Sharemarket closes up firmly

Miners led the bounce-back on the Australian sharemarket as US rate rise jitters eased, offsetting falling iron ore prices and disappointing Chinese manufacturing data.

The overnight lead from Wall Street was slightly negative, but marching to its own tune the S&P/ASX 200 index climbed to close up 52 points, or 0.93 per cent, at 5662.3 with bargain hunting investors emboldened by the rebound off technical support at the 5600 level yesterday.

The HSBC China flash PMI index firmed 0.2 points to 49.1 but missed forecasts for a rise to 49.3.

“Domestic demand stabilised but remains in contraction, HSBC economist Julia Wang said.

“Meanwhile, new export orders weakened further, pointing to more sluggish external demand ahead.”

For regional markets the bad Chinese news was intially taken as good news because investors expect it will lead to further monetary easing, but optimism faded.

In Tokyo the Nikkei index surrendered a solid lead and was flat at the close of the ASX.

The Shanghai composite index also pared a one per cent gain, sliding to trade up 0.6 up per cent at the close of the ASX.

The China Securities Journal reported mutual funds had just started to become net buyers of stocks, even after the benchmark index has rallied more than 120 percent in the past year.

In a research note Standard Life economists said real wages in developed economies had been improving since last year, buoyed by low inflation from falling oil prices, but Chinese growth was on a long-term downward trend and income growth would have to moderate accordingly.

“The challenge is to engineer this transition without a significant increase in unemployment,” they said.

The Australian dollar dipped to a low of US78.70¢ overnight but bounced back to unchanged at US79¢ after the US Federal Reserve minutes all but ended debate over whether rates would rise next month.

Government 10-year yields slipped 2.6 points to 2.943 per cent after US yields dipped 5 points to 2.24 per cent last night.

Spot iron ore fell another 2.5 per cent to $US57.12 a tonne yesterday but Dalian iron ore futures bounced 1.5 per cent today.

CMC Markets chief market strategist Michael McCarthy said the local bourse in the past few days had been in danger of falling below the 5600 point level, which he said would have been a bad sign.

"We’ve pulled back from the brink, and there seem to be a few different factors in play here,” Mr McCarthy said.

He said the share price of bionic ear implants supplier Cochlear had surged on news that a competitor had stopped taking market share from the Australian biotech, resulting in a “halo” effect for other healthcare stocks.

Energy stocks benefited as investors speculated that lower oil inventory levels in the US could push prices higher in the near term.

Mr McCarthy said three of the major banks found support given their current lower price levels.

Mining stocks benefited as Chinese manufacturing figures missed analysts’ expectations, boosting the prospect of further stimulus measures in the world’s second largest economy.

Building materials supplier James Hardie also boosted the market as a near tripling of its annual profit pushed up the company’s shares by more than 11 per cent.

Among the major banks, Commonwealth Bank rose $1.07 to $83.56, ANZ lifted 33 cents to $32.22, Westpac added 39 cents to $32.65, but National Australia Bank fell 18 cents to $33.38.

In the resources sector, global miner BHP Billiton was up 42 cents at $29.24, its spinoff South32 nudged up one cent to $2.37, Rio Tinto gained 87 cents to $56.90, and Fortescue Metals put on five cents at $2.12.

In the healthcare sector, blood products and vaccines supplier CSL advanced $1.96 to $91.64, and Cochlear surged $4.08 to $88.45.

James Hardie ascended $1.77 to $16.99 after a big rise in annual profit plus the payment of a special dividend and announcement of another share buyback.

The broader All Ordinaries index was up 49.6 points, or 0.88 per cent, at 5663.6 points.

The June share price index futures contract was 54 points higher at 5659 points, with 24,789 contracts traded.

National turnover was 1.9 billion securities worth $5.09 billion.