ASX starts new year on soft note
The Australian sharemarket surrendered early gains to a three-month low as investors rotated out of the major banks and into miners, while the Reserve Bank's decision to leave rates on hold offered no support.
The S&P/ASX 200 index kicked up to a 0.3 per cent gain after the official Chinese PMI index met forecasts for a mild expansion, but it dropped off to close 19.8 points, or 0.37 per cent, down at 5375.9 as the global rebound narrative faltered.
The global growth outlook was undermined by a fall Japan's Tankan business survey to a nine-month low, a drop in South Korea's PMI index to a 10-month low and a deceleration in Australia's AiG PMI manufacturing index to 48.9 points from 49.2.
The Australian dollar rose US0.4� to US94.60� after the Reserve said rates would stay low for an extended period and painted a benign, below trend growth outlook, while acknowledging an uptick in business lending.
Government 10-year yields rose 3.5 points to 3.577 per cent as the rebound in the ANZ Roy Morgan consumer confidence index ran out of steam.
"Westpac has been of the view that there will be no change in rates until increases occur in the second half of 2015," Westpac chief economist Bill Evans said. "Today's statement gives us no reason to alter that view."
The Shanghai composite index was off 0.1 per cent at the close of the ASX as the Chinse PMI edged up to 51 points.
In Tokyo the Nikkei index was 1.1 up per cent as the yen weakened following the drop in the Tankan and rise in Japan's PMI index.
A UBS economist told Bloomberg a lack of confidence about the outlook among small and medium sized Japanese companies, especially non-manufacturers, indicated wage growth was unlikely to spread broadly as the Japanese government hoped.
Dalian iron ore futures dropped 0.5 per cent following the 1.2 per cent fall in spot iron ore to $US93.80 a tonne yesterday, while copper jumped 1.1 per cent to $US7020 a tonne and gold climbed $US11 to a three-month high of $US1327 an ounce.
"A key concern is whether the growth in seaborne iron ore supply from Australia can be absorbed if steel demand in China cannot grow at the same rate," ANZ commodity strategists said.
"Any weakness in Chinese steel demand in the second half is likely to come from a slowdown in residential construction, as falling residential property prices potentially slow sales and property development."
More to come…
