a broadband network was still a long one. The shares lost 2.4 per cent to A$3.26.
Rural services firm Elders Ltd tumbled 46 per cent to a record low A$0.44 in heavy volume as the shares resumed trading after a profit warning.
The company said it now expected a full-year loss on a decline in demand for branded farm supplies. Elders shares posted their heaviest volume on record, at 33 times its daily average.
The forecast also weighed on farm chemicals group Nufarm on worries about demand for its products, with its shares off 5 per cent at A$5.70.