Slow start to week but US surge drives market to highs
The tough bundle of policies - including a strict enforcement of a 20 per cent capital gain tax on Chinese property sales -resulted in the local sharemarket losing 1.5 per cent, and the dollar dropping below a key level of US101.5¢ on Monday.
But things rebounded when the Dow Jones hit a new record high on Tuesday night - surpassing its previous pre-crisis peak - and momentum from that event helped the local bourse close the week on a 4½-year high.
For the week, the benchmark S&P/ASX200 gained 37.3 points, or 0.7 per cent, at 5123.4 points, while the broader All Ordinaries rose 36.6 points, or 0.7 per cent, at 5137.5.
The Dow Jones index, which tracks the performance of 30 large US companies, is not the most important index in the US.
That title falls to either the benchmark S&P500 (which tracks 500 leading companies), or the Nasdaq (which tracks technology stocks). Nevertheless, the symbolism of the Dow's barrelling run was cheered by global markets, including Australia's.
It provided the opportunity to see how much Australia's market had performed since the global financial crisis, a comparison that actually dampened things slightly, because the ASX200 is still sitting about 25 per cent below its previous peak.
Gross domestic product figures were released this week by the Bureau of Statistics. They showed economic growth in the December quarter of 0.6 per cent, and growth for the 2012 calendar year of 3.1 per cent.
UBS chief economist Scott Haslem said the 3.1 per cent growth for the year was slightly below trend but "certainly a very good result for the economy compared to other advanced economies for 2012".
The Reserve Bank left the official interest rate unchanged at 3 per cent.
On Thursday night the European Central Bank and Bank of England did the same thing, leaving rates at 0.75 per cent and 0.5 per cent respectively.
Europe's central bank said it expected economic activity to stabilise in the first half of this year and then recover gradually in the second half.
Economists took that to mean the ECB would unlikely change its policy settings any time soon.
"The European Central Bank still has monetary policy ammunition at its disposal, but the prevailing consensus is that it is not needed," Commonwealth Bank's European economist, Martin McMahon, said.
"We agree with this general view and expect upcoming ECB meetings through [the first half of] 2013 to be relatively uninteresting for markets ... there will be no further easing unless either economic recovery fails to materialise through [the second half of the year]," he said.
On the mining front, China's top planning body - the National Development and Reform Commission (NDRC) - accused the world's big iron ore suppliers of manipulating prices
Without actually naming names, it said the world's three largest mining companies and some traders had delayed deliveries to create the impression that supply was short.
The big miners rebuffed the claims, but the three of them closed the week lower (BHP Billiton slipped 75¢, or 2 per cent, at $36; Rio Tinto fell $1.72, or 2.6 per cent, at $64.40; and Fortescue Metals fell 11¢, or 2.4 per cent, at $4.42.
On Friday, APN closed 10 per cent higher, and Fairfax Media rose about 7 per cent, but other media stocks were doing very little. That led to renewed speculation of a print tie-up between the media operators APN and Fairfax. But whether that was the source of the stock rises we don't know.
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The week began poorly after China tightened its property market rules, including strict enforcement of a 20% capital gains tax on property sales; that led to the local sharemarket falling about 1.5% and the dollar slipping below a key level of US101.5¢ on Monday.
The Dow Jones rising to a new record high provided positive momentum for global markets, helping Australia’s bourse rebound and close the week at a 4½‑year high despite the earlier China-driven weakness.
For the week the S&P/ASX 200 gained 37.3 points (0.7%) to finish at 5,123.4, while the broader All Ordinaries rose 36.6 points (0.7%) to 5,137.5.
Australian GDP grew 0.6% in the December quarter and 3.1% for the 2012 calendar year; UBS chief economist Scott Haslem said the 3.1% annual result was slightly below trend but still a very good outcome compared with other advanced economies in 2012.
No major rate moves were made: the Reserve Bank left its official rate at 3.0%, the European Central Bank kept rates at 0.75% and the Bank of England at 0.5%; the ECB signalled activity should stabilise, so economists expected little near‑term policy change.
China’s National Development and Reform Commission accused the world’s biggest iron ore suppliers and some traders of delaying deliveries to create an impression of short supply; the major miners rebuffed the claims, but shares in BHP Billiton, Rio Tinto and Fortescue Metals finished the week lower.
All three large miners slipped: BHP Billiton fell 75¢ (about 2%) to $36.00, Rio Tinto dropped $1.72 (2.6%) to $64.40, and Fortescue Metals eased 11¢ (2.4%) to $4.42, according to the article.
APN closed about 10% higher and Fairfax Media rose around 7%, sparking renewed speculation of a print tie‑up between the two companies, but the article notes there was no confirmation that such speculation was the definite cause of the stock rises.
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