Market limps to lower close

The Australian sharemarket limped along in the red for the whole session as domestic rate cut doubts, the threat of credit ratings downgrades and China’s weak trade data out yesterday left investors searching for buying catalysts.

Following the negative lead from Wall Street last night the S&P/ASX 200 index dropped 13.7 points, or 0.23 per cent, to 5946.6 as financials struggled.

Ignoring firmer iron ore prices, miners were dragged down by news ratings agency Standard and Poor’s was set to cut the credit ratings of the mining giants to reflect the steady decline in iron ore prices.

Spot iron ore bounced 2.7 per cent to $US48.82 a tonne yesterday and Dalian iron ore futures jumped 3 per cent today.

The Shanghai composite index reversed a one per cent gain and was down 0.7 per cent at the close of the ASX as profit taking offset rate cut expectations.

In Tokyo the Nikkei index was marginally weaker.

The Australian dollar bounced off its overnight low of US75.55¢ to a high of US76.20¢, before slipping back to US75.85¢ after the ANZ Roy Morgan business confidence index rose 3 points.

However, government 10-year bond yields fell 3.3 points to 2.308 per cent as the broader outlook remained uncertain.

“Forward looking indicators for the economy are providing some hope of a material recovery in non-resource parts of the economy, which is spurring business confidence,” Forex.com analyst Chris Tedder said.

“However, these green shoots are still very fragile and the broader economy, particularly the labour market, remains depressed. This is likely why the market isn’t getting overly excited about today’s figures.”

Economists expect the latest growth figures from China, out on Wednesday, to show a seven per cent expansion in the year to March, which would be the weakest growth pace in 25 years.

“Now people are thinking, can it go lower than that,” Patersons Securities economist Tony Farnham said.

Concerns about Australia’s largest trading partner, and in particular its demand for iron ore, are denting shares in the mining giants, he said.

There’s also concern about the future of the iron ore sector due to weaker prices.

“On a more medium term basis, there’s still the issue of oversupply,” Mr Farnham said.

“There are further efforts going to be made by the mining companies ... to either wind back costs or shut production.”

Ratings agency Standard and Poor’s is set to cut the credit ratings of the mining giants to reflect declining prices, and also put Western Australia on a long term negative watch.

BHP Billiton dropped 30 cents to $29.12 and Rio Tinto shed 34 cents to $54.96.

But Fortescue Metals firmed six cents, or 3.4 per cent, to $1.835 after announcing it will reorganise rosters for its mine workers in its latest move to cut costs.

The energy sector rose following a rise in crude oil prices, with Woodside Petroleum up 28 cents at $35.25 and Santos up five cents at $7.69.

The big four banks fell, with ANZ down 42 cents at $36.32, Commonwealth Bank down 30 cents at $93.80, National Australia Bank down 14 cents at $39.43 and Westpac 21 cents weaker at $39.56.

Suncorp gained 27 cents, or two per cent, to $13.84 after appointing the head of property group GPT, Michael Cameron, as its replacement for outgoing chief executive Patrick Snowball.

The broader All Ordinaries index was down 11.9 points, or 0.2 per cent, at 5916.2 points.

The June share price index futures contract was down 14 points at 5936 points, with 15,897 contracts traded.

National turnover was 1.5 billion securities worth $3.8 billion.