After hitting a 16-month high early in the month, global developments caused the Australian sharemarket to plummet in January, according to the latest Mercer Sector Survey.

"The S&P/ASX 300 index gave up 6.2 per cent for the month, making it the worst monthly return since December 2008," the report said.

Despite positive economic readings released during the month, the market reversed and there was a sell-off across the cyclical and defensive sectors.

"Concerns over Chinese authorities tightening lending policies, increased sovereign risk emanating in Europe and US President Obama's proposal to curb banks' risk-taking ... all contributed to a decline in the local market," the report said.

All sectors posted negative returns over the month to 31 January 2010, but the resources sector, commodities and oil prices fell most sharply.

Energy (-9.8 per cent) and materials (-9.0 per cent) were the worst performers, followed by consumer staples (-8.4 per cent) and healthcare (-5.5 per cent). The IT sector posted the smallest loss (-1.1 per cent).

The global sharemarket also backtracked in the first month of 2010.

The MSCI World ex Australia Index lost 2.9 per cent in Australian dollar terms. All major regions posted a loss in January, with Europe the worst hit (-4.8 per cent).

"This was attributable to sovereign risk concerns stemming from the region," the survey said.

The Far East was the only region not to post a loss with an increase of 1.8 per cent.