Domestic investors remained among the most bullish in the world as they drove the Australian sharemarket to a fresh five-year high and sentiment remained tepid in other Asian markets.
Following the US debt ceiling relief rally to a record high on the US S&P 500 last night the S&P/ASX 200 index rose steadily throughout the day to close 38.4 points, or 0.73 per cent, up at 5321.5 points, with expectations of ongoing US Federal Reserve stimulus supporting markets.
Last night the downgrade of the US credit rating by China’s Dagong agency sparked a sharp sell-off in the US dollar against most risk assets, but gold and the Australian dollar failed to extend overnight rallies.
The dollar was steady at US96.20¢ and gold was trading at $US1318 an ounce, $US45 up on the low reached just prior to the downgrade.
However, lacklustre Chinese data met a more cautious response in metals markets as copper and steel rebar futures struggled. Copper was flat after sliding 0.4 per cent overnight to $US7230 a tonne, while Shanghai steel rebar futures lost 0.4 per cent.
The Chinese economy grew 7.8 per cent in the September-quarter, in line with forecasts, while industrial production decelerated to 10.2 per cent growth in September from 10.4 per cent in August, and nominal retail sales slowed by 0.2 percentage points despite a 0.5 percentage point uplift in the consumer inflation rate.
The Shanghai composite index bounced from the red to trade 0.4 per cent up at the close of the ASX.
In Tokyo the Nikkei index was down 0.4 per cent.
Although analysts remained convinced the Fed would only begin tapering its bond purchases next year, US 10-year yields showed minimal reaction to the Dagong downgrade, easing just 3 points to 2.60 per cent as tapering remained on the market radar. Australian 10-year yields were little changed at 4.125 per cent.
Royal Bank of Scotland Greg Gibbs noted that some Fed watchers still think tapering might be announced in December, but he said having decided to not taper in September, the Fed had revealed its “cautious core”.
“Fiscal impasse may persist,” he said. “It may take some months before the economy dampened by this debate gets jobs growth back to near a 200,000 per month average pace”.
“The US shutdown’s now in the past so the market has some sense of normality to it,” Bell Direct equities analyst Julia Lee said said.
“So today, we were very much focused in on China and the numbers coming through there.”
A weaker US dollar helped gold miner Newcrest, which gained 54 cents, or 5.33 per cent, to close at $10.68.
But the big miners, which express their earnings in greenback terms, didn’t fare as well with BHP Billiton losing five cents to $35.75 while Rio Tinto shed 26 cents to $63.45.
Meanwhile, insurer QBE shed 19 cents to $14.59 while healthcare group ResMed lost six cents to $5.79.
“That rising Aussie dollar is a headwind for earnings and for cash flow,” Ms Lee said. Other energy players were mixed, with Fortescue Metals Group adding six cents to $5.30, Woodside Petroleum gaining 16 cents to $38.16, but Santos dropping 14 cents to $14.75 after warning full year production will be at the low end of guidance.
The big banks all made gains, with ANZ adding 17 cents to $31.86, Commonwealth Bank finding 74 cents to $74.17, NAB adding 34 cents to $35.98 and Westpac rising by 38 cents to $34.
“That’s probably going to continue ... because next month we do see ANZ, NAB and Westpac paying dividends,” Ms Lee said.
Qantas lost five cents to $1.43 after the airline told shareholders average airfares per passenger were set to decline amid high fuel costs and weak demand.
The broader All Ordinaries index was up 39.1 points, or 0.74 per cent, at 5,321.
The December share price index futures contract was 42 points higher at 5,317, with 18,207 contracts traded.National turnover was 1.8 billion securities worth $3.6 billion.