Rampant bullish sentiment on the Australian sharemarket was dealt a stunning blow mid-session by weak Chinese manufacturing data, but the market held on to finish up for the 11th day in 12.
The S&P/ASX 200 index shrugged off the 0.6 per cent loss on Wall Street last night as it surged 0.6 per cent in morning trade, but it reversed to close four points, or 0.08 per cent, up at 5412.3 on a 58 per cent surge in volume as the HSBC China flash PMI index dropped to a seven-month low.
The Australian dollar tumbled US1¢ to US89.40¢ after the Fed reiterated its commitment to tapering its bond purchases and the HSBC index dropped to 48.3 points from 49.5, with no silver lining in the data.
“The building-up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening,” HSBC China economist Hongbin Qu said.
“We believe Beijing policy makers should and can fine-tune policy to keep growth at a steady pace in the coming year.”
Most Chinese stocks fell, but the Shanghai composite index soared over one per cent in early trade after petroleum giants Sinopec surged 10 per cent, before the index settled to a 0.7 per cent gain at the close of the ASX.
Another blow to sentiment came from the People’s Bank of China which drained cash from the financial system for the second time this week.
In Tokyo the Nikkei index fell 2.2 per cent after Japan’s December trade deficit hit a record of $30 billion as soaring energy costs lifted the deflation gripped nation’s import bill by 25 per cent. Exports rose 9.5 per cent.
Overnight the Fed minutes backed away from guidance to raise interest rates if the US unemployment rate hit 6.5 per cent but “several” board members were in favour of cutting bond purchases by $US10 billion a meeting from the current level of $US65 billion a month.
Compounding the uncertain US growth outlook January housing starts slumped 16.5 per cent, with little hope of a rebound after the 5.4 per cent drop of new permits in January, the third straight decline.
Global benchmark US 10-year yields rose three points to 2.74 per cent, and Australian 10-years eased one point to 4.135 per cent, as the uncertain global growth outlook offset further Fed tapering.
Gold slipped $US4 to $US1312, copper lost 0.7 per cent to $US7130 a tonne and spot iron ore slipped 0.4 per cent to $US123.80 a tonne.
However, the gains were trimmed late in afternoon trade following the release of weaker manufacturing numbers from China, CMC Markets analyst Ric Spooner said.
“The key driver for us, after a stronger move, was the release of a disappointing PMI figure from China,” Mr Spooner said.
“We’ve had a bit of an unusual day because we got a weak lead from US markets but we ended up getting a bit stronger with the general mix of our earnings results.”
AMP, Leighton Holdings, Fairfax, and Myer all performed well.
Myer has again called on rival David Jones to consider a merger between the two department stores, sending Myer shares up 10 cents to $2.56, while David Jones had climbed five cents to $3.25.
Fairfax Media shares had soared 16 cents, or 23 per cent, to 88 cents after it reported improved underlying profit and earnings in the first half of the financial year.
Shares in construction and engineering group Leighton were up 80 cents to $17.21 after it lifted full year profit by 13 per cent.
AMP shares were 42 cents higher at $4.92 after its full year profit came in ahead of expectations, despite a two per cent fall in full year profit.
But the resources sector missed out on the gains.
BHP Billiton was down four cents at $39.70, Rio Tinto was 61 cents lower at $69.59 and Fortescue Metals was up three cents at $5.87.
The broader All Ordinaries index was up 5.8 points, or 0.11 per cent, at 5421.3.
The March share price index futures contract was flat at 5377, with 26,896 contracts traded.
National turnover was 1.83 billion securities worth $5.58 billion.