Shares rallied for a second day but pared gains near lunchtime after Chinese manufacturing slumped to a 28-month low.
At 1 pm, the ASX 200 was ahead 5 points or 0.1% at 4554, but well off its high after the 12.30 pm release of Chinese manufacturing figures tempered early optimism over reports of progress on a second Greek bailout tonight. The HSBC China flash purchasing managers' index fell to 48.9, below the 50-point mark that separates contraction from expansion. The reading was the weakest since 2009, raising concerns about future demand for Australian raw materials.
A pick-up in risk appetite was this morning underlined by cyclical stocks outperforming defensives and small caps again heading blue chips. Financial and energy shares fronted the morning's sector gains, while telecoms, utilities and consumer stocks all retreated.
US futures turned negative and Asian markets lost ground after the Chinese data. Dow futures were recently off 1 point as Intel, eBay and American Express sagged in after-market trade following earnings reports this morning. Japan's Nikkei dropped 0.12%, Shanghai 0.63% and Hong Kong's Hang Seng 0.49%.
Agreement on a second aid package for Greece is said to be near after Germany and France thrashed out a deal in seven hours of talks this morning, EU officials said. The French-German proposal will be presented to a summit in Brussels tonight.
In local economic news, business confidence declined last quarter but business conditions recorded a marginal improvement. A NAB quarterly survey of more than 900 firms showed the index of confidence falling 5 points to 6, while business conditions inched up 1 point to 3 points.
"This outcome is likely to reflect the impact of the high Australian dollar, continued cautiousness of households and concerns about the global outlook on sentiment," NAB said in a statement quoted on Fairfax.
Crude oil futures gave up gains after the Chinese data to trade 7 cents weaker at US $98.28 a barrel. Spot gold was 40 cents stronger at US $1,601.40 an ounce. The dollar was buying US $1.0728.
Sheesh, just when solutions seem near for two long-running problems - the US debt ceiling and Greece - along comes another: signs of a slowdown in China. Our market can't take a trick. No idea where we'll go this arvo. Up because of Greece or down on China? I fear the latter but hope to be wrong.
