Chinese stimulus hopes drive stocks up
The Australian sharemarket resumed its recovery rally along with global markets after weak Chinese house price data stoked stimulus hopes.
The S&P/ASX 200 index lagged the 1.2 per cent rally on the US S&P 500 index last night for most of the session and closed 29 points, or 0.54 per cent, up at 5412.2.
Dalian iron ore futures jumped 1.4 per cent, indicating a reversal in the 1.7 per cent drop in spot iron ore to $US80.3 tonne yesterday, after new house prices fell 1.3 per cent across all China’s 70 major cities, the first time all registered a decline.
“Prices remain under downward pressure across the board, with the negative impulse gaining further strength through September,” Westpac economist Huw McKay said.
“The new and secondary markets across every tiers are all now visibly weak. Developers continue to discount aggressively to clear their stock on hand and sellers are maintaining abundant supply in the secondary market.”
The Shanghai composite index was up 0.3 per cent at the close of the ASX.
However, Standard Bank China economist Jeremy Stevens said there seemed to be a realisation by policymakers that the Chinese economy, “and the credit growth that sustains it”, needs to grow even more slowly.
“President Xi Jinping said as much in late July when he spoke of coming to terms to terms with a ‘new normal’,” he said. “Since then, that message has been echoed consistently by a host of others.”
In Tokyo the Nikkei index was up one per cent.
Last night US stocks rallied after mining and construction bellwether Caterpillar beat earnings forecasts after flat sales growth was offset by $US2.5 billion in share buy-backs, reducing the denominator in the earnings per share ratio.
The Wall Street Journal noted that a third of the companies in the Dow Jones 30 index had posted shrinking or flat revenue over the past 12 months.
The Australian dollar slipped to US87.50¢ on the China news while government 10-year yields edged up 1 point to 3.269 per cent.
Gold fell $US13 to $US1230 an ounce and copper climbed 1.1 per cent to $US6700 a tonne.
“It’s been a very big week overall for the Aussie market,” Australian Stock Report senior equity analyst Benny Sada said.
“We’ve had some fairly significant indications from the European Central Bank that they are prepared to be more aggressive with their monetary stimulus and that’s really allayed a lot of those concerns about the eurozone economy.”
The local market has dropped only once during the past eight sessions, falling by just 2.8 points yesterday.
But the big miners were weaker, amid disappointing prices for commodities, particularly for iron ore.
The big four banks drove the market higher today, with Commonwealth Bank up 60 cents at $78.77, Westpac up 19 cents at $34.21, National Australia Bank up 23 cents at $34.27 and ANZ nine cents higher at $33.02.
But the miners fell with BHP Billiton down 10 cents to $33.74, Rio Tinto down 18 cents at $60.05 and Fortescue Metals six cents lower at $3.47.
AMP had gained 17 cents to $5.56 after a positive trading update, while sleep disorder specialist ResMed was 35 cents higher at $5.72 following a six per cent revenue rise during the September quarter.
The broader All Ordinaries index was up 29.4 points, or 0.55 per cent, at 5,399.3.
The December share price index futures contract was 27 points higher at 5,399, with 30,520 contracts traded.
National turnover was 1.5 billion securities worth $3.5 billion.
