The ASX may open higher. Picture: Reuters.
The ASX may open higher. Picture: Reuters.

The Australian sharemarket recovered lost ground after bond yields tumbled to fresh two-year lows following a rise in the unemployment rate and news the US Federal Reserve expected to end its stimulus program in October.

The S&P/ASX 200 index surrendered early gains after weaker than expected Chinese trade data but it recovered to gain 11.9 points, or 0.22 per cent, to 5464.4 as lower bond yields drove demand for higher yielding stocks amid further blows to the domestic and global growth outlooks.

June employment data showed the economy created a net 15,900 new jobs but shed 3800 full time jobs while the unemployment rate rose to 6 per cent as the participation rate increased.

“While total employment is up 0.9 per cent over the last year, full time jobs growth is running at just 0.5 per cent year on year in contrast to part time employment growth which is running at 1.7 per cent year on year,” AMP head of investment strategy Shane Oliver said.

“This is a sign of caution on the part of employers when hiring new staff.”

The Chinese stabilisation outlook was undermined by the 7.2 per cent increase in Chinese June exports, slightly better than May’s number, but well short of the 10 per cent forecast.

Imports bounced back to 5.5 per cent from a 1.6 per cent decline but also missed forecasts.

The Shanghai composite index was up 0.1 per cent at the close of the ASX.

In Tokyo the Nikkei index was off 0.5 per cent.

The Australian dollar hit a high of US94.60¢ after the jobs data but dropped back to US93.95¢, while government 10-year yields tumbled 5.3 points to 3.465 per cent.

Last night US 10-years reversed a 5 point rise to close one point lower at 2.56 per cent after the Fed minutes revealed its $US85 million bond buying program would finally be tapered to zero with a $US15 billion reduction in October.

The Fed gave no clue when rates were expected to rise but bond market signalled even if the did move short-term rates higher it was unlikely to last long.

Although the S&P 500 bounced 0.5 per cent last night global investor caution mounted after the parent company of Portugal’s Banco Espirito Santo defaulted on a bond payment, sending Portuguese yields sharply higher, and US protectorate Puerto Rico edged close to defaulting on its debt with plans to amend laws to allow it to do so.

Dalian iron ore futures slipped 0.4 per cent following the 0.1 per cent rise to US96.60 a dollar in the spot price yesterday. Copper was little changed at $US7125 a tonne and gold climbed $US6 to $US1329 an ounce.

CMC Markets sales trader Betty Lam said the market was up due to positive US and European overnight leads, the extra job additions and a 5.5 per cent gain in the value of China’s monthly imports for June.

“The China trade data definitely provided a little bit of a kickstart to the market as it was slumping a little bit around midday,” she told AAP.

“Three out of the four banks were in the red most of the day, they are pretty much the largest cap stocks on our market so that keeps the market pretty much suspended in the middle.”

Volumes were also thin with the $2.7 billion value of Thursday’s trading less than half the $6 billion average before a slump in activity in the last few months.

Among the banks, ANZ was down two cents to $33.16, Westpac was 10 cents lower at $33.75, Commonwealth Bank rallied late to close six cents up at $80.85 and National Australia Bank gained 12 cents to $33.39.

BHP Billiton was up 16 cents at $37.41, Rio Tinto closed 27 cents higher at $62.41 and Fortescue Metals dropped three cents at $4.35.

Education provider Navitas was 29 cents, or six per cent, higher at $5.15, a day after the loss of a major contract saw its shares dive 30 per cent.

The broader All Ordinaries index was up 12.1 points, or 0.22 per cent, at 5454.3.

On the ASX 24, the September share price index futures contract was six points higher at 5420, with 17,805 contracts traded.

National turnover was 1.6 billion securities worth $2.7 billion.

AAP

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