ASX edges up despite weak China data

The Australian sharemarket edged higher without threatening to test the 6000 level on the S&P/ASX 200 index amid weak Chinese data and volatile commodity price action last night.

Following the slightly negative lead from Wall Street last night the S&P/ASX 200 index rose 13 points, or 0.22 per cent, to 5969.1, with miners offsetting softness in the major banks.

Fresh signs of waning growth momentum in China, despite two rate cuts this year, came from a 1.4 point drop bank into the contraction zone of the HSBC flash PMI index at 49.2, and a 9.1 per cent fall in rail freight volume for the first two months of the year.

The Shanghai composite index initially rallied on stimulus hopes, but it tumbled back to trade down 1.4 per cent at the close of the ASX.

ANZ head of currency strategy Richard Yetsenga said China was on the cusp of debt deleveraging and the rate of credit growth had slowed substantially.

The main question was whether growth “slows gradually over time, or slows abruptly and snowballs” into a more severe deleveraging process he said.

In Tokyo the Nikkei index was down 0.2 per cent as the yen rallied against the weaker US dollar.

The Australian dollar joined the global currency rebound, jumping US1.1¢ to US78.60¢ as doubts over a US rate rise this year prompted profit taking by US dollar bulls.

Government 10-year yields slipped 2 points to 2.367 per cent.

“The US dollar bullish view is in the process of facing its first significant test in months and it may take a turn in the pattern of US economic data to resume its rising trend,” Royal Bank of Scotland currency strategist Greg Gibbs said.

“Where many in the market thought the Fed might be readying the market for a June rates lift-off, their rate dots (forecasts) now suggest that the balance of Fed members expect a lift-off in September, somewhat further away and thus less certain.”

Spot iron ore firmed 0.3 per cent to $US54.81 a tonne and Dalian iron ore futures were up one per cent today.

Last night copper bounced 1.3 per cent before reversing to trade little changed at $US5950 a tonne, while Brent crude oil jumped 2 per cent to $US55.50 a barrel and gold rose $US5 to $US1186 an ounce.

IG market strategist Evan Lucas said the local market was dangling, unable to breach the psychological 6,000 points barrier.

He said a lack of major economic or corporate news and a disappointing report on Chinese manufacturing activity had held back the market on Tuesday.

“For the next five to 10 days we’re probably going to bumble along until the April 7 RBA (Reserve Bank of Australia) meeting on interest rates,” Mr Lucas said.

The preliminary reading for HSBC’s purchasing managers index, released on Tuesday, showed that China’s manufacturing activity contracted in March at its fastest rate in almost a year.

In the resources sector, global miner BHP Billiton lifted 22 cents to $31.22, and Rio Tinto lost 84 cents to $57.37.

Fortescue Metals firmed three cents to $2.01. Fortescue may have to sell part of its iron ore mines or Pilbara infrastructure as it looks to shore up its debt after abandoning a $US2.5 billion refinancing.

Coal miner New Hope was seven cents richer at $2.55 as the company’s chief executive rejected suggestions that the coal industry’s struggles are permanent and said he wants to make acquisitions this year.

Oil and gas producer Woodside Petroleum reversed 12 cents to $35.41. Woodside is cutting 300 jobs and freezing pay as it slashes expenditure following a plunge in the oil price.

Among the major banks, Commonwealth Bank descended 39 cents to $95.09, Westpac put on one cent at $39.57, National Australia Bank shed 23 cents at $38.95, and ANZ found nine cents at $36.89.

Among other stocks, Qantas was five cents lower at $2.99.

The airline said it plans to highlight the customer benefits of an expanded alliance with China Eastern after the competition watchdog said it could lead to higher airfares.

TPG Telecom jumped 31 cents to $9.14 after it lifted its earnings guidance and posted an 18 per cent jump in interim net profit.

Kathmandu plunged 19.5 cents, or 12.42 per cent, to $1.375. The outdoor clothing retailer is putting the brakes on its store expansion in Australia after suffering a half year loss.

The broader All Ordinaries index was up 13.5 points, or 0.23 per cent, at 5934.5 points.

The June share price index futures contract was up 19 points at 5976 points, with 20,792 contracts traded.

National turnover was 1.8 billion securities worth $4.48 billion.