Aust stocks close 0.7% weaker

Local market finishes lower as China's manufacturing sector contracts further.

The Australian sharemarket closed lower today after Chinese manufacturing numbers disappointed, retail sales remained uninspiring and the Reserve Bank of Australia kept the official cash rate on hold.

At the 4.15pm (AEST) official market close, the benchmark S&P/ASX200 index was 38.8 points, or 0.7%, lower at 5,479.7 points, while the broader All Ordinaries index fell 38.7 points, or 0.7%, to 5,460.5 points.

Activity in China's manufacturing sector picked up in May but remains in contraction, according to the HSBC purchasing managers' index released this morning.

Retail spending was also sluggish, lifting by 0.2% in April, below forecasts of a 0.3% rise.

Maxim Asset Management investment director Winston Sammut said a number of uncertainties are proving to be more negative than positive for sentiment.

"What's happening with China - is this a short-term aberration or are things going to improve?" he said.

"The numbers weren't horrendous, they're just a bit disappointing.

"There's a level of uncertainty which doesn't help the market."

The Reserve Bank of Australia also kept the official cash rate on hold at a record low 2.5% today, as widely expected.

"The fact the RBA kept rates on hold seems to indicate that business is doing it a little bit tough," Mr Sammut said. "We're going to have low rates for longer."