The Australian sharemarket fell in a volatile session on Tuesday, dragged lower by a sell-off in mining companies and a weaker iron ore price after China dashed hopes of a big stimulus package.

The benchmark S&P/ASX 200 index dropped 28.5 points, or 0.4 per cent, to 8176.9 at the closing bell, with seven out of the 11 sectors in the red. Shares briefly rallied on hopes that Beijing would announce a hefty public spending package to boost the economy, but fell in afternoon trade.

The All Ordinaries also fell 0.4 per cent.

The Chinese sharemarket spiked at the open as investors returned from a week-long public holiday, but it quickly pared gains after officials failed to deliver the raft of measures that the market had been anticipating.

Instead, they announced plans to issue 200 billion yuan ($41.97 billion) for spending and investment projects by the end of this year.

‘Aggressive positioning’

Tribeca portfolio manager Jun Bei Liu said there were heightened expectations of a sizable spending package from the Chinese government, but investors were left “disappointed”.

“We saw all these aggressive positioning wind back down, particularly if you look at Fortescue, BHP – all the miners are down,” Liu said.

Index heavyweight BHP tumbled 2.4 per cent to $43.79 and Fortescue Metals sank 5.3 per cent to $19.27, in line with a reversal in the iron ore price to below $US110 a tonne.

Energy stocks also turned lower after oil snapped a five-day rally. Brent slid towards $US80 a barrel after advancing almost 13 per cent over the past five sessions amid rising tension in the Middle East. Woodside Energy fell 1.3 per cent to $26.34 and Ampol declined 0.9 per cent to $30.99.

The big banks edged higher, helping to limit losses. Commonwealth Bank rose 0.2 per cent to $134.97, Westpac 0.4 per cent to $30.91, National Australia Bank 0.4 per cent to $37.27 and ANZ 0.4 per cent to $30.11.

Stocks on the move

West African Resources jumped 7.5 per cent to $1.44, recouping some of yesterday’s 20 per cent slump amid concern about the future of its mining permits in Burkina Faso.

The company told the ASX on Tuesday that it had received confirmation from the country’s Ministry of Mines and Quarries that none of its mining permits were under review.

Piedmont Lithium rallied 8.3 per cent to 19.5¢ and Atlantic Lithium added 5.8 per cent to 27.5¢. The lithium sector jumped yesterday on Rio Tinto’s bid for Arcadium. The latter’s shares slipped 2.5 per cent to $5.94 after soaring in the previous session.

And fertiliser and explosives manufacturer Incitec Pivot’s chief financial officer Paul Victor is set to leave the company in February. The shares fell 0.7 per cent to $2.97.