THE sharemarket snapped a six-day losing streak yesterday after Chinese economic growth for the June quarter came in bang-on economists' expectations.
It may have been the slowest annual growth rate in three years, at 7.6 per cent, but investors were unconcerned. They cheered because there were no surprises, and because China's authorities appeared to be successfully managing a slowdown in economic activity the vaunted "soft landing" while curbing inflation without killing growth.
The news lifted resource and financial stocks, and helped the sharemarket close the week on a high, delivering a week's-end reprieve to investors, who had spent the previous six days watching the market track backwards.
The S&P/ASX 200 Index gained 14.2 points, or 0.35 per cent, to 4082.2 for the day. But for the week it lost 75.6 points, or 1.8 per cent.
"If [China's economic growth figure] had come in at much lower than consensus forecast, [then] you would have seen a negative reaction," said HSBC Australia's head of asset management, Geoff Pidgeon.
"China is in a tradeoff between inflationary pressure, asset bubbles, and growth ... That's why they've really put the brakes on growth over the past year ... [and] we think they can actually handle this balancing act quite well."
The dollar strengthened on the news but fell in late trade, unable to hold onto the early gains. It closed at US101.58?, down from US101.64?.
Yesterday evening, European sharemarkets had advanced in opening trade as dealers welcomed the reports, setting aside news of a Moody's ratings downgrade for debt-laden Italy.
IG analyst Cameron Peacock said there was a collective sigh of relief around the globe on the China news, with short positions established over the previous 24 hours being quickly unwound.
"[On Thursday] you saw big names in BHP and Rio getting sold off quite heavily, and I said ... we were either going to be justified in the sell-off, or it was going to be seen as an overreaction," Mr Peacock said.
"Find me another country that's growing at 7.5 per cent growth domestic product on the base size of what China is ... it just seems a massive beat-up to me.
"Doom and gloom is the default position of the market at the moment."
Among the big miners, BHP Billiton finished 8? higher at $30.48 after a three-year closing low on Thursday. But Rio Tinto lost 17? at $54.08.
The big banks all improved, Westpac rising 18? to $22.05, NAB 13? to $23.60, ANZ 17? to $22.35 and Commonwealth 26? to $53.77.
Specialty Fashion shed 2? to 50? after it warned full-year earnings would halve.
DuluxGroup rose 1? to $3.04 after it again extended a takeover timetable for its bid for building products supplier Alesco, which was 2? weaker at $1.97.
Frequently Asked Questions about this Article…
How did China’s June-quarter GDP figure affect the Australian sharemarket?
China’s June-quarter GDP came in at an annual 7.6%, matching economists’ expectations. That “no surprise” result eased investor fears, helped lift resource and financial stocks and snapped a six-day losing streak on the Australian sharemarket as traders welcomed the prospect of a managed slowdown rather than a sharper downturn.
What happened to the S&P/ASX 200 index after the China news?
The S&P/ASX 200 gained 14.2 points (0.35%) to close at 4,082.2 on the day the China data was released. Despite that daily gain, the index still finished the week down 75.6 points, or 1.8%.
Why did big miners like BHP and Rio Tinto move so differently on the day?
BHP Billiton rallied about 8% to $30.48 after hitting a three‑year closing low the previous day, while Rio Tinto fell roughly 17% to $54.08. Analysts said some of the prior selling—including short positions put on over the previous 24 hours—was quickly unwound when the China result met expectations, meaning some moves reflected a reaction and partial reversal rather than only fundamentals.
How did the major Australian banks respond to the market relief?
The big banks improved on the day: Westpac rose to $22.05, NAB to $23.60, ANZ to $22.35 and Commonwealth Bank to $53.77, with each reported as posting double‑digit percentage gains in the article’s trading session.
What did market commentators say about China’s growth and the market reaction?
HSBC Australia’s head of asset management Geoff Pidgeon said China is balancing inflation, asset bubbles and growth and appears to be handling that trade‑off, which helped calm markets. IG analyst Cameron Peacock noted a global sigh of relief and said some of the recent sell‑offs looked like overreactions as traders unwound short positions.
How did the Australian dollar react to the China GDP release?
The Australian dollar initially strengthened on the China news but couldn’t hold the early gains and fell in late trade, closing at US101.58 cents, slightly down from US101.64 cents.
What corporate stock moves were highlighted besides miners and banks?
Specialty Fashion fell about 2% to 50¢ after warning its full‑year earnings would halve. DuluxGroup rose about 1% to $3.04 after it extended a takeover timetable for building‑products supplier Alesco, which was around 2% weaker at $1.97.
Did other global events influence investor sentiment the same day?
Yes. European sharemarkets opened higher as dealers welcomed the China reports, even as Moody’s announced a ratings downgrade for Italy. Overall, the China data helped offset some other negative headlines and prompt short‑position unwinds globally.
Call 1300 880 160
Start a chat
Schedule a call
