Optimism over tonight’s US jobs report helped the Australian sharemarket extend its recovery rally, but a spike in Chinese borrowing costs cooled sentiment.
Following a 1.2 per cent bounce in the US last night the S&P/ASX opened strongly but had a mid-session wobble until Chinese markets closed for lunch. It rallied to close 35.1 points, or 0.68 per cent, up at 5166.5 as investors factored in a win-win outlook for the US non-farm payroll report tonight.
A weaker than forecast US jobs number is likely to be blamed on the cold weather and a strong number in excess of 200,000 as proof the US economy could withstand US Federal Reserve tapering.
“A strong number is probably better for emerging markets and US equities on the basis that if the Fed is likely to plough ahead with its taper better it do so with the background of a resilient US economy,” Royal Bank of Scotland currency strategist Greg Gibbs said.
However the first trading day in China following the week long break got off to a wobbly start as repo – repurchase agreement – rates soared, indicating funding for shadow bank lending remained in sharp supply.
The Shanghai composite index pared early losses and was off 0.2 per cent at the close of the ASX after the HSBC services index eased to a near record low as selling prices fell at the fastest pace in 19 months and outstanding business the quickest in 10 months.
In Tokyo the Nikkei index soared 2 per cent as the yen fell against the US dollar and the euro.
The euro rallied against most major currencies after the European Central Bank shrugged off inflation below its target level and kept interest rates on hold last night.
The Australian dollar fell US0.5¢ from its overnight high to US89.40¢ after the Reserve Bank monetary policy statement’s neutral stance knocked expectations for a rate hike this year.
The Reserve also raised its 2014 growth forecast range from 2 to 3 per cent to 2.25 to 3.25 per cent, with the outlook boosted by the weaker dollar.
“There is no surprise around the proposed dynamics of the Australian – they are unchanged from the November Statement with the modest upgrade to the growth forecasts coming mechanically from the lower exchange rate and no change to the domestic demand forecast,” Westpac chief economist Bill Evans said.
Gold rose $US3 to $US1260 an ounce, copper jumped 1.2 per cent to $US7140 a tonne and spot iron traded for the first time in a week and fell 1.3 per cent to $US121 a tonne.
The resources sector drove most of the gains, with BHP Billiton up 52 cents at $36.09, Rio Tinto up 31 cents at $65.96 and iron ore miner Fortescue up 17 cents at $5.60.
Aurora Oil and Gas shares soared after it received a $1.8 billion takeover offer from Canada’s Baytex Energy Corp worth $1.8 billion.
Its shares were up $1.47, or 56 per cent, at $4.09.
Shares in media group News Corporation were up $1.41, or 8.2 per cent, at $18.61 after it posted a better than expected second quarter profit of $US150 million, despite declining revenues from its Australian newspapers.
Among the banks, National Australia Bank was up 15 cents at $32.78, ANZ was up two cents at $29.45, Commonwealth Bank was up four cents at $73.52, while Westpac was 42 cents higher at $31.25.
The broader All Ordinaries index was up 37.1 points, or 0.72 per cent, at 5184.5.
The March share price index futures contract was 38 points higher at 5120, with 24,540 contracts traded.
National turnover was 1.3 billion securities worth $4.1 billion.