The Australian sharemarket halved early losses after the “down-beat” Reserve Bank policy statement swept aside lingering fears of a rate rise this year.
The S&P/ASX 200 index fell 0.6 per cent in early trade but the Reserve Bank policy statement provided the impetus for a bounce off trend-line support that lifted the index to close 16 points, or 0.29 per cent, down at 5460.8.
Miners resumed falling after iron ore prices fell on fears of a meltdown in Chinese property prices would hit steel and iron ore demand, compounding pressure on a market already tilting into oversupply.
China Real Estate Index System said property sales by volume in the 44 cities they tracked fell 9 per cent month on month in April and 19 per cent over the year, while reports suggested Chinese banks have clamped down or even halted all lending to developers.
“Tightening credit conditions in the property sector and weaker house prices may trigger a downturn in overall fixed asset investment, which could prove to be a bigger drag on the overall economy than currently expected,” Royal Bank of Scotland currency strategist Greg Gibbs said.
“From Australia’s point of view, as China’s largest supplier of steel-making raw materials, this is a significant risk factor.
The Shanghai composite index was off 0.3 per cent at the close of the ASX.
In Tokyo the Nikkei index was up 0.3 per cent.
Overnight US stocks initially rallied after European Central Bank president Mario Draghi said the ECB “governing council is comfortable with acting next time” on interest rates because members were dissatisfied “about the projected path of inflation”. The global benchmark index closed 0.2 per cent down.
The Australian dollar slipped US0.3¢ to $US93.60¢ as the US dollar rallied against most major currencies and the Reserve tempered the domestic yield outlook.
Government 10-year yields dropped 2.5 points to 3.81 per cent.
Gold was little changed at $US1290 a tonne and copper climbed one per cent to $US6720 a tonne.
Yesterday spot iron ore fell 1.3 per cent to an 18-month low of $US103.70 a tonne while Dalian iron ore futures were off 0.8 per cent today.
IG Market analyst Evan Lucas said a mixed performance in the United States had weighed on investors’ minds, but the local market finished the week in a better position than expected.
“What we saw over in the US has carried through,” he said.
“We headed down quite hard this morning but that has reversed, with the banks turning around as the RBA’s statement of monetary policy showed the yield trade would continue to hold true.”
The major banks reacted positively to the RBA’s commentary released this morning, with indications showing rates will be on hold for at least another five months.
However, Mr Lucas said ANZ Bank going ex-dividend had been a drag on the market. Overnight on Wall Street, shares finished mostly lower as investors assessed the latest batch of US company earnings and sold utility and energy stocks.
In the banking sector, ANZ fell $1.08 to $32.72 as it traded ex-dividend but Commonwealth Bank was 41 cents higher at $79.50, Westpac lifted four cents to $34.94, and National Australia Bank added 24 cents to $34.38.
In the resources sector, BHP Billiton fell 31 cents to $37.34, Rio Tinto dumped 51 cents to $60.95, and Fortescue Metals lost one cent to $4.81.
Natural gas distributor Envestra soared 20 cents, or 18 per cent, to $1.33.
Envestra is the target of a $2.37 billion takeover bid from a Hong Kong consortium, rivalling a $2.1 billion offer from a local gas distributor.
Meanwhile, News Corporation jumped 54 cents to $18.29 despite a quarterly profit drop of 85 per cent to $US48 million ($A51.93 million).
Fairfax Media was up 2.5 cents at $1.005.
The broader All Ordinaries index was down 16.1 points, or 0.30 per cent, at 5439.8.
On the ASX 24, the June share price index futures contract was eight points lower at 5451, with 10,740 contracts traded.
National turnover was 1.2 billion securities worth $3.2 billion.