Hopes for Chinese stimulus pulled the Australian sharemarket and metals back from the morning session lows after sentiment was dented overnight by weak US and German manufacturing data.
Following the 0.5 per cent loss on Wall Street last night the S&P/ASX 200 index fell 0.8 per cent before bargain hunters again lifted it to close 10.3 points, or 0.19 per cent, down at 5336.6.
A mid-session one per cent spike in copper to $US6520 a tonne and a broadly weaker US dollar helped support miners, but most of the buying interest was focused on large cap stocks.
The Australian dollar remained immune to Chinese weakness, climbing US0.5ï¿½ to $US91.50ï¿½.
"Flows-wise, we note that repatriation flows by local asset managers look to be offering support for the currency at present, alongside ongoing offshore asset manager interest in Australian assets, and suspected corporate demand too," National Australia Bank global head of currency strategy Ray Attrill said. "We regard this flow-driven support as a more credible explanation than a 'bad news is good news' view that the China data is sufficiently weak that it will elicit a strong policy response from China."
Gold, however, fell $US10 to $US1313, possibly reflecting a shortage of liquidity in the global banking system, particularly China the biggest source of physical gold demand for the past year.
The Shanghai composite index rallied from the red to trade 0.4 per cent up at the close of the ASX as the yuan strengthened on stimulus hopes.
However, the People's Bank of China signalled its commitment to keep a tight rein on credit markets after it drained another $8.2 billion via repos today, taking the total withdrawal to $155 billion in the past six-weeks, and lifting interbank funding costs for the ninth straight day.
In Tokyo the Nikkei index was flat.
More to come