Cliff edge puts investors on defensive

Investors turned their attention to defensive stocks after the resources sector fell.

At close, the benchmark S&P/ASX 200 Index was down 9.5 points, or 0.21 per cent, at 4447.3, while the broader All Ordinaries fell 10.8 points, or 0.24 per cent, to 4462.6.

RBS Morgans Brisbane senior private client adviser Bill Chatterton said the market had recovered slightly from the morning session, led by gains in defensive stocks, after the resources sector fell.

"There's been more of a focus on those stocks that have less volatile earnings," he said.

Telstra closed 4? higher at $4.33 while healthcare company CSL was up 29? at $50.30.

The big miners all posted losses. BHP Billiton finished 20? down at $34, Rio Tinto dived $1.08 to $56.70 and Fortescue slumped 5? to $3.80.

Of the big banks, NAB gained 5? to $23.88, ANZ was up 12? at $23.82, Westpac added 14? to $25.03 and Commonwealth Bank fell 24? to $58.98.

The Australian market took its early lead from a disappointing night on Wall Street where the Dow fell 0.69 per cent, or 89.24 points, to 12,878 over nervousness about political negotiations over the US fiscal cliff.

Locally, national turnover was 1.505 billion shares worth $3.418 billion.

Meanwhile, the dollar was trading on renewed concerns over the fiscal cliff of tax rises and spending cuts in the US. Late on Wednesday the dollar was at US104.46?, down from US104.80? on Tuesday.

The currency lost ground overnight after the US Senate Majority Leader, Harry Reid, warned that little progress had been made in talks between Democrats and Republicans trying to avoid the "fiscal cliff".

The parties are trying to find a way to bring down the US budget deficit without allowing the automatic tax hikes and spending cuts to go ahead, which could push the US back into recession.

On the debt markets, bond futures prices rose strongly, with the December 10-year contract at 96.865 (implying a yield of 3.135 per cent), up from 96.785 (3.215 per cent) on Tuesday.

The three-year contract was trading at 97.330 (2.670 per cent), up from 97.270 (2.730 per cent).

Nomura rates strategist Martin Whetton said that there was no specific data or news driving prices higher.

Crucial data - including capital expenditure numbers - would guide the market in coming days, Mr Whetton said.

Markets are pricing a 50-50 chance that the RBA will ease rates when it meets on Tuesday.