The Australian sharemarket closed slightly firmer following further weakness in iron ore prices and evidence global equity market yield hunting was reaching exhaustion.
The S&P/ASX 200 index gained 11 points, or 0.2 per cent, to 5587.8 on high volume after a jump in HSBC’s China flash PMI index offset a slump in Japanese exports.
Overnight US stocks were mixed with the S&P500 gain 0.2 per cent and the Dow losing 0.2 per cent, while European stocks reversed solid early gains.
Benchmark US 10-year yields edged lower to 2.45 per cent after the IMF downgraded its US 2014 growth to 1.7 per cent from 2 per cent.
The Shanghai composite index climbed 1.3 per cent after the flash PMI index rose one point to 52 and news the Peoples’ Bank of China had provided 1 trillion yuan lending facility to a major Chinese government own bank to finance reconstruction of shanty-towns.
“China has essentially implemented another chunk of monetary policy easing effectively aimed at financing government fiscal stimulus,” Royal Bank of Scotland currency strategist Greg Gibbs said.
“The outcome should tend to underpin the outlook for growth and risk appetite in global markets, but we should keep in mind that the actions appear to come in response to a recent tightening in financial conditions that may relate to concerns over excesses in the Chinese property market and financial system.”
He said there were media reports of a possible default of a construction company on its maturing bonds.
“The default was avoided as the company was able to meet interest and principle repayment this week. It hard to see as a coincidence the term fund injection by the central bank this week and the construction company making its redemption payment on schedule,” he said.
In Tokyo the Nikkei index was off 0.4 per cent after Japanese exports tumbled 2 per cent in June.
The Australian dollar rose $US94.50¢ while government 10-year yields rose 2.4 points to 3.435 as economists divided over inflationary pressures in the economy.
Dalian iron ore futures were down 1.1 per cent following a 1.3 per cent drop in the spot price to $US94.30 a tonne yesterday.
Gold fell $US11 to $US1295 an ounce while copper jumped 0.6 per cent to $US7080 a tonne on the Chinese data.
“The main driver is the US earnings season which has been supporting all markets around the world,” CMC Markets chief market analyst Ric Spooner said.
Investors also liked a better-than-expected read on Chinese manufacturing activity from HSBC, he said.
The British banking giant’s index for activity in China’s factories and workshops hit its highest level since January 2013.
Market gains were tempered by lower iron ore prices in China, however.
Gains of late, which continue to take the market to fresh six-year highs, have been modest because investors generally believe stocks are close to fully valued.
Investors are also waiting on the local company financial reporting season, which gets underway in August.
In the resources sector, BHP Billiton lifted eight cents to $39.06, Rio Tinto jumped 72 cents to $65.25 and Fortescue Metals dipped five cents to $4.57, according to preliminary closing figures.
Gold miner Newcrest Mining dumped 71 cents, or 6.2 per cent, to $10.78 after warning it faces a hit of up to $2.5 billion following a review of the value of its assets.
Investment bank Macquarie Group shed $1.76 to $59.51 after reporting a weaker performance in the first three months of its fiscal year.
Insurance Australia Group climbed 13 cents to $6.17, as it said it was on track for a strong full year result after paying out less than expected in claims for natural disasters.
Among the major banks, Commonwealth Bank added 45 cents to $82.01, National Australia Bank gained eight cents to $34.49, Westpac firmed four cents to $34.13 and ANZ improved eight cents to $33.58.
The broader All Ordinaries index was up 9.8 points, or 0.18 per cent, at 5576.8 points.
The September share price index futures contract at 2.44pm was five points higher at 5532 points, with 19,213 contracts traded.
National turnover was 2.4 billion securities worth $4.6 billion.