The Australian sharemarket failed to follow the rally on Wall Street to a record high last night after iron ore futures tumbled another 2.5 per cent today and global bond markets remained bearish on global growth prospects.
The S&P-ASX 200 index lost 27 points, or 0.49 per cent, to 5492.5, the low of the day, following weak Japanese industrial production data and US GDP data that showed the world’s biggest economy contracted one per cent in the March-quarter, far worse than the initial measure of minus 0.1 per cent.
US stocks ignored the weak growth data as economist revised their June-quarter forecasts higher, albeit from a much lower base, blaming transient factors such as severely cold weather for growth forecast to be 2 per cent mid-March.
However, plunging global bond yields continued to stoke confusion among global growth optimists, and after being vindicated by the GDP data US 10-year yields hit a fresh 11-month low of 2.40 per cent before bouncing to 2.47 per cent, three points higher on the day.
The US growth uncertainty was compounded by pending home sales that rose less than forecast, but sentiment was supported by weekly jobless claims that fell to five-year lows.
The Australian dollar continued its bounce on better-than-expected capital expenditure data, rising US0.3¢ to US93.25¢, while government 10-year yields rose just 1.3 points to 3.656 per cent.
“The uncertainties around the drivers of the persistent bond rally, which has had such an influence on currencies, suggest running less than full risk,” ANZ global head of markets research Richard Yetsenga said.
The Shanghai composite index was up 0.2 per cent at the close of the ASX
In Tokyo the Nikkei index was off 0.3 per cent as a surge in consumer inflation to 3.4 per cent, driven by food and energy costs, ended hopes the Bank of Japan would ramp up its stimulus programme this year.
Japanese industrial production fell 2.5 per cent and household spending slumped 4.6 per cent in April both far worse than forecast.
Dalian iron ore futures fell 2.5 per cent and steel rebar futures dropped 1.7 per cent, signalling further weakness in spot iron ore which dropped 1.1 per cent to US95.70 a tonne, a fresh 20-month low.
“If the market fails to find support at USD95/t we could see prices dip to USD90/t, although demand fundamentals do point to a recovery in June. On the supply front, concerns over potential supply disruption as the result of industrial action have now shifted to Brazil,” ANZ commodity strategists said in a client note.
Gold bounced $US5 to $US1258 an ounce but copper finally weakened, falling 0.9 per cent from an 11-week high to $US6880 a tonne on the dismal US growth data.
Poor performances by local miners and the big banks pulled the local bourse lower on Friday, IG Market analyst Stan Shamu said.
"The biggest concern is that iron ore prices are continuing to slide,” Mr Shamu said.
"All of the iron ore miners have extended their losses and the banks aren’t firing on all cylinders so that’s compounded it."
Iron ore prices for May are now down 12 per cent for the month to $US96.80.
Locally, the big miners led the losses.
Rio Tinto had dropped 77 cents to $59.30, BHP Billiton had shed 48 cents to $37.01 and Fortescue Metals was 13 cents lower at $4.41.
Three of the four big banks ended in negative territory, with Westpac down 10 cents to $34.42, ANZ dropped 24 cents to $33.49, Commonwealth Bank had shed 46 cents to $81.59 but National Australia Bank was eight cents higher at $33.49.
The broader All Ordinaries index was down 13.9 points, or 0.25 per cent, at 5485.3.
The June share price index futures contract was 21 points lower at 5510, with 22,675 contracts traded.
National turnover was 1.7 billion securities worth $6.2 billion.