The Australian sharemarket closed at a fresh five-year high but gains were capped and volumes low as Chinese credit market jitters replaced the simmering tensions in Ukraine as the latest concern for investors.
Following the marginal gains to a record high on Wall Street last night, the S&P/ASX 200 index rose 16.4 points, or 0.3 per cent, to 5462.3 as China had its first onshore bond default after Chaori Solar failed to meet its bond interest payments.
The AiG performance of construction index also contracted at a faster pace, cooling rebalancing optimism from solid data out this week.
Bloomberg reported that Chinese companies with debt double their equity had jumped 57 per cent since 2007, suggesting more defaults were likely, while Reuters said three companies had cancelled bond auctions today as the premium cost of new issues rocketed.
The Shanghai composite index rose 0.6 per cent in early trade and was flat at the close of the ASX.
In Tokyo the Nikkei index was up 0.6 per cent.
“Asia faces considerable uncertainty related to China’s policy dilemma’s trying to improve the functioning of its financial system and avert upward pressure on its exchange rate,” Royal Bank of Scotland currency strategist Greg Gibbs said.
“This has at times undermined global and regional confidence and it may continue to do so from time to time.”
The Australian dollar ramped US1.2¢ to US91.15¢ but dropped back to US90.90¢ on broad US dollar weakness and a surge in the euro after the European Central Bank left rates on hold yesterday and marginally upgraded its regional growth forecast to 1.2 per cent.
US Federal Reserve presidents Bill Dudley and Charles Plosser both confirmed that tapering of the bond buying program would continue and only a “material” change in data would affect that.
Overnight the S&P 500 index edged up 0.2 per cent as US weekly jobless claims dropped and US factory orders fell 0.7 per cent as the cold weather continues to be blamed for the poor trend of data.
Attention is now on tonight’s US non-farm payroll data where forecasts have been trimmed to around 130,000 new jobs, well short of the 200,000 that would reflect solid growth momentum.
"The Ukraine situation that has been hanging over people’s heads looks like it will be put into the neutral category. It hasn’t frightened the market,” Lonsec senior client adviser Michael Heffernan said.
"The other thing is that the economic data that came out this week were all on the positive side - that has been a positive catalyst for the market."
The benchmark S&P/ASX200 index rose by 1.06 per cent over the week, and the All Ordinaries index rose by 1.14 per cent.
Important overseas economic data is likely to be the next market driver, unless the situation in the Ukraine deteriorates.
United States non-farm payroll job data are set to be released on Friday night and Chinese trade figures will follow.
In the local resources sector, BHP Billiton improved six cents to $37.72, Rio Tinto gained 36 cents to $64.94 and Fortescue Metals edged two cents higher to $5.43.
Among the major banks, Commonwealth Bank jumped 45 cents to $76.00, Westpac shed 41 cents to $33.90, ANZ added one cent to $32.58 and National Australia Bank dropped 11 cents to $34.74.
Carsales.com shares surged 86 cents, or 7.8 per cent, to $11.89 following yesterday’s announcement that it would pay $126 million for a major stake in South Korea’s leading car seller’s website.
The broader All Ordinaries index was up 17.3 points, or 0.32 per cent, to 5477 points.
The March share price index futures contract was up 22 points at 5463 points, with 17,756 contracts traded.
National turnover was 1.78 billion securities worth $3.87 billion.