The Australian sharemarket bounced back today as investors poured back into the miners and consumer staples stocks, shrugging off a sharp plunge in the trade deficit.
Following a positive lead from Wall Street the S&P/ASX 200 index climbed 79.5 points, or 1.48 per cent, to 5455.4 as a rebound in iron ore futures and drop in the Australian dollar ignited the rally.
However, the domestic June-quarter growth forecast were dealt the heavy blow of a $1.9 billion deficit in May, almost ten time the consensus forecast, and a steep downward revision in the April deficit to $780 million.
The 4.6 per cent drop in exports in May pointed to a flat contribution from net-exports to GDP growth from the 1.4 percentage point contribution in the March-quarter.
The dollar dropped US0.5¢ to US94.50¢ on the news while government 10-years lost 2.6 points to 3.561 per cent, bucking the 3 point rise in US 10-years to 2.56 per cent.
The Shanghai composite index was flat at the close of the ASX.
In Tokyo the Nikkei index was up 0.3 per cent.
Last night yow measures of US manufacturing missed forecasts but markets rallied on the view they confirmed the growth recovery remained on track.
Westpac economists said well after the winter disruption, the US ISM index had only managed to rise above the lowest of the six readings from the second half of last year, “indicative of an ongoing slower pace” of economic growth in 2014 compared to the temporary burst of growth in summer-fall last year.
In Europe the German PMI slipped to 52 points from 52.4 and French manufacturing contracted at a slower pace.
Dalian iron ore futures were up 1.9 per cent today following the 0.5 per cent rise in the spot price to US$94.40 a tonne yesterday. Copper slipped 0.2 per cent to $US7000 a tonne and cold was steady at $US1325 an ounce.
A spike in Chinese manufacturing activity in June, to its fastest pace of the year, plus strong US auto sales, had improved investor optimism about the global economy, CMC Markets strategist Michael McCarthy said.
“Monthly reads on manufacturing across the globe have painted a picture of expanding economies, boosting prices for commodity currencies, metals and shares,” he said.
“While interest rate rises may be nearer than thought, investors preferred to focus on a stronger industrial outlook, and the Australian share market came to life on the improved sentiment, despite a shocking trade deficit for May.”
Falling iron ore prices contributed to a trade deficit of $1.9 billion in May, nearly triple April’s $780 million deficit.
Among resources stocks, Rio Tinto gained $1.55 to $62.00, BHP Billiton added 85 cents to $36.85 and Fortescue Metals was four cents higher at $4.40.
For the banks, National Australia Bank added 88 cents to $33.18, ANZ gained 55 cents to $33.39, Westpac rose by 49 cents to $33.87 and Commonwealth Bank was 95 cents higher at $80.92.
Retailers also performed well, with Woolworths up $1.02 at $36.10, Coles owner Wesfarmers up $1.14 at $42.66 and Domino’s Pizza 56 cents higher at $22.56.
All sectors finished higher, although Telstra’s gains were more muted, gaining two cents to $5.23.
The broader All Ordinaries index was up 75.2 points, or 1.4 per cent, at 5441.7.
The September share price index futures contract was 72 points higher at 5412, with 31,190 contracts traded.
National turnover was 1.88 billion securities worth $4.8 billion.