Market goes down again
The Australian sharemarket shrugged off a 4 per cent bounce in the spot iron ore price and lost ground again as global event risk mounted and a plunge in foreign direct investment in China signalled soaring concerns about risks in the world's second biggest economy.
Following a slightly negative lead from Wall Street last night the S&P/ASX 200 index dropped 28 points, or 0.51 per cent, to 5445.4 on above average volume, its ninth decline out of ten sessions, after Chinese August FDI followed the 16.9 per cent dive in July with another 14 per cent drop, far worse than the timid 0.8 per cent bounce forecast.
The Shanghai composite index initially fell almost one per cent, but the weak data again stoked stimulus expectations and the index bounced into the black before sliding to trade 0.3 per cent down at the close of the ASX.
In Tokyo the Nikkei index was down 0.2 per cent.
The Australian dollar climbed US0.6¢ to US90.50¢ this morning as iron ore prices firmed and the Reserve Bank minutes revealed mounting concerns over a house price bubble, but it later dropped to US90¢.
Westpac chief economist Bill Evans said the highlight of the Reserve minutes was that the Bank was becoming "significantly more concerned" about the recent build-up in house prices in the Australian economy.
"This is a much more alarmist tone than we saw in the Governor's statement which followed the Board meeting on September 2," he said. "This concern with house prices and leverage is emphasised where the Board notes that credit growth for investor housing is now running at around 10 per cent per annum and the Board emphasises that investor credit has been a particularly strong component of the recent lift in housing credit."
Government 10-year yields lost 2.8 points to 3.62 per cent as weak global data sparked a shift back to safe haven assets ahead of the US Federal Reserve meeting starting today.
Royal Bank of Scotland currency strategist Greg Gibbs said the Fed was expected to reiterate that interest would stay low for a "considerable time", while markets were also watching the take-up form the European Central Banks long term financing facility.
"The Fed policy decision on Wednesday and ECB LTRO operation may influence perceptions around global liquidity," he said. "Investor risk appetite may also be affected by the Scottish vote for or against independence on Thursday."
Spot iron ore bounced 4 per cent to $US85.20 tonne yesterday while Dalian iron ore futures initially leapt over one per cent but later pared gains to 0.4 per cent.
Overnight copper bounced 0.8 per cent to $US6820 a tonne while gold was steady at $US1236 an ounce.
