Market posts modest gains
It was a third day of "buy-the-dip" and modest gains on the Australian sharemarket today after a speech by US Federal Reserve chairman Janet Yellen soothed US rate rise jitters and knocked the US dollar.
The S&P/ASX 200 index climbed 17.9 points, or 0.3 per cent, to a fresh seven-year high of 5944.9 following the 0.3 per cent gain on the US S&P 500 last night and a bounce in metal prices, with miners ignoring a 2 per cent fall in iron ore futures.
The Australian dollar jumped US1.2� from its overnight low to US78.75� on broad US dollar weakness after Ms Yellen said that any modification in the Fed's forward
guidance, such as removing the word "patient", should not be read as indicating "that the committee will necessarily increase the target rate in a couple of meetings."
The speech was viewed as giving the Fed wriggle room on raising rates, but despite her upbeat outlook on the US economy US 10-year yields tumbled 8 points to 1.98 per cent as bond investors trimmed the prospects for a mid-year rise.
Australian 10-year yields fell 4 points to 2.505 per cent.
Ms Yellen noted that the pace of wages growth remained "sluggish" and in the Q&A session, remarked that despite the substantial improvement in labour market conditions, they were not quite back to normal.
"The rates market may not reflect it, but it appears that the FX market has largely factored in the first rate hikes in the US," Royal Bank of Scotland currency strategist Greg Gibbs said. "The focus should begin to turn to how much the Fed hikes, rather than when."
The Shanghai composite index was flat at the close of the ASX on its forst day of trading following the week long New Year holiday.
Sentiment was mixed after the Chinese flash PMI index rose 0.5 points to 50.1 per cent with weakness in export orders.
In Tokyo the Nikkei index was up per cent.
Dalian iron ore futures fell 2.2 per cent and Shanghai steel rebar futures weer down 1.2 per cent.
Brent crude oil was steady at $US58.90 a barrel, gold rose $US10 to $U1208 an ounce and copper jumped 2 per cent to $US5786 a tonne.
More to come…
