Market closes marginally firmer
Bargain hunters shrugged off weaker iron ore and steel prices to reverse early losses on the Australian sharemarket today.
Jitters from the rapid rise of radical Islamist militants in Iraq knocked the S&P/ASX 200 index 0.5 per cent down in early trade but it rallied to close 7.2 points, or 0.13 per cent, up at 5412.3 with miners leading the rebound.
However, Dalian iron ore futures were off another 0.5 per cent, pointing to a fresh 20-month low in spot iron ore which dropped per cent to $US90.90 tonne on Friday, while steel rebar futures were down 0.6 per cent as investors come to terms with China's determination to rebalance away from investment driven growth.
"If prices fall below $US90/t we could see a new trading range of between $US85-90/t throughout the week," ANZ strategists said. "Our view is that markets are more sensitive to positive news than negative, although with the absence of any notable Chinese stimulus, buyers are happy to wait to find the bottom."
China Securities journal reported that a People's bank of China official said investors should realise that the economy was in "quasi- deflation" mode and a prudent monetary policy should focus on lowering funding costs, while expectations were for further targeted cuts in reserve requirement for rural banks.
The Shanghai composite index was up 0.5 per cent at the close of the ASX, buoyed by energy stocks after President Xi Jinping said the nation needed to find new ways to produce and consume fuels to ensure its long-term security.
In Tokyo the Nikkei index fell one per cent as the yen rallied against most major currencies.
The Australian dollar dropped from Friday's high of US94.35¢ to US94¢ and Government 10-year yields lost 3.9 points to 3.745 per cent as rising oil prices dented the global growth outlook and underpinning the demand for safe-haven bonds.
US 10-year yields slipped one point to 2.59 per cent after consumer confidence fell and the US producer price index fell 0.2 per cent last month, swinging attention firmly onto the US Federal Reserve monetary policy announcement on Wednesday night.
Despite weakening US data over the past few weeks there has been some speculation the Fed could ramp up the pace of tapering its bond purchasing program from $US10 to $US15 billion a month, while some economists believe chairman Janet Yellen could give stronger hints that rates could rise more rapidly from zero if employment rates keep on improving.
Gold climbed US9 to $US1282 an ounce and copper rose 0.5 per cent to $US6670 a tonne.
More to come…
