The Australian sharemarket surrendered a solid opening gain but rallied to close at the day’s highs as euphoria over the US Federal Reserve’s revised easy money outlook waned and the Chinese banking system remained in the grip of a cash crunch.
Miners dragged the S&P/ASX 200 index down but it bounced to close 26.7 points, or 0.51 per cent, up at 5291.9 points, as Chinese stocks recovered from the red despite reports the People’s Bank of China planned to keep a tight rein on liquidity into the New Year.
The Shanghai composite index was set to end its worst losing streak in 19-years while trading up 0.4 per cent at the close of the ASX after interbank lending rates remained volatile.
Shanghai seven-day repo funding rates initially dropped 264 points as the central bank tested demand for funding, but rates later soared 350 points to a fresh six-month high of 7.52 per cent.
Bloomberg reported that two of China’s biggest securities firms predicted the PPOC would refrain from regular cash injections in order to rein in debt and contain inflation.
Japanese markets were closed for a public holiday.
On Friday US stocks rallied as the final US September-quarter GDP revision smashed forecasts, coming in at 4.1 per cent, well above the original 2.6 per cent read.
Analysts noted that about a third of growth was from inventory accumulation which was is hoped reflected rising confidence in future demand strength.
On the downside, The Kansas City Fed index fell much more than forecast, underscoring the sporadic nature of growth in the world’s biggest economy.
The Australian dollar bounced US1¢ to US89.30¢ on reports of short covering ahead of quiet holiday trade, while government 10-year yields dropped 3.4 points to 4.256 per cent. US 10-years lost 4 points to 2.89 per cent.
Gold edged up $US6 to $US1201 an ounce, copper firmed 0.3 per cent to $US7220 a tonne and on Friday spot iron ore was flat at $US132.70 a tonne.
"The Fed’s long journey to monetary normalisation has begun with few ripples in commodity markets, apart from precious metals," Barclays analysts said.
"We show that QE has had little direct impact on commodity markets and apart from the obvious candidates (gold), there are unlikely to be very many negative effects as it is tapered."
OptionsXpress market analyst Ben Le Brun says the Australian bourse lost some momentum in late trading.
“It’s been like grinding teeth today, watching this market,” he said.
“It’s been very, very low volumes.” Mr Le Brun said the materials and industrials sectors were soft, and a lot of real estate investment trusts were trading ex-dividend today.
“That’s taken a little bit of the momentum away from the market overall.”
On the local bourse among the major banks, National Australia Bank lifted 36 cents to $34.62, Westpac added 35 cents to $31.92, ANZ firmed 17 cents to $31.95, and Commonwealth Bank gained 83 cents to $76.76.
In the resources sector, global miner BHP Billiton eased seven cents to $37.16, and Rio Tinto found 16 cents at $66.90.
Australia’s largest gold miner, Newcrest, fell 16 cents to $7.54 after it said it was facing a likely class action from shareholders in relation to its market disclosure ahead of a massive financial writedown in June.
Transport group Toll was up five cents at $5.57 after it struck a deal for Asciano to take over its north Queensland rail freight terminals.
Asciano was up three cents at $5.70.
Health insurer nib was up six cents at $2.50 after it said it would lift its premiums by an average of almost eight per cent.
Food producer Goodman Fielder improved 1.5 cents to 66.5 cents after it announced it would sell its biscuits business in Australia to Green’s Foods, generating proceeds of $17 million.
The broader All Ordinaries index was up 30 points, or 0.57 per cent, at 5291.5 points.
The March share price index futures contract was 49 points higher at 5274 points, with 20,186 contracts traded.
National turnover was 1.19 billion securities worth $2.99 billion.