The Australian sharemarket reversed early gains to close slightly firmer as weak metal and iron ore prices continued to reflect slack commodity demand and credit market jitters in China.
The S&P/ASX 200 index climbed 0.6 per cent in early trade but dropped back to close 5.7 points, or 0.1 per cent, up at 5469.7 as the boost to sentiment from tightly targeted Chinese stimulus measures bypassed commodity markets.
Last night Wall Street edged up to a record high as investors looked on the bright side of Chinese export growth of 7 per cent and forecasting matching US payroll data on Friday.
However, the US dollar rose against most currencies and was steady against the Australian dollar at US93.60¢ after St Louis US Federal Reserve president James Bullard said US rates could rise sooner than March 2015 if the jobless rate continued to fall and GDP growth was more than 3 per cent.
Australian government 10-year yields rose marginally to 3.786 per cent while US 10-years rose 2 points to 2.60 per cent.
The Shanghai composite index was up 0.8 per cent at the close of the ASX as tech and financial stocks rallied after the People’s Bank of China revealed plans to increase lending to small businesses, including a 0.5 per cent cut in the reserve requirement ratio for some banks.
“It’s designed to provide reasonable and appropriate growth of money, credit and aggregate financing to promote “stable economic operations,” National Australia Bank economist David De Garis said.
“Analysts seem divided over whether such support will be sufficient for the economy, but the growth-supportive policy intention of the authorities looks clear.”
Chinese consumer inflation jumped to 2.5 per cent in May, up from 1.8 per cent, as a 4.1 per cent leap in food prices offset a drop in rental costs. Producer prices fell 1.4 per cent, an improvement from the previous minus 2 per cent, as firmer producer prices for consumer goods offset tumbling mining and manufacturing costs.
“The industry breakdown suggests that most industries remain under heavy pressure to cut or keep prices flat,” HSBC China economist Qu Hongbin said.
“The improvement was sporadic and does not suggest a broad-based improvement in industrial demand.”
In Tokyo the Nikkei index fell 0.9 per cent.
Dalian iron ore futures were off 0.8 per cent and spot iron ore eased 0.2 per cent to US94.30 a tonne yesterday, while copper lost 0.3 per cent to $US6670 a tonne and gold was steady at $US1255 an ounce.
Australian Stock Report analyst Benny Sada said the local market opened strongly after two sessions of gains on Wall Street, but local economic data had affected sentiment.
“Mixed economic readings might have had an influence on the local market fading in afternoon trade,” Mr Sada said.
The National Australia Bank’s latest business survey showed confidence levels remained steady in May while the number of ANZ job advertisements fell for the first time in five months during May.
In addition, Mr Sada said consumer stocks continued to weigh on the local market.
“There’s been a lot of weakness in the consumer space and that’s handicapped our market today,” he said.
Meanwhile, evidence of local retailers facing earnings pressures came with The Reject Shop and Pacific Brands issuing profit warnings.
The Reject Shop had shed $1.10 to $8.05 and Pacific Brands had dumped five cents to 51 cents.
Among the miners, BHP Billiton rose four cents to $36.28, Rio Tinto was up 24 cents at $59.86, and Fortescue Metals gained 11 cents to $4.63.
In the banking sector, National Australia Bank added 11 cents to $33.64, Westpac gained eight cents to $34.63, ANZ advanced nine cents to $33.76, and Commonwealth Bank was 65 cents higher at $82.42.
The broader All Ordinaries index was up five points, or 0.09 per cent, at 5448.5.
The June share price index futures contract was two points lower at 5476, with 15,775 contracts traded.
National turnover was 1.5 billion securities worth $3.3 billion.