ASX closes firmly in the black
The Australian sharemarket extended its recovery rally after a surprise slowing in the rate of contraction in Chinese manufacturing sparked a short-squeeze across financial markets.
The S&P/ASX 200 index was up 0.6 per cent following a the overnight rally on Wall street but it ramped to close 55.3 points, or 1.02 per cent, up at 5479.9 after the HSBC China PMI index jumped to 49.7 points from 48.3 points, easily beating forecasts for no change.
However, sentiment was capped after the Shanghai composite index delivered a cool reception as it halved early gains to trade per cent at the close of the ASX.
The HSBC survey showed improvements in output and new export orders, but signalling ongoing caution among Chinese manufacturers the employment component declined at a faster pace.
"Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs," HSBC China economist Hongbin Qu said. "But downside risks to growth remain, particularly as the property market continues to cool."
Earlier investors ignored the fall in the Japanese PMI index into the contraction zone and the Nikkei index joined other Asian markets by rallying 2 per cent on the Chinese data.
The Australian dollar rose US0.5¢ from its overnight low to US92.70¢ while government 10-year yields leapt 9.7 points to 3.753 per cent as the Chinese data combined with the US Federal Reserve board meeting minutes in knocking demand for safe-haven assets.
Although economists maintained there was no real news in the Fed minutes released last night, the S&P 500 index climbed 0.8 per cent and US 10-year yields rose 3 points to 2.53 per cent before extending the bounce to 2.56 per cent following the Chinese data.
The Fed said the US economy was growing moderately but stressed that an increase in rates was not imminent. Some members saw possible risks to housing markets and warned that low market volatility levels may signal simmering market risks.
Spot iron ore climbing $US1 to $US98.50a tonne yesterday and Dalian iron ore futures were up per cent today, while gold slipped $US5 to $US1291 a tonne and copper pared a 0.8 per cent overnight drop to trade 0.2 per cent off at $US6870 a tonne.
More to come…
