Afternoon trading Oct 31

Thanks Oscar and morning crew.


Half-time round-up:

Disappointing Chinese factory data dampened buyer interest as the Australian share market inched closer to its 2017 high on the last session of a strong month.  

The ASX 200 came within 22 points of this year's market peak of 5956 set back in May, before fading back to even at 5919 at the halfway point. The market's bull run was dampened by news that China's official factory activity gauge fell shy of expectations this month. The manufacturing PMI eased to 51.6 from a September reading of 52.4. Economists had anticipated a reading above 52. Read more here.

Consumer staples was the best of the sectors, rising 0.9% following an earnings update from Woolworths. Also strong: energy +0.7%, IT +0.7% and industrials +0.6%. The metals & mining sector lost 0.4%, health 0.4% and financials 0.3%.

The local market has risen more than 4% this month after trailling overseas gains for much of the year. However, the scale and speed of the gains prompted Morgan Stanley analysts to question valuations.

"The tyres are overheating, with P/E multiples again at all-time highs (19.4 for industrials ex-financials)," they told Fairfax.  "Indeed, small caps are now trading at a 4% premium to large caps – something only seen on three sustained occasions since 2000 and typically within three weeks on average of a meaningful pullback for the broader market."

Asian markets saw red following overnight weakness on Wall Street. China's Shanghai Composite dipped 0.26%, Hong Kong's Hang Seng 0.4% and Japan's Nikkei 0.45%. Dow futures were recently unchanged.

Crude oil futures eased ten cents or 0.18% this morning to US$54.05 a barrel. Gold futures drifted $1.20 or 0.1% to US$1,276.60 an ounce. The dollar was buying 76.78 US cents.


Euphoric conditions just now. The broader market looks overdue for a pullback, which might take some of the wind out of the rally in small caps. Might. No evidence of weakness yet, although the quarterlies sorted out a few hopefuls this week. Trading: snared a chunk of the spectacular rebound in ASN, but would have liked more. Finally extracted a skinny profit from HRL from a few days okay. Won't touch that again - volume too weak.