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Market reverses early losses amid soothing words from China

The Australian sharemarket reversed early losses to finish in the black following soothing words from Chinese Premier Li Keqiang.

He said China would fasten its “seat belt” and rein in risks as it pursued a mid- to high-speed growth, while he also played down risks of a trade war with the US and said the country would continue to support global growth.

The S&P/ASX 200 index dropped to a 0.5 per cent loss following the 0.3 per cent fall on Wall Street last night, but it bounced to close up 14.9 points, or 0.26 per cent, at 5774 as markets shrugged off US rate rise caution.

“Every year there are predictions of a hard landing, but the economic performance in the past few years despite slowing global growth and trade should put those prophesies to a full stop,” Mr Li said.

“China has maintained steady growth without resorting to strong stimulus, and the economy will continue to enjoy medium to high growth.”

However, the Shanghai composite index was up just 0.1 per cent at the close of the ASX.

Spot iron ore slipped 0.2 per cent to $US88.14 a tonne yesterday despite a 4 per cent jump in Dalian futures, but speculators drove up another 5 per cent today.

Market attention was on the US Federal Reserve interest rate decision tonight with a specific focus on whether the Fed would point to a more rapid pace of hikes than the three increases expected this year.

Overnight the Australian dollar bounced US0.4¢ to US75.70¢ but no further reaction to Mr Li’s comments, while government 10-year yields were marginally easier at 2.92 per cent.

But ongoing signs of global market tremors were seen in the oil market where Brent crude oil tumbled almost 2 per cent before bouncing back to to $US51.50 a barrel.

Shaw and Partners senior private client adviser Craig Sidney said the late market recovery was primarily due to demand for mining stocks ahead of the US Federal Reserve’s rate decision on Thursday.

“The key tonight for the Australian market to watch is the results of the Fed meeting, whereby we expect them to lift interest rates by a quarter of a per cent,” he said.

Rio Tinto, BHP Billiton and Fortescue Metals found support on the back of the rising iron ore price in Asia, Mr Sidney said.

“We have seen positive data recently out of China so if the US does lift interest rates that’s typically going to be positive for the resource stocks.”

Rio Tinto gained 2.2 per cent, BHP rose 1.5 per cent and Fortescue jumped 5.65 per cent.

The big four banks were mixed due to a “a little bit of uncertainty” leading into the Fed meeting and some profit taking, Mr Sidney said.

Westpac and National Australia Bank had modest falls and Commonwealth Bank and ANZ posted slight gains.

The energy sector was mixed, with Caltex, Oil Search and Origin Energy gaining in value, while Woodside Petroleum and Santos lost ground, after oil prices hit a three-month low overnight.

Energy bosses met with Prime Minister Malcolm Turnbull on Wednesday to address a looming energy crisis, and have guaranteed to ensure gas is available for the Australian market.

The Australian dollar was slightly stronger, trading at US75.72¢ at 4.30pm AEDT, up from US75.63¢ at the close of local trading on Tuesday.

The broader All Ordinaries index was up 15.6 points, or 0.27 per cent, at 5813.7 points.

The March SPI200 futures contract was up 20 points, or 0.35 per cent, at 5782 points.

National turnover was 3.2 billion securities traded worth $6.9 billion.

with AAP

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