Australian shares hit a new three-and-a-half month high before reversing gains after China's manufacturing gauge dropped to a nine-month low.
At lunchtime the ASX 200 was unchanged at 4375 after earlier touching its strongest level since early May. Resource stocks led the rise, with gold stocks up 2.9%, metals & mining 1.1% and materials 1%. Energy stocks and defensive sectors accounted for most of the falls.
The market dropped sharply after the 12.30pm EST release of HSBC's flash manufacturing index, which sagged to 47.8 from 49.3 last month. The result was the worst in nine months and marked the 10th month that the index has been stuck below the 50-point level that divides expansion from contraction.
Asian markets, which had been little changed before the data, mostly turned south. Japan's Nikkei eased 0.01% and Shanghai lost 0.21%. Hong Kong's Hang Seng put on 0.75%, buoyed by strong US futures after the Federal Reserve hinted overnight that QE3 is pending. Dow futures were recently up 34 points or 0.3%.
Gold, oil and the Australian dollar were also beneficiaries of increased risk appetite after the Federal Reserve minutes last night. Crude oil futures rallied another 63 cents this morning to US$97.87 a barrel. Spot gold was $3.20 firmer at US$1,659.60 an ounce. The dollar was buying $US1.0512.
Ouch. Those Chinese figures are sobering after last month's reading. Surprised that Shanghai and the ASX are as resilient as they are. I guess the market thinks it increases the odds on monetary easing in China? Sold most of my ARI yesterday but the bit I held over has bitten me hard today. Doubled up near the low and sold some into the partial rebound. In for a third time now. Just added MGX for any arvo rebound.
