ASX rallies to close slightly higher
The Australian sharemarket reversed early losses as iron ore futures and Chinese stocks bounced on speculation Chinese authorities were defending key technical support levels.
Following a weak overnight session on Wall Street the S&P/ASX 200 index dropped 0.6 per cent in morning trade as domestic consumer confidence tumbled but it rallied to close 4.2 points, or 0.08 per cent, at 5424.6.
The Shanghai composite index broke through the psychological 2000 point level in early trade but jumped to trade 0.3 per cent up at the close of the ASX on speculation "state-linked" investors would prevent stocks from driving a collapse as property market fears broadened.
Following the one per cent drop in the spot iron ore price to $US97.50 tonne yesterday Dalian iron ore futures rallied from the red to a 1.2 per cent gain.
In Tokyo the Nikkei index was off 0.3 per cent after the Bank of Japan failed to increase its quantitative easing program.
The Australian dollar continued to weaken, sliding another US0.5¢ to US92.30¢ while government 10-year yields dropped 4.1 points to a fresh 10-month low of 3.669 per cent after the Westpac consumer confidence plunged 6.8 points to a three year low of 92.9 in the wake of last week's widely criticised Federal Budget.
Goldman Sachs economist Tim Toohey said if domestic data continued to soften, commodity prices continued to fall, and the fiscal drag intensified as he expected "a rate cut as early as July is still likely, in our view".
Mr Toohey is one of just three prominent economists still expecting a domestic rate cut and he noted that caution in the Reserve Bank minutes released yesterday occurred before the sharp falls in consumer confidence and iron ore prices.
Underpinning the subdued global interest rate outlook priced into global bond prices New York US Federal Reserve president Bill Dudley said the pace of rate rises "will probably be relatively slow" and that if bond yields acted sharply to a change in expectations a more cautious unwinding of the Fed's $US4 trillion balance sheet would be warranted.
Gold was little changed at $US1295 an ounce while copper lost 0.7 per cent to $US6860 a tonne.
More to come…
