Shares declined ahead of lunchtime Chinese economic data after a jump in inflation threatened to cruel the outlook for further interest rate cuts.
At lunchtime the ASX 200 was 38 points or 0.7% weaker at 5267 and on track for a second straight fall. Gold +4.9% and metals & mining +0.2% were the only sectors to improve this morning. Hardest hit were I.T. -1.6%, financials -1.1% and consumer staples and consumer discretionary -1%.
The declines preceded the 1pm EST release of Chinese economic figures, including GDP, industrial production and retail sales.
"Until we see a clear upside catalyst emerge in the near-term, we may see this lack of enthusiasm persist for some time," Tim Radford, strategist at Rivkin Securities, told Bloomberg. "Investors will watch closely Chinese GDP figures as they will provide further insight into the direction the economy is heading under the government's structural changes."
Expectations for Wednesday's official inflation report were dampened by the biggest increase in three years in a private inflation gauge. The TDS-MI measure of consumer prices surged 0.7% last month, lifting the annual rate to to 2.7% from 2.4%, near the top of the Reserve Bank's 2-3% target band.
Asian markets declined. China's Shanghai Composite lost 0.27%, Hong Kong's Hang Seng 0.54% and Japan's Nikkei 0.77%. Dow futures were recently off 13 points or 0.1% ahead of tonight's public holiday.
Crude oil futures dropped 34 cents this morning to US$93.75 a barrel. Spot gold rallied $3.30 to US$1,257.40 an ounce. The dollar was buying 87.76 US cents.
For the benefit of newcomers to trading, AVA provided an excellent example why it's usually a bad idea to buy the open if a share has been rising ahead of an 'unexpected' announcement. Obviously, inside trading is impossible on the ASX, thanks to the diligence and efficiency of our watchdogs. And yet experience shows that shares that have rallied ahead of announcements tend to get sold off on the news. You would have to be a regulator to understand that conundrum. Been a productive morning at this trading desk, with PRR and PAB both offering a couple of pips off lows. Got rid of the last of my AYR from Friday for brokerage and took a small speculator in QBL.
