Solid, but backward looking March-quarter GDP data failed to halt the Australian sharemarket slide as the detail showed cautious consumers ensured growth remained unbalanced.
The S&P/ASX 200 index dropped 34.9 points, or 0.64 per cent, to 5444.8 after the annualised rate of growth of 3.5 per cent beat forecasts on the back of surging net-exports, with domestic demand growth of 1.6 per cent lagging well behind.
The Australian dollar spiked US0.3¢ higher and reversed to trade little changed at US92.70¢, but Government 10-year yields jumped another 6.5 points to 3.787 per cent as they followed the global retreat in safe-haven yields.
“Record low interest rates are a key tailwind for growth, but the economy remains constrained by a number of headwinds,” Westpac economist Andrew Hanlan said.
“In particular: a tightening of fiscal policy; a slowing of growth in China, triggering a decline in our terms of trade; a still high currency; and a downturn in mining investment.”
ANZ commodity strategist Mark Pervan said deteriorating iron ore fundamentals had prompted a 10 per cent downgrade in his forecasts for the next two years, which if sustained would lead to an 8 per cent drop in Australia’s terms of trade.
He does, however expected a 10 to 15 per cent bounce in prices from oversold levels in coming months.
Yesterday spot iron ore shrugged off falling futures prices to rise 0.5 per cent to $US92.50 a tonne, while Dalian iron ore futures were up 1.1 per cent today.
The Shanghai composite index was off one per cent at the close of the ASX as fears of a property market slowdown weighed on sentiment.
In Tokyo the Nikkei index was flat.
Last night US stocks eased from record highs and US 10-year yields dropped 6 points to 2.58 per cent, raising hopes the bearish signal from bonds last week was a false alarm.
However, futures exchange data appeared to show it was possibly just traders building short bond positions betting that yields will rise as the US Federal Reserve tapers its bond buying program to zero by October.
US factory orders rose 0.7 per cent, flattered by solid defence orders, while vehicle sales also beat forecasts.
Gold was steady at $US1246 an ounce and copper extended its overnight 0.9 per cent fall, dropping another 0.8 per cent to $US6830 a tonne.
Rivkin chief executive Scott Schuberg said Australian investors seemed to be in a pessimistic mood.
“Maybe it’s just a noisy, risky time for there to be money on the table, and there’s just profit-taking going on,” Mr Schuberg said.
“That’s all I can really think of because the other Asian markets aren’t dragging us down, the commodity markets aren’t punishing us too much, and there’s been no economic announcements in afternoon trading.”
Mr Schuberg said investors in Australia may be anticipating weakness in European markets ahead of a meeting of the European Central Bank on Thursday, and the possibility of some spillover into US markets. Investors are awaiting confirmation from the ECB of new measures to stimulate the European economy.
Mr Schuberg was surprised that the Australian GDP (gross domestic product) figures released on Wednesday had not boosted the market.
“I would have thought that a GDP print coming out better than expected would have been reason for the market to cheer,” he said.
The March quarter national accounts released on Wednesday showed the economy expanded by a solid 1.1 per cent, lifting the annual rate to 3.5 per cent.
In the resources sector, global miner BHP Billiton fell 24 cents to $36.16, Rio Tinto dumped 21 cents at $59.44, and Fortescue Metals eased two cents to cents to $4.46.
Among the banks, National Australia Bank retreated 33 cents to $33.31, Westpac backtracked 11 cents to $34.34, ANZ descended 32 cents to $33.39, and Commonwealth Bank gave away 75 cents at $81.15.
Property group Australand jumped 24 cents, or 5.57 per cent, to $4.55 after a property developer from Singapore trumped Stockland’s $2.52 billion takeover proposal for Australand.
Stockland was up seven cents at $4.01.
Fashion retailer Noni B soared 17.5 cents, or 44.87 per cent, to 56.5 cents after revealing it had received several expressions of interest for a takeover.
The broader All Ordinaries index was down 33.7 points, or 0.62 per cent, at 5426.8 points.
The June share price index futures contract was 37 points lower at 5445 points, with 26,810 contracts traded.
National turnover was 1.55 billion securities worth $3.63 billion.