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ASX closes firmly in the black

ASX closes firmly in the black

Resurgent rate cut hopes lifted the Australian sharemarket out of the red while miners shrugged off renewed weakness in iron ore on reports of production cuts in Brazil.

The lead from Wall Street last night was negative, but the S&P/ASX 200 index reversed early weakness to finish up 34.4 points, or 0.42 per cent, at 5814.4 following East Coast reports renewed Australian dollar strength would ensure a rate cut next Tuesday.

The dollar was down US0.7¢ before the news, but it lost another US0.3¢ to US78.90¢ on the domestic yield outlook swing.

Government 10-year yields, however, rose 2.5 points to 2.671 per cent after global benchmark US 10-years ramped 7 points to 2.11 before settling back to 2.04 per cent as investors struggled with US growth uncertainty and strong hints the US Federal Reserve was leaning towards a rate hike in the second half.

“Perhaps contributing to the treasuries selloff was the continuing rout in core European bonds,” Westpac strategist Imre Speizer said.

“German 10 year yields extended a two-week old rise, from 0.27 per cent to 0.39 per cent overnight, as short trades appeared to gather momentum and some who bought at record low yields exited.”

US yields were also initialy supported by a 0.4 per cent rise in personal spending in March and 0.7 per cent increase in the employment cost index.

“The stronger than expected ECI gain can be traced to private sector sales worker bonuses, rather than broad-based gains in employment costs; indeed some sectors such as construction saw weaker annual growth in compensation,” Mr Speizer said.

Chinese markets were closed for a public holiday.

In Tokyo the Nikkei index was down 0.5 per cent on ongoing disappointment the Bank of Japan did not boost its quantitative easing program.

Spot iron ore fell 1.7 per cent to $US56.18 a tonne while Dalian futures did not trade because of the Chinese holiday.

Brazilian iron ore giant Vale, the world’s largest producer, said it was willing to withhold 30 million tonnes of higher cost output.

Brent crude oil climbed one per cent to $US66.70 a barrel and gold tumbled $US21 to $US1183 an ounce.

Quay Equities head of trading Tristan K’Nell said the banks had driven the market into positive territory, with traders buying in now to beat share price rises next week if they report strong profit gains as expected.

BHP Billiton gained 53 cents to $32.50, Rio Tinto was $1.14 higher at $58.29 and Fortescue Metals leapt up 20 cents, or 9.2 per cent, to $2.37.

Atlas Iron remains in a trading halt but released some good news that it would keep two of its mines running, reversing its recent decision to shut down because of low prices.

Other smaller junior miners did well, with BC Iron eight cents, or 18.6 per cent, up at 51 cents, Mount Gibson one cent, or 4.9 per cent, better at 21.5 cents.

Westpac was the best of the banks, rising 27 cents to $36.73, Commonwealth Bank added five cents to $88.92, ANZ added 16 cents to $34.15 and National Australia Bank was up four cents at $36.81.

The broader All Ordinaries index was up 25.1 points, or 0.43 per cent, at 5798.8.

On the ASX 24, the June share price index futures contract was 42 points higher at 5799, with 26,643 contracts traded.

National turnover was 674.9 million securities worth $1.6 billion.