The Australian sharemarket rallied from the red as bargain hunters ignored the crash in iron ore prices on Friday and mixed domestic data out today after Chinese manufacturing data beat forecasts.
The S&P/ASX 200 index fell 0.2 per cent in early trade after spot iron ore slumped 4.1 per cent to $US91.80 a tonne on Friday, but the index bounced to close 26 points, or 0.47 per cent, up at 5518.5, driven by a short-squeeze in mining stocks and dash for domestic focused stocks.
The official Chinese PMI index rose to 50.8 points from 50.4, indicating a mild boost from “mini-stimulus” measures, while officials announced the easing of bank reserve requirement ratios for lending to rural and small companies.
Chinese markets were closed for a public holiday.
On the domestic front the AiG manufacturing PMI index bounced to 49.2 points from 44.8 and March-quarter company operating profits rose 3.1 per cent, beating forecasts for a 2.5 per cent increase.
However, weighing against the GDP data out this week and explaining the higher profits, inventories fell 1.7 per cent over the quarter, much more than the 0.4 per cent drop forecast.
The Australian dollar was little changed at US92.60¢ and Government 10-year yields rose 1.2 points to 3.667 per cent ahead of the Reserve Bank board meeting tomorrow.
A 1.9 per cent drop in the RP Data-Rismark house price index last month added to the certainty rates would stay on hold for a considerable period.
“Economic data recently has been broadly mixed, which underscores the fragile state of affairs in Australia and the need for accommodative monetary policy for some time to come,” Forex.com analyst Chris Tedder said.
“While the economy has improved for the most part this year, the recovery hit a rough patch recently, highlighted by weak consumer confidence, soft housing data and disappointing retail sales figures.”
In Tokyo the Nikkei index jumped 2 per cent.
Asian sentiment was also boosted by a one point slide in global benchmark US10-year yields to 2.48 per cent, with bullish investors hoping the bounce off technical support at 2.40 per cent signalled the end of the bond rally that has unnerved equity markets in recent weeks.
Gold fell $US12 to a fresh four-month low of $US1245 an ounce and copper reversed a 0.6 per cent drop on Friday to trade little changed at $US6845 a tonne.
CMC Markets chief market analyst Ric Spooner said investors were still chasing stocks that offered attractive dividends in relation to their share price, such as the four major banks.
On the other hand, mining stocks were still being impacted by falling iron ore prices but had gained some encouragement from better-than-expected manufacturing figures out of China over the weekend.
"Today has been what is becoming the typical tussle for the Australian market, with the big-yield stocks like the big four banks, Telstra and Woolworths all continuing to be bid upwards,” Mr Spooner said.
"And the big iron-ore stocks mainly heading in the opposite direction."
Mr Spooner said investors would be looking towards Australian GDP (gross domestic product) figures, retail sales and trade balance data to be released over the week to gain further insight into the state of the Australian economy, plus the monthly meeting of the Reserve Bank of Australia tomorrow.
Manufacturing data from Europe and the United States are set to be released overnight.
In the resources sector, BHP Billiton was down 42 cents at $36.59, Rio Tinto was down seven cents at $59.23, but Fortescue Metals added eight cents at $4.49.
Mining contractor Ausdrill fell 11 cents, or 11.28 per cent, to 86.5 cents after it again downgraded its full year profit forecast, this time by nearly 30 per cent.
Origin Energy was 54 cents lower at $14.55 after it said it will pay $US800 million ($A865.57 million) for a stake in WA’s offshore gas fields.
Among the major banks, National Australia Bank was 39 cents richer at $33.88, Westpac found 18 cents to $34.60, ANZ lifted 22 cents to $33.71, and Commonwealth Bank strengthened 67 cents to $82.26.
Among other stocks, toy distributor Funtastic lost 0.9 cents, or 13.04 per cent, to six cents after it halved its earnings forecast and announced the departure of its chief executive.
The broader All Ordinaries index was up 25.4 points, or 0.46 per cent, at 5499.2 points.
The June share price index futures contract was 23 points higher at 5526 points, with 21,257 contracts traded.
National turnover was 1.3 billion securities worth $3.58 billion.