The steady stream of weakening global economic data saw the Australian sharemarket fail to make headway today, but miners spared steeper losses after Chinese inflation data stoked monetary easing hopes.
Following the “no news is good news” outlook of offshore markets, the S&P/ASX 200 index rose 0.4 per cent in early trade, slipped in and out of the red before finishing 4.3 points, or 0.1 per cent, down at 4308.3 points as falling Chinese industrial production and retail sales finally hit sentiment.
The “neutral” Australian employment data lifted the Australian dollar to a high of $US1.0610 on expectations the 14,000 new jobs added in July and the dip in the unemployment rate to 5.2 per cent further pushed out interest rate cuts, but it late slipped back to $US1.0590.
Westpac economists said it would be “inappropriate” to read the headline fall in the unemployment rate as “some indication of a turning point”, and the data was consistent with Westpac’s long-held expectation that employment would maintain a “decidedly modest pace” through the second half of 2012.
The Shanghai composite index was up 0.2 per cent at the close of the ASX, having more than halved earlier gains, with investors torn between signs of a rapid slowdown and hopes for monetary policy relief following the release of July inflation data.
Chinese consumer inflation dropped to 1.8 per cent from per cent, but producer price inflation fell to minus2.9 per cent from minus 2.3 per cent, indicating weak pricing pressure in the economy.
Chinese July industrial production increased 9.2 per cent, missing forecasts for 9.7 per cent growth, while retail sales also missed forecasts with a 13.1 per cent increase.
HSBC co-head of Asian economics QU Hongbin said the sharper than expected fall of PPI - in the contractionary zone for five months in a row - underlined “still lacklustre demand” for raw materials as destocking continued.
“Another month of easing CPI and PPI provides sufficient room for taking further easing actions,” he said.
“As such, we expect another 25bp rate cut soon along with other monetary and fiscal measures.”
Japan’s Nikkei index climbed 0.7 per cent on Chinese stimulus hopes, ignoring the Bank of Japan’s downgraded its industrial production forecast.
ANZ economists wrote in a report that lead economic indicators for July suggested that the current slowing in global growth momentum would extend through to at least September.
“We continue to expect that the loss in economic momentum will be relatively short lived and we are looking for a bounce in production around late 2012,” they said.
Overnight offshore markets were little changed, with European stocks finishing off their lows, despite another round of weak economic data.
Spanish bond yields rose in early trade yesterday but closed little changed as markets wagered Germany would be the first to blink in it stand-off with Spain.
The Spanish government said it would not ask for bailout funding if it came attached with further harsh austerity measures, and although analysts said this could delay European Central Bank bond buying, markets still expect Spanish bonds to be backstopped by the ECB.
The steady uptick in oil prices has revived concerns that energy would be a further drag on global growth. Brent crude oil has rallied over 13 per cent since mid-June to $US112 a barrel.
Yesterday iron ore resumed its decline, falling $US1.10 to $US115.20 a tonne, while today Shanghai steel rebar futures edged up 0.2 per cent. Copper pared overnight weakness, trading 0.4 per cent up at $US7570 a tonne.
The broader All Ordinaries index was down 2.8 points, or 0.06 per cent, at 4,330.1. On the ASX 24, the September share price index futures contract was 13 points lower at 4,267 with 24,656 contracts traded.
"Confidence isn’t quite as strong as everyone would want it to be,” IG Markets market strategist Stan Shamu said.
"But, having said that, we’ve had a pretty big rally over the past week, so at some stage we had to take a breather."
Mr Shamu said the market had been boosted by Rio’s better-than-expected result and the China data, but, on the negative side, Telstra had led the losses.
Mr Shamu said the Australian jobs figures were positive but had not had a major impact upon the market, and the Chinese inflation data had been more influential.
He said slowing inflation in China gave policymakers there room to stimulate the economy and fulfil their pledge to support growth.
Telstra was nine cents lower at $3.88 despite delivering its first increase in annual profits in three years and adding 1.6 million customers to its mobile network.
Rupert Murdoch’s News Corporation reversed 73 cents to $21.88 as it said it was expecting moderate earnings growth in its 2013 financial year, after suffering a 55 per cent slide in profit during 2012.
Gambling firm Tabcorp shed 11 cents to $3.20 after its reported annual net profit fell to $340 million in the year to June 30, 2012, from $534.8 million in 2010/11, largely as the result of the demerger of its casinos business in 2011.
In the resources sector, miner Rio Tinto surged $1.97 to $56.86. On Wednesday, Rio Tinto had provided a bullish outlook for China, predicting a quick recovery in its pace of growth, after the miner’s profits fell due in part to weaker demand from the Asian giant.
BHP Billiton gained 52 cents to $32.80.
Among the major banks, Commonwealth Bank lost 56 cents to $57.03, National Australia Bank surrendered 20 cents to $25.42, ANZ improved seven cents to $23.82, and Westpac sagged 12 cents to $24.01.
Preliminary national turnover was 1.42 billion shares worth $4.2 billion, with 388 stocks down, 427 up and 392 unchanged.