Australian shares have recouped most of Thursday's dramatic sell-off after a broad rally this morning extended Friday's gains before the release of disappointing Chinese manufacturing figures.
At lunchtime the ASX 200 was 33 points or 0.7% stronger at 5052 after earlier hitting 5064, 42 points off the index's four-and-a-half year high recorded last Wednesday. A strong morning saw all sectors rally bar gold (-0.3%), led by consumer staples +1.7%, IT +1%, the Small Ordinaries +0.9% and financials +0.7%.
"There's a little bit of hesitation to put any sort of sizable trades considering the risk in what's going to happen in the Italian election tonight," IG Markets broker Chris Weston told Fairfax. "But that sort of thing reinforces the yield play and because an Italian election doesn't really affect the safe haven of a yield play."
The market came off its high following the 12.45pm EST release of February figures that showed that China's manufacturing sector under-performed expectations this month. HSBC's "flash" or preliminary PMI dropped to 50.4 from 52.3 last month. Analysts had been expecting the index to hold around the 52.2 level.
Asian markets advanced ahead of the data. Shanghai put on 1%, Hong Kong's Hang Seng 0.41% and Japan's Nikkei 1.7%. Dow futures were recently down nine points or less than 0.1%.
Crude oil futures eased 25 cents this morning to US$93.11 a barrel. Spot gold was 10 cents stronger at US$1,581.60 an ounce. The dollar was buying $US1.0269.
Not a good Chinese manufacturing number - above the 50-point level that indicates expansion but growth was much slower than last month. Could be seasonal, could be a signal that predictions of a Chinese rebound were premature. There were plenty of reasons for caution this morning (sequestration, Italian election, last week's freefall, Cyclone Rusty), but you wouldn't know it from the index. Still, volumes seemed tight, especially at the spec end. I squeezed out a successful trade in CKA from 19 but otherwise struggled for trading ideas.
