Plunging global bond yields forced bullish investors to reassess growth expectations but the Australian sharemarket rallied from the red after the capital expenditure data gave some hope for a smooth rebalance from the mining investment slowdown.
The S&P/ASX 200 index dropped 0.4 per cent in early trade but bounced to close 7.7 points, or 0.14 per cent, down at 5519.5 despite a one per cent drop in iron ore futures.
Domestic sentiment was boosted after the capex survey showed spending fell 4.2 per cent in the March-quarter, far more than the 1.5 per cent forecast, but the expected 12 per cent decline over the next year is better than the 17.4 per cent decline previously forecast.
“While this upgrade to investment plans is welcome we would describe the outlook as still uncertain,” Westpac economist Andrew Hanlan said.
“Of particular concern is the retreat of consumer sentiment over recent months, which appears to be translating into some loss of spending momentum heading into (the June-quarter).”
He said companies would most likely be looking for confirmation of a sustained improvement in household demand before committing in a significant way to additional investment spending.
The Australian dollar jumped US0.5¢ to US92.90¢ on the data, but government 10-year yields followed the safe-haven driven dive in global yields with an 8.4 point slump to an 11-month low of 3.623 per cent.
Last night the US S&P 500 index eased 0.1 per cent as global benchmark US 10-year yields tumbled 9 points to an 11-month low of 2.42 per cent, dragging German, UK, Canadian and French yields, among others, down too.
Easing jitters over renewed stress in peripheral eurozone economies somewhat, Italian and Spanish yields also dropped as eurozone money supply slowed, raising hopes for a rate cut next week.
The Shanghai composite index was off 0.2 per cent at the close of the ASX.
In Tokyo the Nikkei index reversed early losses to close flat despite Japanese retail sales slumping 13.7 per cent in April, the fastest pace in 14 years, after the introduction of a consumption tax.
Gold fell $US6 to a fresh four-month low of $US1257 an ounce and copper was 0.2 per cent easier at $US6930 a tonne.
Dalian iron ore futures were down per cent while spot iron ore fell 1.3 per cent to a 20-month low of $US96.80 a tonne yesterday.
"A lot of the mining stocks and mining infrastructure stocks are getting hit pretty hard,” IG chief market strategist Chris Weston said.
"Iron ore is lower."
The price of iron ore, Australia’s most valuable export, is below $US97 a tonne - its lowest level since 2012.
But financial stocks and telco Telstra were holding up reasonably well as investors chased stocks that generated good yields.
Mr Weston said there was much uncertainty around the resources sector and the strength of the Chinese property market, and markets around the globe seemed to be in a holding pattern.
He said capital expenditure numbers released by the Australian Bureau of Statistics on Thursday did not have a substantial effect on the market.
Mr Weston said the headline capex numbers looked bad but detailed figures were more upbeat.
In the resources sector, BHP Billiton dropped 50 cents to $37.49, Rio Tinto lost $1.33 at $60.07, and Fortescue Metals was off 14 cents at $4.54.
New Hope Coal reversed six cents to $2.92 after it said it would axe five per cent of its workforce as it struggles with the current downturn in the coal industry.
Among the major banks, Westpac firmed two cents to $34.52, ANZ added four cents to $33.73, Commonwealth Bank gained 11 cents to $82.05, and National Australia Bank fell 10 cents to $33.41.
Telstra picked up four cents at $5.38.Toll Group rose 26 cents at $5.53 after announcing a restructure that will save it up to $12 million each year.
Shares in toy distributor Funtastic were halted from trade as the company prepared to issue an update to investors.
Before the halt, Funtastic was down 0.1 cents at 6.9 cents.
The broader All Ordinaries index was down 7.5 points, or 0.14 per cent, at 5499.2 points.
The June share price index futures contract was 14 points lower at 5523 points, with 19,128 contracts traded.
National turnover was 1.19 billion securities worth $3.06 billion.