Shares eased from yesterday's 11-week high before paring losses as stimulus hopes helped regional markets shrug off a slowdown in China's manufacturing output.
At lunchtime the ASX 200 was four points or 0.1% softer at 4264 as declines in the metals & mining sector -0.7%, gold stocks -0.9% and health -0.6% overshadowed gains in telecoms +1.2%, property trusts +0.5%, IT +0.9% and industrials +0.3%.
China's official manufacturing index, released at 11 am EST, missed forecasts but clung above the 50-point level that separates expansion from contraction. The index declined to 50.1 last month, the weakest reading in eight months, from 50.2 in June. Economists had predicted an improvement to 50.4.
"[50.1] is obviously a disappointment but still above 50 which is key," Andrew Sullivan at Piper Jaffray told MarketWatch.
Chinese shares took the result in their stride as traders bet that the result increased the prospects for further monetary easing. Shanghai rallied 1.1%, Hong Kong's Hang Seng edged up 0.13% and Japan's Nikkei retreated 1.07%, Dow futures were recently down 11 points or 0.1%.
The morning's domestic economic reports again painted a mixed picture of the economy, with a measure of manufacturing hitting its lowest level in three years while house prices recorded a surprise rise last quarter. The AiG/PWC manufacturing index dropped 6.9 points 40.3, the worst result since June 2009. An ABS report had house prices up 0.5% in the June quarter.
HSBC chief economist Paul Bloxham said the official figures were consistent with the RP Data Rismark July capital city home value data, also released today, which showed capital city home values increasing for the second consecutive month.
"It looks like the housing market has found its bottom," HSBC chief economist Paul Bloxham told Fairfax. "We think with interest rates now below a neutral setting, house prices are likely to stabilise in the second half of this year."
Crude oil futures eased another 11 cents this morning to US$87.96 a barrel. Spot gold was 50 cents stronger at US$1,613.80 an ounce. The dollar was buying $US1.0492.
No rush for the exits since the Chinese data was released, with strength in the Shanghai Composite keeping fingers off the sell button. With minimal movement in the index this morning, I'm still waiting for my first trade. Probably too cautious with the index proving stubbornly resilient to overseas weakness.
