Australian shares ignored soft leads to push to a new 21-month high this morning before mixed Chinese manufacturing reports muddied the waters.
At lunchtime the ASX 200 was 37 points or 0.8% stronger at 4916 after earlier advancing as high as 4920. A broad rally boosted all sectors except IT -1.1% and energy (unchanged). The leaders were a mix of cyclicals and defensives: health +1.2%, telecoms +1.1%, metals & mining +0.9% and financials +0.8%.
The surge stalled briefly following the noon EST release of the official Chinese factory gauge, which showed a mild but unexpected moderation in activity. The January manufacturing purchasing managers' index eased to 50.4 from 50.6 in December. Economists had predicted the index would expand to at least 51. Read more here.
A rival index released at 12.45pm helped steady the nerves and fuelled a return to the morning's highs. HSC's final PMI rose to 52.3 from 51.5 in December.
"[The official] Chinese manufacturing data was not a disastrous result but definitely weaker than what the market was looking for," Jonathan Cavenagh, currency strategist at Westpac in Singapore, told Fairfax. "It would certainly take the shine off of the Aussie dollar. We should see the Aussie test back through $1.04 at some stage today."
Asian markets were mixed. Shanghai dropped 0.48%, Hong Kong's Hang Seng lost 0.52% and Japan's Nikkei rallied 0.24%. Dow futures were more positive, recently up 38 points or 0.3%.
Crude oil futures edged up three cents this morning to US$97.53 a barrel. Spot gold was $4.70 weaker at US$1,660.80 an ounce. The dollar was buying $US1.0415.
Looks like most traders think the weakness of the last few sessions is no more than a bear trap. US futures seem to be anticipating a rebound, despite the mixed Chinese manufacturing reports. Plenty of opportunity today, but you have to front up and after a good week I was short of motivation and concentration. Filled a chair but didn't fill many orders. Decided DML was worth a look under $1, purely for any intraday short covering - chart looks horrible. Elsewhere I was too cautious. Should have caught the bounce in LNC - that's my bread and butter. Plenty more where my orders were a pip too low.
