Market runs out of early steam

A tentative bounce on the Australian sharemarket fizzled out after weak Chinese trade data offset the Reserve Bank’s mildly dovish monetary policy statement that downgraded growth and inflation forecasts.

Following the rally on Wall Street last night the S&P/ASX 200 index climbed 0.7 per cent mid-session, but it slipped to close down 11.1 points, or 0.2 per cent, at 5634.6 after the ongoing tumble in Chinese exports underscored the loss of global growth momentum.

Chinese exports fell 6.2 per cent, far worse than the forecast 1.6 per cent decline, while imports tumbled 16.6 per cent compared to forecasts for a 12.4 per cent fall.

By the close of the ASX the Shanghai composite index had reversed 1.2 per cent to trade 0.1 per cent down with hopes dim the weak trade data would prompt more monetary easing.

Analysts have warned Chinese stocks faced a deeper correction because the government was likely to place further curbs on stock margin lending.

in Tokyo the Nikkei index was up 0.6 per cent.

The Australian dollar fell US1.1 cent to a low of US78.65 cents as the US dollar rallied and fresh rate cut hopes hit the Aussie, but it later bounced to US79.10 cents.

Government 10-year yields fell 13.3 points to 2.856 per cent after the global blowout in bonds eased overnight and markets too the downside view of the Reserve’s doublespeak.

“The RBA has copped criticism from some commentators for sending a confusing message in its Tuesday statement, and now it appears that criticism is justified given the more dovish tones in this quarterly statement on monetary policy,” Royal Bank of Scotland currency strategist Greg Gibbs said.

“It appears that the RBA still has a significant easing bias, but its intentions on rates are less clear.”

While the central bank appeared to be open minded about another rate cut, banking shares were sold off soon after the central bank statement was released, causing the broader market to re-enter negative territory by lunchtime.

This occurred as dividend-focused investors took the view the monetary policy easing cycle was probably over, OptionsXpress market analyst Ben Le Brun said.

"If that’s the end of the rate cycle, have we seen the high watermark for banks?” he said.

"Maybe it’s time to pause for reflection on what has been an incredibly volatile week and the dynamics there from an RBA perspective."

Among the banks, Macquarie Group added $2.68, or 3.5 per cent, to $79.18 after lifting its full year profit 27 per cent, to $1.6 billion, beating both market expectations and its own guidance.

But the major players were mainly weaker.

The Commonwealth was down 47 cents at $82.64, ANZ fell 66 cents to $32.35 but Westpac gained 15 cents to $34.05.

NAB has been in a trading halt since yesterday after announcing that it will engage in a mammoth $5.5 billion capital raising.

Banking and insurance group Suncorp lost two cents to $12.95 after lifting its total lending 3.3 per cent during the three months to March 31.

The energy stocks were the weakest performers, after the West Texas and Brent North Sea oil prices dived overnight after hitting 2015 highs, with crude oil prices continuing to weaken during Asian trade.

Oil and gas explorer Woodside Petroleum dropped $1.26, or 3.6 per cent, to $33.80 and Santos fell 44 cents or 4.9 per cent, to $8.59.

As for the miners, BHP Billiton fell 59 cents to $31.30, after shareholders this week approved its plans to demerge non-core parts of the business.

Rio Tinto was down 11 cents at $58.43 and iron ore group Fortescue Metals fell eight cents to $2.50.

The broader All Ordinaries index was down 9.4 points, or 0.17 per cent, at 5635.4.

The June share price index futures contract was 12 points lower at 5605 with 31,895 contracts traded.

National turnover was 1.3 billion securities worth $4.3 billion.