Torn between the prospect of US money printing to boost asset prices and evidence of deceleration in the Chinese economy the Australian sharemarket eventually settled on the policy support option to close marginally in the black.
The S&P/ASX 200 index finished a roller coaster session 7.7 points, or 0.18 per cent, up at 4383.7 points, with an early 0.5 per cent rally snuffed out by the HSBC China flash PMI index which fell to a nine-month low of 47.8 points from 49.3 points, with a sharper fall in the output component.
Pointing to future weakness, HSBC said bother new order and new export orders contracted at a faster rate, the lowest level since March 09, while inventories of finished goods rose at a faster rate.
The Shanghai composite index was up 0.4 per cent at the close of the ASX as rate cut hopes lifted again and Japan’s Nikkei index was up 0.5 per cent.
Overnight the US Federal Reserve minutes gave a firm nod in the direction of quantitative easing when it was revealed that board members believed that “additional monetary accommodation” was warranted “fairly soon”, sending gold, oil and the Australian dollar higher, while lifting US equities to a flat finish.
The dollar leapt from $US1.0420 to $US1.0545, before sliding to $US1.0510 after the release of the Chinese data.
Gold jumped another $US23 to $US1664 an ounce, oil rose one per cent to $US116 a barrel and copper gained 0.9 per cent to $US7675 a tonne.
However, reflecting a severe supply overhang with little demand in the Chinese infrastructure pipeline, on Wednesday Shanghai iron ore fell another $US1.70 to $US104.70 a tonne, while today steel rebar futures tumbled 1.6 per cent today.
Last night equity market sentiment was initially weak, with European markets down around 1.5 per cent on average before the Fed minutes following reports of wrangling between the Spanish government, states and towns over budget cuts necessary for a bailout.
However, despite improved data since the Fed’s August meeting, markets have elevated the likelihood of Fed stimulus on September 13 to a near certainty, with chairman Ben Bernanke expected to give further insight next week during his Jackson Hole speech.
Westpac global head of interest rate strategy Russell Jones said the minutes set a “high bar for any u-turn” on the part of the Fed, but there were a few provisos.
Mr Jones said the reaction of the Republican Party to the Fed’s renewed easing bias and how it affected negotiating stances on the vexed issue of the “Fiscal Cliff” needed to be watched.
“Republicans have long criticised the Fed’s QE initiatives as excessive interference in the functioning of a capitalist economy and tantamount to currency debasement, while Mitt Romney has already talked publicly of the need for an annual “audit” of Fed activities to bring it under closer Congressional scrutiny,” he said.
Fortescue Metals climbed 9¢ to $4.24 after reporting a 53 per cent increase in profits.
BHP Billiton rose 25¢ to $33.41 and Rio Tinto gained 8¢ to $54.18.
Commonwealth Bank slipped 20¢ to $55.14, Westpac dropped 12¢ to $24.77, National Australia Bank gained 5¢ to $25.31 and ANZ added 4¢ to $25.00.
Qantas jumped 3¢ to $1.20 after reporting a pre-tax profit of $95 million, but a $244 million after- tax loss, its first in 17 years.David Jones tumbled 14¢ to $2.44 after unveiling another set of falling sales figures, with total sales in the fourth quarter dropping to $455.8 million from $462.1 million in the previous corresponding period.
'The West Australian' is a trademark of West Australian Newspapers Limited 2013.
All rights reserved.
Select your state to see news for your area.