Shares swung around on Tuesday, falling at the open then bouncing higher at lunchtime before selling in miners and banks intensified to push the bourse into the red at the close.
Bond proxies, which have been heavily sold off in recent times, enjoyed some slight relief as investors positioned themselves ahead of the expected US Federal Reserve rate rise, early Thursday.
The benchmark S&P;/ASX 200 Index and the broader All Ordinaries Index each slid 0.3 per cent to 5545 points and 5600.7 points, respectively.
A fairly data-intensive day, including a soft local business conditions reading as well as solid Chinese industrial production and retail sales numbers, meant there was plenty of information for investors to sift through.
"Investors have some concern about the softness in the economy and whether we'll see a technical recession (or two quarters of economic contraction), and the mixed bag data hasn't really cleared that up," said Kerry Craig, global market strategist at JP Morgan. "But today's whipsawing is following on from what was happening around Asia, with a bit more nervous positioning coming to the end of 2016.
Resource giants BHP Billiton and Rio Tinto were sold off, with Rio slumping 2.5 per cent, while BHP was only off 0.8 per cent. Fortescue dipped a hefty 5.9 per cent as iron ore futures in China slipped a bit, indicating spot prices may lose the strong momentum that pushed them to a two-year high on Monday night.
There wasn't much love for the big four banks either; all were down between 0.1 per cent and 1.2 per cent. Investors bought consumer staple Wesfarmers, owner of Coles, sending the stock up 1.1 per cent, while Woolworths closed down 0.1 per cent.
While the surge in commodity prices didn't do much for the bigger players on the ASX, the Australian dollar found some support and spiked to a one-month high of US75.15¢ before settling at US74.92¢.
In other equities news, shares in Freelancer jumped 3 per cent after the company announced it will acquire two rival online freelancing companies, Nubelo and Prolancer, gaining exposure to the largest Spanish and Portuguese-language marketplaces.
Shares in retailer Lovisa Holdings jumped 12.4 per cent after the company announced that same-store sales growth for the year exceeded 10 per cent. Fellow retailers JB Hi-Fi and Baby Bunting were also up 1.6 per cent and 3.6 per cent respectively.
Stock Watch: NEXTDC
Shares in data centre operator NEXTDC closed up 2.36 per cent per cent at $3.03 after Citi said they were oversold, while decreasing their valuation slightly to $4.50. The broker's analysts believe the potential threat of overseas competitor AirTrunk becoming established in the Australian market will be mitigated by the fact that growth in demand across the industry will absorb any expansion. Half of NEXTDC's revenue comes from retail, whereas AirTrunk is purely a wholesale service provider. Retail sales can subsidise NEXTDC's wholesale operations, and it can therefore price wholesale services more aggressively to win strategic deals. As companies continue to outsource and Australian IP traffic is expected to grow 24 per cent by 2019, Citi expects NEXTDC to increase supply by 25 per cent in Sydney and 23 per cent in Melbourne. Even if AirTrunk is successful locally, and if NEXTDC's pricing fell by 20 per cent and volumes fell by 5 per cent at NEXTDC's main data centres, Citi's valuation would only wall fall 22 per cent to $3.51, still well above the current stock price. Profits are estimated to grow from $1.8 million in 2016 to $33.3 in 2019.
Business conditions
Business conditions are at a 19-month low, with NAB's monthly index falling from +7 to +5, dragged down by a slowdown in corporate profits and a deterioration in the retail sector. NAB chief economist Alan Oster said the soft result raised questions about the underlying momentum in the economy, amid expectations that both the housing construction cycle and commodity exports would peak in coming months. It wasn't all bad news in the NAB survey as business confidence remained relatively strong, with the monthly index edging up to +5 (from +0.4) in November.
China's economy
China's economic stabilisation held in November, offering policy makers more room to switch focus away from stimulus and towards curbing financial risks. Industrial production climbed 6.2 per cent from a year earlier, compared estimates of 6.1 per cent. Retail sales advanced 10.8 per cent, while fixed-asset investment increased 8.3 per cent in the first 11 months of the year. The world's second-largest economy has remained resilient in the final quarter of the year as exports were cushioned by a weaker yuan and factory prices snapped out of their deflationary funk.
Iron ore
Iron ore jumped 2.4 per cent to a two-year high of $US83.58 a tonne on Monday night, however Dalian iron ore futures slipped slightly during Tuesday's session. Supporting sentiment was the upbeat Chinese data with industrial output and retail sales both growing above expectations in November. Meanwhile, iron ore shipments out of Port Hedland fell just below record highs in November. However, analysts expect iron ore prices to ease as stockpiles fill overseas ports to capacity.
Aussie dollar
The Aussie dollar briefly spiked to a one-month high of US75.15¢ just before midday on Tuesday but once again failed to hold above the US75¢ mark and was fetching US74.88¢ in late trade. The currency was buoyed by rising commodity prices and as the US dollar lost its mojo ahead of the Federal Reserve's two-day policy meeting starting later on Tuesday, but traders said there was a noticeable lack of enthusiasm in the market ahead of the US central bank's decision, due early Thursday morning, Australian time.