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Yield hunters lift ASX into the black

The Australian sharemarket has closed higher. Picture: AP.

Yield hunters again bought the opening drop following another batch of weak earnings data and fresh evidence of global deflation. But after a choppy session month-end window dressing helped the Australian sharemarket close firmly in the black.

Lack of global bullish momentum was evident in another marginally weaker lead from Wall Street last night, but after losing 0.5 per cent at the open the S&P/ASX 200 index climbed to close up 20.3 points, or 0.34 per cent at 5928.8.

Foreign exchange markets were also volatile and after rallying back to US79� last night the Australian dollar fell US1.1� to US77.90� as the US dollar surged against most major currencies despite a sharp fall in US consumer inflation.

Headline US CPI fell 0.7 per cent in January, well in excess of the 0.2 per cent forecast, for a 0.1 per cent annual decline, but core inflation rose 0.2 per cent.

However, US rate rise fears were stoked by a 1.2 per cent rise in real hourly wages and 2.8 per cent rise in durable goods orders.

"The data apparently will bolster the Fed's faith in inflation moving up towards the 2 percent target, as what Janet Yellen calls the 'transitory' impact of lower oil prices washes out," National Australia Bank global head of currency strategy Ray Attril said. "So, the Fed can now commence tightening in June with impunity, so the story goes."

Government 10-year yields rose 4.1 points to 2.46 per cent following the 5 point rise in US 10-years to 2.01 per cent.

In Tokyo the Nikkei index was down 0.2 per cent after retail sales fell 2 per cent and the unemployment rate rose from 3.4 to 3.6 per cent.

The Shanghai composite index was up 0.6 per cent at the close of the ASX.

Spot iron ore fell one per cent to $US62.37 a tonne on Thursday, Dalian iron ore futures were up just 0.2 per cent today despite broad optimism the Chinese government and central bank would stimulate growth to support falling property prices.

After a volatile session last night Brent crude oil settled down one per cent at $US60.90 a barrel, while gold was steady at $US1209 an ounce.

More to come…