Positive US data dampened equity market sentiment and modest Chinese inflation data underscored fears global central banks were “pushing on a string”, but the Australian sharemarket clawed its way back from the red to end its four-day losing streak.
Wall Street finished flat following a late rally last night, but the S&P/ASX 200 index rose 8.3 points, or 0.16 per cent, to 5324.4 as large cap stocks lagged.
Equity market sentiment soured after the forecast beating US ADP private payroll report fanned fears of a strong non-farm payroll number tomorrow that could prompt the US Federal Reserve to announce another cutback in its bond purchasing program.
Jitters were stoked by the Fed’s December meeting minutes which warned of the diminishing marginal benefits of additional quantitative easing.
The minutes did reveal that the $US10 billion cut this month to $US75 billion was not unanimous, but the US dollar rallied on the news and US10-year bond yields jumped 5 points to 2.99 per cent, indicating markets see further cuts in the next few months.
The Shanghai composite index was up 0.4 per cent at the close of the ASX as consumer inflation decelerated from 3 per cent to 2.6 per cent in December, while producer prices fell 1.4 per cent.
In Tokyo the Nikkei index was off 1.6 per cent.
In a client report, HSBC chief economist Stephen King said that heading into 2014, there was something “strikingly odd about the global economy”.
He said inflation in many parts of the world was surprisingly low, especially in the developed world, and sometimes that was positive, reflecting improved productivity.
“Instead, it looks as though low inflation is a reflection of the waning powers of central banks as they have resorted to unconventional monetary stimulus measures,” he said.
“It is already abundantly obvious that unconventional policies have had a bigger impact on financial asset values than on the real economy.”
The Australian dollar fell US0.5¢ to US88.80¢ and government 10-year yields rose 2.4 points to 4.326 per cent.
On the positive side domestic retail sales climbed 0.7 per cent in November, easily beating forecasts of 0.4 per cent.
Gold slipped to $US1226 an ounce, copper slipped 0.3 per cent to $US7322 a tonne and spot iron fell 1.7 per cent to $US131.50 a tone yesterday.
"Analysts were expecting 2.7 per cent and I guess it’s just another sign that China could be slowing with tighter monetary conditions,” Bell Direct equities analyst Julia Lee said.
Local mining stocks were under pressure on Thursday as investors worry about how the Chinese economy is tracking.
The rise in energy stocks was being led by oil and gas producer Santos, which was 21 cents higher at $14.50, while Woodside Petroleum had lifted 12 cents to $38.00 and Oil Search was up three cents at $8.15.
Qantas shares were up, indicating investors were unconcerned about the negative news that ratings agency Moody’s had downgraded its credit rating to junk status.
Qantas was two cents, or 1.8 per cent, higher at $1.12.
Insurer QBE rose 2.5 per cent to $12.07.The banks were mixed, with Westpac down 10 cents at $31.94, ANZ 12 cents weaker at $31.59, while National Australia Bank was up five cents to $34.45 and Commonwealth Bank gained 10 cents to $77.98.
Among the miners BHP Billiton fell seven cents to $36.97, Rio Tinto lost five cents to $65.30 and iron ore producer Fortescue Metals dropped three cents to $5.36.
The broader All Ordinaries index was up 8.8 points, or 0.17 per cent, at 5327.5.
The March share price index futures contract was up two points at 5293, with 15,544 contracts traded.
National turnover was 1.99 billion securities worth $2.96 billion.