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Investors ignore the signs to drive market higher

Reserve Bank governor Philip Lowe.Picture: Bloomberg via Getty Images

There was no obvious catalyst, but the Australian sharemarket ramped higher on low volumes despite weaker iron ore, gold and oil prices.

Few stocks were left behind as the S&P/ASX 200 index jumped to a 1.2 per cent gain before finishing up 47.7 points, or 0.84 per cent, at 5729.3 as traders attempted to reverse the cautious tone and heavy underperformance of the ASX against global markets last quarter.

Spot iron ore fell 1.3 per cent to $US62.05 a tonne on Friday, and with Chinese markets closed until Thursday Singapore futures were little changed in quiet trade.

Gold fell one per cent to $US1275.10 an ounce and Brent crude oil dropped 1.6 per cent to $US56.60 a barrel.

The Australian dollar slipped US0.2¢ to US78.20¢ as the US dollar edged higher against global currencies.

Government 10-year yields dropped 2.2 points to 2.839 per cent ahead of the Reserve Bank board meeting tomorrow.

Markets are not expecting a change in the cash rate from 1.5 per cent following Reserve governor Philip Lowe’s comments in Perth two weeks ago where he revealed concern about high household debt levels and lack of inflationary pressures.

On Friday upside pressure on global bond yields eased after the US personal consumption expenditure deflator, the US Federal Reserve’s preferred inflation indicator, missed forecasts with a decline to an annual pace of 1.3 per cent.

US personal spending rose just 0.1 per cent in August, compounding wage concerns, but US yields fell 3 points on the news but rebounded after the Chicago PMI index spiked higher.

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