Market closes marginally firmer
The Australian sharemarket ranged in and out of the red before closing marginally firmer today as Reserve Bank governor Glenn Stevens painted a gloomy outlook, boosting hopes for another rate cut while expressing alarm over Sydney house prices.
Sentiment was capped and the S&P/ASX 200 index closed up 7.3 points, or 0.13 per cent, at 5478.6 as government long bond yields hit a six-month high, maintaining pressure on high yielding stocks.
Mr Stevens said in a speech of all the three broad sectors – households, government and corporations – it was households that “probably have the least scope to expand their balance sheets” to drive spending.
“That’s because they already did that a decade or more ago,” he said.
“Their debt burden, while being well serviced and with low arrears rates, is already high. It is for this reason that I have previously noted some reservations about how much monetary policy can be expected to do to boost growth with lower and lower interest rates.”
However, 10-year yields jumped 8 points to 3.044 per cent after global bond yields pushed higher again last night on mounting expectations the US Federal Reserve was going to hike interest rates this year.
The Australian dollar initially fell US0.4¢ on the news before bouncing back to US77.40¢ as Mr Stevens’ later comments on “crazy” Sydney house prices hit the wires, dampening rate cut hopes again.
“What is happening in housing in Sydney I find acutely concerning for a host of reasons many of which are not to do with monetary policy... I think it is a social problem,” he said.
The Shanghai composite index fell one per cent, but rallied to trade per cent at the close of the ASX after MSCI said China still need to improve market accessibility and address concerns about the ownership status of mainland shares before they were eligible for global equity indices.
Spot iron ore eased 0.1 per cent to $US64.27 a tonne yesterday and Dalian iron ore futures were 0.2 per cent today.
Oil price gains boosted the local energy sector following a strong performance by international energy companies in the US overnight.
"The positive take away is that we’ve snapped that... losing streak,” OptionsXpress analyst Ben LeBrun said.
"The market has floated a little higher."
Investors were interested in bond markets and international equities, he said.
Among the big energy players, Woodside rose 62 cents to $36.22, and Santos was seven cents higher at $8.07.
In the banking sector, Westpac rose one cent to $31.36, Commonwealth Bank added nine cents to $79.91, National Australia Bank advanced 23 cents to $31.83 but ANZ fell seven cents to $31.09.
In the resources sector, global miner BHP Billiton was six cents higher at $27.66, Rio Tinto was down 30 cents at $56.07 and Fortescue Metals dipped six cents to $2.33.
Woolworths was up 32 cents at $27.43 after it announced plans to invest more than $650 million in new stores and infrastructure and add more than 2,000 staff to its Victorian workforce over the next three years.
Airline Qantas dropped one cent to $3.23 after it said it will begin direct flights between Sydney and San Francisco six days a week from December under an expanded co-operation agreement with American Airlines.
The broader All Ordinaries index was up 6.3 points, or 0.11 per cent, at 5486.0, according to preliminary figures.
The June share price index futures contract was 15 points higher at 5477, with 23,471 contracts traded.
National turnover was 1.9 billion securities worth $4.59 billion.
