A tentative bounce on the Australian sharemarket fizzled after the release of Chinese steel data, which revealed surging inventories and a likely slackening of demand for iron ore in the coming months.
Copper, steel rebar futures and Chinese stocks fell further in early trade today, but they bounced back dragging the S&P/ASX 200 index up 0.4 per cent by the time Shanghai closed for lunch.
However, selling returned to the local bourse and the benchmark index closed just 2.3 points, or 0.04 per cent, up at 5413.8.
Investors shrugged of Chinese February lending data that fell well short of forecasts as some analysts suggested the data was distorted by the week-long Lunar New Year break, but the steel data painted a picture of a rapidly decelerating economy.
Chinese steel sales slowed to just 2.2 per cent in January from 11.1 per cent in December, while inventories almost doubled to 38.6 per cent from 20.4 per cent.
“Clearly output will have to slow while this stock build is worked through, implying downside risk to heavy industrial output in this week’s Jan-Feb outturn, and in subsequent months,” Westpac China economist Huw McKay said.
On the credit data he noted similar “austere February” last year saw a bounce back in March lending and that the lag effect of credit growth was six to nine months.
However, he admitted that the extent of the 8.3 per cent slump in ore yesterday to $US104.80 a tonne was “a surprise development in terms of speed and scale, if not direction”.
However, others have noted that China’s credit markets are far more fragile this year following two near debt defaults and one actual default that has prompted offshore lenders and investors into a “wait and see mode”.
In Tokyo the Nikkei index was up 0.2 per cent.
The Australian dollar was steady at US90.30¢ and government 10-year yields slipped two points to 4.187 per cent following the overnight dip in benchmark US yields on mild safe-haven demand.
Overnight Wall Street finished marginally weaker.
Gold rose $US7 to $US1342 an ounce, copper pared its 2 per cent overnight drop, rising 0.4 per cent to $US6670 a tonne and steel rebar futures pared a 1.6 per cent drop to trade 0.2 per cent down at the close of the ASX.
CMC Markets chief market strategist Michael McCarthy said there appeared to be a rotation of investors selling mining stocks and buying into the banking sector.
He said the market was struggling to stay above the level of 5,450 points, which was around its highest level in five-and-a-half years.
“But there doesn’t appear to be a huge appetite to sell the market off either,” he said.
“And a better performance (from markets) across the Asian region today, too, I think, has been supportive of our market.”
Mr McCarthy said the big miners had been hit in the wake of lower iron ore prices but their performance on Tuesday varied and appeared to be more stock-specific than sector-specific.
Mr McCarthy said investors may be re-assessing the Chinese trade figures released over the weekend that showed a big fall in Chinese exports but a rise in imports.
“It’s imports rather than exports that speaks to Australian companies’ engagement with China,” Mr McCarthy said.
In the resources sector, diversified miner BHP Billiton fell 23 cents to $35.93, Rio Tinto lifted two cents to $61.22, and Fortescue Metals eased nine cents to $4.83.
Rare earths miner Lynas tumbled 2.5 cents to 27 cents after its half-year loss widened.
Among the major banks, the Commonwealth Bank rose 50 cents to $76.25, Westpac advanced 52 cents to $34.29, ANZ added three cents to $32.34, and National Australia Bank found 12 cents at $34.77.
The broader All Ordinaries index was down 1.5 points, or 0.03 per cent, at 5429.3 points.
The March share price index futures contract was eight points lower at 5412 points, with 24,599 contracts traded.
National turnover was 1.7 billion securities worth $4.5 billion.