Large cap stocks on the Australian sharemarket followed global markets to a fresh four-and-a-half year high yesterday after positive German investor confidence data overrode weak global data that sent metal prices to three week lows.
The major banks were again the main drivers behind the rally in the S&P/ASX 200 index to a high of 5106.6 points, before mild profit taking left it 16.8 points, or 0.33 per cent, up at 5098.7 points, while the small ordinaries index fell 0.7 per cent.
Metal prices fell overnight on fears of a Chinese crackdown on property speculation and news that the Chinese central bank drained $4.6 billion of liquidity from the banking system, its first withdrawal of cash in eight months, via repurchase agreements.
The Shanghai composite index was off 0.1 per cent at the close of the ASX as one year interest rates pushed higher and the central bank gauged pricing for another round of repo's tomorrow, raising the prospect of tighter monetary policy this year.
Foreign direct investment into China also fell for the eighth straight month, declining 7.2 per cent, far more than the forecast 4.2 per cent drop.
Also weighing on commodities, European car sales slumped to a 23 year low and the US housing index registered its first drop in 10-months in January.
Today copper pared its losses, rising 0.5 per cent to $US8085 a tonne, nickel bounced 0.8 per cent to $US17,540 a tonne and gold tested $US1600 an ounce before bouncing to $US1607 an ounce.
In Tokyo the Nikkei index was up 0.8 per cent despite Japan's trade deficit surging to a record high as the weaker yen soaring energy imports swamp the better than expected 6.4 per cent increase in exports.
In the US the S&P 500 climbed 0.6 per cent to a fresh five-year
The Australian dollar climbed 0.2Â¢ to $US1.0360, gaining against the US dollar and New Zealand dollar which fell 0.6 per cent after Reserve Bank of New Zealand governor Graeme Wheeler ignored G20 nation advice to avoid verbal currency influence.
Governor Wheeler said the kiwi was "significantly over-valued relative to what would be sustainable long term in the absence of sizeable increases in the terms of trade and productivity".
He said the RBNZ was prepared to intervene to smooth the peaks in currency flows, and his comments left the Aussie vulnerable to regional speculative interest because of the Reserve Bank's more passive approach.
More to come