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ASX up as investors see glass half-full

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.

More to come…