The Australian sharemarket climbed to a post-GFC high as dividend hunters poured cash into the major banks ahead of upcoming earnings reports from three of the big four.
The S&P/ASX 200 index climbed 38.5 points, or 0.7 per cent, to 5517.8 points, but sentiment was capped by soft Chinese manufacturing data and a slump in the Australian dollar which raised risks for offshore investors.
The dollar fell US1¢ to US92.80¢ after March-quarter CPI inflation of 0.6 per cent fell well short of forecasts for a 0.8 per cent increase, 2.9 per cent on an annual basis.
Australian government 10-year yields dropped 6.1 points to 3.946 per cent as the CPI smashed forecasts for an interest rate rise later this year.
“On this occasion we note that the weakness was broad brush rather than concentrated. In effect, there were surprises across multiple categories that were consistent in direction – most coming in on the low side,” Westpac economist Justin Smirk said.
If administrative charges such as utilities, health and education were removed the “non-traded index” there was a 0.2 per cent drop over the quarter, the first recorded fall since the March quarter of 2009.
The Shanghai composite index was off 0.4 per cent at the close of the ASX after the HSBC flash PMI index contracted for the fourth straight month with a reading of 48.3 points.
A report by Bloomberg that Chinese bank debts were soaring and that banks were hoarding cash also weighed on sentiment.
In Tokyo the Nikkei index was up 0.8 per cent.
Gold lost $US6 to $US1284 an ounce, copper was little changed at $US6670 a tonne and spot iron ore dropped 0.7 per cent to $US112.50 a tonne.
Investors viewed that reading as creating what is known as a ‘Goldilocks situation’ - where growth and inflation were ‘just right’, CMC Markets chief market analyst Ric Spooner said.
“It was a pretty significant watershed day here on the Aussie market,” he told AAP.
“It is not too hot or not too cold ... a moderate growth outlook that is not strong enough to remove the valuation support of low interest rates.”
The two main market indices closed at their highest levels since June, 2008.
Among the major banks, Commonwealth Bank lifted 98 cents to $79.01, ANZ was 31 cents higher at $34.59, Westpac added 33 cents to $35.62 and National Australia Bank was 18 cents higher at $35.67.
The resources sector was subdued amid negative reports about the iron ore price outlook.
BHP Billiton lifted 19 cents to $38.20, Rio Tinto gained five cents to $62.79 while Fortescue Metals lost seven cents to $5.25.
Gold miner Newcrest was 10 cents higher at $10.12 after it said it expected full year production to be around the top end of its guidance range.
Australand Property Group dropped five cents to $4.23 after it rejected a $2.4 billion takeover offer from fellow developer Stockland.
Stockland shares dropped two cents to $3.76.
The broader All Ordinaries index was up 35.1 points, or 0.64 per cent, at 5502.2, its highest close since June 18, 2008.
On the ASX 24, the June share price index futures contract was 37 points higher at 5509, with 23,423 contracts traded.
National turnover was 1.55 billion securities worth $4.5 billion.