The Australian sharemarket extended its recovery rally in quiet holiday trade as iron ore miners gained despite the cyclone-related shutdown of operations in the Pilbara.
Following another record high reached on Wall Street on Friday, the S&P/ASX 200 index gained 32.7 points, or 0.61 per cent, to 5386.8 points as the weaker Australian dollar and firmer metal prices boosted exporters.
The dollar fell 0.4¢ to US88.40¢, and lost ground against 16 major currencies, as year-end funding pressures and position squaring unsettled global currency markets.
“We have entered the year-end FX (foreign exchange) merry-go-round, where required rebalancing meets low liquidity,” National Australia Bank currency strategist Emma Lawson said.
“This results in moves such as the euro moving to this year’s high of 1.39 (to the US dollar) last Friday, then retracing much of the move.”
Australian government 0-year yields were steady at 4.225 per cent as global benchmark US 10-year yields eased from two-year highs to 3 per cent ahead to the $US10 billion reduction to $US75 billion in the US Federal Reserve’s bond purchasing program next month.
The Shanghai composite index was marginally higher at the close of the ASX as investors faced tight money market conditions until the Lunar New Year at the end of January that could dent growth.
Bloomberg said economists expect the benchmark money market seven-day repo-rate to stay near record high of 4.65 per cent, up from 3.2 per cent in the March-quarter.
Chinese Premier Premier Li Keqiang said in a statement today the nation had the conditions to keep the economy and its financial markets stable in 2014, and officials would implement a prudent monetary policy and maintain “appropriate liquidity”.
In Tokyo the Nikkei index was up 0.5 per cent, heading for its biggest annual gain in 31 years, as the yen dropped to a fresh five-year low against the US dollar.
Gold was little changed at $US1209 an ounce, copper slipped 0.3 per cent.
Spot iron ore jumped 1.5 per cent to $US132.70 a tonne on Friday and could rally more this week after Brazilian mining giant Vale declared force majeure on supply contracts of up to 4 million tonnes following storm disruptions.
"Firstly, there’s been a delayed reaction to stronger prices in the US in the middle to latter part of last week,” CMC Markets chief market analyst Ric Spooner said.
"Our market was a little bit wrong footed on Friday when we finished more or less unchanged."
BHP Billiton and Rio Tinto led the materials sector in quiet trading, reflecting a jump in prices for base metals and oil over the weekend, Mr Spooner said.
"I think there’s a little bit of optimism around in the commodities space, looking forward to better demand next year,” he said.
BHP rose 47 cents to $38.02, Rio Tinto lifted 64 cents to $68.00 and Fortescue Metals climbed 11 cents to $5.85.
Mining stocks found favour even though Australia’s biggest iron ore miners have stopped loading ships and suspended rail operations as cyclone Christine heads towards the Pilbara coast.
Shares in engineering and construction company Forge Group soared 56 cents, or 54.63 per cent, to $1.585 after it got the go ahead for more work at Gina Rinehart’s Roy Hill iron ore mine in WA.
In the banking sector, Commonwealth Bank gained 36 cents to $77.67, Westpac added 23 cents to $32.32, National Australia Bank gained 14 cents to $34.84 and ANZ improved five cents to $32.21.
Retail stocks were mixed as holiday sales continued.
Myer rose three cents to $2.77, Harvey Norman gained four cents to $3.18 and David Jones was steady at $3.01.
The broader All Ordinaries index was up 34.2 points, or 0.64 per cent, at 5358.0 points.
The March share price index futures contract was 16 points higher at 5330 points, with 12,782 contracts traded.
National turnover was 987 million securities worth $1.84 billion.