Another rally to a six-year high ran out of steam on the Australian sharemarket today as stocks in China struggled and data showed the People’s Bank of China was intent on curbing currency speculators.
The S&P/ASX 200 index opened in the red following falls yesterday by Chinese and US stocks, but bargain hunters stepped in lifting it to a 0.4 per cent gain as the Shanghai composite index reversed an early loss.
The S&P/ASX slipped again to close 3.1 points, or 0.0 per cent, up at 5437.
The Shanghai composite index was trading slightly higher at the close of the ASX, but strategists noted that credit markets were signalling increasing alarm from the central bank’s moves to avoid a credit crisis.
Bloomberg noted that credit spread between Chinese Government two-year bond yields and interest rate swaps used to manage private sector risk reached seven-year highs today, with similar blow outs in short-term rates reflecting increased lender perceptions of risk.
Westpac senior economist Huw McKay said data showed Chinese bank currency holdings more than doubled from over a year ago to $US76 billion and were a “footprint” of large capital inflows.
He said it added credence to claims the PBOC was weakening the yuan to deter the speculative flows as the country’s exporters struggled for competitiveness, especially against other emerging market and European exporters.
“China often makes a policy move only when there are multiple, or at worst dual benefits to be had,” he said.
“Here we have two: slower erosion of competitiveness and a shot across the bow of the ubiquitous speculator.”
In Tokyo the Nikkei index was down 0.3 per cent.
The Australian dollar traded around US90¢ as the US dollar also battled to gain headway from another round of weak US data that raised hopes US Federal Reserve tapering of its bond purchases could slow.
US consumer confidence fell from lofty levels and the Richmond Fed index fell more than forecast, while on the upside the Case Shiller 20 city house index rose 0.76 per cent.
“Markets took last night’s information as generally negative, with equities mixed, yields lower, oil lower and gold higher,” National Australia Bank strategist Emma Lawson said.
Gold rose $US to $US1340 an ounce, copper edged up to $US7066 a tonne and spot iron ore lost 0.7 per cent to an eight-month low of $US119.10 a tonne.
Iron ore miners suffered some of the biggest falls following a dip in the iron ore price.
"Overall, the mining sector is the main reason why the market hasn’t done better today,” CommSec market analyst Steven Daghlian said.
"Rio, BHP and Fortescue were the big losers, but they have had some incredible gains since the start of this month."
BHP Billiton dropped 52 cents to $38.58, Rio Tinto lost $1.65 at $67.97 and Fortescue Metals shed 16 cents to $5.68.
Among the mid-tier iron ore miners, Atlas Iron dropped 5.5 cents to $1.00, Mount Gibson Iron Ore lost 1.5 cents to 91.5 cents and BC Iron was 30 cents weaker at $4.94.
Among the banks, NAB lifted 36 cents to $34.87, Westpac gained 14 cents to $33.56, ANZ added six cents to $32.08 and Commonwealth Bank was 22 cents higher at $75.49.
CSL added 78 cents to $71.95, Ramsay Health Care gained $1.43 to $48.97 and Sonic Healthcare rose by 25 cents to $17.83.
Travel retailer Flight Centre was one of the better performers, up $1.59 to $51.39 after it said strong leisure and corporate travel sales had helped lift the company’s profit by 20 per cent.
Uranium miner Paladin also gained 9.5 cents, or 21 per cent, to 54 cents as Japan made moves towards restarting its nuclear energy program.
The broader All Ordinaries index was up 3.0 points, or 0.06 per cent, at 5447.
The March share price index futures contract was 20 points higher at 5430, with 26,188 contracts traded.
National turnover was 2.19 billion securities worth $5.6 billion.