ASX closes up but bullishness muted
The Australian sharemarket followed the overnight rally on Wall Street but the reaction was muted after Reserve Bank governor Glenn Stevens delivered a blunt message on the difficulties faced in the domestic economy.
The S&P/ASX 200 index climbed 39.2 points, or 0.67 per cent, to 5872.3 with a muted response from high-yielding stocks despite the release of “dovish” Reserve board meeting minutes and Mr Stevens’ making it clear in a speech in New York last night that a rate cut remained firmly on the table.
The Australian dollar fell US1.1¢ to US76.95¢ after Mr Stevens said the dollar would “very likely fall further” and that exuberant Sydney house prices could not dictate monetary policy for the rest of the country.
Mr Stevens strongly suggested counter-cyclical government spending needed to do more to support the transition from mining investment and admitted that household debt leverage “starts from a high level” and the benefits from increased debt could be less effective than in the past.
Government 10-year yields, however, showed little response and were little changed at 2.393 per cent.
“The release of strong labour market data last week has pushed back the market’s expectations for further rate cuts, with the (interest rate swaps) market dropping its expectations for a 25 basis point cut next month to around 50 per cent after the data, from around 75 per cent prior to the employment figures,” Forex.com strategist Chris Tedder said.
The Shanghai composite index remained jittery and was up 0.3 per cent at the close of the ASX as Chinese authorities tried to juggle momentary policy without further stoking the rampant Shanghai composite index.
In Tokyo the Nikkei index rose 1.3 per cent.
Spot iron ore climbed 1.2 per cent to $US51.57 a tonne yesterday and Dalian iron ore futures were down 1.2 per cent today.
“The market was pretty strong out of the blocks this morning but that tempered a little bit throughout the day,” Morgans private client adviser Alistair McCorquodale said.
The release of minutes from the Reserve Bank’s April meeting contributed to the slowing momentum, as the bank said the response of savers and investors to rate cuts was “unusually uncertain” in the current environment of low interest rates and high household debt.
“The RBA release provided a bit of a check,” Mr McCorquodale said.
Weaker commodity prices also continue to concern the RBA.
Mining stocks rose, with Rio Tinto up 84 cents, or 1.5 per cent, to $55.50 despite a 12 per cent fall in iron ore shipments during the March quarter.
BHP Billiton gained 78 cents, or 2.6 per cent, to $30.60 and Fortescue dropped two cents to $1.87.
The banks were modestly higher, with Commonwealth Bank up 45 cents at $91.78, National Australian Bank up 25 cents at $38.58, ANZ up 12 cents at $35.76 and Westpac was steady at $38.79.
Energy stocks fell, but most other sectors, particularly healthcare, made gains.
Telstra added two cents to $6.19.
The broader All Ordinaries index was up 37.2 points, or 0.64 per cent, at 5844.0.
The June share price index futures contract was 50 points higher at 5877, with 18,500 contracts traded.
National turnover was 1.78 billion securities worth $4.9 billion.
