The share market began a new quarter with a downswing as a bounce in Chinese manufacturing activity failed to offset worries over weakening commodity prices and a dive in US equity futures.
At lunchtime the ASX 200 was trading 29 points or 0.5% in the red at 5862 as gains in defensive sectors were swamped by falls in resource stocks and the big banks. The health sector rallied 0.7%, IT 0.6%, telecoms 0.5% and industrials 0.1%. A collapse in iron ore over the last few sessions to a ten-year low helped push the metals & mining sector down 1.8%. Other notable falls included materials -1.5%, gold -1.5%, energy -1.3% and financials -0.5%.
The market was more concerned about a plunge in US equity futures than March Chinese manufacturing data. Dow futures were recently down 123 points or 0.7% after earlier falling more than 1.1%. China's official manufacturing purchasing managers' index defied expectations by rising to 50.1 last month from a February reading of 49.9. Economists predicted the gauge would slide to 49.7. The final reading of HSBC's rival gauge was revised upwards to 49.6 from an initial reading of 49.2. A separate measure of services activity eased last month to 53.7 from 53.9 the previous month.
China's Shanghai Composite edged up 0.21%, Hong Kong's Hang Seng added added 0.35% and Japan's Nikkei lost 0.35%.
“This is going to be a tougher quarter and you can expect higher volatility,” Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors, told Bloomberg. “We have raised cash levels and now have less in equities than in the past year. You need to have some powder dry to buy into the market if we have a correction.”
Crude oil futures receded another 25 cents this morning to US$47.35 a barrel. Spot gold was $2.70 firmer at US$1,185.90 an ounce. The dollar was buying 76.44 US cents.
Not clear why US equity futures are so gloomy. Speculation on the XJO thread that the weakness may be related to talks over Iran's nuclear program or reports of an escalation in the fighting in Yemen. Can't find any confirmation online yet. Mind you, with TON occupying thoughts here, I doubt many noticed the ructions on the XJO. Trading: took a while to get a foothold but eventually secured good bounces in SFR and TPI and a scrappy win in PAN.
