The Australian sharemarket bounced as investors shrugged off Ukraine concerns and another Chinese debt default, instead focusing on solid US industrial production data.
Following the one per cent rally on Wall Street last night the S&P/ASX 200 index gained 0.8 per cent at its peak before slipping to close 27 points, or 0.51 per cent at 5344.6 as the Chinese yuan dropped to an 11-month low, reminding investors of the simmering risks in the world’s second biggest economy.
The yuan fell after property stocks and bonds dropped following news Zhejiang Xingrun Real Estate did not have enough cash to repay creditors that include more than 15 banks about $US566 million.
The Shanghai composite index was up 0.3 per cent at the close of the ASX despite Chinese property prices in the four “first tier” city property markets growing at the slowest rate in 18-months and overall property prices having fallen 5 per cent this year.
“The government appears to be in the process of tightening credit conditions to squeeze out weaker players in several sectors that may have relied on credit that was too easily available and contributing to excesses,” Royal Bank of Scotland currency strategist Greg Gibbs said. “This may be a part of this process. It continues to point to a lower growth outlook.”
In Tokyo the Nikkei index climbed 1.5 per cent.
The Australian dollar was steady at US90.80¢ as the US dollar dropped against most major currencies, despite expectations the US Federal Reserve would announce another $US10 billion cut to its monthly bond buying program tomorrow.
Last night US February industrial production rose 0.6 percent, easily beating forecasts for 0.2 per cent, but the Empire State survey missed and the National association of Home Builders survey also cam in weaker than expected.
Gold tumbled $US25 to $US1360 an ounce, but copper extended its overnight 0.8 per cent bounce, gaining one per cent to $6540 a tonne. On Monday spot iron ore dropped 0.5 per cent to $YS109.60 a tonne.
OptionsXpress market analyst Ben Le Brun said global markets had found some comfort over an easing of geopolitical tension in Crimea.
“That’s what propelled US and European stock markets higher last night. We’ve ridden up on the coat-tails of that,” he said.
In the US, investors were buoyed by a report that showed factory output rebounded last month, indicating that the world’s largest economy is improving.
Also, the United States and the European Union announced asset freezes and other sanctions against Russian and Ukrainian officials involved in the Crimean crisis, but avoided measures that would hurt Russia’s vital economic interests.
In the resources sector, global miner BHP Billiton rose 60 cents to $36.07, Rio Tinto added 57 cents to $61.85, and Fortescue Metals dipped three cents to $4.88.
Among the major banks, Westpac lifted five cents at $33.59, Commonwealth Bank improved 34 cents to $75.19, National Australia Bank jumped 34 cents to $34.54, and ANZ ascended 20 cents to $32.26.
Agricultural chemicals and seeds supplier Nufarm gained 10 cents to $4.00 as it said it will axe 105 jobs as part of a cost-cutting restructure of its Australian operations.
Retailer David Jones was up four cents at $3.33 as it said it will undertake a thorough assessment of a merger proposal put by rival Myer. Myer scraped off one cent at $2.65.
The broader All Ordinaries index was up 25 points, or 0.47 per cent, at 5360.2 points.
The March share price index futures contract was up 24 points at 5346 points, with 162,808 contracts traded.
National turnover was 1.45 billion securities worth $3.84 billion.