ASX up ahead of Easter break

Flip-flopping price action continued on the Australian sharemarket with a swing back into the black as investors lined up ahead of an expected interest rate cut on Tuesday.

Ignoring the negative lead from Wall Street and the broader economic impact from the relentless nosedive in iron ore prices, the S&P/ASX 200 index rose 37.9 points, or 0.65 per cent, to 5898.6 as the major banks offsetting miner weakness.

Yesterday spot iron ore slumped 3.6 per cent to a fresh 10-year low of $US49.53 a tonne, leaving the spot price 10 per cent down this week, while Dalian iron ore futures dived another 3 per cent today.

Underscoring the impact, Australia’s trade deficit widened to $1.26 billion in February as falling prices hit export revenue.

“In Q1, the trade deficit is running at $1.1 billion a month on average, a deterioration from $0.9 billion a month in Q4,” Westpac economist Andrew Hanlan said.

“The terms of trade fell in the quarter, down by around 2.5 per cent we estimate. Net exports are forecast to make a more modest positive contribution to growth in Q1 than in Q4, with a partial rebound in import volumes following a particularly weak result in Q4.”

The Australian dollar dropped US0.2¢ to US75.70¢, marginally above its six-year low of US75.60¢ reached last month , while government 10-year yields fell 3.3 points to 2.30 per cent and two-years dropped 4.8 points to a record low of 1.671 per cent as the iron ore fall firmed up hopes for a rate cut next week.

US 10-year yields tumbled 10 points to 1.85 per cent after the ADP private payroll report fell well short of forecasts, easing US rate rise jitters.

The Shanghai composite index was up 0.2 per cent at the close of the ASX as the best performing global market this year struggled for fresh buying catalysts. Margin debt on the Shanghai Exchange has increased four-fold in the past year to $212 billion.

In Tokyo the Nikkei index jumped 1.8 per cent.

The share market has closed higher as prices for commodities such as gold and copper improved, though iron ore continued its fall. While the mining giants lost ground, most other companies in the resources and energy sector rose, as did financial and many retail stocks.

“Clearly, a good bounce in commodity prices overnight has helped the market,” CMC chief market strategist Michael McCarthy said.

“Although iron ore stocks are not performing today, just about every other resource-related stock is.

“That buoyancy appears to be spreading across the market.”

Mr McCarthy said some of the market’s gains could also be a result of investors covering short positions ahead of the Easter holiday break.

BHP Billiton dropped 12 cents to $30.22, Rio Tinto lost 63 cents to $55.78 and iron ore pure play Fortescue Metals shed 7.5 cents to $1.82, its lowest price in six years.

BC Iron shed 1.5 cents to 34.5 cents after it continued to cut costs, saying it will end a mining, crushing and screening contract earlier than planned.

Gold miner Newcrest gained 64 cents to $13.78, oil and gas producer Woodside Petroleum added 27 cents to $34.15 and Santos picked up two cents at $6.95.

Troubled mining equipment and machinery maker Bradken soared 35 cents, or 18 per cent, to $2.29 after it rejected a $427 million takeover proposal.

Among the major banks, Commonwealth Bank climbed $1.08 to $94.40, National Australia Bank improved 26 cents to $38.69, ANZ lifted 22 cents to $36.67 and Westpac advanced 27 cents to $39.45.

QBE jumped 63 cents, or 4.9 per cent, to $13.42 after forecasting a 30 per cent lift in full year dividend.

The broader All Ordinaries index was up 36.8 points, or 0.63 per cent, at 5869.7 points.

The June share price index futures contract was 46 points higher at 5894 points, with 20,639 contracts traded.

National turnover was 1.3 billion securities worth $4.12 billion.