Market closes slightly lower
The well-telegraphed Federal Budget had little initial impact on the ASX but shares edged lower as Chinese property market jitters escalated and hopes for a bounce in the US economy faded.
The S&P/ASX 200 index opened slightly higher but dropped back to close 1.7 points, or 0.03 per cent, lower at 5496.5 as iron ore futures resumed falling amid mounting concern that falling Chinese property prices could knock growth below the psychological 7 per cent level.
The Shanghai composite index was little changed at the close of the ASX following reports the People's Bank of China had encouraged Chinese banks to accelerate mortgage lending to counter the sharp slowdown in property prices.
Chinese home sales fell 18 per cent in April from the previous month.
Chinese fixed asset investment growth slowed to 17.3 per cent in March and was below expectations for the seventh straight month.
"While this is still a high growth rate, it is a low since 2001 and is down significantly from 19.6 per cent in 2013," Royal Bank of Scotland currency strategist Greg Gibbs said.
"It is consistent with the weaker trend for iron ore prices this year and, in light of a slowdown in the property sector, continues to point to a bigger downside risk for Australian commodity prices this year."
In Tokyo the Nikkei index slipped 0.3 per cent.
Last night US stocks hit record highs but closed marginally firmer after April retail sales growth of 0.1 per cent fell short of forecasts for a 0.4 per cent increase, leaving average growth of sales, excluding autos, for the first four months of the year at the weakest level in five years.
Sentiment was supported by the NFIB small business survey which climbed to a post-GFC high.
The Australian dollar was steady at US93.40¢ after the budget but rallied to US94¢ last night as the euro fell on reports German Bundesbank officials were supportive of rates cuts and quantitative easing in the eurozone.
Government 10-year yields dropped 3.6 points to 3.81 per cent to follow the 5 point drop last night in US 10-years to 2.60 per cent.
Talk of negative deposit rates in the eurozone over the past week has lifted the US dollar index against six major currencies more than one per cent and sparked a global scramble for yields.
The German ZEW business survey provided a signal that the growth recovery in the region was stalling and deflation getting a grip after the outlook component slumped 10 points to 33.1 points, well below forecasts and the lowest level since January 2013.
Gold was slightly firmer at $US1295 and copper dropped 0.5 per cent to $US6830 a tonne. Yesterday's spot iron ore price was not updated but Dalian iron ore futures were down 0.8 per cent.
