Investor dissatisfaction with BHP Billiton over its split and failure to announce a share buyback weighed on the Australian sharemarket in early trade but demand for high yielding stocks lifted it into the black.
Following the 0.5 per cent gain on the US S&P 500 last night the S&P/ASX finished 10.8 points, or 0.19 per cent, up at 5634.6.
Last night offshore sentiment was boosted by a 15.7 per cent jump in US housing starts in July.
The bulk of the improvement was in multi-story dwellings aimed at chasing renters, while signalling lack of momentum in the private sector single family homes rose just 0.9 per cent from a historically low base.
US consumer inflation rose 0.1 per cent, a benign 2 per cent annual rate that would allow US Federal Reserve chairman Janet Yellen to maintain a “dovish” stance in her Jackson Hole speech on Friday.
However, despite the steady yield outlook the US dollar rallied strongly against most major currencies and pushed the Australian dollar down US0.5¢ to US92.80¢. Government 10-year yields rose 1.8 points to 3.426 per cent.
The dollar staged a brief rally during a speech by Governor Glenn Stevens in which he suggested lack of business confidence was the missing factor in preventing a smooth changeover from the mining capex boom.
“Mr Stevens didn’t give much away, but he did reiterate the RBA’s longstanding message that it’s watching from the sidelines at the moment,” Forex.com strategist Chris Tedder said.
The Shanghai composite index was marginally firmer at the close of the ASX as jitters in the wake of weak lending released last week mounted ahead of the manufacturing PMI index tomorrow.
In Tokyo the Nikkei index was up 0.1 per cent as Japan’s trade balance remained in deficit for more than three years.
Commodity prices continued to contradict the bullish message from global stocks.
US West Texas intermediate crude tumbled almost 3 per cent to a seven-month low of $US94.50 a tonne, while copper dropped 0.6 per cent to $US6865 a tonne and gold lost $US5 to $US1295 an ounce.
Spot iron ore eased 0.3 per cent to $US93 a tonne yesterday while Dalian iron ore futures were up 0.4 per cent.
BHP experienced its sharpest fall since March, with investors disappointed the mining giant did not return funds to them amid plans to demerge its smaller mining assets.
There had been expectations of a return of around $US1 billion from BHP, in the form of a share buyback or special dividend.
Lonsec senior client adviser Michael Heffernan said healthy dividends from many companies releasing earnings reports had boosted investor sentiment to overcome BHP’s fall.
A standout performer was Wesfarmers, which announced it will give an extra $1.1 billion back to shareholders after lifting full year profit 19 per cent to $2.69 billion.
"People love dividends,” Mr Heffernan said.
"That has probably been one of the major reasons why the market defied the dampener by BHP."
BHP dropped $1.55, or 3.9 per cent, to $38.13, while Wesfarmers gained $1.66, or 3.8 per cent, to $45.66.
Among other miners, Rio Tinto fell 42 cents to $65.98 and Fortescue Metals dropped seven cents to $4.55 despite a 56 per cent rise in full year profit to $US2.7 billion.
Among the major banks, ANZ lifted 45 cents to $33.27, National Australia Bank rose 31 cents to $34.24, Commonwealth Bank added 31 cents to $80.30 and Westpac gained 10 cents to $34.88.
Coca-Cola Amatil shares lost 20 cents to $9.54 after the beverages supplier suffered a 16 per cent drop in half year profit and warned of tough trading conditions for the rest of 2014.
QBE Insurance recovered from yesterday’s fall, adding 60 cents to $11.31.
The broader All Ordinaries index was up 10.8 points, or 0.19 per cent, at 5629.2 points.
The September share price index futures contract was 20 points higher at 5603 points, with 29,516 contracts traded.
Preliminary national turnover was 2.35 billion securities worth $5.95 billion.