Markets cautious on US deal

The Australian sharemarket led the Asian region in modest relief rallies, following an eleventh hour deal to avert the US budget crisis that brought the world's biggest economy to the edge of an unprecedented debt default.

The Australian sharemarket led the Asian region in modest relief rallies, following an eleventh hour deal to avert the US budget crisis that brought the world's biggest economy to the edge of an unprecedented debt default.

The benchmark S&P/ASX 200 rose 0.4 per cent to close to 5283.1 points on Thursday.

Asian stocks also finished higher apart from China, with Japan's Nikkei 250 climbing 0.83 per cent and South Korea's KOSPI up 0.29 per cent.

The Australian dollar was trading slightly lower as the US currency rose on the back of the news, but remained at four-month highs amid continued appetite for higher-yielding assets. It was buying US95.41¢ late Thursday.

"Everyone breathed a sign of relief and then returned to the other factors that move the markets," Patersons Securities strategist Tony Farnham said.

The muted reaction on regional sharemarkets reflected expectations a last-minute deal would be reached, with attention turning back to economic fundamentals and stock-specific news.

In Australia, production reports from Newcrest Mining, Fortescue Metals and Woodside Petroleum were mostly within expectations but failed to impress the market.

At the same time, investors gained more cheer from news that Boral had signed a $US1.6 billion joint venture with a US firm.

Investors were keeping an eye out for a raft of Chinese figures due on Friday, including third-quarter GDP data, industrial production and September retail sales numbers. Consensus forecasts projected year-on-year growth to rise to 7.7 per cent in the third-quarter, from 7.6 per cent in the previous corresponding period.

Fortescue chief executive Nev Power was pleased to hear about the debt deal, but said Chinese demand was more central to Australia than the US economy.

"We are seeing that strong demand continuing from China. There hasn't been any impact to date, it would seem, from that US debt crisis into the Chinese economy, because steel demand and iron ore demand have continued strongly," he said on Thursday.

The deal between US lawmakers ended the 2-week US government shutdown, which forced thousands of federal employees to take unpaid leave and monuments and national parks closed.

Standard & Poor's analysts said the shutdown could have shaved about 0.6 per cent, or $US24 billion, off US economic growth in the fourth quarter.

Markets were also mindful that another showdown between the warring parties could be in the works, with the agreement only funding the US government until January 15, and raising the debt limit through to February 7.

Ansell chief executive Magnus Nicolin said the short-term compromise would prolong the uncertainty for global markets.

"It's more uncertainty, and uncertainty is never good. I suspect it's going to have a little bit of a dampening effect on economy and stockmarket until a longer-term resolution is made," Mr Nicolin told BusinessDay following the glove and condom maker's annual meeting on Thursday.

The economic impact of the shutdown is expected to delay the US Federal Reserve's plans to wind back its $US85 billion-a-month bond-buying program. Several analysts pushed back to early 2014 their expectations of a December taper.

The Australian currency is forecast to remain at higher-than-expected levels amid a continuation of the Fed's stimulus program, which has kept investors interested in riskier assets such as the local dollar.

Westpac economist Elliot Clarke said the US's apparent difficulties in growing at a sustained above-trend pace could even see the Fed adopt a dovish stance and consider loosening monetary policy further. The shutdown had already delayed the publication of crucial economic data, such as the key non-farm payrolls report.

"It will be some time before we are able to get a clear read on the labour market post-shutdown, but a logical expectation given recent events and the lack of a long-term solution is that we will see soft employment growth through the remainder of 2013 and into 2014," Mr Clarke said.

With Georgia Wilkins, Peter Ker

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