ASX closes firmly in the black
Dismal data from China, Japan, Europe and the US yesterday sparked another reach for yield and a bounce on the Australian sharemarket today.
Following the 0.7 per cent rally on Wall Street last night, the S&P/ASX 200 index climbed 33.8 points, or 0.61 per cent, to 5548.5 as bargain hunters dived back into high-yielding defensive stocks.
Miners lagged, however, after metal and iron ore prices were among the few assets to signal distress over the plunge in China's lending last month and slump in Japanese GDP.
Shortly before the market close Germany confirmed the increasingly dire situation in Europe after its economy shrank 0.2 per cent in the June-quarter, worse than the 0.1 per cent forecast and well off the 0.7 per cent increase in the March-quarter.
Last night stocks rallied after flat US July retail sales growth and a 0.3 per cent drop in eurozone June industrial production raised expectations a rise in US interest rates would be delayed and the European Central Bank would soon be forced to embark on quantitative easing and further rate cuts.
The Australian dollar was steady at US92.90¢ while government 10-year yields fell 6.2 points to 3.391 per cent as stimulus and rate cut hopes from around the world drove bonds lower.
US 10-year yields dropped 2 points to 2.43 per cent.
The Shanghai composite index was marginally lower at the close of the ASX as some economists and the People's Bank of China downplayed the 80 per cent slump lending data, suggesting it was because of "seasonal factors".
"A key question is whether the sharp slowdown in total credit creation reported yesterday is payback for the recent rapid growth or a sign that financing conditions have deteriorated," Royal Bank of Scotland currency strategist Greg Gibbs said. "It is probably a bit of both and it will take more data to get a clearer picture."
In Tokyo the Nikkei index was up 0.7 per cent.
Spot iron ore fell 0.8 per cent yesterday while Dalian iron ore futures were off 1.2 per cent today.
Copper tumbled 1.1 per cent to a two-month low of $US6885 a tonne and gold rose $US4 to $US1313 an ounce.
More to come…
