ASX closes up on yield hunting
Recession warnings were swept aside on the Australian sharemarket as yield hunting returned with frantic demand for the major banks.
The offshore lead was flat last night but the S&P/ASX 200 index jumped 64.1 points, or 1.12 per cent, to 5777.0, but finished well off the day’s high on rising volume, as economists stoked rate cuts hopes with recession warning following the dismal capital expenditure data released this week.
“Given the scale of the declines in this survey we reiterate our warnings that economic growth estimates remain skewed to the downside and the monetary easing cycle is unlikely to be complete,” Goldman Sachs economists said.
“We continue to expect the RBA to ease interest rates again in 2015, most likely at the August meeting.”
The Australian dollar dropped to a low of US76.30¢ before bouncing back to little changed at US76.60¢, while government 10-year yields lost 4.9 points to 2.73 per cent.
The Shanghai composite index got off to a week start as it followed up the 6.5 per cent plunge yesterday with a 4 per cent dive at the open, but it bounced to trade up 1.2 per cent at the close of the ASX as fears of tighter margin lending restrictions eased and bargain hunting returned.
Underscoring the magnified effect of a margin driven 140 per cent high er this year on a record 1.34 trillion yuan ($216 billion) of margin debt, Bloomberg reported 1.65 per cent was the average retreat on down days this year and was the biggest among the worlds top 10 markets. The mean move on the upside has been of 1.44 per cent.
In Tokyo the Nikkei remained in a holding pattern, up just 0.3 per cent at the close of the ASX.
Spot iron ore fell 1.2 per cent to $US62.33 a tonne yesterday and Dalian iron ore futures were down 1.5 per cent today.
CMC Markets chief market analyst Ric Spooner said the jump in the market was surprising given that there was no obvious driver or news when the session started.
Mr Spooner said today’s rally might have been driven by significant interest from overseas investors.
"The logic there would be that a weaker Australian dollar benefits overseas investors,” Mr Spooner said.
"It may also be that people looked at yesterday’s capital expenditure figures and figured that we’re going to see a weaker Australian dollar and possibly lower interest rates."
Official data released yesterday showed that business investment fell 4.4 per cent in the March quarter, a much larger fall than the median market forecast of 2.4 per cent.
The Australian dollar fell in the wake of the disappointing figures and sparked speculation of another interest rate cut.
Mr Spooner said overseas interest in the Australian market could have encouraged local investors sitting on the sidelines to join the buying spree.
The charge upwards was led by the big banks.
Commonwealth Bank rose $1.59 to $85.09, ANZ lifted 47 cents to $33.19, National Australia Bank strengthened 88 cents to $34.32, and Westpac was 44 cents higher at $33.56.
In the resources sector, global miner BHP Billiton gained 39 cents to $29.59, Rio Tinto advanced 55 cents to $58.20, and Fortescue Metals scraped off one cent at $2.42.
Evolution Mining was steady at $1.175 as it successfully raised $172 million to help fund its purchase of the Cowal gold mine in NSW.
Telstra put on seven cents at $6.22.
The broader All Ordinaries index was up 60.3 points, or 1.06 per cent, at 5774.9 points.
The June share price index futures contract was up 51 points at 5780 points, with 34,818 contracts traded.
National turnover was 2.4 billion securities worth $8.4 billion.
