Aust stocks close sharply lower

Local market follows weak Wall St leads on fresh tapering jitters, investors await US retail sales data, sentiment slips.

The Australian stock market has widened morning losses, closing 1.5% lower following weak Wall Street leads as investors worry about the pace of stimulus tapering in the United States.

At the 1615 AEDT official market close, the the benchmark S&P/ASX200 index lost 1.51% to 5,212 points, while the broader All Ordinaries was 1.45% lower at 5,219.8 points.

IG market analyst Stan Shamu said a combination of factors in the United States and Japan had prompted the falls today.

"The US reporting season kicks in later today and everyone thinks earnings might not mirror the valuations we've been seeing," Mr Shamu said.

"So that might be warranting a bit of caution, particularly in the banking sector, with financials reporting in the US including JP Morgan, Wells Fargo and Bank of America."

He said the tapering issues are also worrying investors as Fed members continue to support quantitative easing despite weak payrolls data over the weekend showing the recovery is a bit stressed.

"Retail sales are coming up tonight in the US and the December period will be an indicator of how the festive season went there. If you consider the weather issues that disrupted jobs numbers, they might affect the retail data," he said.

If retail sales data disappoints and investors are still looking at tapering, that will be a concern, he said.

"It has also been a poor day for Japan, which has dropped over two%.

"Confidence is taking a bit of a back seat and investors are staying out of the market."

IG chief market strategist Chris Weston said speeches from regional US Federal Reserve presidents Charles Plosser and Richard Fisher this week could push US stocks lower.

He said recent comments from regional Fed presidents James Bullard and Dennis Lockhart, pointing out that one poor payrolls report does not make a trend, had also had a negative effect on stocks.

"Certainly from a sentiment perspective, which of course is a vitally important component in short-term trading, it seems that confidence is slipping and thus the bears will be eyeing a more protracted move."

United States stocks tumbled in the overnight session as Wall Street awaits a raft of financial reports as earnings season gets into full swing this week.

No major equities news is expected.

In Australia, the market yesterday closed lower following the release of disappointing US jobs figures.

The benchmark S&P/ASX200 index was down 20.3 points, or 0.38%, lower at 5,292.1.

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