Thanks Endless. Half-time round-up:Shares have declined for a...

Thanks Endless.

Half-time round-up:

Shares have declined for a third straight morning as unexpected strength in China's official manufacturing report reduced the odds on rate cuts in Australia's biggest trading partner.

At lunchtime the ASX 200 was 13 points or 0.3% weaker at 4249 after earlier hitting a low of 4238. Defensive stocks accounted for the handful of rising sectors, with resource stocks the main drag.

The market briefly hiccuped higher after the noon release of January manufacturing data from China, but soon resumed its swoon. The official Purchasing Managers Index was more bullish than a private report released by HSBC at 1.30pm is likely to be, unexpectedly rising to 50.5 from 50.3 in December. Analysts had tipped a fall to 49.5, broadly in line with HSBC's flash report last week.

"Looking for the next big leg up in this market is quite challenging," Andrew Pease, chief strategist for the Asia-Pacific region at Russell Investment Group in Sydney, told Bloomberg. "The prospects for the US economy aren't that great and earnings are going to be lacklustre this year."

Asian markets eased following the release of the Chinese PMI. Japan's Nikkei eased 0.02%, Shanghai 0.44% and Hong Kong's Hang Seng 0.18%. Dow futures were recently up seven points or less than 0.1%.

The morning's domestic economic reports were mixed. Manufacturing activity expanded in January for a second month but new-home sales slumped in December. The AIG/PWC Performance of Manufacturing Index rallied 1.4 points last month to 51.6. A Housing Industry Association report had new homes sales down 4.9% in December and near-flat for the quarter.

Crude oil futures rallied 21 cents this morning to US$98.62 a barrel. Spot gold was $3.70 softer at US$1,736.30 an ounce. The dollar was buying US$1.0626.


Thought the Chinese manufacturing report would give our market a leg-up but Shanghai and Hong Kong don't think much of the news. We appear to be back in "good news is bad news" territory because Asian traders want rate cuts in China and today's report makes that less likely. I've had my busiest and most profitable morning of the year, which is not saying much because January was desperate for the sort of pullbacks I favour. Caught ZGL and EWC near the lows (commiserations to Kmac - yesterday's ZGL break looked highly promising and offered every reason to hold overnight). Trades in LLC and AIO have so far gone nowhere.