Weak US jobs data out on Friday sent stimulus hopes and financial markets sharply higher, but a drop in domestic lending in July, and data indicating the Chinese government faced renewed inflation difficulties, saw the Australian sharemarket slightly in the black.
The S&P/ASX 200 index opened 0.5 per cent, but finished 8 points, or 0.18 per cent, up at 4333.8 points, with mining stocks keeping the market in the black after a sharp rally in metal prices.
On Friday, the US S&P 500 index gained 0.4 per cent, but gold leapt $US45 to $US1740 an ounce and copper jumped 3.5 per cent to $US7970 a tonne after the US unemployment rate slipped to 8.1 per cent but the August non-farm payroll increase of 96,000 jobs fell well short of forecasts.
The US Federal Reserve open market committee meets this week, and with stubborn unemployment a major concern, markets raised expectations for a third round of quantitative easing to a near certainty.
Barclays strategists wrote in a client note that while metal prices rallied on the back of expected US policy support and Chinese fiscal spending, global industrial activity continued to slow, and Chinese manufacturing data continued to surprise to the downside, “leading our economists to warn of possible downgrades to our Chinese growth projections”.
“In such an environment and given the weakening in base metal fundamentals, we believe the base metals will underperform other commodity sectors in the short term,” Barclays said.
Over the weekend Chinese industrial production growth of 8.9 per cent narrowly missed forecasts and consumer inflation increased to 2 per cent after food inflation jumped to 3.4 per cent from 2.4 per cent.
China’s exports in August increased 2.7 per cent, below forecasts but an improvement on the one per cent increase in July, while imports fell 2.6 per cent, well below forecasts for an increase of 3.5 per cent.
On Friday spot iron ore price jumped 2.6 per cent to $US89 a tonne, while Shanghai steel rebar futures jumped another 2.6 per cent today on expectations steel mills would resume full production to meet infrastructure project demand.
The Shanghai composite index was 0.1 per cent up at the close of the ASX while Japan’s Nikkei index was marginally lower
The Australian dollar jumped 0.6¢ to $US1.0390, but slipped back to $US1.0350 as bullish sentiment faded in Asian trade.
The euro slipped back from a four month high against the US dollar after a German politician lodged a complaint against the European Central Bank’s bond buying plan, saying he also hoped to delay the German Constitutional ruling on the European Stability Mechanism due on Wednesday.
The broader All Ordinaries index was up 9.2 points, or 0.21 per cent, at 4,358. On the ASX 24, the September share price index futures contract was three points stronger at 4,334 with 20,433 contracts traded.
IG Markets market strategist Stan Shamu said the Australian market followed a positive lead from United States.
"We saw a massive pick-up of risk sentiment (in the US) on Friday as investors start pricing in potential for further stimulus from the US. That was triggered by that weaker than expected payrolls print,” Mr Shamu said.
"That sort of carried on into the Asian session, but we’re being capped by some of the data that we’re seeing out of China.
"Data released on Monday showed that China’s trade surplus widened to $US26.7 billion ($A25.85 billion) in August as exports stayed weak and imports fell, which boosted expectations of a new round of stimulus measures.
Mr Shamu said the data from China may indicate that past stimulus measures from China had not been that effective.
On the local market, in the resources sector, global miner BHP Billiton was up 48 cents at $32.46, and Rio Tinto surged $2.32, or 4.43 per cent, to $54.70.
Among the major banks, National Australia Bank eased five cents to $25.01, ANZ picked up three cents at $24.19, Commonwealth Bank sagged 12 cents to $54.48, and Westpac backtracked 10 cents to $23.60.Among other stocks, property developer Lend Lease lost 56 cents, or 6.64 per cent, to $7.88.
Senior executives at Lend Lease’s construction company, Abigroup, have stood aside while investigations are launched into discrepancies in the company’s financial reports.
Building products maker Boral was three cents lower at $3.42 after the company appointed the head of its US operations as the company’s new chief executive.
Retailer Woolworths was $1.09, or 3.6 per cent, weaker at $29.17 as the stock went ex-dividend.
Preliminary national turnover was 1.92 billion securities worth $4.37 billion, with 538 stocks up, 434 down and 340 unchanged.
On Wall Street on Friday, the Dow Jones Industrial Average rose 14.64 points, or 0.11 per cent, to 13,306.64 points.