Market closes slightly firmer
The Australian sharemarket again reversed early weakness and closed in the black on below average volume as investors camped out on the side-lines ahead of key US and Chinese data out this week.
Following the flat lead from Wall Street the S&P/ASX 200 dropped 0.2 per cent in early trade but rallied to close 11 points, or 0.2 per cent, up at 5588.4 as yield hunters lifted the major banks.
Last night US stocks fell in early trade following weak housing data and PMI services data that underscored the gaping divide between the corporate sector and the rest of the economy as it remained steady at a historical high of 61 points while the employment component tumbled to 52 points.
US pending home sales fell 1.1 per cent, confirming the blowout in US bond yields and mortgage rates since May last year on US Federal Reserve tapering fears had yet to work its way out of the system.
However, while stocks recovered, Westpac strategist Graeme Jarvis noted there was no recovery in high yield credit market indices. The Dow Jones transport index, often considered a bellwether of the broader economy, also continued to diverge from the rest of the market.
Along with the steady outflow from high yield corporate bond funds, the credit market uncertainty signals mounting caution that the global reach for yield was reaching its peak as investors factored in a rise in US rates next year.
The Australian dollar was slightly firmer at US94¢, while government 10-year yields climbed 4.6 points to 3.47 per cent.
The Shanghai composite index was up 0.6 per cent at the close of the ASX as strategists debated stimulus measures and whether the People's Bank of China needed to go further in rolling out unorthodox monetary policies in order to avert a chain of debt defaults.
Lombard Research analysts wrote in a report that for the past two years China had been in a "mini-cycle with a kick in the end of the year".
They said this year may provide less of a kick and structural slowdown may be more apparent because "monetary authorities seem to be out of gas".
Spot iron ore was unchanged at $US94.30 a tonne yesterday while Dalian iron ore futures were up one per cent today.
Gold was slightly firmer at $US1304 an ounce while copper eased to $US7120 a tonne.
More to come…
