Australian sharemarket recovery fades to noon

The Australian sharemarket’s morning rally stumbled as investors warily await an update on US monetary policy.

The ASX staged a modest recovery today.

The Australian sharemarket’s morning rally stumbled into lunchtime deals as investors warily await an update on US monetary policy next week.

At 12.10pm (AEST), the benchmark S & P/ASX 200 index climbed 21.4 points, or 0.41 per cent, to 5,241, while the broader All Ordinaries index rebounded 23.1 points, or 0.43 per cent, to 5,342.2.

The modest recovery follows the market’s 2.2 per cent retreat yesterday, and barely takes a bite out of the 6 per cent lost over the past three weeks.

Australian traders initially followed the strong lead from US markets after dovish comments from Fed governor Lael Brainard, but moves were muted by the lack of a reaction on bond markets and US futures turning lower in Asian trade.

“Federal Reserve member Lael Brainard stole the headlines with a fairly dovish speech that was hardly indicative of a central bank looking to hike this year,” IG chief market strategist Chris Weston said.

“Still, the implied probability of a hike this year has only fallen very modestly and we have seen little in the way of moves in fixed income markets.

“We have seen a slight calming of nerves though.”

CMC Markets chief market strategist Michael McCarthy said the blackout period leading up to next week’s Fed meeting would test investors’ resolve, with volatile trade tipped until a clearer picture on US monetary policy emerges.

“Of concern to doves was the lack of any reaction in bond and currency markets (to Ms Brainard’s speech), meaning sharemarket selling could return during the blackout period,” he said.

The big miners continued to lead the way despite the paring of morning gains, with BHP Billiton rallying 0.8 per cent to $20.10, Rio Tinto adding 0.5 per cent to $47.67 and iron ore miner Fortescue surging 4.1 per cent to $4.895 after announcing a further early debt repayment.

In energy, Santos turned lower, easing 1 per cent to $3.75, while Woodside traded steady at $27.57.

The big banks gave back their early gains, with the big four all around the flatline at noon after jumping as much as 1 per cent earlier.

In retail, Harvey Norman tacked on 0.6 per cent despite key rival The Good Guys falling into the hands of JB Hi-Fi.

The $870 million deal was the biggest local news for the market to digest through the morning, but the impact on JB is unknown given it remains in a trading halt pending the completion of the institutional component of its capital raising.

Also in retail, Coles owner Wesfarmers edged down 0.5 per cent, while Woolworths inched up 0.3 per cent and Myer jumped 2.6 per cent.

Among other blue chips, Telstra recovered 0.3 per cent to $5.005, while Qantas rose 1.2 per cent to $3.30.

Elsewhere, Murray Goulburn bounced 3.4 per cent as it announced a lift in the milk price offered to its farmers, a sign of rising confidence in the beaten-down dairy sector.

Meanwhile, the Australian dollar held steady near US75.5c.