Weak Chinese trade data sends ASX lower

The Australian sharemarket reversed early strength as a slump in domestic consumer confidence and a swathe of disappointing Chinese economic data triggered profit taking.

The S&P/ASX 200 index rose at the open in line with the positive lead from Wall Street, but it dropped back to close down 38.2 points, or 0.64 per cent, at 5908.4 led by weakness in the major banks.

The major miners, however, rallied but finished well off the day’s high after spot iron ore jumped 3.9 per cent to $US50.78 a tonne yesterday and Dalian iron ore futures climbed 0.8 per cent today.

Sentiment took a sharp turn for the worse after the Westpac-Melbourne Institute consumer confidence index fell 3.2 per cent.

Westpac chief economist Bill Evans attributed the fall to the rebound in petrol prices, a failure by the Reserve to cut rates this month and tumbling iron ore prices.

“All of these factors also conspired to undermine confidence about jobs and the economy,” he said.

Selling accelerated after Chinese GDP growth met forecasts at 7 per cent but retail sales grew 10.6 per cent, the slowest pace in nine years, industrial production increased just 5.6 per cent, the worst pace in seven years and fixed asset expenditure rose 13.5 per cent, the weakest level in 15 years.

Last night Chinese lending data pointed to further slowdown, as new bank lending of 1180 yuan ($251 billion) beat forecasts but was the same as total aggregate financing, which meant zero growth in shadow bank loans.

The Shanghai composite index remained in hyper-volatile mode as it reversed a 0.5 per cent gain, fell 1.2 per cent and rallied to trade per cent the close of the ASX as the weak growth outlook offset rate cut expectations.

In Tokyo the Nikkei index was down 0.2 per cent.

The Australian dollar was little changed at US75.90¢ but government 10-year yields dropped 2.9 points to 2.277 per cent as ongoing lacklustre US retail sales data kept a lid on US rate rise fears.

US March retail sales rose 0.9 per cent, missing forecasts for a 1.1 per cent for a tepid rebound from four months of declines.

Investors had expected a positive session after a bounce in the iron ore price overnight, but disappointing economic data hit other sectors of the market, IG Market analyst Stan Shamu said.

"The Westpac consumer sentiment disappointed today so you’ve got a situation where consumer sentiment is still low, we’ve already had a rate cut and the market’s expecting another one,” Mr Shamu said.

"That’s still not enough to raise confidence across the market."

High yielding stocks, those with healthy dividends, were hit hardest.

"All the banks have really struggled today apart from Macquarie,” Mr Shamu said.

Westpac closed 64 cents weaker at $38.92, Commonwealth Bank dropped $1.36 to $92.44, ANZ fell 38 cents to $35.94 and National Australia Bank lost 40 cents to $39.03.

A recovery in iron ore prices to above $US50 a tonne boosted the big miners, despite figures out of China showing its economic growth slumped to a post-global financial crisis low of seven per cent in the March quarter.

BHP Billiton rose 39 cents to $29.51, Rio Tinto gained 87 cents to $55.83 and Fortescue Metals added two cents to $1.85.

The energy sector also rose after a rise in crude oil prices for the fourth straight session.

Woodside Petroleum lifted 16 cents to $35.41 despite its quarterly sales revenue declining 20 per cent, and Santos was up three cents to $7.72.

Telstra dropped nine cents to $6.19, and retailers also slumped, while

Woolworths shed 21 cents to $29.00 and Coles owner Wesfarmers was 45 cents weaker at $43.35.

The broader All Ordinaries index was down 38.9 points, or 0.66 per cent, at 5877.3.

The June share price index futures contract was down 39 points at 5899, with 29,364 contracts traded.

National turnover was 1.9 billion securities worth $5.9 billion.