Miners led a steep fall in the Australian sharemarket on Wednesday, with the bulk of the damage caused by BHP Billiton, which posted its worst day in more than seven years.
The S&P/ASX 200 failed to consolidate Tuesday's first foray into the black this year, with the benchmark index slipping 1.6 per cent, or 83 points, to close at the day's low of 5271.1 while the All Ordinaries fell 1.5 per cent, or 79 points, to 5335.6.
Falling commodity prices as well as an announcement by Brazilian prosecutors of a $58 billion civil law suit against BHP Billiton following November's Samarco dam disaster sparked a 9.4 per cent slide in the miner's shares to $18.79, on an especially bad day for resources stocks.
Rival miner Rio Tinto slumped 7.5 per cent to $47.85, while South 32 fell 8.3 per cent to $1.54 and Fortescue fell 4.9 per cent to $3.13. Overnight, iron ore fell 4.3 per cent to $US63.41 a tonne, while Brent crude oil shed nearly 7 per cent over two trading days to $US44.95 a barrel, before the global benchmark stabilised in Asian trade on Wednesday.
"To put things in context, last month on the Australian All Resources index was a record gain for any month ever," Pengana Global Resources Fund portfolio manager Tim Schroeders said.
"It's not unreasonable that we see a pullback and consolidation period and I think that's what we're going to see this month," he said.
FX movements key factor
A weaker-than-expected Chinese purchasing managers' index read, a gauge of manufacturing, as well as a stronger US dollar had also conspired against commodity prices and resources stocks, he said.
"If we look to the start of the year, we see a lot of participants wrong-footed in the weakness in the US dollar," he said.
"Currency movements seem to be a very important factor in dictating momentum in a number of asset classes for the time being."
Mr Schroeders said contributing to the weakness was short covering following Tuesday's strong gains and profit taking in the banks.
Commonwealth Bank of Australia fell 0.6 per cent to $74.61, National Australia Bank lost 1.2 per cent to $27.30, Westpac Banking Corporation fell 1.1 per cent to $30.30 and ANZ Banking Group dipped 0.6 per cent to $24.90.
Supermarket giant Woolworths also suffered a shocker, dropping 7 per cent to $20.71 after ratings agency Standard & Poors cut its credit rating from BBB+ to BBB, while analysts cut their earnings forecast, including Goldman Sachs which cut its 2016 forecast by 10 per cent.
Rival Wesfarmers fell 1.6 per cent to $42.75. Among the other blue chips, Telstra fell 0.4 per cent to $5.62.
Energy stocks also slipped, including Woodside Petroleum which fell 5.3 per cent to $27.10 and Santos, down 8.7 per cent to $4.20.
Some of the day's strongest stocks were beneficiaries of Tuesday's federal budget, Peak Asset Management executive director Niv Dagan said.
"The $2.9 billion allocation into healthcare is seeing a boost in CSL, which is at an all-time high," he said.
CSL shares were the strongest by market cap, rising 1.8 per cent to a record high of $111.37.
Infrastructure stocks were also buoyed, including Transurban, up 0.5 per cent to $12.07. Tuesday's interest rate cut by the Reserve Bank of Australia benefited real estate investment trusts, which dominated the leaderboard. Westfield Corporation rose 2.5 per cent to $10.63, and Stockland Group added 1.8 per cent to $4.53.
"While the interest rate cut benefits the consumer, on a macro level there is some uncertainty regarding the weakness in Australia's growth," Mr Dagan said.
On the ASX, the best performing stock was Nine Entertainment, up 3.8 per cent to $1.24. The worst performer was WorleyParsons, which fell 14.7 per cent.
Utilities led the sectors, up 0.9 per cent joined by health, up 0.7 per cent as the only two sectors to finish in positive territory. Materials was the weakest, down 5.9 per cent.
