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.
The better-than-expected figure triggered renewed confidence in the iron-ore sector, simultaneously giving Aussie shares a boost, Australian Stock Report senior equity analyst Benny Sada said.
“It offered the first signs that the mini-stimulus measures China had announced in recent months are having the desired impact on the economy,” he said.
“The improvement in Chinese manufacturing sector has brighten the prospect for iron-ore and we are seeing investors now pile in on the iron-ore miners.”
The favourable China factory reading, coupled with the firming of spot iron ore prices overnight, helped mining giant Rio Tinto rise $1.56 to $60.96.
BHP Billiton gained 48 cents to $37.65 while Fortescue Metals rose 16 cents to $4.59.
Energy stocks also rose, with Woodside Petroleum 49 cents higher at $41.72, and Oil Search up 11 cents to $9.25.
Among the major banks, Westpac jumped 19 cents to $33.86, ANZ advanced 38 cents to $33.41, National Australia Bank gained 49 cents to $33.54, and Commonwealth Bank firmed 46 cents to $80.65.
James Hardie rose 78 cents to $14.47 after it more than doubled its annual profit to $US99.5 million and impressed investors with a special dividend and share buyback plan.
The broader All Ordinaries index was up 54.2 points, or one per cent, at 5458.1 points.
The June share price index futures contract was 52 points higher at 5488 points, with 26,316 contracts traded.
National turnover was 1.5 billion securities worth $4 billion.