ASX closes firmly in the black
China stimulus hopes and quarter-end window dressing helped the Australian sharemarket pare Monday's steep loss, but Asian market caution left it off the day's high.
Following the 1.5 per cent bounce on Wall Street last night the S&P/ASX 200 index climbed 1.4 per cent mid-morning, but it dropped back to close up 45.4 points, or 0.78 per cent, at 5891.5 as iron ore and steel markets failed to reflect optimism over the Chinese economy.
Spot iron ore fell 0.8 per cent to a fresh seven-year low of $US52.69 a tonne yesterday, Dalian iron ore futures tumbled another 3 per cent today and steel rebar futures were down one per cent despite the easing of lending restrictions for second homes in China.
Chinese property second home buyers would require a 40 per cent deposit, down from 60 per cent previously and would be exempt from a 5.5 per cent sales tax if they sold after two years compared to the previous five year period.
The Shanghai composite index initially rallied 0.8 per cent to a fresh seven-year high before sliding back to trade up 0.1 per cent at the close of the ASX.
In Tokyo the Nikkei index surrendered a per cent gain and was down 0.3 per cent.
The Australian dollar fell US0.7¢ to US76.25¢ and government two-year yields hit a record low of 1.722 per cent, more than 0.5 percentage points below the cash rate, as rate cut expectations climbed. Aussie 10-year fell 3.9 points to 2.321 per cent.
Westpac chief economist Bill Evans said he expected the Reserve to cut rates next Tuesday but there was some doubt after the March meeting minutes said "members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change".
"We are sticking with that April view while recognising that the Bank could easily defer the rate cut decision until May," he said.
More to come…
