Market posts modest gains
The Australian sharemarket squeezed higher on demand for defensives after solid US GDP data was offset by a kick-up in global borrowing costs.
Following the subdued reaction on Wall Street, the S&P/ASX 200 index rose 10 points, or 0.18 per cent, to 5632.9 as the US Federal Reserve stoked rate rise fears by suggesting US inflation may not stay below the 2 per cent target rate for much longer.
The US dollar surged against major currencies, knocking the Australian dollar US0.5� down to US93.20�, while US 10-year yields jumped 10 points to 2.56 per cent and Aussie 10-years climbed 8.8 points to 3.512 per cent.
However, economist noted the Fed also admitted there was ongoing slack in the labour market despite the unemployment rate at seven-year lows, suggesting they would be reluctant to raise rates early next year as markets feared.
On the GDP data economists again noted that half the 4 per cent June-quarter GDP growth was from inventory accumulation, not final sales, while major revisions to 2012 and 2013 changed the growth trajectory but raised doubts bout the accuracy of current figures.
"While the sharp acceleration in growth in 2013 now reported is more consistent with the marked improvement in the pace of nonfarm payrolls growth seen in 2014 to date, there is cause to be cautious about taking this trend at face value - in particular because of the sharp swing in the contribution of inventories from 2012 to 2013," Westpac economist Elliott Clarke said.
"All told, while the 2014 revisions point to greater momentum through 2013 and into 2014, the US economy is yet to prove it can sustain above trend growth for a prolonged period."
On the domestic front the growth outlook was hit by a 7.9 per cent fall in the export price index and 5 per cent slump in new building approvals.
On the upside business credit growth rose to a 5 per cent annualised trend while "soft" personal credit was again dominated by housing investment demand.
The Shanghai composite index was up 0.1 per cent at the close of the ASX.
In Tokyo the Nikkei index was marginally lower.
Spot iron ore firmed 0.3 per cent to $US95.90 a tonne yesterday while Dalian iron ore futures were flat.
Gold dropped $US5 to $US1294 an ounce while copper was up 0.3 per cent at 4US7110 a tonne.
More to come…
