Australia shares slip on Fed tapering worries, miners hit; RBA eyed

Mon Dec 2, 2013 8:31pm EST

(Adds analysis, quotes, stocks on the move)

SYDNEY Dec 3 (Reuters) - Australian shares slipped 0.3 percent to six-week lows on Tuesday morning, led by selling in miners after metals prices declined on renewed fears the U.S. Federal Reserve may soon start reducing its stimulus.

Investors were also taking a back seat ahead of the outcome of the Reserve Bank of Australia's (RBA) policy meeting later in the day, although the early focus fell on robust U.S. data and the implications for Fed policy.

Heavyweight miners pegged back the market with BHP Billiton Ltd off 0.7 percent and OZ Minerals Ltd tumbling 4.1 percent after copper extended last month's losses on Monday.

Investors cut their exposure to copper after data showed U.S. factory activity at its highest for two and a half years in November and construction spending increased solidly in October, indicating a turn in Fed policy was not far off.

Rio Tinto Ltd slipped 0.5 percent but pared some of the losses after its chief financial officer said the company wants to cut net debt by around one-third to the mid-teens range.

The S&P/ASX 200 index fell 15.5 points to 5,264.0 by 0123 GMT. The benchmark, which declined 0.8 percent on Monday, has risen around 13 percent this year on the back of robust earnings and an improving global economic outlook.

However, speculation the Fed is likely to trim its massive stimulus, a major driver of riskier assets in recent years, has hobbled the market in the last few months.

"I think easy gains in the local market or shares generally are probably behind us," said Shane Oliver, head of investment strategy at AMP Capital Markets. "We're now a lot more dependent on earnings growth and monetary policy."

Traders said the market would be eyeing the RBA statement for clues on the rates outlook. A Reuters poll of 20 analysts showed all expect the central bank to hold rates at a record low of 2.5 percent.

Australian retail sales figures for October released earlier showed a slight uptick of 0.5 percent, though stocks in the sector were mixed.

Department stores Myer Holdings Ltd fell 0.9 percent, while Westfield Group jumped 1.5 percent.

Gold producers slumped as bullion prices tumbled 2.6 percent overnight to their lowest price since early July with funds and speculators increasing bearish bets on the metal. Australia's top gold miner Newcrest Mining Ltd lost 6.2 percent while Perseus Mining Ltd tumbled 5.4 percent.

Meanwhile, Australia's Takeovers Panel declined to make a decision to change the terms of Virgin Australia Holdings Ltd's A$350 million capital raising, which is supported by the carrier's major shareholders. Shares in the airline climbed 1.8 percent.

New Zealand's benchmark NZX 50 index fell 0.7 percent to 4,757.3.

(Reporting by Thuy Ong; Editing by Shri Navaratnam)